BIO-TECHNOLOGY GENERAL CORP.
                  STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

     1. Purpose.

     The purpose of this Stock Option Plan for Non-Employee Directors (the
"Plan") of Bio-Technology General Corp. (the "Corporation") is to strengthen the
Corporation's ability to attract and retain the services of knowledgeable and
experienced persons who, through their efforts and expertise, can make a
significant contribution to the success of the Corporation's business by serving
as members of the Corporation's Board of Directors and to provide additional
incentive for such directors to continue to work for the best interests of the
Corporation and its stockholders through ownership of its Common Stock, $.01 par
value (the "Common Stock"). Accordingly, the Corporation will grant to each
non-employee director options to purchase shares of the Corporation's Common
Stock on the terms and conditions hereafter established.

     2. Stock Subject to Plan.

     The Company may issue and sell a total of 500,000 shares of its Common
Stock pursuant to the Plan. Such shares may be either authorized and unissued or
held by the Company in its treasury. New options may be granted under the Plan
with respect to shares of Common Stock which are covered by the unexercised
portion of an option which has terminated or expired by its terms, by
cancellation or otherwise.

     3. Administration of the Plan.

     The Plan shall be administered by the Board of Directors of the Corporation
(the "Board"). The interpretation and construction by the Board of any
provisions of the Plan or of any other matters related to the Plan shall be
final. The Board may from time to time adopt such rules and regulations for
carrying out the Plan as it may deem advisable. No member of the Board shall be
liable for any action or determination made in good faith with respect to the
Plan.

     The Board of Directors may at any time amend, alter, suspend or terminate
the Plan; provided, however, that any such action would not impair any option to
purchase Common Stock theretofore granted under the Plan; and provided further
that without the approval of the Corporation's stockholders, no amendments or
alterations would be made which would (i) increase the number of shares of
Common Stock that may be purchased by each non-employee director under the Plan
(except as permitted by Paragraph 10), (ii) increase the aggregate number of
shares of Common Stock as to which options may be granted under the Plan (except
as permitted by Paragraph 10), (iii) decrease the option exercise price (except
as permitted by 


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Paragraph 10), or (iv) extend the period during which outstanding options
granted under the Plan may be exercised; and provided further that Paragraph 5
of the Plan shall not be amended more than once every six months other than to
comply with changes in the Internal Revenue Code of 1986, as amended, or the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder.

     4. Eligibility.

     All non-employee directors of the Corporation shall be eligible to receive
options under the Plan. Receipt of stock options under any other stock option
plan maintained by the Corporation or any subsidiary shall not, for that reason,
preclude a director from receiving options under the Plan.

     5. Grants.

     (i) Each person who is re-elected as a non-employee director at the time
the Plan is adopted by the stockholders of the Corporation shall on the date of
such adoption of the Plan (the "Initial Grant Date") be issued an option to
purchase 7,500 shares of the Corporation's Common Stock (the "Initial Option")
at the following price for the following term and otherwise in accordance with
the terms of the Plan:

          (a) The option exercise price per share of Common Stock shall be the
     Fair Market Value (as defined below) of the Common Stock covered by such
     Initial Option on the Initial Grant Date.

          (b) Except as provided herein, the term of an Initial Option shall be
     for a period of ten (10) years from the Initial Grant Date.

     (ii) In addition, each non-employee director shall, on each subsequent date
of such non-employee director's re-election to the Board at the Company's annual
meeting of stockholders (the "Additional Grant Date"), be granted an option to
purchase 7,500 shares of the Corporation's Common Stock (the "Additional
Option") at the following price for the following term and otherwise in
accordance with the terms of the Plan:

          (a) The option exercise price per share of Common Stock shall be the
     Fair Market Value (as defined below) of the Common Stock covered by such
     Additional Option on the Additional Grant Date.

          (b) Except as provided herein, the term of an Additional Option shall
     be for a period of ten (10) years from the Additional Grant Date.

     (iii) "Fair Market Value" shall mean, for each Grant Date, (A) if the
Common Stock is listed or admitted to trading on the New York Stock Exchange


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(the "NYSE") or the American Stock Exchange (the "ASE"), the average of the high
and low sale price of the Common Stock on such date or, if no sale takes place
on such date, the average of the highest closing bid and lowest closing asked
prices of the Common Stock on such exchange, in each case as officially reported
on the NYSE or the ASE, or (B) if no shares of Common Stock are then listed or
admitted to trading on the NYSE or the ASE, the average of the high and low sale
prices of the Common Stock on such date on the NASDAQ National Market or, if no
shares of Common Stock are then quoted on the NASDAQ National Market, the
average of the closing bid and highest asked prices of the Common Stock on such
date on NASDAQ or, if no shares of Common Stock are then quoted on NASDAQ, the
average of the highest bid and lowest asked prices of the Common Stock on such
date as reported in the over-the-counter system. If no closing bid and highest
asked prices thereof are then so quoted or published in the over-the-counter
market, "Fair Market Value" shall mean the fair value per share of Common Stock
(assuming for the purposes of this calculation the economic equivalence of all
shares of classes of capital stock), as determined on a fully diluted basis in
good faith by the Board, as of a date which is 15 days preceding such Grant
Date.

     (iv) Options granted hereunder shall not be "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended.

     6. Regulatory Compliance and Listing.

     The issuance or delivery of any Option may be postponed by the Corporation
for such period as may be required to comply with the Federal securities laws,
any applicable listing requirements of any applicable securities exchange and
any other law or regulation applicable to the issuance or delivery of such
Options, and the Corporation shall not be obligated to issue or deliver any
Options if the issuance or delivery of such options would constitute a violation
of any law or any regulation of any governmental authority or applicable
securities exchange.

     7. Restrictions on Exercisability and Sale.

     (i) Except as provided in Section 7(ii) below, and subject to Section
7(iii) below, each Option granted under the Plan may be exercisable as to 25% of
the total number of shares issuable under such Option on the date six months
after the date of grant and as to an additional 25% on each of the first, second
and third anniversaries of the date of grant.

     (ii) If any event constituting a "Change in Control of the Corporation"
shall occur, all Options granted under the Plan which are outstanding at the
time a Change of Control of the Corporation shall occur shall immediately become
exercisable. A "Change in Control of the Corporation" shall be deemed to occur
if (i)


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there shall be consummated (x) any consolidation or merger of the Corporation in
which the Corporation is not the continuing or surviving corporation or pursuant
to which shares of the Corporation's Common Stock would be converted into cash,
securities or other property, other than a merger of the Corporation in which
the holders of the Corporation's Common Stock immediately prior to the merger
have the same proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (y) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Corporation, or (ii) the stockholders
of the Corporation shall approve any plan or proposal for liquidation or
dissolution of the Corporation, or (iii) any person (as such term is used in
Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), shall become the beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act) of 40% or more of the Corporation's
outstanding Common Stock other than pursuant to a plan or arrangement entered
into by such person and the Corporation, or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the entire Board of Directors shall cease for any reason to constitute a
majority thereof unless the election, or the nomination for election by the
Corporation's stockholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were directors at the
beginning of the period.

     8. Cessation as Director.

     In the event that the holder of an Option granted pursuant to the Plan
shall cease to be a director of the Corporation for any reason (other than
death) such holder may exercise any portion of the Option that is exercisable by
him at the time he ceases to be a director of the Corporation, but only to the
extent such Option is exercisable as of such date, within six months after the
date he ceases to be a director of the Corporation.

     9. Death.

     In the event that a holder of an Option granted pursuant to the Plan shall
die, any option granted to such holder shall be immediately and automatically
accelerated and become fully vested and all unexercised Options shall be
exercisable by his estate, personal representative or beneficiary, for a period
of twelve months after the date of his death.

     10. Stock Splits, Mergers, etc.

     In the event of any stock split, stock dividend or similar transaction
which increases or decreases the number of outstanding shares of Common Stock,
appropriate adjustment shall be made by the Board of Directors, whose
determination shall be final,


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to the number and option exercise price per share of Common Stock which may be
purchased under any outstanding Options. In the case of a merger, consolidation
or similar transaction which results in a replacement of the Corporation's
Common Stock and stock of another corporation but does not constitute a Change
in Control of the Corporation, the Corporation will make a reasonable effort,
but shall not be required, to replace any outstanding Options granted under the
Plan with comparable options to purchase the stock of such other corporation, or
will provide for immediate maturity of all outstanding Options, with all Options
not being exercised within the time period specified by the Board of Directors
being terminated.

     11. Transferability.

     Options are not assignable or transferable, except upon the optionholder's
death to a beneficiary designated by the optionee in accordance with procedures
established by the Board or, if no designated beneficiary shall survive the
optionholder, pursuant to the optionholder's will or by the laws of descent and
distribution, to the extent set forth in Section 9 and during the optionholder's
lifetime, may be exercised only by him.

     12. Exercise of Options.

     An optionholder electing to exercise an Option shall give written notice to
the Corporation of such election and of the number of shares of Common Stock
that he has elected to acquire. An optionholder shall have no rights of a
stockholder with respect to shares of Common Stock covered by his Option until
after the date of issuance of a stock certificate to him upon partial or
complete exercise of his option.

     13. Payment.

     The Option exercise price shall be payable in cash, check or in shares of
Common Stock upon the exercise of the Option. If the shares of Common Stock are
tendered as payment of the Option exercise price, the value of such shares shall
be the Fair Market Value as of the date of exercise. If such tender would result
in the issuance of fractional shares of Common Stock, the Corporation shall
instead return the difference in cash or by check to the director.

     14. Obligation to Exercise Option.

     The granting of an Option shall impose no obligation on the director to
exercise such option.


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     15. Continuance as Director.

     Nothing in the Plan shall be deemed to create any obligation on the part of
the Board to nominate any director for reelection by the Corporation's
stockholders.

     16. Term of Plan.

     The Plan shall be effective as of the date on which it is adopted by the
stockholders of the Company. The Plan will terminate on the date ten years after
the date of adoption by the stockholders of the Company, unless sooner
terminated by the Board. The rights of optionees under options outstanding at
the time of the termination of the Plan shall not be affected solely by reason
of the termination and shall continue in accordance with the terms of the option
(as then in effect or thereafter amended).


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