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                                DOCUCORP, INC.
                        1997 EQUITY COMPENSATION PLAN

    The purpose of the DocuCorp, Inc. 1997 Equity Compensation Plan (the 
"Plan") is to provide (i) designated employees of DocuCorp, Inc. (the 
"Company") and its subsidiaries, (ii) certain consultants and advisors who 
perform services for the Company or its subsidiaries and (iii) non-employee 
members of the Board of Directors of the Company (the "Board") with the 
opportunity to receive grants of incentive stock options, nonqualified stock 
options, stock appreciation rights, restricted stock and performance units.  
The Company believes that the Plan will encourage the participants to 
contribute materially to the growth of the Company, thereby benefitting the 
Company's shareholders, and will align the economic interests of the 
participants with those of the shareholders.

    1.   ADMINISTRATION

    (a)  COMMITTEE.  The Plan shall be administered and interpreted by a 
committee appointed by the Board (the "Committee").  Prior to the effective 
date of an initial public offering of the Company's stock as described in 
Section 21(b) (a "Public Offering"), the Board may exercise any power or 
authority of the Committee under the Plan and, in such case, references to 
the Committee hereunder, as they relate to Plan administration, shall be 
deemed to include the Board as a whole.  After a Public Offering, the 
Committee shall consist of two or more persons appointed by the Board, all of 
whom shall be "outside directors" as defined under section 162(m) of the 
Internal Revenue Code of 1986, as amended (the "Code") and related Treasury 
regulations and may be "non-employee directors" as defined under Rule 16b-3 
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").  
However, notwithstanding anything in the Plan to the contrary, the Board must 
ratify or approve any grants made to Non-Employee Directors.  References in 
the Plan to the "Committee" shall be deemed to include the Board, with 
respect to ratification or approval of grants made to Non-Employee Directors.

    (b)  COMMITTEE AUTHORITY.  The Committee shall have the sole authority to 
(i) determine the individuals to whom grants shall be made under the Plan, 
(ii) determine the type, size and terms of the grants to be made to each such 
individual, (iii) determine the time when the grants will be made and the 
duration of any applicable exercise or restriction period, including the 
criteria for exercisability and the acceleration of exercisability and (iv) 
deal with any other matters arising under the Plan. 

    (c)  COMMITTEE DETERMINATIONS.  The Committee shall have full power and 
authority to administer and interpret the Plan, to make factual 
determinations and to adopt or amend such rules, 

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regulations, agreements and instruments for implementing the Plan and for the 
conduct of its business as it deems necessary or advisable, in its sole 
discretion.  The Committee's interpretations of the Plan and all 
determinations made by the Committee pursuant to the powers vested in it 
hereunder shall be conclusive and binding on all persons having any interest 
in the Plan or in any awards granted hereunder.  All powers of the Committee 
shall be executed in its sole discretion, in the best interest of the 
Company, not as a fiduciary, and in keeping with the objectives of the Plan 
and need not be uniform as to similarly situated individuals.

    2.   GRANTS

    Awards under the Plan may consist of grants of incentive stock options as 
described in Section 5 ("Incentive Stock Options"), nonqualified stock 
options as described in Section 5 ("Nonqualified Stock Options") (Incentive 
Stock Options and Nonqualified Stock Options are collectively referred to as 
"Options"), restricted stock as described in Section 6 ("Restricted Stock"), 
stock appreciation rights as described in Section 7 ("SARs"), and performance 
units as described in Section 8 ("Performance Units") (hereinafter 
collectively referred to as "Grants").  All Grants shall be subject to the 
terms and conditions set forth herein and to such other terms and conditions 
consistent with this Plan as the Committee deems appropriate and as are 
specified in writing by the Committee to the individual in a grant instrument 
(the "Grant Instrument") or an amendment to the Grant Instrument.  The 
Committee shall approve the form and provisions of each Grant Instrument.  
Grants under a particular Section of the Plan need not be uniform as among 
the grantees.

    3.   SHARES SUBJECT TO THE PLAN

    (a)  SHARES AUTHORIZED.  Subject to the adjustment specified below, the 
aggregate number of shares of Class A common stock of the Company ("Company 
Stock") that may be issued or transferred under the Plan is 400,000 shares. 
After a Public Offering, the maximum aggregate number of shares of Company 
Stock that shall be subject to Grants made under the Plan to any individual 
during any calendar year shall be 200,000 shares.  The shares may be 
authorized but unissued shares of Company Stock or reacquired shares of 
Company Stock, including shares purchased by the Company on the open market 
for purposes of the Plan.  If and to the extent Options granted under the 
Plan terminate, expire, or are canceled, forfeited, exchanged or surrendered 
without having been exercised or if any shares of Restricted Stock or 
Performance Units are forfeited, the shares subject to such Grants shall 
again be available for purposes of the Plan.

    (b)  ADJUSTMENTS.  If there is any change in the number or kind of shares 
of Company Stock outstanding (i) by reason of a stock dividend, spinoff, 
recapitalization, stock split, or combination or exchange of shares, (ii) by 
reason of a merger, reorganization or consolidation in which the Company is 
the surviving corporation, (iii) by reason of a reclassification or change in 
par value, or (iv) by reason of any other extraordinary or unusual event 
affecting the outstanding Company Stock as a class without the Company's 
receipt of consideration, or if the value of outstanding shares of Company 
Stock is substantially reduced as a result of a spinoff or the Company's 
payment of an extraordinary dividend or distribution, the maximum number of 
shares 

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of Company Stock available for Grants, the maximum number of shares of 
Company Stock that any individual participating in the Plan may be granted in 
any year, the number of shares covered by outstanding Grants, the kind of 
shares issued under the Plan, and the price per share or the applicable 
market value of such Grants may be appropriately adjusted by the Committee to 
reflect any increase or decrease in the number of, or change in the kind or 
value of, issued shares of Company Stock to preclude, to the extent 
practicable, the enlargement or dilution of rights and benefits under such 
Grants; provided, however, that any fractional shares resulting from such 
adjustment shall be eliminated.  Any adjustments determined by the Committee 
shall be final, binding and conclusive.

    4.   ELIGIBILITY FOR PARTICIPATION

    (a)  ELIGIBLE PERSONS.  All employees of the Company and its subsidiaries 
("Employees"), including Employees who are officers or members of the Board, 
and members of the Board who are not Employees ("Non-Employee Directors") 
shall be eligible to participate in the Plan.  Consultants and advisors who 
perform services to the Company or any of its subsidiaries ("Key Advisors") 
shall be eligible to participate in the Plan if the Key Advisors render bona 
fide services and such services are not in connection with the offer or sale 
of securities in a capital-raising transaction.

    (b)  SELECTION OF GRANTEES.  The Committee shall select the Employees, 
Non-Employee Directors and Key Advisors to receive Grants and shall determine 
the number of shares of Company Stock subject to a particular Grant in such 
manner as the Committee determines.  Employees, Key Advisors and Non-Employee 
Directors who receive Grants under this Plan shall hereinafter be referred to 
as "Grantees".

    5.   GRANTING OF OPTIONS

    (a)  NUMBER OF SHARES.  The Committee shall determine the number of 
shares of Company Stock that will be subject to each Grant of Options to 
Employees, Non-Employee Directors and Key Advisors.

    (b)  TYPE OF OPTION AND PRICE.  

         (i)  The Committee may grant Incentive Stock Options that are 
intended to qualify as "incentive stock options" within the meaning of 
section 422 of the Code or Nonqualified Stock Options that are not intended 
so to qualify or any combination of Incentive Stock Options and Nonqualified 
Stock Options, all in accordance with the terms and conditions set forth 
herein.  Incentive Stock Options may be granted only to Employees.  
Nonqualified Stock Options may be granted to Employees, Non-Employee 
Directors and Key Advisors.

         (ii) The purchase price (the "Exercise Price") of Company Stock 
subject to an Option shall be determined by the Committee and may be equal 
to, greater than, or less than the Fair Market Value (as defined below) of a 
share of Company Stock on the date the Option is granted; 

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provided, however, that (x) the Exercise Price of an Incentive Stock Option 
shall be equal to, or greater than, the Fair Market Value of a share of 
Company Stock on the date the Incentive Stock Option is granted and (y) an 
Incentive Stock Option may not be granted to an Employee who, at the time of 
grant, owns stock possessing more than 10 percent of the total combined 
voting power of all classes of stock of the Company or any parent or 
subsidiary of the Company, unless the Exercise Price per share is not less 
than 110% of the Fair Market Value of Company Stock on the date of grant.

         (iii)  If the Company Stock is publicly traded, then the Fair Market 
Value per share shall be determined as follows: (x) if the principal trading 
market for the Company Stock is a national securities exchange or the Nasdaq 
National Market, the last reported sale price thereof on the relevant date or 
(if there were no trades on that date) the latest preceding date upon which a 
sale was reported, or (y) if the Company Stock is not principally traded on 
such exchange or market, the mean between the last reported "bid" and "asked" 
prices of Company Stock on the relevant date, as reported on Nasdaq or, if 
not so reported, as reported by the National Daily Quotation Bureau, Inc. or 
as reported in a customary financial reporting service, as applicable and as 
the Committee determines.  If the Company Stock is not publicly traded or, if 
publicly traded, is not subject to reported transactions or "bid" or "asked" 
quotations as set forth above, the Fair Market Value per share shall be as 
determined by the Committee.

    (c)  OPTION TERM.  The Committee shall determine the term of each Option. 
The term of any Option shall not exceed ten years from the date of grant. 
However, an Incentive Stock Option that is granted to an Employee who, at the 
time of grant, owns stock possessing more than 10 percent of the total 
combined voting power of all classes of stock of the Company, or any parent 
or subsidiary of the Company, may not have a term that exceeds five years 
from the date of grant.

    (d)  EXERCISABILITY OF OPTIONS.  Options shall become exercisable in 
accordance with such terms and conditions, consistent with the Plan, as may 
be determined by the Committee and specified in the Grant Instrument or an 
amendment to the Grant Instrument.  The Committee may accelerate the 
exercisability of any or all outstanding Options at any time for any reason.

    (e)  TERMINATION OF EMPLOYMENT, DISABILITY OR DEATH.

         (i)  Except as provided below, an Option may only be exercised while 
the Grantee is employed by the Company as an Employee, Key Advisor or member 
of the Board.  In the event that a Grantee ceases to be employed by the 
Company for any reason other than a "disability" or death, any Option which 
is otherwise exercisable by the Grantee shall terminate unless exercised 
within 90 days after the date on which the Grantee ceases to be employed by 
the Company (or within such other period of time as may be specified by the 
Committee), but in any event no later than the date of expiration of the 
Option term.  Any of the Grantee's Options that are not otherwise exercisable 
as of the date on which the Grantee ceases to be employed by the Company 
shall terminate as of such date.

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         (ii) In the event the Grantee ceases to be employed by the Company 
because the Grantee is "disabled", any Option which is otherwise exercisable 
by the Grantee shall terminate unless exercised within one year after the 
date on which the Grantee ceases to be employed by the Company (or within 
such other period of time as may be specified by the Committee), but in any 
event no later than the date of expiration of the Option term.  Any of the 
Grantee's Options which are not otherwise exercisable as of the date on which 
the Grantee ceases to be employed by the Company shall terminate as of such 
date.

         (iii) If the Grantee dies while employed by the Company or within 90 
days after the date on which the Grantee ceases to be employed on account of 
a termination of employment specified in Section 5(e)(i) above (or within 
such other period of time as may be specified by the Committee), any Option 
that is otherwise exercisable by the Grantee shall terminate unless exercised 
within one year after the date on which the Grantee ceases to be employed by 
the Company (or within such other period of time as may be specified by the 
Committee), but in any event no later than the date of expiration of the 
Option term.  Any of the Grantee's Options that are not otherwise exercisable 
as of the date on which the Grantee ceases to be employed by the Company 
shall terminate as of such date.

         (iv) For purposes of this Section 5(e) and Sections 6, 7 and 8:

         (A) The term "Company" shall mean the Company and its parent and
    subsidiary corporations.

         (B) "Employed by the Company" shall mean employment or service as an
    Employee, Key Advisor or member of the Board (so that, for purposes of
    exercising Options and SARs and satisfying conditions with respect to
    Restricted Stock and Performance Units, a Grantee shall not be considered
    to have terminated employment or service until the Grantee ceases to be an
    Employee, Key Advisor and member of the Board), unless the Committee
    determines otherwise.

         (C) "Disability" shall mean a Grantee's becoming disabled within the
    meaning of section 22(e)(3) of the Code.

    (f)  EXERCISE OF OPTIONS.  A Grantee may exercise an Option that has 
become exercisable, in whole or in part, by delivering a notice of exercise 
to the Company with payment of the Exercise Price.  The Grantee shall pay the 
Exercise Price for an Option as specified by the Committee (x) in cash, (y) 
with the approval of the Committee, by delivering shares of Company Stock 
owned by the Grantee (including Company Stock acquired in connection with the 
exercise of an Option, subject to such restrictions as the Committee deems 
appropriate) and having a Fair Market Value on the date of exercise equal to 
the Exercise Price or (z) by such other method as the Committee may approve, 
including after a Public Offering payment through a broker in accordance with 
procedures permitted by Regulation T of the Federal Reserve Board.  Shares of 
Company Stock used to exercise an Option shall have been held by the Grantee 
for the requisite period of time to avoid adverse accounting 

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consequences to the Company with respect to the Option.  The Grantee shall 
pay the Exercise Price and the amount of any withholding tax due (pursuant to 
Section 10) at the time of exercise. 

    (g)  LIMITS ON INCENTIVE STOCK OPTIONS.  Each Incentive Stock Option 
shall provide that, if the aggregate Fair Market Value of the stock on the 
date of the grant with respect to which Incentive Stock Options are 
exercisable for the first time by a Grantee during any calendar year, under 
the Plan or any other stock option plan of the Company or a parent or 
subsidiary, exceeds $100,000, then the option, as to the excess, shall be 
treated as a Nonqualified Stock Option.  An Incentive Stock Option shall not 
be granted to any person who is not an Employee of the Company or a parent or 
subsidiary (within the meaning of section 424(f) of the Code).

    6.   RESTRICTED STOCK GRANTS

    The Committee may issue or transfer shares of Company Stock to an 
Employee, Non-Employee Director or Key Advisor under a Grant of Restricted 
Stock, upon such terms as the Committee deems appropriate.  The following 
provisions are applicable to Restricted Stock:

    (a)  GENERAL REQUIREMENTS.  Shares of Company Stock issued or transferred 
pursuant to Restricted Stock Grants may be issued or transferred for 
consideration or for no consideration, as determined by the Committee.  The 
Committee may establish conditions under which restrictions on shares of 
Restricted Stock shall lapse over a period of time or according to such other 
criteria as the Committee deems appropriate.  The period of time during which 
the Restricted Stock will remain subject to restrictions will be designated 
in the Grant Instrument as the "Restriction Period."

    (b)  NUMBER OF SHARES.  The Committee shall determine the number of 
shares of Company Stock to be issued or transferred pursuant to a Restricted 
Stock Grant and the restrictions applicable to such shares. 

    (c)  REQUIREMENT OF EMPLOYMENT.  If the Grantee ceases to be employed by 
the Company (as defined in Section 5(e)) during a period designated in the 
Grant Instrument as the Restriction Period, or if other specified conditions 
are not met, the Restricted Stock Grant shall terminate as to all shares 
covered by the Grant as to which the restrictions have not lapsed, and those 
shares of Company Stock must be immediately returned to the Company.  The 
Committee may, however, provide for complete or partial exceptions to this 
requirement as it deems appropriate.

    (d)  RESTRICTIONS ON TRANSFER AND LEGEND ON STOCK CERTIFICATE.  During 
the Restriction Period, a Grantee may not sell, assign, transfer, pledge or 
otherwise dispose of the shares of Restricted Stock except to a Successor 
Grantee under Section 11(a).  Each certificate for a share of Restricted 
Stock shall contain a legend giving appropriate notice of the restrictions in 
the Grant.  The Grantee shall be entitled to have the legend removed from the 
stock certificate covering the shares subject to restrictions when all 
restrictions on such shares have lapsed.  The Committee may determine that 
the Company will not issue certificates for shares of Restricted Stock until 
all 

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restrictions on such shares have lapsed, or that the Company will retain 
possession of certificates for shares of Restricted Stock until all 
restrictions on such shares have lapsed.

    (e)  RIGHT TO VOTE AND TO RECEIVE DIVIDENDS.  Unless the Committee 
determines otherwise, during the Restriction Period, the Grantee shall have 
the right to vote shares of Restricted Stock and to receive any dividends or 
other distributions paid on such shares, subject to any restrictions deemed 
appropriate by the Committee.

    (f)  LAPSE OF RESTRICTIONS.  All restrictions imposed on Restricted Stock 
shall lapse upon the expiration of the applicable Restriction Period and the 
satisfaction of all conditions imposed by the Committee.  The Committee may 
determine, as to any or all Restricted Stock Grants, that the restrictions 
shall lapse without regard to any Restriction Period.

    7.   STOCK APPRECIATION RIGHTS

    (a)  GENERAL REQUIREMENTS.  The Committee may grant stock appreciation 
rights ("SARs") to an Employee, Non-Employee Director or Key Advisor 
separately or in tandem with any Option (for all or a portion of the 
applicable Option). Tandem SARs may be granted either at the time the Option 
is granted or at any time thereafter while the Option remains outstanding; 
provided, however, that, in the case of an Incentive Stock Option, SARs may 
be granted only at the time of the Grant of the Incentive Stock Option.  The 
Committee shall establish the base amount of the SAR at the time the SAR is 
granted.  Unless the Committee determines otherwise, the base amount of each 
SAR shall be equal to the per share Exercise Price of the related Option or, 
if there is no related Option, the Fair Market Value of a share of Company 
Stock as of the date of Grant of the SAR.

    (b)  TANDEM SARS.  In the case of tandem SARs, the number of SARs granted 
to a Grantee that shall be exercisable during a specified period shall not 
exceed the number of shares of Company Stock that the Grantee may purchase 
upon the exercise of the related Option during such period.  Upon the 
exercise of an Option, the SARs relating to the Company Stock covered by such 
Option shall terminate.  Upon the exercise of SARs, the related Option shall 
terminate to the extent of an equal number of shares of Company Stock.

    (c)  EXERCISABILITY.  An SAR shall be exercisable during the period 
specified by the Committee in the Grant Instrument and shall be subject to 
such vesting and other restrictions as may be specified in the Grant 
Instrument.  The Committee may accelerate the exercisability of any or all 
outstanding SARs at any time for any reason.  SARs may only be exercised 
while the Grantee is employed by the Company or during the applicable period 
after termination of employment as described in Section 5(e).  A tandem SAR 
shall be exercisable only during the period when the Option to which it is 
related is also exercisable.

    (d)  VALUE OF SARS.  When a Grantee exercises SARs, the Grantee shall 
receive in settlement of such SARs an amount equal to the value of the stock 
appreciation for the number of SARs exercised, payable in cash, Company Stock 
or a combination thereof.  The stock appreciation 

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for an SAR is the amount by which the Fair Market Value of the underlying 
Company Stock on the date of exercise of the SAR exceeds the base amount of 
the SAR as described in Subsection (a).

    (e)  FORM OF PAYMENT.  The Committee shall determine whether the 
appreciation in an SAR shall be paid in the form of cash, shares of Company 
Stock, or a combination of the two, in such proportion as the Committee deems 
appropriate.  For purposes of calculating the number of shares of Company 
Stock to be received, shares of Company Stock shall be valued at their Fair 
Market Value on the date of exercise of the SAR.  If shares of Company Stock 
are to be received upon exercise of an SAR, cash shall be delivered in lieu 
of any fractional share.

    8.   PERFORMANCE UNITS

    (a)  GENERAL REQUIREMENTS.  The Committee may grant performance units 
("Performance Units") to an Employee or Key Advisor.  Each Performance Unit 
shall represent the right of the Grantee to receive an amount based on the 
value of the Performance Unit, if performance goals established by the 
Committee are met.  A Performance Unit shall be based on the Fair Market 
Value of a share of Company Stock or on such other measurement base as the 
Committee deems appropriate.  The Committee shall determine the number of 
Performance Units to be granted and the requirements applicable to such 
Units. 

    (b)  PERFORMANCE PERIOD AND PERFORMANCE GOALS.  When Performance Units 
are granted, the Committee shall establish the performance period during 
which performance shall be measured (the "Performance Period"), performance 
goals applicable to the Units ("Performance Goals") and such other conditions 
of the Grant as the Committee deems appropriate.  Performance Goals may 
relate to the financial performance of the Company or its operating units, 
the performance of Company Stock, individual performance, or such other 
criteria as the Committee deems appropriate.

    (c)  PAYMENT WITH RESPECT TO PERFORMANCE UNITS.  At the end of each 
Performance Period, the Committee shall determine to what extent the 
Performance Goals and other conditions of the Performance Units are met and 
the amount, if any, to be paid with respect to the Performance Units.  
Payments with respect to Performance Units shall be made in cash, in Company 
Stock, or in a combination of the two, as determined by the Committee.

    (d)  REQUIREMENT OF EMPLOYMENT.  If the Grantee ceases to be employed by 
the Company (as defined in Section 5(e)) during a Performance Period, or if 
other conditions established by the Committee are not met, the Grantee's 
Performance Units shall be forfeited.  The Committee may, however, provide 
for complete or partial exceptions to this requirement as it deems 
appropriate.

    9.   QUALIFIED PERFORMANCE-BASED COMPENSATION.

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    (a)  DESIGNATION AS QUALIFIED PERFORMANCE-BASED COMPENSATION.  After a 
Public Offering, the Committee may determine that Performance Units or 
Restricted Stock granted to an Employee shall be considered "qualified 
performance-based compensation" under Section 162(m) of the Code.  The 
provisions of this Section 9 shall apply to Grants of Performance Units and 
Restricted Stock that are to be considered "qualified performance-based 
compensation" under Section 162(m) of the Code.  

    (b)  PERFORMANCE GOALS.  When Performance Units or Restricted Stock that 
are to be considered "qualified performance-based compensation" are granted, 
the Committee shall establish in writing (i) the objective performance goals 
that must be met in order for restrictions on the Restricted Stock to lapse 
or amounts to be paid under the Performance Units, (ii) the Performance 
Period during which the performance goals must be met, (iii) the threshold, 
target and maximum amounts that may be paid if the performance goals are met, 
and (iv) any other conditions, including without limitation provisions 
relating to death, disability, other termination of employment or Change of 
Control, that the Committee deems appropriate and consistent with the Plan 
and Section 162(m) of the Code.  The performance goals may relate to the 
Employee's business unit or the performance of the Company and its 
subsidiaries as a whole, or any combination of the foregoing. The Committee 
shall use objectively determinable performance goals based on one or more of 
the following criteria:  stock price, earnings per share, net earnings, 
operating earnings, return on assets, shareholder return, return on equity, 
growth in assets, unit volume, sales, market share, or strategic business 
criteria consisting of one or more objectives based on meeting specified 
revenue goals, market penetration goals, geographic business expansion goals, 
cost targets or goals relating to acquisitions or divestitures. 

    (c)  ESTABLISHMENT OF GOALS.  The Committee shall establish the 
performance goals in writing either before the beginning of the Performance 
Period or during a period ending no later than the earlier of (i) 90 days 
after the beginning of the Performance Period or (ii) the date on which 25% 
of the Performance Period has been completed, or such other date as may be 
required or permitted under applicable regulations under Section 162(m) of 
the Code.  The performance goals shall satisfy the requirements for 
"qualified performance-based compensation," including the requirement that 
the achievement of the goals be substantially uncertain at the time they are 
established and that the goals be established in such a way that a third 
party with knowledge of the relevant facts could determine whether and to 
what extent the performance goals have been met.  The Committee shall not 
have discretion to increase the amount of compensation that is payable upon 
achievement of the designated performance goals.

    (d)  MAXIMUM PAYMENT.  If Restricted Stock, or Performance Units measured 
with respect to the fair market value of Company Stock, are granted, not more 
than 200,000 shares of Company Stock may be granted to an Employee under the 
Performance Units or Restricted Stock for any Performance Period.  If 
Performance Units are measured with respect to other criteria, the maximum 
amount that may be paid to an Employee with respect to a Performance Period 
is $500,000.

    (e)  ANNOUNCEMENT OF GRANTS.  The Committee shall certify and announce 
the results for each Performance Period to all Grantees immediately following 
the announcement of the Company's 

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financial results for the Performance Period.  If and to the extent that the 
Committee does not certify that the performance goals have been met, the 
grants of Restricted Stock or Performance Units for the Performance Period 
shall be forfeited.

    10.  WITHHOLDING OF TAXES

    (a)  REQUIRED WITHHOLDING.  All Grants under the Plan shall be subject to 
applicable federal (including FICA), state and local tax withholding 
requirements.  The Company shall have the right to deduct from all Grants 
paid in cash, or from other wages paid to the Grantee, any federal, state or 
local taxes required by law to be withheld with respect to such Grants.  In 
the case of Options and other Grants paid in Company Stock, the Company may 
require the Grantee or other person receiving such shares to pay to the 
Company the amount of any such taxes that the Company is required to withhold 
with respect to such Grants, or the Company may deduct from other wages paid 
by the Company the amount of any withholding taxes due with respect to such 
Grants.

    (b)  ELECTION TO WITHHOLD SHARES.  If the Committee so permits, a Grantee 
may elect to satisfy the Company's income tax withholding obligation with 
respect to an Option, SAR, Restricted Stock or Performance Units paid in 
Company Stock by having shares withheld up to an amount that does not exceed 
the Grantee's applicable marginal tax rate for federal (including FICA), 
state and local tax liabilities.  The election must be in a form and manner 
prescribed by the Committee and shall be subject to the prior approval of the 
Committee. 

    11.  TRANSFERABILITY OF GRANTS

    (a)  NONTRANSFERABILITY OF GRANTS.  Except as provided below, only the 
Grantee may exercise rights under a Grant during the Grantee's lifetime.  A 
Grantee may not transfer those rights except by will or by the laws of 
descent and distribution or, with respect to Grants other than Incentive 
Stock Options, if permitted in any specific case by the Committee, pursuant 
to a domestic relations order (as defined under the Code or Title I of the 
Employee Retirement Income Security Act of 1974, as amended, or the 
regulations thereunder).  When a Grantee dies, the personal representative or 
other person entitled to succeed to the rights of the Grantee ("Successor 
Grantee") may exercise such rights.  A Successor Grantee must furnish proof 
satisfactory to the Company of his or her right to receive the Grant under 
the Grantee's will or under the applicable laws of descent and distribution.

    (b)  TRANSFER OF NONQUALIFIED STOCK OPTIONS. Notwithstanding the 
foregoing, the Committee may provide, in a Grant Instrument, that a Grantee 
may transfer Nonqualified Stock Options to family members or other persons or 
entities according to such terms as the Committee may determine; provided 
that the Grantee receives no consideration for the transfer of an Option and 
the transferred Option shall continue to be subject to the same terms and 
conditions as were applicable to the Option immediately before the transfer.

    12.  RIGHT OF FIRST REFUSAL

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    (a)  OFFER.  Prior to a Public Offering, if at any time an individual 
desires to sell, encumber, or otherwise dispose of shares of Company Stock 
distributed to him under this Plan, the individual shall first offer the 
shares to the Company by giving the Company written notice disclosing: (a) 
the name of the proposed transferee of the Company Stock; (b) the certificate 
number and number of shares of Company Stock proposed to be transferred or 
encumbered; (c) the proposed price; (d) all other terms of the proposed 
transfer; and (e) a written copy of the proposed offer.  Within 60 days after 
receipt of such notice, the Company shall have the option to purchase all or 
part of such Company Stock at the then current Fair Market Value (as defined 
in Section 5(b)) and may pay such price in installments over a period not to 
exceed four years, at the discretion of the Committee.

    (b)  SALE.  In the event the Company (or a shareholder, as described 
below) does not exercise the option to purchase Company Stock, as provided 
above, the individual shall have the right to sell, encumber, or otherwise 
dispose of his shares of Company Stock on the terms of the transfer set forth 
in the written notice to the Company, provided such transfer is effected 
within 15 days after the expiration of the option period.  If the transfer is 
not effected within such period, the Company must again be given an option to 
purchase, as provided above.

    (c)  PASS THROUGH OF RIGHTS.  The Board, in its sole discretion, may 
waive the Company's right of first refusal pursuant to this Section 12.  If 
the Company's right of first refusal or repurchase right is so waived, the 
Board may, in its sole discretion, pass through such right to the remaining 
shareholders of the Company in the same proportion that each shareholder's 
stock ownership bears to the stock ownership of all the shareholders of the 
Company, as determined by the Board.  To the extent that a shareholder has 
been given such right and does not purchase his or her allotment, the other 
shareholders shall have the right to purchase such allotment on the same 
basis.

    (d)  PUBLIC OFFERING.  On and after a Public Offering, the Company shall 
have no further right to purchase shares of Company Stock under this Section 
12, and its limitations shall be null and void.

    (e)  SHAREHOLDER'S AGREEMENT.  Notwithstanding the foregoing, the 
Committee may require that a Grantee execute a shareholder's agreement, with 
such terms as the Committee deems appropriate, with respect to any Company 
Stock distributed pursuant to this Plan, in which case the provisions of this 
Section 12 shall not apply to such Company Stock.

    13.  CHANGE OF CONTROL OF THE COMPANY

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<PAGE>

    As used herein, a "Change of Control" shall be deemed to have occurred if:

    (a)  Any "person" (as such term is used in Sections 13(d) and 14(d) of 
the Exchange Act) (other than the following persons:  Michael D. Andereck, 
Xerox Corporation, Safeguard Delaware and Technology Leaders II) becomes a 
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), 
directly or indirectly, of securities of the Company representing 51% or more 
of the voting power of the then outstanding securities of the Company; or

    (b)  The shareholders of the Company approve (or, if shareholder approval 
is not required, the Board approves) an agreement providing for (i) the 
merger or consolidation of the Company with another corporation where the 
shareholders of the Company, immediately prior to the merger or 
consolidation, will not beneficially own, immediately after the merger or 
consolidation, shares entitling such shareholders to 51% or more of all votes 
to which all shareholders of the surviving corporation would be entitled in 
the election of directors (without consideration of the rights of any class 
of stock to elect directors by a separate class vote), (ii) the sale or other 
disposition of all or substantially all of the assets of the Company, or 
(iii) a liquidation or dissolution of the Company.

    14.  CONSEQUENCES OF A CHANGE OF CONTROL

    (a)  NOTICE AND ACCELERATION.  Upon a Change of Control, unless the 
Committee determines otherwise, (i) the Company shall provide each Grantee 
with outstanding Grants written notice of such Change of Control, (ii) all 
outstanding Options and SARs shall automatically accelerate and become fully 
exercisable, (iii) the restrictions and conditions on all outstanding 
Restricted Stock shall immediately lapse, and (iv) Grantees holding 
Performance Units shall receive a payment in settlement of such Performance 
Units, in an amount determined by the Committee, based on the Grantee's 
target payment for the Performance Period and the portion of the Performance 
Period that precedes the Change of Control.

    (b)  ASSUMPTION OF GRANTS.  Upon a Change of Control where the Company is 
not the surviving corporation (or survives only as a subsidiary of another 
corporation), unless the Committee determines otherwise, all outstanding 
Options and SARs that are not exercised shall be assumed by, or replaced with 
comparable options or rights by, the surviving corporation.

    (c)  OTHER ALTERNATIVES.  Notwithstanding the foregoing, subject to 
subsection (d) below, in the event of a Change of Control, the Committee may 
take one or both of the following actions: the Committee may (i) require that 
Grantees surrender their outstanding Options and SARs in exchange for a 
payment by the Company, in cash or Company Stock as determined by the 
Committee, in an amount equal to the amount by which the then Fair Market 
Value of the shares of Company Stock subject to the Grantee's unexercised 
Options and SARs  exceeds the Exercise Price of the Options or the base 
amount of the SARs, as applicable, or (ii) after giving Grantees an 
opportunity to exercise their outstanding Options and SARs, terminate any or 
all unexercised Options and SARs at such time as the Committee deems 
appropriate.  Such surrender or termination 

                                     -12-
<PAGE>

shall take place as of the date of the Change of Control or such other date 
as the Committee may specify.  

    (d)  LIMITATIONS.  Notwithstanding anything in the Plan to the contrary, 
in the event of a Change of Control, the Committee shall not have the right 
to take any actions described in the Plan (including without limitation 
actions described in Subsection (c) above) that would make the Change of 
Control ineligible for pooling of interests accounting treatment or that 
would make the Change of Control ineligible for desired tax treatment if, in 
the absence of such right, the Change of Control would qualify for such 
treatment and the Company intends to use such treatment with respect to the 
Change of Control.

    15.  REQUIREMENTS FOR ISSUANCE OR TRANSFER OF SHARES

    (a)  SHAREHOLDER'S AGREEMENT.  The Committee may require that a Grantee 
execute a shareholder's agreement, with such terms as the Committee deems 
appropriate, with respect to any Company Stock distributed pursuant to this 
Plan.

    (b)  LIMITATIONS ON ISSUANCE OR TRANSFER OF SHARES.  No Company Stock 
shall be issued or transferred in connection with any Grant hereunder unless 
and until all legal requirements applicable to the issuance or transfer of 
such Company Stock have been complied with to the satisfaction of the 
Committee.  The Committee shall have the right to condition any Grant made to 
any Grantee hereunder on such Grantee's undertaking in writing to comply with 
such restrictions on his or her subsequent disposition of such shares of 
Company Stock as the Committee shall deem necessary or advisable as a result 
of any applicable law, regulation or official interpretation thereof, and 
certificates representing such shares may be legended to reflect any such 
restrictions. Certificates representing shares of Company Stock issued or 
transferred under the Plan will be subject to such stop-transfer orders and 
other restrictions as may be required by applicable laws, regulations and 
interpretations, including any requirement that a legend be placed thereon.

    16.  AMENDMENT AND TERMINATION OF THE PLAN

    (a)  AMENDMENT.  The Board may amend or terminate the Plan at any time; 
provided, however, that the Board shall not amend the Plan without 
shareholder approval if such approval is required by Section 162(m) of the 
Code.

    (b)  TERMINATION OF PLAN.  The Plan shall terminate on the day 
immediately preceding the tenth anniversary of its effective date, unless the 
Plan is terminated earlier by the Board or is extended by the Board with the 
approval of the shareholders.

    (c)  TERMINATION AND AMENDMENT OF OUTSTANDING GRANTS.  A termination or 
amendment of the Plan that occurs after a Grant is made shall not materially 
impair the rights of a Grantee unless 

                                     -13-
<PAGE>

the Grantee consents or unless the Committee acts under Section 22(b).  The 
termination of the Plan shall not impair the power and authority of the 
Committee with respect to an outstanding Grant.  Whether or not the Plan has 
terminated, an outstanding Grant may be terminated or amended under Section 
22(b) or may be amended by agreement of the Company and the Grantee 
consistent with the Plan.

    (d)  GOVERNING DOCUMENT.  The Plan shall be the controlling document.  No 
other statements, representations, explanatory materials or examples, oral or 
written, may amend the Plan in any manner.  The Plan shall be binding upon 
and enforceable against the Company and its successors and assigns.

    17.  FUNDING OF THE PLAN

    This Plan shall be unfunded.  The Company shall not be required to 
establish any special or separate fund or to make any other segregation of 
assets to assure the payment of any Grants under this Plan.  In no event 
shall interest be paid or accrued on any Grant, including unpaid installments 
of Grants.

    18.  RIGHTS OF PARTICIPANTS

    Nothing in this Plan shall entitle any Employee, Key Advisor, 
Non-Employee Director or other person to any claim or right to be granted a 
Grant under this Plan.  Neither this Plan nor any action taken hereunder 
shall be construed as giving any individual any rights to be retained by or 
in the employ of the Company or any other employment rights.

    19.  NO FRACTIONAL SHARES

    No fractional shares of Company Stock shall be issued or delivered 
pursuant to the Plan or any Grant.  The Committee shall determine whether 
cash, other awards or other property shall be issued or paid in lieu of such 
fractional shares or whether such fractional shares or any rights thereto 
shall be forfeited or otherwise eliminated.

    20.  HEADINGS

    Section headings are for reference only.  In the event of a conflict 
between a title and the content of a Section, the content of the Section 
shall control.

    21.  EFFECTIVE DATE OF THE PLAN.

    (a)  EFFECTIVE DATE.  Subject to the approval of the Company's 
shareholders, the Plan shall be effective on May 14, 1997.

                                     -14-
<PAGE>

    (b)  PUBLIC OFFERING.  The provisions of the Plan that refer to a Public 
Offering, or that refer to, or are applicable to persons subject to, section 
16 of the Exchange Act or section 162(m) of the Code, shall be effective, if 
at all, upon the initial registration of the Company Stock under section 
12(g) of the Exchange Act, and shall remain effective thereafter for so long 
as such stock is so registered.

    22.  MISCELLANEOUS

    (a)  GRANTS IN CONNECTION WITH CORPORATE TRANSACTIONS AND OTHERWISE. 
Nothing contained in this Plan shall be construed to (i) limit the right of 
the Committee to make Grants under this Plan in connection with the 
acquisition, by purchase, lease, merger, consolidation or otherwise, of the 
business or assets of any corporation, firm or association, including Grants 
to employees thereof who become Employees of the Company, or for other proper 
corporate purposes, or (ii) limit the right of the Company to grant stock 
options or make other awards outside of this Plan.  Without limiting the 
foregoing, the Committee may make a Grant to an employee of another 
corporation who becomes an Employee by reason of a corporate merger, 
consolidation, acquisition of stock or property, reorganization or 
liquidation involving the Company or any of its subsidiaries in substitution 
for a stock option or restricted stock grant made by such corporation.  The 
terms and conditions of the substitute grants may vary from the terms and 
conditions required by the Plan and from those of the substituted stock 
incentives.  The Committee shall prescribe the provisions of the substitute 
grants.

    (b)  COMPLIANCE WITH LAW.  The Plan, the exercise of Options and SARs and 
the obligations of the Company to issue or transfer shares of Company Stock 
under Grants shall be subject to all applicable laws and to approvals by any 
governmental or regulatory agency as may be required.  With respect to 
persons subject to section 16 of the Exchange Act, it is the intent of the 
Company that the Plan and all transactions under the Plan comply with all 
applicable provisions of Rule 16b-3 or its successors under the Exchange Act. 
The Committee may revoke any Grant if it is contrary to law or modify a 
Grant to bring it into compliance with any valid and mandatory government 
regulation. The Committee may also adopt rules regarding the withholding of 
taxes on payments to Grantees.  The Committee may, in its sole discretion, 
agree to limit its authority under this Section.

    (c)  GOVERNING LAW.  The validity, construction, interpretation and 
effect of the Plan and Grant Instruments issued under the Plan shall 
exclusively be governed by and determined in accordance with the law of State 
of Delaware.



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