<DOCUMENT>
<TYPE>EX-10.16
<SEQUENCE>4
<FILENAME>longtermstockplan.txt
<DESCRIPTION>1998 LONG TERM INCENTIVE STOCK PLAN
<TEXT>
 
                             STILWELL FINANCIAL INC.
 
 
 
 
 
                       1998 Long Term Incentive Stock Plan
 
           (as amended and restated effective as of January 18, 2001)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
<PAGE>
 
                                Table of Contents
 
Article                                                                     Page
 
1.  History, Effective Date, Objectives and Duration........................  1
 
2.  Definitions.............................................................  1
 
3.  Administration..........................................................  8
 
4.  Shares Subject to the Plan and Maximum Awards........................... 10
 
5.  Eligibility and General Conditions of Awards............................ 11
 
6.  Stock Options........................................................... 15
 
7.  Stock Appreciation Rights and Limited Stock Appreciation Rights......... 18
 
8.  Restricted Shares....................................................... 19
 
9.  Performance Units and Performance Shares................................ 20
 
10.  Bonus Shares........................................................... 21
 
11.  Beneficiary Designation................................................ 22
 
12.  Deferrals.............................................................. 22
 
13.  Rights of Employees/Directors/Consultants.............................. 22
 
14.  Change of Control...................................................... 23
 
15.  Amendment, Modification, and Termination............................... 24
 
16.  Withholding............................................................ 24
 
17.  Successors............................................................. 26
 
18.  Additional Provisions.................................................. 26
 
 
 
<PAGE>
 
 
                             Stilwell Financial Inc.
                       1998 Long Term Incentive Stock Plan
 
           (AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 18, 2001)
 
Article 1.   History, Effective Date, Objectives and Duration
 
        1.1           History.  Stilwell  Financial Inc., a Delaware corporation
(the  "Company"),  has  established  the Stilwell  Financial Inc. 1998 Long Term
Incentive  Stock Plan, as set forth herein,  and as the same may be amended from
time to time  (the  "Plan").  The Plan was  originally  adopted  by the Board of
Directors of the Company (the "Board") and approved by the sole  stockholder  of
the  Company,  Kansas  City  Southern  Industries,  Inc.  ("KCSI")  and  by  the
stockholders  of KCSI on July 15, 1998,  to be effective as of June 1, 1998 (the
"Effective  Date").  Effective as of August 11, 1999, the Board amended  Section
2.14 of the Plan,  renamed the Plan and restated the Plan,  as so amended as set
forth herein.  Then  effective as of June 15, 2000,  the Board amended  Sections
2.51, 5.7 and 15.1 of the Plan and restated the Plan, as so amended as set forth
herein.  Then  effective as of January 18, 2001,  the  Stilwell  Financial  Inc.
Compensation  Committee  amended  Sections 2.42, 2.51 and 5.6(d) of the Plan and
restated the Plan, as so amended as set forth herein.
 
        1.2           Objectives  of  the  Plan.  The  Plan is intended to allow
employees,  directors and  consultants  of the Company and its  Subsidiaries  to
acquire or increase equity ownership in the Company, thereby strengthening their
commitment to the success of the Company and stimulating their efforts on behalf
of the Company, and to assist the Company and its Subsidiaries in attracting new
employees, directors and consultants and retaining existing employees, directors
and  consultants.  The Plan also is intended to optimize the  profitability  and
growth of the Company through incentives which are consistent with the Company's
goals; to provide  employees,  directors and  consultants  with an incentive for
excellence in individual  performance;  and to promote teamwork among employees,
directors and consultants.
 
        1.3           Duration  of  the Plan.  The  Plan  shall commence  on the
Effective Date and shall remain in effect,  subject to the right of the Board to
amend or terminate the Plan at any time pursuant to Article 15 hereof, until all
Shares  subject to it shall have been  purchased  or acquired  according  to the
Plan's provisions. However, in no event may an Incentive Stock Option be granted
under the Plan on or after the date 10 years  following  the  earlier of (i) the
date the  Plan was  adopted  and  (ii)  the  date the Plan was  approved  by the
stockholders of the Company.
 
Article 2.   Definitions
 
        Whenever used in the Plan,  the following  terms shall have the meanings
set forth below:
 
        2.1           "Article" means an Article of the Plan.
 
        2.2           "Award" means Options (including Incentive Stock Options),
Restricted Shares, Bonus Shares, stock appreciation rights (SARs), limited stock
appreciation  rights (LSARs),  Performance  Units or Performance  Shares granted
under the Plan.
 
<PAGE>
 
        2.3           "Award Agreement" means the written agreement by  which an
Award shall be evidenced.
 
        2.4           "Board" has the meaning set forth in Section 1.1.
 
        2.5 "Bonus  Shares"  means Shares that are awarded to a Grantee  without
cost and  without  restrictions  in  recognition  of past  performance  (whether
determined  by  reference  to another  employee  benefit  plan of the Company or
otherwise)  or as an incentive to become an employee,  director or consultant of
the Company or a Subsidiary.
 
        2.6           "Cause" means, unless otherwise defined in an Award
Agreement,
 
               (i)  before the occurrence of a Change of  Control,  any  one  or
more of the following,  as determined by the Committee:
 
                      (A) a  Grantee's  commission  of  a  crime  which,  in the
        judgment of the  Committee,  resulted or is  likely to result in  damage
        or injury to the Company or a Subsidiary;
 
                      (B) the material  violation by the Grantee of written
        policies of the Company or a Subsidiary;
 
                      (C) the habitual  neglect or failure by the Grantee in the
        performance  of his or her duties to the  Company or a  Subsidiary  (but
        only if such  neglect  or failure is not  remedied  within a  reasonable
        remedial  period  after  Grantee's  receipt of written  notice  from the
        Company which describes such neglect or failure in reasonable detail and
        specifies the remedial period); or
 
                      (D) action or inaction  by the Grantee in connection  with
        his or her  duties to the  Company  or a  Subsidiary  resulting,  in the
        judgment  of the  Committee,  in  material  injury to the  Company  or a
        Subsidiary; and
 
               (ii) from and after the  occurrence  of a Change of Control,  the
occurrence of any one or more of the following,  as determined in the good faith
and reasonable judgment of the Committee:
 
                      (A) Grantee's  conviction  for committing an act of fraud,
        embezzlement,  theft, or any other act  constituting a felony  involving
        moral  turpitude  or causing  material  damage or injury,  financial  or
        otherwise, to the Company;
 
                      (B) a  demonstrably  willful and deliberate act or failure
        to act which is committed in bad faith,  without  reasonable belief that
        such action or inaction is in the best  interests of the Company,  which
        causes material damage or injury, financial or otherwise, to the Company
        (but only if such act or  inaction  is not  remedied  within 15 business
        days of  Grantee's  receipt of written  notice  from the  Company  which
        describes the act or inaction in reasonable detail); or
 
                                       2
<PAGE>
 
                      (C) the  consistent  gross neglect of duties or consistent
        wanton  negligence  by the Grantee in the  performance  of the Grantee's
        duties (but only if such neglect or negligence is not remedied  within a
        reasonable  remedial  period after  Grantee's  receipt of written notice
        from  the  Company  which   describes  such  neglect  or  negligence  in
        reasonable detail and specifies the remedial period).
 
        2.7      "Change of Control" means, unless otherwise defined in an Award
Agreement,  any one or more of the following:
 
               (i) the  acquisition  or holding by any  person,  entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act), other than
by the Company or any Subsidiary or any employee  benefit plan of the Company or
a  Subsidiary  (and other than by KCSI prior to the Spin-off  Distribution),  of
beneficial  ownership  (within  the meaning of Rule 13d-3 under the 1934 Act) of
20% or more of the then-outstanding  Common Stock or the then-outstanding Voting
Power of the Company;  provided,  however, that no Change of Control shall occur
solely by reason of any such acquisition by a corporation with respect to which,
after such acquisition, more than 60% of both the then-outstanding common shares
and the then-outstanding  Voting Power of such corporation are then beneficially
owned, directly or indirectly,  by the persons who were the beneficial owners of
the  then-outstanding  Common Stock and Voting Power of the Company  immediately
before  such  acquisition,  in  substantially  the  same  proportions  as  their
respective   ownership,    immediately   before   such   acquisition,   of   the
then-outstanding Common Stock and Voting Power of the Company; or
 
               (ii)   individuals   who,   as  of  the  date  of  the   Spin-off
Distribution,  constitute the Board (the "Incumbent Board") cease for any reason
to  constitute  at least 75% of the  Board;  provided  that any  individual  who
becomes a director  after the Effective  Date whose  election or nomination  for
election  by the  Company's  stockholders  was  approved  by at least 75% of the
Incumbent  Board (other than an election or nomination  of an  individual  whose
initial  assumption  of office  is in  connection  with an actual or  threatened
"election  contest" relating to the election of the directors of the Company (as
such terms are used in Rule  14a-11  under the 1934 Act) or  "tender  offer" (as
such term is used in Section 14(d) of the 1934 Act) or a proposed  Extraordinary
Transaction  (as defined below)) shall be deemed to be a member of the Incumbent
Board; or
 
               (iii)  approval by the stockholders of the Company of any  one or
more of the following:
 
                      (A) a  merger,  reorganization,  consolidation  or similar
transaction (any of the foregoing, an "Extraordinary  Transaction") with respect
to  which   persons   who  were  the   respective   beneficial   owners  of  the
then-outstanding Common Stock and Voting Power of the Company immediately before
such Extraordinary Transaction would not, if such Extraordinary Transaction were
to be consummated  immediately after such stockholder approval (but otherwise in
accordance  with the terms  presented  in  writing  to the  stockholders  of the
Company for their approval), beneficially own, directly or indirectly, more than
60% of both the then-outstanding  common shares and the then-outstanding  Voting
Power of the  corporation  resulting  from such  Extraordinary
 
 
                                       3
<PAGE>
 
Transaction,   in  substantially   the  same  proportions  as  their  respective
ownership,   immediately   before  such   Extraordinary   Transaction,   of  the
then-outstanding Common Stock and Voting Power of the Company,
 
                      (B) a liquidation or dissolution of the Company, or
 
                      (C) the sale or other  disposition of all or substantially
all  of  the  assets  of the  Company in  one transaction or a series of related
transactions.
 
        2.8           "Change of Control  Value"  means the Fair Market Value of
a Share on the date of a Change of Control.
 
        2.9           "Code" means the Internal Revenue Code of 1986, as amended
from time to time,  and  regulations  and rulings  thereunder.  References  to a
particular section of the Code include references to successor provisions of the
Code or any successor code
 
        2.10          "Committee," "Plan Committee" and  "Management  Committee"
have the meanings set forth in Article 3.
 
        2.11          "Common Stock" means the common stock, $.01 par value, of
the Company.
 
        2.12          "Company" has the meaning set forth in Section 1.1.
 
        2.13  "Covered  Employee"  means a Grantee  who, as of the date that the
value of an Award is  recognizable  as  taxable  income,  is one of the group of
"covered employees," within the meaning of Code Section 162(m).
 
        2.14 "Disability" means, unless otherwise defined in an Award Agreement,
for purposes of the exercise of an Incentive  Stock Option after  Termination of
Affiliation,  a disability  within the meaning of Section  22(e)(3) of the Code,
and for all other purposes, means total disability as determined for purposes of
the long term disability plan of Stilwell or any Subsidiary or other employer of
the Grantee and disability  shall be deemed to occur for purposes of the Plan on
the date such determination of disability is made.
 
        2.15          "Disqualifying Disposition" has the meaning  set  forth in
Section 6.4.
 
        2.16          "Effective Date" has the meaning set forth in Section 1.1.
 
        2.17          "Eligible Person" means (i) any employee (including any
officer) of the Company or any Subsidiary, including any such employee who is on
an approved leave of absence,  layoff, or has been subject to a disability which
does not  qualify  as a  Disability,  (ii) any  director  of the  Company or any
Subsidiary  and  (iii) any  person  performing  services  for the  Company  or a
Subsidiary in the capacity of a consultant. Solely for purposes of granting KCSI
Substitute Options
 
                                       4
<PAGE>
 
 
(as defined in Section 6.3),  Eligible  Person shall also include any person who
holds a KCSI  Option  (as  defined  in  Section  6.3) as of the date that a KCSI
Substitute Option is granted.
 
        2.18          "Exchange  Act" means the Securities Exchange Act of 1934,
as amended from time to time. References to a particular section of the Exchange
Act include references to successor provisions.
 
        2.19          "Extraordinary Transaction" has the meaning set forth in
Section 2.7.
 
        2.20          "Fair Market Value" means (A) with respect to any property
other than Shares,  the fair market value of such  property  determined  by such
methods  or  procedures  as  shall  be  established  from  time  to  time by the
Committee,  and (B) with respect to Shares,  unless otherwise  determined by the
Committee, as of any date, (i) the average of the high and low trading prices on
the date of  determination  on the New York Stock  Exchange  (or,  if no sale of
Shares was reported for such date, on the next preceding date on which a sale of
Shares  was  reported);  (ii) if the Shares are not listed on the New York Stock
Exchange,  the average of the high and low trading  prices of the Shares on such
other  national  exchange  on which  the  Shares  are  principally  traded or as
reported by the National Market System, or similar  organization,  or if no such
quotations are available,  the average of the high bid and low asked  quotations
in the  over-the-counter  market as reported by the  National  Quotation  Bureau
Incorporated or similar organizations; or (iii) in the event that there shall be
no  public  market  for the  Shares,  the fair  market  value of the  Shares  as
determined by the Committee.
 
        2.21          "Freestanding  SAR"  means  an  SAR  that  is  granted
independently of any other Award.
 
        2.22          "Good  Reason"  means,   unless  otherwise  defined  in an
Award Agreement,  the occurrence after a Change of Control,  without a Grantee's
prior written consent, of any one or more of the following:
 
               (i) the assignment to the Grantee of any duties which result in a
        material  adverse change in the Grantee's  position  (including  status,
        offices,  titles,  and reporting  requirements),  authority,  duties, or
        other  responsibilities  with the  Company,  or any other  action of the
        Company which  results in a material  adverse  change in such  position,
        authority, duties, or responsibilities,  other than an insubstantial and
        inadvertent  action  which is  remedied by the  Company  promptly  after
        receipt of notice thereof given by the Grantee,
 
               (ii) any relocation of the Grantee of more than 40 miles from the
        place  where  the  Grantee  was  located  at the time of the  Change  of
        Control, or
 
               (iii) a material reduction or elimination of any component of the
        Grantee's  rate of  compensation,  including  (x) base  salary,  (y) any
        incentive  payment or (z) benefits or perquisites  which the Grantee was
        receiving immediately prior to a Change of Control.
 
                                       5
<PAGE>
 
 
        2.23          "Grant Date" has the meaning set forth in Section 5.2.
 
        2.24          "Grantee"  means  an  individual  who  has been granted an
Award.
 
        2.25          "Incentive  Stock  Option"  means  an option granted under
Article 6 of the Plan that is intended to meet the  requirements  of Section 422
of the Code or any successor provisions thereto.
 
        2.26          "including"  or "includes"  means  "including,  without
limitation,"  or "includes, without limitation," respectively.
 
        2.27          "LSAR" means a limited stock appreciation right.
 
        2.28          "Mature  Shares" means Shares for which the holder thereof
has good  title,  free and clear of all liens and  encumbrances,  and which such
holder  either (i) has held for at least six months or (ii) has purchased on the
open market.
 
        2.29          "Minimum Consideration" means $.01 per Share or such other
amount  that  is from  time  to  time  considered  to be capital for purposes of
Section 154 of the Delaware General Corporation Law.
 
        2.30          "Option" means  an  option  granted under Article 6 of the
Plan.
 
        2.31          "Option  Price"  means  the price at which a Share  may be
purchased  by a Grantee pursuant to an Option.
 
        2.32          "Option Term" means the period beginning on the Grant Date
of an Option and ending on the expiration  date of such Option,  as specified in
the Award  Agreement for such Option and as may,  consistent with the provisions
of the  Plan,  be  extended  from  time to time by the  Committee  prior  to the
expiration date of such Option then in effect.
 
        2.33          "Outside  Director"  means a  member  of the  Board who is
not an  employee  of the Company or any Subsidiary.
 
        2.34          "Performance-Based  Exception" means the performance-based
exception from the tax deductibility limitations of Code Section 162(m).
 
        2.35          "Performance Period" has the meaning set forth in Section
9.2.
 
        2.36          "Performance Share" or "Performance Unit" has  the meaning
set forth in Article 9.
 
        2.37          "Period of Restriction"  means the period during which the
transfer of  Restricted  Shares is limited in some way (the length of the period
being based on the passage of time, the
 
 
                                       6
<PAGE>
 
achievement  of  performance  goals,  or upon the  occurrence of other events as
determined by the Committee),  and the Shares are subject to a substantial  risk
of forfeiture, as provided in Article 8.
 
        2.38          "Person"  shall have the meaning  ascribed to such term in
Section  3(a)(9)  of the  Exchange  Act and used in  Sections  13(d)  and  14(d)
thereof, including a "group" as defined in Section 13(d) thereof.
 
        2.39          "Plan" has the meaning set forth in Section 1.1.
 
        2.40          "Required  Withholding"  has  the  meaning  set  forth  in
Article 16.
 
        2.41          "Restricted  Shares"  means  Shares  that  are  subject to
forfeiture if the Grantee does not satisfy the conditions specified in the Award
Agreement applicable to such Shares.
 
        2.42          "Retirement"  means,  for any  Grantee  who is a  director
of the company or an employee,  Termination  of  Affiliation by the Grantee upon
either (i) having both attained age  fifty-five  (55) and completed at least ten
(10)  years of  service  with the  Company  or a  Subsidiary  or a  Consolidated
Subsidiary,  including any years of service such employee may have had with KCSI
or (ii) meeting such other requirements as may be specified by the Committee.
 
        2.43          "Rule 16b-3" means Rule 16b-3 promulgated by the SEC under
the Exchange  Act, as amended  from time to time,  together  with any  successor
rule, as in effect from time to time.
 
        2.44          "SAR" means a stock appreciation right.
 
        2.45          "SEC"  means  the  United  States  Securities and Exchange
Commission,  or any successor thereto.
 
        2.46          "Section" means, unless  the context otherwise requires, a
Section of the Plan.
 
        2.47          "Section  16 Person"  means a person  who  is  subject  to
potential  liability  under  Section  16(b)  of the 1934  Act  with  respect  to
transactions involving equity securities of the Company.
 
        2.48          "Share" means a share of Common Stock.
 
        2.49          "Spin-off  Distribution" means the distribution by KCSI of
at least 80% of the outstanding  Shares, as a result of which the Company ceases
to be a subsidiary of KCSI.
 
        2.50 "Strike Price" of any SAR shall equal,  for any Tandem SAR (whether
such Tandem SAR is granted at the same time as or after the grant of the related
Option), the Option Price of such Option, or for any other SAR, 100% of the Fair
Market  Value  of a Share  on the  Grant  Date of such  SAR;  provided  that the
Committee may specify a higher Strike Price in the Award Agreement.
 
                                       7
<PAGE>
 
        2.51          "Subsidiary"  means,  for  purposes of grants of Incentive
Stock Options,  a corporation as defined in Section 424(f) of the Code (with the
Company  being  treated  as  the  employer  corporation  for  purposes  of  this
definition) and, for all other purposes,  a United States or foreign corporation
or limited liability  company,  partnership or other similar entity with respect
to  which  the  Company  owns,  directly  or  indirectly,  50% (or  such  lesser
percentage as the Committee may specify,  which  percentage  may be changed from
time to time and may be different for different  entities) or more of the Voting
Power of such  corporation,  limited  liability  company,  partnership  or other
similar  entity  and  "Consolidated  Subsidiary"  means  a  Subsidiary  that  is
consolidated with the Company for financial reporting purposes.
 
        2.52          "Tandem  SAR" means an SAR that is granted  in  connection
with a related Option,  the exercise of which shall require  cancellation of the
right  to  purchase  a Share  under  the  related  Option  (and  when a Share is
purchased under the related Option, the Tandem SAR shall similarly be canceled).
 
        2.53          "Termination of  Affiliation"  occurs on the first day  on
which an  individual  is for any  reason no  longer  providing  services  to the
Company  or  any  Subsidiary  in  the  capacity  of  an  employee,  director  or
consultant,  or with respect to an individual who is an employee or director of,
or consultant  to, a corporation  which is a Subsidiary,  the first day on which
such corporation ceases to be a Subsidiary.
 
        2.54          "10%  Owner"  means  a  person  who  owns   capital  stock
(including  stock treated as owned under Section 424(d) of the Code)  possessing
more than 10% of the total combined voting power of all classes of capital stock
of the Company or any Subsidiary.
 
        2.55          "Voting   Power"   means  the   combined   voting power of
the  then-outstanding  securities of a corporation entitled to vote generally in
the election of directors.
 
Article 3.   Administration
 
        3.1           Committee.
 
               (a) Subject to Article 15, and to Section  3.2, the Plan shall be
administered by the Board,  or a committee  appointed by the Board to administer
the Plan ("Plan  Committee").  To the extent the Board considers it desirable to
comply with or qualify under Rule 16b-3 or meet the Performance-Based Exception,
the Plan Committee shall consist of two or more directors of the Company, all of
whom qualify as "outside  directors" as defined for purposes of the  regulations
under Code Section  162(m) and  "non-employee  directors"  within the meaning of
Rule 16b-3.  The number of members of the Plan Committee shall from time to time
be increased or decreased, and shall be subject to such conditions, in each case
as the Board deems appropriate to permit  transactions in Shares pursuant to the
Plan to  satisfy  such  conditions  of  Rule  16b-3  and  the  Performance-Based
Exception as then in effect.
 
                                       8
<PAGE>
 
               (b) The Board or the Plan  Committee  may appoint and delegate to
another  committee  ("Management  Committee") any or all of the authority of the
Board or the Plan Committee,  as applicable,  with respect to Awards to Grantees
other than  Grantees  who are Section 16 Persons at the time any such  delegated
authority is exercised.
 
               (c) Any references  herein to  "Committee"  are references to the
Board, or the Plan Committee or the Management Committee, as applicable.
 
        3.2           Powers of Committee.  Subject to the express provisions of
the Plan,  the  Committee has full and final  authority  and sole  discretion as
follows:
 
               (i) to  determine  when,  to whom and in what  types and  amounts
Awards should be granted and the terms and conditions  applicable to each Award,
including the benefit  payable under any SAR,  Performance  Unit or  Performance
Share,  and whether or not specific  Awards shall be granted in connection  with
other specific Awards, and if so whether they shall be exercisable  cumulatively
with, or alternatively to, such other specific Awards;
 
               (ii) to determine  the amount,  if any,  that a Grantee shall pay
for  Restricted  Shares,  whether  to  permit or  require  the  payment  of cash
dividends thereon to be deferred and the terms related thereto,  when Restricted
Shares  (including  Restricted  Shares  acquired upon the exercise of an Option)
shall be forfeited and whether such shares shall be held in escrow;
 
               (iii)    to construe  and  interpret  the  Plan and  to  make all
determinations necessary or advisable for the administration of the Plan;
 
               (iv) to make,  amend,  and  rescind  rules  relating to the Plan,
including  rules with respect to the  exercisability  and  nonforfeitability  of
Awards upon the Termination of Affiliation of a Grantee;
 
               (v) to determine the terms and conditions of all Award Agreements
(which need not be identical) and, with the consent of the Grantee, to amend any
such Award  Agreement at any time,  among other things,  to permit  transfers of
such Awards to the extent  permitted by the Plan;  provided  that the consent of
the Grantee shall not be required for any amendment which (A) does not adversely
affect  the  rights  of the  Grantee,  or  (B) is  necessary  or  advisable  (as
determined  by the  Committee) to carry out the purpose of the Award as a result
of any new or change in existing applicable law:
 
               (vi)     to cancel,  with the consent of the Grantee, outstanding
Awards and to grant new Awards in substitution therefor;
 
               (vii) to accelerate the exercisability  (including exercisability
within a period  of less than six  months  after  the  Grant  Date)  of,  and to
accelerate or waive any or all of the terms and  conditions  applicable  to, any
Award or any group of  Awards  for any  reason  and at any  time,  including  in
connection with a Termination of Affiliation;
 
                                       9
<PAGE>
 
               (viii)   subject  to  Sections  1.3  and  5.3, to extend the time
during which any Award or group of Awards may be exercised;
 
               (ix) to make  such  adjustments  or  modifications  to  Awards to
Grantees  working  outside  the United  States as are  advisable  to fulfill the
purposes of the Plan or to comply with applicable local law;
 
               (x) to  impose  such  additional  terms and  conditions  upon the
grant,  exercise  or  retention  of  Awards  as the  Committee  may,  before  or
concurrently with the grant thereof,  deem appropriate,  including  limiting the
percentage of Awards which may from time to time be exercised by a Grantee; and
 
               (xi)     to take any other  action  with  respect to any  matters
relating to the Plan for which it is responsible.
 
        All  determinations  on all  matters  relating  to the Plan or any Award
Agreement may be made in the sole and absolute discretion of the Committee,  and
all such determinations of the Committee shall be final,  conclusive and binding
on all  Persons.  No member of the  Committee  shall be liable for any action or
determination made with respect to the Plan or any Award.
 
Article 4.   Shares Subject to the Plan and Maximum Awards
 
        4.1           Number  of  Shares  Available  for   Grants.  Subject   to
adjustment as provided in Section 4.2, the number of Shares hereby  reserved for
issuance under the Plan shall be 30,000,000,  and the number of Shares for which
Awards (other than KCSI  Substitute  Options,  as defined in Section 6.3) may be
granted to any Grantee on any Grant  Date,  when  aggregated  with the number of
Shares for which Awards (other than KCSI  Substitute  Options)  have  previously
been granted to such  Grantee in the same  calendar  year,  shall not exceed one
percent (1%) of the total Shares  outstanding  as of such Grant Date;  provided,
however,  that the total  number of Shares  for which  Awards  (other  than KCSI
Substitute Options) may be granted to any Grantee in any calendar year shall not
exceed  2,000,000.  If any Shares  subject  to an Award  granted  hereunder  are
forfeited or such Award otherwise terminates without the issuance of such Shares
or of other  consideration  in lieu of such Shares,  the Shares  subject to such
Award,  to the  extent of any such  forfeiture  or  termination  shall  again be
available  for grant  under the  Plan.  If any  Shares  (whether  subject  to or
received pursuant to an Award granted  hereunder,  purchased on the open market,
or otherwise  obtained)  are withheld,  applied as payment,  or sold pursuant to
procedures approved by the Committee and the proceeds thereof applied as payment
in connection  with the exercise of an Award or the withholding of taxes related
thereto,  such Shares,  to the extent of any such withholding or payment,  shall
again be  available  or shall  increase  the  number  of  Shares  available,  as
applicable,  for  grant  under  the Plan.  The  Committee  may from time to time
determine  the  appropriate  methodology  for  calculating  the number of Shares
issued pursuant to the Plan.  Shares issued pursuant to the Plan may be treasury
Shares or newly-issued Shares.
 
                                       10
<PAGE>
 
        4.2           Adjustments in Authorized  Shares.  In the event that  the
Committee  determines  that any dividend or other  distribution  (whether in the
form of cash, Shares,  other securities,  or other property),  recapitalization,
stock split,  reverse stock split,  subdivision,  consolidation  or reduction of
capital,  reorganization,  merger, scheme of arrangement,  split-up, spin-off or
combination  involving  the Company or repurchase or exchange of Shares or other
rights to purchase Shares or other  securities of the Company,  or other similar
corporate  transaction  or event  that  occurs at any time  after  the  Spin-off
Distribution  affects the Shares such that any  adjustment  is determined by the
Committee to be appropriate  in order to prevent  dilution or enlargement of the
benefits or potential  benefits  intended to be made  available  under the Plan,
then the Committee shall, in such manner as it may deem equitable, adjust any or
all of (i) the number and type of Shares (or other  securities or property) with
respect to which  Awards may be granted,  (ii) the number and type of Shares (or
other securities or property) subject to outstanding Awards, and (iii) the grant
or  exercise  price with  respect to any Award or, if deemed  appropriate,  make
provision  for a cash  payment  to the  holder  of an  outstanding  Award or the
substitution  of other  property  for Shares  subject to an  outstanding  Award;
provided, in each case that with respect to Awards of Incentive Stock Options no
such  adjustment  shall be authorized to the extent that such  adjustment  would
cause  the  Plan to  violate  Section  422(b)(1)  of the  Code or any  successor
provision  thereto;  and provided further,  that the number of Shares subject to
any Award denominated in Shares shall always be a whole number.
 
Article 5.   Eligibility and General Conditions of Awards
 
        5.1           Eligibility.  The  Committee  may  grant  Awards   to  any
Eligible Person, whether or not he or she has previously received an Award.
 
        5.2           Grant  Date.  The  Grant  Date  of  an Award  shall be the
date on which the Committee  grants the Award or such later date as specified by
the Committee.
 
        5.3           Maximum Term. The Option Term or other period during which
an Award may be  outstanding  shall under no  circumstances  extend more than 10
years  after the Grant  Date,  and shall be subject to  earlier  termination  as
herein provided;  provided,  however,  that any deferral of a cash payment or of
the delivery of Shares that is permitted or required by the  Committee  pursuant
to Article 12 may, if so  permitted  or required by the  Committee,  extend more
than 10 years after the Grant Date of the Award to which the deferral relates.
 
        5.4           Award  Agreement. To the extent not set forth in the Plan,
the terms and  conditions  of each  Award  (which  need not be the same for each
grant or for each Grantee) shall be set forth in an Award Agreement.
 
        5.5           Restrictions on Share Transferability. The  Committee  may
impose such  restrictions  on any Shares  acquired  pursuant to the  exercise or
vesting  of an Award  as it may deem  advisable,  including  restrictions  under
applicable federal securities laws.
 
                                       11
<PAGE>
 
        5.6           Termination of Affiliation. Except as  otherwise  provided
in an Award Agreement, and subject to the provisions of Section 14.1, the extent
to which the  Grantee  shall  have the right to  exercise,  vest in, or  receive
payment in respect of an Award  following  Termination of  Affiliation  shall be
determined in accordance with the following provisions of this Section 5.6.
 
               (a) For Cause.  If a Grantee has a Termination of Affiliation for
Cause, (i) the Grantee's  Restricted Shares that are forfeitable shall thereupon
be forfeited,  subject to the  provisions of Section 8.4 regarding  repayment of
certain amounts to the Grantee;  and (ii) any unexercised  Option,  LSAR or SAR,
and any  Performance  Share or  Performance  Unit  with  respect  to  which  the
Performance  Period  has  not  ended  as of the  date  of  such  Termination  of
Affiliation,  shall terminate  effective  immediately  upon such  Termination of
Affiliation.
 
               (b) On  Account  of  Death or  Disability.  If a  Grantee  has  a
Termination of Affiliation on account of death or Disability, then:
 
                      (i) the Grantee's  Restricted Shares that were forfeitable
shall thereupon become nonforfeitable;
 
                      (ii) any  unexercised  Option  or   SAR,  whether  or  not
exercisable on the date of such Termination of Affiliation, may be exercised, in
whole or in  part,  within  the  first  12  months  after  such  Termination  of
Affiliation  (but only during the Option  Term) by the Grantee or,  after his or
her death, by (A) his or her personal  representative  or the person to whom the
Option or SAR, as applicable,  is transferred by will or the applicable  laws of
descent  and  distribution,  or (B)  the  Grantee's  beneficiary  designated  in
accordance with Article 11; and
 
                      (iii) the benefit payable  with respect to any Performance
Share or Performance  Unit with respect to which the Performance  Period has not
ended as of the date of such  Termination  of Affiliation on account of death or
Disability  shall be equal to the product of the Fair Market Value of a Share as
of the date of such  Termination of Affiliation or the value of the  Performance
Unit  specified  in the  Award  Agreement  (determined  as of the  date  of such
Termination of Affiliation),  as applicable,  multiplied successively by each of
the following:
 
                             (1) a  fraction,  the  numerator  of  which  is the
number of  months  (including  as a whole  month any  partial  month)  that have
elapsed  since the beginning of such  Performance  Period until the date of such
Termination of Affiliation  and the denominator of which is the number of months
(including as a whole month any partial month) in the Performance Period; and
 
                             (2) a percentage  determined by the Committee  that
would be earned under the terms of the applicable Award Agreement  assuming that
the rate at which the  performance  goals have been  achieved  as of the date of
such Termination of Affiliation  would continue until the end of the Performance
Period,  or, if the Committee elects to compute the benefit after the end of the
Performance Period, the Performance Percentage,  as determined by the Committee,
attained during the Performance Period.
 
                                       12
<PAGE>
 
               (c)           On  Account  of  Retirement.   If  a  Grantee has a
Termination of Affiliation on account of Retirement, then:
 
                      (i) the Grantee's  Restricted Shares that were forfeitable
shall thereupon become nonforfeitable;
 
                      (ii) any   unexercised  Option  or  SAR,  whether  or  not
exercisable on the date of such Termination of Affiliation, may be exercised, in
whole or in part,  within  the  first  five  years  after  such  Termination  of
Affiliation  (but only during the Option  Term) by the Grantee or,  after his or
her death, by (A) his or her personal  representative  or the person to whom the
Option or SAR, as applicable,  is transferred by will or the applicable  laws of
descent  and  distribution,  or (B)  the  Grantee's  beneficiary  designated  in
accordance with Article 11; and
 
                      (iii) the benefit  payable with respect to any Performance
Share or Performance  Unit with respect to which the Performance  Period has not
ended as of the date of such Termination of Affiliation on account of Retirement
shall be equal to the product of the Fair Market Value of a Share as of the date
of  such  Termination  of  Affiliation  or the  value  of the  Performance  Unit
specified in the Award Agreement  (determined as of the date of such Termination
of  Affiliation),  as  applicable,   multiplied  successively  by  each  of  the
following:
 
                             (1) a  fraction,  the  numerator  of  which  is the
number of  months  (including  as a whole  month any  partial  month)  that have
elapsed  since the beginning of such  Performance  Period until the date of such
Termination of Affiliation  and the denominator of which is the number of months
(including as a whole month any partial month) in the Performance Period; and
 
                             (2) a percentage  determined by the Committee  that
would be earned under the terms of the applicable Award Agreement  assuming that
the rate at which the  performance  goals have been  achieved  as of the date of
such Termination of Affiliation  would continue until the end of the Performance
Period,  or, if the Committee elects to compute the benefit after the end of the
Performance Period, the Performance Percentage,  as determined by the Committee,
attained during the Performance Period.
 
               (d)           Any Other  Reason.  If a Grantee has a  Termination
of  Affiliation  for any  reason  other  than for Cause,  death,  Disability  or
Retirement, then:
 
                      (i) the  Grantee's   Restricted   Shares,  to  the  extent
forfeitable on the date of the Grantee's  Termination of  Affiliation,  shall be
forfeited on such date;
 
                      (ii)  if  such  Termination  of  Affiliation was voluntary
or  involuntary,  any  unexercised  Option  or SAR,  to the  extent  exercisable
immediately before the Grantee's Termination of Affiliation, may be exercised in
whole or in part,  not  later  than  three  months  after  such  Termination  of
Affiliation  (but only during the Option  Term) by the Grantee or,  after his or
her death, by (A) his or her personal  representative  or the person to whom the
Option or SAR, as
 
                                       13
<PAGE>
 
applicable,  is  transferred  by will or the  applicable  laws  of  descent  and
distribution,  or (B) the Grantee's  beneficiary  designated in accordance  with
Article 11; and
 
                      (iii)  if such Termination of Affiliation was involuntary,
then any Option, to the extent  unexercisable  immediately  before the Grantee's
Termination of Affiliation, may be exercised in whole or in part, not later than
three months after such  Termination of Affiliation  (but only during the Option
Term) by the  Grantee  or,  after his or her death,  by (A) his or her  personal
representative  or the person to whom the Option is  transferred  by will or the
applicable laws of descent and  distribution,  or (b) the Grantee's  beneficiary
designated in accordance with Article 11: and
 
                      (iv) any  Performance  Shares  or  Performance  Units with
respect  to which the  Performance  Period  has not ended as of the date of such
Termination of Affiliation shall terminate  immediately upon such Termination of
Affiliation.
 
        5.7           Nontransferability of Awards.
 
               (a) Except as provided in Section 5.7(c) below,  each Award,  and
each right under any Award,  shall be exercisable only by the Grantee during the
Grantee's  lifetime,  or, if permissible  under applicable law, by the Grantee's
guardian or legal representative.
 
               (b) Except as provided in Section  5.7(c) below,  no Award (prior
to the time, if applicable,  Shares are issued in respect of such Award), and no
right under any Award, may be assigned,  alienated,  pledged,  attached, sold or
otherwise  transferred  or encumbered by a Grantee  otherwise than by will or by
the laws of descent and  distribution (or in the case of Restricted  Shares,  to
the Company), and any such purported assignment, alienation, pledge, attachment,
sale,  transfer  or  encumbrance  shall be void and  unenforceable  against  the
Company or any Subsidiary; provided, that the designation of a beneficiary shall
not constitute an assignment,  alienation, pledge, attachment, sale, transfer or
encumbrance.
 
               (c) To the extent and in the manner  permitted by the  Committee,
and subject to such terms,  conditions,  restrictions or limitations that may be
prescribed  by the  Committee,  a Grantee may  transfer an Award  (other than an
Incentive Stock Option) to (i) a spouse,  sibling,  parent,  child (including an
adopted child) or grandchild (any of which, an "Immediate Family Member") of the
Grantee; (ii) a trust, the primary beneficiaries of which consist exclusively of
the Grantee or Immediate Family Members of the Grantee;  or (iii) a corporation,
partnership or similar  entity,  the owners of which consist  exclusively of the
Grantee or Immediate Family Members of the Grantee.
 
        5.8           Cancellation  and Rescission of Awards.  Unless the Award
Agreement  specifies  otherwise,  the  Committee may cancel,  rescind,  suspend,
withhold,  or otherwise limit or restrict any  unexercised  Award at any time if
the Grantee is not in  compliance  with all  applicable  provisions of the Award
Agreement and the Plan or if the Grantee has a Termination  of  Affiliation  for
Cause.
 
                                       14
<PAGE>
 
        5.9           Loans  and  Guarantees.  The  Committee  may,  subject  to
applicable  law,  (i) allow a Grantee to defer  payment to the Company of all or
any portion of the Option Price of an Option or the purchase price of Restricted
Shares,  or (ii) cause the Company to loan to the  Grantee,  or guarantee a loan
from a third party to the Grantee for, all or any portion of the Option Price of
an Option or the purchase  price of  Restricted  Shares or all or any portion of
any taxes associated with the exercise of,  nonforfeitability  of, or payment of
benefits in  connection  with,  an Award.  Any such  payment  deferral,  loan or
guarantee by the Company shall be on such terms and  conditions as the Committee
may determine.
 
Article 6.  Stock Options
 
        6.1           Grant of Options.  Subject to the terms and  provisions of
the Plan, Options may be granted to any Eligible Person in such number, and upon
such terms,  and at any time and from time to time as shall be determined by the
Committee.  Without in any manner limiting the generality of the foregoing,  the
Committee  may grant to any Eligible  Person,  or permit any Eligible  Person to
elect  to  receive,  an  Option  in lieu  of or in  substitution  for any  other
compensation  (whether  payable  currently or on a deferred  basis,  and whether
payable under this Plan or otherwise) which such Eligible Person may be eligible
to receive from the Company or a Subsidiary.
 
        6.2           Award  Agreement.  Each Option grant shall be evidenced by
an Award  Agreement  that shall specify the Option Price,  the Option Term,  the
number of shares to which the Option  pertains,  the time or times at which such
Option shall be  exercisable  and such other  provisions as the Committee  shall
determine.
 
        6.3           Option Price. The  Option  Price  of  an Option under this
Plan shall be  determined by the  Committee,  and shall be equal to or more than
100% of the Fair Market Value of a Share on the Grant Date;  provided,  however,
that any Option that is (i) granted to a Grantee in connection with the Spin-off
Distribution, (ii) associated with an option to purchase shares of stock of KCSI
("KCSI  Option")  held by  such  Grantee  immediately  prior  to  such  Spin-off
Distribution,  and (iii) intended to preserve for the Grantee the economic value
of all or a portion of such KCSI Option ("KCSI  Substitute  Option") may, to the
extent necessary to achieve such preservation of economic value, be granted with
an Option  Price that is less than 100% of the Fair  Market  Value of a Share on
the Grant Date; and provided,  further, that any Option that is (x) granted to a
Grantee in connection with the acquisition ("Acquisition"), however effected, by
the Company of another  corporation or entity ("Acquired  Entity") or the assets
thereof,  (y)  associated  with an  option  to  purchase  shares of stock of the
Acquired Entity or an affiliate thereof  ("Acquired Entity Option") held by such
Grantee immediately prior to such Acquisition,  and (z) intended to preserve for
the  Grantee  the  economic  value of all or a portion of such  Acquired  Entity
Option  ("Substitute  Option")  may,  to the extent  necessary  to achieve  such
preservation  of economic  value,  be granted  with an Option Price that is less
than 100% of the Fair Market Value of a Share on the Grant Date.
 
        6.4           Grant of Incentive Stock Options. At the time of the grant
of any Option,  the  Committee  may  designate  that such  Option  shall be made
subject to additional restrictions to permit
 
                                       15
<PAGE>
 
it to qualify as an "incentive  stock option" under the  requirements of Section
422 of the Code. Any Option  designated as an Incentive  Stock Option shall,  to
the extent required by Section 422 of the Code:
 
               (i)      if  granted to  a 10%  Owner,  have an Option  Price not
less than 110% of the Fair Market Value of a Share on its Grant Date;
 
               (ii) be exercisable  for a period of not more than 10 years (five
years in the case of an Incentive  Stock Option granted to a 10% Owner) from its
Grant Date, and be subject to earlier  termination as provided  herein or in the
applicable Award Agreement;
 
               iii) not have an  aggregate  Fair  Market  Value (as of the Grant
Date of each  Incentive  Stock  Option)  of the  Shares  with  respect  to which
Incentive  Stock  Options  (whether  granted  under the Plan or any other  stock
option  plan of the  Grantee's  employer  or any  parent or  Subsidiary  thereof
("Other  Plans")) are  exercisable for the first time by such Grantee during any
calendar  year,  determined in accordance  with the provisions of Section 422 of
the Code, which exceeds $100,000 (the "$100,000 Limit");
 
               (iv) if the aggregate Fair Market Value of the Shares (determined
on the  Grant  Date)  with  respect  to the  portion  of  such  grant  which  is
exercisable  for the first time during any calendar year  ("Current  Grant") and
all  Incentive  Stock  Options  previously  granted under the Plan and any Other
Plans which are  exercisable  for the first time during the same  calendar  year
("Prior Grants") would exceed the $100,000 Limit be exercisable as follows:
 
                      (A) the portion of the Current  Grant  which  would,  when
        added to any Prior Grants,  be exercisable  with respect to Shares which
        would  have  an  aggregate  Fair  Market  Value  (determined  as of  the
        respective  Grant Date for such options) in excess of the $100,000 Limit
        shall,  notwithstanding  the terms of the Current Grant,  be exercisable
        for the first time by the Grantee in the first subsequent  calendar year
        or years in which it  could be  exercisable  for the  first  time by the
        Grantee when added to all Prior Grants  without  exceeding  the $100,000
        Limit; and
 
                      (B) if,  viewed as of the date of the Current  Grant,  any
        portion of a Current  Grant could not be exercised  under the  preceding
        provisions of this Section during any calendar year  commencing with the
        calendar year in which it is first exercisable through and including the
        last  calendar  year in which it may by its  terms  be  exercised,  such
        portion of the Current Grant shall not be an Incentive Stock Option, but
        shall be exercisable as an Option which is not an Incentive Stock Option
        at such date or dates as are provided in the Current Grant;
 
               (v)      be granted within 10 years from the  earlier of the date
the Plan is adopted or the date the Plan is approved by the  stockholders of the
Company; and
 
                                       16
<PAGE>
 
               (vi) by its terms not be assignable or transferable other than by
will or the laws of descent and  distribution  and may be exercised,  during the
Grantee's lifetime,  only by the Grantee;  provided,  however,  that the Grantee
may,  in any  manner  permitted  by the Plan  and  specified  by the  Committee,
designate in writing a beneficiary to exercise his or her Incentive Stock Option
after the Grantee's death.
 
        Any Option  designated  as an Incentive  Stock Option shall also require
the Grantee to notify the  Committee  of any  disposition  of any Shares  issued
pursuant to the exercise of the Incentive  Stock Option under the  circumstances
described  in Section  421(b) of the Code  (relating  to  certain  disqualifying
dispositions) (any such circumstance, a "Disqualifying Disposition"),  within 10
days of such Disqualifying Disposition.
 
        Notwithstanding  the foregoing and Section  3.2(v),  the Committee  may,
without the consent of the Grantee, at any time before the exercise of an Option
(whether or not an Incentive Stock Option), take any action necessary to prevent
such Option from being treated as an Incentive Stock Option.
 
        6.5           Payment.  Options  granted under  this Article 6 shall  be
exercised  by the  delivery  of a written  notice of  exercise  to the  Company,
setting  forth the  number of Shares  with  respect to which the Option is to be
exercised, accompanied by full payment for the Shares made by any one or more of
the following means subject to the approval of the Committee:
 
                      (a)  cash, personal check or wire transfer;
 
                      (b)  Mature Shares, valued at  their Fair Market  Value on
the date of exercise;
 
                      (c) Restricted Shares held by the Grantee for at least six
        months  prior to the  exercise of the Option,  each such Share valued at
        the Fair Market Value of a Share on the date of exercise;
 
                      (d) subject to  applicable  law,  pursuant  to  procedures
        approved by the  Committee,  through the sale of the Shares  acquired on
        exercise of the Option through a  broker-dealer  to whom the Grantee has
        submitted an irrevocable notice of exercise and irrevocable instructions
        to deliver  promptly to the Company the amount of sale or loan  proceeds
        sufficient  to pay for such Shares,  together  with, if requested by the
        Company,  the amount of  federal,  state,  local or foreign  withholding
        taxes payable by Grantee by reason of such exercise; or
 
                      (e) when permitted by the  Committee,  payment may also be
        made in accordance with Section 5.9.
 
        If any Restricted Shares ("Tendered  Restricted Shares") are used to pay
the Option Price, a number of Shares acquired on exercise of the Option equal to
the  number  of  Tendered  Restricted
 
                                       17
<PAGE>
 
Shares  shall  be  subject  to  the same restrictions as the Tendered Restricted
Shares, determined as of the date of exercise of the Option.
 
Article 7.   Stock Appreciation Rights and Limited Stock Appreciation Rights
 
        7.1           Grant of SARs. Subject to the terms and conditions of  the
Plan,  SARs may be granted to any  Eligible  Person at any time and from time to
time  as  shall  be  determined  by  the  Committee.  The  Committee  may  grant
Freestanding SARs, Tandem SARs, or any combination thereof.
 
        The Committee shall determine the number of SARs granted to each Grantee
(subject to Article 4), the Strike Price thereof,  and,  consistent with Section
7.2 and the other  provisions  of the  Plan,  the  other  terms  and  conditions
pertaining to such SARs.
 
        7.2           Exercise of Tandem SARs.  Tandem SARs may be exercised for
all or part of the Shares subject to the related Award upon the surrender of the
right to exercise the equivalent  portion of the related Award. A Tandem SAR may
be exercised only with respect to the Shares for which its related Award is then
exercisable.
 
        Notwithstanding  any other provision of this Plan to the contrary,  with
respect  to a Tandem  SAR,  (i) the  Tandem  SAR will  expire no later  than the
expiration of the underlying  Option;  (ii) the value of the payout with respect
to the Tandem  SAR may be for no more than 100% of the  difference  between  the
Option  Price of the  underlying  Option and the Fair Market Value of the Shares
subject to the  underlying  Option at the time the Tandem SAR is exercised;  and
(iii) the Tandem SAR may be  exercised  only when the Fair  Market  Value of the
Shares subject to the Option exceeds the Option Price of the Option.
 
        7.3           Payment  of  SAR  Amount.  Upon exercise  of  an  SAR, the
Grantee  shall be  entitled  to receive  payment  from the  Company in an amount
determined by multiplying:
 
               (a)    the excess of the Fair Market Value of a Share on the date
                      of  exercise  over the Strike Price;
 
by
 
               (b)    the  number  of  Shares  with  respect to which the SAR is
                      exercised;
 
provided that the Committee may provide in the Award  Agreement that the benefit
payable on  exercise  of an SAR shall not  exceed  such  percentage  of the Fair
Market Value of a Share on the Grant Date as the  Committee  shall  specify.  As
determined  by the  Committee,  the payment upon SAR exercise may be in cash, in
Shares which have an aggregate  Fair Market Value (as of the date of exercise of
the SAR) equal to the amount of the payment, or in some combination  thereof, as
set forth in the Award Agreement.
 
                                       18
<PAGE>
 
        7.4           Grant of LSARs.  Subject  to the terms and  conditions  of
the Plan,  LSARs may be granted to any Eligible Person at any time and from time
to time as shall be determined by the  Committee.  Each LSAR shall be identified
with a Share subject to an Option or SAR held by the Grantee,  which may include
an  Option  or SAR  previously  granted  under  the  Plan.  Upon  the  exercise,
expiration,  termination,  forfeiture or  cancellation of the Option or SAR with
which an LSAR is identified, such LSAR shall terminate.
 
        7.5           Exercise  of  LSARs.  Each  LSAR  shall  automatically  be
exercised  upon a Change of Control which has not been approved by the Incumbent
Board. The exercise of an LSAR shall result in the cancellation of the Option or
SAR with which such LSAR is identified, to the extent of such exercise.
 
        7.6           Payment of LSAR Amount.  Within 10 business days after the
exercise of an LSAR,  the Company  shall pay to the Grantee,  in cash, an amount
equal to the difference between:
 
               (a)    the greatest of (i) the Change of Control Value,  (ii) the
                      Fair Market Value of a Share on the date occurring  during
                      the 180-day period  immediately  preceding the date of the
                      Change of Control on which such Fair  Market  Value is the
                      greatest or (iii) such other valuation  amount, if any, as
                      may  be  determined  pursuant  to  the  provisions  of the
                      applicable Award Agreement;
 
minus
 
               (b)    either  (i) in the  case  of an  LSAR  identified  with an
                      Option,  the  Option  Price of such  Option or (ii) in the
                      case of an LSAR  identified  with an SAR, the Strike Price
                      of such SAR.
 
Article 8.   Restricted Shares
 
        8.1           Grant of  Restricted  Shares.  Subject  to  the  terms and
provisions of the Plan,  the  Committee,  at any time and from time to time, may
grant Restricted  Shares to any Eligible Person in such amounts as the Committee
shall determine.
 
        8.2           Award Agreement.  Each grant of Restricted Shares shall be
evidenced by an Award Agreement that shall specify the Period(s) of Restriction,
the  number of  Restricted  Shares  granted,  and such other  provisions  as the
Committee  shall  determine.  The  Committee may impose such  conditions  and/or
restrictions  on any Restricted  Shares  granted  pursuant to the Plan as it may
deem advisable,  including  restrictions  based upon the achievement of specific
performance goals  (Company-wide,  divisional,  Subsidiary  and/or  individual),
time-based   restrictions  on  vesting,  and/or  restrictions  under  applicable
securities laws.
 
        8.3           Consideration.  The Committee shall  determine the amount,
if any, that a Grantee shall pay for Restricted  Shares,  which shall be (except
with respect to Restricted Shares that are treasury shares) at least the Minimum
Consideration for each Restricted Share. Such payment shall
 
                                       19
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be made in full by the  Grantee  before  the  delivery  of the shares and in any
event no later than 10 business days after the Grant Date for such shares.
 
        8.4           Effect of Forfeiture. If Restricted Shares are  forfeited,
and if the  Grantee  was  required  to pay for  such  shares  or  acquired  such
Restricted Shares upon the exercise of an Option, the Grantee shall be deemed to
have resold such Restricted Shares to the Company at a price equal to the lesser
of (x) the amount  paid by the Grantee for such  Restricted  Shares,  or (y) the
Fair Market Value of a Share on the date of such  forfeiture.  The Company shall
pay to the Grantee the required amount as soon as is administratively practical.
Such Restricted Shares shall cease to be outstanding, and shall no longer confer
on the Grantee  thereof any rights as a  stockholder  of the  Company,  from and
after the date of the event causing the  forfeiture,  whether or not the Grantee
accepts the Company's tender of payment for such Restricted Shares.
 
        8.5           Escrow;  Legends.  The  Committee  may  provide  that  the
certificates for any Restricted  Shares (x) shall be held (together with a stock
power  executed  in blank by the  Grantee)  in  escrow by the  Secretary  of the
Company  until such  Restricted  Shares become  nonforfeitable  or are forfeited
and/or (y) shall bear an  appropriate  legend  restricting  the transfer of such
Restricted Shares. If any Restricted Shares become  nonforfeitable,  the Company
shall cause certificates for such shares to be issued without such legend.
 
Article 9.   Performance Units and Performance Shares
 
        9.1           Grant of Performance Units and Performance Shares. Subject
to the terms of the Plan, Performance Units or Performance Shares may be granted
to any Eligible Person in such amounts and upon such terms,  and at any time and
from time to time, as shall be determined by the Committee.
 
        9.2           Value/Performance Goals. Each Performance Unit shall have
an initial value that is established by the Committee at the time of grant. Each
Performance  Share shall have an initial value equal to the Fair Market Value of
a Share on the date of grant.  The Committee shall set performance  goals which,
depending  on the extent to which  they are met,  will  determine  the number or
value of Performance  Units or  Performance  Shares that will be paid out to the
Grantee.  For  purposes  of this  Article 9, the time  period  during  which the
performance goals must be met shall be called a "Performance Period."
 
        9.3           Earning  of  Performance  Units  and  Performance  Shares.
Subject to the terms of this Plan, after the applicable  Performance  Period has
ended, the holder of Performance  Units or Performance  Shares shall be entitled
to  receive  a payout  based on the  number  and value of  Performance  Units or
Performance  Shares  earned by the Grantee over the  Performance  Period,  to be
determined  as a function of the extent to which the  corresponding  performance
goals have been achieved.
 
        If a Grantee is promoted, demoted or transferred to a different business
unit of the  Company  during a  Performance  Period,  then,  to the  extent  the
Committee  determines the performance goals
 
                                       20
<PAGE>
 
or  Performance  Period are no longer  appropriate,  the  Committee  may adjust,
change or eliminate the performance goals or the applicable  Performance  Period
as it deems  appropriate in order to make them appropriate and comparable to the
initial performance goals or Performance Period.
 
        9.4           Form and  Timing  of  Payment  of  Performance  Units  and
Performance  Shares.  Payment of earned  Performance Units or Performance Shares
shall be made in a lump sum  following the close of the  applicable  Performance
Period.  The Committee may pay earned Performance Units or Performance Shares in
the  form of cash or in  Shares  (or in a  combination  thereof)  which  have an
aggregate Fair Market Value equal to the value of the earned  Performance  Units
or Performance Shares at the close of the applicable  Performance  Period.  Such
Shares may be granted  subject to any  restrictions  deemed  appropriate  by the
Committee.  The form of  payout of such  Awards  shall be set forth in the Award
Agreement pertaining to the grant of the Award.
 
        As determined by the Committee, a Grantee may be entitled to receive any
dividends  declared  with respect to Shares which have been earned in connection
with grants of Performance  Units or Performance  Shares but not yet distributed
to the Grantee. In addition,  a Grantee may, as determined by the Committee,  be
entitled to exercise his or her voting rights with respect to such Shares.
 
Article 10.   Bonus Shares
 
        Subject to the terms of the Plan,  the  Committee may grant Bonus Shares
to any Eligible  Person,  in such amount and upon such terms and at any time and
from time to time as shall be  determined  by the  Committee.  The terms of such
Bonus Shares shall be set forth in the Award  Agreement  pertaining to the grant
of the Award.
 
Article 11.   Beneficiary Designation
 
        Each Grantee under the Plan may, from time to time, name any beneficiary
or  beneficiaries  (who may be named  contingently or  successively) to whom any
benefit  under the Plan is to be paid in case of his or her  death  before he or
she receives any or all of such benefit.  Each such designation shall revoke all
prior  designations  by the same Grantee,  shall be in a form  prescribed by the
Company,  and will be  effective  only when filed by the Grantee in writing with
the  Company  during  the  Grantee's  lifetime.  In  the  absence  of  any  such
designation,  benefits  remaining unpaid at the Grantee's death shall be paid to
the Grantee's estate.
 
                                       21
<PAGE>
 
Article 12.  Deferrals  The  Committee  may permit or require a Grantee to defer
receipt of the payment of cash or the delivery of Shares that would otherwise be
due by  virtue  of the  exercise  of an  Option  or SAR,  the lapse or waiver of
restrictions  with  respect  to  Restricted  Shares,  the  satisfaction  of  any
requirements or goals with respect to Performance  Units or Performance  Shares,
or the grant of Bonus Shares. If any such deferral is required or permitted, the
Committee shall  establish  rules and procedures for such  deferrals.  Except as
otherwise  provided  in an Award  Agreement,  any payment or any Shares that are
subject to such  deferral  shall be made or  delivered  to the Grantee  upon the
Grantee's Termination of Affiliation.
 
Article 13.   Rights of Employees/Directors/Consultants
 
        13.1          Employment.  Nothing in the Plan shall  interfere  with or
limit in any way the right of the Company to terminate any Grantee's employment,
directorship  or  consultancy at any time, nor confer upon any Grantee the right
to continue in the employ or as a director or consultant of the Company.
 
        13.2          Participation.  No employee,  director or consultant shall
have the right to be selected to receive an Award under the Plan or, having been
so selected, to be selected to receive a future Award.
 
Article 14.   Change of Control
 
        14.1          Change  of  Control. Except  as otherwise provided  in  an
Award Agreement, if a Change of Control occurs, then:
 
               (i)  the  Grantee's   Restricted  Shares  that  were  forfeitable
shall thereupon become nonforfeitable;
 
               (ii) any unexercised Option or SAR, whether or not exercisable on
the date of such Change of Control, shall thereupon be fully exercisable and may
be exercised, in whole or in part; and
 
               (iii) the Company  shall  immediately  pay to the  Grantee,  with
respect to any Performance  Share or Performance  Unit with respect to which the
Performance  Period has not ended as of the date of such  Change of  Control,  a
cash payment equal to the product of (A) in the case of a Performance Share, the
Change of Control Value or (B) in the case of a Performance  Unit,  the value of
the Performance Unit specified in the Award Agreement, as applicable, multiplied
successively by each of the following:
 
                      (1) a fraction,  the  numerator  of which is the number of
whole and  partial  months  that have  elapsed  between  the  beginning  of such
Performance Period and the date of such Change
 
                                       22
<PAGE>
 
of  Control  and the  denominator  of which is the  number of whole and  partial
months in the Performance Period; and
 
                      (2) a  percentage  equal  to a  greater  of (x) the target
percentage,  if any,  specified  in the  applicable  Award  Agreement or (y) the
maximum  percentage,  if any,  that  would  be  earned  under  the  terms of the
applicable Award Agreement assuming that the rate at which the performance goals
have been achieved as of the date of such Change of Control would continue until
the end of the Performance Period.
 
        14.2          Pooling  of   Interests   Accounting.  If   the  Committee
determines,  prior  to a sale  or  merger  of the  Company  that  the  Committee
determines is reasonably likely to occur, that the grant or exercise of Options,
SARs  or  LSARs  would  preclude  the use of  pooling  of  interests  accounting
("pooling")  after  the  consummation  of such  sale or  merger  and  that  such
preclusion  of  pooling  would have a  material  adverse  effect on such sale or
merger,  the Committee  may (a) make any  adjustments  in such Options,  SARs or
LSARs  prior  to  the  sale  or  merger  that  will  permit  pooling  after  the
consummation of such sale or merger or (b) cause the Company to pay the benefits
attributable to such Options, SARs or LSARs (including for this purpose not only
the spread  between  the then Fair  Market  Value of the Shares  subject to such
Options,  SARs or LSARs and the Option Price or Strike Price applicable thereto,
but also the additional value of such Options,  SARs, or LSARs in excess of such
spread,  as determined  by the  Committee) in the form of Shares if such payment
would not cause the  transaction  to remain or become  ineligible  for  pooling;
provided,  however,  no  such  adjustment  or  payment  may be made  that  would
adversely affect in any material way any such Options, SARs or LSARs without the
consent of the affected Grantee.
 
Article 15.   Amendment, Modification, and Termination
 
        15.1          Amendment,  Modification, and Termination.  Subject to the
terms of the  Plan,  the  Board  may at any time and from  time to time,  alter,
amend, suspend or terminate the Plan in whole or in part without the approval of
the Company's stockholders.  The Board may delegate to the Plan Committee any or
all of the authority of the Board under Section 15.1 to alter, amend, suspend or
terminate the Plan.
 
        15.2          Adjustment  of  Awards  Upon  the  Occurrence  of  Certain
Unusual or Nonrecurring  Events. The Committee may make adjustments in the terms
and  conditions  of, and the criteria  included  in,  Awards in  recognition  of
unusual or nonrecurring  events  (including the events described in Section 4.2)
affecting the Company or the  financial  statements of the Company or of changes
in  applicable  laws,  regulations,  or  accounting  principles,   whenever  the
Committee  determines that such  adjustments are appropriate in order to prevent
dilution or  enlargement  of the benefits or potential  benefits  intended to be
made  available  under  the  Plan;  provided  that no such  adjustment  shall be
authorized  to the extent that such  authority  would be  inconsistent  with the
Plan's meeting the requirements of the Performance-Based Exception.
 
                                       23
<PAGE>
 
        15.3          Awards  Previously  Granted.  Notwithstanding   any  other
provision  of  the  Plan  to  the  contrary,  no  termination,   amendment,   or
modification  of the Plan shall  adversely  affect in any material way any Award
previously granted under the Plan, without the written consent of the Grantee of
such Award.
 
Article 16.   Withholding
 
        16.1          Withholding
 
               (a)      Mandatory Tax Withholding.
 
                      (1) Whenever,  under the Plan,  Shares are to be delivered
               upon  exercise or payment of an Award or upon  Restricted  Shares
               becoming  nonforfeitable,  or any other  event  with  respect  to
               rights and benefits  hereunder,  the Company shall be entitled to
               require  (i) that the  Grantee  remit an  amount  in cash,  or if
               determined by the Committee, Mature Shares, sufficient to satisfy
               all   federal,   state,   local  and  foreign   tax   withholding
               requirements related thereto ("Required  Withholding"),  (ii) the
               withholding  of  such  Required   Withholding  from  compensation
               otherwise  due to the Grantee or from any Shares or other payment
               due to the Grantee under the Plan or (iii) any combination of the
               foregoing.
 
                      (2) Any Grantee who makes a  Disqualifying  Disposition or
               an election  under  Section  83(b) of the Code shall remit to the
               Company an amount  sufficient to satisfy all  resulting  Required
               Withholding;  provided  that,  in lieu of or in  addition  to the
               foregoing,  the  Company  shall have the right to  withhold  such
               Required  Withholding  from  compensation  otherwise  due  to the
               Grantee or from any Shares or other  payment  due to the  Grantee
               under the Plan.
 
               (b)      Elective Share Withholding.
                        --------------------------
                      (1) Subject to subsection 16.1(b)(2),  a Grantee may elect
               the withholding ("Share Withholding") by the Company of a portion
               of the Shares subject to an Award upon the exercise of such Award
               or upon Restricted Shares becoming non-forfeitable or upon making
               an election  under  Section  83(b) of the Code (each,  a "Taxable
               Event")  having a Fair  Market  Value  equal  to (i) the  minimum
               amount  necessary  to  satisfy  Required  Withholding   liability
               attributable  to the Taxable Event;  or (ii) with the Committee's
               prior  approval,  a greater  amount,  not to exceed the estimated
               total amount of such  Grantee's tax liability with respect to the
               Taxable Event.
 
                      (2)  Each Share Withholding  election shall be  subject to
               the following conditions:
 
                             (i)    any   Grantee's  election   shall  be
subject to the  Committee's  discretion to revoke the  Grantee's  right to elect
Share Withholding at any time before the Grantee's election if the Committee has
reserved the right to do so in the Award Agreement;
 
                                       24
<PAGE>
 
                             (ii)   the  Grantee's  election must be made
before the date (the "Tax  Date") on which the amount of tax to be  withheld  is
determined; and
 
                             (iii)  the Grantee's election shall be irrevocable.
 
        16.2          Notification  under  Code Section 83(b). If  the  Grantee,
in  connection  with the  exercise  of any  Option,  or the grant of  Restricted
Shares,  makes the election permitted under Section 83(b) of the Code to include
in such Grantee's gross income in the year of transfer the amounts  specified in
Section  83(b) of the Code,  then such Grantee  shall notify the Company of such
election  within 10 days of filing the notice of the election  with the Internal
Revenue Service, in addition to any filing and notification required pursuant to
regulations  issued  under  Section  83(b) of the Code.  The  Committee  may, in
connection with the grant of an Award or at any time thereafter prior to such an
election  being  made,  prohibit a Grantee  from making the  election  described
above.
 
Article 17.   Successors
 
        All  obligations  of the Company  under the Plan with  respect to Awards
granted hereunder shall be binding on any successor to the Company,  whether the
existence  of such  successor  is the result of a direct or  indirect  purchase,
merger, consolidation,  or otherwise of all or substantially all of the business
and/or assets of the Company.
 
Article 18.   Additional Provisions
 
        18.1          Gender and Number. Except where otherwise indicated by the
context,  any masculine  term used herein also shall  include the feminine,  the
plural shall include the singular and the singular shall include the plural.
 
        18.2          Severability.  If any part of the Plan is declared by any
court or governmental  authority to be unlawful or invalid, such unlawfulness or
invalidity  shall not invalidate any other part of the Plan. Any Section or part
of a Section so  declared  to be  unlawful or invalid  shall,  if  possible,  be
construed  in a manner  which will give  effect to the terms of such  Section or
part of a Section to the fullest  extent  possible  while  remaining  lawful and
valid.
 
        18.3          Requirements  of  Law.  The  granting  of  Awards  and the
issuance  of Shares  under the Plan  shall be subject  to all  applicable  laws,
rules,  and regulations,  and to such approvals by any governmental  agencies or
stock exchanges as may be required. Notwithstanding any provision of the Plan or
any Award,  Grantees  shall not be entitled  to  exercise,  or receive  benefits
under,  any Award,  and the Company shall not be obligated to deliver any Shares
or other benefits to a Grantee,  if such exercise or delivery would constitute a
violation by the Grantee or the Company of any applicable law or regulation.
 
        18.4          Securities Law Compliance.
 
                                       25
<PAGE>
 
               (a) If the  Committee  deems  it  necessary  to  comply  with any
applicable  securities law, or the requirements of any stock exchange upon which
Shares may be  listed,  the  Committee  may  impose  any  restriction  on Shares
acquired  pursuant  to  Awards  under  the  Plan as it may deem  advisable.  All
certificates  for Shares  delivered  under the Plan pursuant to any Award or the
exercise  thereof  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 SEC, any stock exchange upon which Shares are then
listed,  any applicable  securities law, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to such
restrictions.  If so requested by the Company,  the Grantee shall make a written
representation  to the Company that he or she will not sell or offer to sell any
Shares unless a registration  statement  shall be in effect with respect to such
Shares under the  Securities Act of 1993, as amended,  and any applicable  state
securities law or unless he or she shall have furnished to the Company  evidence
satisfactory to the Company that such registration is not required.
 
               (b)  If  the   Committee   determines   that  the   exercise   or
nonforfeitability  of, or  delivery  of  benefits  pursuant  to, any Award would
violate any applicable  provision of securities laws or the listing requirements
of any stock  exchange upon which any of the  Company's  equity  securities  are
listed, then the Committee may postpone any such exercise,  nonforfeitability or
delivery,  as applicable,  but the Company shall use all  reasonable  efforts to
cause such  exercise,  nonforfeitability  or  delivery  to comply  with all such
provisions at the earliest practicable date.
 
        18.5          No Rights as a Stockholder.  A Grantee shall not have  any
rights as a  stockholder  of the Company with respect to the Shares  (other than
Restricted  Shares)  which may be  deliverable  upon exercise or payment of such
Award until such shares have been  delivered to him or her.  Restricted  Shares,
whether held by a Grantee or in escrow by the  Secretary  of the Company,  shall
confer on the  Grantee all rights of a  stockholder  of the  Company,  except as
otherwise  provided  in the Plan or Award  Agreement.  At the time of a grant of
Restricted  Shares,  the  Committee  may require  the payment of cash  dividends
thereon to be deferred  and,  if the  Committee  so  determines,  reinvested  in
additional Restricted Shares. Stock dividends and deferred cash dividends issued
with respect to Restricted  Shares shall be subject to the same restrictions and
other  terms  as apply to the  Restricted  Shares  with  respect  to which  such
dividends  are  issued.  The  Committee  may  provide for payment of interest on
deferred cash dividends.
 
        18.6          Nature  of  Payments.  Awards shall  be  special incentive
payments  to the Grantee and shall not be taken into  account in  computing  the
amount of salary or  compensation of the Grantee for purposes of determining any
pension,  retirement,  death or other benefit under (a) any pension, retirement,
profit-sharing,  bonus,  insurance or other employee benefit plan of the Company
or any Subsidiary or (b) any agreement between (i) the Company or any Subsidiary
and (ii) the Grantee, except as such plan or agreement shall otherwise expressly
provide.
 
        18.7          Performance  Measures.  Unless  and  until  the  Committee
proposes for stockholder vote and  stockholders  approve a change in the general
performance measures set forth
 
                                       26
<PAGE>
 
in this Section 18.7, the performance measure(s) to be used for purposes of such
Awards shall be chosen from among the following:
 
        (a)    Earnings (either in the aggregate or on a per-share basis);
 
        (b)    Net income (before or after taxes);
 
        (c)    Operating income;
 
        (d)    Cash flow;
 
        (e)    Return measures (including return on assets, equity, or sales);
 
        (f)    Earnings before or after either,  or any  combination  of, taxes,
               interest or depreciation and amortization;
 
        (g)    Gross revenues;
 
        (h)    Share price (including growth measures and stockholder  return or
               attainment  by the Shares of a  specified  value for a  specified
               period of time);
 
        (i)    Reductions  in  expense  levels in each case,  where  applicable,
               determined  either on a  Company-wide  basis or in respect of any
               one or more business units;
 
        (j)    Net economic value; or
 
        (k)    Market share.
 
        Any of the foregoing  performance measures may be applied, as determined
by the Committee,  on the basis of the Company as a whole,  or in respect of any
one or more Subsidiaries or divisions of the Company or any part of a Subsidiary
or division of the Company that is specified by the Committee.
 
        The Committee may adjust the  determinations of the degree of attainment
of the preestablished  performance goals;  provided,  however, that Awards which
are designed to qualify for the Performance-Based  Exception may not be adjusted
upward  without the approval of the Company's  stockholders  (the  Committee may
adjust such Awards downward).
 
        In the event that applicable tax and/or securities laws change to permit
Committee  discretion  to  alter  the  governing  performance  measures  without
obtaining  stockholder  approval  of such  changes,  and still  qualify  for the
Performance-Based  Exception,  the Committee  shall have sole discretion to make
such changes without obtaining stockholder approval.
 
                                       27
<PAGE>
 
        18.8          Governing  Law.  The Plan,  and all agreements  hereunder,
shall be construed in  accordance  with and governed by the laws of the State of
Delaware other than its laws respecting choice of law.
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