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                                                                   EXHIBIT 10.35

                              MOLECULAR BIOSYSTEMS, INC.
                                1998 STOCK OPTION PLAN

                          (AS AMENDED AND RESTATED THROUGH
                                SEPTEMBER 22, 1998)


                                     ARTICLE ONE

                                  GENERAL PROVISIONS

       I.      PURPOSE OF THE PLAN

               This 1998 Stock Option Plan is intended to promote the
interests of Molecular Biosystems, 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:

                         (i)    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,

                        (ii)    the Salary Investment Option Grant Program
under which eligible employees may elect to have a portion of their base
salary invested each year in special options,

                       (iii)    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 the Corporation (or any
Parent or Subsidiary), and

                        (iv)    the Automatic Option Grant Program under
which eligible non-employee Board members shall automatically receive options
at periodic intervals to purchase shares of Common Stock.

               B.     The provisions of Articles One and Six shall apply to
all equity programs

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under the Plan and shall govern the interests of all persons under the Plan.

       III.    ADMINISTRATION OF THE PLAN

               A.     The following provisions shall govern the
administration of the Plan:

                         (i)    The Board shall have the authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders but may delegate such authority in whole or in
part to the Primary Committee.

                        (ii)    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.

                       (iii)    The Primary Committee shall have the sole and
exclusive authority to determine which Section 16 Insiders and other highly
compensated Employees shall be eligible for participation in the Salary
Investment Option Grant Program for one or more calendar years.  However, all
option grants under the Salary Investment Option Grant Program shall be made
in accordance with the express terms of that program, and the Primary
Committee shall not exercise any discretionary functions with respect to the
option grants made under that program.

                        (iv)    Administration of the Automatic Option Grant
Program shall be self-executing in accordance with the terms of that program.

               B.     Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full power and authority
subject to the provisions of the Plan:

                         (i)    to establish such rules as it may deem
appropriate for proper administration of the Plan, to make all factual
determinations, to construe and interpret the provisions of the Plan and the
awards thereunder and to resolve any and all ambiguities thereunder;

                        (ii)    to determine, with respect to awards made
under the Discretionary Option Grant and Stock Issuance Programs, which
eligible persons are to receive such awards, the time or times when such
awards are to be made, the number of shares to be covered by each such award,
the vesting schedule (if any) applicable to the award, the status of a
granted option as either an Incentive Option or a Non-Statutory Option and
the maximum term for which the option is to remain outstanding;

                       (iii)    to amend, modify or cancel any outstanding
award with the consent of the holder or accelerate the vesting of such award;
and

                        (iv)    to take such other discretionary actions as
permitted pursuant

                                      2.
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to the terms of the applicable program.

Decisions of each Plan Administrator within the scope of its administrative
functions under the Plan shall be final and binding on all parties.

               C.     Members of the Primary Committee or any Secondary
Committee shall serve for such period of time as the Board may determine and
may be removed 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.     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
options or stock issuances under the Plan.

       IV.     ELIGIBILITY

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

                         (i)    Employees,

                        (ii)    non-employee members of the Board or the
           board of directors of any Parent or Subsidiary, and

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

               B.     Only Employees who are Section 16 Insiders or other
highly compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program.

               C.     Only non-employee Board members shall be eligible to
participate in the Automatic Option Grant Program.

       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 initially reserved for issuance over the term of the
Plan shall not exceed the number of shares authorized under the Predecessor
Plans being subsumed under this Plan plus Two Million (2,000,000) shares
newly authorized by the Board subject to stockholder approval.  There are
approximately Four Hundred Eighty Eight Thousand

                                      3.
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(488,000) shares which are authorized but not yet subject to any outstanding
option under the Predecessor Plans.  There are approximately Three Million
One Hundred Thousand (3,100,000) shares authorized under the Predecessor
Plans which are subject to currently outstanding option grants.

               B.     No one person participating in the Plan may receive
options, separately exercisable stock appreciation rights and direct stock
issuances for more than Six Hundred and Fifty Thousand (650,000) shares of
Common Stock in the aggregate per calendar year, beginning with the 1998
calendar year.

               C.     Shares of Common Stock subject to outstanding options
(including options incorporated into this Plan from the Predecessor Plans)
shall be available for subsequent issuance under the Plan to the extent those
options expire, terminate or are cancelled for any reason prior to exercise
in full. Unvested shares issued under the Plan and subsequently repurchased
by the Corporation, at the original exercise or issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent options or direct stock issuances under the Plan.  However, should
the exercise price of an option under the Plan 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.  Shares of Common Stock underlying one or more
stock appreciation rights exercised under the Plan shall NOT be available for
subsequent issuance.

               D.     If any change is 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 number and/or class of securities by which the
share reserve is to increase each calendar year pursuant to the automatic share
increase provisions of the Plan, (iii) the number and/or class of securities for
which any one person may be granted options, separately exercisable stock
appreciation rights and direct stock issuances under the Plan per calendar year,
(iv) the number and/or class of securities for which grants are subsequently to
be made under the Automatic Option Grant Program to new and continuing
non-employee Board members, (iv) the number and/or class of securities and the
exercise price per share in effect under each outstanding option under the Plan
and (v) the number and/or class of securities and price per share in effect
under each outstanding option incorporated into this Plan from the Predecessor
Plans.  Such adjustments to the outstanding options are to be effected in a
manner which shall preclude the enlargement or dilution of rights and benefits
under such options. The adjustments determined by the Plan Administrator shall
be final, binding and conclusive.

                                      4.
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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 at the time of the option grant, but in no event shall
the exercise price per share be less than one eighty-five percent (85%) of
the fair market value of the common stock on the date of grant.

                      2.      The exercise price shall become immediately due
upon exercise of the option and shall, subject to the provisions of Section
II of Article Six and the documents evidencing the option, be payable in cash
or check made payable to the Corporation.  Should the Common Stock be
registered under Section 12 of the 1934 Act at the time the option is
exercised, then the exercise price may also be paid as follows:

                           (i)     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

                          (ii)     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
       instructions to (a) a Corporation-approved 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.

               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

                                      5.
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a term in excess of ten (10) years measured from the option grant date.

               C.     CESSATION OF SERVICE.

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

                           (i)     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.

                          (ii)     Any option exercisable in whole or in part by
       the Optionee at the time of death may be subsequently exercised by his
       or her Beneficiary.

                         (iii)     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.

                          (iv)     Should the Optionee's Service be terminated
       for Misconduct or should the Optionee engage in Misconduct while his or
       her options are outstanding, then all such options 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:

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

                          (ii)     to permit the option to be exercised, during
       the applicable post-Service exercise period, for one or more additional
       installments in which the Optionee would have vested had the Optionee
       continued in Service.

                                      6.
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               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.

               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, Incentive Options 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.
Non-Statutory Options shall be subject to the same restrictions, except that
a Non-Statutory Option may, to the extent permitted by the Plan
Administrator, be assigned in whole or in part during the Optionee's lifetime
to one or more members of the Optionee's immediate family or to a trust
established exclusively for Optionee and/or one or more such family members.
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 eighty five percent (85%) of the Fair Market Value per share of
Common Stock on the option grant date.

               C.     DOLLAR LIMITATION.  The aggregate Fair Market Value of
the shares of Common Stock (determined as of the respective date or dates of
grant) 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.

                                      7.
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               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.

       III.    CHANGE IN CONTROL/HOSTILE TAKE-OVER

               A.     Each option outstanding at the time of a Change in
Control but not otherwise fully-vested shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the Change
in Control, become exercisable for all of the shares of Common Stock at the
time subject to that 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 Change in Control, assumed or otherwise continued in full
force and effect by the successor corporation (or parent thereof) pursuant to
the terms of the Change in Control, (ii) such option is replaced with a cash
incentive program of the successor corporation which preserves the spread
existing at the time of the Change in Control on the shares of Common Stock
for which the option is not otherwise at that time exercisable and provides
for subsequent payout in accordance with the same vesting schedule applicable
to those option shares or (iii) the acceleration of such option is subject to
other limitations imposed by the Plan Administrator at the time of the option
grant.

               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 Change in Control,
except to the extent: (i) those repurchase rights are assigned to the
successor corporation (or parent thereof) or otherwise continue in full force
and effect pursuant to the terms of the Change in Control 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 Change in
Control, all outstanding options shall terminate and cease to be outstanding,
except to the extent assumed by the successor corporation (or parent thereof)
or otherwise expressly continued in full force and effect pursuant to the
terms of the Change in Control.

               D.     Each option which is assumed in connection with a
Change in Control shall be appropriately adjusted, immediately after such
Change in Control, to apply to the number and class of securities which would
have been issuable to the Optionee in consummation of such Change in Control
had the option been exercised immediately prior to such Change in Control.
Appropriate adjustments to reflect such Change in Control shall also be made
to (i) the exercise price payable per share under each outstanding option,
PROVIDED the aggregate exercise price payable for such securities shall
remain the same, (ii) the maximum number and/or class of securities available
for issuance over the remaining term of the Plan and (iii) 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
under the Plan per calendar year.

                                      8.
<PAGE>

               E.     The Plan Administrator may at any time provide that one
or more options will automatically accelerate in connection with a Change in
Control, whether or not those options are assumed or otherwise continued in
full force and effect pursuant to the terms of the Change in Control.  Any
such option shall accordingly become exercisable, immediately prior to the
effective date of such Change in Control, for all of the shares of Common
Stock at the time subject to that option and may be exercised for any or all
of those shares as fully-vested shares of Common Stock.  In addition, the
Plan Administrator may at any time provide that one or more of the
Corporation's repurchase rights shall not be assignable in connection with
such Change in Control and shall terminate upon the consummation of such
Change in Control.

               F.     The Plan Administrator may at any time provide that one
or more options will automatically accelerate upon an Involuntary Termination
of the Optionee's Service within a designated period (not to exceed
twenty-four (24) months) following the effective date of any Change in
Control in which those options do not otherwise accelerate.  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.  In addition, the Plan Administrator may at any time provide
that one or more of the Corporation's repurchase rights shall immediately
terminate upon such Involuntary Termination.

               G.     The Plan Administrator may at any time provide that one
or more options will automatically accelerate in connection with a Hostile
Take-Over.  Any such option shall become exercisable, immediately prior to
the effective date of such Hostile Take-Over, for all of the shares of Common
Stock at the time subject to that option and may be exercised for any or all
of those shares as fully-vested shares of Common Stock. In addition, the Plan
Administrator may at any time provide that one or more of the Corporation's
repurchase rights shall terminate automatically upon the consummation of such
Hostile Take-Over.  Alternatively, the Plan Administrator may condition such
automatic acceleration and termination upon an Involuntary Termination of the
Optionee's Service within a designated period (not to exceed twenty-four (24)
months) following the effective date of such Hostile Take-Over.  Each option
so accelerated shall remain exercisable for fully-vested shares until the
expiration or sooner termination of the option term.

               H.     The portion of any Incentive Option accelerated in
connection with a Change in Control or Hostile Take Over shall remain
exercisable as an Incentive Option only to the extent the applicable One
Hundred Thousand Dollar ($100,000) 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.

       IV.     STOCK APPRECIATION RIGHTS

               The Plan Administrator may, subject to such conditions as it
may determine, grant to selected Optionees stock appreciation rights which
will allow the holders of those rights to elect between the exercise of the
underlying option for shares of Common Stock and the surrender of that

                                      9.
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option in exchange for a distribution from the Corporation in an amount equal
to the excess of (a) the Option Surrender Value of the number of shares for
which the option is surrendered over (b) the aggregate exercise price payable
for such shares.  The distribution 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.




                                      10.
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                                 ARTICLE THREE

                     SALARY INVESTMENT OPTION GRANT PROGRAM

       I.      OPTION GRANTS

               The Primary Committee may implement the Salary Investment
Option Grant Program for one or more calendar years beginning after the Plan
Effective Date and select the Section 16 Insiders and other highly
compensated Employees eligible to participate in the Salary Investment Option
Grant Program for each such calendar year.  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 Plan
Administrator (or its designate) an irrevocable authorization directing the
Corporation to reduce his or her base salary for that calendar year by an
amount not less than Ten Thousand Dollars ($10,000.00) nor more than One
Hundred Thousand Dollars ($100,000.00).  The Primary Committee shall have
complete discretion to determine whether to approve the filed authorization
in whole or in part.  To the extent the Primary Committee approves the
authorization, the individual who filed that authorization shall be granted
an option under the Salary Investment Grant Program on the first trading day
in January for the calendar year for which the 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 Plan Administrator; 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 Percent (33%) 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 DIVIDED BY (B x 67%), where

                      X is the number of option shares,

                                      11.
<PAGE>

                      A is the dollar amount of the approved reduction in the
                      Optionee's base salary 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.     CESSATION OF SERVICE.  Each option outstanding at the
time of the Optionee's cessation of Service 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 EARLIER of (i) the expiration of the option
term or (ii) the expiration of the three (3)-year period following the
Optionee's cessation of Service.  To the extent the option is held by the
Optionee at the time of his or her death, the option may be exercised by his
or her Beneficiary. However, the option shall, immediately upon the
Optionee's cessation of Service, 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.    CHANGE IN CONTROL/HOSTILE TAKE-OVER

               A.     In the event of any Change in Control or Hostile
Take-Over while the Optionee remains in Service, each outstanding option
shall automatically accelerate so that each such option shall, immediately
prior to the effective date of the Change in Control or Hostile Take-Over,
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 option
accelerated in connection with a Change in Control shall terminate upon the
Change in Control, except to the extent assumed by the successor corporation
(or parent thereof) or otherwise continued in full force and effect pursuant
to the terms of the Change in Control.  Each such option accelerated in
connection with a Hostile Take-Over shall remain exercisable until the
expiration or sooner termination of the option term.

               B.     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 of his or her outstanding options.  The Optionee shall in
return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Option Surrender Value of the shares of Common
Stock at the time subject to each 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.

                                      12.
<PAGE>

       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
options made under the Discretionary Option Grant Program.





                                      13.
<PAGE>

                                 ARTICLE FOUR

                             STOCK ISSUANCE PROGRAM

       I.      STOCK ISSUANCE TERMS

               Up to Ten percent (10%) of the shares of Common Stock
available under the Plan may be issued under the Stock Issuance Program
without any intervening options.  Shares of Common Stock may also be issued
under the Stock Issuance Program pursuant to share right awards which entitle
the recipients to receive those shares upon the attainment of designated
performance goals or Service requirements.  Each such award shall be
evidenced by one or more documents which comply with the terms specified
below.

               A.     PURCHASE PRICE.

                      1.      The purchase price per share of Common Stock
subject to direct issuance shall be fixed by the Plan Administrator, but in
no event shall the price per share be less than one hundred percent (100%) of
the fair market value of the common stock on the date of issuance.

                      2.      Subject to the provisions of Section II 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:

                           (i)     cash or check made payable to the
       Corporation, or

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

               B.     VESTING/ISSUANCE PROVISIONS.

                      1.      The Plan Administrator may issue shares of
Common Stock which are fully and immediately vested upon issuance or which
are to vest in one or more installments over the Participant's period of
Service or upon attainment of specified performance objectives.
Alternatively, the Plan Administrator may issue share right awards which
shall entitle the recipient to receive a specified number of vested shares of
Common Stock upon the attainment of one or more performance goals or Service
requirements established by the Plan Administrator.

                      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 of Common Stock 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

                                      14.
<PAGE>

Participant's unvested shares of Common Stock and (ii) such escrow
arrangements as the Plan Administrator shall deem appropriate.

                      3.      The Participant shall have full stockholder
rights with respect to the issued shares of Common Stock, whether or not the
Participant's 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, 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 waive the surrender
and cancellation of one or more unvested shares of Common Stock (or other
assets attributable thereto) which would otherwise occur upon the cessation
of the Participant's 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.

                      6.      Outstanding share right awards shall
automatically terminate, and no shares of Common Stock shall actually be
issued in satisfaction of those awards, if the performance goals or Service
requirements established for such awards are not attained.  The Plan
Administrator, however, shall have the authority to issue shares of Common
Stock in satisfaction of one or more outstanding share right awards as to
which the designated performance goals or Service requirements are not
attained.

       II.     CHANGE IN CONTROL/HOSTILE TAKE-OVER

               A.     All of the Corporation's outstanding repurchase rights
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
Change in Control, except to the extent (i) those repurchase rights are
assigned to the successor corporation (or parent thereof) or otherwise
continue in full force and effect pursuant to the terms of the Change in
Control or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.

               B.     The Plan Administrator may at any time provide for the
automatic

                                      15.
<PAGE>

termination of one or more of those outstanding repurchase rights and the
immediate vesting of the shares of Common Stock subject to those terminated
rights upon (i) a Change in Control or Hostile Take-Over or (ii) an
Involuntary Termination of the Participant's Service within a designated
period (not to exceed twenty-four (24) months) following the effective date
of any Change in Control or Hostile Take-Over in which those repurchase
rights are assigned to the successor corporation (or parent thereof) or
otherwise continue in full force and effect.

       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.






                                      16.
<PAGE>

                                 ARTICLE FIVE

                         AUTOMATIC OPTION GRANT PROGRAM

       I.      OPTION TERMS

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

                      1.      Each individual who is first elected or
appointed as a non-employee Board member at any time after the Plan Effective
Date shall automatically be granted, on the date of such initial election or
appointment, a Non-Statutory Option to purchase Fifteen Thousand (15,000)
shares of Common Stock, provided that individual has not previously been in
the employ of the Corporation or any Parent or Subsidiary and is not a 5%
Stockholder or Affiliate (the "Commencement Grant").

                      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, whether or not that individual is
standing for re-election to the Board, shall automatically be granted a
Non-Statutory Option to purchase Six Thousand Five Hundred (6,500) shares of
Common Stock, provided such individual has served as a non-employee Board
member for at least six (6) months and is not a 5% Stockholder or Affiliate
(the "Annual Grant"), and provided that such individual has not received an
automatic option grant under the Plan or the Predecessor Plans within the
immediately preceding six month period.

               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
Commencement Grant and each Annual Grant shall vest, and the Corporation's
repurchase right shall lapse, at the time of the next Annual Stockholders
Meeting.

                                      17.
<PAGE>

               E.     CESSATION OF BOARD SERVICE.  The following provisions
shall govern the exercise of any options outstanding at the time of the
Optionee's cessation of Board service:

                           (i)     Any option outstanding at the time of the
       Optionee's cessation of Board service for any reason shall remain
       exercisable for a twelve (12)-month period following the date of such
       cessation of Board service, but in no event shall such option be
       exercisable after the expiration of the option term.

                          (ii)     Any option exercisable in whole or in part by
       the Optionee at the time of death may be subsequently exercised by his
       or her Beneficiary.

                         (iii)     Following the Optionee's cessation of Board
       service, the option may not be exercised in the aggregate for more than
       the number of shares in which the Optionee was vested on the date of
       such cessation of Board 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 Board service,
       terminate and cease to be outstanding for any and all shares in which
       the Optionee is not otherwise at that time vested.

                          (iv)     However, 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.

       II.     CHANGE IN CONTROL/HOSTILE TAKE-OVER

               A.     In the event of any Change in Control or Hostile
Take-Over, 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 may, immediately prior to the effective date of such Change in
Control the Hostile Take-Over, be exercised for all or any portion of those
shares as fully-vested shares of Common Stock.  Each such option accelerated
in connection with a Change in Control shall terminate upon the Change in
Control, except to the extent assumed by the successor corporation (or parent
thereof) or otherwise continued in full force and effect pursuant to the
terms of the Change in Control.  Each such option accelerated in connection
with a Hostile Take-Over shall remain exercisable until the expiration or
sooner termination of the option term.

               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 Change in Control
or Hostile Take-Over.

                                      18.
<PAGE>

               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 of his or her outstanding options.  The Optionee shall in
return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Option Surrender Value of the shares of Common
Stock at the time subject to each 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.

               D.     Each option which is assumed in connection with a
Change in Control shall be appropriately adjusted to apply to the number and
class of securities which would have been issuable to the Optionee in
consummation of such Change in Control had the option been exercised
immediately prior to such Change in Control.  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.

       III.    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 options
made under the Discretionary Option Grant Program.







                                      19.
<PAGE>

                                  ARTICLE SIX

                                 MISCELLANEOUS

       I.      NO IMPAIRMENT OF AUTHORITY

               Outstanding awards 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.

       II.     FINANCING

               The Plan Administrator may permit any Optionee or Participant
to pay the option exercise price under the Discretionary Option Grant Program
or the purchase price of shares issued under the Stock Issuance Program by
delivering a full-recourse, interest bearing 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.  In no event may the maximum credit
available to the Optionee or Participant 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.

       III.    TAX WITHHOLDING

               A.     The Corporation's obligation to deliver shares of
Common Stock upon the exercise of options or 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 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:

                      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.

                                      20.
<PAGE>

                      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 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.

       IV.     EFFECTIVE DATE AND TERM OF THE PLAN

               A.     The Plan shall become effective immediately upon the
Plan Effective Date.  However, the Salary Investment Option Grant Program
shall not be implemented until such time as the Primary Committee or the
Board may deem appropriate.  Options may be granted under the Discretionary
Option Grant or Automatic Option Grant Program at any time on or after the
Plan Effective Date.

               B.     The Plan shall serve as the successor to the
Predecessor Plans, and no further options or direct stock issuances shall be
made under the Predecessor Plans after the Plan Effective Date.   All options
outstanding under the Predecessor Plans on the Plan Effective Date shall be
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 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.     The Plan shall terminate upon the EARLIEST of (i) the
tenth anniversary of the Plan Effective Date, (ii) the date on which all
shares available for issuance under the Plan shall have been issued as
fully-vested shares or (iii) the termination of all outstanding options in
connection with a Change in Control.  Upon such plan termination, all
outstanding options and unvested stock issuances shall thereafter continue to
have force and effect in accordance with the provisions of the documents
evidencing such grants or issuances.

       V.      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, no
such amendment or modification shall adversely affect the rights and
obligations with respect to stock options or unvested stock issuances at the
time outstanding under the Plan unless the Optionee or the Participant
consents to such amendment or modification. In addition, certain amendments
may require stockholder approval pursuant to applicable laws or regulations.

                                      21.
<PAGE>

               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 shall be 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
cancelled and cease to be outstanding.

       VI.     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.

       VII.    REGULATORY APPROVALS

               A.     The implementation of the Plan, the granting of any
stock option under the Plan and the issuance of any shares of Common Stock
(i) upon the exercise of any granted option 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 stock options granted under it and the shares of Common Stock
issued pursuant to it.

               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.

       VIII.   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.

                                      22.
<PAGE>

                                   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.      BENEFICIARY shall mean, in the event the Plan Administrator
implements a beneficiary designation procedure, the person designated by an
Optionee or Participant, pursuant to such procedure, to succeed to such
person's rights under any outstanding awards held by him or her at the time
of death.  In the absence of such designation or procedure, the Beneficiary
shall be the personal representative of the estate of the Optionee or
Participant or the person or persons to whom the award is transferred by will
or the laws of descent and distribution.

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

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

                           (i)     a merger, consolidation or reorganization
       approved by the Corporation's stockholders, UNLESS securities
       representing more than fifty percent (50%) of the total combined voting
       power of the voting securities of the successor corporation are
       immediately thereafter beneficially owned, directly or indirectly and in
       substantially the same proportion, by the persons who beneficially owned
       the Corporation's outstanding voting securities immediately prior to
       such transaction,

                          (ii)     any stockholder-approved transfer or other
       disposition of all or substantially all of the Corporation's assets, or

                         (iii)     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 recommends such stockholders accept.

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

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

       G.      CORPORATION shall mean Molecular Biosystems, Inc., a Delaware
corporation, and

                                      A-1.
<PAGE>

its successors.

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

       I.      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.

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

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

                           (i)     If the Common Stock is at the time traded on
       the Nasdaq National Market, then the Fair Market Value shall be the
       closing selling price per share of Common Stock on the date in question,
       as such price is reported on the Nasdaq National Market or any successor
       system.  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.

                          (ii)     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.

       L.      5% STOCKHOLDER OR AFFILIATE shall mean a non-employee Board
member who, directly or indirectly, owns stock (as determined under Code
Section 424(d)) possessing equal to or more than five percent (5%) of the
total combined voting power of the outstanding securities of the Corporation
(or any Parent or Subsidiary) or is affiliated with or is a representative of
such a five percent or greater stockholder.

       M.      HOSTILE TAKE-OVER shall mean:

                           (i)     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

                                      A-2.
<PAGE>

       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

                          (ii)     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 the Board
       approved such election or nomination.

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

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

                           (i)     such individual's involuntary dismissal or
       discharge by the Corporation for reasons other than Misconduct, or

                          (ii)     such individual's voluntary resignation
       following (A) a change in his or her position with the Corporation or
       Parent or Subsidiary employing the individual which materially reduces
       his or her duties and responsibilities or the level of management to
       which he or she reports, (B) a reduction in his or her level of
       compensation (including base salary, fringe benefits and target bonus
       under any 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.

       P.      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 intentional
wrongdoing by such person, whether by omission or commission, which adversely
affects the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner.  This shall not limit the grounds for the
dismissal or discharge of any person in the Service of the Corporation (or
any Parent or Subsidiary).

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

       R.      NON-STATUTORY OPTION shall mean an option not intended to
satisfy the

                                      A-3.
<PAGE>

requirements of Code Section 422.

       S.      OPTION SURRENDER VALUE shall mean the Fair Market Value per
share of Common Stock on the date the option is surrendered to the
Corporation or, in the event of a Hostile Take-Over, effected through a
tender offer, the highest reported price per share of Common Stock paid by
the tender offeror in effecting such Hostile Take-Over, if greater.  However,
if the surrendered option is an Incentive Option, the Option Surrender Value
shall not exceed the Fair Market Value per share.

       T.      OPTIONEE shall mean any person to whom an option is granted
under the Discretionary Option Grant, Salary Investment Option Grant or
Automatic 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 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 1998 Stock Option 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, Salary Investment
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.  However, the Primary Committee shall have the
plenary authority to make all factual determinations and to construe and
interpret any and all ambiguities under the Plan to the extent such authority
is not otherwise expressly delegated to any other Plan Administrator.

       Z.      PLAN EFFECTIVE DATE shall mean the date on which the Plan is
approved by the shareholders of the Corporation.

                                      A-4.
<PAGE>

       AA.     PREDECESSOR PLANS shall mean the Corporation's pre-existing
1993 Stock Option Plan and 1997 Outside Directors' Stock Option Plan, in each
case as in effect immediately prior to the Plan Effective Date hereunder.

       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 and to administer the Salary Investment Option Grant
Program with respect to all eligible individuals.

       CC.     SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary
investment grant program in effect under the Plan.

       DD.     SECONDARY COMMITTEE shall mean a committee of one (1) 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.

       EE.     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.

       FF.     SERVICE shall mean the performance of services for 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.

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

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

       II.     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.

       JJ.     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.

       KK.     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).

                                      A-5.