<PAGE>

                                                                    EXHIBIT 10.3

                            THE AMENDED AND RESTATED

                            2001 INCENTIVE AWARD PLAN

                                       OF

                          DISCOVERY THERAPEUTICS, INC.


          Discovery Therapeutics, Inc., a Delaware corporation, has adopted the
2001 Incentive Award Plan of Discovery Therapeutics, Inc., (the "Plan"),
                                                                 ----
effective November 14, 2001, for the benefit of its eligible employees,
consultants and directors.

          The purposes of the Plan are as follows:

          (1) To provide an additional incentive for directors, Employees and
Consultants (as such terms are defined below) to further the growth, development
and financial success of the Company by personally benefiting through the
ownership of Company stock and/or rights which recognize such growth,
development and financial success.

          (2) To enable the Company to obtain and retain the services of
directors, Employees and Consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company and/or rights which will reflect the growth, development and financial
success of the Company.

                                   ARTICLE I.
                                   DEFINITIONS

          Wherever the following terms are used in the Plan they shall have the
meanings specified below, unless the context clearly indicates otherwise. The
singular pronoun shall include the plural where the context so indicates.

          1.1 "Administrator" shall mean the entity that conducts the general
               -------------
administration of the Plan as provided herein. With reference to the
administration of the Plan with respect to Options granted to Independent
Directors, the term "Administrator" shall refer to the Board. With reference to
                     -------------
the administration of the Plan with respect to any other Award, the term
"Administrator" shall refer to the Committee unless the Board has assumed the
authority for administration of the Plan generally as provided in Section 10.1.

          1.2 "Award" shall mean an Option, a Restricted Stock award, a
               -----
Performance Award, a Dividend Equivalents award, a Deferred Stock award, a Stock
Payment award or a Stock Appreciation Right which may be awarded or granted
under the Plan (collectively, "Awards").
                               ------

          1.3 "Award Agreement" shall mean a written agreement executed by an
               ---------------
authorized officer of the Company and the Holder which shall contain such terms
and conditions with respect to an Award as the Administrator shall determine,
consistent with the Plan.

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     1.4  "Award Limit" shall mean 250,000 shares of Common Stock, as adjusted
           -----------
pursuant to Section 11.3; provided, however, that solely with respect to
                          --------  -------
Performance Awards granted pursuant to Section 8.2(b), Award Limit shall mean
$500,000.

     1.5 "Board" shall mean the Board of Directors of the Company.
          -----

     1.6 "Change of Control" shall mean the occurrence, after the Public
          -----------------
 Trading Date, of any of the following:

     (a)  a sale of assets representing fifty percent (50%) or more of the fair
market value of the Company's consolidated assets (in a single transaction or
in a series of related transactions);

     (b)  a liquidation or dissolution of the Company;

     (c)  a merger or consolidation involving the Company or any subsidiary of
the Company after the completion of which: (i) in the case of a merger (other
than a triangular merger) or a consolidation involving the Company, the
shareholders of the Company immediately prior to the completion of such merger
or consolidation beneficially own (within the meaning of Rule 13d-3 promulgated
under the Exchange Act), or comparable successor rules), directly or indirectly,
outstanding voting securities representing less than sixty percent (60%) of the
combined voting power of the surviving entity in such merger or consolidation,
and (ii) in the case of a triangular merger involving the Company or a
subsidiary of the Company, the shareholders of the Company immediately prior to
the completion of such merger beneficially own (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rules), directly or
indirectly, outstanding voting securities representing less than sixty percent
(60%) of the combined voting power of the parent of the surviving entity in such
merger;

     (d)  an acquisition by any person, entity or "group" (within the meaning of
Section 13(d) or 14(d) of the Exchange Act or any comparable successor
provisions), other than any employee benefit plan, or related trust, sponsored
or maintained by the Company or an affiliate of the Company and other than in a
merger or consolidation of the type referred to in clause (c), of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act,
or comparable successor rules) of outstanding voting securities of the Company
representing more than thirty percent (30%) of the combined voting power of the
Company (in a single transaction or series of related transactions); or

     1.7  "Code" shall mean the Internal Revenue Code of 1986, as amended.
           ----

     1.8  "Committee" shall mean the Compensation Committee of the Board, or
           ---------
another committee or subcommittee of the Board, appointed as provided in Section
10.1.

     1.9  "Common Stock" shall mean the common stock of the Company, par value
           ------------
$0.001 per share.


     1.10 "Company" shall mean Discovery Therapeutics, Inc., a Delaware
           -------
corporation.

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          1.11 "Consultant" shall mean any consultant or adviser if:
                ----------

          (a)  The consultant or adviser renders bona fide services to the
Company;

          (b)  The services rendered by the consultant or adviser are not in
connection with the offer or sale of securities in a capital-raising transaction
and do not directly or indirectly promote or maintain a market for the Company's
securities; and

          (c)  The consultant or adviser is a natural person who has contracted
directly with the Company to render such services.

          1.12 "Deferred Stock" shall mean Common Stock awarded under Article
                --------------
VIII of the Plan.

          1.13 "Director" shall mean a member of the Board.
                --------

          1.14 "Dividend Equivalent" shall mean a right to receive the
                -------------------
equivalent value (in cash or Common Stock) of dividends paid on Common Stock,
awarded under Article VIII of the Plan.

          1.15 "DRO" shall mean a domestic relations order as defined by the
                ---
Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder.

          1.16 "Employee" shall mean any officer or other employee (as defined
                --------
in accordance with Section 3401(c) of the Code) of the Company, or of any
corporation which is a Subsidiary.

          1.17 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
                ------------
amended.

          1.18 "Fair Market Value" of a share of Common Stock as of a given date
                -----------------
shall be (a) the closing price of a share of Common Stock on the principal
exchange on which shares of Common Stock are then trading, if any (or as
reported on any composite index which includes such principal exchange), on the
trading day previous to such date, or if shares were not traded on the trading
day previous to such date, then on the next preceding date on which a trade
occurred, or (b) if Common Stock is not traded on an exchange but is quoted on
Nasdaq or a successor quotation system, the mean between the closing
representative bid and asked prices for the Common Stock on the trading day
previous to such date as reported by Nasdaq or such successor quotation system,
or (c) if Common Stock is not publicly traded on an exchange and not quoted on
Nasdaq or a successor quotation system, the Fair Market Value of a share of
Common Stock as established by the Administrator acting in good faith.

          1.19 "Holder" shall mean a person who has been granted or awarded an
                ------
Award.

          1.20 "Incentive Stock Option" shall mean an option which conforms to
                ----------------------
the applicable provisions of Section 422 of the Code and which is designated as
an Incentive Stock Option by the Administrator.

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          1.21 "Independent Director" shall mean a member of the Board who is
                --------------------
not an Employee of the Company.

          1.22 "Non-Qualified Stock Option" shall mean an Option which is not
                --------------------------
designated as an Incentive Stock Option by the Administrator.

          1.23 "Option" shall mean a stock option granted under Article IV of
                ------
the Plan. An Option granted under the Plan shall, as determined by the
Administrator, be either a Non-Qualified Stock Option or an Incentive Stock
Option; provided, however, that Options granted to Independent Directors and
        --------  -------
Consultants shall be Non-Qualified Stock Options.

          1.24 "Performance Award" shall mean a cash bonus, stock bonus or other
                -----------------
performance or incentive award that is paid in cash, Common Stock or a
combination of both, awarded under Article VIII of the Plan.

          1.25 "Performance Criteria" shall mean the following business criteria
                --------------------
with respect to the Company, any Subsidiary or any division or operating unit:
(a) net income, (b) pre-tax income, (c) operating income, (d) cash flow, (e)
earnings per share, (f) return on equity, (g) return on invested capital or
assets, (h) cost reductions or savings, (i) funds from operations, (j)
appreciation in the fair market value of Common Stock, and (k) earnings before
any one or more of the following items: interest, taxes, depreciation or
amortization.

          1.26 "Plan" shall mean the 2001 Incentive Award Plan of Discovery
                ----
Therapeutics, Inc.

          1.27 "Public Trading Date" shall mean the first date upon which Common
                -------------------
Stock is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system.

          1.28 "Restricted Stock" shall mean Common Stock awarded under Article
                ----------------
VII of the Plan.

          1.29 "Rule 16b-3" shall mean Rule 16b-3 promulgated under the Exchange
                ----------
Act, as such Rule may be amended from time to time.

          1.30 "Section 162(m) Participant" shall mean any Employee designated
                --------------------------
by the Administrator as a Employee whose compensation for the fiscal year in
which the Employee is so designated or a future fiscal year may be subject to
the limit on deductible compensation imposed by Section 162(m) of the Code.

          1.31 "Securities Act" shall mean the Securities Act of 1933, as
                --------------
amended.

          1.32 "Stock Appreciation Right" shall mean a stock appreciation right
                ------------------------
granted under Article IX of the Plan.

          1.33 "Stock Payment" shall mean (a) a payment in the form of shares of
                -------------
Common Stock, or (b) an option or other right to purchase shares of Common
Stock, as part of a

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deferred compensation arrangement, made in lieu of all or any portion of the
compensation, including without limitation, salary, bonuses and commissions,
that would otherwise become payable to a Employee or Consultant in cash, awarded
under Article VIII of the Plan.

          1.34 "Subsidiary" shall mean any corporation in an unbroken chain of
                ----------
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.

          1.35 "Substitute Award" shall mean an Option granted under this Plan
                ----------------
upon the assumption of, or in substitution for, outstanding equity awards
previously granted by a company or other entity in connection with a corporate
transaction, such as a merger, combination, consolidation or acquisition of
property or stock; provided, however, that in no event shall the term
                   --------  -------
"Substitute Award" be construed to refer to an award made in connection with the
cancellation and repricing of an Option. Notwithstanding the provisions of
Article V of the Plan to the contrary, in the case of an Option that is a
Substitute Award, the price per share of the shares subject to such Option may
be less than the Fair Market Value per share on the date of grant, provided,
                                                                   --------
that:

          (a)  the aggregate Fair Market Value (as of the date such Substitute
Award is granted) of the shares subject to the Substitute Award, less the
aggregate exercise price, shall not exceed
                          ----------------

          (b)  the aggregate fair market value (as of the time immediately
preceding the transaction giving rise to the Substitute Award, such fair market
value to be determined by the Committee) of the shares of the predecessor entity
that were subject to the grant assumed or substituted for by the Company, less
the aggregate exercise price of such shares.

          1.36 "Termination of Consultancy" shall mean the time when the
                --------------------------
engagement of a Holder as a Consultant to the Company or a Subsidiary is
terminated for any reason, with or without cause, including, but not by way of
limitation, by resignation, discharge, death or retirement, but excluding
terminations where there is a simultaneous commencement of employment with the
Company or any Subsidiary. The Administrator, in its absolute discretion, shall
determine the effect of all matters and questions relating to Termination of
Consultancy, including, but not by way of limitation, the question of whether a
Termination of Consultancy resulted from a discharge for good cause, and all
questions of whether a particular leave of absence constitutes a Termination of
Consultancy. Notwithstanding any other provision of the Plan, the Company or any
Subsidiary has an absolute and unrestricted right to terminate a Consultant's
service at any time for any reason whatsoever, with or without cause, except to
the extent expressly provided otherwise in writing.

          1.37 "Termination of Directorship" shall mean the time when a Holder
                ---------------------------
who is an Independent Director ceases to be a Director for any reason,
including, but not by way of limitation, a termination by resignation, failure
to be elected, death or retirement. The Board, in its sole and absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Directorship with respect to Independent Directors.

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          1.38 "Termination of Employment" shall mean the time when the
                -------------------------
employee-employer relationship between a Holder and the Company or any
Subsidiary is terminated for any reason, with or without cause, including, but
not by way of limitation, a termination by resignation, discharge, death,
disability or retirement; but excluding (a) terminations where there is a
simultaneous reemployment or continuing employment of a Holder by the Company or
any Subsidiary, (b) at the discretion of the Administrator, terminations which
result in a temporary severance of the employee-employer relationship, and (c)
at the discretion of the Administrator, terminations which are followed by the
simultaneous establishment of a consulting relationship by the Company or a
Subsidiary with the former employee. The Administrator, in its absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Employment, including, but not by way of limitation, the question
of whether a Termination of Employment resulted from a discharge for good cause,
and all questions of whether a particular leave of absence constitutes a
Termination of Employment; provided, however, that, with respect to Incentive
                           --------  -------
Stock Options, unless otherwise determined by the Administrator in its
discretion, a leave of absence, change in status from an employee to an
independent contractor or other change in the employee-employer relationship
shall constitute a Termination of Employment if, and to the extent that, such
leave of absence, change in status or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section.

                                  ARTICLE II.
                             SHARES SUBJECT TO PLAN

          2.1  Shares Subject to Plan.
               ----------------------

          (a)  The shares of stock subject to Awards shall be Common Stock,
initially shares of the Company's Common Stock. Subject to adjustment as
provided in Section 11.3, the aggregate number of such shares which may be
issued upon exercise of such Options or rights or upon any such Awards under the
Plan shall not exceed 700,000. The shares of Common Stock issuable upon exercise
of such Options or rights or upon any such awards may be either previously
authorized but unissued shares or treasury shares.

          (b)  The maximum number of shares which may be subject to Awards
granted under the Plan to any individual in any fiscal year shall not exceed the
Award Limit; provided, however, that the foregoing limitation shall not apply
             --------  -------
prior to the Public Trading Date and, on or following the Public Trading Date,
the foregoing limitation shall not apply until the earliest of: (i) the first
material modification of the Plan (within the meaning of Section 162(m) of the
Code and the regulations issued thereunder); (ii) the issuance of all of the
shares of Common Stock reserved for issuance under the Plan; (iii) the
expiration of the Plan; (iv) the first meeting of stockholders at which
Directors are to be elected that occurs after the close of the third calendar
year following the calendar year in which occurred the first registration of an
equity security of the Company under Section 12 of the Exchange Act; or (v) such
other date required by Section 162(m) of the Code and the rules and regulations
promulgated thereunder. To the extent required by Section 162(m) of the Code,
shares subject to Options which are canceled continue to be counted against the
Award Limit.

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          2.2 Add-back of Options and Other Rights. If any Option, or other
              ------------------------------------
right to acquire shares of Common Stock under any other Award under the Plan,
expires or is canceled without having been fully exercised, or is exercised in
whole or in part for cash as permitted by the Plan, the number of shares subject
to such Option or other right but as to which such Option or other right was not
exercised prior to its expiration, cancellation or exercise may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. Furthermore, any shares subject to Awards which are adjusted pursuant to
Section 11.3 and become exercisable with respect to shares of stock of another
corporation shall be considered cancelled and may again be optioned, granted or
awarded hereunder, subject to the limitations of Section 2.1. Shares of Common
Stock which are delivered by the Holder or withheld by the Company upon the
exercise of any Award under the Plan, in payment of the exercise price thereof
or tax withholding thereon, may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1. If any shares of Restricted Stock are
surrendered by the Holder or repurchased by the Company pursuant to Section 7.4
or 7.5 hereof, such shares may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1. Notwithstanding the provisions of
this Section 2.2, no shares of Common Stock may again be optioned, granted or
awarded if such action would cause an Incentive Stock Option to fail to qualify
as an incentive stock option under Section 422 of the Code.

                                  ARTICLE III.
                               GRANTING OF AWARDS

          3.1 Award Agreement. Each Award shall be evidenced by an Award
              ---------------
Agreement. Award Agreements evidencing Awards intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code. Award Agreements evidencing
Incentive Stock Options shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 422 of the Code.

          3.2 Provisions Applicable to Section 162(m) Participants.
              ----------------------------------------------------

          (a) The Committee, in its discretion, may determine whether an Award
is to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code.

          (b) Notwithstanding anything in the Plan to the contrary, the
Committee may grant any Award to a Section 162(m) Participant, including
Restricted Stock the restrictions with respect to which lapse upon the
attainment of performance goals which are related to one or more of the
Performance Criteria and any performance or incentive award described in Article
VIII that vests or becomes exercisable or payable upon the attainment of
performance goals which are related to one or more of the Performance Criteria.

          (c) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect to
any Award granted under Articles VII and VIII which may be granted to one or
more Section 162(m) Participants, no later than ninety (90) days following the
commencement of any fiscal year in question or any other designated fiscal
period or period of service (or such other time as may be required or permitted
by Section 162(m) of the Code), the Committee shall, in writing, (i)

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designate one or more Section 162(m) Participants, (ii) select the
Performance Criteria applicable to the fiscal year or other designated fiscal
period or period of service, (iii) establish the various performance targets, in
terms of an objective formula or standard, and amounts of such Awards, as
applicable, which may be earned for such fiscal year or other designated fiscal
period or period of service, and (iv) specify the relationship between
Performance Criteria and the performance targets and the amounts of such Awards,
as applicable, to be earned by each Section 162(m) Participant for such fiscal
year or other designated fiscal period or period of service. Following the
completion of each fiscal year or other designated fiscal period or period of
service, the Committee shall certify in writing whether the applicable
performance targets have been achieved for such fiscal year or other designated
fiscal period or period of service. In determining the amount earned by a
Section 162(m) Participant, the Committee shall have the right to reduce (but
not to increase) the amount payable at a given level of performance to take into
account additional factors that the Committee may deem relevant to the
assessment of individual or corporate performance for the fiscal year or other
designated fiscal period or period of service.

          (d) Furthermore, notwithstanding any other provision of the Plan or
any Award which is granted to a Section 162(m) Participant and is intended to
qualify as performance-based compensation as described in Section 162(m)(4)(C)
of the Code shall be subject to any additional limitations set forth in Section
162(m) of the Code (including any amendment to Section 162(m) of the Code) or
any regulations or rulings issued thereunder that are requirements for
qualification as performance-based compensation as described in Section
162(m)(4)(C) of the Code, and the Plan shall be deemed amended to the extent
necessary to conform to such requirements.

          3.3 Limitations Applicable to Section 16 Persons. Notwithstanding any
              --------------------------------------------
other provision of the Plan, the Plan, and any Award granted or awarded to any
individual who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of
the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan and Awards granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.

          3.4 Consideration. In consideration of the granting of an Award under
              -------------
the Plan, the Holder shall agree, in the Award Agreement, to remain in the
employ of (or to consult for or to serve as an Independent Director of, as
applicable) the Company or any Subsidiary for a period of at least one year (or
such shorter period as may be fixed in the Award Agreement or by action of the
Administrator following grant of the Award) after the Award is granted (or, in
the case of an Independent Director, until the next annual meeting of
stockholders of the Company).

          3.5 At-Will Employment. Nothing in the Plan or in any Award Agreement
              ------------------
hereunder shall confer upon any Holder any right to continue in the employ of,
or as a Consultant for, the Company or any Subsidiary, or as a director of the
Company, or shall interfere with or restrict in any way the rights of the
Company and any Subsidiary, which are hereby expressly reserved, to discharge
any Holder at any time for any reason whatsoever, with or without cause,

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<PAGE>

except to the extent expressly provided otherwise in a written employment
agreement between the Holder and the Company and any Subsidiary.

                                   ARTICLE IV.
                        GRANTING OF OPTIONS TO EMPLOYEES,
                      CONSULTANTS AND INDEPENDENT DIRECTORS

          4.1 Eligibility. Any Employee or Consultant selected by the Committee
              -----------
pursuant to Section 4.4(a)(i) shall be eligible to be granted an Option. Each
Independent Director of the Company shall be eligible to be granted Options at
the times and in the manner set forth in Section 4.5.

          4.2 Disqualification for Stock Ownership. No person may be granted an
              ------------------------------------
Incentive Stock Option under the Plan if such person, at the time the Incentive
Stock Option is granted, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any then
existing Subsidiary or parent corporation (within the meaning of Section 422 of
the Code) unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code.

          4.3 Qualification of Incentive Stock Options. No Incentive Stock
              ----------------------------------------
Option shall be granted to any person who is not an Employee.

          4.4 Granting of Options to Employees and Consultants.
              -------------------------------------------

          (a) The Committee shall from time to time, in its absolute discretion,
and subject to applicable limitations of the Plan:

              (i)    Determine which Employees are Employees and select from
among the Employees or Consultants (including Employees or Consultants who have
previously received Awards under the Plan) such of them as in its opinion should
be granted Options;

              (ii)   Subject to the Award Limit, determine the number of shares
to be subject to such Options granted to the selected Employees or Consultants;

              (iii)  Subject to Section 4.3, determine whether such Options are
to be Incentive Stock Options or Non-Qualified Stock Options and whether such
Options are to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code; and

              (iv)   Determine the terms and conditions of such Options,
consistent with the Plan; provided, however, that the terms and conditions of
                          --------  -------
Options intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall include, but not be limited to, such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code.

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<PAGE>

          (b) Upon the selection of a Employee or Consultant to be granted an
Option, the Committee shall instruct the Secretary of the Company to issue the
Option and may impose such conditions on the grant of the Option as it deems
appropriate.

          (c) Any Incentive Stock Option granted under the Plan may be modified
by the Committee, with the consent of the Holder, to disqualify such Option from
treatment as an "incentive stock option" under Section 422 of the Code.

          4.5 Granting of Options to Independent Directors. The Board shall from
              --------------------------------------------
time to time, in its absolute discretion, and subject to applicable limitations
of the Plan:

          (a) Select from among the Independent Directors (including Independent
Directors who have previously received Options under the Plan) such of them as
in its opinion should be granted Options;

          (b) Subject to the Award Limit, determine the number of shares to be
subject to such Options granted to the selected Independent Directors;

          (c) Subject to the provisions of Article 5, determine the terms and
conditions of such Options, consistent with the Plan.

              All the foregoing Option grants authorized by this Section 4.5 are
subject to stockholder approval of the Plan.

          4.6 Options in Lieu of Cash Compensation. Options may be granted under
              ------------------------------------
the Plan to Employees and Consultants in lieu of cash bonuses which would
otherwise be payable to such Employees and Consultants and to Independent
Directors in lieu of directors' fees which would otherwise be payable to such
Independent Directors, pursuant to such policies which may be adopted by the
Administrator from time to time.

                                   ARTICLE V.
                                TERMS OF OPTIONS

          5.1 Option Price. The price per share of the shares subject to each
              ------------
Option granted to Employees and Consultants shall be set by the Committee;
provided, however, that such price shall be no less than the par value of a
--------  -------
share of Common Stock, unless otherwise permitted by applicable state law;
provided, further, that on or following the Public Trading Date, such price
--------  -------
shall be not less than 85% of the Fair Market Value of a share of Common Stock
on the date the Option is granted, and:

          (a) In the case of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, such price shall
not be less than 100% of the Fair Market Value of a share of Common Stock on the
date the Option is granted;

          (b) In the case of Incentive Stock Options such price shall not be
less than 100% of the Fair Market Value of a share of Common Stock on the date
the Option is granted (or the date the Option is modified, extended or renewed
for purposes of Section 424(h) of the Code);

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<PAGE>

          (c) In the case of Incentive Stock Options granted to an individual
then owning (within the meaning of Section 424(d) of the Code) more than 10% of
the total combined voting power of all classes of stock of the Company or any
Subsidiary or parent corporation thereof (within the meaning of Section 422 of
the Code), such price shall not be less than 110% of the Fair Market Value of a
share of Common Stock on the date the Option is granted (or the date the Option
is modified, extended or renewed for purposes of Section 424(h) of the Code).

          5.2 Option Term. The term of an Option granted to an Employee or
              -----------
consultant shall be set by the Committee in its discretion; provided, however,
                                                            --------  -------
that, in the case of Incentive Stock Options, the term shall not be more than 10
years from the date the Incentive Stock Option is granted, or five years from
the date the Incentive Stock Option is granted if the Incentive Stock Option is
granted to an individual then owning (within the meaning of Section 424(d) of
the Code) more than 10% of the total combined voting power of all classes of
stock of the Company or any Subsidiary or parent corporation thereof (within the
meaning of Section 422 of the Code). Except as limited by requirements of
Section 422 of the Code and regulations and rulings thereunder applicable to
Incentive Stock Options, the Committee may extend the term of any outstanding
Option in connection with any Termination of Employment or Termination of
Consultancy of the Holder, or amend any other term or condition of such Option
relating to such a termination.

          5.3 Option Vesting.
              --------------

          (a) The period during which the right to exercise, in whole or in
part, an Option granted to an Employee or a Consultant vests in the Holder shall
be set by the Committee and the Committee may determine that an Option may not
be exercised in whole or in part for a specified period after it is granted;
provided, however, that, unless the Committee otherwise provides in the terms of
--------  -------
the Award Agreement or otherwise, no Option shall be exercisable by any Holder
who is then subject to Section 16 of the Exchange Act within the period ending
six months and one day after the date the Option is granted. At any time after
grant of an Option, the Committee may, in its sole and absolute discretion and
subject to whatever terms and conditions it selects, accelerate the period
during which an Option granted to an Employee or Consultant vests.

          (b) No portion of an Option granted to an Employee or Consultant which
is unexercisable at Termination of Employment or Termination of Consultancy, as
applicable, shall thereafter become exercisable, except as may be otherwise
provided by the Committee either in the Award Agreement or by action of the
Committee following the grant of the Option.

          (c) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by a Holder during any calendar year (under the Plan and all
other incentive stock option plans of the Company and any parent or subsidiary
corporation, within the meaning of Section 422 of the Code) of the Company,
exceeds $100,000, such Options shall be treated as Non-Qualified Stock Options
to the extent required by Section 422 of the Code. The rule set forth in the
preceding sentence shall be applied by taking Options into account in the order
in which they were granted. For purposes

                                       11

<PAGE>

of this Section 5.3(c), the Fair Market Value of stock shall be determined as of
the time the Option with respect to such stock is granted.

          5.4 Terms of Options Granted to Independent Directors. On or following
              -------------------------------------------------
the Public Trading Date, the price per share of the shares subject to each
Option granted to an Independent Director shall equal 100% of the Fair Market
Value of a share of Common Stock on the date the Option is granted; provided,
                                                                    --------
however, that the price of each share subject to each Option granted to
-------
Independent Directors on the Public Trading Date shall equal the initial public
offering price (net of underwriting discounts and commissions) per share of
Common Stock. Prior to the Public Trading Date, the price per share of the
shares subject to each Option granted to an Independent Directors shall be set
by the Committee; provided, however, that such price shall be no less than the
                  --------  -------
par value of a share of Common Stock, unless otherwise permitted by applicable
state law.

                                   ARTICLE VI.
                               EXERCISE OF OPTIONS

          6.1 Partial Exercise. An exercisable Option may be exercised in whole
              ----------------
or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Administrator may require that, by the terms of the
Option, a partial exercise be with respect to a minimum number of shares.

          6.2 Manner of Exercise. All or a portion of an exercisable Option
              ------------------
shall be deemed exercised upon delivery of all of the following to the Secretary
of the Company or his or her office:

          (a) A written notice complying with the applicable rules established
by the Administrator stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Holder or other person then
entitled to exercise the Option or such portion of the Option;

          (b) Such representations and documents as the Administrator, in its
absolute discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Administrator may, in its absolute
discretion, also take whatever additional actions it deems appropriate to effect
such compliance including, without limitation, placing legends on share
certificates and issuing stop-transfer notices to agents and registrars;

          (c) In the event that the Option shall be exercised pursuant to
Section 11.1 by any person or persons other than the Holder, appropriate proof
of the right of such person or persons to exercise the Option; and

          (d) Full cash payment to the Secretary of the Company for the shares
with respect to which the Option, or portion thereof, is exercised. However, the
Administrator may, in its discretion, (i) allow a delay in payment up to 30 days
from the date the Option, or portion thereof, is exercised; (ii) allow payment,
in whole or in part, through the delivery of shares of Common Stock which have
been owned by the Holder for at least six months, duly endorsed for transfer to
the Company with a Fair Market Value on the date of delivery equal to the
aggregate

                                       12

<PAGE>

exercise price of the Option or exercised portion thereof; (iii) allow payment,
in whole or in part, through the surrender of shares of Common Stock then
issuable upon exercise of the Option having a Fair Market Value on the date of
Option exercise equal to the aggregate exercise price of the Option or exercised
portion thereof; (iv) allow payment, in whole or in part, through the delivery
of property of any kind which constitutes good and valuable consideration; (v)
allow payment, in whole or in part, through the delivery of a full recourse
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such terms
as may be prescribed by the Administrator; (vi) allow payment, in whole or in
part, through the delivery of a notice that the Holder has placed a market sell
order with a broker with respect to shares of Common Stock then issuable upon
exercise of the Option, and that the broker has been directed to pay a
sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price, provided that payment of such
                                           --------
proceeds is then made to the Company upon settlement of such sale; or (vii)
allow payment through any combination of the consideration provided in the
foregoing subparagraphs (ii), (iii), (iv), (v) and (vi). In the case of a
promissory note, the Administrator may also prescribe the form of such note and
the security to be given for such note. The Option may not be exercised,
however, by delivery of a promissory note or by a loan from the Company when or
where such loan or other extension of credit is prohibited by law.

          6.3 Conditions to Issuance of Stock Certificates. The Company shall
              --------------------------------------------
not be required to issue or deliver any certificate or certificates for shares
of stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:

          (a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed;

          (b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations of
the Securities and Exchange Commission or any other governmental regulatory body
which the Administrator shall, in its absolute discretion, deem necessary or
advisable;

          (c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Administrator shall, in its absolute
discretion, determine to be necessary or advisable;

          (d) The lapse of such reasonable period of time following the exercise
of the Option as the Administrator may establish from time to time for reasons
of administrative convenience; and

          (e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax, which in the discretion of
the Administrator may be in the form of consideration used by the Holder to pay
for such shares under Section 6.2(d).

          6.4 Rights as Stockholders. Holders shall not be, nor have any of the
              ----------------------
rights or privileges of, stockholders of the Company in respect of any shares
purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by the Company to such
Holders.

                                       13

<PAGE>

          6.5 Ownership and Transfer Restrictions. The Administrator, in its
              -----------------------------------
absolute discretion, may impose such restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an Option as it
deems appropriate. Any such restriction shall be set forth in the respective
Award Agreement and may be referred to on the certificates evidencing such
shares. The Holder shall give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(a) two years from the date of granting (including the date the Option is
modified, extended or renewed for purposes of Section 424(h) of the Code) such
Option to such Holder, or (b) one year after the transfer of such shares to such
Holder.

          6.6 Limitations on Exercise of Options Granted to Independent
              ---------------------------------------------------------
Directors. No Option granted to an Independent Director may be exercised to any
---------
extent by anyone after the first to occur of the following events:

          (a) The expiration of 12 months from the date of the Holder's death;

          (b) The expiration of 12 months from the date of the Holder's
Termination of Directorship by reason of his or her permanent and total
disability (within the meaning of Section 22(e)(3) of the Code);

          (c) The expiration of six months from the date of the Holder's
Termination of Directorship for any reason other than such Holder's death or his
or her permanent and total disability, unless the Holder dies within said
six-month period;

          (d) The expiration of 10 years from the date the Option was granted.

          6.7 Additional Limitations on Exercise of Options. Holders may be
              ---------------------------------------------
required to comply with any timing or other restrictions with respect to the
settlement or exercise of an Option, including a window-period limitation, as
may be imposed in the discretion of the Administrator.

                                  ARTICLE VII.
                            AWARD OF RESTRICTED STOCK

          7.1 Eligibility. Subject to the Award Limit, Restricted Stock may be
              -----------
awarded to any Employee who the Committee determines is a Employee or any
Consultant who the Committee determines should receive such an Award.

          7.2 Award of Restricted Stock.
              -------------------------

          (a) The Committee may from time to time, in its absolute discretion:

              (i)  Determine which Employees are Employees and select from among
the Employees or Consultants (including Employees or Consultants who have
previously received other awards under the Plan) such of them as in its opinion
should be awarded Restricted Stock; and

                                       14

<PAGE>

              (ii)  Determine the purchase price, if any, and other terms and
conditions applicable to such Restricted Stock, consistent with the Plan.

          (b) The Committee shall establish the purchase price, if any, and form
of payment for Restricted Stock; provided, however, that such purchase price
                                 --------  -------
shall be no less than the par value of the Common Stock to be purchased, unless
otherwise permitted by applicable state law. In all cases, legal consideration
shall be required for each issuance of Restricted Stock.

          (c) Upon the selection of a Employee or Consultant to be awarded
Restricted Stock, the Committee shall instruct the Secretary of the Company to
issue such Restricted Stock and may impose such conditions on the issuance of
such Restricted Stock as it deems appropriate.

          7.3 Rights as Stockholders. Subject to Section 7.4, upon delivery of
              ----------------------
the shares of Restricted Stock to the escrow holder pursuant to Section 7.6, the
Holder shall have, unless otherwise provided by the Committee, all the rights of
a stockholder with respect to said shares, subject to the restrictions in his or
her Award Agreement, including the right to receive all dividends and other
distributions paid or made with respect to the shares; provided, however, that
                                                       --------  -------
in the discretion of the Committee, any extraordinary distributions with respect
to the Common Stock shall be subject to the restrictions set forth in Section
7.4.

          7.4 Restriction. All shares of Restricted Stock issued under the Plan
              -----------
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Award Agreement, be
subject to such restrictions as the Committee shall provide, which restrictions
may include, without limitation, restrictions concerning voting rights and
transferability and restrictions based on duration of employment with the
Company, Company performance and individual performance; provided, however,
                                                         --------  -------
that, unless the Committee otherwise provides in the terms of the Award
Agreement or otherwise, no share of Restricted Stock granted to a person subject
to Section 16 of the Exchange Act shall be sold, assigned or otherwise
transferred until at least six months and one day have elapsed from the date on
which the Restricted Stock was issued, and provided, further, that, except with
                                           --------  -------
respect to shares of Restricted Stock granted to Section 162(m) Participants, by
action taken after the Restricted Stock is issued, the Committee may, on such
terms and conditions as it may determine to be appropriate, remove any or all of
the restrictions imposed by the terms of the Award Agreement. Restricted Stock
may not be sold or encumbered until all restrictions are terminated or expire.
If no consideration was paid by the Holder upon issuance, a Holder's rights in
unvested Restricted Stock shall lapse, and such Restricted Stock shall be
surrendered to the Company without consideration, upon Termination of Employment
or, if applicable, upon Termination of Consultancy with the Company; provided,
                                                                     --------
however, that the Committee in its sole and absolute discretion may provide that
-------
such rights shall not lapse in the event of a Termination of Employment
following a "change of ownership or control" (within the meaning of Treasury
Regulation Section 1.162-27(e)(2)(v) or any successor regulation thereto) of the
Company or because of the Holder's death or disability; provided, further,
                                                        --------  -------
except with respect to shares of Restricted Stock granted to Section 162(m)
Participants, the Committee in its sole and absolute discretion may provide that
no such lapse or surrender shall occur in the event of a

                                       15

<PAGE>

Termination of Employment, or a Termination of Consultancy, without cause or
following any Change of Control of the Company or because of the Holder's
retirement, or otherwise.

          7.5 Repurchase of Restricted Stock. The Committee shall provide in the
              ------------------------------
terms of each individual Award Agreement that the Company shall have the right
to repurchase from the Holder the Restricted Stock then subject to restrictions
under the Award Agreement immediately upon a Termination of Employment or, if
applicable, upon a Termination of Consultancy between the Holder and the
Company, at a cash price per share equal to the price paid by the Holder for
such Restricted Stock; provided, however, that the Committee in its sole and
                       --------  -------
absolute discretion may provide that no such right of repurchase shall exist in
the event of a Termination of Employment following a "change of ownership or
control" (within the meaning of Treasury Regulation Section 1.162-27(e)(2)(v) or
any successor regulation thereto) of the Company or because of the Holder's
death or disability; provided, further, that, except with respect to shares of
                     --------  -------
Restricted Stock granted to Section 162(m) Participants, the Committee in its
sole and absolute discretion may provide that no such right of repurchase shall
exist in the event of a Termination of Employment or a Termination of
Consultancy without cause or following any Change of Control of the Company or
because of the Holder's retirement, or otherwise.

          7.6 Escrow. The Secretary of the Company or such other escrow holder
              ------
as the Committee may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions imposed under the
Award Agreement with respect to the shares evidenced by such certificate expire
or shall have been removed.

          7.7 Legend. In order to enforce the restrictions imposed upon shares
              ------
of Restricted Stock hereunder, the Committee shall cause a legend or legends to
be placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions under Award Agreements, which legend or legends
shall make appropriate reference to the conditions imposed thereby.

          7.8 Section 83(b) Election. If a Holder makes an election under
              ----------------------
Section 83(b) of the Code, or any successor section thereto, to be taxed with
respect to the Restricted Stock as of the date of transfer of the Restricted
Stock rather than as of the date or dates upon which the Holder would otherwise
be taxable under Section 83(a) of the Code, the Holder shall deliver a copy of
such election to the Company immediately after filing such election with the
Internal Revenue Service.

                                  ARTICLE VIII.
                    PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
                         DEFERRED STOCK, STOCK PAYMENTS

          8.1 Eligibility. Subject to the Award Limit, one or more Performance
              -----------
Awards, Dividend Equivalents, awards of Deferred Stock and/or Stock Payments may
be granted to any Employee whom the Committee determines is a Employee or any
Consultant whom the Committee determines should receive such an Award.

                                       16

<PAGE>

          8.2 Performance Awards.
              ------------------

          (a) Any Employee or Consultant selected by the Committee may be
granted one or more Performance Awards. The value of such Performance Awards may
be linked to any one or more of the Performance Criteria or other specific
performance criteria determined appropriate by the Committee, in each case on a
specified date or dates or over any period or periods determined by the
Committee. In making such determinations, the Committee shall consider (among
such other factors as it deems relevant in light of the specific type of award)
the contributions, responsibilities and other compensation of the particular
Employee or Consultant.

          (b) Without limiting Section 8.2(a), the Committee may grant
Performance Awards to any 162(m) Participant in the form of a cash bonus payable
upon the attainment of objective performance goals which are established by the
Committee and relate to one or more of the Performance Criteria, in each case on
a specified date or dates or over any period or periods determined by the
Committee. Any such bonuses paid to 162(m) Participants shall be based upon
objectively determinable bonus formulas established in accordance with the
provisions of Section 3.2. The maximum amount of any Performance Award payable
to a 162(m) Participant under this Section 8.2(b) shall not exceed the Award
Limit with respect to any fiscal year of the Company.

          8.3 Dividend Equivalents.
              --------------------

          (a) Any Employee or Consultant selected by the Committee may be
granted Dividend Equivalents based on the dividends declared on Common Stock, to
be credited as of dividend payment dates, during the period between the date a
Stock Appreciation Right, Deferred Stock or Performance Award is granted, and
the date such Stock Appreciation Right, Deferred Stock or Performance Award is
exercised, vests or expires, as determined by the Committee. Such Dividend
Equivalents shall be converted to cash or additional shares of Common Stock by
such formula and at such time and subject to such limitations as may be
determined by the Committee.

          (b) Any Holder of an Option who is an Employee or Consultant selected
by the Committee may be granted Dividend Equivalents based on the dividends
declared on Common Stock, to be credited as of dividend payment dates, during
the period between the date an Option is granted, and the date such Option is
exercised, vests or expires, as determined by the Committee. Such Dividend
Equivalents shall be converted to cash or additional shares of Common Stock by
such formula and at such time and subject to such limitations as may be
determined by the Committee.

          (c) Any Holder of an Option who is an Independent Director selected by
the Board may be granted Dividend Equivalents based on the dividends declared on
Common Stock, to be credited as of dividend payment dates, during the period
between the date an Option is granted and the date such Option is exercised,
vests or expires, as determined by the Board. Such Dividend Equivalents shall be
converted to cash or additional shares of Common Stock by such formula and at
such time and subject to such limitations as may be determined by the Board.

                                       17

<PAGE>

          (d) Dividend Equivalents granted with respect to Options intended to
be qualified performance-based compensation for purposes of Section 162(m) of
the Code shall be payable, with respect to pre-exercise periods, regardless of
whether such Option is subsequently exercised.

          8.4 Stock Payments. Any Employee or Consultant selected by the
              --------------
Committee may receive Stock Payments in the manner determined from time to time
by the Committee. The number of shares shall be determined by the Committee and
may be based upon the Performance Criteria or other specific performance
criteria determined appropriate by the Committee, determined on the date such
Stock Payment is made or on any date thereafter.

          8.5 Deferred Stock. Any Employee or Consultant selected by the
              --------------
Committee may be granted an award of Deferred Stock in the manner determined
from time to time by the Committee. The number of shares of Deferred Stock shall
be determined by the Committee and may be linked to the Performance Criteria or
other specific performance criteria determined to be appropriate by the
Committee, in each case on a specified date or dates or over any period or
periods determined by the Committee. Common Stock underlying a Deferred Stock
award will not be issued until the Deferred Stock award has vested, pursuant to
a vesting schedule or performance criteria set by the Committee. Unless
otherwise provided by the Committee, a Holder of Deferred Stock shall have no
rights as a Company stockholder with respect to such Deferred Stock until such
time as the Award has vested and the Common Stock underlying the Award has been
issued.

          8.6 Term. The term of a Performance Award, Dividend Equivalent, award
              ----
of Deferred Stock and/or Stock Payment shall be set by the Committee in its
discretion.

          8.7 Exercise or Purchase Price. The Committee may establish the
              --------------------------
exercise or purchase price of a Performance Award, shares of Deferred Stock or
shares received as a Stock Payment; provided, however, that such price shall not
                                    --------  -------
be less than the par value of a share of Common Stock, unless otherwise
permitted by applicable state law.

          8.8 Exercise Upon Termination of Employment, Termination of
              -------------------------------------------------------
Consultancy or Termination of Directorship. A Performance Award, Dividend
------------------------------------------
Equivalent, award of Deferred Stock and/or Stock Payment is exercisable or
payable only while the Holder is an Employee, Consultant or Independent
Director, as applicable; provided, however, that the Administrator in its sole
                         --------  -------
and absolute discretion may provide that the Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment may be exercised or
paid subsequent to a Termination of Employment following a "change of control or
ownership" (within the meaning of Section 1.162-27(e)(2)(v) or any successor
regulation thereto) of the Company; provided, further, that except with respect
                                    --------  -------
to Performance Awards granted to Section 162(m) Participants, the Administrator
in its sole and absolute discretion may provide that Performance Awards may be
exercised or paid following a Termination of Employment or a Termination of
Consultancy without cause, or following a Change of Control of the Company, or
because of the Holder's retirement, death or disability, or otherwise.

          8.9 Form of Payment. Payment of the amount determined under Section
              ---------------
8.2 or 8.3 above shall be in cash, in Common Stock or a combination of both, as
determined by the

                                       18

<PAGE>

Committee. To the extent any payment under this Article VIII is effected in
Common Stock, it shall be made subject to satisfaction of all provisions of
Section 6.3.

                                  ARTICLE IX.
                            STOCK APPRECIATION RIGHTS

          9.1 Grant of Stock Appreciation Rights. A Stock Appreciation Right may
              ----------------------------------
be granted to any Employee or Consultant selected by the Committee. A Stock
Appreciation Right may be granted (a) in connection and simultaneously with the
grant of an Option, (b) with respect to a previously granted Option, or (c)
independent of an Option. A Stock Appreciation Right shall be subject to such
terms and conditions not inconsistent with the Plan as the Committee shall
impose and shall be evidenced by an Award Agreement.

          9.2 Coupled Stock Appreciation Rights.
              ---------------------------------

          (a) A Coupled Stock Appreciation Right ("CSAR") shall be related to a
                                                   ----
particular Option and shall be exercisable only when and to the extent the
related Option is exercisable.

          (b) A CSAR may be granted to the Holder for no more than the number of
shares subject to the simultaneously or previously granted Option to which it is
coupled.

          (c) A CSAR shall entitle the Holder (or other person entitled to
exercise the Option pursuant to the Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the extent
then exercisable pursuant to its terms) and to receive from the Company in
exchange therefor an amount determined by multiplying the difference obtained by
subtracting the Option exercise price from the Fair Market Value of a share of
Common Stock on the date of exercise of the CSAR by the number of shares of
Common Stock with respect to which the CSAR shall have been exercised, subject
to any limitations the Committee may impose.

          9.3 Independent Stock Appreciation Rights.
              -------------------------------------

          (a) An Independent Stock Appreciation Right ("ISAR") shall be
                                                        ----
unrelated to any Option and shall have a term set by the Committee. An ISAR
shall be exercisable in such installments as the Committee may determine. An
ISAR shall cover such number of shares of Common Stock as the Committee may
determine; provided, however, that unless the Committee otherwise provides in
           --------  -------
the terms of the ISAR or otherwise, no ISAR granted to a person subject to
Section 16 of the Exchange Act shall be exercisable until at least six months
have elapsed from (but excluding) the date on which the Option was granted. The
exercise price per share of Common Stock subject to each ISAR shall be set by
the Committee. An ISAR is exercisable only while the Holder is an Employee or
Consultant; provided, that the Committee may determine that the ISAR may be
            --------
exercised subsequent to Termination of Employment or Termination of Consultancy
without cause, or following a Change of Control of the Company, or because of
the Holder's retirement, death or disability, or otherwise.

          (b) An ISAR shall entitle the Holder (or other person entitled to
exercise the ISAR pursuant to the Plan) to exercise all or a specified portion
of the ISAR (to the extent then

                                       19

<PAGE>

exercisable pursuant to its terms) and to receive from the Company an amount
determined by multiplying the difference obtained by subtracting the exercise
price per share of the ISAR from the Fair Market Value of a share of Common
Stock on the date of exercise of the ISAR by the number of shares of Common
Stock with respect to which the ISAR shall have been exercised, subject to any
limitations the Committee may impose.

          9.4  Payment and Limitations on Exercise.
               -----------------------------------

          (a)  Payment of the amounts determined under Section 9.2(c) and 9.3(b)
above shall be in cash, in Common Stock (based on its Fair Market Value as of
the date the Stock Appreciation Right is exercised) or a combination of both, as
determined by the Committee. To the extent such payment is effected in Common
Stock it shall be made subject to satisfaction of all provisions of Section 6.3
above pertaining to Options.

          (b)  Holders of Stock Appreciation Rights may be required to comply
with any timing or other restrictions with respect to the settlement or exercise
of a Stock Appreciation Right, including a window-period limitation, as may be
imposed in the discretion of the Committee.

                                   ARTICLE X.
                                 ADMINISTRATION

          10.1 Compensation Committee. Prior to the Public Trading Date, the
               ----------------------
Compensation Committee shall be appointed by the Board and, in the absence of an
appointed committee, shall consist of the entire Board. On or following the
Public Trading Date, the Compensation Committee (or another committee or a
subcommittee of the Board assuming the functions of the Committee under the
Plan) shall consist solely of two or more Independent Directors appointed by and
holding office at the pleasure of the Board, each of whom is both a
"non-employee director" as defined by Rule 16b-3 and an "outside director" for
purposes of Section 162(m) of the Code. Appointment of Committee members shall
be effective upon acceptance of appointment. Committee members may resign at any
time by delivering written notice to the Board. Vacancies in the Committee may
be filled by the Board.

          10.2 Duties and Powers of Committee. It shall be the duty of the
               ------------------------------
Committee to conduct the general administration of the Plan in accordance with
its provisions. The Committee shall have the power to interpret the Plan and the
Award Agreements, and to adopt such rules for the administration, interpretation
and application of the Plan as are consistent therewith, to interpret, amend or
revoke any such rules and to amend any Award Agreement provided that the rights
or obligations of the Holder of the Award that is the subject of any such Award
Agreement are not affected adversely. Any such grant or award under the Plan
need not be the same with respect to each Holder. Any such interpretations and
rules with respect to Incentive Stock Options shall be consistent with the
provisions of Section 422 of the Code. In its absolute discretion, the Board may
at any time and from time to time exercise any and all rights and duties of the
Committee under the Plan except with respect to matters which under Rule 16b-3
or Section 162(m) of the Code, or any regulations or rules issued thereunder,
are required to be determined in the sole discretion of the Committee.
Notwithstanding the foregoing, the full

                                       20

<PAGE>

Board, acting by a majority of its members in office, shall conduct the general
administration of the Plan with respect to Options and Dividend Equivalents
granted to Independent Directors.

          10.3 Majority Rule; Unanimous Written Consent. The Committee shall act
               ----------------------------------------
by a majority of its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by all members of
the Committee.

          10.4 Compensation; Professional Assistance; Good Faith Actions.
               ---------------------------------------------------------
Members of the Committee shall receive such compensation, if any, for their
services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee incur in connection with the
administration of the Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and the
Company's officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or the Board in good
faith shall be final and binding upon all Holders, the Company and all other
interested persons. No members of the Committee or Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan or Awards, and all members of the Committee and the Board
shall be fully protected by the Company in respect of any such action,
determination or interpretation.

          10.5 Delegation of Authority to Grant Awards. Subject to Section 157
               ---------------------------------------
of the Delaware General Corporation Law and other applicable laws, the Committee
may, but need not, delegate from time to time some or all of its authority to
grant Awards under the Plan to a committee consisting of one or more members of
the Committee or of one or more officers of the Company; provided, however, that
                                                         --------  -------
the Committee may not delegate its authority to grant Awards to individuals (a)
who are subject on the date of the grant to the reporting rules under Section
16(a) of the Exchange Act, (b) who are Section 162(m) Participants, or (c) who
are officers of the Company who are delegated authority by the Committee
hereunder. Any delegation hereunder shall be subject to the restrictions and
limits that the Committee specifies at the time of such delegation of authority
and may be rescinded at any time by the Committee. At all times, any committee
appointed under this Section 10.5 shall serve in such capacity at the pleasure
of the Committee.

                                  ARTICLE XI.
                            MISCELLANEOUS PROVISIONS

          11.1 Not Transferable.
               ----------------

          (a) Except as otherwise provided in Section 11.1(b):

              (i)  No Award under the Plan may be sold, pledged, assigned or
transferred in any manner other than by will or the laws of descent and
distribution or, subject to the consent of the Administrator, pursuant to a DRO,
unless and until such Award has been exercised, or the shares underlying such
Award have been issued, and all restrictions applicable to such shares have
lapsed;

                                       21

<PAGE>

                (ii)    No Option, Restricted Stock award, Deferred Stock award,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment or interest or right therein shall be liable for the debts, contracts or
engagements of the Holder or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence; and

                (iii)   During the lifetime of the Holders, only he may exercise
an Option or other Award (or any portion thereof) granted to him under the Plan,
unless it has been disposed of pursuant to a DRO; after the death of the Holder,
any exercisable portion of an Option or other Award may, prior to the time when
such portion becomes unexercisable under the Plan or the applicable Award
Agreement, be exercised by his personal representative or by any person
empowered to do so under the deceased Holder's will or under the then applicable
laws of descent and distribution.

           (b)  Notwithstanding Section 11.1(a), the Administrator, in its sole
      discretion, may determine to permit a Holder to transfer a Non-Qualified
      Stock Option to any one or more Permitted Transferees (as defined below),
      subject to the following terms and conditions: (i) a Non-Qualified Stock
      Option transferred to a Permitted Transferee shall not be assignable or
      transferable by the Permitted Transferee other than by will or the laws of
      descent and distribution; (ii) any Non-Qualified Stock Option which is
      transferred to a Permitted Transferee shall continue to be subject to all
      the terms and conditions of the Non-Qualified Stock Option as applicable
      to the original Holder (other than the ability to further transfer the
      Non-Qualified Stock Option); and (iii) the Holder and the Permitted
      Transferee shall execute any and all documents requested by the
      Administrator, including, without limitation documents to (A) confirm the
      status of the transferee as a Permitted Transferee, (B) satisfy any
      requirements for an exemption for the transfer under applicable federal
      and state securities laws and (C) evidence the transfer. For purposes of
      this Section 11.1(b), "Permitted Transferee" shall mean, with respect to a
                             --------------------
      Holder, any child, stepchild, grandchild, parent, stepparent, grandparent,
      spouse, former spouse, sibling, niece, nephew, mother-in-law,
      father-in-law, son-in-law, daughter-in-law, brother-in-law, or
      sister-in-law, including adoptive relationships, any person sharing the
      Holder's household (other than a tenant or employee), a trust in which
      these persons (or the Holder) control the management of assets, and any
      other entity in which these persons (or the Holder) own more than fifty
      percent (50%) of the voting interests, or any other transferee
      specifically approved by the Administrator after taking into account any
      state or federal tax or securities laws applicable to transferable
      Non-Qualified Stock Options."

           11.2 Amendment, Suspension or Termination of the Plan. Except as
                ------------------------------------------------
otherwise provided in this Section 11.2, the Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Administrator.

                                       22

<PAGE>

However, without approval of the Company's stockholders given within 12 months
before or after the action by the Administrator, no action of the Administrator
may, except as provided in Section 11.3, increase the limits imposed in Section
2.1 on the maximum number of shares which may be issued under the Plan. No
amendment, suspension or termination of the Plan shall, without the consent of
the Holder, alter or impair any rights or obligations under any Award
theretofore granted or awarded, unless the Award itself otherwise expressly so
provides. No Awards may be granted or awarded during any period of suspension or
after termination of the Plan, and in no event may any Incentive Stock Option be
granted under the Plan after the first to occur of the following events:

           (a)  The expiration of 10 years from the date the Plan is adopted by
the Board; or

           (b)  The expiration of 10 years from the date the Plan is approved by
the Company's stockholders under Section 11.4.

           11.3 Changes in Common Stock or Assets of the Company, Acquisition or
                ----------------------------------------------------------------
Liquidation of the Company and Other Corporate Events.
-----------------------------------------------------

           (a)  Subject to Section 11.3(e), in the event that the Administrator
determines that any dividend or other distribution (whether in the form of cash,
Common Stock, other securities or other property), recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, or exchange of Common Stock or
other securities of the Company, issuance of warrants or other rights to
purchase Common Stock or other securities of the Company, or other similar
corporate transaction or event, in the Administrator's sole discretion, affects
the Common Stock such that an adjustment is determined by the Administrator to
be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with respect
to an Award, then the Administrator shall, in such manner as it may deem
equitable, adjust any or all of:

                (i)    The number and kind of shares of Common Stock (or other
securities or property) with respect to which Awards may be granted or awarded
(including, but not limited to, adjustments of the limitations in Section 2.1 on
the maximum number and kind of shares which may be issued and adjustments of the
Award Limit);

                (ii)   The number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Awards; and

                (iii)  The grant or exercise price with respect to any Award.

           (b)  Subject to Sections 11.3(c) and 11.3(e), in the event of any
transaction or event described in Section 11.3(a) or any unusual or nonrecurring
transactions or events affecting the Company, any affiliate of the Company, or
the financial statements of the Company or any affiliate, or of changes in
applicable laws, regulations or accounting principles, the Administrator, in its
sole and absolute discretion, and on such terms and conditions as it deems

                                       23

<PAGE>

appropriate, either by the terms of the Award or by action taken prior to
the occurrence of such transaction or event and either automatically or upon the
Holder's request, is hereby authorized to take any one or more of the following
actions whenever the Administrator determines that such action is appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan or with respect to any Award under
the Plan, to facilitate such transactions or events or to give effect to such
changes in laws, regulations or principles:

                (i)    To provide for either the purchase of any such Award for
an amount of cash equal to the amount that could have been attained upon the
exercise of such Award or realization of the Holder's rights had such Award been
currently exercisable or payable or fully vested or the replacement of such
Award with other rights or property selected by the Administrator in its sole
discretion;
                (ii)   To provide that the Award cannot vest, be exercised or
become payable after such event;

                (iii)  To provide that such Award shall be exercisable as to all
shares covered thereby, notwithstanding anything to the contrary in Section 5.3
or 5.4 or the provisions of such Award;

                (iv)   To provide that such Award be assumed by the successor or
survivor corporation, or a parent or subsidiary thereof, or shall be substituted
for by similar options, rights or awards covering the stock of the successor or
survivor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices;

                (v)    To make adjustments in the number and type of shares of
Common Stock (or other securities or property) subject to outstanding Awards,
and in the number and kind of outstanding Restricted Stock or Deferred Stock
and/or in the terms and conditions of (including the grant or exercise price),
and the criteria included in, outstanding options, rights and awards and
options, rights and awards which may be granted in the future; and

                (vi)   To provide that, for a specified period of time prior to
such event, the restrictions imposed under an Award Agreement upon some or all
shares of Restricted Stock or Deferred Stock may be terminated, and, in the case
of Restricted Stock, some or all shares of such Restricted Stock may cease to be
subject to repurchase under Section 7.5 or forfeiture under Section 7.4 after
such event.

           (c)  Notwithstanding any other provision of the Plan, in the event of
a Change of Control, each outstanding Award shall be assumed or an equivalent
award substituted by the successor corporation or a parent or subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Award, if applicable for the Award, the Holder
shall have the right to exercise the Award as to all of the Common Stock
underlying the Award, including shares as to which it would not otherwise be
exercisable. As applicable, if an Award is exercisable in lieu of assumption or
substitution in the event of a merger or sale of

                                       24

<PAGE>

assets, the Administrator shall notify the Holder that the Award shall be
fully exercisable for a period of 15 days from the date of such notice, and the
Award shall terminate upon the expiration of such period. For the purposes of
this Section 11.3(c), the Award shall be considered assumed if, following the
merger or sale of assets, the award confers the right to purchase or receive,
for each share of awarded stock subject to the Award immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of
Common Stock for each share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding shares); provided,
                                                                --------
however, that if such consideration received in the merger or sale of assets was
-------
not solely common stock of the successor corporation or its parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Award (if applicable),
for each share of awarded stock subject to the Award, to be solely common stock
of the successor corporation or its parent equal in fair market value to the per
share consideration received by holders of Common Stock in the merger or sale of
assets.

           (d)  Subject to Sections 11.3(e), 3.2 and 3.3, the Administrator may,
in its discretion, include such further provisions and limitations in any Award,
agreement or certificate, as it may deem equitable and in the best interests of
the Company.

           (e)  With respect to Awards which are granted to Section 162(m)
Participants and are intended to qualify as performance-based compensation under
Section 162(m)(4)(C), no adjustment or action described in this Section 11.3 or
in any other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause such Award to fail to so qualify under Section
162(m)(4)(C), or any successor provisions thereto. No adjustment or action
described in this Section 11.3 or in any other provision of the Plan shall be
authorized to the extent that such adjustment or action would cause the Plan to
violate Section 422(b)(1) of the Code. Furthermore, no such adjustment or action
shall be authorized to the extent such adjustment or action would result in
short-swing profits liability under Section 16 or violate the exemptive
conditions of Rule 16b-3 unless the Administrator determines that the Award is
not to comply with such exemptive conditions. The number of shares of Common
Stock subject to any Award shall always be rounded to the next whole number.

           (f)  Notwithstanding the foregoing, in the event that the Company
becomes a party to a transaction that is intended to qualify for "pooling of
interests" accounting treatment and, but for one or more of the provisions of
this Plan or any Award Agreement would so qualify, then this Plan and any Award
Agreement shall be interpreted so as to preserve such accounting treatment, and
to the extent that any provision of the Plan or any Award Agreement would
disqualify the transaction from pooling of interests accounting treatment
(including, if applicable, an entire Award Agreement), then such provision shall
be null and void. All determinations to be made in connection with the preceding
sentence shall be made by the independent accounting firm whose opinion with
respect to "pooling of interests" treatment is required as a condition to the
Company's consummation of such transaction.

           (g)  The existence of the Plan, the Award Agreement and the Awards
granted hereunder shall not affect or restrict in any way the right or power of
the Company or the shareholders of the Company to make or authorize any
adjustment, recapitalization,

                                       25

<PAGE>

reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company, any issue of stock or of
options, warrants or rights to purchase stock or of bonds, debentures, preferred
or prior preference stocks whose rights are superior to or affect the Common
Stock or the rights thereof or which are convertible into or exchangeable for
Common Stock, or the dissolution or liquidation of the company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.

                11.4  Approval of Plan by Stockholders. The Plan will be
                      --------------------------------
submitted for the approval of the Company's stockholders within 12 months after
the date of the Board's initial adoption of the Plan. Awards may be granted or
awarded prior to such stockholder approval, provided that such Awards shall not
be exercisable nor shall such Awards vest prior to the time when the Plan is
approved by the stockholders, and provided further that if such approval has not
been obtained at the end of said twelve-month period, all Awards previously
granted or awarded under the Plan shall thereupon be canceled and become null
and void. In addition, if the Board determines that Awards other than Options or
Stock Appreciation Rights which may be granted to Section 162(m) Participants
should continue to be eligible to qualify as performance-based compensation
under Section 162(m)(4)(C) of the Code, the Performance Criteria must be
disclosed to and approved by the Company's stockholders no later than the first
stockholder meeting that occurs in the fifth year following the year in which
the Company's stockholders previously approved the Performance Criteria.

                11.5  Tax Withholding. The Company shall be entitled to require
                      ---------------
payment in cash or deduction from other compensation payable to each Holder of
any sums required by federal, state or local tax law to be withheld with respect
to the issuance, vesting, exercise or payment of any Award. The Administrator
may in its discretion and in satisfaction of the foregoing requirement allow
such Holder to elect to have the Company withhold shares of Common Stock
otherwise issuable under such Award (or allow the return of shares of Common
Stock) having a Fair Market Value equal to the sums required to be withheld.
Notwithstanding any other provision of the Plan, the number of shares of Common
Stock which may be withheld with respect to the issuance, vesting, exercise or
payment of any Award (or which may be repurchased from the Holder of such Award
within six months after such shares of Common Stock were acquired by the Holder
from the Company) in order to satisfy the Holder's federal and state income and
payroll tax liabilities with respect to the issuance, vesting, exercise or
payment of the Award shall be limited to the number of shares which have a Fair
Market Value on the date of withholding or repurchase equal to the aggregate
amount of such liabilities based on the minimum statutory withholding rates for
federal and state tax income and payroll tax purposes that are applicable to
such supplemental taxable income.

                11.6  Loans. The Committee may, in its discretion, extend one or
                      -----
more loans to Employees, Consultants or Directors in connection with the
exercise or receipt of an Award granted or awarded under the Plan, or the
issuance of Restricted Stock or Deferred Stock awarded under the Plan. The terms
and conditions of any such loan shall be set by the Committee.

                11.7  Forfeiture Provisions. Pursuant to its general authority
                      ---------------------
to determine the terms and conditions applicable to Awards under the Plan, the
Administrator shall have the right

                                       26

<PAGE>

to provide, in the terms of Awards made under the Plan, or to require a Holder
to agree by separate written instrument, that (a)(i) any proceeds, gains or
other economic benefit actually or constructively received by the Holder upon
any receipt or exercise of the Award, or upon the receipt or resale of any
Common Stock underlying the Award, must be paid to the Company, and (ii) the
Award shall terminate and any unexercised portion of the Award (whether or not
vested) shall be forfeited, if (b)(i) a Termination of Employment, Termination
of Consultancy or Termination of Directorship occurs prior to a specified date,
or within a specified time period following receipt or exercise of the Award, or
(ii) the Holder at any time, or during a specified time period, engages in any
activity in competition with the Company, or which is inimical, contrary or
harmful to the interests of the Company, as further defined by the Administrator
or (iii) the Holder incurs a Termination of Employment, Termination of
Consultancy or Termination of Directorship for "cause" (as such term is defined
in an Award Agreement between the Company and the Holder).

                11.8   Effect of Plan Upon Options and Compensation Plans. The
                       -------------------------------------------------
adoption of the Plan shall not affect any other compensation or incentive plans
in effect for the Company or any Subsidiary. Nothing in the Plan shall be
construed to limit the right of the Company (a) to establish any other forms of
incentives or compensation for Employees, Directors or Consultants of the
Company or any Subsidiary, or (b) to grant or assume options or other rights or
awards otherwise than under the Plan in connection with any proper corporate
purpose including but not by way of limitation, the grant or assumption of
options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any corporation,
partnership, limited liability company, firm or association.

                11.9   Compliance with Laws. The Plan, the granting and vesting
                       --------------------
of Awards under the Plan and the issuance and delivery of shares of Common Stock
and the payment of money under the Plan or under Awards granted or awarded
hereunder are subject to compliance with all applicable federal and state laws,
rules and regulations (including but not limited to state and federal securities
law and federal margin requirements) and to such approvals by any listing,
regulatory or governmental authority as may, in the opinion of counsel for the
Company, be necessary or advisable in connection therewith. Any securities
delivered under the Plan shall be subject to such restrictions, and the person
acquiring such securities shall, if requested by the Company, provide such
assurances and representations to the Company as the Company may deem necessary
or desirable to assure compliance with all applicable legal requirements. To the
extent permitted by applicable law, the Plan and Awards granted or awarded
hereunder shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.

                11.10  Titles. Titles are provided herein for convenience only
                       ------
and are not to serve as a basis for interpretation or construction of the Plan.

                11.11  Governing Law. The Plan and any agreements hereunder
                       -------------
shall be administered, interpreted and enforced under the internal laws of the
State of Delaware without regard to conflicts of laws thereof.

                                       27

<PAGE>

                                      * * *

                  I hereby certify that the foregoing Plan was duly adopted by
the Board of Directors of Discovery Therapeutics, Inc. on November 14, 2001.

                  Executed on this 14th day of November, 2001.


                                          /s/ Peter G. Savas
                                          ------------------------------------
                                          Peter G. Savas
                                          Chairman of the Board of Directors,
                                          Chief Executive Officer and President




                                      * * *
                  I hereby certify that the foregoing Plan was approved by the
stockholders of Discovery Therapeutics, Inc. on November 14, 2001.

                  Executed on this 14th day of November, 2001.


                                          /s/ Kenneth L. Rice, Jr.
                                          ------------------------------------
                                          Kenneth L. Rice, Jr.
                                          Vice President, Chief Commercial
                                          Officer and Secretary

                                       28