COBALT CORP
EXHIBIT 10.7
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>9
<FILENAME>a2087177zex-10_7.txt
<DESCRIPTION>EXHIBIT 10.7
<TEXT>
<Page>

                                                                    EXHIBIT 10.7

                              EQUITY INCENTIVE PLAN

                               COBALT CORPORATION

                               SEPTEMBER 11, 1998

                 (REFLECTS ALL AMENDMENTS THROUGH MAY 29, 2002)


                         THIS DOCUMENT CONSTITUTES PART
                       OF A PROSPECTUS COVERING SECURITIES
                            THAT HAVE BEEN REGISTERED
                  UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

<Page>

                               COBALT CORPORATION

                              EQUITY INCENTIVE PLAN

                                TABLE OF CONTENTS

<Table>
<Caption>
Article    Section                                                             Page
-------    -------                                                             ----
   <S>       <C>         <C>                                                     <C>
   1                     ESTABLISHMENT, PURPOSE, AND DURATION

             1.1         Establishment of the Plan                                1
             1.2         Purpose of the Plan                                      1
             1.3         Duration of the Plan                                     2

   2                     DEFINITIONS                                              2

   3                     ADMINISTRATION

             3.1         The Committee                                            8
             3.2         Authority of the Committee                               9
             3.3         Decisions Binding                                        9

   4                     SHARES SUBJECT TO THE PLAN
             4.1         Number of Shares                                        10
             4.2         Lapsed Awards                                           11
             4.3         Adjustments in Authorized Shares                        11

   5                     ELIGIBILITY AND PARTICIPATION

             5.1         Eligibility                                             11
             5.2         Actual Participation                                    11

   6                     STOCK OPTIONS

             6.1         Grant of Options                                        12
             6.2         Option Award Agreement                                  14
             6.3         Option Price                                            15
             6.4         Duration of Options                                     15
             6.5         Exercise of Options                                     15
             6.6         Payment                                                 15
             6.7         Restrictions on Share Transferability                   16
             6.8         Termination of Employment Due to Death,
                         Disability or Retirement                                16
             6.9         Termination of Employment for
                         Other Reasons                                           18
             6.10        Transferability of Options                              18
</Table>

                                       i
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<Table>
   <S>       <C>         <C>                                                     <C>
   7                     STOCK APPRECIATION RIGHTS

             7.1         Grant of SARs                                           19
             7.2         Exercise of Tandem SARs                                 20
             7.3         Exercise of Affiliated SARs                             20
             7.4         Exercise of Freestanding SARs                           20
             7.5         SAR Agreement                                           20
             7.6         Term of SARs                                            20
             7.7         Payment of SAR Amount                                   21
             7.8         Rule 16b-3 Requirements                                 21
             7.9         Termination of Employment Due to Death, Disability,
                         or Retirement                                           21
             7.10        Termination of Employment for Other Reasons             22
             7.11        Nontransferability of SARs                              23

   8                     RESTRICTED STOCK

             8.1         Grant of Restricted Stock                               23
             8.2         Restricted Stock Agreement                              23
             8.3         Transferability                                         23
             8.4         Other Restrictions                                      24
             8.5         Certificate Legend                                      24
             8.6         Removal of Restrictions                                 24
             8.7         Voting Rights                                           25
             8.8         Dividends and Other Distributions                       25
             8.9         Termination of Employment Due to Death, Disability, or
                         Retirement                                              25
             8.10        Termination of Employment for Other Reasons             25

   9                     PERFORMANCE UNITS AND PERFORMANCE SHARES

             9.1         Grant of Performance Units/Shares                       26
             9.2         Value of Performance Units/Shares                       26
             9.3         Earning of Performance Units/Shares                     26
             9.4         Form and Timing of Payment of Performance
                         Units/Shares                                            27
             9.5         Termination of Employment Due to Death, Disability,
                         Retirement, or Involuntary Termination (without Cause)  27
             9.6         Termination of Employment for Other Reasons             27
             9.7         Nontransferability                                      27

   10                    BENEFICIARY DESIGNATION                                 28

   11                    DEFERRALS                                               28
</Table>

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<Table>
   <S>       <C>         <C>                                                     <C>
   12                    RIGHTS OF EMPLOYEES

             12.1        Employment                                              28
             12.2        Participation                                           29

   13                    CHANGE IN CONTROL                                       29

   14                    AMENDMENT, MODIFICATION, AND TERMINATION

             14.1        Amendment, Modification, and Termination                30
             14.2        Awards Previously Granted                               30

   15                    WITHHOLDING

             15.1        Tax Withholding                                         30
             15.2        Share Withholding                                       30

   16                    INDEMNIFICATION                                         30

   17                    SUCCESSORS                                              31

   18                    LEGAL CONSTRUCTION

             18.1        Gender and Number                                       31
             18.2        Severability                                            31
             18.3        Requirements of Law                                     31
             18.4        Securities Law Compliance                               32
             18.5        Governing Law                                           32
</Table>

                                      iii
<Page>

                               COBALT CORPORATION
                              EQUITY INCENTIVE PLAN

                 ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION

     1.1  ESTABLISHMENT OF THE PLAN. Cobalt Corporation, a Wisconsin corporation
(hereinafter referred to as the "Company"), has established an incentive
compensation plan to be known as the "Cobalt Corporation Equity Incentive Plan"
(hereinafter referred to as the "Plan"), as set forth in this document. The Plan
permits the grant of Nonqualified Stock Options, Incentive Stock Options, SARs,
Restricted Stock, Performance Units, and Performance Shares.

     This Plan was originally created in connection with the distribution (the
"Distribution"), by the corporation formerly known as United Wisconsin Services,
Inc. of all of the shares in the Company in connection with the spin-off of the
managed care and specialty products business to the Company. In connection with
the Distribution, Options ("Substituted Awards") will be issued under this Plan
in substitution for Options issued under the equity incentive plan of the
corporation formerly known as United Wisconsin Services, Inc. (the "Prior
Plan").

     Upon approval by the Board of Directors of the Company, subject to
ratification by an affirmative vote of the holders of a majority of the Shares
of the Company, the Plan shall become effective as of the Distribution Date (the
"Effective Date"), and shall remain in effect as provided in Section 1.3 herein.

     1.2  PURPOSE OF THE PLAN. The purpose of the Plan is to promote the
success, and enhance the value, of the Company by linking the personal interests
of Participants to those of Company shareholders, and by providing Participants
with an incentive for outstanding performance.

     The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants upon whose
judgment, interest, and special effort the successful conduct of its operation
is dependent.

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     1.3  DURATION OF THE PLAN. Subject to approval by the Board of Directors of
the Company and ratification by the shareholders of the Company, the Plan shall
commence on the Effective Date, as described in Section 1.1 herein, and shall
remain in effect, subject to the right of the Board of Directors to terminate
the Plan at any time pursuant to Article 14 herein, until all Shares subject to
it shall have been purchased or acquired according to the Plan's provisions.
However, in no event may an Award be granted under the Plan more than ten years
after the Effective Date.

                             ARTICLE 2. DEFINITIONS

     Whenever used in the Plan, the following terms shall have the meanings set
forth below and, when the meaning is intended, the initial letter of the word is
capitalized:

          (a)  "Affiliate" - A company closely related to the Company such as
               Blue Cross & Blue Shield United of Wisconsin, or such other
               company as the Board may designate. For purposes of Options
               received in connection with the Distribution, American Medical
               Security Group, Inc. (and its subsidiaries) will be considered
               Affiliates.

          (b)  "Affiliated SAR" means an SAR that is granted in connection with
               a related Option, and which will be deemed to automatically be
               exercised simultaneous with the exercise of the related Option.

          (c)  "Award" means, individually or collectively, a grant under this
               Plan of Nonqualified Stock Options, Incentive Stock Options,
               SARs, Restricted Stock, Performance Units, or Performance Shares.

          (d)  "Award Agreement" means an agreement entered into by each
               Participant and the Company, setting forth the terms and
               provisions applicable to Awards granted to Participants under
               this Plan.

                                       2
<Page>

          (e)  "Beneficial Owner" shall have the meaning ascribed to such term
               in Rule 13d-3 of the General Rules and Regulations under the
               Exchange Act.

          (f)  "Board" or "Board of Directors" means the Board of Directors of
               the Company.

          (g)  "Cause" means: (i) willful and gross misconduct on the part of a
               Participant that is materially and demonstrably detrimental to
               the Company; or (ii) the commission by a Participant of one or
               more acts which constitute an indictable crime under United
               States Federal, state, or local law. "Cause" under either (i) or
               (ii) shall be determined in good faith by the Committee.

          (h)  "Change in Control" of the Company shall be deemed to have
               occurred as of the first day that any one or more of the
               following conditions shall have been satisfied:

               (i)     Any Person (other than those Persons in control of the
                       Company as of the Effective Date, or other than a trustee
                       or other fiduciary holding securities under an employee
                       benefit plan of the Company, or a corporation owned
                       directly or indirectly by the shareholders of the Company
                       in substantially the same proportions as their ownership
                       of stock of the Company), becomes the Beneficial Owner,
                       directly or indirectly, of securities of the Company
                       representing twenty-five percent (25%) or more of the
                       combined voting power of the Company's then outstanding
                       securities; or

               (ii)    During any period of two (2) consecutive years (not
                       including any period prior to the Effective Date),
                       individuals who at the beginning of such period
                       constitute the Board

                                       3
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                       (and any new Director, whose election by the Company's
                       shareholders was approved by a vote of at least
                       two-thirds (2/3) of the Directors then still in office
                       who either were Directors at the beginning of the period
                       or whose election or nomination for election was so
                       approved), cease for any reason to constitute a majority
                       thereof; or

               (iii)   The shareholders of the Company approve: (A) a plan of
                       complete liquidation of the Company; or (B) an agreement
                       for the sale or disposition of all or substantially all
                       the Company's assets; or (C) a merger, consolidation, or
                       reorganization of the Company with or involving any other
                       corporation, other than a merger, consolidation, or
                       reorganization that would result in the voting securities
                       of the Company outstanding immediately prior thereto
                       continuing to represent (either by remaining outstanding
                       or by being converted into voting securities of the
                       surviving entity), at least fifty percent (50%) of the
                       combined voting power of the voting securities of the
                       Company (or such surviving entity) outstanding
                       immediately after such merger, consolidation, or
                       reorganization.

                       However, in no event shall a "Change in Control" be
                       deemed to have occurred, with respect to a Participant,
                       if the Participant is part of a purchasing group which
                       consummates the Change-in-Control transaction. A
                       Participant shall be deemed "part of a purchasing group"
                       for purposes of the preceding sentence if the Participant
                       is an equity participant in the purchasing company or
                       group (except for: (i) passive ownership of less than
                       three percent (3%) of the stock of the purchasing
                       company; or (ii) ownership of equity participation in the
                       purchasing

                                       4
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                       company or group which is otherwise not significant, as
                       determined prior to the Change in Control by a majority
                       of the nonemployee continuing Directors).

          (i)  "Code" means the Internal Revenue Code of 1986, as amended from
               time to time.

          (j)  "Committee" means the Management Review Committee, as specified
               in Article 3, appointed by the Board to administer the Plan.

          (k)  "Company" means Cobalt Corporation, a Wisconsin corporation,
               (until the Effective Date known as Newco/UWS, Inc.) or any
               successor thereto as provided in Article 17 herein.

          (l)  "Director" means any individual who is a Non-Employee member of
               the Board of Directors of the Company.

          (m)  "Directors Plan" means the 1995 Directors Stock Option Plan of
               United Wisconsin Services, Inc.

          (n)  "Disability" means a permanent and total disability, within the
               meaning of Code Section 22(e)(3), as determined by the Committee
               in good faith, upon receipt of sufficient competent medical
               advice from one or more individuals, selected by the Committee,
               who are qualified to give professional medical advice.

          (o)  "Distribution Date" means the date the stock of the Company was
               distributed by the corporation formerly known as United Wisconsin
               Services, Inc.

          (p)  "Employee" means any full-time employee of the Company or of the
               Company's Subsidiaries or Affiliates. Directors who are not
               otherwise employed by the Company shall not be considered
               Employees under this Plan.

                                       5
<Page>

          (q)  "Exchange Act" means the Securities Exchange Act of 1934, as
               amended from time to time, or any successor act thereto.

          (r)  "Fair Market Value" means the closing price for Shares on the
               relevant date, or (if there were no sales on such date) the
               average of closing prices on the nearest day before and the
               nearest day after the relevant date, on a stock exchange or over
               the counter, as determined by the Committee.

          (s)  "Freestanding SAR" means an SAR that is granted independently of
               any Options.

          (t)  "Incentive Stock Option" or "ISO" means an Option to purchase
               Shares, granted under Article 6 herein, which is designated as an
               Incentive Stock Option and is intended to meet the requirements
               of Section 422 of the Code.

          (u)  "Insider" shall mean a Participant who is, on the relevant date,
               an officer, Director or 10% shareholder of the Company, subject
               to Section 16 of the Exchange Act.

          (v)  "Nonqualified Stock Option" or "NQSO" means an Option to purchase
               Shares, granted under Article 6 herein, which is not intended to
               be an Incentive Stock Option.

          (w)  "Option" means an Incentive Stock Option or a Nonqualified Stock
               Option.

          (x)  "Option Price" means the price at which a Share may be purchased
               by a Participant pursuant to an Option, as determined by the
               Committee.

          (y)  "Participant" means an Employee or a Director who has outstanding
               an Award granted under the Plan.

                                       6
<Page>

          (z)  "Performance Unit" means an Award granted to an Employee, as
               described in Article 9 herein.

          (aa) "Performance Share" means an Award granted to an Employee, as
               described in Article 9 herein.

          (bb) "Period of Restriction" means the period during which the
               transfer of Shares of Restricted Stock is limited in some way
               (based on the passage of time, the achievement of performance
               goals, or upon the occurrence of other events as determined by
               the Committee, at its discretion), and the Shares are subject to
               a substantial risk of forfeiture, as provided in Article 8
               herein.

          (cc) "Person" shall have the meaning ascribed to such term in Section
               3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
               thereof, including a "group" as defined in Section 13(d).

          (dd) "Restricted Stock" means an Award granted to a Participant
               pursuant to Article 8 herein.

          (ee) "Retirement" means severance of employment or termination of
               services with the Company, Affiliate, or Subsidiary as applicable
               for any reason other than leave of absence, death, Disability, or
               Cause on or after the attainment of age fifty-five (55) with ten
               (10) Years of Service.

          (ff) "Shares" means the shares of common stock of the Company.

          (gg) "Stock Appreciation Right" or "SAR" means an Award, granted alone
               or in connection with a related Option, designated as an SAR,
               pursuant to the terms of Article 7 herein.

          (hh) "Subsidiary" means any corporation in which the Company owns
               directly, or indirectly through subsidiaries, at least fifty
               percent (50%) of the total combined voting power of all classes
               of stock, or

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               any other entity (including, but not limited to, partnerships and
               joint ventures) in which the Company owns at least fifty percent
               (50%) of the combined equity thereof.

          (ii) "Substituted Award" means an Option issued under this Plan in
               substitution for an award issued under another equity incentive
               plan, including but not limited to awards issued pursuant to the
               Prior Plan and the Directors Plan.

          (jj) "Tandem SAR" means an SAR that is granted in connection with a
               related Option, the exercise of which shall require forfeiture of
               the right to purchase a Share under the related Option (and when
               a Share is purchased under the Option, an SAR shall similarly be
               cancelled).

          (kk) "Window Period" means the period beginning on the third business
               day following the date of public release of the Company's
               quarterly sales and earnings information, and ending on the
               thirtieth day following such date.

          (ll) "Years of Service" means years of vesting service as set forth in
               Article 15.6 of the Cobalt Corporation Pension Plan as amended
               and restated effective January 1, 1999, or any successor plan
               thereto.

                            ARTICLE 3. ADMINISTRATION

     3.1  THE COMMITTEE. The Plan shall be administered by the Management Review
Committee of the Board, or by any other Committee appointed by the Board
consisting of not less than two (2) Directors who are not Employees. The members
of the Committee shall be appointed from time to time by, and shall serve at the
discretion of, the Board of Directors.

                                       8
<Page>

     All members of the Committee shall be Non-Employee Directors. "Non-Employee
Directors," as defined in rule 16b-3 promulgated by the Securities and Exchange
Commission ("SEC") under the Exchange Act, means a director who (i) is not
currently an officer or otherwise employed by the Company or any affiliate (ii)
does not receive compensation for consulting service or in any other capacity
from the Company in excess of $60,000 in any one year, (iii) does not possess an
interest in and is not engaged in business relationships required to be reported
under Items 404(a) or 404(b) of Regulation S-K promulgated under the Exchange
Act and (iv) is an Outside Director as defined in Treas. Reg. 1.162-27.

     3.2  AUTHORITY OF THE COMMITTEE. The Committee shall have full power except
as limited by law or by the Articles of Incorporation or Bylaws of the Company,
and subject to the provisions herein, to determine the size and types of Awards
with respect to Employees; to determine the terms and conditions of such
Employee Awards in a manner consistent with the Plan; to construe and interpret
the Plan and any agreement or instrument entered into under the Plan; to
establish, amend, or waive rules and regulations for the Plan's administration;
and (subject to the provisions of Article 14 herein) to amend the terms and
conditions of any outstanding Award to the extent such terms and conditions are
within the discretion of the Committee as provided in the Plan. Further, the
Committee shall make all other determinations which may be necessary or
advisable for the administration of the Plan. As permitted by law, the Committee
may delegate its authority as identified hereunder.

     3.3  DECISIONS BINDING. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders or
resolutions of the Board of Directors shall be final, conclusive, and binding on
all persons, including the Company, its shareholders, Employees, Directors,
Participants, and their estates and beneficiaries.

                                       9
<Page>

                      ARTICLE 4. SHARES SUBJECT TO THE PLAN

     4.1  NUMBER OF SHARES. Subject to adjustment as provided in Section 4.3
herein, the total number of Shares available for grant under the Plan may not
exceed 8,700,000. These 8,700,000 Shares may be either authorized but unissued
or reacquired Shares.

     The following rules will apply for purposes of the determination of the
number of Shares available for grant under the Plan:

          (a)  While an Award is outstanding, it shall be counted against the
               authorized pool of Shares, regardless of its vested status.

          (b)  The grant of an Option or Restricted Stock shall reduce the
               Shares available for grant under the Plan by the number of Shares
               subject to such Award.

          (c)  The grant of a Tandem SAR shall reduce the number of Shares
               available for grant by the number of Shares subject to the
               related Option (i.e., there is no double counting of Options and
               their related Tandem SARs).

          (d)  The grant of an Affiliated SAR shall reduce the number of Shares
               available for grant by the number of Shares subject to the SAR,
               in addition to the number of Shares subject to the related
               Option.

          (e)  The grant of a Freestanding SAR shall reduce the number of Shares
               available for grant by the number of Freestanding SARs granted.

          (f)  The Committee shall in each case determine the appropriate number
               of Shares to deduct from the authorized pool in connection with
               the grant of Performance Units and/or Performance Shares.

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<Page>

          (g)  To the extent that an Award is settled in cash rather than in
               Shares, the authorized Share pool shall be credited with the
               appropriate number of Shares represented by the cash settlement
               of the Award, as determined at the sole discretion of the
               Committee (subject to the limitation set forth in Section 4.2
               herein).

     4.2  LAPSED AWARDS. If any Award granted under this Plan is canceled,
terminates, expires, or lapses for any reason (with the exception of the
termination of a Tandem SAR upon exercise of the related Option, or the
termination of a related Option upon exercise of the corresponding Tandem SAR),
any Shares subject to such Award again shall be available for the grant of an
Award under the Plan.

     4.3  ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, stock
dividend, split-up, share combination, or other change in the corporate
structure of the Company affecting the Shares, such adjustment shall be made in
the number and class of Shares which may be delivered under the Plan, and in the
number and class of and/or price of Shares subject to outstanding Options, SARs,
and Restricted Stock granted under the Plan, as may be determined to be
appropriate and equitable by the Committee, in its sole discretion, to prevent
dilution or enlargement of rights; and provided that the number of Shares
subject to any Award shall always be a whole number.

                    ARTICLE 5. ELIGIBILITY AND PARTICIPATION

     5.1  ELIGIBILITY. Persons eligible to participate in this Plan include all
Employees and Directors.

     5.2  ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees, those to
whom Awards shall be granted and shall determine the nature and amount of each
Award. Directors shall receive Options as provided in Section 6.1.

                                       11
<Page>

                            ARTICLE 6. STOCK OPTIONS

     6.1  GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted to Employees at any time and from time to time as shall
be determined by the Committee. The Committee shall have discretion in
determining the number of Shares subject to Options granted to each Employee
except that no Employee may receive Options (other than Substituted Awards) with
respect to more than 250,000 Shares in any year. The Committee may grant ISOs,
NQSOs, or a combination thereof to Employees. Directors may receive only NQSOs.
Substituted Awards may be issued under the Plan. The number of Substituted
Awards shall be the number of awards immediately before the substitution,
adjusted to prevent dilution or enlargement of the Participant's rights. The
grant date of such Substituted Awards shall be the grant date under the plan
through which the awards were originally granted. Substituted Awards shall be
issued to Directors and Employees who participated in the Prior Plan and in the
Directors Plan in accordance with the terms of the Employee Benefits Agreement
executed in connection with the Distribution, and such Substituted Awards shall
be subject to the same grant date, exercise price (as adjusted pursuant to
Section 6.3), vesting and exercise period such awards were subject to under the
Prior Plan and the Directors Plan.

          To the extent Shares are available for grant under the Plan, each
Director who is first elected as a Director subsequent to the Effective Date (a
"Subsequent Director") shall be granted, as of the date on which such Subsequent
Director is qualified and first begins to serve as a Director, an Option to
purchase 6,000 shares, subject to adjustment pursuant to Section 4.3 or to
purchase such lesser number of Shares as remain available for grant under the
Plan. In the event that the number of Shares available for grant under the Plan
is insufficient to make all grants hereby specified on the relevant date, then
all Directors who are entitled to a grant on such date shall share ratably in
the number of Shares then available for grant under the Plan. The Option Price
of such Option shall equal the Fair Market Value of a Share on the date the
grant of this Option is effective.

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          If sufficient Shares are not available under the Plan to fulfill the
grant of Options to any Subsequent Director first elected after the Effective
Date, and thereafter additional Shares become available, such Subsequent
Director receiving an Option for fewer than 6,000 Shares shall then receive an
Option to purchase an amount of Shares, determined by dividing the number of
Shares available pro-rata among each Subsequent Director receiving an Option for
fewer than 6,000 Shares, then available under the Plan, not to exceed 6,000
Shares, subject to adjustment as to any one Subsequent Director. The date of
grant shall be the date such additional Shares become available. The Option
Price of an Option shall equal the Fair Market Value of a Share on the date the
Option is granted.

          If a Subsequent Director receives an Option to purchase fewer than
6,000 Shares, subject to adjustment pursuant to Section 4.3 hereof, and
additional Shares subsequently become available under the Plan, an Option to
purchase such Shares shall first be allocated as of the date of availability to
any Subsequent Director who has not previously been granted an Option. Such
Options shall be granted to purchase a number of Shares no greater than the
number of Shares covered by Options granted to other Subsequent Directors first
elected subsequent to the Effective Date, but who have received Options to
purchase fewer than 6,000 Shares (subject to adjustment pursuant to Section
4.3). Thereafter, Options for any remaining Shares shall be granted pro-rata
among all Subsequent Directors granted Options to purchase fewer than 6,000
Shares. No Director first elected after the Effective Date shall receive an
Option to purchase more than 6,000 Shares (subject to adjustment under Section
4.3).

          To the extent Shares are available for grant under the Plan, each
Director shall be granted during each calendar year, other than the calendar
year in which the Director receives the option with respect to 6,000 Shares as a
Subsequent Director, an Option to purchase 1,000 Shares, subject to adjustment
pursuant to Section 4.3 (the "Annual Director Grant"). The date of the Annual
Director Grants will be the first trading day of each calendar year. In the
event that the number of Shares available for grant in any calendar year is
insufficient to make Annual Director Grants, then no Annual Director Grants
shall be made during such calendar year. The absence of Annual

                                       13
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Director Grants during a calendar year shall not affect the Annual Director
Grants in a subsequent calendar year.

     The Option Price of the Shares purchasable under each Option granted to a
Director shall be equal to one hundred percent (100%) of the Fair Market Value
per Share on the date of grant of such Option.

     Subject to acceleration as provided below, Options granted to Directors
shall vest annually at the rate of thirty-three and one third percent (33-1/3%)
of the aggregate number of Shares granted annually beginning on the first
anniversary of the date of grant and on each subsequent anniversary of the date
of grant thereafter. If a Director's tenure ends during the applicable
three-year period due to death, Disability or Retirement or following a Change
in Control, however, such Director's Options shall become immediately
exercisable as to one hundred percent (100%) of the Shares covered thereby as of
the Director's last day of service as a Director with the Company to the extent
such Option may be exercised pursuant to Section 6.5 of this Plan. Retirement
with respect to a Director shall mean the date of the Company's annual
shareholders' meeting at which he or she would otherwise, but for said
Retirement, be a nominee for election to the Board, or the date on which the
Director attains seventy (70) years of age.

     Once any portion of an Option issued to a Director becomes exercisable, it
shall remain exercisable for the shortest period of (1) twelve years from the
date of grant; or (2) two (2) years following the date on which the Director
ceases to serve in such capacity for any reason other than removal for Cause. If
a Director is removed for Cause, all outstanding Options held by the Director
shall immediately be forfeited to the Company and no additional exercise period
shall be allowed, regardless of the vested status of the Options.

     6.2  OPTION AWARD AGREEMENT. Each Option grant shall be evidenced by an
Option Award Agreement that shall specify the Option Price, the duration of the
Option, the number of Shares to which the Option pertains, and such other
provisions as the Committee shall determine. The Option Award Agreement also
shall specify whether

                                       14
<Page>

the Option is intended to be an ISO within the meaning of Section 422 of the
Code, or an NQSO whose grant is intended not to fall under the Code provisions
of Section 422.

     6.3  OPTION PRICE. The Option Price for each grant of an Option to an
Employee shall be determined by the Committee; provided that the Option Price
shall not be less than one hundred percent (100%) of the Fair Market Value of a
Share on the date the Option is granted. The Option Price for a Substituted
Award shall be the award price immediately before the substitution, adjusted to
prevent dilution or enlargement of the Participant's rights.

     6.4  DURATION OF OPTIONS. Each Option granted shall expire at such time as
the Committee shall determine at the time of grant; provided, however, that no
ISO shall be exercisable later than the tenth (10th) anniversary date of its
grant, and no NQSO shall be exercisable later than the twelfth (12th)
anniversary date of its grant. Substituted Awards shall expire on the earlier of
the date provided in this Section 6.4 or the date such awards would have expired
under the plan and agreement pursuant to which they were originally granted.

     6.5  EXERCISE OF OPTIONS. Options granted to Employees under the Plan shall
be exercisable at such times and be subject to such restrictions and conditions
as the Committee shall in each instance approve, which need not be the same for
each grant or for each Employee.

     6.6  PAYMENT. Options shall be exercised by the delivery of a written
notice of exercise to the Secretary of the Company, setting forth the number of
Shares with respect to which the Option is to be exercised, accompanied by full
payment for the Shares.

     The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent, or (b) by tendering
previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price (provided that the Shares which are
tendered must have been held by the

                                       15
<Page>

Participant for at least six (6) months prior to their tender to satisfy the
Option Price), or (c) by a combination of (a) and (b).

     The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law restrictions,
or by any other means which the Committee determines to be consistent with the
Plan's purpose and applicable law.

     As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased under the Option(s).

     6.7  RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option under
the Plan, as it may deem advisable, including, without limitation, restrictions
under applicable federal securities laws, under the requirements of any stock
exchange or market upon which such Shares are then listed and/or traded, and
under any Blue Sky or state securities laws applicable to such Shares.

     6.8  TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY OR RETIREMENT.
Unless otherwise provided in an Employee's employment agreement, Executive
Severance Agreement (such severance agreements have been entered into with
certain Company executives), or other written agreement entered into by the
Company and the Employee (including, but not limited to an Award Agreement), the
following apply:

          (a)  TERMINATION BY DEATH. In the event the employment of an Employee
               is terminated by reason of death, all outstanding Options granted
               to that Employee shall immediately vest one hundred percent
               (100%), and shall remain exercisable at any time prior to their
               expiration date, or for one (1) year after the date of death,
               whichever period is shorter, by such person or persons as shall
               have been named as the Employee's beneficiary, or by such

                                       16
<Page>

               persons that have acquired the Employee's rights under the Option
               by will or by the laws of descent and distribution.

          (b)  TERMINATION BY DISABILITY. In the event the employment of an
               Employee is terminated by reason of Disability, all outstanding
               Options granted to that Employee shall immediately vest one
               hundred percent (100%) as of the date the Committee determines
               the definition of Disability to have been satisfied, and shall
               remain exercisable at any time prior to their expiration date, or
               for one (1) year after the date that the Committee determines the
               definition of Disability to have been satisfied, whichever period
               is shorter.

          (c)  TERMINATION BY RETIREMENT. Each Employee's Award Agreement shall
               set forth the extent to which the Employee shall have the right
               to exercise the Option following termination of the Employee's
               employment with the Company due to Retirement. Such provisions
               shall be determined in the sole discretion of the Committee,
               shall be included in the Award Agreement entered into with each
               Employee, and need not be uniform among all Options issued
               pursuant to this Article 6.

          (d)  EMPLOYMENT TERMINATION FOLLOWED BY DEATH. In the event that an
               Employee's employment terminates by reason of Disability or
               Retirement, and within the exercise period allowed by the
               Committee following such termination the Employee dies, then the
               remaining exercise period under outstanding Options shall equal
               the longer of: (i) one (1) year following death; or (ii) the
               remaining portion of the exercise period which was triggered by
               the employment termination. Such Options shall be exercisable by
               such person or persons who shall have been named as the
               Employee's beneficiary, or by such persons who have acquired the

                                       17
<Page>

               Employee's rights under the Option by will or by the laws of
               descent and distribution.

          (e)  EXERCISE LIMITATIONS ON ISOS. In the case of ISOs, the tax
               treatment prescribed under Section 422 of the Code may not be
               available if the Options are not exercised within the Section 422
               prescribed time periods after each of the various types of
               employment termination.

     6.9  TERMINATION OF EMPLOYMENT FOR OTHER REASONS. If the employment of an
Employee shall terminate for any reason other than the reasons set forth in
Section 6.8 (and other than for Cause), all Options held by the Employee which
are not vested as of the effective date of employment termination immediately
shall be forfeited to the Company (and shall once again become available for
grant under the Plan). However, the Committee, in its sole discretion, shall
have the right to immediately vest all or any portion of such Options, subject
to such terms as the Committee, in its sole discretion, deems appropriate.

     Options which are vested as of the effective date of employment termination
may be exercised by the Employee within the period beginning on the effective
date of employment termination, and ending six (6) months after such date or on
such later date as is approved by the Committee.

     If the employment of an Employee shall be terminated by the Company for
Cause, all outstanding Options held by the Participant immediately shall be
forfeited to the Company and no additional exercise period shall be allowed,
regardless of the vested status of the Options.

     For Employees employed by Affiliates, termination shall mean termination of
such Employee's employment with the Affiliate.

     6.10 TRANSFERABILITY OF OPTIONS. No ISO granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by

                                       18
<Page>

will or by the laws of descent and distribution. Further, all ISOs
granted to a Participant under the Plan shall be exercisable during his or her
lifetime only by such Participant.

     NQSOs granted hereunder may be exercised only during a Participant's
lifetime by the Participant, the Participant's guardian or legal representative
or by a permissible transferee. NQSOs shall be transferable by Participants
pursuant to the laws of descent and distribution upon a Participant's death, and
during a Participant's lifetime, NQSOs shall be transferable by Participants to
members of their immediate family, trusts for the benefit of members of their
immediate family, and charitable institutions ("permissible transferees") to the
extent permitted under Section 16 of the Exchange Act and subject to federal and
state securities laws. The term "immediate family" shall mean any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, sister-in-law, or
brother-in-law and shall include adoptive relationships.

     NQSOs also shall be transferable by Participants other than to permissible
transferees with the prior approval of the Committee which shall have the
authority to approve such transfers of NQSOs on a case-by-case basis in its sole
discretion.

     The Committee shall have the authority to establish rules and regulations
specifically governing the transfer of NQSOs granted under this Plan as it deems
necessary and advisable.

                      ARTICLE 7. STOCK APPRECIATION RIGHTS

     7.1  GRANT OF SARS. Subject to the terms and conditions of the Plan, an SAR
may be granted to an Employee at any time and from time to time as shall be
determined by the Committee. The Committee may grant Affiliated SARs,
Freestanding SARs, Tandem SARs, or any combination of these forms of SARs.

     The Committee shall have complete discretion in determining the number of
SARs granted to each Employee (subject to Article 4 herein) and, consistent with
the provisions of the Plan, in determining the terms and conditions pertaining
to such SARs. However, the grant price of a Freestanding SAR shall be at least
equal to one hundred

                                       19
<Page>

percent (100%) of the Fair Market Value of a Share on the date of grant of the
SAR. The grant price of Tandem or Affiliated SARs shall equal the Option Price
of the related Option. In no event shall any SAR granted hereunder become
exercisable within the first six (6) months of its grant.

     7.2  EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.

     Notwithstanding any other provision of this Plan to the contrary, with
respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR
will expire no later than the expiration of the underlying ISO; (ii) the value
of the payout with respect to the Tandem SAR may be for no more than one hundred
percent (100%) of the difference between the Option Price of the underlying ISO
and the Fair Market Value of the Shares subject to the underlying ISO at the
time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only
when the Fair Market Value of the Shares subject to the ISO exceeds the Option
Price of the ISO.

     7.3  EXERCISE OF AFFILIATED SARS. Affiliated SARs shall be deemed to be
exercised upon the exercise of the related Options. The deemed exercise of
Affiliated SARs shall not necessitate a reduction in the number of related
Options.

     7.4  EXERCISE OF FREESTANDING SARS. Freestanding SARs may be exercised upon
whatever terms and conditions the Committee, in its sole discretion, imposes
upon them.

     7.5  SAR AGREEMENT. Each SAR grant shall be evidenced by an Award Agreement
that shall specify the grant price, the term of the SAR, and such other
provisions as the Committee shall determine.

     7.6  TERM OF SARS. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided, however, that
such term shall not exceed twelve (12) years.

                                       20
<Page>

     7.7  PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, an Employee shall be
entitled to receive payment from the Company in an amount determined by
multiplying:

          (a)  The difference between the Fair Market Value of a Share on the
               date of exercise over the grant price; by

          (b)  The number of Shares with respect to which the SAR is exercised.

     At the discretion of the Committee, the payment upon SAR exercise may be in
cash, in Shares of equivalent value, or in some combination thereof.

     7.8  RULE 16b-3 REQUIREMENTS. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on exercise of an SAR (including,
without limitation, the right of the Committee to limit the time of exercise to
specified periods) as may be required to satisfy the requirements of Section 16
(or any successor rule) of the Exchange Act.

     For example, if the Participant is an Insider, the ability of the
Participant to exercise SARs for cash will be limited to Window Periods.
However, if the Committee determines that the Participant is not an Insider, or
if the securities laws change to permit greater freedom of exercise of SARs,
then the Committee may permit exercise at any point in time, to the extent the
SARs are otherwise exercisable under the Plan.

     7.9  TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT

          (a)  TERMINATION BY DEATH. In the event the employment of an Employee
               is terminated by reason of death, all outstanding SARs granted to
               that Employee shall immediately vest one hundred percent (100%),
               and shall remain exercisable at any time prior to their
               expiration date, or for one (1) year after the date of death,
               whichever period is shorter, by such person or persons as shall
               have been named as the Employee's beneficiary, or by such

                                       21
<Page>

               persons that have acquired the Employee's rights under the SAR by
               will or by the laws of descent and distribution.

          (b)  TERMINATION BY DISABILITY. In the event the employment of a
               Participant is terminated by reason of Disability, all
               outstanding SARs granted to that Employee shall immediately vest
               one hundred percent (100%) as of the date the Committee
               determines the definition of Disability to have been satisfied,
               and shall remain exercisable at any time prior to their
               expiration date, or for one (1) year after the date that the
               Committee determines the definition of Disability to have been
               satisfied, whichever period is shorter.

          (c)  TERMINATION BY RETIREMENT. In the event the employment of an
               Employee is terminated by reason of Retirement, the Committee
               shall retain discretion over the treatment of SARs.

          (d)  EMPLOYMENT TERMINATION FOLLOWED BY DEATH. In the event that an
               Employee's employment terminates by reason of Disability or
               Retirement, and within the exercise period allowed by the
               Committee following such termination the Employee dies, then the
               remaining exercise period under outstanding SARs shall equal the
               longer of: (i) one (1) year following death; or (ii) the
               remaining portion of the exercise period which was triggered by
               the employment termination. Such SARs shall be exercisable by
               such person or persons who shall have been named as the
               Employee's beneficiary, or by such persons who have acquired the
               Employee's rights under the SAR by will or by the laws of descent
               and distribution.

     7.10 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. If the employment of an
Employee shall terminate for any reason other than the reasons set forth in
Section 7.9 (and other than for Cause), all SARs held by the Employee which are
not vested as of the effective date of employment termination immediately shall
be forfeited to the

                                       22
<Page>

Company (and shall once again become available for grant under the Plan).
However, the Committee, in its sole discretion, shall have the right to
immediately vest all or any portion of such SARs, subject to such terms as the
Committee, in its sole discretion, deems appropriate.

     SARs which are vested as of the effective date of employment termination
may be exercised by the Employee within the period beginning on the effective
date of employment termination, and ending six (6) months after such date or on
such later date as is approved by the Committee.

     If the employment of an Employee shall be terminated by the Company for
Cause, all outstanding SARs held by the Employee immediately shall be forfeited
to the Company and no additional exercise period shall be allowed, regardless of
the vested status of the SARs.

     7.11 NONTRANSFERABILITY OF SARs. No SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, all SARs
granted to an Employee under the Plan shall be exercisable during his or her
lifetime only by such Employee.

                           ARTICLE 8. RESTRICTED STOCK

     8.1  GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to eligible Employees in such amounts as the Committee shall
determine.

     8.2  RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be
evidenced by an Award Agreement that shall specify the Period of Restriction, or
Periods, the number of Restricted Stock Shares granted, and such other
provisions as the Committee shall determine.

     8.3  TRANSFERABILITY. Except as provided in this Article 8, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged, assigned,
or

                                       23
<Page>

otherwise alienated or hypothecated until the end of the applicable Period of
Restriction established by the Committee and specified in the Award Agreement,
or upon earlier satisfaction of any other conditions, as specified by the
Committee in its sole discretion and set forth in the Award Agreement. However,
in no event may any Restricted Stock granted under the Plan become vested in an
Employee prior to six (6) months following the date of its grant. All rights
with respect to the Restricted Stock granted to an Employee under the Plan shall
be available during his or her lifetime only to such Participant.

     8.4  OTHER RESTRICTIONS. The Committee shall impose such other restrictions
on any Shares of Restricted Stock granted pursuant to the Plan as it may deem
advisable including, without limitation, restrictions based upon the achievement
of specific performance goals (Company-wide, divisional, and/or individual),
and/or restrictions under applicable federal or state securities laws; and may
legend the certificates representing Restricted Stock to give appropriate notice
of such restrictions.

     8.5  CERTIFICATE LEGEND. In addition to any legends placed on certificates
pursuant to Section 8.4 herein, each certificate representing Shares of
Restricted Stock granted pursuant to the Plan shall bear the following legend:

          "The sale or other transfer of the shares of stock
          represented by this certificate, whether voluntary,
          involuntary, or by operation of law, is subject to certain
          restrictions on transfer as set forth in the Cobalt
          Corporation Equity Incentive Plan, and in an associated
          Award Agreement. A copy of the Plan and such Award Agreement
          may be obtained from the Secretary of Cobalt Corporation."

     8.6  REMOVAL OF RESTRICTIONS. Except as otherwise provided in this Article
8, Shares of Restricted Stock covered by each Restricted Stock grant made under
the Plan shall become freely transferable by the Employee after the last day of
the Period of Restriction. Once the Shares are released from the restrictions,
the Employee shall be

                                       24
<Page>

entitled to have the legend required by Section 8.5 removed from his or her
Share certificate.

     8.7  VOTING RIGHTS. During the Period of Restriction, Employees holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares.

     8.8  DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction,
Employees holding Shares of Restricted Stock granted hereunder shall be entitled
to receive all dividends and other distributions paid with respect to those
Shares while they are so held. If any such dividends or distributions are paid
in Shares, the Shares shall be subject to the same restrictions on
transferability and forfeitability as the Shares of Restricted Stock with
respect to which they were paid.

     In the event that any dividend constitutes a "derivative security" or an
"equity security" pursuant to Rule 16(a) under the Exchange Act, such dividend
shall be subject to a vesting period equal to the longer of: (i) the remaining
vesting period of the Shares of Restricted Stock with respect to which the
dividend is paid; or (ii) six months. The Committee shall establish procedures
for the application of this provision.

     8.9  TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT. In
the event the employment of an Employee is terminated by reason of death or
Disability, all outstanding Shares of Restricted Stock shall immediately vest
one hundred percent (100%) as of the date of employment termination (in the case
of Disability, the date employment terminates shall be deemed to be the date
that the Committee determines the definition of Disability to have been
satisfied). The Committee retains discretion over the treatment of Restricted
Stock upon Retirement. In the event of full vesting, the holder of the
certificates of Restricted Stock shall be entitled to have any
nontransferability legends required under Sections 8.4 and 8.5 of this Plan
removed from the Share certificates.

     8.10 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. If the employment of an
Employee shall terminate for any reason other than those specifically set forth
in

                                       25
<Page>

Section 8.9 herein, all Shares of Restricted Stock held by the Employee which
are not vested as of the effective date of employment termination immediately
shall be forfeited and returned to the Company (and, subject to Section 4.2
herein, shall once again become available for grant under the Plan).

     With the exception of a termination of employment for Cause, the Committee,
in its sole discretion, shall have the right to provide for lapsing of the
restrictions on Restricted Stock following employment termination, upon such
terms and provisions as it deems proper.

               ARTICLE 9. PERFORMANCE UNITS AND PERFORMANCE SHARES

     9.1  GRANT OF PERFORMANCE UNITS/SHARES. Subject to the terms of the Plan,
Performance Units and Performance Shares may be granted to eligible Employees at
any time and from time to time, as shall be determined by the Committee. The
Committee shall have complete discretion in determining the number of
Performance Units and Performance Shares granted to each Employee.

     9.2  VALUE OF PERFORMANCE UNITS/SHARES. Each Performance Unit shall have an
initial value that is established by the Committee at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value of
a Share on the date of grant. The Committee shall set performance goals in its
discretion which, depending on the extent to which they are met, will determine
the number and/or value of Performance Units/Shares that will be paid out to the
Employee. The time period during which the performance goals must be met shall
be called a "Performance Period." Performance Periods shall, in all cases,
exceed six (6) months in length.

     9.3  EARNING OF PERFORMANCE UNITS/SHARES. After the applicable Performance
Period has ended, the holder of Performance Units/Shares shall be entitled to
receive payout on the number of Performance Units/Shares earned by the Employee
over the Performance Period, to be determined as a function of the extent to
which the corresponding performance goals have been achieved.

                                       26
<Page>

     9.4  FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/ SHARES. Payment of
earned Performance Units/Shares shall be made in a single lump sum, within
forty-five (45) calendar days following the close of the applicable Performance
Period. The Committee, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash or in Shares (or in a combination thereof),
which have an aggregate Fair Market Value equal to the value of the earned
Performance Units/Shares at the close of the applicable Performance Period.

     Prior to the beginning of each Performance Period, Participants may elect
to defer the receipt of Performance Unit/Share payout upon such terms as the
Committee deems appropriate.

     9.5  TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, RETIREMENT, OR
INVOLUNTARY TERMINATION (WITHOUT CAUSE). In the event the employment of an
Employee is terminated by reason of death or Disability or involuntary
termination without Cause during a Performance Period, the Employee shall
receive a prorated payout of the Performance Units/Shares. The Committee retains
discretion over the treatment of Performance Units/Shares upon Retirement. Any
prorated payout shall be determined by the Committee, in its sole discretion,
and shall be based upon the length of time that the Employee held the
Performance Units/Shares during the Performance Period, and shall further be
adjusted based on the achievement of the preestablished performance goals.

     Timing of payment of earned Performance Units/Shares shall be determined by
the Committee at its sole discretion.

     9.6  TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event that an
Employee's employment terminates for any reason other than those reasons set
forth in Section 9.5 herein, all Performance Units/Shares shall be forfeited by
the Employee to the Company, and shall once again be available for grant under
the Plan.

     9.7  NONTRANSFERABILITY. Performance Units/Shares may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by

                                       27
<Page>

will or by the laws of descent and distribution. Further, an Employee's rights
under the Plan shall be exercisable during the Employee's lifetime only by the
Employee or the Employee's legal representative.

                       ARTICLE 10. BENEFICIARY DESIGNATION

     Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when any necessary spousal
consent is obtained and filed by the Participant in writing with the Secretary
of the Company during the Participant's lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participant's death shall be paid
to the Participant's estate.

                              ARTICLE 11. DEFERRALS

     The Committee may permit a Participant to defer such Participant's receipt
of the payment of cash or the delivery of Shares that would otherwise be due to
such Participant by virtue of the exercise of an Option or SAR, the lapse or
waiver of restrictions with respect to Restricted Stock, or the satisfaction of
any requirements or goals with respect to Performance Units/Shares. If any such
deferral election is required or permitted, the Committee shall, in its sole
discretion, establish rules and procedures for such payment deferrals.

                         ARTICLE 12. RIGHTS OF EMPLOYEES

     12.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Employee's employment at any time,
nor confer upon any Employee any right to continue in the employ of the Company.

     For purposes of the Plan, transfer of employment of a Participant between
the Company and any one of its Subsidiaries (or between Subsidiaries) or Blue
Cross & Blue Shield United of Wisconsin shall not be deemed a termination of
employment.

                                       28
<Page>

     12.2 PARTICIPATION. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.

                          ARTICLE 13. CHANGE IN CONTROL

     Upon the occurrence of a Change in Control, unless otherwise specifically
prohibited by the terms of Section 18 herein or otherwise determined in
accordance with an Employee's employment agreement, Executive Severance
Agreement (such severance agreements have been entered into with certain Company
executives), or other written agreement entered into by the Company and the
Employee (including, but not limited to an Award Agreement):

          (a)  Any and all Options and SARs granted hereunder shall become
               immediately exercisable;

          (b)  Any Period of Restriction and restrictions imposed on Restricted
               Shares shall lapse, and within ten (10) business days after the
               occurrence of a Change in Control, the stock certificates
               representing Shares of Restricted Stock, without any restrictions
               or legend thereon, shall be delivered to the applicable
               Participants;

          (c)  The target value attainable under all Performance Units and
               Performance Shares shall be deemed to have been fully earned for
               the entire Performance Period as of the effective date of the
               Change in Control, and shall be paid out in cash to Participants
               within thirty (30) days following the effective date of the
               Change in Control; provided, however, that there shall not be an
               accelerated payout with respect to Performance Units or
               Performance Shares which were granted less than six (6) months
               prior to the effective date of the Change in Control;

          (d)  Subject to Article 14 herein, the Committee shall have the
               authority to make any modifications to the Awards as determined
               by the

                                       29
<Page>

               Committee to be appropriate before the effective date of the
               Change in Control.

              ARTICLE 14. AMENDMENT, MODIFICATION, AND TERMINATION

     14.1 AMENDMENT, MODIFICATION, AND TERMINATION. With the approval of the
Board, at any time and from time to time, the Committee may terminate, amend, or
modify the Plan.

     14.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment, or modification
of the Plan shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant holding
such Award.

                             ARTICLE 15. WITHHOLDING

     15.1 TAX WITHHOLDING. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state, and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising or as a result of this Plan.

     15.2 SHARE WITHHOLDING. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock,
or upon the achievement of performance goals related to Performance Shares, or
any other taxable event arising as a result of Awards granted hereunder,
Participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares having a Fair Market Value on the date the tax is to be determined equal
to the minimum statutory total tax that could be imposed on the transaction. All
elections shall be irrevocable, made in writing, and signed by the Participant,
and shall be subject to any restrictions or limitations that the Committee, in
its sole discretion, deems appropriate.

                           ARTICLE 16. INDEMNIFICATION

     Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any

                                       30
<Page>

loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgment in any such action, suit, or proceeding against him or her, provided he
or she shall give the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf. The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such persons may be entitled under
the Company's Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.

                             ARTICLE 17. SUCCESSORS

     All obligations, of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.

                         ARTICLE 18. LEGAL CONSTRUCTION

     18.1 GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.

     18.2 SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.

     18.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and regulations,
and

                                       31
<Page>

to such approvals by any governmental agencies or national securities exchanges
as may be required.

     Notwithstanding any other provision set forth in the Plan, if required by
the then-current Section 16 of the Exchange Act, any "derivative security" or
"equity security" offered pursuant to the Plan to any Insider may not be sold or
transferred for at least six (6) months after the date of grant of such Award.
The terms "equity security" and "derivative security" shall have the meanings
ascribed to them in the then-current Rule 16(a) under the Exchange Act.

     18.4 SECURITIES LAW COMPLIANCE. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions or Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the Plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.

     18.5 GOVERNING LAW. To the extent not preempted by federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of Wisconsin.

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</TEXT>
</DOCUMENT>
