APPLIED BIOMETRICS, INC.
                                 1998 STOCK PLAN



<PAGE>



                                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..................................15

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

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

SECTION 13.  General Provisions...............................................16




                                       2
<PAGE>



                            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 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 the 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


                                       3
<PAGE>

                        compensated for such services and who is not an employee
                        of the Company or any Parent Corporation or Subsidiary
                        of the Company. A Non-Employee Director may serve as a
                        Consultant.

            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
                        of 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 such principal exchange 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.



                                       4
<PAGE>

                        This definition shall be further governed by the
                        provisions of Code Section 162(m) and regulations
                        promulgated thereunder.

            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
                        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:



                                       5
<PAGE>

            (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;

            (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 500,000. 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 of shares



                                       6
<PAGE>

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 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
150,000 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



                                       7
<PAGE>

granted under the Plan be so exercised, so as to disqualify either the Plan or
any Incentive Stock 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



                                       8
<PAGE>

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 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


                                       9
<PAGE>

apply for purposes of Section 422 of the Code, the option will thereafter be
treated as a Non-Qualified Stock Option.

            (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.



                                       10
<PAGE>

            (a) Grant and Exercise. Except as set forth in paragraph (k) of
Section 5, 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 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




                                       11
<PAGE>

            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.

            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.



                                       12
<PAGE>

            (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. 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




                                       13
<PAGE>

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), 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.



                                       14
<PAGE>

            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;

            (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 Rule 16b-3 under the Securities Exchange Act of
1934, 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




                                       15
<PAGE>

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 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



                                       16
<PAGE>

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.

            (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.



                                       17