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                                                                   EXHIBIT 10.2




                              CARDIOMETRICS, INC.

                           1995 STOCK INCENTIVE PLAN

                                  ARTICLE ONE

                               GENERAL PROVISIONS



         I.      PURPOSE OF THE PLAN

                 This 1995 Stock Incentive Plan is intended to promote the
interests of Cardiometrics, Inc., a Delaware corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for
them to remain in the service of the Corporation.

                 Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.

         II.     STRUCTURE OF THE PLAN

                 A.       The Plan shall be divided into four separate equity
programs:

                          1.      the Discretionary Option Grant Program under
which eligible persons may, at the discretion of the Plan Administrator, be
granted options to purchase shares of Common Stock,

                          2.      the Salary Investment Option Grant Program
under which the Corporation's officers and other highly- compensated employees
may elect to have a portion of their base salary reduced each year in return
for options to purchase shares of Common Stock,

                          3.      the Stock Issuance Program under which
eligible persons may, at the discretion of the Plan Administrator, be issued
shares of Common Stock directly, either through the immediate purchase of such
shares or as a bonus for services rendered to the Corporation (or any Parent or
Subsidiary), and

                          4.      the Automatic Option Grant Program under
which Eligible Directors shall automatically receive option grants at periodic
intervals to purchase shares of Common Stock.

                 B.       The provisions of Articles One and Six shall apply to
all equity programs under the Plan and shall accordingly govern the interests
of all persons under the Plan.

         III.    ADMINISTRATION OF THE PLAN

                 A.       The Primary Committee shall have sole and exclusive
authority to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to
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Section 16 Insiders.  No non-employee Board member shall be eligible to serve
on the Primary Committee if such individual has, during the twelve (12)-month
period immediately preceding the date of his or her appointment to the
Committee or (if shorter) the period commencing with the Section 12(g)
Registration Date and ending with the date of his or her appointment to the
Primary Committee, received an option grant or direct stock issuance under the
Plan or any other stock option, stock appreciation, stock bonus or other stock
plan of the Corporation (or any Parent or Subsidiary), other than pursuant to
the Automatic Option Grant Program.

                 B.       Administration of the Discretionary Option Grant and
Stock Issuance Programs with respect to all other persons eligible to
participate in those programs may, at the Board's discretion, be vested in the
Primary Committee or a Secondary Committee, or the Board may retain the power
to administer those programs with respect to all such persons.  The members of
the Secondary Committee may be Board members who are Employees eligible to
receive discretionary option grants or direct stock issuances under the Plan or
any other stock option, stock appreciation, stock bonus or other stock plan of
the Corporation (or any Parent or Subsidiary).

                 C.       Members of the Primary Committee or any Secondary
Committee shall serve for such period of time as the Board may determine and
shall be subject to removal by the Board at any time.  The Board may also at
any time terminate the functions of any Secondary Committee and reassume all
powers and authority previously delegated to such committee.

                 D.       Each Plan Administrator shall, within the scope of
its administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Discretionary Option Grant and Stock Issuance Programs
and to make such determinations under, and issue such interpretations of, the
provisions of such programs and any outstanding options or stock issuances
thereunder as it may deem necessary or advisable.  Decisions of each Plan
Administrator within the scope of its administrative functions under the Plan
shall be final and binding on all parties who have an interest in the
Discretionary Option Grant or Stock Issuance Program under its jurisdiction or
any stock option or stock issuance outstanding thereunder.

                 E.       Service on the Primary Committee or the Secondary
Committee shall constitute service as a Board member, and members of each such
committee shall accordingly be entitled to full indemnification and
reimbursement as Board members for their service on such committee.  No member
of the Primary Committee or the Secondary Committee shall be liable for any act
or omission made in good faith with respect to the Plan or any option grants or
stock issuances under the Plan.

                 F.       Administration of the Automatic Option Grant Program
shall be self-executing in accordance with the terms of that program, and no
Plan Administrator shall exercise any discretionary functions with respect to
option grants made thereunder.



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         IV.     ELIGIBILITY

                 A.       The persons eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs are as follows:



                          1.      Employees,

                          2.      non-employee members of the Board (other than
those serving as members of the Primary Committee) or the board of directors of
any Parent or Subsidiary, and

                          3.      consultants or other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).

                 B.       Only the Corporation's officers and other
highly-compensated Employees shall be eligible to participate in the Salary
Investment Option Grant Program.

                 C.       The Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority (subject to the
provisions of the Plan) to determine, (i) with respect to the option grants
under the Discretionary Option Grant Program, which eligible persons are to
receive option grants, the time or times when such option grants are to be
made, the number of shares to be covered by each such grant, the status of the
granted option as either an Incentive Option or a Non-Statutory Option, the
time or times at which each option is to become exercisable, the vesting
schedule (if any) applicable to the option shares and the maximum term for
which the option is to remain outstanding and (ii) with respect to stock
issuances under the Stock Issuance Program, which eligible persons are to
receive stock issuances, the time or times when such issuances are to be made,
the number of shares to be issued to each Participant, the vesting schedule (if
any) applicable to the issued shares and the consideration to be paid by the
Participant for such shares.   The Primary Committee shall have sole and
exclusive authority to select the individuals eligible to participate in the
Salary Investment Option Grant Program, but all options granted under such
program shall be made solely in accordance with the express terms and
conditions of Article Three of the Plan.

                 D.       The Plan Administrator shall have the absolute
discretion either to grant options in accordance with the Discretionary Option
Grant Program or to effect stock issuances in accordance with the Stock
Issuance Program.

                 E.       The individuals eligible to receive option grants
under the Automatic Option Grant Program shall be limited to (i) those
individuals who first become non-employee Board members on or after the Plan
Effective Date, whether through appointment by the Board or election by the
Corporation's stockholders, and (ii) those individuals who are re-elected to
serve as non-employee Board members at one or more Annual Stockholders Meetings
held after the Plan Effective Date.  A non-employee Board member who has
previously been in the employ of the Corporation (or any Parent or Subsidiary)
shall not be eligible to receive an initial option grant under the


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Automatic Option Grant Program at the time he or she first becomes a
non-employee Board member, but shall be eligible to receive periodic option
grants under the Automatic Option Grant Program upon his or her subsequent
re-election to the Board at one or more Annual Stockholders Meetings.

         V.      STOCK SUBJECT TO THE PLAN

                 A.       The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares
repurchased by the Corporation on the open market.  The maximum number of
shares of Common Stock which may be issued over the term of the Plan shall not
exceed 1,399,914 shares.  Such authorized share reserve is comprised of the
number of shares which remained available for issuance, as of the Plan
Effective Date, under the Predecessor Plans as last approved by the
Corporation's stockholders, including the shares subject to the outstanding
options incorporated into the Plan, plus an increase of 225,000 shares approved
by the Board on April 3, 1996 and approved by the Corporation's stockholders on
May 16, 1996.

                 B.       No one person participating in the Plan may receive
options, separately exercisable stock appreciation rights and direct stock
issuances for more than 200,000 shares of Common Stock per calendar year,
except that for the calendar year in which such person first commences Service,
the limit shall be increased to 300,000 shares.

                 C.       Shares of Common Stock subject to outstanding options
shall be available for subsequent issuance under the Plan to the extent (i) the
options (including any options incorporated from the Predecessor Plans) expire
or terminate for any reason prior to exercise in full or (ii) the options are
canceled in accordance with the cancellation-regrant provisions of Article Two.
All shares issued under the Plan (including shares issued upon exercise of
options incorporated from the Predecessor Plans), whether or not those shares
are subsequently repurchased by the Corporation pursuant to its repurchase
rights under the Plan, shall reduce on a share-for-share basis the number of
shares of Common Stock available for subsequent issuance under the Plan.  In
addition, should the exercise price of an option under the Plan (including any
option incorporated from the Predecessor Plans) be paid with shares of Common
Stock or should shares of Common Stock otherwise issuable under the Plan be
withheld by the Corporation in satisfaction of the withholding taxes incurred
in connection with the exercise of an option or the vesting of a stock issuance
under the Plan, then the number of shares of Common Stock available for
issuance under the Plan shall be reduced by the gross number of shares for
which the option is exercised or which vest under the stock issuance, and not
by the net number of shares of Common Stock issued to the holder of such option
or stock issuance.

                 D.       Should any change be made to the Common Stock by
reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration,
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the maximum number and/or class of
securities for which any one person may be granted options, separately
exercisable stock appreciation rights and direct stock issuances per calendar
year, (iii) the number and/or class of securities for which automatic option
grants are to be subsequently made per Eligible Director under the Automatic



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Option Grant Program and (iv) the number and/or class of securities and the
exercise price per share in effect under each outstanding option (including any
option incorporated from the Predecessor Plans) in order to prevent the
dilution or enlargement of  benefits thereunder.  The adjustments determined by
the Plan Administrator shall be final, binding and conclusive.



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                                  ARTICLE TWO

                       DISCRETIONARY OPTION GRANT PROGRAM



         I.      OPTION TERMS

                 Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below.  Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the
Plan applicable to such options.

                 A.       EXERCISE PRICE.

                          1.      The exercise price per share shall be fixed
by the Plan Administrator but shall not be less than eighty-five percent (85%)
of the Fair Market Value per share of  Common Stock on the option grant date.

                          2.      The exercise price shall become immediately
due upon exercise of the option and shall, subject to the provisions of Section
I of Article Six and the documents evidencing the option, be payable in one or
more of the forms specified below:

                                  a)       cash or check made payable to the
Corporation,

                                  b)       shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the Exercise
Date, or

                                  c)       to the extent the option is
exercised for vested shares,  through a special sale and remittance procedure
pursuant to which the Optionee shall concurrently provide irrevocable written
instructions to (a) a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation, out of the
sale proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be withheld by
the Corporation by reason of such exercise and (b) the Corporation to deliver
the certificates for the purchased shares directly to such brokerage firm in
order to complete the sale transaction.

                 Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.

                 B.       EXERCISE AND TERM OF OPTIONS.  Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option.  However, no option shall have a term in
excess of ten (10) years measured from the option grant date.


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                 C.       EFFECT OF TERMINATION OF SERVICE.

                          1.      The following provisions shall govern the
exercise of any options held by the Optionee at the time of cessation of
Service or death:

                                  a)       Any option outstanding at the time
of the Optionee's cessation of Service for any reason shall remain exercisable
for such period of time thereafter as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option, but no such
option shall be exercisable after the expiration of the option term.

                                  b)       Any option exercisable in whole or
in part by the Optionee at the time of death may be subsequently exercised by
the personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's will or in
accordance with the laws of descent and distribution.

                                  c)       During the applicable post-Service
exercise period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the date of
the Optionee's cessation of Service.  Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares for
which the option has not been exercised.  However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and cease to be
outstanding to the extent the option is not otherwise at that time exercisable
for vested shares.

                                  d)       Should the Optionee's Service be
terminated for Misconduct, then all outstanding options held by the Optionee
shall terminate immediately and cease to be outstanding.

                          2.      The Plan Administrator shall have complete
discretion, exercisable either at the time an option is granted or at any time
while the option remains outstanding, to:

                                  a)       extend the period of time for which
the option is to remain exercisable following the Optionee's cessation of
Service from the period otherwise in effect for that option to such greater
period of time as the Plan Administrator shall deem appropriate, but in no
event beyond the expiration of the option term, and/or

                                  b)       permit the option to be exercised,
during the applicable post-Service exercise period, not only with respect to
the number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but also with
respect to one or more additional installments in which the Optionee would have
vested had the Optionee continued in Service.

                 d.       STOCKHOLDER RIGHTS.  The holder of an option shall
have no stockholder rights with respect to the shares subject to the option
until such person shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.


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                 E.       REPURCHASE RIGHTS.  The Plan Administrator shall have
the discretion to grant options which are exercisable for unvested shares of
Common Stock.  Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase, at the exercise
price paid per share, any or all of those unvested shares.  The terms upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
document evidencing such repurchase right.

                 F.       LIMITED TRANSFERABILITY OF OPTIONS.  During the
lifetime of the Optionee, the option shall be exercisable only by the Optionee
and shall not be assignable or transferable other than by will or by the laws
of descent and distribution following the Optionee's death.  However, a
Non-Statutory Option may be assigned in whole or in part during Optionee's
lifetime in accordance with the terms of a Qualified Domestic Relations Order.
The assigned portion may only be exercised by the person or persons who acquire
a proprietary interest in the option pursuant to such Qualified Domestic
Relations Order.  The terms applicable to the assigned portion shall be the
same as those in effect for the option immediately prior to such assignment and
shall be set forth in such documents issued to the assignee as the Plan
Administrator may deem appropriate.

         II.     INCENTIVE OPTIONS

                 The terms specified below shall be applicable to all Incentive
Options.  Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Six shall be applicable to Incentive
Options. Options which are specifically designated as Non- Statutory Options
when issued under the Plan shall not be subject to the terms of this Section
II.

                 A.       ELIGIBILITY.  Incentive Options may only be granted
to Employees.

                 B.       EXERCISE PRICE.  The exercise price per share shall
not be less than one hundred percent (100%) of the Fair Market Value per share
of Common Stock on the option grant date.

                 C.       DOLLAR LIMITATION.  The aggregate Fair Market Value
(determined as of the respective date or dates of grant) of the shares of
Common Stock for which one or more options granted to any Employee under the
Plan (or any other option plan of the Corporation or any Parent or Subsidiary)
may for the first time become exercisable as Incentive Options during any one
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000).  To the extent the Employee holds two (2) or more such options
which become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such options as Incentive Options
shall be applied on the basis of the order in which such options are granted.

                 D.       10% STOCKHOLDER.  If any Employee to whom an
Incentive Option is granted is a 10% Stockholder, then the exercise price per
share shall not be less than one hundred ten percent (110%) of the Fair Market
Value per share of Common Stock on the option grant date, and the option term
shall not exceed five (5) years measured from the option grant date.


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         III.    CORPORATE TRANSACTION/CHANGE IN CONTROL

                 A.       In the event of any Corporate Transaction, each
outstanding option shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable for all the shares of Common Stock at the time subject
to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock.  However, an outstanding option shall not
so accelerate if and to the extent:  (i) such option is, in connection with the
Corporate Transaction, either to be assumed by the successor corporation (or
parent thereof) or to be replaced with a comparable option to purchase shares
of the capital stock of the successor corporation (or parent thereof), (ii)
such option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing on the unvested option shares
at the time of the Corporate Transaction and provides for subsequent payout in
accordance with the same vesting schedule applicable to such option or (iii)
the acceleration of such option is subject to other limitations imposed by the
Plan Administrator at the time of the option grant.  The determination of
option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be final, binding and conclusive.

                 B.       All outstanding repurchase rights shall also
terminate automatically, and the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent: (i) those repurchase rights are to be
assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the repurchase
right is issued.

                 C.       Immediately following the consummation of the
Corporate Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

                 D.       Each option which is assumed in connection with a
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities which
would have been issuable to the Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction.  Appropriate adjustments shall also be made to (i) the number and
class of securities available for issuance under the Plan following the
consummation of such Corporate Transaction, (ii) the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same, and (iii) the maximum number
of securities and/or class of securities for which any one person may be
granted stock options, separately exercisable stock appreciation rights and
direct stock issuances under the Plan per calendar year.

                 E.       Any options which are assumed or replaced in the
Corporate Transaction and do not otherwise accelerate at that time shall
automatically accelerate (and any of the Corporation's outstanding repurchase
rights which do not otherwise terminate at the time of the Corporate
Transaction shall automatically terminate and the shares of Common Stock
subject to


                     
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those terminated rights shall immediately vest in full) in the event the
Optionee's Service should subsequently terminate by reason of an Involuntary
Termination within twelve (12) months following the effective date of such
Corporate Transaction.  Any options so accelerated shall remain exercisable for
fully-vested shares until the earlier of (i) the expiration of the option term
or (ii) the expiration of the one (1)-year period measured from the effective
date of the Involuntary Termination.

                 F.       The Plan Administrator shall have the discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to (i) provide for the automatic acceleration of
one or more outstanding options (and the automatic termination of one or more
outstanding repurchase rights with the immediate vesting of the shares of
Common Stock subject to those rights) upon the occurrence of a Change in
Control or (ii) condition any such option acceleration (and the termination of
any outstanding repurchase rights) upon the subsequent Involuntary Termination
of the Optionee's Service within a specified period following the effective
date of such Change in Control.  Any options accelerated in connection with a
Change in Control shall remain fully exercisable until the expiration or sooner
termination of the option term.

                 G.       The portion of any Incentive Option accelerated in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the applicable One
Hundred Thousand Dollar limitation is not exceeded.  To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall be
exercisable as a Non-Statutory Option under the Federal tax laws.

                 H.       The grant of options under the Discretionary Option
Grant Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.

         IV.     CANCELLATION AND REGRANT OF OPTIONS

                 The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected option
holders, the cancellation of any or all outstanding options under the
Discretionary Option Grant Program (including outstanding options incorporated
from the Predecessor Plans) and to grant in substitution new options covering
the same or different number of shares of Common Stock but with an exercise
price per share based on the Fair Market Value per share of Common Stock on the
new grant date.

         V.      STOCK APPRECIATION RIGHTS

                 A.       The Plan Administrator shall have full power and
authority to grant to selected Optionees tandem stock appreciation rights
and/or limited stock appreciation rights.

                 B.       The following terms shall govern the grant and
exercise of tandem stock appreciation rights:


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                          1.      One or more Optionees may be granted the
right, exercisable upon such terms as the Plan Administrator may establish, to
elect between the exercise of the underlying option for shares of Common Stock
and the surrender of that option in exchange for a distribution from the
Corporation in an amount equal to the excess of (a) the Fair Market Value (on
the option surrender date) of the number of shares in which the Optionee is at
the time vested under the surrendered option (or surrendered portion thereof)
over (b) the aggregate exercise price payable for such shares.

                          2.      No such option surrender shall be effective
unless it is approved by the Plan Administrator.  If the surrender is so
approved, then the distribution to which the Optionee shall be entitled may be
made in shares of Common Stock valued at Fair Market Value on the option
surrender date, in cash, or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem appropriate.

                          3.      If the surrender of an option is rejected by
the Plan Administrator, then the Optionee shall retain whatever rights the
Optionee had under the surrendered option (or surrendered portion thereof) on
the option surrender date and may exercise such rights at any time prior to the
later of (a) five (5) business days after the receipt of the rejection notice
or (b) the last day on which the option is otherwise exercisable in accordance
with the terms of the documents evidencing such option, but in no event may
such rights be exercised more than ten (10) years after the  option grant date.

                 C.       The following terms shall govern the grant and
exercise of limited stock appreciation rights:

                          1.      One or more Section 16 Insiders may be
granted limited stock appreciation rights with respect to their outstanding
options.

                          2.      Upon the occurrence of a Hostile Take-Over,
each individual holding one or more options with such a limited stock
appreciation right in effect for at least six (6) months shall have the
unconditional right (exercisable for a thirty (30)-day period following such
Hostile Take-Over) to surrender each such option to the Corporation, to the
extent the option is at the time exercisable for vested shares of Common Stock.
In return for the surrendered option, the Optionee shall receive a cash
distribution from the Corporation in an amount equal to the excess of (A) the
Take-Over Price of the shares of Common Stock which are at the time vested
under each surrendered option (or surrendered portion thereof) over (B) the
aggregate exercise price payable for such shares.  Such cash distribution shall
be paid within five (5) days following the option surrender date.

                          3.      Neither the approval of the Plan
Administrator nor the consent of the Board shall be required in connection with
such option surrender and cash distribution.

                          4.      The balance of the option (if any) shall
continue in full force and effect in accordance with the documents evidencing
such option.


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                                 ARTICLE THREE

                     SALARY INVESTMENT OPTION GRANT PROGRAM



         I.      OPTION GRANTS

                 The Primary Committee shall have the sole and exclusive
authority to determine the calendar year or years (if any) for which the Salary
Investment Option Grant Program is to be in effect and to select the
Corporation's officers and other highly compensated Employees who are to
participate in the Salary Investment Option Grant Program for those calendar
year or years.  Each selected individual who elects to participate in the
Salary Investment Option Grant Program must, prior to the start of each
calendar year of participation, file with the Primary Committee (or its
designate) an irrevocable authorization directing the Corporation to reduce his
or her base salary for that calendar year by a designated multiple of one
percent (1%).  However, the minimum amount of such salary reduction must be not
less than five percent (5%) of the individual's current rate of annual base
salary and must not be more than twenty five percent (25%) of such base salary.
Each selected individual who files a proper salary reduction authorization
shall automatically be granted an option under this Salary Investment Option
Grant Program on the first trading day in January of the calendar year for
which that salary reduction is to be in effect.

         II.     OPTION TERMS

                 Each option shall be a Non-Statutory Option evidenced by one
or more documents in the form approved by the Primary Committee; provided,
however, that each such document shall comply with the terms specified below.

                 A.       EXERCISE PRICE.

                          1.      The exercise price per share shall be
thirty-three and one-third percent (33-1/3%) of the Fair Market Value per share
of Common Stock on the option grant date.

                          2.      The exercise price shall become immediately
due upon exercise of the option and shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.

                 B.       NUMBER OF OPTION SHARES.  The number of shares of
Common Stock subject to the option shall be determined pursuant to the
following formula (rounded down to the nearest whole number):

                          X = A / (B x 66-2/3%), where



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                          X is the number of option shares,

A is the dollar amount by which the Optionee's base salary is to be reduced for
the calendar year, and B is the Fair Market Value per share of Common Stock on
the option grant date.

                 C.       EXERCISE AND TERM OF OPTIONS.  The option shall
become exercisable in a series of twelve (12) successive equal monthly
installments upon the Optionee's completion of each calendar month of Service
in the calendar year for which the salary reduction is in effect.  Each option
shall have a maximum term of ten (10) years measured from the option grant
date.

                 D.       EFFECT OF TERMINATION OF SERVICE.  Should the
Optionee cease Service for any reason while holding one or more options under
this Article Three, then each such option shall remain exercisable, for any or
all of the shares for which the option is exercisable at the time of such
cessation of Service, until the expiration of the ten (10)-year option term.
Should the Optionee die while holding one or more options under this Article
Three, then each such option may be exercised, for any or all of the shares for
which the option is exercisable at the time of the Optionee's cessation of
Service (less any shares subsequently purchased by Optionee prior to death), by
the personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's will or in
accordance with the laws of descent and distribution.  Such right of exercise
shall lapse, and the option shall terminate, upon the expiration of the ten
(10)-year option term.  However, the option shall, immediately upon the
Optionee's cessation of Service for any reason, terminate and cease to remain
outstanding with respect to any and all shares of Common Stock for which the
option is not otherwise at that time exercisable.

         III.    CORPORATE TRANSACTION/CHANGE IN CONTROL

                 A.       Should any Corporate Transaction be effected while
the Optionee remains in Service, then each outstanding option held by such
Optionee under the Salary Investment Option Grant Program shall automatically
accelerate so that each such option shall, immediately prior to the effective
date of the Corporate Transaction, become fully exercisable with respect to the
total number of shares of Common Stock at the time subject to such option and
may be exercised for any or all of those shares as fully-vested shares of
Common Stock.  Each such outstanding option shall be assumed by the successor
corporation (or parent thereof) in the Corporate Transaction and shall remain
exercisable for the fully-vested shares until the expiration of the ten
(10)-year option term.

                 B.       Should any Change in Control occur while the Optionee
remains in Service, then each outstanding option held by such Optionee under
the Salary Investment Option Grant Program shall automatically accelerate so
that each such option shall, immediately prior to the effective date of the
Change in Control, become fully exercisable with respect to the total number of
shares of Common Stock at the time subject to such option and may be exercised
for


                                       13
<PAGE>   14

any or all of those shares as fully-vested shares of Common Stock.  The option
shall remain so exercisable until the expiration of the ten (10)-year option
term.

                 C.       The grant of options under the Salary Investment
Option Grant Program shall in no way affect the right of the Corporation to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.

         IV.     REMAINING TERMS

                 The remaining terms of each option granted under the Salary
Investment Option Grant Program shall be the same as the terms in effect for
option grants made under the Discretionary Option Grant Program.


                                       14
<PAGE>   15
                                  ARTICLE FOUR

                             STOCK ISSUANCE PROGRAM



         I.      STOCK ISSUANCE TERMS

                 Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants.  Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.

                 A.       PURCHASE PRICE.

                          1.      The purchase price per share shall be fixed
by the Plan Administrator, but shall not be less than eighty-five percent (85%)
of the Fair Market Value per share of Common Stock on the issuance date.

                          2.      Subject to the provisions of Section I of
Article Six, shares of Common Stock may be issued under the Stock Issuance
Program for any of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:

                      a)       cash or check made payable to the Corporation, or

                      b)       past services rendered to the Corporation (or any
Parent or Subsidiary).

                 B.       VESTING PROVISIONS.

                          1.      Shares of Common Stock issued under the Stock
Issuance Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives.  The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:

                       a)       the Service period to be completed by the 
Participant or the performance objectives to be attained,

                       b)       the number of installments in which
the shares are to vest,

                       c)       the interval or intervals (if any) which 
are to lapse between installments, and

                       d)       the effect which death, Permanent
Disability or other event designated by the Plan Administrator is to have upon
the vesting schedule,

                                        15

<PAGE>   16
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.

                          2.      Any new, substituted or additional securities
or other property (including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect to his or her
unvested shares by reason of any stock dividend, stock split, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration shall be issued subject to (i) the same vesting requirements
applicable to the Participant's unvested shares and (ii) such escrow
arrangements as the Plan Administrator shall deem appropriate.

                          3.      The Participant shall have full stockholder
rights with respect to any shares of Common Stock issued to him or her under
the Stock Issuance Program, whether or not his or her interest in those shares
is vested.  Accordingly, the Participant shall have the right to vote such
shares and to receive any regular cash dividends paid on such shares.

                          4.      Should the Participant cease to remain in
Service while holding one or more unvested shares of Common Stock issued under
the Stock Issuance Program or should the performance objectives not be attained
with respect to one or more such unvested shares of Common Stock, then those
shares shall be immediately surrendered to the Corporation for cancellation,
and the Participant shall have no further stockholder rights with respect to
those shares.  To the extent the surrendered shares were previously issued to
the Participant for consideration paid in cash or cash equivalent (including
the Participant's purchase-money indebtedness), the Corporation shall repay to
the Participant the cash consideration paid for the surrendered shares and
shall cancel the unpaid principal balance of any outstanding purchase-money
note of the Participant attributable to the surrendered shares.

                          5.      The Plan Administrator may in its discretion
waive the surrender and cancellation of one or more unvested shares of Common
Stock (or other assets attributable thereto) which would otherwise occur upon
cessation of Service or the non-attainment of the performance objectives
applicable to those shares.  Such waiver shall result in the immediate vesting
of the Participant's interest in the shares of Common Stock as to which the
waiver applies.  Such waiver may be effected at any time, whether before or
after the Participant's cessation of Service or the attainment or
non-attainment of the applicable performance objectives.

         II.     CORPORATE TRANSACTION/CHANGE IN CONTROL

                 All of the Corporation's outstanding repurchase/cancellation
rights under the Stock Issuance Program shall terminate automatically, and all
the shares of Common Stock subject to those terminated rights shall immediately
vest in full, in the event of any Corporate Transaction, except to the extent
(i) those repurchase/cancellation rights are assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction
or (ii) such accelerated vesting is precluded by other limitations imposed in
the Stock Issuance Agreement.

                                       16

<PAGE>   17

                 To the extent any repurchase/cancellation rights applicable to
the Participant's outstanding shares under the Stock Issuance Program are
assigned in the Corporate Transaction, those rights shall automatically
terminate, and the shares subject to those terminated rights shall immediately
vest in full, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within twelve (12) months
following the effective date of such Corporate Transaction.

                 The Plan Administrator shall have the discretion, exercisable
either at the time the unvested shares are issued or at any time while the
Corporation's repurchase/cancellation rights remain outstanding, to (i) provide
for the automatic termination of one or more outstanding
repurchase/cancellation rights and the immediate vesting of the shares subject
to those rights upon the occurrence of a Change in Control or (ii) condition
any such accelerated vesting upon the subsequent Involuntary Termination of the
Participant's Service within a specified period following the effective date of
such Change in Control.

         III.    SHARE ESCROW/LEGENDS

                 Unvested shares may, in the Plan Administrator's discretion,
be held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing those unvested shares.


                                       17
<PAGE>   18
                                  ARTICLE FIVE

                         AUTOMATIC OPTION GRANT PROGRAM

         I.      OPTION TERMS

                 A.       GRANT DATES.  Option grants shall be made on the dates
specified below:

                          1.      Each Eligible Director who is first elected
or appointed as a non-employee Board member on or after the Plan Effective Date
shall automatically be granted, on the date of such initial election or
appointment, a Non-Statutory Option to purchase 5,000 shares of Common Stock,
provided such individual has not previously been in the employ of the
Corporation (or any Parent or Subsidiary).

                          2.      On the date of each Annual Stockholders
Meeting held after the Plan Effective Date, each individual who is to continue
to serve as a non-employee Board member shall automatically be granted a
Non-Statutory Option to purchase an additional 2,500 shares of Common Stock,
provided such individual has served as a non-employee Board member for a period
of at least six (6) months.  There shall be no limit on the number of such
2,500-share option grants any one Eligible Director may receive over his or her
period of Board service.

                 B.       EXERCISE PRICE.

                          1.      The exercise price per share shall be equal
to one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.

                          2.      The exercise price shall be payable in one or
more of the alternative forms authorized under the Discretionary Option Grant
Program.  Except to the extent the sale and remittance procedure specified
thereunder is utilized, payment of the exercise price for the purchased shares
must be made on the Exercise Date.

                 C.       OPTION TERM.  Each option shall have a term of ten
(10) years measured from the option grant date.

                 D.       EXERCISE AND VESTING OF OPTIONS.  Each option shall
be immediately exercisable for any or all of the option shares.  However, any
shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's
cessation of Board service prior to vesting in those shares.  Each initial
5,000-share grant shall vest, and the Corporation's repurchase right shall
lapse, in a series of twenty-four (24) successive equal monthly installments
over the Optionee's period of continued service as a Board member, with the
first such installment to vest upon the Optionee's completion of one (1) month
of Board service measured from the option grant date.  Each annual 2,500-share
grant shall vest, and the Corporation's repurchase right shall lapse in a
series of twelve (12) successive equal monthly installments over the Optionee's
period of continued service as a Board member, measured from the option grant
date.

                                       18

<PAGE>   19

                 E.       EFFECT OF TERMINATION OF BOARD SERVICE.  The
following provisions shall govern the exercise of any options held by the
Optionee at the time the Optionee ceases to serve as a Board member:

                                  1.       The Optionee (or, in the event of
the Optionee's death, the personal representative of the Optionee's estate or
the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution)
shall have a twelve (12)-month period following the date of the Optionee's
cessation of Board service in which to exercise each such option.

                                  2.       During the twelve (12)-month
exercise period, the option may not be exercised in the aggregate for more than
the number of vested shares of Common Stock for which the option is exercisable
at the time of the Optionee's cessation of Board service.

                                  3.       Should the Optionee cease to serve
as a Board member by reason of death or Permanent Disability, then all shares
at the time subject to the option shall immediately vest so that such option
may, during the twelve (12)-month exercise period following such cessation of
Board service, be exercised for all or any portion of those shares as
fully-vested shares of Common Stock.

                                  4.       In no event shall the option remain
exercisable after the expiration of the option term.  Upon the expiration of
the twelve (12)-month exercise period or (if earlier) upon the expiration of
the option term, the option shall terminate and cease to be outstanding for any
vested shares for which the option has not been exercised.  However, the option
shall, immediately upon the Optionee's cessation of Board service for any
reason other than death or Permanent Disability, terminate and cease to be
outstanding to the extent the option is not otherwise at that time exercisable
for vested shares.

         II.     CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

                 A.       In the event of any Corporate Transaction, the shares
of Common Stock at the time subject to each outstanding option but not
otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable for all of the shares of Common Stock at the time
subject to such option and may be exercised for all or any portion of those
shares as fully-vested shares of Common Stock.  Immediately following the
consummation of the Corporate Transaction, each automatic option grant shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof).

                 B.       In connection with any Change in Control, the shares
of Common Stock at the time subject to each outstanding option but not
otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Change in Control, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of those shares as
fully-vested shares of Common Stock.  Each such option shall remain exercisable
for such fully-vested option shares


 
                                       19
<PAGE>   20

until the expiration or sooner termination of the option term or the cash-out
of the option in connection with a Hostile Take-Over.

                 C.       Upon the occurrence of a Hostile Take-Over, the
Optionee shall have a thirty (30)-day period in which to surrender to the
Corporation each automatic option held by him or her for a period of at least
six (6) months.  The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Take-Over Price of the shares of Common Stock at the time subject to the
surrendered option (whether or not the Optionee is otherwise at the time vested
in those shares) over (ii) the aggregate exercise price payable for such
shares.  Such cash distribution shall be paid within five (5) days following
the surrender of the option to the Corporation.  No approval or consent of the
Board or any Plan Administrator shall be required in connection with such
option surrender and cash distribution.

                 D.       The shares of Common Stock subject to each option
surrendered in connection with the Hostile Take-Over shall not be available for
subsequent option grant under this Plan.

                 E.       Each option which is assumed in connection with a
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities which
would have been issuable to the Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction.  Appropriate adjustments shall also be made to the exercise price
payable per share under each outstanding option, provided the aggregate
exercise price payable for such securities shall remain the same.

                 F.       The grant of options under the Automatic Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.

         III.    AMENDMENT OF THE AUTOMATIC OPTION GRANT PROGRAM

                 The provisions of this Automatic Option Grant Program,
together with the option grants outstanding thereunder, may not be amended at
intervals more frequently than once every six (6) months, other than to the
extent necessary to comply with applicable Federal income tax laws and
regulations.

         IV.     REMAINING TERMS

                 The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.



                                       20
<PAGE>   21
                                  ARTICLE SIX

                                 MISCELLANEOUS

         I.      FINANCING

                 A.       The Plan Administrator may permit any Optionee or
Participant to pay the option exercise price under the Discretionary Option
Grant or Salary Investment Option Grant Program or the purchase price of shares
issued under the Stock Issuance Program by delivering a promissory note payable
in one or more installments.   The terms of any such promissory note (including
the interest rate and the terms of repayment) shall be established by the Plan
Administrator in its sole discretion.  Promissory notes may be authorized with
or without security or collateral.  In all events, the maximum credit available
to the Optionee or Participant may not exceed the sum of (i) the aggregate
option exercise price or purchase price payable for the purchased shares plus
(ii) any Federal, state and local income and employment tax liability incurred
by the Optionee or the Participant in connection with the option exercise or
share purchase.

                 B.       The Plan Administrator may, in its discretion,
determine that one or more such promissory notes shall be subject to
forgiveness by the Corporation in whole or in part upon such terms as the Plan
Administrator may deem appropriate.

         II.     TAX WITHHOLDING

                 A.       The Corporation's obligation to deliver shares of
Common Stock upon the exercise of stock options or stock appreciation rights or
upon the issuance or vesting of such shares under the Plan shall be subject to
the satisfaction of all applicable Federal, state and local income and
employment tax withholding requirements.

                 B.       The Plan Administrator may, in its discretion,
provide any or all holders of Non-Statutory Options or unvested shares of
Common Stock under the Plan (other than the options granted or the shares
issued under the Automatic Option Grant Program) with the right to use shares
of Common Stock in satisfaction of all or part of the Taxes incurred by such
holders in connection with the exercise of their options or the vesting of
their shares.  Such right may be provided to any such holder in either or both
of the following formats:

                          1.      STOCK WITHHOLDING:  The election to have the
Corporation withhold, from the shares of Common Stock otherwise issuable upon
the exercise of such Non-Statutory Option or the vesting of such shares, a
portion of those shares with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent (100%)) designated
by the holder.

                          2.      STOCK DELIVERY:  The election to deliver to
the Corporation, at the time the Non-Statutory Option is exercised or the
shares vest, one or more shares of Common Stock previously acquired by such
holder (other than in connection with the option exercise or

                                           21
<PAGE>   22

share vesting triggering the Taxes) with an aggregate Fair Market Value equal
to the percentage of the Taxes (not to exceed one hundred percent (100%))
designated by the holder.

         III.    EFFECTIVE DATE AND TERM OF THE PLAN

                 A.       The Plan shall become effective on the Plan Effective
Date, and the initial options under the Automatic Option Grant Program shall be
made to the Eligible Directors at that time.

                 B.       The Plan shall serve as the successor to the
Predecessor Plans, and no further option grants shall be made under the
Predecessor Plans after the Plan Effective Date.  All options outstanding under
the Predecessor Plans as of such date were incorporated into the Plan at that
time and shall be treated as outstanding options under the Plan.  However, each
outstanding option so incorporated shall continue to be governed solely by the
terms of the documents evidencing such option, and no provision of the Plan
shall be deemed to affect or otherwise modify the rights or obligations of the
holders of such incorporated options with respect to their acquisition of
shares of  Common Stock.

                 C.       One or more provisions of the Plan, including
(without limitation) the option/vesting acceleration provisions of Article Two
relating to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated
from the Predecessor Plans which do not otherwise contain such provisions.

                 D.       On April 3, 1996, the Board approved an increase in
the number of shares issuable under the Plan by 225,000 shares to 1,399,914
shares, and the Corporation's stockholders approved such share increase at the
1996 Annual Stockholders Meeting.  No options may be exercised and no shares
may be issued on the basis of the 225,000 share increase prior to stockholder
approval of such increase.  Except as so limited, the Plan Administrator may
grant options at any time before expiration of the Plan.  The provisions in the
1996 restatement of the Plan shall apply only to options and stock awards
granted under the Plan from and after the effective date of such restatement.
All options and stock awards granted under the Plan immediately prior to the
effective date of such restatement shall continue to be governed by the terms
and conditions of the Plan (and the instrument evidencing each such option or
stock award) as in effect on the date each such option or stock award was
previously granted, and nothing in the 1996 restatement shall be deemed to
affect or otherwise modify the rights or obligations of the holders of such
options or stock awards with respect to the acquisition of shares of Common
Stock thereunder.

                 E.       The Plan shall terminate upon the earliest of (i)
September 30, 2005, (ii) the date on which all shares available for issuance
under the Plan shall have been issued pursuant to the exercise of the options
or the issuance of shares (whether vested or unvested) under the Plan or (iii)
the termination of all outstanding options in connection with a Corporate
Transaction.  Upon such Plan termination, all outstanding stock options and
unvested stock issuances shall continue to have force and effect in accordance
with the provisions of the documents evidencing such options or issuances.


                                       22

<PAGE>   23

         IV.     AMENDMENT OF THE PLAN

                 A.       The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects.  However, (i) no
such amendment or modification shall adversely affect the rights and
obligations with respect to options, stock appreciation rights or unvested
stock issuances at the time outstanding under the Plan unless the Optionee or
the Participant consents to such amendment or modification, and (ii) any
amendment made to the Automatic Option Grant Program (or any options
outstanding thereunder) shall be in compliance with the limitations of that
program.  In addition, the Board shall not, without the approval of the
Corporation's stockholders, (i) materially increase the maximum number of
shares issuable under the Plan, the number of shares for which options may be
granted under the Automatic Option Grant Program or the maximum number of
shares for which any one person may be granted options, separately exercisable
stock appreciation rights and direct stock issuances in the aggregate per
calendar year, except for permissible adjustments in the event of certain
changes in the Corporation's capitalization, (ii) materially modify the
eligibility requirements for Plan participation or (iii) materially increase
the benefits accruing to Plan participants.

                 B.       Options to purchase shares of Common Stock may be
granted under the Discretionary Option Grant and Salary Investment Option Grant
Programs and shares of Common Stock may be issued under the Stock Issuance
Program that are in each instance in excess of the number of shares then
available for issuance under the Plan, provided any excess shares actually
issued under those programs are held in escrow until there is obtained
stockholder approval of an amendment sufficiently increasing the number of
shares of Common Stock available for issuance under the Plan.  If such
stockholder approval is not obtained within twelve (12) months after the date
the first such excess issuances are made, then (i) any unexercised options
granted on the basis of such excess shares shall terminate and cease to be
outstanding and (ii) the Corporation shall promptly refund to the Optionees and
the Participants the exercise or purchase price paid for any excess shares
issued under the Plan and held in escrow, together with interest (at the
applicable Short Term Federal Rate) for the period the shares were held in
escrow, and such shares shall thereupon be automatically canceled and cease to
be outstanding.

         V.      USE OF PROCEEDS

                 Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.

         VI.     REGULATORY APPROVALS

                 A.       The implementation of the Plan, the granting of any
option or stock appreciation right under the Plan and the issuance of any
shares of Common Stock (i) upon the exercise of any option or stock
appreciation right or (ii) under the Stock Issuance Program shall be subject to
the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the options and stock
appreciation rights granted under it and the shares of Common Stock issued
pursuant to it.


                                         23

<PAGE>   24

                 B.       No shares of Common Stock or other assets shall be
issued or delivered under the Plan unless and until there shall have been
compliance with all applicable requirements of Federal and state securities
laws, including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any stock exchange (or the Nasdaq National
Market, if applicable) on which Common Stock is then listed for trading.

         VII.    NO EMPLOYMENT/SERVICE RIGHTS

                 Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the
Corporation (or any Parent or Subsidiary employing or retaining such person) or
of the Optionee or the Participant, which rights are hereby expressly reserved
by each, to terminate such person's Service at any time for any reason, with or
without cause.



                                         24
<PAGE>   25
                                    APPENDIX



                 The following definitions shall be in effect under the Plan:

                 A.       AUTOMATIC OPTION GRANT PROGRAM shall mean the
automatic option grant program in effect under the Plan.

                 B.       BOARD shall mean the Corporation's Board of
Directors.

                 C.       CHANGE IN CONTROL shall mean a change in ownership or
control of the Corporation effected through either of the following
transactions:

                          1.      the acquisition, directly or indirectly by
any person or related group of persons (other than the Corporation or a person
that directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the meaning of
Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer made directly to the
Corporation's stockholders which the Board does not recommend such stockholders
to accept, or

                          2.      a change in the composition of the Board over
a period of thirty-six (36) consecutive months or less such that a majority of
the Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (A) who were still in
office at the time such election or nomination was approved by the Board.

                 D.       CODE shall mean the Internal Revenue Code of 1986, as
amended.

                 E.       COMMON STOCK shall mean the Corporation's common
stock.

                 F.       CORPORATE TRANSACTION shall mean either of the
following stockholder-approved transactions to which the Corporation is a
party:

                          1.      a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction; or

                          2.      the sale, transfer or other disposition of
all or substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.



                                        A-1
<PAGE>   26

                 G.       CORPORATION shall mean Cardiometrics, Inc., a
Delaware corporation, and any corporate successor to all or substantially all
of the assets or voting stock of Cardiometrics, Inc. which shall by appropriate
action adopt the Plan.

                 H.       DISCRETIONARY OPTION GRANT PROGRAM shall mean the
discretionary option grant program in effect under the Plan.

                 I.       DOMESTIC RELATIONS ORDER shall mean any judgment,
decree or order (including approval of a property settlement agreement) which
provides or otherwise conveys, pursuant to applicable State domestic relations
laws (including community property laws), marital property rights to any spouse
or former spouse of the Optionee.

                 J.       ELIGIBLE DIRECTOR shall mean a non-employee Board
member eligible to participate in the Automatic Option Grant Program in
accordance with the eligibility provisions of Article One.

                 K.       EMPLOYEE shall mean an individual who is in the
employ of the Corporation (or any Parent or Subsidiary), subject to the control
and direction of the employer entity as to both the work to be performed and
the manner and method of performance.

                 L.       EXERCISE DATE shall mean the date on which the
Corporation shall have received written notice of the option exercise.

                 M.       FAIR MARKET VALUE per share of Common Stock on any
relevant date shall be determined in accordance with the following provisions:

                          1.      If the Common Stock is at the time traded on
the Nasdaq National Market, then the Fair Market Value shall be the closing
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system.  If there is no closing price for the
Common Stock on the date in question, then the Fair Market Value shall be the
closing price on the last preceding date for which such quotation exists.

                          2.      If the Common Stock is at the time listed on
any Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of transactions
on such exchange.  If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.

                          3.      For purposes of any option grants made on the
Plan Effective Date, the Fair Market Value shall be deemed to be equal to the
price per share at which the Common Stock is sold in the initial public
offering pursuant to the Underwriting Agreement.



                                      A-2
<PAGE>   27
                 N.       HOSTILE TAKE-OVER shall mean a change in ownership of
the Corporation effected through the following transaction:

                          1.      the acquisition, directly or indirectly, by
any person or related group of persons (other than the Corporation or a person
that directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the meaning of
Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's outstanding
securities  pursuant to a tender or exchange offer made directly to the
Corporation's stockholders which the Board does not recommend such stockholders
to accept, and

                          2.      more than fifty percent (50%) of the
securities so acquired are accepted from persons other than Section 16
Insiders.

                 O.       INCENTIVE OPTION shall mean an option which satisfies
the requirements of Code Section 422.

                 P.       INVOLUNTARY TERMINATION shall mean the termination of
the Service of any individual which occurs by reason of:

                          1.      such individual's involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or


                          2.      such individual's voluntary resignation
following (A) a change in his or her position with the Corporation which
materially reduces his or her level of responsibility, (B) a reduction in his
or her level of compensation (including base salary, fringe benefits and
participation in corporate-performance based bonus or incentive programs) by
more than fifteen percent (15%) or (C) a relocation of such individual's place
of employment by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Corporation without the individual's
consent.

                 Q.       MISCONDUCT shall mean the commission of any act of
fraud, embezzlement or dishonesty by the Optionee or Participant, any
unauthorized use or disclosure by such person of confidential information or
trade secrets of the Corporation (or any Parent or Subsidiary), or any other
intentional misconduct by such person adversely affecting the business or
affairs of the Corporation (or any Parent or Subsidiary) in a material manner.
The foregoing definition shall not be deemed to be inclusive of all the acts or
omissions which the Corporation (or any Parent or Subsidiary) may consider as
grounds for the dismissal or discharge of any Optionee, Participant or other
person in the Service of the Corporation (or any Parent or Subsidiary).

                 R.       1934 ACT shall mean the Securities Exchange Act of
1934, as amended.

                 S.       NON-STATUTORY OPTION shall mean an option not
intended to satisfy  the requirements of Code Section 422.



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                 T.       OPTIONEE shall mean any person to whom an option is
granted under the Discretionary Option Grant, Automatic Option Grant or Salary
Investment Option Grant Program.

                 U.       PARENT shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the Corporation,
provided each corporation in the unbroken chain (other than the Corporation)
owns, at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

                 V.       PARTICIPANT shall mean any person who is issued
shares of Common Stock under the Stock Issuance Program.

                 W.       PERMANENT DISABILITY OR PERMANENTLY DISABLED shall
mean the inability of the Optionee or the Participant to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment expected to result in death or to be of continuous
duration of twelve (12) months or more.  However, solely for the purposes of
the Automatic Option Grant Program, Permanent Disability or Permanently
Disabled shall mean the inability of the non-employee Board member to perform
his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.

                 X.       PLAN shall mean the Corporation's 1995 Stock
Incentive Plan, as set forth in this document.

                 Y.       PLAN ADMINISTRATOR shall mean the particular entity,
whether the Primary Committee, the Board or the Secondary Committee, which is
authorized to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to one or more classes of eligible persons, to the extent
such entity is carrying out its administrative functions under those programs
with respect to the persons under its jurisdiction.

                 Z.       PLAN EFFECTIVE DATE shall mean the date on which the
Underwriting Agreement is executed and the initial public offering price of the
Common Stock is established.

                 AA.      PREDECESSOR PLANS shall mean the Corporation's
existing 1985 Stock Option Plan and the interim 1995 Stock Option Plan.

                 BB.      PRIMARY COMMITTEE shall mean the committee of two (2)
or more non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders.

                 CC.      QUALIFIED DOMESTIC RELATIONS ORDER shall mean a
Domestic Relations Order which substantially complies with the requirements of
Code Section 414(p).  The Plan Administrator shall have the sole discretion to
determine whether a Domestic Relations Order is a Qualified Domestic Relations
Order.



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<PAGE>   29
                 DD.      SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the
special equity incentive program in effect under the Plan pursuant to which
selected individuals may apply a portion of their base salary to the
acquisition of below-market option grants.

                 EE.      SECONDARY COMMITTEE shall mean a committee of two (2)
or more Board members appointed by the Board to administer the Discretionary
Option Grant and Stock Issuance Programs with respect to eligible persons other
than Section 16 Insiders.

                 FF.      SECTION 16 INSIDER shall mean an officer or director
of the Corporation subject to the short-swing profit liabilities of Section 16
of the 1934 Act.

                 GG.      SECTION 12(g) REGISTRATION DATE shall mean the first
date on which the Common Stock is registered under Section 12(g) of the 1934
Act.

                 HH.      SERVICE shall mean the provision of services to the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in
the documents evidencing the option grant or stock issuance.

                 II.      STOCK EXCHANGE shall mean either the American Stock
Exchange or the New York Stock Exchange.

                 JJ.      STOCK ISSUANCE AGREEMENT shall mean the agreement
entered into by the Corporation and the Participant at the time of issuance of
shares of Common Stock under the Stock Issuance Program.

                 KK.      STOCK ISSUANCE PROGRAM shall mean the stock issuance
program in effect under the Plan.

                 LL.      SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

                 MM.      TAKE-OVER PRICE shall mean the greater of (i) the
Fair Market Value per share of Common Stock on the date the option is
surrendered to the Corporation in connection with a Hostile Take-Over or (ii)
the highest reported price per share of Common Stock paid by the tender offeror
in effecting such Hostile Take-Over.  However, if the surrendered option is an
Incentive Option, the Take-Over Price shall not exceed the clause (i) price per
share.

                 NN.      TAXES shall mean the Federal, state and local income
and employment tax liabilities incurred by the holder of Non-Statutory Options
or unvested shares of Common Stock in connection with the exercise of those
options or the vesting of those shares.



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<PAGE>   30

                 OO.      10% STOCKHOLDER shall mean the owner of stock (as
determined under Code Section 424(d)) possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Corporation (or
any Parent or Subsidiary).

                 PP.      UNDERWRITING AGREEMENT shall mean the agreement
between the Corporation and the underwriter or underwriters managing the
initial public offering of the Common Stock.


 
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