HERSHEY FOODS CORP
KEY EMPLOYEE INCENTIVE PLAN
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>ex101_keip.txt
<DESCRIPTION>KEY EMPLOYEE INCENTIVE PLAN
<TEXT>



                                                                   Exhibit 10.1


                            HERSHEY FOODS CORPORATION

                           KEY EMPLOYEE INCENTIVE PLAN



1.   ESTABLISHMENT AND PURPOSE

     Hershey Foods Corporation (the  "Corporation")  hereby  establishes the Key
     Employee Incentive Plan (the "Plan"). The purpose of the Plan is to provide
     to selected  key  employees of the  Corporation  and its  subsidiaries  (as
     defined  below),  upon whose efforts the  Corporation  is dependent for the
     successful  conduct of its  business,  further  incentive  to continue  and
     increase  their  efforts  as  employees  and to remain in the employ of the
     Corporation and its subsidiaries.

     The Plan  continues  the Annual  Incentive  Program  ("AIP"),  with certain
     modifications,  as in effect under the Corporation's  Management  Incentive
     Plan ("MIP")  established  in 1975 and as amended  thereafter,  pursuant to
     which participants are entitled to receive cash awards based on achievement
     of  performance  goals  during  annual  performance  cycles.  The Plan also
     continues the Long-Term  Incentive Program ("LTIP") portion of the MIP with
     certain modifications. In addition to performance stock units ("Performance
     Stock  Units"),  the LTIP  portion  now also  includes  nonqualified  stock
     options for the purchase of Common Stock  ("Options");  stock  appreciation
     rights ("SARs"); and restricted stock units ("Restricted Stock Units").

     As used  herein,  (i) the  term  "Subsidiary  Corporation"  shall  mean any
     present  or  future   corporation  which  is  or  would  be  a  "subsidiary
     corporation"  of the  Corporation as defined in Section 424 of the Internal
     Revenue Code of 1986 (the "Code"), and (ii) the term "Corporation"  defined
     above  shall  refer  collectively  to  Hershey  Foods  Corporation  and its
     Subsidiary Corporations unless the context indicates otherwise.

2.   STOCK SUBJECT TO THE PLAN

     The aggregate number of shares of the Corporation's Common Stock, $1.00 Par
     Value (the  "Common  Stock"),  which may be covered  by  Performance  Stock
     Units,  Options,  SARs and Restricted  Stock Units granted  pursuant to the
     LTIP portion of the Plan will be  established by the Board of Directors and
     will be subject to  adjustment  in  accordance  with Section 12 below.  The
     shares issued under this Plan may be either authorized but unissued shares,
     treasury  shares  held  by  the  Corporation  or  any  direct  or  indirect
     subsidiary  thereof or shares  acquired  by the  Corporation  through  open
     market  purchases  (whether made before or after any exercise of Options(s)
     or the granting of stock compensation  hereunder) or otherwise. In addition
     to shares of Common Stock actually  issued or  distributed  under the Plan,
     there shall be deemed to have been  issued a number of shares  equal to (i)
     the number of shares of Common Stock in respect of which optionees  utilize
     the manner of  exercise  of,  and  payment  for,  Options  as  provided  in
     Paragraph  7II(g)  of this  Plan,  and

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     (ii) the  number of shares of Common
     Stock which is  equivalent  in value to any cash amounts  distributed  upon
     payment of Performance  Stock Units,  SARs or Restricted  Stock Units.  For
     purposes of  determining  the charge to be made  pursuant  to subpart  (ii)
     against  the shares of Common  Stock  subject  to the Plan,  the value of a
     share of  Common  Stock  shall  be its Fair  Market  Value  as  defined  in
     Paragraph 4 when awards are made with respect to  Performance  Stock Units,
     upon exercise of SARs, and upon  expiration of the  applicable  restriction
     period of  Restricted  Stock Units.  Any shares  subject  under the Plan to
     Performance Stock Units, Options, SARs or Restricted Stock Units which, for
     any reason, expire or terminate or are forfeited or surrendered shall again
     be available for issuance under the Plan.

3.   ADMINISTRATION

     The  Plan  shall  be  administered  by  the   Compensation   and  Executive
     Organization  Committee  (the  "Committee"),  or any  successor  committee,
     appointed  by and  consisting  solely of members of the Board of  Directors
     (the  "Board")  of the  Corporation,  each  of  whom  qualifies  as  both a
     "nonemployee  director"  within the meaning of Rule 16b-3 or its  successor
     under  the  Securities  Exchange  Act of 1934 (the  "Exchange  Act") and an
     "outside  director"  within  the  meaning  of  Section  162(m) of the Code.
     Committee  members shall not be eligible to  participate  in the Plan.  The
     Board may from time to time remove and appoint  members of the Committee in
     substitution for, or in addition to, members  previously  appointed and may
     fill vacancies,  however caused, in the Committee.  The Committee may adopt
     such rules and regulations as it deems useful in governing its affairs. Any
     action of the  Committee  with  respect to the  administration  of the Plan
     shall be taken by majority vote at a Committee  meeting or written  consent
     of all Committee members.

     Subject to the terms and conditions of the Plan,  the Committee  shall have
     authority:  (i) to construe and interpret Plan  provisions;  (ii) to define
     the terms used in the Plan; (iii) to prescribe, amend and rescind rules and
     regulations  relating to the Plan; (iv) to select  particular  employees to
     participate in the Plan, (v) to determine the terms,  conditions,  form and
     amount of  grants,  distributions  or  payments  made to each  participant,
     including  conditions  upon  and  provisions  for  vesting,   exercise  and
     acceleration  of any  grants,  distributions  or  payments;  (vi)  upon the
     request of a participant in the Plan, to approve and determine the duration
     of leaves  of  absence  which may be  granted  to the  participant  without
     constituting  a termination  of his or her  employment  for purposes of the
     Plan; and (vii) to make all other determinations necessary or advisable for
     the  administration and operation of the Plan. The Committee shall have the
     right to impose varying terms and conditions  with respect to each grant or
     award. All determinations and  interpretations  made by the Committee shall
     be final,  binding and  conclusive on all  participants  and on their legal
     representatives and beneficiaries.

4.   FAIR MARKET VALUE

     As used in the Plan (unless a different  method of  calculation is required
     by  applicable  law, and except as otherwise  specifically  provided in any
     Plan  provision),  "Fair Market  Value" on or as of any date shall mean (i)
     the  closing  price of the Common  Stock as  reported in the New

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     York Stock Exchange Composite Transactions Report (or any other
     consolidated transactions reporting system which subsequently may replace
     such Composite Transactions Report) for the New York Stock Exchange trading
     day immediately preceding such date, or if there are no sales on such date,
     on the next preceding day on which there were sales, or (ii) in the event
     that the Common Stock is no longer listed for trading on the New York Stock
     Exchange, an amount determined in accordance with standards adopted by the
     Committee.

5.   ELIGIBILITY AND PARTICIPATION

     Key employees of the Corporation or of any of its Subsidiary  Corporations,
     including  officers and directors who are regular employees but not members
     of the Committee,  who in the opinion of the Committee are in a position to
     contribute   significantly  to  the  success  of  the  Corporation  or  any
     Subsidiary  Corporation,  division  or  operating  unit  thereof,  shall be
     eligible for selection to participate in the Plan. In making this selection
     and in  determining  the form  and  amount  of  grants,  distributions  and
     payments under the Plan,  the Committee  shall take into account the duties
     of the respective employees,  their present and potential  contributions to
     the success of the Corporation or any Subsidiary  Corporation,  division or
     operating  unit  thereof,  and such other factors as the Committee may deem
     relevant in  connection  with  accomplishing  the purposes of the Plan.  An
     employee  who  has  been  selected  to  participate  may,  if he or  she is
     otherwise eligible,  receive more than one grant from time to time, and may
     be granted any  combination  of  contingent  target grants under the AIP or
     under the LTIP components of the Plan, as the Committee shall determine.

6.   ANNUAL INCENTIVE PROGRAM

     The Committee may from time to time,  subject to the provisions of the Plan
     and such  other  terms  and  conditions  as the  Committee  may  determine,
     establish  contingent target grants for those eligible employees it selects
     to participate in the AIP. Each such contingent  grant may be, but need not
     be, evidenced by a written instrument,  and shall be determined in relation
     to the  participant's  level of  responsibility  in the Corporation and the
     competitive  compensation  practices  of other major  businesses,  and such
     other factors as are deemed appropriate by the Committee.

     (a) Awards actually earned by and paid to AIP  participants  ("AIP Awards")
         will be based  primarily upon  achievement of performance  goals over a
         one-year performance cycle as approved by the Committee.

     (b) The Committee, within the limits of the Plan, shall have full authority
         and  discretion  to  determine  the  time  or  times  of   establishing
         contingent  target  grants;  to select  from among those  eligible  the
         employees to receive  awards;  to review and certify the achievement of
         performance  goals;  to  designate  levels  of  awards  to be earned in
         relation to levels of achievement of performance  goals;  to adopt such
         financial  and  nonfinancial  performance  or  other  criteria  for the
         payment  of  awards  as it may  determine  from  time to time;  to make
         awards;  and to  establish  such other  measures as may be necessary to
         achieve the  objectives  of the Plan.  The  financial or  non-financial
         performance goals established by the Committee may be based upon one or
         more of the following: earnings per share, return on net assets, market

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         share,  control of costs, net sales,  cash flow,  economic  value-added
         measures, sales growth, earnings growth, stock price, return on equity,
         improvements in financial ratings,  regulatory compliance,  achievement
         of balance sheet or income statement objectives, or any other objective
         goals established by the Committee (the "Performance Factors").

     (c) Aggregate  annual AIP Awards  shall not exceed six (6%)  percent of the
         excess of Before-Tax  Income  (defined for these purposes as Net Income
         plus  provision for Federal,  state and local income taxes and interest
         expense on long-term debt, but after  consideration  of the cost of the
         Plan) over sixteen (16%) percent of Total Invested Capital (defined for
         these  purposes  as  Stockholders'  Equity  plus  Long-Term  Debt  plus
         Deferred Income Taxes) determined as the average of such Total Invested
         Capital  at the  beginning  of the  year  and the end of each  calendar
         quarter of such year. The maximum amount any participant can receive as
         an AIP Award for any calendar year shall not exceed $2,100,000.

     (d) AIP Awards as earned  under the terms of the Plan shall be paid in cash
         and may exceed or be less than the contingent  target grants,  provided
         that  payments  do not exceed  the  maximum  permitted  cost of the AIP
         calculated  pursuant to subparagraph (c) above.  Payment shall normally
         be made as soon as  possible  following  the  close  of the  year,  but
         payment of all or any portion may be deferred by participants  with the
         approval of the Committee.

7.   LONG-TERM INCENTIVE PROGRAM

     The LTIP consists of the following four components:

     I.  PERFORMANCE STOCK UNITS

         The Committee may, subject to the provisions of the Plan and such other
         terms and conditions as the Committee may determine,  grant Performance
         Stock  Units  to  reflect  the  value  of   contingent   target  grants
         established for each eligible employee selected for participation. Each
         grant of Performance  Stock Units may be, but need not be, evidenced by
         a written instrument. Such contingent target grants shall be determined
         in  relation  to  the  employee's  level  of   responsibility   in  the
         Corporation or any Subsidiary  Corporation,  division or operating unit
         thereof,  and the  competitive  compensation  practices  of other major
         businesses.

         (a)  Awards actually earned by and paid to holders of Performance Stock
              Units ("PSU Awards") will be based upon achievement of performance
              goals over performance  cycles as approved by the Committee.  Such
              performance  cycles  each  shall  cover such  period of time,  not
              exceeding  five years,  as the  Committee  from time to time shall
              determine.

         (b)  The  Committee,  within  the  limits of the Plan,  shall have full
              authority  and  discretion  to  determine  the  time or  times  of
              establishing   contingent   target  grants  and  the  granting  of

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              Performance  Stock Units;  to select from among those eligible the
              employees  to  receive  PSU  Awards;  to review  and  certify  the
              achievement of performance goals; to designate levels of awards to
              be earned in  relation  to levels of  achievement  of  performance
              goals;  to adopt such  financial and  nonfinancial  performance or
              other  criteria for the payment of PSU Awards as it may  determine
              from time to time;  to make awards;  and to  establish  such other
              measures as may be necessary to the  objectives  of the Plan.  The
              performance goals established by the Committee may be based on one
              or more of the Performance Factors.

         (c)  Payments of PSU Awards  shall be made in shares of Common Stock or
              partly  in cash as the  Committee  in its  sole  discretion  shall
              determine and shall be charged against the shares  available under
              the LTIP portion of the Plan as provided in Paragraph 2; provided,
              however,  that no  fractional  shares shall be issued and any such
              fraction will be  eliminated  by rounding  downward to the nearest
              whole share. In any case in which actual payment of a PSU Award is
              deferred as  provided  below,  a charge  will be made  against the
              available shares for the number of shares equivalent to the dollar
              amount of the deferred PSU Award.

         (d)  PSU Awards as earned  under the terms of the Plan may exceed or be
              less than the contingent target grants.  Payment shall normally be
              made as soon as  possible  following  the close of the  year,  but
              payment of all or any portion may be deferred by participants with
              the approval of the Committee.

         (e) The maximum amount a participant  can receive as a PSU Award in any
             calendar year is $2,430,000.

     II. STOCK OPTIONS

         The Committee may, from time to time,  subject to the provisions of the
         Plan and such other terms and  conditions  as it may  determine,  grant
         nonqualified  Options  to  purchase  shares  of  Common  Stock  of  the
         Corporation  to employees  eligible to  participate  in the Plan.  Each
         grant of an Option shall be on such terms and conditions and be in such
         form as the  Committee  may from time to time  approve,  subject to the
         following:

         (a)  The exercise  price per share with respect to each Option shall be
              determined by the Committee in its sole discretion,  but shall not
              be less than 100% of the Fair Market  Value of the Common Stock as
              of the date of the grant of the Option.

         (b)  Options  granted  under  the Plan  shall be  exercisable,  in such
              installments  and for such  periods,  as shall be  provided by the
              Committee  at the  time of  granting,  but in no event  shall  any
              Option granted extend for a period in excess of ten years from the
              date of grant.

         (c)  The maximum  number of shares of Common  Stock  covered by Options
              granted to a  participant  for any calendar  year shall not exceed
              250,000.

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         (d)  Among other  conditions  that may be imposed by the Committee,  if
              deemed  appropriate,  are  those  relating  to (i) the  period  or
              periods and the conditions of exercisability  of any Option;  (ii)
              the minimum  periods  during  which  grantees  of Options  must be
              employed, or must hold Options before they may be exercised; (iii)
              the minimum  periods  during which shares  acquired  upon exercise
              must be held  before  sale or transfer  shall be  permitted;  (iv)
              conditions  under  which such  Options or shares may be subject to
              forfeiture;  and (v) the  frequency  of exercise or the minimum or
              maximum number of shares that may be acquired at any one time.

         (e)  Exercise  of an Option  shall be by  written  notice  stating  the
              election  to  exercise  in the form and manner  determined  by the
              Committee.

         (f)  The  purchase  price upon  exercise of any Option shall be paid in
              full by making  payment  (i) in cash;  (ii) in whole or in part by
              the delivery of a certificate or  certificates of shares of Common
              Stock of the Corporation, valued at its then Fair Market Value; or
              (iii) by a combination of (i) and (ii).

         (g)  Notwithstanding  subparagraph  (e) above,  any  optionee  may make
              payment of the Option price through a simultaneous exercise of his
              or her Option and sale of the shares thereby acquired  pursuant to
              a brokerage  arrangement  approved in advance by the  Committee to
              assure its conformity with the terms and conditions of the Plan.

         (h)  The Committee may require the surrender of outstanding Options as
              a condition to the grant of new Options.

         (i)  Notwithstanding  any other  provision of the Plan or of any Option
              agreement  between  the  Corporation  and an  employee,  upon  the
              occurrence of a Change in Control, each outstanding Option held by
              a  participant  who  is an  employee  of  the  Corporation  or any
              Subsidiary  Corporation  or  who  retired  while  employed  by the
              Corporation  or any  Subsidiary  Corporation  shall  become  fully
              vested and  exercisable  notwithstanding  any vesting  schedule or
              installment schedule relating to the exercisability of such Option
              contained  in  the  applicable   Option   agreement  or  otherwise
              established at the time of grant of the Option.

         (j)  For purposes of this Plan, a "Change in Control" means:

              (1) Individuals  who, on June 8, 1999,  constitute  the Board (the
                  "Incumbent  Directors")  cease for any reason to constitute at
                  least a  majority  of the  Board,  provided  that  any  person
                  becoming a director subsequent to June 8, 1999, whose election
                  or nomination  for election was approved by a vote of at least
                  two-thirds  of the  Incumbent  Directors  then  on  the  Board
                  (either by specific vote or by approval of the proxy statement
                  of the  Corporation  in which such  person is named as nominee
                  for director,  without written  objection to such  nomination)
                  shall be an Incumbent  Director;  PROVIDED,  HOWEVER,  that no
                  individual initially elected or nominated as a director of the
                  Corporation  as a result of an actual or  threatened  election
                  contest (as  described in Rule 14a-11 under the Exchange  Act)

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                 ("Election   Contest")   or   other   actual   or   threatened
                  solicitation  of  proxies or  consents  by or on behalf of any
                  person  (as such term is  defined  in  Section  3(a)(9) of the
                  Exchange  Act and as used in Section  13(d)(3) and 14(d)(2) of
                  the  Exchange  Act)  ("Person")  other than the Board  ("Proxy
                  Contest"),  including by reason of any  agreement  intended to
                  avoid or settle any Election  Contest or Proxy Contest,  shall
                  be  deemed  an  Incumbent  Director;   and  PROVIDED  FURTHER,
                  HOWEVER,  that a director who has been approved by the Hershey
                  Trust while it beneficially owns more than 50% of the combined
                  voting power of the then outstanding  voting securities of the
                  Corporation  entitled  to vote  generally  in the  election of
                  directors (the "Outstanding  Corporation  Voting Power") shall
                  be deemed to be an Incumbent Director; or

              (2) The  acquisition  or  holding  by  any  Person  of  beneficial
                  ownership  (within  the  meaning  of Section  13(d)  under the
                  Exchange  Act  and  the  rules  and  regulations   promulgated
                  thereunder)  of shares of the Common  Stock and/or the Class B
                  Common Stock of the  Corporation  representing  25% or more of
                  either (i) the total number of then outstanding shares of both
                  Common Stock and Class B Common Stock of the Corporation  (the
                  "Outstanding  Corporation  Stock")  or  (ii)  the  Outstanding
                  Corporation  Voting Power;  provided that, at the time of such
                  acquisition  or holding of  beneficial  ownership  of any such
                  shares,  the Hershey Trust does not beneficially own more than
                  50% of the Outstanding Corporation Voting Power; and provided,
                  further,  that any such  acquisition  or holding of beneficial
                  ownership  of shares of either  Common Stock or Class B Common
                  Stock  of the  Corporation  by any of the  following  entities
                  shall  not by  itself  constitute  such a  Change  in  Control
                  hereunder:  (i) the Hershey Trust;  (ii) any trust established
                  by the  Corporation or by any Subsidiary  Corporation  for the
                  benefit of the Corporation  and/or its employees or those of a
                  Subsidiary  Corporation or by any Subsidiary  Corporation  for
                  the benefit of the  Corporation  and/or its employees or those
                  of a Subsidiary  Corporation;  (iii) any employee benefit plan
                  (or related trust)  sponsored or maintained by the Corporation
                  or any  Subsidiary  Corporation;  (iv) the  Corporation or any
                  Subsidiary  Corporation  or (v)  any  underwriter  temporarily
                  holding securities pursuant to an offering of such securities;
                  or

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              (3) The approval by the  stockholders  of the  Corporation  of any
                  merger,  reorganization,  recapitalization,  consolidation  or
                  other form of business combination (a "Business  Combination")
                  if, following  consummation of such Business Combination,  the
                  Hershey Trust does not  beneficially  own more than 50% of the
                  total voting power of all outstanding voting securities of (x)
                  the surviving entity or entities (the "Surviving Corporation")
                  or (y) if applicable,  the ultimate  parent  corporation  that
                  directly or indirectly has  beneficial  ownership of more than
                  50% of the  combined  voting  power  of the  then  outstanding
                  voting securities eligible to elect directors of the Surviving
                  Corporation; or

              (4) The approval by the stockholders of the Corporation of (i) any
                  sale or other  disposition of all or substantially  all of the
                  assets  of the  Company,  other  than  to a  corporation  (the
                  "Acquiring  Corporation")  if, following  consummation of such
                  sale or other disposition, the Hershey Trust beneficially owns
                  more than 50% of the  total  voting  power of all  outstanding
                  voting  securities  eligible  to  elect  directors  (x) of the
                  Acquiring  Corporation  or (y)  if  applicable,  the  ultimate
                  parent  corporation that directly or indirectly has beneficial
                  ownership of more than 50% of the combined voting power of the
                  then outstanding voting securities eligible to elect directors
                  of  the  Acquiring  Corporation,  or  (ii)  a  liquidation  or
                  dissolution of the Company.

              For purposes of this Plan, "Hershey Trust" means either or both of
              (a) the Hershey Trust  Company,  a  Pennsylvania  corporation,  as
              Trustee for the Milton  Hershey  School,  or any  successor to the
              Hershey Trust Company as such trustee,  and (b) the Milton Hershey
              School, a Pennsylvania not-for-profit corporation

         (k)  For purposes of this Plan, a "Potential Change in Control" means:

              (1) The Hershey  Trust by action of any of the Board of  Directors
                  of Hershey  Trust  Company;  the Board of  Managers  of Milton
                  Hershey School; the Investment Committee of the Hershey Trust;
                  and/or any of the officers of Hershey  Trust Company or Milton
                  Hershey    School   (acting   with    authority)    undertakes
                  consideration  of any action the taking of which would lead to
                  a Change in  Control  as defined  herein,  including,  but not
                  limited to  consideration  of (i) an offer made to the Hershey
                  Trust to purchase any number of its shares in the  Corporation
                  such that if the Hershey  Trust  accepted  such offer and sold
                  such number of shares in the  Corporation  the  Hershey  Trust
                  would  no  longer  have  more  than  50%  of  the  Outstanding
                  Corporation  Voting  Power,  (ii) an  offering  by the Hershey
                  Trust of any number of its shares in the  Corporation for sale
                  such that if such  sale were  consummated  the  Hershey  Trust
                  would  no  longer  have  more  than  50%  of  the  Outstanding
                  Corporation  Voting Power or (iii) entering into any agreement
                  or understanding  with a person or entity that would lead to a
                  Change in Control; or

              (2) The Board approves a transaction  described in subsection (2),
                  (3) or (4) of the definition of a Change in Control  contained
                  in subparagraph (j) of Paragraph 7II hereof.

         (l)  In the event that a transaction which would constitute a Change in
              Control if approved by the  stockholders  of the Corporation is to
              be  submitted  to  such  stockholders  for  their  approval,  each
              participant  who is an  employee  and who holds an Option  granted
              under the Plan at the time  scheduled for the taking of such vote,
              whether or not then exercisable, shall have the right to receive a
              notice at least ten (10)  business days prior to the date on which
              such vote is to be taken.  Such notice shall set forth the date on
              which such vote of  stockholders  is to be taken, a description of
              the transaction  being proposed to stockholders for such approval,
              a description of the provisions of  subparagraph  (i) of Paragraph

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              7II of the Plan and a  description  of the impact  thereof on such
              participant  in  the  event  that  such  stockholder  approval  is
              obtained. Such notice shall also set forth the manner in which and
              price at which all  Options  then  held by each  such  participant
              could  be  exercised  upon  the  obtaining  of  such   stockholder
              approval.

     III.STOCK APPRECIATION RIGHTS

         The Committee may, from time to time,  subject to the provisions of the
         Plan  and  such  other  terms  and  conditions  as  the  Committee  may
         determine, grant SARs to employees eligible to participate in the Plan.
         SARs may, but need not be  evidenced  by an  agreement  executed by the
         Corporation  and the  holder,  and shall be  subject  to such terms and
         conditions  consistent with the Plan as the Committee shall impose from
         time to time, including the following:

         (a)  SARs may, but need not,  relate to Options granted under the Plan,
              as the Committee  shall  determine  from time to time. In no event
              shall any SARs granted  extend for a period in excess of ten years
              from the date of grant.

         (b)  A holder shall  exercise his or her SARs by giving  written notice
              of  such  exercise  in  the  form  and  manner  determined  by the
              Committee, and the date upon which such written notice is received
              by the Corporation shall be the exercise date for the SARs.

         (c)  A holder of SARs shall be entitled to receive  upon  exercise  the
              excess of the Fair Market  Value of a share of Common Stock at the
              time of exercise over the Fair Market Value of a share at the time
              the SARs were  granted,  multiplied  by the number of shares  with
              respect to which the SARs relate.

         (d)  In the sole discretion of the Committee, the amount payable to the
              holder upon exercise of SARs may be paid either in Common Stock or
              in cash or in a combination  thereof. To the extent paid in Common
              Stock,  the value of the Common  Stock  that shall be  distributed
              shall be the Fair  Market  Value of a share of Common  Stock  upon
              exercise  of the  SARs  as  provided  in  Paragraph  2;  provided,
              however,  that no  fractional  shares shall be issued and any such
              fraction will be  eliminated  by rounding  downward to the nearest
              whole share.

         (e)  In the sole discretion of the Committee,  SARs related to specific
              Options may be exercisable only upon surrender of all or a portion
              of the related Option, or may be exercisable, in whole or in part,
              only at such times and to the extent  that the  related  Option is
              exercisable,  and the number of shares purchasable pursuant to the
              related  Option  may be  reduced  to the  extent of the  number of
              shares with respect to which the SARs are exercised.

         (f)  In lieu of  receiving  payment  at the time of  exercise  of SARs,
              payment of all or any portion  may be deferred by the  participant
              with the approval of the Committee.


                                       9
<PAGE>


         (g) The  maximum  number of SARs  granted to a  participant  during any
             calendar year shall not exceed 250,000.

     IV. RESTRICTED STOCK UNITS

         The Committee may, from time to time,  subject to the provisions of the
         Plan and such other terms and  conditions  as it may  determine,  grant
         Restricted  Stock Units to  employees  eligible to  participate  in the
         Plan.  Each  grant of  Restricted  Stock  Units may be, but need not be
         evidenced by a written instrument.  The grant of Restricted Stock Units
         shall state the number of Restricted  Stock Units covered by the grant,
         and shall contain such terms and  conditions and be in such form as the
         Committee may from time to time approve, subject to the following:

         (a) Each Restricted  Stock Unit shall be equivalent in value to a share
of Common Stock.

         (b)  Vesting of each grant of Restricted  Stock Units shall require the
              holder  to  remain  in  the  employment  of the  Corporation  or a
              Subsidiary  Corporation  for a prescribed  period (a  "Restriction
              Period").  The Committee shall determine the Restriction Period or
              Periods which shall apply to the shares of Common Stock covered by
              each  grant  of  Restricted  Stock  Units.   Except  as  otherwise
              determined by the Committee and provided in the written instrument
              granting  the  Restricted  Stock  Units,  and except as  otherwise
              provided in Paragraph 8, all  Restricted  Stock Units granted to a
              participant under the Plan shall terminate upon termination of the
              participant's  employment  with the  Corporation or any Subsidiary
              Corporation  before the end of the  Restriction  Period or Periods
              applicable to such Restricted  Stock Units,  and in such event the
              holder  shall not be entitled to receive any payment  with respect
              to those  Restricted  Stock Units.  The Committee may also, in its
              sole  discretion,  establish  other terms and  conditions  for the
              vesting of Restricted Stock Units,  including conditioning vesting
              on the  achievement  of one or  more of the  Performance  Factors.
              Notwithstanding any other provisions of the Plan or of any written
              instrument granting Restricted Stock Units, upon the occurrence of
              a Change in Control as defined in  subparagraph  (j) of  Paragraph
              7II hereof,  all  restrictions on Restricted Stock Units held by a
              participant   who  is  an  employee  of  the  Corporation  or  any
              Subsidiary Corporation shall lapse.

         (c)  Upon expiration of the Restriction Period or Periods applicable to
              each grant of Restricted  Stock Units,  the holder shall,  without
              payment on his part,  be entitled to receive  payment in an amount
              equal to the  aggregate  Fair Market Value of the shares of Common
              Stock covered by such grant upon such expiration. Such payment may
              be made in cash,  in shares of Common Stock equal to the number of
              Restricted Stock Units with respect to which such payment is made,
              or in any  combination  thereof,  as  the  Committee  in its  sole
              discretion shall  determine.  Any payment in cash shall reduce the
              number  of  shares of  Common  Stock  available  under the Plan as
              provided in Paragraph 2, to the extent of the number of Restricted
              Stock  Units to which  such  payment  relates.  Further  upon such
              expiration, the holder shall be entitled to receive a cash payment
              in an amount  equal to each cash  dividend the  Corporation  would

                                       10
<PAGE>


              have paid to such holder during the term of those Restricted Stock
              Units as if the  holder had been the owner of record of the shares
              of Common  Stock  covered by such  Restricted  Stock  Units on the
              record date for the payment of such dividend.

         (d)  In lieu of  receiving  payment  at the time of  expiration  of the
              Restriction  Period or Periods,  payment of all or any portion may
              be deferred by the participant with the approval of the Committee.


         (e)  The  maximum  number  of  shares  of  Common  Stock  as  to  which
              Restricted  Stock  Units may be granted to a  participant  for any
              calendar year shall not exceed 50,000.

8.   TERMINATION OF EMPLOYMENT

     Upon  termination of employment  with the  Corporation of any  participant,
     such  participant's  rights with respect to any  contingent  target  grants
     under the AIP, or any Performance Stock Units,  Options, SARs or Restricted
     Stock Units granted under the LTIP, shall be as follows:

     (a) In the event that the  participant  is  terminated or discharged by the
         Corporation  for  any  reason,  except  as and to the  extent  provided
         otherwise by the  Committee in writing,  the  participant's  rights and
         interests  under the Plan shall  immediately  terminate  upon notice of
         termination of employment. Upon the occurrence of a Potential Change in
         Control (as defined in  subparagraph  (k) of Paragraph  7II hereof) and
         for a period  of one year  thereafter,  and  upon the  occurrence  of a
         Change in Control  (as defined in  subparagraph  (j) of  Paragraph  7II
         hereof), the following special provisions and notice requirements shall
         be applicable in the event of the  termination of the employment of any
         participant  holding  an Option  under the Plan:  (i) in no event may a
         notice of  termination  of  employment  be issued to such a participant
         unless at least ten (10) business  days prior to the effective  date of
         such  termination  the participant is provided with a written notice of
         intent to terminate the  participant's  employment  which sets forth in
         reasonable detail the reason for such intent to terminate,  the date on
         which such  termination  is to be effective,  and a description  of the
         participant's  rights under this Plan and under the agreements granting
         such Option or Options,  including  the fact that no such Option may be
         exercised after such  termination has become  effective and the manner,
         extent and price at which all Options then held by such participant may
         be   exercised;   and  (ii)  such  notice  of  intent  to  terminate  a
         participant's   employment   shall  not  be  considered  a  "notice  of
         termination of  employment"  for purposes of the first sentence of this
         Paragraph 8 (a). This Paragraph 8 (a) is intended only to provide for a
         requirement  of notice to terminate  upon the  occurrence of the events
         set forth herein and shall not be construed to create an  obligation of
         continued  employment  or a contract of  employment in any manner or to
         otherwise  affect or limit the  Corporation's  ability to terminate the
         employment of any participant holding an Option under the Plan.

     (b) If a participant  terminates  employment  with the  Corporation  as the
         result,  in the sole judgment of the Committee,  of his or her becoming
         totally disabled (in which event termination will be deemed to occur on
         the date the Committee makes such  determination),  or if a participant
         should  die or (except  as to  Restricted  Stock  Units)  retire  while

                                       11
<PAGE>



         employed by the Corporation or any of its Subsidiary Corporations, then
         the  participant  or, as the case may be, the person or persons to whom
         the participant's  interest under the Plan shall pass by will or by the
         laws of  descent  and  distribution  (the  "Estate"),  shall  have  the
         following rights:

         (i)  the  grantee  of a  contingent  AIP grant or the  Estate  shall be
              entitled to receive payment of an AIP award as, and to the extent,
              determined by the Committee;

         (ii) if the holder of Performance  Stock Units shall have been employed
              for at least two-thirds of the related  performance cycle prior to
              the date of  termination  or  death,  then,  except  as  otherwise
              provided  in  the  written  instrument  (if  any)  evidencing  the
              Performance  Stock Units,  and subject to any further  adjustments
              the Committee may make in its absolute discretion, the participant
              or the Estate shall be entitled to receive  payment of a PSU Award
              upon the  expiration of the related  performance  cycle,  provided
              that such  award  shall be  adjusted  by  multiplying  the  amount
              thereof by a fraction,  the numerator of which shall be the number
              of full  and  partial  calendar  months  between  the  date of the
              beginning  of  each  such  performance   cycle  and  the  date  of
              termination  or death,  and the  denominator of which shall be the
              number of full and  partial  calendar  months from the date of the
              beginning  of  the  performance  cycle  to the  end  of  the  said
              performance cycle;

         (iii)except as otherwise  provided in the terms and  conditions  of the
              stock  option or SAR  grant,  the  holder or the  Estate  shall be
              entitled to exercise  (provided any vesting  requirement  has been
              satisfied  as of the date of  exercise)  any  Option  or SAR for a
              period of five years  (three  years in the case of options or SARs
              granted prior to 1997) from such date of death,  total  disability
              or  retirement,  or for such longer  period as the  Committee  may
              determine  in the case of  financial  hardship  or  other  unusual
              circumstances  (subject to the maximum exercise period for Options
              and  SARs  specified  in  Paragraph  7II(b)  and  7III(a)  hereof,
              respectively);

         (iv) except as otherwise provided in the written instrument  evidencing
              the Restricted Stock Units, upon death or termination due to total
              disability  the holder or the Estate  shall be entitled to receive
              payment in respect of the  Restricted  Stock Units,  provided that
              such Units shall be adjusted by multiplying  the amount thereof by
              a fraction, the numerator of which shall be the number of full and
              partial  calendar  months  between the date of grant of such Units
              and the date of death or termination, and the denominator of which
              shall be the number of full and partial  calendar  months from the
              date of the  grant  to the  end of the  Restriction  Period.  Upon
              retirement,  the  participant's  rights with respect to Restricted
              Stock Units shall immediately terminate.

     (c) In the  event of  resignation  by the  participant,  the  participant's
         rights and interests  under the Plan shall  immediately  terminate upon
         such resignation;  provided, however, that the Committee shall have the
         absolute  discretion  to review the  reasons and  circumstances  of the
         resignation  and to  determine  whether,  alternatively,  and  to  what
         extent,  if any,  the  participant  may  continue to hold any rights or
         interests under the Plan.

                                       12
<PAGE>




     (d) A transfer of a participant's  employment without an intervening period
         from the Corporation to a Subsidiary Corporation or vice versa, or from
         one  Subsidiary   Corporation  to  another,   shall  not  be  deemed  a
         termination of employment.

     (e) The  Committee  shall  be  authorized  to make all  determinations  and
         calculations required by this Paragraph 8, including any determinations
         necessary to establish the reason for  terminations  of employment  for
         purposes of the Plan, which  determinations  and calculations  shall be
         conclusive and binding on any affected participants and Estates.

9.   ADDITIONAL REQUIREMENTS

     No  Performance  Stock  Units,  Options,  SARs or  Restricted  Stock  Units
     (hereinafter collectively an "Interest") granted pursuant to the Plan shall
     be exercisable or realized in whole or in part, and the  Corporation  shall
     not be obligated  to sell,  distribute  or issue any shares  subject to any
     such Interest,  if such exercise and sale would,  in the opinion of counsel
     for the  Corporation,  violate the  Securities  Act of 1933, as amended (or
     other Federal or state statutes having similar requirements). Each Interest
     shall be subject to the further  requirement that, if at any time the Board
     of  Directors  shall  determine  in its  discretion  that  the  listing  or
     qualification  of the shares relating or subject to such Interest under any
     securities  exchange  requirements  or under  any  applicable  law,  or the
     consent or approval of any  governmental  regulatory  body, is necessary or
     desirable as a condition  of, or in connection  with,  the granting of such
     Interest or the distribution or issue of shares  thereunder,  such Interest
     may  not  be   exercised   in  whole  or  in  part  unless  such   listing,
     qualification,  consent or  approval  shall have been  effected or obtained
     free of any condition not acceptable to the Board of Directors.

     Interests may be subject to restrictions as to resale or other  disposition
     and to such other  provisions as may be  appropriate to comply with Federal
     and state securities laws and stock exchange requirements, and the exercise
     of any Interest or entitlement to payment thereunder may be contingent upon
     receipt  from the holder  (or any other  person  permitted  by this Plan to
     exercise  any  Interest  or  receive  any  distribution   hereunder)  of  a
     representation  that at the  time of such  exercise  it is his or her  then
     present  intention to acquire the shares being  distributed  for investment
     and not for resale.

10.  NONTRANSFERABILITY

     Unless  otherwise  approved  by  the  Committee,   contingent  AIP  grants,
     Performance Stock Units,  Options,  SARs and Restricted Stock Units granted
     under  the Plan to an  employee  shall be  nonassignable  and  shall not be
     transferable  by him or her  otherwise  than by will or the laws of descent
     and distribution, and shall be exercisable, during the employee's lifetime,
     only by the employee or the employee's guardian or legal representative.


                                       13
<PAGE>



11.  DISCLAIMER OF RIGHTS

     No provision in the Plan or any contingent  target AIP grants,  Performance
     Stock Units,  Options,  SARs or Restricted  Stock Units granted pursuant to
     the Plan shall be construed to confer upon the  participant any right to be
     employed  by  the  Corporation  or by  any  Subsidiary  Corporation,  or to
     interfere in any way with the right and authority of the Corporation or any
     Subsidiary  Corporation  either to increase or decrease the compensation of
     the participant at any time, or to terminate any relationship of employment
     between  the  participant  and  the  Corporation  or any of its  Subsidiary
     Corporations.

     Participants  under the Plan shall have none of the rights of a stockholder
     of the  Corporation  with respect to shares  subject to  Performance  Stock
     Units, Options, SARs or Restricted Stock Units unless and until such shares
     have been issued to him or her.

12.  STOCK ADJUSTMENTS

     In the event that the shares of Common  Stock,  as  presently  constituted,
     shall be changed into or exchanged for a different number or kind of shares
     of stock or other  securities of the Corporation or of another  corporation
     (whether   by   reason   of   merger,   consolidation,    recapitalization,
     reclassification,  stock split, combination of shares or otherwise),  or if
     the number of such shares of Common  Stock shall be  increased  through the
     payment of a stock dividend, or a dividend on the shares of Common Stock of
     rights or warrants to purchase securities of the Corporation shall be made,
     then there shall be substituted  for or added to each share available under
     and  subject to the Plan as  provided  in  Paragraph  2 hereof,  and to the
     limitations set forth in Paragraphs 7II (c); 7III (g) and 7IV (e), and each
     share  theretofore  appropriated or thereafter  subject or which may become
     subject to Performance Stock Units, Options, SARs or Restricted Stock Units
     under the Plan, the number and kind of shares of stock or other  securities
     into which each  outstanding  share of Common  Stock shall be so changed or
     for which each such share  shall be  exchanged  or to which each such share
     shall be entitled,  as the case may be.  Outstanding  Options and SARs also
     shall be  appropriately  amended  as to  price  and  other  terms as may be
     necessary to reflect the foregoing  events. In the event there shall be any
     other  change  in the  number or kind of the  outstanding  shares of Common
     Stock,  or of any stock or other  securities  into which the  Common  Stock
     shall have been changed or for which it shall have been exchanged,  then if
     the Board of Directors shall, in its sole  discretion,  determine that such
     change  equitably  requires an adjustment in the shares available under and
     subject to the Plan, or in any Performance  Stock Units,  Options,  SARs or
     Restricted  Stock Units  theretofore  granted or which may be granted under
     the  Plan,  such  adjustments   shall  be  made  in  accordance  with  such
     determination.

     No fractional  shares of Common Stock or units of other securities shall be
     issued pursuant to any such  adjustment,  and any fractions  resulting from
     any such adjustment  shall be eliminated in each case by rounding  downward
     to the nearest whole share or unit.


                                       14
<PAGE>


13.  TAXES

     The  Corporation  shall be  entitled  to  withhold  the  amount  of any tax
     attributable to any amounts  payable or shares of Common Stock  deliverable
     under the Plan. The person  entitled to any such  delivery,  whether due to
     the settlement of PSUs, the exercise of an Option or SAR, or the vesting of
     Restricted  Stock Units,  or any other  taxable event may, by notice to the
     Corporation, elect to have such withholding satisfied by a reduction of the
     number of shares otherwise so deliverable (a "Stock Withholding Election"),
     or by delivery of shares of Stock  already owned by the  Participant,  with
     the amount of shares subject to such reduction or delivery to be calculated
     based on the Fair Market Value on the date of such taxable event. Reporting
     Persons may make a Stock  Withholding  Election only in accordance with the
     methods then permitted under applicable  Securities and Exchange Commission
     interpretations.

14.  EFFECTIVE DATE AND TERMINATION OF PLAN

     The Plan shall become  effective upon adoption by the Board of Directors of
     the  Corporation,  provided such adoption is approved by the  stockholders,
     within  twelve  months of  adoption by the Board of  Directors.  Contingent
     target AIP grants,  Performance Stock Units,  Options,  SARs and Restricted
     Stock Units  under this Plan,  granted  before  approval of the Plan by the
     stockholders,  shall be granted  subject to such  approval and shall not be
     exercisable or payable before such approval.

     The  Board of  Directors  at any  time may  terminate  the  Plan,  but such
     termination  shall  not alter or impair  any of the  rights or  obligations
     under any contingent target AIP grants,  Performance Stock Units,  Options,
     SARs or Restricted  Stock Units  theretofore  granted under the Plan unless
     the affected participant shall so consent.

15.  PRIOR PLAN

     Effective  upon the  adoption  of this Plan by the Board of  Directors,  no
     additional  grants  of  contingent  target  grants  under  the  AIP  or  of
     Performance  Stock  Units shall be made under the MIP;  provided,  that any
     payments  of AIP awards or  deferrals  thereof  made with  respect to prior
     grants of contingent  AIP awards,  any prior grants of any LTIP Units,  and
     any payments of LTIP awards or deferrals  thereto made with respect to such
     prior grants, shall not be affected.  Notwithstanding the foregoing, to the
     extent the remaining  shares reserved for use under the LTIP portion of the
     MIP are  insufficient  for any LTIP awards  under  performance  cycles that
     began  prior to January 1, 1987,  shares  available  under this Plan may be
     used for such purpose.

16.  APPLICATION OF FUNDS

     The proceeds  received by the  Corporation  from the sale of capital  stock
     pursuant to Options will be used for general corporate purposes.

                                       15
<PAGE>



17.  NO OBLIGATION TO EXERCISE OPTION OR SAR

     The  granting  of an  Option or SAR shall  impose  no  obligation  upon the
optionee to exercise such Option or SAR.

18.  AMENDMENT

     The Board of Directors by majority vote, at any time and from time to time,
     may amend the Plan in such respects as it shall deem advisable,  to conform
     to  any   change  in  any   applicable   law  or  in  any  other   respect.
     Notwithstanding the foregoing, the Plan may not be terminated or amended in
     a manner adverse to the interests of any  participant  (without the consent
     of the participant)  either: (a) after a Potential Change in Control occurs
     and for one (1) year  following  the  cessation  of a  Potential  Change in
     Control,  or (b) for a two-year period beginning as of the date of a Change
     in Control (the  "Coverage  Period").  Upon the  expiration of the Coverage
     Period,  subparagraph  (l) of Paragraph 7II of the Plan and Paragraph 8 (a)
     of the Plan may not be amended in any manner  that would  adversely  affect
     any participant without the consent of the participant.


                                       16


</TEXT>
</DOCUMENT>
