BARR LABORATORIES, INC.
 
                       2002 STOCK AND INCENTIVE AWARD PLAN
 
1. PURPOSES. The purposes of this Plan are (a) to provide competitive incentives
that will enable the Company to attract, retain, motivate and reward persons who
render services that benefit the Company or other enterprises in which the
Company has a significant interest, and (b) to give such persons an interest
parallel to the interests of the Company's shareholders generally.
 
2. DEFINITIONS. Unless otherwise required by the context, the following terms,
when used in this Plan, shall have the meanings set forth in this section 2.
 
   (a) "Allied Enterprise" means a business enterprise, other than the Company
or a Subsidiary, in which the Committee determines the Company has a significant
interest, contingent or otherwise.
 
   (b) "Appreciation-Only Award" means Options and Stock Appreciation Rights the
exercise price of which is equal to at least 100% of Fair Market Value on the
date of grant of the Options or Stock Appreciation Rights or, in the case of
Linked Stock Appreciation Rights, on the date of grant of the Options to which
such Linked Stock Appreciation Rights relate.
 
   (c) "Award" means an award granted under this Plan in one of the forms
provided for in paragraph 3(a).
 
   (d) "Beneficiary" means a person or entity (including but not limited to a
trust or estate), designated in writing by a Service Provider or other rightful
holder of an Award, on such forms and in accordance with such terms and
conditions as the Committee may prescribe, to whom such Service Provider's or
other rightful holder's rights under the Plan shall pass in the event of the
death of such Service Provider or other rightful holder.
 
   (e) "Board" or "Board of Directors" means the Board of Directors of the
Company, as constituted from time to time.
 
   (f) "Change in Control" means any of the following:
 
      (i) any person (as such term is used in sections 13(d) and 14(d)(2) of the
   Exchange Act), other than (A) the Company, (B) a Subsidiary, (C) a trustee or
   other fiduciary holding securities under an employee benefit plan of the
   Company or a Subsidiary, or (D) an underwriter engaged in a distribution of
   Company stock to the public with the Company's written consent, becomes the
   beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly
   or indirectly, of Voting Securities that represent more than thirty percent
   (30%) of the combined voting power of the
 
 
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   Company's then outstanding Voting Securities. However, if the "person" in
   question is an institutional investor whose investment in Voting Securities
   is purely passive when such person becomes such a more than thirty percent
   beneficial owner of Voting Securities, then such event (i.e., such person's
   becoming a more than thirty percent beneficial owner of Voting Securities)
   shall not be deemed to constitute a Change in Control under this subparagraph
   2(f)(i) for so long as (and only for so long as) such person's investment in
   Voting Securities remains purely passive;
 
      (ii) the stockholders of the Company approve a merger, consolidation,
   recapitalization or reorganization of the Company or a Subsidiary, reverse
   split of any class of Voting Securities, or an acquisition of securities or
   assets by the Company or a Subsidiary, or consummation of any such
   transaction if stockholder approval is not obtained, other than (A) any such
   transaction in which the holders of outstanding Voting Securities immediately
   prior to the transaction receive, with respect to such Voting Securities (or,
   in the case of a transaction in which the Company is the surviving
   corporation or a transaction involving a Subsidiary, retain), voting
   securities of the surviving or transferee entity representing more than fifty
   percent (50%) of the total voting power outstanding immediately after such
   transaction, with the voting power of each such continuing holder relative to
   other such continuing holders not substantially altered in the transaction,
   or (B) any such transaction which would result in a Related Party
   beneficially owning more than 50 percent of the voting securities of the
   surviving entity outstanding immediately after such transaction;
 
      (iii) the stockholders of the Company approve a plan of complete
   liquidation of the Company or an agreement for the sale or disposition by the
   Company of all or substantially all of the Company's assets other than any
   such transaction which would result in a Related Party owning or acquiring
   more than 50 percent of the assets owned by the Company immediately prior to
   the transaction; or
 
      (iv) the persons who were members of the Board of Directors immediately
   before a tender or exchange offer for shares of Common Stock by any person
   other than the Company or a Related Party, or before a merger or
   consolidation of the Company or a Subsidiary, or contested election of the
   Board of Directors, or before any combination of such transactions, cease to
   constitute a majority of the Board of Directors as a result of such
   transaction or transactions.
 
For purposes of the foregoing provisions of this paragraph 2(f),
 
    (A) the term "Related Party" shall mean (I) a Subsidiary, (II) an employee
or group of employees of the Company or any Subsidiary, (III) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any Subsidiary, or (IV) a corporation or other form of business entity owned
directly or indirectly by the stockholders of the Company in substantially the
same proportion as their ownership of Voting Securities; and
 
    (B) the term "Voting Securities" shall mean any securities of the Company
which carry the right to vote generally in the election of directors.
 
 
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    (g) "Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time. References to a particular section of the Code shall include
references to any related Treasury Regulations and to successor provisions.
 
    (h) "Committee" means the committee appointed by the Board of Directors to
administer the Plan pursuant to the provisions of paragraph 13(a) below.
 
    (i) "Common Stock" means common stock of the Company, par value $.01 per
share.
 
    (j) "Company" means Barr Laboratories, Inc., a New York corporation, its
successors and assigns.
 
    (k) "Dollar-Denominated Awards" means Performance Unit Awards and any other
Award the amount of which is based on a specified amount of money (other than an
amount of money determined by reference to the Fair Market Value of a specified
number of shares of Common Stock).
 
    (l) "Employee" means any person who is employed by the Company or a
Subsidiary on a full-time or part-time basis, including an officer or director
if he is so employed.
 
    (m) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
 
    (n) "Fair Market Value" on a particular date means as follows:
 
        (i) If the Common Stock is listed or admitted to trading on such date on
    the New York Stock Exchange, the mean between the high and low sales price
    of a share of Common Stock on such date as reported in the principal
    consolidated transaction reporting system with respect to securities listed
    or admitted to trading on the New York Stock Exchange; or
 
        (ii) If the Common Stock is not listed or admitted to trading on the New
    York Stock Exchange but is listed or admitted to trading on another national
    exchange, the mean between the high and low sales price of a share of Common
    Stock on such date as reported in the principal consolidated transaction
    reporting system with regard to securities listed or admitted to trading on
    such national exchange; or
 
        (iii) If the Common Stock is not listed or admitted to trading on any
    national exchange, the mean between the high and low sales price of a share
    of Common Stock on such date in the over-the-counter market, as reported by
    the National Association of Securities Dealers, Inc. Automated Quotation
    System, the National Quotation Bureau or such other system then in use with
    regard to the Common Stock or, if on such date the Common Stock is publicly
    traded but not quoted by any such system, the mean of the
 
 
                                       47
<PAGE>
    closing bid and asked prices of a share of Common Stock on such date as
    furnished by a professional market maker making a market in the Common
    Stock; or
 
 
        (iv) If in (i), (ii) or (iii) above, as applicable, there were no sales
    on such date reported as provided above, the respective prices on the most
    recent prior day on which a sale was so reported.
 
In the case of an Incentive Stock Option, if the foregoing method of determining
fair market value should be inconsistent with section 422 of the Code, "Fair
Market Value" shall be determined by the Committee in a manner consistent with
such section of the Code and shall mean the value as so determined.
 
    (o) "General Counsel" means the General Counsel of the Company serving from
time to time.
 
    (p) "Incentive Award" means an amount of money or a number of shares of
Common Stock which is distributed to a Service Provider pursuant to the Plan, or
which the Committee agrees to distribute in the future to a Service Provider
pursuant to the Plan, in lieu of, or as a supplement to, any other compensation
that may have been earned by services rendered prior to the date on which the
Incentive Award is granted. The amount of the award may be based upon (i) a
specified number of shares of Common Stock or the Fair Market Value of a
specified number of shares of Common Stock, or (ii) a specified amount of money
not determined by reference to the Fair Market Value of a specified number of
shares of Common Stock. Performance Share Awards, Performance Unit Awards and
Restricted Stock Awards are specific types of Incentive Awards.
 
    (q) "Incentive Stock Option" means an option, including an Option as the
context may require, intended to meet the requirements of section 422 of the
Code.
 
    (r) "Non-Statutory Stock Option" means an option, including an Option as the
context may require, which is not intended to be an Incentive Stock Option.
 
    (s) "Option" means an option granted under this Plan to purchase shares of
Common Stock. Options may be Incentive Stock Options or Non-Statutory Stock
Options.
 
    (t) "Performance-Based Compensation" means compensation that satisfies the
requirements applicable to "performance-based compensation" under Code section
162(m)(4)(C).
 
    (u) "Performance Share Award" means a right granted pursuant to section 6 to
receive a specified number of shares of Common Stock, and/or an amount of money
determined by reference to the Fair Market Value of a specified number of shares
of Common Stock, at a future time or times if a specified performance goal is
attained and any other terms or conditions specified by the Committee are
satisfied.
 
 
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    (v) "Performance Unit Award" means a right granted pursuant to section 6 to
receive a specified amount of money (other than an amount of money determined by
reference to the Fair Market Value of a specified number of shares of Common
Stock) at a future time or times if a specified performance goal is attained and
any other terms or conditions specified by the Committee are attained.
 
    (w) "Plan" means the Barr Laboratories, Inc. 2002 Stock and Incentive Award
Plan set forth in these pages, as amended from time to time.
 
    (x) "Restricted Stock Award" means shares of Common Stock which are issued
or transferred to a Service Provider under section 5 below subject to
restrictions and/or forfeiture provisions specified by the Committee that will
cease to apply if continued employment and/or other performance objectives or
contingencies specified by the Committee are attained. Such other performance
objectives may include, without limitation, corporate, divisional or business
unit financial or operating performance measures and such other contingencies
may include, without limitation, the participant's depositing with the Company,
acquiring or retaining for stipulated time periods specified amounts of Common
Stock.
 
    (y) "SEC Rule 16b-3" means Rule 16b-3 of the Securities and Exchange
Commission promulgated under the Exchange Act, as such rule or any successor
rule may be in effect from time to time.
 
    (z) "Section 16 Person" means a person subject to potential liability under
section 16(b) of the Exchange Act with respect to transactions involving equity
securities of the Company.
 
    (aa) "Service Provider" means a person who renders, has rendered or who the
Committee expects to render services that benefit or will benefit the Company or
a Subsidiary or an Allied Enterprise, in the capacity of employee, independent
contractor, agent, advisor, consultant, representative or otherwise, and
includes but is not limited to (i) Employees, and (ii) personal service
corporations, limited liability companies and similar entities through which
such a person renders, has rendered or is expected to render such services, but
does not include any member of the Board who is not an Employee.
 
    (bb) "Stock Appreciation Right" means a right granted under section 9 below.
 
    (cc) "Subsidiary" means a corporation or other form of business association
of which shares (or other ownership interests) having more than 50% of the
voting power are owned or controlled, directly or indirectly, by the Company;
provided, however, that in the case of an Incentive Stock Option, the term
"Subsidiary" shall mean a Subsidiary (as defined by the preceding clause) which
is also a "subsidiary corporation" as defined in section 424(f) of the Code.
 
3. GRANTS OF AWARDS
 
 
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    (a) Subject to the provisions of the Plan, the Committee may at any time,
and from time to time, grant the following types of awards to any Service
Provider:
 
        (i) Incentive Awards, which may but need not be Performance Share
            Awards, Performance Unit Awards or Restricted Stock Awards,
 
        (ii) Options,
 
        (iii) Stock Appreciation Rights, and
 
        (iv) any awards not embraced within (i), (ii) or (iii) above that
    provide the Service Provider with the right to purchase or otherwise acquire
    Common Stock or that are valued by reference to the market value of Common
    Stock (including, but not limited to, phantom securities and dividend
    equivalents). Any such awards shall be in a form determined by the Committee
    and shall have such terms and conditions as are determined by the Committee
    (which may include terms contingent upon a Change of Control), provided that
    such awards shall not be inconsistent with the terms and purposes of the
    Plan.
 
Any provision above of this paragraph 3(a) to the contrary notwithstanding, the
Committee may grant Incentive Stock Options only to Service Providers who are
Employees.
 
    (b) After an Award has been granted,
 
        (i) the Committee may waive any term or condition thereof that could
    have been excluded from such Award when it was granted, and
 
        (ii) with the written consent of the affected participant, may amend any
    Award after it has been granted to include (or exclude) any provision which
    could have been included in (or excluded from) such Award when it was
    granted,
 
and no additional consideration need be received by the Company in exchange for
such waiver or amendment.
 
    (c) The Committee may (but need not) grant any Award linked to another
Award. Linked Awards may be granted as either alternatives or supplements to one
another. The terms and conditions of any such linked Awards shall be determined
by the Committee, subject to the provisions of the Plan.
 
    (d) The Committee may rescind the grant of any Award, provided that after an
instrument evidencing the grant of such Award has been issued and delivered to
the Service Provider the Committee may rescind the grant of such Award only with
the written consent of such Service Provider.
 
    (e) The Committee may grant Awards that qualify as Performance-Based
Compensation, as well as Awards that do not qualify as Performance-Based
Compensation.
 
 
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Any provision of the Plan to the contrary notwithstanding, the Plan shall be
interpreted, administered and construed to permit the Committee to grant Awards
that qualify as Performance-Based Compensation as well as Awards that do not so
qualify, and any provision of the Plan that cannot be so interpreted,
administered or construed shall to that extent be disregarded.
 
4. STOCK SUBJECT TO THIS PLAN; AWARD LIMITS
 
    (a) Subject to the provisions below of paragraphs 4(c) and 4(d) and section
11,
 
        (i) the maximum aggregate number of shares of Common Stock which may be
issued or transferred pursuant to Awards is three million shares of Common Stock
plus such number of shares of Common Stock as remain available for grants of
stock options under the 1993 Stock Incentive Plan on the date of its termination
by the Board, plus such number of shares of Common Stock as are subject to any
stock options granted under such 1993 Stock Incentive Plan that expire or
terminate for any reason after the date of its termination by the Board without
having been exercised. Not more than 15% of such maximum aggregate number of
shares which may be issued or transferred pursuant to Awards may be issued or
transferred pursuant to Awards that are not Appreciation-Only Awards, and not
more than 3,000,000 of such maximum aggregate number of shares which may be
issued or transferred pursuant to Awards may be issued or transferred under
Options that are Incentive Stock Options; and
 
        (ii) the maximum number of shares of Common Stock with respect to which
Options or Stock Appreciation Rights may be granted during any calendar year to
any Employee or other Service Provider is 300,000 shares of Common Stock; and
 
        (iii) the maximum number of shares of Common Stock with respect to which
any and all Awards other than Appreciation-Only Awards and Dollar-Denominated
Awards may be granted in any one calendar year to any Employee or other Service
Provider is 300,000 shares of Common Stock; and
 
        (iv) no Employee or other Service Provider may receive more than
$1,000,000 (or the equivalent thereof in shares of Common Stock, based on Fair
Market Value on the date as of which the number of shares is determined) in
payment of Dollar-Denominated Awards that are granted to such Employee or other
Service Provider in any one calendar year.
 
If, after any Award is earned or exercised, the issuance or transfer of shares
of Common Stock or money is deferred, any amounts equivalent to dividends or
other earnings during the deferral period (including shares which may be
distributed in payment of any such amounts) shall be disregarded in applying the
per Employee or other Service Provider limitations set forth above in clauses
(ii), (iii) and (iv) of this paragraph 4(a). If, in connection with an
acquisition of another company or all or part of the assets of another company
by the Company or a Subsidiary, or in connection with a merger or other
combination of another company with the Company or a Subsidiary, the Company
either (A) assumes stock options or other stock incentive obligations of such
other company, or (B) grants stock options or other stock incentives in
substitution for stock options or other stock incentive obligations of such
other company, then none of the shares of
 
 
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<PAGE>
Common Stock that are issuable or transferable pursuant to such stock options or
other stock incentives that are assumed or granted in substitution by the
Company shall be charged against the limitations set forth in subparagraph
4(a)(i) above.
 
    (b) Shares which may be issued or transferred pursuant to Awards may be
authorized but unissued shares of Common Stock, shares of Common Stock held in
the treasury, whether acquired by the Company specifically for use under this
Plan or otherwise, or shares issued or transferred to, or otherwise acquired by,
a trust or other legal entity pursuant to paragraph 14(d) below, as the
Committee may from time to time determine, provided, however, that any shares
acquired or held by the Company for the purposes of this Plan shall, unless and
until issued or transferred to a trust or other legal entity pursuant to
paragraph 14(d) below or to a Service Provider or other rightful holder of an
Award in accordance with the terms and conditions of such Award, be and at all
times remain treasury shares of the Company, irrespective of whether such shares
are entered in a special account for purposes of this Plan, and shall be
available for any corporate purpose.
 
    (c) Subject to the provisions of paragraphs 5(c) and 9(f), if any shares of
Common Stock subject to an Award shall not be issued or transferred to a Service
Provider and shall cease to be issuable or transferable to a Service Provider
because of the termination, expiration or cancellation, in whole or in part, of
such Award or for any other reason, or if any such shares shall, after issuance
or transfer, be reacquired by the Company because of a Service Provider's
failure to comply with the terms and conditions of an Award, the shares not so
issued or transferred, or the shares so reacquired by the Company, as the case
may be, shall no longer be charged against the limitations provided for in
subparagraph (a)(i) above of this section 4 and may again be made subject to
Awards.
 
    (d) If the purchase price of shares subject to a Non-Statutory Stock Option
is paid in shares of Common Stock in accordance with the provisions of clause
(iv) of paragraph 8(b) below, the number of shares surrendered to the Company in
payment of the purchase price of the shares subject to the Option shall be added
back to the maximum aggregate number of shares which may be issued or
transferred pursuant to Awards under subparagraph 4(a)(i) above, so that the
maximum aggregate number of shares which may be issued or transferred pursuant
to Awards under subparagraph 4(a)(i) above shall have been charged only for the
net number of shares that were issued or transferred by the Company pursuant to
the Non-Statutory Stock Option exercise.
 
5. INCENTIVE AWARDS AND RESTRICTED STOCK AWARDS
 
Except as otherwise provided in paragraph (e) of section 14, Incentive Awards
and Restricted Stock Awards shall be subject to the following provisions:
 
    (a) A Service Provider may be granted an Incentive Award or Restricted Stock
Award whether or not he is eligible to receive similar or dissimilar incentive
compensation under any other plan or arrangement of the Company.
 
 
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    (b) Shares of Common Stock subject to an Incentive Award may be issued or
transferred to a Service Provider at the time such Award is granted, or at any
time subsequent thereto, or in installments from time to time, as the Committee
shall determine. In the event that any such issuance or transfer shall not be
made to the Service Provider at the time such Award is granted, the Committee
may but need not provide for payment to such Service Provider, either in money
or shares of Common Stock, from time to time or at the time or times such shares
shall be issued or transferred to such Service Provider, of amounts equivalent
to the dividends which would have been payable to such Service Provider in
respect of such shares (as adjusted under section 11) if such shares had been
issued or transferred to such Service Provider at the time such Award was
granted.
 
    (c) Any Incentive Award or Restricted Stock Award may, in the discretion of
the Committee, be settled in money, on each date on which shares would otherwise
have been delivered or become unrestricted, in an amount equal to the Fair
Market Value on such date of any shares which would otherwise have been
delivered or become unrestricted; and the number of shares for which such money
is paid shall be added back to the maximum aggregate number of shares available
for use under the Plan.
 
    (d) Incentive Awards and Restricted Stock Awards shall be subject to such
terms and conditions, including, without limitation, restrictions on the sale or
other disposition of the shares issued or transferred pursuant to such Award,
and conditions calling for forfeiture of the Award or the shares issued or
transferred pursuant thereto in designated circumstances, as the Committee may
determine; provided, however, that upon the issuance or transfer of shares to a
Service Provider pursuant to any such Award, the recipient shall, with respect
to such shares, be and become a shareholder of the Company fully entitled to
receive dividends, to vote and to exercise all other rights of a shareholder
except to the extent otherwise provided in the Award. All or any portion of an
Incentive Award may but need not be made in the form of a Restricted Stock
Award. In the case of a Restricted Stock Award, the Committee may but need not
(unless required by applicable law) require the recipient to pay the par value
of the shares to be issued or transferred pursuant thereto.
 
    (e) No participant shall acquire any rights in or to or with respect to any
Incentive Award or Restricted Stock Award unless and until a written instrument
signed by an officer of the Company and setting forth the terms and conditions
of such Incentive Award or Restricted Stock Award is delivered to him. Any such
instrument shall be consistent with this Plan and incorporate it by reference.
 
6. PERFORMANCE SHARE AWARDS AND PERFORMANCE UNIT AWARDS
 
    (a) Subject to the terms and conditions of the Plan, the Committee may grant
any Service Provider a Performance Share Award and/or a Performance Unit Award.
The Committee may but need not provide that a specified portion of the
Performance Share Award or Performance Unit Award will be earned if the
specified performance goal applicable to the Award is partially attained.
 
 
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    (b) Subject to paragraph 7(b) below, the specified performance goal
applicable to a Performance Share Award or Performance Unit Award may but need
not consist, without limitation, of any one or more of the following: completion
of a specified period of employment with or other service that benefits the
Company or a Subsidiary or an Allied Enterprise, achievement of financial or
operational goals, and/or the occurrence of a specified circumstance or event.
The performance goal applicable to Performance Share Awards and Performance Unit
Awards, and the other terms and conditions of such awards, need not be the same
for each award or each Service Provider to whom an award is granted. A Service
Provider may (but need not) be granted Performance Share Awards and Performance
Unit Awards each year, and the performance period applicable to any such Award
may overlap with one or more years included in the performance period applicable
to any earlier- or later-granted Award. Subject to paragraph 7(d) below, the
Committee may retain discretion to adjust the determinations of the degree of
attainment of the performance objectives applicable to Performance Share Awards
and Performance Unit Awards.
 
    (c) Performance Share Awards that are earned may be settled in the form of
shares of Common Stock or money equal to the Fair Market Value of the shares of
Common Stock that would otherwise be delivered or a combination of both shares
of Common Stock and such money, as the Committee may provide. Performance Unit
Awards that are earned may be settled in the form of money or in the form of
shares of Common Stock having a Fair Market Value on the settlement date equal
to the money that would otherwise be paid. Shares or money may be issued,
transferred or paid (as applicable) in settlement of a Performance Share Award
or Performance Unit Award that is earned when the Award is earned or at such
later time or times as the Committee may provide, and until issued, transferred
or paid may accrue amounts equivalent to dividends which may be paid currently
as accrued or which may be deferred, deemed reinvested in shares of Common Stock
and settled in the form of such shares or money when shares or money are issued,
transferred or paid in settlement of the earned Performance Share Award or
Performance Unit Award, all as the Committee may provide.
 
    (d) Subject to paragraph 7(e) below, the Committee may but need not provide
that, if the Service Provider's death or disability or another circumstance or
event specified by the Committee occurs before the performance goal applicable
to a Performance Share Award or Performance Unit Award is attained, and
irrespective of whether the performance goal is thereafter attained, the
Performance Share Award or Performance Unit Award will be earned in whole or in
part (as the Committee may specify).
 
    (e) The Committee may but need not provide for a Service Provider's
Performance Share Award or Performance Unit Award to be forfeited in whole or in
part if such Participant's employment by or other service that benefits the
Company, a Subsidiary or an Allied Enterprise terminates for any reason before
shares (or money) are issued, transferred or paid (as applicable) in full
settlement of such Performance Share Award or Performance Unit Award.
 
    (f) Except as otherwise provided in the instrument evidencing a Performance
Share Award or Performance Unit Award, Performance Share Awards and Performance
Unit Awards may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of descent and
distribution or to a designated Beneficiary.
 
 
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    (g) No Service Provider shall acquire any rights in or to or with respect to
a Performance Share Award or Performance Unit Award unless and until a written
instrument signed by an officer of the Company and setting forth the terms and
conditions of such Performance Share Award or Performance Unit Award is
delivered to him. Any such instrument shall be consistent with this Plan and
incorporate it by reference.
 
7. PERFORMANCE MEASURES AND OTHER PROVISIONS APPLICABLE TO PERFORMANCE-BASED
COMPENSATION AWARDS
 
    (a) Awards that the Committee intends to qualify as Performance-Based
Compensation shall be granted and administered in a manner that will enable such
Awards to qualify as Performance-Based Compensation.
 
    (b) The performance goal applicable to any Award (other than an
Appreciation-Only Award) that the Committee intends to qualify as
Performance-Based Compensation shall be based on any one or more of the
following performance measures:
 
            (i)   Net Sales;
 
            (ii)  Net Income or Operating Income;
 
            (iii) Return on Equity;
 
            (iv)  Return on Capital;
 
            (v)   Earnings per Share;
 
            (vi)  Total Shareholder Return; or
 
            (vii) Number of New Drug Applications or Abbreviated New Drug
        Applications filed or approved.
 
Subject to the terms of the Plan, each of these measures shall be defined by the
Committee on a consolidated, Company, subsidiary, business unit, product line or
product basis, may but need not be in comparison with peer group performance,
and may include or exclude discontinued operations, unusual items, non-recurring
items, non-operating items, extraordinary items, the effects of changes in
accounting standards, the effects of and expenses attributable to acquisitions
and/or divestitures, and income and expenses attributable to this Plan and/or
any other stock or incentive plan or plans. The Committee shall select the
performance measure or measures on which the performance goal applicable to any
such Award shall be based and shall establish the levels of performance at which
such Award is to be earned in whole or in part.
 
    (c) Any provision of the Plan to the contrary notwithstanding, but subject
to paragraph 7(e), section 10 and section 11 below, Awards to which paragraph
7(b) above applies shall (i) "be paid solely on account of the attainment of one
or more preestablished, objective
 
 
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<PAGE>
performance goals" (within the meaning of Treasury Regulation 1.162-27(e)(2) or
its successor) over a period of one year or longer, which performance goals
shall be based upon one or more of the performance measures set forth in
paragraph 7(b) above, and (ii) be subject to such other terms and conditions as
the Committee may impose.
 
    (d) The terms of the performance goal applicable to any Award to which
paragraph 7(b) above applies shall preclude discretion to increase the amount of
compensation that would otherwise be due upon attainment of the goal.
 
    (e) An Award to which paragraph 7(a) above applies may be earned in whole or
in part if the Service Provider's death or disability or another circumstance or
event specified by the Committee occurs before the performance goal applicable
to the Award is attained, and irrespective of whether the performance goal
applicable to the Award is thereafter attained, but only if and to the extent
that (i) the Committee so provides with respect to such Award, and (ii) the
Award will nevertheless qualify as Performance-Based Compensation if the
performance goal applicable to such Award is attained and the Service Provider's
death or disability or any such other circumstance or event specified by the
Committee does not occur.
 
8. OPTIONS. Except as otherwise provided in paragraph (e) of section 14, Options
shall be subject to the following provisions:
 
    (a) Subject to the provisions of section 11, the purchase price per share
shall be, in the case of an Incentive Stock Option, not less than 100% of the
Fair Market Value of a share of Common Stock on the date the Incentive Stock
Option is granted (or in the case of any optionee who, at the time such
Incentive Stock Option is granted, owns stock possessing more than 10 percent of
the total combined voting power of all classes of stock of his employer
corporation or of its parent or subsidiary corporation, not less than 110% of
the Fair Market Value of a share of Common Stock on the date the Incentive Stock
Option is granted) and, in the case of a Non-Statutory Stock Option, not less
than the par value of a share of Common Stock on the date the Non-Statutory
Stock Option is granted. Subject to the foregoing limitations, the purchase
price per share may, if the Committee so provides at the time of grant of an
Option, be indexed to the increase or decrease in an index specified by the
Committee.
 
    (b) The purchase price of shares subject to an Option may be paid in whole
or in part (i) in money, (ii) by bank-certified, cashier's or personal check
subject to collection, (iii) if so provided in the Option and subject to section
402 of the Sarbanes-Oxley Act of 2002 as amended from time to time and subject
to such terms and conditions as the Committee may impose, by delivering to the
Company a properly executed exercise notice together with a copy of irrevocable
instructions to a stockbroker to sell immediately some or all of the shares
acquired by exercise of the option and to deliver promptly to the Company an
amount of sale proceeds (or, in lieu of or pending a sale, loan proceeds)
sufficient to pay the purchase price, or (iv) if so provided in the Option and
subject to such terms and conditions as may be specified in the Option, in
shares of Common Stock which have been owned by the optionee for at least six
months or which were acquired on the open market and which are surrendered to
the Company actually or by attestation. Shares of Common Stock thus surrendered
shall be valued at their Fair Market Value on the date of exercise. If so
provided in the Option and subject to such terms and
 
 
                                       56
<PAGE>
conditions as are specified in the Option, in lieu of the foregoing methods of
payment, any portion of the purchase price of the shares to be issued or
transferred may be paid by a promissory note secured by a pledge of the
purchased shares in such form and containing such provisions (which may but need
not provide for interest and for payment of the note at the election of the
Service Provider in money or in shares of Common Stock or other property
surrendered to the Company) as the Committee may approve; provided that (A)
payment by promissory note may be made only if and to the extent that the
General Counsel determines that it is permissible under the New York Business
Corporation Law and section 402 of the Sarbanes-Oxley Act of 2002 as amended
from time to time, and (B) if the Committee permits any such note to be paid by
surrender of shares of Common Stock, such shares shall be valued at their Fair
Market Value on the date of such surrender, and (C) if the Committee permits any
such note to be paid by surrender of other property, such other property shall
be valued at its fair market value on any reasonable basis established or
approved by the Committee, and (D) in the case of an Incentive Stock Option, any
such note shall bear interest at the minimum rate required to avoid imputation
of interest under federal income tax laws applicable at the time of exercise and
(E) any such note shall mature in ten years or such lesser period as may be
specified by the Committee.
 
    (c) Options may be granted for such lawful consideration, including but not
limited to money or other property, tangible or intangible, or labor or services
received or to be received by the Company, as the Committee may determine when
the Option is granted. Property for purposes of the preceding sentence shall
include an obligation of the Company unless prohibited by applicable law.
Subject to the foregoing and the other provisions of this section 8, each Option
may be exercisable in full at the time of grant or may become exercisable in one
or more installments and at such time or times, as the Committee may determine.
The Committee may at any time accelerate the date on which an Option becomes
exercisable, and no additional consideration need be received by the Company in
exchange for such acceleration. Unless otherwise provided in the Option, an
Option, to the extent it becomes exercisable, may be exercised at any time in
whole or in part until the expiration or termination of the Option.
 
    (d) Subject to paragraph 14(a) below, each Option shall be exercisable
during the life of the optionee only by him or his guardian or legal
representative, and after death only by his Beneficiary or, absent a
Beneficiary, by his estate or by a person who acquired the right to exercise the
Option by will or the laws of descent and distribution. Notwithstanding any
other provision of this Plan, (i) no Option shall be exercisable after the tenth
anniversary of the date on which the Option was granted, and (ii) no Incentive
Stock Option which is granted to any optionee who, at the time such Option is
granted, owns stock possessing more than 10 percent of the total combined voting
power of all classes of stock of his employer corporation or of its parent or
subsidiary corporation, shall be exercisable after the expiration of five (5)
years from the date such Option is granted. If an Option is granted for a term
of less than ten years, the Committee may, at any time prior to the expiration
of the Option, extend its term for a period ending not later than on the tenth
anniversary of the date on which the Option was granted, and no additional
consideration need be received by the Company in exchange for such extension.
The Committee may but need not provide for an Option to be exercisable after
termination of the Service Provider's employment or other service for any period
specified by the Committee but not beyond its fixed expiration date.
 
 
                                       57
<PAGE>
    (e) Subject to subparagraph 4(a)(i) above, an Option may, but need not, be
an Incentive Stock Option; provided that the aggregate Fair Market Value
(determined as of the time the option is granted) of the stock with respect to
which Incentive Stock Options may be exercisable for the first time by any
Employee during any calendar year (under all plans, including this Plan, of his
employer corporation and its parent and subsidiary corporations) shall not
exceed $100,000 unless the Code is amended to allow a higher dollar amount.
 
    (f) Shares purchased pursuant to the exercise of an Option shall be issued
or transferred to the person exercising the Option as soon as practicable after
the Option is properly exercised. However, the Committee may (but need not)
permit the person exercising an Option to elect to defer the issuance or
transfer of shares purchased pursuant to the exercise of the Option on such
terms and subject to such conditions and for such periods of time as the
Committee may in its discretion provide. During any period during which the
issuance or transfer of shares is deferred, the person who exercised the Option
may be paid amounts equivalent to the dividends which would have been paid on
the deferred shares had they been issued and outstanding, or in lieu of such
amounts such person may be credited on the books of the Company with a number of
additional deferred shares of Common Stock determined by dividing the amount of
each such dividend equivalent by the Fair Market Value of a share of Common
Stock on the relevant dividend payment date, which additional deferred shares
may in turn accrue additional dividend equivalents and be issued or transferred
when the shares purchased pursuant to the exercise of the Option are issued or
transferred to such person or at such other time or times as the Committee may
provide. No person exercising an Option shall acquire any rights of a
shareholder unless and until the shares purchased pursuant to the exercise of
the Option are issued or transferred to him. Any shares issued or transferred in
lieu of amounts equivalent to dividends as aforesaid shall be charged against
the maximum aggregate number of shares available for grants of Awards under the
Plan.
 
    (g) No Service Provider shall acquire any rights in or to or with respect to
an Option unless and until a written instrument signed by an officer of the
Company and setting forth the terms and conditions of such Option is delivered
to him. Any such instrument shall be consistent with this Plan and incorporate
it by reference. An Option, if so approved by the Committee, may include terms,
conditions, restrictions and limitations in addition to those provided for in
this Plan including, without limitation, terms and conditions providing for the
transfer or issuance of shares, on exercise of an Option, which may be
non-transferable and forfeitable to the Company in designated circumstances.
 
    (h) The Committee may (but need not) provide, at the time of grant of an
Incentive Stock Option or, with respect to a Non-Statutory Stock Option, at or
after the time of grant, that the Service Provider to whom such Option is
granted shall be granted a Non-Statutory Stock Option (a "Restored Option") if
and when (i) such Service Provider exercises all or part of an Option, including
a previously granted Restored Option, (an "Original Option") by surrendering
shares of Common Stock already owned by him in full or partial payment of the
option price under such Original Option and/or (ii) shares of Common Stock are
surrendered or withheld to satisfy tax obligations incident to the exercise of
such Original Option. All Restored Options are subject to the availability of
shares of Common Stock under the Plan at the time of such exercise.
 
 
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<PAGE>
A Restored Option shall cover a number of shares of Common Stock not greater
than the number of shares of Common Stock surrendered in payment of the option
price under such Original Option and/or used to satisfy any tax obligation
incident to the exercise of such Original Option. Each Restored Option shall
have an option price equal to the Fair Market Value of the Common Stock on the
date of grant of the Restored Option and shall expire on the stated expiration
date of the Original Option. The date of grant of a Restored Option shall be the
date on which the exercise of the Original Option or a previously granted
Restored Option resulted in the grant of such Restored Option. A Restored Option
shall be exercisable at any time and from time to time from or after the date of
grant of the Restored Option (or as the Committee in its sole discretion shall
otherwise specify in the written instrument evidencing the Restored Option). The
written instrument evidencing a Restored Option shall contain such other terms
and conditions, which may include a restriction on the transferability of the
Common Stock received upon the exercise of the Original Option or Restored
Option, as the Committee in its sole discretion may deem desirable.
 
    (i) The Committee shall not have the authority to reduce the exercise price
of outstanding Options, whether by cancelling the Options and granting new
Options in replacement thereof or otherwise, except as permitted by section 11
below (relating to adjustments for changes in capitalization and similar
adjustments).
 
    (j) No Employee shall make any elective contribution or employee
contribution to the Plan (within the meaning of Treasury Regulation section
1.401(k)-1(d)(2)(iv)(B)(4)) during the 12 months after the Employee's receipt of
a hardship distribution from a plan of the Company or a related party within the
provisions of Code sections 414(b), (c), (m) or (o) containing a cash or
deferred arrangement under section 401(k) of the Code, or during the following
calendar year. The preceding sentence shall not apply if and to the extent that
the General Counsel determines it is not necessary to qualify any such plan as a
cash or deferred arrangement under section 401(k) of the Code.
 
    (k) No option shall be exercisable unless and until the Company (i) obtains
the approval of all regulatory bodies whose approval the General Counsel may
deem necessary or desirable, and (ii) complies with all legal requirements
deemed applicable by the General Counsel.
 
    (l) An Option shall be considered exercised if and when written notice,
signed by the person exercising the Option and stating the number of shares with
respect to which the Option is being exercised, is received by the Secretary on
a properly completed form approved for this purpose by the Committee,
accompanied by full payment of the Option exercise price in one or more of the
forms authorized by the Committee and described in paragraph 8(b) above for the
number of shares to be purchased. No Option may at any time be exercised with
respect to a fractional share.
 
9. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights shall be subject to such
terms and conditions, not inconsistent with the Plan, as shall from time to time
be determined by the Committee and to the following terms and conditions:
 
 
                                       59
<PAGE>
    (a) Stock Appreciation Rights may be granted in connection with all or any
part of an Option, either at the time of the grant of such Option or at any time
thereafter during the term of the Option (in either case, "Linked Stock
Appreciation Rights"), or may be granted without reference to an Option
("Free-Standing Stock Appreciation Rights").
 
    (b) Linked Stock Appreciation Rights may be granted either as an alternative
or a supplement to a specified Option (the "related" Option). Each Linked Stock
Appreciation Right that is granted as an alternative to an Option shall entitle
the holder to receive the amount determined pursuant to paragraph 9(e) below if
and when he surrenders a related Option to purchase one share of Common Stock
that is then exercisable. Each Linked Stock Appreciation Right that is granted
as a supplement to an Option shall entitle the holder to receive the amount
determined pursuant to paragraph 9(e) below if and when the holder purchases a
share under the related Option.
 
    (c) Stock Appreciation Rights may be granted for such lawful consideration,
including but not limited to money or other property, tangible or intangible, or
labor or services received or to be received by the Company, as the Committee
may determine when the Rights are granted. Property for purposes of the
preceding sentence shall include an obligation of the Company unless prohibited
by applicable law. Subject to the foregoing and the other provisions of this
section 9, Stock Appreciation Rights may be exercisable in full at the time of
grant or may become exercisable in one or more installments and at such time or
times, as the Committee may determine. The Committee may at any time accelerate
the date on which Stock Appreciation Rights become exercisable, and no
additional consideration need be received by the Company in exchange for such
acceleration. Unless otherwise provided in the Rights, Stock Appreciation
Rights, to the extent they become exercisable, may be exercised at any time in
whole or in part until they expire or terminate.
 
    (d) No Free-Standing Stock Appreciation Right shall be exercisable after the
tenth anniversary of the date on which it was granted, and no Linked Stock
Appreciation Right shall be exercisable after the related Option ceases to be
exercisable. If the Committee grants a Stock Appreciation Right for a lesser
term than that permitted by the preceding sentence, the Committee may, at any
time prior to its expiration, extend its term to the maximum term permitted by
the preceding sentence, and no additional consideration need be received by the
Company in exchange for such extension. The Committee may but need not provide
for Stock Appreciation Rights to be exercisable after termination of the Service
Provider's employment or other service for any period specified by the Committee
but not beyond the date on which they expire pursuant to the first sentence of
this paragraph 9(d).
 
    (e) Upon exercise of Stock Appreciation Rights, the holder thereof shall be
entitled to receive shares of Common Stock that have a Fair Market Value on the
date of exercise of such Rights equal to the amount by which the Fair Market
Value of a share of Common Stock on the date of such exercise exceeds the
Exercise Price of the Stock Appreciation Rights, multiplied by the number of
Stock Appreciation Rights exercised; provided that in no event shall a
fractional share be issued and, provided further, that if and to the extent that
the Committee so provides in the instrument evidencing such Rights, and subject
to such terms and conditions (if any) as the Committee may in its sole
discretion impose, the holder may be paid money in lieu of all or any
 
 
                                       60
<PAGE>
part of the shares that the holder would otherwise be entitled to receive upon
exercise of such Rights, with the amount of such money being equal to the Fair
Market Value of the shares that the holder would otherwise be entitled to
receive. In the case of Linked Stock Appreciation Rights, the Exercise Price
shall be the price at which shares may be purchased under the related Option,
unless the Committee specified a different price when the Rights were granted
(which shall not be less than the lowest price at which the related Option could
have been granted under section 8 above). In the case of Free-Standing Stock
Appreciation Rights, the Exercise Price shall be the Fair Market Value of a
share of Common Stock on the date the Rights were granted, unless the Committee
specified a different price when the Rights were granted (which shall not be
less than the par value of Common Stock). The Committee may provide that,
notwithstanding the foregoing, upon exercise of Stock Appreciation Rights at any
time during a period commencing on the third business day following the date of
release for publication of any annual or quarterly summary statements of the
Company's sales and earnings and ending on the twelfth business day following
such date (a "Window Period"), or during the thirty-day period following a
Change in Control (a "Change in Control Period"), including, without limitation,
upon exercise of Stock Appreciation Rights which expire before the end of the
Window Period or Change in Control Period in which they are exercised, the
amount of money or shares which a Section 16 Person shall be entitled to receive
shall equal the amount by which the highest Fair Market Value of Common Stock
during such Window Period or such Change in Control Period exceeds the Exercise
Price of the Stock Appreciation Rights multiplied by the number of Stock
Appreciation Rights exercised but, in the case of Stock Appreciation Rights that
relate to an Incentive Stock Option, not in excess of the maximum amount that
may be paid under Code section 422 without disqualifying such Option as an
Incentive Stock Option.
 
    (f) The limitations set forth in subparagraph 4(a)(i) above, other than the
limitation applicable to Incentive Stock Options, shall be charged only for the
number of shares which are actually issued or transferred in settlement of Stock
Appreciation Rights. In the case of an exercise of a Linked Stock Appreciation
Right that is alternative to a Non-Statutory Stock Option, if the number of
shares of Common Stock previously charged against such maximum aggregate number
of shares available for issuance or transfer under the Plan on account of the
surrendered portion of the Option exceeds the number of shares (if any) actually
issued or transferred pursuant to such surrender, the excess may be added back
to the maximum aggregate number of shares available for issuance or transfer
under the Plan.
 
    (g) Subject to paragraph 14(a) below, Stock Appreciation Rights shall be
exercisable during the life of the Service Provider only by him or his guardian
or legal representative, and after death only by his Beneficiary or, absent a
Beneficiary, by his estate or by a person who acquired the Stock Appreciation
Rights by will or the laws of descent and distribution.
 
    (h) No Service Provider shall acquire any rights in or to or with respect to
a Stock Appreciation Right unless and until a written instrument signed by an
officer of the Company and setting forth the terms and conditions of such Right
is delivered to him. Any such instrument shall be consistent with this Plan and
incorporate it by reference.
 
10. CERTAIN CHANGE IN CONTROL, TERMINATION OF SERVICE, DEATH AND DISABILITY
PROVISIONS. Notwithstanding any provision of the Plan to the contrary, any Award
which is
 
 
                                       61
<PAGE>
outstanding but not yet fully exercisable, vested, earned or payable at the time
of a Change in Control shall become fully exercisable, vested, earned and
payable at that time; provided that if such Change in Control occurs less than
six months after the date on which such Award was granted and if the
consideration for which such Award was granted consisted in whole or in part of
future services, then such Award shall become fully exercisable, vested, earned
and payable at the time of such Change in Control only if the participant agrees
in writing (if requested to do so by the Committee in writing) to remain in the
employment or other applicable service that benefits the Company or a Subsidiary
or an Allied Enterprise, at least through the date which is six months after the
date such Award was granted with substantially the same title, duties,
authority, reporting relationships and compensation as on the day immediately
preceding the Change in Control. Any Option or Stock Appreciation Right affected
by the preceding sentence shall remain exercisable until it expires or
terminates pursuant to its terms and conditions. Subject to the foregoing
provisions of this section 10, the Committee may at any time, and subject to
such terms and conditions as it may impose:
 
    (a) authorize the holder of an Option or Stock Appreciation Right to
exercise the Option or Stock Appreciation Right following the termination of the
participant's employment or other applicable service that benefits the Company
or a Subsidiary or an Allied Enterprise, or following the participant's death or
disability, whether or not the Option or Stock Appreciation Right would
otherwise be exercisable following such event, provided that in no event may an
Option or Right be exercised after the expiration of its term;
 
    (b) grant Options and Stock Appreciation Rights which become exercisable
only in the event of a Change in Control;
 
    (c) provide for Stock Appreciation Rights to be exercised automatically and
only for money in the event of a Change in Control;
 
    (d) authorize any Award to become non-forfeitable, fully earned and payable
following (i) the termination of the participant's employment with or other
applicable service that benefits the Company or a Subsidiary or an Allied
Enterprise, or (ii) the participant's death or disability, whether or not the
Award would otherwise become non-forfeitable, fully earned and payable following
such event;
 
    (e) grant Awards which become non-forfeitable, fully earned and payable only
in the event of a Change in Control; and
 
    (f) provide in advance or at the time of a Change in Control for money to be
paid in settlement of any Award in the event of a Change in Control, either at
the election of the participant or at the election of the Committee.
 
11. ADJUSTMENT PROVISIONS. In the event that any recapitalization, or
reclassification, split-up or consolidation of shares of Common Stock shall be
effected, or the outstanding shares of Common Stock shall be, in connection with
a merger or consolidation of the Company or a sale by the Company of all or a
part of its assets, exchanged for a different number or class of shares of stock
or other securities or property of the Company or any other entity or person, or
a spin-
 
 
                                       62
<PAGE>
off or a record date for determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in Common Stock or other
property (other than normal cash dividends) shall occur, (a) the maximum
aggregate number and class of shares or other securities or property that may be
issued or transferred in accordance with subparagraph 4(a)(i) above pursuant to
(i) Awards, (ii) Awards that are not Appreciation-Only Awards, and (iii)
Incentive Stock Options, that are thereafter granted, (b) the maximum number and
class of shares or other securities or property with respect to which Options or
Stock Appreciation Rights, or Awards other than Appreciation-Only Awards and
Dollar-Denominated Awards, may be granted during any calendar year to any
Employee or other Service Provider pursuant to subparagraph 4(a)(ii) or
4(a)(iii) above, (c) the number and class of shares or other securities or
property that may be issued or transferred under outstanding Awards, (d) the
purchase price to be paid per share under outstanding and future Awards, and (e)
the price to be paid per share by the Company or a Subsidiary for shares or
other securities or property issued or transferred pursuant to Awards which are
subject to a right of the Company or a Subsidiary to reacquire such shares or
other securities or property, shall in each case be equitably adjusted; provided
that with respect to Incentive Stock Options any such adjustments shall comply
with sections 422 and 424 of the Code.
 
12. EFFECTIVE DATE AND DURATION OF PLAN. The Plan shall be effective as of the
date of its adoption by the Board, provided that the shareholders of the Company
thereafter approve it either (a) at a duly held stockholders' meeting or (b) by
the written consent of the holders of a majority of the securities of the
Company entitled to vote, in accordance with any applicable provisions of
section 505 of the New York Business Corporation Law. If the Plan is not so
approved by shareholders, the Plan (and any Award granted thereunder) shall be
null, void and of no force or effect. If so approved, the Plan shall remain in
effect until all shares authorized to be issued or transferred hereunder have
been issued or transferred or until the Plan is sooner terminated by the Board
of Directors, and shall continue in effect thereafter with respect to any Awards
outstanding at the time of such termination. In no event shall an Incentive
Stock Option be granted under the Plan more than ten (10) years from the date
the Plan is adopted by the Board, or the date the Plan is approved by the
shareholders of the Company, whichever is earlier, unless within such ten year
period shareholders approve an increase in the number of shares available for
grants under the Plan, in which case more than ten (10) years from the last date
on which the shareholders so approve any such increase.
 
13. ADMINISTRATION.
 
    (a) The Plan shall be administered by a committee of the Board consisting of
two or more directors appointed from time to time by the Board. No person shall
be appointed to or shall serve as a member of such committee unless at the time
of such appointment and service he shall be a "non-employee director" as defined
in SEC Rule 16b-3. Notwithstanding the foregoing, the Board may, in its
discretion, delegate to another committee of the Board any or all of the
authority and responsibility of the Committee with respect to awards to Service
Providers who are not subject to Section 16 of the Exchange Act at the time any
such delegated authority or responsibility is exercised. Such other committee
may consist of two or more directors who may, but need not, be officers or
employees of the Company or of any of its Subsidiaries. To the extent that the
Board has delegated to such other committee the authority and responsibility of
 
 
                                       63
<PAGE>
the Committee pursuant to the foregoing, all references to the Committee in the
Plan shall be to such other committee. Unless the Board determines otherwise,
the Committee shall be comprised solely of "outside directors" within the
meaning of section 162(m)(4)(C)(i) of the Code and Treasury Regulation section
1.162-27(e)(3).
 
    (b) The Committee may establish such rules and regulations, not inconsistent
with the provisions of the Plan, as it may deem necessary for the proper
administration of the Plan, and may amend or revoke any rule or regulation so
established. The Committee shall, subject to the provisions of the Plan, have
full power and discretion to interpret, administer and construe the Plan and
full authority to make all determinations and decisions thereunder including
without limitation the authority and discretion to (i) determine the persons who
are Service Providers and select the Service Providers who are to participate in
the Plan, (ii) determine when Awards shall be granted, (iii) determine the
number of shares and/or amount of money to be made subject to each Award, (iv)
determine the type of Award to grant, (v) determine the terms and conditions of
each Award, including the exercise price, in the case of an Option or Stock
Appreciation Right, and whether specific awards shall be linked to one another
and if so whether they shall be alternative to or supplement one another, (vi)
make any adjustments pursuant to section 11 of the Plan, and (vii) determine
whether or not a specific Award is intended to qualify as Performance-Based
Compensation. Without limiting the generality of the foregoing, the Committee
shall have the authority to establish and administer performance goals
applicable to Awards, and the authority to certify that such performance goals
are attained, within the meaning of Treasury Regulation section 1.162-27(c)(4).
The interpretation by the Committee of the terms and provisions of the Plan and
any instrument issued thereunder, and its administration thereof, and all action
taken by the Committee, shall be final, binding and conclusive on the Company,
its stockholders, Subsidiaries, Allied Enterprises, all participants and Service
Providers, and upon their respective Beneficiaries, successors and assigns, and
upon all other persons claiming under or through any of them.
 
    (c) Members of the Board of Directors and members of the Committee acting
under this Plan shall be fully protected in relying in good faith upon the
advice of counsel and shall incur no liability except for gross or willful
misconduct in the performance of their duties.
 
14. GENERAL PROVISIONS.
 
    (a) Any provision of the Plan to the contrary notwithstanding, any Award,
including without limitation any Option or Stock Appreciation Right, shall not
be transferable by the participant or other rightful holder of such Award other
than by will or the laws of descent and distribution or to a Beneficiary
designated by the participant or other rightful holder of such Award.
Notwithstanding the foregoing and any other provision of the Plan to the
contrary, a Service Provider may transfer any Award granted to him under this
Plan, other than an Incentive Stock Option or any other Award that is linked to
an Incentive Stock Option, to members of his immediate family (defined as his
children, grandchildren and spouse, including children and grandchildren by
marriage or adoption) or to one or more trusts for the benefit of such family
members or partnerships or other entities in which family members are the only
partners or members if (and only if) (i) the instrument evidencing such Award
expressly so provides (or is amended to so provide), (ii) the Committee consents
in writing to such transfer and, if such
 
 
                                       64
<PAGE>
consent is conditional, any conditions to such consent are satisfied, and (iii)
such transfer is not a transfer for value within the meaning of General
Instruction A(1)(a)(5) to SEC Form S-8 (or a successor form). Any such
transferred Award shall continue to be subject to the same terms and conditions
that were applicable to such Award immediately prior to its transfer (except
that such transferred Award shall not be further transferable by either the
Service Provider or the transferee inter vivos).
 
    (b) Nothing in this Plan or in any instrument executed pursuant hereto shall
confer upon any person any right to continue in the employment or other service
of the Company or a Subsidiary or an Allied Enterprise, or shall affect the
right of the Company or a Subsidiary or any Allied Enterprise to terminate the
employment or other service of any person at any time with or without cause.
 
    (c) No shares of Common Stock shall be issued or transferred pursuant to an
Award unless and until all legal requirements applicable to the issuance or
transfer of such shares have, in the opinion of the General Counsel, been
satisfied. Any such issuance or transfer shall be contingent upon the person
acquiring the shares giving the Company any assurances the General Counsel may
deem necessary or desirable to assure compliance with all applicable legal
requirements.
 
    (d) No person (individually or as a member of a group) and no Beneficiary or
other person claiming under or through him, shall have any right, title or
interest in or to any shares of Common Stock (i) issued or transferred to, or
acquired by, a trust or other legal entity pursuant to the next sentence of this
paragraph 14(d), (ii) allocated, or (iii) reserved for the purposes of this
Plan, or subject to any Award, except as to such shares of Common Stock, if any,
as shall have been issued or transferred to him. The Committee may (but need
not) provide at any time or from time to time (including without limitation upon
or in contemplation of a Change in Control) for a number of shares of Common
Stock, equal to the number of such shares subject to Awards then outstanding, to
be issued or transferred to, or acquired by, a trust (which may but need not be
a grantor trust) or other legal entity for the purpose of satisfying the
Company's obligations under such Awards, and, unless prohibited by applicable
law, such shares held in trust or in such other legal entity shall be considered
authorized and issued shares with full dividend and voting rights,
notwithstanding that the Awards to which such shares relate shall not have been
exercised or may not be exercisable or vested at that time.
 
    (e) In the event the laws of a foreign country, in which the Company or a
Subsidiary or any Allied Enterprise has Service Providers, prescribe certain
requirements for stock incentives to qualify for advantageous tax treatment
under the laws of that country (including, without limitation, laws establishing
options analogous to Incentive Stock Options), the Board of Directors, may
restate, in whole or in part, this Plan and may include in such restatement
additional provisions for the purpose of qualifying the restated plan and stock
incentives granted thereunder under such laws; provided, however, that (i) the
terms and conditions of a stock incentive granted under such restated plan may
not be more favorable to the recipient than would be permitted if such stock
incentive had been granted under the Plan as herein set forth, (ii) all shares
allocated to or utilized for the purposes of such restated plan shall be subject
to the limitations of section 4, and (iii) the provisions of the restated plan
may give the Board less but
 
 
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not more discretion to amend or terminate such restated plan than is provided
with respect to this Plan by the provisions of section 15 hereof.
 
    (f) The Company and its Subsidiaries and any Allied Enterprises may make
such provisions as they may deem appropriate for the withholding of any taxes
which they determine they are required to withhold in connection with any Award.
Without limiting the foregoing, the Committee may, subject to such terms and
conditions as it may impose, permit or require any withholding tax obligation
arising in connection with the grant, exercise, vesting, distribution or payment
of any Award, up to the minimum required federal, state and local withholding
taxes, including payroll taxes, to be satisfied in whole or in part, with or
without the consent of the participant, by having the Company withhold all or
any part of the shares of Common Stock that vest or would otherwise be
distributed at such time. Any shares so withheld shall be valued at their Fair
Market Value on the date of such withholding.
 
    (g) Nothing in this Plan is intended to be a substitute for, or shall
preclude or limit the establishment or continuation of, any other plan, practice
or arrangement for the payment of compensation or fringe benefits to directors,
officers, employees, consultants or Service Providers generally, or to any class
or group of such persons, which the Company or any Subsidiary now has or may
hereafter lawfully put into effect, including, without limitation, any incentive
compensation, retirement, pension, group insurance, stock purchase, stock bonus
or stock option plan.
 
    (h) Except to the extent that the Committee determines otherwise,
transactions by and with respect to Section 16 Persons under the Plan shall be
administered in a manner that complies with an exemption under SEC Rule 16b-3.
 
    (i) The Company's obligation to issue or transfer shares of Common Stock or
to pay money in respect of any Award shall be subject to the condition that such
issuance, transfer or payment would not impair the Company's capital or
constitute a breach of or cause the Company to be in violation of any covenant,
warranty or representation made by the Company in any credit agreement to which
the Company is a party before the date of grant of such Award.
 
    (j) By accepting any benefits under the Plan, each participant, and each
person claiming under or through him, shall be conclusively deemed to have
indicated his acceptance and ratification of, and consent to, all provisions of
the Plan and any action or decision under the Plan by the Company, its agents
and employees, and the Board of Directors and the Committee.
 
    (k) The validity, construction, interpretation and administration of the
Plan and of any determinations or decisions made thereunder, and the rights of
all persons having or claiming to have any interest therein or thereunder, shall
be governed by, and determined exclusively in accordance with, the laws of the
State of New York, but without giving effect to the principles of conflicts of
laws thereof. Without limiting the generality of the foregoing, the period
within which any action arising under or in connection with the Plan must be
commenced, shall be governed by the laws of the State of New York, without
giving effect to the principles of conflicts of laws thereof, irrespective of
the place where the act or omission complained of took
 
 
                                       66
<PAGE>
place and of the residence of any party to such action and irrespective of the
place where the action may be brought.
 
    (l) The use of the masculine gender shall also include within its meaning
the feminine. The use of the singular shall include within its meaning the
plural and vice versa.
 
15. AMENDMENT AND TERMINATION. Subject to any applicable shareholder approval
requirements of New York or federal law, the New York Stock Exchange or the
Code, the Plan may be amended by the Board of Directors at any time and in any
respect, including without limitation to permit or facilitate qualification of
Options theretofore or thereafter granted (a) as Incentive Stock Options under
the Code, or (b) for such other special tax treatment as may hereafter be
enacted, provided that, without stockholder approval, no amendment shall
increase the aggregate number of shares which may be issued under Incentive
Stock Options under the Plan within the meaning of Proposed Treasury Regulation
section 1.422A-2(b)(iv) or its successor, or shall permit the exercise price of
outstanding Options to be reduced, whether by cancelling the Options and
granting new Options in replacement thereof or otherwise, except as permitted by
section 11 hereof. The Plan may also be terminated at any time by the Board of
Directors. No amendment or termination of this Plan shall adversely affect any
Award granted prior to the date of such amendment or termination without the
written consent of the holder of such Award.
 
 
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                                                                      APPENDIX B
 
                             BARR LABORATORIES, INC.
                2002 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
 
1. PURPOSES. The purposes of the Plan are (a) to enhance the Company's ability
to attract, retain and motivate non-employee directors, and (b) to provide
non-employee directors with opportunities to acquire a proprietary interest in
the Company.
 
2. DEFINITIONS.
 
    (a) "Board" or "Board of Directors" means the Board of Directors of the
Company, as constituted from time to time.
 
    (b) "Change in Control" means any of the following:
 
    (i) any person (as such term is used in Sections 13(d) and 14(d)(2) of the
Exchange Act), other than (A) the Company, (B) a Subsidiary, (C) a trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or a Subsidiary, or (D) an underwriter engaged in a distribution of Company
stock to the public with the Company's written consent, becomes the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of Voting Securities that represent more than thirty percent (30%) of the
combined voting power of the then outstanding Voting Securities. However, if the
"person" in question is an institutional investor whose investment in Voting
Securities is purely passive when such person becomes such a more than thirty
percent beneficial owner of Voting Securities, then such event (i.e., such
person's becoming a more than thirty percent beneficial owner of Voting
Securities) shall not be deemed to constitute a Change in Control under this
subsection 2(b)(i) for so long as (and only for so long as) such person's
investment in Voting Securities remains purely passive;
 
    (ii) the stockholders of the Company approve a merger, consolidation,
recapitalization or reorganization of the Company or a Subsidiary, reverse split
of any class of Voting Securities, or an acquisition of securities or assets by
the Company or a Subsidiary, or consummation of any such transaction if
stockholder approval is not obtained, other than (A) any such transaction in
which the holders of outstanding Voting Securities immediately prior to the
transaction receive, with respect to such Voting Securities (or, in the case of
a transaction in which the Company is the surviving corporation or a transaction
involving a Subsidiary, retain), voting securities of the surviving or
transferee entity representing more than fifty percent (50%) of the total voting
power outstanding immediately after such transaction, with the voting power of
each such continuing holder relative to other such continuing holders not
substantially altered in the transaction, or (B) any such transaction which
would result in a Related Party beneficially owning more than 50 percent of the
voting securities of the surviving entity outstanding immediately after such
transaction;
 
 
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<PAGE>
    (iii) the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets other than any such transaction
which would result in a Related Party owning or acquiring more than 50 percent
of the assets owned by the Company immediately prior to the transaction; or
 
    (iv) the persons who were members of the Board of Directors immediately
before a tender or exchange offer for shares of Common Stock by any person other
than the Company or a Related Party, or before a merger or consolidation of the
Company or a Subsidiary, or contested election of the Board of Directors, or
before any combination of such transactions, cease to constitute a majority of
the Board of Directors as a result of such transaction or transactions.
 
For purposes of the foregoing provisions of this section 2(b),
 
            (A) the term "Related Party" shall mean (I) a Subsidiary, (II) an
employee or group of employees of the Company or any Subsidiary, (III) a trustee
or other fiduciary holding securities under an employee benefit plan of the
Company or any Subsidiary, or (IV) a corporation or other form of business
entity owned directly or indirectly by the stockholders of the Company in
substantially the same proportion as their ownership of Voting Securities; and
 
            (B) the term "Voting Securities" shall mean any securities of the
Company which carry the right to vote generally in the election of directors.
 
    (c) "Committee" means the Board, if and to the extent it administers the
Plan, and any committee appointed by the Board of Directors to administer the
Plan pursuant to the provisions of section 4 below.
 
    (d) "Common Stock" means common stock of the Company, par value $.01 per
share.
 
    (e) "Company" means Barr Laboratories, Inc., a New York corporation, its
successors and assigns.
 
    (f) "Disability" or "Disabled" means a medically determinable physical or
mental condition, impairment, ailment or incapacity as a result of which the
individual in question is unable to substantially perform the duties of a
director for a period of more than 90 days without risk of serious injury (or,
in the case of someone who is not a director on the date in question, who would
be unable to substantially perform such duties for such a period without risk of
serious injury if s/he were a director on such date).
 
    (g) "Eligible Director" means a member of the Board of Directors who is not
an employee of the Company or any of its Subsidiaries.
 
    (h) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
 
 
                                       69
<PAGE>
    (i) "Fair Market Value" on a particular date means as follows:
 
            (i) If the Common Stock is listed or admitted to trading on such
date on the New York Stock Exchange, the mean between the high and low sale
prices of a share of Common Stock on such date as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange; or
 
            (ii) If the Common Stock is not listed or admitted to trading on the
New York Stock Exchange but is listed or admitted to trading on another national
exchange, the mean between the high and low sale prices of a share of Common
Stock on such date as reported in the principal consolidated transaction
reporting system with regard to securities listed or admitted to trading on such
national exchange; or
 
            (iii) If the Common Stock is not listed or admitted to trading on
any national exchange, the mean between the high and low sale prices of a share
of Common Stock on such date in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System, the
National Quotation Bureau or such other system then in use with regard to the
Common Stock or, if on such date the Common Stock is publicly traded but not
quoted by any such system, the mean of the closing bid and asked prices of a
share of Common Stock on such date as furnished by a professional market maker
making a market in the Common Stock; or
 
            (iv) If in (i), (ii) or (iii) above, as applicable, there were no
sales on such date reported as provided above, the respective prices on the most
recent prior day on which a sale was so reported.
 
    (j) "General Counsel" means the General Counsel of the Company serving from
time to time.
 
    (k) "Plan" means the Barr Laboratories, Inc. 2002 Stock Option Plan for
Non-Employee Directors set forth in these pages, as amended from time to time.
 
    (l) "Secretary" means the Secretary of the Company serving from time to
time.
 
    (m) "SEC Rule 16b-3" means Rule 16b-3 of the Securities and Exchange
Commission promulgated under the Exchange Act, as such rule or any successor
rule may be in effect from time to time.
 
    (n) "Subsidiary" means a corporation or other form of business association
of which shares (or other ownership interests) having more than 50% of the
voting power are, or in the future become, owned or controlled, directly or
indirectly, by the Company.
 
3. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in section 7,
the total number of shares of Common Stock for which options may be granted
under the Plan shall be
 
 
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<PAGE>
300,000 plus such number of shares of Common Stock as remain available for
grants of options under the 1993 Stock Option Plan for Non-Employee Directors on
the date (if any) on which such 1993 Plan is terminated by the Board insofar as
new grants are concerned, plus such number of shares of Common Stock as are
subject to any stock options granted under such 1993 Plan that expire or
terminate for any reason after the date (if any) on which such 1993 Plan is so
terminated by the Board without having been exercised. Such shares may be
authorized but unissued shares, treasury shares, including shares acquired in
the open market or in private transactions, shares issued or transferred to, or
otherwise acquired by, a trust or other legal entity pursuant to the second
succeeding sentence, or a combination of each, as the Committee may from time to
time determine; provided, however, that any shares acquired or held by the
Company for the purposes of this Plan shall, unless and until issued or
transferred to a trust or other legal entity pursuant to second succeeding
sentence or to a participant or other rightful holder of an option in accordance
with the terms and conditions of this Plan, be and at all times remain treasury
shares of the Company, irrespective of whether such shares are entered in a
special account for purposes of this Plan, and shall be available for any
corporate purpose. If, in connection with an acquisition of another company or
all or part of the assets of another company by the Company or a Subsidiary or
in connection with a merger or other combination of another company with the
Company or a Subsidiary, the Company either (a) assumes stock options or other
stock incentive obligations of such other company, or (b) grants stock options
or other stock incentives in substitution for stock options or other stock
incentive obligations of such other company, then none of the shares of Company
stock that are issuable or transferable pursuant to such stock options or other
stock incentives that are assumed or granted in substitution by the Company
shall be charged against the number of shares for which options may be granted
under this Plan. The Committee may (but need not) provide at any time or from
time to time (including without limitation upon or in contemplation of a Change
in Control) for a number of shares of Common Stock, equal to the number of such
shares subject to options then outstanding under this Plan, to be issued or
transferred to, or acquired by, a trust (which may but need not be a grantor
trust) or other legal entity for the purpose of satisfying the Company's
obligations under such options, and, unless prohibited by applicable law, such
shares held in trust or in such other legal entity shall be considered
authorized and issued shares with full dividend and voting rights,
notwithstanding that the options to which such shares relate may not be
exercisable at that time. If any option granted under the Plan is cancelled or
expires or terminates for any reason without having been exercised in full, the
shares subject to, but not delivered under, such option shall no longer be
charged against the number of shares for which options may be granted under the
Plan and shall become available for the grant of other options under the Plan.
If the option exercise price of an option granted under the Plan is paid in
shares of Common Stock in accordance with the provisions of section 6.5(c)
below, the number of shares surrendered to the Company in payment of the
exercise price of the shares subject to the option shall be added to the number
of shares for which options may be granted under the Plan pursuant to this
section 3, so that the total number of shares for which options may be granted
under the Plan pursuant to this section shall have been charged only for the net
number of shares that were issued or transferred by the Company pursuant to the
option exercise
 
4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Board or a
committee of the Board consisting of two or more directors appointed from time
to time by the Board.
 
 
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<PAGE>
Unless the Board determines otherwise, no person shall be appointed to or shall
serve as a member of such committee unless at the time of such appointment and
service he shall be a "non-employee director" as defined in SEC Rule 16b-3.
Subject to the terms of the Plan, the Committee (which term includes the Board,
if and to the extent that it administers the Plan) shall have full power to
administer, interpret and construe the Plan, to grant options under section
6.2(b) of the Plan, to determine the terms and conditions of options, to amend
the terms and conditions of options granted under the Plan, to determine all
questions arising thereunder, and to adopt and amend such rules and regulations
for administering the Plan as the Committee deems desirable.
 
5. PARTICIPATION IN THE PLAN. Only Eligible Directors shall participate in the
Plan.
 
6. OPTION TERMS. All options granted under the Plan shall be nonstatutory
options not intended to qualify as "incentive stock options" under Section 422
of the Internal Revenue Code of 1986, as amended. Each option granted under the
Plan and the issuance of shares thereunder shall be subject to the following
terms and conditions:
 
6.1 OPTION INSTRUMENTS. Each option granted under the Plan shall be evidenced by
a written instrument duly executed on behalf of the Company and dated as of the
applicable date of grant. Each such instrument shall be signed on behalf of the
Company by an officer or officers delegated such authority by the Committee
using either manual or facsimile signature. Each such instrument shall comply
with and be subject to the terms and conditions of the Plan. Any such instrument
may contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Committee. With the written consent of the
affected participant, the Committee may amend the instrument evidencing any
option granted under the Plan.
 
6.2 OPTION GRANTS.
 
    (a) Automatic Grants. Immediately following any meeting of the stockholders
of the Company or the Board that takes place after the 2002 annual meeting of
stockholders and at which an Eligible Director is first elected to the Board,
such Eligible Director shall hereby be granted an option to purchase 15,000
shares of Common Stock under the Plan. Immediately following each annual meeting
of stockholders of the Company commencing with the 2003 annual meeting, and
continuing with each annual meeting thereafter until the Plan is terminated or
expires pursuant to section 8 or 9 below, each person who is an Eligible
Director immediately following such annual meeting (other than any such person
who was first elected to the Board at such annual meeting) shall hereby be
granted an option to purchase 7,500 shares of Common Stock under the Plan. The
price at which shares may be purchased under any option granted pursuant to this
section 6.2(a) shall be their Fair Market Value on the date on which such option
is granted.
 
    (b) Discretionary Grants. At any time and from time to time while the Plan
is in effect the Committee may grant options to purchase shares of Common Stock
to any Eligible Director under the Plan, in addition to any options to which
such Eligible Director may be entitled pursuant to section 6.2(a) above. The
price at which shares may be purchased under any options
 
 
                                       72
<PAGE>
granted pursuant to this section 6.2(b) shall not be less than their Fair Market
Value on the date on which the grant of such options is effective. The Committee
may rescind the grant of any option granted pursuant to this section 6.2(b),
provided that after an instrument evidencing the grant of such option has been
issued and delivered to the participant the Committee may rescind the grant of
such option only with the written consent of the participant.
 
6.3 TERM OF OPTION AND LIMITATIONS ON RIGHT TO EXERCISE.
 
    (a) Except as otherwise provided in sections 6.3(b), (c) and (d) below, an
option may be exercised at any time for all or from time to time for any part of
the shares which are subject to purchase under the option, before the tenth
anniversary of the date on which the option was granted. If not sooner exercised
or terminated pursuant to the preceding sentence or the other provisions of this
section 6.3, an option shall expire on the tenth anniversary of the date on
which it was granted.
 
    (b) An option granted pursuant to section 6.2(a) above may not be exercised
in whole or in part unless and until the participant shall have served on the
Board of Directors during the period extending from the date of grant of the
option until the date of the annual meeting of stockholders next following the
date of grant of the option. A 15,000 share option that is granted to an
Eligible Director pursuant to section 6.2(a) above shall be subject to the first
sentence of this section 6.3(b) and, in addition, may not be exercised with
respect to more than one-third of the shares subject to the option unless and
until the participant shall have served on the Board of Directors during the
period extending from the date of grant of the option until the second annual
meeting of stockholders next following the date of grant of the option, nor with
respect to more than two-thirds of the shares subject to the option unless and
until the participant shall have served on the Board of Directors during the
period extending from the date of grant of the option until the third annual
meeting of stockholders next following the date of grant of the option. An
option that is granted pursuant to section 6.2(b) above may not be exercised
with respect to such number of shares subject to the option unless and until the
participant shall have served on the Board of Directors for such period(s) of
time after the date of grant of such option (if any) or provided such other
lawful consideration for the grant of such option as the Committee may specify
when it approves the grant of the option. Notwithstanding the preceding
provisions of this section 6.3(b), any option that is granted under the Plan and
that is outstanding and exercisable on the date on which a Change in Control
occurs shall become exercisable in full on such date, provided that there has
been no interruption of the participant's service on the Board before such date
and, provided further, that if such Change in Control occurs less than six
months after the date on which such option was granted, then such option shall
be exercisable on and after the date on which the Change in Control occurs only
if the participant agrees in writing (if requested to do so in writing on or
before such date by the party acquiring control or its representative) to remain
on the Board at least through the date which is six months after the date on
which such option was granted with the same compensation as immediately before
the Change in Control. In addition, any option that is granted under the Plan
and that is held by a participant and outstanding and exercisable on the date
(if any) on which such participant's service on the Board terminates by reason
of death or Disability shall become exercisable in full on such date.
 
 
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<PAGE>
    (c) A participant's right to exercise an option that is otherwise
exercisable pursuant to the provision of sections 6.3(a) and 6.3(b) above shall
terminate one year after the participant's service on the Board of Directors
terminates for any reason other than cause within the meaning of the Company's
by-laws, and upon the termination of the participant's service on the Board of
Directors for such cause. However, if (i) a participant's service on the Board
terminates by reason of death or Disability, or (ii) a participant dies or
becomes Disabled during the one year period after the participant's service on
the Board terminates for any reason other than cause, death or Disability, then
any option that is (or becomes) exercisable pursuant to sections 6.3(a) and
6.3(b) above on the date on which the participant's service on the Board
terminates by reason of death or Disability, or on the date on which the
participant dies or becomes Disabled during the one year period after the
participant's service on the Board terminates for any reason other than cause,
death or Disability, shall terminate two years after the participant's service
on the Board terminates, in the case of (i) hereof, or two years after the
participant dies or becomes Disabled, in the case of (ii) hereof; provided that
in no event shall any option be exercisable on or after the tenth anniversary of
the date on which it was granted.
 
    (d) An option may not be exercised for fewer than fifty shares unless fewer
than fifty shares remain subject to the option at the time, in which case the
option may not be exercised for less than the full balance of the shares that
remain subject to the option at the time.
 
    (e) The Company's obligation to issue or transfer shares of Common Stock
pursuant to the exercise of any option under this Plan shall be subject to the
condition that such issuance or transfer would not impair the Company's capital
or constitute a breach of or cause the Company to be in violation of any
covenant, warranty or representation made by the Company in any credit agreement
to which the Company is a party before the date of grant of such option.
 
6.4 TIME AND MANNER OF OPTION EXERCISE. An option shall be considered exercised
if and when written notice, signed by the person exercising the option and
stating the number of shares with respect to which the option is being
exercised, is received by the Secretary on a form approved for this purpose by
the Committee, accompanied by full payment of the option exercise price in one
or more of the forms described in section 6.5 below for the number of shares to
be purchased. No option may at any time be exercised with respect to a
fractional share.
 
6.5 PAYMENT OF EXERCISE PRICE. The option exercise price may be paid in whole or
in part (a) in cash, (b) by bank-certified check, cashier's check, or personal
check subject to collection, (c) if so provided in the written instrument
evidencing the option and subject to such other terms and conditions as the
Committee may in its discretion impose, in whole shares of Common Stock valued
at their Fair Market Value on the date of exercise and surrendered to the
Company actually or by attestation, provided that such shares have been held by
the participant for at least six months before the date of exercise or were
acquired on the open market, or (d) if (and only if) permissible under section
714 of the New York Business Corporation Law and section 402 of the
Sarbanes-Oxley Act of 2002, by delivering to the Company a properly executed
exercise notice together with a copy of irrevocable instructions to a
stockbroker to sell immediately some or all of the shares acquired by exercise
of the option and to deliver promptly to the Company an amount of sale proceeds
(or, in lieu of or pending a sale, loan proceeds) sufficient to pay the purchase
price.
 
 
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<PAGE>
6.6 EXERCISE AFTER DEATH. Following the death of a participant, any options that
are or become exercisable at the time of the participant's death may be
exercised prior to their expiration or termination pursuant to the provisions of
sections 6.3(a) and (c) above by the person to whom or entity to which the
options were transferred during the participant's lifetime in accordance with
section 6.7 below (if any) or, if the options were not so transferred, by the
participant's beneficiary designated pursuant to the provision of section 6.7
below or, if no such beneficiary has been designated or survives the
participant, by the participant's estate or the person or persons to whom the
options passed by will or the laws of descent and distribution.
 
6.7 TRANSFERABILITY. An option granted under the Plan is not transferable by the
participant other than by will or the laws of descent and distribution and,
during the lifetime of the participant, is exercisable only by him or his legal
representative (or other rightful holder of such option). Notwithstanding the
foregoing, a participant may designate a beneficiary to whom his options shall
pass in the event of his death, provided that such beneficiary is designated in
writing on a form approved for that purpose by the Committee and such form is
received by the Secretary prior to the participant's death and, provided
further, that the Committee consents to any beneficiary so designated. In
addition, notwithstanding the foregoing, during his lifetime a participant may
transfer any option granted under the Plan to members of his immediate family
(defined as his children, grandchildren and spouse, including children and
grandchildren by marriage or adoption) or to one or more trusts for the benefit
of such family members or partnerships or other entities in which family members
are the only partners or members, if (and only if) (a) the Committee consents in
writing to such transfer and, if such consent is conditional, any conditions to
such consent are satisfied, and (b) such transfer is not a transfer for value
within the meaning of General Instruction A(1)(a)(5) to SEC Form S-8 (or a
successor form). Any such transferred option shall continue to be subject to the
same terms and conditions that were applicable to such option immediately prior
to its transfer (except that such transferred option shall not be further
transferable either by the participant or the transferee inter vivos).
 
6.8 REGULATORY APPROVAL AND COMPLIANCE. No option shall be exercisable unless
and until the Company (i) obtains the approval of all regulatory bodies whose
approval the General Counsel may deem necessary or desirable, and (ii) complies
with all legal requirements deemed applicable by the General Counsel.
 
6.9 DELIVERY OF PURCHASED SHARES. Shares purchased pursuant to the exercise of
an option granted under the Plan shall be issued or transferred to the person
exercising the option as soon as practicable after the options are properly
exercised. However, the Committee may (but need not) permit the person
exercising the option to elect to defer the issuance or transfer of shares
purchased pursuant to the exercise of the options granted under the Plan on such
terms and subject to such conditions and for such periods of time as the
Committee may in its discretion provide. During any period during which the
issuance or transfer of shares is deferred, the person who exercised the option
may be paid amounts equivalent to the dividends which would have been paid on
the deferred shares had they been issued and outstanding, or in lieu of such
amounts the person who exercised the option may be credited on the books of the
Company with a number of additional deferred shares of Common Stock determined
by dividing the amount of each such dividend equivalent by the Fair Market Value
of a share of Common Stock on the relevant dividend payment date, which
additional deferred shares may in turn accrue additional
 
 
                                       75
<PAGE>
dividend equivalents and be issued or transferred when the shares purchased
pursuant to the exercise of the option are issued or transferred to such person
or at such other time or times as the Committee may provide. Any shares issued
or transferred in lieu of amounts equivalent to dividends as aforesaid shall be
charged against the number of shares available for grants under the Plan.
 
7. CAPITAL ADJUSTMENTS. The aggregate number and class of shares subject to
issuance and transfer under the Plan set forth in section 3 of the Plan, the
number and class of shares with respect to which options shall be or may be
granted to Eligible Directors under section 6 of the Plan, the number and class
of shares subject to each outstanding option, and the exercise price per share
specified in each outstanding option, shall be appropriately adjusted by the
Committee in the event of stock dividends, stock splits, spinoffs or other
distributions of assets (other than normal cash dividends), recapitalizations,
reorganizations, mergers, consolidations, exchanges or other changes in
corporate structure or capitalization, provided that, notwithstanding the
foregoing, the Committee may but need not appropriately adjust the number of
shares with respect to which options are to be granted pursuant to section
6.2(a) of the Plan after any of the aforementioned events.
 
8. EFFECTIVE DATE AND DURATION OF PLAN. The Plan shall become effective if and
when the stockholders of the Company approve it either (i) at a duly held
stockholders' meeting or (ii) by the written consent of the holders of a
majority of the securities of the Company entitled to vote, in accordance with
any applicable provisions of Section 505 of the New York Business Corporation
Law. If the Plan is not so approved by stockholders, the Plan shall be null,
void and of no force or effect. If so approved, the Plan shall remain in effect
until all shares authorized to be issued or transferred hereunder have been
issued or transferred or until the Plan is sooner terminated by the Board of
Directors, and shall continue in effect thereafter with respect to any options
outstanding at the time of such termination.
 
9. AMENDMENT AND TERMINATION OF THE PLAN. Subject to any applicable shareholder
approval requirements of New York or federal law and the New York Stock
Exchange, the Plan may be amended by the Board of Directors at any time and in
any respect, provided that, without stockholder approval, no amendment shall
permit the exercise price of outstanding options granted under the Plan to be
reduced, whether by cancelling the options and granting new options in
replacement thereof or otherwise, except as permitted by section 7 hereof. The
Plan may also be terminated at any time by the Board of Directors. Any provision
of this section 9 to the contrary notwithstanding, no amendment or termination
of the Plan shall adversely affect any option granted prior to the date of such
amendment or termination without the written consent of the participant.
 
10. GENERAL PROVISIONS.
 
    (a) Nothing contained in this Plan shall be deemed to confer upon any person
any right to continue as a director of or to be associated in any other way with
the Company for any period of time or at any particular rate of compensation.
 
 
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    (b) No person shall have any rights as a stockholder of the Company with
respect to any shares optioned to him under the Plan until such shares are
issued or transferred to him.
 
    (c) All expenses of adopting and administering the Plan shall be borne by
the Company, and none of such expenses shall be charged to any participant.
 
    (d) The Plan shall be governed by and construed under the laws of the State
of New York without giving effect to the principles of conflicts of laws of that
State.
 
    (e) Option grants under this Plan are intended to qualify for an exemption
under SEC Rule 16b-3. Every provision of the Plan shall be administered,
interpreted and construed to qualify option grants under the Plan for such an
exemption, and any provision that cannot be so administered, interpreted and
construed shall to that extent be disregarded.
 
 
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