


                                                                  EXHIBIT 10.1


                             CREE RESEARCH, INC.

                             AMENDED AND RESTATED
                           EQUITY COMPENSATION PLAN
                    (as amended through November 11, 1997)

                      (formerly the Cree Research, Inc.
                         Employee Stock Option Plan)


                        ARTICLE I - GENERAL PROVISIONS

1.1   The Plan is designed, for the benefit of the Company, to attract and
      retain for the Company personnel of exceptional ability; to motivate
      such personnel through added incentives to make a maximum contribution
      to the Company; to develop and maintain a highly competent management
      team; and to be competitive with other companies with respect to
      executive compensation.

1.2   Awards under the Plan may be made to Participants in the form of (i)
      Incentive Stock Options; (ii) Nonqualified Stock Options; (iii)
      Restricted Stock; and (iv) Other Stock-Based Awards and such other
      forms of equity-based compensation as may be provided and are
      permissible under this Plan and the law.

1.3   The Cree Research, Inc. Employee Stock Option Plan (the "Stock Option
      Plan") was initially adopted effective August 2, 1989, and was amended
      and restated in the form of the Equity Compensation Plan effective as
      of July 1, 1995.  This amendment and restatement of the Stock Option
      Plan shall be effective as of September 17, 1996 (the "Effective
      Date").  Notwithstanding any other provision of this Plan, any Award
      granted to a Participant prior to the date on which the shareholders of
      the Company approve the Plan (which approval must be obtained within
      the 12-month period before the Effective Date or the 12-month period
      after the Effective Date in order for Incentive Stock Options to be
      granted under the Plan) shall be conditioned upon and subject to such
      shareholder approval to the extent required by Section 16(b) of the
      Act, or the rules thereunder, or Section 422 of the Code.  If an
      Incentive Stock Option is granted prior to the date on which such
      shareholder approval is obtained, and such approval is not obtained
      after the end of the 12-month period beginning on the effective date,
      such Incentive Stock Option shall be deemed a Nonqualified Stock Option
      granted pursuant to Article V.
 
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                           ARTICLE II - DEFINITIONS

Except where the context otherwise indicates, the following definitions apply:

2.1   "Acceleration Event" means the occurrence of an event defined in
      Article IX of the Plan.

2.2   "Act" means the Securities Exchange Act of 1934, as now in effect or as
      hereafter amended.  All citations to sections of the Act or rules
      thereunder are to such sections or rules as they may from time to time
      be amended or renumbered.

2.3   "Agreement" means the written agreement evidencing each Award granted
      to a Participant under the Plan.

2.4   "Award" means an award granted to a Participant in accordance with the
      provisions of the Plan, including, but not limited to, a Stock Option,
      Restricted Stock, Other Stock-Based Awards, or any combination of the
      foregoing.

2.5   "Board" means the Board of Directors of Cree Research, Inc.

2.6   "Code" means the Internal Revenue Code of 1986, as now in effect or as
      hereafter amended.  All citations to sections of the Code are to such
      sections as they may from time to time be amended or renumbered.

2.7   "Committee" means the Compensation Committee or such other committee
      consisting of two or more members as may be appointed by the Board to
      administer this Plan pursuant to Article III.  To the extent required
      by Rule 16b-3 under the Act, the Committee shall consist of individuals
      who are members of the Board and Non-employee Directors.  Committee
      members may also be appointed for such limited purposes as may be
      provided by the Board.

2.8   "Company" means Cree Research, Inc., a North Carolina corporation, and
      its successors and assigns.  The term "Company" shall include any
      corporation which is a member of a controlled group of corporations (as
      defined in Section 414(b) of the Code, as modified by Section 415(h) of
      the Code) which includes the Company; any trade or business (whether or
      not incorporated) which is under common control (as defined in Section
      414(c) of the Code, as modified by Section 415(h) of the Code) with the
      Company; any organization (whether or not incorporated) which is a
      member of an affiliated service group (as defined in Section 414(m) of
      the Code) which includes the Company; and any other entity required to
      be aggregated with the Company pursuant to regulations under Section
      414(o) of the Code.  With respect to all purposes of the Plan,
      including, but not

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      limited to, the establishment, amendment, termination, operation and
      administration of the Plan, Cree Research, Inc. shall be authorized to act
      on behalf of all other entities included within the definition of
      "Company".

2.9   "Disability" means a disability as determined under procedures
      established by the Committee or in any Award.

2.10  "Discount Stock Options" means Nonqualified Stock Options which provide
      for an exercise price of less than the Fair Market Value of the Stock
      at the date of the Award.

2.11  "Non-employee Director" shall have the meaning set forth in Rule 16b-3
      under the Act.

2.12  "Early Retirement" shall mean retirement from active employment with
      the Company, with the express consent of the Committee, pursuant to
      early retirement provisions established by the Committee or in any
      Award.

2.13  "Eligible Participant" means any employee of the Company, as shall be
      determined by the Committee, as well as any other person, including
      directors, whose participation the Committee determines is in the best
      interest of the Company, subject to limitations as may be provided by
      the Code, the Act or the Committee.

2.14  "Fair Market Value" means, with respect to any given day, the following:

      (i)   If the Stock is not listed for trading on a national securities
            exchange but is listed on the NASDAQ National Market System or
            the NASDAQ Small-Cap Market System, then the Fair Market Value
            shall be the last sale price of the Stock on the date of
            reference if a minimum of 100 shares are traded on such date or,
            if less than 100 shares are traded on such date, then the last
            sale price of the Stock as of the last date on which at least 100
            shares were traded, in either case as reported by the NASDAQ
            National Market System or the NASDAQ Small-Cap Market System, as
            the case may be.

      (ii)  If the Stock is listed for trading on any national securities
            exchange, then the Fair Market Value shall be the closing price
            of the Stock on such exchange on the date of reference if a
            minimum of 100 shares are traded on such date or, if less than
            100 shares are traded on such date, then the closing price of the
            Stock on such exchange as of the last date on which at least 100
            shares were traded.

      The Committee may establish an alternative method of 

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      determining Fair Market Value.

2.15  "Incentive Stock Option" means a Stock Option granted under Article IV
      of the Plan, and as defined in Section 422 of the Code.

2.16  "Nonqualified Stock Option" means a Stock Option granted under Article
      V of the Plan.

2.17  "Normal Retirement" shall mean retirement from active employment with
      the Company on or after age 65, or pursuant to such other requirements
      as may be established by the Committee or in any Award.

2.18  "Option Grant Date" means, as to any Stock Option, the latest of:

      (a)   the date on which the Committee grants the Stock Option by
            entering into an Award Agreement with the Participant;

      (b)   the date the Participant receiving the Stock Option becomes an
            employee of the Company, to the extent employment status is a
            condition of the grant or a requirement of the Code or the Act; or

      (c)   such other date (later than the dates described in (a) and (b)
            above) as the Committee may designate.

2.19  "Participant" means an Eligible Participant to whom an Award has been
      granted and who has entered into an Agreement evidencing the Award.

2.20  "Plan" means the Cree Research, Inc. Equity Compensation Plan as set
      forth herein, and, as further amended or amended and restated from time
      to time.

2.21  "Restricted Stock" means an Award of Stock under Article VII of the
      Plan, which Stock is issued with the restriction that the holder may
      not sell, transfer, pledge, or assign such Stock and with such other
      restrictions as the Committee, in its sole discretion, may impose,
      including without limitation, any restriction on the right to vote such
      Stock, and the right to receive any cash dividends, which restrictions
      may lapse separately or in combination at such time or times, in
      installments or otherwise, as the Committee may deem appropriate.

2.22  "Restriction Period" means the period commencing on the date an Award
      of Restricted Stock is granted and ending on such date as the Committee
      shall determine.

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2.23  "Retirement" shall mean Early Retirement or Normal Retirement.

2.24  "Stock" means shares of the Common Stock of Cree Research, Inc., par
      value $.005 per share, as may be adjusted pursuant to the provisions of
      Section 3.11.

2.25  "Stock Option" means an Award under Article IV or V of the Plan of an
      option to purchase Stock.  A Stock Option may be either an Incentive
      Stock Option or a Nonqualified Stock Option.

2.26  "Termination of Employment" means the discontinuance of employment of a
      Participant with the Company for any reason.  The determination of
      whether a Participant has discontinued employment shall be made by the
      Committee in its discretion.  In determining whether a Termination of
      Employment has occurred, the Committee may provide that service as a
      consultant or service with a business enterprise in which the Company
      has a significant ownership interest shall be treated as employment
      with the Company.  The Committee shall have the discretion, exercisable
      either at the time the Award is granted or at the time the Participant
      terminates employment, to establish as a provision applicable to the
      exercise of one or more Awards that during the limited period of
      exercisability following Termination of Employment, the Award may be
      exercised not only with respect to the number of shares of Stock for
      which it is exercisable at the time of the Termination of Employment
      but also with respect to one or more subsequent installments for which
      the Award would have become exercisable had the Termination of
      Employment not occurred.


                         ARTICLE III - ADMINISTRATION

3.1   This Plan shall be administered by the Committee.  A Committee member
      who is not a Non-employee Director, with respect to action to be taken
      by the Committee, shall not be able to participate in the decision to
      the extent prescribed by Rule 16b-3 under the Act.  The Committee, in
      its discretion, may delegate to one or more of its members such of its
      powers as it deems appropriate.  The Committee also may limit the power
      of any member to the extent necessary to comply with Rule 16b-3 under
      the Act or any other law.  Members of the Committee shall be appointed
      originally, and as vacancies occur, by the Board, to serve at the
      pleasure of the Board.  The Board may serve as the Committee, if by the
      terms of the Plan all Board members are otherwise eligible to serve on
      the Committee.

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3.2   The Committee shall meet at such times and places as it determines.  A
      majority of its members shall constitute a quorum, and the decision of
      a majority of those present at any meeting at which a quorum is present
      shall constitute the decision of the Committee.  A memorandum signed by
      all of its members shall constitute the decision of the Committee
      without necessity, in such event, for holding an actual meeting.

3.3   The Committee shall have the exclusive right to interpret, construe and
      administer the Plan, to select the persons who are eligible to receive
      an Award, and to act in all matters pertaining to the granting of an
      Award and the contents of the Agreement evidencing the Award, including
      without limitation, the determination of the number of Stock Options,
      shares of Stock subject to an Award, and the form, terms, conditions
      and duration of each Award, and any amendment thereof consistent with
      the provisions of the Plan.  All acts, determinations and decisions of
      the Committee made or taken pursuant to grants of authority under the
      Plan or with respect to any questions arising in connection with the
      administration and interpretation of the Plan, including the
      severability of any and all of the provisions thereof, shall be
      conclusive, final and binding upon all Participants, Eligible
      Participants and their beneficiaries.

3.4   The Committee may adopt such rules, regulations and procedures of
      general application for the administration of this Plan, as it deems
      appropriate.

3.5   Without limiting the foregoing Sections 3.1, 3.2, 3.3 and 3.4, and
      notwithstanding any other provisions of the Plan, the Committee is
      authorized to take such action as it determines to be necessary or
      advisable, and fair and equitable to Participants, with respect to an
      Award in the event of an Acceleration Event as defined in Article IX.
      Such action may include, but shall not be limited to, establishing,
      amending or waiving the forms, terms, conditions and duration of an
      Award and the Award Agreement, so as to provide for earlier, later,
      extended or additional times for exercise or payments, differing
      methods for calculating payments, alternate forms and amounts of
      payment, an accelerated release of restrictions or other
      modifications.  The Committee may take such actions pursuant to this
      Section 3.5 by adopting rules and regulations of general applicability
      to all Participants or to certain categories of Participants, by
      including, amending or waiving terms and conditions in an Award and the
      Award Agreement, or by taking action with respect to individual
      Participants.

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3.6   The number of shares of Stock which are available for Award under the
      Plan shall be 2,540,000 shares or any larger number of shares of Stock
      that, subsequent to the date this Plan is adopted, may be authorized
      for issuance by the Company.  Such shares of Stock shall be made
      available from authorized and unissued shares. If, for any reason, any
      shares of Stock awarded or subject to purchase under the Plan are not
      delivered or purchased, or are reacquired by the Company, for reasons
      including, but not limited to, a forfeiture of Restricted Stock or
      termination, expiration or cancellation of a Stock Option, or any other
      termination of an Award without payment being made in the form of
      Stock, whether or not Restricted Stock, such shares of Stock shall not
      be charged against the aggregate number of shares of Stock available
      for Awards under the Plan, and may again be available for Award under
      the Plan.

3.7   Each Award granted under the Plan shall be evidenced by a written Award
      Agreement.  Each Award Agreement shall be subject to and incorporate,
      by reference or otherwise, the applicable terms and conditions of the
      Plan, and any other terms and conditions, not inconsistent with the
      Plan, as may be imposed by the Committee.

3.8   The Company shall not be required to issue or deliver any certificates
      for shares of Stock prior to:

      (a)   the listing of such shares on any stock exchange on which the
            Stock may then be listed; and

      (b)   the completion of any registration or qualification of such
            shares of Stock under any federal or state law, or any ruling or
            regulation of any government body which the Company shall, in its
            discretion, determine to be necessary or advisable.

3.9   All certificates for shares of Stock delivered under the Plan shall
      also be subject to such stop-transfer orders and other restrictions as
      the Committee may deem advisable under the rules, regulations, and
      other requirements of the Securities and Exchange Commission, any stock
      exchange upon which the Stock is then listed and any applicable federal
      or state laws, and the Committee may cause a legend or legends to be
      placed on any such certificates to make appropriate reference to such
      restrictions.  In making such determination, the Committee may rely
      upon an opinion of counsel for the Company.

3.10  Subject to the restrictions on Restricted Stock, as provided in Article
      VII of the Plan and in the Restricted Stock Award Agreement, each
      Participant who receives an Award of Restricted Stock shall have all of
      the rights of a 

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      shareholder with respect to such shares of Stock, including the right to 
      vote the shares to the extent, if any, such shares possess voting rights 
      and receive dividends and other distributions.  Except as provided 
      otherwise in the Plan or in an Award Agreement, no Participant awarded a 
      Stock Option shall have any right as a shareholder with respect to any 
      shares of Stock covered by his or her Stock Option prior to the date of 
      issuance to him or her of a certificate or certificates for such shares 
      of Stock.

3.11  If any reorganization, recapitalization, reclassification, stock
      split-up, stock dividend, or consolidation of shares of Stock, merger
      or consolidation of the Company or sale or other disposition by the
      Company of all or a portion of its assets, any other change in the
      Company's corporate structure, or any distribution to shareholders
      other than a cash dividend results in the outstanding shares of Stock,
      or any securities exchanged therefor or received in their place, being
      exchanged for a different number or class of shares of Stock or other
      securities of the Company, or for shares of Stock or other securities
      of any other corporation; or new, different or additional shares or
      other securities of the Company or of any other corporation being
      received by the holders of outstanding shares of Stock, then equitable
      adjustments shall be made by the Committee in:

      (a)   the limitation on the aggregate number of shares of Stock that
            may be awarded as set forth in Section 3.6 of the Plan;

      (b)   the number and class of Stock that may be subject to an Award,
            and which have not been issued or transferred under an
            outstanding Award;

      (c)   the purchase price to be paid per share of Stock under
            outstanding Stock Options; and

      (d)   the terms, conditions or restrictions of any Award and Award
            Agreement, including the price payable for the acquisition of
            Stock; provided, however, that all adjustments made as the result
            of the foregoing in respect of each Incentive Stock Option shall
            be made so that such Stock Option shall continue to be an
            Incentive Stock Option, as defined in Section 422 of the Code.

3.12  In addition to such other rights of indemnification as they may have as
      directors or as members of the Committee, the members of the Committee
      shall be indemnified by the Company against reasonable expenses,
      including attorney's fees, actually and necessarily incurred in
      connection with the defense of any action, suit or proceeding, or in
      connection
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      with any appeal therein, to which they or any of them may be a
      party by reason of any action taken or failure to act under or in
      connection with the Plan or any Award granted thereunder, and against
      all amounts paid by them in settlement thereof, provided such
      settlement is approved by independent legal counsel selected by the
      Company, or paid by them in satisfaction of a judgment or settlement in
      any such action, suit or proceeding, except as to matters as to which
      the Committee member has been negligent or engaged in misconduct in the
      performance of his duties; provided, that within 60 days after
      institution of any such action, suit or proceeding, a Committee member
      shall in writing offer the Company the opportunity, at its own expense,
      to handle and defend the same.

3.13  The Committee may require each person purchasing shares of Stock
      pursuant to a Stock Option or other Award under the Plan to represent
      to and agree with the Company in writing that he is acquiring the
      shares of Stock without a view to distribution thereof.  The
      certificates for such shares of Stock may include any legend which the
      Committee deems appropriate to reflect any restrictions on transfer.

3.14  The Committee shall be authorized to make adjustments in performance
      based criteria or in the terms and conditions of other Awards in
      recognition of unusual or nonrecurring events affecting the Company or
      its financial statements or changes in applicable laws, regulations or
      accounting principles.  The Committee may correct any defect, supply
      any omission or reconcile any inconsistency in the Plan or any Award
      Agreement in the manner and to the extent it shall deem desirable to
      carry it into effect.  In the event the Company shall assume
      outstanding employee benefit awards or the right or obligation to make
      future such awards in connection with the acquisition of another
      corporation or business entity, the Committee may, in its discretion,
      make such adjustments in the terms of Awards under the Plan as it shall
      deem appropriate.

3.15  The Committee shall have full power and authority to determine whether, to
      what extent and under what circumstances, any Award shall be canceled or
      suspended.  In particular, but without limitation, all outstanding Awards
      to any Participant may be canceled if (a) the Participant, without the
      consent of the Committee, while employed by the Company or after
      termination of such employment, becomes associated with, employed by,
      renders services to, or owns any interest in, other than any insubstantial
      interest, as determined by the Committee, any business that is in
      competition with the Company or with any business in which the Company has
      a substantial interest as determined by the Committee; or (b) is
      terminated for cause as determined by the Committee.

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                     ARTICLE IV - INCENTIVE STOCK OPTIONS

4.1   Each provision of this Article IV and of each Incentive Stock Option
      granted hereunder shall be construed in accordance with the provisions
      of Section 422 of the Code, and any provision hereof that cannot be so
      construed shall be disregarded.

4.2   Incentive Stock Options shall be granted only to Eligible Participants
      who are in the active employment of the Company, each of whom may be
      granted one or more such Incentive Stock Options for a reason related
      to his employment at such time or times determined by the Committee
      following the Effective Date through the date which is ten (10) years
      following the Effective Date, subject to the following conditions:

      (a)   The Incentive Stock Option price per share of Stock shall be set
            in the Award Agreement, but shall not be less than 100% of the
            Fair Market Value of the Stock on the Option Grant Date.  If the
            Eligible Participant owns more than 10% of the outstanding Stock
            (as determined pursuant to Section 424(d) of the Code) on the
            Option Grant Date, the Incentive Stock Option price per share
            shall not be less than 110% of the Fair Market Value of the Stock
            on the Option Grant Date.

      (b)   The Incentive Stock Option may be exercised in whole or in part
            from time to time within ten (10) years from the Option Grant
            Date (five (5) years if the Eligible Participant owns more than
            10% of the Stock on the Option Grant Date), or such shorter
            period as may be specified by the Committee in the Award;
            provided, that in any event, the Incentive Stock Option shall
            lapse and cease to be exercisable upon a Termination of
            Employment or within such period following a Termination of
            Employment as shall have been specified in the Incentive Stock
            Option Award Agreement, which period shall in no event exceed
            three months unless:

            (i)   employment shall have terminated as a result of death or
                  Disability, in which event such period shall not exceed one
                  year after the date of death or Disability; or

            (ii)  death shall have occurred following a Termination of
                  Employment and while the Incentive Stock Option or Stock
                  Right was still exercisable, in which event such period
                  shall not exceed one year after the date of death;

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            provided, further, that such period following a Termination of
            Employment shall in no event extend the original exercise period
            of the Incentive Stock Option or any related Stock Right.

      (c)   To the extent the aggregate Fair Market Value, determined as of
            the Option Grant Date, of the shares of Stock with respect to
            which Incentive Stock Options (determined without regard to this
            subsection) are first exercisable during any calendar year by any
            Eligible Participant exceeds $100,000, such options shall be
         treated as Nonqualified Stock Options granted under Article V.

      (d)   The Committee may adopt any other terms and conditions which it
            determines should be imposed for the Incentive Stock Option to
            qualify under Section 422 of the Code, as well as any other terms
            and conditions not inconsistent with this Article IV as
            determined by the Committee.

4.3   The Committee may at any time offer to buy out for a payment in cash,
      Stock or Restricted Stock an Incentive Stock Option previously granted,
      based on such terms and conditions as the Committee shall establish and
      communicate to the Participant at the time that such offer is made.

4.4   If the Incentive Stock Option Award Agreement so provides, the
      Committee may require that all or part of the shares of Stock to be
      issued upon the exercise of an Incentive Stock Option shall take the
      form of Restricted Stock, which shall be valued on the date of
      exercise, as determined by the Committee, on the basis of the Fair
      Market Value of such Restricted Stock determined without regard to the
      deferral limitations and/or forfeiture restrictions involved.


                    ARTICLE V - NONQUALIFIED STOCK OPTIONS

5.1   One or more Stock Options may be granted as Nonqualified Stock Options
      to Eligible Participants to purchase shares of Stock at such time or
      times determined by the Committee, following the Effective Date,
      subject to the terms and conditions set forth in this Article V. 

5.2   The Nonqualified Stock Option price per share of Stock shall be
      established in the Award Agreement and may be less than or greater than
      100% of the Fair Market Value at the time of the grant.

5.3   The Nonqualified Stock Option may be exercised in full or in part from
      time to time within such period as may be 

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      specified by the Committee or in the Award Agreement; provided, that, in 
      any event, the Nonqualified Stock Option and the related Stock Right shall
      lapse and cease to be exercisable three months following the Participant's
      Termination of Employment.

5.4   The Nonqualified Stock Option Award Agreement may include any other
      terms and conditions not inconsistent with this Article V or in Article
      VI, as determined by the Committee.


           ARTICLE VI - INCIDENTS OF STOCK OPTIONS AND STOCK RIGHTS

6.1   Each Stock Option shall be granted subject to such terms and
      conditions, if any, not inconsistent with this Plan, as shall be
      determined by the Committee, including any provisions as to continued
      employment as consideration for the grant or exercise of such Stock
      Option and any provisions which may be advisable to comply with
      applicable laws, regulations or rulings of any governmental authority.

6.2   A Stock Option shall not be transferable by the Participant other than
      by will or by the laws of descent and distribution, or, to the extent
      otherwise allowed by Rule 16b-3 under the Act or other applicable law,
      pursuant to a qualified domestic relations order as defined by the Code
      or the Employee Retirement Income Security Act, or the rules
      thereunder, and shall be exercisable during the lifetime of the
      Participant only by him or by his guardian or legal representative.

6.3   Shares of Stock purchased upon exercise of a Stock Option shall be paid
      for in such amounts, at such times and upon such terms as shall be
      determined by the Committee, subject to limitations set forth in the
      Stock Option Award Agreement.  Without limiting the foregoing, the
      Committee may establish payment terms for the exercise of Stock Options
      which permit the Participant to deliver shares of Stock, or other
      evidence of ownership of Stock satisfactory to the Company, with a Fair
      Market Value equal to the Stock Option price as payment.

6.4   No cash dividends shall be paid on shares of Stock subject to
      unexercised Stock Options.  The Committee may provide, however, that a
      Participant to whom a Stock Option has been granted which is
      exercisable in whole or in part at a future time for shares of Stock
      shall be entitled to receive an amount per share equal in value to the
      cash dividends, if any, paid per share on issued and outstanding Stock,
      as of the dividend record dates occurring during the period between the
      date of the grant and the time each such share of Stock is delivered
      pursuant to exercise of such Stock Option or the related Stock 

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      Right. Such amounts (herein called "dividend equivalents") may, in the
      discretion of the Committee, be:

      (a)   paid in cash or Stock either from time to time prior to, or at
            the time of the delivery of, such Stock, or upon expiration of
            the Stock Option if it shall not have been fully exercised; or

      (b)   converted into contingently credited shares of Stock, with
            respect to which dividend equivalents may accrue, in such manner,
            at such value, and deliverable at such time or times, as may be
            determined by the Committee.

      Such Stock, whether delivered or contingently credited, shall be
      charged against the limitations set forth in Section 3.6.

6.5   The Committee, in its sole discretion, may authorize payment of
      interest equivalents on dividend equivalents which are payable in cash
      at a future time.

6.6   In the event of Disability or death, the Committee, with the consent of
      the Participant or his legal representative, may authorize payment, in
      cash or in Stock, or partly in cash and partly in Stock, as the
      Committee may direct, of an amount equal to the difference at the time
      between the Fair Market Value of the Stock subject to a Stock Option
      and the option price in consideration of the surrender of the Stock
      Option.

6.7   If a Participant is required to pay to the Company an amount with
      respect to income and employment tax withholding obligations in
      connection with exercise of a Nonqualified Stock Option, and/or with
      respect to certain dispositions of Stock acquired upon the exercise of
      an Incentive Stock Option, the Committee, in its discretion and subject
      to such rules as it may adopt, may permit the Participant to satisfy
      the obligation, in whole or in part, by making an irrevocable election
      that a portion of the total Fair Market Value of the shares of Stock
      subject to the Nonqualified Stock Option and/or with respect to certain
      dispositions of Stock acquired upon the exercise of an Incentive Stock
      Option, be paid in the form of cash in lieu of the issuance of Stock
      and that such cash payment be applied to the satisfaction of the
      withholding obligations.  The amount to be withheld shall not exceed
      the statutory minimum federal and state income and employment tax
      liability arising from the Stock Option exercise transaction.
      Notwithstanding any other provision of the Plan, any election under
      this Section 6.7 is required to satisfy the applicable requirements
      under Rule 16b-3 of the Act.

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6.8   The Committee may permit the voluntary surrender of all or a portion of
      any Stock Option granted under the Plan to be conditioned upon the
      granting to the Participant of a new Stock Option for the same or a
      different number of shares of Stock as the Stock Option surrendered, or
      may require such surrender as a condition precedent to a grant of a new
      Stock Option to such Participant.  Subject to the provisions of the
      Plan, such new Stock Option shall be exercisable at the such price,
      during such period and on such other terms and conditions as are
      specified by the Committee at the time the new Stock Option is
      granted.  Upon surrender, the Stock Options surrendered shall be
      canceled and the shares of Stock previously subject to them shall be
      available for the grant of other Stock Options.


                        ARTICLE VII - RESTRICTED STOCK

7.1   Restricted Stock Awards may be made to certain Participants as an
      incentive for the performance of future services that will contribute
      materially to the successful operation of the Company.  Awards of
      Restricted Stock may be made either alone, in addition to or in tandem
      with other Awards granted under the Plan and/or cash payments made
      outside of the Plan.

7.2   With respect to Awards of Restricted Stock, the Committee shall:

      (a)   determine the purchase price, if any, to be paid for such
            Restricted Stock, which may be equal to or less than par value
            and may be zero, subject to such minimum consideration as may be
            required by applicable law;

      (b)   determine the length of the Restriction Period;

      (c)   determine any restrictions applicable to the Restricted Stock
            such as service or performance, other than those set forth in
            this Article VII;

      (d)   determine if the restrictions shall lapse as to all shares of
            Restricted Stock at the end of the Restriction Period or as to a
            portion of the shares of Restricted Stock in installments during
            the Restriction Period; and

      (e)   determine if dividends and other distributions on the Restricted
            Stock are to be paid currently to the Participant or paid to the
            Company for the account of the Participant.

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<PAGE>


7.3   Awards of Restricted Stock must be accepted within a period of 60 days,
      or such shorter period as the Committee may specify, by executing a
      Restricted Stock Award Agreement and paying whatever price, if any, is
      required.  The prospective recipient of a Restricted Stock Award shall
      not have any rights with respect to such Award, unless such recipient
      has executed a Restricted Stock Award Agreement and has delivered a
      fully executed copy thereof to the Committee, and has otherwise
      complied with the applicable terms and conditions of such Award.

7.4   Except when the Committee determines otherwise, or as otherwise
      provided in the Restricted Stock Award Agreement, if a Participant
      terminates employment with the Company for any reason before the
      expiration of the Restriction Period, all shares of Restricted Stock
      still subject to restriction shall be forfeited by the Participant and
      shall be reacquired by the Company.

7.5   Except as otherwise provided in this Article VII, no shares of
      Restricted Stock received by a Participant shall be sold, exchanged,
      transferred, pledged, hypothecated or otherwise disposed of during the
      Restriction Period.

7.6   To the extent not otherwise provided in a Restricted Stock Award
      Agreement, in cases of death, Disability or Retirement or in cases of
      special circumstances, the committee, if it finds that a waiver would
      be appropriate, may elect to waive any or all remaining restrictions
      with respect to such Participant's Restricted Stock.

7.7   In the event of hardship or other special circumstances of a
      Participant whose employment with the Company is involuntarily
      terminated, the Committee may waive in whole or in part any or all
      remaining restrictions with respect to any or all of the Participant's
      Restricted Stock, based on such factors and criteria as the Committee
      may deem appropriate.

7.8   The certificates representing shares of Restricted Stock may either:

      (a)   be held in custody by the Company until the Restriction Period
            expires or until restrictions thereon otherwise lapse, and the
            Participant shall deliver to the Company a stock power endorsed
            in blank relating to the Restricted Stock; and/or

      (b)   be issued to the Participant and registered in the name of the
            Participant, and shall bear an appropriate restrictive legend and
            shall be subject to appropriate stop-transfer orders.

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<PAGE>


7.9   Except as provided in this Article VII, a Participant receiving a
      Restricted Stock Award shall have, with respect to the shares of
      Restricted Stock covered by any Award, all of the rights of a
      shareholder of the Company, including the right to vote the shares to
      the extent, if any, such shares possess voting rights and the right to
      receive any dividends; provided, however, the Committee may require
      that any dividends on such shares of Restricted Stock shall be
      automatically deferred and reinvested in additional Restricted Stock
      subject to the same restrictions as the underlying Award, or may
      require that dividends and other distributions on Restricted Stock
      shall be paid to the Company for the account of the Participant.  The
      Committee shall determine whether interest shall be paid on such
      amounts, the rate of any such interest, and the other terms applicable
      to such amounts.

7.10  If and when the Restriction Period expires without a prior forfeiture
      of the Restricted Stock subject to such Restriction Period,
      unrestricted certificates for such shares shall be delivered to the
      Participant.

7.11  In order to better ensure that Award payments actually reflect the
      performance of the Company and the service of the Participant, the
      Committee may provide, in its sole discretion, for a tandem
      performance-based or other Award designed to guarantee a minimum value,
      payable in cash or Stock to the recipient of a Restricted Stock Award,
      subject to such performance, future service, deferral and other terms
      and conditions as may be specified by the Committee.


                   ARTICLE VIII - OTHER STOCK-BASED AWARDS

8.1   Other awards that are valued in whole or in part by reference to, or
      are otherwise based on, Stock ("Other Stock-Based Awards"), including
      without limitation, convertible preferred stock, convertible
      debentures, exchangeable securities, phantom stock and Stock awards or
      options valued by reference to book value or performance, may be
      granted either alone or in addition to or in tandem with Stock Options
      or Restricted Stock granted under the Plan and/or cash awards made
      outside of the Plan.

      Subject to the provisions of the Plan, the Committee shall have
      authority to determine the Eligible Participants to whom and the time
      or times at which such Awards shall be made, the number of shares of
      Stock subject to such Awards, and all other conditions of the Awards.
      The Committee also may provide for the grant of shares of Stock upon
      the completion of a specified Performance Period.

                                       16
<PAGE>

      The provisions of Other Stock-Based Awards need not be the same with
      respect to each recipient.

8.2   Other Stock-Based Awards made pursuant to this Article VIII shall be
      subject to the following terms and conditions:


            (a)   Subject to the provisions of this Plan and the Award
            Agreement, shares of Stock subject to Awards made under this
            Article VIII may not be sold, assigned, transferred, pledged or
            otherwise encumbered prior to the date on which the shares are
            issued, or, if later, the date on which any applicable
            restriction, performance or deferral period lapses.

      (b)   Subject to the provisions of this Plan and the Award Agreement
            and unless otherwise determined by the Committee at the time of
            the Award, the recipient of an Award under this Article VIII
            shall be entitled to receive, currently or on a deferred basis,
            interest or dividends or interest or dividend equivalents with
            respect to the number of shares covered by the Award, as
            determined at the time of the Award by the Committee, in its sole
            discretion, and the Committee may provide that such amounts, if
            any, shall be deemed to have been reinvested in additional Stock
            or otherwise reinvested.

      (c)   Any Award under this Article VIII and any Stock covered by any
            such Award  shall vest or  be forfeited to the extent so provided
            in the Award Agreement, as determined by the Committee, in its
            sole discretion.

      (d)   Upon the Participant's Retirement, Disability or death, or in
            cases of special circumstances, the Committee may, in its sole
            discretion, waive in whole or in part any or all of the remaining
            limitations imposed hereunder, if any, with respect to any or all
            of an Award under this Article VIII.

      (e)   Each Award under this Article VIII shall be confirmed by, and
            subject to the terms of, an Award Agreement.

      (f)   Stock, including securities convertible into Stock, issued on a
            bonus basis under this Article VIII may be issued for no cash
            consideration.

8.3   Other Stock-Based Awards may include a phantom stock Award, which is
      subject to the following terms and conditions:

                                       17
<PAGE>

      (a)   The Committee shall select the Eligible Participants who may
            receive phantom stock Awards. The Eligible Participant shall be
            awarded a phantom stock unit, which shall be the equivalent to a
            share of Stock.

      (b)   Under an Award of phantom stock, payment shall be made on the dates
            or dates as specified by the Committee or as stated in the Award
            Agreement and phantom stock Awards may be settled in cash, Stock, or
            some combination thereof as determined by the Committee in its sole
            discretion.

      (c)   The Committee shall determine such other terms and conditions of
            each Award as it deems necessary in its sole discretion.


                       ARTICLE IX - ACCELERATION EVENTS

9.1   For the purposes of the Plan, an Acceleration Event shall occur in the
      event of a "Potential Change in Control," or "Change in Control" or a
      "Board-Approved Change in Control", as those terms are defined below.

9.2   A "Change in Control" shall be deemed to have occurred if:

      (a)   Any "Person" as defined in Section 3(a)(9) of the Act, including
            a "group" (as that term is used in Sections 13(d)(3) and 14(d)(2)
            of the Act), but excluding the Company and any employee benefit
            plan sponsored or maintained by the Company, including any
            trustee of such plan acting as trustee, who:

            (i)   makes a tender or exchange offer for any shares of the
                  Company's Stock (as defined below) pursuant to which any
                  shares of the Company's Stock are purchased (an "Offer"); or

            (ii)  together with its "affiliates" and "associates" (as those
                  terms are defined in Rule 12b-2 under the Act) becomes the
                  "Beneficial Owner" (within the meaning of Rule 13d-3 under
                  the Act) of at least 20% of the Company's Stock (an
                  "Acquisition");

      (b)   The shareholders of the Company approve a definitive agreement or
            plan to merge or consolidate the Company with or into another
            corporation, to sell or otherwise dispose of all or substantially
            all of its assets, or to liquidate the Company (individually, a
            "Transaction"); or

                                       18
<PAGE>

      (c)   When, during any period of 24 consecutive months during the
            existence of the Plan, the individuals who, at the beginning of such
            period, constitute the Board (the "Incumbent Directors") cease for
            any reason other than death to constitute at least a majority
            thereof; provided, however, that a director who was not a director
            at the beginning of such 24 month period shall be deemed to have
            satisfied such 24 month requirement, and be an Incumbent Director,
            if such director was elected by, or on the recommendation of or with
            the approval of, at least two-thirds of the directors who then
            qualified as Incumbent Directors either actually, because they were
            directors at the beginning of such 24 month period, or by prior
            operation of this Section 9.2(c).

9.3   A "Board-Approved Change in Control" shall be deemed to have occurred if
      the Offer, Acquisition or Transaction, as the case may be, is approved
      by a majority of the Directors serving as members of the Board at the
      time of the Potential Change in Control or Change in Control.

9.4   A "Potential Change in Control" means the happening of any one of the
      following:

      (a)   The approval by shareholders of an agreement by the Company, the
            consummation of which would result in a Change in Control of the
            Company, as defined in Section 9.2; or

      (b)   The acquisition of Beneficial Ownership, directly or indirectly,
            by any entity, person or group, other than the Company or any
            Company employee benefit plan, including any trustee of such plan
            acting as such trustee, of securities of the Company representing
            five percent or more of the combined voting power of the Company's
            outstanding securities and the adoption by the Board of a
            resolution to the effect that a Potential Change in Control of the
            Company has occurred for the purposes of this Plan.

9.5   Upon the occurrence of an Acceleration Event, the Committee in its
      discretion may declare any or all then outstanding Stock option, not
      previously exercisable and vested as immediately exercisable and fully
      vested, in whole or in part.

9.6   Upon the occurrence of an Acceleration Event, the Committee in its
      discretion may declare the restrictions applicable to Awards of Restricted
      Stock or Other Stock-Based Awards to have lapsed, in which case the
      Company shall remove all restrictive legends and stop-transfer orders
      applicable to the certif-icates for such shares of Stock, and deliver such
      certificates to the Participants in whose names they are registered.

                                       19
<PAGE>


9.7   Upon the occurrence of an Acceleration Event, the value of all
      outstanding Stock Options, Restricted Stock and Other Stock-Based
      Awards, in each case to the extent vested, shall, unless otherwise
      determined by the Committee in its sole discretion at or after grant
      but prior to any Change in Control, be cashed out on the basis of the
      "Change in Control Price" (as defined in Section 9.8) as of the date
      such Change in Control or such Potential Change in Control is
      determined to have occurred or such other date as the Committee may
      determine prior to the Change in Control.

9.8   For purposes of Section 9.7, "Change in Control Price" means the
      highest price per share of Stock paid in any transaction reported on
      any exchange on which the Stock is then traded or on the NASDAQ
      National Market System or the NASDAQ Small-Cap Market System, as the
      case may be, or paid or offered in any bona fide transaction related to
      a Potential or actual Change in Control of the Company, at any time
      during the 60 day period immediately preceding the occurrence of the
      Change in Control, or, where applicable, the occurrence of the
      Potential Change in Control event, in each case as determined by the
      Committee.


                    ARTICLE X - AMENDMENT AND TERMINATION

10.1  The Board, upon recommendation of the Committee, or otherwise, at any
      time and from time to time, may amend or terminate the Plan.  To the
      extent required by Rule 16b-3 under the Act, no amendment, without
      approval by the Company's shareholders, shall:

      (a)   alter the group of persons eligible to participate in the Plan;

      (b)   except as provided in Section 3.6, increase the maximum number of
            shares of Stock or Stock Options which are available for Awards
            under the Plan;

      (c)   extend the period during which Incentive Stock option Awards may
            be granted beyond the date which is ten (10) years following the
            Effective Date.

      (d)   limit or restrict the powers of the Committee with respect to the
            administration of this Plan;

      (e)   change the definition of an Eligible Participant for the purpose
            of an Incentive Stock Option or increase the limit or the value
            of shares of Stock for which an Eligible Participant may be
            granted an Incentive Stock Option;

                                       20
<PAGE>


      (f)   materially increase the benefits accruing to Participants under
            this Plan;

      (g)   materially modify the requirements as to eligibility for
            participation in this Plan; or

      (h)   change any of the provisions of this Article X.

10.2  No amendment to or discontinuance of this Plan or any provision thereof
      by the Board or the shareholders of the Company shall, without the
      written consent of the Participant, adversely affect, as shall be
      determined by the Committee, any Award theretofore granted to such
      Participant under this Plan; provided, however, the Committee retains
      the right and power to:

      (a)   annul any Award if the Participant is terminated for cause as
            determined by the Committee;

      (b)   provide for the forfeiture of shares of Stock or other gain under
            an Award as determined by the Committee for competing against the
            Company; and

      (c)   convert any outstanding Incentive Stock Option to a Nonqualified
            Stock Option.

10.3  If an Acceleration Event has occurred, no amendment or termination
      shall impair the rights of any person with respect to an outstanding
      Award as provided in Article IX.


                    ARTICLE XI - MISCELLANEOUS PROVISIONS

11.1  Nothing in the Plan or any Award granted hereunder shall confer upon
      any Participant any right to continue in the employ of the Company, or
      to serve as a director thereof, or interfere in any way with the right
      of the Company to terminate his or her employment at any time.  Unless
      specifically provided otherwise, no Award granted under the Plan shall
      be deemed salary or compensation for the purpose of computing benefits
      under any employee benefit plan or other arrangement of the Company for
      the benefit of its employees unless the Company shall determine
      otherwise.  No Participant shall have any claim to an Award until it is
      actually granted under the Plan.  To the extent that any person
      acquires a right to receive payments from the Company under the Plan,
      such right shall, except as otherwise provided by the Committee, be no
      greater than the right of an unsecured general creditor of the
      Company.  All payments to be made hereunder shall be paid from the
      general funds of the company, and no special or separate fund shall be
      
                                       21
<PAGE>

      established and no segregation of assets shall be made to assure
      payment of such amounts, except as provided in Article VII with respect
      to Restricted Stock and except as otherwise provided by the Committee.

11.2  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 Stock Option or the exercise thereof,
      or in connection with any other type of equity-based compensation
      provided hereunder or the exercise thereof, including, but not limited
      to, the withholding of payment of all or any portion of such Award or
      another Award under this Plan until the Participant 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, or selling any property
      contingently credited by the Company for the purpose of paying such
      Award or another Award under this Plan, in order to withhold or
      reimburse itself for the amount it is required to so withhold.

11.3  The Plan and the grant of Awards shall be subject to all applicable
      federal and state laws, rules, and regulations and to such approvals by
      any United States government or regulatory agency as may be required.
      Any provision herein relating to compliance with Rule 16b-3 under the
      Act shall not be applicable with respect to participation in the Plan
      by Participants who are not subject to Section 16(b) of the Act.

11.4  The terms of the Plan shall be binding upon the Company, and its
      successors and assigns.

11.5  Neither a Stock Option, nor any other type of equity-based compensation
      provided for hereunder, shall be transferable except as provided for
      herein.  Unless otherwise provided by the Committee or in an Award
      Agreement, transfer restrictions shall only apply to Incentive Stock
      Options as required in Article IV and to the extent otherwise required
      by federal or state securities laws.  If any Participant makes such a
      transfer in violation hereof, any obligation of the Company shall
      forthwith terminate.

11.6  This Plan and all actions taken hereunder shall be governed by the laws
      of the State of North Carolina.

11.7  The Plan is intended to constitute an "unfunded" plan for incentive and
      deferred compensation.  With respect to any 

                                       22
<PAGE>

      payments not yet made to a Participant by the Company, nothing contained
      herein shall give any such Participant any rights that are greater than
      those of a general creditor of the Company. In its sole discretion, the
      Committee may authorize the creation of trusts or other arrangements to
      meet the obligations created under the Plan to deliver shares of Stock or
      payments in lieu of or with respect to Awards hereunder; provided,
      however, that, unless the Committee otherwise determines with the consent
      of the affected Participant, the existence of such trusts or other
      arrangements is consistent with the "unfunded" status of the Plan.

11.8  Each Participant exercising an Award hereunder agrees to give the
      Committee prompt written notice of any election made by such
      Participant under Section 83(b) of the Code, or any similar provision
      thereof.

11.9  If any provision of this Plan or an Award Agreement is or becomes or is
      deemed invalid, illegal or unenforceable in any jurisdiction, or would
      disqualify the Plan or any Award Agreement under any law deemed
      applicable by the Committee, such provision shall be construed or
      deemed amended to conform to applicable laws or if it cannot be
      construed or deemed amended without, in the determination of the
      Committee, materially altering the intent of the Plan or the Award
      Agreement, it shall be stricken and the remainder of the Plan or the
      Award Agreement shall remain in full force and effect.

                                       23

