ORTHOLOGIC CORP.
                             1997 STOCK OPTION PLAN

1.       Purpose

         The  purposes  of the 1997 Stock  Option Plan  ("Plan")  of  OrthoLogic
Corp.,  a Delaware  corporation,  are to attract  and retain the best  available
employees  and  directors of  OrthoLogic  Corp.  or any parent or  subsidiary or
affiliate  of  OrthoLogic  Corp.  which now exists or  hereafter is organized or
acquired by or acquires  OrthoLogic  Corp.  (collectively or individually as the
context  requires the  "Company") as well as  appropriate  third parties who can
provide valuable  services to the Company,  to provide  additional  incentive to
such  persons and to promote the success of the  business of the  Company.  This
Plan is intended to comply  with Rule 16b-3 under  Section 16 of the  Securities
Exchange Act of 1934, as amended or any successor rule ("Rule  16b-3"),  and the
Plan shall be construed, interpreted and administered to comply with Rule 16b-3.

2.       Definitions

         a.  "Affiliate"  means any corporation,  partnership,  joint venture or
other  entity,  domestic or foreign,  in which the Company,  either  directly or
through another affiliate or affiliates, has a 50% or more ownership interest.

         b. "Affiliated Group" means the group consisting of the Company and any
entity that is an "affiliate," a "parent" or a "subsidiary" of the Company.

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

         d. "Committee"  means the Compensation or Stock Option Committee of the
Board (as designated by the Board), if such a committee has been appointed.

         e. "Code" means the United  States  Internal  Revenue Code of 1986,  as
amended.

         f.  "Incentive  Stock  Options"  means  options  intended to qualify as
incentive  stock  options  under  Section  422 of  the  Code,  or any  successor
provision.

         g. "ISO  Group"  means  the group  consisting  of the  Company  and any
corporation that is a "parent" or a "subsidiary" of the Company.

         h. "Nonemployee Director" means a director of the Company who is not an
employee of the Company or any Affiliated Group Member.
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         i. "Nonqualified  Stock Options" means options that are not intended to
qualify for favorable income tax treatment under Sections 421 through 424 of the
Code.

         j.  "Parent"  means a  corporation  that is a "parent"  of the  Company
within the meaning of Code Section 424(e).

         k.  "Section  16" means  Section 16 of the  Securities  Exchange Act of
1934, as amended.

         l.  "Subsidiary"  means a  corporation  that is a  "subsidiary"  of the
Company within the meaning of Code Section 424(f).

3.       Incentive and Nonqualified Stock Options

         Two  types  of  options  (referred  to  herein  as  "options,"  without
distinction  between  such two types) may be granted  under the Plan:  Incentive
Stock Options and Nonqualified Stock Options.

4.       Eligibility and Administration

         a. Eligibility.  The following individuals shall be eligible to receive
grants pursuant to the Plan as follows:

                  (1) Any employee  (including any officer or director who is an
employee)  of the Company or any ISO Group  member  shall be eligible to receive
either Incentive Stock Options or Nonqualified  Stock Options under the Plan. An
employee may receive more than one option under the Plan.

                  (ii) Any director of the Company or  consultant to the Company
who is not an  employee  of the  Company  or any of its  subsidiaries  shall  be
eligible to receive Nonqualified Stock Options under the Plan.

                  (iii) Any other  individual whose  participation  the Board or
the  Committee  determines  is in the best  interests  of the  Company  shall be
eligible to receive Nonqualified Stock Options.

         b.  Administration.  The Plan may be  administered by the Board or by a
Committee  appointed by the Board which is  constituted so to permit the Plan to
comply under Rule 16b-3 and 162(m) of the Code. The Company shall  indemnify and
hold harmless each director and Committee member for any action or determination
made in good faith with respect to the Plan or any option. Determinations by the
Committee or the Board shall be final and conclusive upon all parties.

5.       Shares Subject to Options

         The stock available for grant of options under the Plan shall be shares
of the Company's  authorized but unissued or reacquired voting common stock. The
aggregate  number of shares  that may be issued  pursuant to exercise of options
granted under the Plan shall
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be 1,040,000  shares;  provided,  however,  that,  in any one calendar  year, no
individual may receive grants of options  covering more than 200,000 shares.  If
any  outstanding  option  grant  under  the Plan for any  reason  expires  or is
terminated,  the shares of common stock allocable to the unexercised  portion of
the option  grant shall again be available  for options  under the Plan as if no
options had been granted with respect to such shares.

6.       Terms and Condition of Options

         Option  grants under the Plan shall be evidenced by  agreements in such
form and containing such provisions as are consistent with the Plan as the Board
or the Committee  shall from time to time approve.  Each agreement shall specify
whether  the  option(s)   granted   thereby  are  Incentive   Stock  Options  or
Nonqualified  Stock Options.  Such  agreements may incorporate all or any of the
terms hereof by reference  and shall comply with and be subject to the following
terms and conditions:

         a. Shares Granted. Each option grant agreement shall specify the number
of Incentive Stock Options and/or Nonqualified Stock Options being granted;  one
option shall be deemed granted for each share of stock. In addition, each option
grant agreement shall specify the exercisability and/or vesting schedule of such
options, if any.

         b.  Purchase  Price.  The purchase  price for a share  subject to (i) a
Nonqualified  Stock  Option  may be any amount  determined  in good faith by the
Committee, and (ii) an Incentive Stock Option shall not be less than 100% of the
fair  market  value of the share on the date the  option is  granted,  provided,
however,  the option price of an  Incentive  Stock Option shall not be less than
110% of the fair market value of such share on the date the option is granted to
an  individual  then  owning  (after  the  application  of the  family and other
attribution rules of Section 424(d) or any successor rule of the Code) more than
10% of the total combined voting power of all classes of stock of the Company or
any ISO Group member.  For purposes of the Plan, "fair market value" at any date
shall be (i) the  reported  closing  price of such  stock on the New York  Stock
Exchange or other  established  stock exchange or Nasdaq National Market on such
date,  or if no sale of such stock  shall  have been made on that  date,  on the
preceding  date on which  there was such a sale,  (ii) if such stock is not then
listed on an exchange or the Nasdaq  National  Market,  the last trade price per
share for such stock in the  over-the-counter  market as quoted on Nasdaq or the
pink sheets or successor  publication of the National  Quotation  Bureau on such
date, or (iii) if such stock is not then listed or quoted as  referenced  above,
an amount determined in good faith by the Board or the Committee.

         c.  Termination.  Unless  otherwise  provided  herein or in a  specific
option grant agreement  which may provide for accelerated  vesting and/or longer
or shorter periods of  exercisability,  no option shall be exercisable after the
expiration of the earliest of
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                  (i) in the case of an Incentive Stock Option:

                           (1) 10 years from the date the option is granted,  or
                  five  years  from  the  date  the  option  is  granted  to  an
                  individual  owning  (after the  application  of the family and
                  other  attribution rules of Section 424(d) of the Code) at the
                  time  such  option  was  granted,  more  than 10% of the total
                  combined  voting  power of all classes of stock of the Company
                  or any ISO Group member,

                           (2) three months  after the date the optionee  ceases
                  to perform  services for the Company or any ISO Group  member,
                  if  such  cessation  is  for  any  reason  other  than  death,
                  disability (within the meaning of Code Section  22(e)(3)),  or
                  cause,

                           (3) one year  after the date the  optionee  ceases to
                  perform  services for the Company or any ISO Group member,  if
                  such cessation is by reason of death or disability (within the
                  meaning of Code Section 22(e)(3)), or

                           (4) the date the optionee ceases to perform  services
                  for the Company or any ISO Group member,  if such cessation is
                  for cause,  as determined by the Board or the Committee in its
                  sole discretion;

                  (ii) in the case of a Nonqualified Stock Option;

                           (1) 10 years from the date the option is granted,

                           (2) two years after the date the  optionee  ceases to
                  perform  services  for the  Company  or any  Affiliated  Group
                  member,  if such cessation is for any reason other than death,
                  permanent disability, retirement or cause,

                           (3) three years after the date the optionee ceases to
                  perform  services  for the  Company  or any  Affiliated  Group
                  member,  if such  cessation  is by reason of death,  permanent
                  disability or retirement, or

                           (4) the date the optionee ceases to perform  services
                  for  the  Company  or any  Affiliated  Group  member,  if such
                  cessation  is for  cause,  as  determined  by the Board or the
                  Committee in its sole discretion;

provided,  that, unless otherwise provided in a specific option grant agreement,
an option shall only be exercisable  for the periods above following the date an
optionee ceases to perform  services to the extent the option was exercisable on
the date of such cessation.

         d.  Method of  Payment.  The  purchase  price  for any share  purchased
pursuant to the  exercise of an option  granted  under the Plan shall be paid in
full upon exercise of the option by any of
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the  following  methods,  (i) by cash,  (ii) by  check,  or (iii) to the  extent
permitted under the particular grant  agreement,  by transferring to the Company
shares of stock of the  Company  at their  fair  market  value as of the date of
exercise of the option as determined in accordance with paragraph 6(b), provided
that  the  optionee   held  the  shares  of  stock  for  at  least  six  months.
Notwithstanding  the  foregoing,  the Company may  arrange for or  cooperate  in
permitting  broker-assisted  cashless exercise procedures.  The Company may also
extend and maintain,  or arrange for the extension and maintenance of, credit to
an  optionee  to finance  the  optionee's  purchase  of shares  pursuant  to the
exercise  of  options,  on such  terms as may be  approved  by the  Board or the
Committee,  subject to applicable  regulations of the Federal  Reserve Board and
any other  applicable  laws or  regulations in effect at the time such credit is
extended.

         e. Exercise. Except for options which have been transferred pursuant to
paragraph  6(f),  no option  shall be  exercisable  during  the  lifetime  of an
optionee by any person  other than the  optionee,  his or her  guardian or legal
representative.  The Board or the Committee shall have the power to set the time
or times within which each option shall be  exercisable  and to  accelerate  the
time or times of exercise;  provided, however, no options may be exercised prior
to the later of the  expiration  of six months from the date of grant thereof or
stockholder  approval,  unless otherwise provided by the Board or Committee.  To
the extent that an optionee  has the right to exercise  one or more  options and
purchase  shares pursuant  thereto,  the option(s) may be exercised from time to
time by  written  notice to the  Company  stating  the  number  of shares  being
purchased  and  accompanied  by payment in full of the  purchase  price for such
shares. Any certificate for shares of outstanding stock used to pay the purchase
price  shall be  accompanied  by a stock  power  duly  endorsed  in blank by the
registered owner of the certificate (with the signature thereon guaranteed).  If
the certificate tendered by the optionee in such payment covers more shares than
are required for such payment,  the  certificate  shall also be  accompanied  by
instructions  from the optionee to the Company's  transfer agent with respect to
the disposition of the balance of the shares covered thereby.

         f.  Nontransferability.  No option shall be transferable by an optionee
otherwise  than by will or the laws of descent and  distribution,  provided that
the Committee in its discretion may grant options that are transferable, without
payment of  consideration,  to  immediate  family  members of the optionee or to
trusts or  partnerships  for such family  members;  the Committee may also amend
outstanding options to provide for such transferability.

         g. ISO $100,000  Limit. If required by applicable tax rules regarding a
particular grant, to the extent that the aggregate fair market value (determined
as of the date an Incentive  Stock Option is granted) of the shares with respect
to which an Incentive  Stock Option grant under this Plan (when  aggregated,  if
appropriate, with
<PAGE>
shares  subject to other  Incentive  Stock Option  grants made before said grant
under  this Plan or  another  plan  maintained  by the  Company or any ISO Group
member) is  exercisable  for the first time by an optionee  during any  calendar
year exceeds  $100,000 (or such other limit as is prescribed by the Code),  such
option grant shall be treated as a grant of Nonqualified  Stock Options pursuant
to Code Section 422(d).

         h. Investment Representation. Unless the shares of stock covered by the
Plan have been registered with the Securities and Exchange  Commission  pursuant
to  Section 5 of the  Securities  Act of 1933,  as  amended,  each  optionee  by
accepting an option grant represents and agrees,  for himself or herself and his
or her  transferees  by will or the laws of descent and  distribution,  that all
shares of stock purchased upon the exercise of the option grant will be acquired
for  investment  and not for resale or  distribution.  Upon such exercise of any
portion of any option grant, the person entitled to exercise the same shall upon
request of the Company furnish evidence satisfactory to the Company (including a
written  and signed  representation)  to the effect that the shares of stock are
being acquired in good faith for investment and not for resale or  distribution.
Furthermore,  the  Company  may  if it  deems  appropriate  affix  a  legend  to
certificates  representing  shares of stock  purchased  upon exercise of options
indicating  that such shares have not been  registered  with the  Securities and
Exchange Commission and may so notify its transfer agent.

         i. Rights of  Optionee.  An optionee  or  transferee  holding an option
grant shall have no rights as a  stockholder  of the Company with respect to any
shares  covered by any option  grant  until the date one or more of the  options
granted  thereunder have been properly exercised and the purchase price for such
shares  has  been  paid in full.  No  adjustment  shall  be made  for  dividends
(ordinary or  extraordinary,  whether  cash,  securities  or other  property) or
distributions  or other  rights for which the  record  date is prior to the date
such share  certificate  is issued,  except as provided for in  paragraph  6(k).
Nothing in the Plan or in any  option  grant  agreement  shall  confer  upon any
optionee  any right to  continue  performing  services  for the  Company  or any
Affiliated  Group member,  or interfere in any way with any right of the Company
or any Affiliated Group member to terminate the optionee's services at any time.

         j.  Fractional  Shares.  The  Company  shall not be  required  to issue
fractional  shares upon the exercise of an option.  The value of any  fractional
share  subject to an option  grant shall be paid in cash in  connection  with an
exercise  that  results  in all full  shares  subject to the grant  having  been
exercised.

         k.  Reorganizations,  Etc.  Subject  to  paragraph  9  hereof,  if  the
outstanding shares of stock of the class then subject to this Plan are increased
or decreased, or are changed into or exchanged for a different number or kind of
shares or securities, as a result of one or more reorganizations,  stock splits,
reverse stock splits,
<PAGE>
stock  dividends,  spin-offs,  other  distributions  of assets to  stockholders,
appropriate  adjustments  shall be made in the number  and/or  type of shares or
securities  for which options may  thereafter be granted under this Plan and for
which options then outstanding under this Plan may thereafter be exercised.  Any
such  adjustments  in  outstanding  options  shall be made without  changing the
aggregate exercise price applicable to the unexercised portions of such options.

         l. Option Modification.  Subject to the terms and conditions and within
the  limitations of the Plan,  the Board or the Committee may modify,  extend or
renew  outstanding  options  granted  under the Plan, or accept the surrender of
outstanding options (to the extent not theretofore  exercised).  Notwithstanding
the  foregoing,  no  modification  of an  option  (either  directly  or  through
modification of the Plan) shall,  without the consent of the optionee,  alter or
impair any rights of the  optionee  under the option.  Notwithstanding  anything
herein to the  contrary,  the Board or  Committee  may not  reprice  outstanding
options nor may the Board or the Committee  accept the surrender of  outstanding
options in conjunction  with a grant of new options in substitution  therefor at
an  exercise  price lower than the price of the  options  surrendered,  and this
sentence may not be amended without consent of the Board and ratification by the
Company's stockholders.

         m. Grants to Foreign Optionees.  The Board or the Committee in order to
fulfill the Plan  purposes and without  amending  the Plan may modify  grants to
optionees who are foreign nationals or performing services for the Company or an
Affiliated  Group member  outside the United States to recognize  differences in
local law, tax policy or custom.

         n. Other  Terms.  Each option  grant  agreement  may contain such other
terms,  provisions  and  conditions  not  inconsistent  with  the Plan as may be
determined  by  the  Board  or  the  Committee,   such  as  without   limitation
discretionary  performance  standards,  tax  withholding  provisions,  or  other
forfeiture provisions regarding competition and confidential information.

7.       Termination or Amendment of the Plan

         The Board may at any time terminate or amend the Plan;  provided,  that
stockholder  approval  shall be  obtained  of any action  for which  stockholder
approval  is  required  in order to comply  with Rule  16b-3,  the Code or other
applicable laws or regulatory requirements within such time periods prescribed.

8.       Stockholder Approval and Term of the Plan

         The Plan shall be effective as of March 26, 1997,  the date as of which
it was adopted by the Board,  subject to ratification by the stockholders of the
Company within (each of) the time  period(s)  prescribed  under Rule 16b-3,  the
Code,  and any  other  applicable  laws or  regulatory  requirements,  and shall
continue thereafter
<PAGE>
until  terminated by the Board.  Unless sooner  terminated by the Board,  in its
sole discretion,  the Plan will expire on March 25, 2007, solely with respect to
the granting of Incentive  Stock  Options or such later date as may be permitted
by the Code for Incentive Stock Options,  provided that options outstanding upon
termination  or  expiration  of the Plan shall  remain in effect until they have
been exercised or have expired or been forfeited.

9.        Merger, Consolidation or Reorganization

         In the event of a merger,  consolidation or reorganization with another
corporation  in which the Company is not the surviving  corporation,  the Board,
the  Committee  (subject to the approval of the Board) or the board of directors
of any corporation  assuming the obligations of the Company hereunder shall take
action  regarding each  outstanding  and  unexercised  option pursuant to either
clause (a) or (b) below:

         a. Appropriate  provision may be made for the protection of such option
by the substitution on an equitable basis of appropriate shares of the surviving
corporation,  provided  that the excess of the  aggregate  fair market value (as
defined in  paragraph  6(b)) of the shares  subject to such  option  immediately
before such  substitution  over the exercise  price thereof is not more than the
excess of the aggregate fair market value of the substituted shares made subject
to option  immediately  after such substitution over the exercise price thereof;
or

         b.  Appropriate  provision  may be made  for the  cancellation  of such
option. In such event, the Company, or the corporation  assuming the obligations
of the Company hereunder,  shall pay the optionee an amount of cash (less normal
withholding  taxes)  equal to the excess of the highest  fair  market  value (as
defined  in  paragraph  6(b)) per share of the  Common  Stock  during the 60-day
period immediately  preceding the merger,  consolidation or reorganization  over
the option  exercise  price,  multiplied by the number of shares subject to such
options (whether or not then exercisable).

10.      Dissolution or Liquidation

         Anything  contained  herein  to the  contrary  notwithstanding,  on the
effective date of any  dissolution or liquidation of the Company,  the holder of
each then outstanding option (whether or not then exercisable) shall receive the
cash  amount  described  in  paragraph  9(b)  hereof  and such  option  shall be
cancelled.

11.      Acceleration of Exercisability and Vesting Under Certain
         Circumstances

         Notwithstanding  any provision in the Plan to the contrary,  unless the
particular letter of grant provides otherwise,  75% of the unvested options held
by each optionee  shall  automatically  become  exercisable  and vested upon the
occurrence, before the
<PAGE>
expiration or termination of such option, of the acquisition by a third party of
100% of the  Company's  outstanding  equity  securities,  a merger  in which the
Company is not the surviving corporation,  a sale of all or substantially all of
the Company's assets, or a similar  reorganization of the Company (collectively,
"Accelerating  Events").  The balance of each optionee's  unvested  options will
vest and become  exercisable  in 12 equal  monthly  installments  following  the
occurrence of any Accelerating Event, or according to the optionee's  individual
vesting  schedule as applicable  without regard to this Section 11, whichever is
earlier.  If an optionee  loses his position  with the Company as a result of or
subsequent to the occurrence of an Accelerating Event, 100% of the unexpired and
unvested  options  granted  pursuant  to this Plan held by such  optionee  shall
automatically become vested upon such loss of position.

12.      Withholding Taxes

         a. General  Rule.  Pursuant to applicable  federal and state laws,  the
Company is or may be required to collect  withholding taxes upon the exercise of
an option. The Company may require,  as a condition to the exercise of an option
or the issuance of a stock  certificate,  that the optionee  concurrently pay to
the Company (either in cash or, at the request of optionee but in the discretion
of the Board or the Committee and subject to such rules and  regulations  as the
Board or the Committee may adopt from time to time, in shares of Common Stock of
the  Company)  the entire  amount or a portion of any taxes which the Company is
required to withhold by reason of such exercise, in such amount as the Committee
or the Board in its discretion may determine.

         b. Withholding from Shares to be Issued.  In lieu of part or all of any
such payment,  the optionee may elect,  subject to such rules and regulations as
the Board or the  Committee  may adopt  from time to time,  or the  Company  may
require  that the Company  withhold  from the shares to be issued that number of
shares  having a fair market value (as defined in  paragraph  6(b)) equal to the
amount which the Company is required to withhold.

         c. Special Rule for Insiders.  Any such request or election (to satisfy
a withholding  obligation  using shares) by an individual  who is subject to the
provisions  of  Section  16  shall be made in  accordance  with  the  rules  and
regulations of the Securities and Exchange Commission promulgated thereunder.