<DOCUMENT>
<TYPE>EX-10.8
<SEQUENCE>8
<FILENAME>a2071685zex-10_8.txt
<DESCRIPTION>EXHIBIT 10.8
<TEXT>
<Page>
 
                          EON LABS MANUFACTURING, INC.
 
                                STOCK OPTION PLAN
 
 
 
 
1.0      PURPOSE
 
         The purpose of the Plan is to encourage ownership in the Company by
         selected Employees, Nonemployee Directors and Consultants and Advisors,
         thus providing an incentive for such individuals to contribute to the
         future success and prosperity of the Company. In addition, the Plan is
         intended to provide incentives that will attract and retain highly
         qualified individuals as Employees and Nonemployee Directors and to
         assist in aligning the interests of such Employees and Nonemployee
         Directors with those of the Company's Stockholders.
 
2.0      DEFINITIONS
 
THE FOLLOWING TERMS SHALL HAVE THE FOLLOWING MEANINGS UNLESS THE CONTEXT
INDICATES OTHERWISE:
 
2.1      "AWARD" shall mean Stock Options.
 
2.2      "AWARD AGREEMENT" shall mean a written agreement between the Company
         and a Participant that establishes and records an Award to the
         Participant and may include terms, conditions, restrictions and
         limitations applicable to the Award that are in addition to those under
         the Plan.
 
2.3      "BOARD" shall mean the Board of Directors of the Company.
 
2.4      "CAUSE" shall mean, subject to a Participant's Award Agreement, and for
         the purposes of this Plan only the:
 
         (i)      conviction for, or guilty plea to, a felony or crime of
                  similar gravity,
 
         (ii)     perpetration by the Participant of a material, dishonest act
                  or fraud against the Company, or
 
         (iii)    material breach by a Participant of any of the covenants or
                  provisions of the Participant's non-competition agreement, if
                  any, in effect on the date such Participants is terminated for
                  Cause pursuant to Section 8.2 of the Plan.
 
 
2.5      "CHANGE IN CONTROL OF THE COMPANY" shall mean the occurrence of any one
         of the following events:
 
         (i)      the acquisition of beneficial ownership (within the meaning of
                  Rule 13d-3 promulgated under the Securities Exchange Act of
                  1934) of 50% or more of the Company Voting Securities directly
                  or indirectly by a person (as such term is used in Sections
                  13d and 14d of the Securities Exchange Act of 1934) or by two
 
 
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                  or more persons acting as a partnership, limited partnership,
                  joint venture, syndicate or other such group, other than the
                  Company or the Parent or companies controlled by the Parent;
                  provided, however, that such acquisition shall not constitute
                  a Change in Control of the Company hereunder if a majority of
                  the holders of the Company Voting Securities immediately prior
                  to such acquisition retain directly or through ownership of
                  one or more holding companies, immediately following such
                  acquisition, a majority of the voting securities entitled to
                  vote generally in the election of directors of the successor
                  entity;
 
         (ii)     consummation of a merger, consolidation, sale, disposition or
                  other reorganization or business combination of the Company
                  (the "Transaction") (other than a reincorporation of the
                  Company), in each case, unless, following such Transaction,
                  all or substantially all of the individuals or entities who
                  were the beneficial owners, respectively, of the Company
                  Voting Securities immediately prior to such Transaction
                  beneficially own , directly or indirectly, more than 50% of,
                  respectively, the then outstanding voting securities entitled
                  to vote generally in the election of directors , as the case
                  may be, of the corporation resulting from such Transaction
                  (including, without limitation, a corporation which as a
                  result of such transaction owns the Company either directly or
                  through one or more subsidiaries);
 
         (iii)    the sale, liquidation or distribution of all or substantially
                  all of the assets of the Company to a third party who is not
                  an affiliate of the Company;
 
         (iv)     the Stockholders of the Company approve a plan for the
                  dissolution of the Company in accordance with applicable state
                  law; or
 
         (v)      during any period of 24 consecutive months, individuals who at
                  the beginning of such period constitute the Board of Directors
                  cease for any reason to constitute a majority thereof unless
                  the election, or the nomination for election, by the Company's
                  Stockholders of each director who was not a director at the
                  beginning of the period was approved by a vote of at least
                  two-thirds of the directors then still in office who were
                  directors at the beginning of such period.
 
2.6      "CODE" shall mean the Internal Revenue Code of 1986, as amended.
 
2.7      "COMMITTEE" shall mean the Board or a compensation committee or
         subcommittee of the Board appointed by the Board from among its
         members; provided, however, that following an Initial Public Offering,
         it shall mean a committee comprised solely of two or more "outside
         directors" within the meaning of Section 162(m) of the Code and the
         regulations thereunder and, if practicable, each member of the
         Committee shall be a "nonemployee director" within the meaning of the
         rules promulgated under Section 16(b) of the Exchange Act.
 
2.8      "COMMON STOCK" shall mean the Company's common stock, par value $0.01
         per share; provided, however, that immediately following the date upon
         which the Company amends its Certificate of Incorporation to create
         Class B convertible, non-voting common stock, par value $.01 per share,
         of the Company (the "Class B Stock"), all references to "Common Stock"
         in the Plan and in any outstanding option awarded prior
 
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         to such date, as well as options granted thereafter, shall be deemed to
         refer to Class B Stock.
 
2.9      "COMPANY" shall mean Eon Labs Manufacturing, Inc.
 
2.10     "COMPANY VOTING SECURITIES" means the outstanding voting securities of
         the Company entitled to vote generally in the election of directors,
         determined on a fully-diluted basis.
 
2.11     "CONSOLIDATED INCOME BEFORE INTEREST, TAXES, DEPRECIATION AND
         AMORTIZATION"shall mean, for the applicable twelve (12) month period,
         the consolidated income of the Company and its wholly-owned
         subsidiaries from the operations of the Company and its wholly-owned
         subsidiaries before the deduction of interest expense, depreciation and
         amortization expense and provision for taxes on income with respect to
         such period, determined in accordance with generally accepted
         accounting principles consistently applied; it being understood and
         agreed that (i) in no event shall the consolidated income of the
         Company and its wholly-owned subsidiaries include any extraordinary or
         non-operating items of income or expense or insurance proceeds received
         by the Company or any of its wholly-owned subsidiaries or income or
         expense not directly related to the operations of the Company and its
         wholly-owned subsidiaries, (ii) the Company shall not be precluded from
         changing the accounting principles applied by it, on advice from its
         independent accountants, and any such change shall not violate the
         requirement of consistent application of accounting principles and
         (iii) there shall be no deduction made for management fees (but not
         royalty fees) paid to Hexal Pharmaceuticals, Inc. or Eon Labs, Inc. or
         their affiliates (except for out-of-pocket expenses reasonably incurred
         by such entities directly in connection with the Company's business).
 
2.12     "CONSULTANTS AND ADVISORS" shall mean persons (other than persons who
         are Employees or Nonemployee Directors) or entities that render
         services to the Company, including independent contractors.
 
2.13     "DISABILITY" shall mean a permanent and total disability as defined in
         the Company's long term disability insurance program; provided,
         however, that in the event no such program is in effect, Disability
         shall mean a total and permanent disability or incapacity resulting
         from medically demonstrable bodily injury or disease (i) which prevents
         the Participant from engaging in any regular occupation for
         compensation or profit, (ii) which has continuously existed for a
         period of at least six months and (iii) for which the Participant would
         be eligible for or is in receipt of disability benefits under the
         Federal Social Security Act. Disability will be determined by the
         Committee who may reasonably require the Participant to undergo
         examination by a qualified physician selected by the Committee at any
         time or times for the purposes of determining whether the Participant
         incurred and continues to have a Disability.
 
2.14     "EFFECTIVE DATE" shall mean the date on which the Plan is adopted and
         approved by a majority of the Stockholders of the Company.
 
2.15     "EMPLOYEE" shall mean a full-time, salaried, exempt employee of the
         Company.
 
2.16     "EMPLOYMENT REPURCHASE NOTICE" shall mean the written notice provided
         by the Company to the Participant stating the Company's election to
         exercise its right to call
 
 
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         Common Stock held by the Participant pursuant to the exercise of a
         Stock Option, specifying the number of Shares to be repurchased, and
         specifying a closing date for such repurchase.
 
2.17     "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
         amended, including applicable regulations thereunder.
 
2.18     "FAIR MARKET VALUE" shall mean:
 
         (i)      if the Common Stock is readily tradeable on a national
                  securities exchange or other market system, (x) in the
                  over-the-counter market as reported by the NASDAQ Stock
                  Market, the closing price on the date of determination, if any
                  trades were made on such day and if such information is
                  available, otherwise the average of the last bid and asked
                  prices for the date of determination, or (y) if the Class A
                  Common Stock of the Company is then traded on a national
                  securities exchange, the average of the high and low prices
                  for date of determination or, if lower, the closing price on
                  the date of determination, on the principal national
                  securities exchange on which it is so traded; provided,
                  however, that if the Common Stock was not traded on the date
                  of determination, prices shall be determined as of the last
                  preceding trading date; or
 
         (ii)     if the Common Stock is not readily tradeable on a national
                  securities exchange or other market system, the value as
                  determined in good faith by the Committee.
 
2.19     "INITIAL PUBLIC OFFERING" shall mean the sale of any Common Stock of
         the Company pursuant to a registration statement that has been declared
         effective under the Securities Act of 1933, as amended, if as a result
         of such sale (i) the issuer becomes a reporting company under Section
         12(b) or 12(g) of the Exchange Act and (ii) such Common Stock is traded
         on the New York Stock Exchange or the American Stock Exchange, or
         quoted on the NASDAQ National Market System or traded or quoted on any
         other national stock exchange or national securities system.
 
2.20     "NONEMPLOYEE DIRECTOR" shall mean a member of the Board who is not an
         Employee.
 
2.21     "PARTICIPANT" shall mean any Employee, Nonemployee Director, Consultant
         or Advisor to whom an Award has been granted by the Committee under the
         Plan.
 
2.22     "PLAN" shall mean the Eon Labs Manufacturing, Inc. Stock Option Plan.
 
2.23     "PUT CAP" shall mean, as of the date of determination, the lesser of
         (i) the dollar amount of Common Stock that the Company is able to
         repurchase without violating applicable state law and/or the terms of
         any agreement with its banks or institutional lenders, or (ii) twenty
         percent (20%) of the Company's Consolidated Income before Interest,
         Taxes, Depreciation and Amortization for the twelve (12) month period
         ending on December 31st immediately preceding the date of determination
         less the aggregate dollar amount of shares of Common Stock repurchased
         during such twelve (12) month period ending on such December 31st from
         Participants, or former Employees other than payments to such
         Participants, or former Employees pursuant to Section 9.2 of the Plan.
         For purposes of this definition, the aggregate dollar amount of Common
         Stock repurchased during such 12 month period shall include the Fair
         Market Value of shares of Common Stock withheld by the Company upon a
         Participant's exercise of a Stock Option to satisfy the Participant's
         minimum statutory withholding tax obligation.
 
 
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2.24     "STOCK OPTION" shall mean the grant by the Committee to a Participant
         of a non-qualified stock option to purchase Common Stock in accordance
         with Section 6. Such option shall not be an "incentive stock option"
         within the meaning of Section 422 of the Code.
 
2.25     "STOCKHOLDERS" shall mean those persons holding securities of the
         Company having general voting power, under ordinary circumstances, to
         elect the Company's Board.
 
2.26     "VEST" shall mean with respect to Stock Options, when the Stock Option
         (or a portion of such Stock Option) first becomes exercisable and
         remains exercisable subject to the terms and conditions of such Stock
         Option.
 
2.27     "VESTING DATE" Shall mean the date or dates on which an Award Vests.
 
3.0      ELIGIBILITY AND PARTICIPATION
 
3.1      ELIGIBILITY. All Employees, Nonemployee Directors and Consultants and
         Advisors shall be eligible to participate in the Plan and to receive
         Awards.
 
3.2      PARTICIPATION. Participants shall consist of such Employees,
         Nonemployee Directors and Consultants and Advisors as the Committee in
         its sole discretion designates to receive Awards under the Plan.
         Designation of a Participant in any year shall not require the
         Committee to designate such person or entity to receive an Award in any
         other year or, once designated, to receive the same type or amount of
         Award as granted to the Participant in any other year. The Committee
         shall consider such factors as it deems pertinent in selecting
         Participants and in determining the type and amount of their respective
         Awards.
 
 
 
4.0      ADMINISTRATION
 
4.1      RESPONSIBILITY. The Committee shall have the responsibility, in its
         sole discretion, to control, operate, manage and administer the Plan in
         accordance with its terms.
 
4.2      AWARD AGREEMENT. Each Award granted under the Plan shall be evidenced
         by an Award Agreement which shall be signed by the Committee and the
         Participant; provided, however, that in the event of any conflict
         between a provision of the Plan and any provision of an Award
         Agreement, the Plan shall prevail.
 
4.3      AUTHORITY OF THE COMMITTEE. The Committee shall have all the
         discretionary authority that may be necessary or helpful to enable it
         to discharge its responsibilities with respect to the Plan, including
         but not limited to the following:
 
         (i)      to determine eligibility for participation in the Plan;
 
         (ii)     to determine the type and amount of any Award granted under
                  the Plan;
 
 
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         (iii)    to supply any omission, correct any defect or reconcile any
                  inconsistency in the Plan in such manner as it shall deem
                  appropriate in its sole discretion to carry the same into
                  effect;
 
         (iv)     to issue administrative guidelines as an aid to administer the
                  Plan and make changes in such guidelines as it deems proper;
 
         (v)      to make rules for carrying out and administering the Plan and
                  to make changes in such rules as it deems proper;
 
         (vi)     to determine the Fair Market Value of Common Stock underlying
                  an Award;
 
         (vii)    to accelerate the Vesting of any Award; and
 
         (viii)   to take any and all other actions it deems necessary or
                  advisable for the proper operation or administration of the
                  Plan.
 
4.4      ACTION BY THE COMMITTEE. The Committee may act only by a majority of
         its members, provided, however, that in the event the Committee is
         comprised of only two members, the Committee shall act only by
         unanimous consent. Any determination of the Committee may be made,
         without a meeting, by a writing or writings signed by all of the
         members of the Committee. In addition, the Committee may authorize any
         one or more of its members to execute and deliver documents on behalf
         of the Committee.
 
4.5      DELEGATION OF AUTHORITY. The Committee may delegate to one or more of
         its members, or to one or more agents, such administrative duties as it
         may deem advisable; provided, however, that any such delegation shall
         be in writing; provided, further, that if the Committee delegates the
         authority to grant Awards to any officer or employee who is not a
         member of the Committee, such delegation shall be pursuant to a written
         resolution adopted by the Committee and shall in all other respects
         comply with Section 157, Title 8, of the Delaware Code. In addition,
         the Committee, or any person to whom it has delegated duties under this
         Section 4.5, may employ one or more persons to render advice with
         respect to any responsibility the Committee or such person may have
         under the Plan. The Committee may employ such legal or other counsel,
         consultants and agents as it may deem desirable for the administration
         of the Plan and may rely upon any opinion or computation received from
         any such counsel, consultant or agent. Expenses incurred by the
         Committee in the engagement of such counsel, consultant or agent shall
         be paid by the Company.
 
4.6      DETERMINATIONS AND INTERPRETATIONS BY THE COMMITTEE. All determinations
         and interpretations made by the Committee shall be binding and
         conclusive on all Participants and their heirs, successors, and legal
         representatives.
 
4.7      LIABILITY. No member of the Board and no Employee shall be liable for
         any act or failure to act hereunder, except in circumstances involving
         his or her bad faith, gross negligence or willful misconduct, or for
         any act or failure to act hereunder by any other member or Employee or
         by any agent to whom duties in connection with the administration of
         the Plan have been delegated.
 
4.8      INDEMNIFICATION. The Company shall indemnify members of the Committee
         and any agent of the Committee who is an Employee, against any and all
         liabilities or expenses
 
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         to which they may be subjected by reason of any act or failure to act
         with respect to their duties on behalf of the Plan, except in
         circumstances involving such person's bad faith, gross negligence or
         willful misconduct.
 
5.0      COMMON STOCK SUBJECT TO PLAN
 
5.1      AVAILABLE SHARES OF COMMON STOCK. Subject to adjustment as provided in
         Section 5.3, the number of shares of Common Stock available for the
         grant of Awards under the Plan shall not exceed 79,000 shares of Common
         Stock. Common Stock subject to or underlying an Award that expires
         unexercised, or is forfeited, terminated or canceled, and Common Stock
         that is tendered to pay for the exercise of an Award shall thereafter
         again be available for grant under the Plan.
 
5.2      MAXIMUM AGGREGATE NUMBER OF SHARES OF COMMON STOCK UNDERLYING AWARDS
         GRANTED UNDER THE PLAN TO ANY SINGLE PARTICIPANT. Following an Initial
         Public Offering, but in no event prior to the latest date that 162(m)
         of the Code and the rules and regulations thereunder shall first apply
         to the Plan, the maximum aggregate number of shares of Common Stock
         underlying all Awards that may be granted to any single Participant
         during the life of the Plan shall be 25,000 shares of Common Stock,
         subject to adjustment as provided in Section 5.3. For purposes of this
         paragraph, any Awards that expire unexercised, or are forfeited,
         terminated or canceled, and shares of Common Stock that are tendered to
         pay for the exercise of an Award shall be counted in determining the
         maximum aggregate number of shares of Common Stock that may be granted
         to any single Participant during the life of the Plan.
 
5.3      ADJUSTMENT TO COMMON STOCK. If there is any change in the Common Stock
         of the Company, through merger, consolidation, reorganization,
         recapitalization, a Common Stock dividend, a Common Stock split,
         reverse Common Stock split, split-up, split-off, spin-off, combination
         of Common Stock, exchange of Common Stock, dividend in-kind or other
         like change in capital structure or distribution (other than normal
         cash distributions or cash dividends) to Stockholders of the Company,
         an adjustment shall be made to each outstanding Award so that each such
         Award shall thereafter be with respect to or exercisable for such
         securities, cash and/or other property as would have been received in
         respect of the Common Stock subject to such Award had such Award been
         paid, distributed or exercised in full immediately prior to such change
         or distribution. In addition, in the event of any such change or
         distribution, in order to prevent dilution or enlargement of
         Participants' rights under the Plan, the Committee shall have the
         authority to adjust, in an equitable manner, the number and kind of
         shares of Common Stock that may be issued under the Plan, the number
         and kind of shares of Common Stock subject to outstanding Awards, the
         exercise price applicable to outstanding Common Stock Options, and
         other value determinations applicable to outstanding Awards. Further,
         the Committee is authorized to make adjustments to the terms and
         conditions of, and the criteria included in, Awards in recognition of
         unusual or nonrecurring events affecting the Company or the financial
         statements thereof, or in response to changes in applicable laws,
         regulations, or accounting principles.
 
6.0      STOCK OPTIONS
 
6.1      IN GENERAL. The Committee may, in its sole discretion, grant Stock
         Options to Employees, Nonemployee Directors and Consultants and
         Advisors for any reason, including but not limited to the attainment of
         performance objectives as defined in the
 
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         Participant's Award Agreement. The Committee shall, in its sole
         discretion, determine the Employees, the Nonemployee Directors and
         Consultants and Advisors who will receive Stock Options and the number
         of shares of Common Stock underlying each Stock Option.
 
6.2      EXERCISE PRICE. The Committee shall specify the exercise price of each
         Stock Option in the Award Agreement; provided, however, that the
         exercise price of any Stock Option shall not be less than 100 percent
         of the Fair Market Value of the Common Stock underlying such Award on
         the date of grant unless the Committee in its sole discretion and due
         to special circumstances determines otherwise.
 
6.3      TERM OF AWARDS. Except as the Committee in its sole discretion may
         otherwise provide in the Award Agreement, the terms of the Stock
         Options shall be ten (10) years, and any Award shall expire and cease
         to be exercisable after the tenth anniversary of the date of grant.
 
6.4      EXERCISE OF STOCK OPTIONS. The Stock Options shall be exercised as set
         forth in the Participant's Award Agreement. The Stock Option exercise
         price may be paid in cash. After an Initial Public Offering, in the
         sole discretion of the Committee, payment may also be made (i) by the
         delivery or presentation of Common Stock then owned by the Participant
         for not less than six (6) months or (ii) by the delivery of a properly
         executed exercise notice to the Company together with a copy of
         irrevocable instructions to a broker to effect the immediate sale of
         some or all of the Shares purchased pursuant to exercising the Options
         and to remit promptly to the Company, out of the sale or loan proceeds
         available on the settlement date, the aggregate exercise price payable
         for the purchased Shares (a "Cashless Exercise"). To facilitate the
         foregoing Cashless Exercise, the Company may enter into agreements for
         coordinated procedures with one or more brokerage firms. The Committee
         may prescribe any other method of paying the exercise price that it
         determines to be consistent with applicable law and the purpose of the
         Plan, including without limitation, in lieu of the exercise of a Stock
         Option by delivery of Common Stock then owned by a Participant,
         providing the Company with a notarized statement attesting to the
         number of shares of Common Stock owned by the Participant for not less
         than six (6) months, where upon verification by the Company, the
         Company would issue to the Participant only the number of incremental
         shares of Common Stock to which the Participant is entitled upon
         exercise of the Stock Option.
 
7.0      VESTING AND NON-TRANSFERABILITY
 
7.1      VESTING. The Committee shall specify the Vesting Date with respect to
         each grant of an Award. The Committee may grant an Award that is
         Vested, either in whole or in part, on the date of grant. The Vesting
         of such Award may be subject to such other terms and conditions as
         shall be determined by the Committee, including, without limitation,
         accelerating the Vesting of such Award. If the Committee fails to
         specify a Vesting Date or Vesting Dates in the Award Agreement,
         one-fifth of an Award will Vest on each anniversary following the date
         of grant such that the Award will be fully (100%) vested upon the fifth
         calendar anniversary of the date of grant in accordance with the
         schedule set forth below.
 
<Table>
<Caption>
                  Calendar Anniversary                  Percent Vesting on                   Total Percent
                   After Grant Date                    the Anniversary Date                     Vested
<S>                      <C>                                            <C>                       <C>
                         1                                              20%                         20%
 
                                       8
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                         2                                              20%                         40%
                         3                                              20%                         60%
                         4                                              20%                         80%
                         5                                              20%                        100%
</Table>
 
7.2      NON-TRANSFERABILITY. An Award shall not be transferable by the
         Participant other than by will or the laws of descent and distribution,
         and Stock Options shall be exercisable, during the Participant's
         lifetime, only by the Participant. Notwithstanding the foregoing, the
         Committee, in its sole discretion may permit the transferability of an
         Award by a Participant solely to members of the Participant's immediate
         family or trusts or family partnerships or other similar entities for
         the benefit of such persons and subject to such terms, conditions,
         restrictions and/or limitations, if any, as the Committee may include
         in the Award Agreement.
 
8.0      DEATH, DISABILITY, AND TERMINATION WITHOUT CAUSE
 
8.1      TERMINATION OF EMPLOYMENT DUE TO DEATH OR DISABILITY. Subject to a
         Participant's Award Agreement, if the employment or performance of
         services of a Participant (who is an individual) is terminated as a
         result of death or Disability, all Awards or portions thereof that have
         not yet Vested shall Vest only to the extent such unvested portion
         would have Vested had the Participant's employment terminated one day
         after the grant date Anniversary immediately following the date of such
         death or Disability. Such Vested Awards shall remain exercisable for
         the one year following the date of termination, but in no event later
         than the term of such Awards.
 
8.2      TERMINATION OF EMPLOYMENT FOR CAUSE. Subject to a Participant's Award
         Agreement, in the event a Participant is terminated by the Company for
         Cause, all unvested Awards and any Vested, but unexercised Awards shall
         be forfeited upon the date of such termination.
 
8.3      TERMINATION OF EMPLOYMENT WITHOUT CAUSE. Subject to a Participant's
         Award Agreement, if the employment or performance of services of a
         Participant (who is an individual) is terminated by the Participant or
         by the Company for any reason other than for Cause, death, or
         Disability, all Awards or portions thereof that have not yet Vested,
         shall be forfeited and any Vested Awards shall remain exercisable for
         90 days after the date of termination; provided, however, that a
         Consultant or Advisor who terminates services to become an Employee or
         a Nonemployee Director shall not be deemed to have terminated without
         Cause.
 
9.0       HOLDING PERIOD AND SALE TO COMPANY
 
9.1      HOLDING PERIOD. Except as provided in Section 9.4 or the Committee in
         its sole discretion determines otherwise, a Participant who acquires
         Common Stock pursuant to an Award shall hold such Common Stock for a
         period of not less than six (6) months from the date the Participant
         exercised a Stock Option. During the six (6) month period, the Common
         Stock may not be sold, assigned, transferred or otherwise disposed of,
         or pledged or hypothecated as collateral for a loan or as security for
         the performance of any obligation or for any other purpose as the
         Committee shall determine. Following such six-month period, in no event
         shall the Common Stock be assignable, transferable, sold, pledged,
         encumbered or otherwise subject to any legal process for the payment of
         any claim against the Participant, other than to the Company in
         accordance with
 
                                       9
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         Sections 9.2 and 9.3 below, to members of the Participant's immediate
         family or trusts or family partnerships or other similar entities for
         the benefit of such persons, or to such parties pursuant to a will or
         the laws of descent and distribution, and subject to such terms,
         conditions, restrictions and/or limitations, if any, as the Committee
         may require.
 
9.2      CALL RIGHT OF THE COMPANY.
 
         (i)      EXERCISE OF THE CALL RIGHT. Subject to Section 9.1, in the
                  event of an Employee's termination from employment with the
                  Company, or a Nonemployee Director's, Consultant's or
                  Advisor's termination of the performance of services for the
                  Company, the Company shall have the right to call and the
                  Participant shall, upon such election of the Company, be
                  obligated to sell all or any part of the Common Stock acquired
                  by such Participant pursuant to the exercise of a Stock
                  Option. Such call right shall be exercisable during the period
                  that is not less than six months after the acquisition of the
                  Common Stock being repurchased nor more than one year after
                  the later of (a) the termination of the Participant's
                  employment with the Company or (b) such acquisition, unless
                  the Committee in its sole discretion determines otherwise.
                  Upon the exercise of such call right, the Company shall tender
                  to the Participant an amount of cash and/or a note, in
                  accordance with paragraph (ii) below, equal to the Fair Market
                  Value of the Common Stock held by the Participant on the date
                  the call right is exercised. The Company may exercise its
                  right to call with respect to all or any portion of the Common
                  Stock subject to such call, and if the Company calls only a
                  portion of such Common Stock, the remaining Common Stock shall
                  continue to be subject to the Company's right to call.
 
         (ii)     METHOD OF PAYMENT. The Company may, in its sole discretion,
                  pay the purchase price for any Common Stock repurchased by it
                  pursuant to this Section 9.2 either in cash and/or by delivery
                  on the date of purchase of a check in an amount equal to at
                  least fifty percent (50%) of such purchase price, together
                  with the Company's promissory note in a principal amount equal
                  to the remainder of such purchase price (the "COMPANY NOTE"),
                  provided that any indebtedness of the Participant to the
                  Company, whether or not otherwise then due and payable, shall
                  be deducted from the purchase price for any such Common Stock
                  repurchased by the Company hereunder, but only to the extent
                  that such indebtedness does not exceed such purchase price.
                  The Company Note shall be due and payable not later than two
                  (2) years from the date of issuance, with principal and
                  interest thereon (which interest shall be set at the prime
                  rate set by Citibank, N.A. on the date of a such repurchase)
                  payable on an unsecured basis in two (2) equal annual
                  installments, with the first installment to occur on the first
                  calendar anniversary of the date of issuance and the remaining
                  installment to occur on the second calendar anniversary
                  thereof.
 
         (iii)    ASSIGNMENT. For purposes of the Company's Call Right set forth
                  in this Section 9, the term "Company" shall include any party
                  to whom the Company has assigned its rights to purchase
                  Shares.
 
9.3      PUT RIGHT OF PARTICIPANTS. Subject to Section 9.1, the Committee, in
         its sole discretion, may grant a Participant the right to sell to the
         Company and the Company shall, upon such election by the Participant,
         be obligated to purchase all or any part of the Common
 
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         Stock acquired pursuant to the Participant's exercise of a Stock
         Option at the Fair Market Value of the Common Stock on the date of
         sale to the Company (the "Put Right"); provided, that, in no event
         shall such Put Right be exercisable until after December 31, 2002;
         and provided, further, that the Participant has held such Common
         Stock at least 6 months from the date such Common Stock was acquired
         pursuant to the exercise of the Stock Options. Such Put Right shall
         be exercisable for all or a portion of the Common Stock subject to
         the Put Right. If a Participant puts only part of the Common Stock
         subject to the Put Right, the remaining Common Stock shall continue
         to be subject to the Put Right. The Put Right shall be exercisable
         only between December 1 and December 31 of any year (the "Put
         Window"), or such other period as the Committee, in its sole
         discretion may permit, by submitting written notice to the
         Committee; provided, however, that if the value of the Common Stock
         put by all Participants, and former Employees during a Put Window
         exceeds the Put Cap, the puts shall be limited as follows. The
         Company shall determine the number of shares of Common Stock that
         equal the Put Cap using the per share value as of the last day of
         the Put Window, and that number of shares shall hereinafter be
         referred to as "X." If the number of shares put during the Put
         Window exceeds X, the Company shall not be obligated to purchase a
         percentage of the Common Stock put by each Participant. Such
         percentage shall be equal to one (1) minus a fraction, the numerator
         of which is X and the denominator of which is the total Common Stock
         put by all Participants during such period.
 
9.4      PUBLIC OFFERING. In the event of an Initial Public Offering with
         aggregate gross proceeds to the Company of at least Twenty-Five Million
         Dollars ($25,000,000), or a merger, consolidation, sale, disposition or
         other reorganization or business combination of the Company in which
         the Company is not the surviving entity, the holding period and
         prohibitions of transfer of Common Stock described in Section 9.1, the
         call right of the Company described in Section 9.2, and the Put Right
         described in 9.3 shall terminate immediately and be without further
         force or effect, except to the extent an Award and its related Award
         Agreement are assumed, expressly rather than by operation of law, by
         the successor corporation (or its Parent) in connection with such a
         merger, consolidation, sale, disposition or other reorganization or
         business combination of the Company.
 
10.0     CHANGE IN CONTROL
 
10.1     ACCELERATED VESTING. The Committee, in its sole discretion, pursuant to
         a Participant's Award Agreement on the date the Award is granted, may
         provide that if a Participant's employment or performance of services
         is terminated by the Company without Cause within the one-year period
         following a Change in Control of the Company, the Vesting Date(s) for
         all or a portion of such Award may be accelerated.
 
10.2     CASHOUT. The Committee, in its sole discretion, may determine that,
         upon the occurrence of a Change in Control of the Company, all or a
         portion of certain outstanding Awards shall terminate within a
         specified number of days after notice to the holders, and each such
         holder shall receive with respect to each share of Common Stock subject
         to a Stock Option, an amount equal to the excess of the Fair Market
         Value of the Common Stock underlying the Stock Option on the date of
         the Change in Control of the Company over the exercise price of such
         Stock Option. Such amount shall be payable in cash, in one or more
         kinds of property (including the property, if any,
 
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         payable in the transaction) or in a combination thereof, as the
         Committee, in its sole discretion, shall determine.
 
10.3     ASSUMPTION OR SUBSTITUTION OF AWARDS. Notwithstanding anything
         contained in the Plan to the contrary, the Committee may, in its sole
         discretion, provide that an Award may be assumed by any entity which
         acquires control of the Company or may be substituted by a similar
         award under such entity's compensation plans.
 
11.0     TAXES
 
11.1     WITHHOLDING TAXES. The Company may require a Participant who incurs
         taxable wage income pursuant to exercising a Stock Option to reimburse
         the Company which employs such Participant for any taxes required by
         any governmental regulatory authority to be withheld or otherwise
         deducted and paid by such entity in respect of the issuance or
         disposition of the Common Stock. In lieu thereof, the Company or shall
         have the right to withhold the amount of such taxes from any other sums
         due or to become due from the Company to the Participant upon such
         terms and conditions as the Committee shall prescribe. The Company may,
         in its discretion, hold the Common Stock certificate to which such
         Participant is entitled upon the exercise of a Stock Option as security
         for the payment of such withholding tax liability, until cash
         sufficient to pay that liability has been accumulated.
 
11.2     USE OF COMMON STOCK TO SATISFY WITHHOLDING OBLIGATION. With respect to
         withholding required upon the exercise of Stock Options, Employees and
         Nonemployee Directors may elect to satisfy the withholding requirement,
         in whole or in part, by having the Company withhold shares of Common
         Stock issuable upon the exercise of the Stock Option or other taxable
         event having a Fair Market Value on the date of tax that is determined
         to be equal to the Employee's or Nonemployee Director's minimum
         statutory tax obligation; provided, however, that the Committee may
         disapprove of any such election, suspend or terminate the right to make
         such elections or provide that the right to make such elections shall
         not apply to particular shares of Common Stock or exercises. The
         Committee may impose any additional conditions or restrictions on the
         right to make such an election as it shall deem appropriate, including
         conditions or restrictions with respect to Section 16 of the Exchange
         Act.
 
 
11.3     NO GUARANTEE OF TAX CONSEQUENCES. No person connected with the Plan in
         any capacity, including, but not limited to, the Company and its
         directors, officers, agents and Employees makes any representation,
         commitment, or guarantee that any tax treatment, including, but not
         limited to, federal, state and local income, estate and gift tax
         treatment, will be applicable with respect to Awards granted or amounts
         paid for the benefit of a Participant under the Plan.
 
12.0     TERM OF THE PLAN
 
12.1     TERM. The Plan shall be effective as of the Effective Date and shall
         terminate on the tenth anniversary of the Effective Date (unless sooner
         terminated by the Board under Section 12.2).
 
12.2     TERMINATION OF PLAN. The Board may suspend or terminate the Plan at any
         time with or without prior notice; provided, however, that no action
         authorized by this Section 12.2
 
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         shall reduce the amount of any outstanding Award or change the terms
         and conditions thereof without the Participant's consent.
 
12.3     AMENDMENT OF PLAN. The Board may amend the Plan at any time without
         prior notice; provided, however, that no action authorized by this
         Section 12.3 shall reduce the amount of any outstanding Award or change
         the terms and conditions thereof without the Participant's consent;
         provided, further, that no amendment of the Plan shall, without the
         approval of the Stockholders of the Company:
 
         (i)      increase the total number of shares of Common Stock which may
                  be issued under the Plan;
 
         (ii)     modify the requirements as to eligibility for Awards under the
                  Plan.
 
         Provided, further, that following an Initial Public Offering, no
         amendment of the Plan shall, without the approval of the Company's
         Stockholders, increase the maximum number of shares of Common Stock
         which may be granted to any individual under the Plan.
 
         In addition, the Plan shall not be amended without the approval of such
         amendment by the Company's Stockholders if such approval is required
         under the rules and regulations of the stock exchange or national
         market system on which the Common Stock is listed.
 
12.4     AMENDMENT OR CANCELLATION OF AWARD AGREEMENTS. The Committee may amend
         or modify any Award Agreement at any time by mutual agreement between
         the Committee and the Participant or such other persons as may then
         have an interest therein. In addition, by mutual agreement between the
         Committee and a Participant or such other persons, Awards may be
         granted in substitution and exchange for, or in cancellation of, any
         Awards previously granted under the Plan or any other present or future
         plan of the Company or of an entity which (i) is purchased by the
         Company, (ii) purchases the Company, or (iii) merges into or with the
         Company.
 
12.5     ADDITIONAL TERMS AND CONDITIONS. The Committee may, by way of the
         Participant's Award Agreement or otherwise, establish such other terms,
         conditions, restrictions and/or limitations, if any, of any Award,
         provided they are not inconsistent with the Plan, including, without
         limitation, the requirement that the Participant not engage in
         competition with the Company.
 
13.0     MISCELLANEOUS
 
13.1     ELECTION TO DEFER COMPENSATION ATTRIBUTABLE TO AWARD. The Committee
         may, in its sole discretion, allow a Participant to elect to defer the
         receipt of any compensation attributable to an Award under guidelines
         and procedures to be established by the Committee.
 
13.2     LISTING OF COMMON STOCKS AND RELATED MATTERS. If at any time the
         Committee shall determine that the listing, registration or
         qualification of Common Stock subject to any Award on any securities
         exchange or under any applicable law, or the consent or approval of any
         governmental regulatory authority, is necessary or desirable as a
         condition of, or in connection with, the granting of an Award or the
         issuance of Common
 
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         Stock thereunder, such Award may not be exercised, distributed or
         paid out, as the case may be, in whole or in part, unless such
         listing, registration, qualification, consent or approval shall have
         been effected or obtained free of any conditions not acceptable to
         the Committee.
 
13.3     CONDITIONS UPON ISSUANCE OF COMMON STOCK:
 
         (i)      Common Stock shall not be issued pursuant to any Award unless
                  the exercise of any Award and the issuance and delivery of
                  Common Stock pursuant to an Award shall comply with all
                  applicable laws, and shall be further subject to the approval
                  of counsel for the Company with respect to such compliance.
 
         (ii)     as a condition to receiving Common Stock pursuant to an Award,
                  the Company may require the person receiving such Common Stock
                  (a) to represent and warrant at the time of receipt that the
                  Common Stock is being purchased only for investment and
                  without any present intention to sell or distribute such
                  Common Stock if, in the opinion of counsel for the Company,
                  such a representation is required by any applicable laws and
                  (b) to agree to comply with any restrictions on transfer or
                  disposition of any interest in the Common Stock for a period
                  of up to 180 days following the effective date of a
                  registration statement of the Company filed under the
                  Securities Act of 1933.
 
13.4     NO FIDUCIARY RELATIONSHIP CREATED. Nothing contained in the Plan, and
         no action taken pursuant to its provisions, shall create or be
         construed to create a trust of any kind, or a fiduciary relationship
         between the Company and any Participant, beneficiary, legal
         representative or any other person. The Plan is not intended to be
         subject to the Employee Retirement Income Security Act of 1974, as
         amended.
 
13.5     NO RIGHT TO CONTINUED EMPLOYMENT OR SERVICE OR TO GRANTS. The
         Participant's rights, if any, to continue to serve the Company as a
         Nonemployee Director, officer, Employee, Consultant or Advisor or
         otherwise, shall not be enlarged or otherwise affected by his or her
         designation as a Participant under the Plan, and the Company reserves
         the right to terminate the employment of any Employee, or the services
         of any Nonemployee Director, Consultant or Advisor at any time. The
         adoption of the Plan shall not be deemed to give any Employee,
         Nonemployee Director, Consultant or Advisor or any other individual any
         right to be selected as a Participant or to be granted an Award.
 
13.6     AWARDS SUBJECT TO FOREIGN LAWS. The Committee may grant Awards to
         individual Participants who are subject to the tax laws of nations
         other than the United States, and such Awards may have terms and
         conditions as determined by the Committee as necessary to comply with
         applicable foreign laws. The Committee may take any action which it
         deems advisable to obtain approval of such Awards by the appropriate
         foreign governmental entity; provided, however, that no such Awards may
         be granted pursuant to this Section 13.6 and no action may be taken
         which would result in a violation of the Exchange Act or any other
         applicable law.
 
13.7     GOVERNING LAW. The Plan, all Awards granted hereunder, and all actions
         taken in connection herewith shall be governed by and construed in
         accordance with the laws of the state of Delaware without reference to
         principles of conflict of laws, except as superseded by applicable
         federal law.
 
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13.8     OTHER BENEFITS. No Award granted under the Plan shall be considered
         compensation for purposes of computing benefits under any retirement
         plan of the Company nor affect any benefits or compensation under any
         other benefit or compensation plan of the Company now or subsequently
         in effect.
 
13.9     NO FRACTIONAL SHARES OF COMMON STOCK. No fractional shares of Common
         Stock shall be issued or delivered pursuant to the Plan or any Award.
         The Committee shall determine whether cash, Common Stock, Stock
         Options, or other property shall be issued or paid in lieu of
         fractional shares of Common Stock or whether such fractional shares of
         Common Stock or any rights thereto shall be forfeited or otherwise
         eliminated.
 
 
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