Document:

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EXHIBIT 10.4

                        TERMINATION AND RELEASE AGREEMENT

     THIS TERMINATION AND RELEASE AGREEMENT (the "Agreement) is dated as of
March 7th, 2002 (the "Effective Date"), by and between Schein Pharmaceutical
(Bermuda), LTD. ("Schein'), and Endorex Newco, LTD. ("Endorex"),

                                    RECITALS

     WHEREAS, on February 2, 2000, Schein and Endorex entered into a
Development, Licence and Supply Agreement (the "Development Agreement"); and,

     WHEREAS, Schein and Endorex now mutually desire to terminate the
Development Agreement and each of their respective rights, duties, obligation
and remedies under the Development Agreement, all upon the terms and conditions
as set forth below.

     NOW, THEREFORE, the parties to this Agreement hereby agree as follows:

1.   TERMINATION OF DEVELOPMENT AGREEMENT.

     (a) Effective as of the Effective Date, Schein and Endorex hereby agree
that the Development Agreement and all licences contained therein are hereby
terminated and of no further force or effect whatsoever and, except as otherwise
set forth herein, neither Schein nor Endorex shall have any further obligations
with respect thereto. In consideration for the parties entering into this
Agreement effectively terminating the Development Agreement, and the general
releases contained herein, within three (3) business days from the Effective
Date, Schein shall pay to Endorex the amount of three-hundred thousand dollars
($300,000.00) in cash by wire transfer of immediately available funds to an
account designated by Endorex as set forth on Exhibit A, attached hereto and
incorporated herein by this reference.

     (b) Without limiting subparagraph (a) above, each of Schein and Endorex
expressly acknowledge and agree that neither party nor any of their respective
Affiliates (as defined below) shall have any ongoing obligations, liabilities or
responsibilities of any nature whatsoever pursuant to the non-competition
covenant contained in Clause 4 of the Development Agreement and that, except as
otherwise provide herein, the provisions of Clause 14 -CONSEQUENCES OF
TERMINATION shall not survive the termination of the Development Agreement and
shall be of no further force or effect. For purposes hereof, "Affiliate" shall
mean, when used with respect to a person, any other person directly or
indirectly controlling, controlled by, or under common control with the subject
person. For purposes of this Agreement, "control" means the direct or indirect
ownership of over 50% of the outstanding voting securities of a person, or the
right to receive over 50% of the profits or earnings of a person.

     (c) Notwithstanding the above, the confidentiality provisions set forth in
Subsection 17.1 of the Development Agreement shall remain in full force and
effect for a period of seven years from the Effective Date and, further, the
indemnity obligations contained in Subsections

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15.7.1 and 15.7.2 of the Development Agreement shall survive the termination of
the Development Agreement effected hereby.

2.   MUTUAL RELEASE.

     (a) RELEASE BY ENDOREX. Except as expressly set forth in Paragraph 1 above,
Endorex hereby releases and forever discharges Schein and its Affiliates, and
its and their respective directors, officers, employees, agents, successors arid
assigns, from and against any and all liabilities, obligations, expenses,
losses, damages, indemnities, claims, causes of action and demands whatsoever
which Endorex ever had, now has or may have, whether now known or unknown,
against Schein and/or any of its Affiliates arising out of, resulting from, or
in any way related to the Development Agreement.

     (b) RELEASE BY SCHEIN. Except as expressly set forth in Paragraph 1 above,
Schein hereby releases and forever discharges Endorex and its Affiliates, and
its and their respective directors, officers, employees, agents, successors and
assigns, from and against any and all liabilities, obligations, expenses,
losses, damages, indemnities, claims, causes of action and demands whatsoever
which Schein ever had, now has or may have, whether now known or unknown,
against Endorex and/or any of its Affiliates arising out of, resulting from, or
in any way related to the Development Agreement.

     (c) The parties understand and expressly agree that the mutual releases set
forth herein extend to all claims arising on or prior to the Effective Date
related to the Development Agreement of every nature and kind whatsoever,
whether known or unknown, as provided by California Civil Code Section 1542 and
any other law in any other state or jurisdiction to the same or similar effect,
arid the parties do hereby waive and relinquish any and all rights, benefits, or
protections they may have under such laws. Section 1542 of the Civil Code of the
State of California provides as follows:

     "A general release does not extend to claims which the creditor does not
     know or suspect to exist in his favor at the time of executing the release,
     which if known by him must have materially affected his settlement with the
     debtor."

3.   MISCELLANEOUS.

     (a) ASSIGNMENT, BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by one party
(whether by operation of law or otherwise) without the prior written consent of
the other party. Provided, however, that either party may assign this Agreement
without the other party's consent in connection with a merger, acquisition or
other sale or transfer of such party's business or the portion of the business
to which this Agreement relates, Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective permitted successors and assigns.

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     (b) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to its rules of
conflict of laws.

     (c) COUNTERPARTS. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.

     (d) SEVERABILITY. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering Invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.

     (e) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties concerning its subject matter and supercedes any and all agreements,
written or oral, between the parties hereto concerning the subject matter of
this Agreement. This Agreement may be amended or modified, or any provision
hereof waived, only by a written instrument executed by the parties hereto.

     IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above,

SCHEIN PHARMACEUTICAL
(BERMUDA) LTD.                             ENDOREX NEWCO, LTD.
By:                                        By:
   ------------------------------             ----------------------------------
Title:                                     Title:
      ---------------------------                -------------------------------

                                        3<Page>

EXHIBIT 10.5

                               ENDOREX CORPORATION
                AMENDED AND RESTATED 1995 OMNIBUS INCENTIVE PLAN
                          (APPROVED NOVEMBER 29, 2001)

ARTICLE ONE
GENERAL PROVISIONS

I. PURPOSE OF THE PLAN

This Amended and Restated 1995 Omnibus Incentive Plan is intended to promote the
interests of Endorex Corporation, a Delaware corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the `Corporation as an incentive for
them to remain in the service of the Corporation. Capitalized terms shall have
the meanings assigned to such terms in the attached Appendix.

II. STRUCTURE OF THE PLAN

A. The Plan shall be divided into four separate equity programs:

(i) the Discretionary Option Grant Program under which eligible persons may, at
the discretion of the Plan Administrator, be granted options to purchase shares
of Common Stock,

(ii) the Salary Investment Option Grant Program under which eligible employees
may elect to have a portion of their base salary invested each year in options
to purchase shares of Common Stock,

(iii) the Automatic Option Grant Program under which eligible non-employee Board
members shall automatically receive options at periodic intervals to purchase
shares of Common Stock, and

(iv) the Director Fee Option Grant Program under which non-employee
Board members may elect to have all or any portion of their annual retainer fee
otherwise payable in cash applied to a special option grant.

B. The provisions of Articles One and Six shall apply to all equity programs
under the Plan and shall accordingly govern the interests of all persons under
the Plan.

III. ADMINISTRATION OF THE PLAN

A. The Board shall have the authority to administer the Discretionary Option
Grant Program with respect to Section 16 Insiders but may delegate such
authority in whole or in part to the Primary Committee. The Board or the Primary
Committee shall have sole and exclusive authority to exercise all discretionary
functions under the Salary Investment Option Grant Program.

B. Administration of the Discretionary Option Grant Program with respect to all
other persons eligible to participate in that program may, at the Board's
discretion, be vested in the Primary Committee or a Secondary Committee, or the
Board may retain the power to administer that program with respect to all such
persons.

C. Members of the Primary Committee or any Secondary Committee shall serve for
such period of time as the Board may determine and may be removed by the Board
at any time. The Board may also at any time terminate the functions of any
Secondary Committee and reassume all powers and authority previously delegated
to such committee.

D. Each Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority to establish such rules
and regulations as it may deem appropriate for proper administration of the
Discretionary Option Grant Program and to

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make such determinations under, and issue such interpretations of, the
provisions of such program and any outstanding options thereunder as it may deem
necessary or advisable. Decisions of the Plan Administrator within the scope of
its administrative functions under the Plan shall be final and binding on all
parties who have an interest in the Discretionary Option Grant Program under its
jurisdiction or any option thereunder.

E. Service on the Primary Committee or the Secondary Committee shall constitute
service as a Board member, and members of each such committee shall accordingly
be entitled to full indemnification and reimbursement as Board members for their
service on such committee. No member of the Primary Committee or the Secondary
Committee shall be liable for any act or omission made in good faith with
respect to the Plan or any option grants under the Plan.

F. Administration of the Automatic Option Grant and Director Fee Option Grant
Programs shall be self-executing in accordance with the terms of those programs,
and no Plan Administrator shall exercise any discretionary functions with
respect to option grants made under those programs.

IV. ELIGIBILITY

A. The persons eligible to participate in the Discretionary Option Grant Program
are as follows:

(i) Employees,

(ii) non-employee members of the Board or the board of directors of any Parent
or Subsidiary, and

(iii) consultants and other independent advisors who provide services to the
Corporation (or any Parent or Subsidiary).

B. Only Employees who are Section 16 Insiders or other highly compensated
individuals shall be eligible to participate in the Salary Investment Option
Grant Program.

C. Each Plan Administrator shall, within the scope of its administrative
jurisdiction under the Plan, have full authority (subject to the provisions of
the Plan) to determine, with respect to the option grants under the
Discretionary Option Grant Program, which eligible persons are to receive option
grants, the time or times when such option grants are to be made, the number of
shares to be covered by each such grant, the status of the granted option as
either an Incentive Option or a Non-Statutory Option, the time or times at which
each option is to become exercisable, the vesting schedule (if any) applicable
to the option shares and the maximum term for which the option is to remain
outstanding.

D. Only non-employee Board members shall be eligible to participate in the
Automatic Option Grant and Director Fee Option Grant Programs.

V. STOCK SUBJECT TO THE PLAN

A. The stock issuable under the Plan shall be shares of authorized but unissued
or reacquired Common Stock, including shares repurchased by the Corporation on
the open market. The maximum number of shares of Common Stock reserved for
issuance over the term of the Plan shall not exceed 4,500,000 shares. Such
authorized share reserve is comprised of (i) the number of shares which remain
available for issuance, as of the Plan Restatement Date, under the Predecessor
Plans as last approved by the Corporation's stockholders, including the shares
subject to the outstanding options to be incorporated into the Plan and the
additional shares which would otherwise be available for future grant (86,667
shares), plus (ii) the additional increase of 1,413,333 shares authorized by the
Board on October 21, 1997 and subsequently approved by the stockholders, (iii)
the additional increase of 500,000 shares authorized by the Board on February
11, 1998 and subsequently approved by the stockholders, (iv) the 99,360 share,
107,557 share and 127,419 share increases effected on January 4, 1999, January
3, 2000 and January 2, 2001, respectively, pursuant to the annual share increase
provisions of Section V.B., and (v) the additional increase of 2,165,664 shares
authorized by the Board on May 16, 2001 subject to approval by the stockholders
at the 2001 Annual Meeting. The share reserve numbers reflect the 1-for-15
reverse stock split effected on June 11, 1997.

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B. The number of shares of Common Stock available for issuance under the Plan
shall automatically increase on the first trading day of each fiscal year during
the term of the Plan, beginning with the 1999 fiscal year, by an amount equal to
one percent (1%) of the shares of Common Stock outstanding on the last trading
day of the immediately preceding fiscal year, but in no event shall any such
annual increase exceed 500,000 shares. No Incentive Options may be granted on
the basis of the additional shares of Common Stock added to the share reserve as
a result of the automatic annual increases effected on January 4, 1999, January
3, 2000 and January 2, 2001.

C. No one person participating in the Plan may receive options and separately
exercisable stock appreciation rights for more than 750,000 shares of Common
Stock per calendar year beginning with the 1998 calendar year.

D. Shares of Common Stock subject to outstanding options shall be available for
subsequent issuance under the Plan to the extent (i) the options expire or
terminate for any reason prior to exercise in full or (ii) the options are
cancelled in accordance with the cancellation-regrant provisions of Article Two.
Unvested shares issued under the Plan and subsequently repurchased by the
Corporation at the original issue price paid per share pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants under the Plan. However, should the exercise price of an option under the
Plan be paid with shares of Common Stock or should shares of Common Stock
otherwise issuable under the Plan be withheld by the Corporation in satisfaction
of the withholding taxes incurred in connection with the exercise of an option
under the Plan, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised, and not by the net number of shares of Common Stock issued
to the holder of such option.

E. Should any change be made to the Common Stock by reason of any stock split,
stock dividend, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration, appropriate adjustments shall be made to
(i) the maximum number and/or class of securities issuable under the Plan, (ii)
the maximum number and/or class of securities by which the share reserve may
increase annually pursuant to the provisions of Section V.B., (iii) the number
and/or class of securities for which any one person may be granted options and
separately exercisable stock appreciation rights per calendar year, (iv) the
number and/or class of securities for which grants are subsequently to be made
under the Automatic Option Grant Program and (v) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option in order to prevent the dilution or enlargement of benefits thereunder.
The adjustments determined by the Plan Administrator shall be final, binding and
conclusive.

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ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM

I. OPTION TERMS

Each option shall be evidenced by one or more documents in the form approved by
the Plan Administrator; PROVIDED, however, that each such document shall comply
with the terms specified below. Each document evidencing an Incentive Option
shall, in addition, be subject to the provisions of the Plan applicable to such
options.

A. EXERCISE PRICE.

1. The exercise price per share shall not be less than eighty-five percent (85%)
of the Fair Market Value per share of Common Stock on the option grant date
unless otherwise determined by the Plan Administrator.

2. The exercise price shall become immediately due upon exercise of the option
and shall, subject to the provisions of Section I of Article Six and the
documents evidencing the option, be payable in one or more of the forms
specified below:

(i) cash or check made payable to the Corporation,

(ii) in shares of Common Stock held for the requisite period necessary to avoid
a charge to the Corporation's earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date, or

(iii) to the extent the option is exercised for vested shares, through a special
sale and remittance procedure pursuant to which the Optionee shall concurrently
provide irrevocable written instructions to (a) a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares and remit to
the Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the purchased
shares plus all applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise and (b)
the Corporation to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale. Except to the extent such
sale and remittance procedure is utilized, payment of the exercise price for the
purchased shares must be made on the Exercise Date.

B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at such time
or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.

C. EFFECT OF TERMINATION OF SERVICE.

1. The following provisions shall govern the exercise of any options held by the
Optionee at the time of cessation of Service or death:

(i) Any option outstanding at the time of the Optionee's cessation of Service
for any reason shall remain exercisable for such period of time thereafter as
shall be determined by the Plan Administrator and set forth in the documents
evidencing the option, but no such option shall be exercisable after the
expiration of the option term.

(ii) Any option exercisable in whole or in part by the Optionee at the time of
death may be exercised subsequently by the personal representative of the
Optionee's estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent and
distribution.

(iii) During the applicable post-Service exercise period, the option may not be
exercised in the aggregate for more than the number of vested shares for which
the option is exercisable on the date of the Optionee's cessation of Service.
Upon the expiration of the applicable exercise period or (if earlier) upon the
expiration of the option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has not been exercised.
However, the option shall, immediately upon the Optionee's cessation of Service,
terminate and cease to be outstanding to the extent the option is not otherwise
at that time exercisable for vested shares. (iv) Should the Optionee's Service
be terminated for Misconduct, then all outstanding options held by the Optionee
shall terminate immediately and cease to be outstanding.

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2. The Plan Administrator shall have the discretion, exercisable either at the
time an option is granted or at any time while the option remains outstanding,
to:

(i) extend the period of time for which the option is to remain exercisable
following the Optionee's cessation of Service from the period otherwise in
effect for that option to such greater period of time as the Plan Administrator
shall deem appropriate, but in no event beyond the expiration of the option
term, and/or

(ii) permit the option to be exercised, during the applicable post-Service
exercise period, not only with respect to the number of vested shares of Common
Stock for which such option is exercisable at the time of the Optionee's
cessation of Service but also with respect to one or more additional
installments in which the Optionee would have vested under the option had the
Optionee continued in Service.

D. STOCKHOLDER RIGHTS. The holder of an option shall have no stockholder rights
with respect to the shares subject to the option until such person shall have
exercised the option, paid the exercise price and become a holder of record of
the purchased shares.

E. REPURCHASE RIGHTS. The Plan Administrator shall have the discretion to grant
options which are exercisable for unvested shares of Common Stock. Should the
Optionee cease Service while holding such unvested shares, the Corporation shall
have the right to repurchase, at the exercise price paid per share, any or all
of those unvested shares. The terms upon which such repurchase right shall be
exercisable (including the period and procedure for exercise and the appropriate
vesting schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right.

F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee,
Incentive Options shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, a Non-Statutory Option
may, in connection with the Optionee's estate plan, be assigned in whole or in
part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for the benefit of one or
more such family members. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate.

II. INCENTIVE OPTIONS

The terms specified below shall be applicable to all Incentive Options. Except
as modified by the provisions of this Section II, all the provisions of Articles
One, Two and Five shall be applicable to Incentive Options. Options which are
specifically designated as Non-Statutory Options when issued under the Plan
shall not be subject to the terms of this Section II.

A. ELIGIBILITY. Incentive Options may only be granted to Employees.

B. EXERCISE PRICE. The exercise price per share shall not be less than one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.

C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares of Common
Stock (determined as of the respective date or dates of grant) for which one or
more options granted to any Employee under the Plan (or any other option plan of
the Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one (1) calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.

D. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is granted is a
10% Stockholder, then the exercise price per share shall not be less than one
hundred ten percent

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(110%) of the Fair Market Value per share of Common Stock on the option grant
date, and the option term shall not exceed five (5) years measured from the
option grant date.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. In the event of any Corporate Transaction, each outstanding option shall
automatically accelerate so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, become fully exercisable for
all of the shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
However, an outstanding option shall NOT so accelerate if and to the extent: (i)
such option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation (or parent thereof) or to be replaced with
a comparable option to purchase shares of the capital stock of the successor
corporation (or parent thereof), (ii) such option is to be replaced with a cash
incentive program of the successor corporation which preserves the spread
existing on the unvested option shares at the time of the Corporate Transaction
and provides for subsequent payout in accordance with the same vesting schedule
applicable to such option or (iii) the acceleration of such option is subject to
other limitations imposed by the Plan Administrator at the time of the option
grant. The determination of option comparability under clause (i) above shall be
made by the Plan Administrator, and its determination shall be final, binding
and conclusive.

B. All outstanding repurchase rights shall also terminate automatically, and the
shares of Common Stock subject to those terminated rights shall immediately vest
in full, in the event of any Corporate Transaction, except to the extent: (i)
those repurchase rights are to be assigned to the successor corporation (or
parent thereof) in connection with such Corporate Transaction or (ii) such
accelerated vesting is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.

C. Notwithstanding Section III.A. and Section III.B. of this Article Two, the
Plan Administrator shall have the discretion, exercisable either at the time the
option is granted or at any time while the option remains outstanding, to
provide for the automatic acceleration of one or more outstanding options (and
the automatic termination of one or more outstanding repurchase rights with the
immediate vesting of the shares of Common Stock subject to those rights) upon
the occurrence of a Corporate Transaction, whether or not those options are to
be assumed or replaced (or those repurchase rights are to be assigned) in the
Corporate Transaction. The Plan Administrator shall also have the discretion to
grant options which do not accelerate whether or not such options are assumed
(and to provide for repurchase rights that do not terminate whether or not such
rights are assigned) in connection with a Corporate Transaction.

D. Immediately following the consummation of the Corporate Transaction, all
outstanding options shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof).

E. Each option which is assumed in connection with a Corporate Transaction shall
be appropriately adjusted, immediately after such Corporate Transaction, to
apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to (i) the number and class of securities
available for issuance under the Plan following the consummation of such
Corporate Transaction, (ii) the exercise price payable per share under each
outstanding option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same and (iii) the maximum number of securities
and/or class of securities for which any one person may be granted stock
options, separately exercisable stock appreciation rights and direct stock
issuances under the Plan.

F. The Plan Administrator shall have the discretion, exercisable at the time the
option is granted or at any time while the option remains outstanding, to
provide for the automatic acceleration of any options which are assumed or
replaced in a Corporate Transaction and do not otherwise accelerate at that time
(and the termination of any of the Corporation's

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outstanding repurchase rights which do not otherwise terminate at the time of
the Corporate Transaction) in the event the Optionee's Service should
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of such Corporate Transaction. Any options so accelerated shall remain
exercisable for fully-vested shares until the EARLIER of (i) the expiration of
the option term or (ii) the expiration of the one (1)-year period measured from
the effective date of the Involuntary Termination.

G. The Plan Administrator shall have the discretion, exercisable either at the
time the option is granted or at any time while the option remains outstanding,
to (i) provide for the automatic acceleration of one or more outstanding options
(and the automatic termination of one or more outstanding repurchase rights with
the immediate vesting of the shares of Common Stock subject to those rights)
upon the occurrence of a Change in Control or (ii) condition any such option
acceleration (and the termination of any outstanding repurchase rights) upon the
subsequent Involuntary Termination of the Optionee's Service within a designated
period (not to exceed eighteen (18) months) following the effective date of such
Change in Control. Any options accelerated in connection with a Change in
Control shall remain fully exercisable until the expiration or sooner
termination of the option term.

H. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Non-Statutory Option under the Federal tax laws.

I. The grant of options under the Discretionary Option Grant Program shall in no
way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

IV. CANCELLATION AND REGRANT OF OPTIONS

The Plan Administrator shall have the authority to effect, at any time and from
time to time, with the consent of the affected option holders, the cancellation
of any or all outstanding options under the Discretionary Option Grant Program
(including outstanding options incorporated from the Predecessor Plans) and to
grant in substitution new options covering the same or different number of
shares of Common Stock but with an exercise price per share based on the Fair
Market Value per share of Common Stock on the new grant date.

V. STOCK APPRECIATION RIGHTS

A. The Plan Administrator shall have full power and authority to grant to
selected Optionees tandem stock appreciation rights and/or limited stock
appreciation rights.

B. The following terms shall govern the grant and exercise of tandem stock
appreciation rights:

(i) One or more Optionees may be granted the right, exercisable upon such terms
as the Plan Administrator may establish, to elect between the exercise of the
underlying option for shares of Common Stock and the surrender of that option in
exchange for a distribution from the Corporation in an amount equal to the
excess of (a) the Fair Market Value (on the option surrender date) of the number
of shares in which the Optionee is at the time vested under the surrendered
option (or surrendered portion thereof) over (b) the aggregate exercise price
payable for such shares.

(ii) No such option surrender shall be effective unless it is approved by the
Plan Administrator, either at the time of the actual option surrender or at any
earlier time. If the surrender is so approved, then the distribution to which
the Optionee shall be entitled may be made in shares of Common Stock valued at
Fair Market Value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.

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(iii) If the surrender of an option is rejected by the Plan Administrator, then
the Optionee shall retain whatever rights the Optionee had under the surrendered
option (or surrendered portion thereof) on the option surrender date and may
exercise such rights at any time prior to the later of (a) five (5) business
days after the receipt of the rejection notice or (b) the last day on which the
option is otherwise exercisable in accordance with the terms of the documents
evidencing such option, but in no event may such rights be exercised more than
ten (10) years after the option grant date.

C. The following terms shall govern the grant and exercise of limited stock
appreciation rights:

(i) One or more Section 16 Insiders may be granted limited stock appreciation
rights with respect to their outstanding options.

(ii) Upon the occurrence of a Hostile Take-Over, each such individual holding
one or more options with such a limited stock appreciation right shall have the
unconditional right (exercisable for a thirty (30)-day period following such
Hostile Take-Over) to surrender each such option to the Corporation, to the
extent the option is at the time exercisable for vested shares of Common Stock.
In return for the surrendered option, the Optionee shall receive a cash
distribution from the Corporation in an amount equal to the excess of (a) the
Take-Over Price of the shares of Common Stock which are at the time vested under
each surrendered option (or surrendered portion thereof) over (b) the aggregate
exercise price payable for such shares. Such cash distribution shall be paid
within five (5) days following the option surrender date.

(iii) Neither the approval of the Plan Administrator nor the consent of the
Board shall be required in connection with such option surrender and cash
distribution.

(iv) The balance of the option (if any) shall continue in full force and effect
in accordance with the documents evidencing such option.

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ARTICLE THREE
SALARY INVESTMENT OPTION GRANT PROGRAM

I. OPTION GRANTS

The Primary Committee shall have the sole and exclusive authority to determine
the calendar year or years (if any) for which the Salary Investment Option
Program is to be in effect and to select the Employees eligible to participate
in the Salary Investment Option Grant Program for those calendar year or years.
Each selected Employee who elects to participate in the Salary Investment Option
Grant Program must, prior to the start of each calendar year of participation,
file with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by a designated percentage (in multiples of one percent (1%)). However, the
amount of such salary reduction must be not less than Ten Thousand Dollars
($10,000.00) and must not be more than Seventy-Five Thousand Dollars
($75,000.00). Each individual who files a proper salary reduction authorization
shall automatically be granted an option under this Salary Investment Option
Grant Program on or before the last trading day in January of the calendar year
for which that salary reduction is to be in effect.

II. OPTION TERMS

Each option shall be a Non-Statutory Option evidenced by one or more documents
in the form approved by the Plan Administrator; PROVIDED, however, that each
such document shall comply with the terms specified below.

A. EXERCISE PRICE.

1. The exercise price per share shall be thirty-three and one-third percent
(33 1/3%) of the Fair Market Value per share of Common Stock on the option grant
date.

2. The exercise price shall become immediately due upon exercise of the option
and shall be payable in one or more of the alternative forms authorized under
the Discretionary Option Grant Program. Except to the extent the sale and
remittance procedure specified thereunder is utilized, payment of the exercise
price for the purchased shares must be made on the Exercise Date.

B. NUMBER OF OPTION SHARES. The number of shares of Common Stock subject to the
option shall be determined pursuant to the following formula (rounded down to
the nearest whole number):
X = A y (B x 66 2/3%), where
X is the number of option shares,
A is the dollar amount of the Optionee's base salary reduction for the calendar
year, and
B is the Fair Market Value per share of Common Stock on the option
grant date.

C. EXERCISE AND TERM OF OPTIONS. The option shall become exercisable in a series
of twelve (12) successive equal monthly installments upon the Optionee's
completion of each calendar month of Service in the calendar year for which the
salary reduction is in effect. Each option shall have a maximum term of ten (10)
years measured from the option grant date.

D. EFFECT OF TERMINATION OF SERVICE. Should the Optionee cease Service for any
reason while holding one or more options under this Article Three, then each
such option shall remain exercisable, for any or all of the shares for which the
option is exercisable at the time of such cessation of Service, until the
EARLIER of (i) the expiration of the ten (10)-year option term or (ii) the
expiration of the three (3)-year period measured from the date of such cessation
of Service. Should the Optionee die while holding one or more options under this
Article Three, then each such option may be exercised, for any or all of the
shares for which the option is exercisable at the time of the Optionee's
cessation of Service (less any shares subsequently purchased by the Optionee
prior to death), by the personal representative of the Optionee's estate or by
the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution. Such
right of exercise shall lapse, and the option shall terminate, upon the EARLIER
of (i) the expiration of the ten (10)-year option term or (ii) the three
(3)-year period measured from the date of the Optionee's

<Page>

cessation of Service. However, the option shall, immediately upon the Optionee's
cessation of Service for any reason, terminate and cease to remain outstanding
with respect to any and all shares of Common Stock for which the option is not
otherwise at that time exercisable.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. In the event of any Corporate Transaction while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for all of the shares of Common Stock at
the time subject to such option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. Each such outstanding option
shall be assumed by the successor corporation (or parent thereof) in the
Corporate Transaction and shall remain exercisable for the fully-vested shares
until the earlier of (i) the expiration of the option term or (ii) the
expiration of the three (3)-year period measured from the date of Optionee's
cessation of Service.

B. In the event of a Change in Control while the Optionee remains in Service,
each outstanding option held by such Optionee under this Salary Investment
Option Grant Program shall automatically accelerate so that each such option
shall immediately become fully exercisable for all of the shares ofCommon Stock
at the time subject to such option and may be exercised for any or all of such
shares as fully-vested shares of Common Stock. The option shall remain so
exercisable until the earlier of (i) the expiration of the option term or (ii)
the expiration of the three (3)-year period measured from the date of Optionee's
cessation of Service.

C. The grant of options under the Salary Investment Option Grant Program shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

IV. REMAINING TERMS

The remaining terms of each option granted under the Salary Investment Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.

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ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM

I. OPTION TERMS

A. GRANT DATES. Option grants shall be made on the dates specified below:

1. Each individual serving as a non-employee Board member on the Plan
Restatement Date shall automatically be granted at that time a Non-Statutory
Option to purchase 42,000 shares of Common Stock.

2. Each individual who is first elected or appointed as a non-employee Board
member at any time beginning with the 2001 Annual Meeting shall automatically be
granted, on the date of such initial election or appointment, a Non-Statutory
Option to purchase 50,000 shares of Common Stock.

3. Each individual who is re-elected as a non-employee Board member at any time
beginning with the 2001 Annual Meeting shall automatically be granted, on the
date of such re-election, a Non-Statutory Option to purchase 10,000 shares of
Common Stock, provided that individual has served as a non-employee Board member
for at least six (6) months.

B. EXERCISE PRICE.

1. The exercise price per share shall be equal to one hundred percent (100%) of
the Fair Market Value per share of Common Stock on the option grant date.

2. The exercise price shall be payable in one or more of the alternative forms
authorized under the Discretionary Option Grant Program. Except to the extent
the sale and remittance procedure specified thereunder is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.

C. OPTION TERM. Each option shall have a term of ten (10) years measured from
the option grant date.

D. EXERCISE AND VESTING OF OPTIONS. Each option shall be immediately exercisable
for any or all of the option shares. Each initial 50,000-share option shall be
immediately vested. However, any shares purchased under the annual 10,000-share
option shall be subject to repurchase by the Corporation, at the exercise price
paid per share, upon the Optionee's cessation of Board service prior to vesting
in those shares. Each annual 10,000-share option shall vest, and the
Corporation's repurchase right shall lapse, on the first year anniversary of the
option grant date.

E. TERMINATION OF BOARD SERVICE. The following provisions shall govern the
exercise of any options outstanding at the time the Optionee ceases to serve as
a Board member:

(i) Any option outstanding at the time of the Optionee's cessation of Board
service for any reason shall remain exercisable for a twelve (12)-month period
following the date of such cessation of Board service.

(ii) Any option exercisable in whole or in part by the Optionee at the time of
death may be exercised by the personal representative of the Optionee's estate
or the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution.

(iii) During the twelve (12)-month exercise period, the option may not be
exercised in the aggregate for more than the number of vested shares of Common
Stock for which the option is exercisable at the time of the Optionee's
cessation of Board service.

(iv) Should the Optionee cease to serve as a Board member by reason of death or
Permanent Disability, then all shares at the time subject to the option shall
immediately vest so that such option may, during the twelve (12)-month exercise
period following such cessation of Board service, be exercised for all or any
portion of those shares as fully-vested shares of Common Stock.

(v) In no event shall the option remain exercisable after the expiration of the
option term. Upon the expiration of the twelve (12)-month exercise period or (if
earlier) upon the expiration of the option term, the option shall terminate and
cease to be outstanding for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee's cessation
of Board service for any reason other than death or Permanent Disability,
terminate and cease to be outstanding to the extent the option is not otherwise
at that time exercisable for vested shares.

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II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

A. In the event of any Corporate Transaction, the shares of Common Stock at the
time subject to each outstanding option but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, become fully exercisable for
all of the shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of those shares as fully-vested shares of
Common Stock. Immediately following the consummation of the Corporate
Transaction, each automatic option grant shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

B. In connection with any Change in Control, the shares of Common Stock at the
time subject to each outstanding option but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to
the effective date of the Change in Control, become fully exercisable for all of
the shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of those shares as fully-vested shares of
Common Stock. Each such option shall remain exercisable for such fully-vested
option shares until the expiration or sooner termination of the option term or
the surrender of the option in connection with a Hostile Take-Over.

C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty
(30)-day period in which to surrender to the Corporation each of his or her
outstanding automatic option grants. The Optionee shall in return be entitled to
a cash distribution from the Corporation in an amount equal to the excess of (i)
the Take-Over Price of the shares of Common Stock at the time subject to each
surrendered option (whether or not the Optionee is otherwise at the time vested
in those shares) over (ii) the aggregate exercise price payable for such shares.
Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation.

D. Each option which is assumed in connection with a Corporate Transaction shall
be appropriately adjusted, immediately after such Corporate Transaction, to
apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the exercise price payable per share under
each outstanding option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same.

E. The grant of options under the Automatic Option Grant Program shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

III. REMAINING TERMS

The remaining terms of each option granted under the Automatic Option Grant
Program shall be the same as the terms in effect for options made under the
Discretionary Option Grant Program.

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ARTICLE FIVE
DIRECTOR FEE OPTION GRANT PROGRAM

I. OPTION GRANTS

Each non-employee Board member may elect to apply all or any portion of the
annual retainer fee otherwise payable in cash for his or her service on the
Board to the acquisition of a special option grant under this Director Fee
Option Grant Program. Such election must be filed with the Corporation's Chief
Financial Officer prior to the first day of the calendar year for which the
annual retainer fee which is the subject of that election is otherwise payable.
Each non-employee Board member who files such a timely election shall
automatically be granted an option under this Director Fee Option Grant Program
on the first trading day in January in the calendar year for which the annual
retainer fee which is the subject of that election would otherwise be payable.

II. OPTION TERMS

Each option shall be a Non-Statutory Option governed by the terms and conditions
specified below.

A. EXERCISE PRICE.

1. The exercise price per share shall be equal to thirty-three and one-third
percent (33 1/3%) of the Fair Market Value per share of Common Stock on the
option grant date.

2. The exercise price shall become immediately due upon exercise of the option
and shall be payable in one or more of the alternative forms authorized under
the Discretionary Option Grant Program. Except to the extent the sale and
remittance procedure specified thereunder is utilized, payment of the exercise
price for the purchased shares must be made on the Exercise Date.

B. NUMBER OF OPTION SHARES. The number of shares of Common Stock subject to the
option shall be determined pursuant to the following formula (rounded down to
the nearest whole number):
X = A y (B x 66 2/3%), where
X is the number of option shares,
A is the portion of the annual retainer fee subject to the non-employee Board
member's election, and
B is the Fair Market Value per share of Common Stock on the option grant date.

C. EXERCISE AND TERM OF OPTIONS. The option shall become exercisable for fifty
percent (50%) of the option shares upon the Optionee's completion of the first
six (6) months of Board service in the calendar year for which his or her
election under this Director Fee Option Grant Program is in effect, and the
balance of the option shares shall become exercisable in a series of six (6)
successive equal monthly installments upon the Optionee's completion of each
additional month of Board service during that calendar year. Each option shall
have a maximum term of ten (10) years measured from the option grant date.

D. TERMINATION OF BOARD SERVICE. Should the Optionee cease Board service for any
reason (other than death or Permanent Disability) while holding one or more
options under this Director Fee Option Grant Program, then each such option
shall remain exercisable, for any or all of the shares for which the option is
exercisable at the time of such cessation of Board service, until the EARLIER of
(i) the expiration of the ten (10)-year option term or (ii) the expiration of
the three (3)-year period measured from the date of such cessation of Board
service. However, each option held by the Optionee under this Director Fee
Option Grant Program at the time of his or her cessation of Board service shall
immediately terminate and cease to remain outstanding with respect to any and
all shares of Common Stock for which the option is not otherwise at that time
exercisable.

E. DEATH OR PERMANENT DISABILITY. Should the Optionee's service as a Board
member cease by reason of death or Permanent Disability, then each option held
by such Optionee under this Director Fee Option Grant Program shall immediately
become exercisable for all the shares of Common Stock at the time subject to
that option, and the option may be exercised for any or all of those shares as
fully-vested shares until the EARLIER of (i) the expiration of the ten (10)-year
option term or (ii) the expiration of the three (3)-year period

<Page>

measured from the date of such cessation of Board service. Should the Optionee
die after cessation of Board service but while holding one or more options under
this Director Fee Option Grant Program, then each such option may be exercised,
for any or all of the shares for which the option is exercisable at the time of
the Optionee's cessation of Board service (less any shares subsequently
purchased by Optionee prior to death), by the personal representative of the
Optionee's estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent and
distribution. Such right of exercise shall lapse, and the option shall
terminate, upon the EARLIER of (i) the expiration of the ten (10)-year option
term or (ii) the three (3)-year period measured from the date of the Optionee's
cessation of Board service.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

A. In the event of any Corporate Transaction while the Optionee remains a Board
member, each outstanding option held by such Optionee under this Director Fee
Option Grant Program shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable with respect to the total number of shares of Common
Stock at the time subject to such option and may be exercised for any or all of
those shares as fully vested shares of Common Stock. Each such outstanding
option shall be assumed by the successor corporation (or parent thereof) in the
Corporate Transaction and shall remain exercisable for the fully vested shares
until the EARLIER of (i) the expiration of the ten (10)-year option term or (ii)
the expiration of the three (3)-year period measured from the date of the
Optionee's cessation of Board service.

B. In the event of a Change in Control while the Optionee remains in Service,
each outstanding option held by such Optionee under this Director Fee Option
Grant Program shall automatically accelerate so that each such option shall
immediately become fully exercisable with respect to the total number of shares
of Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock. The option shall
remain so exercisable until the EARLIER or (i) the expiration of the ten
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of the Optionee's cessation of Service.

C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty
(30)-day period in which to surrender to the Corporation each of his or her
outstanding option grants. The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Take-Over Price of the shares of Common Stock at the time subject to each
surrendered option (whether or not the Optionee is otherwise at the time vested
in those shares) over (ii) the aggregate exercise price payable for such shares.
Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation.

D. The grant of options under the Director Fee Option Grant Program shall in no
way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

IV. REMAINING TERMS

The remaining terms of each option granted under this Director Fee Option Grant
Program shall be the same as the terms in effect for option grants made under
the Discretionary Option Grant Program.

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ARTICLE SIX
MISCELLANEOUS

I. FINANCING

A. The Plan Administrator may permit any Optionee to pay the option exercise
price under the Discretionary Option Grant Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. In all events, the maximum credit available to the Optionee
may not exceed the sum of (i) the aggregate option exercise price payable for
the purchased shares plus (ii) any Federal, state and local income and
employment tax liability incurred by the Optionee in connection with the option
exercise.

B. The Plan Administrator may, in its discretion, determine that one or more
such promissory notes shall be subject to forgiveness by the Corporation in
whole or in part upon such terms as the Plan Administrator may deem appropriate.

II. TAX WITHHOLDING

A. The Corporation's obligation to deliver shares of Common Stock upon the
exercise of options or upon the vesting of such shares under the Plan shall be
subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.

B. The Plan Administrator may, in its discretion, provide any or all holders of
Non-Statutory Options or unvested shares of Common Stock under the Plan (other
than the options granted under the Director Fee Option Grant Program) with the
right to use shares of Common Stock in satisfaction of all or part of the Taxes
incurred by such holders in connection with the exercise of their options or the
vesting of their shares. Such right may be provided to any such holder in either
or both of the following formats:

(i) STOCK WITHHOLDING: The election to have the Corporation withhold, from the
shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder. (ii) STOCK
DELIVERY: The election to deliver to the Corporation, at the time the
Non-Statutory Option is exercised or the shares vest, one or more shares of
Common Stock previously acquired by such holder (other than in connection with
the option exercise or share vesting triggering the Taxes) with an aggregate
Fair Market Value equal to the percentage of the Taxes (not to exceed one
hundred percent (100%)) designated by the holder.

III. EFFECTIVE DATE AND TERM OF THE PLAN

A. The Plan was initially adopted by the Board on April 24, 1995. The Plan was
amended on July 15, 1996 to increase the number of shares of Common Stock
available for issuance by 15,000 shares. The Plan was subsequently amended and
restated on October 21, 1997, to effect the following changes: (i) increase the
number of shares by an additional 1,413,333 shares, (ii) provide that the share
reserve shall automatically increase on the first trading day of each fiscal
year beginning with the 1999 fiscal year by an amount equal to one percent (1%)
of the shares outstanding on the last trading day of the preceding fiscal year,
(iii) implement a limit on the number of shares for which any one individual may
be granted options or separately exercisable stock appreciation rights, (iv)
implement the Salary Investment Option Grant, Automatic Option Grant and
Director Fee Option Grant Programs, (v) extend eligibility under the
Discretionary Option Grant Program to all employees of the Corporation (or any
Parent or Subsidiary), non-employee members of the Board or the board of
directors of any Parent or Subsidiary and consultants and other advisors who
provide services to the Corporation (or any parent or Subsidiary), (vi) allow
any unvested shares issued under the Plan and subsequently repurchased by the
Company at the option exercise price paid per share to be reissued under the
Plan, (vii) eliminate the stock issuance and dividend equivalent right features
of the Plan, (viii) incorporate the Corporation's existing 1994 Non-Employee
Stock Option Plan and the Incentive Stock Option

<Page>

Plan so that the Plan will serve as the successor to those plans and (ix) effect
a series of additional changes to the provisions of the Plan (including the
stockholder approval requirements) in order to allow the Plan Administrator more
flexibility and to take advantage of the recent amendments to Rule 16b-3 of the
1934 Act. The Plan was subsequently amended on February 11, 1998 to increase the
share reserve by an additional 500,000 shares.

B. On February 21, 2001, the Board amended the Plan to: (i) modify the number of
shares and vesting schedule applicable to the initial option grants under the
Automatic Option Grant Program from 42,000 shares vesting over a period of two
years to 50,000 shares vesting immediately and (ii) modify the number of shares
and vesting schedule applicable to the formerly bi-annual grants under the
Automatic Option Grant Program from 12,000 shares vesting over a period of two
years to an annual grant of 10,000 shares vesting over one year. On May 16,
2001, the Board amended the Plan to increase the number of shares of Common
Stock available for issuance under the Plan by 2,165,664 shares. On September
26, 2001, the Board amended the Plan to implement a maximum annual limit of
500,000 shares of Common Stock by which the share reserve may increase annually
over the term of the Plan under the automatic share increase provision
(collectively the "2001 Amendments"). The 2001 Amendments remain subject to
approval by the stockholders at the 2001 Annual Meeting.

C. The Plan shall serve as the successor to the Predecessor Plans, and no
further option grants or direct stock issuances shall be made under the
Predecessor Plans after the date of stockholder approval of this restatement.
All options outstanding under the Predecessor Plans on the Plan Restatement Date
have been incorporated into the Plan and shall be treated as outstanding options
under the Plan. However, each outstanding option so incorporated shall continue
to be governed solely by the terms of the documents evidencing such option, and
no provision of the Plan shall be deemed to affect or otherwise modify the
rights or obligations of the holders of such incorporated options with respect
to their acquisition of shares of Common Stock.

D. The Plan shall terminate upon the EARLIEST of (i) April 23, 2005, (ii) the
date on which all shares available for issuance under the Plan shall have been
issued as fully-vested shares or (iii) the termination of all outstanding
options in connection with a Corporate Transaction. Upon such Plan termination,
all outstanding options and unvested stock issuances shall continue to have
force and effect in accordance with the provisions of the documents evidencing
such options.

IV. AMENDMENT OF THE PLAN

A. The Board shall have complete and exclusive power and authority to amend or
modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect any rights and obligations with respect to
options, stock appreciation rights or unvested stock issuances at the time
outstanding under the Plan unless the Optionee consents to such amendment or
modification. In addition, amendments to the Plan shall be subject to approval
of the Corporation's stockholders to the extent required by applicable laws or
regulations.

B. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant Program that are in excess of the number of shares
then available for issuance under the Plan, provided any excess shares actually
issued under such program are held in escrow until there is obtained stockholder
approval of an amendment sufficiently increasing the number of shares of Common
Stock available for issuance under the Plan. If such stockholder approval is not
obtained within twelve (12) months after the date the first such excess grants
are made, then (i) any unexercised options granted on the basis of such excess
shares shall terminate and cease to be outstanding and (ii) the Corporation
shall promptly refund to the Optionees the exercise paid for any excess shares
issued under the Plan and held in escrow, together with interest (at the
applicable Short Term Federal Rate) for the period the shares were held in
escrow, and such shares shall thereupon be automatically cancelled and cease to
be outstanding.

<Page>

V. USE OF PROCEEDS

Any cash proceeds received by the Corporation from the sale of shares of Common
Stock under the Plan shall be used for general corporate purposes.

VI. REGULATORY APPROVALS

A. The implementation of the Plan, the granting of any option or stock
appreciation right under the Plan and the issuance of any shares of Common Stock
upon the exercise of any option or stock appreciation right shall be subject to
the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the options and stock
appreciation rights granted under it and the shares of Common Stock issued
pursuant to it.

B. No shares of Common Stock or other assets shall be issued or delivered under
the Plan unless and until there shall have been compliance with all applicable
requirements of Federal and state securities laws and all applicable listing
requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock is then listed for trading.

VII. NO EMPLOYMENT/SERVICE RIGHTS

Nothing in the Plan shall confer upon the Optionee any right to continue in
Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining such person) or of the Optionee, which rights are hereby
expressly reserved by each, to terminate such person's Service at any time for
any reason, with or without cause.

<Page>

APPENDIX

The following definitions shall be in effect under the Plan:

A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant program
in effect under the Plan.

B. BOARD shall mean the Corporation's Board of Directors.

C. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:

(i) the acquisition, directly or indirectly, by any person or related group of
persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Corporation),
of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders, which the Board
does not recommend such stockholders to accept, or

(ii) a change in the composition of the Board over a period of thirty-six (36)
consecutive months or less such that a majority of the Board members ceases, by
reason of one or more contested elections for Board membership, to be comprised
of individuals who either (I) have been Board members continuously since the
beginning of such period or (II) have been elected or nominated for election as
Board members during such period by at least a majority of the Board members
described in clause (I) who were still in office at the time the Board approved
such election or nomination.

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

E. COMMON STOCK shall mean the Corporation's common stock.

F. CORPORATE TRANSACTION shall mean either of the following stockholder-approved
transactions to which the Corporation is a party:

(i) a merger or consolidation in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different from the
persons holding those securities immediately prior to such transaction; or

(ii) the sale, transfer or other disposition of all or substantially all of the
Corporation's assets in complete liquidation or dissolution of the Corporation.

G. CORPORATION shall mean Endorex Corporation, a Delaware corporation, and any
corporate successor to all or substantially all of the assets or voting stock of
Endorex Corporation which shall by appropriate action adopt the Plan.

H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option grant
program in effect under the Plan.

I. DIRECTOR FEE OPTION GRANT PROGRAM shall mean the special stock option grant
in effect for non-employee Board members under Article Four of the Plan.

J. EMPLOYEE shall mean an individual who is in the employ of the Corporation (or
any Parent or Subsidiary), subject to the control and direction of the employer
entity as to both the work to be performed and the manner and method of
performance.

K. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.

L. FAIR MARKET VALUE per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:

(i) If the Common Stock is at the time traded on the Nasdaq National Market,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question, as such price is reported by the National
Association of Securities Dealers on the Nasdaq National Market or any successor
system. If there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.

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(ii) If the Common Stock is at the time listed on any Stock Exchange, then the
Fair Market Value shall be the closing selling price per share of Common Stock
on the date in question on the Stock Exchange determined by the Plan
Administrator to be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such exchange. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.

(iii) If the Common Stock is at the time traded on the Nasdaq OTC Market, then
the Fair Market Value shall be the mean of the highest bid and lowest asked
prices per share of Common Stock on the date in question, as such prices are
quoted by the National Association of Securities Dealers. If both bid and asked
prices are not available for the date in question, then the Fair Market Value
shall be the average of the highest bid and lowest asked prices for the last
preceding date for which such quotations exist.

M. HOSTILE TAKE-OVER shall mean the acquisition, directly or indirectly, by any
person or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3
of the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities pursuant
to a tender or exchange offer made directly to the Corporation's stockholders
which the Board does not recommend such stockholders to accept.

N. INCENTIVE OPTION shall mean an option which satisfies the requirements of
Code Section 422.

O. INVOLUNTARY TERMINATION shall mean the termination of the Service of any
individual which occurs by reason of:

(i) such individual's involuntary dismissal or discharge by the Corporation for
reasons other than Misconduct, or

(ii) such individual's voluntary resignation following (A) a change in his or
her position with the Corporation which materially reduces his or her level of
responsibility, (B) a reduction in his or her level of compensation (including
base salary, fringe benefits and participation in corporate performance based
bonus or incentive programs) by more than fifteen percent (15%) or (C) a
relocation of such individual's place of employment by more than fifty (50)
miles, provided and only if such change, reduction or relocation is effected by
the Corporation without the individual's consent.

P. MISCONDUCT shall mean the commission of any act of fraud, embezzlement or
dishonesty by the Optionee, any unauthorized use or disclosure by such person of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by such person adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
any Optionee or other person in the Service of the Corporation (or any Parent or
Subsidiary).

Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.

R. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.

S. OPTIONEE shall mean any person to whom an option is granted under the
Discretionary Option Grant, Automatic Option Grant or Director Fee Option Grant
Program.

T. PARENT shall mean any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation, provided each corporation in
the unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

U. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability of the
Optionee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in death
or to be of

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continuous duration of twelve (12) months or more. However, solely for the
purposes of the Director Fee Option Grant Program, Permanent Disability or
Permanently Disabled shall mean the inability of the non-employee Board member
to perform his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.

V. PLAN shall mean the Corporation's Amended and Restated 1995 Omnibus Incentive
Plan, as set forth in this document.

W. PLAN ADMINISTRATOR shall mean the particular entity, whether the Primary
Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant Program with respect to one or more
classes of eligible persons, to the extent such entity is carrying out its
administrative functions under that program with respect to the persons under
its jurisdiction.

X. PLAN RESTATEMENT DATE shall mean October 21, 1997, the date on which the Plan
was restated by the Board.

Y. PREDECESSOR PLANS shall mean the 1994 Non-Employee Stock Option Plan and the
Incentive Stock Option Plan.

Z. PRIMARY COMMITTEE shall mean the committee of two (2) or more non-employee
Board members appointed by the Board to administer the Discretionary Option
Grant Program with respect to Section 16 Insiders.

AA. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary investment
grant program in effect under the Plan.

BB. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board members
appointed by the Board to administer the Discretionary Option Grant Program with
respect to eligible persons other than Section 16 Insiders.

CC. SECTION 16 INSIDER shall mean an officer or director of the Corporation
subject to the short swing profit liabilities of Section 16 of the 1934 Act.

DD. SERVICE shall mean the performance of services to the Corporation (or any
Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee
member of the board of directors or a consultant or independent advisor, except
to the extent otherwise specifically provided in the documents evidencing the
option grant or stock issuance.

EE. STOCK EXCHANGE shall mean either the American Stock Exchange or the New York
Stock Exchange.

FF. SUBSIDIARY shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

GG. TAKE-OVER PRICE shall mean the GREATER of (i) the Fair Market Value per
share of Common Stock on the date the option is surrendered to the Corporation
in connection with a Hostile Take-Over or (ii) the highest reported price per
share of Common Stock paid by the tender offeror in effecting such Hostile
Take-Over. However, if the surrendered option is an Incentive Option, the
Take-Over Price shall not exceed the clause (i) price per share.

HH. TAXES shall mean the Federal, state and local income and employment tax
liabilities incurred by the holder of Non-Statutory Options or unvested shares
of Common Stock in connection with the exercise of those options or the vesting
of those shares.

II. 10% STOCKHOLDER shall mean the owner of stock (as determined under Code
Section 424(d)) possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation (or any Parent or
Subsidiary).

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