LSB INDUSTRIES, INC. 1998 STOCK OPTION AND INCENTIVE PLAN  

           The Board of Directors of LSB Industries, Inc., a Delaware corporation (the "Company"), has adopted this 1998 Stock Option and Incentive Plan (the "Plan"), effective the 13th day of August, 1998, as follows:

1.      Purpose. This Plan permits selected officers and employees, prospective employees, consultants and independent contractors of the Company or any Subsidiary who bear a large measure of responsibility for the success of the Company to acquire and retain a proprietary interest in the Company and to participate in the future of the Company as shareholders. The purpose of this Plan is to advance the interests of the Company and its shareholders by enabling the Company and the subsidiaries to offer to its employee-directors, officers, employees, consultants and independent contractors, long-term performance-based stock and/or other equity interests in the Company, thereby enhancing its ability to attract, retain and reward such individuals, and by providing an incentive for employee-directors, officers, employees to render outstanding service to the Company and to the Company's shareholders.

2.      Definitions. For purposes of the Plan, the following terms shall be defined as set forth herein:

         2.1      "Act" means the Securities Act of 1933, as amended from time to time, or any successor
                    statute or statutes thereto.

         2.2      "Agreement" means the agreement between the Company and the Holder setting forth 
                    the terms and conditions of an award under the Plan.

         2.3      "Board" means the Board of Directors of the Company.

         2.4      "Change of Control" means a change of control of the Company pursuant to Section 
                     8.2 hereof.

         2.5     "Code" means the Internal Revenue Code of 1986, as amended from time to time, 
                   and any successor statute or statutes thereto.

         2.6     "Committee" means the Stock Option Committee of the Board or any other committee 
                   of the Board which the Board may designate. In all events, the Committee shall consist 
                   only of non-employee directors of the Company.

         2.7     "Common Stock" means the Common Stock of the Company, par value $.10 per share.

         2.8      "Disability" means disability as determined under the procedures established by the 
                    Committee for purposes of the Plan.

         2.9      "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to 
                    time, or any successor statute or statutes thereto.

         2.10     "Fair Market Value", unless otherwise required by any applicable provision of the 
                    Code or any regulations issued thereunder, means, as of any given date:

                    2.10.1      the closing price of the Common Stock on the last preceding day on 
                                    which the Common Stock was traded, as reported on a national securities
                                    exchange; and,

                    2.10.2      if the fair market value of the Common Stock cannot be determined 
                                    pursuant to clause (i) hereof, such price as the Committee shall determine.

        2.11     "Formula Price Per Share" means the highest gross price (before brokerage 
                    commissions, soliciting dealers' fees and similar charges) paid for any share of Common 
                    Stock at any time during the ninety (90) day period immediately prior to the Change 
                    of Control (whether by way of exchange, conversion, distribution, liquidation or 
                    otherwise) paid or to be paid for any share of Common Stock in connection with a 
                    Change of Control. If the consideration paid or to be paid in any transaction that results 
                    in a Change of Control consists, in whole or in part, of consideration, other than cash, 
                    the Board shall take such action, as in its judgment it deems appropriate, to establish 
                    the cash value of such consideration, but such valuation shall not be less than the value, 
                    if any, attributed to such consideration by any other party to such transaction that 
                    results in a Change of Control.

        2.12     "Holder" means an eligible employee-director, officer, employee, consultant or 
                    independent contractor of the Company or a Subsidiary who has received an award 
                    under the Plan.

         2.13    "Incentive Stock Option" or "ISO" means any Stock Option intended to be and 
                    designated as an "incentive stock option" within the meaning of Section 422 of the Code.

         2.14    "Non-Qualified Stock Option" means any Stock Option that is not an Incentive Stock 
                    Option.

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         2.15     "SAR Value" means the excess of the Fair Market Value of one share of Common 
                     Stock over the exercise price per share specified in a related Stock Option in the 
                     case of a Stock Appreciation Right granted in tandem with a Stock Option and the 
                     Stock Appreciation Right price per share in the case of a Stock Appreciation Right 
                     awarded on a free-standing basis multiplied by the number of shares in respect of 
                     which the Stock Appreciation Right shall be exercised, on the date of exercise.

        2.16      "Section 16(b) Holder" means such officer or director or ten percent (10%) beneficial 
                     owner of Common Stock subject to Section 16(b) of the Exchange Act.

        2.17      "Stock Appreciation Right" means the right, pursuant to an award granted under 
                     Section 7 hereof, to recover an amount equal to the SAR Value.

        2.18      "Stock Option" means any Incentive Stock Option or Non-Qualified Stock Option to
                     purchase shares of Common Stock which is awarded pursuant to this Plan.

        2.19      "Subsidiary" means any present or future subsidiary corporation of the Company, as 
                     such term is defined in Section 424(f) of the Code.

3.      Administration.

        3.1      Board; Committee. The Board shall create a committee consisting of three members of 
                   the Board. The Board may also appoint one member of the Board as an alternate 
                   member of the Committee. Upon such appointment, the Committee shall have all the 
                   powers, privileges and duties set forth herein. The Board may, from time to time, 
                   appoint members of any such Committee in substitution for, or in addition to, members
                   previously appointed, may fill vacancies in the Committee and may discharge the 
                   Committee. The Committee shall select one of its members as its Chairman and shall 
                   hold its meetings at such times and places as it shall deem advisable. A majority of 
                   its members shall constitute a quorum and all determinations shall be made by a 
                   majority of such quorum. Any determination reduced to writing and signed by a 
                   majority of the members of the Committee, shall be fully effective and a valid 
                   act of the Committee as if it had been made by a majority vote at a meeting 
                   duly called and held. The membership of the Committee shall at all times be 
                   constituted so as to not adversely affect the compliance of the Plan with the 
                   requirements of Rule 16b-3 under the Exchange Act, to the extent it is applicable, 
                   or with the requirements of any other applicable law, rule or regulation.

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        3.2      Power and Authority. The Committee shall have full power and authority to do all things
                   necessary or appropriate to administer this Plan according to its terms and provisions 
                   (excluding the power to appoint members of the Committee and to terminate, modify, 
                   or amend the Plan, except as otherwise authorized by the Board), including, but not 
                   limited to the full power and authority (subject to the express provisions of this Plan):

                   3.2.1     to award Stock Options and Stock Appreciation Rights, pursuant to the 
                                terms of this Plan, to eligible individuals described under Section 5 hereof;

                   3.2.2     to select the eligible individuals to whom Stock Options or Stock Appreciation 
                                Rights, or any combination thereof, if any, may from time to time be awarded
                                hereunder;

                   3.2.3     to determine the Incentive Stock Options, Non-Qualified Stock Options, Stock
                                Appreciation Rights, or any combination thereof, if any, to be awarded 
                                hereunder to one or more eligible employees or persons;

                  3.2.4     to determine the number of shares to be covered by each award granted 
                               hereunder;

                  3.2.5     to determine the terms and conditions not inconsistent with the terms of the Plan, 
                               of any award hereunder (including, but not limited to, share price, any restrictions 
                               or limitations, and any vesting, exchange, surrender, cancellation, acceleration,
                               termination, exercise or forfeiture provisions, as the Committee shall determine);

                  3.2.6     to determine any specified performance goals or such other factors or criteria 
                               which need to be attained for the vesting of an award granted hereunder;

                  3.2.7     to determine the terms and conditions under which awards hereunder are to 
                               operate on a tandem basis and/or in conjunction with or apart from other equity
                               awarded under this Plan and cash awards made by the Company or any 
                               Subsidiary outside of this Plan;

                 3.2.8     to determine the extent and circumstances under which Common Stock and 
                              other amounts payable with respect to an award hereunder shall be deferred, 
                              which may be either automatic or at the election of the Holder; and

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                 3.2.9     to substitute (i) new Stock Options for previously granted Stock Options, which
                              previously granted Stock Options have higher option exercise prices and/or 
                              contain other less favorable terms, and (ii) new awards of any other type for 
                              previously granted awards of the same or other type, which previously granted 
                              awards are upon less favorable terms.

       3.3     Interpretation of Plan.

                 3.3.1     Subject to Sections 3.2 and 9 hereof, the Committee shall have the authority at 
                              its discretion to adopt, alter and repeal such general and special administrative 
                              rules, regulations, and practices governing the Plan as it shall, from time to time, 
                              deem advisable, to construe and interpret the terms and provisions of this Plan 
                              and any award issued under this Plan (and to determine the form and substance 
                              of all Agreements relating thereto), and to otherwise supervise the administration 
                              of this Plan.

                 3.3.2     Anything in this Plan to the contrary notwithstanding, no term of this Plan 
                              relating to Incentive Stock Options shall be interpreted, amended or 
                              altered, nor shall any discretion or authority granted under this Plan be so 
                              exercised, so as to disqualify the Plan under Section 422 of the Code, or, 
                              without the consent of the Holder(s) affected, to disqualify any Incentive 
                              Stock Option under Section 422 of the Code.

                 3.3.3    Subject to Sections 3.2 and 9 hereof, all decisions made by the Committee 
                             pursuant to the provisions of this Plan shall be made in the Committee's sole 
                             discretion and shall be final and binding upon all persons granted options 
                             pursuant to the Plan.

4.      Shares Subject to Plan.

        4.1     Number of Shares. The aggregate number of shares of Common Stock reserved and 
                  available for distribution under this Plan shall be 850,000 shares. If any shares of 
                  Common Stock that are subject to a Stock Option or Stock Appreciation Right cease 
                  to be subject to such Stock Option or Stock Appreciation Right, or any such award 
                  otherwise terminates without a payment being made to the Holder in the form of 

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                  Common Stock, such shares shall again be available for distribution in connection with 
                  future grants and awards under this Plan. The number of shares available for distribution 
                  under this Plan shall be reduced by the number of shares of Common Stock issued under 
                  this Plan upon the exercise of a Stock Option.

        4.2     Character of Shares. The Company may elect to satisfy its obligations to a Holder 
                  exercising a Stock Option entirely by issuing authorized and unissued shares of Common 
                  Stock to such Holder, entirely by transferring treasury shares to such Holder, or in part 
                  by the issue of authorized and unissued shares and the balance by the transfer of treasury 
                  shares.

5.      Eligibility.

        5.1      General. Awards under this Plan may be made to: (i) officers and other employees of the
                   Company or any Subsidiary who are at the time of the grant of an award under this Plan
                   regularly employed by the Company or any Subsidiary, including any full time salaried 
                   officer or employee who is a member of the Board (except as provided in the last 
                   sentence under Section 3.1); and, (ii) consultants or independent contractors whom the 
                   Board believes have contributed or will contribute to the success of the Company.

        5.2     Multiple Awards. The Committee shall from time to time designate such employees, 
                  consultants or independent contractors to whom options are to be granted, and the 
                  number of shares to be subject to each option. The Committee may at any time grant 
                  one or more Stock Options or Stock Appreciation Rights or a combination thereof 
                  to an individual to whom a Stock Option or Stock Appreciation Right has previously 
                  been granted under this or any other stock option plan of the Company, whether or 
                  not such previously granted Stock Option or Stock Appreciation Right has been fully 
                  exercised.

        5.3      Ineligibility for Awards. No person designated by the Board to serve on the Committee,
                   effective at such future time so that he qualifies as a "disinterested person" within the 
                   meaning of Rule 16b-3(c) of the Exchange Act, shall be eligible to receive any awards 
                   under the Plan during the period from the date such designation is made to the date 
                   such designation becomes effective. Notwithstanding Section 5.1 hereof, no member 
                   of the Committee, while serving as such, shall be eligible to receive an award under 
                   the Plan.

6.      Stock Options.

         6.1      Grant and Exercise. Stock Options granted under the Plan may be of two types: 
                    (i) Incentive Stock Options and (ii) Non-Qualified Stock Options. Only full-time 

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                    salaried officers or employees may be granted Incentive Stock Options. Any individual 
                    eligible to participate under this Plan may be granted Non-Qualified Stock Options. Any 
                    Stock Option granted under the Plan shall contain such terms, not inconsistent with this 
                    Plan, as the Committee may from time to time approve. The Committee shall have the 
                    authority to grant to any eligible individual Incentive Stock Options, Non-Qualified 
                    Stock Options, or both types of Stock Options and, in each case, may be granted 
                    alone, in tandem with, or without, or in addition to Stock Appreciation Rights. To the 
                    extent that any Stock Option (or portion thereof) does not qualify as an Incentive 
                    Stock Option, it shall constitute a separate Non-Qualified Stock Option. Unless 
                    granted in substitution for another outstanding award, Stock Options shall be granted 
                    for no consideration other than services to the Company or a Subsidiary.

        6.2      Exercise Price.

                   6.2.1      Less Than 10% Shareholder. The exercise price in any option granted under 
                                 this Plan to an individual who, at the time the Stock Option is granted, does 
                                 not own stock possessing more than ten percent (10%) of the total combined 
                                 voting power of all classes of stock of the Company or of any Subsidiary 
                                 (computed in accordance with the provisions applicable to Section 422(b)(6) 
                                 of the Code) (a "less than 10% Shareholder") shall be not less than the Fair 
                                 Market Value of the shares of Common Stock subject to the Stock Option 
                                 at the time the Stock Option is granted, determined by the Committee in 
                                 accordance with the applicable regulations and rulings of the Commissioner 
                                 of the Internal Revenue Service in effect at the time the Stock Option is granted.

                  6.2.2      10% Shareholder. The exercise price in any option granted under the Plan to 
                                an individual who is not a less than ten percent (10%) Shareholder (a "10%
                                Shareholder") shall be not less than one hundred ten percent (110%) of the 
                                Fair Market Value of the shares of Common Stock subject to the Stock Option 
                                at the time the Stock Option is granted, determined in accordance with the 
                                applicable regulations and rulings of the Commissioner of the Internal Revenue 
                                Service in effect at the time the Stock Option is granted.

        6.3      Option Term. The term of each Stock Option shall be fixed by the Board, but no Stock 
                   Option shall be exercisable more than ten (10) years (five (5) years, in the case of an 

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                   Incentive Stock Option granted to a 10% Shareholder) after the date on which the Stock
                   Option is granted.

        6.4      Exercise of Non-Qualified Stock Options. Non-Qualified Stock Options shall be 
                   exercisable at such time or times and subject to such terms and conditions as shall be
                   determined by the Committee; provided, however, that no Non-Qualified Stock Option 
                   granted under this Plan may be exercised until after the expiration of six (6) months 
                   from the date the Stock Option is granted. If the Committee provides, in its discretion, 
                   that any Stock Option is exercisable only in installments, the Committee may waive 
                   such installment exercise provisions at any time at or after the time of grant in whole 
                   or in part, based upon such factors as the Committee shall determine; provided that 
                   the Committee cannot waive the requirement that the Stock Option may not be 
                   exercised until after the expiration of six (6) months from the date the Stock Option is 
                   granted.

        6.5      Exercise of Incentive Stock Options.

                   6.5.1      By an Employee. No Incentive Stock Option granted under this Plan shall be
                                 exercisable after the expiration of ten (10) years from the date such ISO is 
                                 granted, except that no ISO granted to a person who is not a less than 10%
                                 Shareholder shall be exercisable after the expiration of five (5) years from the 
                                 date such option is granted. Employment by a Subsidiary shall be employment 
                                 by the Company. Unless such requirements are waived by the Committee, 
                                 the employee, while still in the employment of the Company, may exercise the 
                                 options as follows:

                                 6.5.1.1      at any time after one (1) year of continuous employment from the 
                                                  date such ISO is granted, as to twenty percent (20%) of the 
                                                  shares subject to the option;

                                6.5.1.2      at any time after two (2) years of such continuous employment 
                                                 from the date such ISO is granted, as to an additional twenty 
                                                 percent (20%) of the shares subject to the option;

                                6.5.1.3      at any time after three (3) years of such continuous employment 
                                                 from the date such ISO is granted, as to an additional thirty 
                                                 percent (30%) of the shares subject to the option; and

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                               6.5.1.4      at any time after four (4) years of such continuous employment 
                                                from the date such ISO is granted, as to all of the shares 
                                                remaining subject to the option.

                       The Committee may decide in each case to what extent leaves of absence for 
                       government or military service, illness, temporary disability, or other reasons, 
                       shall not interrupt continuous employment.

          6.5.2     Termination of Employment. Except as otherwise expressly provided in Sections 
                       6.5.3 and 6.5.4 of this Plan or in the Agreement, no Stock Option may be 
                       exercised at any time unless the Holder thereof is then an employee of the 
                       Company or a Subsidiary.

          6.5.3     By a Former Employee. No person may exercise an ISO after he is no longer an 
                       employee of the Company or any Subsidiary; except that if an employee ceases 
                       to be an employee on account of physical or mental disability as defined in 
                       Section 22(e)(3) of the Code ("Former Employee"), he may exercise the ISO 
                       within twelve (12) months after the date on which he ceased to be an employee, 
                       for the number of shares for which he could have exercised at the time he ceased 
                       to be an employee. No ISO granted under this Plan shall in any event be exercised 
                       by such Former Employee after the expiration of ten (10) years from the date 
                       such ISO is granted, except that no ISO granted to a person who is a 10% 
                       Shareholder may be exercisable after the expiration of five (5) years from the date 
                       such ISO is granted.

          6.5.4     In Case of Death. If any employee or Former Employee who was granted an ISO 
                      dies prior to the termination of such ISO, such ISO may be exercised within twelve 
                      (12) months after the death of the employee or Former Employee by his estate, or 
                      by a person who acquired the right to exercise such ISO by bequest or inheritance, 
                      or by reason of the death of such employee or Former Employee, provided that:

                     6.5.4.1      such employee died while an employee of the Company or a Subsidiary; or

                     6.5.4.2      such Former Employee had ceased to be an employee of the Company 
                                      or a Subsidiary on account of physical or mental disability and died within 
                                      three (3) months after the date on which he ceased to be such employee.

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                       Such ISO may be exercised only as to the number of shares for which he could have 
                       exercised at the time the employee or Former Employee died. No ISO granted under 
                       this Plan shall in any event be exercised in case of death of an employee or Former 
                       Employee after the expiration of ten (10) years from the date such ISO is granted, 
                       except that no ISO granted to a 10% Shareholder shall be exercisable after the 
                       expiration of five (5) years from the date such ISO is granted.

          6.5.5     The Committee may, in its discretion, waive the installment exercise provisions at 
                       any time at or after the time of grant, in whole or in part, based on such factors as 
                       the Committee shall determine; provided that at all times no ISO may be exercised 
                       until the expiration of six (6) months from the date that the Stock Option was granted.

     6.6     Termination of Options. A Stock Option granted under this Plan shall be considered 
               terminated, in whole or in part, to the extent that it can no longer be exercised for 
               shares originally subject to it, provided that a Stock Option granted shall be 
               considered terminated at an earlier date upon surrender for cancellation by the Holder 
               to whom such Stock Option was granted.

     6.7     Notice of Exercise and Payment. Subject to any installment, exercise and waiting period
               provisions that are applicable in a particular case, Stock Options granted under this Plan 
               may be exercised, in whole or in part, at any time during the term of the Stock Option, 
               by giving written notice of such exercise to the Company identifying the Stock Option 
               being exercised and specifying the number of shares then being purchased. Such notice 
               shall be accompanied by payment in full of the exercise price, which shall be in cash or, 
               unless otherwise provided in the Agreement, in whole shares of Common Stock which 
               are already owned by the Holder of the Stock Option or, unless otherwise provided 
               in the Agreement, partly in cash and partly in such Common Stock. Cash payments 
               shall be made by wire transfer, certified check or bank check or personal check, in 
               each case payable to the order of the Company; provided, however, that the 
               Company shall not be required to deliver certificates for shares of Common Stock 
               with respect to which a Stock Option is exercised until the Company has confirmed 
               the receipt of good and valuable funds in payment of the purchase price thereof. 
               Payments in the form of Common Stock (which shall be valued at the Fair Market 
               Value of a share of Common Stock on the date of exercise) shall be made by delivery of 

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               stock certificates in negotiable form which are effective to transfer good and valid title 
               thereto to the Company, free of any liens or encumbrances, with signature guaranteed 
               by a bank or investment banking firm.

      6.8     Issuance of Shares. As soon as practicable after its receipt of such notice and payment, the
                Company shall cause one or more certificates for the shares so purchased to be delivered 
                to the Holder or his or her estate, as the case may be. No Holder or estate shall have any 
                of the rights of a shareholder with reference to shares of Common Stock subject to a 
                Stock Option until after the Stock Option has been exercised in accordance with Section 
                6.7 and certificates representing the shares of Common Stock so purchased by the Holder
                pursuant to the Stock Option have been delivered to the Holder or estate.

      6.9     Partial Exercise. A Stock Option granted under this Plan may be exercised as to any part 
                of the shares for which it could be exercised. Such a partial exercise of a Stock Option 
                shall not affect the right to exercise the Stock Option from time to time in accordance 
                with this Plan as to the remaining shares of Common Stock subject to the Stock Option.

     6.10    $100,000 Per Year Limitation. To the extent that the aggregate Fair Market Value of 
                Common Stock with respect to which Incentive Stock Options are exercisable for the 
                first time by a Holder during any calendar year (under all of the Company's plans) 
                exceeds $100,000, such excess Stock Options shall be treated as Non-Qualified 
                Stock Options for purposes of Section 422 of the Code.

     6.11    Buyout and Settlement Provisions. The Committee may at any time offer to buy out for 
                cash or otherwise settle a Stock Option previously granted, based upon such terms and
                conditions as the Committee shall establish and communicate to the Holder at the time 
                that such offer is made, including a settlement for exchange of a different award under 
                the Plan for the surrender of the Stock Option.

7.     Stock Appreciation Rights.

        7.1     Grant and Exercise. Stock Appreciation Rights may be granted in tandem with ("Tandem 
                  Stock Appreciation Right") or in conjunction with all or part of any Stock Option granted 
                  under this Plan or may be granted on a free-standing basis. In the case of a Non-Qualified 
                  Stock Option, a Tandem Stock Appreciation Right may be granted either at or after the 
                  time of the grant of such Non-Qualified Stock Option. In the case of an Incentive Stock 
                  Option, a Tandem Stock Appreciation Right may be granted only at the time of the grant 

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                  of such Incentive Stock Option. Unless granted in substitution for another outstanding 
                  award, Stock Appreciation Rights shall be granted for no consideration other than 
                  services to the Company or a Subsidiary.

       7.2     Termination. A Tandem Stock Appreciation Right shall terminate and shall no longer be
                 exercisable upon the termination or exercise of the related Stock Option, except that, 
                 unless otherwise determined by the Board, a Tandem Stock Appreciation Right granted 
                 with respect to less than the full number of shares covered by a related Stock Option 
                 shall not be reduced until after the number of shares remaining under the related Stock 
                 Option equals the number of shares covered by the Tandem Stock Appreciation Right.

        7.3     Method of Exercise. A Tandem Stock Appreciation Right may be exercised by a Holder, 
                  in accordance with Section 7.4 hereof, by surrendering the applicable portion of the 
                  related Stock Option. Upon such exercise and surrender, the Holder shall be entitled 
                  to receive such amount in the form of payment determined in the manner prescribed 
                  in Section 7.5 hereof. Stock Options which have been so surrendered, in whole or 
                  in part, shall no longer be exercisable to the extent Tandem Stock Appreciation 
                  Rights have been exercised.

       7.4      Exercisability. Tandem Stock Appreciation Rights shall be exercisable only at such time
                  or times and to the extent that the Stock Options to which they relate shall be 
                  exercisable in accordance with the provisions of Section 6 hereof and this Section 7, 
                  and may be subject to such additional limitations on exercisability as shall be 
                  determined by the Committee and set forth in the Agreement. Other Stock 
                  Appreciation Rights shall be exercisable at such time or times and subject to such 
                  terms and conditions as shall be determined by the Committee and set forth in the 
                  Agreement. Notwithstanding anything to the contrary contained herein (including the 
                  provisions of Section 8.1 hereof), any Stock Appreciation Right granted to a 
                  Section 16(b) Holder to be settled wholly or partially in cash (i) shall not be 
                  exercisable during the first six (6) months of the term of such Stock Appreciation 
                  Right, except that this special limitation shall not apply in the event of death or disability 
                  of such Holder prior to the expiration of the six (6) month period, and (ii) shall only be
                  exercisable during the period beginning on the third business day following the date of 
                  release for publication of the Company of quarterly or annual summary statements of 
                  sales and earnings and ending on the twelfth (12) business day following such date.

       7.5     Receipt of SAR Value. Upon the exercise of a Stock Appreciation Right, a Holder shall be
                 entitled to receive up to, but not more than, an amount in cash and/or shares of Common 

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                 Stock equal to the SAR Value with the Committee having the right to determine the form 
                 of payment.

      7.6      Shares Affected Under Plan. Upon the exercise of a Tandem Stock Appreciation Right, the
                 Stock Option or part thereof to which such Tandem Stock Appreciation Right is related 
                 shall be deemed to have been exercised for the purpose of the limitation set forth in 
                 Section 4.1 hereof on the number of shares of Common Stock to be issued under the Plan, 
                 but only to the extent of the number of shares, if any, issued under the Tandem Stock
                 Appreciation Right at the time of exercise based upon the SAR Value.

       7.7     Limited Stock Appreciation Rights. The Committee may grant "Limited Stock 
                 Appreciation Rights", i.e., Stock Appreciation Rights that become exercisable upon 
                 the occurrence of one or more of the events which trigger a Change of Control as 
                 defined in Section 8.2 hereof, and shall be settled in an amount equal to the Formula 
                 Price Per Share, subject to such other terms and conditions as the Committee 
                 may specify; provided, however, if any Limited Stock Appreciation Right is granted 
                 to a Section 16(b) Holder such Limited Stock Appreciation Right (i) shall only be 
                 exercisable within sixty (60) days after the event triggering the Change of Control; 
                 and (ii) may not be exercised during the first six (6) months after the date of grant 
                 of such Limited Stock Appreciation Right (except in the event of death or disability 
                 of such Holder prior to the expiration of the six (6) month period); and (iii) shall 
                 only be exercisable in the event that the date of the Change of Control was outside the 
                 control of such Holder; and (iv) shall only be settled in cash in an amount equal to the 
                 Formula Price Per Share.

8.     Acceleration.

        8.1     Acceleration Upon Change of Control. Unless the award Agreement provides otherwise or
                  unless the Holder waives the application of this Section 8.1 prior to a Change of Control 
                  (as hereinafter defined), in the event of a Change of Control, each outstanding Stock 
                  Option, Stock Appreciation Right and Limited Stock Appreciation Right granted under 
                  the Plan shall immediately become exercisable in full notwithstanding the vesting or 
                  exercise provisions contained in the Agreement.

       8.2      Change of Control Defined. A "Change of control" shall be deemed to have occurred 
                  upon any of the following events:

                  8.2.1     The consummation of any of the following transactions: any merger, reverse 
                               stock split, recapitalization or other business combination of the Company, 
                               with or into another corporation, or an acquisition of securities or assets 

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                               by the Company, pursuant to which the Company is not the continuing or 
                               surviving corporation or pursuant to which shares of Common Stock 
                               would be converted into cash, securities or other property, other than a 
                               transaction in which the majority of the holders of Common Stock 
                               immediately prior to such transaction will own at least fifty percent (50%) 
                               of the total voting power of the then-outstanding securities of the surviving
                               corporation immediately after such transaction; or

                   8.2.2     A transaction in which any person (as such term is defined in Sections 13(d)(3) 
                                and 14(d)(2) of the Exchange Act), corporation or other entity (other than the
                                Company, or any profit-sharing, employee ownership or other employee benefit 
                                plan sponsored by the Company or any Subsidiary, or any trustee of or fiduciary 
                                with respect to any such plan when acting in such capacity, or any group 
                                comprised solely of such entities): (i) shall purchase any Common Stock (or 
                                securities convertible into Common Stock) for cash, securities or any other
                                consideration pursuant to a tender offer or exchange offer, without the prior 
                                consent of the Board, or (ii) shall become the "beneficial owner" (as such term is
                                defined in Rule 13d-3 under the Exchange Act), directly or indirectly (in one
                                transaction or a series of transactions), of securities of the Company representing 
                                fifty percent (50%) or more of the total voting power of the then-outstanding 
                                securities of the Company ordinarily (and apart from the rights accruing under 
                                special circumstances) having the right to vote in the election of directors 
                                (calculated as provided in Rule 13d-3(d) in the case of rights to acquire the 
                                Company's securities); or

                 8.2.3       If, during any period of two consecutive years, individuals who at the beginning 
                                of such period constituted the entire Board and any new director whose election 
                                by the Board, or nomination for election by the Company's stockholders was
                                approved by a vote of at least two-thirds of the directors then still in office who 
                                either were directors at the beginning of the period or whose election or 
                                nomination for election by the stockholders was previously so approved, cease 
                                for any reason to constitute a majority thereof.

       8.3      General Waiver by Board. The Committee may, after grant of an award, accelerate the 
                  vesting of all or any part of any Stock Option, and/or waive any limitations or 
                  restrictions, if any, for all or any part of an award.

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        8.4     Acceleration Upon Termination of Employment. In the case of a Holder whose 
                  employment or affiliation with the Company or a Subsidiary is involuntarily terminated 
                  for any reason (other than for cause), the Committee may, at its option and in its sole 
                  discretion, accelerate the vesting of all or any part of any award and/or waive, in 
                  whole or in part, any or all of the remaining deferral limitations or restrictions imposed 
                  hereunder or pursuant to the Agreement.

9.      Amendments and Termination.

        9.1      Amendments to Plan; Termination. The Board may at any time, and from time to time, 
                   amend any of the provisions of the Plan, and may at any time suspend or terminate the 
                   Plan; provided, however, that no such amendment shall be effective unless and until it 
                   has been duly approved by the stockholders of the outstanding shares of Common 
                   Stock if (i) such amendment materially increases the benefits accruing to participants 
                   under this Plan; (ii) such amendment materially increases the number of securities which 
                   may be issued under this Plan; (iii) such amendment materially modifies the 
                   requirements as to eligibility for participation in this Plan; or, (iv) the failure to obtain 
                   such approval would adversely affect the compliance of the Plan with the requirements 
                   of Rule 16b-3 under the Exchange Act, or with the requirements of any other 
                   applicable law, rule or regulation.

        9.2     Amendments to Individual Awards. The Board may amend the terms of any award 
                  granted under the Plan; provided, however, that subject to Section 11 hereof, no such
                  amendment may be made by the Board which in any material respect impairs the rights 
                  of the Holder without the Holder's consent.

10.    Term of Plan.

        10.1     Effective Date. The Plan shall be effective as of August 13, 1998 ("Effective Date"), 
                    subject to the approval of the Plan by the stockholders of the Company within one year 
                    after the Effective Date. Any awards granted under the Plan prior to such approval 
                    shall be effective when made (unless otherwise specified by the Committee at the time 
                    of grant) but shall be conditioned upon, and subject to, such approval of the Plan by the
                    Company's stockholders and approval of the Company's application to list the shares of 
                    the Company's Common Stock covered by the Plan on the New York Stock Exchange 
                    (and no awards shall vest or otherwise become free of restrictions prior to such 
                    approvals).

        10.2     Termination Date. No award shall be granted pursuant to the Plan on or after the tenth 
                    (10th) anniversary of the Effective Date, but awards granted prior to such tenth (10th)

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                    anniversary may extend beyond that date. The Plan shall terminate at such time as no 
                    further awards may be granted and all awards granted under the Plan are no longer
                    outstanding.

11.     Adjustment Upon Change of Shares. Subject to any required action by the stockholders of the
          Company, the number of shares of Common Stock for which Stock Options may thereafter be
          granted, and the number of shares of Common Stock then subject to Stock Options previously
          granted, and the price per share payable upon exercise of such Stock Option and the number of
          shares and exercise price relating to Stock Appreciation Rights, shall be proportionately 
          adjusted for any increase or decrease in the number of issued shares of Common Stock of the
          Company resulting from a subdivision or consolidation of shares of Common Stock or the 
          payment of a stock dividend (but only on the Common Stock) or any other increase or 
          decrease in the number of shares of Common Stock effected without receipt of consideration 
          by the Company.

         11.1     If the Company is reorganized or consolidated or merged with another corporation, in 
                     which the Company is the non-surviving corporation, a Holder of an outstanding Stock 
                     Option and/or Stock Appreciation Right granted under this Plan shall be entitled 
                     (subject to the provisions of this Section 11) to receive options and/or stock appreciation
                     rights covering shares of such reorganized, consolidated or merged corporation in the 
                     same proportion as granted to Holder prior to such reorganization, consolidation or 
                     merger at an equivalent exercise price, and subject to the same terms and conditions 
                     as this Plan. For purposes of the preceding sentence, the excess of the aggregate Fair 
                     Market Value of shares subject to the option immediately after the reorganization,
                     consolidation or merger over the aggregate exercise price of such shares shall not be 
                     more than the excess of the aggregate Fair Market Value of all shares of Common 
                     Stock subject to the option or Stock Appreciation Right immediately before such
                     reorganization, consolidation or merger over the aggregate exercise price of such 
                     shares of Common Stock, and the new stock option or stock appreciation right or 
                     assumption of the old Stock Option or old Stock Appreciation Right by any 
                     surviving corporation shall not give the Holder additional benefits which he did not 
                     have under the old Stock Option or Stock Appreciation Right.

       11.2      To the extent that the foregoing adjustments relate to the shares of Common Stock 
                    of the Company, such adjustments shall be made by the Committee, whose 
                    determination in that respect shall be final, binding and conclusive, provided that each 
                     Incentive Stock Option granted pursuant to this Plan shall not be adjusted in a manner 
                     that causes the Incentive Stock Option to fail to continue to qualify as an incentive 
                     stock option within the meaning of Section 422 of the Code.

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        11.3      Except as expressly provided in this Section 11, the Holder shall have no rights by 
                     reason of any subdivision or consolidation of shares of stock of any class or the 
                     payment of any stock dividend or any other increase or decrease in the number of 
                     shares of stock of any class or by reason of any dissolution, liquidation, merger, 
                     consolidation, reorganization or spin-off of assets or stock of another corporation, 
                     and any issue by the Company of shares of stock of any class, or securities 
                     convertible into shares of stock of any class, shall not affect, and no adjustment 
                     by reason thereof shall be made with respect to, the number or price of shares 
                     of Common Stock subject to the Stock Option or the number or price of Stock 
                     Appreciation Rights granted under this Plan.

        11.4     The grant of a Stock Option or Stock Appreciation Right pursuant to this Plan shall not 
                    affect in any way the right or power of the Company to make adjustments, 
                    reclassifications, 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.

12.     General Provisions.

        12.1     Investment Representations. The Committee may require each person acquiring shares of
                    Common Stock pursuant to an award under this Plan to represent to and agree with the
                    Company in writing that the Holder is acquiring the shares for investment without a 
                    view to distribution thereof.

        12.2     Additional Incentive Arrangements. Nothing contained in this Plan shall prevent the 
                    Board from adopting such other or additional incentive arrangements as it may deem 
                    desirable, including, but not limited to, the granting of Stock Options and the 
                    awarding of stock and cash otherwise than under this Plan; and such arrangements 
                    may be either generally applicable or applicable only in specific cases.

        12.3     No Right of Employment. Nothing contained in this Plan or in any award hereunder 
                    shall be deemed to confer upon any employee of the Company or any Subsidiary 
                    any right to continued employment with the Company or any Subsidiary, nor 
                    shall it interfere in any way with the right of the Company or any Subsidiary to 
                    terminate the employment of any of its employees at any time.

         12.4     Withholding Taxes. Not later than the date as of which an amount first becomes 
                     includible in the gross income of the Holder for federal income tax purposes 
                     with respect to any award under the Plan, the Holder shall pay to the Company, 
                     or make arrangements satisfactory to the Company regarding the payment of, 
                     

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                     any federal, state and local taxes of any kind required by law to be withheld or 
                     paid with respect to such amount. If permitted by the Board, tax withholding or 
                     payment obligations may be settled with Common Stock, including Common 
                     Stock that is part of the award that gives rise to the withholding requirement. 
                     The obligations of the Company under this Plan shall be conditional upon such 
                     payment or arrangements and the Company shall, to the extent permitted by 
                     law, have the right to deduct any such taxes from any payment of any kind
                     otherwise due to the Holder from the Company.

       12.5      Governing Law. This Plan and all awards made and actions taken thereunder shall be 
                    governed by and construed in accordance with the laws of the State of Delaware (without
                    regard to choice of law provisions).

        12.6     Other Benefit Plans. Any award granted under this Plan shall not be deemed 
                    compensation for purposes of computing benefits under any retirement plan of the 
                    Company or any Subsidiary and shall not affect any benefits under any other 
                    benefit plan now or subsequently in effect under which the availability or amount 
                    of benefits is related to the level of compensation (unless required by specific 
                    reference in any such other plan to awards under this Plan).

       12.7      Employee Status. A leave of absence, unless otherwise determined by the Board prior to 
                    the commencement thereof, shall not be considered a termination of employment. Any 
                    awards granted under this Plan shall not be affected by any change of employment, so 
                    long as the Holder continues to be an employee of the Company or any Subsidiary.

       12.8      Non-Transferability. Other than the transfer of a Stock Option or Stock Appreciation 
                    Right by will or by the laws of descent and distribution, no award under this Plan 
                    may be alienated, sold, assigned, hypothecated, pledged, exchanged, transferred, 
                    encumbered or charged, and any attempt to alienate, sell, assign, hypothecate, 
                    pledge, exchange, transfer, encumber or charge the same shall be void. No right or 
                    benefit hereunder shall in any manner be liable for or subject to the debts, contracts, 
                    liabilities or torts of the person entitled to such benefit. Unless otherwise provided 
                    in this Plan or the Agreement, any Stock Option or Stock Appreciation Right 
                    granted under this Plan is only exercisable during the lifetime of the Holder by the 
                    Holder or by his guardian or legal representative.

       12.9      Applicable Laws. The obligations of the Company with respect to all awards under this 
                    Plan shall be subject to (i) all applicable laws, rules and regulations, including, without 
                    limitation, the requirements of all federal securities laws, rules and regulations and state
                    securities and blue sky laws, rules and regulations, and such approvals by any 

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                    governmental agencies as may be required, including, without limitation, the 
                    effectiveness of a registration statement under the Act, and (ii) the rules and 
                    regulations of any national securities exchange on which the Common Stock 
                    may be listed or the NASDAQ National Market System if the Common Stock 
                    is designated for quotation thereon.

       12.10     Conflicts. If any of the terms or provisions of the Plan conflict with the requirements of 
                     Rule 16b-3 under the Exchange Act, or with the requirements of any other applicable 
                     law, rule or regulation, and/or with respect to Incentive Stock Options, Section 422 
                     of the Code, then such terms or provisions shall be deemed inoperative to the extent 
                     they so conflict with the requirements of said Rule 16b-3, and/or with respect to 
                     Incentive Stock Options, 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, such provision shall be deemed to be incorporated 
                     herein with the same force and effect as if such provision had been set out at length 
                     herein.

       12.11     Written Agreements. Each award granted under this Plan shall be confirmed by, and 
                     shall be subject to the terms of the Agreement approved by the Committee and 
                     executed by the Company and the Holder. The Committee may terminate any 
                     award made under this Plan if the Agreement relating thereto is not executed and 
                     returned to the Company within sixty (60) days after the Agreement has been 
                     delivered to the Holder for his or her execution.

        12.12     Indemnification of Committee. In addition to such other rights of indemnification as 
                      they may have as directors or as members of the Committee, the members of the 
                      Committee shall be indemnified by the Company against the reasonable expenses, 
                      including attorneys' fees actually and necessarily incurred in connection with the 
                      defense of any action, suit or proceeding, or in connection with any appeal therein, 
                      to which they or any of them may be a party by reason of any action taken or failure 
                      to act under or in connection with the Plan or any award granted thereunder, and 
                      against all amounts paid by them in settlement thereof (provided such settlement is 
                      approved by independent legal counsel selected by the Company) or paid by them 
                      in satisfaction of a judgment in any such action, suit or proceeding, except in 
                      relation to matters as to which it shall be adjudged in such action, suit or proceeding 
                      that such Committee member is liable for negligence or misconduct in the 
                      performance of his duties; provided that within sixty (60) days after institution of 
                      

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                      any such action, suit or proceeding a Committee member shall in writing offer the 
                      Company the opportunity, at its own expense, to handle and defend the same.

        12.13     Consideration for Common Stock. The Committee may not grant any awards under 
                      this Plan pursuant to which the Company will be required to issue any shares of 
                      Common Stock unless the Company will receive consideration for the shares of 
                      Common Stock sufficient under the laws of the State of Delaware so that such 
                      shares of Common Stock will be, when issued, validly issued and fully paid and
                      nonassessable when issued.

         12.14    Common Stock Certificates. All certificates for shares of Common Stock delivered 
                      under this Plan shall be subject to such stop-transfer orders and other restrictions as 
                      the Committee may deem advisable under the rules, regulations, and other 
                      requirements of the Securities and Exchange Commission, any stock exchange 
                      upon which the Common Stock is then listed, any applicable federal or state 
                      securities law and any applicable corporate law, and the Committee may cause 
                      a legend or legends to be put on any such certificates to make appropriate 
                      reference to such restrictions. Notwithstanding anything to the contrary contained 
                      herein, whenever certificates representing shares of Common Stock subject to an 
                      award are required to be delivered pursuant to the terms of this Plan, the 
                      Company may, in lieu of such delivery requirement, comply with the provisions 
                      of Section 158 of the Delaware General Corporation Law.

         12.15     Unfunded Status of Plan. This Plan is intended to constitute an "unfunded" plan for 
                       incentive and deferred compensation. With respect to any payments not yet made to 
                       a Holder by the Company, nothing contained herein shall give any such Holder any 
                       rights that are greater than those of a general creditor of the Company.

 

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