Exhibit 10.1

                            APPLIED BIOMETRICS, INC.
                                 1998 STOCK PLAN
                       as amended through January 1, 2000






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                                TABLE OF CONTENTS


SECTION  1. General Purpose of Plan; Definitions..............................3

SECTION  2. Administration....................................................5

SECTION  3. Stock Subject to Plan.............................................6

SECTION  4. Eligibility.......................................................7

SECTION  5. Stock Options.....................................................7

SECTION  6. Stock Appreciation Rights........................................10

SECTION  7. Restricted Stock.................................................12

SECTION  8. Deferred Stock Awards............................................13

SECTION  9. Other Awards.....................................................14

SECTION 10.  Transfer, Leave of Absence, etc.................................14

SECTION 11.  Amendments and Termination......................................15

SECTION 12.  Unfunded Status of Plan.........................................15

SECTION 13.  General Provisions..............................................15





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                            APPLIED BIOMETRICS, INC.
                                 1998 STOCK PLAN


                  SECTION 1.  General Purpose of Plan; Definitions

The name of this plan is the Applied Biometrics, Inc. 1998 Stock Plan (the
"Plan"). The purpose of the Plan is to enable Applied Biometrics, Inc. (the
"Company") and its Subsidiaries to retain and attract executives and other key
employees, non-employee directors and consultants who contribute to the
Company's success by their ability, ingenuity and industry, and to enable such
individuals to participate in the long-term success and growth of the Company by
giving them a proprietary interest in the Company.

         For purposes of the Plan, the following terms shall be defined as set
forth below:

         a.       "Agreement" means an agreement by and between the Company and
                  an optionee or recipient of an award under the Plan setting
                  forth the terms and conditions of the option or award.

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

         c.       "Cause" means a felony conviction of a participant or the
                  failure of a participant to contest prosecution for a felony,
                  or a participant's willful misconduct or dishonesty, any of
                  which is directly and materially harmful to the business or
                  reputation of the Company.

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

         e.       "Committee" means the Committee referred to in Section 2 of
                  the Plan. If at any time no Committee shall be in office, then
                  the functions of the Committee specified in the Plan shall be
                  exercised by the Board, unless the Plan specifically states
                  otherwise.

         f.       "Company" means Applied Biometrics, Inc., a corporation
                  organized under the laws of the State of Minnesota (or any
                  successor corporation).

         g.       "Consultant" means any person, including an advisor, engaged
                  by the Company or a Parent Corporation of Subsidiary of the
                  Company to render services, who is compensated for such
                  services and who is not an employee of the Company or any
                  Parent Corporation or Subsidiary of the Company.


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         h.       "Deferred Stock" means an award made pursuant to Section 8
                  below of the right to receive Stock at the end of a specified
                  deferral period.

         i.       "Disability" means permanent and total disability as
                  determined by the Committee.

         j.       "Fair Market Value" means the value of Stock on any given date
                  which shall be determined by the Committee as follows: (a) if
                  the Stock is listed for trading on one or more national
                  securities exchanges, or is traded on the Nasdaq Stock Market
                  or the Nasdaq Small Cap Market, the last reported sales price
                  on the principal such exchange, the Nasdaq Stock Market or the
                  Nasdaq Small Cap Market on the date in question, or if such
                  Stock shall not have been traded on any principal exchange or
                  market on such date, the last reported sales price on such
                  principal exchange, the Nasdaq Stock Market or the Nasdaq
                  Small Cap Market, on the first day prior thereto on which such
                  Stock was so traded; or (b) if the Stock is not listed for
                  trading on a national securities exchange, the Nasdaq Stock
                  Market or the Nasdaq Small Cap Market, but is traded in the
                  over-the-counter market, the closing bid price for such Stock
                  on the day prior to the date in question, or if there is no
                  closing bid price for such Stock on such day, the closing bid
                  price on the first day prior thereto on which such price
                  existed; or (c) if neither (a) nor (b) is applicable, by any
                  means fair and reasonable by the Committee, which
                  determination shall be final and binding on all parties."

         k.       "Incentive Stock Option" means any Stock Option intended to be
                  and designated as an "Incentive Stock Option" within the
                  meaning of Section 422 of the Code.

         l.       "Non-Employee Director" means a "Non-Employee Director" within
                  the meaning of Rule 16b-3(b)(3) under the Securities Exchange
                  Act of 1934.

         m.       "Non-Qualified Stock Option" means any Stock Option that is
                  not an Incentive Stock Option, and is intended to be and is
                  designated as a "Non-Qualified Stock Option."

         n.       "Other Awards" means those awards granted pursuant to Section
                  9 hereof.

         o.       "Outside Director" means a Director who: (a) is not a current
                  employee of the Company or any member of an affiliated group
                  which includes the Company; (b) is not a former employee of
                  the Company who receives compensation for prior services
                  (other than benefits under a tax-qualified retirement plan)
                  during the taxable year; (c) has not been an officer of the
                  Company; (d) does not receive remuneration from the Company,
                  either directly or indirectly, in any capacity other than as a
                  director, except as otherwise permitted under Code Section
                  162(m) and regulations thereunder. For this purpose,
                  remuneration includes any payment in exchange for good or
                  services. This definition shall be further governed by the
                  provisions of Code Section 162(m) and regulations promulgated
                  thereunder.


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         p.       "Parent Corporation" means any corporation (other than the
                  Company) in an unbroken chain of corporations ending with the
                  Company if 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.

         q.       "Restricted Stock" means an award of shares of Stock that are
                  subject to restrictions under Section 7 below.

         r.       "Retirement" means retirement from active employment or
                  engagement with the Company and any Subsidiary or Parent
                  Corporation of the Company on or after age 55.

         s.       "Stock" means the Common Stock, $.01 par value per share, of
                  the Company.

         t.       "Stock Appreciation Right" means the right pursuant to an
                  award granted under Section 6 below to surrender to the
                  Company all or a portion of a Stock Option in exchange for an
                  amount equal to the difference between (i) the Fair Market
                  Value, as of the date such Stock Option or such portion
                  thereof is surrendered, of the shares of Stock covered by such
                  Stock Option or such portion thereof, and (ii) the aggregate
                  exercise price of such Stock Option or such portion thereof.

         u.       "Stock Option" means any option to purchase shares of Stock
                  granted pursuant to Section 5 below.

         v.       "Subsidiary" means any corporation (other than the Company) in
                  an unbroken chain of corporations beginning with the Company
                  if 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.

         SECTION 2.  Administration.

         The Plan shall be administered by the Board of Directors or by a
Committee appointed by the Board of Directors of the Company consisting of at
least two Directors, all of whom shall be Non-Employee Directors and Outside
Directors, who shall serve at the pleasure of the Board.

         The Committee shall have the power and authority to grant to eligible
optionees and participants, pursuant to the terms of the Plan: (i) Stock
Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Deferred
Stock awards, or (v) Other Awards.

         In particular, the Committee shall have the authority:

         (i)      to select the optionees and participants to whom Stock
                  Options, Stock Appreciation Rights, Restricted Stock, Deferred
                  Stock awards and/or Other Awards may from time to time be
                  granted hereunder;


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         (ii)     to determine whether and to what extent Incentive Stock
                  Options, Non-Qualified Stock Options, Stock Appreciation
                  Rights, Restricted Stock, Deferred Stock awards and/or Other
                  Awards, or a combination of the foregoing, are to be granted
                  hereunder;

         (iii)    to determine the number of shares to be covered by each such
                  award granted hereunder;

         (iv)     to determine the terms and conditions, not inconsistent with
                  the terms of the Plan, of any award granted hereunder
                  (including, but not limited to, any restriction on any Stock
                  Option or other award and/or the shares of Stock relating
                  thereto), provided, however, that in the event of a merger or
                  asset sale, the applicable provisions of Section 5(c) of the
                  Plan shall govern the acceleration of the vesting of any Stock
                  Option; and

         (v)      to determine whether, to what extent and under what
                  circumstances Stock and other amounts payable with respect to
                  an award under this Plan shall be deferred either
                  automatically or at the election of the participant.

         The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan. The Committee may
delegate to officers of the Company the authority to exercise the powers
specified in (i), (ii), (iii), (iv) and (v) above with respect to persons who
are not either the chief executive officer of the Company or the four highest
paid officers of the Company other than the chief executive officer.

         All decisions made by the Committee pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company and Plan
participants.

         SECTION 3.  Stock Subject to Plan.

         The total number of shares of Stock reserved and available for
distribution under the Plan shall be 1,250,000 shares, plus any shares of Common
Stock which, as of the date that this Plan (as amended through January 1, 2000)
is approved by the Company's shareholders, are reserved for issuance under the
Company's 1994 Amended Stock Plan and 1996 Stock Plan and which are not
thereafter issued or which have been issued but are subsequently forfeited or
cancelled and which would otherwise have been available for further issuance
under such plans. Such shares may consist, in whole or in part, of authorized
and unissued shares.

         Subject to paragraph (b)(iv) of Section 6 below, if any shares that
have been optioned ceased to be subject to Options, or if any shares subject to
any Restricted Stock or Deferred Stock award or Other Award granted hereunder
are forfeited or such award otherwise terminates without a payment being made to
the participant, such shares shall again be available for distribution in
connection with future awards under the Plan. Upon a Stock-for-Stock exercise of
a Stock Option or upon the withholding of Stock for the payment of the option
price or taxes, only the net number


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of shares issued to the optionee shall be used to calculate the number of shares
remaining available for distribution under the Plan.

         In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, other change in corporate
structure affecting the Stock, or spin-off or other distribution of assets to
shareholders, such substitution or adjustment shall be made in the aggregate
number of shares reserved for issuance under the Plan, in the number and option
price of shares subject to outstanding options granted under the Plan, and in
the number of shares subject to Restricted Stock or Deferred Stock awards
granted under the Plan as may be determined to be appropriate by the Committee,
in its sole discretion, provided that the number of shares subject to any award
shall always be a whole number. Such adjusted option price shall also be used to
determine the amount payable by the Company upon the exercise of any Stock
Appreciation Right associated with any Option.


         SECTION 4.  Eligibility.

         Officers, other key employees of the Company and Subsidiaries,
non-employee directors and Consultants who are responsible for or contribute to
the management, growth and/or profitability of the business of the Company and
its Subsidiaries are eligible to be granted Stock Options, Stock Appreciation
Rights, Restricted Stock or Deferred Stock awards or Other Awards under the
Plan. The optionees and participants under the Plan shall be selected from time
to time by the Committee, in its sole discretion, from among those eligible, and
the Committee shall determine, in its sole discretion, the number of shares
covered by each award.

         Notwithstanding the foregoing, no person shall receive grants of Stock
Options, Restricted and Deferred Stock under this Plan which exceed 200,000
shares during any fiscal year of the Company.

         SECTION 5.  Stock Options.

         Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.

         The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options. No Incentive Stock
Options shall be granted under the Plan after June 1, 2008.

         The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options, or both types of options (in each
case with or without Stock Appreciation Rights). To the extent that any option
does not qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option.

         Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or any Incentive Stock


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Option under Section 422 of the Code. The preceding sentence shall not preclude
any modification or amendment to an outstanding Incentive Stock Option, whether
or not such modification or amendment results in disqualification of such Option
as an Incentive Stock Option, provided the optionee consents in writing to the
modification or amendment.

         Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.

         (a) Option Price. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Committee at the time of grant. In no
event shall the option price per share of Stock purchasable under an Incentive
Stock Option or a Non-Qualified Stock Option be less than 100% of the Fair
Market Value of the Stock on the date of the grant of the option. If an employee
owns or is deemed to own (by reason of the attribution rules applicable under
Section 424(d) of the Code) more than 10% of the combined voting power of all
classes of stock of the Company or any Parent Corporation or Subsidiary and an
Incentive Stock Option is granted to such employee, the option price shall be no
less than 110% of the Fair Market Value of the Stock on the date the option is
granted.

         (b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary and an Incentive Stock Option is granted to
such employee, the term of such option shall be no more than five years from the
date of grant.

         (c) Exercisability. Stock Options shall be exercisable at such time or
times as determined by the Committee at or after grant. If the Committee
provides, in its discretion, that any option is exercisable only in
installments, the Committee may waive such installment exercise provisions at
any time. Notwithstanding the foregoing, unless the Stock Option Agreement
provides otherwise, any Stock Option granted under this Plan shall be
exercisable in full, without regard to any installment exercise provisions, for
a period specified by the Company, but not to exceed sixty (60) days prior to or
subsequent to the occurrence of any of the following events: (i) dissolution or
liquidation of the Company other than in conjunction with a bankruptcy of the
Company or any similar occurrence, (ii) any merger, consolidation, acquisition,
separation, reorganization, or similar occurrence, where the Company will not be
the surviving entity or (iii) the transfer of substantially all of the assets of
the Company or the acquisition of beneficial ownership of more than 50% of any
class of equity security of the Company.

         (d) Method of Exercise. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice of exercise
to the Company specifying the number of shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price, either by
certified or bank check, or by any other form of legal consideration deemed
sufficient by the Committee and consistent with the Plan's purpose and
applicable law, including promissory notes or a properly executed exercise
notice together with irrevocable instructions to a broker acceptable to the
Company to promptly deliver to the Company the amount of sale or loan proceeds


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to pay the exercise price. As determined by the Committee at the time of grant
or exercise, in its sole discretion, payment in full or in part may also be made
in the form of unrestricted Stock already owned by the optionee (which in the
case of Stock acquired upon exercise of an option have been owned for more than
six months on the date of surrender)(based on the Fair Market Value of the Stock
on the date immediately preceding the date the option is exercised, as
determined by the Committee), provided, however, that, in the case of an
Incentive Stock Option, the right to make a payment in the form of already owned
shares may be authorized only at the time the option is granted. No shares of
Stock shall be issued until full payment therefor has been made. An optionee
shall generally have the rights to dividends and other rights of a shareholder
with respect to shares subject to the option when the optionee has given written
notice of exercise, has paid in full for such shares and, if requested, has
given the representation described in paragraph (a) of Section 13.

         (e)      Non-transferability of Options.

                  (i) Subject to Section 5(e)(ii) below, no Stock Option shall
         be transferable by the optionee otherwise than by will or by the laws
         of descent and distribution, and all Stock Options shall be
         exercisable, during the optionee's lifetime, only by the optionee.

                  (ii) The Committee may, in its discretion, authorize all or a
         portion of the options to be granted to an optionee to be on terms
         which permit transfer by such optionee to (A) the spouse, children or
         grandchildren of the optionees ("Immediate Family Members"), (B) a
         trust or trusts for the exclusive benefit of such Immediate Family
         Members, or (C) a partnership or partnerships in which such Immediate
         Family Members are the only partners, provided that (1) there may be no
         consideration for any such transfer, (2) the stock option agreement
         pursuant to which such options are granted must be approved by the
         Committee, and must expressly provide for transferability in a manner
         consistent with this Section 5(e)(ii), and (3) subsequent transfers of
         transferred options shall be prohibited except those in accordance with
         Section 5(e)(i). Following transfer, any such options shall continue to
         be subject to the same terms and conditions as were applicable
         immediately prior to transfer, provided that the term "optionee" herein
         shall in such event be deemed to refer to the transferee, except that
         the events of termination of employment of Sections 5(f), 5(g), 5(h)
         and 5(i) hereof shall continue to be applied with respect to the
         original optionee, following which the options shall be exercisable by
         the transferee only to the extent, and for the periods specified in
         such Sections.

         (f) Termination by Death. If an optionee's employment by the Company
and any Subsidiary or Parent Corporation terminates by reason of death, the
Stock Option may thereafter be immediately exercised, to the extent then
exercisable (or on such accelerated basis as the Committee shall determine at or
after grant), by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee, for a period of three years (or such
shorter period as the Committee shall specify at grant) from the date of such
death or until the expiration of the stated term of the option, whichever period
is shorter. In the event of termination of employment by reason of death, if an
Incentive Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, the option will thereafter
be treated as a Non-Qualified Stock Option.


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         (g) Termination by Reason of Disability. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Disability
(or on such accelerated basis as the Committee shall determine at or after
grant), but may not be exercised after three years (or such shorter period as
the Committee shall specify at grant) from the date of such termination of
employment or the expiration of the stated term of the option, whichever period
is the shorter. In the event of termination of employment by reason of
Disability, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, the
option will thereafter be treated as a Non-Qualified Stock Option.

         (h) Termination by Reason of Retirement. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Retirement, any Stock Option held by such optionee may thereafter be exercised
to the extent it was exercisable at the time of such Retirement, but may not be
exercised after three years (or such shorter period as Committee shall specify
at grant) from the date of such termination of employment or the expiration of
the stated term of the option, whichever period is the shorter. In the event of
termination of employment by reason of Retirement, if an Incentive Stock Option
is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, the option will thereafter be treated as a
Non-Qualified Stock Option.

         (i) Other Termination. Unless otherwise determined by the Committee, if
an optionee's employment by the Company and any Subsidiary or Parent Corporation
terminates for any reason other than death, Disability or Retirement, the Stock
Option may be exercised to the extent it was exercisable at such termination for
the lesser of three months or the balance of the option's term. In the event of
a termination of employment other than for death, Disability or Retirement and
if pursuant to its terms any Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422 of the
Code, the option will thereafter be treated as a Non-Qualified Stock Option. In
the event the optionee is terminated for Cause by the Company or any Subsidiary
or Parent Corporation, the Stock Option shall thereupon terminate.

         (j) Annual Limit on Incentive Stock Options. The aggregate Fair Market
Value (determined as of the time the Option is granted) of the Common Stock with
respect to which an Incentive Stock Option under this Plan or any other plan of
the Company and any Subsidiary or Parent Corporation is exercisable for the
first time by an optionee during any calendar year shall not exceed $100,000.

         SECTION 6.  Stock Appreciation Rights.

         (a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of the grant of such Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of the grant of the option.

         A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the


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related Stock Option, except that a Stock Appreciation Right granted with
respect to less than the full number of shares covered by a related Stock Option
shall not be reduced until the exercise or termination of the related Stock
Option exceeds the number of shares not covered by the Stock Appreciation Right.

         A Stock Appreciation Right may be exercised by an optionee, in
accordance with paragraph (b) of this Section 6, by surrendering the applicable
portion of the related Stock Option. Upon such exercise and surrender, the
optionee shall be entitled to receive an amount determined in the manner
prescribed in paragraph (b) of this Section 6. Stock Options which have been so
surrendered, in whole or in part, shall no longer be exercisable to the extent
the related Stock Appreciation Rights have been exercised.

         (b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the following:

                  (i) Stock Appreciation Rights shall be exercisable only at
         such time or times and to the extent that the Stock Options to which
         they relate shall be exercisable in accordance with the provisions of
         Section 5 and this Section 6 of the Plan.

                  (ii) Upon the exercise of a Stock Appreciation Right, an
         optionee shall be entitled to receive up to, but not more than, an
         amount in cash or shares of Stock equal in value to the excess of the
         Fair Market Value of one share of Stock over the option price per share
         specified in the related option multiplied by the number of shares in
         respect of which the Stock Appreciation Right shall have been
         exercised, with the Committee having the right to determine the form of
         payment; provided the Committee may not require the optionee to receive
         more than 50% of the aggregate value of such Stock Appreciation Rights
         in shares of Stock.

                  (iii) Stock Appreciation Rights shall be transferable only
         when and to the extent that the underlying Stock Option would be
         transferable under Section 5 of the Plan.

                  (iv) Upon the exercise of a Stock Appreciation Right, the
         Stock Option or part thereof to which such Stock Appreciation Right is
         related shall be deemed to have been exercised for the purpose of the
         limitation set forth in Section 3 of the Plan on the number of shares
         of Stock to be issued under the Plan, but only to the extent of the
         number of shares issued or issuable under the Stock Appreciation Right
         at the time of exercise based on the value of the Stock Appreciation
         Right at such time.

                  (v) A Stock Appreciation Right granted in connection with an
         Incentive Stock Option may be exercised only if and when the market
         price of the Stock subject to the Incentive Stock Option exceeds the
         exercise price of such Option.

                  (vi) Each award shall be confirmed by, and subject to the
         terms of, a Stock Appreciation Rights Agreement executed by the Company
         and the participant.


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         SECTION 7.  Restricted Stock.

         (a) Administration. Shares of Restricted Stock may be issued either
alone or in addition to other awards granted under the Plan. The Committee shall
determine the officers and key employees of the Company and Subsidiaries to
whom, and the time or times at which, grants of Restricted Stock will be made,
the number of shares to be awarded, the time or times within which such awards
may be subject to forfeiture, and all other conditions of the awards. The
Committee may also condition the grant of Restricted Stock upon the attainment
of specified performance goals. The provisions of Restricted Stock awards need
not be the same with respect to each recipient.

         (b) Awards and Certificates. The prospective recipient of an award of
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an Agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.

                  (i) Each participant shall be issued a stock certificate in
         respect of shares of Restricted Stock awarded under the Plan. Such
         certificate shall be registered in the name of the participant, and
         shall bear an appropriate legend referring to the terms, conditions,
         and restrictions applicable to such award, substantially in the
         following form:

                  "The transferability of this certificate and the shares of
                  stock represented hereby are subject to the terms and
                  conditions (including forfeiture) of the Applied Biometrics,
                  Inc. 1998 Stock Plan and an Agreement entered into between the
                  registered owner and Applied Biometrics, Inc. Copies of such
                  Plan and Agreement are on file in the offices of Applied
                  Biometrics, Inc., 501 East Highway 13, Suite 108, Burnsville,
                  MN 55337.

                  (ii) The Committee shall require that the stock certificates
         evidencing such shares be held in custody by the Company until the
         restrictions thereon shall have lapsed, and that, as a condition of any
         Restricted Stock award, the participant shall have delivered a stock
         power, endorsed in blank, relating to the Stock covered by such award.

         (c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to the Plan shall be subject to the following restrictions and
conditions:

                  (i) Subject to the provisions of this Plan and the award
         Agreement, during a period set by the Committee commencing with the
         date of such award (the "Restriction Period"), the participant shall
         not be permitted to sell, transfer, pledge or assign shares of
         Restricted Stock awarded under the Plan. In no event shall the
         Restriction Period be less than one (1) year. Within these limits, the
         Committee may provide for the lapse of such restrictions in
         installments where deemed appropriate.

                  (ii) Except as provided in paragraph (c)(i) of this Section 7,
         the participant shall have, with respect to the shares of Restricted
         Stock, all of the rights of a shareholder of the Company, including the
         right to vote the shares and the right to receive any cash dividends.


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         The Committee, in its sole discretion, may permit or require the
         payment of cash dividends to be deferred and, if the Committee so
         determines, reinvested in additional shares of Restricted Stock (to the
         extent shares are available under Section 3 and subject to paragraph
         (g) of Section 13). Certificates for shares of unrestricted Stock shall
         be delivered to the grantee promptly after, and only after, the period
         of forfeiture shall have expired without forfeiture in respect of such
         shares of Restricted Stock.

                  (iii) Subject to the provisions of the award Agreement and
         paragraph (c)(iv) of this Section 7, upon termination of employment for
         any reason during the Restriction Period, all shares still subject to
         restriction shall be forfeited by the participant.

                  (iv) In the event of special hardship circumstances of a
         participant whose employment is terminated (other than for Cause),
         including death, Disability or Retirement, or in the event of an
         unforeseeable emergency of a participant still in service, the
         Committee may, in its sole discretion, when it finds that a waiver
         would be in the best interest of the Company, waive in whole or in part
         any or all remaining restrictions with respect to such participant's
         shares of Restricted Stock.

                  (v) Notwithstanding the foregoing, all restrictions with
         respect to any participant's shares of Restricted Stock shall lapse on
         the date determined by the Committee, but in no event more than sixty
         (60) days prior to or subsequent to the occurrence of any of the
         following events: (i) dissolution or liquidation of the Company other
         than in conjunction with a bankruptcy of the Company or any similar
         occurrence, (ii) any merger, consolidation, acquisition, separation,
         reorganization, or similar occurrence, where the Company will not be
         the surviving entity or (iii) the transfer of substantially all of the
         assets of the Company or the acquisition of beneficial ownership of
         more than 50% of any class of equity security of the Company.

         SECTION 8.  Deferred Stock Awards.

         (a) Administration. Deferred Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall determine
the officers and key employees of the Company and Subsidiaries to whom and the
time or times at which Deferred Stock shall be awarded, the number of Shares of
Deferred Stock to be awarded to any participant or group of participants, the
duration of the period (the "Deferral Period") during which, and the conditions
under which, receipt of the Stock will be deferred, and the terms and conditions
of the award in addition to those contained in paragraph (b) of this Section 8.
The Committee may also condition the grant of Deferred Stock upon the attainment
of specified performance goals. The provisions of Deferred Stock awards need not
be the same with respect to each recipient.

         (b)      Terms and Conditions.

                  (i) Subject to the provisions of this Plan and the award
         agreement, Deferred Stock awards may not be sold, assigned,
         transferred, pledged or otherwise encumbered during the Deferral
         Period. In no event shall the Deferral Period be less than one (1)
         year. At the expiration of the Deferral Period (or Elective Deferral
         Period, where applicable),


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<PAGE>


         share certificates shall be delivered to the participant, or his legal
         representative, in a number equal to the shares covered by the Deferred
         Stock award.

                  (ii) Amounts equal to any dividends declared during the
         Deferral Period with respect to the number of shares covered by a
         Deferred Stock award will be paid to the participant currently or
         deferred and deemed to be reinvested in additional Deferred Stock or
         otherwise reinvested, all as determined at the time of the award by the
         Committee, in its sole discretion.

                  (iii) Subject to the provisions of the award Agreement and
         paragraph (b)(iv) of this Section 8, upon termination of employment for
         any reason during the Deferral Period for a given award, the Deferred
         Stock in question shall be forfeited by the participant.

                  (iv) In the event of special hardship circumstances of a
         participant whose employment is terminated (other than for Cause)
         including death, Disability or Retirement, or in the event of an
         unforeseeable emergency of a participant still in service, the
         Committee may, in its sole discretion, when it finds that a waiver
         would be in the best interest of the Company, waive in whole or in part
         any or all of the remaining deferral limitations imposed hereunder with
         respect to any or all of the participant's Deferred Stock.

                  (v) A participant may elect to further defer receipt of the
         award for a specified period or until a specified event (the "Elective
         Deferral Period"), subject in each case to the Committee's approval and
         to such terms as are determined by the Committee, all in its sole
         discretion. Subject to any exceptions adopted by the Committee, such
         election must generally be made prior to completion of one half of the
         Deferral Period for a Deferred Stock award (or for an installment of
         such an award).

                  (vi) Each award shall be confirmed by, and subject to the
         terms of, a Deferred Stock Agreement executed by the Company and the
         participant.

         SECTION 9.  Other Awards.

         The Committee may from time to time grant Stock, other Stock based and
non-Stock based awards under this Plan including without limitations those
awards pursuant to which shares of Stock are or in the future may be acquired,
awards denominated in Stock units, securities convertible into Stock, phantom
securities and dividend equivalents. The Committee shall determine the terms and
conditions of such Stock, Stock based and non-Stock based awards provided that
such awards shall not be inconsistent with the terms of this Plan.

         SECTION 10.  Transfer, Leave of Absence, etc

         For purposes of the Plan, the following events shall not be deemed a
termination of employment:

         (a) a transfer of an employee from the Company to a Parent Corporation
or Subsidiary, or from a Parent Corporation or Subsidiary to the Company, or
from one Subsidiary to another;


                                       14
<PAGE>


         (b) a leave of absence, approved in writing by the Committee, for
military service or sickness, or for any other purpose approved by the Company
if the period of such leave does not exceed ninety (90) days (or such longer
period as the Committee may approve, in its sole discretion); and

         (c) a leave of absence in excess of ninety (90) days, approved in
writing by the Committee, but only if the employee's right to reemployment is
guaranteed either by a statute or by contract, and provided that, in the case of
any leave of absence, the employee returns to work within 30 days after the end
of such leave.

         SECTION 11.  Amendments and Termination

         The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made (i) which would impair the rights
of an optionee or participant under a Stock Option, Stock Appreciation Right,
Restricted Stock, Deferred Stock or other Stock-based award theretofore granted,
without the optionee's or participant's consent, or (ii) which without the
approval of the stockholders of the Company would cause the Plan to no longer
comply with Section 422 of the Code or any other regulatory requirements.

         The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively, but, subject to Section 3 above, no
such amendment shall impair the rights of any holder without his consent. The
Committee may also substitute new Stock Options for previously granted options,
including previously granted options having higher option prices.

         SECTION 12.  Unfunded Status of Plan.

         The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder, provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.

         SECTION 13.  General Provisions.

         (a) All certificates for shares of Stock delivered under the Plan
pursuant to any Restricted Stock, Deferred Stock or other Stock-based awards
shall be subject to such stock-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Stock is then listed, and any applicable Federal or state securities
laws, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions. The Committee
may require each person purchasing shares pursuant to a Stock Option under the
Plan to represent to and agree with the Company in writing that the optionee is
acquiring


                                       15
<PAGE>


the shares without a view to distribution thereof. The certificates
for such shares may include any legend which the Committee deems appropriate to
reflect any restrictions on transfer.

         (b) Subject to paragraph (d) below, recipients of Restricted Stock,
Deferred Stock and other Stock-based awards under the Plan (other than Stock
Options) are not required to make any payment or provide consideration other
than the rendering of services.

         (c) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption
of the Plan shall not confer upon any employee of the Company or any Subsidiary
any right to continued employment with the Company or a Subsidiary, as the case
may be, nor shall it interfere in any way with the right of the Company or a
Subsidiary to terminate the employment of any of its employees at any time.

         (d) Each participant shall, no later than the date as of which any part
of the value of an award first becomes includible as compensation in the gross
income of the participant for Federal income tax purposes, pay to the Company,
or make arrangements satisfactory to the Committee regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company and Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the participant. With respect to
any award under the Plan, if the terms of such award so permit, a participant
may elect by written notice to the Company to satisfy part or all of the
withholding tax requirements associated with the award by (i) authorizing the
Company to retain from the number of shares of Stock that would otherwise be
deliverable to the participant, or (ii) delivering to the Company from shares of
Stock already owned by the participant, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the
participant under this Section 13(d). Any such election shall be in accordance
with, and subject to, applicable tax and securities laws, regulations and
rulings and in the event shares are withheld, the amount withheld may not exceed
the minimum required federal, state and FICA withholding amount.

         (e) At the time of grant, the Committee may provide in connection with
any grant made under this Plan that the shares of Stock received as a result of
such grant shall be subject to a repurchase right in favor of the Company
pursuant to which any participant who, at any time within a specified period
after termination of employment with the Company, directly or indirectly
competes with, or is employed by a competitor of, the Company, shall be required
to offer to the Company any shares that the participant acquired under the Plan,
with the price being the then Fair Market Value of the Stock, subject to such
other terms and conditions as the Committee may specify at the time of grant.

         (f) The Committee may, at the time of the grant of an award under the
Plan, provide the Company with the right to repurchase, or require the
forfeiture of, shares of Stock acquired pursuant to the Plan by any participant
who, at any time within two years after termination of employment with the
Company or any Subsidiary or Parent Corporation, directly or indirectly competes
with, or is employed by a competitor of, the Company or any Subsidiary or Parent
Corporation.


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<PAGE>


         (g) The reinvestment of dividends in additional Restricted Stock (or in
Deferred Stock or other types of Plan awards) at the time of any dividend
payment shall only be permissible if the Committee (or the Company's chief
financial officer) certifies in writing that under Section 3 sufficient shares
are available for such reinvestment (taking into account then outstanding Stock
Options and other Plan awards).

         SECTION 14.  Effective Date of Plan.

         The Plan shall be effective on the date it is adopted by the Board of
Directors.

                             ----------------------


Adopted by the Board of Directors -- June 1, 1998.
Approved by the Shareholders -- June 12, 1998.
Amended by the Board of Directors January 1, 2000.








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