SCIOS INC.


                           1992 EQUITY INCENTIVE PLAN

                            Adopted February 11, 1992
                      Approved by Stockholders May 5, 1992
                            Amended February 3, 1997
                      Approved By Stockholders May 13, 1997


         PURPOSES.

                  The purpose of the 1992 Equity  Incentive Plan (the "Plan") is
to provide a means by which  Employees and Directors of and  Consultants  to the
Company,  and its  Affiliates,  may be  given an  opportunity  to  benefit  from
increases  in value of the stock of the  Company  through  the  granting  of (i)
Incentive Stock Options,  (ii) Supplemental Stock Options,  (iii) stock bonuses,
and (iv) rights to purchase restricted stock, all as defined below.

                  The  Company,  by  means of the  Plan,  seeks  to  retain  the
services of persons who are now Employees or Directors of or  Consultants to the
Company,  to secure and retain the  services  of new  Employees,  Directors  and
Consultants, and to provide incentives for such persons to exert maximum efforts
for the success of the Company.

                  The Company  intends  that the Stock  Awards  issued under the
Plan  shall,  in  the  discretion  of  the  Board  or  any  Committee  to  which
responsibility  for  administration  of the Plan has been delegated  pursuant to
subsection  3(c),  be either  (i)  Options  granted  pursuant  to section 6 or 8
hereof,  including  Incentive Stock Options and Supplemental  Stock Options,  or
(ii) stock bonuses or rights to purchase  restricted  stock granted  pursuant to
section 7 hereof.  All Options shall be separately  designated  Incentive  Stock
Options or Supplemental  Stock Options at the time of grant, and in such form as
issued pursuant to section 6, and a separate certificate or certificates will be
issued for shares purchased on exercise of each type of Option.

         DEFINITIONS.

                  "Affiliate"   means  any  parent   corporation  or  subsidiary
corporation,  whether now or hereafter  existing,  as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.

                  "Board" means the Board of Directors of the Company.

                  "Code" means the Internal Revenue Code of 1986, as amended.

                  "Committee"  means  a  Committee  appointed  by the  Board  in
accordance with subsection 3(c) of the Plan.

                  "Company" means Scios Inc., a Delaware corporation.

                  "Consultant" means any person,  including an advisor,  engaged
by the Company or an Affiliate to render  services  and who is  compensated  for
such services,  provided that the term "Consultant" shall not include a Director
whose only services to the Company are provided in his capacity as a Director.

                  "Continuous  Status as an  Employee,  Director or  Consultant"
means that the service of an individual to the Company,  whether as an Employee,
Director,  or Consultant is not  interrupted or terminated by the Company or any
Affiliate.  The  Board  or  the  chief  executive  officer  of the  Company  may
determine,  in that party's sole  discretion,  whether  Continuous  Status as an
Employee, Director or Consultant shall be considered interrupted in the case of:
(i) any leave of absence  approved by the Board or the chief executive  officer,
including  sick leave,  military  leave,  or any other personal  leave;  or (ii)
transfers between locations of the Company or between the Company, Affiliates or
its successor.

                  "Covered  Employee" means the chief executive  officer and the
four (4) other  highest  compensated  officers  of the  Company  for whom  total
compensation is required to be reported to stockholders  under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.

                  "Director" means a member of the Board.

                  "Disability" means total and permanent disability as defined
in Section 22(e)(3) of the Code.

                  "Employee" means any person, including Officers and Directors,
employed by the Company or any  Affiliate of the Company.  Neither  service as a
Director nor payment of a director's  fee by the Company  shall be sufficient to
constitute "employment" by the Company.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

                  "Incentive  Stock Option" means an Option  intended to qualify
as an incentive  stock option  within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.

                  "Non-Employed  Director"  means a Director who is not an
Employee or Consultant of the Company or an Affiliate of the Company.

                  "Non-Employee Director" means a Director who either (i) is not
a current  Employee or Officer of the Company or its parent or subsidiary,  does
not receive compensation (directly or indirectly) from the Company or its parent
or subsidiary  for services  rendered as a consultant  or in any capacity  other
than as a Director  (except  for an amount as to which  disclosure  would not be
required  under  Item  404(a) of  Regulation  S-K  promulgated  pursuant  to the
Securities Act  ("Regulation  S-K")),  does not possess an interest in any other
transaction  as to which  disclosure  would be  required  under  Item  404(a) of
Regulation  S-K,  and is not  engaged  in a  business  relationship  as to which
disclosure  would be required  under Item 404(b) of  Regulation  S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.

                  "Officer"  means a person  who is an  officer  of the  Company
within  the  meaning  of  Section  16 of the  Exchange  Act  and the  rules  and
regulations promulgated thereunder.

                  "Option" means a stock option granted pursuant to the Plan.

                  "Option  Agreement"  means a  written  agreement  between  the
Company and an Optionee  evidencing  the terms and  conditions  of an individual
Option grant. Each Option Agreement shall be subject to the terms and conditions
of the Plan.

                  "Optionee" means an Employee, Director or Consultant who holds
an outstanding Option.

                  "Outside  Director"  means a Director  who either (i) is not a
current  employee  of the  Company or an  "affiliated  corporation"  (within the
meaning of the Treasury  regulations  promulgated  under  Section  162(m) of the
Code),  is not a former  employee of the Company or an "affiliated  corporation"
receiving  compensation  for prior  services  (other than  benefits  under a tax
qualified  pension  plan),  was not an officer of the Company or an  "affiliated
corporation"  at any time,  and is not  currently  receiving  direct or indirect
remuneration from the Company or an "affiliated corporation" for services in any
capacity other than as a Director,  or (ii) is otherwise  considered an "outside
director" for purposes of Section 162(m) of the Code.

                  "Plan" means this 1992 Equity Incentive Plan.

                  "Rule  16b-3"  means  Rule  16b-3 of the  Exchange  Act or any
successor  to Rule 16b-3,  as in effect with  respect to the Company at the time
discretion is being exercised regarding the Plan.

                  "Securities Act" means the Securities Act of 1933, as amended,
with respect to the Company at the time.

                  "Stock   Award"  means  any  right  granted  under  the  Plan,
including  any  Option,  any stock  bonus and any right to  purchase  restricted
stock.

                  "Stock Award  Agreement"  means a written  agreement  between
the Company and a holder of a Stock Award  evidencing the terms and conditions
of an individual  Stock Award grant.  Each Stock Award  Agreement  shall
be subject to the terms and conditions of the Plan.

                  "Supplemental  Stock  Option"  means an Option not intended to
qualify as an Incentive Stock Option.

         ADMINISTRATION.

                  The Plan shall be  administered  by the Board unless and until
the Board  delegates  administration  to a Committee,  as provided in subsection
3(c).

                  Subject to the  provisions  of section 8, the Board shall have
the power,  subject to, and within the limitations of, the express provisions of
the Plan:

                           To  determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how Stock Awards
shall be granted;  whether a Stock Award will be an Incentive  Stock  Option,  a
Supplemental Stock Option, a stock bonus, a right to purchase  restricted stock,
or a combination  of the  foregoing;  the provisions of each Stock Award granted
(which need not be  identical),  including the time or times when a person shall
be  permitted  to receive  stock  pursuant to a Stock  Award;  and the number of
shares with  respect to which Stock Awards shall be granted to each such person.
To construe and  interpret  the Plan and Stock Awards  granted  under it, and to
establish,  amend and revoke rules and regulations for its  administration.  The
Board,  in the  exercise  of this power,  may  correct  any defect,  omission or
inconsistency  in the Plan or in any Stock Award  Agreement,  in a manner and to
the  extent  it shall  deem  necessary  or  expedient  to make  the  Plan  fully
effective.
                   To amend the Plan of a Stock Award as provided in section 14.

                           Generally,  to  exercise  such  powers  and to
perform such acts as the Board deems  necessary or expedient to promote the best
interests of the Company.

                  The  Board  may  delegate  administration  of  the  Plan  to a
committee  composed  of not  fewer  than  two  (2)  members  of the  Board  (the
"Committee"), all of the members of which Committee may be, in the discretion of
the Board, Non-Employee Directors and/or Outside Directors. If administration is
delegated to a Committee,  the  Committee  shall have,  in  connection  with the
administration  of the Plan,  the  powers  theretofore  possessed  by the Board,
including  the power to delegate to a  subcommittee  of two (2) or more  Outside
Directors  any of the  administrative  powers the  Committee  is  authorized  to
exercise (and  references  in this Plan to the Board shall  thereafter be to the
Committee or such a subcommittee),  subject,  however, to such resolutions,  not
inconsistent  with the  provisions  of the Plan,  as may be adopted from time to
time by the Board.  Notwithstanding  anything in this section 3 to the contrary,
the Board or the Committee may delegate to a committee of one or more members of
the Board the  authority to grant Stock  Awards to eligible  persons who (1) are
not then subject to Section 16 of the Exchange Act and/or (2) are either (i) not
then Covered  Employees and are not expected to be Covered Employees at the time
of  recognition of income  resulting from such Stock Award,  or (ii) not persons
with  respect to whom the Company  wishes to comply with  Section  162(m) of the
Code.  The Board may  abolish any such  committee  at any time and revest in the
Board the administration of the Plan.

         SHARES SUBJECT TO THE PLAN.

                  Subject  to  the   provisions   of  section  13   relating  to
adjustments  upon  changes in stock,  the stock that may be issued  pursuant  to
Stock Awards shall not exceed in the aggregate five million  (5,000,000)  shares
of the Company's common stock. If any Stock Award shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in full,
the stock not  acquired  under such Stock Award shall revert to and again become
available for issuance under the Plan.

                  The  stock  subject  to the Plan  may be  unissued  shares  or
reacquired shares, bought on the market or otherwise.

         ELIGIBILITY.

                  Incentive  Stock  Options  may be granted  only to  Employees.
Stock  Awards  other  than  Incentive  Stock  Options  may be  granted  only  to
Employees, Directors or Consultants.

                  No person  shall be  eligible  for the  grant of an  Incentive
Stock  Option if, at the time of grant,  such  person  owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock  possessing  more than ten percent
(10%) of the total combined  voting power of all classes of stock of the Company
or of any of its Affiliates  unless the exercise  price of such Incentive  Stock
Option is at least one hundred ten  percent  (110%) of the fair market  value of
such  stock  at the  date  of  grant  and  the  Incentive  Stock  Option  is not
exercisable after the expiration of five (5) years from the date of grant.

                  Subject to the provisions of section 13 relating to adjustment
upon  changes  in stock,  no person  shall be  eligible  to be  granted  Options
covering  more than three  hundred  thousand  (300,000)  shares of the Company's
common stock in any calendar year.

         OPTION PROVISIONS.

         Each  Option  shall be in such form and shall  contain  such  terms and
conditions  as the Board  shall deem  appropriate.  The  provisions  of separate
Options  need  not  be  identical,   but  each  Option  shall  include  (through
incorporation of provisions  hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

                  Term.  No Option shall be  exercisable  after the  expiration
of ten (10) years from the date it was granted.

                  Price. The exercise price of each Incentive Stock Option shall
be not less than one  hundred  percent  (100%) of the fair  market  value of the
stock  subject  to the Option on the date the Option is  granted.  The  exercise
price of each  Supplemental  Stock  Option  shall be not less  than  eighty-five
percent (85%) of the fair market value of the stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive  Stock Option or a  Supplemental  Stock Option) may be granted with an
exercise  price  lower  than that set forth in the  preceding  sentence  if such
Option is granted  pursuant to an assumption or substitution  for another option
in a manner satisfying the provisions of Section 424(a) of the Code.

                  Consideration.  The purchase price of stock acquired  pursuant
to an Option shall be paid, to the extent  permitted by applicable  statutes and
regulations,  either (i) in cash at the time the Option is exercised, or (ii) at
the  discretion  of the  Board  or the  Committee,  at the  time of  grant of an
Incentive  Stock  Option or either  at the time of the  grant or  exercise  of a
Supplemental  Stock Option, (A) by delivery to the Company of other common stock
of the Company,  (B) according to a deferred  payment  arrangement,  except that
payment of the common  stock's "par value" (as defined in the  Delaware  General
Corporation  Law) shall not be made by deferred  payment,  or other  arrangement
(which may include, without limiting the generality of the foregoing, the use of
other common stock of the Company) with the person to whom the Option is granted
or to whom the Option is transferred  pursuant to subsection 6(d), or (C) in any
other form of legal consideration that may be acceptable to the Board.

                  In the  case of any  deferred  payment  arrangement,  interest
shall be compounded  at least  annually and shall be charged at the minimum rate
of interest  necessary to avoid the treatment as interest,  under any applicable
provisions of the Code, of any amounts other than amounts  stated to be interest
under the deferred payment arrangement.

                  Transferability.  An  Incentive  Stock  Option  shall  not  be
transferable  except by will or by the laws of  descent  and  distribution,  and
shall be  exercisable  during the  lifetime of the person to whom the  Incentive
Stock Option is granted only by such person.  A Supplemental  Stock Option shall
not be  transferable  except by will or by the laws of descent and  distribution
(and  shall  be  exercisable  during  the  lifetime  of the  person  to whom the
Supplemental  Stock Option is granted only by such person) unless the applicable
Option Agreement expressly provides for other  transferability.  Notwithstanding
the  foregoing,  the  person to whom an Option is  granted  may,  by  delivering
written notice to the Company, in a form satisfactory to the Company,  designate
a third party who, in the event of the death of the Optionee,  shall  thereafter
be entitled to exercise the Option.

                  Vesting.  The total  number of shares of stock  subject  to an
Option may, but need not, be allotted in periodic  installments  (which may, but
need not, be equal).  The Option  Agreement  may provide  that from time to time
during  each of such  installment  periods,  the Option  may become  exercisable
("vest") with respect to some or all of the shares allotted to that period,  and
may be  exercised  with  respect to some or all of the shares  allotted  to such
period  and/or any prior period as to which the Option became vested but was not
fully  exercised.  During the  remainder  of the term of the Option (if its term
extends beyond the end of the installment periods),  the option may be exercised
from time to time with  respect  to any  shares  then  remaining  subject to the
Option. The Option may be subject to such other terms and conditions on the time
or times when it may be exercised  (which may be based on  performance  or other
criteria) as the Board may deem  appropriate.  The provisions of this subsection
6(e) are subject to any Option provisions governing the minimum number of shares
as to which an Option may be exercised.

                  Termination of Status as an Employee,  Director or Consultant.
An Option shall terminate  three (3) months after  termination of the Continuous
Status as an Employee,  Director or Consultant with the Company or an Affiliate,
unless (i) such  termination is due to such person's  Disability,  in which case
the Option  may,  but need not,  provide  that it may be  exercised  at any time
within  one (1)  year  following  termination  of the  Continuous  Status  as an
Employee,  Director or Consultant, or (ii) the Optionee dies while in the employ
of or while  serving as a Consultant or Director to the Company or an Affiliate,
or within not more than three (3) months  after  termination  of the  Continuous
Status as an Employee,  Director or Consultant in which case the Option may, but
need not,  provide  that it may be exercised  at any time within  eighteen  (18)
months  following the death of the Optionee by the person or persons to whom the
Optionee's  rights  under such option pass by will or by the laws of descent and
distribution;  or (iii) the  Option by its terms  specifies  either  (A) that it
shall terminate sooner than three (3) months after termination of the Continuous
Status as an Employee,  Director or Consultant,  or (B) that it may be exercised
more than three (3) months  after  termination  of the  Continuous  Status as an
Employee,  Director  or  Consultant  with  the  Company  or an  Affiliate.  This
subsection  6(f) shall not be  construed  to extend the term of any Option or to
permit anyone to exercise the Option after  expiration of its term, nor shall it
be  construed  to  increase  the  number of  shares  as to which  any  Option is
exercisable  from  the  amount  exercisable  on the date of  termination  of the
Continuous Status as an Employee, Director or Consultant.

                  Early  Exercise.  The  Option  may,  but need  not,  include a
provision whereby the Optionee may elect at any time while an Employee, Director
or Consultant to exercise the Option as to any part or all of the shares subject
to the Option  prior to the full vesting of the Option.  Any unvested  shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.

                  Re-Load Options.  Without in any way limiting the authority of
the Board or Committee to make or not to make grants of Options  hereunder,  the
Board or Committee  shall have the authority  (but not an obligation) to include
as part of any Option Agreement a provision  entitling the Optionee to a further
Option (a  "Re-Load  Option")  in the event the  Optionee  exercises  the Option
evidenced by the Option  Agreement,  in whole or in part, by surrendering  other
shares of common stock in accordance with this Plan and the terms and conditions
of the Option  Agreement.  Any such Re-Load  Option (i) shall be for a number of
shares equal to the number of shares  surrendered as part or all of the exercise
price of such Option;  (ii) shall have an  expiration  date which is the same as
the  expiration  date of the  Option  the  exercise  of which  gave rise to such
Re-Load  Option;  and (iii) shall have an  exercise  price which is equal to one
hundred  percent  (100%) of the fair market value of the common stock subject to
the Re-Load  Option on the date of exercise  of the  original  Option or, in the
case of a Re-Load Option which is an Incentive Stock Option and which is granted
to a 10% stockholder (as described in subsection  5(b)),  shall have an exercise
price which is equal to one hundred ten percent  (110%) of the fair market value
of the  stock  subject  to the  Re-Load  Option on the date of  exercise  of the
original Option.

                 Any such Re-Load  Option may be an Incentive  Stock Option or a
Supplemental  Stock Option,  as the Board or Committee may designate at the time
of the grant of the original Option, provided,  however, that the designation of
any Re-Load  Option as an  Incentive  Stock  Option  shall be subject to the one
hundred  thousand  dollar  ($100,000)  annual  limitation on  exercisability  of
Incentive Stock Options described in subsection 12(d) of the Plan and in Section
422(d) of the Code.  There shall be no Re-Load Options on a Re-Load Option.  Any
such Re-Load Option shall be subject to the  availability  of sufficient  shares
under  subsection 4(a) and the limits on the grants of Options under  subsection
5(c) and shall be  subject to such other  terms and  conditions  as the Board or
Committee may determine which are not inconsistent  with the express  provisions
of the Plan regarding the terms of Options.

         TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.

         Each stock bonus or restricted  stock  purchase  agreement  shall be in
such form and  shall  contain  such  terms  and  conditions  as the Board or the
Committee  shall deem  appropriate.  The terms and  conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the terms
and  conditions of separate  agreements  need not be  identical,  but each stock
bonus  or  restricted   stock   purchase   agreement   shall  include   (through
incorporation  of provisions  hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:

                  Purchase  Price.  The purchase price under each stock purchase
agreement  shall be such amount as the Board or Committee  shall  determine  and
designate in such Stock Award  Agreement.  Notwithstanding  the  foregoing,  the
Board or the Committee may determine that eligible  participants in the Plan may
be awarded stock pursuant to a stock bonus agreement in  consideration  for past
services actually rendered to the Company or for its benefit.

                  Transferability.  No rights under a stock bonus or  restricted
stock purchase  agreement shall be  transferable,  except by will or the laws of
descent and distribution,  unless the applicable Stock Award Agreement expressly
provides for other transferability.

                  Consideration.  The purchase price of stock acquired  pursuant
to a stock purchase  agreement shall be paid either:  (i) in cash at the time of
purchase;  (ii) at the discretion of the Board or the Committee,  according to a
deferred  payment  arrangement,  except that payment of the common  stock's "par
value" (as defined in the Delaware General Corporation Law) shall not be made by
deferred  payment,  or other  arrangement  with the  person to whom the stock is
sold; or (iii) in any other form of legal  consideration  that may be acceptable
to  the  Board  or  the  Committee  in  their  discretion.  Notwithstanding  the
foregoing,  the Board or the Committee to which  administration  of the Plan has
been  delegated  may  award  stock  pursuant  to  a  stock  bonus  agreement  in
consideration  for past  services  actually  rendered  to the Company or for its
benefit.

                  Vesting.  Shares of stock sold or awarded  under the Plan may,
but need not,  be  subject  to a  repurchase  option in favor of the  Company in
accordance  with  a  vesting  schedule  to be  determined  by the  Board  or the
Committee.

                  Termination  of  Employment or  Relationship  as a Director or
Consultant.  In the event a  Participant's  Continuous  Status  as an  Employee,
Director or  Consultant  terminates,  the Company may  repurchase  or  otherwise
reacquire  any or all of the shares of stock held by that person  which have not
vested as of the date of  termination  under  the  terms of the  stock  bonus or
restricted stock purchase agreement between the Company and such person.

         NON-EMPLOYED DIRECTOR OPTIONS.

                  Only  Non-Employed  Directors  shall be  eligible  to  receive
Options as provided for in this section 8. All Options granted  pursuant to this
section 8 shall be subject to all other  provisions  of the Plan, as modified by
this section 8.

                  The following  Non-Employed  Director Options shall be granted
under the Plan:

                           Each  person  who is on or after the date  hereof
elected for the first time to be a Non-Employed Director shall, upon the date of
his initial election to be a Non-Employed  Director by the Board or stockholders
of the Company, automatically be granted a Supplemental Stock Option to purchase
twenty  thousand  (20,000)  shares of the  Company's  common  stock  (subject to
adjustment as provided in section 13 hereof) on such date.

                           Each  Non-Employed  Director who serves on the
Company's  Board of  Directors on the final  vesting  date of an Option  granted
pursuant to subsection  8(b)(i) or pursuant to  subsection  (b) of the Company's
1989  Non-Employee  Director  Stock  Option  Plan,  as the  case  may be,  shall
automatically  be granted a  Supplemental  Stock Option to purchase ten thousand
(10,000) shares of the Company's common stock (subject to adjustment as provided
in section 13 hereof) on such date.

                  The exercise price of each Non-Employed  Director Option shall
be one hundred  percent  (100%) of the fair market value of the stock subject to
such Option on the date such Option is granted.

                  The term of each Non-Employed Director Option commences on the
date it is granted and, unless sooner terminated as set forth herein, expires on
the date ("Expiration  Date") ten (10) years from the date of grant. The term of
each Non-Employed Director Option may terminate sooner than such Expiration Date
if the Optionee's service as a Non-Employed  Director (or subsequent services as
an Employee) of the Company  terminates for any reason or for no reason.  In the
event of such termination of service,  the Option shall terminate on the earlier
of the  Expiration  Date or the date twelve (12)  months  following  the date of
termination of service;  provided,  however, that if such termination of service
is due to the Optionee's death, the Option shall terminate on the earlier of the
Expiration  Date or eighteen (18) months  following  the date of the  Optionee's
death.  In any and all  circumstances,  a  Non-Employed  Director  Option may be
exercised following termination of the Optionee's service to the Company only as
to  that  number  of  shares  as to  which  it was  exercisable  on the  date of
termination of such service under the  provisions of subsections  8(f) and 8(g).
Notwithstanding  the  foregoing,  if exercise  within the  foregoing  periods is
prohibited  under  subsection  10(b)  below,  the  term of the  Option  shall be
extended  to a date  thirty  (30) days  following  the  first  date on which the
condition of subsection  10(b) of the Plan has been met, and the Option shall be
exercisable  as to the number of shares  that could have been  exercised  on the
date of  termination  of service  had the  condition  of  subsection  10(b) been
satisfied on that date.

                  Payment of the exercise  price of each  Non-Employed  Director
Option is due in full in cash upon any exercise  when the number of shares being
purchased  upon such exercise is less than 1,000 shares;  but when the number of
shares being  purchased  upon an exercise is 1,000 or more shares,  the Optionee
may elect to make  payment  of the  exercise  price  under one of the  following
alternatives:

                           Payment of the exercise price per share in cash at
the time of exercise; or

                           Provided that at the time of exercise the  Company's
common stock is publicly traded and quoted regularly in The Wall Street Journal,
payment by delivery of already-owned shares of common stock of the Company owned
by the  Optionee  for at least six (6)  months  and owned  free and clear of any
liens, claims,  encumbrances or security interests,  which common stock shall be
valued at fair market value on the date of exercise; or

                           Payment by a  combination  of the methods of payment
specified in  subsections  8(e)(i) and 8(e)(ii) above.

                  (i) Subject to the provisions of section 13, the  Non-Employed
Director  Options  described in subsection  8(b)(i) shall become  exercisable in
installments  as  follows:  twenty  percent  (20%) of the shares  covered by the
Option on the date one (1) year after the date of grant, and one and six hundred
sixty-seven  thousandths percent (1.667%) of the shares covered by the Option at
the end of every  subsequent  month period  thereafter until all the shares have
become  vested on the date five (5) years from the date of grant;  provided that
shares  shall  become  exercisable  only during  period  that the  Optionee is a
Non-Employed Director of the Company.

                  (ii) The Non-Employed Director Options described in subsection
8(b)(ii)  shall  become  exercisable  in  installments  as follows:  one and six
hundred  sixty-seven  thousandths  percent (1.667%) of the shares covered by the
Option at the end of every subsequent month period after the date of grant until
all the shares  have  become  vested on the date five (5) years from the date of
grant;  provided that shares shall become  exercisable  only during periods that
the Optionee is a Non-Employed Director of the Company.

                  (iii) Subject to the limitations  contained herein  including,
without  limitation,  those  contained in subsection  10(b) and section 16, each
Option shall be  exercisable  with respect to each  installment  on or after the
date of vesting  applicable to such  installment,  provided,  however,  that the
minimum  number of shares with respect to which a Non-Employed  Director  Option
may be  exercised  at any one time is one  hundred  (100),  except that the last
exercise thereunder may be less than one hundred (100).

                  No  Non-Employed  Director,  individually  or as a member of a
group,  and no beneficiary or other person  claiming under or through him, shall
have any right,  title or interest in or to any option reserved for the purposes
of the Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.

                  It shall be a condition precedent to the Company's  obligation
to issue or transfer  shares to a  Non-Employed  Director,  or to  evidence  the
removal of any restrictions on transfer,  that such  Non-Employed  Director make
arrangements  satisfactory  to the  Company  to  insure  that the  amount of any
federal or other  withholding  tax required to be withheld  with respect to such
sale or transfer, or such removal or lapse, is made available to the Company for
timely payment of such tax.

         CANCELLATION AND RE-GRANT OF OPTIONS.

                  Except with  respect to  Non-Employed  Director  Options,  the
Board or the Committee shall have the authority to effect,  at any time and from
time to time,  with the  consent of the  affected  holders of  Options,  (i) the
repricing of any outstanding Options under the Plan and/or (ii) the cancellation
of any outstanding Options under the Plan and the grant in substitution therefor
of new Options under the Plan  covering the same or different  numbers of shares
of stock,  but  having  an  exercise  price per share not less than the  minimum
exercise price required  pursuant to subsections  5(b) and 6(b) on the new grant
date.  Notwithstanding  the  foregoing,  the Board or the Committee may grant an
Option  with an  exercise  price  lower than that set forth above if such Option
and/or Stock  Appreciation  Right is granted as part of a  transaction  to which
section 424(a) of the Code applies.

                  Shares  subject to an Option  canceled  under  this  Section 9
shall continue to be counted  against the maximum award of Options  permitted to
be granted  pursuant to subsection  5(c) of the Plan. The repricing of an Option
under this Section 9, resulting in a reduction of the exercise  price,  shall be
deemed to be a cancellation of the original Option and the grant of a substitute
Option in the event of such  repricing,  both the original  and the  substituted
Options shall be counted  against the maximum awards of Options  permitted to be
granted  pursuant  to  subsection  5(c)  of the  Plan.  The  provisions  of this
subsection  9(b)  shall be  applicable  only to the extent  required  by Section
162(m) of the Code.

         COVENANTS OF THE COMPANY.

                  During the terms of the Stock  Awards,  the Company shall keep
available  at all times the number of shares of stock  required to satisfy  such
Stock Awards up to the number of shares of stock authorized under the Plan.

                  The  Company  shall  seek  to  obtain  from  each   regulatory
commission or agency having  jurisdiction over the Plan such authority as may be
required  to issue and sell shares of stock  under the Stock  Awards;  provided,
however,  that this undertaking  shall not require the Company to register under
the  Securities  Act either  the Plan,  any Stock  Award or any stock  issued or
issuable  pursuant to any such Stock Award.  If, after reasonable  efforts,  the
Company is unable to obtain from any such  regulatory  commission  or agency the
authority  which counsel for the Company deems necessary for the lawful issuance
and sale of stock  under  the  Plan,  the  Company  shall be  relieved  from any
liability for failure to issue and sell stock under such Stock Awards unless and
until such authority is obtained.

         USE OF PROCEEDS FROM STOCK.

         Proceeds  from  the  sale of  stock  pursuant  to  Stock  Awards  shall
constitute general funds of the Company.

         MISCELLANEOUS.

                  Except with  respect to  Non-Employed  Director  Options,  the
Board  shall have the power to  accelerate  the time at which a Stock  Award may
first be  exercised  or the time during  which a Stock Award or any part thereof
will vest, notwithstanding the provisions in the Stock Award stating the time at
which it may first be exercised or the time during which it will vest.

                  Neither an  Optionee  nor any person to whom a Stock  Award is
transferred  under  subsection 6(d) or 7(b) shall be deemed to be the holder of,
or to have any of the rights of a holder with respect to, any shares  subject to
such Stock Award unless and until such person has satisfied all requirements for
exercise of the Stock Award pursuant to its terms.

                  Nothing in the Plan or any instrument  executed or Stock Award
granted pursuant thereto shall confer upon any Employee,  Director,  Consultant,
Optionee, or other holder of Stock Awards any right to continue in the employ of
the Company or any Affiliate (or to continue acting as a Director or Consultant)
or shall  affect the right of the  Company or any  Affiliate  to  terminate  the
employment of any Employee, with or without cause, or the right of the Company's
Board of Directors  and/or the Company's  stockholders to remove any Director as
provided in the  Company's  Bylaws and the  provisions  of the Delaware  General
Corporation  Law or the right to terminate the  relationship  of any  Consultant
subject  to the  terms  of such  Consultant's  agreement  with  the  Company  or
Affiliate.

                  To the extent that the aggregate fair market value (determined
at the time of grant) of stock with  respect to which  Incentive  Stock  Options
granted after 1986 are exercisable for the first time by any Optionee during any
calendar  year under all plans of the  Company  and its  Affiliates  exceeds one
hundred  thousand  dollars  ($100,000),  the Options or portions  thereof  which
exceed such limit  (according to the order in which they were granted)  shall be
treated as Supplemental Stock Options.

                  Withholding.  To the extent  provided  by the terms of a Stock
Award  Agreement,  the person to whom a Stock  Award is granted  may satisfy any
federal,  state or local tax withholding  obligation relating to the exercise of
acquisition  of  such  Stock  Award  by  any  of  the  following  means  or by a
combination of such means:  (1) tendering a cash payment;  (2)  authorizing  the
Company  to  withhold  shares  from the  shares of the  common  stock  otherwise
issuable to the  participant as a result of the exercise or acquisition of stock
under the Stock Award;  or (3) delivering to the Company owned and  unencumbered
shares of the common stock of the Company.

                  The  Company  may  require any person to whom a Stock Award is
granted,  or any  person  to whom a  Stock  Award  is  transferred  pursuant  to
subsection  6(d) or 7(b), as a condition of exercising or acquiring  stock under
any Stock Award, (i) to give written  assurances  satisfactory to the Company as
to such  person's  knowledge and  experience  in financial and business  matters
and/or to  employ a  purchaser  representative  reasonably  satisfactory  to the
Company who is knowledgeable  and experienced in financial and business matters,
and  that he or she is  capable  of  evaluating,  alone  or  together  with  the
purchaser  representative,  the merits and risks of exercising  the Stock Award;
and (ii) to give written  assurances  satisfactory  to the Company  stating that
such person is acquiring  the stock subject to the Stock Award for such person's
own  account  and not  with  any  present  intention  of  selling  or  otherwise
distributing  the stock.  The foregoing  requirements,  and any assurances given
pursuant to such  requirements,  shall be  inoperative if a. the issuance of the
shares upon the exercise or  acquisition of stock under the Stock Award has been
registered  under a then currently  effective  registration  statement under the
Securities Act, or b. as to any particular requirement,  a determination is made
by  counsel  for  the  Company  that  such  requirement  need  not be met in the
circumstances  under the then applicable  securities laws. The Company may, upon
advice of counsel to the Company,  place  legends on stock  certificates  issued
under the Plan as such counsel deems necessary or appropriate in order to comply
with  applicable  securities  laws,  including,  but  not  limited  to,  legends
restricting the transfer of the stock.

         ADJUSTMENTS UPON CHANGES IN STOCK.

                  If any  change is made in the stock  subject  to the Plan,  or
subject to any Stock Award,  without the receipt of consideration by the Company
(through    merger,     consolidation,     reorganization,     recapitalization,
reincorporation,  stock  dividend,  dividend in property other than cash,  stock
split,  liquidating dividend,  combination of shares, exchange of shares, change
in  corporate  structure  or other  transaction  not  involving  the  receipt of
consideration by the Company),  the Plan will be  appropriately  adjusted in the
type(s) and the maximum  number of  securities  subject to the Plan  pursuant to
subsection 4(a) and the limitation of subsection 5(c), and the outstanding Stock
Awards will be  appropriately  adjusted in the type(s) and number of  securities
and price per share of stock  subject to such  outstanding  Stock  Awards.  Such
adjustments  shall be made by the Board or the Committee,  the  determination of
which shall be final, binding and conclusive. (The conversion of any convertible
securities of the Company shall not be treated as a  "transaction  not involving
the receipt of consideration by the Company.")

                  In the event  of:  (1) a  dissolution  or  liquidation  of the
Company; (2) a merger or consolidation in which the Company is not the surviving
corporation;  (3) a  reverse  merger  in  which  the  Company  is the  surviving
corporation but the shares of the Company's common stock outstanding immediately
preceding the merger are converted by virtue of the merger into other  property,
whether in the form of securities,  cash or otherwise;  or (4) any other capital
reorganization  in which  more than  fifty  percent  (50%) of the  shares of the
Company  entitled to vote are  exchanged,  then,  at the sole  discretion of the
Board  and  to the  extent  permitted  by  applicable  law:  (i)  any  surviving
corporation  shall assume any Stock Awards  outstanding  under the Plan or shall
substitute  similar Stock Awards for those outstanding under the Plan, (ii) such
Stock Awards shall continue in full force and effect,  or (iii) any  outstanding
unexercised  rights under any Stock Awards shall be  terminated if not exercised
prior to such event,  provided,  however, that with respect to Stock Awards then
held by persons  performing  services for the Company or an Affiliate,  the time
during  which such  Stock  Awards  become  vested or may be  exercised  shall be
accelerated prior to such termination.

         (c) In the event a change in control (as hereinafter defined) occurs at
the Company after the date of adoption of this Plan and,  within one (1) year of
such change in control,  (i) an Optionee's  employment  with the Company and its
Affiliates is terminated other than for cause (as hereinafter  defined), or (ii)
a  Non-Employee  Director's  directorship  with the Company is terminated by the
Company or by the Non-Employee Director for any reason or for no reason, Options
held by such terminated  Employee or Director may be exercised in full following
such termination without regard to the vesting limitations to which such Options
are otherwise subject. For the purposes of the foregoing,  a "change in control"
shall have  occurred if (i) any person (as defined in Section 13 of the Exchange
Act) acquires shares,  other than directly from the Company, and thereby becomes
the owner of more than thirty percent (30%) of the Company's  outstanding shares
(on a fully diluted  basis) or (ii) the Company enters into a merger (other than
one in  connection  with a  voluntary  change of  corporate  domicile or similar
reorganization or recapitalization transaction) in which the stockholders of the
Company  (determined  immediately prior to the merger) do not own at least fifty
percent  (50%) of the  outstanding  shares  of the  surviving  entity  after the
merger.  For purposes of the  foregoing,  a termination  shall be deemed to have
been made for "cause" in the event the  Optionee's  employment is terminated for
any  of  the  following  reasons:   (A)  the  Optionee's  continued  failure  to
substantially  perform his duties with the  Company or its  Affiliates,  (B) the
engaging  by the  Optionee  in  gross  misconduct  materially  and  demonstrably
injurious to the Company, its Affiliates or their Employees, or (C) illicit drug
use or  habitual  alcohol  use,  or (D) the  commission  by the  Optionee of any
felony.

         AMENDMENT OF THE PLAN.

                  The  Board at any time,  and from time to time,  may amend the
Plan, provided,  however, that the Board shall not amend the Plan more than once
every six (6) months  with  respect to the  provisions  of the section 8 of Plan
(which relate to the amount, price and timing of grants of Non-Employed Director
Options),  other  than  to  comport  with  changes  in the  Code,  the  Employee
Retirement  Income  Security Act, or the rules  thereunder.  However,  except as
provided  in  Section 13  relating  to  adjustments  upon  changes in stock,  no
amendment shall be effective  unless approved by the stockholders of the Company
within twelve (12) months before or after the adoption of the  amendment,  where
the amendment will:

                           Increase the number of shares reserved for Stock
Awards under the Plan;

                           Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification  requires stockholder
approval in order for the Plan to satisfy the requirements of Section 422 of the
Code); or

                           Modify the Plan in any other way if such modification
requires  stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code.

                  It is expressly contemplated that the Board may amend the Plan
in any respect the Board deems  necessary or advisable to provide  Optionee with
the maximum benefits provided or to be provided under the provisions of the Code
and the regulations  promulgated  thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or  Incentive  Stock Options  granted under it into
compliance therewith.

                  Rights and  obligations  under any Stock Award granted  before
amendment of the Plan shall not be impaired by any  amendment of the Plan unless
(i) the Company  requests  the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.

                  The  Board at any time,  and from time to time,  may amend the
terms of any one or more Stock  Award;  provided,  however,  that the rights and
obligations  under any Stock Award  shall not be impaired by any such  amendment
unless  (i) the  Company  requests  the  consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.

         TERMINATION OR SUSPENSION OF THE PLAN.

                  The  Board  may  suspend  or  terminate  the Plan at any time.
Unless sooner terminated, the Plan shall terminate on February 2, 2007. No Stock
Awards may be granted  under the Plan while the Plan is suspended or after it is
terminated.

                  Rights and obligations under any Stock Award granted while the
Plan is in effect shall not be altered or impaired by suspension or  termination
of the Plan,  except  with the consent of the person to whom the Stock Award was
granted.

         EFFECTIVE DATE OF PLAN.

         The Plan shall become  effective  as  determined  by the Board,  but no
Stock Awards  granted under the Plan shall be  exercisable  unless and until the
Plan has been approved by the stockholders of the Company,  and, if required, an
appropriate  permit has been issued by the  Commissioner  of Corporations of the
State of California.