THE 2002 LONG-TERM INCENTIVE AWARD PLAN
                                       OF
                            WALTER INDUSTRIES, INC.
 
    Walter Industries, Inc., a Delaware corporation, has adopted the 2002
Long-Term Incentive Award Plan of Walter Industries, Inc., (the "Plan"),
effective February 21, 2002, for the benefit of its eligible employees,
consultants and directors.
 
    The purposes of the Plan are as follows:
 
        (1) To provide an additional incentive for directors, Employees and
    Consultants (as such terms are defined below) to further the growth,
    development and financial success of the Company by personally benefiting
    through the ownership of Company stock and/or rights which recognize such
    growth, development and financial success.
 
        (2) To enable the Company to obtain and retain the services of
    directors, Employees and Consultants considered essential to the long range
    success of the Company by offering them an opportunity to own stock in the
    Company and/or rights which will reflect the growth, development and
    financial success of the Company.
 
                                   ARTICLE I.
                                  DEFINITIONS
 
    Wherever the following terms are used in the Plan they shall have the
meanings specified below, unless the context clearly indicates otherwise. The
singular pronoun shall include the plural where the context so indicates.
 
    1.1. "ADMINISTRATOR" shall mean the entity that conducts the general
administration of the Plan as provided herein. With reference to the
administration of the Plan with respect to Options granted to Independent
Directors, the term "Administrator" shall refer to the Board. With reference to
the administration of the Plan with respect to any other Award, the term
"Administrator" shall refer to the Committee unless the Board has assumed the
authority for administration of the Plan generally as provided in Section 10.1.
 
    1.2. "AWARD" shall mean an Option, a Restricted Stock award, a Performance
Award, a Dividend Equivalents award, a Deferred Stock award, a Stock Payment
award or a Stock Appreciation Right which may be awarded or granted under the
Plan (collectively, "Awards").
 
    1.3. "AWARD AGREEMENT" shall mean a written agreement executed by an
authorized officer of the Company and the Holder which shall contain such terms
and conditions with respect to an Award as the Administrator shall determine,
consistent with the Plan.
 
    1.4. "AWARD LIMIT" shall mean 1,000,000 shares of Common Stock, as adjusted
pursuant to Section 11.3; PROVIDED, HOWEVER, that solely with respect to
Performance Awards granted pursuant to Section 8.2(b), Award Limit shall mean
$2,000,000.
 
    1.5. "BOARD" shall mean the Board of Directors of the Company.
 
    1.6. "CHANGE IN CONTROL" shall mean a change in ownership or control of the
Company effected through any of the following transactions:
 
        (a) (i) Any person or related group of persons (other than the Company
    or a person that, prior to such transaction, directly or indirectly
    controls, is controlled by, or is under common control with, the Company or
    any person which as of the date of adoption of this Plan by the Board, has
    "beneficial
 
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    ownership" (within the meaning of Rule 13d-3 under the Exchange Act) of
    securities possessing more than 30% of the total combined voting power of
    the Company's outstanding securities) directly or indirectly acquires
    beneficial ownership of securities possessing more than 40% of the total
    combined voting power of the Company's outstanding securities, or
 
        (ii) Any person or related group of persons (other than the Company or a
    person that, prior to such transaction, directly or indirectly controls, is
    controlled by, or is under common control with, the Company) who is not, as
    of the date of adoption of this Plan by the Board, a beneficial owner of 1%
    or more of the total combined voting power of the Company's outstanding
    securities, directly or indirectly acquires beneficial ownership of
    securities possessing more than 25% of the total combined voting power of
    the Company's outstanding securities and is, upon the consummation of such
    acquisition, the beneficial owner of the largest percentage of the total
    combined voting power of the Company's outstanding securities; or
 
        (b) There is a change in the composition of the Board over a period of
    36 consecutive months (or less) such that a majority of the Board members
    (rounded up to the nearest whole number) ceases to be comprised of
    individuals who either (i) have been Board members continuously since the
    beginning of such period, or (ii) have been elected or nominated for
    election as Board members during such period by at least a majority of the
    Board members described in clause (i) who were still in office at the time
    such election or nomination was approved by the Board; or
 
        (c) The stockholders of the Company approve a merger or consolidation of
    the Company with any other corporation (or other entity), other than a
    merger or consolidation which would result in the voting securities of the
    Company outstanding immediately prior thereto continuing to represent
    (either by remaining outstanding or by being converted into voting
    securities of the surviving entity) more than 66 2/3% of the combined voting
    power of the voting securities of the Company or such surviving entity
    outstanding immediately after such merger or consolidation; provided,
    however, that a merger or consolidation effected to implement a
    recapitalization of the Company (or similar transaction) in which no person
    acquires more than 25% of the combined voting power of the Company's then
    outstanding securities shall not constitute a Change in Control; or
 
        (d) The stockholders of the Company approve a plan of complete
    liquidation of the Company or an agreement for the sale, lease or other
    disposition by the Company of all or substantially all of the Company's
    assets.
 
    1.7. "CODE" shall mean the Internal Revenue Code of 1986, as amended.
 
    1.8. "COMMITTEE" shall mean the Compensation Committee of the Board, or
another committee or subcommittee of the Board, appointed as provided in
Section 10.1.
 
    1.9. "COMMON STOCK" shall mean the common stock of the Company, par value
$.01 per share.
 
    1.10. "COMPANY" shall mean Walter Industries, Inc., a Delaware corporation.
 
    1.11. "CONSULTANT" shall mean any consultant or adviser if:
 
        (a) The consultant or adviser renders bona fide services to the Company;
 
        (b) The services rendered by the consultant or adviser are not in
    connection with the offer or sale of securities in a capital-raising
    transaction and do not directly or indirectly promote or maintain a market
    for the Company's securities; and
 
        (c) The consultant or adviser is a natural person who has contracted
    directly with the Company to render such services.
 
    1.12. "DEFERRED STOCK" shall mean Common Stock awarded under Article VIII of
the Plan.
 
    1.13. "DIRECTOR" shall mean a member of the Board.
 
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    1.14. "DIVIDEND EQUIVALENT" shall mean a right to receive the equivalent
value (in cash or Common Stock) of dividends paid on Common Stock, awarded under
Article VIII of the Plan.
 
    1.15. "DRO" shall mean a domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder.
 
    1.16. "EMPLOYEE" shall mean any officer or other employee (as defined in
accordance with Section 3401(c) of the Code) of the Company, or of any
corporation which is a Subsidiary.
 
    1.17. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
 
    1.18. "FAIR MARKET VALUE" of a share of Common Stock as of a given date
shall be (a) the mean of the high and low sales prices (rounded to the nearest
$0.01) of a share of Common Stock on the principal exchange on which shares of
Common Stock are then trading, if any (or as reported on any composite index
which includes such principal exchange), on the trading day immediately
preceding such date, or if shares were not traded on the trading day immediately
preceding such date, then on the next preceding date on which a trade occurred,
or (b) if Common Stock is not traded on an exchange but is quoted on Nasdaq or a
successor quotation system, the mean between the closing representative bid and
asked prices for the Common Stock on the trading day immediately preceding such
date as reported by Nasdaq or such successor quotation system, or (c) if Common
Stock is not publicly traded on an exchange and not quoted on Nasdaq or a
successor quotation system, the Fair Market Value of a share of Common Stock as
established by the Administrator acting in good faith.
 
    1.19. "HOLDER" shall mean a person who has been granted or awarded an Award.
 
    1.20. "INCENTIVE STOCK OPTION" shall mean an option which conforms to the
applicable provisions of Section 422 of the Code and which is designated as an
Incentive Stock Option by the Administrator.
 
    1.21. "INDEPENDENT DIRECTOR" shall mean a member of the Board who is not an
Employee of the Company.
 
    1.22. "NON-QUALIFIED STOCK OPTION" shall mean an Option which is not
designated as an Incentive Stock Option by the Administrator.
 
    1.23. "OPTION" shall mean a stock option granted under Article IV of the
Plan. An Option granted under the Plan shall, as determined by the
Administrator, be either a Non-Qualified Stock Option or an Incentive Stock
Option; PROVIDED, HOWEVER, that Options granted to Independent Directors and
Consultants shall be Non-Qualified Stock Options.
 
    1.24. "PERFORMANCE AWARD" shall mean a cash bonus, stock bonus or other
performance or incentive award that is paid in cash, Common Stock or a
combination of both, awarded under Article VIII of the Plan.
 
    1.25. "PERFORMANCE CRITERIA" shall mean any objective business criterion
with respect to the Company, any Subsidiary or any division or operating unit,
as determined by the Administrator. Such performance criteria may include,
without limitation, one or more of: (a) net income, (b) pre-tax income,
(c) operating income, (d) cash flow, (e) earnings per share, (f) return on
equity, (g) return on invested capital or assets, (h) cost reductions or
savings, (i) funds from operations, (j) appreciation in the fair market value of
Common Stock, (k) earnings before any one or more of the following items:
interest, taxes, depreciation or amortization and (l) consummations of
acquisitions or sales of certain of the Company's assets, subsidiaries or other
businesses. With respect to Awards intended to qualify as "performance-based
compensation" under Section 162(m)(4)(C) of the Code, "Performance Criteria"
shall be limited to the criteria set forth in Section 1.25(a)-(l) above, and
such criteria shall be applied only to the extent permissible with respect to
such qualification under Section 162(m)(4)(C).
 
    1.26. "PLAN" shall mean the 2002 Long-Term Incentive Award Plan of Walter
Industries, Inc.
 
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    1.27. "RESTRICTED STOCK" shall mean Common Stock awarded under Article VII
of the Plan.
 
    1.28. "RULE 16B-3" shall mean Rule 16b-3 promulgated under the Exchange Act,
as such Rule may be amended from time to time.
 
    1.29. "SECTION 162(M) PARTICIPANT" shall mean any Employee whose
compensation for a given fiscal year may be subject to the limit on deductible
compensation imposed by Section 162(m) of the Code.
 
    1.30. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
 
    1.31. "STOCK APPRECIATION RIGHT" shall mean a stock appreciation right
granted under Article IX of the Plan.
 
    1.32. "STOCK PAYMENT" shall mean (a) a payment in the form of shares of
Common Stock, or (b) an option or other right to purchase shares of Common
Stock, as part of a deferred compensation arrangement, made in lieu of all or
any portion of the compensation, including without limitation, salary, bonuses
and commissions, that would otherwise become payable to an Employee or
Consultant in cash, awarded under Article VIII of the Plan.
 
    1.33. "SUBSIDIARY" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
 
    1.34. "SUBSTITUTE AWARD" shall mean an Option granted under this Plan upon
the assumption of, or in substitution for, outstanding equity awards previously
granted by a company or other entity in connection with a corporate transaction,
such as a merger, combination, consolidation or acquisition of property or
stock; PROVIDED, HOWEVER, that in no event shall the term "Substitute Award" be
construed to refer to an award made in connection with the cancellation and
repricing of an Option.
 
    1.35. "TERMINATION OF CONSULTANCY" shall mean the time when the engagement
of a Holder as a Consultant to the Company or a Subsidiary is terminated for any
reason, with or without cause, including, but not by way of limitation, by
resignation, discharge, death or retirement, but excluding terminations where
there is a simultaneous commencement of employment with the Company or any
Subsidiary. The Administrator, in its discretion, shall determine the effect of
all matters and questions relating to Termination of Consultancy, including, but
not by way of limitation, the question of whether a Termination of Consultancy
resulted from a discharge for good cause, and all questions of whether a
particular leave of absence constitutes a Termination of Consultancy.
Notwithstanding any other provision of the Plan, the Company or any Subsidiary
has an absolute and unrestricted right to terminate a Consultant's service at
any time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.
 
    1.36. "TERMINATION OF DIRECTORSHIP" shall mean the time when a Holder who is
an Independent Director ceases to be a Director for any reason, including, but
not by way of limitation, a termination by resignation, failure to be elected,
death or retirement. The Administrator, in its discretion, shall determine the
effect of all matters and questions relating to Termination of Directorship with
respect to Independent Directors.
 
    1.37. "TERMINATION OF EMPLOYMENT" shall mean the time when the
employee-employer relationship between a Holder and the Company or any
Subsidiary is terminated for any reason, with or without cause, including, but
not by way of limitation, a termination by resignation, discharge, death,
disability or retirement; but excluding (a) terminations where there is a
simultaneous reemployment or continuing employment of a Holder by the Company or
any Subsidiary, (b) at the discretion of the Administrator, terminations which
result in a temporary severance of the employee-employer relationship, and
(c) at the discretion of the Administrator, terminations which are followed by
the simultaneous establishment of a consulting relationship by the Company or a
Subsidiary with the former employee. The Administrator, in
 
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its discretion, shall determine the effect of all matters and questions relating
to Termination of Employment, including, but not by way of limitation, the
question of whether a Termination of Employment resulted from a discharge for
good cause, and all questions of whether a particular leave of absence
constitutes a Termination of Employment; PROVIDED, HOWEVER, that, with respect
to Incentive Stock Options, unless otherwise determined by the Administrator in
its discretion, a leave of absence, change in status from an employee to an
independent contractor or other change in the employee-employer relationship
shall constitute a Termination of Employment if, and to the extent that, such
leave of absence, change in status or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section.
 
                                  ARTICLE II.
                             SHARES SUBJECT TO PLAN
 
    2.1. SHARES SUBJECT TO PLAN.
 
        (a) The shares of stock subject to Awards shall be Common Stock. Subject
    to adjustment as provided in Section 11.3, the aggregate number of such
    shares which may be issued upon exercise of such Options or rights or upon
    any such Awards under the Plan shall not exceed 3,000,000. The shares of
    Common Stock issuable upon exercise of such Options or rights or upon any
    such awards may be either previously authorized but unissued shares or
    treasury shares.
 
        (b) The maximum number of shares which may be subject to Awards granted
    under the Plan to any individual in any calendar year shall not exceed the
    Award Limit. To the extent required by Section 162(m) of the Code, shares
    subject to Options which are canceled continue to be counted against the
    Award Limit.
 
    2.2. ADD-BACK OF OPTIONS AND OTHER RIGHTS; CERTAIN ACQUIRED ENTITIES.
 
        (a) If any Option, or other right to acquire shares of Common Stock
    under any other Award under the Plan, expires or is canceled without having
    been fully exercised, or is exercised in whole or in part for cash as
    permitted by the Plan, the number of shares subject to such Option or other
    right but as to which such Option or other right was not exercised prior to
    its expiration, cancellation or exercise may again be optioned, granted or
    awarded hereunder, subject to the limitations of Section 2.1. Furthermore,
    any shares subject to Awards which are adjusted pursuant to Section 11.3 and
    become exercisable with respect to shares of stock of another corporation
    shall be considered cancelled and may again be optioned, granted or awarded
    hereunder, subject to the limitations of Section 2.1. Shares of Common Stock
    which are delivered by the Holder or withheld by the Company upon the
    exercise of any Award under the Plan, in payment of the exercise price
    thereof or tax withholding thereon, may again be optioned, granted or
    awarded hereunder, subject to the limitations of Section 2.1. If any shares
    of Restricted Stock are surrendered by the Holder or repurchased by the
    Company pursuant to Section 7.4 or 7.5 hereof, such shares may again be
    optioned, granted or awarded hereunder, subject to the limitations of
    Section 2.1. Notwithstanding the provisions of this Section 2.2, no shares
    of Common Stock may again be optioned, granted or awarded if such action
    would cause an Incentive Stock Option to fail to qualify as an incentive
    stock option under Section 422 of the Code.
 
        (b) Subject to Sections 3.2(d) and 3.3, any shares of Common Stock that
    are issued by the Company, and any Awards that are granted as a result of
    the assumption of, or in substitution for, outstanding awards previously
    granted by an acquired entity shall not be counted against the limitations
    set forth in Section 2.1.
 
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                                  ARTICLE III.
                               GRANTING OF AWARDS
 
    3.1. AWARD AGREEMENT. Each Award shall be evidenced by an Award Agreement.
Award Agreements evidencing Awards intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code. Award Agreements evidencing Incentive Stock Options
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.
 
    3.2. PROVISIONS APPLICABLE TO SECTION 162(M) PARTICIPANTS.
 
        (a) The Committee, in its discretion, may determine whether an Award is
    to qualify as performance-based compensation as described in
    Section 162(m)(4)(C) of the Code.
 
        (b) Notwithstanding anything in the Plan to the contrary, the Committee
    may grant any Award to a Section 162(m) Participant, including Restricted
    Stock the restrictions with respect to which lapse upon the attainment of
    performance goals which are related to one or more of the Performance
    Criteria, and any performance or incentive award described in Article VIII
    that vests or becomes exercisable or payable upon the attainment of
    performance goals which are related to one or more of the Performance
    Criteria.
 
        (c) To the extent necessary to comply with the performance-based
    compensation requirements of Section 162(m)(4)(C) of the Code, with respect
    to any Award granted under Articles VII and VIII which may be granted to one
    or more Section 162(m) Participants, no later than ninety (90) days
    following the commencement of any fiscal year in question or any other
    designated fiscal period or period of service (or such other time as may be
    required or permitted by Section 162(m) of the Code), the Committee shall,
    in writing, (i) designate one or more Section 162(m) Participants,
    (ii) select the Performance Criteria applicable to the fiscal year or other
    designated fiscal period or period of service, (iii) establish the various
    performance targets, in terms of an objective formula or standard, and
    amounts of such Awards, as applicable, which may be earned for such fiscal
    year or other designated fiscal period or period of service, and
    (iv) specify the relationship between Performance Criteria and the
    performance targets and the amounts of such Awards, as applicable, to be
    earned by each Section 162(m) Participant for such fiscal year or other
    designated fiscal period or period of service. Following the completion of
    each fiscal year or other designated fiscal period or period of service, the
    Committee shall certify in writing whether the applicable performance
    targets have been achieved for such fiscal year or other designated fiscal
    period or period of service. In determining the amount earned by a
    Section 162(m) Participant, the Committee shall have the right to reduce
    (but not to increase) the amount payable at a given level of performance to
    take into account additional factors that the Committee may deem relevant to
    the assessment of individual or corporate performance for the fiscal year or
    other designated fiscal period or period of service.
 
        (d) Furthermore, notwithstanding any other provision of the Plan, any
    Award which is granted to a Section 162(m) Participant and is intended to
    qualify as performance-based compensation as described in
    Section 162(m)(4)(C) of the Code shall be subject to any additional
    limitations set forth in Section 162(m) of the Code (including any amendment
    to Section 162(m) of the Code) or any regulations or rulings issued
    thereunder that are requirements for qualification as performance-based
    compensation as described in Section 162(m)(4)(C) of the Code, and the Plan
    shall be deemed amended to the extent necessary to conform to such
    requirements.
 
    3.3. LIMITATIONS APPLICABLE TO SECTION 16 PERSONS. Notwithstanding any other
provision of the Plan, the Plan, and any Award granted or awarded to any
individual who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of
the Exchange Act) that
 
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are requirements for the application of such exemptive rule. To the extent
permitted by applicable law, the Plan and Awards granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such applicable
exemptive rule.
 
    3.4. CONSIDERATION. In consideration of the granting of an Award under the
Plan, the Holder shall agree, in the Award Agreement, to remain in the employ of
(or to consult for or to serve as an Independent Director of, as applicable) the
Company or any Subsidiary for a period of at least one year (or such shorter
period as may be fixed in the Award Agreement or by action of the Administrator
following grant of the Award) after the Award is granted (or, in the case of an
Independent Director, until the next annual meeting of stockholders of the
Company).
 
    3.5. AT-WILL EMPLOYMENT. Nothing in the Plan or in any Award Agreement
hereunder shall confer upon any Holder any right to continue in the employ of,
or as a Consultant for, the Company or any Subsidiary, or as a director of the
Company, or shall interfere with or restrict in any way the rights of the
Company and any Subsidiary, which are hereby expressly reserved, to discharge
any Holder at any time for any reason whatsoever, with or without cause, except
to the extent expressly provided otherwise in a written employment agreement
between the Holder and the Company and any Subsidiary.
 
                                  ARTICLE IV.
                       GRANTING OF OPTIONS TO EMPLOYEES,
                     CONSULTANTS AND INDEPENDENT DIRECTORS
 
    4.1. ELIGIBILITY. Any Employee or Consultant selected by the Administrator
pursuant to Section 4.4(a)(i) shall be eligible to be granted an Option. Each
Independent Director of the Company shall be eligible to be granted Options at
the times and in the manner set forth in Section 4.5.
 
    4.2. DISQUALIFICATION FOR STOCK OWNERSHIP. No person may be granted an
Incentive Stock Option under the Plan if such person, at the time the Incentive
Stock Option is granted, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any then
existing Subsidiary or parent corporation (within the meaning of Section 422 of
the Code) unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code.
 
    4.3. QUALIFICATION OF INCENTIVE STOCK OPTIONS. No Incentive Stock Option
shall be granted to any person who is not an Employee.
 
    4.4. GRANTING OF OPTIONS TO EMPLOYEES AND CONSULTANTS.
 
        (a) The Administrator shall from time to time, in its discretion, and
    subject to applicable limitations of the Plan:
 
           (i) Select from among the Employees or Consultants (including
       Employees or Consultants who have previously received Awards under the
       Plan) such of them as in its opinion should be granted Options;
 
           (ii) Subject to the Award Limit, determine the number of shares to be
       subject to such Options granted to the selected Employees or Consultants;
 
           (iii) Subject to Section 4.3, determine whether such Options are to
       be Incentive Stock Options or Non-Qualified Stock Options and whether
       such Options are to qualify as performance-based compensation as
       described in Section 162(m)(4)(C) of the Code; and
 
           (iv) Determine the terms and conditions of such Options, consistent
       with the Plan; PROVIDED, HOWEVER, that the terms and conditions of
       Options intended to qualify as performance-based compensation as
       described in Section 162(m)(4)(C) of the Code shall include, but not be
       limited to, such terms and conditions as may be necessary to meet the
       applicable provisions of Section 162(m) of the Code.
 
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        (b) Upon the selection of an Employee or Consultant to be granted an
    Option, the Administrator shall instruct the Secretary of the Company to
    issue the Option and may impose such conditions on the grant of the Option
    as it deems appropriate.
 
        (c) Any Incentive Stock Option granted under the Plan may be modified by
    the Administrator, with the consent of the Holder, to disqualify such Option
    from treatment as an "incentive stock option" under Section 422 of the Code.
 
    4.5. GRANTS OF OPTIONS TO INDEPENDENT DIRECTORS.
 
        (a) AUTOMATIC GRANTS. Each person who is an Independent Director as of
    the effective date hereof automatically shall be granted (i) an Option to
    purchase 4,000 shares of Common Stock (subject to adjustment as provided in
    Section 11.3) on such effective date and (ii) commencing in the first
    calendar year which begins after the effective date hereof, an Option to
    purchase 4,000 shares of Common Stock (subject to adjustment as provided in
    Section 11.3) on the date of each annual meeting of the Company's
    stockholders at which the Independent Director is reelected to the Board.
    During the term of the Plan, a person who is initially elected to the Board
    after the effective date hereof and who is an Independent Director at the
    time of such initial election automatically shall be granted (i) an Option
    to purchase 4,000 shares of Common Stock (subject to adjustment as provided
    in Section 11.3) on the date of such initial election and (ii) commencing in
    the first calendar year which begins after the date of such election, an
    Option to purchase 4,000 shares of Common Stock (subject to adjustment as
    provided in Section 11.3) on the date of each annual meeting of the
    Company's stockholders at which the Independent Director is reelected to the
    Board. Members of the Board who are employees of the Company who
    subsequently retire from the Company and remain on the Board will not
    receive an Option grant pursuant to this Section 4.5(a).
 
        (b) DISCRETIONARY GRANTS. In addition to the grants set forth in
    Section 4.5(a) hereof, the Administrator may from time to time, in its
    discretion, and subject to applicable limitations of the Plan:
 
           (i) Select from among the Independent Directors (including
       Independent Directors who have previously received Options under the
       Plan) such of them as in its opinion should be granted Options;
 
           (ii) Subject to the Award Limit, determine the number of shares to be
       subject to such Options granted to the selected Independent Directors;
 
           (iii) Subject to the provisions of Article 5, determine the terms and
       conditions of such Options, consistent with the Plan.
 
    The foregoing Option grants authorized by this Section 4.5 are subject to
stockholder approval of the Plan.
 
    4.6. OPTIONS IN LIEU OF CASH COMPENSATION. Options may be granted under the
Plan to Employees and Consultants in lieu of cash bonuses which would otherwise
be payable to such Employees and Consultants and to Independent Directors in
lieu of directors' fees which would otherwise be payable to such Independent
Directors, pursuant to such policies which may be adopted by the Administrator
from time to time.
 
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                                   ARTICLE V.
                                TERMS OF OPTIONS
 
    5.1. OPTION PRICE. The price per share of the shares subject to each Option
granted to Employees and Consultants shall be set by the Administrator;
PROVIDED, HOWEVER, that such price shall be no less than the par value of a
share of Common Stock, unless otherwise permitted by applicable state law, and:
 
        (a) In the case of Options intended to qualify as performance-based
    compensation as described in Section 162(m)(4)(C) of the Code, such price
    shall not be less than 100% of the Fair Market Value of a share of Common
    Stock on the date the Option is granted;
 
        (b) In the case of Incentive Stock Options such price shall not be less
    than 100% of the Fair Market Value of a share of Common Stock on the date
    the Option is granted (or the date the Option is modified, extended or
    renewed for purposes of Section 424(h) of the Code);
 
        (c) In the case of Incentive Stock Options granted to an individual then
    owning (within the meaning of Section 424(d) of the Code) more than 10% of
    the total combined voting power of all classes of stock of the Company or
    any Subsidiary or parent corporation thereof (within the meaning of
    Section 422 of the Code), such price shall not be less than 110% of the Fair
    Market Value of a share of Common Stock on the date the Option is granted
    (or the date the Option is modified, extended or renewed for purposes of
    Section 424(h) of the Code).
 
    5.2. OPTION TERM. The term of an Option granted to an Employee or Consultant
shall be set by the Administrator in its discretion; PROVIDED, HOWEVER, that, in
the case of Incentive Stock Options, the term shall not be more than 10 years
from the date the Incentive Stock Option is granted, or five years from the date
the Incentive Stock Option is granted if the Incentive Stock Option is granted
to an individual then owning (within the meaning of Section 424(d) of the Code)
more than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code). Except as limited by requirements of Section 422 of
the Code and regulations and rulings thereunder applicable to Incentive Stock
Options, the Administrator may in its discretion (a) extend the term of any
outstanding Option in connection with any Termination of Employment or
Termination of Consultancy of the Holder, or amend any other term or condition
of such Option relating to such a termination or (b) grant an Option for a term
of less than 10 years and subsequently extend the term of such Option to
10 years without consideration.
 
    5.3. OPTION VESTING.
 
        (a) The period during which the right to exercise, in whole or in part,
    an Option granted to an Employee or a Consultant vests in the Holder shall
    be set by the Administrator and the Administrator may determine that an
    Option may not be exercised in whole or in part for a specified period after
    it is granted. At any time after grant of an Option, the Administrator may,
    in its discretion and subject to whatever terms and conditions it selects,
    accelerate the period during which an Option granted to an Employee or
    Consultant vests.
 
        (b) No portion of an Option granted to an Employee or Consultant which
    is unexercisable at Termination of Employment or Termination of Consultancy,
    as applicable, shall thereafter become exercisable, except as may be
    otherwise provided by the Administrator either in the Award Agreement or by
    action of the Administrator following the grant of the Option.
 
        (c) To the extent that the aggregate Fair Market Value of stock with
    respect to which "incentive stock options" (within the meaning of
    Section 422 of the Code, but without regard to Section 422(d) of the Code)
    are exercisable for the first time by a Holder during any calendar year
    (under the Plan and all other incentive stock option plans of the Company
    and any parent or subsidiary corporation,
 
                                      A-9
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    within the meaning of Section 422 of the Code) of the Company, exceeds
    $100,000, such Options shall be treated as Non-Qualified Stock Options to
    the extent required by Section 422 of the Code. The rule set forth in the
    preceding sentence shall be applied by taking Options into account in the
    order in which they were granted. For purposes of this Section 5.3(c), the
    Fair Market Value of stock shall be determined as of the time the Option
    with respect to such stock is granted.
 
    5.4. TERMS OF OPTIONS GRANTED TO INDEPENDENT DIRECTORS. The price per share
of the shares subject to each Option granted to an Independent Director shall
equal 100% of the Fair Market Value of a share of Common Stock on the date the
Option is granted. Options granted to Independent Directors pursuant to
Section 4.5(a) hereof shall become exercisable in cumulative annual installments
of one-third each on each of the first, second and third anniversaries of the
date of Option grant and, subject to Section 6.6, the term of each Option
granted to an Independent Director shall be a maximum of 10 years from the date
the Option is granted, except that any Option granted to an Independent Director
shall by its terms become immediately exercisable in full upon the retirement of
the Independent Director at age 65 with 5 years of service as an Independent
Director. Unless otherwise provided for by the Administrator, no portion of an
Option which is unexercisable at Termination of Directorship shall thereafter
become exercisable.
 
    5.5. SUBSTITUTE AWARDS. Notwithstanding the foregoing provisions of this
Article V to the contrary, in the case of an Option that is a Substitute Award,
the price per share of the shares subject to such Option may be less than the
Fair Market Value per share on the date of grant, PROVIDED, that the excess of:
 
        (a) The aggregate Fair Market Value (as of the date such Substitute
    Award is granted) of the shares subject to the Substitute Award; over
 
        (b) The aggregate exercise price thereof;
 
    does not exceed the excess of:
 
        (c) The aggregate fair market value (as of the time immediately
    preceding the transaction giving rise to the Substitute Award, such fair
    market value to be determined by the Administrator) of the shares of the
    predecessor entity that were subject to the grant assumed or substituted for
    by the Company; over
 
        (d) The aggregate exercise price of such shares.
 
                                  ARTICLE VI.
                              EXERCISE OF OPTIONS
 
    6.1. PARTIAL EXERCISE. An exercisable Option may be exercised in whole or in
part. However, an Option shall not be exercisable with respect to fractional
shares and the Administrator may require that, by the terms of the Option, a
partial exercise be with respect to a minimum number of shares.
 
    6.2. MANNER OF EXERCISE. All or a portion of an exercisable Option shall be
deemed exercised upon delivery of all of the following to the Secretary of the
Company or his or her office:
 
        (a) A written notice complying with the applicable rules established by
    the Administrator stating that the Option, or a portion thereof, is
    exercised. The notice shall be signed by the Holder or other person then
    entitled to exercise the Option or such portion of the Option;
 
        (b) Such representations and documents as the Administrator, in its
    discretion, deems necessary or advisable to effect compliance with all
    applicable provisions of the Securities Act and any other federal or state
    securities laws or regulations. The Administrator may, in its discretion,
    also take whatever additional actions it deems appropriate to effect such
    compliance including, without
 
                                      A-10
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    limitation, placing legends on share certificates and issuing stop-transfer
    notices to agents and registrars;
 
        (c) Any form or forms of identification requested by the Administrator
    and, in the event that the Option shall be exercised pursuant to
    Section 11.1 by any person or persons other than the Holder, appropriate
    proof of the right of such person or persons to exercise the Option; and
 
        (d) Full cash payment to the Secretary of the Company for the shares
    with respect to which the Option, or portion thereof, is exercised. However,
    the Administrator may, in its discretion, (i) allow a delay in payment up to
    30 days from the date the Option, or portion thereof, is exercised;
    (ii) allow payment, in whole or in part, through the delivery of shares of
    Common Stock which have been owned by the Holder for at least six months,
    duly endorsed for transfer to the Company with a Fair Market Value on the
    date of delivery equal to the aggregate exercise price of the Option or
    exercised portion thereof; (iii) allow payment, in whole or in part, through
    the surrender of shares of Common Stock then issuable upon exercise of the
    Option having a Fair Market Value on the date of Option exercise equal to
    the aggregate exercise price of the Option or exercised portion thereof;
    (iv) allow payment, in whole or in part, through the delivery of property of
    any kind which constitutes good and valuable consideration; (v) allow
    payment, in whole or in part, through the delivery of a full recourse
    promissory note bearing interest (at no less than such rate as shall then
    preclude the imputation of interest under the Code) and payable upon such
    terms as may be prescribed by the Administrator; (vi) allow payment, in
    whole or in part, through the delivery of a notice that the Holder has
    placed a market sell order with a broker with respect to shares of Common
    Stock then issuable upon exercise of the Option, and that the broker has
    been directed to pay a sufficient portion of the net proceeds of the sale to
    the Company in satisfaction of the Option exercise price, PROVIDED that
    payment of such proceeds is then made to the Company upon settlement of such
    sale; or (vii) allow payment through any combination of the consideration
    provided in the foregoing subparagraphs (ii), (iii), (iv), (v) and (vi). In
    the case of a promissory note, the Administrator may also prescribe the form
    of such note and the security to be given for such note. The Option may not
    be exercised, however, by delivery of a promissory note or by a loan from
    the Company when or where such loan or other extension of credit is
    prohibited by law.
 
    6.3. CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The Company shall not be
required to issue or deliver any certificate or certificates for shares of stock
purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
 
        (a) The admission of such shares to listing on all stock exchanges on
    which such class of stock is then listed;
 
        (b) The completion of any registration or other qualification of such
    shares under any state or federal law, or under the rulings or regulations
    of the Securities and Exchange Commission or any other governmental
    regulatory body which the Administrator shall, in its discretion, deem
    necessary or advisable;
 
        (c) The obtaining of any approval or other clearance from any state or
    federal governmental agency which the Administrator shall, in its
    discretion, determine to be necessary or advisable;
 
        (d) The lapse of such reasonable period of time following the exercise
    of the Option as the Administrator may establish from time to time for
    reasons of administrative convenience; and
 
        (e) The receipt by the Company of full payment for such shares,
    including payment of any applicable withholding tax, which in the discretion
    of the Administrator may be in the form of consideration used by the Holder
    to pay for such shares under Section 6.2(d).
 
                                      A-11
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    6.4. RIGHTS AS STOCKHOLDERS. Holders shall not be, nor have any of the
rights or privileges of, stockholders of the Company in respect of any shares
purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by the Company to such
Holders.
 
    6.5. OWNERSHIP AND TRANSFER RESTRICTIONS. The Administrator, in its
discretion, may impose such restrictions on the ownership and transferability of
the shares purchasable upon the exercise of an Option as it deems appropriate.
Any such restriction shall be set forth in the respective Award Agreement and
may be referred to on the certificates evidencing such shares. The Holder shall
give the Company prompt notice of any disposition of shares of Common Stock
acquired by exercise of an Incentive Stock Option within (a) two years from the
date of granting (including the date the Option is modified, extended or renewed
for purposes of Section 424(h) of the Code) such Option to such Holder, or
(b) one year after the transfer of such shares to such Holder.
 
    6.6. ADDITIONAL LIMITATIONS ON EXERCISE OF OPTIONS. Holders may be required
to comply with any timing or other restrictions with respect to the settlement
or exercise of an Option, including a window-period limitation, as may be
imposed in the discretion of the Administrator.
 
                                  ARTICLE VII.
                           AWARD OF RESTRICTED STOCK
 
    7.1. ELIGIBILITY. Subject to the Award Limit, Restricted Stock may be
awarded to any Employee or Consultant who the Administrator determines should
receive such an Award.
 
    7.2. AWARD OF RESTRICTED STOCK.
 
        (a) The Administrator may from time to time, in its discretion:
 
           (i) Select from among the Employees or Consultants (including
       Employees or Consultants who have previously received other Awards under
       the Plan) such of them as in its opinion should be awarded Restricted
       Stock; and
 
           (ii) Determine the purchase price, if any, and other terms and
       conditions applicable to such Restricted Stock, consistent with the Plan.
 
        (b) The Administrator shall establish the purchase price, if any, and
    form of payment for Restricted Stock; PROVIDED, HOWEVER, that such purchase
    price shall be no less than the par value of the Common Stock to be
    purchased, unless otherwise permitted by applicable state law. In all cases,
    legal consideration shall be required for each issuance of Restricted Stock.
 
        (c) Upon the selection of an Employee or Consultant to be awarded
    Restricted Stock, the Administrator shall instruct the Secretary of the
    Company to issue such Restricted Stock and may impose such conditions on the
    issuance of such Restricted Stock as it deems appropriate.
 
    7.3. RIGHTS AS STOCKHOLDERS. Subject to Section 7.4, upon delivery of the
shares of Restricted Stock to the escrow holder pursuant to Section 7.6, the
Holder shall have, unless otherwise provided by the Administrator, all the
rights of a stockholder with respect to said shares, subject to the restrictions
in his or her Award Agreement, including the right to receive all dividends and
other distributions paid or made with respect to the shares; PROVIDED, HOWEVER,
that in the discretion of the Administrator, any extraordinary distributions
with respect to the Common Stock shall be subject to the restrictions set forth
in Section 7.10.
 
                                      A-12
<Page>
    7.4. RESTRICTION. All shares of Restricted Stock issued under the Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Award Agreement, be
subject to such restrictions as the Administrator shall provide, which
restrictions may include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on duration of employment with
the Company, Company performance and individual performance; PROVIDED, HOWEVER,
that, except with respect to shares of Restricted Stock granted to
Section 162(m) Participants, by action taken after the Restricted Stock is
issued, the Administrator may, on such terms and conditions as it may determine
to be appropriate, remove any or all of the restrictions imposed by the terms of
the Award Agreement. Restricted Stock may not be sold or encumbered until all
restrictions are terminated or expire. If no consideration was paid by the
Holder upon issuance, a Holder's rights in unvested Restricted Stock shall
lapse, and such Restricted Stock shall be surrendered to the Company without
consideration, upon Termination of Employment or, if applicable, upon
Termination of Consultancy with the Company; PROVIDED, HOWEVER, that the
Administrator in its discretion may provide that such rights shall not lapse in
the event of a Termination of Employment following a "change of ownership or
control" (within the meaning of Treasury Regulation
Section 7.162-27(e)(2)(v) or any successor regulation thereto) of the Company or
because of the Holder's death or disability; PROVIDED, FURTHER, except with
respect to shares of Restricted Stock granted to Section 162(m) Participants,
the Administrator in its discretion may provide that no such lapse or surrender
shall occur in the event of a Termination of Employment, or a Termination of
Consultancy, without cause or following any Change in Control of the Company or
because of the Holder's retirement, or otherwise.
 
    7.5. REPURCHASE OF RESTRICTED STOCK. The Administrator shall provide in the
terms of each individual Award Agreement that the Company shall have the right
to repurchase from the Holder the Restricted Stock then subject to restrictions
under the Award Agreement immediately upon a Termination of Employment or, if
applicable, upon a Termination of Consultancy between the Holder and the
Company, at a cash price per share equal to the price paid by the Holder for
such Restricted Stock; PROVIDED, HOWEVER, that the Administrator in its
discretion may provide that no such right of repurchase shall exist in the event
of a Termination of Employment following a "change of ownership or control"
(within the meaning of Treasury Regulation Section 7.162-27(e)(2)(v) or any
successor regulation thereto) of the Company or because of the Holder's death or
disability; PROVIDED, FURTHER, that, except with respect to shares of Restricted
Stock granted to Section 162(m) Participants, the Administrator in its
discretion may provide that no such right of repurchase shall exist in the event
of a Termination of Employment or a Termination of Consultancy without cause or
following any Change in Control of the Company or because of the Holder's
retirement, or otherwise.
 
    7.6. ESCROW. The Secretary of the Company or such other escrow holder as the
Administrator may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions imposed under the
Award Agreement with respect to the shares evidenced by such certificate expire
or shall have been removed.
 
    7.7. LEGEND. In order to enforce the restrictions imposed upon shares of
Restricted Stock hereunder, the Administrator shall cause a legend or legends to
be placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions under Award Agreements, which legend or legends
shall make appropriate reference to the conditions imposed thereby.
 
    7.8. SECTION 83(B) ELECTION. If a Holder makes an election under
Section 83(b) of the Code, or any successor section thereto, to be taxed with
respect to the Restricted Stock as of the date of transfer of the Restricted
Stock rather than as of the date or dates upon which the Holder would otherwise
be taxable under Section 83(a) of the Code, the Holder shall deliver a copy of
such election to the Company immediately after filing such election with the
Internal Revenue Service.
 
                                      A-13
<Page>
                                 ARTICLE VIII.
              DIVIDEND EQUIVALENTS, DEFERRED STOCK, STOCK PAYMENTS
 
    8.1. ELIGIBILITY. Subject to the Award Limit, one or more Performance
Awards, Dividend Equivalents, awards of Deferred Stock and/or Stock Payments may
be granted to any Employee or any Consultant whom the Administrator determines
should receive such an Award.
 
    8.2. PERFORMANCE AWARDS.
 
        (a) Any Employee or Consultant selected by the Administrator may be
    granted one or more Performance Awards. The value of such Performance Awards
    may be linked to any one or more of the Performance Criteria or other
    specific performance criteria determined appropriate by the Administrator,
    in each case on a specified date or dates or over any period or periods
    determined by the Administrator. In making such determinations, the
    Administrator shall consider (among such other factors as it deems relevant
    in light of the specific type of award) the contributions, responsibilities
    and other compensation of the particular Employee or Consultant.
 
        (b) Without limiting Section 8.2(a), the Administrator may grant
    Performance Awards to any 162(m) Participant in the form of a cash bonus
    payable upon the attainment of objective performance goals which are
    established by the Administrator and relate to one or more of the
    Performance Criteria, in each case on a specified date or dates or over any
    period or periods determined by the Administrator. Any such bonuses paid to
    Section 162(m) Participants shall be based upon objectively determinable
    bonus formulas established in accordance with the provisions of
    Section 9.8. The maximum amount of any Performance Award payable to a
    Section 162(m) Participant under this Section 8.2(b) shall not exceed the
    Award Limit with respect to any calendar year of the Company.
 
    8.3. DIVIDEND EQUIVALENTS.
 
        (a) Any Employee or Consultant selected by the Administrator may be
    granted Dividend Equivalents based on the dividends declared on Common
    Stock, to be credited as of dividend payment dates, during the period
    between the date a Stock Appreciation Right, award of Deferred Stock, or
    Performance Award is granted, and the date such Stock Appreciation Right,
    award of Deferred Stock, or Performance Award is exercised, vests or
    expires, as determined by the Administrator. Such Dividend Equivalents shall
    be converted to cash or additional shares of Common Stock by such formula
    and at such time and subject to such limitations as may be determined by the
    Administrator.
 
        (b) Any Holder of an Option who is an Employee or Consultant selected by
    the Administrator may be granted Dividend Equivalents based on the dividends
    declared on Common Stock, to be credited as of dividend payment dates,
    during the period between the date an Option is granted, and the date such
    Option is exercised, vests or expires, as determined by the Administrator.
    Such Dividend Equivalents shall be converted to cash or additional shares of
    Common Stock by such formula and at such time and subject to such
    limitations as may be determined by the Administrator.
 
        (c) Any Holder of an Option who is an Independent Director selected by
    the Administrator may be granted Dividend Equivalents based on the dividends
    declared on Common Stock, to be credited as of dividend payment dates,
    during the period between the date an Option is granted and the date such
    Option is exercised, vests or expires, as determined by the Administrator.
    Such Dividend Equivalents shall be converted to cash or additional shares of
    Common Stock by such formula and at such time and subject to such
    limitations as may be determined by the Administrator.
 
                                      A-14
<Page>
        (d) Dividend Equivalents granted with respect to Options intended to be
    qualified performance-based compensation for purposes of Section 162(m) of
    the Code shall be payable, with respect to pre-exercise periods, regardless
    of whether such Option is subsequently exercised.
 
    8.4. STOCK PAYMENTS. Any Employee or Consultant selected by the
Administrator may receive Stock Payments in the manner determined from time to
time by the Administrator. The number of shares shall be determined by the
Administrator and may be based upon the Performance Criteria or other specific
performance criteria determined appropriate by the Administrator, determined on
the date such Stock Payment is made or on any date thereafter.
 
    8.5. DEFERRED STOCK. Any Employee or Consultant selected by the
Administrator may be granted an award of Deferred Stock in the manner determined
from time to time by the Administrator. The number of shares of Deferred Stock
shall be determined by the Administrator and may be linked to the Performance
Criteria or other specific performance criteria determined to be appropriate by
the Administrator, in each case on a specified date or dates or over any period
or periods determined by the Administrator. Common Stock underlying a Deferred
Stock award will not be issued until the Deferred Stock award has vested,
pursuant to a vesting schedule or performance criteria set by the Administrator.
Unless otherwise provided by the Administrator, a Holder of Deferred Stock shall
have no rights as a Company stockholder with respect to such Deferred Stock
until such time as the Award has vested and the Common Stock underlying the
Award has been issued.
 
    8.6. TERM. The term of a Performance Award, Dividend Equivalent, award of
Deferred Stock and/or Stock Payment shall be set by the Administrator in its
discretion.
 
    8.7. EXERCISE OR PURCHASE PRICE. The Administrator may establish the
exercise or purchase price of a Performance Award, shares of Deferred Stock or
shares received as a Stock Payment; PROVIDED, HOWEVER, that such price shall not
be less than the par value of a share of Common Stock, unless otherwise
permitted by applicable state law.
 
    8.8. EXERCISE UPON TERMINATION OF EMPLOYMENT, TERMINATION OF CONSULTANCY OR
TERMINATION OF DIRECTORSHIP. A Performance Award, Dividend Equivalent, award of
Deferred Stock and/or Stock Payment is exercisable or payable only while the
Holder is an Employee, Consultant or Independent Director, as applicable;
PROVIDED, HOWEVER, that the Administrator in its discretion may provide that the
Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock
Payment may be exercised or paid subsequent to a Termination of Employment
following a "change of control or ownership" (within the meaning of
Section 7.162-27(e)(2)(v) or any successor regulation thereto) of the Company;
PROVIDED, FURTHER, that except with respect to Performance Awards granted to
Section 162(m) Participants, the Administrator in its discretion may provide
that Performance Awards may be exercised or paid following a Termination of
Employment or a Termination of Consultancy without cause, or following a Change
in Control of the Company, or because of the Holder's retirement, death or
disability, or otherwise.
 
    8.9. FORM OF PAYMENT. Payment of the amount determined under Section 8.2 or
8.3 above shall be in cash, in Common Stock or a combination of both, as
determined by the Administrator. To the extent any payment under this
Article VIII is effected in Common Stock, it shall be made subject to
satisfaction of all provisions of Section 6.9.
 
                                  ARTICLE IX.
                           STOCK APPRECIATION RIGHTS
 
    9.1. GRANT OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right may be
granted to any Employee or Consultant selected by the Administrator. A Stock
Appreciation Right may be granted (a) in connection and simultaneously with the
grant of an Option, (b) with respect to a previously granted Option, or
(c) independent of an Option. A Stock Appreciation Right shall be subject to
such terms and conditions
 
                                      A-15
<Page>
not inconsistent with the Plan as the Administrator shall impose and shall be
evidenced by an Award Agreement.
 
    9.2. COUPLED STOCK APPRECIATION RIGHTS.
 
        (a) A Coupled Stock Appreciation Right ("CSAR") shall be related to a
    particular Option and shall be exercisable only when and to the extent the
    related Option is exercisable.
 
        (b) A CSAR may be granted to the Holder for no more than the number of
    shares subject to the simultaneously or previously granted Option to which
    it is coupled.
 
        (c) A CSAR shall entitle the Holder (or other person entitled to
    exercise the Option pursuant to the Plan) to surrender to the Company
    unexercised a portion of the Option to which the CSAR relates (to the extent
    then exercisable pursuant to its terms) and to receive from the Company in
    exchange therefor an amount determined by multiplying the difference
    obtained by subtracting the Option exercise price from the Fair Market Value
    of a share of Common Stock on the date of exercise of the CSAR by the number
    of shares of Common Stock with respect to which the CSAR shall have been
    exercised, subject to any limitations the Administrator may impose.
 
    9.3. INDEPENDENT STOCK APPRECIATION RIGHTS.
 
        (a) An Independent Stock Appreciation Right ("ISAR") shall be unrelated
    to any Option and shall have a term set by the Administrator. An ISAR shall
    be exercisable in such installments as the Administrator may determine. An
    ISAR shall cover such number of shares of Common Stock as the Administrator
    may determine. The exercise price per share of Common Stock subject to each
    ISAR shall be set by the Administrator. An ISAR is exercisable only while
    the Holder is an Employee or Consultant; provided, that the Administrator
    may determine that the ISAR may be exercised subsequent to Termination of
    Employment or Termination of Consultancy without cause, or following a
    Change in Control of the Company, or because of the Holder's retirement,
    death or disability, or otherwise.
 
        (b) An ISAR shall entitle the Holder (or other person entitled to
    exercise the ISAR pursuant to the Plan) to exercise all or a specified
    portion of the ISAR (to the extent then exercisable pursuant to its terms)
    and to receive from the Company an amount determined by multiplying the
    difference obtained by subtracting the exercise price per share of the ISAR
    from the Fair Market Value of a share of Common Stock on the date of
    exercise of the ISAR by the number of shares of Common Stock with respect to
    which the ISAR shall have been exercised, subject to any limitations the
    Administrator may impose.
 
    9.4. PAYMENT AND LIMITATIONS ON EXERCISE.
 
        (a) Payment of the amounts determined under Section 9.2(c) and 9.3(b)
    above shall be in cash, in Common Stock (based on its Fair Market Value as
    of the date the Stock Appreciation Right is exercised) or a combination of
    both, as determined by the Administrator. To the extent such payment is
    effected in Common Stock it shall be made subject to satisfaction of all
    provisions of Section 6.3 above pertaining to Options.
 
        (b) Holders of Stock Appreciation Rights may be required to comply with
    any timing or other restrictions with respect to the settlement or exercise
    of a Stock Appreciation Right, including a window-period limitation, as may
    be imposed in the discretion of the Administrator.
 
                                      A-16
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                                   ARTICLE X.
                                 ADMINISTRATION
 
    10.1. COMPENSATION COMMITTEE. The Compensation Committee (or one or more
other committees or subcommittees of the Board assuming the functions of the
Committee under the Plan) shall consist solely of two or more Independent
Directors appointed by and holding office at the pleasure of the Board, each of
whom is both a "non-employee director" as defined by Rule 16b-3 and an "outside
director" for purposes of Section 162(m) of the Code. Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members may
resign at any time by delivering written notice to the Board. Vacancies in the
Committee may be filled by the Board.
 
    10.2. DUTIES AND POWERS OF ADMINISTRATOR. It shall be the duty of the
Administrator to conduct the general administration of the Plan in accordance
with its provisions. The Administrator shall have the power to interpret the
Plan and the Award Agreements, and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith, to
interpret, amend or revoke any such rules and to amend any Award Agreement
provided that the rights or obligations of the Holder of the Award that is the
subject of any such Award Agreement are not affected adversely. Any such grant
or award under the Plan need not be the same with respect to each Holder. Any
such interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its discretion,
the Board may at any time and from time to time exercise any and all rights and
duties of the Administrator under the Plan except with respect to matters which
under Rule 16b-3 or Section 162(m) of the Code, or any regulations or rules
issued thereunder, are required to be determined in the discretion of the
Committee. Notwithstanding the foregoing, the full Board, acting by a majority
of its members in office, shall conduct the general administration of the Plan
with respect to Options and Dividend Equivalents granted to Independent
Directors.
 
    10.3. MAJORITY RULE; UNANIMOUS WRITTEN CONSENT. The Committee shall act by a
majority of its members in attendance at a meeting at which a quorum is present
or by a memorandum or other written instrument signed by all members of the
Committee.
 
    10.4. COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS. Members of
the Committee shall receive such compensation, if any, for their services as
members as may be determined by the Board. All expenses and liabilities which
members of the Committee incur in connection with the administration of the Plan
shall be borne by the Company. The Committee may, with the approval of the
Board, employ attorneys, consultants, accountants, appraisers, brokers or other
persons. The Committee, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. All actions shall be taken and all interpretations and determinations
shall be made by the Administrator reasonably and in good faith. No member of
the Administrator shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or Awards, and all
members of the Administrator shall be fully protected by the Company in respect
of any such action, determination or interpretation.
 
    10.5. DELEGATION OF AUTHORITY TO GRANT AWARDS. The Committee may, but need
not, delegate from time to time some or all of its authority to grant Awards
under the Plan to a committee consisting of one or more members of the Committee
or of one or more officers of the Company; PROVIDED, HOWEVER, that the Committee
may not delegate its authority to grant Awards to individuals (a) who are
subject on the date of the grant to the reporting rules under Section 16(a) of
the Exchange Act, (b) who are Section 162(m) Participants, or (c) who are
officers of the Company who are delegated authority by the Committee hereunder.
Any delegation hereunder shall be subject to the restrictions and limits that
the Committee specifies at the time of such delegation of authority and may be
rescinded at any time by the Committee. At all times, any committee appointed
under this Section 10.5 shall serve in such capacity at the pleasure of the
Committee.
 
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                                  ARTICLE XI.
                            MISCELLANEOUS PROVISIONS
 
    11.1. TRANSFERABILITY OF AWARDS.
 
        (a) Except as otherwise provided in Section 17.1(b):
 
           (i) No Award under the Plan may be sold, pledged, assigned or
       transferred in any manner other than by will or the laws of descent and
       distribution or, subject to the consent of the Administrator, pursuant to
       a DRO, unless and until such Award has been exercised, or the shares
       underlying such Award have been issued, and all restrictions applicable
       to such shares have lapsed;
 
           (ii) No Award or interest or right therein shall be liable for the
       debts, contracts or engagements of the Holder or his or her successors in
       interest or shall be subject to disposition by transfer, alienation,
       anticipation, pledge, encumbrance, assignment or any other means whether
       such disposition be voluntary or involuntary or by operation of law by
       judgment, levy, attachment, garnishment or any other legal or equitable
       proceedings (including bankruptcy), and any attempted disposition thereof
       shall be null and void and of no effect, except to the extent that such
       disposition is permitted by the preceding sentence; and
 
           (iii) During the lifetime of the Holder, only he or she may exercise
       an Option or other Award (or any portion thereof) granted to him or her
       under the Plan, unless it has been disposed of pursuant to a DRO; after
       the death of the Holder, any exercisable portion of an Option or other
       Award may, prior to the time when such portion becomes unexercisable
       under the Plan or the applicable Award Agreement, be exercised by his or
       her personal representative or by any person empowered to do so under the
       deceased Holder's will or under the then applicable laws of descent and
       distribution.
 
        (b) Notwithstanding Section 17.1(a), the Administrator, in its
    discretion, may determine to permit a Holder to transfer a Non-Qualified
    Stock Option to any one or more Permitted Transferees (as defined below),
    subject to the following terms and conditions: (i) a Non-Qualified Stock
    Option transferred to a Permitted Transferee shall not be assignable or
    transferable by the Permitted Transferee other than by will or the laws of
    descent and distribution; (ii) any Non-Qualified Stock Option which is
    transferred to a Permitted Transferee shall continue to be subject to all
    the terms and conditions of the Non-Qualified Stock Option as applicable to
    the original Holder (other than the ability to further transfer the
    Non-Qualified Stock Option); and (iii) the Holder and the Permitted
    Transferee shall execute any and all documents requested by the
    Administrator, including, without limitation documents to (A) confirm the
    status of the transferee as a Permitted Transferee, (B) satisfy any
    requirements for an exemption for the transfer under applicable federal and
    state securities laws and (C) evidence the transfer. For purposes of this
    Section 17.1(b), "Permitted Transferee" shall mean, with respect to a
    Holder, any child, stepchild, grandchild, parent, stepparent, grandparent,
    spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
    son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including
    adoptive relationships, any person sharing the Holder's household (other
    than a tenant or employee), a trust in which these persons (or the Holder)
    control the management of assets, and any other entity in which these
    persons (or the Holder) own more than fifty percent of the voting interests,
    or any other transferee specifically approved by the Administrator after
    taking into account any state or federal tax or securities laws applicable
    to transferable Non-Qualified Stock Options.
 
    11.2. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN. Except as otherwise
provided in this Section 17.2, the Plan may be wholly or partially amended or
otherwise modified, suspended or terminated at any time or from time to time by
the Administrator. However, without approval of the Company's stockholders given
within 12 months before or after the action by the Administrator, no action of
the
 
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Administrator may, except as provided in Section 17.3, increase the limits
imposed in Section 8.1 on the maximum number of shares which may be issued under
the Plan. No amendment, suspension or termination of the Plan shall, without the
consent of the Holder, alter or impair any rights or obligations under any Award
theretofore granted or awarded, unless the Award itself otherwise expressly so
provides. No Awards may be granted or awarded during any period of suspension or
after termination of the Plan, and in no event may any Incentive Stock Option be
granted under the Plan after the first to occur of the following events:
 
        (a) The expiration of 10 years from the date the Plan is adopted by the
    Board; or
 
        (b) The expiration of 10 years from the date the Plan is approved by the
    Company's stockholders under Section 17.10.
 
    11.3. CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY, ACQUISITION OR
LIQUIDATION OF THE COMPANY AND OTHER CORPORATE EVENTS.
 
        (a) Subject to Section 17.3(d), in the event that the Administrator
    determines that any dividend or other distribution (whether in the form of
    cash, Common Stock, other securities or other property), recapitalization,
    reclassification, stock split, reverse stock split, reorganization, merger,
    consolidation, split-up, spin-off, combination, repurchase, liquidation,
    dissolution, or sale, transfer, exchange or other disposition of all or
    substantially all of the assets of the Company, or exchange of Common Stock
    or other securities of the Company, issuance of warrants or other rights to
    purchase Common Stock or other securities of the Company, or other similar
    corporate transaction or event, in the Administrator's discretion, affects
    the Common Stock such that an adjustment is determined by the Administrator
    to be appropriate in order to prevent dilution or enlargement of the
    benefits or potential benefits intended to be made available under the Plan
    or with respect to an Award, then the Administrator shall, in such manner as
    it may deem equitable, adjust any or all of:
 
           (i) The number and kind of shares of Common Stock (or other
       securities or property) with respect to which Awards may be granted or
       awarded (including, but not limited to, adjustments of the limitations in
       Section 8.1 on the maximum number and kind of shares which may be issued
       and adjustments of the Award Limit);
 
           (ii) The number and kind of shares of Common Stock (or other
       securities or property) subject to outstanding Awards; and
 
           (iii) The grant or exercise price with respect to any Award.
 
        (b) Subject to Sections 17.3(b)(vii) and 17.3(d), in the event of any
    transaction or event described in Section 17.3(a) or any unusual or
    nonrecurring transactions or events affecting the Company, any affiliate of
    the Company, or the financial statements of the Company or any affiliate, or
    of changes in applicable laws, regulations or accounting principles, the
    Administrator, in its discretion, and on such terms and conditions as it
    deems appropriate, either by the terms of the Award or by action taken prior
    to the occurrence of such transaction or event and either automatically or
    upon the Holder's request, is hereby authorized to take any one or more of
    the following actions whenever the Administrator determines that such action
    is appropriate in order to prevent dilution or enlargement of the benefits
    or potential benefits intended to be made available under the Plan or with
    respect to any Award under the Plan, to facilitate such transactions or
    events or to give effect to such changes in laws, regulations or principles:
 
           (i) To provide for either the purchase of any such Award for an
       amount of cash equal to the amount that could have been attained upon the
       exercise of such Award or realization of the Holder's rights had such
       Award been currently exercisable or payable or fully vested or the
       replacement of such Award with other rights or property selected by the
       Administrator in its discretion;
 
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           (ii) To provide that the Award cannot vest, be exercised or become
       payable after such event;
 
           (iii) To provide that such Award shall be exercisable as to all
       shares covered thereby, notwithstanding anything to the contrary in
       Section 5.3 or 5.4 or the provisions of such Award;
 
           (iv) To provide that such Award be assumed by the successor or
       survivor corporation, or a parent or subsidiary thereof, or shall be
       substituted for by similar options, rights or awards covering the stock
       of the successor or survivor corporation, or a parent or subsidiary
       thereof, with appropriate adjustments as to the number and kind of shares
       and prices; and
 
           (v) To make adjustments in the number and type of shares of Common
       Stock (or other securities or property) subject to outstanding Awards,
       and in the number and kind of outstanding Restricted Stock or Deferred
       Stock and/or in the terms and conditions of (including the grant or
       exercise price), and the criteria included in, outstanding options,
       rights and awards and options, rights and awards which may be granted in
       the future.
 
           (vi) To provide that, for a specified period of time prior to such
       event, the restrictions imposed under an Award Agreement upon some or all
       shares of Restricted Stock or Deferred Stock may be terminated, and, in
       the case of Restricted Stock, some or all shares of such Restricted Stock
       may cease to be subject to repurchase under Section 7.5 or forfeiture
       under Section 7.4 after such event.
 
           (vii) Notwithstanding any other provision of the Plan, in the event
       of a Change in Control, each outstanding Award shall, immediately prior
       to the effective date of the Change in Control, automatically become
       fully exercisable for all of the shares of Common Stock at the time
       subject to such rights and may be exercised for any or all of those
       shares as fully-vested shares of Common Stock.
 
        (c) Subject to Sections 17.3(d), 9.2 and 9.3, the Administrator may, in
    its discretion, include such further provisions and limitations in any
    Award, agreement or certificate, as it may deem equitable and in the best
    interests of the Company.
 
        (d) No adjustment or action described in this Section 17.3 or in any
    other provision of the Plan shall be authorized to the extent that such
    adjustment or action would cause the Plan to violate Section 422(b)(1) of
    the Code. Furthermore, no such adjustment or action shall be authorized to
    the extent such adjustment or action would result in short-swing profits
    liability under Section 16 or violate the exemptive conditions of
    Rule 16b-3 unless the Administrator determines that the Award is not to
    comply with such exemptive conditions. The number of shares of Common Stock
    subject to any Award shall always be rounded to the next whole number.
 
        (e) The existence of the Plan, the Award Agreement and the Awards
    granted hereunder shall not affect or restrict in any way the right or power
    of the Company or the stockholders of the Company to make or authorize any
    adjustment, recapitalization, reorganization or other change in the
    Company's capital structure or its business, any merger or consolidation of
    the Company, any issue of stock or of options, warrants or rights to
    purchase stock or of bonds, debentures, preferred or prior preference stocks
    whose rights are superior to or affect the Common Stock or the rights
    thereof or which are convertible into or exchangeable for Common Stock, or
    the dissolution or liquidation of the company, or any sale or transfer of
    all or any part of its assets or business, or any other corporate act or
    proceeding, whether of a similar character or otherwise.
 
    11.4. APPROVAL OF PLAN BY STOCKHOLDERS. The Plan will be submitted for the
approval of the Company's stockholders within 12 months after the date of the
Board's initial adoption of the Plan. Awards may be granted or awarded prior to
such stockholder approval, provided that such Awards shall not be exercisable
nor shall such Awards vest prior to the time when the Plan is approved by the
stockholders, and provided further that if such approval has not been obtained
at the end of said twelve-month period, all Awards
 
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previously granted or awarded under the Plan shall thereupon be canceled and
become null and void. In addition, if the Board determines that Awards other
than Options or Stock Appreciation Rights which may be granted to
Section 162(m) Participants should continue to be eligible to qualify as
performance-based compensation under Section 162(m)(4)(C) of the Code, the
Performance Criteria must be disclosed to and approved by the Company's
stockholders no later than the first stockholder meeting that occurs in the
fifth year following the year in which the Company's stockholders previously
approved the Performance Criteria.
 
    11.5. TAX WITHHOLDING. The Company shall be entitled to require payment in
cash or deduction from other compensation payable to each Holder of any sums
required by federal, state or local tax law to be withheld with respect to the
issuance, vesting, exercise or payment of any Award. The Administrator may in
its discretion and in satisfaction of the foregoing requirement allow such
Holder to elect to have the Company withhold shares of Common Stock otherwise
issuable under such Award (or allow the return of shares of Common Stock) having
a Fair Market Value equal to the sums required to be withheld. Notwithstanding
any other provision of the Plan, the number of shares of Common Stock which may
be withheld with respect to the issuance, vesting, exercise or payment of any
Award (or which may be repurchased from the Holder of such Award within six
months after such shares of Common Stock were acquired by the Holder from the
Company) in order to satisfy the Holder's federal and state income and payroll
tax liabilities with respect to the issuance, vesting, exercise or payment of
the Award shall be limited to the number of shares which have a Fair Market
Value on the date of withholding or repurchase equal to the aggregate amount of
such liabilities based on the minimum statutory withholding rates for federal
and state tax income and payroll tax purposes that are applicable to such
supplemental taxable income.
 
    11.6. LOANS. The Administrator may, in its discretion, extend one or more
loans to Employees in connection with the exercise or receipt of an Award
granted or awarded under the Plan, or the issuance of Deferred Stock awarded
under the Plan. The terms and conditions of any such loan shall be set by the
Administrator.
 
    11.7. FORFEITURE PROVISIONS. Pursuant to its general authority to determine
the terms and conditions applicable to Awards under the Plan, the Administrator
shall have the right to provide, in the terms of Awards made under the Plan, or
to require a Holder to agree by separate written instrument, that (a)(i) any
proceeds, gains or other economic benefit actually or constructively received by
the Holder upon any receipt or exercise of the Award, or upon the receipt or
resale of any Common Stock underlying the Award, must be paid to the Company,
and (ii) the Award shall terminate and any unexercised portion of the Award
(whether or not vested) shall be forfeited, if (b)(i) a Termination of
Employment, Termination of Consultancy or Termination of Directorship occurs
prior to a specified date, or within a specified time period following receipt
or exercise of the Award, or (ii) the Holder at any time, or during a specified
time period, engages in any activity in competition with the Company, or which
is inimical, contrary or harmful to the interests of the Company, as further
defined by the Administrator or (iii) the Holder incurs a Termination of
Employment, Termination of Consultancy or Termination of Directorship for cause.
 
    11.8. EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS. The adoption of
the Plan shall not affect any other compensation or incentive plans in effect
for the Company or any Subsidiary. Nothing in the Plan shall be construed to
limit the right of the Company (a) to establish any other forms of incentives or
compensation for Employees, Directors or Consultants of the Company or any
Subsidiary, or (b) to grant or assume options or other rights or awards
otherwise than under the Plan in connection with any proper corporate purpose
including but not by way of limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, partnership,
limited liability company, firm or association.
 
    11.9. COMPLIANCE WITH LAWS. The Plan, the granting and vesting of Awards
under the Plan and the issuance and delivery of shares of Common Stock and the
payment of money under the Plan or under Awards granted or awarded hereunder are
subject to compliance with all applicable federal and state laws,
 
                                      A-21
<Page>
rules and regulations (including but not limited to state and federal securities
law and federal margin requirements) and to such approvals by any listing,
regulatory or governmental authority as may, in the opinion of counsel for the
Company, be necessary or advisable in connection therewith. Any securities
delivered under the Plan shall be subject to such restrictions, and the person
acquiring such securities shall, if requested by the Company, provide such
assurances and representations to the Company as the Company may deem necessary
or desirable to assure compliance with all applicable legal requirements. To the
extent permitted by applicable law, the Plan and Awards granted or awarded
hereunder shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.
 
    11.10. TITLES. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of the Plan.
 
    11.11. GOVERNING LAW. The Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.
 
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