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                                                                    EXHIBIT 10.3

                            DEPOSITION SCIENCES, INC.
                            -------------------------

                           2001 EQUITY INCENTIVE PLAN
                           --------------------------

                    (AS ADOPTED AND EFFECTIVE APRIL 13, 2001)

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<TABLE>
<CAPTION>

                                            DEPOSITION SCIENCES, INC.
                                           2001 EQUITY INCENTIVE PLAN

                                                TABLE OF CONTENTS
<S>                                                                                                             <C>
SECTION 1 - PURPOSE..............................................................................................1

SECTION 2 - DEFINITIONS..........................................................................................1

SECTION 3 - ADMINISTRATION.......................................................................................5
         3.1      Committee Membership...........................................................................5
         3.2      Committee Procedures...........................................................................5
         3.3      Committee Responsibilities.....................................................................5
         3.4      Committee Liability............................................................................6
         3.5      Financial Reports..............................................................................6

SECTION 4 - ELIGIBILITY..........................................................................................6
         4.1      General Rule...................................................................................6
         4.2      Ten-Percent Shareholders.......................................................................6
         4.3      Attribution Rules..............................................................................6
         4.4      Outstanding Stock..............................................................................7

SECTION 5 - STOCK SUBJECT TO PLAN................................................................................7
         5.1      Basic Limitation...............................................................................7
         5.2      Additional Shares..............................................................................7

SECTION 6 - TERMS AND CONDITIONS OF AWARDS OR SALES..............................................................7
         6.1      Stock Purchase Agreement.......................................................................7
         6.2      Duration of Offers.............................................................................8
         6.3      Purchase Price.................................................................................8
                  6.3.1    Minimum Purchase Price................................................................8
                  6.3.2    Purchase Price and Payment............................................................8
         6.4      Payment for Shares.............................................................................8
                  6.4.1    Surrender of Stock....................................................................8
                  6.4.2    Promissory Notes......................................................................9
                  6.4.3    Cashless Exercise.....................................................................9
         6.5      Exercise of Awards on Termination of Service...................................................9

SECTION 7 - ADDITIONAL TERMS AND CONDITIONS OF RESTRICTED SHARES.................................................9
         7.1      Form and Amount of Award.......................................................................9
         7.2      Vesting.......................................................................................10
         7.3      Effect of Change in Control...................................................................10
         7.4      Voting and Dividend Rights....................................................................10

SECTION 8 - TERMS AND CONDITIONS OF OPTIONS.....................................................................10
         8.1      Stock Option Agreement........................................................................10
         8.2      Number of Shares..............................................................................10
         8.3      Exercise Price................................................................................10
         8.4      Vesting and Exercisability....................................................................11
         8.5      Effect of Change in Control...................................................................11
         8.6      Term..........................................................................................11
         8.7      Exercise of Options on Termination of Service.................................................11
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<TABLE>
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                                            DEPOSITION SCIENCES, INC.
                                           2001 EQUITY INCENTIVE PLAN

<S>                                                                                                            <C>
         8.8      Payment of Option Shares......................................................................11
                  8.8.1    Surrender of Stock...................................................................12
                  8.8.2    Promissory Notes.....................................................................12
                  8.8.3    Cashless Exercise....................................................................12
         8.9      No Rights as a Shareholder....................................................................12
         8.10     Modification, Extension and Assumption of Options.............................................12

SECTION 9 - ADJUSTMENT OF SHARES................................................................................13
         9.1      General.......................................................................................13
         9.2      Reorganizations...............................................................................13
         9.3      Reservation of Rights.........................................................................13

SECTION 10 - WITHHOLDING TAXES..................................................................................13
         10.1     General.......................................................................................13
         10.2     Share Withholding.............................................................................14
         10.3     Cashless Exercise/Pledge......................................................................14
         10.4     Other Forms of Payment........................................................................14

SECTION 11 - ASSIGNMENT OR TRANSFER OF AWARDS; REPURCHASE OF SHARES.............................................14
         11.1     General.......................................................................................14
         11.2     Trusts........................................................................................14
         11.3     Third Party Transfer Restrictions.............................................................15
         11.4     Repurchase of Vested Shares Upon Termination of Service.......................................15
                  11.4.1   Prior to a Major Event...............................................................15
                  11.4.2   After a Major Event..................................................................15

SECTION 12 - LEGAL REQUIREMENTS.................................................................................16

SECTION 13 - NO EMPLOYMENT RIGHTS...............................................................................16

SECTION 14 - DURATION AND AMENDMENTS............................................................................16
         14.1     Term of the Plan..............................................................................16
         14.2     Right to Amend or Terminate the Plan..........................................................16
         14.3     Effect of Amendment or Termination............................................................17

ATTACHMENTS

Incentive Stock Option Agreement
Nonstatutory Stock Option Agreement
Exhibit A         Tax Summary
Exhibit B         Notice of Exclusive and Common Stock Purchase Agreement
Exhibit B-1       Form of Election Under Section 83(b)
Exhibit C         Joint Escrow Instructions
Exhibit D         Assignment Separate From Certificate
Exhibit E         Acknowledgment of and Agreement to be Bound
Exhibit F         Promissory Note
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                            DEPOSITION SCIENCES, INC.
                            -------------------------
                           2001 EQUITY INCENTIVE PLAN
                           --------------------------

                    (AS ADOPTED AND EFFECTIVE APRIL 13, 2001)

                                   SECTION 1
                                     PURPOSE

The purpose of the DEPOSITION SCIENCES, INC. 2001 Equity Incentive Plan (the
"Plan") is to offer selected employees, directors and consultants of the
Company, of Advanced Lighting Technologies, Inc. ("ADLT"), which is the parent
corporation of the Company, and of the subsidiaries of the Company and ADLT, an
opportunity to acquire a proprietary interest in the success of the Company, or
to increase such interest, to encourage such selected persons to remain in the
employ of the Company and to attract new employees with outstanding
qualifications. The Plan seeks to achieve this purpose by providing for Awards
in the form of Restricted Shares and Options (which may constitute Incentive
Stock Options or Nonstatutory Options) as well as the direct award or sale of
shares of the Company's Common Stock.

                                   SECTION 2
                                   DEFINITIONS

2.1               ADLT BOARD shall mean the Board of Directors of ADLT, as
         constituted from time to time.

2.2               AFFILIATE shall mean ADLT and any Subsidiary.

2.3               AWARD shall mean any award of an Option, Restricted Share or
         other right under the Plan.

2.4               BOARD OF DIRECTORS or BOARD shall mean the Board of Directors
         of the Company, as constituted from time to time.

2.5               [RESERVED.]

2.6               CHANGE IN CONTROL means, (a) with respect to the Company such
         time as a "person" or "group" (within the meaning of Sections 13(d) and
         14(d)(2) of the Exchange Act) becomes the ultimate "beneficial owner"
         (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of
         the total voting power of the Stock on a fully diluted basis, and (b)
         with respect to ADLT such time as (i) a "person" or "group" (within the
         meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the
         ultimate "beneficial owner" (as defined in Rule 13d-3 under the
         Exchange Act) of more than 50% of the total voting power of the common
         stock of ADLT; or (ii) individuals who on the effective date of the
         Plan constitute the members of the ADLT Board (together with any new or
         successor directors whose election by the ADLT Board or whose
         nomination by

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         the ADLT Board for election by ADLT's stockholders was approved by a
         vote of at least two-thirds of the members of the ADLT Board on the
         date of their election or nomination) cease for any reason to
         constitute a majority of the members of the ADLT Board then in office.
         The term "Change in Control" shall not include: (i) a transaction the
         sole purpose of which is to change the state of the Company's
         incorporation; or (ii) the Initial Public Offering.

2.7               CODE shall mean the Internal Revenue Code of 1986, as amended.

2.8               COMMITTEE shall mean a committee of the Board of Directors
         which is authorized to administer the Plan under Section 3.

2.9               COMMON-LAW EMPLOYEE means an individual paid from W-2 Payroll
         of the Company or an Affiliate. If, during any period, the Company (or
         Affiliate, as applicable) has not treated an individual as a Common-Law
         Employee and, for that reason, has not paid such individual in a manner
         which results in the issuance of a Form W-2 and withheld taxes with
         respect to him or her, then that individual shall not be an eligible
         Employee for that period, even if any person, court of law or
         government agency determines, retroactively, that that individual is or
         was a Common-Law Employee during all or any portion of that period.

2.10              COMPANY shall mean DEPOSITION SCIENCES, INC., an Ohio
         corporation, qualified to do business in the State of California.

2.11              EMPLOYEE shall mean (i) any individual who is a Common-Law
         Employee of the Company or of an Affiliate, (ii) a member of the Board
         of Directors, including (without limitation) an Outside Director, or an
         affiliate of a member of the Board of Directors, (iii) a member of the
         board of directors of an Affiliate, or (iv) an independent contractor
         who performs services for the Company or an Affiliate. Service as a
         member of the Board of Directors, a member of the board of directors of
         an Affiliate or an independent contractor shall be considered
         employment for all purposes of the Plan except the second sentence of
         Section 4.1.

2.12              EXCHANGE ACT means the Securities and Exchange Act of 1934, as
         amended.

2.13              EXERCISE PRICE shall mean the amount for which one Share may
         be purchased upon exercise of an Option, as set forth in the applicable
         Stock Option Agreement.

2.14              FAIR MARKET VALUE means the market price of Shares, determined
         by the Committee as follows:

                         If the Shares were traded over-the-counter on the date
                         in question but were not traded on the NASDAQ Stock
                         Market or the NASDAQ National Market System, then the
                         Fair Market Value shall be equal

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                         to the mean between the last reported representative
                         bid and asked prices quoted for such date by the
                         principal automated inter-dealer quotation system on
                         which the Shares are quoted or, if the Shares are not
                         quoted on any such system, by the "Pink Sheets"
                         published by the National Quotation Bureau, Inc.;

                         If the Shares were traded over-the-counter on the date
                         in question and were traded on the NASDAQ Stock Market
                         or the NASDAQ National Market System, then the Fair
                         Market Value shall be equal to the last-transaction
                         price quoted for such date by the NASDAQ Stock Market
                         or the NASDAQ National Market;

                         If the Shares were traded on a stock exchange on the
                         date in question, then the Fair Market Value shall be
                         equal to the closing price reported by the applicable
                         composite transactions report for such date; and

                         If none of the foregoing provisions is applicable, then
                         the Fair Market Value shall be determined by the
                         Committee in good faith on the basis of existing facts
                         and circumstances.

           In all cases, the determination of Fair Market Value by the Committee
           shall be conclusive and binding on all persons.

2.15              [RESERVED.]

2.16              GRANT DATE means the date the Board of Directors approves an
         Award.

2.17              INCENTIVE STOCK OPTION or "ISO" shall mean an employee
         incentive stock option described in Code Section 422(b).

2.18              INITIAL PUBLIC OFFERING shall mean the first public offering
         of common stock of the Company which is registered under the Securities
         Act.

2.19              MAJOR EVENT shall mean the earlier to occur of (a) a Change in
         Control, (b) the Initial Public Offering, or (c) a sale of
         substantially all the Company's assets to an unrelated person or
         entity.

2.20              NONSTATUTORY OPTION or NSO shall mean an employee stock option
         that is not an ISO.

2.21              OFFEREE shall mean an individual to whom the Committee has
         offered the right to acquire Shares under the Plan (other than upon
         exercise of an Option).

2.22              OPTION shall mean an Incentive Stock Option or Nonstatutory
         Option granted under the Plan and entitling the holder to purchase
         Shares.

2.23              OPTIONEE shall mean an individual or estate who holds an
         Option.

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2.24              OUTSIDE DIRECTOR shall mean a member of the Board who is not a
         Common-Law Employee of the Company or an Affiliate.

2.25              PARTICIPANT shall mean an individual or estate who holds an
         Award.

2.26              PLAN shall mean this DEPOSITION SCIENCES, INC. 2001 Equity
         Incentive Plan.

2.27              PROMISSORY NOTE shall mean any promissory note executed by an
         Offeree or Optionee pursuant to Section 6.4.2 or Section 8.8.2, of this
         Plan, respectively.

2.28              PURCHASE PRICE shall mean the consideration for which one
         Share may be acquired under the Plan (other than upon exercise of an
         Option), as set forth in the Award.

2.29              RESTRICTED SHARE shall mean a Share sold or granted to an
         eligible Employee which is nontransferable and subject to substantial
         risk of forfeiture until restrictions lapse.

2.30              SECURITIES ACT shall mean the Securities Act of 1933, as
         amended.

2.31               SERVICE shall mean service as an Employee.

2.32              SHARE shall mean one share of Stock, as adjusted in accordance
         with Section 9 (if applicable).

2.33              STOCK shall mean the common stock of the Company.

2.34              STOCK AWARD AGREEMENT shall mean the agreement between the
         Company and the recipient of a Restricted Share which contains the
         terms, conditions and restrictions pertaining to such Restricted Share.

2.35              STOCK OPTION AGREEMENT shall mean the agreement between the
         Company and an Optionee which contains the terms, conditions and
         restrictions pertaining to his or her Option.

2.36              STOCK PURCHASE AGREEMENT shall mean the agreement between the
         Company and an Offeree who acquires Shares under the Plan which
         contains the terms, conditions and restrictions pertaining to the
         acquisition of such Shares.

2.37              SUBSIDIARY means any subsidiary corporation within the meaning
         of Code Section 424(f) with respect to ADLT, other than the Company. A
         corporation that attains the status of an Affiliate on a date after the
         adoption of the Plan shall be considered an Affiliate commencing as of
         such date.

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2.38              TOTAL AND PERMANENT DISABILITY means that the Optionee is
         unable to engage in any substantial gainful activity by reason of any
         medically determinable physical or mental impairment.

2.39              W-2 PAYROLL means whatever mechanism or procedure that the
         Company or an Affiliate utilizes to pay any individual which results in
         the issuance of Form W-2 to the individual. "W-2 Payroll" does not
         include any mechanism or procedure which results in the issuance of any
         form other than a Form W-2 to an individual, including, but not limited
         to, any Form 1099 which may be issued to an independent contractor, an
         agency employee or a consultant. Whether a mechanism or procedure
         qualifies as a "W-2 Payroll" shall be determined in the absolute
         discretion of the Company (or Affiliate, as applicable), and the
         Company or Affiliate determination shall be conclusive and binding on
         all persons.

                                   SECTION 3
                                 ADMINISTRATION

3.1           COMMITTEE MEMBERSHIP.

           The Plan shall be administered by the Board of Directors. In the
           event the Company's Shares become publicly traded, the Board may
           appoint a Committee which, if appointed, shall be comprised solely of
           two or more Outside Directors (although Committee functions may be
           delegated to officers to the extent the awards relate to persons who
           are not subject to the reporting requirements of Section 16 of the
           Exchange Act). If no Committee has been appointed, the entire Board
           shall constitute the Committee.

3.2           COMMITTEE PROCEDURES.

           The Board of Directors shall designate one of the members of the
           Committee as chairperson. The Committee may hold meetings at such
           times and places as it shall determine. The acts of a majority of the
           Committee members present at meetings at which a quorum exists, or
           acts reduced to or approved in writing by all Committee members,
           shall be valid acts of the Committee.

3.3           COMMITTEE RESPONSIBILITIES.

           The Committee has and may exercise such power and authority as may be
           necessary or appropriate for the Committee to carry out its functions
           as described in the Plan. The Committee has authority in its
           discretion to determine eligible Employees to whom, and the time or
           times at which, Awards may be granted and the number of Shares
           subject to each Award. Subject to the express provisions of the
           respective Award agreements (which need not be identical) and to make
           all other determinations necessary or advisable for Plan
           administration, the Committee has authority to prescribe, amend, and
           rescind rules and regulations relating to the Plan. All
           interpretations, determinations,

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            and actions by the Committee will be final, conclusive, and binding
            upon all persons.

3.4           COMMITTEE LIABILITY.

           No member of the Board or the Committee will be liable for any action
           or determination made in good faith by the Committee with respect to
           the Plan or any Award made under the Plan.

3.5           FINANCIAL REPORTS.

           To the extent required by applicable law, and not less often than
           annually, the Company shall furnish to Offerees, Optionees and
           Shareholders who have received Stock under the Plan its financial
           statements including a balance sheet regarding the Company's
           financial condition and results of operations, unless such Offerees,
           Optionees or Shareholders have duties with the Company that assure
           them access to equivalent information. Such financial statements need
           not be audited.

                                   SECTION 4

                                   ELIGIBILITY

4.1           GENERAL RULE.

           Only Employees shall be eligible for designation as Participants by
           the Committee. In addition, only Common-Law Employees shall be
           eligible for the grant of ISOs.

4.2           TEN-PERCENT SHAREHOLDERS.

           An Employee who owns more than ten percent (10%) of the total
           combined voting power of all classes of outstanding stock of the
           Company or any Affiliate shall not be eligible for designation as an
           Offeree or Optionee unless (i) the Exercise Price for an ISO (and a
           NSO to the extent required by applicable law) is at least one hundred
           ten percent (110%) of the Fair Market Value of a Share on the Grant
           Date, (ii) the Purchase Price of Shares is at least one hundred
           percent (100%) of the Fair Market Value of a Share on the Grant Date,
           and (iii) in the case of an ISO, such ISO by its terms is not
           exercisable after the expiration of five years from the Grant Date.

4.3           ATTRIBUTION RULES.

           For purposes of Section 4.2 above, in determining stock ownership, an
           Employee shall be deemed to own the stock owned, directly or
           indirectly, by or for his brothers, sisters, spouse, ancestors and
           lineal descendants. Stock owned, directly or indirectly, by or for a
           corporation, partnership, estate or trust shall be deemed to be owned
           proportionately by or for its shareholders, partners or

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           beneficiaries. Stock with respect to which such Employee holds an
           Option shall not be counted.

4.4           OUTSTANDING STOCK.

           For purposes of Section 4.2 above, "outstanding stock" shall include
           all stock actually issued and outstanding immediately after the
           grant. "Outstanding Stock" shall not include shares authorized for
           issuance under outstanding Options held by the Employee or by any
           other person.

                                   SECTION 5
                              STOCK SUBJECT TO PLAN

5.1           BASIC LIMITATION.

           Shares offered under the Plan shall be authorized but unissued
           Shares, or Shares held in treasury. Subject to Sections 5.2 and 9 of
           the Plan, the aggregate number of Shares which may be issued or
           transferred pursuant to an Award under the Plan shall not exceed
           10,000,000 Shares plus 18% of the number of Shares which are issued
           by the Company after the effective date of the Plan (other than the
           Shares issued pursuant to the Plan), which number shall not exceed
           16,200,000 Shares (also subject to Sections 5.2 and 9 of the Plan).
           Any or all Shares reserved under the Plan may be issued pursuant to
           an ISO.

           In any event the number of Shares which are subject to Awards or
           other rights outstanding at any time under the Plan shall not exceed
           the number of Shares which then remain available for issuance under
           the Plan. The Company, during the term of the Plan, shall at all
           times reserve and keep available sufficient Shares to satisfy the
           requirements of the Plan. No individual shall receive an Award or
           Awards to acquire more than 25% of the Shares initially "reserved for
           issuance" under the Plan in any twelve-month period.

5.2           ADDITIONAL SHARES.

           In the event that any outstanding Option or other right for any
           reason expires or is canceled or otherwise terminated, the Shares
           allocable to the unexercised portion of such Option or other right
           shall again be available for the purposes of the Plan. If a
           Restricted Share is forfeited before any dividends have been paid
           with respect to such Restricted Share, then such Restricted Share
           shall again become available for award under the Plan.

                                   SECTION 6
                     TERMS AND CONDITIONS OF AWARDS OR SALES

6.1           STOCK PURCHASE AGREEMENT.

           Each award or sale of Shares under the Plan (other than upon exercise
           of an Option) shall be evidenced by a Stock Purchase Agreement
           between the Offeree

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           and the Company. Such award or sale shall be subject to all
           applicable terms and conditions of the Plan and may be subject to
           any other terms and conditions which are not inconsistent with the
           Plan and which the Committee deems appropriate for inclusion in a
           Stock Purchase Agreement. The provisions of the various Stock
           Purchase Agreements entered into under the Plan need not be
           identical.

6.2           DURATION OF OFFERS.

           Any right to acquire Shares under the Plan (other than an Option)
           shall automatically expire if not exercised by the Offeree within 30
           days after the grant of such right was communicated to the Offeree by
           the Committee.

6.3           PURCHASE PRICE.

           6.3.1            MINIMUM PURCHASE PRICE.

                         The Purchase Price and Exercise Price of Shares to be
                         offered under the Plan shall not be less than
                         eighty-five percent (85%) of the Fair Market Value on
                         the Grant Date (100% for 10% shareholders as provided
                         in Section 4.2). Until such time as there has been a
                         Major Event, the Purchase Price and Exercise Price of
                         Shares to be offered under the Plan shall be the Fair
                         Market Value on the Grant Date.

           6.3.2            PURCHASE PRICE AND PAYMENT.

                         Subject to Subsection 6.3.1, the Purchase Price shall
                         be determined by the Committee in its sole discretion.
                         The Purchase Price shall be payable in a form described
                         in Subsection 6.4 below. Notwithstanding the preceding
                         sentences of this Section 6.3, in the event the Company
                         awards Shares in the form of compensation to Employees,
                         then the Purchase Price (if applicable) shall be
                         determined by the Committee.

6.4           PAYMENT FOR SHARES.

           The entire Purchase Price of Shares issued under the Plan shall be
           payable in lawful money of the United States of America at the time
           when such Shares are purchased, except as provided below.
           Notwithstanding any other provision of the Plan, Shares may, in the
           discretion of the Committee, be awarded under the Plan in
           consideration of Services rendered to the Company or an Affiliate
           prior to the Award. Permissible forms of payment, in addition to
           cash, are:

           6.4.1            SURRENDER OF STOCK.

                         To the extent that a Stock Purchase Agreement so
                         provides, payment may be made all or in part with
                         Shares which have already been owned by the Offeree or
                         the Offeree's representative for more than

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                         six (6) months after the later to occur of (a) purchase
                         of the Shares or (b) vesting of the Shares in the event
                         of purchase prior to vesting, and which are surrendered
                         to the Company in good form for transfer. Such Shares
                         shall be valued at Fair Market Value (unless stated
                         otherwise in the Stock Option Agreement) on the date
                         the new Shares are purchased under the Plan.

           6.4.2            PROMISSORY NOTES.

                         To the extent that a Stock Purchase Agreement so
                         provides, payment may be made all or in part with a
                         full recourse promissory note executed by the Offeree,
                         which note shall bear a market rate of interest. The
                         terms and conditions of such note shall be determined
                         by the Committee. The Committee may require that the
                         Offeree pledge the Offeree's Shares to the Company for
                         the purpose of securing the payment of such note. In no
                         event shall the stock certificate(s) representing such
                         Shares be released to the Offeree until such note is
                         paid in full.

           6.4.3            CASHLESS EXERCISE.

                         To the extent that a Stock Purchase Agreement so
                         provides and a public market for the Shares exists,
                         payment may be made all or in part by delivery (on a
                         form prescribed by the Committee) of an irrevocable
                         direction to a securities broker to sell Shares and to
                         deliver all or part of the sale proceeds to the Company
                         in payment of the aggregate Exercise Price.

6.5           EXERCISE OF AWARDS ON TERMINATION OF SERVICE.

           Each Stock Award Agreement shall set forth the extent to which the
           recipient shall have the right to exercise the Award following
           termination of the recipient's Service with the Company and its
           Affiliates. Such provisions shall be determined in the sole
           discretion of the Committee, need not be uniform among all the Awards
           issued pursuant to the Plan, and may reflect distinctions based on
           the reasons for termination of employment.

                                   SECTION 7
              ADDITIONAL TERMS AND CONDITIONS OF RESTRICTED SHARES

7.1           FORM AND AMOUNT OF AWARD.

           Each Stock Award Agreement shall specify the number of Shares that
           are subject to the Award.

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7.2           VESTING.

           Each Stock Award Agreement shall specify the conditions upon which
           Restricted Shares shall become vested, in full or in installments.
           Except for officers, directors and consultants of the Company and its
           Affiliates, Restricted Shares shall vest (within the meaning of
           Section 83 of the Code) no less rapidly than the rate of 20% per year
           for each of the first five years from the Grant Date. Subject to the
           preceding sentence, the vesting of Restricted Shares shall be
           determined by the Committee in its sole discretion.

7.3           EFFECT OF CHANGE IN CONTROL.

           The Committee may determine at the time of making an Award or
           thereafter, that such Award shall become fully vested, in whole or in
           part, in the event that a Change in Control occurs with respect to
           the Company or ADLT.

7.4           VOTING AND DIVIDEND RIGHTS.

           Holders of Restricted Shares shall have the same voting, dividend and
           other rights as the Company's other stockholders.

                                   SECTION 8
                         TERMS AND CONDITIONS OF OPTIONS

8.1           STOCK OPTION AGREEMENT.

           Each grant of an Option under the Plan shall be evidenced by a Stock
           Option Agreement between the Optionee and the Company. Such Option
           shall be subject to all applicable terms and conditions of the Plan
           and may be subject to any other terms and conditions which are not
           inconsistent with the Plan and which the Committee deems appropriate
           for inclusion in a Stock Option Agreement. The provisions of the
           various Stock Option Agreements entered into under the Plan need not
           be identical.

8.2           NUMBER OF SHARES.

           Each Stock Option Agreement shall specify the number of Shares that
           are subject to the Option and shall provide for the adjustment of
           such number in accordance with Section 9. The Stock Option Agreement
           shall also specify whether the Option is an ISO or a Nonstatutory
           Option.

8.3           EXERCISE PRICE.

           Each Stock Option Agreement shall specify the Exercise Price. Subject
           to Section 6.3.1 regarding minimum Purchase Price, the Exercise Price
           under any Option shall be determined by the Committee in its sole
           discretion. The Exercise Price shall be payable in a form described
           in Subsection 8.8 below.

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8.4           VESTING AND EXERCISABILITY.

           Each Stock Option Agreement shall specify the date when all or any
           installment of the Option is to become exercisable (which date may be
           in advance of scheduled vesting of the Option Shares). Except for
           officers, directors and consultants of the Company and its
           Affiliates, an Option shall become exercisable no less rapidly than
           the rate of 20% per year for each of the first five years from the
           Grant Date. Subject to the preceding sentence, the exercisability of
           any Option shall be determined by the Committee in its sole
           discretion.

8.5           EFFECT OF CHANGE IN CONTROL.

           The Committee may determine, at the time of granting an Option or
           thereafter, that such Option shall become fully exercisable as to all
           Shares subject to such Option in the event that a Change in Control
           occurs with respect to the Company or ADLT.

8.6           TERM.

           The Stock Option Agreement shall specify the term of the Option. The
           term shall not exceed ten years from the Grant Date (or five (5)
           years for ten percent (10%) shareholders as provided in Section 4.2).
           Subject to the preceding sentence, the Committee at its sole
           discretion shall determine when an Option is to expire.

8.7           EXERCISE OF OPTIONS ON TERMINATION OF SERVICE.

           Each Option shall set forth the extent to which the Optionee shall
           have the right to exercise the Option following termination of the
           Optionee's Service with the Company and its Affiliates. Such
           provisions shall be determined in the sole discretion of the
           Committee, need not be uniform among all Options issued pursuant to
           the Plan, and may reflect distinctions based on the reasons for
           termination of employment. Notwithstanding the foregoing, to the
           extent required by applicable law, each Option shall provide that the
           Optionee shall have the right to exercise the vested portion of any
           Option held at termination for at least 60 days following termination
           of Service with the Company for any reason, and that the Optionee
           shall have the right to exercise the Option for at least six months
           if the Optionee's Service terminates due to death or Total and
           Permanent Disability. In the event the Option is an ISO, then the
           Option must be exercised within the time periods specified in Section
           422(b) of the Code in order to maintain its status as an ISO.

8.8           PAYMENT OF OPTION SHARES.

           The entire Exercise Price of Option Shares issued under the Plan
           shall be payable in lawful money of the United States of America at
           the time when such Shares are purchased, except as provided below:

                                       11
<PAGE>   15

           8.8.1            SURRENDER OF STOCK.

                         To the extent that a Stock Option Agreement so
                         provides, payment may be made all or in part with
                         Shares which have already been owned by the Optionee or
                         the Optionee's representative for more than six (6)
                         months after the later to occur of (a) purchase of the
                         Shares, or (b) vesting of the Shares in the event of
                         purchase prior to vesting, and which are surrendered to
                         the Company in good form for transfer. Such Shares
                         shall be valued at Fair Market Value (unless stated
                         otherwise in the Option Agreement) on the date the new
                         Shares are purchased under the Plan.

           8.8.2            PROMISSORY NOTES.

                         To the extent that a Stock Option Agreement so
                         provides, payment may be made all or in part with a
                         full recourse promissory note executed by the Optionee,
                         which note shall bear a market rate of interest. The
                         terms and conditions of such note shall be determined
                         by the Committee. The Committee may require that the
                         Optionee pledge the Optionee's Shares to the Company
                         for the purpose of securing the payment of such note.
                         In no event shall the stock certificate(s) representing
                         such Shares be released to the Optionee until such note
                         is paid in full.

           8.8.3            CASHLESS EXERCISE.

                         To the extent that a Stock Option Agreement so provides
                         and a public market for the Shares exists, payment may
                         be made all or in part by delivery (on a form
                         prescribed by the Committee) of an irrevocable
                         direction to a securities broker to sell Shares and to
                         deliver all or part of the sale proceeds to the Company
                         in payment of the aggregate Exercise Price.

8.9           NO RIGHTS AS A SHAREHOLDER.

           An Optionee, or a transferee of an Optionee, shall have no rights as
           a shareholder with respect to any Shares covered by an Option until
           the date of the issuance of a stock certificate for such Shares.

8.10          MODIFICATION, EXTENSION AND ASSUMPTION OF OPTIONS.

           Within the limitations of the Plan, the Committee may modify, extend
           or assume outstanding Options or may accept the cancellation of
           outstanding Options (whether granted by the Company or another
           issuer) in return for the grant of new Options for the same or a
           different number of Shares and at the same or a different Exercise
           Price or for other consideration.

                                       12
<PAGE>   16

                                   SECTION 9
                              ADJUSTMENT OF SHARES

9.1           GENERAL.

           In the event of a subdivision of the outstanding Stock, a declaration
           of a dividend payable in Shares, a combination or consolidation of
           the outstanding Stock into a lesser number of Shares, a
           recapitalization, a reclassification or a similar occurrence, the
           Committee shall make appropriate adjustments in one or more of (i)
           the number of Shares available for future Awards under Section 5,
           (ii) the number of Shares covered by each outstanding Award or (iii)
           the Exercise Price or Purchase Price under each outstanding Award.

9.2           REORGANIZATIONS.

           In the event that the Company is a party to a merger or
           reorganization, outstanding Options shall be subject to the agreement
           of merger or reorganization.

9.3           RESERVATION OF RIGHTS.

           Except as provided in this Section 9, an Optionee or an Offeree shall
           have no rights by reason of (i) any subdivision or consolidation of
           shares of stock of any class, (ii) the payment of any dividend or
           (iii) any other increase or decrease in the number of shares of stock
           of any class. Any issue by the Company of shares of stock of any
           class, or securities convertible into shares of stock of any class,
           shall not affect, and no adjustment by reason thereof shall be made
           with respect to, the number, Exercise Price or Purchase Agreement of
           Shares subject to an Option or Stock Purchase Agreement. The grant of
           an Award pursuant to the Plan shall not affect in any way the right
           or power of the Company to make adjustments, reclassifications,
           reorganizations or changes of its capital or business structure, to
           merge or consolidate or to dissolve, liquidate, sell or transfer all
           or any part of its business or assets.

                                   SECTION 10
                                WITHHOLDING TAXES

10.1          GENERAL.

           To the extent required by applicable federal, state, local or foreign
           law, a Participant or his or her successor shall make arrangements
           satisfactory to the Committee for the satisfaction of any withholding
           tax obligations that arise in connection with the Plan. The Company
           shall not be required to issue any Shares or make any cash payment
           under the Plan until such obligations are satisfied.

                                       13
<PAGE>   17

10.2          SHARE WITHHOLDING.

           The Committee may permit a Participant to satisfy all or part of the
           Company's minimum statutory withholding tax obligations related to an
           Award by having the Company withhold all or a portion of any Shares
           that otherwise would be issued to the Participant. The Participant
           also may surrender all or a portion of any Shares that the
           Participant previously acquired and which have been held for more
           than six (6) months after the later to occur of (a) purchase of the
           Shares, or (b) the vesting of the Shares in the event of purchase
           prior to vesting. Such Shares shall be valued at their Fair Market
           Value on the date when taxes otherwise would be withheld in cash. Any
           payment of taxes by assigning Shares to the Company may be subject to
           restrictions, including any restrictions required by rules of any
           federal or state regulatory body or other authority.

10.3          CASHLESS EXERCISE/PLEDGE.

           The Committee may provide that if Company Shares are publicly traded
           at the time of exercise, arrangements may be made to meet the
           Optionee's withholding obligation by cashless exercise or pledge as
           provided in Section 8.8.3.

10.4          OTHER FORMS OF PAYMENT.

           The Committee may permit such other means of tax withholding as it
           deems appropriate.

                                   SECTION 11
             ASSIGNMENT OR TRANSFER OF AWARDS; REPURCHASE OF SHARES

11.1          GENERAL.

           An Award granted under the Plan shall not be anticipated, assigned,
           attached, garnished, optioned, transferred or made subject to any
           creditor's process, whether voluntarily, involuntarily or by
           operation of law, except as approved by the Committee.
           Notwithstanding the foregoing, ISOs may not be transferable. Offerees
           and Optionees may not transfer their rights hereunder except by will,
           beneficiary designation or the laws of descent and distribution.

11.2          TRUSTS.

           Neither this Section 11 nor any other provision of the Plan shall
           preclude a Participant from transferring or assigning Restricted
           Shares to (a) the trustee of a trust that is revocable by such
           Participant alone, both at the time of the transfer or assignment and
           at all times thereafter prior to such Participant's death, or (b) the
           trustee of any other trust to the extent approved by the Committee in
           writing. A transfer or assignment of Restricted Shares from such
           trustee to any other person than such Participant shall be permitted
           only to the extent approved in advance by the Committee in writing,
           and Restricted Shares held by such trustee

                                       14
<PAGE>   18

            shall be subject to all the conditions and restrictions set forth in
            the Plan and in the applicable Stock Award Agreement, as if such
            trustee were a party to such Agreement.

11.3          THIRD PARTY TRANSFER RESTRICTIONS.

           In the event a Participant proposes to sell, pledge or otherwise
           transfer to a third party any Shares acquired under the Plan or any
           interest in such Shares at any time prior to the occurrence of a
           Major Event, the Participant must give a written "Transfer Notice" to
           the Company describing fully the proposed transfer. Upon receipt of
           the Transfer Notice, the Company and its assignees may purchase all,
           and not less than all, of the Shares on the terms described in the
           Transfer Notice. If the Company repurchase would occur before the
           Participant has held the Shares six months, the repurchase shall be
           made from the third party transferee six months and one day after the
           purchase of the Shares by the Participant and for the then current
           Fair Market Value. The Company's rights under this Subsection shall
           be freely assignable, in whole or in part. Upon the occurrence of a
           Major Event, the transfer restrictions set forth in this Section 11.3
           shall not apply. In the event of an Initial Public Offering, so long
           as the Shares are publicly traded, the transfer restrictions set
           forth in this Section 11.3 shall not apply.

11.4          REPURCHASE OF VESTED SHARES UPON TERMINATION OF SERVICE.

           11.4.1           PRIOR TO A MAJOR EVENT. Following a Participant's
                            termination of Service for any reason, and before a
                            Major Event, the Company shall purchase all of those
                            vested Shares that the Participant has or will
                            acquire under an Award. Shares which have been
                            purchased prior to vesting will be repurchased at
                            the original purchase price thereof as set forth in
                            Exhibit B. The Company will consummate the purchase
                            of such Shares within 60 days of the Participant's
                            termination of Service or, if later, within 60 days
                            after the expiration of any applicable period during
                            which the Participant may purchase shares. The
                            purchase price for any vested Shares repurchased
                            prior to the occurrence of a Major Event shall be
                            the then current Fair Market Value and shall be paid
                            in cash. If the Company repurchase would occur
                            before the Participant has held the Shares six
                            months, the repurchase shall occur six months and
                            one day after the purchase of the Shares by the
                            Participant and for the then current Fair Market
                            Value.

           11.4.2           AFTER A MAJOR EVENT. The Company shall not have any
                            obligation to purchase vested Shares following a
                            Participant's termination of Service for any reason
                            after the occurrence of a Major Event.

                                       15
<PAGE>   19

                                   SECTION 12
                               LEGAL REQUIREMENTS

Shares shall not be issued under the Plan unless the issuance and delivery of
such Shares complies with (or is exempt from) all applicable requirements of
law, including (without limitation) the Securities Act, the rules and
regulations promulgated thereunder, state securities laws and regulations, and
the regulations of any stock exchange on which the Company's securities may then
be listed. If necessary to comply with Section 16 of the Exchange Act and its
rules only ("Section 16"), any equity security issued pursuant to the Plan may
not be sold for at least six (6) months after acquisition and any derivative
security issued pursuant to the Plan will not be exercisable for six (6) months
from its Grant Date. Terms used in the preceding sentence shall, for purposes of
such sentence only, have the meanings, if any, assigned or attributed to them
under Section 16.

                                   SECTION 13
                              NO EMPLOYMENT RIGHTS

No provision of the Plan, nor any right or Option granted under the Plan, shall
be construed to give any person any right to become, to be treated as, or to
remain an Employee. The Company and its Affiliates reserve the right to
terminate any person's Service at any time, with or without cause.

                                   SECTION 14
                             DURATION AND AMENDMENTS

14.1          TERM OF THE PLAN.

           The Plan, as set forth herein, shall become effective on the date of
           its adoption by the Board of Directors, subject to the approval of
           the Company's shareholders. In the event that the shareholders fail
           to approve the Plan within twelve (12) months after its adoption by
           the Board of Directors, any grants already made shall be null and
           void, and no additional grants shall be made after such date. The
           Plan shall terminate automatically ten (10) years after its adoption
           by the Board of Directors and may be terminated on any earlier date
           pursuant to Subsection 14.2 below.

14.2          RIGHT TO AMEND OR TERMINATE THE PLAN.

           The Board of Directors may amend the Plan at any time and from time
           to time. Rights and obligations under any right or Option granted
           before amendment of the Plan shall not be materially altered, or
           impaired adversely, by such amendment, except with consent of the
           person to whom the right or Option was granted. An amendment of the
           Plan shall be subject to the approval of the Company's shareholders
           only to the extent required by applicable laws, regulations or rules
           including the rules of any applicable exchange.

                                       16
<PAGE>   20

14.3            EFFECT OF AMENDMENT OR TERMINATION.

           No Shares shall be issued or sold under the Plan after the
           termination thereof, except upon exercise of an Option granted prior
           to such termination. The termination of the Plan, or any amendment
           thereof, shall not affect any Shares previously issued or any Option
           previously granted under the Plan.

                                       17
<PAGE>   21

                                                         [ADLT OFFICER ISO FORM]

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER
THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE
OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT
PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND
QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS IS NOT REQUIRED.

THIS OPTION SHALL BECOME EFFECTIVE ONLY IF THE OPTIONEE HAS AGREED TO THE
CANCELLATION OF THE OPTION GRANTED TO OPTIONEE UNDER THE 2001 STOCK INCENTIVE
PLAN.

                            DEPOSITION SCIENCES, INC.
                           2001 EQUITY INCENTIVE PLAN

                        INCENTIVE STOCK OPTION AGREEMENT

         DEPOSITION SCIENCES, INC. (the "Company"), hereby grants an Option to
purchase shares of its common stock ("Shares") to the Optionee named below. The
terms and conditions of the Option are set forth in this cover sheet, in the
attachment and in the Company's 2001 Equity Incentive Plan (the "Plan").

Grant Date: _____________, 200____     Vesting Start Date: ____________, 200____

Name of Optionee: ________________ Optionee's Social Security Number: __________

Number of Shares Covered by Option: ____________________________________

Exercise Price Per Share:  $____________________________________________

[ ]      Check here if Optionee is a 10% owner.

           BY SIGNING THIS COVER SHEET, YOU AGREE TO ALL OF THE TERMS AND
           CONDITIONS DESCRIBED IN THE ATTACHED NOTICE OF EXERCISE AND COMMON
           STOCK PURCHASE AGREEMENT AND IN THE PLAN, A COPY OF WHICH IS ALSO
           ATTACHED.

                   DEPOSITION SCIENCES, INC.:    -------------------------------
                                                 (Signature)

                                                 Title:
                                                       -------------------------

                   OPTIONEE:
                                                 -------------------------------
                                                 (Signature)

                                       1
<PAGE>   22

                                                         [ADLT OFFICER ISO FORM]

                            DEPOSITION SCIENCES, INC.
                           2001 EQUITY INCENTIVE PLAN

                        INCENTIVE STOCK OPTION AGREEMENT

INCENTIVE STOCK OPTION              This Option is intended to be an incentive
                                    stock option under Section 422 of the
                                    Internal Revenue Code of 1986, as amended
                                    (the "Code") and will be interpreted
                                    accordingly.

VESTING                             Your Option vests and becomes exercisable
                                    upon the earlier to occur of (a) (i) a
                                    Change in Control, (ii) the Initial Public
                                    Offering, or (iii) the sale of substantially
                                    all of the Company's assets to an unrelated
                                    person or entity (collectively, a "Major
                                    Event"); or (b) the fifth anniversary of
                                    your Vesting Start Date.

                                    No additional Shares will vest after your
                                    employment with the Company or its
                                    affiliates (including any approved leaves of
                                    absence) ("Service") has terminated for any
                                    reason.

TERM                                Your Option will expire in any event
                                    (including death or Total and Permanent
                                    Disability) at the close of business at
                                    Company headquarters on the day before the
                                    tenth anniversary (fifth anniversary for a
                                    10% owner) of the Grant Date, as shown on
                                    the cover sheet. (It will expire earlier if
                                    your Service terminates, as described
                                    below.)

REGULAR TERMINATION                 If your Service terminates for any reason
                                    except death or your Total and Permanent
                                    Disability, your Option will expire at the
                                    close of business at Company headquarters on
                                    the 90th day after your termination date
                                    (but in any event, not later than the
                                    expiration date set forth above under
                                    "Term"). During that 90-day period, you may
                                    exercise that portion of your Option that
                                    was vested on your termination date.

DEATH                               If you die while in Service with the Company
                                    or its affiliates, your Option will expire
                                    at the close of business at Company
                                    headquarters on the date six months
                                    following the date of issuance of
                                    testamentary letters or letters of
                                    administration to the executor or
                                    administrator of your estate, which date
                                    must not be later than one year after the
                                    date of death (but in any event, not later
                                    than the expiration date set forth above
                                    under "Term"). During this period, your
                                    estate may exercise that portion of your
                                    Option that was vested on the date of death.

DISABILITY                          If your Service terminates because of your
                                    Total and Permanent Disability, your Option
                                    will expire at the close of business at

                                       2
<PAGE>   23

                                                         [ADLT OFFICER ISO FORM]

                                    Company headquarters on the date twelve
                                    months after your termination date (but in
                                    any event not later than the expiration date
                                    set forth above under the "Term"). (However,
                                    if your Total and Permanent Disability is
                                    not expected to result in death or to last
                                    for a continuous period of at least 12
                                    months, your Option will be eligible for ISO
                                    tax treatment only if it is exercised within
                                    three months following the termination of
                                    your Service.) During that twelve-month
                                    period, you may exercise that portion of
                                    your Option that was vested on the date of
                                    your Total and Permanent Disability.

LEAVES OF ABSENCE                   For purposes of this Option, your Service
                                    does not terminate when you go on a bona
                                    fide leave of absence that was approved by
                                    the Company in writing, if the terms of the
                                    leave provide for continued service
                                    crediting, or when continued Service
                                    crediting is required by applicable law.
                                    However, your Service will be treated as
                                    terminating 90 days after you went on leave,
                                    unless your right to return to active work
                                    is guaranteed by law or by a contract. Your
                                    Service terminates in any event when the
                                    approved leave ends unless you immediately
                                    return to active work. The Company
                                    determines which leaves count for this
                                    purpose, and when your Service terminates
                                    for all purposes under the Plan. The Company
                                    also determines the extent to which you may
                                    exercise the vested portion of your Option
                                    during a leave of absence.

NOTICE OF EXERCISE                  When you wish to exercise this Option, you
                                    must execute the Notice of Exercise and
                                    Common Stock Purchase Agreement, attached
                                    hereto as Exhibit B. Your exercise will be
                                    effective when it is received by the
                                    Company. If someone else wants to exercise
                                    this Option after your death, that person
                                    must prove to the Company's satisfaction
                                    that he or she is entitled to do so.

FORM OF PAYMENT                     When you submit Exhibit B, you must include
                                    payment of the Exercise Price for the Shares
                                    you are purchasing. Payment may be made in
                                    one (or a combination) of the following
                                    forms:

                                    -   Your personal check, a cashier's check
                                        or a money order.

                                    -   Shares which you have owned for more
                                        than six months after the later to occur
                                        of (a) the purchase of the Shares or (b)
                                        vesting of the Shares in the event of
                                        purchase prior to vesting, and which are
                                        surrendered to the Company. The value of
                                        the Shares, determined as of the
                                        effective date of the Option exercise,
                                        will be applied to the Exercise Price.

                                    -   To the extent that a public market for
                                        the Shares exists as determined by the
                                        Company, by delivery (on a form
                                        prescribed by the Committee) of an
                                        irrevocable direction to

                                       3
<PAGE>   24

                                                         [ADLT OFFICER ISO FORM]

                                        a securities broker to sell Shares and
                                        to deliver all or part of the sale
                                        proceeds to the Company in payment of
                                        the aggregate Exercise Price.

WITHHOLDING TAXES                   You will not be allowed to exercise this
                                    Option unless you pay (or make satisfactory
                                    arrangements for) any withholding taxes due
                                    as a result of the Option exercise or the
                                    sale of Shares acquired upon exercise of
                                    this Option.

RESTRICTIONS ON EXERCISE AND RESALE

                                    By signing this Agreement, you agree not to
                                    exercise this Option or sell any Shares
                                    acquired upon exercise of this Option at a
                                    time when applicable laws, regulations or
                                    Company or underwriter trading policies
                                    prohibit exercise or sale. In particular,
                                    the Company shall have the right to
                                    designate one or more periods of time, each
                                    of which shall not exceed 180 days in
                                    length, during which this Option shall not
                                    be exercisable if the Company determines (in
                                    its sole discretion) that such limitation on
                                    exercise could in any way facilitate a
                                    lessening of any restriction on transfer
                                    pursuant to the Securities Act or any state
                                    securities laws with respect to any issuance
                                    of securities by the Company, facilitate the
                                    registration or qualification of any
                                    securities by the Company under the
                                    Securities Act or any state securities laws,
                                    or facilitate the perfection of any
                                    exemption from the registration or
                                    qualification requirements of the Securities
                                    Act or any applicable state securities laws
                                    for the issuance or transfer of any
                                    securities. Such limitation on exercise
                                    shall not alter the vesting schedule set
                                    forth in this Agreement other than to limit
                                    the periods during which this Option shall
                                    be exercisable.

                                    If the sale of Shares under the Plan is not
                                    registered under the Securities Act of 1933,
                                    as amended (the "Securities Act"), but an
                                    exemption is available which requires an
                                    investment or other representation, you
                                    shall represent and agree at the time of
                                    exercise that the Shares being acquired upon
                                    exercise of this Option are being acquired
                                    for investment, and not with a view to the
                                    sale or distribution thereof, and shall make
                                    such other representations as are deemed
                                    necessary or appropriate by the Company and
                                    its counsel.

THIRD PARTY TRANSFER RESTRICTIONS

                                    In the event that you receive a bona fide
                                    offer to sell, pledge or otherwise transfer
                                    to a third party any Shares acquired under
                                    the Plan or any interest in such Shares at
                                    any time prior to the occurrence of a Major
                                    Event, you must give a written "Transfer
                                    Notice" to the Company describing fully the
                                    proposed transfer.

                                       4
<PAGE>   25

                                                         [ADLT OFFICER ISO FORM]

                                    Upon receipt of the Transfer Notice, the
                                    Company and its assignees may purchase all,
                                    and not less than all, of the Shares on the
                                    terms described in the Transfer Notice. If
                                    the Company repurchase would occur before
                                    you have held the Shares six months, the
                                    repurchase shall be made from the third
                                    party transferee six months and one day
                                    after the purchase of the Shares by you and
                                    for the then current Fair Market Value. The
                                    Company's rights under this paragraph shall
                                    be freely assignable, in whole or in part.
                                    Upon the occurrence of a Major Event, this
                                    transfer restriction shall not apply.

REPURCHASE OF VESTED SHARES UPON TERMINATION OF SERVICE

                                    Following your termination of Service for
                                    any reason, the Company shall purchase all
                                    of those vested Shares that you have or will
                                    acquire under the Option (Shares which have
                                    been purchased prior to vesting (if any)
                                    will be repurchased at the original purchase
                                    price thereof as set forth in Exhibit B).
                                    The Company will consummate the purchase of
                                    such Shares within 60 days of your
                                    termination of Service or, if later, within
                                    60 days after the expiration of any
                                    applicable period during which you may
                                    purchase Shares. The purchase price for any
                                    Shares repurchased prior to the occurrence
                                    of a Major Event shall be the then current
                                    Fair Market Value and shall be paid in cash.
                                    If the Company repurchase would occur before
                                    you have held the Shares six months, the
                                    repurchase shall occur six months and one
                                    day after the purchase of the Shares by you
                                    and for the then current Fair Market Value.
                                    The Company shall not have any obligation to
                                    purchase vested Shares following a
                                    Participant's termination of Service for any
                                    reason after the occurrence of a Major
                                    Event.

TRANSFER OF OPTION                  Prior to your death, only you may exercise
                                    this Option. You cannot transfer or assign
                                    this Option. For instance, you may not sell
                                    this Option or use it as security for a
                                    loan. If you attempt to do any of these
                                    things, this Option will immediately become
                                    invalid. You may, however, dispose of this
                                    Option in your will.

                                    Regardless of any marital property
                                    settlement agreement, the Company is not
                                    obligated to honor a Notice of Exercise from
                                    your spouse or former spouse, nor is the
                                    Company obligated to recognize such
                                    individual's interest in your Option in any
                                    other way.

RETENTION RIGHTS                    YOU ACKNOWLEDGE AND AGREE THAT THE VESTING
                                    OF SHARES PURSUANT TO THIS OPTION IS EARNED
                                    ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT
                                    AT THE WILL OF THE COMPANY (NOT

                                       5
<PAGE>   26

                                                         [ADLT OFFICER ISO FORM]

                                    THROUGH THE ACT OF BEING HIRED, BEING
                                    GRANTED THIS OPTION OR ACQUIRING SHARES
                                    HEREUNDER). YOU FURTHER ACKNOWLEDGE AND
                                    AGREE THAT NOTHING IN THIS AGREEMENT, NOR IN
                                    THE PLAN SHALL CONFER UPON YOU ANY RIGHT
                                    WITH RESPECT TO CONTINUATION OF EMPLOYMENT
                                    OR CONSULTANCY BY THE COMPANY, NOR SHALL IT
                                    INTERFERE IN ANY WAY WITH YOUR RIGHT OR THE
                                    COMPANY'S RIGHT TO TERMINATE YOUR EMPLOYMENT
                                    OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
                                    CAUSE.

SHAREHOLDER RIGHTS                  Neither you, nor your estate or heirs, have
                                    any rights as a shareholder of the Company
                                    until a certificate for the Shares acquired
                                    upon exercise of this Option has been
                                    issued. No adjustments are made for
                                    dividends or other rights if the applicable
                                    record date occurs before your stock
                                    certificate is issued, except as described
                                    in the Plan.

ADJUSTMENTS                         In the event of a stock split, a stock
                                    dividend or a similar change in the
                                    Company's Stock, the number of Shares
                                    covered by this Option and the Exercise
                                    Price Per share may be adjusted pursuant to
                                    the Plan. Your Option shall be subject to
                                    the terms of the agreement of merger,
                                    liquidation or reorganization in the event
                                    the Company is subject to such corporate
                                    activity.

LEGENDS                             All certificates representing the Shares
                                    issued upon exercise of this Option shall,
                                    where applicable, have endorsed thereon the
                                    following legends:

                                    "THE SECURITIES REPRESENTED BY THIS
                                    CERTIFICATE ARE SUBJECT TO CERTAIN
                                    RESTRICTIONS ON TRANSFER AND REPURCHASE
                                    REQUIREMENTS AS SET FORTH IN AN AGREEMENT
                                    BETWEEN THE COMPANY AND THE REGISTERED
                                    HOLDER, OR SUCH HOLDER'S PREDECESSOR IN
                                    INTEREST. SUCH AGREEMENT IMPOSES CERTAIN
                                    TRANSFER RESTRICTIONS AND CERTAIN REPURCHASE
                                    REQUIREMENTS ON THE COMPANY (OR ITS ASSIGNS)
                                    UPON THE SALE OF THE SHARES OR UPON
                                    TERMINATION OF SERVICE WITH THE COMPANY. A
                                    COPY OF SUCH AGREEMENT IS ON FILE AT THE
                                    PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
                                    FURNISHED UPON WRITTEN REQUEST TO THE
                                    SECRETARY OF THE COMPANY BY THE HOLDER OF
                                    SHARES REPRESENTED BY THIS CERTIFICATE.

                                       6
<PAGE>   27

                                                         [ADLT OFFICER ISO FORM]

                                    THE SECURITIES REPRESENTED BY THIS
                                    CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
                                    THE SECURITIES ACT OF 1933, OR THE
                                    SECURITIES LAWS OF ANY STATE, AND MAY BE
                                    OFFERED AND SOLD ONLY IF REGISTERED AND
                                    QUALIFIED PURSUANT TO THE RELEVANT
                                    PROVISIONS OF FEDERAL AND STATE SECURITIES
                                    LAWS OR IF THE COMPANY IS PROVIDED AN
                                    OPINION OF COUNSEL, SATISFACTORY TO THE
                                    COMPANY AND ITS COUNSEL, THAT REGISTRATION
                                    AND QUALIFICATION UNDER FEDERAL AND STATE
                                    SECURITIES LAWS IS NOT REQUIRED."

APPLICABLE LAW                      This Agreement will be interpreted and
                                    enforced under the laws of the State of
                                    California (without regard to their choice
                                    of law provisions).

THE PLAN AND                        The text of the Plan is incorporated in this
OTHER AGREEMENTS                    Agreement by reference. Certain capitalized
                                    terms used in this Agreement are defined in
                                    the Plan.

                                    This Agreement, including its attachments,
                                    and the Plan constitute the entire
                                    understanding between you and the Company
                                    regarding this Option. Any prior agreements,
                                    commitments or negotiations concerning this
                                    Option are superseded.

           BY SIGNING THE COVER SHEET OF THIS AGREEMENT, YOU AGREE TO ALL OF THE
           TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN. YOU ALSO
           ACKNOWLEDGE THAT YOU HAVE READ SECTION 11, "PURCHASER'S INVESTMENT
           REPRESENTATIONS" OF THE ATTACHED EXHIBIT B AND THAT YOU CAN AND
           HEREBY DO MAKE THE SAME REPRESENTATIONS WITH RESPECT TO THE GRANT OF
           THIS OPTION.

                                       7
<PAGE>   28

                                                         [ADLT OFFICER NSO FORM]

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER
THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE
OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT
PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND
QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS IS NOT REQUIRED.

THIS OPTION SHALL BECOME EFFECTIVE ONLY IF THE OPTIONEE HAS AGREED TO THE
CANCELLATION OF THE OPTION GRANTED TO OPTIONEE UNDER THE 2001 STOCK INCENTIVE
PLAN.

                            DEPOSITION SCIENCES, INC.
                           2001 EQUITY INCENTIVE PLAN

                       NONSTATUTORY STOCK OPTION AGREEMENT

         DEPOSITION SCIENCES, INC. (the "Company"), hereby grants an Option to
purchase shares of its common stock ("Shares") to the Optionee named below. The
terms and conditions of the Option are set forth in this cover sheet, in the
attachment and in the Company's 2001 Equity Incentive Plan (the "Plan").

Grant Date: _____________, 200____     Vesting Start Date: ____________, 200____

Name of Optionee: ________________ Optionee's Social Security Number: __________

Number of Shares Covered by Option: _______________________________

Exercise Price Per Share:  $_______________________________________

[ ]      Check here if Optionee is a 10% owner.

           BY SIGNING THIS COVER SHEET, YOU AGREE TO ALL OF THE TERMS AND
           CONDITIONS DESCRIBED IN THE ATTACHED NOTICE OF EXERCISE AND COMMON
           STOCK PURCHASE AGREEMENT AND IN THE PLAN, A COPY OF WHICH IS ALSO
           ATTACHED.

                DEPOSITION SCIENCES, INC.: ----------------------------------
                                           (Signature)

                                           ----------------------------------
                                           Title:

                OPTIONEE:
                                           ----------------------------------
                                           (Signature)

                                       1
<PAGE>   29

                                                         [ADLT OFFICER NSO FORM]

                            DEPOSITION SCIENCES, INC.
                           2001 EQUITY INCENTIVE PLAN

                       NONSTATUTORY STOCK OPTION AGREEMENT

NONSTATUTORY STOCK OPTION           This Option is not intended to be an
                                    incentive stock option under Section 422 of
                                    the Internal Revenue Code of 1986, as
                                    amended (the "Code") and will be interpreted
                                    accordingly.

VESTING                             Your Option vests and becomes exercisable
                                    upon the earlier to occur of (a) (i) a
                                    Change in Control, (ii) the Initial Public
                                    Offering, or (iii) the sale of substantially
                                    all of the Company's assets to an unrelated
                                    person or entity (collectively, a "Major
                                    Event"); or (b) the fifth anniversary of
                                    your Vesting Start Date.

                                    No additional Shares will vest after your
                                    employment with the Company or its
                                    affiliates (including any approved leaves of
                                    absence) ("Service") has terminated for any
                                    reason.

TERM                                Your Option will expire in any event
                                    (including death or Total and Permanent
                                    Disability) at the close of business at
                                    Company headquarters on the day before the
                                    tenth anniversary (fifth anniversary for a
                                    10% owner) of the Grant Date, as shown on
                                    the cover sheet. (It will expire earlier if
                                    your Service terminates, as described
                                    below.)

REGULAR TERMINATION                 If your Service terminates for any reason
                                    except death or your Total and Permanent
                                    Disability, your Option will expire at the
                                    close of business at Company headquarters on
                                    the 90th day after your termination date
                                    (but in any event, not later than the
                                    expiration date set forth above under
                                    "Term"). During that 90-day period, you may
                                    exercise that portion of your Option that
                                    was vested on your termination date.

DEATH                               If you die while in Service with the Company
                                    or its affiliates, your Option will expire
                                    at the close of business at Company
                                    headquarters on the date six months
                                    following the date of issuance of
                                    testamentary letters or letters of
                                    administration to the executor or
                                    administrator of your estate, which date
                                    must not be later than one year after the
                                    date of death (but in any event, not later
                                    than the expiration date set forth above
                                    under "Term"). During this period, your
                                    estate may exercise that portion of your
                                    Option that was vested on the date of death.

DISABILITY                          If your Service terminates because of your
                                    Total and Permanent Disability, your Option
                                    will expire at the close of business at

                                       2
<PAGE>   30

                                                         [ADLT OFFICER NSO FORM]

                                    Company headquarters on the date twelve
                                    months after your termination date (but in
                                    any event not later than the expiration date
                                    set forth above under the "Term"). During
                                    that twelve-month period, you may exercise
                                    that portion of your Option that was vested
                                    on the date of your Total and Permanent
                                    Disability.

LEAVES OF ABSENCE                   For purposes of this Option, your Service
                                    does not terminate when you go on a bona
                                    fide leave of absence that was approved by
                                    the Company in writing, if the terms of the
                                    leave provide for continued service
                                    crediting, or when continued Service
                                    crediting is required by applicable law.
                                    However, your Service will be treated as
                                    terminating 90 days after you went on leave,
                                    unless your right to return to active work
                                    is guaranteed by law or by a contract. Your
                                    Service terminates in any event when the
                                    approved leave ends unless you immediately
                                    return to active work. The Company
                                    determines which leaves count for this
                                    purpose, and when your Service terminates
                                    for all purposes under the Plan. The Company
                                    also determines the extent to which you may
                                    exercise the vested portion of your Option
                                    during a leave of absence.

NOTICE OF EXERCISE                  When you wish to exercise this Option, you
                                    must execute the Notice of Exercise and
                                    Common Stock Purchase Agreement, attached
                                    hereto as Exhibit B. Your exercise will be
                                    effective when it is received by the
                                    Company. If someone else wants to exercise
                                    this Option after your death, that person
                                    must prove to the Company's satisfaction
                                    that he or she is entitled to do so.

FORM OF PAYMENT                     When you submit Exhibit B, you must include
                                    payment of the Exercise Price for the Shares
                                    you are purchasing. Payment may be made in
                                    one (or a combination) of the following
                                    forms:

                                    -   Your personal check, a cashier's check
                                        or a money order.

                                    -   Shares which you have owned for more
                                        than six months after the later to occur
                                        of (a) the purchase of the Shares or (b)
                                        vesting of the Shares in the event of
                                        purchase prior to vesting, and which are
                                        surrendered to the Company. The value of
                                        the Shares, determined as of the
                                        effective date of the Option exercise,
                                        will be applied to the Exercise Price.

                                    -   To the extent that a public market for
                                        the Shares exists as determined by the
                                        Company, by delivery (on a form
                                        prescribed by the Committee) of an
                                        irrevocable direction to a securities
                                        broker to sell Shares and to deliver all
                                        or part of the sale proceeds to the
                                        Company in payment of the aggregate
                                        Exercise Price.

                                       3
<PAGE>   31

                                                         [ADLT OFFICER NSO FORM]

WITHHOLDING TAXES                   You will not be allowed to exercise this
                                    Option unless you pay (or make satisfactory
                                    arrangements for) any withholding taxes due
                                    as a result of the Option exercise or the
                                    sale of Shares acquired upon exercise of
                                    this Option.

RESTRICTIONS ON EXERCISE AND RESALE

                                    By signing this Agreement, you agree not to
                                    exercise this Option or sell any Shares
                                    acquired upon exercise of this Option at a
                                    time when applicable laws, regulations or
                                    Company or underwriter trading policies
                                    prohibit exercise or sale. In particular,
                                    the Company shall have the right to
                                    designate one or more periods of time, each
                                    of which shall not exceed 180 days in
                                    length, during which this Option shall not
                                    be exercisable if the Company determines (in
                                    its sole discretion) that such limitation on
                                    exercise could in any way facilitate a
                                    lessening of any restriction on transfer
                                    pursuant to the Securities Act or any state
                                    securities laws with respect to any issuance
                                    of securities by the Company, facilitate the
                                    registration or qualification of any
                                    securities by the Company under the
                                    Securities Act or any state securities laws,
                                    or facilitate the perfection of any
                                    exemption from the registration or
                                    qualification requirements of the Securities
                                    Act or any applicable state securities laws
                                    for the issuance or transfer of any
                                    securities. Such limitation on exercise
                                    shall not alter the vesting schedule set
                                    forth in this Agreement other than to limit
                                    the periods during which this Option shall
                                    be exercisable.

                                    If the sale of Shares under the Plan is not
                                    registered under the Securities Act of 1933,
                                    as amended (the "Securities Act"), but an
                                    exemption is available which requires an
                                    investment or other representation, you
                                    shall represent and agree at the time of
                                    exercise that the Shares being acquired upon
                                    exercise of this Option are being acquired
                                    for investment, and not with a view to the
                                    sale or distribution thereof, and shall make
                                    such other representations as are deemed
                                    necessary or appropriate by the Company and
                                    its counsel.

THIRD PARTY TRANSFER RESTRICTIONS

                                    In the event that you receive a bona fide
                                    offer to sell, pledge or otherwise transfer
                                    to a third party any Shares acquired under
                                    the Plan or any interest in such Shares at
                                    any time prior to the occurrence of a Major
                                    Event, you must give a written "Transfer
                                    Notice" to the Company describing fully the
                                    proposed transfer. Upon receipt of the
                                    Transfer Notice, the Company and its
                                    assignees may purchase all, and not less
                                    than all, of the Shares on the terms
                                    described in the Transfer Notice. If the
                                    Company repurchase would occur before you
                                    have held the Shares six

                                       4
<PAGE>   32

                                                         [ADLT OFFICER NSO FORM]

                                    months, the repurchase shall be made from
                                    the third party transferee six months and
                                    one day after the purchase of the Shares by
                                    you and for the then current Fair Market
                                    Value. The Company's rights under this
                                    paragraph shall be freely assignable, in
                                    whole or in part. Upon the occurrence of a
                                    Major Event, this transfer restriction shall
                                    not apply.

REPURCHASE OF VESTED SHARES UPON TERMINATION OF SERVICE

                                    Following your termination of Service for
                                    any reason, the Company shall purchase all
                                    of those vested Shares that you have or will
                                    acquire under the Option (Shares which have
                                    been purchased prior to vesting (if any)
                                    will be repurchased at the original purchase
                                    price thereof as set forth in Exhibit B).
                                    The Company will consummate the purchase of
                                    such Shares within 60 days of your
                                    termination of Service or, if later, within
                                    60 days after the expiration of any
                                    applicable period during which you may
                                    purchase Shares. The purchase price for any
                                    Shares repurchased prior to the occurrence
                                    of a Major Event shall be the then current
                                    Fair Market Value and shall be paid in cash.
                                    If the Company repurchase would occur before
                                    you have held the Shares six months, the
                                    repurchase shall occur six months and one
                                    day after the purchase of the Shares by you
                                    and for the then current Fair Market Value.
                                    The Company shall not have any obligation to
                                    purchase vested Shares following a
                                    Participant's termination of Service for any
                                    reason after the occurrence of a Major
                                    Event.

TRANSFER OF OPTION                  Prior to your death, only you may exercise
                                    this Option. You cannot transfer or assign
                                    this Option. For instance, you may not sell
                                    this Option or use it as security for a
                                    loan. If you attempt to do any of these
                                    things, this Option will immediately become
                                    invalid. You may, however, dispose of this
                                    Option in your will.

                                    Regardless of any marital property
                                    settlement agreement, the Company is not
                                    obligated to honor a Notice of Exercise from
                                    your spouse or former spouse, nor is the
                                    Company obligated to recognize such
                                    individual's interest in your Option in any
                                    other way.

RETENTION RIGHTS                    YOU ACKNOWLEDGE AND AGREE THAT THE VESTING
                                    OF SHARES PURSUANT TO THIS OPTION IS EARNED
                                    ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT
                                    AT THE WILL OF THE COMPANY (NOT THROUGH THE
                                    ACT OF BEING HIRED, BEING GRANTED THIS
                                    OPTION OR ACQUIRING SHARES HEREUNDER). YOU
                                    FURTHER ACKNOWLEDGE AND AGREE THAT NOTHING
                                    IN THIS AGREEMENT, NOR IN THE PLAN

                                       5
<PAGE>   33

                                                         [ADLT OFFICER NSO FORM]

                                    SHALL CONFER UPON YOU ANY RIGHT WITH RESPECT
                                    TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY
                                    BY THE COMPANY, NOR SHALL IT INTERFERE IN
                                    ANY WAY WITH YOUR RIGHT OR THE COMPANY'S
                                    RIGHT TO TERMINATE YOUR EMPLOYMENT OR
                                    CONSULTANCY AT ANY TIME, WITH OR WITHOUT
                                    CAUSE.

SHAREHOLDER RIGHTS                  Neither you, nor your estate or heirs, have
                                    any rights as a shareholder of the Company
                                    until a certificate for the Shares acquired
                                    upon exercise of this Option has been
                                    issued. No adjustments are made for
                                    dividends or other rights if the applicable
                                    record date occurs before your stock
                                    certificate is issued, except as described
                                    in the Plan.

ADJUSTMENTS                         In the event of a stock split, a stock
                                    dividend or a similar change in the
                                    Company's Stock, the number of Shares
                                    covered by this Option and the Exercise
                                    Price Per share may be adjusted pursuant to
                                    the Plan. Your Option shall be subject to
                                    the terms of the agreement of merger,
                                    liquidation or reorganization in the event
                                    the Company is subject to such corporate
                                    activity.

LEGENDS                             All certificates representing the Shares
                                    issued upon exercise of this Option shall,
                                    where applicable, have endorsed thereon the
                                    following legends:

                                    "THE SECURITIES REPRESENTED BY THIS
                                    CERTIFICATE ARE SUBJECT TO CERTAIN
                                    RESTRICTIONS ON TRANSFER AND REPURCHASE
                                    REQUIREMENTS AS SET FORTH IN AN AGREEMENT
                                    BETWEEN THE COMPANY AND THE REGISTERED
                                    HOLDER, OR SUCH HOLDER'S PREDECESSOR IN
                                    INTEREST. SUCH AGREEMENT IMPOSES CERTAIN
                                    TRANSFER RESTRICTIONS AND CERTAIN REPURCHASE
                                    REQUIREMENTS ON THE COMPANY (OR ITS ASSIGNS)
                                    UPON THE SALE OF THE SHARES OR UPON
                                    TERMINATION OF SERVICE WITH THE COMPANY. A
                                    COPY OF SUCH AGREEMENT IS ON FILE AT THE
                                    PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
                                    FURNISHED UPON WRITTEN REQUEST TO THE
                                    SECRETARY OF THE COMPANY BY THE HOLDER OF
                                    SHARES REPRESENTED BY THIS CERTIFICATE.

                                    THE SECURITIES REPRESENTED BY THIS
                                    CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
                                    THE SECURITIES ACT OF 1933, OR THE
                                    SECURITIES LAWS OF ANY STATE, AND MAY BE
                                    OFFERED AND SOLD ONLY IF REGISTERED AND
                                    QUALIFIED PURSUANT TO THE RELEVANT

                                       6
<PAGE>   34

                                                         [ADLT OFFICER NSO FORM]

                                    PROVISIONS OF FEDERAL AND STATE SECURITIES
                                    LAWS OR IF THE COMPANY IS PROVIDED AN
                                    OPINION OF COUNSEL, SATISFACTORY TO THE
                                    COMPANY AND ITS COUNSEL, THAT REGISTRATION
                                    AND QUALIFICATION UNDER FEDERAL AND STATE
                                    SECURITIES LAWS IS NOT REQUIRED."

APPLICABLE LAW                      This Agreement will be interpreted and
                                    enforced under the laws of the State of
                                    California (without regard to their choice
                                    of law provisions).

THE PLAN AND                        The text of the Plan is incorporated in this
OTHER AGREEMENTS                    Agreement by reference. Certain capitalized
                                    terms used in this Agreement are defined in
                                    the Plan.

                                    This Agreement, including its attachments,
                                    and the Plan constitute the entire
                                    understanding between you and the Company
                                    regarding this Option. Any prior agreements,
                                    commitments or negotiations concerning this
                                    Option are superseded.

           BY SIGNING THE COVER SHEET OF THIS AGREEMENT, YOU AGREE TO ALL OF THE
           TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN. YOU ALSO
           ACKNOWLEDGE THAT YOU HAVE READ SECTION 11, "PURCHASER'S INVESTMENT
           REPRESENTATIONS" OF THE ATTACHED EXHIBIT B AND THAT YOU CAN AND
           HEREBY DO MAKE THE SAME REPRESENTATIONS WITH RESPECT TO THE GRANT OF
           THIS OPTION.

                                       7<PAGE>   1

                                                                   Exhibit 10(w)

                               JOSEPH P. FLANNERY
                          [private address and phone]

                                             March 21, 2001

Mr. Charles M. Berger
Chairman and Chief Executive Officer
The Scotts Company
41 S. High Street, Suite 3500
Columbus, OH  43215

Dear Chuck:

         The purpose of this letter is to memorialize the understandings we have
reached regarding your employment by The Scotts Company ("Scotts" or the
"Company") following the May 10, 2001 Board meeting and your affiliation with
the Company thereafter.

FROM MAY 10, 2001 THROUGH SEPTEMBER 30, 2001
--------------------------------------------

         Your employment at Scotts is currently subject to an Employment
Agreement entered into between you and Scotts dated August 7, 1998 (the "1998
Employment Agreement"). You agree that the 1998 Employment Agreement is hereby
amended in two respects:

          1.   At the Scotts' Board meeting to be held on May 10, 2001, you
               shall resign your position as Chief Executive Officer of Scotts.

          2.   The term of the 1998 Employment Agreement shall be extended until
               September 30, 2001. After May 10, 2001, you shall continue to be
               employed as a full-time Scotts' associate and you will continue
               to serve as an executive officer of Scotts with the title of
               Chairman of the Board. Your base salary, incentive compensation,
               expense reimbursement and benefits shall be paid as provided in
               the 1998 Employment Agreement through September 30, 2001.

         Except as modified by the preceding paragraph, the 1998 Employment
Agreement shall remain in full force and effect.

FROM OCTOBER 1, 2001 THROUGH JANUARY 16, 2003
---------------------------------------------

         From October 1, 2001 through January 16, 2003 (the proposed date for
Scotts' 2003 Annual Meeting of Shareholders), you shall continue as a Scotts'
associate and executive officer (maintaining the title of Chairman of the Board)
at an annual salary of $500,000. You shall be entitled to receive all benefits
available to an executive officer of Scotts, but shall not be entitled
<PAGE>   2

Charles M. Berger
March 21, 2001
Page 2

to any incentive compensation or to a stock option grant. You shall be entitled
to the use of the Company airplane for business purposes, to an annual physical
at the Company's expense and to participate in the Ayco program so long as you
remain Chairman of the Board.

         You shall be entitled to a guest office and administrative assistance
at Scotts' World Headquarters through January 16, 2003, but your principal
office after October 1, 2001 shall be at your home in Naples, Florida. Scotts
agrees to reimburse you for the commission you pay in connection with the sale
of your home in Columbus, Ohio and for the expense of moving your personal
effects to Naples, Florida, up to a maximum reimbursement of $150,000.

         It is presently the Committee's intention to have you stand for
re-election as a Director of the Company when your current term expires at the
Company's Annual Meeting of Shareholders in 2002. On January 16, 2003, it is
expected that you will resign your position as Chairman of the Board and that
you will retire as a full-time Scotts' associate. Upon your retirement as a
full-time Scotts' associate, you shall be entitled to such benefits as are then
available to a retiree at your then age and with your then years of service, and
all other benefits that you were entitled to receive as Chairman of the Board
shall cease.

FROM JANUARY 17, 2003 THROUGH MAY 9, 2003
-----------------------------------------

         After your retirement from Scotts on January 16, 2003, you will
continue to be paid monthly at the rate of $500,000 per year through May 9,
2003, but you will not be entitled to receive any benefits in addition to these
payments.

DEATH, DISABILITY OR CHANGE IN CONTROL
--------------------------------------

         Should you die or become totally disabled or should Scotts undergo a
Change in Control (as defined in the 1998 Employment Agreement) prior to May 9,
2003, your beneficiaries or your estate shall be entitled to receive the balance
of any payments due you through May 9, 2003. Any such payments due you shall be
paid in a lump sum within 90 days of the effective date of the Change in Control
or your death or total disability. Any options to purchase Scotts' common shares
owned by you at your death shall be dealt with as provided in the Scotts' stock
option plan pursuant to which they were granted.

                                           Very truly yours,

                                            /s/ Joseph P. Flannery
                                           -------------------------
                                           Joseph P. Flannery, Chairman
                                           Compensation and Organization
                                           Committee of the Board of Directors

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