Exhibit 10.2

# ADOLOR CORPORATION

# 2003 STOCK-BASED
INCENTIVE COMPENSATION PLAN

# Adopted February 27, 2003

# ADOLOR CORPORATION

# 2003 STOCK-BASED
INCENTIVE COMPENSATION PLAN

# 1. Purpose of the Plan

The
purpose of the Plan is to assist the Company, its Subsidiaries and Affiliates in
attracting and retaining valued Employees, Consultants and Directors by offering them a
greater stake in the Companys success and a closer identification with it, and to
encourage ownership of the Companys stock by such Employees, Consultants and
Directors.

# 2. Definitions

|2.1. |  | Affiliate means
any entity other than the Subsidiaries in which the           Company has a substantial
direct or indirect equity interest, as determined by           the Board.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.2. |  | Award means
an award of Deferred Stock, Restricted Stock or Options           under the Plan.
|---- |  | -----------------------------------------------------------------------------------------------

|2.3. |  | Board means
the Board of Directors of the Company.
|---- |  | ----------------------------------------------------

|2.4. |  | Cause means
the Participants (i) conviction for committing a           felony under federal law
or of the state in which such action occurred, (ii)           dishonesty in the course of
fulfilling his or her employment or consulting           duties or (iii) willful and
deliberate failure to perform his or her employment           or consulting duties in any
material respect, or such other similar events as           shall be determined by the
Committee. The Committee shall have the sole           discretion to determine whether
Cause as set forth in (i), (ii) or           (iii) above exists, and its
determination shall be final.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.5. |  |  Change
of Control  means the happening of any of the following:
|---- |  | ------------------------------------------------------------------

|(i) |  | any
Person, other than (a) the Company or any of its Subsidiaries, (b) a trustee           or
other fiduciary holding securities under an employee benefit plan of the
          Company or any of its Subsidiaries, (c) an underwriter temporarily holding
          securities pursuant to an offering of such securities, (d) a corporation owned,
          directly or indirectly, by the stockholders of the Company in substantially the
          same proportion as their ownership of stock of the Company, or (e) a Holder or
          any group (as such term is used in Sections 13(d) and 14(d) of the
          Exchange Act) which includes such Holder, becomes the beneficial
          owner (as defined in Rule 13d-3 under the Exchange Act), directly or
          indirectly, of securities of the Company (not including in the securities
          beneficially owned by such Person any securities acquired directly from the
          Company or its Subsidiaries) representing more than 20% of either the then
          outstanding shares of Stock of the Company or the combined voting power of the
          Companys then outstanding securities;
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(ii) |  | the individuals
who serve on the Board as of the effective date hereof (the Incumbent Directors)
cease for any reason to constitute at least a majority of the Board; provided, however,
any Person who becomes a director subsequent to the effective date hereof, whose election
or nomination for election was approved by a vote of at least a majority of the directors
then constituting the Incumbent Board, shall for purposes of this clause (ii) be
considered an Incumbent Director;
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(iii) |  | the
consummation of a merger or consolidation of the Company in which the
          stockholders of the Company immediately prior to such merger or consolidation,
          would not, immediately after the merger or consolidation, beneficially own (as
          such term is defined in Rule 13d-3 under the Exchange Act), directly or
          indirectly, shares representing in the aggregate 50% or more of the combined
          voting power of the securities of the corporation issuing cash or securities in
          the merger or consolidation (or of its ultimate parent corporation, if any); or
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(iv) |  | the stockholders
of the Company approve a plan of complete liquidation or dissolution of the Company, or
there is consummated an agreement for the sale or disposition by the Company of all or
substantially all of the Companys assets, other than a sale or disposition by the
Company of all or substantially all of the Companys assets to an entity, at least
50% of the combined voting power of the voting securities of which are owned by Persons
in substantially the same proportion as their ownership of the Company immediately prior
to such sale.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | If an
event set forth in clause (i)(e) of the definition of Change of Control occurs,
a Change of Control shall be deemed to have occurred for each Holder other than any
Holder who alone or as part of any group (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Subsidiaries) representing more than
20% of either the then outstanding shares of Stock of the Company or the combined voting
power of the Companys then outstanding securities.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.6. |  | Code means the Internal Revenue Code of 1986, as amended.
|---- |  | -----------------------------------------------------------

|2.7. |  | Common Stock means the common stock of the Company, par value $.0001
               per share, or such other class or kind of shares or other securities resulting
               from the application of Section 9.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.8. |  | Company means Adolor Corporation, a Delaware corporation, or any
               successor corporation.
|---- |  | --------------------------------------------------------------------------------------------------------

|2.9. |  | Committee means the committee designated by the Board to administer
               the Plan under Section 4. The Committee shall have at least two members, each of
               whom shall be a member of the Board, a Non-Employee Director and an Outside
               Director.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.10. |  | Consultant means a key consultant or advisor to the Company, its
               Subsidiaries or Affiliates who is not an Employee.
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------

|2.11. |  | Deferred Stock means an Award made under Section 6 of the Plan to
               receive Common Stock at the end of a specified Deferral Period.
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------

|2.12. |  | Deferral Period means the period during which the receipt of a
               Deferred Stock Award under Section 6 of the Plan will be deferred.
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------

|2.13. |  | Director means a member of the Board.
|----- |  | ---------------------------------------

|2.14. |  | Disability means disabled within the meaning of section 22(e)(3) of
               the Code.
|----- |  | ----------------------------------------------------------------------------------------------

|2.15. |  | Employee means an officer or other employee of the Company, a
               Subsidiary or an Affiliate including a director who is such an employee.
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

|2.16. |  | Fair Market Value means, on any given date (i) if shares of Common
               Stock are then listed on a national stock exchange, the closing sales price per
               share of Common Stock on the exchange for the last preceding date on which there
               was a sale of shares of Common Stock on such exchange, as determined by the
               Committee, (ii) if shares of Common Stock are then listed on the Nasdaq National
               Market or the Nasdaq SmallCap Market, the closing sales price (or the closing
               bid price if no sales were reported) per share of Common Stock on the Nasdaq
               National Market or the Nasdaq SmallCap Market, as applicable, for the last
               preceding date on which there was a sale of shares of Common Stock on the Nasdaq
               National Market or the Nasdaq SmallCap Market, as applicable, as determined by
               the Committee, (iii) if shares of Common Stock are not then listed on a national
               stock exchange, the Nasdaq National Market or the Nasdaq Small Cap Market but
               are then traded on an over-the-counter market, the average of the closing bid
               and asked prices for the shares of Common Stock in such over-the-counter market
               for the last preceding date on which there was a sale of such shares of Common
               Stock in such market, as determined by the Committee, or (iv) if shares of
               Common Stock are not then listed on a national stock exchange or traded on an
               over-the-counter market, or if the Committee determines that the value as
               determined pursuant to Section (i), (ii) or (iii) above does not reflect fair
               market value, the Committee shall determine fair market value after taking into
               account such factors that it deems appropriate.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.17. |  | Holder means a Participant to whom an Award is made.
|----- |  | ------------------------------------------------------

|2.18. |  | Incentive
Stock Option means an Option intended to meet the           requirements of an
incentive stock option as defined in section 422 of the Code           and designated as
an Incentive Stock Option.
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.19. |  | 1934
Act means the Securities Exchange Act of 1934, as amended.
|----- |  | -----------------------------------------------------------------

|2.20. |  | Non-Employee
Director means a member of the Board who meets the           definition of a non-employee
director under Rule 16b-3(b)(3)           promulgated by the Securities and
Exchange Commission under the 1934 Act.
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.21. |  | Non-Qualified
Option means an Option not intended to be an Incentive           Stock Option, and
designated as a Non-Qualified Option.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------

|2.22. |  | Option means
any stock option granted from time to time under           Section 8 of the Plan.
|----- |  | ------------------------------------------------------------------------------------------------

|2.23. |  | Outside
Director means a member of the Board who meets the           definition of an outside
director under Treasury Regulation §          1.162-27(e)(3)(i).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.24. |  | Participant means
a Consultant, Director or Employee.
|----- |  | -------------------------------------------------------

|2.25. |  | Performance
Goal means a goal that must be met by the end of a           period specified by
the Committee (but that is substantially uncertain to be met           before the grant
of an Award) based upon: (i) the price of Common Stock, (ii)           the market share
of the Company, its Subsidiaries or Affiliates (or any business           unit thereof),
(iii) sales by the Company, its Subsidiaries or Affiliates (or           any business
unit thereof), (iv) earnings per share of Common Stock, (v) return           on
shareholder equity of the Company, (vi) costs of the Company, its           Subsidiaries
or Affiliates (or any business unit thereof), (vii) cash flow of           the Company,
its Subsidiaries or Affiliates (or any business unit thereof),           (viii) return on
total assets of the Company, its Subsidiaries or Affiliates (or           any business
unit thereof), (ix) return on invested capital of the Company, its           Subsidiaries
or Affiliates (or any business unit thereof), (x) return on net           assets of the
Company, its Subsidiaries or Affiliates (or any business unit           thereof), (xi)
operating income of the Company, its Subsidiaries or           Affiliates(or
any business unit thereof), (xii) net income           of the Company, its Subsidiaries
or Affiliates (or any business unit thereof),           or (xiii) any other goal the
Committee deems appropriate.
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.26. |  | Person means
any individual, partnership, corporation, company,           limited liability company,
association, trust, joint venture, unincorporated           organization, entity or
division, or any government, governmental department or           agency or political
subdivision thereof.
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.27. |  | Plan means
the Adolor Corporation 2003 Stock-Based Incentive           Compensation Plan herein set
forth, as amended from time to time.
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------

|2.28. |  | Restricted
Stock means Common Stock awarded by the Committee under           Section 7 of the
Plan.
|----- |  | -----------------------------------------------------------------------------------------------------

|2.29. |  | Restriction
Period means the period during which Restricted Stock           awarded under
Section 7 of the Plan is subject to forfeiture.
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------

|2.30. |  | Retirement means
retirement from the active employment of the           Company, a Subsidiary or an
Affiliate pursuant to the relevant provisions of the           applicable pension plan of
such entity or as otherwise determined by the Board.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.31. |  | Subsidiary means
any corporation (other than the Company) in an           unbroken chain of corporations
beginning with the Company (or any subsequent           parent of the Company) if each of
the corporations other than the last           corporation in the unbroken chain owns
stock possession 50% or more of the total           combined voting power of all classes
of stock in one of the other corporations           in such chain.
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.32. |  | Ten
Percent Shareholder means a Person who on any given date owns,           either
directly or indirectly (taking into account the attribution rules           contained in
section 424(d) of the Code), stock possessing more than 10% of the           total
combined voting power of all classes of stock of the Company or a           Subsidiary.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 3. Eligibility

Any
Participant is eligible to receive an Award.

4.    
          Administration and Implementation of Plan

4.1.    
          The Plan shall be administered by the Committee, which shall have full power to
          interpret and administer the Plan and full authority to act in selecting the
          Participants to whom Awards will be granted, in determining the type and amount
          of Awards to be granted to each such Participant, the terms and conditions of
          Awards granted under the Plan and the terms of agreements which will be entered
          into with Holders. Notwithstanding the foregoing, the Board may designate one or
          more of its members or officers of the Company to serve as a secondary committee
          and delegate to the secondary committee authority to grant Awards to eligible
          individuals who are not subject to the requirements of Rule 16b-3 under the 1934
          Act or section 162(m) of the Code. The secondary committee shall have the same
          authority with respect to selecting the individuals to whom such Awards are
          granted and establishing the terms and conditions of such Awards as the
          Committee has under the terms of the Plan.

4.2.    
          The Committees powers shall include, but not be limited to, the power to
          determine whether, to what extent and under what circumstances an Option may be
          exchanged for cash, Restricted Stock, Deferred Stock or some combination
          thereof; to determine whether, to what extent and under what circumstances an
          Award is made and operates on a tandem basis with other Awards made hereunder;
          to determine whether, to what extent and under what circumstances Common Stock
          or cash payable with respect to an Award shall be deferred, either automatically
          or at the election of the Holder (including the power to add deemed earnings to
          any such deferral); to grant Awards (other than Incentive Stock Options) that
          are transferable by the Holder; and to determine the effect, if any, of a change
          in control of the Company upon outstanding Awards.

4.3.    
          The Committee shall have the power to adopt regulations for carrying out the
          Plan and to make changes in such regulations as it shall, from time to time,
          deem advisable. The Committee shall have the power unilaterally and without
          approval of a Holder to amend an existing Award in order to carry out the
          purposes of the Plan so long as such an amendment does not take away any benefit
          granted to a Holder by the Award and as long as the amended Award comports with
          the terms of the Plan. Any interpretation by the Committee of the terms and
          provisions of the Plan and the administration thereof, and all action taken by
          the Committee, shall be final and binding on Holders.

4.4.    
          The Committee may condition the grant of any Award or the lapse of any Deferral
          or Restriction Period (or any combination thereof) upon the Holders
          achievement of a Performance Goal that is established by the Committee before
          the grant of the Award. The Committee shall have discretion to determine the
          specific targets with respect to each Performance Goal. Before granting an Award
          or permitting the lapse of any Deferral or Restriction Period subject to this
          Section, the Committee shall certify that an individual has satisfied the
          applicable Performance Goal.

5.    
          Shares of Stock Subject to the Plan

5.1.    
          Subject to adjustment as provided in Section 9, the total number of shares of
          Common Stock available for Awards under the Plan shall be 3,500,000 shares.

5.2.    
          The maximum number of shares of Common Stock subject to Awards that may be
          granted to any Participant shall not exceed 500,000 during any calendar year
          (the Individual Limit). Subject to Section 5.3, Section 9 and
          Section 12.7, any Award that is canceled or repriced by the Committee shall
          count against the Individual Limit. Notwithstanding the foregoing, the
          Individual Limit may be adjusted to reflect the effect on Awards of any
          transaction or event described in Section 9.

5.3.    
          Any shares issued by the Company through the assumption or substitution of
          outstanding grants from an acquired company shall not (i) reduce the shares
          available for Awards under the Plan, or (ii) be counted against the Individual
          Limit. Any shares issued hereunder may consist, in whole or in part, of
          authorized and unissued shares or treasury shares. If any shares subject to any
          Award granted hereunder are forfeited or such Award otherwise terminates without
          the issuance of such shares or the payment of other consideration in lieu of
          such shares, the shares subject to such Award, to the extent of any such
          forfeiture or termination, shall again be available for Awards under the Plan.

6.    
          Deferred Stock

An
Award of Deferred Stock is an agreement by the Company to deliver to the recipient a
specified number of shares of Common Stock at the end of a specified deferral period or
periods. Such an Award shall be subject to the following terms and conditions:

6.1.    
          Deferred Stock Awards shall be evidenced by Deferred Stock agreements. Such
          agreements shall conform to the requirements of the Plan and may contain such
          other provisions as the Committee shall deem advisable.

6.2.       
          Upon determination of the number of shares of Deferred Stock to be awarded to a
          Holder, the Committee shall direct that the same be credited to the
          Holders account on the books of the Company but that issuanceand delivery of the same shall be deferred until the date or
          dates provided in Section 6.5 hereof. Prior to issuance and delivery hereunder
          the Holder shall have no rights as a stockholder with respect to any shares of
          Deferred Stock credited to the Holders account.

6.3.    
          Subject to the provisions of Section 6.4 concerning Deferred Stock Awards that
          are subject to the achievement of Performance Goals, amounts equal to any
          dividends declared during the Deferral Period with respect to the number of
          shares covered by a Deferred Stock Award will be paid to the Holder currently,
          or deferred and deemed to be reinvested in additional Deferred Stock, or
          otherwise reinvested on such terms as are determined at the time of the Award by
          the Committee, in its sole discretion, and specified in the Deferred Stock
          agreement.

6.4.    
          The Committee may condition the grant of an Award of Deferred Stock or the
          expiration of the Deferral Period upon the Holders achievement of one or
          more Performance Goal(s) specified in the Deferred Stock agreement. Unless
          otherwise specified in a Deferred Stock agreement, if the Holder fails to
          achieve the specified Performance Goal(s), the Committee shall not grant the
          Deferred Stock Award to the Holder, or the Holder shall forfeit the Award and no
          Common Stock shall be transferred to him pursuant to the Deferred Stock Award.
          Dividends paid during the Deferral Period on Deferred Stock subject to a
          Performance Goal shall be reinvested in additional Deferred Stock and the
          expiration of the Deferral Period for such Deferred Stock shall be subject to
          the Performance Goal(s) previously established by the Committee.

6.5.    
          The Deferred Stock agreement shall specify the duration of the Deferral Period,
          taking into account termination of employment or service on account of death,
          Disability, Retirement or other cause. The Deferral Period may consist of one or
          more installments. At the end of the Deferral Period or any installment thereof
          the shares of Deferred Stock applicable to such installment credited to the
          account of a Holder shall be issued and delivered to the Holder (or, where
          appropriate, the Holders legal representative) in accordance with the
          terms of the Deferred Stock agreement. The Committee may, in its sole
          discretion, accelerate the delivery of all or any part of a Deferred Stock Award
          or waive the deferral limitations for all or any part of a Deferred Stock Award.

7.    
          Restricted Stock

An
Award of Restricted Stock is a grant by the Company of a specified number of shares of
Common Stock to the Participant, which shares are subject to forfeiture upon the happening
of specified events. Such an Award shall be subject to the following terms and conditions:

7.1.    
          Restricted Stock shall be evidenced by Restricted Stock agreements. Such
          agreements shall conform to the requirements of the Plan and may contain such
          other provisions as the Committee shall deem advisable.

7.2     Upon determination of the number
of shares of Restricted Stock to be granted to the Holder, the Committee shall direct that
a certificate or certificates representing the number of shares of Common Stock be issued
to the Holder with the Holder designated as the registered owner. The certificate(s)
representing such shares shall be legended as to sale, transfer, assignment, pledge or
other encumbrances during the Restriction Period and deposited by the Holder, together
with a stock power endorsed in blank, with the Company, to be held in escrow during the
Restriction Period.

7.3     During the Restriction Period the
Holder shall have the right to vote the shares of Restricted Stock. Subject to the
provisions of Section 7.4 concerning Restricted Stock Awards that are subject to the
achievement of Performance Goals, amounts equal to any dividends declared during the
Restriction Period with respect to the number of shares covered by a Restricted Stock
Award will be paid to the Holder currently, or deferred and deemed to be reinvested in
additional Restricted Stock, or otherwise reinvested on such terms as are determined at
the time of the Award by the Committee, in its sole discretion, and specified in the
Restricted Stock agreement.

7.4     The Committee may condition the
grant of an Award of Restricted Stock or the expiration of the Restriction Period upon the
Holders achievement of one or more Performance Goal(s) specified in the Restricted
Stock Agreement. Unless otherwise specified in a Restricted Stock Agreement, if the Holder
fails to achieve the specified Performance Goal(s), the Committee shall not grant the
Restricted Stock to the Holder, or the Holder shall forfeit the Award of Restricted Stock
and the Common Stock shall be forfeited to the Company. Dividends paid during the
Restriction Period on Restricted Stock subject to a Performance Goal shall be reinvested
in additional Restricted Stock and the expiration of the Restriction Period for such
Restricted Stock shall be subject to the Performance Goal(s) previously established by the
Committee.

7.5    
The Restricted Stock agreement shall specify the duration of the Restriction Period and
the performance, employment or other conditions (including termination of employment or
service on account of death, Disability, Retirement or other cause) under which the
Restricted Stock may be forfeited to the Company. At the end of the Restriction Period the
restrictions imposed hereunder shall lapse with respect to the number of shares of
Restricted Stock as determined by the Committee, and the legend shall be removed and such
number of shares delivered to the Holder (or, where appropriate, the Holders legal
representative). The Committee may, in its sole discretion, modify or accelerate the
vesting and delivery of shares of Restricted Stock.

# 8. Options

Options
give a Participant the right to purchase a specified number of shares of Common Stock from
the Company for a specified time period at a fixed price. Options may be either Incentive
Stock Options or Non-Qualified Stock Options. The grant of Options shall be subject to the
following terms and conditions:

8.1.       
          Option Grants: Options shall be evidenced by Option agreements. Such agreements
          shall conform to the requirements of the Plan, and may contain such other
          provisions as the Committee shall deem advisable.

8.2.       
          Specific Option Grants to Directors: Each Director who is not an employee of the
          Company shall receive an Option to purchase 15,000 shares of Common Stock upon
          his or her initial election to the Board, and the shares of Common Stock
          underlying such Options shall vest one-third (1/3) per year that such Director
          remains a Director for three years beginning on the first anniversary of the
          grant. Beginning at the 2003 annual meeting of the stockholders of the Company
          and at each annual meeting of the stockholders of the Company held thereafter
          while the Plan is in effect, each Director continuing as such after such meeting
          who is not an employee of the Company shall receive an Option to purchase 13,000
          shares of Common Stock, and the shares of Common Stock underlying such Options
          shall vest in full on the first anniversary of the grant; provided,
          however, that in the event a Director resigns from the Board other than
          for Cause prior to such one-year anniversary, the vesting of such Option shall
          accelerate so that such Option becomes immediately exercisable with respect to
          one-twelfth (1/12) of the shares of Common Stock underlying such Option for each
          full month that has elapsed between the date of the grant of such Option and the
          date of such resignation. Notwithstanding anything to the contrary in the Plan,
          the price per share at which Common Stock may be purchased upon the exercise of
          an Option granted pursuant to this Section 8.2 shall be not less than the Fair
          Market Value of a share of Common Stock on the date of grant.

8.3.       
          Option Price: The price per share at which Common Stock may be purchased upon
          exercise of an Option shall be determined by the Committee, but, in the case of
          grants of Incentive Stock Options, shall be not less than the Fair Market Value
          of a share of Common Stock on the date of grant. In the case of any Incentive
          Stock Option granted to a Ten Percent Shareholder, the option price per share
          shall not be less than 110% of the Fair Market Value of a share of Common Stock
          on the date of grant. The option price per share for Non-Qualified Options may
          be less than the Fair Market Value of a share of Common Stock on the date of
          grant.

8.4.       
          Term of Options: The Option agreements shall specify when an Option may be
          exercisable and the terms and conditions applicable thereto. The term of an
          Option shall in no event be greater than ten years (five years in the case of an
          Incentive Stock Option granted to a Ten Percent Shareholder and ten years in the
          case of all other Incentive Stock Options). The Committee may, in its sole
          discretion, accelerate the time at which an Option vests. The Committee may, in
          its sole discretion, extend the period of exercise for Options that have vested.

8.5.       
          Incentive Stock Options: Each provision of the Plan and each Option agreement
          relating to an Incentive Stock Option shall be construed so that each Incentive
          Stock Option shall be an incentive stock option as defined in section 422 of the
          Code, and any provisions of the Option agreement thereof that cannot be so
          construed shall be disregarded. In no event may a Holder be granted an Incentive
          Stock Option which does not comply with such grant and vesting limitations as
          may be prescribed by section 422(b) of the Code. Incentive Stock Options may
          only be granted to Employees; provided, however, that they may not
          be granted to employees of Affiliates. Without limiting the foregoing, the
          aggregate Fair Market Value (determined as of the time the Option is granted) of
          the Common Stock with respect to which an Incentive Stock Option may first
          become exercisable by a Participant in any one calendar year under the Plan
          shall not exceed $100,000.

8.6.       
          Restrictions on Transferability of Incentive Stock Options: No Incentive Stock
          Option shall be transferable otherwise than by will or the laws of descent and
          distribution and, during the lifetime of the Holder, shall be exercisable only
          by the Holder. Upon the death of a Holder, the Person to whom the rights have
          passed by will or by the laws of descent and distribution may exercise an
          Incentive Stock Option only in accordance with this Section 8.

8.7.       
          Payment of Option Price: The option price of the shares of Common Stock upon the
          exercise of an Option shall be paid: (i) in full in cash at the time of the
          exercise or, (ii) with the consent of the Committee, in whole or in part in
          Common Stock held by the Holder for at least six months valued at Fair Market
          Value on the date of exercise. With the consent of the Committee, payment upon
          the exercise of a Non-Qualified Option may be made in whole or in part by
          Restricted Stock which has been held by the Holder for at least six months
          (based on the fair market value of the Restricted Stock on the date the Option
          is exercised, as determined by the Committee). In such case the Common Stock to
          which the Option relates shall be subject to the same forfeiture restrictions
          originally imposed on the Restricted Stockexchanged
          therefore.

8.8.       
          Termination by Death: Unless otherwise provided in an Option agreement, if a
          Holders employment or service by the Company, a Subsidiary or Affiliate
          terminates by reason of death, any Option granted to such Holder may thereafter
          be exercised (to the extent such Option was exercisable at the time of death)
          by, where appropriate, the Holders transferee or by the Holders
          legal representative, for a period of 12 months from the date of death or until
          the expiration of the stated term of the Option, whichever period is shorter.

8.9.       
          Termination by Reason of Disability: Unless otherwise provided in an Option
          agreement, if a Holders employment or service by the Company, a Subsidiary
          or Affiliate terminates by reason of Disability, any unexercised Option granted
          to the Holder may thereafter be exercised by the Holder (or, where appropriate,
          the Holders transferee or legal representative), to the extent it was
          exercisable at the time of termination, for a period of 12 months from the date
          of such termination of employment or service or until the expiration of the
          stated term of the Option, whichever period is shorter.

8.10.       
          Termination by Reason of Retirement: If a Holders employment by or service
          with the Company, a Subsidiary or Affiliate terminates by reason of Retirement,
          any unexercised Option granted to the Holder may thereafter be exercised by the
          Holder (or, where appropriate, the Holders transferee or legal
          representative), to the extent it was exercisable at the time of termination,
          for a period of 90 days from the date of such termination of employment or
          service or until the expiration of the stated term of the Option, whichever
          period is shorter.

8.11.       
          Termination Not for Cause: If a Holders employment by or service with the
          Company, a Subsidiary or Affiliate is terminated by the Company, the Subsidiary
          or Affiliate not for Cause, any unexercised Option granted to the Holder may
          thereafter be exercised by the Holder (or, where appropriate, the Holders
          transferee or legal representative), to the extent it was exercisable at the
          time of termination, for a period of 90 days from the date of such termination
          of employment or service or until the expiration of the stated term of the
          Option, whichever period is shorter.

8.12.       
          Termination for Cause: If a Holders employment or service with the
          Company, a Subsidiary or Affiliate is terminated by the Company, the Subsidiary
          or Affiliate for Cause, all unexercised Options awarded to the Holder shall
          terminate on the date of such termination.

8.13.       
          Termination for Other Reason: If a Holders employment or service with the
          Company, a Subsidiary or Affiliate terminates for any reason not specified in
          this Section 8 (including voluntary termination), any unexercised Option granted
          to the Holder may thereafter be exercised by the Holder (or, where appropriate,
          the Holders transferee or legal representative), to the extent it was
          exercisable at the time of termination, for a period of 90 days from the date of
          such termination of employment or service or until the expiration of the stated
          term of the Option, whichever period is shorter.

8.14.       
          Continuation of Service: Notwithstanding anything to the contrary in this
          Section 8, a Holders cessation of service as an Employee, Director or
          Consultant other than for Cause shall not be treated as a termination under this
          Section 8 if the Holder continues without interruption to serve thereafter in a
          material manner in one (or more) of such other capacities, as determined by the
          Committee in its sole discretion.

9.    
          Changes in Capitalization; Change of Control

9.1.    
          In the event of a reorganization, recapitalization, stock split, spin-off,
          split-off, split-up, stock dividend, issuance of stock rights, combination of
          shares, merger, consolidation or any other change in the corporate structure of
          the Company affecting Common Stock, or any distribution to stockholders of the
          Company other than a cash dividend, the Board shall make appropriate adjustment
          in the number and kind of shares authorized by the Plan and any other
          adjustments to outstanding Awards as it determines appropriate. No fractional
          shares of Common Stock shall be issued pursuant to such an adjustment. The Fair
          Market Value of any fractional shares resulting from adjustments pursuant to
          this Section shall, where appropriate, be paid in cash to the Holder.

9.2.    
          Upon a Change of Control, the Committee shall fully vest all Awards made under
          the Plan. In addition, upon a Change of Control, the Committee may, at its
          discretion (i) cancel any outstanding Awards in exchange for a cash payment of
          an amount equal to the difference between the then Fair Market Value of the
          Award less the option or base price of the Award, (ii) after having given the
          Award Holder a chance to exercise any outstanding Options, terminate any or all
          of the Award Holders unexercised Options, or (iii) where the Company is
          not the surviving corporation, cause the surviving corporation to assume or
          replace all outstanding Awards with comparable awards.

9.3.    
          The judgment of the Committee with respect to any matter referred to in this
          Section 9 shall be conclusive and binding upon each Holder without the need for
          any amendment to the Plan.

10.    
          Effective Date, Termination and Amendment

The
Plan shall become effective on February 27, 2003, subject to shareholder approval. Options
granted under the Plan prior to such shareholder approval shall expressly not be
exercisable prior to such approval. The Plan shall remain in full force and effect until
the earlier of ten years from the date of its adoption by the Board, or the date it is
terminated by the Board. The Board shall have the power to amend, suspend or terminate the
Plan at any time, provided that no such amendment shall be made without shareholder
approval which shall (i) increase (except as provided in Section 9) the total number of
shares available for issuance pursuant to the Plan; (ii) change the class of Participants
eligible to be Holders; (iii) modify the Individual Limit (except as provided Section 9)
or the categories of Performance Goals set forth in Section 4.4; or (iv) change the
provisions of this Section 10. Termination of the Plan pursuant to this Section 10 shall
not affect Awards outstanding under the Plan at the time of termination.

# 11. Transferability

Except
as provided in Section 8.6 and this Section 11, Awards may not be pledged, assigned or
transferred for any reason during the Holders lifetime, and any attempt to do so
shall be void and the relevant Award shall be forfeited. The Committee may grant Awards
(except Incentive Stock Options) that are transferable by the Holder during his lifetime,
but such Awards shall be transferable only to the extent specifically provided in the
agreement entered into with the Holder. The transferee of the Holder shall, in all cases,
be subject to the provisions of the agreement between the Company and the Holder.

12.    
          General Provisions

12.1.    
          Nothing contained in the Plan, or any Award granted pursuant to the Plan, shall
          confer upon any Employee or Consultant any right with respect to continuance of
          employment or service by the Company, a Subsidiary or Affiliate, nor interfere
          in any way with the right of the Company, a Subsidiary or Affiliate to terminate
          the employment or service of any Employee or Consultant at any time.

12.2.    
          Nothing contained in the Plan, and no action taken pursuant to the provisions of
          the Plan, shall create or shall be construed to create a trust of any kind, or a
          fiduciary relationship between the Company or its Subsidiaries, or their
          officers or the Committee, on the one hand, and any Participant, the Company,
          its Subsidiaries or any other Person or entity, on the other.

12.3.    
          For purposes of this Plan, neither (i) transfer of employment between the
          Company and its Subsidiaries and Affiliates nor (ii) transfer of status from
          Employee to Consultant shall be deemed termination of employment.

12.4.    
          Holders shall be responsible to make appropriate provision for all taxes
          required to be withheld in connection with any Award, the exercise thereof and
          the transfer of shares of Common Stock pursuant to this Plan. Such
          responsibility shall extend to all applicable Federal, state, local or foreign
          withholding taxes. In the case of the payment of Awards in the form of Common
          Stock, or the exercise of Options, the Company shall have the right to retain
          the number of shares of Common Stock whose Fair Market Value equals the amount
          to be withheld in satisfaction of the applicable withholding taxes. Agreements
          evidencing such Awards shall contain appropriate provisions to effect
          withholding in this manner.

12.5.    
          Without amending the Plan, Awards may be granted to Participants who are foreign
          nationals or employed outside the United States or both, on such terms and
          conditions different from those specified in the Plan as may, in the judgment of
          the Committee, be necessary or desirable to further the purpose of the Plan.

12.6.    
          To the extent that Federal laws (such as the 1934 Act, the Code or the Employee
          Retirement Income Security Act of 1974) do not otherwise control, the Plan and
          all determinations made and actions taken pursuant hereto shall be governed by
          the law of the State of Delaware and construed accordingly.

12.7.    
          The Committee may amend any outstanding Awards to the extent it deems
          appropriate; provided, however, except as provided in Section 9,
          no Award may be repriced, replaced, regranted through cancellation, or modified
          without shareholder approval if the effect would be to reduce the exercise price
          for the shares underlying the Award. The Committee may amend Awards without the
          consent of the Holder, except in the case of amendments adverse to the Holder,
          in which case the Holders consent is required to any such amendment.

12.8.    
          All shares of Common Stock purchased upon the exercise of an Option or issued
          pursuant to an Award of Deferred Stock or Restricted Stock shall be subject to
          restrictions on transfer pursuant to applicable securities laws and such other
          agreements as the Committee shall deem appropriate and shall bear a legend
          subjecting such shares to those restrictions on transfer in accordance with the
          applicable Award. The certificates shall also bear a legend referring to any
          restrictions on transfer arising hereunder or under any other applicable law,
          regulation, rule or agreement.

12.9.    
          The Plan and each Award under the Plan shall be subject to the requirement that
          if at any time the Committee shall determine that (i) the listing, registration
          or qualification of the shares of Common Stock purchased upon the exercise of an
          Option or issued pursuant to an Award of Deferred Stock or Restricted Stock upon
          any securities exchange or under any state or federal law, (ii) the consent or
          approval of any government regulatory body or (iii) an agreement by the
          recipient of an Award with respect to the disposition of such shares is
          necessary or desirable as a condition of, or in connection with, the Plan or the
          granting of such Award or the issue or purchase of such shares thereunder, the
          Award may not be consummated in whole or in part until such listing,
          registration, qualification, consent, approval or agreement shall have been
          effected or obtained free of any conditions not acceptable to the Committee.