DANIEL GREEN COMPANY
                              450 North Main Street
                              Old Town, Maine 04468

                                  ------------

                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                          TO BE HELD SEPTEMBER 6, 2001

                                  ------------


     The Annual Meeting of  Stockholders of Daniel Green Company (the "Company")
will be held at The  Strathallan  Hotel,  550 East Avenue,  Rochester,  New York
14607 on Thursday,  September 6, 2001 at 10:00 o'clock in the forenoon,  for the
following purposes:

     1. To elect seven persons to the Board of Directors of the Company.

     2. To ratify the action of the Board of Directors  in selecting  Deloitte &
Touche LLP as auditors for the Company for 2001.

     3. To approve a proposal to amend the Company's Articles of Organization to
increase the number of authorized shares from 4,000,000 to 6,000,000.

     4. To amend the existing  Stock  Incentive  Plan and to replace it with the
2001 Long-Term Incentive Plan.

     5. To transact such other business as may properly come before the meeting.

     Stockholders  of record as of the close of  business  on July 24,  2001 are
entitled to notice of and to vote at the meeting and at any adjournment thereof.


                                              By order of the Board of Directors


                                              GARY E. PFLUGFELDER, Clerk

August 6, 2001


A form of proxy and a return envelope are enclosed for the use of  Stockholders.
It is requested that you fill in, date and sign the enclosed proxy and return it
in the enclosed  envelope even if you plan to attend the meeting in Rochester on
September 6, 2001.






                              DANIEL GREEN COMPANY
                              450 North Main Street
                              Old Town, Maine 04468


                                 PROXY STATEMENT

                     For The Annual Meeting Of Stockholders
                          To Be Held September 6, 2001

     This Proxy  Statement is furnished in connection  with the  solicitation of
proxies  by the  Board of  Directors  of Daniel  Green  Company,  a  corporation
organized under the laws of The Commonwealth of  Massachusetts  (the "Company"),
for use at the  Annual  Meeting  of  Stockholders  of the  Company to be held on
Thursday,  September 6, 2001 at 10:00 A.M. at The  Strathallan  Hotel,  550 East
Avenue,  Rochester,  New York  14607,  together  with  any and all  adjournments
thereof. It is anticipated that this Proxy Statement and the enclosed proxy will
first be sent or given to stockholders on or about August 6, 2001.

     A copy of the Annual  Report to  Stockholders  of the  Company for the year
ended December 31, 2000, including audited financial statements, is being mailed
with this Proxy  Statement.  You may also obtain a copy of the Company's  Annual
Report on Form 10-KSB  filed with the  Securities  Exchange  Commission  without
charge  upon  written  request  submitted  to Daniel  Green  Company,  c/o Chief
Financial Officer, 450 North Main Street, Old Town, Maine 04468.

     The close of  business  on July 24,  2001 has been fixed as the record date
for the determination of stockholders entitled to notice of, and to vote at, the
meeting and at any adjournment.  Each stockholder  shall be entitled to one vote
for each  share  held of  record  in his or her name on that  date.  There  were
outstanding on the record date 1,901,413 shares of Common Stock, $2.50 par value
per share,  of the Company,  being the only class of stock of the Company issued
and outstanding and entitled to vote at the meeting.

     The enclosed  proxy is solicited by and on behalf of the Board of Directors
of the Company,  which has designated the nominees for Directors listed below. A
stockholder  giving  such proxy has the right to revoke it at the  meeting or at
any time prior thereto.  All shares  represented by proxies in the form enclosed
herewith will be voted at the meeting and at any adjournments in accordance with
the terms of such proxies,  provided such proxies appear to be valid and to have
been executed by stockholders of record entitled to vote at the meeting and have
not previously been revoked. If no contrary  instructions are given, the persons
named in the proxy will vote FOR the seven  nominees  described on the following
pages;  FOR the  ratification  of the  appointment  of  Deloitte & Touche LLP as
auditors of the Company for 2001; FOR the amendment of the Company's Articles of
Organization to increase the number of authorized  shares;  FOR the amendment of
the existing  Stock  Incentive  Plan and adoption of its  replacement,  the 2001
Long-Term Incentive Plan; and, in their discretion,  upon any other matter which
may properly come before the meeting or any adjournment.  The Board of Directors
does  not  know of any  matters  not  specifically  referred  to in  this  Proxy
Statement which may come before the meeting.

     In  accordance  with  the  By-Laws  of  the  Company,  a  majority  of  the
outstanding  shares of  Common  Stock  entitled  to vote,  present  in person or
represented by proxy at the meeting,  is required to constitute a quorum for the
transaction of business.  The affirmative vote of a majority of the quorum shall
be required  for the  election  of  Directors  and to pass any measure  properly
presented to the meeting,  except Proposal 3 which requires the affirmative vote
of a majority of the outstanding shares. Shares which abstain from voting on any
matter shall be included for purposes of  determining  the presence of a quorum,
but shall be excluded in  tabulating  votes cast for or against any  proposal to
which an abstention  pertains.  Abstention  may not be specified on the proposal
relating to the election of directors.  However, votes that are withheld will be
excluded entirely from the vote and have no effect.  Broker non-votes will count
only in the determination of a quorum.

     All costs of preparing, assembling and mailing the enclosed proxy material,
and any additional  material which may hereafter be sent in connection  with the
solicitation  and collection of the enclosed proxy,  will be paid by the Company
and  no  part  will  be  paid  directly  or  indirectly  by  any  other  person.
Solicitation of proxies may be made by personal  interview,  mail,  telephone or
telecopier  by officers and regular  employees of the Company but no  additional
compensation will be paid them for the time so employed.


                                        1


                       PROPOSAL 1 -- ELECTION OF DIRECTORS

     Seven  persons  are to be elected to the Board of  Directors.  The Board of
Directors has nominated the persons listed below for election.  If elected, each
nominee will hold office until the Annual  Meeting to be held in 2002, and until
his successor is elected and shall qualify.

     The following biographies set forth certain information with respect to the
nominees for  election as  directors of the Company,  none of whom is related to
any other nominee or executive officer.

EDWARD BLOOMBERG, Age:  63

     Edward  Bloomberg has been a director of the Company  since 1993.  For more
than the last  five  years  Mr.  Bloomberg  has been an  independent  investment
advisor.

STEVEN M. DEPERRIOR, Age:  42

     Steven M.  DePerrior has been a director of the Company since 1996. He is a
Principal with Burke Group,  which provides certain  human-resources  consulting
services to the Company.  Mr. DePerrior also serves on the board of directors of
Centennial Technologies.

GREGORY M. HARDEN, Age:  44

     Gregory M.  Harden has been a director of the  Company  since  1996.  He is
President and Chief Executive Officer of Harden Furniture Co., Inc., a furniture
manufacturer in  McConnellsville,  New York. Mr. Harden also serves on the board
of directors for Oneida, Ltd. and Utica Mutual Insurance Company.

WILHELM PFANDER, Age:  63

     Wilhelm Pfander has been a director of the Company since April, 2000. He is
Senior Vice  President--Sourcing  and  Development  of the Company,  having been
elected in February,  2000.  For more than five years prior  thereto he was Vice
President-Manufacturing and Product Development at Penobscot Shoe Company.

GARY E. PFLUGFELDER, Age:  69

     Gary E.  Pflugfelder  has been a Director  of the Company  since 1983.  Mr.
Pflugfelder  is sales  consultant  to, and prior to  September 6, 1992 served as
General  Manager of, the Personal  Financial  Security  Division of Aetna Life &
Casualty Company.

JAMES R. RIEDMAN, Age:  41

     James R. Riedman has been a Director of the Company since 1993 and has been
Chairman of the Board of Directors  and Chief  Executive  Officer of the Company
since 1996. Mr. Riedman is President of Riedman  Corporation,  a holding company
which,  until  January,  2001,  included a  commercial  insurance  agency  which
obtained property and casualty insurance  coverage for the Company.  Mr. Riedman
is also a director of Harris Interactive Inc.

GREG A. TUNNEY, Age:  39

     Greg A. Tunney has been a Director  of the Company  since 1998 and has been
President and Chief  Operating  Officer of the Company since 1998.  From 1992 to
1998, Mr. Tunney was a Vice President of Brown Shoe Company.

     A  stockholder  using the enclosed  form of proxy may authorize the persons
named in the proxy to vote for all or any of the  above  named  nominees  or may
withhold  from said persons  authority to vote for all or any of such  nominees.
The Board of Directors  recommends a vote FOR the nominees named above.  If, for
any reason, any of the nominees named above should not be available for election
as  contemplated,  it is the intention of the persons named in the proxy to vote
for such  other  person  or  persons,  if any,  as the  Board of  Directors  may
recommend.  The Board of Directors has no reason to believe any nominees will be
unavailable.


                                       2


                Meetings Of The Board Of Directors And Committees
                      Of The Board Of Directors During 2000

     The  Board of  Directors  held  eight  meetings  during  2000.  Each of the
Directors attended more than 75% of the total number of meetings of the Board of
Directors  and any committee on which he served,  except Mr.  Pfander who missed
one of three Board  meetings  since he was elected and Mr.  Bloomberg who missed
five of the 17 meetings of the Board and Committees to which he was elected.

     The Board has a Compensation/Pension  Committee whose function is to review
executive compensation, including the grant of stock options under the Company's
Stock Incentive Plan, and matters  relating to the Company's  benefit plans. The
members of the  Compensation/Pension  Committee  at the end of 2000 were Messrs.
Pflugfelder,  DePerrior and Bloomberg.  The  Compensation/Pension  Committee met
twice during 2000.

     The Board has a Nominating Committee whose function is to select candidates
for  nomination  to the  Board  of  Directors.  The  members  of the  Nominating
Committee at the end of 2000 were Messrs. Riedman,  Bloomberg and DePerrior. The
Nominating  Committee met once during 2000.  While there is no formal  procedure
established  for  stockholders  to  submit  recommendations  to  the  Nominating
Committee,  the Nominating  Committee will consider  candidates  whose names are
submitted to the Company.

     The Board also has an Audit Committee whose members at the end of 2000 were
Messrs. Bloomberg,  Harden and Pflugfelder.  The Audit Committee met three times
during 2000. In carrying out its  responsibilities,  the Audit Committee reviews
the Company's  policies and  procedures  for internal  accounting  and financial
controls with the Company's  independent  auditors and with  management and also
reviews the degree of cooperation extended to the auditors by Company employees.
The Committee  also reviews the results of the audit of the  Company's  year-end
financial statements and notes.

     Other  functions of the Audit  Committee  are to recommend the selection of
the  Company's  independent  auditors  and to approve any  professional  service
rendered by the independent  auditors after  considering  whether providing such
service will affect the independence of the auditors.

     On July 27, 2000 the Board of Directors adopted the Audit Committee Charter
which sets forth the Company's  policies with respect to the role,  independence
and  responsibilities  of Audit  Committee  members.  A copy is attached to this
Proxy Statement as Exhibit A.

     The Audit Committee Report to Stockholders is found in Proposal 2.

     A Special  Committee  of the Board was  appointed  on November  18, 1999 to
consider,  negotiate and vote upon an agreement with Riedman Corporation for the
purchase by the Company of the common  stock of  Penobscot  Shoe  Company  which
Riedman  Corporation had acquired in a cash tender offer.  All of the members of
the Board other than James R.  Riedman,  President of Riedman  Corporation,  and
Greg Tunney,  President of the Company, were appointed to the Special Committee.
The  Special  Committee  met five times,  including  meetings  with  independent
counsel.  A Stock Purchase  Agreement was unanimously  approved by the Committee
and signed by the Company and Riedman  Corporation  on February  10,  2000.  See
"Certain Relationships and Related Transactions."


                            Compensation Of Directors

     Each  Director  receives  a $500  fee for  each  meeting  of the  Board  of
Directors  attended.  In  addition,  each  Director who is not an officer of the
Company  receives  a $500 fee for  each  meeting  of a  committee  of the  Board
attended  ($650 in the case of the  committee  chairman).  Directors who are not
officers of the Company were also paid an annual  retainer of $2,500 in 2000. On
February  16, 2001 the Board  increased  the annual  retainer  for  non-employee
directors to $5,000 in cash (payable at the rate of $625 per quarter  commencing
January 1, 2001) and an option to purchase  $5,000 worth of shares to be granted
at the annual meeting of directors, commencing in 2001 (the exercise price being
the  market  price of the  Company's  common  shares on that  date).  The option
portion is subject to the stockholders' approval of the 2001 Long-Term Incentive
Plan set forth in Proposal 4. Fifty  percent of the  director  options will vest
immediately  and  the  balance  will  vest  equally  on  the  first  and  second
anniversary of the date of grant, if the optionholder continues to be a director
on those dates.


                                       3


Security Ownership Of Certain  Beneficial  Owners And  Management

     The  following  table sets forth  certain  information  with respect to the
beneficial  ownership of the  Company's  Common Stock by each  beneficial  owner
known  by the  Company  to own 5% or  more of the  Common  Stock,  each  current
Director, each nominee for Director, the Chief Executive Officer of the Company,
the four most highly  compensated  executive officers other than the CEO and all
Directors,  nominees  for Director  and  executive  officers of the Company as a
group, as of August 6, 2001.



                                                                            Shares of      Percentage of
                                                                          Common Stock     Common Stock
                                                                          Beneficially     Beneficially
             Name And Address                                              Owned as of      Owned as of
           of Beneficial Owner                                           August 6, 2001    August 6, 2001
              --------------                                             --------------    --------------
                                                                                          
         Edward Bloomberg, Director ...................................      131,500(1)         6.9%
            11 Turnagain Road
            Kentfield, CA 94904
         Michael J. Crew ..............................................      103,858(2)         5.5%
            Investment Advisor
            681 Falmouth Rd., Box C-2
            Mashpee, MA 02649
         Steven DePerrior, Director ...................................      527,631(8)            *
            Burke Group
            10 East Street
            Honeoye Falls, NY 14472
         Gregory Harden, Director .....................................        2,000               *
            Harden Furniture
            Mill Pond Way
            McConnellsville, NY 13401
         Wilhelm Pfander, Director ....................................        5,000(3)            *
            11273 Callaway Green Drive
            Ft. Myers, FL 33913
         Gary E. Pflugfelder, Director & Clerk ........................        5,000(4)            *
            500 South Salina Street
            Suite 320
            Syracuse, NY 13202
         James R. Riedman, Chairman & CEO .............................    1,442,790(5)        59.1%
            Riedman Corporation
            45 East Avenue
            Rochester, NY 14064
         Riedman Corporation ..........................................      601,355(6)        29.7%
            45 East Avenue
            Rochester, NY 14604
         Retirement Committee of the Daniel Green Company
           Retirement Savings Partnership Plan ........................      527,131           25.9%
            450 North Main Street
            Old Town, Maine 04468
         Greg A. Tunney, President ....................................       57,109(7)         2.9%
            Daniel Green Company
            450 North Main Street
            Old Town, Maine 04468
         Robert Weedon, CFO & Treasurer ...............................          -0-               *
            Daniel Green Company
            450 North Main Street
            Old Town, ME 04468
         8 Officers and Directors as a Group...........................    1,643,899(1)(3)     66.8%
                                                                              (4)(5)(6)(7)(8)


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


                                       4


(1)  Includes 14,000 shares held by members of Mr. Bloomberg's family and 61,500
     shares  held by Mr.  Bloomberg  on behalf of clients in his  capacity as an
     investment  advisor,  as  to  which  Mr.  Bloomberg  disclaims   beneficial
     ownership.

(2)  Based upon  information  provided to the Company on a Schedule 13D filed on
     August 10, 1998 and subsequent correspondence.

(3)  Consists  of 5,000  shares  which Mr.  Pfander  has the option to  purchase
     provided the market price of the  Company's  common stock  reaches  certain
     prices. See "Option Grants In Last Fiscal Year."

(4)  Includes 500 shares owned by a family member,  as to which Mr.  Pflugfelder
     disclaims beneficial ownership.

(5)  Includes 25,000 shares which Mr. Riedman may purchase through exercise of a
     stock option granted to him on April 11, 2001 in connection with a $750,000
     loan to the Company which he can convert to 203,804  shares  (included) and
     50,000  shares  which he may  purchase  through  exercise of a stock option
     granted  to him on June 1,  2000 in  connection  with his  guarantee  of $1
     million  of the  Company's  bank  debt.  It also  includes  601,355  shares
     beneficially  owned by  Riedman  Corporation,  of which  Mr.  Riedman  is a
     shareholder,  director and President, and the following shares of which Mr.
     Riedman disclaims beneficial ownership:  7,700 shares owned by his children
     and 527.131  shares owned by the Daniel Green  Company  Retirement  Savings
     Partnership Plan (the "Retirement Plan") of whose Retirement Committee, the
     Plan fiduciary, Mr. Riedman is a member and shares the right to vote.

(6)  Includes  25,000  shares that  Riedman  Corporation  may  purchase  through
     exercise of a stock  option  granted to it on July 29,  1997 in  connection
     with a bridge loan to the Company,  50,000 shares that Riedman  Corporation
     may purchase  through exercise of a stock option granted to it on September
     1, 1999 in connection  with a guaranty  provided for certain bank financing
     for the Company,  and 50,000 shares that Riedman  Corporation  may purchase
     through  exercise of a stock option  granted to it on January 19, 2001,  in
     connection  with a guaranty of additional  bank  financing  provided to the
     Company.

(7)  Includes 50,000 shares which Mr. Tunney has the option to purchase provided
     the market price of the Company's  common stock reaches  certain prices and
     7,109 shares allocated to Mr. Tunney's account in the Company's  Retirement
     Savings Partnership Plan. See "Option Grants In Last Fiscal Year."

(8)  Includes  527,131 shares owned by the Retirement  Plan, of whose Retirement
     Committee,  the Plan  fiduciary,  Mr.  DePerrior is a member and shares the
     right to vote.

                        Executive Officers of the Company

     In  addition  to Mr.  Riedman,  Mr.  Tunney  and Mr.  Pfander  who are also
directors,  Robert Weedon, age 46, served as an executive officer of the Company
during  2000.  He became Chief  Financial  Officer of the Company on November 1,
2001.  For more than five years prior thereto,  Mr. Weedon was Business  Systems
Manager for Reebok International Ltd.

                 Compensation of Executive Officers During 2000

     The following information  concerning annual and long-term  compensation is
furnished for the years 1998,  1999 and 2000 with respect to the Chief Executive
Officer of the Company and each  executive  officer of the Company who  received
compensation for 2000 which exceeded $100,000.

                           Summary Compensation Table



                                                                                                  Long-Term
                                                                                                 Compensation
                                                         Annual Compensation         Other        Securities
                                                        --------------------        Annual        Underlying
Name and Principal Position                  Year        Salary       Bonus      Compensation       Options
--------------------                         ----       --------      -----       ----------      ----------
                                                                                      
James R. Riedman........................     2000       $ 25,000       -0-            (1)           -0-(2)
(CEO since June, 1996)                       1999       $ 25,000       -0-            (1)           -0-(2)
                                             1998       $ 25,000       -0-            (1)             -0-
Greg A. Tunney .........................     2000       $178,675       -0-            (1)        50,000 Shares
(President and COO                           1999       $165,843       -0-            (1)             -0-
since April 1998)                            1998       $119,400       -0-            (1)             -0-
Wilhelm Pfander ........................     2000       $ 99,900       -0-            (1)       5,000 Shares(3)
(Senior VP-Sourcing &
Product Development)


----------
(1)  Other annual compensation,  if any, did not exceed the lesser of $50,000 or
     10% of salary and bonus.

(2)  Options  for 50,000  shares  each were  granted in 1999 and 2000 to Riedman
     Corporation  of which James R. Riedman is  President,  in  connection  with
     guaranties  provided by Riedman  Corporation for certain bank financing for
     the Company.

(3)  The Company has also entered into a deferred  compensation  agreement  with
     Mr.  Pfander  whereby  it will  pay him  $100,000  during  the  first  year
     following his retirement after age 65.


                                       5


                        Option Grants In Last Fiscal Year



                                                            Percent of Total
                                       Number of Shares    Options Granted to
                                          Underlying            Employees        Exercise of Base
            Name                        Options Granted      in Fiscal Year       Price ($/Share)   Expiration Date
            ----                       ----------------    ------------------    ----------------   ---------------
                                                                                           
Gregg Tunney, President ...............     50,000                68%                  $3.56           10/25/10
Wilhelm Pfander, VP ...................      5,000                 7%                   3.56           10/25/10


     Mr.  Tunney's option was granted in exchange for his surrender of an option
for the same  number of shares  granted  to him on April 1,  1998.  The  earlier
option had an  exercise  price of $4.50 per share  which,  in  keeping  with the
provisions of the Company's Stock Incentive Plan, was $1.00 more than the market
price of the  Company's  common  stock on the date of  grant.  As  explained  in
Proposal 4, the Board of Directors determined that the exercise price formula of
the Plan  prevented the Company from realizing the full benefit of option grants
to employees and future employees. Thus, it amended the Plan to provide that the
exercise price would be equal to the market value on date of grant and awarded a
new option for 50,000 shares to Mr. Tunney at $3.56, the market price on October
26,  2000.  The grant was on  condition  a) that the  stockholders  approved the
amendment and b) that Mr. Tunney surrender his existing option. The option which
Mr.  Tunney will  surrender if Proposal 4 is approved  vested upon the Company's
common stock  reaching  certain market prices as follows:  50% at $5.50,  75% at
$6.50 and 100% at $7.50.  The new option vests 50% at $4.50,  75% at $5.50,  and
100% at $6.50.

     Mr. Pfander's option was granted in exchange for his surrender of an option
for the same  number of  shares  granted  to him on April 6,  2000  which had an
exercise price of $4.75,  one dollar more than the market price of the Company's
stock on that date. The option vests on the same terms as does Mr.  Tunney's new
option described above.

     None of the options  granted has been  exercised.  The market  value of the
Company's  stock at December 31, 2000 was $3.86.  Thus,  the options  granted to
Messrs.   Tunney  and  Pfander  were  not   exercisable   (not  having  vested).
Nevertheless,  the  difference  between  the  market  price  at year end and the
exercise price (i.e.,  $.30) multiplied by the number of shares subject to their
options  produces a "value" for the options of $15,000 for Mr. Tunney and $1,500
for Mr. Pfander.

     (See  below,   "Certain   Relationships   and  Related   Transactions"  for
information  with  respect  to  options  granted  in 1999  and  2001 to  Riedman
Corporation of which James R. Riedman, CEO of Daniel Green, is President.)

                 Certain Relationships And Related Transactions

     Riedman Corporation, a holding company which, until January, 2000, included
a commercial insurance agency,  obtained property and casualty insurance for the
Company.  During 1998, 1999 and 2000, the Company paid  approximately  $272,102,
$234,700  and  $162,569,  respectively,  for such  insurance  coverage.  Riedman
Corporation's  total fees in connection with these  transactions  were less than
approximately $26,000 for 1998, $21,476 for 1999 and $30,000 for 2000.

     Riedman  Corporation  entered  into a Stock  Purchase  Agreement  with  the
Company dated February 10, 2000.  Because James R. Riedman is both President and
director of Riedman  Corporation and Chairman and CEO of the Company,  the Board
of  Directors  appointed a Special  Committee  of all  directors  other than Mr.
Riedman and Greg A. Tunney, President of the Company, to consider, negotiate and
vote upon the Stock Purchase  Agreement on behalf of the Company.  The Agreement
provided  for the  sale by  Riedman  Corporation  to the  Company  of all of the
outstanding  stock of Penobscot  Shoe Company  ("Penobscot")  for  approximately
$17.8 million. Penobscot is a Maine corporation engaged in the design, importing
and sale of branded footwear to retailers.

     Riedman  Corporation  acquired the  Penobscot  stock in a cash tender offer
(commenced  October 12, 1999) and cash-out merger (concluded  January 18, 2000).
Prior to the Riedman  Corporation  tender  offer,  the  Company  had  negotiated
directly  with  Penobscot  to conduct  its own cash  tender  offer at $11.75 per
share. However, the Company was unable to secure necessary financing without the
guaranties of Riedman  Corporation  which  determined that the terms proposed by
the bank were  unacceptable.  Accordingly,  with the  approval of the  Company's
Board of Directors, Riedman Corporation proceeded to make the acquisition at the
same price per share.

     The  Special  Committee  of  the  Company's  Board  of  Directors  retained
independent  legal  counsel and an  appraiser  to advise it with  respect to its
fiduciary obligations and the terms of the Stock Purchase Agreement with Riedman


                                       6


Corporation which, after  negotiation,  was unanimously  approved by the Special
Committee. The Purchase Price reflects the sum of (a) $11.75 per share times the
number of shares of  Penobscot  acquired  by Riedman  Corporation  in the tender
offer, (b) direct expenses incurred by Riedman Corporation including interest on
funds borrowed (the "Acquisition Loan") to fund the escrow agreement for all the
Penobscot  shares'  cash  price and (c) a  negotiated  amount  that the  Special
Committee deemed  reasonable.  The balance of the Acquisition Loan escrow funds,
after  payment of the  tendered  Penobscot  shares,  was paid over to  Penobscot
together with interest earned while in escrow. Riedman Corporation then borrowed
$3 million  from  Penobscot  to reduce the  Acquisition  Loan.  This  amount and
interest thereon were offset against the Purchase Price at closing.

     The Company  agreed to pay all  Penobscot  stockholders  who  dissented and
exercised  appraisal rights the "fair value" of their shares under Maine law. It
also agreed to pay all remaining  stockholders  (those who neither  tendered nor
dissented)  $11.75 per share.  In furtherance of these  agreements,  the Company
agreed to defend and indemnify Riedman Corporation,  its officers, directors and
agents,  from  liability  to Penobscot  stockholders  for claims  arising  after
closing the Stock  Purchase  Agreement  which relate to acts or omissions of the
Company.   Riedman  Corporation  made  various  customary   representations  and
warranties  to the  Company  concerning  both  Penobscot  and the conduct of the
tender offer and merger by Riedman Corporation.

     In connection  with the bank financing for its acquisition of Penobscot and
the  dissenters'  action,  the Company twice  required the guaranties of Riedman
Corporation.  In  consideration  therefor,  the Board of Directors (Mr.  Riedman
abstaining)  granted  Riedman  Corporation two options for 50,000 shares each to
purchase  Daniel  Green  common  stock  for 10  years.  The  first  was given on
September 1, 1999 and has an exercise price of $4.75 per share,  $1.00 per share
more than the  market  price on that date.  The second was given on January  19,
2001 and has an  exercise  price of $4.00 per share,  the  market  price on that
date.

     In order to assist the Company with its working capital  requirements,  Mr.
Riedman loaned the Company  $750,000 on April 11, 2001. The note  evidencing the
indebtedness is due in one year and is convertible into 203,804 shares of common
stock at $3.68,  the market  price of the stock on that date.  At the same time,
Mr.  Riedman  was granted an option to  purchase  25,000  shares for 10 years at
$3.68 per share.  The Company's  continuing  cash  requirements  necessitated an
increase in the Company's bank line and on June 1, 2001 Mr. Riedman guaranteed a
portion thereof for which he was granted an option to purchase 50,000 shares for
10 years at $3.50 per share, the market price of the stock on that date.

     On June 1, 2001 the Board of  Directors  of the Company and the  Retirement
Committee of the  Retirement  Plan  approved the  Company's  sale and the Plan's
purchase of 330,097 newly issued shares of common stock at $5.15 per share ($1.7
million  aggregate)  the  "fair  market  price"  determined  by  an  independent
appraisal  company.  The shares will be allocated to the accounts of  Retirement
Plan participants  (Company  employees) annually over seven years. The funds for
the  purchase  were  transferred  to the  Retirement  Plan  from  surplus  funds
remaining  after  termination  of the pension plan of the Company's  subsidiary,
Penobscot  Shoe  Company.  The  Retirement  Plan has the  right  for 120 days to
purchase up to 135,922  additional  shares at the same price per share.  Messrs.
Riedman and  DePerrior  are members of the  Retirement  Committee  which has the
right  to  vote  the  Retirement  Plan's  shares  which  include  61,112  shares
previously  acquired by the Retirement Plan, the 330,097 purchased on June 1 and
those it has the right to purchase, a total of 466,019.

             Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors  and  executive  officers  and  persons  who hold more than 10% of its
Common Stock to file with the  Securities  and Exchange  Commission  (the "SEC")
reports  of  ownership  and  changes in  ownership  of Common  Stock.  Officers,
directors and  greater-than-10%  shareholders  are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.

     Based  solely on review of the  copies  of such  reports  furnished  to the
Company or written  representations  that no other  reports were  required,  the
Company  believes  that,  with  respect  to its 2000  fiscal  year,  all  filing
requirements    applicable   to   the   Company's   officers,    directors   and
greater-than-10%  shareholders  were complied  with,  except that reports of the
following were not timely filed:  Edward  Bloomberg did not timely file a Form 4
Statement of Change in Beneficial Ownership with regard to the purchase of 2,000
shares and James  Riedman did not timely  file a Form 4  Statement  of Change in
Beneficial Ownership with regard to the receipt of a note convertible to 203,804
shares and an option to purchase 25,000 shares.

             PROPOSAL 2 -- RATIFICATION OF THE SELECTION OF AUDITORS

     The Company's  financial  statements  for the year ended  December 31, 2000
were  examined  by  Deloitte  &  Touche  LLP,   independent   certified   public
accountants.  Deloitte  & Touche LLP (or a  predecessor  firm) has served as the
Company's  independent  auditors  since  1973.  The Board of  Directors,  on the
recommendation  of the Audit Committee,  has appointed  Deloitte & Touche LLP as
the independent auditors of the Company for 2001, subject to ratification by the
stockholders.

     A representative of Deloitte & Touche LLP will be present at the meeting to
answer questions and make a statement if he desires to do so.

     The  Board  of  Directors  recommends  a vote FOR the  ratification  of its
selection of Deloitte & Touche LLP as the Company's independent auditors. In the
event that  stockholders do not ratify the appointment,  the appointment will be
reconsidered by the Audit Committee and the Board of Directors.

                          Report of the Audit Committee

     The  Audit  Committee  has  reviewed  and  discussed  with  management  the
Company's financial  statements audited by Deloitte & Touche LLP,  ("Deloitte"),
the Company's  independent  auditors.  It has also  discussed  with Deloitte the
matters required to be discussed by Statement on Auditing Standards 61 including
the role of the auditor,  the Company's  significant  accounting  policies,  the
methodology used by management in making  significant  accounting


                                       7


estimates   and  the  basis  for  the   auditor's   conclusions   regarding  the
reasonableness of those estimates,  the methodology used by management in making
significant  adjustments in the financial  statements,  any  disagreements  with
management  over  the  application  of  accounting  principles,  the  basis  for
management's   accounting   estimates  and  the  disclosures  in  the  financial
statements,  any  difficulties  encountered in performing the audit, and certain
other matters.  Deloitte has provided the Committee with the written disclosures
and letter  required by  Independent  Standards  Board  Statement  No. 1 and the
Committee has discussed with  Deloitte,  Deloitte's  independence.  Based on the
review and discussions  mentioned,  the Audit Committee recommended to the Board
of Directors that the audited financial  statements be included in the Company's
Annual  Report  on Form  10-KSB  for 2000 for  filing  with the  Securities  and
Exchange Commission.

                                                        Respectfully submitted,

                                                        The Audit Committee
                                                          Edward Bloomberg
                                                          Gregory Harden
                                                          Gary Pflugfelder

Audit Fees

     The aggregate fees billed by Deloitte for  professional  services  rendered
for the audit of the Company's annual  financial  statements for the fiscal year
ended December 31, 2000 and for the reviews of the financial statements included
in the Company's Quarterly Reports on Form 10-QSB ("Audit Fees") for that fiscal
year were $98,900.

Financial Information Systems Design and Implementation Fees

     Deloitte did not perform professional  services for information  technology
services  relating to financial  information  systems design and  implementation
("IT Fees") for the fiscal year ended December 31, 2000.

All Other Fees

     The aggregate fees billed by Deloitte for services rendered to the Company,
other than the  services  for which  "Audit Fees" and "IT Fees" were charged for
the fiscal year ended December 31,2000 were $10,500.

     The Audit  Committee  has  considered  whether the  provision  of non-audit
services is compatible with maintaining the principal accountant's independence.

               PROPOSAL 3 -- AMENDMENT OF ARTICLES OF ORGANIZATION
                          TO INCREASE AUTHORIZED SHARES

     The Company is presently  authorized  to issue  4,000,000  shares of common
stock,  par value  $2.50 per share.  As of July 24,  2001  there were  1,901,413
shares of common  stock  issued and  outstanding,  100,000  shares  reserved for
issuance under the Company's  Stock  Incentive Plan (of which options for 65,500
shares have been  granted),  125,000  reserved  for  issuance  under  options to
Riedman  Corporation  and 278,804  shares  reserved  for options and  conversion
rights held by Mr. Riedman. The 2001 Long-Term Incentive Plan (Proposal 4 below)
calls for 300,000  shares to be reserved,  replacing the 100,000  reserved under
the Stock Incentive Plan. The Company's Rights Plan of February 9, 1996 requires
the reservation of _____________ shares.

     On February 16, 2001 the Board of Directors  adopted a resolution,  subject
to  stockholder  approval at the Annual  Meeting on April 26, 2001, to amend the
Company's  Articles of Organization to increase the number of authorized  shares
from 4,000,000 to 6,000,000.  The  affirmative  vote of holders of a majority of
the outstanding  shares is required to adopt the proposed amendment set forth in
Exhibit B attached hereto. If approved by the  stockholders,  the amendment will
take effect on September 7, 2001.

     The purpose of the  amendment  is to provide the  Company  with  additional
shares of common  stock which may be made  available  for future  financing  and
acquisition transactions,  stock dividends or splits, employee benefit plans and
other general corporate purposes. If the amendment is approved, the Company also
will have generally greater  flexibility in the future to issue shares in excess
of those  presently  authorized,  without  the  expense  and  delay of a special
stockholders' meeting.

     Except in  connection  with its stock option  plans  discussed  below,  the
Company currently has no arrangements or  understandings  for the reservation or
issuance of additional  shares of common stock and no holder of common


                                       8


stock has any  preemptive  right with respect to the common stock.  If the Board
deems it in the best  interests  of the  Company and the  stockholders  to issue
additional  shares of common stock in the future,  the Board generally would not
seek  further   authorization   by  vote  of  the   stockholders,   unless  such
authorization is otherwise required by applicable law or regulations.

     Should the Board desire to issue  additional  shares of common stock in the
future,  such issuance of  additional  shares could dilute the voting power of a
person  seeking  control of the Company,  thereby  deterring  or rendering  more
difficult a merger,  tender offer,  proxy contest or an extraordinary  corporate
transaction  opposed by the  Company's  Board of  Directors.  The Company has no
knowledge that any person intends to effect such a transaction.

     The Board recommends a vote FOR adoption of the proposal.

                    PROPOSAL 4 -- AMENDMENT OF THE COMPANY'S
                    STOCK INCENTIVE PLAN AND APPROVAL OF ITS
                 REPLACEMENT, THE 2001 LONG-TERM INCENTIVE PLAN

     The Company's  Stock  Incentive  Plan  provides that the exercise  price of
options  awarded under the Plan shall be $1.00 more than the market price of the
Company's common stock on the date the option is granted. The Board of Directors
concluded that this premium was a substantial detriment to the attractiveness of
options awarded to employees and potential employees.  Thus, on October 26, 2000
the Board of Directors adopted a resolution,  subject to stockholder approval at
the Annual  Meeting on September 6, 2001, to amend the Stock  Incentive  Plan to
provide that exercise price of options  awarded under the Plan shall be equal to
the market value of the Company's common stock on the date the option is granted
(the "Exercise Price Amendment").

     At the same time the Board approved the grant of options at the then market
price of its common  stock to holders of  existing  options to  purchase  65,500
shares,  provided that they surrendered their existing options. In each instance
the exercise  price on the new option ($3.56) is less than that for the existing
option  ($4.75).  The grant of the new  options is subject to the  stockholders'
approval of the Exercise Price Amendment to the existing Stock Incentive Plan.

     The Exercise  Price  Amendment  occasioned a review of the Stock  Incentive
Plan and the Company's entire method of dealing with long-term incentives.  As a
result  the Board of  Directors,  on  February  16,  2001,  adopted,  subject to
stockholder  approval,  a replacement  plan called the 2001  Long-Term Plan (the
"Plan"), a copy of which is attached hereto as Exhibit C. Under the Plan, awards
may be made to existing and future officers,  other  employees,  consultants and
directors  of the  Company or its  subsidiaries  from time to time.  The Plan is
intended to promote the long-term  financial interests and growth of the Company
by providing its employees, officers, directors and consultants with appropriate
incentives  and  rewards to enter into and  continue  in the employ of, or their
relationship   with,  the  Company.   Plan  awards  create  for  participants  a
proprietary  interest  in the  long-term  success  of the  Company  and  provide
incentive  to  the  performance  of  individual   officers,   other   employees,
consultants and directors in fulfilling  their  responsibilities  for long-range
achievements.

     The Board of Directors  or the  compensation  committee  (both of which are
referred  to below as the  "committee"),  will make  recommendations  for grants
under  the  Plan  from  among  those  eligible  persons  who hold  positions  of
responsibility  and whose performance,  in the judgment of the committee,  has a
significant effect on the Company's success.

     Under the Plan 300,000  shares of common stock are available for awards and
have been reserved from authorized common stock. As of July 24, 2001, there were
outstanding  options  to  purchase  65,500  shares of common  stock.  Options to
purchase  additional  shares  will  be  granted  to the  outside  (non-employee)
directors  at the annual  meeting if the Plan is approved by  stockholders  (see
above, Proposal 1 -- Election of Directors -- Compensation of Directors).

     The  Plan  provides  for the  grant of stock  options,  stock  appreciation
rights,  stock awards and cash  awards.  Stock  options may be  incentive  stock
options that comply with Section 422 of the  Internal  Revenue Code of 1986,  as
amended ("Code") or  non-qualified  stock options.  Future  allocation of awards
under the Plan is not currently determinable as the allocation is dependent upon
future  decisions to be made by the  committee in its sole  discretion,  and the
applicable provisions of the Plan.

     Stock options may be granted at exercise  prices that are no less than 100%
of the fair  market  value of the  Company's  common  shares  on the date of the
grant.  The  exercise  price of any stock option may, at the  discretion  of


                                       9


the committee,  be paid in cash or by surrendering shares or another award under
the  Plan,  valued  at  fair  market  value  on the  date  of  exercise,  or any
combination of cash or stock.

     Stock appreciation rights are rights to receive,  without payment to Daniel
Green,  cash or  shares of  Company  common  stock  with a value  determined  by
reference  to the  difference  between the exercise or strike price of the stock
appreciation  rights and the fair market value or other  specified  valuation of
the shares at the time of exercise.  Stock appreciation rights may be granted in
tandem with stock options or separately.

     Stock  awards may  consist  of shares of Daniel  Green  common  stock or be
denominated  in units of shares of common  stock.  A stock award may provide for
voting rights and dividend equivalent rights.  Stock awards may be granted at no
less than 100% of the fair market  value of Daniel  Green  common  shares on the
date of the grant.

     The committee may specify conditions for awards,  including vesting service
and performance conditions.  Vesting conditions may include, without limitation,
provision for  acceleration in the case of a  change-in-control  of the Company,
and performance conditions may include, without limitation,  conditions based on
achievement of specific business objectives,  increases in specified indices and
attaining specified growth measures or rates.

     An  award  may  provide  for  the  granting  or  issuance  of   additional,
replacement  or  alternative  awards upon the  occurrence  of specified  events,
including the exercise of the original award.

     An award may  provide  for a tax  gross-up  payment to a  participant  if a
change-in-control  of the Company results in the participant owing an excise tax
or other tax above the rate  ordinarily  applicable,  due to the  parachute  tax
provisions of Section 280G of the Code or otherwise.  The gross-up payment would
be in an amount so that the net amount received by the participant, after paying
the increased tax and any additional  taxes on the additional  amount,  would be
equal  to that  receivable  by the  participant  if the  increased  tax were not
applicable.

     The Board of Directors recommends a vote FOR approval of the Exercise Price
Amendment and the 2001 Long-Term  Incentive Plan which will replace the existing
Stock Incentive Plan.

                        PROPOSALS FOR NEXT ANNUAL MEETING

     A  stockholder  proposal  submitted  for  inclusion  in the proxy and proxy
statement  relating to the next Annual  Meeting of  Stockholders  of the Company
must be received by the Company no later than December 1, 2001.

     STOCKHOLDERS  OF RECORD AS OF THE  CLOSE OF  BUSINESS  ON JULY 24, 2001 AND
BENEFICIAL  OWNERS OF THE COMPANY'S  COMMON STOCK ARE ENTITLED TO RECEIVE A COPY
WITHOUT  CHARGE OF THE  COMPANY'S  2000 ANNUAL REPORT TO THE SEC ON FORM 10-KSB.
STOCKHOLDERS  WHO WISH TO RECEIVE A COPY OF THIS REPORT  SHOULD WRITE TO: ROBERT
WEEDON,  CHIEF FINANCIAL OFFICER,  DANIEL GREEN COMPANY,  450 NORTH MAIN STREET,
OLD TOWN, MAINE 04468.



                                              GARY E. PFLUGFELDER, Clerk

August 6, 2001



EXHIBITS Attached
     A. Audit Committee Charter
     B. Amendment of Articles of Organization
     C. 2001 Long-Term Incentive Plan


                                       10


                                    EXHIBIT A

                             Audit Committee Charter

     This  charter  for the  Daniel  Green  Company  ("the  Company")  shall  be
reviewed,  updated and  approved  annually by the  Company's  board of directors
("the board").

Role and Independence

     The  audit  committee  of the  board  of  directors  assists  the  board in
fulfilling its  responsibility for oversight of the quality and integrity of the
accounting,  auditing  and  reporting  practices  of the  Company and other such
duties as directed by the board.  The membership of the committee  shall consist
of at least three  directors  who are generally  knowledgeable  in financial and
auditing  matters,  including  at least one member  with  accounting  or related
financial  management  expertise.  Each member shall be free of any relationship
that, in the opinion of the board,  would  interfere  with his or her individual
exercise  of  independent  judgment,  and shall meet the  director  independence
requirements  for  serving  on audit  committees  as set forth in the  corporate
governance  standards of NASDAQ.  The committee is expected to maintain free and
open communication (including private executive sessions at least annually) with
the independent  accountants  and the management of the Company.  In discharging
this  oversight  role,  the  committee is empowered  to  investigate  any matter
brought to its  attention,  with full power to retain  outside  counsel or other
experts for this purpose.

     The board of directors  shall appoint one member of the audit  committee as
chairperson.  He or she shall be  responsible  for  leadership of the committee,
including  preparing the agenda,  presiding over the meetings,  making committee
assignments and reporting to the board of directors.  The chairperson  will also
maintain  regular  liaison  with the CEO,  CFO and the  lead  independent  audit
partner.

Responsibilities

     The audit committee's primary responsibilities include:

     o    Recommending to the board the  independent  accountants to be selected
          or retained to audit the financial  statements  of the Company.  In so
          doing, the committee will request from the auditor written affirmation
          that the auditor is in fact independent,  discuss with the auditor any
          relationships  that  may  impact  the  auditor's   independence,   and
          recommend to the board any actions  necessary to oversee the auditors'
          independence.

     o    Overseeing the  independent  auditors  relationship by discussing with
          the auditor the nature and rigor of the audit  process,  receiving and
          reviewing audit reports,  and providing the auditor full access to the
          committee (and the board) to report any and all appropriate matters.

     o    Reviewing the audited  financial  statements and discussing  them with
          management  and  the  independent  auditor.  These  discussions  shall
          include  consideration  of the  quality  of the  Company's  accounting
          principles as applied in its financial reporting,  including review of
          estimates,  reserves and accruals,  review of judgmental areas, review
          of audit adjustments  whether or not recorded and such other inquiries
          as may be appropriate.  Based on the review,  the committee shall make
          its  recommendation  to the board as to the inclusion of the Company's
          audited  financial  statements in the Company's  annual report on Form
          10-KSB or Form 10-K, whichever is applicable.

     o    Reviewing with  management and the  independent  auditor the quarterly
          financial  information prior to the Company's filing of Form 10-QSB or
          Form 10-Q,  whichever is  applicable.  This review may be performed by
          the committee or its chairperson.

     o    Discussing with  management and the external  auditors the quality and
          adequacy of the Company's internal controls.  Particular emphasis will
          be on controls  over  acquisition  related  activities  and  inventory
          valuation.

     o    Discussing  with  management the status of banking  relationships  and
          related debt  agreements,  pending  litigation,  taxation  matters and
          other areas of  oversight to the legal and  compliance  area as may be
          appropriate.

     o    Reporting  audit  committee  activities  to the full board and issuing
          annually a report to be  included  in the proxy  statement  (including
          appropriate oversight conclusions) for submission to the shareholders.


                                      A-1


                                    EXHIBIT B

                      Amendment of Articles of Organization

     RESOLVED,  that the Articles of  Organization  of Daniel  Green  Company be
amended to increase the authorized capital stock from $10,000,000  consisting of
4,000,000 shares of Common Stock, $2.50 par value, to $15,000,000, consisting of
6,000,000 shares of Common Stock, $2.50 par value.


                                      B-1


                                    EXHIBIT C

                          2001 LONG-TERM INCENTIVE PLAN
                                       OF
                              DANIEL GREEN COMPANY

     1.  Objective.  The  objective of the 2001  Long-Term  Incentive  Plan (the
"Plan") of DANIEL GREEN COMPANY, a Massachusetts corporation (the "Company"), is
to advance the  interests  of the Company and its  stockholders  by  providing a
means to attract and retain  officers and other key employees to the Company and
its  Subsidiaries  (hereinafter  defined)  and  to  reward  the  performance  of
officers,  other  employees,  consultants  and  directors for  fulfilling  their
responsibilities  for  long-range  achievements.  These  objectives  are  to  be
accomplished  by making awards under the Plan to  Participants  (as  hereinafter
defined)  that  provide  them with a  proprietary  interest  in the  growth  and
performance of the Company and its Subsidiaries.

     2.  Definitions.  As used herein,  the terms set forth below shall have the
meanings ascribed thereto below:

     "Affiliate"  means an  affiliate  of the  Company  as defined in Rule 12b-2
promulgated under Section 12 of the Exchange Act.

     "Award"  means the grant of any form of stock  option,  stock  appreciation
right,  stock award,  cash award or other rights or interests,  whether  granted
singly,  in combination or in tandem, by the Company to a Participant under this
Plan.

     "Award Agreement" means any written  agreement,  contract,  notice or other
instrument or document evidencing an Award.

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

     "Change  of  Control"  means  the  occurrence  of any one of the  following
events:

          (a) any  person  or  entity  other  than  Riedman  Corporation  or any
     affiliate of Riedman Corporation  (including James R. Riedman or any entity
     controlled  by him) is or  becomes  the  beneficial  owner (as  defined  in
     Section  13d-3  of the  Securities  Exchange  Act  of  1934),  directly  or
     indirectly,  of securities of the Company (not  including in the securities
     beneficially owned by such person any securities acquired directly from the
     Company  or  any  of  its  affiliates  (as  defined  in  SEC  Rule  12b-2))
     representing thirty-five percent (35%) or more of the combined voting power
     of the Company's then outstanding voting securities;

          (b) the  following  individuals  cease for any reason to  constitute a
     majority of the number of directors then serving:  individuals  who, on the
     effective  date  of  this  Plan  (the  "Effective  Date"),  constitute  the
     Company's Board of Directors (the "Board") and any new Director (other than
     a director  whose initial  assumption  of office is in  connection  with an
     actual or threatened  election  contest,  including,  but not limited to, a
     consent solicitation, relating to the election of directors of the Company)
     whose  appointment  or election by the Board or nomination  for election by
     the  Company's  stockholders  was approved or  recommended  by a vote of at
     least  two-thirds  (2/3) of the  Directors  then still in office who either
     were  directors on the  Effective  Date or whose  appointment,  election or
     nomination for election was previously so approved or recommended;

          (c) there is consummated a merger or  consolidation  of the Company or
     any  direct  or  indirect   subsidiary   of  the  Company  with  any  other
     corporation, other than (i) a merger or consolidation which would result in
     the voting securities of the Company outstanding  immediately prior thereto
     continuing  to  represent  (either  by  remaining  outstanding  or by being
     converted  into voting  securities of the surviving or parent  entity) more
     than  fifty  percent  (50%) of the  combined  voting  power  of the  voting
     securities of the Company or such  surviving or parent  entity  outstanding
     immediately  after  such  merger  or  consolidation  or  (ii) a  merger  or
     consolidation  effected to implement a recapitalization  of the Company (or
     similar transaction) in which no person,  directly or indirectly,  acquired
     thirty-five  percent  (35%)  or more of the  combined  voting  power of the
     Company's  then  outstanding  securities  (not  including in the securities
     beneficially owned by such person any securities acquired directly from the
     Company or its affiliates); or

          (d)  the  stockholders  of the  Company  approve  a plan  of  complete
     liquidation  of the Company or there is  consummated  an agreement  for the
     sale or  disposition  by the  Company  of all or  substantially  all of the
     Company's assets (or any transaction having a similar effect), other than a
     sale or  disposition  by the  Company  of all or  substantially  all of the
     Company's assets to an entity, at least fifty percent (50%) of the combined
     voting power


                                      C-1


     of the voting  securities of which are owned by stockholders of the Company
     in  substantially  the same  proportions as their  ownership of the Company
     immediately prior to such sale.

     "Code"  means the Internal  Revenue  Code of 1986,  as amended from time to
time.  References  to any  provision  of the Code  shall be  deemed  to  include
regulations thereunder and successor provisions and regulations thereto.

     "Committee" means the Compensation  Committee of the Board; the composition
of the committee  shall at all times satisfy the provisions of Section 162(m) of
the Code and the requirements of Section 14(c) of this Plan.

     "Common Stock" means the common stock,  par value $2.50 per share (or $1.25
per share if the  Amendment  to the  Articles  of  Organization  of the  Company
reducing  par  value to $1.25  has been  approved  by the  stockholders)  of the
Company.

     "Director" means an individual serving as a member of the Board.

     "Exchange Act" means the  Securities  Exchange Act of 1934, as amended from
time to time. References to any provision of the Exchange Act shall be deemed to
include rules thereunder and successor provisions and rules thereto.

     "Fair Market  Value" means,  with respect to Common Stock,  Awards or other
property,  as of a  particular  date,  (i) if the  Common  Stock is  listed on a
national securities exchange,  the closing sales price per share of Common Stock
on the consolidated transaction reporting system for the principal such national
securities  exchange on that date,  or, if there shall have been no such sale so
reported on that date,  on the last  preceding  date on which such a sale was so
reported, (ii) if the Common Stock is not so listed, but is quoted in the Nasdaq
National Market System, the closing sales price per share of Common Stock on the
Nasdaq National Market System on that date, or, if there shall have been no such
sale so reported on that date, on the last  preceding  date on which such a sale
was so reported,  (iii) if the Common Stock is not so listed or quoted, the mean
between  the  closing  bid and  asked  price on that  date,  or, if there are no
quotations  available  for such date, on the last  preceding  date on which such
quotations  shall be  available,  as reported by Nasdaq,  or, if not reported by
Nasdaq, by the National Quotation Bureau, Inc.

     "Incentive  Stock  Option" or "ISO"  means an option that is intended to be
and is designated as an "incentive  stock option"  within the meaning of Section
422 of the Code, or any successor provision.

     "Non-Qualified  Stock Option" or "NQO" means an option that is not intended
to qualify as an "incentive  stock option"  within the meaning of Section 422 of
the Code, or any successor provision.

     "Participant"  means any eligible person described in Section 3 of the Plan
to whom an Award has been made under this Plan and his or her successors, heirs,
executors and administrators, as the case may be.

     "Pricing Date" means the date on which an Award  consisting of an option or
stock appreciation right is granted,  except that the Committee may provide that
(i) the Pricing Date is the date on which the recipient is hired or promoted (or
similar event),  if the grant of the option or stock  appreciation  right occurs
not more than 90 days after the date of such  hiring,  promotion or other event,
and (ii) if an Award  consisting  of an  option or stock  appreciation  right is
granted in tandem with or in  substitution  for an  outstanding  option or stock
appreciation  right,  the Pricing Date is the date of grant of such  outstanding
option or stock appreciation right.

     "Subsidiary"  means  any  corporation  of which  the  Company  directly  or
indirectly  owns shares  representing  more than 50% of the voting  power of all
classes or series of capital stock of such  corporation  which have the right to
vote  generally  on  matters  submitted  to a vote of the  stockholders  of such
corporation.

     3. Eligibility.  Executive officers and other employees of the Company, its
parent or any of its Subsidiaries,  including any officer or member of the Board
who is also such an  employee,  and  persons  who  provide  consulting  or other
services to the Company  deemed by the Board to be of  substantial  value to the
Company, and non-employee  Directors are eligible to be granted Awards under the
Plan.  In addition,  persons who have been offered  employment by the Company or
its  Subsidiaries,  and persons  employed by an entity that the Board reasonably
expects to become a  Subsidiary  of the  Company,  are eligible to be granted an
Award under the Plan.

     4. Stock Subject to the Plan.

          (a)  The  total  amount  of  Common  Stock  that  may  be  subject  to
     outstanding Awards shall not exceed three hundred thousand (300,000) shares
     of common stock.


                                      C-2


          (b) If an Award  valued  by  referenced  to  Common  Stock may only be
     settled in cash,  the number of shares to which such Award relates shall be
     deemed to be Common  Stock  subject  to such  Award  for  purposes  of this
     Section 4. Any shares of Common  Stock  delivered  pursuant to an Award may
     consist,  in whole or in part, of authorized and unissued shares,  treasury
     shares or shares acquired in the market for a Participant's account.

          (c) Except as  provided in an Award  Agreement,  in the event that the
     Committee shall determine that any dividend or other distribution  (whether
     in the form of cash,  stock or other  property),  recapitalization,  Common
     Stock  split,  reverse  split,   reorganization,   merger,   consolidation,
     spin-off,  combination,  repurchase  or share  exchange,  or other  similar
     corporate  transaction  or event,  affects  the  Common  Stock such that an
     adjustment is  appropriate  in order to prevent  dilution or enlargement of
     the rights of holders of Awards under the Plan,  then the  Committee  shall
     make  such  equitable  changes  or  adjustments  as it deems  necessary  or
     appropriate  to any or all of (i) the  number  and kind of shares of Common
     Stock or other property  (including  cash) that may thereafter be issued in
     connection with Awards,  (ii) the number and kind of shares of Common Stock
     or other  property  (including  cash)  issued or  issuable  in  respect  of
     outstanding Awards, (iii) the exercise price, grant price or purchase price
     relating to any Award;  provided  that,  with  respect to  Incentive  Stock
     Options, such adjustment shall be made in accordance with Section 424(h) of
     the Code,  (iv) any  performance  goals and (v) the individual  limitations
     applicable to Awards.

     5. Administration.  This Plan shall be administered by the Committee, which
shall have full and  exclusive  power to  interpret  this Plan and to adopt such
rules,  regulations  and  guidelines  and taking such actions as  necessary  for
carrying  out this Plan as it may deem  necessary  or proper.  Unless  otherwise
provided in an Award Agreement with respect to a particular award, the Committee
may, in its discretion,  provide for the extension of the  exercisability  of an
Award,  accelerate the vesting or exercisability of an Award,  eliminate or make
less restrictive any restrictions  contained in an Award,  waive any restriction
or other  provision  of this  Plan or an Award or  otherwise  amend or modify an
Award in any manner  that is either (i) not adverse to the  Participant  holding
such Award or (ii) consented to by such  Participant.  The Committee may correct
any defect or supply any omission or reconcile any inconsistency in this Plan or
in any Award in the manner and to the extent the  Committee  deems  necessary or
desirable to carry it into effect.  References in this Plan to "permitted by the
Committee" and words of similar import refer to  authorization  contained in the
original  Award  Agreement  or an  amendment  thereto or to other  action by the
Committee,  whether of general or limited  applicability or in connection with a
particular exercise, Award payment or other event. Any decision of the Committee
in the  interpretation and administration of this Plan shall lie within its sole
and  absolute  discretion  and shall be final,  conclusive  and  binding  on all
parties concerned. The express grant of any specific power to the Committee, and
the taking of any action by the  Committee,  shall not be  construed as limiting
any power or authority of the Committee.

     Each member of the Committee  shall be entitled,  in good faith, to rely or
act upon any  report or other  information  furnished  to him by any  officer or
other  employee  of the Company or any  Subsidiary,  the  Company's  independent
certified public  accountants or any executive  compensation  consultant,  legal
counsel or other professional retained by the Company or the Committee to assist
in the  administration  of the Plan.  No member of the  Committee nor officer or
employee of the Company to whom it has delegated  authority in  accordance  with
the  provisions of Section 6 of this Plan,  shall be liable for anything done or
omitted  to be done by him or her,  by any  member  of the  Committee  or by any
officer of the Company in connection  with the  performance  of any duties under
this Plan, except for his or her own willful misconduct or as expressly provided
by  statute.  The  Company  shall  indemnify  (to  the  extent  permitted  under
Massachusetts law) and hold harmless each member of the Committee and each other
director or  employee  of the Company to whom any duty or power  relating to the
administration or interpretation of the Plan has been delegated against any cost
or expense (including  counsel fees) or liability  (including any amount paid in
settlement  of a claim with the  approval of the  Committee)  arising out of any
action,  omission or determination relating to the Plan, unless, in either case,
such  action,  omission  or  determination  was  taken  or made by such  member,
director or employee without good faith or the reasonable  belief that it was in
the best interests of the Company.

     6.  Delegation  of  Authority.  The  Committee  may  delegate  to the Chief
Executive  Officer and to other senior  officers of the Company its duties under
this Plan  pursuant to such  conditions  or  limitations  as the  Committee  may
establish,  except  that  the  Committee  may not  delegate  to any  person  the
authority to grant Awards to, or take other action with respect to, Participants
who are subject to Section 16 of the Exchange Act.


                                      C-3


     7.  Awards.  The  Committee  shall  select  persons  to whom  Awards may be
granted,  determine  the type or types of Awards to be made to each  Participant
under this Plan,  determine the number of Awards to be granted and the number of
shares of Common  Stock to which an Award will  relate and  determine  all other
terms,  conditions,   restrictions  and  conditions,  including  achievement  of
specific  business  objectives,   increases  in  specified  indices,   attaining
specified growth rates and other comparable  measurements of performance  goals,
if any. Each Award made hereunder shall be embodied in an Award Agreement, which
shall contain such terms,  conditions and  limitations as shall be determined by
the Committee, in its sole discretion and consistent with the provisions hereof,
and shall be signed by the Participant and by the Chief Executive  Officer,  the
President or any Vice President of the Company for and on behalf of the Company.
Award Agreements and the forms contained  therein need not be identical for each
Participant.  By accepting an Award, a Participant thereby agrees that the Award
shall  be  subject  to all of the  terms  and  provisions  of the  Plan  and the
applicable Award  Agreement.  Awards may consist of those listed in this Section
7. Awards may be made in combination or in tandem with, in replacement of, or as
alternatives  to,  Awards  under  this  Plan or any other  employee  plan of the
Company or any of its  Subsidiaries,  including any incentive or similar plan of
any acquired entity, or reload options automatically granted to offset specified
exercises of options.  The Committee  shall determine the time or times at which
an  option  may be  exercised,  in whole or in part,  the  method  by which  the
exercise  price  may be paid or  deemed  to be paid,  the form of such  payment,
including,  without  limitation,  cash,  Common  Stock or other Awards or awards
granted  under other the Company  plans or other  property  (including  notes or
other  contractual  obligations  of  Participants  to make payment on a deferred
basis, such as through "cashless exercise" arrangements, to the extent permitted
by applicable  law),  and the methods by which Common Stock will be delivered or
be deemed to be delivered to Participants. An Award may provide for the granting
or issuance of additional, replacement or alternative Awards upon the occurrence
of specified events,  including the exercise of the original Award. An Award may
provide that to the extent that the  acceleration of vesting or any payment made
to a  Participant  under  this Plan in the event of a Change of  Control  of the
Company is subject to federal income,  excise,  or other tax at a rate above the
rate  ordinarily  applicable  to like  payments  paid in the ordinary  course of
business ("Penalty Tax"), whether as a result of the provisions of Sections 28OG
and 4999 of the Code, any similar or analogous provisions of any statute adopted
subsequent to the date hereof, or otherwise, then the Company shall be obligated
to pay such Participant an additional  amount of cash (the "Additional  Amount")
such  that  the net  amount  received  by such  Participant,  after  paying  any
applicable  Penalty Tax and any federal or state  income tax on such  Additional
Amount,  shall be equal to the amount that such Participant  would have received
if such Penalty Tax were not applicable.

          (a) Stock  Option.  An Award may  consist  of an option to  purchase a
     specified  number of shares of Common Stock at a specified  exercise  price
     that is not less  than the  greater  of (i) the  Fair  Market  Value of the
     Common  Stock on the  Pricing  Date and  (ii) the par  value of the  Common
     Stock.  The number of shares and  exercise  price shall be specified by the
     Committee.  A stock  option  may be in the  form  of an NQO or an  ISO.  In
     addition to being subject to applicable  terms,  conditions and limitations
     established by the Committee, an ISO shall comply with the requirement that
     no ISO shall be granted with an exercise  price less than 100% (110% for an
     individual  described in Section  422(b)(6) of the Code) of the Fair Market
     Value of a share of Common  Stock on the date of the grant and  granted  no
     more than ten (10) years after the effective date of the Plan.  Anything in
     the plan to the contrary  notwithstanding,  no term of the Plan relating to
     ISOs shall be interpreted,  amended or altered, nor shall any discretion or
     authority granted under the Plan be exercised,  so as to qualify either the
     Plan or any ISO under  Section 422 of the Code unless so  requested  by the
     affected  Participant.  Each  option  shall be  clearly  identified  in the
     applicable Award Agreement as either an ISO or an NQO.

          (b)  Stock  Appreciation  Right.  An Award may  consist  of a right to
     receive a payment, in cash or Common Stock, equal to the excess of the Fair
     Market Value or other specified  valuation of a specified  number of shares
     of  Common  Stock on the date  the  stock  appreciation  right  ("SAR")  is
     exercised  over a specified  strike price  determined by the Committee that
     shall be set forth in the applicable Award  Agreement.  The Committee shall
     determine the time or times at which an SAR may be exercised in whole or in
     part, the method of exercise,  method of settlement,  form of consideration
     payable in settlement, method by which Common Stock will be delivered or be
     deemed to be delivered to  Participants,  whether or not the SAR will be in
     tandem with any other Award and any other terms and conditions of any SAR.

          (c) Stock  Award.  An Award  may  consist  of  Common  Stock or may be
     denominated  in units of  Common  Stock.  All or part of any  Award  may be
     subject to restrictions on transfer and other  restrictions  and conditions
     established  by the Committee and set forth in the Award  Agreement,  which
     may  include,  but is not limited to,  continuous  service with the Company
     and/or its  Subsidiaries.  Such Awards may be based on Fair Market


                                      C-4


     Value or other  valuations  determined by the Committee.  The  certificates
     evidencing  shares of Common Stock issued in connection with an Award shall
     contain  appropriate  legends  and  restrictions  describing  the terms and
     conditions  applicable thereto,  the Company may retain physical possession
     of the certificates and the Participant  shall have delivered a stock power
     to the Company,  endorsed in blank, relating to the Common Stock. Except to
     the extent  restricted  under the terms of the Plan and any Award Agreement
     relating to the Award, a Participant granted an Award shall have all of the
     rights of a stockholder,  including,  without limitation, the right to vote
     Common Stock issued as an Award or the right to receive dividends thereon.

          (d) Cash Award. An Award may be denominated in cash with the amount of
     the eventual payment subject to future service and such other  restrictions
     and conditions as may be established by the Committee, and set forth in the
     Award Agreement, including, but not limited to, continuous service with the
     Company and its Subsidiaries.

          (e) Other Stock-Based Awards. The Committee is authorized,  subject to
     limitations  under  applicable  law, to grant such other Awards that may be
     denominated  or payable in,  valued in whole or in part by reference to, or
     otherwise  based on, or  related  to,  Common  Stock and  factors  that may
     influence  the value of Common  Stock,  as  deemed by the  Committee  to be
     consistent with the purposes of the Plan,  including,  without  limitation,
     convertible or exchangeable  debt securities,  other rights  convertible or
     exchangeable  into Common Stock,  purchase rights for Common Stock,  Awards
     with value and payment  contingent  upon  performance of the Company or any
     other factors designated by the Committee and Awards valued by reference to
     the  book  value of  Common  Stock or the  value  of  securities  of or the
     performance of specified  Subsidiaries  ("Other Stock Based  Awards").  The
     Committee  shall  determine the terms and conditions of such Awards.  Stock
     issued pursuant to an Award in the nature of a purchase right granted under
     this Section 7(e) shall be purchased  for such  consideration,  paid for at
     such  times,  by  such  methods  and  in  such  forms,  including,  without
     limitation,  cash,  Common Stock,  other Awards or other  property,  as the
     Committee shall determine.

          (f) Loan Provisions. With consent of the Committee, and subject at all
     times to, and only to the extent, if any, permitted under and in accordance
     with,  laws and  regulations  and other binding  obligations  or provisions
     applicable to the Company, the Company may make, guarantee or arrange for a
     loan or loans to a  Participant  with respect to the exercise of any option
     or other payment in connection  with any Award,  including the payment by a
     Participant of any or all federal, state or local income or other taxes due
     in connection with any Award.  Subject to such  limitations,  the Committee
     shall  have  full  authority  to  decide  whether  to make a loan or  loans
     hereunder  and to determine  the amount,  terms and  provisions of any such
     loan or loans,  including the interest rate to be charged in respect of any
     such  loan or  loans,  whether  the  loan or loans  are to be paid  with or
     without recourse against the borrower, the terms on which the loan is to be
     repaid  and  conditions,  if any,  under  which  the loan or  loans  may be
     forgiven.

          (g)  Performance-Based  Awards.  The Committee may, in its discretion,
     designate any Award the exercisability or settlement of which is subject to
     the  achievement of  performance  conditions as a  performance-based  Award
     subject to this Section  7(g), in order to qualify such Award as "qualified
     performance-based  compensation"  within the meaning of Code Section 162(m)
     and regulations thereunder. The performance objectives for an Award subject
     to this Section 7(g) shall  consist of one or more  business  criteria,  as
     specified by the Committee,  but subject to this Section 7(g).  Performance
     objectives  shall be objective and shall otherwise meet the requirements of
     Section  162(m)(4)(C) of the Code. The levels of performance  required with
     respect to such business  criteria may be expressed in absolute or relative
     levels.  Achievement of performance  objectives with respect to such Awards
     shall be measured over a period of not less than one (1) year nor more than
     five (5) years,  as the Committee may specify.  Performance  objectives may
     differ for such  Awards to  different  Participants.  The  Committee  shall
     specify  the  weighting  to be  given  to each  performance  objective  for
     purposes of  determining  the final amount payable with respect to any such
     Award. The Committee may, in its discretion,  reduce the amount of a payout
     otherwise to be made in  connection  with an Award  subject to this Section
     7(g),  but may not exercise  discretion  to increase  such amount,  and the
     Committee  may  consider  other  performance  criteria in  exercising  such
     discretion.  All  determinations  by the Committee as to the achievement of
     performance  objectives shall be in writing. The Committee may not delegate
     any responsibility with respect to an Award subject to this Section 7(g).

          (h) Acceleration  Upon a Change of Control.  Notwithstanding  anything
     contained  herein  to the  contrary,  all  conditions  and/or  restrictions
     relating to the continued performance of services and/or the achievement of
     performance objectives with respect to the exercisability or full enjoyment
     of an Award shall  immediately


                                      C-5


     lapse upon a Change in Control,  provided,  however,  that such lapse shall
     not occur if (i) it is  intended  that the  transaction  constituting  such
     Change  in  Control  be  accounted  for as a  pooling  of  interests  under
     Accounting  Principles Board Option No. 16 (or any successor thereto),  and
     operation of this  Section 7(h) would  otherwise  violate  Paragraph  47(c)
     thereof,  or (ii) the Committee,  in its  discretion,  determines that such
     lapse shall not occur, provided, further, that the Committee shall not have
     the  discretion  granted  in  clause  (ii)  if  it  is  intended  that  the
     transaction  constituting  such  Change in  Control be  accounted  for as a
     pooling  of  interests  under  Accounting  Principles  Board No. 16 (or any
     successor  thereto),  and such discretion would otherwise violate Paragraph
     47(c) thereof.

     8. Payment of Awards.

          (a) General.  Payment  required to be made by the Company  pursuant to
     Awards  may be made in the form of cash or  Common  Stock  or  combinations
     thereof and may include such restrictions as the Committee shall determine,
     including  in the  case of  Common  Stock,  restrictions  on  transfer  and
     forfeiture provisions.

          (b)  Deferral.  With the  approval of the  Committee,  payments may be
     deferred,  either in the form of installments or a future lump sum payment.
     The Committee may permit  selected  Participants to elect to defer payments
     of some or all types of Awards in accordance with procedures established by
     the Committee.  Any deferred payment, whether elected by the Participant or
     specified by the Award  Agreement or by the Committee,  may be forfeited if
     and to the extent that the Award Agreement so provides.

          (c) Dividends and Interest.  Dividends or dividend  equivalent  rights
     may be extended to and made part of any Award  denominated  in Common Stock
     or  units  of  Common  Stock,   subject  to  such  terms,   conditions  and
     restrictions as the Committee may establish. Dividend equivalent rights may
     be awarded on a  free-standing  basis or in connection  with another Award.
     The Committee may provide that dividend  equivalent rights shall be paid or
     distributed  when accrued or shall be deemed to be reinvested in additional
     Common  Stock,  Awards or other  investment  vehicles,  and subject to such
     restrictions on transferability  and risks of forfeiture,  as the Committee
     may specify.  The  Committee  may establish  rules and  procedures  for the
     crediting of interest on deferred  cash  payments and dividend  equivalents
     for deferred payment denominated in Common Stock or units of Common Stock.

          (d)  Substitution  of Awards.  At the discretion of the  Committee,  a
     Participant  may be offered an election to  substitute an Award for another
     Award or Awards of the same or different type.

     9. Tax Withholding.  The Company shall have the right to deduct  applicable
taxes from any Award payment and withhold, at the time of delivery or vesting of
cash or shares  of Common  Stock  under  this  Plan,  or from  payroll  or other
payments to the Participant,  an appropriate  amount of cash or number of shares
of Common Stock or a combination thereof for payment of taxes required by law or
to take such other action as may be necessary in the opinion of the Committee to
satisfy all obligations  for  withholding of such taxes.  The Committee may also
permit  withholding  to be satisfied by the transfer to the Company of shares of
Common Stock  theretofore owned by the holder of the Award with respect to which
withholding  is  required.  If shares of Common  Stock are used to  satisfy  tax
withholding, such shares shall be valued based on the Fair Market Value when the
tax withholding is required to be made.

     10. Employment, Termination, Etc.

          (a) Nothing  contained in the Plan or any Award Agreement shall confer
     upon  any  Participant  any  right  with  respect  to the  continuation  of
     employment  or  engagement  by the  Company or any of its  Subsidiaries  or
     interfere  in  any  way  with  the  right  of  the  Company  or  any of its
     Subsidiaries,  subject  to the  terms  of  any  separate  agreement  to the
     contrary,  at any  time to  terminate  such  employment  or  service  or to
     increase or decrease the compensation of the Participant.

          (b) No  person  shall  have any  claim or  right to  receive  an Award
     hereunder  or  require  the  Committee  to make an Award at any time to any
     Participant. The Committee's grant of an Award to a Participant at any time
     shall  neither  require  the  Committee  to grant any  other  Award to such
     Participant  or other  person at any time or preclude  the  Committee  from
     making subsequent grants to such Participant or any other person.

          (c) Upon the termination of employment or engagement of a Participant,
     any unexercised,  deferred or unpaid Awards shall be treated as provided in
     the specific Award  Agreement  evidencing the Award. In the


                                      C-6


     event of such a termination, the Committee may, in its discretion,  provide
     for the extension of the exercisability of an Award, accelerate the vesting
     or  exercisability  of an Award,  eliminate  or make less  restrictive  any
     restrictions  contained  in  an  Award,  waive  any  restriction  or  other
     provision of this Plan or an Award or  otherwise  amend or modify the Award
     in any manner  that is either (i) not adverse to such  Participant  or (ii)
     consented to by such Participant.

     11.  Amendment,  Modification,  Suspension  or  Termination.  The Board may
amend, modify,  suspend,  discontinue or terminate this Plan at any time for the
purpose of meeting or addressing  any changes in legal  requirements  or for any
other purpose  permitted by law except that (a) no amendment or alteration  that
would impair the rights of any Participant under any Award previously granted to
such  Participant  shall be made without such  Participant's  consent and (b) no
amendment or  alteration  shall be effective  prior to approval by the Company's
stockholders  if and to the extent the Board  determines  that such  approval is
appropriate  for purposes of satisfying  Section 162(m) or 422 of the Code or is
otherwise required by law or applicable stock exchange requirements.  Awards may
be granted under the Plan prior to the receipt of such  approval.  The Board may
also modify, suspend, terminate, discontinue or limit the power and authority of
the Committee at any time. Except as required in Section 11(b) hereunder, unless
the Board determines otherwise, no stockholder approval shall be required before
any action taken by the Board pursuant to this Section 11 is effective.  Nothing
herein shall  restrict  the  Committee's  ability to exercise its  discretionary
authority  pursuant  to  Section 5 which  discretion  may be  exercised  without
amendment to the Plan.

     12. Transfer and Assignment.

          (a) Awards and other rights under the Plan will not be transferable by
     a Participant  except by will or the laws of descent and distribution or to
     a Beneficiary in the event of a  Participant's  death.  Awards shall not be
     pledged,  mortgaged,  hypothecated  or otherwise  encumbered,  or otherwise
     subject to the claims of  creditors,  and,  in the case of ISOs and SARs in
     tandem therewith, shall be exercisable during the lifetime of a Participant
     only by such Participant or his guardian or legal representative; provided,
     however,  that such  Awards and other  rights  (other  than ISOs or SARs in
     tandem  therewith) may be transferred to one or more  Beneficiaries  during
     the lifetime of the Participant to the extent and on such terms as then may
     be permitted by the Committee.

          (b) Upon the death of a  Participant,  outstanding  Awards  granted to
     such  Participant may be exercised only by the executor or administrator of
     the  Participant's  estate or by a person who shall have acquired the right
     to such  exercise  by will or by the laws of descent and  distribution.  No
     transfer of an Award by will or the laws of descent and distribution  shall
     be  effective  to bind the  Company  unless the  Committee  shall have been
     furnished  with  (i)  written  notice  thereof  and with a copy of the will
     and/or such evidence as the  Committee may deem  necessary to establish the
     validity of the transfer and (ii) an agreement by the  transferee to comply
     with all of the terms and  conditions  of the Award  that are or would have
     been applicable to the Participant and to be bound by the  acknowledgements
     made by the Participant in connection with the grant of the Award.

     13. The Company's Right to Engage in Certain Transactions. The existence of
this Plan or  outstanding  Awards  shall not  affect in any  manner the right or
power  of the  Company  or its  stockholders  to  make or  authorize  any or all
adjustments, recapitalizations,  reorganizations or other changes in the capital
stock of the  Company  or its  business  or any merger or  consolidation  of the
Company, or any issue of bonds, debentures,  preferred or prior preference stock
(whether or not such issue is prior to, on a parity with or junior to the Common
Stock) or the dissolution or liquidation of the Company, or any sale or transfer
of all or any part of its  assets or  business,  or any other  corporate  act or
proceeding  of any kind,  whether or not of a  character  similar to that of the
acts or proceedings enumerated above.

     14. Securities Laws.

          (a) Notwithstanding anything herein to the contrary, the Company shall
     not be  obligated  to cause to be  issued  or  delivered  any  certificates
     evidencing  Common Stock  pursuant to the Plan unless and until the Company
     is  advised  by  its  counsel  that  the  issuance  and  delivery  of  such
     certificates  is in compliance  with all  applicable  laws,  regulations of
     governmental  authority and the requirements of any securities  exchange on
     which shares of Common Stock are traded.  The  Company,  however,  shall be
     under no obligation to effect the  registration  pursuant to the Securities
     Act of any interests in the Plan or any Stock to be issued  hereunder or to
     effect similar  compliance under any state laws. The Committee may require,
     as a condition  of the issuance  and  delivery of  certificates  evidencing
     shares of Common Stock,  that the  Participant  to whom such shares will be
     issued make


                                      C-7


     such agreements and  representations,  and that such certificates bear such
     legends,  as the  Committee,  in its sole  discretion,  deems  necessary or
     desirable.

          (b) The  transfer  of any shares of Common  Stock  hereunder  shall be
     effective only at such time as counsel to the Company shall have determined
     that the  issuance  and  delivery  of such  shares  of  Common  Stock is in
     compliance with all applicable laws,  regulations of governmental authority
     and the  requirements of any securities  exchange on which shares of Common
     Stock are traded or quoted.  The  Committee  may,  in its sole  discretion,
     defer the  effectiveness of any transfer of Common Stock hereunder in order
     to  allow  the  issuance  of  such  Common  Stock  to be made  pursuant  to
     registration  or an  exemption  from  registration  or  other  methods  for
     compliance  available under federal or state securities laws. The Committee
     shall  inform  the  Participant  in writing  of its  decision  to defer the
     effectiveness  of a  transfer.  During  the  period  of  such  deferral  in
     connection with the exercise of an Option,  the Participant may, by written
     notice,  withdraw  such  exercise  and obtain the refund of any amount paid
     with respect thereto.

          (c) The grant of Awards to persons who are  required  to file  reports
     under Section 16(a) of the Securities and Exchange Act of 1934, as amended,
     shall be determined by a body  constituted  in accordance  with, and to the
     extent required by, Rule 16b-3 promulgated under said Act.

     15. Unfunded Status of Awards;  Creation of Trusts. The Plan is intended to
constitute an "unfunded"  plan for  incentive  and deferred  compensation.  With
respect to any  payments  not yet made to a  Participant  pursuant  to an Award,
nothing  contained in the Plan or any Award shall give any such  Participant any
rights  that are  greater  than  those of a  general  creditor  of the  Company;
provided,  however,  that the  Committee may authorize the creation of trusts or
make other  arrangements  to meet the  Company's  obligations  under the Plan to
deliver  cash,  Common  Stock,  other Awards or other  property  pursuant to any
Award,  which  trusts  or  other  arrangements  shall  be  consistent  with  the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant.

     16.  Notification  of  Election  Under  Section  83(b) of the Code.  If any
Participant  shall, in connection with the acquisition of Common Stock under the
Plan,  make the election  permitted  under Section  83(b) of the Code (i.e.,  an
election  to  include  in gross  income  in the  year of  transfer  the  amounts
specified in Section 83(b)),  such Participant  shall notify the Company of such
election within ten (10) days of filing notice of the election with the Internal
Revenue Service, in addition to any filing and a notification  required pursuant
to regulation issued under the authority of Section 83(b) of the Code.

     17. Notification Upon Disqualifying Disposition Under Section 421(b) of the
Code.  Each  Participant  shall notify the Company of any  disposition of Common
Stock  issued  pursuant  to the  exercise  of an  ISO  under  the  circumstances
described  in Section  421(b) of the Code  (relating  to  certain  disqualifying
dispositions), within ten (10) days of such disposition.

     18.  Participant  Rights. No Participant shall have any claim to be granted
any award under the Plan, and there is no obligation for uniformity of treatment
for  Participants.  Except as provided  specifically  herein, a Participant or a
transferee of an Award shall have no rights as a stockholder with respect to any
shares of Common Stock  covered by any Award until the date of the issuance of a
certificate or certificates to him or her for such shares of Common Stock.

     19.  Beneficiary.  A  Participant  may file  with the  Committee  a written
designation  of a Beneficiary on such form as may be prescribed by the Committee
and may, from time to time, amend or revoke such  designation.  If no designated
Beneficiary  survives  the  Participant,  the executor or  administrator  of the
Participant's estate shall be deemed to be the grantee's Beneficiary.

     20.  Interpretation.  The Plan is designed and intended to comply with Rule
16b-3 and, to the extent  applicable,  shall constitute  "qualified  performance
based  compensation"  within the meaning of Section  162(m) of the Code, and all
provisions hereof shall be construed in a manner to so comply.  Accordingly,  if
any  provision  of the  Plan  or any  Award  Agreement  does  not  comply  or is
inconsistent  with the requirement of Code Section 162(m),  such provision shall
be  construed  or deemed  amended  to the  extent  necessary  to conform to such
requirements,  and no provision  shall be deemed to confer upon the Committee or
any other person  discretion  to increase the amount of  compensation  otherwise
payable  in  connection  with any  Awards  upon  attainment  of the  performance
objectives.


                                      C-8


     21.  Severability.  If any  provision  of the Plan is held to be invalid or
unenforceable,  the other provisions of the Plan shall not be affected but shall
be applied as if the invalid or unenforceable provision had not been included in
the Plan.

     22.  Expenses and  Receipts.  The expenses of the Plan shall be paid by the
Company.  Any proceeds received by the Company in connection with any Award will
be used for general corporate purposes.

     23. Failure to Comply. In addition to the remedies of the Company elsewhere
provided for herein,  failure by a Participant  (or  Beneficiary) to comply with
any of the terms and conditions of the Plan or the applicable  Award  Agreement,
unless such failure is remedied by such  Participant  (or  Beneficiary  or other
person)  within ten (10) days  after  notice of such  failure by the  Committee,
shall be grounds for the  cancellation and forfeiture of such Award, in whole or
in part, as the Committee, in its absolute discretion, may determine.

     24.  Non-Exclusivity  of the Plan.  Neither the adoption of the Plan by the
Board nor its  submission to the Company's  stockholders  for approval  shall be
construed  as creating any  limitations  on the power of the Board to adopt such
other  compensatory  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.

     25. No Fractional  Shares.  No  fractional  shares of Common Stock shall be
issued or  delivered  pursuant  to the Plan or any Award.  The  Committee  shall
determine  whether cash,  other Awards or other property shall be issued or paid
in lieu of such  fractional  shares or  whether  such  fractional  shares or any
rights thereto shall be forfeited or otherwise eliminated.

     26. Governing Law. This Plan and all determinations  made and actions taken
pursuant hereto, to the extent not otherwise governed by mandatory provisions of
the Code or the securities  laws of the United States,  shall be governed by and
construed in accordance with the laws of the Commonwealth of  Massachusetts  or,
if the Company is  reincorporated  in another state while the Plan is in effect,
the laws of that state.

     27.  Effective  Date of Plan.  This Plan shall be effective on February 16,
2001,  provided the Plan has been approved by the stockholders of the Company at
the Annual Meeting to be held on April 26, 2001.  Unless  earlier  terminated by
the Board,  the right to grant Awards under the Plan will terminate on the tenth
(10th) anniversary of the Effective Date. Awards outstanding at Plan termination
will remain in effect according to their terms and the provisions of the Plan.


                                      C-9