ADVANCED TISSUE SCIENCES, INC
                          1997 STOCK INCENTIVE PLAN
                        -----------------------------
                       
                               ARTICLE ONE

                           GENERAL PROVISIONS
                           ------------------

     I.    PURPOSE OF THE PLAN

           This 1997 Stock Incentive Plan is intended to promote the interests
of Advanced Tissue Sciences 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.  This Plan
shall serve as the successor equity incentive program to the Corporation's
1992 Stock Option/Stock Issuance Plan.

           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 three separate equity programs:

                -    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,

                -    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

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

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


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     III.  ADMINISTRATION OF THE PLAN

           A.    The Primary Committee shall have sole and exclusive 
authority to administer the Discretionary Option Grant and Stock Issuance 
Programs with respect to Section 16 Insiders.

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

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

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

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

                                  -2-

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      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.    Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or
times when such option grants are to be made, the number of shares to be
covered by each such grant, the status of the granted option as either an
Incentive Option or a Non-Statutory Option, the time or times when each option
is to become exercisable, the vesting schedule (if any) applicable to the
option shares and the maximum term for which the option is to remain
outstanding and (ii) with respect to stock issuances under the Stock Issuance
Program, which eligible persons are to receive stock issuances, the time or
times when such issuances are to be made, the number of shares to be issued to
each Participant, the vesting schedule (if any) applicable to the issued
shares and the consideration for such shares.

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

           D.    The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals who
first become non-employee Board members on or after the Plan Effective Date,
whether through appointment by the Board or election by the Corporation's
stockholders, and (ii) those individuals who continue to serve as non-employee
Board members at one or more Annual Stockholders Meetings held on or after the
Plan Effective Date.

                                  -3-


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     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 7,005,642 shares.  Such authorized share reserve is 
comprised of (i) the number of shares which remain available for issuance, as 
of the Plan Effective Date, under the Predecessor Plan as last approved by 
the Corporation's stockholders (consisting of 4,005,642 shares, including the
shares subject to the outstanding options to be incorporated into the Plan), 
and (ii) an increase of 3,000,000 shares, adopted by the Board in March 1997 
and approved by the Corporation's stockholders at the 1997 Annual Meeting.

           B.    No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances
for more than 750,000 shares of Common Stock in the aggregate per calendar
year, beginning with the 1997 calendar year.

           C.    Shares of Common Stock subject to outstanding options 
(including options incorporated into this Plan from the Predecessor Plan) 
shall be available for subsequent issuance under the Plan to the extent those 
options expire or terminate for any reason prior to exercise in full.  
Unvested shares issued under the Plan and subsequently cancelled or 
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 option grants 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.

           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 for which any one person may be granted stock options, separately 
exercisable stock appreciation rights and direct stock issuances under this 
Plan per calendar year, (iii) 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 

                                   -4-

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securities and price per share in effect under each outstanding option 
incorporated into this Plan from the Predecessor Plan.  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.

                                   -5-

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                                ARTICLE TWO

                     DISCRETIONARY OPTION GRANT PROGRAM
                     ----------------------------------        

     I.    OPTION TERMS

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

           A.    EXERCISE PRICE.

                 1.   The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the
Fair Market Value per share of Common Stock on the option grant date.

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

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

                      (ii)   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

                      (iii)  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-designated brokerage firm to effect the immediate 
     sale of the purchased shares and remit to the Corporation, out of the 
     sale proceeds available on the settlement date, sufficient funds to 
     cover the aggregate exercise price payable for the purchased shares plus
     all applicable Federal, state and local income and employment taxes 
     required to be withheld by the Corporation by reason of such exercise 
     and (b) the Corporation to deliver the certificates for the purchased 
     shares directly to such brokerage firm in order to complete the sale.

           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.

                                   -6-


<PAGE>

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

           C.    EFFECT OF TERMINATION OF SERVICE.

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

                      (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 the 
     personal representative of the Optionee's estate or by the person or 
     persons to whom the option is transferred pursuant to the Optionee's 
     will or in accordance with the laws of descent and distribution.

                      (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, then all outstanding options held by the Optionee shall 
     terminate immediately and cease to be outstanding.

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

                                   -7-


<PAGE>

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

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

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

           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.  However, a
Non-Statutory Option may, in connection with the Optionee's estate plan, 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 one or more such family members.  The assigned portion may
only be exercised by the person or persons who acquire a proprietary interest
in the option pursuant to the assignment. 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.

                                  -8-


<PAGE>

     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 Five shall be applicable to Incentive
Options.  Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall not be subject to the terms of this Section
II.

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

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

           C.    DOLLAR LIMITATION.  The aggregate Fair Market Value 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.

           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.  CORPORATE TRANSACTION/CHANGE IN CONTROL

           A.    In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable 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.  However, an outstanding
option shall not so accelerate if and to the extent:  (i) such option is, in
connection with the Corporate Transaction, to be assumed by the successor
corporation (or parent thereof), (ii) such option is to be replaced with a
cash incentive program of the successor corporation which preserves the spread
existing on the unvested option shares at the time of the Corporate
Transaction and provides for subsequent payout in accordance with the same
vesting schedule applicable to 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.

                                  -9-

<PAGE>


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

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

           D.    Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction
had the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction 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 stock options, separately exercisable stock appreciation rights and
direct stock issuances under the Plan per calendar year.

           E.    The Plan Administrator shall have full power and authority to
grant one or more options under the Discretionary Option Grant Program which
will automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those options are assumed or replaced and 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 provide that one or more of the Corporation's outstanding
repurchase rights with respect to shares held by the Optionee at the time of
such Involuntary Termination shall immediately terminate, and the shares
subject to those terminated repurchase rights shall accordingly vest in full.

           F.    The Plan Administrator shall have full power and authority to
grant one or more options under the Discretionary Option Grant Program which
will automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Change in Control.  Each option 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

                                  -10-

<PAGE>


provide that one or more of the Corporation's outstanding repurchase rights
with respect to shares held by the Optionee at the time of such Involuntary
Termination shall immediately terminate, and the shares subject to those
terminated repurchase rights shall accordingly vest in full.

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

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

     IV.   CANCELLATION AND REGRANT OF OPTIONS

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

                                  -11-


<PAGE>

                                 ARTICLE THREE

                            STOCK ISSUANCE PROGRAM
                            ----------------------            

     I.    STOCK ISSUANCE TERMS

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

           A.    PURCHASE PRICE.

                 1.   The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than one hundred percent (100%) of the
Fair Market Value per share of Common Stock on the issuance date.

                 2.   Subject to the provisions of Section I of Article Five, 
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 PROVISIONS.

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

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

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

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

                                  -12

<PAGE>

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

shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.

                 2.   Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which
the Participant may have the right to receive with respect to the
Participant's 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 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 any shares of Common Stock issued to the Participant under the 
Stock Issuance Program, 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 issued under the Stock 
Issuance Program or should the performance objectives not be attained with 
respect to one or more such unvested shares of Common Stock, then those shares 
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares.  To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and
shall cancel the unpaid principal balance of any outstanding purchase-money
note of the Participant attributable to the surrendered shares.

                 5.   The Plan Administrator may in its discretion waive the 
surrender and cancellation of one or more unvested shares of Common Stock 
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 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.

                                  -13-

<PAGE>

     II.   CORPORATE TRANSACTION/CHANGE IN CONTROL

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

           B.    The Plan Administrator shall have the discretionary
authority, exercisable either at the time the unvested shares are issued or
any time while the Corporation's repurchase rights with respect to such shares
remain outstanding under the Stock Issuance Program, to provide that those
rights shall automatically terminate in whole or in part, and the shares of
Common Stock subject to those terminated rights shall immediately vest, in the
event the Participant's Service should subsequently terminate by reason of an
Involuntary Termination within a designated period (not to exceed eighteen
(18) months) following the effective date of any Corporate Transaction in
which those repurchase rights are assigned to the successor corporation (or
parent thereof).

           C.    The Plan Administrator shall have the discretionary
authority, exercisable either at the time the unvested shares are issued or
any time while the Corporation's repurchase rights with respect to such shares
remain outstanding under the Stock Issuance Program, to provide that those
rights shall automatically terminate in whole or in part, and the shares of
Common Stock subject to those terminated rights shall immediately vest, in the
event the Participant's Service should subsequently terminate by reason of an
Involuntary Termination within a designated period (not to exceed eighteen
(18) months) following the effective date of any Change in Control.

     III.  SHARE ESCROW/LEGENDS

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

                                  -14-

<PAGE>

                                  ARTICLE FOUR

                        AUTOMATIC OPTION GRANT PROGRAM
                        ------------------------------


     I.    OPTION TERMS

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

                 1.   Each individual who is first elected or appointed as a
non-employee Board member on or 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 50,000 shares of Common Stock.

                 2.   Each non-employee Board member, whether elected or
appointed to the Board before or after the Plan Effective Date, shall receive
a series of additional 50,000-share Non-Statutory Options over his or her
period of continued Board service.  The first such additional 50,000-share
option grant shall be made at the Annual Stockholders Meeting held in the
calendar year in which the final one-third (1/3) annual installment of the
shares subject to the last previous automatic option grant made to such
individual under either the Predecessor Plan or this Plan vests.  Such
non-employee Board member shall receive an additional 50,000-share
Non-Statutory Option under this Automatic Option Grant Program on the date of
every third Annual Stockholders Meeting thereafter during his or her period of
continued Board service, and there will be no limit on the number of such
additional 50,000-share automatic option grants any one individual may receive
over his or her period of Board service.  Each such 50,000-share option grant
shall be made to the non-employee Board member, whether or not he or she is
standing for re-election at the Annual Stockholders Meeting at which the grant
is to be made, so long as he or she is to continue to serve as a non-employee
Board member.

           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.

                                  -15-

<PAGE>

           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.  The shares
subject to each option grant shall vest, and the Corporation's repurchase
right with respect to those shares shall lapse, in a series of three (3)
successive equal annual installments upon the optionee's completion of each
year of Board service over the three (3)-year period measured from the option
grant date.

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

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

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

                      (iii)  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.

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

                                  -16-

<PAGE>

     II.   CORPORATE TRANSACTION/CHANGE IN CONTROL

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

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

           C.     All outstanding repurchase rights under the Automatic Option
Grant Program shall also terminate automatically, and the unvested shares of
Common Stock subject to those terminated rights shall immediately vest in
full, in the event of any Corporate Transaction or Change in Control.

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

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

     III.  REMAINING TERMS

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

                                   -17-

<PAGE>

                                 ARTICLE FIVE

                                 MISCELLANEOUS
                                 -------------


     I.    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.

     II.   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 (other than the options granted or the shares issued under the
Automatic Option Grant Program) with the right to use shares of Common Stock
in satisfaction of all or part of the Taxes incurred by such holders in
connection with the exercise of their options or the vesting of their shares.
Such right may be provided to any such holder in either or both of the
following formats:

                 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.

                 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.

                                  -18-

<PAGE>

     III.  EFFECTIVE DATE AND TERM OF THE PLAN

           A.    The Plan was adopted by the Board in March 1997 and became
effective upon approval by the Corporation's stockholders at the 1997 Annual
Meeting held on the Plan Effective Date.

           B.    The Plan shall serve as the successor to the Predecessor
Plan, and no further option grants or direct stock issuances shall be made
under the Predecessor Plan after the Plan Effective Date.  All options
outstanding under the Predecessor Plan 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 Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated
from the Predecessor Plan which do not otherwise contain such provisions.

           D.    The Plan shall terminate upon the earliest of (i) May 19,
2007, (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 Corporate Transaction.  Upon such
plan termination, all outstanding option grants 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.

     IV.   AMENDMENT OF THE PLAN

           A.    The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects.  However, 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.

           B.    Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant Program 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)

                                  -19-

<PAGE>

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.

     V.    USE OF PROCEEDS

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

     VI.   REGULATORY APPROVALS

           A.    The implementation of the Plan, the granting of any 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.

     VII.  NO EMPLOYMENT/SERVICE RIGHTS

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

                                  -20-

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

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

                 (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 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 twenty-four (24) 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.

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

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

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

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

                                   A-1

<PAGE>

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

     G.    CORPORATION shall mean Advanced Tissue Sciences Inc., a Delaware 
corporation, and its successors.

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

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

     J.    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.

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

     L.    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 deemed equal 
     to 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 deemed equal to 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.

                                   A-2

<PAGE>

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

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

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

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

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

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

     S.    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.

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

                                  A-3

<PAGE>

     U.    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.

     V.    PLAN shall mean the Corporation's 1997 Stock Incentive Plan, as
set forth in this document.

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

     X.    PLAN EFFECTIVE DATE shall mean May 20, 1997, the date of the 1997
Annual Stockholders Meeting at which the Plan was approved by the
Corporation's stockholders.

     Y.    PREDECESSOR PLAN shall mean the Corporation's 1992 Stock
Option/Stock Issuance Plan, in effect immediately prior to the Plan Effective
Date hereunder.

     Z.    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.

     AA.   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.

     AB.   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.

     AC.   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.

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

                                   A-4

<PAGE>

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

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

     AG.   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.

     AH.   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.

     AI.   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