1995 Incentive Stock Plan - Hewlett-Packard Co.


                             HEWLETT-PACKARD COMPANY
                            1995 INCENTIVE STOCK PLAN

                 (As amended June 30, 2000, September 16, 1999,
            February 12, 1999, July 17, 1997 and November 21, 1996)


                   PART 1. PLAN ADMINISTRATION AND ELIGIBILITY

I. PURPOSE

The purpose of this 1995 Incentive Stock Plan (the "Plan") of Hewlett-Packard
Company ("HP" or the "Company") is to encourage ownership in the Company by key
personnel whose long-term employment is considered essential to the Company's
continued progress and thus to provide them with a further incentive to continue
in the employ of the Company or its subsidiaries or affiliates. (Each of the
Company and all such subsidiaries and affiliates is referred to hereinafter as a
"Participating Company.")

II. ADMINISTRATION

The Board of Directors (the "Board) of the Company or any committee (the
"Committee") of the Board that will satisfy Rule 16b-3 of the Exchange Act, and
any regulations promulgated thereunder, as from time to time in effect,
including any successor rule ("Rule 16b-3), shall supervise and administer the
Plan. The Committee shall consist solely of two or more non-employee directors
of the Company, who shall be appointed by the Board. A member of the Board shall
be deemed to be a "non-employee director" only if he satisfies such requirements
as the Securities and Exchange Commission may establish for non-employee
directors under Rule 16b-3. Members of the Board receive no additional
compensation for their services in connection with the administration of the
Plan.

The Board or the Committee may adopt such rules or guidelines as it deems
appropriate to implement the Plan. All questions of interpretation of the Plan
or of any shares issued under it shall be determined by the Board or the
Committee and such determination shall be final and binding upon all persons
having an interest in the Plan. Any or all powers and discretion vested in the
Board or the Committee under this Plan may be exercised by any subcommittee so
authorized by the Board or the Committee and satisfying the requirements of Rule
16b-3 for employees subject to Section 16 of the Exchange Act. In addition, the
Board or the Committee may delegate to the Executive Committee of the Board of
Directors the power to approve stock options and stock awards to employees not
subject to Section 16 of the Exchange Act.



III. PARTICIPATION IN THE PLAN

Key employees of the Company, including officers, and directors of the Company,
who are also employed by a Participating Company, shall be eligible to
participate in the Plan.

IV. STOCK SUBJECT TO THE PLAN

The maximum number of shares that may be awarded under the Plan shall be 
128,000,000 shares of the Company's $0.01 par value Common Stock ("Common 
Stock"). If a class of Preferred Stock is created and authorized by the 
Company's amended Certificate of Incorporation, Preferred Stock may be used 
in lieu of Common Stock for Plan grants. The limitation on the number of 
shares that may be awarded under the Plan shall be subject to adjustment as 
provided in Section XXII of the Plan.

The grant of a stock award not pursuant to an option under the Plan ("Stock
Award") shall be subject to such restrictions as the Committee shall determine
to be appropriate, including but not limited to restrictions on resale,
repurchase provisions, special vesting requirements or forfeiture provisions.
The grant and exercise of a stock option shall be subject to such restrictions
as the Committee may determine to be appropriate in accordance with Section VII
of the Plan.

The Committee may authorize conversion, assumption or substitution under the
Plan of any or all outstanding stock options or other stock-based awards
("Conversion Options") held by employees of an entity (the "Acquired Company")
with whom HP or one of HP's subsidiaries engages in an Acquisition. For purposes
of this paragraph, an "Acquisition" shall mean (1) a dissolution or liquidation
of all or substantially all of the assets of the Acquired Company, (2) a
purchase of assets from the Acquired Company, whether or not the purchased
assets represent substantially all of the assets of the Acquired Company or one
of its subsidiaries, (3) a reverse merger in which the Acquired Company is the
surviving corporation but the shares of the Acquired Company's voting stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, or (4) any other capital reorganization or purchase in which more
than fifty percent (50%) of the shares of the Acquired Company entitled to vote
are exchanged. Any conversion, assumption or substitution will be effective on
the closing date of the Acquisition. The Conversion Options may be nonstatutory
options or incentive stock options entitled to special tax treatment under
Section 422 of the Code ("ISOs"). Notwithstanding any other provision of this
Plan, the Committee may specify the Conversion Options' terms and conditions,
which may be different from those applicable to other options or awards granted
under the Plan and may replicate the material terms and conditions of the
Conversion Options.

The Committee may authorize the conversion under the Plan of any or all
outstanding stock appreciation rights held by employees of a Participating
Company. Such converted options are referred to as "FSAR Conversion Options",
and shall be nonstatutory options. All FSAR Conversion Options shall have the
same terms and conditions as options granted under the Plan.

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If any outstanding option under the Plan for any reason expires or is terminated
without having been exercised in full, or if any Stock Awards are forfeited, the
forfeited shares or shares allocable to the unexercised portion of such option
shall again become available for grant pursuant to the Plan.

                  PART 2. OPTIONS AND STOCK APPRECIATION RIGHTS

V. INCENTIVE STOCK OPTIONS

Any option granted under the Plan may be designated by the Committee as a
non-statutory option or as an ISO.

No option intended to qualify as an ISO may be granted under the Plan if such
grant, together with any applicable prior grants, would exceed any maximum
established under the Internal Revenue Code for ISOs that may be granted to a
single employee. Should it be determined that any ISO granted under the Plan
exceeds such maximum, the ISO shall be null and void to the extent, but only to
the extent, of such excess. Section 422(d)(1) of the Internal Revenue Code
presently provides that with respect to options granted after December 31, 1986
the aggregate fair market value (determined as of the time the ISO is granted)
of the stock with respect to which ISOs are exercisable for the first time by an
employee in any calendar year under all incentive stock option plans of the
Company shall not exceed $100,000.

Nothing in this section shall be deemed to prevent the grant of options in
excess of the maximum established by the Internal Revenue Code where such excess
amount is treated as a nonstatutory option not entitled to special tax treatment
under Section 422 of the Internal Revenue Code.

VI. TERMS, CONDITIONS AND FORM OF OPTIONS

Each option granted under this Plan shall be authorized by action of the
Committee and shall be evidenced by a written agreement in such form as the
Committee shall from time to time approve, which agreements shall comply with
and be subject to the following terms and conditions:

    A. Options Non-transferable

      (1) General

Except as provided in subsection VI.A(2) below, each option granted under the
Plan by its terms shall not be transferable by the optionee otherwise than by
will, or by the laws of descent and distribution, and shall be exercised during
the lifetime of the optionee only by him. No option or interest therein may be
transferred, assigned, pledged or hypothecated by the optionee during his
lifetime, whether by operation of law or otherwise, or be made subject to
execution, attachment or similar process.

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      (2) Transferability to Certain Vehicles

The Committee, in its sole discretion, may establish, as permitted by applicable
law, rules and conditions under which an optionee may transfer an option to
those types of trusts or other vehicles that the Committee may determine to be
eligible for transfer.

    B. Period of Option. The Committee may specify, at the time of grant, a
vesting schedule of any option. If no vesting schedule is specified, no option
may be exercised before the first anniversary of the date upon which it was
granted, nor may it be exercised as to more than one-fourth of the number of
shares covered thereby before the second anniversary of such date, nor as to
more than one-half of the number of shares covered thereby before the third
anniversary of such date, nor as to more than three-fourths of the number of
shares covered thereby before the fourth anniversary of such date. Any option
granted pursuant to the Plan shall become exercisable in full upon the
retirement of the optionee because of age or total and permanent disability or
upon the death of the optionee. Except as provided in this subsection B, no
option shall be exercisable after the expiration of 10 years from the date upon
which such option is granted. However, the Committee may, at the time an option
is granted to any employee who is not subject to Section 16 of the Exchange Act,
specify a different term for the option up to a maximum term of 10.5 years. Each
option shall be subject to termination before its date of expiration as
hereinafter provided.

    C. Exercise of Options. Options may be exercised only by written notice to
the Company at its head office accompanied by payment in U.S. dollars of the
full consideration for the shares as to which they are exercised, and, with
respect to nonstatutory options, by payment of all applicable U.S. withholding
taxes upon such exercise. In addition, if and to the extent authorized by the
Committee, optionees may make all or any portion of any payment due to the
Company upon exercise of an option by delivery of any property (including
securities of the Company) other than cash, as long as such property constitutes
valid consideration for the stock under applicable law.

The Committee may, but need not, permit the payment of required tax withholding
due upon exercise of an option by the withholding of shares otherwise issuable
upon exercise of the option. Option shares withheld in payment of such taxes
shall be valued at the fair market value of the stock on the date of exercise.
Fair market value shall be deemed to be the mean of the highest and lowest
quoted selling prices for such shares on the exercise date as reported on the
New York Stock Exchange Composite Tape. The Committee may impose special
restrictions on the use of option shares as payment for withholding taxes by
individuals subject to Section 16 of the Exchange Act.

No option may be exercised while the optionee is on any leave of absence from
the Company, other than an approved personal or medical leave having an
employment guaranty. Options will continue to vest during any authorized leave
of absence, and may be exercised to the extent permitted by subsection VI.B
above upon the optionee's return to an active employment status.

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    D. Termination of Options

      (1) Termination of Employment

All rights of an employee in an option, to the extent that it has not been
exercised, shall terminate upon the termination of his employment for any
reason.

      (2) Retirement and Death

In the event of an employee's retirement due to age or total and permanent
disability, all rights of an employee in an option, to the extent that it has
not been exercised, shall terminate three years from the date thereof with
respect to nonstatutory options and three months from the retirement date with
respect to ISOs or upon expiration of the option, whichever shall first occur.
In the event of the death of the employee, the option shall terminate upon
failure of his designated representative to exercise the option in accordance
with the time period provided in subsection VI(E) below.

      (3) Leave of Absence

The Committee may, but shall not be required to, authorize the continuation of
options held by employees who, at the Company's request or with the Company's
consent, are terminating or taking a leave of absence from the Company to accept
employment with not-for-profit or for-profit corporations, governmental
agencies, industry associations or other organizations in connection with the
Company's investments or strategic alliances. Such approval must be obtained
from the Committee prior to termination of employment in order to prevent the
immediate termination of options. The Committee may, in its sole discretion,
delegate its authority under this subsection to the Executive Committee.

      (4) Divestiture

If an employee terminates because of a divestiture by the Company, the Committee
may, in its sole discretion, amend any option previously granted to such
employee pursuant to the Plan such that the option becomes exercisable in full
and/or permits the employee to exercise such option which has not already been
exercised until the earlier of: (i) three months from the closing date of the
divestiture, or such longer date, if any, which the Committee may authorize, or
(ii) the expiration of the option. The Committee may, in its sole discretion,
delegate its authority under this subsection to the Executive Committee.

      (5) Voluntary Severance Program

If an employee terminates as a result of participation in a Participating
Company voluntary severance program approved by the Executive Committee, any
option granted pursuant to the Plan shall become exercisable in full, and the
employee may exercise any such option that has not already been exercised until
the earlier of (i) three months from the employee's termination date, or (ii)
the expiration of the option.

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    E. Exercise by Representative Following Death of Employee. The employee, by
written notice to the Company, may designate one or more persons (and from time
to time change such designation) including his legal representative, who, by
reason of his death, shall acquire the right to exercise all or a portion of the
option. If the person or persons so designated wish to exercise any portion of
the option, they must do so within one year after the death of the employee or
retired employee, as the case may be. All rights of the representative(s) in the
option shall terminate upon failure to exercise the option within the time
period set forth in this subsection VI.E. Any exercise by a representative shall
be subject to the provisions of this Plan.

VII. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS

The Committee shall have the power to modify, extend or renew outstanding
options and authorize the grant of new options in substitution therefor,
provided that any such action may not have the effect of altering or impairing
any rights or obligations of any option previously granted without the consent
of the optionee.

  The Committee shall have the power to lower the exercise price of an
outstanding option not intended to qualify as an ISO under the Internal Revenue
Code; provided, however, that the exercise price per share may not be reduced
below 75% of the fair market value of a share of Common Stock on the date the
action is taken to reduce the exercise price. Such fair market value shall be
deemed to be the mean of the highest and lowest quoted selling prices for such
shares on that date as reported on The New York Stock Exchange Composite Tape.

VIII. OPTION PRICE

The option price per share for the shares covered by each nonstatutory option
shall be not less than 75% of the fair market value of a share of Common Stock
on the date the option is granted. The option price per share for ISOs shall be
not less than the fair market value on the option grant date. Such fair market
value shall be deemed to be the mean of the highest and lowest quoted selling
prices for such share on that date as reported on The New York Stock Exchange
Composite Tape. The option price per share for Conversion Options shall be
determined by the Committee at the time of the related merger or acquisition.

IX. LOANS FOR EXERCISE OF OPTIONS

Any option agreement under this Plan entered into with an employee may, but need
not, provide that the Company shall lend to the employee who holds the option
the funds for any exercise of his option. Any such loans made to individuals
subject to Section 16 of the Exchange Act shall be at a rate of interest
adequate to avoid imputation of income under Sections 483 and 7872 of the
Internal Revenue Code and shall be for a term not to exceed 15 months from the
date of exercise of the related option. Any loan by the Company to fund the
exercise of an option shall be subject to such other terms and 

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conditions as shall be set forth in the option agreement, which terms and
conditions shall be determined by the Committee at the time of the grant of the
option. Loans may or may not be secured by stock issued pursuant to such option
exercises, at the Committee's discretion.

X. STOCK APPRECIATION RIGHTS

  A. General. This section shall apply to employees who hold options heretofore
or hereafter granted under the Plan ("Options"). The Committee may, but shall
not be required to, grant to such employees stock appreciation rights as herein
provided with respect to not more than the number of shares (from time to time)
subject to the Options held by such employees. The stock appreciation rights
shall be integral parts of the respective Options and shall have no existence
apart therefrom.

A stock appreciation right shall be the right of the holder thereof to elect to
surrender part or all of any Option that is wholly exercisable, or of any
exercisable portion of an Option that is partially exercisable, and receive in
exchange therefore cash or shares of Common Stock (valued at current fair market
value) or a combination thereof. Such cash or shares or combination shall have
an aggregate value ("Appreciation") equal to the excess of the current fair
market value of one share over the Option price of one share specified in such
Option multiplied by the number of shares subject to such Option or the portion
thereof that is surrendered. The current fair market value of a share shall be
the mean of the highest and lowest quoted selling prices for shares as reported
on The New York Stock Exchange Composite Tape on the day on which a stock
appreciation right is exercised, or if no sale was made on such date, then on
the next preceding day on which such a sale was made. No fractional share shall
be issued on the exercise of a stock appreciation right, and settlement
therefore shall be made in cash.

Each stock appreciation right granted under this Plan shall be subject to the
following terms and conditions: (1) each stock appreciation right shall be
evidenced by a written agreement between the Company and the holder in such form
as the Committee shall authorize; (2) each stock appreciation right granted
under the Plan by its terms shall not be transferable by the holder otherwise
than by will or by the laws of descent and distribution, and shall be exercised
during the lifetime of the holder only by him, and no stock appreciation right
or interest therein may be transferred, assigned, pledged or hypothecated by the
holder during his lifetime, whether by operation of law or otherwise, or be made
subject to execution, attachment or similar process; (3) all rights of an
employee in a stock appreciation right, to the extent that it has not been
exercised, shall terminate upon the death of the employee or the termination of
his employment for any reason other than retirement because of age or total and
permanent disability, and in case of such retirement three years from the date
thereof with respect to nonstatutory Options and three months from the date
thereof with respect to Options intended to qualify as ISOs or upon expiration
of the Option, whichever shall first occur; provided, however, that the
employee, by written notice to the Company, may designate one or more persons
(and from time to time change such designation), including his legal
representative, who, by reason of his death, shall acquire the right to exercise
all or a portion of the rights 

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accrued under the stock appreciation right as of the date of his death. If the
person or persons so designated wish to exercise any portion of the stock
appreciation right, they must do so within one year after the death of the
employee or retired employee, as the case may be, and such exercise shall be
subject to the provisions of this Plan; and (4) the life of stock appreciation
rights shall be coterminous with the life of the Options.

The holder of a stock appreciation right may exercise the same by (1) filing
with the Secretary of the Company a written election, which election shall be
delivered by the Secretary to the Committee, specifying (a) the Option or
portion thereof to be surrendered, and (b) the percentage of the Appreciation
that he desires to receive in cash, if any; and (2) surrendering such Option for
cancellation or partial cancellation, as the case may be; provided, however,
that any election that specifies that the holder of a stock appreciation right
desires to receive any portion of the Appreciation in cash shall be of no force
or effect unless and until the Committee shall have consented to such election.

Upon exercise of a stock appreciation right, the number of shares reserved for
issuance under the Plan shall be reduced by the number of shares covered by the
Option, or the portion thereof, which is surrendered in connection with such
exercise.

Nothing in the Plan shall be construed to give any eligible employee any right
to be granted a stock appreciation right. Neither the Plan nor the granting of a
stock appreciation right nor any other action taken pursuant to the Plan shall
constitute or be evidence of any agreement or understanding, express or implied,
that the Company will employ the holder of a stock appreciation right for any
period of time or in any position or at any particular rate of compensation. The
holder of a stock appreciation right shall have no rights as a shareholder with
respect to the shares covered by his stock appreciation right until the date of
issuance to him of a stock certificate therefor, and, except as otherwise
specifically provided in the stock option agreement for the Options, no
adjustment will be made for dividends or other rights for which the record date
is prior to the date such certificate is issued.

The Board or the Committee shall have the sole discretion to consent to approve
or disapprove, in whole or in part, any election to receive any portion of the
Appreciation in cash.

  B. ADDITIONAL RESTRICTIONS APPLICABLE TO SECTION 16 EMPLOYEES. No stock
appreciation right or related Option may be exercised during the first six
months of its term, except in the event of death or total and permanent
disability of the holder occurring prior to the expiration of this six-month
period.

Stock appreciation rights granted to individuals subject to Section 16 of the
Exchange Act must comply with any applicable provisions of Rule 16b-3. These
rights shall contain such additional conditions or restrictions as may be
required under this rule (or any successor rule) to qualify for the maximum
exemption from Section 16 of the Exchange Act with respect to Plan transactions.

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XI. INDIVIDUAL GRANT LIMITATION

The Plan prohibits a single participant from receiving grants of options or
stock appreciation rights during any single fiscal year of the Company for more
than an aggregate of 1,200,000 shares of Common Stock (subject to adjustment as
provided in Section XXII of the Plan). The amount of any payment of stock
appreciation rights in cash shall be based upon the fair market value of Common
Stock on the date of exercise. Fair market value shall be the mean of the high
and low prices of such stock on The New York Stock Exchange Composite Tape on
the date in question, or if no sales of such stock were made on that date, the
mean of the high and low prices of such stock on the next preceding day on which
sales were made.

                          PART 3. STOCK AND CASH AWARDS

XII. STOCK AND CASH AWARD DETERMINATION

The Committee may grant an eligible employee Stock Awards or awards of cash
("Cash Awards") at such times and in such amounts as the Committee may designate
which in its opinion fully reflect the performance level and potential of such
employee. The Committee shall designate whether such awards are payable in
Common Stock, cash, or a combination thereof. Such awards shall be made in
accordance with such guidelines as the Committee may from time to time adopt.
Stock Awards and Cash Awards shall be independent of any grant of an option
under this Plan and shall be made subject to such restrictions as the Committee
may determine to be appropriate.

XIII. PAYMENT OF STOCK OR CASH AWARDS

  A. No employee shall have the right to receive payment of any Stock Award or
Cash Award until notified of the amount of such award, in writing, by the
Committee or its authorized delegate.

  B. Payment of Cash Awards shall be made in a lump sum or in annual
installments over such period as the Committee may designate, which period shall
not exceed five years, provided that the Committee may from time to time
designate minimum installment amounts.

  C. After an award of Common Stock subject to restrictions ("Restricted
Stock"), such shares will be deposited in certificate or book entry form in
escrow with the Company's Secretary. The employee shall retain all rights in the
Restricted Stock while it is held in escrow including but not limited to voting
rights and the right to receive dividends, except that the employee shall not
have the right to transfer or assign such shares until all restrictions
pertaining to such shares are terminated, at which time the applicable stock
certificates shall be released from escrow and delivered to the employee by the
Company's Secretary.

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  D. The Committee may permit, on such terms as it deems appropriate, use of
Restricted Stock as partial or full payment upon exercise of a stock option
under the Company's incentive stock option or compensation plans or this Plan.
In the event shares of Restricted Stock are so tendered as consideration for the
exercise of an option, a number of the shares issued upon the exercise of said
option, equal to the number of shares of Restricted Stock used as consideration
therefor, shall be subject to the same restrictions as the Restricted Stock so
submitted plus any additional restrictions that may be imposed by the Committee.

XIV. TERMINATION OF RESTRICTIONS ON STOCK AWARDS

The Committee will establish the period or periods after which the restrictions
on Restricted Stock will lapse.

The Committee may in its discretion permit an employee to elect to receive in
lieu of shares of Restricted Stock, at the expiration of the restrictions, a
cash payment equal to the fair market value of the Common Stock on the date the
restrictions lapse. The Committee may also permit the employee to elect to pay
required tax withholding due upon the lapse of restrictions with part of the
shares due the employee at such time. The shares cancelled in payment of
required tax withholding shall be valued at the fair market value of the Common
Stock on the date the restrictions lapse. Fair market value shall be the mean of
the high and low prices of such stock on The New York Stock Exchange Composite
Tape on the date in question, or if no sales of such stock were made on that
date, the mean of the high and low prices of such stock on the next preceding
day on which sales were made.

XV. RESTRICTIONS AND FORFEITURE OF STOCK AWARDS

The Company's obligation to deliver stock held in escrow is subject to the
condition that the employee remain an employee of the Company on active or
authorized leave status or be under contract to provide services to the Company
as provided in Section XVII hereof for the entire deferral and/or restriction
period, including mandatory and optional deferrals. If the employee fails to
meet this condition, the employee's right to any such unpaid amounts or
undelivered stock shall be forfeited. This provision may be waived by the
Committee in exceptional circumstances, including the employee serving at the
Company's request or with the Company's consent as an employee of a
not-for-profit or for-profit corporation, a governmental agency, industry
association or other similar organization in connection with the Company's
investments or strategic alliances. Unless the Committee provides otherwise, in
the event an employee holding restricted shares ceases to be on active pay
status during the restricted period for a period of more than six months, the
restricted period shall be extended by a period of time equal to the length of
the period of inactive status.

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XVI. DEATH OF A PARTICIPATING EMPLOYEE HOLDING RESTRICTED STOCK

  A. By written notice to the Company, an employee who has received a grant of
Restricted Stock may designate one or more persons (and from time to time change
such designation) who, by reason of his death, shall acquire the right to
receive any vested but unpaid awards held by the employee at the time of his
death. Such awards shall be paid to the designated representative at such time
and in such manner as if the employee were living.

  B. In the event of the death of an employee holding unvested restricted
shares, the employee's designated representative shall be entitled to receive a
prorated number of shares determined by dividing the number of whole years
lapsed since the grant date by the number of years in the restricted period and
multiplying this ratio by the number of shares subject to the restricted stock
award. Remaining unvested shares shall be forfeited unless additional payments
are specifically authorized by the Committee.

  C. If at the time of the employee's death, there is no effective beneficiary
designation as to all or some portion of the awards hereunder, such awards or
such portion thereof shall be paid to or on the order of the legal
representative of the employee's estate. In the event of uncertainty as to the
interpretation or effect of any notice of designation, the Committee's decision
with respect thereto shall be conclusive.

XVII. RETIREMENT OR DISABILITY OF EMPLOYEE HOLDING STOCK AWARD

In the event of total and permanent disability of an employee who has
participated in the Plan, any unpaid but vested award shall be paid to the
employee if legally competent or to a committee or other legally designated
guardian or representative if the employee is legally incompetent.

At the time of grant of any Stock Award, the Committee may specify special
conditions or terms covering the status of such Stock Award upon the retirement
or total and permanent disability of the employee. If no provision is made, and
if the employee retires due to age or is totally and permanently disabled but is
still legally competent, the Company's obligation to make any payment due
thereafter under the Stock Award feature of the Plan is subject to the
conditions that for the entire period of deferral or restriction, including
mandatory and optional deferrals:

    A. An employee retiring due to age shall render as an independent contractor
and not as an employee such advisory or consultative services to the Company as
shall be reasonably requested by the Company's Board of Directors (the "Board")
or the Executive Committee in writing from time to time, consistent with the
state of the retired employee's health and any employment or other activities in
which such employee may be engaged. For purposes of this Plan, the employee
shall not be required to devote a major portion of time to such services and
shall be entitled to reimbursement for any 


                                       11


reasonable out-of-pocket expenses incurred in connection with the performance of
such services;

    B. The employee shall not render services for any organization or engage
directly or indirectly in any business which, in the opinion of the Committee,
competes with, or is in conflict with the interest of, a Participating Company.
The employee shall be free, however, to purchase, as an investment or otherwise,
stock or other securities of such organizations as long as they are listed upon
a recognized securities exchange or traded over-the-counter, or as long as such
investment does not represent a substantial investment to the employee or a
significant (greater than 10%) interest in the particular organization. For the
purposes of this subsection XVII(B), any organization that is engaged in the
business of producing, leasing or selling products or providing services of the
type now or at any time hereafter made or provided by a Participating Company
shall be deemed to compete with a Participating Company;

    C. The employee shall not, without prior written authorization from the
Company, disclose to anyone outside a Participating Company, or use in other
than a Participating Company's business, any confidential information or
material relating to the business of any Participating Company, either during or
after employment with a Participating Company; and

    D. The employee shall disclose promptly and assign to the Company all right,
title and interest in any invention or idea, patentable or not, made or
conceived by the employee during employment by the Company, relating in any
manner to the actual or anticipated business, research or development work of
the Company and shall do anything reasonably necessary to enable the Company to
secure a patent where appropriate in the United States and in foreign countries.

XVIII. PERFORMANCE-BASED RESTRICTED STOCK AWARDS.

  A. Award Agreement. The Committee, in its discretion, may grant
performance-based restricted stock awards to an eligible employee or make
vesting of performance-based restricted shares contingent upon the attainment of
performance goals relating to: (1) earnings growth, (2) return on shareholders'
equity, (3) earnings per share, (4) return on assets, (5) revenue growth,
(6)stock price, or (7) other business goals defined by the Committee, each as
may be adjusted by extraordinary financial events, if applicable. Any such
objectives and the period in which such objectives are to be met will be
determined by the Committee at the time of grant and reflected in the written
award agreement. The number or value of performance shares that will be paid out
to a participant at the end of the performance period will depend on the extent
to which the Company has met the objectives determined by the Committee.

  B. Payment of Performance-based Restricted Shares. Payment of earned
performance-based restricted shares is made as soon as practicable after the
Committee has determined that the performance goals have been met. The
Committee, in its discretion, may pay earned performance-based restricted stock
in the form of shares of Common Stock, cash 

                                       12


or a combination thereof. Payment of performance-based restricted stock in cash
results in the return of the shares to the Plan, and the shares subject to an
award paid in cash will again be available for grant under the Plan. Unless
otherwise established by the Committee in the applicable award agreement, upon a
participant's termination of employment, for any reason, all remaining unearned
performance-based restricted shares shall be forfeited and returned to the Plan
and shall again be available for award under the Plan. The Committee shall also
set forth in the grant the number of performance-based restricted shares or the
amount of payment to be made under a performance award if the performance goals
are met or exceeded, including the fixing of a maximum payment (subject to
subsection XVIII(D)).

  C. Nontransferability. A performance share award is nontransferable other than
by will, the laws of descent and distribution or, if permitted by the Committee,
beneficiary designation, and a participant's rights under an award are
exercisable during the participant's lifetime only by the participant. The
extent to which a participant's rights under an award of performance-based
restricted stock are exercisable, if at all, in the event of the total and
permanent disability or death during a performance period of a participant shall
be determined by the Committee at the time of grant.

  D. Maximum Payment. In any fiscal year, no individual may receive payment for
performance-based restricted stock in excess of an aggregate of 120,000,000
shares of Common Stock, including stock options, stock appreciation rights and
other Stock Awards granted under this Plan (subject to adjustment as provided in
Section XXII of the Plan). The amount of any payment of performance-based
restricted shares in cash shall be based upon the fair market value of the
Common Stock on the date the restrictions lapse. Fair market value shall be the
mean of the high and low prices of such stock on The New York Stock Exchange
Composite Tape on the date in question, or if no sales of such stock were made
on that date, the mean of the high and low prices of such stock on the next
preceding day on which sales were made.

                           PART 4. GENERAL PROVISIONS

XIX. ASSIGNMENTS

The rights and benefits under this Plan may not be assigned except for the
designation of a representative or beneficiary, as provided in Sections VI, X,
XVI and XVIII.

XX. TIME FOR GRANTING OPTIONS OR STOCK AWARDS

All options for shares, stock appreciation rights and Stock Awards subject to
this Plan shall be granted, if at all, not later than 10 years after the
adoption of this Plan by the Board.

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XXI. LIMITATION OF RIGHTS

  A. No Right to an Option or Stock Award. Nothing in the Plan shall be 
construed to give any personnel of the Participating Companies any right to be
granted an option, Stock Award or Cash Award.

  B. No Employment Right. Neither the Plan, nor the granting of an option, Stock
Award or Cash Award nor any other action taken pursuant to the Plan shall
constitute or be evidence of any agreement or understanding, express or implied,
that any of the Participating Companies will employ a grantee for any period of
time or in any position, or at any particular rate of compensation.

  C. No Shareholder Rights for Options. An optionee shall have no rights as a
shareholder with respect to the shares covered by his options until the date of
the issuance to him of a stock certificate therefor, and no adjustment will be
made for dividends or other rights for which the record date is prior to the
date such certificate is issued.

XXII. CHANGES IN PRESENT STOCK

In the event of any merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, or other change in the corporate structure or
capitalization affecting the Company's present Common Stock, appropriate
adjustment shall be made by the Board in the number (including the aggregate
numbers specified in Section IV, XI and XVIII(D)) and kind of shares that are or
may become subject to options and Stock Awards granted or to be granted
hereunder, and in the option price of shares which are subject to options
granted hereunder.

XXIII. CHANGE IN CONTROL

In the event that the Company is merged into or acquired by another entity in a
transaction involving a change in control, the Committee shall have complete
authority and discretion, but not the obligation, to accelerate the vesting of
outstanding stock options and the termination of restrictions on Stock Awards.

The Committee may also ask the Board to negotiate, as part of any agreement
involving a sale or merger of the Company, a sale of substantially all the
Company's assets or similar transaction, terms providing protection for
employees holding stock options or Stock Awards.

XXIV. EFFECTIVE DATE OF THE PLAN

The Plan shall take effect on the date of adoption by the Board, subject to
approval by the shareholders of the Company at a meeting held within 12 months
after the date of such adoption. Options, Stock Awards or Cash Awards may be
granted under the Plan at any time after the adoption of the Plan by the Board
and prior to the termination of this Plan.


                                       14


XXV. AMENDMENT OF THE PLAN

The Board or the Committee may suspend or discontinue the Plan or revise or
amend it in any respect whatsoever; provided, however, that the Company may seek
shareholder approval of an amendment if determined to be required by or
advisable by any law or regulation, including without limitation, any
regulations of the Securities and Exchange Commission or the Internal Revenue
Service, the rules of any stock exchange on which the Company's stock is listed
or other applicable law or regulation.

XXVI. NOTICE

Any written notice to the Company required by any of the provisions of this Plan
shall be addressed to the Secretary of the Company and shall become effective
when it is received.

XXVII. COMPANY BENEFIT PLANS

Nothing contained in this Plan shall prevent the employee prior to death, or the
employee's dependents or beneficiaries after the employee's death, from
receiving, in addition to any awards provided for under this Plan and any
salary, any payments under a Company retirement plan or which may be otherwise
payable or distributable to such employee, or to the employee's dependents or
beneficiaries under any other plan or policy of the Company or otherwise.

XXVIII. UNFUNDED PLAN

Insofar as it provides for awards of stock or cash, this Plan shall be unfunded.
Although bookkeeping accounts may be established with respect to employees who
are granted awards of stock under this Plan, any such accounts will be used
merely as a bookkeeping convenience. Except for the holding of Restricted Stock
in escrow pursuant to subsection XIII(C), the Company shall not be required to
segregate any assets that may at any time be represented by awards of stock or
cash, nor shall this Plan be construed as providing for such segregation, nor
shall the Company nor the Board nor the Committee be deemed to be a trustee of
stock or cash to be awarded under the Plan. Any liability of the Company to any
employee with respect to an award of stock or cash under this Plan shall be
based solely upon any contractual obligations that may be created by the Plan;
no such obligation of the Company shall be deemed to be secured by any pledge or
other encumbrance on any property of the Company. Neither the Company nor the
Board nor the Committee shall be required to give any security or bond for the
performance of any obligation that may be created by this Plan.

XXIX. GOVERNING LAW

This Plan and all determinations made and actions taken pursuant hereto shall be
governed by the law of the State of California and construed accordingly.

                                       15


11/24/94       Adopted by the Compensation Committee 
2/28/95        Approved by the Shareholders 
4/17/95        Two for one stock split
7/16/96        Two for one stock split
11/21/96       Part 1, Section II, Part 2, Section X and Part 4, Section XXV 
               amended by the Compensation Committee 
7/17/97        Part 1, Section IV amended by the Compensation Committee
5/20/98        The Company reincorporated in the State of Delaware
2/12/99        Part 2, Section VI(B) & (D) amended by the Compensation Committee
9/16/99        Part 1, Section VI amended by the Compensation Committee 
6/30/00        Part 2, Section VI(C) & Part 3, Section XIV amended by the
               Compensation Committee 
10/27/00       Two for one stock split in the form of a stock dividend




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