EXHIBIT 10.2
 
                              THE PMI GROUP, INC.



                                EQUITY INCENTIVE
                                      PLAN

 
                               TABLE OF CONTENTS
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                                                                            PAGE
                                                                            ----


                                                                    
1.   Purpose................................................................ 1

2.   Definitions............................................................ 1

3.   Scope of the Plan...................................................... 5
     (a)      Number of Shares Available For Delivery Under the
              Plan.......................................................... 5
     (b)      Effect of Expiration or Termination........................... 5
     (c)      Treasury Stock................................................ 5
     (d)      Committee Discretion to Cancel Options........................ 5

4.   Administration .......................................................  6
     (a)      Committee Administration...................................... 6
     (b)      Board Reservation and Delegation ............................. 6
     (c)      Committee Authority........................................... 6
     (d)      Committee Determinations Final................................ 7

5.   Eligibility............................................................ 7

6.   Conditions to Grants................................................... 8
     (a)      General Conditions............................................ 8
     (b)      Grant of Replacement Options.................................. 8
     (c)      Grant of Options and Option Price.............................10
     (d)      Grant of Incentive Stock Options..............................10
     (e)      Grant of Reload Options.......................................12
     (f)      Grant of Shares of Restricted Stock...........................13
     (g)      Grant of Unrestricted Stock...................................15
     (h)      Grant of Performance Shares...................................15

7.   Non-transferability....................................................16

8.   Exercise...............................................................17
     (a)      Exercise of Options...........................................17
     (b)      Special Rules for Section 16 Grantees.........................18
     (c)      Permissible Shares Issued.....................................18

9.   Loans and Guarantees...................................................18

10.  Notification under Section 83(b).......................................19
 
11.  Mandatory Withholding Taxes............................................19
 
12.  Elective Share Withholding.............................................19
 
13.  Termination of Employment..............................................20
     (a)    Restricted Stock................................................20
     (b)    Other Awards....................................................20
     (c)    Maximum Extension...............................................21
 
14.  Equity Incentive Plans of Foreign Subsidiaries.........................21
 


                                       i

 


                                                                      
15.  Substituted Awards.....................................................21
 
16.  Securities Law Matters.................................................22
 
17.  No Funding Required....................................................22
 
18.  No Employment Rights...................................................22
 
19.  Rights as a Stockholder................................................22
 
20.  Nature of Payments.....................................................23
 
21.  Non-Uniform Determinations.............................................23
 
22.  Adjustments............................................................23
 
23.  Amendment of the Plan..................................................24
 
24.  Termination of the Plan................................................24
 
25.  No Illegal Transactions................................................24
 
26.  Controlling Law........................................................24
 
27.  Severability...........................................................24


                                       ii

 
     The Plan. The PMI Group, Inc., having established The PMI Group, Inc.
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Equity Incentive Plan, hereby amends and restates the Plan, effective as of
February 14, 1996.  The amended and restated Plan is subject to ratification by
an affirmative vote of the holders of a majority of the Stock who are present in
person or by proxy and entitled to vote at the 1996 Annual Meeting of
Stockholders.

     1.  Purpose. The primary purpose of the Plan is to provide a means by which
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key employees of the Company and its Subsidiaries can acquire and maintain stock
ownership, thereby strengthening their commitment to the success of the Company
and its Subsidiaries and their desire to remain employed by the Company and its
Subsidiaries.  Another purpose of the Plan is to provide continuation of
benefits and opportunities provided to former participants in any of the Sears
Plans, or the Allstate Plan, which benefits and opportunities were lost,
terminated, forfeited, canceled (with or without the consent of the granter) or
reduced as a result of the Company's initial public offering ("IPO"), by
providing for the grant of substitute Awards hereunder.  The Plan also is
intended to attract and retain key employees and to provide such employees with
additional incentive and reward opportunities designed to encourage them to
enhance the profitable growth of the Company and its Subsidiaries.

     2.  Definitions.
         ----------- 

     As used in the Plan, terms defined parenthetically immediately after their
use shall have the respective meanings provided by such definitions and the
terms set forth below shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):

     (a) "Allstate Option" means an option granted under the Allstate Plan.

     (b) "Allstate Plan" means The Allstate Corporation Equity Incentive Plan.

     (c) "Award" means, individually or collectively, a grant under the Plan of
options, restricted Stock, unrestricted Stock or performance shares.

     (d) "Award Agreement" means the written agreement by which an Award is
evidenced.

     (e) "Board" means the board of directors of the Company.

     (f) "Committee" means the committee of the Board appointed pursuant to
Article 4.

 
     (g) "Company" means The PMI Group, Inc., a Delaware corporation.

     (h) "Disability" means, as relates to the exercise of an incentive stock
option after Termination of Employment, a permanent and total disability within
the meaning of Section 22(e)(3) of the Internal Revenue Code, and for all other
purposes, a mental or physical condition which, in the opinion of the Committee,
renders a Grantee unable or incompetent to carry out the job responsibilities
which such Grantee held or the duties to which such Grantee was assigned at the
time the disability was incurred, and which is expected to be permanent or for
an indefinite duration.

     (i) "Effective Date" means the date described in the first paragraph of the
Plan.

     (j) "Fair Market Value" of the Stock means, as of any applicable date
(other than the Effective Date) the mean between the high and low prices of the
Stock as reported on the New York Stock Exchange Composite Tape, or if there
were no sales on such date, on the next preceding date on which there was such a
reported sale, provided, however, that if the Stock is acquired and sold in a
simultaneous sale pursuant to the provisions of Article 8(a)(iv), Fair Market
Value means the price received upon such sale. Solely as of the effective date
of the IPO, Fair Market Value of the Stock means the price to the public
pursuant to the form of final prospectus used in connection with the IPO, as
indicated on the cover page of such prospectus or otherwise.

     (k) "Fiscal Year" means the fiscal year of the Company.

     (l) "Grant Date" means the date of grant of an Award determined in
accordance with Article 6.

     (m) "Grantee" means an individual who has been granted an Award.

     (n) "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, and regulations and rulings thereunder. References to a particular
section of the Internal Revenue Code shall include references to successor
provisions.

     (o) "IPO" means such term as defined in the first paragraph of the Plan.

     (p) "Minimum Consideration" means the $.01 par value per share or such
larger amount determined pursuant to resolution of the Board to be capital
within the meaning of Section 154 of the Delaware General Corporation Law.

     (q) "Net Operating Income Per Share" means as to any Fiscal Year, (i) the
Company's net income from operations, net of

                                       2

 
after-tax realized capital gains and losses, divided by (ii) the weighted
average number of shares of Stock outstanding during the Fiscal Year, plus
dilutive common equivalent shares calculated in accordance with Accounting
Principles Board Opinion No. 15.  Net Operating Income Per Share for a multi-
Fiscal Year period means the average of Net Operating Income Per Share
calculated separately for each Fiscal Year of such multi-Fiscal Year period.

     (r) "1934 Act" means the Securities Exchange Act of 1934, as amended.

     (s) "Option Price" means the per share purchase price of (i) Stock subject
to an option or (ii) restricted Stock subject to an option.

     (t) "Parent" means Allstate Insurance Company.

     (u) "Performance Goals" means the goal(s) (or combined goal(s)) determined
by the Committee (in its discretion) to be applicable to a Grantee with respect
to an Award.  As determined by the Committee, the Performance Goals (if any)
applicable to an Award may provide for a targeted level or levels of achievement
using one or more of the following measures: (i) Net Operating Income per Share,
(ii) Return on Equity, and (iii) Total Return.  The Performance Goals may differ
from Grantee to Grantee and from Award to Award.

     (v) "Plan" means The PMI Group, Inc. Equity Incentive Plan, as set forth in
this instrument and as hereafter amended from time to time.

     (w) "PMI Group Grantee" means any individual who is employed on the
Effective Date by The PMI Group, Inc. or any of its Subsidiaries.

     (x) "Reload Option" has the meaning specified in Article 6(e).

     (y) "Retirement" means a Termination of Employment occurring on or after an
individual attains age 65, or a Termination of Employment approved by the
Company as an early retirement; provided that in the case of a Section 16
Grantee, such early retirement must be approved by the Committee.

     (z) "Return on Equity" means as to any Fiscal Year, the Company's net
income after taxes expressed as a percentage of average stockholders' equity.
For this purpose, average stockholders' equity shall be calculated as the
average of stockholders' equity on the first and last days of the Fiscal Year,
and excluding unrealized gains and losses.

     (aa) "Sears" means Sears, Roebuck and Co., a New York corporation.

                                       3

 
     (bb) "Sears Option" means an option granted under a Sears Plan.

     (cc) "Sears Plans" means the following plans of Sears:  the 1994 Employees
Stock Plan, the 1990 Employees Stock Plan, the 1986 Employees Stock Plan, the
1982 Employees Stock Plan, the 1978 Employees Stock Plan and the 1979 Incentive
Compensation Plan.

     (dd) "SEC" means the Securities and Exchange Commission.

     (ee) "Section 16 Grantee" means a person subject to potential liability
with respect to equity securities of the Company under Section 16(b) of the 1934
Act.

     (ff) "Stock" means common stock of the Company, par value $.01 per share.

     (gg) "Subsidiary" means a corporation as defined in Section 424(f) of the
Internal Revenue Code, with the Company being treated as the employer
corporation for purposes of this definition.

     (hh) "10% Owner" means a person who owns stock (including stock treated as
owned under Section 424(d) of the Internal Revenue Code) possessing more than
10% of the Voting Power of the Company.

     (ii) "Termination of Employment" occurs the first day on which an
individual is for any reason no longer employed by the Company or any of its
Subsidiaries, or by the Parent or any of its subsidiaries, or with respect to an
individual who is an employee of a Subsidiary or a subsidiary of the Parent, the
first day on which the Company (or the Parent, as the case may be) no longer
owns voting securities possessing at least 50% of the Voting Power of such
Subsidiary (or subsidiary of the Parent, as the case may be).

     (jj) "Total Return" means as to any Fiscal Year or multi-Fiscal Year
period, the total return (change in share price plus reinvestment of any
dividends) of the Stock, as compared to the total return of an index or indexes
selected by the Committee.  For this purpose, the Committee shall choose from
among (i) the Standard & Poor's 500 Composite Index, (ii) the Standard & Poor's
Financial Miscellaneous Index, (iii) the Russell 1000 Index, and (iv) the
Russell 1000 Financial Services Index.

     (kk) "Voting Power" means the combined voting power of the then-outstanding
voting securities entitled to vote generally in the election of directors.

                                       4

 
     3.  Scope of the Plan.
         ----------------- 

     (a) Number of Shares Available For Delivery Under the Plan. A maximum of
         ------------------------------------------------------              
1,400,000 shares of Stock shall be authorized for issuance and delivery on
account of the exercise of Awards, including Awards of Replacement Options. No
more than an aggregate of 300,000 shares of the aforesaid 1,400,000 shares of
Stock may be granted under Article 6(f) and (g). No more than 150,000 shares of
Stock may be granted as stock options to any employee during the duration of the
Plan.  During any Fiscal Year, no Grantee shall be granted more than 20,000
performance shares.  Shares of Stock issuable under the Plan may be either
authorized but unissued shares of Stock or Treasury Stock.

     (b) Effect of Expiration or Termination. If and to the extent an Award
         -----------------------------------                               
shall expire or terminate for any reason without having been exercised in full
(including, without limitation, a cancellation and regrant of an option pursuant
to Article 4(c)(vii)), or shall be forfeited, without, in either case, the
Grantee having enjoyed any of the benefits of stock ownership (other than voting
rights or dividends that are likewise forfeited), the shares of Stock (including
restricted Stock) associated with such Award shall become available for other
Awards. Except in the case of a Reload Option granted to a Section 16 Grantee,
the grant of a Reload Option shall not reduce the number of shares of Stock
available for other Awards.

     (c) Treasury Stock. The Committee shall have the authority to cause the
         --------------                                                     
Company to purchase from time to time shares of Stock to be held as treasury
shares and used for or in connection with Awards.

     (d) Committee Discretion to Cancel Options. Except with respect to options
         --------------------------------------                                
granted pursuant to Article 6(b), the Committee may, in its discretion, elect at
any time, should it determine it is in the best interest of the Company's
stockholders to cancel any options granted hereunder, to cancel all or any of
the options granted hereunder and pay the holders of any such options an amount
(payable in such proportion as the Committee may determine in cash or in Stock
(valued at the Fair Market Value of a share of Stock on the date of cancellation
of such option)) equal to the number of shares of Stock subject to such canceled
option, multiplied by the amount (if any) by which the Fair Market Value of
Stock on the date of cancellation of the option exceeds the Option Price;
provided that if the Committee should determine that not making payment of such
amount to the holders of such option upon the cancellation would be in the best
interests of stockholders of the Company (ignoring in such determination the
cost of such payment and considering only other matters), the Committee may void
options granted hereunder and declare that no payment shall be made to the
holders of such options.

                                       5

 
     4.  Administration.
         -------------- 

     (a) Committee Administration. Subject to Article 4(b), the Plan shall be
         ------------------------                                            
administered by the Committee, which shall consist of not less than two persons
appointed by the Board, who are directors of the Company and not employees of
the Parent, the Company or any of its Subsidiaries. Membership on the Committee
shall be subject to such limitations (including, if appropriate, a change in the
minimum number of members of the Committee) as the Board deems appropriate to
permit transactions pursuant to the Plan to be exempt from potential liability
under Section 16(b) of the 1934 Act and to comply with Section 162 (m) of the
Internal Revenue Code.

     (b) Board Reservation and Delegation. The Board may, in its discretion,
         --------------------------------                                   
reserve to itself or delegate to another committee of the Board any or all of
the authority and responsibility of the Committee with respect to Awards to
Grantees who are not Section 16 Grantees at the time any such delegated
authority or responsibility is exercised. Such other committee may consist of
one or more directors who may, but need not be, officers or employees of the
Company or of any of its Subsidiaries. To the extent that the Board has reserved
to itself or delegated the authority and responsibility of the Committee to such
other committee, all references to the Committee in the Plan shall be to such
other committee.

     (c) Committee Authority. The Committee shall have full and final authority,
         -------------------                                                    
in its sole and absolute discretion, but subject to the express provisions of
the Plan, as follows:

               (i)  to grant Awards,

               (ii) to determine (A) when Awards may be granted, and (B) whether
     or not specific Awards shall be identified with other specific Awards, and
     if so, whether they shall be exercisable cumulatively with, or
     alternatively to, such other specific Awards,

               (iii) to interpret the Plan and to make all determinations
     necessary or advisable for the administration of the Plan,

               (iv) to prescribe, amend, and rescind rules and regulations
     relating to the Plan, including, without limitation, rules with respect to
     the exercisability and nonforfeitability of Awards upon the Termination of
     Employment of a Grantee,

               (v) to determine the terms and provisions of the Award
     Agreements, which need not be identical and, with the consent of the
     Grantee, to modify any such Award Agreement at any time,

                                       6

 
               (vi) to cancel options in accordance with the provision of
     Section 3(d),

               (vii) except as provided in Section 4(c)(vi) hereof, to cancel,
     with the consent of the Grantee, outstanding Awards, and to grant new
     Awards in substitution thereof,

               (viii) to accelerate the exercisability of, and to accelerate or
     waive any or all of the restrictions and conditions applicable to, any
     Award,

               (ix) to authorize foreign Subsidiaries to adopt plans as provided
     in Article 14,

               (x) to make such adjustments or modifications to Awards to
     Grantees working outside the United States as are necessary and advisable
     to fulfill the purposes of the Plan,

               (xi) to authorize any action of or make any determination by the
     Company as the Committee shall deem necessary or advisable for carrying out
     the purposes of the Plan,

               (xii) to make appropriate adjustments to, cancel or continue
     Awards in accordance with Article 22, and

               (xiii) to impose such additional conditions, restrictions, and
     limitations upon the grant, exercise or retention of Awards as the
     Committee may, before or concurrently with the grant thereof, deem
     appropriate, including, without limitation, requiring simultaneous exercise
     of related identified Awards, and limiting the percentage of Awards which
     may from time to time be exercised by a Grantee.

          (d) Committee Determinations Final. The determination of the Committee
              ------------------------------                                    
on all matters relating to the Plan or any Award Agreement shall be conclusive
and final. No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Award.

     5.   Eligibility. Awards may be granted to any employee of the Company or
          -----------                                                         
any of its Subsidiaries. In selecting the individuals to whom Awards may be
granted, as well as in determining the number of shares of Stock subject to, and
the other terms and conditions applicable to, each Award, the Committee shall
take into consideration such factors as it deems relevant in promoting the
purposes of the Plan.

                                       7

 
     6.   Conditions to Grants.
          -------------------- 

          (a)  General Conditions.
               ------------------ 

               (i) In accordance with its powers under the Plan, the Committee
     may grant replacement options (including Reload Options) in accordance with
     this Article 6 to preserve those opportunities and benefits of PMI Group
     Grantees which were terminated, forfeited, canceled, or reduced in
     connection with the IPO.

               (ii) The Grant Date of an Award shall be the date on which the
     Committee grants the Award or such later date as specified in advance by
     the Committee.

               (iii) The term of each Award (subject to Article 6(b), with
     respect to replacement Awards and Articles 6(d) and 6(e) with respect to
     incentive stock options and Reload Options, respectively) shall be a period
     of not more than 12 years from the Grant Date, and shall be subject to
     earlier termination as herein provided.

               (iv) A Grantee may, if otherwise eligible, be granted additional
     Awards in any combination.

               (v) The Committee may grant Awards with terms and conditions
     which differ among the Grantees thereof. To the extent not set forth in the
     Plan, the terms and conditions of each Award shall be set forth in an Award
     Agreement.

          (b) Grant of Replacement Options. Subject to Article 3(a), the
              ----------------------------                              
Committee may grant options ("Replacement Options") under the Plan to each PMI
Group Grantee who holds unexercised Sears Options (whether or not
nonforfeitable) and unexercised Allstate Options (whether or not forfeitable) at
the Effective Date; provided that such PMI Group Grantee's right to exercise any
Sears Options and Allstate Options has been forfeited or canceled in connection
with the IPO. The Award Agreement with respect to such Replacement Options shall
provide that the Grantee may exercise a Replacement Option at the same time as
he would have been able to exercise the Sears Option or Allstate Option it
replaces, subject to Article 8(b), if applicable.

               (i)  Replacement of Sears Options.
                    ---------------------------- 

                    (A) The Option Price for a Replacement Option shall be
          determined by the following formula; provided that in no event shall
          the Option Price be less than the Minimum Consideration:

                    Option Price = A x B
                                   -----
                                      C

                                       8

 
          Any fraction of a cent shall be rounded down to the next full cent.

                    (B) The number of shares of Stock for which the Replacement
          Option is exercisable shall be determined in accordance with the
          following formula:

                    Number of Shares = C x D
                                       -----
                                          B

          Any fractional share shall be rounded up to the next full share.

                    (C)  In the foregoing formulas,

               "A"  is the option exercise price for a Sears Option being
                    replaced,

               "B"  is the Fair Market Value of a share of Stock as of the
                    effective date of the IPO,

               "C"  is the Fair Market Value of a Sears common share as of the
                    effective date of the IPO, and

               "D"  is the number of Sears common shares for which the Sears
                    Option being replaced is exercisable.

                    (D) Each Replacement Option shall have the same terms and
          conditions (other than the Option Price and the number of shares of
          Stock, but including any provision for Reload Options) as, and not
          give the Grantee any benefits he did not have, under the corresponding
          Sears Option.

               (ii) Replacement of Allstate Options.
                    ------------------------------- 

                    (A) The Option Price for a Replacement Option shall be
          determined by the following formula; provided that in no event shall
          the Option Price be less than the Minimum Consideration:

                    Option Price = A x B
                                   -----
                                      C

          Any fraction of a cent shall be rounded down to the next full cent.

                    (B) The number of shares of Stock for which the Replacement
          Option is exercisable shall be determined in accordance with the
          following formula:

                    Number of Shares = C x D
                                       -----

                                       9

 
                                          B

          Any fractional share shall be rounded up to the next full share.

                    (C)  In the foregoing formulas,

               "A"  is the option exercise price for an Allstate Option being
                    replaced,

               "B"  is the Fair Market Value of a share of Stock as of the
                    effective date of the IPO,

               "C"  is the Fair Market Value of an Allstate common share as of
                    the effective date of the IPO, and

               "D"  is the number of Allstate common shares for which the
                    Allstate Option being replaced is exercisable.

                    (D) Each Replacement Option shall have the same terms and
          conditions (other than the Option Price and the number of shares of
          Stock, but including any provision for Reload Options) as, and not
          give the Grantee any benefits he did not have, under the corresponding
          Allstate Option.

          (c) Grant of Options and Option Price. Other than for purposes of
              ---------------------------------                            
Replacement Options as set forth in Article 6(b) above, the Committee may, in
its discretion, grant options (which may be options to acquire unrestricted
Stock or restricted Stock) to any employee eligible under Article 5 to receive
Awards. No later than the Grant Date of any option, the Committee shall
determine the Option Price; provided that the Option Price shall, except as
provided in subsection (d) below and in Article 15, not be less than 100% of the
Fair Market Value of the Stock on the Grant Date.

          (d) Grant of Incentive Stock Options. At the time of the grant of any
              --------------------------------                                 
option other than a Replacement Option, the Committee may designate that such
option shall be made subject to additional restrictions to permit it to qualify
as an "incentive stock option" under the requirements of Section 422 of the
Internal Revenue Code. Any option designated as an incentive stock option:

               (i) shall have an Option Price of (A) not less than 100% of the
     Fair Market Value of the Stock on the Grant Date or (B) in the case of a
     10% Owner, not less than 110% of the Fair Market Value of the Stock on the
     Grant Date;

               (ii) shall have a term of not more than 10 years (five years, in
     the case of a 10% Owner) from the Grant

                                       10

 
     Date, and shall be subject to earlier termination as provided herein or in
     the applicable Award Agreement;

               (iii) shall not have an aggregate Fair Market Value (determined
     for each incentive stock option at its Grant Date) of Stock with respect to
     which incentive stock options are exercisable for the first time by such
     Grantee during any calendar year (under the Plan and any other employee
     stock option plan of the Grantee's employer or any parent (including but
     not limited to Allstate Insurance Company and Sears) or subsidiary thereof
     ("Other Plans")), determined in accordance with the provisions of Section
     422 of the Internal Revenue Code, which exceeds $100,000 (the "$100,000
     Limit");

               (iv) shall, if the aggregate Fair Market Value of Stock
     (determined on the Grant Date) with respect to all incentive stock options
     previously granted under the Plan and any Other Plans ("Prior Grants") and
     any incentive stock options under such grant (the "Current Grant") which
     are exercisable for the first time during any calendar year would exceed
     the $100,000 Limit, be exercisable as follows:

                    (A) the portion of the Current Grant exercisable for the
          first time by the Grantee during any calendar year which would be,
          when added to any portions of any Prior Grants exercisable for the
          first time by the Grantee during such calendar year with respect to
          stock 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 provisions
          of the immediately preceding sentence 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 a separate option
          at such date or dates as are provided in the Current Grant;

               (v) shall 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

                                       11

 
               (vi) shall require the Grantee to notify the Committee of any
     disposition of any Stock issued pursuant to the exercise of the incentive
     stock option under the circumstances described in Section 421(b) of the
     Internal Revenue Code (relating to certain disqualifying dispositions),
     within 10 days of such disposition.

Notwithstanding the foregoing and Article 4(c)(v), the Committee may take any
action with respect to any option, including but not limited to an incentive
stock option, without the consent of the Grantee, in order to prevent such
option from being treated as an incentive stock option.

          (e) Grant of Reload Options. The Committee may provide in an Award
              -----------------------                                       
Agreement, including an Award Agreement for the grant of a Replacement Option
when the Replaced Sears Option or Replaced Allstate Option included a reload
option for Sears shares or Allstate shares, respectively, as the case may be,
that a Grantee who exercises all or any portion of an option for shares of Stock
which have a Fair Market Value equal to not less than 100% of the Option Price
for such options ("Exercised Options") and who paid the Option Price with shares
of Stock shall be granted, subject to Article 3, an additional option ("Reload
Option") for a number of shares of stock equal to the sum ("Reload Number") of
the number of shares of Stock tendered to exercise the Exercised Options plus,
if so provided by the Committee, the number of shares of Stock, if any, retained
by the Company in connection with the exercise of the Exercised options to
satisfy any federal, state or local tax withholding requirements.

          Reload Options shall be subject to the following terms and conditions:

               (i) the Grant Date for each Reload Option shall be the date of
     exercise of the Exercised Option to which it relates;

               (ii) subject to Article 6(e)(iii) below, the Reload Option may be
     exercised at any time during the unexpired term of the Exercised Option
     (subject to earlier termination thereof as provided in the Plan and in the
     applicable Award Agreement); and

               (iii) the terms of the Reload Option shall be the same as the
     terms of the Exercised Option to which it relates, except that (A) the
     Option Price shall be the Fair Market Value of the Stock on the Grant Date
     of the Reload Option and (B) no Reload Option may be exercised within one
     year from the Grant Date thereof.

                                       12

 
          (f) Grant of Shares of Restricted Stock.
              ----------------------------------- 

               (i) The Committee may, in its discretion, grant shares of
     restricted Stock to any employee eligible under Article 5 to receive
     Awards.

               (ii) Before the grant of any shares of restricted Stock, the
     Committee shall determine, in its discretion:

                    (A) whether the certificates for such shares shall be
          delivered to the Grantee or held (together with a stock power executed
          in blank by the Grantee) in escrow by the Secretary of the Company
          until such shares become nonforfeitable or are forfeited,

                    (B) the per share purchase price of such shares, which may
          be zero provided, however, that

                         (1) the per share purchase price of all such shares
               (other than treasury shares) shall not be less than the Minimum
               Consideration for each such share; and

                         (2) if such shares are to be granted to a Section 16
               Grantee, the per share purchase price of any such shares shall
               also be at least 50% of the Fair Market Value of the Stock on the
               Grant Date unless such shares are granted for no monetary
               consideration (in which case treasury shares are to be delivered)
               or with a purchase price per share equal to the Minimum
               Consideration for the Stock, and

                    (C) the restrictions applicable to such grant;

               (iii) Payment of the purchase price (if greater than zero) for
     shares of restricted Stock shall be made in full by the Grantee before the
     delivery of such shares and, in any event, no later than 10 days after the
     Grant Date for such shares. Such payment may, at the election of the
     Grantee, be made in any one or any combination of the following:

                    (A)  cash,

                    (B) Stock valued at its Fair Market Value on the date of
          payment or, if the date of payment is not a business day, the next
          succeeding business day, or

                    (C) with the approval of the Committee, shares of restricted
          Stock, each valued at the Fair Market Value of a share of Stock on the
          date of payment

                                       13

 
          or, if the date of payment is not a business day, the next succeeding
          business day

     provided, however, that, in the case of payment in Stock or restricted
     Stock,

                         (1) the use of Stock or restricted Stock in payment of
               such purchase price by a Section 16 Grantee is subject to the
               prior receipt by the Company of either a favorable opinion of
               counsel for the Company or a "no action" letter from the staff of
               the SEC with respect to the exemption of such use of stock from
               potential liability under Section 16(b) of the 1934 Act or the
               inapplicability of such Section;

                         (2) in the discretion of the Committee and to the
               extent permitted by law, payment may also be made in accordance
               with Article 9; and

                         (3) if the purchase price for restricted Stock ("New
               Restricted Stock") is paid with shares of restricted Stock ("Old
               Restricted Stock"), the restrictions applicable to the New
               Restricted Stock shall be the same as if the Grantee had paid for
               the New Restricted Stock in cash unless, in the judgment of the
               Committee, the Old Restricted Stock was subject to a greater risk
               of forfeiture, in which case a number of shares of New Restricted
               Stock equal to the number of shares of Old Restricted Stock
               tendered in payment for New Restricted Stock may in the
               discretion of the Committee be subject to the same restrictions
               as the Old Restricted Stock, determined immediately before such
               payment.

               (iv) The Committee may, but need not, provide that all or any
     portion of a Grantee's Award of restricted Stock shall be forfeited

                    (A) except as otherwise specified in the Award Agreement,
          upon the Grantee's Termination of Employment within a specified time
          period after the Grant Date, or

                    (B) if the Company or the Grantee does not achieve specified
          performance goals within a specified time period after the Grant Date
          and before the Grantee's Termination of Employment, or

                    (C) upon failure to satisfy such other restrictions as the
          Committee may specify in the Award Agreement.

                                       14

 
               (v) If a share of restricted Stock is forfeited, then

                    (A) the Grantee shall be deemed to have resold such share of
          restricted Stock to the Company at the lesser of (1) the purchase
          price paid by the Grantee (such purchase price shall be deemed to be
          zero dollars ($0) if no purchase price was paid) or (2) the Fair
          Market Value of a share of Stock on the date of such forfeiture;

                    (B) the Company shall pay to the Grantee the amount
          determined under clause (A) of this sentence as soon as is
          administratively practical; and

                    (C) such share of restricted Stock 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
          Company's tender of the payment specified in clause (B) of this
          sentence, whether or not such tender is accepted by the Grantee.

               (vi) Any share of restricted Stock shall bear an appropriate
     legend specifying that such share is non-transferable and subject to the
     restrictions set forth in the Plan. If any shares of restricted Stock
     become nonforfeitable, the Company shall cause certificates for such shares
     to be issued or reissued without such legend and delivered to the Grantee
     or, at the request of the Grantee, shall cause such shares to be credited
     to a brokerage account specified by the Grantee.

          (g) Grant of Unrestricted Stock. The Committee may, in its discretion,
              ---------------------------                                       
grant shares of unrestricted Stock to any employee eligible under Article 5 to
receive Awards.

          (h)  Grant of Performance Shares.
               --------------------------- 

               (i) The Committee may, in its discretion, grant performance
     shares to any employee eligible under Article 5 to receive Awards.

               (ii) Each performance share shall have an initial value equal to
     the Fair Market Value of a share of Stock on the date of grant.

               (iii) The Committee shall set performance objectives in its
     discretion which, depending on the extent to which they are met, will
     determine the number of performance shares that will be paid out to the
     Participants.  The time period during which the performance objectives must
     be met shall be called the "Performance Period".

                                       15

 
          (iv) The Committee may set performance objectives based upon the
     achievement of Company-wide, divisional, or individual goals, applicable
     Federal or state securities laws, or any other basis determined by the
     Committee in its discretion.  For purposes of qualifying grants of
     performance shares as "performance-based compensation" under Section 162(m)
     of the Internal Revenue Code, the Committee, in its discretion, may
     determine that the performance objectives applicable to performance shares
     shall be based on the achievement of Performance Goals.  The Performance
     Goals shall be set by the Committee on or before the latest date
     permissible to enable the performance shares to qualify as "performance-
     based compensation" under Section 162(m) of the Internal Revenue Code.  In
     granting performance shares which are intended to qualify under Code
     Section 162(m), the Committee shall follow any procedures determined by it
     from time to time to be necessary or appropriate to ensure qualification of
     the performance shares under Internal Revenue Code Section 162(m) (e.g., in
                                                                        ----    
     determining the Performance Goals).

               (v) After the applicable Performance Period has ended, the
     Grantee shall be entitled to receive a payout of the number of performance
     shares earned over the Performance Period, to be determined as a function
     of the extent to which the corresponding performance objectives have been
     achieved.  Payment of earned performance shares shall be made as soon as
     practicable after the expiration of the applicable Performance Period.  The
     Committee, in its sole discretion, may pay earned performance shares in the
     form of cash, in shares of Stock (which have an aggregate Fair Market Value
     equal to the value of the earned performance Shares at the close of the
     applicable Performance Period) or in a combination thereof.

     7.   Non-transferability. Each Award (other than unrestricted Stock)
          -------------------                                            
granted hereunder shall 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. Each share of restricted
Stock shall be non-transferable until such share becomes nonforfeitable.
Notwithstanding the foregoing, the Grantee may, to the extent provided in the
Plan and in a manner specified by the Committee, (a) designate in writing a
beneficiary to exercise his options after the Grantee's death, and (b) transfer
an option (other than an incentive stock option) to a revocable, inter vivos
trust as to which the Grantee is both the settlor and the trustee, but in no
event shall any such transfer be effective unless the Company shall have
received a favorable opinion of counsel for the Company or the staff of the SEC
shall have issued an interpretive or "no action" letter to the effect that
transfers made on a basis substantially consistent with this Article would not
violate the conditions for the exemption provided by SEC Rule 16b-3.

                                       16

 
     8.  Exercise.
         -------- 

          (a) Exercise of Options. Subject to Articles 4, 6, 14 and 17, and such
              -------------------                                               
terms and conditions as the Committee may impose, each option shall be
exercisable in one or more installments commencing not earlier than the first
anniversary of the Grant Date of such option; provided, however, that in the
case of a Replacement Option, such option shall be exercisable commencing not
earlier than the first anniversary of the grant date of the Sears Option or
Allstate Option it replaces. Options shall not be exercisable for twelve months
following a hardship distribution that is subject to Treasury Regulation (S)
1.401(k)-1(d)(2)(iv)(B)(4), except to the extent permitted thereunder. Each
option shall be exercised by delivery to the Company of written notice of intent
to purchase a specific number of shares of Stock or restricted Stock subject to
the option. The Option Price of any shares of Stock or restricted Stock as to
which an option shall be exercised shall be paid in full at the time of the
exercise. Payment may, at the election of the Grantee, or if specified, as
provided in the Award Agreement, be made in any one or any combination of the
following forms:

               (i) check in such form as may be satisfactory to the Committee,

               (ii) Stock valued at its Fair Market Value on the date of
     exercise or, if the date of exercise is not a business day, the next
     succeeding business day; provided that for the exercise of a Replacement
     Option, such Stock must have been held for at least six months, valued at
     the Fair Market Value on the date of exercise,

               (iii) Except with respect to the exercise of a Replacement Sears
     Option, with the approval of the Committee, shares of restricted Stock,
     each valued at the Fair Market Value of a share of Stock on the date of
     exercise or, if the date of exercise is not a business day, the next
     succeeding business day, or

               (iv) Except with respect to the exercise of a Replacement Sears
     option, through simultaneous sale through a broker of shares of
     unrestricted Stock acquired on exercise, as permitted under Regulation T of
     the Federal Reserve Board.

          If restricted Stock ("Tendered Restricted Stock") is used to pay the
Option Price for Stock, then a number of shares of Stock acquired on exercise of
the option equal to the number of shares of Tendered Restricted Stock shall be
subject to the same restrictions as the Tendered Restricted Stock, determined as
of the date of exercise of the option. If the Option Price for restricted Stock
is paid with Tendered Restricted Stock, and if the Committee determines that the
restricted Stock acquired on exercise of the option is subject to restrictions
("Greater

                                       17

 
Restrictions") that cause it to have a greater risk of forfeiture than the
Tendered Restricted Stock, then notwithstanding the preceding sentence, all the
restricted Stock acquired on exercise of the option shall be subject to such
Greater Restrictions.

          Shares of unrestricted Stock acquired by a Grantee on exercise of an
option shall be delivered to the Grantee or, at the request of the Grantee,
shall be credited directly to a brokerage account specified by the Grantee.

          (b) Special Rules for Section 16 Grantees. Subject to Articles 6 and
              -------------------------------------                           
15, no option shall be exercisable by a Section 16 Grantee during the first six
months after its Grant Date, except as exempted from Section 16(b) of the 1934
Act under Rule 16a-2(d) under the 1934 Act. This limitation shall not apply if
the Grantee dies or incurs a Disability before the end of the six-month period.

          (c) Permissible Shares Issued. No shares of Stock shall be issued
              -------------------------                                    
hereunder upon option exercise except shares of Stock available under Article
3(a). Each Grantee, by acceptance of an award, waives all rights to specific
performance or injunctive or other equitable relief and acknowledges that he has
an adequate remedy at law in the form of damages.

     9.   Loans and Guarantees. The Committee may, in its discretion except with
          --------------------                                                  
respect to the Replacement of a Sears Option:

          (a) allow a Grantee to defer payment to the Company of all or any
portion of (i) the Option Price of an option, (ii) the purchase price of a share
of restricted Stock, or (iii) any taxes associated with a benefit hereunder
which is not a cash benefit at the time such benefit is so taxable, or

          (b) cause the Company to guarantee a loan from a third party to the
Grantee, in an amount equal to all or any portion of such option Price, purchase
price, or any related taxes. Any such payment deferral or guarantee by the
Company pursuant to this Article 9 shall be, on a secured or unsecured basis,
for such periods, at such interest rates, and on such other terms and conditions
as the Committee may determine. Notwithstanding the foregoing, a Grantee shall
not be entitled to defer the payment of such Option Price, purchase price, or
any related taxes unless the Grantee (i) enters into a binding obligation to pay
the deferred amount and (ii) except with respect to treasury shares, pays upon
exercise of an option or grant of shares of restricted Stock, as the case may
be, an amount equal to or greater than the aggregate Minimum Consideration
therefor. If the Committee has permitted a payment deferral or caused the
Company to guarantee a loan pursuant to this Article 9, then the Committee may,
in its discretion, require the immediate payment of such deferred amount or the
immediate release of such guarantee upon the Grantee's Termination of Employment
or if the Grantee sells or otherwise

                                       18

 
transfers the Grantee's shares of Stock purchased pursuant to such deferral or
guarantee.

     10.  Notification under Section 83(b). The Committee may, on the Grant Date
          --------------------------------                                      
or any later date, prohibit a Grantee from making the election described below.
If the Committee has not prohibited such Grantee from making such election, and
the Grantee shall, in connection with the exercise of any option, or the grant
of any share of restricted Stock, make the election permitted under Section
83(b) of the Internal Revenue Code (i.e., an election to include in such
Grantee's gross income in the year of transfer the amounts specified in Section
83(b) of the Internal Revenue Code), such Grantee shall notify the Company of
such election within 10 days of filing notice of the election with the Internal
Revenue Service, in addition to any filing and notification required pursuant to
regulations issued under the authority of Section 83(b) of the Internal Revenue
Code.

     11.  Mandatory Withholding Taxes.
          --------------------------- 

          (a) Whenever under the Plan, cash or shares of Stock are to be
delivered upon exercise or payment of an Award or upon a share of restricted
Stock becoming nonforfeitable, or any other event with respect to rights and
benefits hereunder, the Company shall be entitled to require as a condition of
delivery (i) that the Grantee remit an amount sufficient to satisfy all federal,
state, and local withholding tax requirements related thereto, (ii) the
withholding of such sums from compensation otherwise due to the Grantee or from
any shares of Stock due to the Grantee under the Plan or (iii) any combination
of the foregoing.

          (b) If any disqualifying disposition described in Article 6(c)(vi) is
made with respect to shares of Stock acquired under an incentive stock option
granted pursuant to the Plan or any election described in Article 10 is made,
then the person making such disqualifying disposition or election shall remit to
the Company an amount sufficient to satisfy all federal, state, and local
withholding taxes thereby incurred; provided that, in lieu of or in addition to
the foregoing, the Company shall have the right to withhold such sums from
compensation otherwise due to the Grantee or from any shares of Stock due to the
Grantee under the Plan.

     12.  Elective Share Withholding.
          -------------------------- 

          (a) Subject to the prior approval of the Committee and to Article
12(b), a Grantee may elect the withholding ("Share Withholding") by the Company
of a portion of the shares of Stock otherwise deliverable to such Grantee upon
the exercise or payment of an Award or upon a share of restricted Stock's
becoming nonforfeitable (each a "Taxable Event") having a Fair Market Value
equal to

                                       19

 
               (i) the minimum amount necessary to satisfy required federal,
     state, or local withholding tax 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.

          (b) Each Share Withholding election by a Grantee shall be subject to
the following restrictions:

               (i) any Grantee's election shall be subject to the Committee's
     right to revoke its approval of Share Withholding by such Grantee at any
     time before the Grantee's election if the Committee has reserved the right
     to do so at the time of its approval;

               (ii) if the Grantee is a Section 16 Grantee, such Grantee's
     election shall be subject to the disapproval of the Committee at any time,
     whether or not the Committee has reserved the right to do so;

               (iii) the Grantee's election must be made before the date (the
     "Tax Date") on which the amount of tax to be withheld is determined;

               (iv) the Grantee's election shall be irrevocable;

               (v) a Section 16 Grantee may not elect Share Withholding to the
     extent that such Share Withholding is to occur within six months after the
     grant of the related option (except if the Grantee dies or incurs a
     Disability before the end of the six-month period); and

               (vi) a Section 16 Grantee must elect Share Withholding during the
     ten business day period beginning on the third business day after the
     release of the Company's quarterly or annual summary statement of sales and
     earnings.

     13.  Termination of Employment.
          ------------------------- 

          (a) Restricted Stock. Except as otherwise provided by the Committee on
              ----------------                                                  
or after the Grant Date, a Grantee's shares of restricted Stock that are
forfeitable shall be forfeited upon the Grantee's Termination of Employment.

          (b) Other Awards. If a Grantee has a Termination of Employment, then,
              ------------                                                     
unless otherwise provided in the Grant Agreement, any unexercised option to the
extent exercisable on the date of the Grantee's Termination of Employment may be
exercised by the Grantee, in whole or in part, at any time within three months
following such Termination of Employment, except that

                                       20

 
               (i) if the Grantee's Termination of Employment is on account of
     Disability, then any unexercised option (except a Replacement of a Sears
     Option) to the extent exercisable at the date of such Termination of
     Employment, may be exercised, in whole or in part, by the Grantee at any
     time within two years after the date of such Termination of Employment; and

               (ii) if the Grantee's Termination of Employment is on account of
     Retirement, then any unexercised option to the extent exercisable at the
     date of such Termination of Employment, may be exercised, in whole or in
     part, by the Grantee at any time within (a) two years after the date of
     such Termination of Employment, in the case of a Replacement Sears Option
     or (b) five years after the date of such Termination of Employment in the
     case of all other options.

               (iii) if the Grantee's Termination of Employment is caused by the
     death of the Grantee or if the Grantee's death occurs during the period
     following Termination of Employment during which the option would be
     exercisable under the preceding clause of Article 13(b) or under Article
     13(b)(i) or (ii), then any unexercised option to the extent exercisable on
     the date of the Grantee's death, may be exercised, in whole or in part, at
     any time within two years after the Grantee's death by the Grantee's
     personal representative or by the person to whom the option is transferred
     by will or the applicable laws of descent and distribution.

          (c) Maximum Extension. Notwithstanding the foregoing, no Award shall
              -----------------                                               
be exercisable beyond the maximum term permitted under the original Award
Agreement unless with respect to any option except a Replacement Sears option,
the Committee explicitly extends such original term, in which case such term
shall not be extended beyond the maximum term permitted by the Plan.

     14.  Equity Incentive Plans of Foreign Subsidiaries. The Committee may
          ----------------------------------------------                   
authorize any foreign Subsidiary to adopt a plan for granting Awards ("Foreign
Equity Incentive Plan"). All awards granted under such Foreign Equity Incentive
Plans shall be treated as grants under the Plan. Such Foreign Equity Incentive
Plans shall have such terms and provisions as the Committee permits not
inconsistent with the provisions of the Plan and which may be more restrictive
than those contained in the Plan. Awards granted under such Foreign Equity
Incentive Plans shall be governed by the terms of the Plan except to the extent
that the provisions of the Foreign Equity Incentive Plans are more restrictive
than the terms of the Plan, in which case such terms of the Foreign Equity
Incentive Plans shall control.

     15.  Substituted Awards. Except with respect to Replacement Options, the
          ------------------                                                 
Committee may grant substitute awards for any

                                       21

 
canceled Award granted under this Plan or any plan of any entity acquired by the
Company or any of its Subsidiaries in accordance with this Article 15. If the
Committee cancels any Award (granted under this Plan, or any plan of any entity
acquired by the Company or any of its Subsidiaries), and a new Award is
substituted therefor, then the Committee may, in its discretion, determine the
terms and conditions of such new Award, and may provide that the Grant Date of
the canceled Award shall be the date used to determine the earliest date or
dates for exercising the new substituted Award under Article 8 hereof so that
the Grantee may exercise the substituted Award at the same time as if the
Grantee had held the substituted Award since the Grant Date of the canceled
Award.

     16.  Securities Law Matters.
          ---------------------- 

          (a) If the Committee deems necessary to comply with the Securities Act
of 1933, the Committee may require a written investment intent representation by
the Grantee and may require that a restrictive legend be affixed to certificates
for shares of Stock.

          (b) If based upon the opinion of counsel for the Company, the
Committee determines that the exercise or nonforfeitability of, or delivery of
benefits pursuant to, any Award could violate any applicable provision of (i)
federal or state securities law or regulations or (ii) the listing requirements
of any national securities exchange on which are listed any of the Company's
equity securities, then the Committee may postpone any such exercise,
nonforfeitability or delivery, as the case may be, but the Company shall use its
best efforts to cause such exercise, nonforfeitability or delivery to comply
with all such provisions at the earliest practicable date.

     17.  No Funding Required. Benefits payable under the Plan to any person
          -------------------                                               
shall be paid directly by the Company. The Company shall not be required to
fund, or otherwise segregate assets to be used for payment of, benefits under
the Plan.

     18.  No Employment Rights. Neither the establishment of the Plan, nor the
          --------------------                                                
granting of any Award shall be construed to (a) give any Grantee the right to
remain employed by the Company or any of its Subsidiaries or to any benefits not
specifically provided by the Plan or (b) in any manner modify the right of the
Company or any of its Subsidiaries to modify, amend, or terminate any of its
employee benefit plans.

     19.  Rights as a Stockholder. A Grantee shall not, by reason of any Award
          -----------------------                                             
(other than restricted Stock) have any right as a stockholder of the Company
with respect to the shares of Stock which may be deliverable upon exercise or
payment of such Award until such shares have been delivered to him. Shares of
restricted Stock held by a Grantee or held in escrow by the Secretary of the
Company shall confer on the Grantee all rights

                                       22

 
of a stockholder of the Company, except as otherwise provided in the Plan or the
Award Agreement. The Committee, in its discretion, at the time of grant of
restricted Stock, may permit or require the payment of cash dividends thereon to
be deferred and, if the Committee so determines, reinvested in additional
restricted Stock to the extent shares are available under Article 3, or
otherwise reinvested in Stock. Stock dividends, deferred cash dividends and
dividends in the form of property other than cash, issued with respect to
restricted Stock shall, unless otherwise provided in the Award Agreement, be
treated as additional shares of restricted Stock that are subject to the same
restrictions and other terms as apply to the shares with respect to which such
dividends are issued. The Committee may, in its discretion, provide for
crediting and payment of interest on deferred cash dividends.

     20.  Nature of Payments. Any and all grants, payments of cash, or
          ------------------                                          
deliveries of shares of Stock hereunder shall constitute 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 the purposes of determining
any pension, retirement, death or other benefits under (a) any pension,
retirement, profit-sharing, bonus, life insurance or other employee benefit plan
of the Company or any of its Subsidiaries or (b) any agreement between the
Company or any Subsidiary, on the one hand, and the Grantee, on the other hand,
except as such plan or agreement shall otherwise expressly provide.

     21.  Non-Uniform Determinations. Neither the Committee's nor the Board's
          --------------------------                                         
determinations under the Plan need be uniform and may be made by the Committee
or the Board selectively among persons who receive, or are eligible to receive,
Awards (whether or not such persons are similarly situated). Without limiting
the generality of the foregoing, the Committee shall be entitled, among other
things, to make non-uniform and selective determinations, to enter into non-
uniform and selective Award Agreements as to (a) the identity of the Grantees,
(b) the terms and provisions of Awards, and (c) the treatment, under Article 13,
of Terminations of Employment.

     22.  Adjustments. Subject to Article 6, the Committee may make such
          -----------                                                   
provision with respect to Awards, including without limitation, equitable
adjustment of

          (a) the aggregate numbers of shares of Stock available under Articles
3(a) and 3(b),

          (b) the number of shares of Stock or shares of restricted Stock
covered by an Award, and

          (c)  the Option Price, or

the termination or continuation of an Award as it may determine to be
appropriate and equitable to reflect a stock dividend,

                                       23

 
stock split, reverse stock split, share combination, recapitalization, merger,
consolidation, acquisition of property or shares, separation, spin-off,
reorganization, stock rights offering, liquidation, or similar event, of or by
the Company.

     23.  Amendment of the Plan. The Board may from time to time in its
          ---------------------                                        
discretion amend or modify the Plan without the approval of the stockholders of
the Company, except as such stockholder approval may be required (a) to permit
transactions in Stock pursuant to the Plan to be exempt from potential liability
under Section 16(b) of the 1934 Act, (b) to permit the Company to deduct, in
computing its income tax liability pursuant to the provisions of the Internal
Revenue Code, compensation resulting from Awards, (c) to retain incentive stock
option treatment under Section 422 of the Internal Revenue Code, or (d) under
the listing requirements of any securities exchange on which are listed any of
the Company's equity securities.

     24.  Termination of the Plan. The Plan shall terminate on the tenth (10th)
          -----------------------                                              
anniversary of the Effective Date or at such earlier time as the Board may
determine. Any termination, whether in whole or in part, shall not affect (a)
any Award then outstanding under the Plan, or (b) the Company's ability to make
adjustments to or cancel or continue Awards in accordance with Article 22.

     25.  No Illegal Transactions. The Plan and all Awards granted pursuant to
          -----------------------                                             
it are subject to all laws and regulations of any governmental authority which
may be applicable thereto; and notwithstanding any provision of the Plan or any
Award, Grantees shall not be entitled to exercise Awards or receive the benefits
thereof and the Company shall not be obligated to deliver any Stock or pay any
benefits to a Grantee if such exercise, delivery, receipt or payment of benefits
would constitute a violation by the Grantee or the Company of any provision of
any such law or regulation.

     26.  Controlling Law. The law of the State of Delaware except its law with
          ---------------                                                      
respect to choice of law, shall be controlling in all matters relating to or
arising out of the Plan or any Award.

     27.  Severability. If all or any part of the Plan is declared by any court
          ------------                                                         
or governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not serve to invalidate any portion of the Plan not declared to
be unlawful or invalid. Any Article or part of an Article so declared to be
unlawful or invalid shall, if possible, be construed in a manner which will give
effect to the terms of such Article or part of an Article to the fullest extent
possible while remaining lawful and valid.

                                       24