ARONEX PHARMACEUTICALS, INC.
                             1998 STOCK OPTION PLAN

                                    ARTICLE I

                                      PLAN

     1.1  PURPOSE.  This Plan is a plan for  employees  and  consultants  of the
Company and its  Affiliates and is intended to advance the best interests of the
Company,  its  Affiliates,  and its  stockholders by providing those persons who
have substantial responsibility for the management and growth of the Company and
its  Affiliates  with  additional  incentives  and an  opportunity  to obtain or
increase their proprietary interest in the Company,  thereby encouraging them to
continue in the employ of the Company or any of its Affiliates.

     1.2  EFFECTIVE  DATE OF PLAN.  This Plan shall be effective  March 19, 1998
(the  "Effective  Date"),  if within  one year of that  date it shall  have been
approved  by at least a  majority  vote of  stockholders  voting in person or by
proxy  at a  duly  held  stockholders'  meeting,  or if  the  provisions  of the
corporate  charter,  by-laws or applicable state law prescribes a greater degree
of  stockholder  approval for this  action,  the approval by the holders of that
percentage,  at a duly held meeting of stockholders.  No Option shall be granted
pursuant to this Plan after March 19, 2008.


                                   ARTICLE II

                                   DEFINITIONS

     The words and phrases  defined in this  Article  shall have the meaning set
out in these  definitions  throughout this Plan, unless the context in which any
such  word or  phrase  appears  reasonably  requires  a  broader,  narrower,  or
different meaning.

     2.1   "AFFILIATE"   means  any  parent   corporation   and  any  subsidiary
corporation. The term "parent corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if, at the
time of the  action or  transaction,  each of the  corporations  other  than the
Company owns stock  possessing 50% or more of the total combined voting power of
all  classes of stock in one of the other  corporations  in the chain.  The term
"subsidiary  corporation"  means any corporation  (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of the
action or transaction,  each of the corporations other than the last corporation
in the unbroken  chain owns stock  possessing  50% or more of the total combined
voting  power of all  classes of stock in one of the other  corporations  in the
chain.

     2.2 "BOARD OF DIRECTORS" means the board of directors of the Company.

     2.3 "CAUSE," when used in connection  with the termination of an Employee's
employment or  Consultant's  engagement  by the Company,  means (i) any material
failure of the Employee or Consultant to perform his duties under any employment
or consulting  agreement with the Company (other than any such failure resulting
from the Employee or Consultant's incapacity due to Disability),  subject to any
written  notice and  opportunity  to cure  provided  for by such  employment  or
consulting  agreement,  (ii) the Employee or  Consultant's  gross  negligence or
willful or  intentional  wrongdoing or misconduct  relating to his employment or
engagement by the Company, (iii) a material breach by the Employee or Consultant
of any proprietary information,  inventions or non-competition agreement between
the  Employee  or  Consultant  and the  Company,  (iv) a material  breach by the
Employee or Consultant of any insider trading, business ethics or similar policy
of the Company,  or (iv)  conviction  of the Employee or  Consultant of a felony
offense or a crime involving moral turpitude.


WOD01:4414.1
                                       -1-

<PAGE>



     2.4 "CHANGE OF CONTROL" means:

          (i) the acquisition after the Effective Date by any individual, entity
     or group  (within  the  meaning  of Section  13(d)(3)  or  14(d)(2)  of the
     Securities  Exchange Act of 1934,  as amended) (a  "Person") of  beneficial
     ownership of 30 percent or more of either (i) the then  outstanding  shares
     of common stock of the Company (the "Outstanding Common Stock") or (ii) the
     combined  voting power of the then  outstanding  voting  securities  of the
     Company  entitled  to vote  generally  in the  election of  directors  (the
     "Outstanding  Voting  Securities"),  provided  that  for  purposes  of this
     subsection (i), the following acquisitions shall not constitute a Change of
     Control: (A) any acquisition directly from the Company, (B) any acquisition
     by the  Company,  (C) any  acquisition  by any  employee  benefit  plan (or
     related  trust)  sponsored or maintained by the Company or any  corporation
     controlled  by the  Company,  or (D)  any  acquisition  by any  corporation
     pursuant to a transaction  which  complies with clauses (A), (B) and (C) of
     subsection (iii) hereof; or

          (ii) individuals,  who, as of the Effective Date, constitute the Board
     (the  "Incumbent  Board")  cease for any  reason to  constitute  at least a
     majority of the Board,  provided  that any  individual  becoming a director
     subsequent  to  the  Effective  Date  whose  nomination  or  election,   or
     nomination  for election by the Company's  stockholders,  was approved by a
     vote of at least a majority of the directors then  comprising the Incumbent
     Board shall be  considered  as though such  individual  was a member of the
     Incumbent Board, but excluding, for this purpose, any such individual whose
     initial  assumption of office occurs as a result of an actual or threatened
     election  contest  with  respect to the election or removal of directors or
     other  actual or  threatened  solicitation  of proxies or consents by or on
     behalf of a Person other than the Board; or


WOD01:4414.1
                                       -2-
<PAGE>

          (iii)  consummation  after  the  Effective  Date of a  reorganization,
     merger  or   consolidation   or  sale  or  other   disposition  of  all  or
     substantially all of the assets of the Company (a "Corporate  Transaction")
     unless, in each case, following such Corporate Transaction,  (A) (1) all or
     substantially  all of the  persons  who were the  beneficial  owners of the
     Outstanding  Common Stock immediately  prior to such Corporate  Transaction
     beneficially own, directly or indirectly,  more than 60 percent of the then
     outstanding  shares of common stock of the corporation  resulting from such
     Corporate Transaction,  and (2) all or substantially all of the persons who
     were the beneficial owners of the Outstanding Voting Securities immediately
     prior  to  such  Corporate   Transaction   beneficially   own  directly  or
     indirectly,  more than 60 percent of the combined  voting power of the then
     outstanding voting securities entitled to vote generally in the election of
     directors of the  corporation  resulting  from such  Corporate  Transaction
     (including,  without  limitation,  a corporation  which as a result of such
     transaction owns the Company or all or  substantially  all of the Company's
     assets   either   directly  or  through  one  or  more   subsidiaries)   in
     substantially  the same  proportions as their  ownership of the Outstanding
     Common Stock and the outstanding  Voting  Securities  immediately  prior to
     such Corporate  Transaction,  as the case may be, (B) no Person  (excluding
     (1) any  corporation  resulting  from  such  Corporate  Transaction  or any
     employee benefit plan (or related trust) of the Company or such corporation
     resulting from such Corporate  Transaction  and (2) any Person  approved by
     the Incumbent Board) beneficially owns, directly or indirectly,  20 percent
     or more of the then  outstanding  shares of common stock of the corporation
     resulting from such Corporate  Transaction or the combined  voting power of
     the then outstanding  voting  securities of such corporation  except to the
     extent that such ownership existed prior to such Corporate  Transaction and
     (C) at least a majority  of the  members of the board of  directors  of the
     corporation  resulting from such Corporate  Transaction were members of the
     Incumbent Board at the time of the execution of the initial agreement or of
     the action of the Board providing for such Corporate Transaction.

     2.5 "CODE" means the internal Revenue Code of 1986, as amended.

     2.6 "COMMITTEE" means the Compensation  Committee of the Board of Directors
or such other  committee  designated  by the Board of  Directors.  The Committee
shall be comprised solely of at least two members who are Non-Employee Directors
and Outside Directors.

     2.7 "COMPANY" means Aronex Pharmaceuticals, Inc., a Delaware corporation.

     2.8  "CONSULTANT"  means a person  who is  engaged  by the  Company  or any
Affiliate to render consulting services and to whom an Option is granted.


WOD01:4414.1
                                       -3-

<PAGE>



     2.9 "DISABILITY" means a physical or mental infirmity which, in the opinion
of a  physician  selected  by the  Committee,  shall  prevent  the  Employee  or
Consultant  from  earning  a  reasonable  livelihood  with  the  Company  or any
Affiliate  and which can be  expected  to result in death or which has lasted or
can be expected to last for a  continuous  period of not less than 12 months and
which:  (a) was not  contracted,  suffered  or  incurred  while the  Employee or
Consultant was engaged in, or did not result from having engaged in, a felonious
criminal  enterprise;  (b)  did not  result  from  alcoholism  or  addiction  to
narcotics;  and (c) did not result from an injury incurred while a member of the
Armed Forces of the United States for which the Employee or Consultant  receives
a military pension.

     2.10 "EMPLOYEE"  means a person employed by the Company or any Affiliate to
whom an Option is granted.

     2.11  "FAIR  MARKET  VALUE" of the Stock as of any date  means (a) the last
sale price of the Stock on that date (or, if there was no sale on such date, the
next preceding date on which there was such a sale) as reported on the principal
securities  exchange  on which the Stock is  listed;  or (b) if the Stock is not
listed on a securities  exchange,  the last sale price of the Stock on that date
(or, if there was no sale on such date,  the next  preceding date on which there
was such a sale) as reported on the Nasdaq Stock Market;  or (c) if the Stock is
not  listed on the  Nasdaq  Stock  Market,  the  average of the high and low bid
quotations  for the Stock on that date as  reported  by the  National  Quotation
Bureau Incorporated; or (d) if none of the foregoing is applicable, an amount at
the election of the Committee  equal to (x) the average  between the closing bid
and ask  prices  per share of Stock on the last  preceding  date on which  those
prices were reported or (y) an amount as determined by the Committee in its sole
discretion.

     2.12  "INCENTIVE  OPTION" means an Option  granted under this Plan which is
designated as an "Incentive  Option" and satisfies the  requirements  of Section
422 of the Code.

     2.13 "NON-EMPLOYEE  DIRECTOR" means a "non-employee  director" as that term
is defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended.

     2.14  "NONQUALIFIED  OPTION" means an Option  granted under this Plan other
than an Incentive Option.

     2.15 "OPTION"  means either an Incentive  Option or a  Nonqualified  Option
granted under this Plan to purchase shares of Stock.

     2.16  "OPTION  AGREEMENT"  means the written  agreement  which sets out the
terms of an Option.

     2.17 "OPTIONEE" means a person who is granted an Option under this Plan.

     2.18 "OUTSIDE DIRECTOR" means a member of the Board of Directors serving on
the Committee who satisfies the criteria of Section 162(m) of the Code.

     2.19 "PLAN" means the Aronex Pharmaceuticals,  Inc. 1998 Stock Option Plan,
as set out in this document and as it may be amended from time to time.

     2.20 "STOCK"  means the common  stock of the  Company,  par value $.001 per
share,  or, in the event that the  outstanding  shares of common stock are later
changed into or exchanged  for a different  class of stock or  securities of the
Company or another corporation, that other stock or security.

     2.21 "10%  STOCKHOLDER"  means an individual who, at the time the Option is
granted,  owns stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or of any Affiliate.  An individual shall
be considered as owning the stock owned,  directly or indirectly,  by or for his
brothers and sisters  (whether by the whole or half blood),  spouse,  ancestors,
and lineal descendants; and stock owned, directly or indirectly,

WOD01:4414.1
                                       -4-

<PAGE>



by or for a corporation,  partnership,  estate, or trust, shall be considered as
being  owned   proportionately   by  or  for  its   stockholders,   partners  or
beneficiaries.


                                   ARTICLE III

                                   ELIGIBILITY

     The individuals who shall be eligible to receive Incentive Options shall be
those key  employees of the Company or any of its  Affiliates  as the  Committee
shall  determine  from time to time.  The  individuals  who shall be eligible to
receive Nonqualified Options shall be those key employees and consultants of the
Company or any of its Affiliates as the Committee  shall  determine from time to
time. No member of the  Committee  shall be eligible to receive any Option or to
receive stock, stock options,  or stock appreciation rights under any other plan
of the Company or any of its Affiliates,  if to do so would cause the individual
not to be a Non-Employee Director or an Outside Director. The Board of Directors
may designate one or more  individuals  who shall not be eligible to receive any
Option under this Plan or under other similar plans of the Company.


                                   ARTICLE IV

                     GENERAL PROVISIONS RELATING TO OPTIONS

     4.1  AUTHORITY  TO  GRANT  OPTIONS.   The  Committee  may  grant  to  those
individuals,  as it shall from time to time  determine,  Options under the terms
and conditions of this Plan. Subject only to any applicable  limitations set out
in this  Plan,  the  number of shares of Stock to be covered by any Option to be
granted to an Employee  or  Consultant  of the Company or any of its  Affiliates
shall be as determined by the Committee.

     4.2 DEDICATED  SHARES.  The total number of shares of Stock with respect to
which  Options may be granted  under the Plan shall be 750,000  shares of Stock.
The shares may be treasury shares or authorized but unissued  shares.  The total
number of shares of Stock with respect to which Incentive Options may be granted
under the Plan shall be 750,000 shares.  The maximum number of shares subject to
Options which may be issued to any Optionee  under the Plan during any period of
three consecutive  years is 250,000 shares.  The number of shares stated in this
Section 4.2 shall be subject to adjustment in accordance  with the provisions of
Section 4.5.

     In the event that any outstanding  Option shall expire or terminate for any
reason or any  Option is  surrendered,  the  shares  of Stock  allocable  to the
unexercised  portion of that Option may again be subject to an Option  under the
Plan.

     4.3 NON-TRANSFERABILITY.  Options shall not be transferable by the Optionee
otherwise than (i) by will or under the laws of descent and distribution or (ii)
pursuant  to a qualified  domestic  relations  order as defined in the Code,  in
Title I of the  Employee  Retirement  Income  Security  Act, or in the rules and
regulations  as may be in  effect  from  time to time  thereunder,  and shall be
exercisable, during the Optionee's lifetime, only by him.

     4.4 REQUIREMENTS OF LAW. The Company shall not be required to sell or issue
any Stock under any Option if issuing that Stock would constitute or result in a
violation by the Optionee or the Company of any  provision of any law,  statute,
or regulation of any governmental  authority.  Specifically,  in connection with
any applicable statute or regulation relating to the registration of securities,
upon  exercise  of any Option,  the  Company  shall not be required to issue any
Stock unless the  Committee  has  received  evidence  satisfactory  to it to the
effect  that the holder of that  Option will not  transfer  the Stock  except in
accordance  with  applicable  law,  including  receipt  of an opinion of counsel
satisfactory  to the Company to the effect that any proposed  transfer  complies
with applicable law. The  determination by the Committee on this matter shall be
final,  binding  and  conclusive.  The  Company  may,  but  shall in no event be
obligated  to,  register any Stock  covered by this Plan  pursuant to applicable
securities  laws of any country or any political  subdivision.  In the event the
Stock issuable on exercise of an Option is not registered, the Company

WOD01:4414.1
                                       -5-

<PAGE>



may imprint on the certificate  evidencing the Stock any legend that counsel for
the Company considers  necessary or advisable to comply with applicable law. The
Company shall not be obligated to take any other affirmative  action in order to
cause the exercise of an Option and the issuance of shares thereunder, to comply
with any law or regulation of any governmental authority.

     4.5  CHANGES  IN  THE  COMPANY'S  CAPITAL   STRUCTURE.   The  existence  of
outstanding  Options  shall  not  affect  in any way the  right  or power of the
Company   or  its   stockholders   to  make  or   authorize   any   adjustments,
recapitalizations,  reorganizations  or other changes in the  Company's  capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds,  debentures,  preferred  or prior  preference  stock ahead of or
affecting the Stock or its rights,  or the  dissolution  or  liquidation  of the
Company,  or any sale or transfer of all or any part of its assets or  business,
or any other  corporate  act or  proceeding,  whether of a similar  character or
otherwise.

     If the Company shall effect a  subdivision  or  consolidation  of shares or
other capital  readjustment,  the payment of a stock dividend, or other increase
or reduction of the number of shares of the Stock outstanding, without receiving
compensation for it in money,  services or property then (a) the number,  class,
and per share price of shares of Stock subject to outstanding Options under this
Plan shall be appropriately  adjusted in such a manner as to entitle an Optionee
to  receive  upon  exercise  of  an  Option,   for  the  same   aggregate   cash
consideration,  the  equivalent  total  number and class of shares he would have
received  had he  exercised  his Option in full  immediately  prior to the event
requiring the  adjustment;  and (b) the number and class of shares of Stock then
reserved to be issued under the Plan shall be adjusted by  substituting  for the
total number and class of shares of Stock then  reserved,  that number and class
of shares of Stock that would have been received by the owner of an equal number
of  outstanding  shares  of such  class  of  Stock as the  result  of the  event
requiring the adjustment.

     If the Company is merged or consolidated  with another  corporation and the
Company is not the  surviving  corporation,  or if the Company is  liquidated or
sells or otherwise  disposes of substantially  all its assets while  unexercised
Options  remain  outstanding  under this Plan,  (a) subject to the provisions of
clause  (c)  below,  after  the  effective  date of the  merger,  consolidation,
liquidation,  sale or other  disposition,  as the case may be, each holder of an
outstanding  Option shall be entitled,  upon exercise of the Option, to receive,
in lieu of shares of Stock,  the  number and class or classes of shares of stock
or other securities or property to which the holder would have been entitled if,
immediately  prior  to the  merger,  consolidation,  liquidation,  sale or other
disposition,  the  holder had been the holder of record of a number of shares of
Stock  equal  to the  number  of  shares  as to  which  the  Option  shall be so
exercised;  (b) the Committee  shall waive any limitations set out in or imposed
under  this  Plan so that  all  Options,  from  and  after a date  prior  to the
effective  date  of  the  merger,  consolidation,  liquidation,  sale  or  other
disposition,  as  the  case  may  be,  specified  by  the  Committee,  shall  be
exercisable  in full;  and (c) all  outstanding  Options  may be canceled by the
Committee as of the effective  date of any merger,  consolidation,  liquidation,
sale or other disposition,  if (i) notice of cancellation shall be given to each
holder of an Option  and (ii) each  holder of an Option  shall have the right to
exercise that Option in full (without  regard to any  limitations  set out in or
imposed under this Plan or the Option  Agreement  granting that Option) during a
period  set by  the  Committee  preceding  the  effective  date  of the  merger,
consolidation,  liquidation,  sale or other disposition and, if in the event all
outstanding  Options may not be  exercised in full under  applicable  securities
laws  without  registration  of the shares of Stock  issuable on exercise of the
Options,  the  Committee  may limit the exercise of the Options to the number of
shares of Stock,  if any, as may be issued without  registration.  The method of
choosing  which Options may be exercised,  and the number of shares of Stock for
which  Options may be exercised,  shall be solely  within the  discretion of the
Committee.

     The issue by the  Company  of shares of stock of any class,  or  securities
convertible  into  shares of stock of any class,  for cash or  property,  or for
labor or services  either  upon  direct  sale or upon the  exercise of rights or
warrants to subscribe for them, or upon  conversion of shares or  obligations of
the Company  convertible into shares or other securities,  shall not affect, and
no  adjustment  by reason of such  issuance  shall be made with  respect to, the
number, class, or price of shares of Stock then subject to outstanding Options.

     4.6 CHANGES OF CONTROL. In the event of a Change of Control,  the Committee
may, in its discretion, at the time an Option is granted or any time thereafter:
(i) provide for the acceleration of any time period

WOD01:4414.1
                                       -6-

<PAGE>



relating to the  exercise of the Option,  (ii)  provide for the  purchase of the
Option upon the Optionee's  request for an amount of cash or other property that
could have been  received  upon the  exercise  of the Option had the Option been
then  currently  exercisable,  (iii)  adjust the terms of the Option in a manner
determined  by the  Committee  to reflect the Change of Control,  (iv) cause the
Option to be assumed, or new rights substituted therefore, by another entity, or
(v) make such other  provisions as the  Committee may consider  equitable and in
the best interest of the Company.


                                    ARTICLE V

                                     OPTIONS

     5.1 TYPE OF OPTION.  The  Committee  shall  specify  whether a given Option
shall constitute an Incentive Option or a Nonqualified Option.

     5.2 OPTION PRICE. The price at which Stock may be purchased under an Option
shall not be less than the greater of: (a) 100% of the Fair Market  Value of the
shares of Stock on the date the Option is granted or (b) the aggregate par value
of the shares of Stock on the date the Option is granted. In the case of any 10%
Stockholder,  the  price at which  shares  of Stock  may be  purchased  under an
Incentive  Option  shall not be less than 110% of the Fair  Market  Value of the
Stock on the date the Incentive Option is granted.

     5.3 DURATION OF OPTIONS;  TERMINATION. No Option shall be exercisable after
the expiration of 10 years from the date the Option is granted. In the case of a
10% Stockholder,  no Incentive Option shall be exercisable  after the expiration
of five years from the date the Incentive  Option is granted.  Unless  otherwise
provided in the Option Agreement or by the Committee:

               (a) If the employment or engagement of an Optionee by the Company
          shall  terminate  for any reason  other than  Cause,  Disability,  the
          voluntary  retirement of the Optionee in accordance with the Company's
          retirement policy as then in effect or the death of the Optionee:  (i)
          Options  granted  to such  Optionee,  to the  extent  that  they  were
          exercisable at the time of such termination,  shall remain exercisable
          until the expiration of 90 days after such termination,  on which date
          they shall expire,  and (ii) Options granted to such Optionee,  to the
          extent that they were not exercisable at the time of such termination,
          shall expire at the close of business on the date of such termination;
          provided,  however,  that no  Option  shall be  exercisable  after the
          expiration of its term.

               (b) If the employment or engagement of an Optionee by the Company
          shall terminate on account of the Disability, the voluntary retirement
          of the Optionee in accordance with the Company's  retirement policy as
          then in effect or the death of the  Optionee:  (i) Options  granted to
          such Optionee, to the extent that they were exercisable at the time of
          such termination, shall remain exercisable until the expiration of one
          year after such termination, on which date they shall expire, and (ii)
          Options  granted to such  Optionee,  to the extent  that they were not
          exercisable at the time of such termination, shall expire at the close
          of business on the date of such termination;  provided,  however, that
          no Option shall be exercisable after the expiration of its term.

               (c) In the event of the  termination of an Optionee's  employment
          or  engagement  for Cause,  all  outstanding  Options  granted to such
          Optionee shall expire at the  commencement  of business on the date of
          such termination.

     5.4 AMOUNT EXERCISABLE.  Each Option may be exercised from time to time, in
whole or in part, in the manner and subject to the conditions the Committee,  in
its sole discretion,  may provide in the Option Agreement, as long as the Option
is valid and  outstanding.  To the extent that the  aggregate  Fair Market Value
(determined  as of the time an  Incentive  Option is  granted) of the Stock with
respect to which  Incentive  Options  first become  exercisable  by the Optionee
during any calendar year (under this Plan and any other  incentive  stock option
plan(s) of the Company or any Affiliate) exceeds $100,000, the Incentive Options
shall  be  treated  as  Nonqualified  Options.  In  making  this  determination,
Incentive  Options  shall be taken into  account in the order in which they were
granted.

WOD01:4414.1
                                       -7-

<PAGE>



     5.5 EXERCISE OF OPTIONS.  Each Option shall be exercised by the delivery of
written notice to the Company, to the attention of its Secretary,  setting forth
the  number  of  shares  of Stock  with  respect  to which  the  Option is to be
exercised,  together with: (a) cash, wire transfer, certified check, bank draft,
or postal or express  money  order  payable to the order of the  Company  for an
amount  equal to the  option  price of the  shares,  or (b) if  approved  by the
Committee,  Stock at its Fair Market Value on the date of  exercise,  and/or any
other form of payment which is acceptable to the  Committee,  and specifying the
address to which the  certificates  for the shares are to be mailed.  Subject to
Sections  4.4 and 8.3,  as  promptly  as  practicable  after  receipt of written
notification and payment, the Company shall deliver to the Optionee certificates
for the number of shares  with  respect to which the Option has been  exercised,
issued in the  Optionee's  name.  If shares of Stock are used in  payment of the
exercise price,  the aggregate Fair Market Value of the shares of Stock tendered
must be equal to or less than the aggregate  exercise  price of the shares being
purchased upon exercise of the Option,  and any difference must be paid by cash,
certified  check,  bank draft,  or postal or express  money order payable to the
Company. Delivery of the shares shall be deemed effected for all purposes when a
stock transfer agent of the Company shall have deposited the certificates in the
United States mail,  addressed to the Optionee,  at the address specified by the
Optionee.

     Whenever an Option is exercised by exchanging  shares of Stock owned by the
Optionee,  the Optionee shall deliver to the Company certificates  registered in
the name of the Optionee  representing  a number of shares of Stock  legally and
beneficially owned by the Optionee,  free of all liens, claims, and encumbrances
of every kind,  accompanied by stock powers duly endorsed in blank by the record
holder of the shares represented by the certificates (with signature  guaranteed
by a commercial bank or trust company or by a brokerage firm having a membership
on a registered national stock exchange).  The delivery of certificates upon the
exercise of Options is subject to the condition  that the person  exercising the
Option  provide the Company with the  information  the Company might  reasonably
request pertaining to exercise, sale or other disposition of an Option.

     5.6 SUBSTITUTION OPTIONS.  Options may be granted under this Plan from time
to  time  in  substitution   for  stock  options  held  by  employees  of  other
corporations who are about to become employees of or affiliated with the Company
or any  Affiliate as the result of a merger or  consolidation  of the  employing
corporation with the Company or any Affiliate, or the acquisition by the Company
or any Affiliate of the assets of the employing corporation,  or the acquisition
by the Company or any  Affiliate of stock of the  employing  corporation  as the
result of which it becomes an Affiliate of the Company. The terms and conditions
of the substitute Options granted may vary from the terms and conditions set out
in this Plan  (including,  without  limitation,  the terms and  conditions  with
respect  to the price at which  Stock may be  purchased  under an Option) to the
extent the Committee,  at the time of grant, may deem appropriate to conform, in
whole or in part, to the  provisions of the stock  options in  substitution  for
which they are granted.

     5.7 NO  RIGHTS AS  STOCKHOLDER.  No  Optionee  shall  have any  rights as a
stockholder  with respect to Stock  covered by his Option until the date a stock
certificate is issued for the Stock.


                                   ARTICLE VI

                                 ADMINISTRATION

     This  Plan  shall  be  administered  by the  Committee.  All  questions  of
interpretation  and application of this Plan and Options shall be subject to the
determination of the Committee. A majority of the members of the Committee shall
constitute a quorum.  All  determinations  of the  Committee  shall be made by a
majority of its members.  Any decision or  determination  reduced to writing and
signed by a majority of the members shall be as effective as if it had been made
by a majority  vote at a meeting  properly  called and held.  This Plan shall be
administered  in such a manner as to permit the Options  granted  under it which
are  designated  to be  Incentive  Options to qualify as Incentive  Options.  In
carrying out its authority  under this Plan,  the Committee  shall have full and
final  authority  and  discretion,  including  but not limited to the  following
rights, powers and authorities, to:


WOD01:4414.1
                                       -8-

<PAGE>



               (a)  determine the persons to whom and the time or times at which
          Options will be made,

               (b)  determine  the  number of shares and the  purchase  price of
          Stock covered in each Option, subject to the terms of the Plan,

               (c)  determine  the  terms,  provisions  and  conditions  of each
          Option, which need not be identical,

               (d)  accelerate the time at which any  outstanding  Option may be
          exercised,

               (e)  define  the  effect,  if any,  on an  Option  of the  death,
          disability, retirement, or termination of employment of the Optionee,

               (f) prescribe,  amend and rescind rules and regulations  relating
          to administration of this Plan, and

               (g) make all  other  determinations  and take all  other  actions
          deemed   necessary,   appropriate,   or   advisable   for  the  proper
          administration of this Plan.

     The actions of the Committee in exercising all of the rights,  powers,  and
authorities  set out in this Article and all other  Articles of this Plan,  when
performed in good faith and in its sole judgment, shall be final, conclusive and
binding on all parties.


                                   ARTICLE VII

                        AMENDMENT OR TERMINATION OF PLAN

     The Board of Directors of the Company may amend,  terminate or suspend this
Plan at any time, in its sole and absolute discretion;  provided,  however, that
to the extent required to maintain the status of any Incentive  Option under the
Code, no amendment that would (a) change the aggregate number of shares of Stock
which may be issued under Incentive  Options,  (b) change the class of employees
eligible to receive  Incentive  Options,  or (c) decrease the exercise price for
Incentive  Options  below the Fair  Market  Value of the Stock at the time it is
granted,  shall be made  without  the  approval of the  Company's  stockholders.
Subject to the  preceding  sentence,  the Board shall have the power to make any
changes in this Plan and in the regulations and administrative  provisions under
it or in any outstanding  Incentive  Option as in the opinion of counsel for the
Company  may be  necessary  or  appropriate  from  time to time  to  enable  any
Incentive  Option granted under this Plan to continue to qualify as an incentive
stock option or such other stock  option as may be defined  under the Code so as
to receive preferential Federal income tax treatment.


                                  ARTICLE VIII

                                  MISCELLANEOUS

     8.1 NO  ESTABLISHMENT  OF A TRUST FUND. No property  shall be set aside nor
shall a trust  fund of any kind be  established  to  secure  the  rights  of any
Optionee under this Plan. All Optionees  shall at all times rely solely upon the
general  credit of the  Company for the  payment of any  benefit  which  becomes
payable under this Plan.

     8.2 NO  EMPLOYMENT  OBLIGATION.  The  granting  of  any  Option  shall  not
constitute  an  employment  contract,  express or  implied,  nor impose upon the
Company or any  Affiliate  any  obligation  to employ or  continue to employ any
Optionee.  The right of the Company or any Affiliate to terminate the employment
of any person shall not be  diminished or affected by reason of the fact that an
Option has been granted to him.


     WOD01:4414.1 
                                      -9-

<PAGE>



     8.3 TAX  WITHHOLDING.  The  Company or any  Affiliate  shall be entitled to
deduct from other  compensation  payable to each  Optionee any sums  required by
federal,  state,  or local tax law to be withheld  with  respect to the grant or
exercise of an Option. In the alternative,  the Company may require the Optionee
(or other person  exercising the Option) to pay the sum directly to the employer
corporation. If the Optionee (or other person exercising the Option) is required
to pay the sum  directly,  payment  in cash or by check of such  sums for  taxes
shall be  delivered  within  ten days  after  the date of  exercise  or lapse of
restrictions.  The Company shall have no obligation  upon exercise of any Option
until payment has been received,  unless  withholding  (or offset against a cash
payment) as of or prior to the date of exercise is  sufficient to cover all sums
due with respect to that exercise.  The Company and its Affiliates  shall not be
obligated to advise an Optionee of the  existence of the tax or the amount which
the employer corporation will be required to withhold.

     8.4 WRITTEN  AGREEMENT.  Each Option shall be embodied in a written  Option
Agreement  which shall be subject to the terms and  conditions  of this Plan and
shall be signed by the Optionee and by a member of the  Committee and an officer
of the Company on behalf of the Committee and the Company.  The Option Agreement
may contain any other provisions that the Committee in its discretion shall deem
advisable which are not inconsistent with the terms of this Plan.

     8.5  INDEMNIFICATION  OF THE  COMMITTEE  AND THE BOARD OF  DIRECTORS.  With
respect to administration of this Plan, the Company shall indemnify each present
and future member of the Committee and the Board of Directors against,  and each
member of the  Committee  and the Board of Directors  shall be entitled  without
further  action  his  part to  indemnity  from the  Company  for,  all  expenses
(including  attorneys'  fees, the amount of judgments and the amount of approved
settlements  made with a view to the  curtailment of costs of litigation,  other
than  amounts  paid  to  the  Company  itself)  reasonably  incurred  by  him in
connection  with or arising out of any action,  suit,  or proceeding in which he
may be involved by reason of his being or having been a member of the  Committee
and/or the Board of Directors, whether or not he continues to be a member of the
Committee   and/or  the  Board  of  Directors  at  the  time  of  incurring  the
expenses--including, without limitation, matters as to which he shall be finally
adjudged  in any  action,  suit or  proceeding  to have been  found to have been
negligent in the  performance of his duty as a member of the Committee or of the
Board of  Directors.  However,  this  indemnity  shall not include any  expenses
incurred by any member of the Committee and/or the Board of Directors in respect
of matters  as to which he shall be  finally  adjudged  in any  action,  suit or
proceeding to have been guilty of gross negligence or willful  misconduct in the
performance  of his duty as a member of the Committee or the Board of Directors.
In addition,  no right of indemnification  under this Plan shall be available to
or enforceable by any member of the Committee or the Board of Directors  unless,
within 60 days after  institution of any action,  suit or  proceeding,  he shall
have offered the Company, in writing,  the opportunity to handle and defend same
at its own expense.  This right of indemnification shall inure to the benefit of
the heirs,  executors or  administrators of each member of the Committee and the
Board of  Directors  and shall be in  addition  to all  other  rights to which a
member of the  Committee  and the Board of Directors may be entitled as a matter
of law, contract, or otherwise.

     8.6 GENDER. If the context requires,  words of one gender when used in this
Plan shall  include the others and words used in the  singular  or plural  shall
include the other.

     8.7   HEADINGS.   Headings  of  Articles  and  Sections  are  included  for
convenience of reference only and do not constitute  part of this Plan and shall
not be used in construing the terms of this Plan.

     8.8 OTHER  COMPENSATION  PLANS.  The adoption of this Plan shall not affect
any other stock  option,  incentive or other  compensation  or benefit  plans in
effect  for the  Company or any  Affiliate,  nor shall  this Plan  preclude  the
Company from establishing any other forms of incentive or other compensation for
employees of the Company or any Affiliate.

     8.9 OTHER OPTIONS. The grant of an Option shall not confer upon an Optionee
the right to receive any future or other Options under this Plan, whether or not
Options may be granted to similarly situated Optionees,  or the right to receive
future Options upon the same terms or conditions as previously granted.

WOD01:4414.1
                                      -10-

<PAGE>


     8.10 ARBITRATION OF DISPUTES. Any controversy arising out of or relating to
the Plan or an Option  Agreement  shall be  resolved  by  arbitration  conducted
pursuant to the arbitration rules of the American Arbitration  Association.  The
arbitration shall be final and binding on the parties.

     8.11  GOVERNING  LAW.  The  provisions  of this  Plan  shall be  construed,
administered, and governed under the laws of the State of Delaware.



WOD01:4414.1
                                      -11-