Document:

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                                                                    Exhibit 10.2

                             CONSULTATION AGREEMENT

          THIS AGREEMENT (the "Agreement"), made and entered into this 17th day
of May, 2000, by and between Endorex Corporation, a Delaware corporation
authorized to do business in Illinois, (hereinafter termed the "Company"); and
Kenneth Tempero, M.D., Ph.D., (hereinafter termed "Chairman of the Board" or
"Chairman").

                              W I T N E S S E T H:

          WHEREAS, the Company is engaged in, among other things, the
development and marketing of drug delivery systems,

          WHEREAS, Chairman is ready, willing, and able to provide certain
services in addition to his normal duties as Chairman of the Board of the
Company in the area of directing the Company's Board of Directors (the "Board")
and review of Endorex's management's actions and strategies upon the following
terms and conditions, and

          WHEREAS, both parties understand that it is the policy of the Company
to respect the secret or confidential information of third parties, and should
Chairman possess secret or confidential information of third parties, such
information will not be disclosed to the Company.

          NOW, THEREFORE, for and in consideration of the terms and conditions
hereinafter set forth, the Parties hereto agree as follows:

          1.   TERM

          The term of this Agreement will be from the 17th day of May, 2000,
until the Board meeting following the 2001 shareholders' meeting, unless earlier
terminated (i) upon mutual agreement of the parties, (ii) by either party upon
thirty (30) days written notice to the other party, or (iii) pursuant to Section
4 (b) herein. However, it is mutually agreed that this agreement shall, if
determined to be needed and so requested by the Board, be modified as
appropriate and/or extended by mutual agreement.  This agreement replaces the
existing consultation agreement  date May 13, 1999 by and between the Company
and Chairman.

          2.   COMPENSATION

               (a) Endorex agrees to pay Chairman a sum of $5,600 per month,
equivalent to four (4) consulting days per month (8 hours per day) at $175 per
hour, during the term of this Agreement for services herein described, to be
paid in monthly installments. Such compensation rate shall begin as of June 1,
2000. The Company agrees to reimburse Chairman for all out-of-pocket incurred by
Chairman in connection with this Agreement, subject to prior approval of the
Company. All such expenses will be reimbursed within 30 days of submission with
appropriate vouchers and upon approval of the Company.
<PAGE>

               (b) In recognition of his additional duties and activities beyond
normal board service, the Chairman will be granted options to purchase 12,000
shares of Endorex Corporation Common Stock at an exercise price of $3.25 per
share which will vest 25 percent (or 3,000 share options) per quarter from the
date hereof.

               (c) The Company also agrees to provide an allowance for the
Chairman for healthcare costs up to a maximum of $10,606 per year.

          3.   SERVICES

          Chairman, as an independent contractor and not as an employee of the
Company, will devote a minimum of thirty-two (32) hours per month to the Company
and shall keep accurate records of the time devoted to performing Services (as
defined below) under this Agreement.  Chairman agrees, on a non-exclusive basis,
to assist and advise the Company in its business and research and development
activities.  It is agreed that the time commitment and compensation herewith may
be adjusted from time to time upon mutual agreements of the parties.  However,
for all time beyond the thirty-two (32) hours per month devoted beyond normal
board service, the Chairman will be compensated at a rate of $215 per hour.
"Services" will include but not be limited to the following (and are further
defined on Appendix A attached hereto. Such services shall be rendered at times
and in places agreeable to the Company and to the Chairman.

     a.  Conduct all Board of Directors meetings and participate as a member ex-
         officio of all board committees.

     b.  Evaluate and/or advise the Company on matters related to licensing
         opportunities and agreements.

     c.  Advise the Company on product development strategy.

     d.  Identify and assist the Company in developing corporate partners.

     e.  Advise the Company in the design of pertinent clinical trials and
         research programs.

     f.  Other duties and/or tasks as assigned by the Board and agreed to by
         Chairman.

                                       2
<PAGE>

          4.   NO CONFLICTS

               (a) Chairman represents and warrants that, to the best of his
knowledge, he has no direct or indirect interest, which is, or may appear to be,
incompatible with his services under this Agreement.

               (b) Chairman agrees to refrain from any activity during the term
of this Agreement, which is or could be interpreted as constituting a conflict
of interest. In such a situation, Chairman agrees to undertake to notify the
Company in advance of acceptance of a consulting that might reasonably produce a
conflict. The Board will review the situation and within ten (10) business days
notify Chairman, in writing (from the CEO), of its opinion regarding the
potential conflict and either grant or withhold permission for Chairman to
accept the consulting assignment. If the Board withholds permission to accept
the assignment, the Chairman may elect to: a) resign from the position of
Chairman (in which case the ex-Chairman may be in a position to accept the
assignment providing such assignment does not otherwise conflict with Chairman's
fiduciary duties as a director of the Company, or b) decline the assignment (in
which case the Company will undertake to pay the Chairman, for a period not to
exceed two (2) months, the amount that the Chairman would have reasonably
expected to receive in the performance of the assignment. Such payments shall be
over and above payments otherwise associated with this contract.

               (c) Chairman represents and warrants that his agreement to
perform the Services pursuant to this Agreement does not violate any agreement
or obligation between Chairman and any third party. Appendix B lists the current
consulting agreements to which Chairman is a party as of the date hereof.
Chairman will promptly notify the company regarding any changes in his private
interest which might result, or appear to result, in a conflict of interest.

          5.   DATA AND CONFIDENTIAL INFORMATION

               (a) With respect to "Data", which term shall include, but is not
limited to writings, drawings, pictures, statistical information, graphic
representation, and computer software, Chairman agrees that:

                    (1) All Data first originated, developed, or reduced to
normal communicable form in collaboration with the Company personnel pursuant to
this Agreement shall owned by, and become the sole and exclusive property of the
Company; and Chairman shall be reimbursed by the Company for the cost or
reproduction and delivery of any Data requested by the Company.

                    (2) With respect to Data subject to a copyright owned by
Chairman or a third party which is delivered to the Company pursuant to this
Agreement, and to the extent Chairman may have, or may acquire, prior to
expiration or termination of this Agreement. Chairman hereby grants or agrees to
grant to the Company a non-exclusive and irrevocable license throughout the
world to publish, translate, reproduce, use in any manner and deliver the Data.

                                       3
<PAGE>

                    (3) Chairman shall not deliver Data subject to proprietary
rights, or Data subject to copyright owned by a third party, unless such Data is
licensed pursuant to paragraph 5 subsections (1) and (2), above.

                    (4) Chairman shall not be required to deliver or disclose to
the Company any Data created by Chairman prior to the date of this Agreement, or
developed other than in conjunction with this Agreement.

               (b) Chairman recognizes and acknowledges that the Company
possesses certain confidential information that constitutes a valuable, special,
and unique asset. As used herein, the term "confidential information" includes
all information and materials belonging to, used by, or in the possession of the
Company relating to its products, methods, processes, services, technology,
inventions, scientific developments, patents, ideas, internal specifications and
reports, anticipated procurements, possible new projects or programs, contracts,
financial information, developments, business strategies, pricing, current and
prospective customers, marketing plans, and trade secrets of every kind and
character, but shall not include (i) information that was already within the
public domain at the time the information is acquired by Chairman, or (ii)
information that subsequently becomes public through no act or omission of the
Chairman. Chairman agrees that all of the confidential information is and shall
continue to be the exclusive property of the Company, whether or not prepared in
whole or in part by Chairman and whether or not disclosed to or entrusted to
Chairman's custody. Chairman agrees that Chairman shall not, at any time
following the execution of this Agreement, use or disclose in any manner any
confidential information of the Company.

               (c) To the extent any inventions, technologies, reports,
memoranda, studies, writings, articles, plans, designs, specifications,
exhibits, software code, or other materials prepared by Chairman in the
performance of services under this Agreement include material subject to
copyright protection, such materials have been specially commissioned by the
Company and they shall be deemed "work for hire" as such term is defined under
U.S. copyright law. To the extent any such materials do not qualify as "work for
hire" under applicable law, and to the extent they include material subject to
copyright, patent, trade secret, or other proprietary rights protection,
Chairman hereby irrevocably and exclusively assigns to the Company, its
successors, and assigns, all right, title, and interest in and to all such
materials. To the extent any of Chairman rights in the same, including without
limitation any moral rights, are not subject to assignment hereunder, Chairman
hereby irrevocably and unconditionally waives all enforcement of such rights.
Chairman shall execute and deliver such instruments and take such other actions
as may be required to carry out and confirm the assignments contemplated by this
paragraph and the remainder of this Agreement. All documents, magnetically or
optically encoded media, and other tangible materials created by Chairman, as
part of its services under this Agreement shall be owned by the Company.

               (d) Chairman agrees that upon termination of this Agreement,
Consultant will upon request, at company expense, return to the Company all
drawings, blueprints, notes, memoranda, specifications, designs, writings,
software, devices, documents and any other material containing or disclosing any
confidential or proprietary information of the Company. After the Company
requests return of materials, Chairman will not retain any copies or originals
of such material.

                                       4
<PAGE>

          6.   ASSIGNMENT/ENTIRE AGREEMENT

          Neither party may assign its rights or obligations under this
Agreement without the written consent of the other party.  Neither this
Agreement nor any provision hereof may be changed, waived, discharged, or
terminated other than by an instrument in writing signed by the party against
which enforcement of the change, waiver, discharge or termination is being
asserted.  This Agreement constitutes the entire Agreement between the parties
and supersedes any prior or contemporaneous written or oral agreements,
representations and warranties between them with respect to the subject matter
hereof.  If any provision of this Agreement is held unenforceable or inoperative
by any court either or whole or in part the remaining provisions shall be deemed
severable and unaffected and shall continue in full force and effect.

          7.   MISCELLANEOUS

               (a) Indemnity. Chairman agrees to indemnify, defend, and hold the
Company and its successors, officers, directors, agents and employees harmless
from any and all actions, causes of action, claims, demands, cost, liabilities,
expenses and damages (including attorneys' fees) arising out of, or in
connection with any breach of Sections 4 and 5 of this Agreement by Chairman.

               (b) Relationship of Parties. Chairman is an independent
contractor of the Company. Nothing in this Agreement shall be construed as
creating an employer-employee relationship, as a guarantee of future employment
or engagement, or as a limitation upon the Company' s sole discretion to
terminate this Agreement at any time without cause. Chairman further agrees to
be responsible for all of Chairman's federal and state taxes, withholding,
social security, insurance, and other benefits except as otherwise expressly set
forth herein.

               (c) Other Activities. Chairman is free to engage in other
independent contracting activities, provided that Chairman does not engage in
any such activities which are inconsistent with or in conflict with any
provisions hereof, or that so occupy Chairman's attention as to interfere with
the proper and efficient performance of Chairman's Services hereunder. Chairman
agrees not to induce or attempt to influence, directly or indirectly, any
employee at the Company to terminate his/her employment and work for Chairman or
any other person.

               (d) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois without regard to
conflict of law principles.

                                       5
<PAGE>

               (e) Remedy for Breach. The parties hereto agree that, in the
event of breach or threatened breach of any covenants of Chairman, the damage or
imminent damage to the value and the goodwill of the Company's business shall be
inestimable, and that therefore any remedy at law or in damages shall be
inadequate. Accordingly, the parties hereto agree that the Company shall be
entitled to injunctive relief against Chairman in the event of any breach or
threatened breach of any of such provisions by Chairman, in addition to any
other relief (including damages) available to the Company under this Agreement
or under law.

               (f) Survival. Sections 5, 7(a), 7(e) and 7(f) shall survive
termination of this Agreement.

     IN WITNESS WHEREOF, the Parties hereto set their hands this 17th day of May
2000.

                              ENDOREX CORPORATION

                              By:______________________________________
                                 Michael S. Rosen, President/CEO

                              CHAIRMAN:

                              By: _____________________________________
                                  Kenneth Tempero, M.D., Ph.D.

                                       6
<PAGE>

                                                                      APPENDIX A
                                                                      ----------

                            Endorex Job Description

Position:  Non-Executive Chairman of the Board
---------

Key Responsibilities:
---------------------

1.  Corporate Strategy
    a.  Works with CEO and key management to formulate, codify in writing, and
        periodically update a Board-approved long-range strategy statement.
    b.  Oversees management's generation and periodic updates of the corporate
        business plan.

2.  Board Function
    a.  Sets agendas, oversees generation of Board books, and chairs Board
        meetings.
    b.  Determines membership and maintains an oversight function with regards
        to Board committees.
    c.  Analyzes profiles of expertise among Board members, observes
        functionality and works with Board, management and major shareholders to
        augment and evolve Board membership and skills as needed for corporate
        success.
    d.  Serves as interim CEO in the event of disability or conflict
        incapacitating CEO.

3.  Interaction with Management
    a.  Assumes primary responsibility for communication of Board's performance
        evaluations, suggestions regarding functionality, etc. of CEO to the CEO
        and, further, assumes responsibility of working with CEO to generate and
        carry out development plans to meet the Board's desires and guidance.
    b.  Reviews (on a regular and frequent basis) with CEO and key management
        (as appropriate) progress against corporate objectives and the business
        plan and, further, relates same to the long-range strategy. Maintains
        awareness and oversight with regards to adjustments management
        undertakes to keep the above "in sync" and ascertains that Board is
        aware of same in an adequate and timely manner.
    c.  By consulting with the corporate Scientific Advisory Boards, corporate
        management and corporate joint venture partners on a periodic basis,
        forms a "board level" evaluation of their sense of progress, concerns
        (if any), frustration, etc. and communicates same directly to the Board.
        This may involve, among other activities, occasional attendance of joint
        venture working and/or management meetings.
    d.  Works with CEO to create and maintain a succession program (acceptable
        to the Board) for key corporate positions.

                                       7
<PAGE>

    e.  Makes himself/herself available to consult with management regarding
        business development issues or joint venture activities or to meet with
        potential investors and/or owners of intellectual property for which the
        company is negotiating on an "on call" basis.

4.  Other
        Any other duties or responsibilities assigned by the Board of Directors.

Time Commitment
---------------

     Estimated to initially require four (4) days per month, but expected to
average seven (7) days per month.

Compensation
------------

     A package will be designed to recognize time and effort while maintaining
independent status for the Chairman.  Expenses incurred in association with
these duties will be reimbursed (directly and/or, where more practical, via
allowance).

Term of Office
--------------

     To be set by the Board.

                                       8<PAGE>

                                                                    EXHIBIT 10.1
                                                                    ------------

                                 AMENDMENT TO
                               ALLSCRIPTS, INC.
                             AMENDED AND RESTATED
                           1993 STOCK INCENTIVE PLAN

     RESOLVED, that the second sentence of Section 2 is hereby deleted in its
entirety and replaced with the following:

          "The maximum number of Common Shares to be issued pursuant to all
     grants under this Plan shall be 7,393,489."
<PAGE>

                               ALLSCRIPTS, INC.
                             AMENDED AND RESTATED
                           1993 STOCK INCENTIVE PLAN

     WHEREAS, on September 14, 1993, the Board of Directors of Allscripts, Inc.
(the "Company") approved the adoption of the Company's 1993 Stock Incentive Plan
(this "Plan" or the "1993 Plan");

     WHEREAS, effective June 28, 1999 the Company effected a reverse split of
its common shares, $0.01 par value per share (the "Common Shares), pursuant to
which each Common Share was converted into one-sixth of a Common Share (the
"Reverse Split");

     WHEREAS, all references in this Plan to numbers of Common Shares shall
reflect the Reverse Split;

     WHEREAS, the Company has adopted an Incentive Stock Option Plan (the
"Initial Option Plan"), a 1990 Stock Option Plan (the "1990 Plan"), a Consultant
Option Plan (the "Consultant Plan") and an Amended and Restated 1993 Eligible
Director Stock Option Plan (the "Director Plan") (the Initial Option Plan, 1990
Plan, Consultant Plan and Director Plan being collectively referred to herein as
the "Predecessor Plans").

     WHEREAS, the Board of Directors adopted resolutions on June 7, 1999
approving an amendment and restatement of this Plan and pursuant to such
resolutions, the Company wishes to amend and restate the Plan to contain the
following terms:

     1.    Purpose.  The purpose of this Plan is to provide a means whereby the
           -------
Company may, through the grant of stock incentives, including options to
purchase the Company's Common Shares and stock appreciation rights, to key
individuals who perform services for or on behalf of the Company (such as
employees, officers, Eligible Directors, consultants and agents of the Company),
attract and retain persons of ability as key individuals and motivate such
persons to exert their best efforts on behalf of the Company.  "Eligible
Directors" shall be members of the Board of Directors of the Company who are not
employees or officers of the Company or of any other entity and who do not own
beneficially, or are not affiliated with an entity that owns beneficially 10% or
more of the Company's outstanding voting securities on the date when Stock
Incentives are to be granted to such persons under this Plan.  The Plan
authorizes the grant to such key individuals of the Company of stock incentives
in the form of (a) incentive stock options ("ISOs") to purchase Common Shares of
the Company under Section 422 of the Internal Revenue Code of 1986, as amended
from time to time (the "Code"), (b) nonqualified stock options to purchase
Common Shares of the Company ("Nonqualified Options") and (c) stock appreciation
rights ("SARs") (ISOs, Nonqualified Options and SARs being referred to
collectively as "Stock Incentives").

     2.    Number of Shares Available Under Plan. Stock Incentives may be
           -------------------------------------
granted by the Company from time to time to key individuals who perform services
for or on behalf of the Company (such recipients being hereafter referred to as
"grantees"). The maximum number of Common Shares to be issued pursuant to all
grants under this Plan shall be 4,393,489. The shares issued upon exercise of
Stock Incentives granted under this Plan may be authorized and unissued shares
or shares held by the Company in its treasury, or both. In the event of a lapse,
expiration, termination, forfeiture or cancellation of any Stock Incentive
granted under this Plan or any Predecessor Plan without the issuance of shares,
the shares subject to or reserved for such Stock Incentive may be used again for
new grants of

                                       2
<PAGE>

Stock Incentives hereunder; provided that in no event may the number of Common
Shares issued hereunder exceed the total number of shares reserved for issuance.
Any Common Shares withheld or surrendered to pay withholding taxes pursuant to
Section 9 or withheld or surrendered in full or partial payment of the exercise
price of an ISO or Nonqualified Option pursuant to Section 5(e) and any Common
Shares covered by Stock Incentives which Stock Incentives are withheld or
surrendered to pay withholding taxes pursuant to Section 9 or withheld or
surrendered in full or partial payment of the exercise price of an ISO or
Nonqualified Option pursuant to Section 5(e) shall be added to the aggregate
Common Shares available for issuance. In no event shall the number of Common
Shares underlying Stock Incentives granted hereunder to any individual in any
twelve-month period exceed 3,000,000 Common Shares.

     3.    Administration.  This Plan shall be administered by the Compensation
           --------------
Committee (the "Committee") as appointed by the Board of Directors of the
Company (the "Board").  To the extent required to comply with Rule 16b-3 under
the Securities Exchange Act of 1934, each member of the Committee shall qualify
as a "non-employee director," as defined therein.

     The Committee may interpret the Plan, prescribe, amend, and rescind any
rules and regulations necessary or appropriate for the administration of the
Plan, and make such other determinations and take such other action as it deems
necessary or advisable, except, as otherwise expressly reserved in the Plan to
the Board.

     The Committee may employ such legal counsel, consultants and agents as it
may deem desirable for the administration of the Plan and may rely upon any
opinion received from any such counsel or consultant and any computation
received from any such consultant or agent.

     No member or former member of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Stock
Incentive awarded under it. To the maximum extent permitted by applicable law,
each member or former member of the Committee shall be indemnified and held
harmless by the Company against any cost or expense (including counsel fees) or
liability (including any sum paid in settlement of a claim with the approval of
the Company) arising out of any act or omission to act in connection with the
Plan unless arising out of such member's or former member's own fraud or bad
faith. Such indemnification shall be in addition to any rights of
indemnification the members or former members may have as directors or under the
By-Laws of the Company.

     4.    Eligibility and Awards. The Committee shall, subject to the
           ----------------------
limitations of the Plan, have full power and discretion to establish selection
guidelines; to select eligible persons for participation; and to determine the
form of grant, either in the form of ISOs, Non-qualified Options, SARs or
combinations thereof, the number of Common Shares subject to the grant, the
fair market value of the Common Shares, when necessary, the restriction and
forfeiture provisions relating to Common Shares, the time and conditions of
vesting or exercise, the conditions, if any, under which time of vesting or
exercise may be accelerated, the conditions, form, time, manner and terms of
payment of any award, and all other terms and conditions of the grant;
provided, however, that ISOs shall not be granted to any individual who is not
--------  -------
an employee of the Company.

     5.    Terms and Conditions of Stock Incentives. Each Stock Incentive
           ----------------------------------------
granted under the Plan shall be evidenced by an agreement, in form approved by
the Committee which shall be subject to the following express terms and
conditions and to such other terms and conditions as the Committee may deem
appropriate:

                                       3
<PAGE>

     (a)   Stock Incentive Period. Each Stock Incentive agreement shall specify
           ----------------------
the period for which the Stock Incentive thereunder is granted (which, in the
case of ISOs, shall not exceed ten years from the date of grant or, in the case
of a grant to a person who owns, directly or indirectly, within the meaning of
Section 424(d) of the Code, stock representing more than 10% of the voting power
of all classes of stock of the Company, shall not exceed five years from the
date of grant) and shall provide that the Stock Incentive shall expire at the
end of such period.

     (b)   Grant Period. Consistent with paragraph 11, an ISO must be granted
           ------------
within ten years of the date this amendment and restatement of this Plan was
adopted or the date this amendment and restatement of this Plan is approved by
the Shareholders of the Company, whichever is earlier.

     (c)   Exercise Price. The per share exercise price of each Stock Incentive
           --------------
shall be determined by the Committee at the time any Stock Incentive is granted,
and, in the case of ISOs, shall not be less than the fair market value (or if
granted to a person who owns, directly or indirectly, within the meaning of
Section 424(d) of the Code, stock representing more than 10% of the voting power
of all classes of stock of the Company, 110% of fair market value) (but in no
event less than the par value) of the Common Shares of the Company on the date
the Stock Incentive is granted. If the Company's Common Shares are actively
traded or quoted in an established market (such as a national securities
exchange or the National Association of Securities Dealers Automated Quotation
System) the fair market value of the Company's Common Shares shall be the price
of the Common Shares as of the close of the date the Stock Incentive is granted;
however, in all other cases the fair market value of the Company's Common Shares
shall be that value that the Committee shall have determined as the fair market
value in good faith and in its sole discretion.

     (d)   Exercise of Stock Incentive.  No part of any Stock Incentive may be
           ---------------------------
exercised until the grantee shall have satisfied the conditions (e.g., such as
remaining in the employ of the Company for a certain period of time), if any,
after the date on which the Stock Incentive is granted as the Committee may
specify in the Stock Incentive agreement. Subject in each case to the provisions
of paragraph (f) of this paragraph 5, any Stock Incentive may be exercised, to
the extent exercisable by its terms, at such time or times as may be determined
by the Committee.

     (e)   Payment of Purchase Price Upon Exercise of ISO or Nonqualified
           --------------------------------------------------------------
Option. Upon the exercise of an ISO or Nonqualified Option, the purchase price
------
shall be paid in cash or, if the Stock Incentive agreement so provides, (i) in
Common Shares of the Company, valued at its fair market value on the date of
exercise, (ii) by surrender of other options for Common Shares of the Company
held by the grantee which have not expired, with the surrender value being the
amount by which the fair market value of a Common Share on the date of exercise
exceeds the exercise price of the surrendered option(s), (iii) by surrender of
SARs for their cash value, or (iv) by any combination of the foregoing. Fair
market value for purposes of this paragraph (e) shall be determined as of the
date of exercise pursuant to the method described in paragraph (c) of this
paragraph 5.

     (f)   Exercise in the Event of Death, Disability or Other Termination of
           ------------------------------------------------------------------
Employment. Subject to the limitations as to the exercisability of ISOs, which
----------
are described in subparagraphs (1), (2) and (3) below, and the remaining
provisions of this Plan, the Committee,

                                       4
<PAGE>

     in its sole discretion, shall determine the provisions concerning the
     exercisability of options to be included in each grantee's Stock Incentive
     Agreement.

               (1)   If an ISO grantee dies, his ISO may be exercised, to the
          extent that the grantee could have done so at the date of his death,
          by the person or persons to whom the grantee's rights under the ISO
          pass by will or applicable law, or if no such person has such right,
          by his executors or administrators, at any time, or from time to time,
          for up to one year after the date of the grantee's death (as the
          Committee may specify in the Stock Incentive Agreement) but not later
          than the expiration date specified in paragraph (a) of this paragraph
          5 if sooner than one year.

               (2)   If an ISO grantee's employment with the Company shall
          terminate because of his permanent disability, he may exercise his
          ISO, to the extent that he could have done so at the date of his
          termination, at any time, or from time to time, within one year of
          such termination but not later than the expiration date specified in
          paragraph (a) of this paragraph 5 if sooner than one year. For this
          purpose, the term "permanent disability" means the permanent
          incapacity of a grantee to perform the usual duties of his employment
          by reason of physical or mental impairment. Permanent disability shall
          be deemed to exist when so determined by the Committee based upon a
          written opinion of a licensed physician who has been approved by the
          Committee.

               (3)   If an ISO grantee's employment with the Company shall
          terminate for any reason other than death or permanent disability, he
          may exercise his ISO, to the extent that he could have done so at the
          date of his termination, at any time, or from time to time, within
          three months of the date of his termination but not later than the
          expiration date specified in paragraph (a) of this paragraph 5 if
          sooner than three months.

          (g)  Transferability. Except as provided in this Section 5(g), no
               ---------------
     Stock Incentive may be assigned or otherwise transferred. Each Stock
     Incentive granted under the Plan shall be transferable by will and by the
     laws of descent and distribution. In addition, under such rules and
     procedures as the Committee may establish and subject to the discretion of
     the Committee, the grantee of a Stock Incentive (other than an ISO) may
     transfer such Stock Incentive, provided that (i) the applicable Stock
     Incentive Agreement expressly so permits and (ii) the grantee provides such
     documentation or information concerning any such transfer or transferee as
     the Committee may reasonably request. Any Stock Incentives held by any
     transferees shall be subject to the same terms and conditions that applied
     immediately prior to the transfer. No ISO may be assigned or otherwise
     transferred in any manner.

          (h)  Dollar Limitation. No ISO may be granted under the Plan to any
               -----------------
     employee if in the calendar year in which the ISO is first exercisable the
     aggregate fair market value (determined as of the date of grant) of Common
     Shares of the Company for which such employee has been granted ISOs which
     first become exercisable in such calendar year exceeds $100,000. Any Stock
     Incentive which violates the rules of this subparagraph (h) of this
     paragraph 5 shall be deemed to be a Nonqualified Option rather than an ISO.

                                       5
<PAGE>

          (i)  SAR's.
               -----

               (1)   A grantee of an SAR shall have the right to receive cash or
          Common Shares having a fair market value equal to the appreciation in
          market value of a stated number of Common Shares from the date of
          grant, or in the case of an SAR granted in tandem with or by reference
          to an ISO or Nonqualified Option granted simultaneously with or prior
          to the grant of such SAR, from the date of grant of the related stock
          option to the date of exercise.

               (2)   SARs may be granted in tandem with or with reference to a
          related ISO or Nonqualified Option, in which event the grantee may
          elect to exercise either the option or the SAR (as to the same Common
          Shares subject to the option and the SAR), or the SAR may be granted
          independently of a related stock option. The right shall be
          exercisable not more than ten years after the date of grant if granted
          in tandem with or with reference to an ISO.

               (3)   Upon exercise of an SAR, the grantee shall be paid the
          excess of the then fair market value of the number of shares to which
          the SAR relates over the fair market value of such number of shares at
          the date of grant of the SAR or of the related stock option, as the
          case may be. Such excess shall be paid in cash or in Common Shares
          having a fair market value equal to such excess, or a combination
          thereof, as the Committee shall determine.

          (j)   Other Provisions. Each Stock Incentive agreement shall contain
                ----------------
     such terms and provisions as the Committee may determine to be necessary or
     desirable.

          (k)   No Rights as a Shareholder. No grantee shall have any rights
                --------------------------
     as a shareholder with respect to any Common Shares subject to his Stock
     Incentive prior to the date of issuance to him of a certificate or
     certificates for such shares.

     6.   Adjustments in Event of Change in Common Shares. If during the term of
          -----------------------------------------------
this Plan, there shall be any change in the Company's Common Shares through a
merger, consolidation, reorganization, recapitalization or otherwise, or if
there shall be a dividend on the Company's Common Shares, payable in Common
Shares, or if there shall be a stock split, combination or other change in the
Company's issued Common Shares, the Common Shares available under this Plan
shall be increased or decreased proportionately to give effect to such change in
the Common Shares and the Common Shares subject to then existing Stock
Incentives shall be proportionately adjusted so that upon the issuance of Common
Shares pursuant to such Stock Incentives, the person receiving such Common
Shares will receive the securities which would have been received if the
issuance of Common Shares pursuant to the Stock Incentives had occurred
immediately prior to such merger, consolidation, reorganization,
recapitalization, dividend, stock split, combination or other change. Each such
Stock Incentive shall be adjusted to nearest whole share, rounding downwards. In
no event shall any fractional share become subject to a Stock Incentive issued
hereunder.

     7.    Compliance with Other Laws and Regulations.  The Plan, the grant and
           ------------------------------------------
exercise of Stock Incentives thereunder, and the obligation of the Company to
sell and deliver Common Shares under such Stock Incentives, shall be subject to
all applicable federal and state laws, rules and regulations and to such
approvals by any government or regulatory agency as may be required.  If at any
time the Committee shall determine in its discretion that the listing,
registration or qualification of the shares

                                       6
<PAGE>

covered by the Plan upon any national securities exchange or under any state or
federal law, or the consent or approval of any government regulatory body, is
necessary or desirable as a condition of, or in connection with, the sale or
purchase of shares under the Plan, no shares will be delivered unless and until
such listing, registration, qualification, consent or approval shall have been
effected or obtained, or otherwise provided for, free of any conditions not
acceptable to the Committee. If shares are not required to be registered, but
are exempt from registration, upon exercising all or any portion of a Stock
Incentive, the Company may require each grantee (or any person acting under
paragraph 5(f)), to represent that the shares are being acquired for investment
only and not with a view to their sale or distribution, and to make such other
representations deemed appropriate by counsel to the Company. Stock certificates
evidencing unregistered shares acquired upon exercise of Stock Incentives shall
bear any legend required by applicable state securities laws and a restrictive
legend substantially as follows:

The securities represented hereby have not been registered under the Securities
Act of 1933, as amended (the "Act"), and may not be transferred in the absence
of such registration or an opinion of counsel acceptable to the Company that
such transfer will not require registration under such Act.

     8.    No Rights to Continued Employment.  The Plan and any Stock Incentive
           ---------------------------------
granted under the Plan shall not confer upon any grantee any right with respect
to employment or the continuance of employment by the Company, nor shall they
affect in any way the right of the Company to terminate his relationship
(including his employment) at any time.

     9.    Withholding. The Committee in its discretion may cause to be made
           -----------
as a condition precedent to the payment of any cash or stock, appropriate
arrangements for the withholding of any federal, state, local or foreign taxes.

     10.   Amendment, Suspension and Discontinuance.  The Board may from time to
           ----------------------------------------
time amend, suspend or discontinue the Plan; provided, however, no action of the
Board may, without the approval of Shareholders (a) increase the number of
shares reserved for Stock Incentives pursuant to paragraph 2; (b) permit
granting of any ISO at any option price less than that determined in accordance
with paragraph 5(c); (c) change the eligibility of employees or class of persons
to receive the Stock Incentives (other than as described in paragraphs 1, 2 and
4); or (d) permit the granting of Stock Incentives after the termination date
provided for in paragraph 11.

     11.   Effective Date and Term.  The Effective Date of the Plan shall be the
           -----------------------
date of the approval of this amendment and restatement of the Plan by the
Shareholders of the Company within twelve months before or after this amendment
and restatement of the Plan is approved by the Company's Board of Directors.
This Plan shall terminate and no Stock Incentive shall be granted after the
expiration of the period of ten years from the date this amendment and
restatement of the Plan was adopted by the Board of Directors; provided that any
Stock Incentives previously granted may be exercised in accordance with their
terms.

     12.   The Plan shall be governed by and construed in accordance with the
laws of the State of Illinois.

                                       7

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