MARVEL ENTERPRISES INC, PRE 14C, 1998-12-17

MARVEL ENTERPRISES INC
PRE 14C, 1998-12-17
DOLLS & STUFFED TOYS

Previous: COMMUNITY BANK SHARES OF INDIANA INC, 4, 1998-12-17

Next: NATIONSBANC MONTGOMERY FUNDING CORP, 8-K, 1998-12-17

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14C INFORMATION

Information Statement Pursuant to Section 14(c) of the Securities Exchange Act
of 1934

Check the appropriate box:
[X] Preliminary Information Statement
[ ] Definitive Information Statement

MARVEL ENTERPRISES, INC.
(Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:

2) Aggregate number of securities to which transaction applies:

3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11

4) Proposed maximum aggregate value of transaction:

5) Total fee paid:

[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
.....................................................................
2) Form, Schedule or Registration Statement No.:
.....................................................................
3) Filing Party:
.....................................................................
4) Date Filed:
.....................................................................

783669.3

<PAGE>

MARVEL ENTERPRISES, INC.
685 THIRD AVENUE
NEW YORK, NEW YORK 10017

INFORMATION STATEMENT

We Are Not Asking You for a Proxy and You Are Requested Not to Send Us a
Proxy

This Information Statement is being mailed to stockholders of Marvel
Enterprises, Inc. (the "Company") on or about December 28, 1998, in connection
with the approval of the Company's 1998 Stock Incentive Plan (the "1998 Stock
Incentive Plan") by written consent of the holders of more than a majority in
combined voting power of shares of the Company's common stock, $0.01 par value
per share (the "Common Stock") and 8% cumulative convertible exchangeable
preferred stock, $0.01 par value per share (the "8% Preferred Stock").

Stockholders of record at the close of business on December 11, 1998, are
entitled to receive this Information Statement. At the close of business on that
date, the Company had 33,452,127 shares of Common Stock outstanding, each share
being entitled to one vote, and 16,900,000 shares of 8% Preferred Stock
outstanding, each share being entitled to 1.039 votes. The 1998 Stock Incentive
Plan requires, for its effectiveness, the approval of at least a majority in
combined voting power of the outstanding shares of Common Stock and 8% Preferred
Stock. The Company expects to obtain that approval by the written consent of
stockholders prior to the mailing of the definitive form of this Information
Statement.

Holders of shares of Common Stock and 8% Preferred Stock are not entitled
under the Delaware General Corporation Law (the "DGCL") to dissenters' rights of
appraisal in connection with the approval of the 1998 Stock Incentive Plan.

Once again, we are not asking you for a proxy and you are requested not
to send us a proxy.

783669.3
-2-

<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Under regulations of the Securities and Exchange Commission, persons who
have the power to acquire shares of stock upon conversion of other securities,
or to vote or dispose of shares of stock, either alone or jointly with others,
are deemed to be beneficial owners of those shares. The following tables set
forth certain information regarding the beneficial ownership of Common Stock and
8% Preferred Stock, as of December 15, 1998, by (i) each person who is the
beneficial owner of 5% or more of the outstanding Common Stock or 8% Preferred
Stock (based, in part, upon copies of all Schedules 13D and 13G provided to the
Company), (ii) each director of the Company, (iii) each executive officer named
in the Summary Compensation Table and (iv) all executive officers and directors
of the Company as a group. Because the voting or dispositive power of certain
shares listed in the following table is shared, the same securities are
sometimes listed opposite more than one name in the table and the sharing of
voting or dispositive power is described in a footnote. The total number of
shares of Common Stock and 8% Preferred Stock listed below for directors and
executive officers as a group eliminates such duplication.

Each share of 8% Preferred Stock is convertible by its holder into 1.039
shares of Common Stock. The tables assume that no warrants for the purchase of
stock of the Company have been exercised. As far as the Company is aware, none
of the stockholders named in the tables owns any warrants for the purchase of
stock of the Company.

The Schedules 13D and 13G that the Company used in compiling the tables
take differing positions as to whether shares of stock covered by the
Stockholders' Agreement are held with "shared voting power." The tables do not
attempt to reconcile those differences.

Stockholders' Agreement

The Company and the following stockholders are parties to a Stockholders'
Agreement (the "Stockholders' Agreement") dated as of October 1, 1998:

(1) (i) Avi Arad, (ii) Isaac Perlmutter, (iii) Isaac Perlmutter
T.A., (iv) The Laura and Isaac Perlmutter Foundation Inc., (v)
Object Trading Corp., and (vi) Zib Inc. (the "Perlmutter/Arad
Group");

(2) (i) Mark Dickstein, (ii) Dickstein & Company, L.P., (iii)
Dickstein Focus Fund L.P., (iv) Dickstein International Limited,
(v) Elyssa Dickstein, Jeffrey Schwarz and Alan Cooper as
Trustees U/T/A/D 12/27/88, Mark Dickstein, Grantor, (vi) Mark
Dickstein and Elyssa Dickstein, as Trustees of the Mark and
Elyssa Dickstein Foundation, and (vii) Elyssa Dickstein (the
"Dickstein Entities" and, together with the Perlmutter/Arad
Group, the "Investor Group");

and (3) (i) The Chase Manhattan Bank, (ii) Morgan Stanley & Co.,
Incorporated, and (iii) Whippoorwill Associates, Incorporated,
as agent of and/or general partner for certain accounts and
funds (the "Lender Group").

The Stockholders' Agreement provides that its parties will take such
action as may reasonably be in their power to cause the Company's 11-member
board of directors (the "Board") to include, subject to certain conditions, six
directors designated by the Investor Group (one of whom, subject to certain
conditions, shall be designated by the Dickstein Entities) and five directors
designated by the Lender Group. The number of directors that the Investor Group,
the Dickstein Entities and the Lender Group may designate will be reduced
following June 30, 2000 if the applicable group decreases its beneficial
ownership of capital stock of the Company below certain pre-determined levels,
as set forth in the Stockholders' Agreement. The Stockholders' Agreement
provides for the creation of various committees of the Board as well as the
composition of those committees.

The parties to the Stockholders' Agreement have the power to vote, in the
aggregate, 71.7% in combined voting power of the outstanding shares of the
Company's stock, as follows: 20,413,175 shares of Common Stock, or 61.0% of the
outstanding shares of Common Stock entitled to vote, and 12,116,587 shares of 8%
Preferred Stock, or 71.7% of the outstanding shares of 8% Preferred Stock
entitled to vote.

783669.3
-3-

<PAGE>

The Stockholders' Agreement was filed by the Company with the Securities
and Exchange Commission as Exhibit 99.4 to the Company's Current Report on Form
8-K/A, filed on October 16, 1998.

783669.3
-4-

<PAGE>

Shares of Common Stock Beneficially Owned
-------------------------------------------------------------------------------------------
Sole Dispositive Shared Dispositive
Sole Voting Power Shared Voting Power Power Power
----------------- ---------------------- ---------------------- -----------------------
Five Percent Stockholders, Percent Percent Percent Percent
Directors of of of of
and Executive Officers Number Class Number Class Number Class Number Class
- -------------------------- -------- -------- ----------- --------- -------- ------- --------- ---------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Avi Arad (1)..................... 0 * 33,002,308 71.7% 4,150,000 12.4% 0 *
1698 Post Road East
Westport, Connecticut 06880
Isaac Perlmutter (2)............. 0 * 33,002,308 71.7% 13,168,573 35.5% 0 *
P.O. Box 1028
Lake Worth, Florida 33460
Mark Dickstein (3)............... 47,500 * 5,870,933 15.8% 47,500 * 5,870,933 15.8%
c/o Dickstein Partners Inc.
600 Madison Avenue
16th Floor
New York, New York 10021
The Chase Manhattan
Corporation (4).................. 0 0 33,002,308 71.7% 2,096,291 6.1% 0 0
270 Park Avenue
New York, New York 10017
Morgan Stanley & Co.
Incorporated (5) ................ 0 0 33,002,308 71.7% 4,020,792 11.3% 0 0
1585 Broadway
New York, New York 10036
Whippoorwill Associates, Inc.
as agent of and/or general
partner for certain institutions
and funds (6) .................. 0 0 3,499,853 9.8% 0 0 3,499,853 9.8%
11 Martine Avenue
White Plains, NY 10606
Value Partners, Ltd............. 2,800,341 8.4% 0 * 2,800,341 8.4% 0 *
Suite 808
4514 Cole Avenue
Dallas, Texas 75205
Morton E. Handel ............... 1,000 * 0 * 0 * 0 *
Eric Ellenbogen................. 0 * 0 * 0 * 0 *
Shelley F. Greenhaus............ 0 * 0 * 0 * 0 *
James F. Halpin................. 5,000 * 0 * 0 * 0 *
Michael M. Lynton............... 0 * 0 * 0 * 0 *
Lawrence Mittman................ 0 * 0 * 0 * 0 *
Rod Perth....................... 0 * 0 * 0 * 0 *
Michael J. Petrick.............. 0 * 0 * 0 * 0 *
Joseph M. Ahearn ............... 100 * 0 * 0 * 0 *
William H. Hardie, III.......... 0 * 0 * 0 * 0 *
Alan Fine ...................... 0 * 0 * 0 * 0 *
David J. Fremed ................ 0 * 0 * 0 * 0 *
All executive officers and
directors as a group
(14 persons).................. 53,500 * 33,002,308 71.7% 17,366,073 37.7% 5,870,933 12.8%
</TABLE>

- --------------------------
* Less than 1%.

(1) Mr. Arad is a director of the Company and a party to the
Stockholders' Agreement. Except for the 4,150,000 shares over which
Mr. Arad has sole dispositive power, shares over which Mr. Arad may
be deemed to have shared voting power are beneficially owned by other
parties to the Stockholders' Agreement and it is only by reason of
Mr. Arad's position as a party to the Stockholders' Agreement that
Mr. Arad may be deemed to possess that shared voting power.

783669.3
-5-

<PAGE>

(2) Mr. Perlmutter is a director of the Company and a party to the
Stockholders' Agreement.

(a) Shares over which Mr. Perlmutter may be deemed to have sole dispositive
power are directly held as follows:
<TABLE>

Holder Shares of Common Stock Shares of 8% Preferred Stock
------ ---------------------- ----------------------------
<S> <C> <C>
Zib Inc. 9,256,000 ---
The Laura and Isaac Perlmutter
Foundation Inc. 250,000 ---
Object Trading Corp. 33,500 3,492,852
</TABLE>

. The sole stockholder of Zib Inc., a Delaware corporation, is Isaac
Perlmutter T.A., a Florida trust (the "Perlmutter Trust"). Mr.
Perlmutter is a trustee and the sole beneficiary of the Perlmutter
Trust, and may revoke it at any time. Mr. Perlmutter is a director and
the president of the Laura and Isaac Perlmutter Foundation Inc., a
Florida not-for-profit corporation. Mr. Perlmutter is the sole
stockholder of Object Trading Corp., a Delaware corporation. Mr.
Perlmutter may be deemed to possess (i) the power to vote and dispose of
the shares of Common Stock beneficially owned by Zib Inc. and Object
Trading Corp. and (ii) the power to direct the vote and disposition of
the shares of Common Stock beneficially owned by the Laura and Isaac
Perlmutter Foundation Inc.

(b) Except for the 13,168,573 shares over which Mr. Perlmutter has
sole dispositive power, shares over which Mr. Perlmutter may be
deemed to have shared voting power are beneficially owned by
parties to the Stockholders' Agreement which are unaffiliated
with Mr. Perlmutter and it is only by reason of Mr. Perlmutter's
position as a party to the Stockholders' Agreement that Mr.
Perlmutter may be deemed to possess that shared voting power.

(3) Mr. Dickstein is a director of the Company and a party to the
Stockholders' Agreement. Shares over which Mr. Dickstein may be
deemed to have shared voting power are shares directly held as
follows:
<TABLE>

Holder Shares of Common Stock Shares of 8% Preferred Stock
------ ---------------------- ----------------------------

<S> <C> <C>
Dickstein & Co., L.P. 1,458,029 2,419,609
Dickstein Focus Fund L.P. 195,620 232,577
Dickstein International Limited 613,967 805,876
The Mark and Elyssa Dickstein Foundation --- 10,000
Mark Dickstein 47,500 ---
</TABLE>

(a) Dickstein & Co., L.P. is a Delaware limited partnership.
(b) Dickstein Focus Fund L.P. is a Delaware limited partnership.
(c) Dickstein International Limited is a limited-liability, open-end
investment fund incorporated as an international business
company in the Territory of the British Virgin Islands.
(d) The Mark and Elyssa Dickstein Foundation is a New York Trust
organized to be exempt from federal income taxes under Section
501(c)(3) of the Internal Revenue Code.
(e) Dickstein Partners Inc., a Delaware corporation, is the advisor
to Dickstein International Limited and is the general partner of
Dickstein Partners, L.P., a Delaware limited partnership which
in turn is the general partner of both Dickstein & Co., L.P. and
Dickstein Focus Fund L.P. By reason of his position as president
and sole director of Dickstein Partners Inc., Mr. Dickstein may
be deemed to possess the power to vote and dispose of the shares
of Common Stock beneficially owned by Dickstein & Co., L.P.,
Dickstein Focus Fund L.P. and Dickstein International Limited.
By reason of his position as a trustee of the Mark and Elyssa
Dickstein Foundation, Mr. Dickstein may be deemed to possess the
power to direct the vote and disposition of the shares of Common
Stock beneficially owned by the Mark and Elyssa Dickstein
Foundation.
(f) Not included in the table are the shares of Common Stock that
underlie (i) 140,000 shares of 8% Preferred Stock directly held
by Elyssa Dickstein, Mark Dickstein's wife, and (ii) 50,000
shares of 8% Preferred Stock directly held by Elyssa Dickstein,
Jeffrey Schwarz and Alan Cooper as Trustees U/T/A/D 12/27/88,
Mark Dickstein, Grantor (the "Dickstein Trust"), a New York
trust established by Mark Dickstein, as Grantor, for the benefit
of his children. Mark Dickstein has no beneficial interest in
the Dickstein Trust.

(4) (a) Shares over which The Chase Manhattan Corporation, a
Delaware corporation, may be deemed to have sole dispositive
power are held directly by The Chase Manhattan Bank, a New York
corporation that is wholly owned by The Chase Manhattan
Corporation. The Chase Manhattan Bank is a party to the
Stockholders' Agreement.

(b) Except for the 2,096,291 shares over which The Chase Manhattan
Corporation has sole dispositive power, shares over which The
Chase Manhattan Corporation may be deemed to have shared voting
power are beneficially owned by parties to the Stockholders'
Agreement which are unaffiliated with The Chase Manhattan
Corporation

783669.3
-6-

<PAGE>

and it is only by reason of The Chase Manhattan Bank's position
as a party to the Stockholders' Agreement that The Chase
Manhattan Corporation may be deemed to possess that shared
voting power.

(5) Morgan Stanley & Co. Incorporated is a party to the Stockholders'
Agreement.

(6) Whippoorwill Associates, Incorporated ("Whippoorwill") may be deemed
to be the beneficial owner of these shares because it has
discretionary authority with respect to the investments of, and acts
as agent for, the direct holders of the shares. Whippoorwill
disclaims any beneficial ownership of Common Stock or 8% Preferred
Stock except to the extent of Whippoorwill's pecuniary interest in
that stock, if any. Whippoorwill, as agent of and/or general partner
for certain institutions and funds, is a party to the Stockholders'
Agreement. Figures include approximately 49,000 shares of Common
Stock that are not subject to the Stockholders' Agreement.

783669.3
-7-

<PAGE>

Shares of 8% Preferred Stock Beneficially Owned
----------------------------------------------------------------------------------------------
Sole Dispositive Shared Dispositive
Sole Voting Power Shared Voting Power Power Power
-------------------- ---------------------- ---------------------- -----------------------
Five Percent Stockholders, Percent Percent Percent Percent
Directors of of of of
and Executive Officers Number Class Number Class Number Class Number Class
- -------------------------- -------- ------- ----------- -------- ---------- -------- --------- ---------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Avi Arad (1)........................ 0 * 12,116,587 71.7% 0 * 0 *
1698 Post Road East
Westport, Connecticut 06880
Isaac Perlmutter (2)................ 0 * 12,116,587 71.7% 3,492,852 20.7% 0 *
P.O. Box 1028
Lake Worth, Florida 33460
Mark Dickstein (3).................. 0 * 3,468,062 20.5% 0 * 3,468,062 20.5%
c/o Dickstein Partners Inc.
600 Madison Avenue
16th Floor
New York, New York 10021
The Chase Manhattan
Corporation (4)..................... 0 0 12,116,587 71.7% 777,201 4.6% 0 0
270 Park Avenue
New York, New York 10017
Morgan Stanley & Co.
Incorporated (5) ................... 0 0 12,116,587 71.7% 2,166,908 12.8% 0 0
1585 Broadway
New York, New York 10036
Whippoorwill Associates, Inc.
as agent of and/or general
partner for certain institutions
and funds (6) ..................... 0 0 2,041,443 12.1% 0 0 2,041,443 12.1%
11 Martine Avenue
White Plains, NY 10606
Morton E. Handel ................... 0 * 0 * 0 * 0 *
Avi Arad............................ 0 * 0 * 0 * 0 *
Eric Ellenbogen..................... 0 * 0 * 0 * 0 *
Shelley F. Greenhaus................ 0 * 0 * 0 * 0 *
James F. Halpin..................... 0 * 0 * 0 * 0 *
Michael M. Lynton................... 0 * 0 * 0 * 0 *
Lawrence Mittman.................... 0 * 0 * 0 * 0 *
Rod Perth........................... 0 * 0 * 0 * 0 *
Michael J. Petrick.................. 0 * 0 * 0 * 0 *
Joseph M. Ahearn ................... 0 * 0 * 0 * 0 *
William H. Hardie, III.............. 0 * 0 * 0 * 0 *
Alan Fine .......................... 0 * 0 * 0 * 0 *
David J. Fremed .................... 0 * 0 * 0 * 0 *
All executive officers and
directors as a group
(14 persons)...................... 0 0 12,116,587 71.7% 3,492,852 20.7 3,468,062 20.5%
</TABLE>

- --------------------------
* Less than 1%.

(1) Mr. Arad is a director of the Company and a party to the
Stockholders' Agreement. Shares over which Mr. Arad may be deemed to
have shared voting power are beneficially owned by other parties to
the Stockholders' Agreement and it is only by reason of Mr. Arad's
position as a party to the Stockholders' Agreement that Mr. Arad may
be deemed to possess that shared voting power.

783669.3
-8-

<PAGE>

(2) Mr. Perlmutter is a director of the Company and a party to the
Stockholders' Agreement.

(a)Shares over which Mr. Perlmutter may be deemed to have sole dispositive
power are directly held as follows:

Holder Shares of 8% Preferred Stock
------ ----------------------------
Object Trading Corp. 3,492,852

. Mr. Perlmutter is the sole stockholder of Object Trading Corp., a
Delaware corporation. Mr. Perlmutter may be deemed to possess the power
to vote and dispose of the shares of 8% Preferred Stock beneficially
owned by Object Trading Corp.

(b)Except for the 3,492,852 shares over which Mr. Perlmutter has sole
dispositive power, shares over which Mr. Perlmutter may be deemed to
have shared voting power are beneficially owned by parties to the
Stockholders' Agreement which are unaffiliated with Mr. Perlmutter and
it is only by reason of Mr. Perlmutter's position as a party to the
Stockholders' Agreement that Mr. Perlmutter may be deemed to possess
that shared voting power.

(3) Mr. Dickstein is a director of the Company and a party to the
Stockholders' Agreement. Shares over which Mr. Dickstein may be deemed to
have shared voting power are shares directly held as follows:

Holder Shares of 8% Preferred Stock
------ ----------------------------
Dickstein & Co., L.P. 2,419,609
Dickstein Focus Fund L.P. 232,577
Dickstein International Limited 805,876
The Mark and Elyssa Dickstein Foundation 10,000
Mark Dickstein ---

(a) Dickstein & Co., L.P. is a Delaware limited partnership.
(b) Dickstein Focus Fund L.P. is a Delaware limited partnership.
(c) Dickstein International Limited is a limited-liability, open-end
investment fund incorporated as an international business
company in the Territory of the British Virgin Islands.
(d) The Mark and Elyssa Dickstein Foundation is a New York Trust
organized to be exempt from federal income taxes under Section
501(c)(3) of the Internal Revenue Code.
(e) Dickstein Partners Inc., a Delaware corporation, is the advisor
to Dickstein International Limited and is the general partner of
Dickstein Partners, L.P., a Delaware limited partnership which
in turn is the general partner of both Dickstein & Co., L.P. and
Dickstein Focus Fund L.P. By reason of his position as president
and sole director of Dickstein Partners Inc., Mr. Dickstein may
be deemed to possess the power to vote and dispose of the shares
of 8% Preferred Stock beneficially owned by Dickstein & Co.,
L.P., Dickstein Focus Fund L.P. and Dickstein International
Limited. By reason of his position as a trustee of the Mark and
Elyssa Dickstein Foundation, Mr. Dickstein may be deemed to
possess the power to direct the vote and disposition of the
shares of 8% Preferred Stock beneficially owned by the Mark and
Elyssa Dickstein Foundation.
(f) Not included in the table are (i) 140,000 shares of 8% Preferred
Stock directly held by Elyssa Dickstein, Mark Dickstein's wife,
and (ii) 50,000 shares of 8% Preferred Stock directly held by
the Dickstein Trust. Mark Dickstein has no beneficial interest
in the Dickstein Trust.

(b) Except for the 777,201 shares over which The Chase Manhattan
Corporation has sole dispositive power, shares over which The
Chase Manhattan Corporation may be deemed to have shared voting
power are beneficially owned by parties to the Stockholders'
Agreement which are unaffiliated with The Chase Manhattan
Corporation and it is only by reason of The Chase Manhattan
Bank's position as a party to the Stockholders' Agreement that
The Chase Manhattan Corporation may be deemed to possess that
shared voting power.

(5) Morgan Stanley & Co. Incorporated is a party to the Stockholders'
Agreement.

(6) Whippoorwill may be deemed to be the beneficial owner of these shares
because it has discretionary authority with respect to the
investments of, and acts as agent for, the direct holders of the
shares. Whippoorwill disclaims any beneficial ownership of Common
Stock or 8% Preferred Stock except to the extent of Whippoorwill's
pecuniary interest in that stock, if any. Whippoorwill, as agent of
and/or general partner for certain institutions and funds, is a

783669.3
-9-

<PAGE>

party to the Stockholders' Agreement. Figures include approximately
20,000 shares of 8% Preferred Stock that are not subject to the
Stockholders' Agreement.

EXECUTIVE COMPENSATION

The following table sets forth information for the years indicated
concerning the compensation awarded to, earned by or paid to, the Chief
Executive Officer of the Company during 1997, the Company's three other
executive officers who served as executive officers of the Company as of
December 31, 1997 and two executive officers who served as executive officers
during 1997 but terminated their employment with the Company before December 31,
1997 (the "Named Executive Officers"), for services rendered in all capacities
to the Company and its subsidiaries during such period.

Summary Compensation Table

Long Term
Annual Compensation Compensation

Securities Underlying
Name and Principal Position Year Salary($) Bonus($) Options(#)
- ------------------------------------- ---- --------- ---------- ---------------------
<S> <C> <C> <C>
Joseph M. Ahearn (1) 1997 $500,000 $150,000 --
President and Chief Executive 1996 350,000 150,000 --
Officer 1995 350,000 -- 280,000(2)

Daniel J. Werther (3) 1997 $132,364 -- --
Executive Vice President and 1996 300,000 25,000 --
Senior Legal Officer 1995 252,000 25,000 75,000

Andrew R. Gatto (4) 1997 $212,562 -- --
Executive Vice President - 1996 275,000 50,000 --
Marketing 1995 126,923 30,000 30,000

Alan Fine (5) 1997 $400,000 $302,816 --
President and Chief Executive Officer 1996 253,846 117,858 30,000
of the Company's Toy Division -- -- -- --

William H. Hardie, III (6)
Executive Vice President,
Business Affairs 1997 $83,539 $10,000 --
-- -- -- --

David J. Fremed (7) 1997 $165,000 $40,000 --
Chief Financial Officer 1996 140,000 25,000 --
-- -- -- --
- -----------------------------
</TABLE>

(1) Mr. Ahearn's employment with the Company terminated in December 1998.

(2) Includes options for 250,000 shares of Common Stock granted in March
1995 after consummation of the Company's initial public offering and
options for 30,000 shares of Common Stock granted in December 1995 in
lieu of $150,000 non-discretionary cash bonus payable pursuant to the
terms of Mr. Ahearn's employment agreement with the Company. All of
those stock options have been cancelled.

(3) Mr. Werther terminated his employment with the Company in May 1997.
All of his stock options have been cancelled.

(4) Mr. Gatto commenced employment with the Company in July 1995 and
terminated his employment with the Company in October 1997. All of his
stock options have been cancelled.

783669.3
-10-

<PAGE>

(5) Mr. Fine commenced employment with the Company in May 1996, and was
appointed as the President and Chief Executive Officer of the Company's
Toy Division in the fourth quarter of 1998. All of his stock options
shown in this table have been cancelled.

(6) Mr. Hardie commenced employment with the Company in September 1997.

(7) All of Mr. Fremed's stock options shown in this table, which were
granted to him before he became an executive officer of the Company,
have been cancelled.

Option/SAR Grants

The Company did not grant any stock options during 1997 to the Named
Executive Officers under its 1995 Stock Option Plan. The 1995 Stock Option Plan
will terminate upon the effectiveness of the 1998 Stock Incentive Plan.

The following chart shows the number of exercisable and unexercisable
stock options held by the Named Executive Officers. None of the Named Executive
Officers exercised stock options during 1997. Based upon the December 31, 1997,
NYSE closing price per share of Common Stock of $7.75, none of the stock options
held by the Named Executive Officers were considered in-the-money.

Year End 1997 Options

Number of Securities
Underlying Unexercised
Options/SARs at Year
End #(1)
----------------------

Name Exercisable Unexercisable
- ---- ----------- -------------
Joseph M. Ahearn 280,000 --

Alan Fine 20,000 10,000 (2)

David J. Fremed 30,000 --

(1) Represents shares of Common Stock underlying stock options; none of the
Named Executive Officers hold SARs (stock appreciation rights). All of
these stock options have been cancelled.
(2) Represents options exercisable as of August 16, 1998.

Compensation of Directors

Currently, non-employee directors receive an annual retainer of $25,000
and an annual grant of 10,000 shares of Common Stock to be immediately vested.
In addition non-employee directors receive a one-time grant of five-year options
to purchase 20,000 shares of common stock at the price to be set for the initial
grant of options under the 1998 Stock Incentive Plan, subject to stockholder
approval of the 1998 Stock Incentive Plan. Those options are to expire within 90
days following the date a director ceases to serve on the Board and are to vest
one-third immediately and one-third on each of the two succeeding anniversaries
of the grant. In addition, the chairman of the Compensation and Audit Committees
receives an annual retainer of $5,000 and the non-executive Chairman of the
Board receives an annual payment of $100,000 and a one-time grant of options to
purchase 30,000 shares of Common Stock on the same terms as those applicable to
the options made available to the other non-employee members of the Board.

Members of the Board who are officers or employees of the Company or any
of its subsidiaries do not receive compensation for serving in their capacity as
directors.

A special committee of the Board was formed in December, 1996 to consider a
plan of reorganization proposed by Marvel Entertainment Group, Inc., a Delaware
corporation ("Marvel Entertainment") concurrently

783669.3
-11-

<PAGE>

with the filing of Marvel Entertainment's chapter 11 petitions. The committee
was comprised of Paul R. Verkuil, Alfred A. Piergallini and James F. Halpin, who
received $30,000, $20,000, and $20,000, respectively, for serving on the
committee.

Employment Agreements

The Company has entered into employment agreements with each of the
following Named Executive Officers: Joseph M. Ahearn, Andrew R. Gatto, Alan
Fine, William H. Hardie, III, and David J. Fremed. Those agreements have
governed, respectively, Mr. Ahearn's employment as President and Chief Executive
Officer, Mr. Gatto's employment as Executive Vice President--Marketing, Mr.
Fine's employment as President and Chief Executive Officer of the Company's Toy
Division, Mr. Hardie's employment as Executive Vice President--Business Affairs,
and Mr. Fremed's employment as Chief Financial Officer. Mr. Gatto terminated his
employment with the Company in October 1997. Mr. Ahearn's employment agreement
expired on December 31, 1997, in accordance with its terms. Because of
uncertainties related to the bankruptcy of Marvel Entertainment, Mr. Ahearn and
the Compensation Committee of the Board elected to defer discussions regarding
the renewal of his contract until August 1998, when Mr. Ahearn and the Company
entered into a new employment agreement effective as of January 1, 1998. Mr.
Ahearn's employment with the Company terminated in December 1998.

Employment Agreement with Mr. Ahearn. Under his 1998 employment agreement,
Mr. Ahearn received a base salary, subject to discretionary increases, of
$600,000 and was entitled to an annual non-discretionary bonus of $150,000. The
employment agreement further provided for the payment of discretionary bonuses
and participation in the Company's stock option plan as determined by the Board.
Mr. Ahearn also received a $1,000 monthly automobile allowance and was entitled
to participate in employee benefit plans generally available to the Company's
employees. Mr. Ahearn will also receive, prior to December 31, 1998, a special
bonus of $450,000. In lieu of regular payments of base salary, on each of
January 4, 1999 and January 3, 2000, the Company will pay Mr. Ahearn $600,000.

Employment Agreement with Mr. Gatto. Under his employment agreement, Mr.
Gatto received a base salary, subject to discretionary increases, of $275,000.
Mr. Gatto was entitled to an annual non-discretionary bonus of $50,000. The
employment agreement further provided for the payment of discretionary bonuses
and participation in the Company's stock option plan as determined by the Board.
Mr. Gatto also received a $1,000 monthly automobile allowance and was entitled
to participate in employee benefit plans generally available to the Company's
employees.

Employment Agreement with Mr. Fine. Pursuant to his employment agreement,
Mr. Fine has agreed to render his exclusive and full-time services to the
Company for a term of employment expiring on December 31, 1999. Under his
employment agreement, Mr. Fine receives a base salary, subject to discretionary
increases, of $400,000. Mr. Fine is entitled to an annual non-discretionary
bonus based on a formula for FOB sales. The employment agreement further
provides for the payment of discretionary bonuses and participation in the
Company's stock option plan as determined by the Board. Mr. Fine also receives a
$1,000 monthly automobile allowance and is entitled to participate in employee
benefit plans generally available to the Company's employees.

Mr. Fine's employment agreement provides that, in the event of termination
other than for cause, Mr. Fine is entitled to his salary and car allowance
earned through the date of termination and thereafter for a period up to twelve
months. Mr. Fine is also entitled to the pro rata portion of his annual bonus
earned through the date of termination.

Employment Agreement with Mr. Hardie. Pursuant to his employment agreement,
Mr. Hardie has agreed to render his exclusive and full-time services to the
Company for a term of employment expiring on August 31, 2000. Under his
employment agreement, Mr. Hardie receives a base salary, subject to
discretionary increases, of $250,000. Mr. Hardie is entitled to a bonus of
$25,000 per year (this bonus was $10,000 for the four months of Mr. Hardie's
employment during 1997) plus discretionary bonuses and participation in the
Company's stock option plan as determined by the Board. Mr. Hardie also receives
a $700 monthly automobile allowance and is entitled to participate in employee
benefit plans generally available to the Company's employees.

783669.3
-12-

<PAGE>

Mr. Hardie's employment agreement provides that, in the event of
termination other than for cause, Mr. Hardie is entitled to his salary and car
allowance earned through the date of termination and thereafter for a period up
to twelve months. Mr. Hardie is also entitled to the pro rata portion of his
annual bonus earned through the date of termination.

Employment Agreement with Mr. Fremed. Pursuant to his employment agreement,
Mr. Fremed has agreed to render his exclusive and full-time services to the
Company for a term of employment expiring on December 31, 2000. Under his
employment agreement, Mr. Fremed receives a base salary, subject to
discretionary increases, of $215,000. Mr. Fremed is entitled to a bonus of
$30,000 per year plus discretionary bonuses and participation in the Company's
stock option plan as determined by the Board. Mr. Fremed also receives a $750
monthly automobile allowance and is entitled to participate in employee benefit
plans generally available to the Company's employees.

Mr. Fremed's employment agreement provides that, in the event of
termination other than for cause, Mr. Fremed is entitled to his salary and car
allowance earned through the date of termination and thereafter for a period up
to nine months.

Each of the employment agreements with Messrs. Ahearn, Gatto, Fine, Hardie
and Fremed prohibits disclosure of proprietary and confidential information
regarding the Company and its business to anyone outside the Company both during
and subsequent to employment and otherwise provides that all inventions made by
the employees during their employment belong to the Company. In addition, the
employees agree during their employment, and for one year thereafter, not to
engage in any competitive business activity.

Compensation Committee Interlocks and Insider Participation

Isaac Perlmutter, James F. Halpin, Morton E. Handel and Donald Rosenblum
served as members of the Company's Compensation Committee during 1997. Except
for Mr. Perlmutter, former Chairman of the Board of Directors, none of those
individuals was an officer or employee of the Company during 1997 or formerly.

Tangible Media Advertising Services. Tangible Media, Inc. ("Tangible
Media"), a corporation which is wholly owned by Mr. Perlmutter, acted in 1997 as
the Company's media consultant in placing the Company's advertising and, in
connection therewith, received certain fees and commissions based on the cost of
the placement of such advertising. Tangible Media received payments of fees and
commissions totaling approximately $1,274,000 in 1997. The Company retains the
services of a non-affiliated media consulting agency on matters of advertising
creativity.

Employee, Office Space and Overhead Cost Sharing Arrangements. The Company
and Tangible Media have shared certain space at the Company's principal
executive offices and related overhead expenses. Since 1994, Tangible Media and
the Company have been parties to an employee, office space and overhead cost
sharing agreement governing the Company's sharing of employees, office space and
overhead expenses (the "Cost Sharing Agreement"). Under the Cost Sharing
Agreement, any party thereto may through its employees provide services to
another party, upon request, whereupon the party receiving services shall be
obligated to reimburse the providing party for the cost of such employees'
salaries and benefits accrued for the time devoted by such employees to
providing services. Under the Cost Sharing Agreement, Tangible Media is
obligated to reimburse the Company for 18% of the rent paid under the sublease
for the space, which obligations reflect the approximate percentage of floor
space occupied by Tangible Media. The Cost Sharing Agreement also requires
Tangible Media to reimburse the Company for any related overhead expenses
comprised of commercial rent tax, repair and maintenance costs and telephone and
facsimile services, in proportion to its percentage occupancy. The Cost Sharing
Agreement is coterminous with the term of the Company's sublease for its
executive offices. The Company paid approximately $38,000 to Tangible Media in
1997 under this Agreement.

1995 Stockholders' Agreement. In connection with the Company's initial
public offering, Marvel Entertainment, Mr. Perlmutter, two affiliates of Mr.
Perlmutter through which Mr. Perlmutter held his shares of stock of the Company,
Mr. Arad and the Company entered into the 1995 Stockholders' Agreement which
provided, among other things, that Marvel Entertainment, its permitted
transferees (in this case, Marvel Characters, Inc., a Delaware corporation
("Characters"), a wholly owned subsidiary of Marvel Entertainment) ("Permitted
Transferees"), if any, and Messrs. Perlmutter and Arad would each vote their
respective shares of

783669.3
-13-

<PAGE>

common stock of the Company to elect as directors of the Company (i) eight
persons designated by Characters, (ii) two persons designated by Mr. Perlmutter
and (iii) one person designated by Mr. Arad. The 1995 Stockholders' Agreement
terminated, by its terms, in June 1997.

Company Registration Rights Agreement. During 1997, the Company was a party
to a registration rights agreement dated as of March 2, 1995 (the "1995
Registration Rights Agreement") with Mr. Arad and Mr. Perlmutter pursuant to
which they and certain of their transferees each had the right, subject to
certain conditions, to require the Company to register under the Securities Act,
all or any portion of the shares of Common Stock held by each of them on two
occasions. In addition, Mr. Arad, Mr. Perlmutter and certain of their
transferees had certain rights to participate in such registrations and in other
registrations by the Company of its Common Stock. The Company was obligated to
pay any expenses incurred in connection with such registrations, except for
underwriting discounts and commissions attributable to the shares of Common
Stock sold by Mr. Arad, Mr. Perlmutter, and certain of their transferees
pursuant to such registrations. The 1995 Registration Rights Agreement was
terminated upon the effectiveness of a new Registration Rights Agreement among
the Company, Mr. Arad, Mr. Perlmutter, and others in December 1998.

Proxy and Stock Option Agreements. In November 1997, Mr. Perlmutter and
certain of his affiliates (the "Perlmutter Group") and Mr. Arad each entered
into proxy and stock option agreements with certain creditors of Marvel
Entertainment (the "Proxy and Stock Option Agreements"). The Proxy and Stock
Option Agreements terminated upon the occurrence of the merger of a wholly owned
subsidiary of the Company with and into Marvel Entertainment on October 1, 1998
(the "Merger").

In the Proxy and Stock Option Agreements, the Perlmutter Group and Mr. Arad
agreed to vote all shares of common stock of the Company held beneficially or of
record by them in favor of the Merger and other actions necessary or appropriate
to effect the Merger.

The Proxy and Stock Option Agreements also restricted the ability of the
Perlmutter Group and Mr. Arad to dispose of shares of common stock of the
Company or to take other actions not consistent with the plan of reorganization
proposed by the Company and others in the chapter 11 case of Marvel
Entertainment (the "Plan of Reorganization").

Under each Proxy and Stock Option Agreement, the creditor parties had the
option to purchase, for $4 per share, all of the Perlmutter Group's and Mr.
Arad's shares of common stock of the Company under certain circumstances.

The Commitment Letter. Zib Inc. (an entity owned entirely by Mr.
Perlmutter), Dickstein Partners Inc. (an affiliate of Mr. Dickstein) and the
Company entered into a Commitment Letter, dated November 19, 1997 (the
"Commitment Letter"), in which Zib Inc. and Dickstein Partners Inc. committed to
purchase $60 million and $30 million in amount, respectively, of the 8%
Preferred Stock of the Company to be issued pursuant to the Plan of
Reorganization. Pursuant to the Plan of Reorganization, (i) certain secured
creditors of Marvel Entertainment purchased, pursuant to an option in the Plan
of Reorganization, $20,071,480 in amount of 8% Preferred Stock that would
otherwise have been purchased by Zib Inc.; (ii) Whippoorwill, as agent of and/or
general partner for certain institutions and funds, purchased, pursuant to an
assignment from Zib Inc., $5 million in amount of 8% Preferred Stock that would
otherwise have been purchased by Zib Inc.; (iii) Zib Inc. purchased $34,928,520
in amount of 8% Preferred Stock; and (iv) Dickstein Partners Inc. and its
assignees purchased $30 million in amount of 8% Preferred Stock.

Excess Administration Claims Note. Zib Inc. has agreed to fund the
Company's payment of any administration claims in the bankruptcy case of Marvel
Entertainment in excess of $35 million in exchange for a note (the "Excess
Administration Claims Note"). If it is issued, the Excess Administration Claims
Note will be a five-year, unsecured, interest-bearing promissory note in the
amount of that excess. The Company will have the right to pay interest on the
Excess Administration Claims Note in cash or by adding the required interest
payment to the principal balance of the note. The note will be accelerated upon
a change in control of the Company and upon the occurrence of certain events of
default. The Excess Administration Claims Note will be prepayable in whole or in
part at any time, initially at a redemption price equal to 106% of the principal
amount being prepaid, reducing to 100% of the principal amount prepaid on and
after the third anniversary of the issuance of the Excess Administration Claims
Note.

783669.3
-14-

<PAGE>

THE 1998 STOCK INCENTIVE PLAN

On November 11, 1998, the Board of Directors approved the adoption of the
1998 Stock Incentive Plan. According to its terms, the effectiveness of the 1998
Stock Incentive Plan is subject to the approval of the stockholders of the
Company. That approval is expected to be obtained prior to the mailing of the
definitive form of this Information Statement. The 1998 Stock Incentive Plan
provides for the granting of options, stock appreciation rights, restricted
stock, performance shares and performance units (collectively, "Awards") to
officers, employees and directors of the Company and its subsidiaries and to
consultants and advisors to the Company or its subsidiaries (collectively,
"Participants"). The class of Participants as of December [__], 1998 was
approximately [______] persons.

The principal provisions of the 1998 Stock Incentive Plan are summarized
below. The following summary of the material provisions of the 1998 Stock
Incentive Plan does not purport to be complete and is qualified in its entirety
by the terms of the 1998 Stock Incentive Plan, a complete copy of which is
attached hereto as Annex A and incorporated herein by reference. All defined
terms used herein shall have the meanings set forth in the 1998 Stock Incentive
Plan, unless otherwise indicated herein.

The 1998 Stock Incentive Plan is intended to provide financial incentives
to the Participants, rewarding them for making significant contributions to the
Company's success and encouraging them to associate their interests with those
of the Company and its stockholders. The 1998 Stock Incentive Plan should also
assist the Company in attracting and retaining competent and dedicated
individuals whose efforts will be important in helping the Company achieve its
long-term growth objectives.

The 1998 Stock Incentive Plan will be administered by a "Committee" which
is composed of at least two directors of the Company, each of whom is a
"non-employee director" within the meaning of Rule 16b-3 promulgated under
Section 16(b) ("Rule 16b-3") of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and an "outside director" within the meaning of regulations
promulgated under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). Pursuant to the 1998 Stock Incentive Plan, the Committee
will select Participants to whom Awards will be granted and determine the type,
size, terms and conditions of Awards, including the per share purchase price and
vesting provisions of Options and the restrictions or performance criteria
relating to Restricted Stock and Performance Awards. The Committee will also
administer, construe and interpret the 1998 Stock Incentive Plan.

Securities to be Offered

An aggregate of [_________] shares of Common Stock ("Shares") may be issued
or transferred pursuant to the 1998 Stock Incentive Plan; however, no
Participant may receive Awards with respect to more than [_______] Shares during
any calendar year. In the event of any Change in Capitalization, the Committee
may adjust the maximum number and class of Shares with respect to which Awards
may be granted under the 1998 Stock Incentive Plan, the maximum number of Shares
with respect to which Options or Awards may be granted to any Participant during
any year, the number and class of Shares which are subject to outstanding Awards
granted under the 1998 Stock Incentive Plan, and if applicable, the purchase
price therefor. In addition, if any Award expires or terminates without having
been exercised, the Shares subject to that Award again become available for
grant under the 1998 Stock Incentive Plan.

Individuals Who May Participate in the 1998 Stock Incentive Plan

All of the Company's (and its subsidiaries') officers, employees and
directors together with its (and its subsidiaries') advisors and consultants are
eligible to receive Awards under the 1998 Stock Incentive Plan. Awards under the
Plan shall be granted at the sole discretion of the Committee. The granting of
an Award does not confer upon the Participant any right to continue in the
employ of the Company or affect any right or power of the Company to terminate
the services of such Participant at any time. Awards with respect to [___]
Shares have been allocated to Participants, and except for these Awards, Awards
are discretionary and therefore not determinable under the 1998 Stock Incentive
Plan as of the date of this Information Statement.

783669.3
-15-

<PAGE>

Awards

Options. The Committee may grant to Participants Options to purchase
Shares. Subject to the provisions of the Code, Options may be either Incentive
Stock Options (within the meaning of Section 422 of the Code) or Nonqualified
Stock Options. The per Share purchase price (i.e., the "exercise price") under
each Option shall be established by the Committee at the time the Option is
granted. The per Share exercise price of an Option shall not be less than 100%
of the Fair Market Value of a Share on the date the Option is granted (110% in
the case of an Incentive Stock Option granted to a Ten-Percent Stockholder).
Options will be exercisable at such times and in such installments as determined
by the Committee. The Committee may accelerate the exercisability of any Option
at any time. Each Option granted pursuant to the 1998 Stock Incentive Plan shall
be for such term as determined by the Committee, provided, however, that no
Option shall be exercisable after the expiration of ten years from its grant
date (five years in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder). The Agreement evidencing the Option grant shall set
forth the terms and conditions applicable to such Option upon a termination or
change in the employment status of the Optionee as determined by the Committee.
The Committee may also grant dividend equivalent rights in tandem with an
Option.

Unless permitted by the Committee, Options are not transferable by the
Optionee other than by will or the laws of descent and distribution and may be
exercised during the Optionee's lifetime only by the Optionee or the Optionee's
guardian or legal representative. The purchase price for Shares acquired
pursuant to the exercise of an Option must be paid (i) in cash, (ii) by
transferring Shares to the Company, or (iii) a combination of the foregoing,
upon such terms and conditions as determined by the Committee.

Stock Appreciation Rights. The 1998 Stock Incentive Plan permits the
granting of Stock Appreciation Rights to Participants in connection with an
Option or as a freestanding right. A Stock Appreciation Right permits the
Grantee to receive, upon exercise, cash and/or Shares, at the discretion of the
Committee, equal in value to an amount determined by multiplying (i) the excess,
if any, of (x) for those granted in connection with an Option, the Fair Market
Value per Share on the date preceding the exercise date over the purchase price
per Share under the related Option, or (y) for those not granted in connection
with an Option, the Fair Market Value per Share on the date preceding the
exercise date over the Fair Market Value per Share on the grant date of the
Stock Appreciation Right by (ii) the number of Shares as to which such Stock
Appreciation Right is being exercised.

Stock Appreciation Rights granted in connection with an Option cover the
same Shares as those covered by such Option and are generally subject to the
same terms. A Stock Appreciation Right granted in connection with an Incentive
Stock Option is exercisable only if the Fair Market Value of a Share on the
exercise date exceeds the purchase price specified in the related Incentive
Stock Option Agreement. Freestanding Stock Appreciation Rights shall be granted
on such terms and conditions as shall be determined by the Committee, but shall
not have a term of greater than ten years.

Restricted Stock. The terms of a Restricted Stock Award, including the
restrictions placed on such Shares and the time or times at which such
restrictions will lapse, shall be determined by the Committee at the time the
Award is made. The Committee may determine at the time an Award of Restricted
Stock is granted that dividends paid on such Restricted Stock may be paid to the
Grantee or deferred and, if deferred, whether such dividends will be reinvested
in shares of Common Stock. Deferred dividends (together with any interest
accrued thereon) will be paid upon the lapsing of restrictions on shares of
Restricted Stock or forfeited upon the forfeiture of shares of Restricted Stock.
The agreements evidencing Awards of Restricted Stock shall set forth the terms
and conditions of such Awards upon a Grantee's termination of employment or
service.

Performance Units and Performance Shares. Performance Units and Performance
Shares will be awarded at such times as the Committee may determine and the
vesting of Performance Units and Performance Shares is based upon the attainment
of specified performance objectives by the Corporation, a subsidiary or a
division within the specified performance period (the "Performance Cycle").
Performance objectives and the length of the Performance Cycle for Performance
Units and Performance Shares will be determined by the Committee at the time the
Award is made. Prior to the end of a Performance Cycle, the Committee, in its
discretion, may adjust the performance objectives to reflect a Change in
Capitalization, a change in the tax rate or book tax rate of the Corporation or
any subsidiary, or any other event which may materially affect the performance
of the Corporation, a subsidiary or division. The agreements evidencing Awards
of Performance Units and Performance Shares will set forth the terms and
conditions of such Awards, including those applicable in the

783669.3
-16-

<PAGE>

event of the Grantee's termination of employment. Each Performance Unit will
represent one Share and payments in respect of vested Performance Units will be
made in cash, Shares or Shares of Restricted Stock or any combination of cash,
Shares or Shares of Restricted Stock. The Committee will determine the total
number of Performance Shares subject to an Award and the time or times at which
the Performance Shares will be issued to the Grantee at the time the Award is
made. In addition, the Committee will determine (a) the time or times at which
the awarded but not issued Performance Shares shall be issued to the Grantee and
(b) the time or times at which awarded and issued Performance Shares shall
become vested in or forfeited by the Grantee, in either case based upon the
attainment of specified performance objectives within the Performance Cycle. At
the time the Award of Performance Shares is made, the Committee may determine
that dividends be paid or deferred on the Performance Shares issued. Deferred
dividends (together with any interest accrued thereon) will be paid upon the
lapsing of restrictions on Performance Shares or forfeited upon the forfeiture
of Performance Shares.

Additional Information

The 1998 Stock Incentive Plan provides that in satisfaction of the federal,
state and local income taxes and other amounts as may be required by law to be
withheld with respect to an Option or Award, the Optionee or Grantee may make a
written election to have withheld a portion of the Shares issuable to him or her
having an aggregate fair market value equal to the withholding taxes.

The Committee shall have the authority at the time a grant of Options or an
Award is made to award designated Optionees or Grantees tax bonuses that shall
be paid on the exercise of such Options or payment of such Awards. The Committee
shall have full authority to determine the amount of any such tax bonus and the
terms and conditions affecting the vesting and payment thereof.

The 1998 Stock Incentive Plan will terminate on the day preceding the tenth
anniversary of its effective date. The Board may terminate or amend the 1998
Stock Incentive Plan at any time, except that (i) no such amendment or
termination may adversely affect outstanding Awards, and (ii) to the extent
necessary under applicable law or securities exchange rule, no amendment will be
effective unless approved by stockholders.

Federal Income Tax Consequences Relating to Options

In general, an Optionee will not recognize taxable income upon grant or
exercise of an Incentive Stock Option and the Company will not be entitled to
any business expense deduction with respect to the grant or exercise of an
Incentive Stock Option. Upon the exercise of an Incentive Stock Option, however,
the excess of the fair market value on the date of the exercise of the Shares
received over the exercise price of Shares will be treated as an adjustment to
alternative minimum taxable income. In order for the exercise of an Incentive
Stock Option to qualify for the foregoing tax treatment, the Optionee generally
must be an employee of the Company or a Subsidiary from the date the Incentive
Stock Option is granted through the date three months before the date of
exercise, except in the case of death or disability, where special rules apply.

If the Optionee has held the Shares acquired upon exercise of an Incentive
Stock Option for at least two years after the date of grant and for at least one
year after the date of exercise, upon disposition of the Shares by the Optionee,
the difference, if any, between the sale price of the Shares and the exercise
price of the Option will be treated as long-term capital gain or loss. If the
Optionee does not satisfy these holding period requirements, the Optionee will
recognize ordinary income at the time of the disposition of the Shares,
generally in an amount equal to the excess of the fair market value of the
Shares at the time the Option was exercised over the exercise price of the
Option. The balance of gain realized, if any, will be long-term or short-term
capital gain, depending on whether or not the Shares were sold more than one
year after the Option was exercised. If the Optionee sells the Shares prior to
the satisfaction of the holding period requirements but at a price below the
fair market value of the Shares at the time the Option was exercised, the amount
of ordinary income will be limited to the excess of the amount realized on the
sale over the exercise price of the Option. Subject to the discussion below with
respect to Section 162(m) of the Code, the Company will be allowed a business
expense deduction to the extent the Optionee recognizes ordinary income.

In general, an Optionee to whom a Nonqualified Stock Option is granted will
recognize no income at the time of the grant of the Option. Upon exercise of a
Nonqualified Stock Option, an Optionee will recognize ordinary income in an
amount equal to the amount by which the fair market value of the Shares on the
date of exercise

783669.3
-17-

<PAGE>

exceeds the exercise price of the Option (special rules may apply in the case of
an optionee who is subject to Section 16(b) of the Exchange Act). Subject to the
discussion below with respect to Section 162(m) of the Code, if it complies with
applicable withholding requirements, the Company will be entitled to a business
expense deduction in the same amount and at the same time as the Optionee
recognizes ordinary income.

Under certain circumstances, the accelerated vesting or the cashout of
Options or the accelerated lapse of restrictions on other Awards in connection
with a change in control of the Company might be deemed an "excess parachute
payment" for purposes of the golden parachute tax provisions of Section 280G of
the Code. To the extent it is so considered, the Optionee may be subject to a
20% excise tax and the Company may be denied a tax deduction.

Section 162(m) of the Code and the regulations thereunder generally would
disallow the Company a federal income tax deduction for compensation paid to the
chief executive officer and the four other most highly compensated executive
officers to the extent such compensation paid to any of such individuals exceeds
one million dollars in any year. Section 162(m) generally does not disallow a
deduction for payments of qualified "performance-based compensation" the
material terms of which have been approved by stockholders. The Company intends
that compensation attributable to Options, Stock Appreciation Rights and
Performance Awards granted under the 1998 Stock Incentive Plan will be qualified
"performance-based compensation." To qualify, the Company expects to obtain
stockholder approval of the 1998 Stock Incentive Plan prior to the mailing of
the definitive form of this Information Statement.

The closing price of Common Stock as reported on the New York Stock
Exchange on December 15, 1998 was $5.625 per share.

New Plan Benefits: 1998 Stock Incentive Plan

"Options" means options to purchase shares of Common Stock. "Shares" means
shares of Common Stock. Mr. Ahearn's employment with the Company terminated in
December 1998, as did Mr. Werther's in May 1997 and Mr. Gatto's in October 1997.

<TABLE>
<CAPTION>
<S> <C> <C>
Name and Position Dollar Value ($) Number of Units
- ----------------- ------------------ ----------------

Joseph M. Ahearn $6.125 per share 100,000 options
President and
Chief Executive Officer

Daniel J. Werther --- ---
Executive Vice President and
Senior Legal Officer

Andrew R. Gatto --- ---
Executive Vice President - Marketing

Alan Fine $6.125 per share 300,000 options
President and Chief Executive Officer
of the Company's Toy Division

William H. Hardie, III $5.875 per share 100,000 options
Executive Vice President, Business Affairs

David J. Fremed $5.875 per share 100,000 options
Chief Financial Officer

Executive Group $5.875 to $6.125 per share 2,460,000 options

Non-Executive Director Group $6.25 per share 210,000 options; 90,000 shares

Non-Executive Officer Employee Group $5.875 per share 811,000 options
</TABLE>

INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON

The officers and directors of the Company have an interest in the 1998
Stock Incentive Plan to the extent they are eligible to participate therein.

By order of the Board of Directors,

/s/ WILLIAM H. HARDIE, III
-------------------------------
William H. Hardie, III
Secretary

Dated: December 17, 1998

783669.3
-18-

<PAGE>

ANNEX A

MARVEL ENTERPRISES, INC.

1998 STOCK INCENTIVE PLAN

776880.5

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page

<S> <C> <C>
1. Purpose..................................................................................................1

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

3. Administration...........................................................................................4

4. Stock Subject to the Plan................................................................................5

5. Option Grants for Eligible Individuals...................................................................6
5.1 Authority of Committee..........................................................................6
5.2 Purchase Price..................................................................................6
5.3 Maximum Duration................................................................................7
5.4 Vesting.........................................................................................7
5.5 Method of Exercise..............................................................................7
5.6 Modification or Substitution....................................................................8
5.7 Non-transferability.............................................................................8
5.8 Rights of Optionees.............................................................................8
5.9 Effect of Change in Control.....................................................................8
5.10 Dividend Equivalent Rights......................................................................8
5.11 Grants to Certain Outside Directors.............................................................8

6. Stock Appreciation Rights................................................................................9
6.1 Time of Grant...................................................................................9
6.2 Stock Appreciation Right Related to an Option...................................................9
(a) Exercise................................................................................9
(b) Amount Payable..........................................................................9
(c) Treatment of Related Options and Stock Appreciation Rights Upon
Exercise................................................................................9
6.3 Stock Appreciation Right Unrelated to an Option................................................10
6.4 Method of Exercise.............................................................................10
6.5 Form of Payment................................................................................10
6.6 Modification or Substitution...................................................................10
6.7 Effect of Change in Control....................................................................11

7. Restricted Stock........................................................................................11
7.1 Grant..........................................................................................11
7.2 Rights of Grantee..............................................................................11
7.3 Non-transferability............................................................................11
7.4 Lapse of Restrictions..........................................................................11

i
776880.5

<PAGE>

Page

(a) Generally..............................................................................11
(b) Effect of Change in Control............................................................12
7.5 Modification or Substitution...................................................................12
7.6 Treatment of Dividends.........................................................................12
7.7 Delivery of Shares.............................................................................12

8. Performance Awards......................................................................................12
8.1 Performance Objectives.........................................................................12
8.2 Performance Units..............................................................................13
(a) Vesting and Forfeiture.................................................................13
(b) Payment of Awards......................................................................13
8.3 Performance Shares.............................................................................14
(a) Rights of Grantee......................................................................14
(b) Non-transferability....................................................................14
(c) Lapse of Restrictions..................................................................14
(d) Treatment of Dividends.................................................................14
(e) Delivery of Shares.....................................................................15
8.4 Effect of Change in Control....................................................................15
8.5 Non-transferability............................................................................15
8.6 Modification or Substitution...................................................................15

9. Effect of a Termination of Employment or Service........................................................16

10. Adjustment Upon Changes in Capitalization...............................................................16

11. Effect of Certain Transactions..........................................................................17

12. Interpretation..........................................................................................17

13. Pooling Transactions....................................................................................17

14. Termination and Amendment of the Plan...................................................................18

15. Non-Exclusivity of the Plan.............................................................................18

16. Limitation of Liability.................................................................................18

17. Regulations and Other Approvals; Governing Law..........................................................19

ii
776880.5

<PAGE>

Page
18. Miscellaneous...........................................................................................20
18.1 Multiple Agreements............................................................................20
18.2 Withholding of Taxes...........................................................................20

19. Effective Date..........................................................................................21

20. Termination of 1995 Stock Option Plan...................................................................21
</TABLE>

iii
776880.5

<PAGE>

MARVEL ENTERPRISES, INC.
1998 STOCK INCENTIVE PLAN

1. Purpose.

The purpose of this Plan is to strengthen Marvel
Enterprises, Inc. (the "Company") by providing an incentive to its officers,
employees, consultants and directors and thereby encouraging them to devote
their abilities and industry to the success of the Company's business
enterprise. It is intended that this purpose be achieved by extending to
officers, employees, consultants and directors of the Company and its
subsidiaries an added long-term incentive for high levels of performance and
unusual efforts through the grant of Incentive Stock Options, Nonqualified Stock
Options, Stock Appreciation Rights, Restricted Stock, Performance Units and
Performance Shares (as each term is hereinafter defined).

2. Definitions.

For purposes of the Plan:

2.1 "Agreement" means the written agreement between the
Company and an Optionee or Grantee evidencing the grant of an Option or Award
and setting forth the terms and conditions thereof.

2.2 "Award" means a grant of Restricted Stock, a Stock
Appreciation Right, a Performance Award or any or all of them.

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

2.4 "Cause" means, unless otherwise defined in the Agreement
evidencing a particular Award, an individual's (i) intentional failure to
perform reasonably assigned duties, (ii) dishonesty or willful misconduct in the
performance of duties, (iii) involvement in a transaction in connection with the
performance of duties to the Company or any of its Subsidiaries thereof which
transaction is adverse to the interests of the Company or any of its
Subsidiaries and which is engaged in for personal profit, (iv) willful violation
of any law, rule or regulation in connection with the performance of duties
(other than traffic violations or similar offenses), or (v) the commission of an
act of fraud or intentional misappropriation or conversion of assets or
opportunities of the Company or any Subsidiary.

2.5 "Change in Capitalization" means any increase or
reduction in the number of Shares, or any change in the Shares or exchange of
Shares for a different number or kind of shares or other securities of the
Company, by reason of a reclassification, recapitalization, merger,
consolidation, reorganization, spin-off, split-up, issuance of warrants or
rights or debentures, stock dividend, stock split or reverse stock split, cash
dividend,

776880.5

<PAGE>

property dividend, combination or exchange of shares, repurchase of shares,
change in corporate structure or otherwise.

2.6 "Code" means the Internal Revenue Code of 1986, as
amended.

2.7 "Committee" means a committee as described in Section
3.1 hereof consisting of at least two (2) Nonemployee Directors appointed by the
Board to administer the Plan and to perform the functions set forth herein.

2.8 "Company" means Marvel Enterprises, Inc.

2.9 "Dividend Equivalent Right" means a right to receive all
or some portion of the cash dividends that are or would be payable with respect
to Shares.

2.10 "Division" means any of the operating units or
divisions of the Company designated as a Division by the Committee.

2.11 "Eligible Individual" means any officer, employee,
consultant or director of the Company or a Subsidiary designated by the
Committee as eligible to receive Options or Awards subject to the conditions set
forth herein.

2.12 "Exchange Act" means the Securities Exchange Act of
1934, as amended.

2.13 "Fair Market Value" per Share as of a particular date
shall mean (i) the closing sales price per Share on a national securities
exchange for the last preceding date on which there was a sale of such Shares on
such exchange, or (ii) if the Shares are then traded on an over-the-counter
market, the average of the closing bid and asked prices for the Shares in such
over-the-counter market for the last preceding date on which there was a sale of
such Shares in such market, or (iii) if the Shares are not then listed on a
national securities exchange or traded in an over-the-counter market, such value
as the Committee in its discretion may determine.

2.14 "Grantee" means a person to whom an Award has been
granted under the Plan.

2.15 "Incentive Stock Option" means an Option satisfying the
requirements of Section 422 of the Code and designated by the Committee as an
Incentive Stock Option.

2.16 "Nonqualified Stock Option" means an Option which is
not an Incentive Stock Option.

2
776880.5

<PAGE>

2.17 "Option" means an Incentive Stock Option, a
Nonqualified Stock Option or either or both of them.

2.18 "Optionee" means a person to whom an Option has been
granted under the Plan.

2.19 "Parent" means any corporation which is a parent
corporation (within the meaning of Section 424(e) of the Code) with respect to
the Company.

2.20 "Performance Awards" means Performance Units,
Performance Shares or either or both of them.

2.21 "Performance Cycle" means the time period specified by
the Committee at the time a Performance Award is granted during which the
performance of the Company, a Subsidiary or a Division will be measured.

2.22 "Performance Shares" means Shares issued or transferred
to an Eligible Individual under Section 8.3 hereof.

2.23 "Performance Unit" means Performance Units granted to
an Eligible Individual under Section 8.2 hereof.

2.24 "Plan" means the Marvel Enterprises Inc. 1998 Stock
Incentive Plan.

2.25 "Pooling Transaction" means an acquisition of the
Company in a transaction which is intended to be treated as a "pooling of
interests" under generally accepted accounting principles.

2.26 "Restricted Stock" means Shares issued or transferred
to an Eligible Individual pursuant to Section 7 hereof.

2.27 "Shares" means the common stock, par value $0.01 per
share, of the Company.

2.28 "Stock Appreciation Right" (SAR) means a right to
receive all or some portion of the increase in the value of the Shares as
provided in Section 6 hereof.

2.29 "Subsidiary" means any corporation which is a
subsidiary corporation (within the meaning of Section 424(f) of the Code) with
respect to the Company.

3
776880.5

<PAGE>

2.30 "Successor Corporation" means a corporation, or a
parent or subsidiary thereof within the meaning of Section 424(a) of the Code,
which issues or assumes a stock option in a transaction to which Section 424(a)
of the Code applies.

2.31 "Ten-Percent Stockholder" means an Eligible Individual,
who, at the time an Incentive Stock Option is to be granted to him or her, owns
(within the meaning of Section 422(b)(6) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company, or of a Parent or a Subsidiary.

3. Administration.

3.1 The Plan shall be administered by the Committee, which
shall hold meetings at such times as may be necessary for the proper
administration of the Plan. The Committee shall keep minutes of its meetings. A
quorum shall consist of not less than two members of the Committee and a
majority of a quorum may authorize any action. Any decision or determination
reduced to writing and signed by a majority of all of the members shall be as
fully effective as if made by a majority vote at a meeting duly called and held.
Each member of the Committee shall be a nonemployee director within the meaning
of Rule 16b-3 promulgated under the Exchange Act. To the extent compliance with
Section 162(m) of the Code is desired, such Committee members shall also be
"outside directors" within the meaning of Section 162(m) of the Code. No member
of the Committee shall be liable for any action, failure to act, determination
or interpretation made in good faith with respect to this Plan or any
transaction hereunder, except for liability arising from his or her own willful
misfeasance, gross negligence or reckless disregard of his or her duties. The
Company hereby agrees to indemnify each member of the Committee for all costs
and expenses and, to the extent permitted by applicable law, any liability
incurred in connection with defending against, responding to, negotiating for
the settlement of or otherwise dealing with any claim, cause of action or
dispute of any kind arising in connection with any actions in administering this
Plan or in authorizing or denying authorization to any transaction hereunder.

3.2 Subject to the express terms and conditions set forth
herein, the Committee shall have the power from time to time to:

(a) determine those Eligible Individuals to whom Options
shall be granted under the Plan and the number of Incentive Stock Options and/or
Nonqualified Stock Options to be granted to each Eligible Individual and to
prescribe the terms and conditions (which need not be identical) of each Option,
including the purchase price per Share subject to each Option, and make any
amendment or modification to any Agreement consistent with the terms of the
Plan; and

(b) select those Eligible Individuals to whom Awards
shall be granted under the Plan and to determine the number of Stock
Appreciation Rights, Performance Units, Performance Shares, and/or Shares of
Restricted Stock to be granted

4
776880.5

<PAGE>

pursuant to each Award, the terms and conditions of each Award, including the
restrictions or performance criteria relating to such Performance Units or
Performance Shares, the maximum value of each Performance Unit and Performance
Share and make any amendment or modification to any Agreement consistent with
the terms of the Plan.

3.3 Subject to the express terms and conditions set forth
herein, the Committee shall have the power from time to time:

(a) to construe and interpret the Plan and the Options
and Awards granted hereunder and to establish, amend and revoke rules and
regulations for the administration of the Plan, including, but not limited to,
correcting any defect or supplying any omission, or reconciling any
inconsistency in the Plan or in any Agreement, in the manner and to the extent
it shall deem necessary or advisable to make the Plan fully effective and comply
with applicable law including Rule 16b-3 under the Exchange Act and the Code to
the extent applicable. All decisions and determinations by the Committee in the
exercise of this power shall be final, binding and conclusive upon the Company,
its Subsidiaries, the Optionees and Grantees, and all other persons having any
interest therein;

(b) to determine the duration and purposes for leaves
of absence which may be granted to an Optionee or Grantee on an individual basis
without constituting a termination of employment or service for purposes of the
Plan;

(d) generally, to exercise such powers and to perform
such acts as are deemed necessary or advisable to promote the best interests of
the Company with respect to the Plan; and

(e) to provide for the limited transferability of
Options to certain family members, family trusts or family partnerships of
Optionees.

4. Stock Subject to the Plan.

4.1 The maximum number of Shares that may be made the
subject of Options and Awards granted under the Plan is [_______]; provided,
however, that the maximum number of Shares that may be the subject of Options
and Awards granted to any Eligible Individual during any calendar year may not
exceed [_______] Shares. Upon a Change in Capitalization the maximum number of
Shares which may be made the subject of Options and Awards granted under the
Plan and which may be granted to any Eligible Individual during any calendar
year shall be adjusted in number and kind pursuant to Section 10 hereof. The
Company shall reserve for the purposes of the Plan, out of its authorized but

5
776880.5

<PAGE>

unissued Shares or out of Shares held in the Company's treasury, or partly out
of each, such number of Shares as shall be determined by the Board.

4.2 Upon the granting of an Option or an Award, the number
of Shares available under Section 4.1 hereof for the granting of further Options
and Awards shall be reduced as follows:

(a) In connection with the granting of an Option or an
Award (other than the granting of a Performance Unit denominated in dollars),
the number of Shares shall be reduced by the number of Shares in respect of
which the Option or Award is granted or denominated.

(b) In connection with the granting of a Performance
Unit denominated in dollars, the number of Shares shall be reduced by an amount
equal to the quotient of (i) the dollar amount in which the Performance Unit is
denominated, divided by (ii) the Fair Market Value of a Share on the date the
Performance Unit is granted.

4.3 Whenever any outstanding Option or Award or portion
thereof expires, is canceled or is otherwise terminated for any reason without
having been exercised or payment having been made in respect of the entire
Option or Award, the Shares allocable to the expired, canceled or otherwise
terminated portion of the Option or Award may again be the subject of Options or
Awards granted hereunder.

5. Option Grants for Eligible Individuals.

5.1 Authority of Committee. Subject to the provisions of
the Plan and to Section 4.1 hereof, the Committee shall have full and final
authority to select those Eligible Individuals who will receive Options, the
terms and conditions of which shall be set forth in an Agreement; provided,
however, that no person shall receive any Incentive Stock Options unless he or
she is an employee of the Company, a Parent or a Subsidiary at the time the
Incentive Stock Option is granted. The aggregate Fair Market Value (determined
as of the date of grant of an Incentive Stock Option) of the Shares with respect
to which Incentive Stock Options granted under this Plan and all other option
plans of the Company, any Parent and any Subsidiary become exercisable for the
first time by an Optionee during any calendar year shall not exceed $100,000.
Any such Options granted in excess of the $100,000 limitation shall be deemed to
be Nonqualified Stock Options.

5.2 Purchase Price. The purchase price or the manner in
which the purchase price is to be determined for Shares under each Option shall
be determined by the Committee and set forth in the Agreement; provided,
however, that the purchase price per Share under each Option shall not be less
than 100% of the Fair Market Value of a Share on the date the Option is granted
(110% in the case of an Incentive Stock Option granted to a Ten-Percent
Stockholder).

6
776880.5

<PAGE>

5.3 Maximum Duration. Options granted hereunder shall be for
such term as the Committee shall determine, provided that an Incentive Stock
Option shall not be exercisable after the expiration of ten (10) years from the
date it is granted (five (5) years in the case of an Incentive Stock Option
granted to a Ten-Percent Stockholder) and a Nonqualified Stock Option shall not
be exercisable after the expiration of ten (10) years from the date it is
granted. The Committee may, subsequent to the granting of any Option, extend the
term thereof, but in no event shall the term as so extended exceed the maximum
term provided for in the preceding sentence.

5.4 Vesting. Subject to Section 5.9 hereof, each Option
shall become exercisable in such installments (which need not be equal)
and at such times as may be designated by the Committee and set forth in the
Agreement. If the Committee does not so designate, Options shall become
exercisable in three equal or nearly equal installments on the first, second and
third anniversaries of the date of grant. To the extent not exercised,
installments shall accumulate and be exercisable, in whole or in part, at any
time after becoming exercisable, but not later than the date the Option expires.
The Committee may accelerate the exercisability of any Option or portion thereof
at any time.

5.5 Method of Exercise. The exercise of an Option shall be
made only by a written notice delivered in person or by mail to the Secretary of
the Company at the Company's principal executive office, specifying the number
of Shares to be purchased and accompanied by payment therefor and otherwise in
accordance with the Agreement pursuant to which the Option was granted. The
purchase price for any Shares purchased pursuant to the exercise of an Option
shall be paid in full upon such exercise by any one or a combination of the
following: (i) cash or (ii) with the consent of the Committee, transferring
Shares to the Company upon such terms and conditions as determined by the
Committee (such as, for example, a requirement that such Shares have been held
for at least six months if necessary to avoid adverse accounting consequences).
Any Shares transferred to the Company as payment of the purchase price under an
Option shall be valued at their Fair Market Value on the day preceding the date
of exercise of such Option, unless otherwise provided in an Agreement.
Notwithstanding the foregoing, the Committee shall have discretion to determine
at the time of grant of each Option or at any later date (up to and including
the date of exercise) the form of payment acceptable in respect of the exercise
of such Option. The written notice pursuant to this Section 5.5 may also provide
instructions from the Optionee to the Company that upon receipt of the purchase
price in cash from the Optionee's broker or dealer, designated as such on the
written notice, in payment for any Shares purchased pursuant to the exercise of
an Option, the Company shall issue such Shares directly to the designated broker
or dealer. If requested by the Committee, the Optionee shall deliver the
Agreement evidencing the Option to the Secretary of the Company who shall
endorse thereon a notation of such exercise and return such Agreement to the
Optionee. No fractional Shares (or cash in lieu thereof) shall be issued upon
exercise of an Option and the number of Shares that may be purchased upon
exercise shall be rounded to the nearest number of whole Shares.

7
776880.5

<PAGE>

5.6 Modification or Substitution. The Committee may, in its
discretion, modify outstanding Options or accept the surrender of outstanding
Options (to the extent not exercised) and grant new Options in substitution for
them. Notwithstanding the foregoing, no modification of an Option shall
adversely alter or impair any rights or obligations under the Option without the
Optionee's consent.

5.7 Non-transferability. No Option granted hereunder shall
be transferable by the Optionee to whom granted otherwise than by will or the
laws of descent and distribution unless specifically authorized by the
Committee, and unless transferred in a manner permitted by the Committee an
Option may be exercised during the lifetime of such Optionee only by the
Optionee or his or her guardian or legal representative. The terms of such
Option shall be final, binding and conclusive upon the beneficiaries, executors,
administrators, heirs and successors of the Optionee.

5.8 Rights of Optionees. No Optionee shall be deemed for any
purpose to be the owner of any Shares subject to any Option unless and until (i)
the Option shall have been exercised pursuant to the terms thereof, (ii) the
Company shall have issued and delivered the Shares to the Optionee and (iii) the
Optionee's name shall have been entered as a stockholder of record on the books
of the Company. Thereupon, the Optionee shall have full voting, dividend and
other ownership rights with respect to such Shares, subject to such terms and
conditions as may be set forth in the applicable Agreement.

5.9 Effect of Change in Control. Notwithstanding anything
contained in the Plan to the contrary, the Committee may provide in an Agreement
for the accelerated vesting of all or any portion of an Option in the event of a
change in control of the Company.

5.10 Dividend Equivalent Rights. Dividend Equivalent Rights
may be granted to Eligible Individuals in tandem with an Option. The terms and
conditions applicable to each Dividend Equivalent Right shall be specified in
the Agreement under which the Dividend Equivalent Rights may be payable
currently or deferred until the lapsing of restrictions on such Dividend
Equivalent Rights or until the vesting, exercise, payment, settlement or other
lapse of restrictions on the Option to which the Dividend Equivalent Rights
relate. In the event that the amount payable in respect of Dividend Equivalent
Rights are to be deferred, the Committee shall determine whether such amounts
are to be held in cash or reinvested in Shares or deemed (notionally) to be
reinvested in Shares. If amounts payable in respect to Dividend Equivalent
Rights are to be held in cash, there may be credited at the end of each year (or
portion thereof) interest on the amount of the account at the beginning of the
year at a rate per annum as the Committee, in its discretion, may determine.
Dividend Equivalent Rights may be settled in cash or Shares or a combination
thereof, in a single installment or multiple installments.

5.11 Grants to Certain Outside Directors. In the event a
Director of the Company is required by contract to deliver any compensation from
the Company to the

8
776880.5

<PAGE>

Director's employer, the Director may elect, with the consent of the Committee,
to have Awards pursuant to this Plan made to such Director's employer. In such
case, the vesting, exercisability and termination provisions shall be applied
with respect to the service of the Director.

6. Stock Appreciation Rights. The Committee may, in its
discretion, either alone or in connection with the grant of an Option, grant
Stock Appreciation Rights in accordance with the Plan, the terms and conditions
of which shall be set forth in an Agreement. If granted in connection with an
Option, a Stock Appreciation Right shall cover the same Shares covered by the
Option (or such lesser number of Shares as the Committee may determine) and
shall, except as provided in this Section 6, be subject to the same terms and
conditions as the related Option.

6.1 Time of Grant. A Stock Appreciation Right may be granted
(i) at any time if unrelated to an Option, or (ii) if related to an Option,
either at the time of grant, or at any time thereafter during the term of the
Option.

6.2 Stock Appreciation Right Related to an Option.

(a) Exercise. Subject to Section 6.7 hereof, a Stock
Appreciation Right granted in connection with an Option shall be exercisable at
such time or times and only to the extent that the related Option is
exercisable, and will not be transferable even if the related Option is
transferable. A Stock Appreciation Right granted in connection with an Incentive
Stock Option shall be exercisable only if the Fair Market Value of a Share on
the date of exercise exceeds the purchase price specified in the related
Incentive Stock Option Agreement.

(b) Amount Payable. Upon the exercise of a Stock
Appreciation Right related to an Option, the Grantee shall be entitled to
receive an amount determined by multiplying (A) the excess of the Fair Market
Value of a Share on the date preceding the date of exercise of such Stock
Appreciation Right over the per Share purchase price under the related Option,
by (B) the number of Shares as to which such Stock Appreciation Right is being
exercised. Notwithstanding the foregoing, the Committee may limit in any manner
the amount payable with respect to any Stock Appreciation Right by including
such a limit in the Agreement evidencing the Stock Appreciation Right at the
time it is granted.

(c) Treatment of Related Options and Stock Appreciation
Rights Upon Exercise. Upon the exercise of a Stock Appreciation Right granted in
connection with an Option, the Option shall be canceled to the extent of the
number of Shares as to which the Stock Appreciation Right is exercised, and upon
the exercise of an Option granted in

9
776880.5

<PAGE>

connection with a Stock Appreciation Right, the Stock Appreciation Right shall
be canceled to the extent of the number of Shares as to which the Option is
exercised.

6.3 Stock Appreciation Right Unrelated to an Option. The
Committee may grant to Eligible Individuals Stock Appreciation Rights unrelated
to Options. Stock Appreciation Rights unrelated to Options shall contain such
terms and conditions as to exercisability (subject to Section 6.7 hereof),
vesting and duration as the Committee shall determine, but in no event shall
they have a term of greater than ten (10) years. If the Committee does not
designate a vesting schedule, the schedule shall be in equal or nearly equal
installments on the first, second and third anniversaries of the date of grant.
Upon exercise of a Stock Appreciation Right unrelated to an Option, the Grantee
shall be entitled to receive an amount determined by multiplying (A) the excess
of the Fair Market Value of a Share on the date preceding the date of exercise
of such Stock Appreciation Right over the Fair Market Value of a Share on the
date the Stock Appreciation Right was granted, by (B) the number of Shares as to
which the Stock Appreciation Right is being exercised. Notwithstanding the
foregoing, the Committee may limit in any manner the amount payable with respect
to any Stock Appreciation Right by including such a limit in the Agreement
evidencing the Stock Appreciation Right at the time it is granted.

6.4 Method of Exercise. Stock Appreciation Rights shall be
exercised by a Grantee only by a written notice delivered in person or by mail
to the Secretary of the Company at the Company's principal executive office,
specifying the number of Shares with respect to which the Stock Appreciation
Right is being exercised. If requested by the Committee, the Grantee shall
deliver the Agreement evidencing the Stock Appreciation Right being exercised
and the Agreement evidencing any related Option to the Secretary of the Company
who shall endorse thereon a notation of such exercise and return such Agreement
to the Grantee.

6.5 Form of Payment. Payment of the amount determined under
Sections 6.2(b) or 6.3 hereof may be made in the discretion of the Committee,
solely in whole Shares in a number determined at their Fair Market Value on the
date preceding the date of exercise of the Stock Appreciation Right, or solely
in cash, or in a combination of cash and Shares. If the Committee decides to
make full payment in Shares and the amount payable results in a fractional
Share, payment for the fractional Share will be made in cash.

6.6 Modification or Substitution. Subject to the terms of the
Plan, the Committee may modify outstanding Awards of Stock Appreciation Rights
or accept the surrender of outstanding Awards of Stock Appreciation Rights (to
the extent not exercised) and grant new Awards in substitution for them.
Notwithstanding the foregoing, no modification of an Award shall adversely alter
or impair any rights or obligations under the Agreement without the Grantee's
consent.

10
776880.5

<PAGE>

6.7 Effect of Change in Control. Notwithstanding anything
contained in this Plan to the contrary, the Committee may provide in an
Agreement for the accelerated vesting of all or a portion of any Stock
Appreciation Right in the event of a change in control of the Company.

7. Restricted Stock.

7.1 Grant. The Committee may grant to Eligible Individuals
Awards of Restricted Stock, and may issue Shares of Restricted Stock in payment
in respect of vested Performance Units (as hereinafter provided in Section 8.2
hereof), which shall be evidenced by an Agreement between the Company and the
Grantee. Each Agreement shall contain such restrictions, terms and conditions as
the Committee may, in its discretion, determine and (without limiting the
generality of the foregoing) such Agreements may require that an appropriate
legend be placed on Share certificates. Awards of Restricted Stock shall be
subject to the terms and provisions set forth below in this Section 7.

7.2 Rights of Grantee. Shares of Restricted Stock granted
pursuant to an Award hereunder shall be issued in the name of the Grantee as
soon as reasonably practicable after the Award is granted provided that the
Grantee has executed an Agreement evidencing the Award, the appropriate blank
stock powers and, in the discretion of the Committee, an escrow agreement and
any other documents which the Committee may require as a condition to the
issuance of such Shares. If a Grantee shall fail to execute the Agreement
evidencing a Restricted Stock Award, the appropriate blank stock powers and, in
the discretion of the Committee, an escrow agreement and any other documents
which the Committee may require within the time period prescribed by the
Committee at the time the Award is granted, the Award shall be null and void. At
the discretion of the Committee, Shares issued in connection with a Restricted
Stock Award shall be deposited together with the stock powers with an escrow
agent (which may be the Company) designated by the Committee. Unless the
Committee determines otherwise and as set forth in the Agreement, upon delivery
of the Shares to the escrow agent, the Grantee shall have all of the rights of a
stockholder with respect to such Shares, including the right to vote the Shares
and to receive all dividends or other distributions paid or made with respect to
the Shares.

7.3 Non-transferability. Until any restrictions upon the
Shares of Restricted Stock awarded to a Grantee shall have lapsed in the manner
set forth in Section 7.4 hereof, such Shares shall not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise hypothecated, nor
shall they be delivered to the Grantee.

7.4 Lapse of Restrictions.

(a) Generally. Restrictions upon Shares of Restricted
Stock awarded hereunder shall lapse at such time or times and on such terms and
conditions as the Committee may determine, which restrictions shall be set forth
in the Agreement evidencing

11
776880.5

<PAGE>

the Award. If the Committee does not so provide, restrictions shall lapse in
three equal or nearly equal installments on the first, second and third
anniversaries of the date of grant.

(b) Effect of Change in Control. Notwithstanding anything
contained in the Plan to the contrary, the Committee may provide in an Agreement
for the lapsing of all restrictions imposed upon any or all Shares of Restricted
Stock in the event of a change in control of the Company.

7.5 Modification or Substitution. Subject to the terms of the
Plan, the Committee may modify outstanding Awards of Restricted Stock or accept
the surrender of outstanding Shares of Restricted Stock (to the extent the
restrictions on such Shares have not yet lapsed) and grant new Awards in
substitution for them. Notwithstanding the foregoing, no modification of an
Award shall adversely alter or impair any rights or obligations under the
Agreement without the Grantee's consent.

7.6 Treatment of Dividends. At the time the Award of Shares
of Restricted Stock is granted, the Committee may, in its discretion, determine
that the payment to the Grantee of dividends, or a specified portion thereof,
declared or paid on such Shares by the Company shall be (i) deferred until the
lapsing of the restrictions imposed upon such Shares and (ii) held by the
Company for the account of the Grantee until such time. In the event that
dividends are to be deferred, the Committee shall determine whether such
dividends are to be reinvested in Shares (which shall be held as additional
Shares of Restricted Stock) or held in cash. If deferred dividends are to be
held in cash, there may be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the year at a rate per
annum as the Committee, in its discretion, may determine. Payment of deferred
dividends in respect of Shares of Restricted Stock (whether held in cash or as
additional Shares of Restricted Stock), together with interest accrued thereon,
if any, shall be made upon the lapsing of restrictions imposed on the Shares in
respect of which the deferred dividends were paid, and any dividends deferred
(together with any interest accrued thereon) in respect of any Shares of
Restricted Stock shall be forfeited upon the forfeiture of such Shares.

7.7 Delivery of Shares. Upon the lapse of the restrictions on
Shares of Restricted Stock, the Committee shall cause a stock certificate to be
delivered to the Grantee with respect to such Shares, free of all restrictions
hereunder.

8. Performance Awards.

8.1 Performance Objectives. Performance objectives for
Performance Awards may be expressed in terms of (i) earnings per Share, (ii)
pre-tax profits, (iii) net earnings or net worth, (iv) return on equity or
assets, (v) any combination of the foregoing, or (vi) any other standard or
standards deemed appropriate by the Committee at the time the Award is granted.
Performance objectives may be in respect of the performance of the Company and
its Subsidiaries (which may be on a consolidated basis), a Subsidiary or a

12
776880.5

<PAGE>

Division. Performance objectives may be absolute or relative and may be
expressed in terms of a progression within a specified range. Prior to the end
of a Performance Cycle, the Committee, in its discretion, may adjust the
performance objectives to reflect a Change in the Capitalization, a change in
the tax rate or book tax rate of the Company or any Subsidiary, or any other
event which may materially affect the performance of the Company, a Subsidiary
or a Division, including, but not limited to, market conditions or a significant
acquisition or disposition of assets or other property by the Company, a
Subsidiary or a Division.

8.2 Performance Units. The Committee, in its discretion, may
grant Awards of Performance Units to Eligible Individuals, the terms and
conditions of which shall be set forth in an Agreement between the Company and
the Grantee. Performance Units may be denominated in Shares or a specified
dollar amount and, contingent upon the attainment of specified performance
objectives within the Performance Cycle, represent the right to receive payment
as provided in Section 8.2(b) hereof of (i) in the case of Share-denominated
Performance Units, the Fair Market Value of a Share on the date the Performance
Unit was granted, the date the Performance Unit became vested or any other date
specified by the Committee, (ii) in the case of dollar-denominated Performance
Units, the specified dollar amount or (iii) a percentage (which may be more than
100%) of the amount described in clause (i) or (ii) depending on the level of
performance objective attainment; provided, however, that the Committee may at
the time a Performance Unit is granted, specify a maximum amount payable in
respect of a vested Performance Unit. Each Agreement shall specify the number of
the Performance Units to which it relates, the performance objectives which must
be satisfied in order for the Performance Units to vest and the Performance
Cycle within which such objectives must be satisfied.

(a) Vesting and Forfeiture. A Grantee shall become vested
with respect to the Performance Units to the extent that the performance
objectives set forth in the Agreement are satisfied for the Performance Cycle.

(b) Payment of Awards. Payment to Grantees in respect of
vested Performance Units shall be made within sixty (60) days after the last day
of the Performance Cycle to which such Award relates unless the Agreement
evidencing the Award provides for the deferral of payment, in which event the
terms and conditions of the deferral shall be set forth in the Agreement.
Subject to Section 8.4 hereof, such payments may be made entirely in Shares
valued at their Fair Market Value as of the last day of the applicable
Performance Cycle or such other date specified by the Committee, entirely in
cash, or in such combination of Shares and cash as the Committee in its
discretion, shall determine at any time prior to such payment; provided,
however, that if the Committee in its discretion determines to make such payment
entirely or partially in Shares of Restricted Stock, the Committee must
determine the extent to which such payment will be in Shares of Restricted Stock
and the terms of such Restricted Stock at the time the Award is granted.

13
776880.5

<PAGE>

8.3 Performance Shares. The Committee, in its discretion, may
grant Awards of Performance Shares to Eligible Individuals, the terms and
conditions of which shall be set forth in an Agreement between the Company and
the Grantee. Each Agreement may require that an appropriate legend be placed on
Share certificates. Awards of Performance Shares shall be subject to the
following terms and provisions:

(a) Rights of Grantee. The Committee shall provide at the
time an Award of Performance Shares is made, the time or times at which the
actual Shares represented by such Award shall be issued in the name of the
Grantee; provided, however, that no Performance Shares shall be issued until the
Grantee has executed an Agreement evidencing the Award, the appropriate blank
stock powers and, in the discretion of the Committee, an escrow agreement and
any other documents which the Committee may require as a condition to the
issuance of such Performance Shares. If a Grantee shall fail to execute the
Agreement evidencing an Award of Performance Shares, the appropriate blank stock
powers and, in the discretion of the Committee, an escrow agreement and any
other documents which the Committee may require within the time period
prescribed by the Committee at the time the Award is granted, the Award shall be
null and void. At the discretion of the Committee, Shares issued in connection
with an Award of Performance Shares shall be deposited together with the stock
powers with an escrow agent (which may be the Company) designated by the
Committee. Except as restricted by the terms of the Agreement, upon delivery of
the Shares to the escrow agent, the Grantee shall have, in the discretion of the
Committee, all of the rights of a stockholder with respect to such Shares,
including the right to vote the Shares and to receive all dividends or other
distributions paid or made with respect to the Shares.

(b) Non-transferability. Until any restrictions upon the
Performance Shares awarded to a Grantee shall have lapsed in the manner set
forth in Sections 8.3(c) or 8.4 hereof, such Performance Shares shall not be
sold, transferred or otherwise disposed of and shall not be pledged or otherwise
hypothecated, nor shall they be delivered to the Grantee. The Committee may also
impose such other restrictions and conditions on the Performance Shares, if any,
as it deems appropriate.

(c) Lapse of Restrictions. Subject to Section 8.4 hereof,
restrictions upon Performance Shares awarded hereunder shall lapse and such
Performance Shares shall become vested at such time or times and on such terms,
conditions and satisfaction of performance objectives as the Committee may, in
its discretion, determine at the time an Award is granted.

(d) Treatment of Dividends. At the time the Award of
Performance Shares is granted, the Committee may, in its discretion, determine
that the payment to the Grantee of dividends, or a specified portion thereof,
declared or paid on actual Shares represented by such Award which have been
issued by the Company to the Grantee shall be (i) deferred until the lapsing of
the restrictions imposed upon such Performance Shares and (ii) held by the
Company for the account of the Grantee until such time. In the event that

14
776880.5

<PAGE>

dividends are to be deferred, the Committee shall determine whether such
dividends are to be reinvested in Shares (which shall be held as additional
Performance Shares) or held in cash. If deferred dividends are to be held in
cash, there may be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the year at a rate per
annum as the Committee, in its discretion, may determine. Payment of deferred
dividends in respect of Performance Shares (whether held in cash or in
additional Performance Shares), together with interest accrued thereon, if any,
shall be made upon the lapsing of restrictions imposed on the Performance Shares
in respect of which the deferred dividends were paid, and any dividends deferred
(together with any interest accrued thereon) in respect of any Performance
Shares shall be forfeited upon the forfeiture of such Performance Shares.

(e) Delivery of Shares. Upon the lapse of the
restrictions on Performance Shares awarded hereunder, the Committee shall cause
a stock certificate to be delivered to the Grantee with respect to such Shares,
free of all restrictions hereunder.

8.4 Effect of Change in Control. Notwithstanding anything
contained in the Plan to the contrary:

(a) With respect to the Performance Units, the Committee
may determine that a Grantee shall (i) become vested in a percentage of
Performance Units as a result of a change in control of the Company and (ii) be
entitled to receive in respect of all Performance Units which become vested as a
result of a change in control of the Company, a cash payment in an amount as
determined by the Committee and as set forth in the Agreement.

(b) With respect to the Performance Shares, the Committee
may provide in an Agreement for the lapse of restrictions imposed upon on all or
a portion of the Performance Shares in the event of a change in control of the
Company.

(c) The Agreements evidencing Performance Shares and
Performance Units shall provide for the treatment of such Awards (or portions
thereof) which do not become vested as the result of a change in control of the
Company, including, but not limited to, provisions for the adjustment of
applicable performance objectives.

8.5 Non-transferability. No Performance Awards shall be
transferable by the Grantee otherwise than by will or the laws of descent and
distribution.

8.6 Modification or Substitution. Subject to the terms of the
Plan, the Committee may modify outstanding Performance Awards or accept the
surrender of outstanding Performance Awards and grant new Performance Awards in
substitution for them. Notwithstanding the foregoing, no modification of a
Performance Award shall adversely alter or impair any rights or obligations
under the Agreement without the Grantee's consent.

15
776880.5

<PAGE>

9. Effect of a Termination of Employment or Service.

The Agreement evidencing the grant of each Option and
each Award shall set forth the terms and conditions applicable to such Option or
Award upon a termination or change in the status of the employment or service of
the Optionee or Grantee by the Company, a Subsidiary or a Division (including a
termination or change by reason of the sale of a Subsidiary or a Division or a
change in status from employee or director to consultant), as the Committee may,
in its discretion, determine at the time the Option or Award is granted or
thereafter. Notwithstanding the foregoing and unless specifically set forth in
an Agreement to the contrary, (i) in the event an Optionee's or Grantee's
employment or service with the Company is terminated for Cause, the Option or
Award granted to the Optionee or Grantee hereunder shall immediately terminate
in full and in the case of Options, no rights thereunder may be exercised, and
in all other cases, no payment will be made with respect thereto, and (ii) in
the event the Optionee's or Grantee's employment or service with the Company is
terminated other than for Cause, the Option or Award granted to the Optionee or
Grantee hereunder shall terminate in full on the ninetieth (90th) day following
such termination and in the case of Options, no rights thereunder may be
exercised, and in all other cases, no payment will be made with respect thereto.

10. Adjustment Upon Changes in Capitalization.

(a) In the event of a Change in Capitalization, the
Committee shall conclusively determine the appropriate adjustments, if any, to
the (i) maximum number and class of Shares or other stock or securities with
respect to which Options or Awards may be granted under the Plan, (ii) maximum
number of class of Shares or other stock or securities with respect to which
Options may be granted to any Eligible Individual during the term of the Plan
and (iii) the number and class of Shares or other stock or securities which are
subject to outstanding Options or Awards granted under the Plan, and the
purchase price therefor, if applicable.

(b) Any such adjustment in the Shares or other stock or
securities subject to outstanding Incentive Stock Options (including any
adjustments in the purchase price) shall be made in such manner as not to
constitute a modification as defined by Section 424(h)(3) of the Code and only
to the extent otherwise permitted by Sections 422 and 424 of the Code.

(c) If, by reason of a Change in Capitalization, a
Grantee of an Award shall be entitled to, or an Optionee shall be entitled to
exercise an Option with respect to, new, additional or different shares of stock
or securities, such new, additional or different shares shall thereupon be
subject to all of the conditions, restrictions and performance criteria which
were applicable to the Shares subject to the Award or Option, as the case may
be, prior to such Change in Capitalization.

16
776880.5

<PAGE>

11. Effect of Certain Transactions. Subject to Sections
5.9, 6.7, 7.4(b) and 8.4 hereof, in the event of (i) the liquidation or
dissolution of the Company or (ii) a merger or consolidation of the Company (a
"Transaction"), the Plan and the Options and Awards issued hereunder shall
continue in effect in accordance with their respective terms except that
following a Transaction each Optionee and Grantee shall be entitled to receive
in respect of each Share subject to any outstanding Options or Awards, as the
case may be, upon exercise of any Option or SAR or payment or transfer in
respect of any Award, the same number and kind of stock, securities, cash,
property, or other consideration that each holder of a Share was entitled to
receive in the Transaction in respect of a Share; provided, however, that such
stock, securities, cash, property, or other consideration shall remain subject
to all of the conditions, restrictions and performance criteria which were
applicable to the Options or Awards prior to such Transaction.

12. Interpretation.

(a) Awards under the Plan are intended to comply with
Rule 16b-3 promulgated under the Exchange Act and the Committee shall interpret
and administer the provisions of the Plan or any Agreement in a manner
consistent therewith. Any provisions inconsistent with such Rule shall be
inoperative and shall not affect the validity of the Plan.

(b) Unless otherwise expressly stated in the relevant
Agreement, each Award granted under the Plan (other than Restricted Stock) is
intended to be performance-based compensation within the meaning of Section
162(m)(4)(C) of the Code. Except in cases of the death, disability or change in
control, the Committee shall not be entitled to exercise any discretion
otherwise authorized hereunder with respect to such Awards if the ability to
exercise such discretion or the exercise of such discretion itself would cause
the compensation attributable to such Awards to fail to qualify as
performance-based compensation.

13. Pooling Transactions. Notwithstanding anything
contained in the Plan or any Agreement to the contrary, in the event of a change
in control of the Company which is also intended to constitute a Pooling
Transaction, the Committee shall take such actions, if any, which are
specifically recommended by an independent accounting firm retained by the
Company to the extent reasonably necessary in order to assure that the Pooling
Transaction will qualify as such, including but not limited to (i) deferring the
vesting, exercise, payment or settlement with respect to any Option or Award,
(ii) providing that the payment or settlement in respect of any Option or Award
be made in the form of cash, Shares or securities of a successor or acquired of
the Company, or a combination of the foregoing and (iii) providing for the
extension of the term of any Option or Award to the extent necessary to
accommodate the foregoing, but not beyond the maximum term permitted for any
Option or Award.

17
776880.5

<PAGE>

14. Termination and Amendment of the Plan.

The Plan shall terminate on the day preceding the tenth
anniversary of the date of its adoption by the Board and no Option or Award may
be granted thereafter. The Board may sooner terminate the Plan and the Board may
at any time and from time to time amend, modify or suspend the Plan; provided,
however, that:

(a) No such amendment, modification, suspension or
termination shall impair or adversely alter any Options, SARs or Awards
theretofore granted under the Plan, except with the consent of the Optionee or
Grantee, nor shall any amendment, modification, suspension or termination
deprive any Optionee or Grantee of any Shares which he or she may have acquired
through or as a result of the Plan; and

(b) To the extent necessary under Section 16(b) of the
Exchange Act and the rules and regulations promulgated thereunder or applicable
law or securities exchange rule, no amendment shall be effective unless approved
by the stockholders of the Company in accordance with applicable law and
regulations.

15. Non-Exclusivity of the Plan.

The adoption of the Plan by the Board shall not be
construed as amending, modifying or rescinding any previously approved incentive
arrangement or as creating any limitations on the power of the Board to adopt
such other incentive arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under the Plan, and
such arrangements may be either applicable generally or only in specific cases.

16. Limitation of Liability.

As illustrative of the limitations of liability of the
Company, but not intended to be exhaustive thereof, nothing in the Plan shall be
construed to:

(a) give any person any right to be granted an Option or
Award other than at the sole discretion of the Committee;

(b) give any person any rights whatsoever with respect
to Shares except as specifically provided in the Plan;

18
776880.5

<PAGE>

(d) be evidence of any agreement or understanding,
expressed or implied, that the Company will employ any person at any particular
rate of compensation or for any particular period of time.

17. Regulations and Other Approvals; Governing Law.

17.1 Except as to matters of federal law, this Plan and
the rights of all persons claiming hereunder shall be construed and determined
in accordance with the laws of the State of New York without giving effect to
conflicts of law principles thereof.

17.2 The obligation of the Company to sell or deliver
Shares with respect to Options and Awards granted under the Plan shall be
subject to all applicable laws, rules and regulations, including all applicable
federal and state securities laws, and the obtaining of all such approvals by
governmental agencies as may be deemed necessary or appropriate by the
Committee.

17.3 The Board may make such changes as may be necessary
or appropriate to comply with the rules and regulations of any government
authority, or to obtain for Eligible Individuals granted Incentive Stock Options
the tax benefits under the applicable provisions of the Code and regulations
promulgated thereunder.

17.4 Each Option and Award is subject to the requirement
that, if at any time the Committee determines, in its discretion, that the
listing, registration or qualification of Shares issuable pursuant to the Plan
is required by any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Option or
Award or the issuance of Shares, no Options or Awards shall be granted or
payment made or Shares issued, in whole or in part, unless listing,
registration, qualification, consent or approval has been effected or obtained
free of any conditions as acceptable to the Committee.

17.5 Notwithstanding anything contained in the Plan or
any Agreement to the contrary, in the event that the disposition of Shares
acquired pursuant to the Plan is not covered by a then current registration
statement under the Securities Act of 1933, as amended, (the "Securities Act")
and is not otherwise exempt from such registration, such Shares shall be
restricted against transfer to the extent required by the Securities Act and
Rule 144 or other regulations thereunder. The Committee may require any
individual receiving Shares pursuant to an Option or Award granted under the
Plan, as a condition precedent to receipt of such Shares or Awards, to represent
and warrant to the Company in writing that the Shares acquired by such
individual are acquired without a view to any distribution thereof and will not
be sold or transferred other than pursuant to an effective registration thereof
under said Act or pursuant to an exemption applicable under the Securities Act
or the rules and regulations promulgated thereunder. The certificates evidencing
any of such Shares or Awards shall be appropriately amended to reflect their
status as restricted securities as aforesaid.

19
776880.5

<PAGE>

18. Miscellaneous.

18.1 Multiple Agreements. The terms of each Option or
Award may differ from other Options or Awards granted under the Plan at the same
time, or at some other time. The Committee may also grant more than one Option
or Award to a given Eligible Individual during the term of the Plan, either in
addition to, or in substitution for, one or more Options or Awards previously
granted to that Eligible Individual.

18.2 Withholding of Taxes. (a) The Company may make such
provisions and take such steps as it may deem necessary or appropriate for the
withholding of any taxes which the Company is required by any law or regulation
of any governmental authority, whether federal, state or local, domestic or
foreign, to withhold in connection with any Option or the exercise thereof, any
Stock Appreciation Right or the exercise thereof, or the grant of any other
Award, including, but not limited to, the withholding of cash or Shares which
would be paid or delivered pursuant to such exercise or Award or another
exercise of Award under this Plan until the Grantee reimburses the Company for
the amount the Company is required to withhold with respect to such taxes, or
canceling any portion of such Award or another Award under this Plan in an
amount sufficient to reimburse itself for the amount it is required to so
withhold. The Committee may permit a Grantee (or any beneficiary or other person
authorized to act) to elect to pay a portion or all of any amounts required or
permitted to be withheld to satisfy federal, state, local or foreign tax
obligations by directing the Company to withhold a number of whole Shares which
would otherwise be distributed and which have a Fair Market Value sufficient to
cover the amount of such required or permitted withholding taxes.

(b) If an Optionee makes a disposition, within the
meaning of Section 424(c) of the Code and regulations promulgated thereunder, of
any Share or Shares issued to such Optionee pursuant to the exercise of an
Incentive Stock Option within the two-year period commencing on the day after
the date of the grant or within the one-year period commencing on the day after
the date of transfer of such Share or Shares to the Optionee pursuant to such
exercise, the Optionee shall, within ten (10) days of such disposition, notify
the Company thereof, by delivery of written notice to the Company at its
principal executive office.

(c) The Committee shall have the authority, at the
time of grant of an Option or Award under the Plan or at any time thereafter, to
award tax bonuses to designated Optionees or Grantees, to be paid upon their
exercise of Options or payment in respect of Awards granted hereunder. The
amount of any such payments shall be determined by the Committee. The Committee
shall have full authority in its absolute discretion to determine the amount of
any such tax bonus and the terms and conditions affecting the vesting and
payment thereof.

20
776880.5

<PAGE>

19. Effective Date. The effective date of the Plan shall
be the date of its adoption by the Board, subject only to the approval by the
holders of a majority of the securities of the Company in accordance with the
applicable laws of the State of Delaware within twelve (12) months of such
adoption.

20. Termination of 1995 Stock Option Plan. Upon the
effectiveness of the Plan, the Company's 1995 Stock Option Plan shall terminate.

21
776880.5