Document:

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                                                                  REDACTED
                                                                  EXHIBIT 10.309

                            **CONFIDENTIAL TREATMENT
                                   REQUESTED**

                                 BLOOD SCREENING
                         HCV/HIV PROBE LICENSE AGREEMENT

                                     BETWEEN

                               CHIRON CORPORATION

                            F. HOFFMANN-LA ROCHE LTD.

                                       AND

                          ROCHE MOLECULAR SYSTEMS, INC.

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                                 BLOOD SCREENING
                         HCV/HIV PROBE LICENSE AGREEMENT

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                          PAGE
<S>                                                                       <C>
RECITALS                                                                    3

ARTICLE 1: DEFINITIONS                                                      4

ARTICLE 2: LICENSE GRANTS                                                   9

ARTICLE 3: PAYMENTS, ROYALTIES                                             10

ARTICLE 4: RECORDS AND REPORTS                                             10

ARTICLE 5: OTHER ACTIONS                                                   12

ARTICLE 6: REPRESENTATIONS AND WARRANTIES                                  13

ARTICLE 7: TERM AND TERMINATION                                            15

ARTICLE 8: CONFIDENTIALITY                                                 18

ARTICLE 9: INDEMNITY                                                       19

ARTICLE 10: ALTERNATIVE DISPUTE RESOLUTION                                 20

ARTICLE 11: MISCELLANEOUS                                                  21

ARTICLE 12: FIELD RESTRICTIONS AND OTHER COVENANTS                         23

ARTICLE  13: EUROPEAN COMMUNITY PROVISIONS                                 25

EXHIBIT A: COMPENSATION TO CHIRON

EXHIBIT B: CHIRON PATENT LIST

EXHIBIT C: FORM OF REPORT

EXHIBIT D: CHIRON LICENSED PRODUCTS & UNIT SIZES

EXHIBIT E: SCHEDULES OF COUNTRIES
</TABLE>

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                                 BLOOD SCREENING
                   HCV/HIV PROBE LICENSE AND OPTION AGREEMENT

This agreement (hereinafter "Agreement") is made by and between CHIRON
CORPORATION, a Delaware corporation, of 4560 Horton Street, Emeryville,
California 94608 (hereinafter referred to as "CHIRON"), F. HOFFMANN-LA ROCHE
LTD., a Swiss corporation, of Grenzacherstrasse 124, Basel, Switzerland
(hereinafter referred to as "ROCHE PARENT"), and ROCHE MOLECULAR SYSTEMS, INC.,
a Delaware corporation, of 1145 Atlantic Avenue, Suite 100, Alameda, California
94501 (hereinafter referred to as "RMS" and collectively with ROCHE PARENT,
"ROCHE").

                                   BACKGROUND

WHEREAS, CHIRON currently owns or controls certain patent rights relating to the
Hepatitis C virus ("HCV"), as defined below, and the human immunodeficiency
virus ("HIV"), as defined below.

WHEREAS, CHIRON and ROCHE have as of the date hereof entered into that certain
Settlement Agreement (the "Settlement Agreement") pertaining to the settlement
of the certain litigation matters described therein.

WHEREAS, in consideration of and subject to the execution and delivery of the
Settlement Agreement, CHIRON is willing to grant licenses to ROCHE under certain
patent rights relating to HCV and HIV for use in assays for the detection of
nucleic acid sequences for use in Blood Screening, as defined below, all on the
terms and conditions set forth herein.

WHEREAS, CHIRON and ROCHE understand and acknowledge the importance of nucleic
acid detection testing in Blood Screening as a crucial step towards ensuring the
safety of the world's supply of blood, plasma and blood components.

WHEREAS, to avoid a delay in the settlement of the litigation matters described
in the Settlement Agreement, the parties have agreed to the interim licensing
terms set forth herein that will afford both parties a reasonable opportunity to
consider, propose and negotiate a long term, broad collaboration in Blood
Screening.

WHEREAS, ROCHE has agreed that if the parties are unable to reach agreement on a
long term, broad collaboration in Blood Screening that they will engage in an
orderly transition of Roche's Existing Customers, as defined below, to CHIRON or
a third party.

WHEREAS, to minimize the impact of such a transition, ROCHE has agreed to limit
the scope of this interim license to its Existing Customers.

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NOW, THEREFORE, in consideration of the above provisions and the mutual
covenants contained herein, CHIRON and ROCHE hereby agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

In this Agreement the following words and phrases shall have the following
meanings:

     1.1 "ADR" means Alternative Dispute Resolution in accordance with Article
10.

     1.2 "Affiliate" means an entity that directly, or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with, a specified entity. For the purposes of this definition, "control"
(including with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any entity, means: (a) the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that entity, whether through the
ownership of voting securities or by contract or otherwise; or (b) the ownership
of at least fifty percent (50%) of the voting securities of that entity.
Notwithstanding anything to the contrary contained herein, "Affiliate" shall not
include, in the case of CHIRON, Novartis AG or any Affiliate of Novartis AG,
unless Novartis shall have acquired direct control of a majority of the Board of
Directors of CHIRON. Notwithstanding anything to the contrary contained herein,
"Affiliate" shall not include, in the case of ROCHE, Genentech Inc. or any
Affiliate of Genentech Inc., nor Laboratory Corporation of America Holdings or
any Affiliate of Laboratory Corporation of America Holdings.

     1.3 "Authorized Distributor" means a BONA FIDE, unaffiliated distributor,
but excluding any entity which is a Major IVD Manufacturer (as defined below)
that is not licensed in the Field (as defined below) under one or more of the
CHIRON Licensed Patents (as defined below) or is affiliated with, or directly or
indirectly controlled by, such a Major IVD Manufacturer, except to the extent
that such unlicensed Major IVD Manufacturer or its Affiliates distributes CHIRON
Licensed Product for ROCHE or its Affiliates on a local country basis and in the
same manner in which it distributes other diagnostic products for ROCHE or its
Affiliates and ROCHE and its Affiliates are not otherwise selling CHIRON
Licensed Products in such country.

     1.4 "Blood Screening" means the use of products that detect nucleic acid
sequences(s) for: (a) the screening of blood, plasma or blood components
intended for transfusion; or (b) confirmatory or supplemental testing of the
same samples otherwise screened for purposes described in Section 1.4(a).

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     1.5 "Calendar Quarter" means the three (3) month period beginning January
1, April 1, July 1 or October 1. For Units Shipped outside the United States,
the Calendar Quarter and Calendar Year (as defined below) shall be consistent
with ROCHE financial reporting practices.

     1.6 "Calendar Year" means January 1 through December 31.

     1.7 "CHIRON Future Sequence Patent Rights" means any and all Valid Claims
Directed to HCV or Directed to HIV of United States and foreign patents and
patent applications: (a) which are based upon inventions conceived or rights
acquired after the Effective Date (as defined below); (b) which claim HCV or HIV
nucleic acid sequence(s) or a method to use (other than in the manufacture of
peptides) or detect such sequences specifically; (c) which are owned by,
licensed to or otherwise controlled by CHIRON or its Affiliates, with rights to
license or sublicense; and (d) with respect to which CHIRON has the right to
grant the option provided for in Section 2.3 of this Agreement. For purposes of
this Agreement, an invention will be deemed to have been conceived if there is a
patent, patent application, written invention disclosure statement or other
tangible document (whether or not witnessed) describing such invention.

     1.8 "CHIRON Licensed Patents" means Valid Claims Directed to HCV and/or
Directed to HIV which cover the manufacture, use, sale, offer for sale or
importation of a Product that are contained within any of the following: (a) the
patents and applications identified in Exhibit B and any continuation,
continuation-in-part and divisional applications therefrom; (b) any reissued or
reexamined patents obtained from such patents and applications; (c) all foreign
counterparts of such patents and applications; and (d) all future patents and
applications which are based on inventions conceived by CHIRON or its Affiliates
on or before the Effective Date.

     1.9 "CHIRON Licensed Products" means Products which are manufactured, used,
offered for sale, imported or sold under circumstances which would, in the
absence of the license granted under Section 2.1 constitute an infringement of a
Valid Claim of the CHIRON Licensed Patents, as set forth on Exhibit D.

     1.10 "Directed to HCV" means that the claim or technology in question is
directed to methods, compositions, reagents or kits specifically for use in
nucleic acid-based diagnostic assays for the detection of HCV nucleic acid
sequence(s), or specifically for use in the manufacture of any compositions or
reagents for use in, or manufacture of nucleic acid-based diagnostic assays for
detection of HCV nucleic acid sequence(s) excluding, for example, PCR claims and
technology and other methods for detection of nucleic acid sequence(s) generally
which involve nucleic acid amplification. The terminology "specifically for use"
as used in this Section 1.10, is intended to exclude inventions suitable for use
with viruses or analytes other than HCV (including by way of example and not by
way

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of limitation, inventions relating to PCR, or assay formats, improved expression
systems, detectable labels, instrumentation, packaging and the like), which
shall not be considered "specifically for use" in HCV detection as contemplated
by this Section 1.10 and shall therefore not be considered as "Directed to HCV"
hereunder.

     1.11 "Directed to HIV" means that the claim or technology in question is
directed to methods, compositions, reagents or kits specifically for use in
nucleic acid-based diagnostic assays for the detection of HIV nucleic acid
sequence(s), or specifically for use in the manufacture of any compositions or
reagents for use in, or manufacture of nucleic acid-based diagnostic assays for
detection of HIV nucleic acid sequence(s) excluding, for example, PCR claims and
technology and other methods for detection of nucleic acid sequence(s) generally
which involve nucleic acid amplification. The terminology "specifically for use"
as used in this Section 1.11, is intended to exclude inventions suitable for use
with viruses or analytes other than HIV (including by way of example and not by
way of limitation, inventions relating to PCR, or assay formats, improved
expression systems, detectable labels, instrumentation, packaging and the like),
which shall not be considered "specifically for use" in HIV detection as
contemplated by this Section 1.11 and shall therefore not be considered as
"Directed to HIV" hereunder.

     1.12 "Earned Royalty" shall have the meaning specified in Paragraph 1 of
Exhibit A.

     1.13 "Effective Date" means September 1, 2000.

     1.14 "End User" means a person or entity who is a final purchaser of a
Product, and whose use of a Product results in the Product's consumption,
operation, destruction or loss of activity.

     1.15 "Existing Agreements" means those written agreements for the use or
sale of CHIRON Licensed Products in Blood Screening, executed by ROCHE or an
Affiliate and an End User prior to September 1, 2000 and not materially amended
or extended after that date other than with respect to the price of the CHIRON
Licensed Product. For the avoidance of doubt, any agreement modified, renewed,
extended or otherwise altered so as to extend the term of the agreement beyond
the term in effect as of September 1, 2000 or materially increase the volume
tested beyond the volume agreed to by the parties, if any, in effect as of
September 1, 2000, shall be deemed to be newly executed as of the date of such
execution, modification, renewal, extension or alteration and shall, for the
purposes of this Agreement, be deemed to be an Existing Offer, as defined below.
Within thirty (30) days after the Effective Date, ROCHE shall use commercially
reasonable efforts to provide (but in any event no later than December 31, 2000
shall provide) a schedule of such Existing Agreements containing information
sufficient to confirm the validity its contents and the

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calculation of Earned Royalties in an examination permitted under Section 4.5 to
a mutually acceptable independent certified public accountant. Such schedule
shall contain such additional information as is reasonably requested by CHIRON,
including without limitation, a summary of the term length and termination
rights of each of the Existing Agreements.

     1.16 "Existing Customers" means End Users that are (a) original parties to
Existing Agreements or (b) initial recipients of Existing Offers that enter into
a written contract containing the terms of the Existing Offer without
substantial changes.

     1.17 "Existing Offers" means, with respect to the use or sale of CHIRON
Licensed Products, either (a) those binding bids or tenders made in writing on
or prior to September 1, 2000 and verified by a mutually acceptable independent
certified public accountant, at the length of term and anticipated testing
volumes, if any, set forth in such bids or tenders; provided, however, that
"Existing Offers" does not include any such bid or tender that, as of the
Effective Date, may be withdrawn by ROCHE without material financial penalty or
(b) bids, tenders or other proposals made at any time to an End User located in
a country listed in Schedule 1 of Exhibit E; provided, however, that the parties
agree that there are not, as of the Effective Date, and shall not be,
thereafter, any Existing Offers to End Users located in a country listed in
Schedule 2.

     1.18 "Field" means the commercial use of human IN VITRO diagnostic products
that detect nucleic acid sequences of HCV and/or HIV. Expressly excluded from
the Field are: (a) products in Blood Screening; and (b) products specifically
labeled or promoted for use in the Transplantation Field (as defined below).

     1.19 "HCV" means any viral isolate of the hepatitis C virus described in
the CHIRON Licensed Patents or classified as HCV by the International Committee
on the Taxonomy of Viruses (or any body that replaces such Committee) or any
subtype of such isolate and further includes any isolate that is at least forty
percent (40%) homologous to any such isolate and of the same genomic type and
substantially the same genomic organization, any isolate that has a genome that
either hybridizes to or is substantially identical to any such isolate or its
compliment, and any defective or modified form of any of the above isolates.

     1.20 "HIV" means any viral isolate of the human immunodeficiency virus
classified as HIV by the International Committee on the Taxonomy of Viruses (or
any body that replaces such Committee) or any subtype of such isolate and
further includes any isolate that is at least forty percent (40%) homologous to
any such isolate and of the same genomic type and substantially the same genomic
organization, any isolate that has a genome that either hybridizes to or is

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substantially identical to any such isolate or its compliment, and any defective
or modified form of any of the above isolates.

     1.21 "HIV Agreement" means the HIV Probe License Agreement by and between
CHIRON and ROCHE dated as of the Effective Date, as amended from time to time.

     1.22 "Major IVD Manufacturer" means a commercial entity (and its
Affiliates) that manufactures, sells and engages in other commercial activities
with respect to IN VITRO diagnostic products, and has a significant marketing
presence in one or more countries. Major IVD Manufacturers include Abbott,
Bayer, Johnson & Johnson, Pasteur, Sanofi, Dade Behring, Organon Teknika, Becton
Dickinson, bioMerieux, BioRad, Fujirebio and Beckman Coulter and each of their
successors and assigns and any other entity which commands in the future at
least an equivalent presence as measured by total product sales as do any of the
foregoing entities as of the Effective Date in such country.

     1.23 "Product(s)" means reagents, compositions or kits suitable for use in
Blood Screening.

     1.24 "Territory" shall mean those jurisdictions in which Existing Customers
are located.

     1.25 "Shipped" means when the CHIRON Licensed Product is consumed, invoiced
or shipped by ROCHE or its Affiliates to a non-Affiliate third party, provided
that where an invoice is issued, the obligations to pay Earned Royalties
hereunder shall arise on the invoice date. Sales to or between Affiliates shall
not be included in the calculation of Earned Royalties until ROCHE or its
Affiliate consumes the CHIRON Licensed Product in providing a commercial service
for a non-Affiliate third party or Ships the CHIRON Licensed Product to a
non-Affiliate third party.

     1.26 "Transplantation Field" means the commercial use of products that
detect nucleic acid sequences for the screening of any biological materials
intended for transfusion or transplantation, in each case from any donor,
including autologous donors, other than the transfusion or transplantation of
blood or its derivatives, components or replacements.

     1.27 "Unit" means, for each CHIRON Licensed Product Shipped, the number of
individual donations of blood or plasma received that are tested by Existing
Customers through the use of such CHIRON Licensed Product. The number of donor
results that each CHIRON Licensed Product generates shall be collected from
Existing Customers by ROCHE in such detail and accuracy so as to enable a
determination of the amounts payable by ROCHE to CHIRON hereunder.
Notwithstanding the foregoing, Units Shipped shall not include those

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CHIRON Licensed Products Shipped to third parties at no charge for (A) testing,
quality control or evaluation purposes or (B) replacement of defective goods.

     1.28 "Valid Claim" means a claim in any issued, active, unexpired patent
which has not been withdrawn, cancelled, lapsed or disclaimed, or held
unpatentable, invalid or permanently unenforceable by a non-appealed or
nonappealable final decision by a court or other appropriate body of competent
jurisdiction. The scope of a Valid Claim shall be limited to its terms as
defined by any such court or decision-making body of competent jurisdiction in a
non-appealable or non-appealed final decision.

                                    ARTICLE 2
                                 LICENSE GRANTS

     2.1 CHIRON GRANTS. Subject to the terms and conditions of this Agreement,
CHIRON hereby grants to ROCHE and its Affiliates, so long as they remain
Affiliates of ROCHE, a nonexclusive license in the Territory, without the right
to sublicense, under the CHIRON Licensed Patents to make, import, use, offer for
sale and sell CHIRON Licensed Products for use in Blood Screening solely for
sale to or use by or on behalf of Existing Customers under the Existing
Agreements and Existing Offers. CHIRON covenants not to sue any End User of a
CHIRON Licensed Product (with respect to which ROCHE has performed all of its
material obligations under this Agreement) to the extent of activities in Blood
Screening or otherwise permitted under this Agreement. Conversely, no immunity
from suit shall apply to End User activities outside of Blood Screening. CHIRON
retains the right to conduct research in any field, including to develop
Products, and retains all rights outside of Blood Screening, and the
nonexclusive right to practice and to grant licenses under the CHIRON Licensed
Patents to make, have made, use, import, offer for sale and sell any products in
Blood Screening.

     2.2 EXCLUSION FROM CHIRON LICENSE. ROCHE acknowledges that neither ROCHE
nor its Affiliates are licensed under this Agreement to perform research or to
develop any product other than a CHIRON Licensed Product.

     2.3 CHIRON FUTURE SEQUENCE PATENT RIGHTS. CHIRON grants to ROCHE a
non-exclusive option to obtain one or more non-exclusive, worldwide licenses, or
sublicenses, as the case may be, with a right to sublicense to ROCHE Affiliates
only, under the CHIRON Future Sequence Patent Rights, to make, have made, use,
import, offer for sale and sell CHIRON Licensed Products in Blood Screening
solely for sale to or use by or on behalf of Existing Customers under the
Existing Agreements and Existing Offers, but of no longer term or greater scope
than the term and scope of this Agreement. Such license or sublicense shall be
on commercially reasonable terms to be mutually determined through good faith
negotiation and resolved, if necessary, through

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the ADR process in accordance with Article 10 of this Agreement to determine the
terms that are commercially reasonable.

                                    ARTICLE 3
                               PAYMENTS, ROYALTIES

     With respect both to CHIRON Licensed Products sold or Shipped, ROCHE shall
make payments to CHIRON as set forth in Exhibit A.

                                    ARTICLE 4
                               RECORDS AND REPORTS

     4.1 SALES REPORT. ROCHE shall, within sixty (60) days after the last day of
each Calendar Quarter after the Effective Date, deliver to CHIRON a true and
accurate report for the prior Calendar Quarter, substantially in the from
attached as Exhibit C to this Agreement, which shall state the amount of monies
due hereunder, if any, as Earned Royalties, and shall include all information
reasonably necessary to calculate such amount, including, but not limited to,
the following information, presented by country and by Product Category (as
defined in paragraph 1 of Exhibit A):

     (a) the number of Units Shipped and the applicable Earned Royalty amount or
     amounts, and adjustments to Units Shipped (returns, replacements, etc.);
     and

     (b) a statement of the basis for any deviation from the Earned Royalty
     amounts as expressed in paragraph 1 of Exhibit A.

     4.2 PAYMENT DATES. Not later than the date each report required under
Section 4.1 is due, ROCHE shall pay to CHIRON the royalty due under this
Agreement for the period covered by such report. If no royalties are due, ROCHE
shall so report, stating the reasons why no such royalty is due.

     4.3 PAYMENT PROCEDURES. ROCHE shall pay royalties and all other payments
due hereunder to CHIRON in immediately available funds on the due date by wire
transfer to:

      Bank of America- San Francisco
      San Francisco, California
      Account Name: Chiron Corporation
      Account Number: 14725-00611
      ABA #: 121000358
      Reference: ROCHE Blood Screening HCV/HIV Probe License Agreement

or at such place and in such other manner as CHIRON may designate in a notice
signed by CHIRON's Treasurer or Controller to ROCHE.

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     4.4 TAXES ON ROYALTIES. ROCHE shall deduct from amounts payable hereunder
all taxes assessed or imposed against, or required to be withheld from, royalty
payments due and shall pay such amount to the appropriate fiscal or tax
authorities on behalf of CHIRON. ROCHE shall forward promptly to CHIRON all tax
receipts received by ROCHE evidencing payment of such taxes.

     4.5 AUDIT. ROCHE shall keep reasonably detailed and accurate records and
books of account to enable a determination of the amounts payable by ROCHE and
its Affiliates to CHIRON hereunder. Upon thirty (30) days written notice by
CHIRON, and not more frequently than once during the initial term of this
Agreement and not more than once per Calendar Year, if this Agreement is
extended, CHIRON may have such records and books of account examined during
reasonable business hours by a mutually acceptable independent certified public
accountant selected by CHIRON and at CHIRON's expense, whose acceptance shall
not unreasonably be withheld by ROCHE, for the purpose of verifying the amounts
due hereunder; provided that such independent accountant agrees to provide
CHIRON only the information necessary to verify the calculation of amounts due
hereunder. A copy of any final written report provided by the independent
accountant to CHIRON shall be given concurrently to ROCHE. Such examination
shall not be permitted unless it is requested within three (3) years following
the end of the Calendar Year to which the books and records pertain. Where such
examination results in a finding that ROCHE underpaid CHIRON by more than one
million dollars ($1,000,000) over the period audited, ROCHE shall reimburse
CHIRON for its reasonable costs and expenses in conducting such examination.
ROCHE and CHIRON shall promptly rectify any overpayments or underpayments by
repaying such amounts together with interest thereon at an annual rate equal to
the lesser of: (a) two percent (2%) above the 90 Day United States Dollar LIBOR
rate as published in the Wall Street Journal, or (b) the maximum rates permitted
by applicable law, from the time such payment was originally due to the time it
is paid.

     4.6 CONFIDENTIALITY OF AUDIT. CHIRON agrees that all audited information
shall be confidential to ROCHE and its Affiliates, and that any person or entity
conducting an audit on behalf of CHIRON pursuant to Section 4.5 shall be
required to protect the confidentiality of such information.

     4.7 PAYMENT IN UNITED STATES CURRENCY. All payments shall be made in United
States Dollars and shall be made on the dates set forth herein.

     4.8 LATE PAYMENT FEE. Any payment, including, without limitation, royalty
payments, made by ROCHE hereunder after the date such payment is due, as set
forth in this Article 4 hereof, shall bear interest at the lesser of: (a) two
percent (2%) above the 90 Day United States Dollar LIBOR rate as published in
the Wall Street Journal as of the date such payment was due; or (b) the maximum
rate permitted by applicable law.

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                                    ARTICLE 5
                                  OTHER ACTIONS

     5.1 PATENT VALIDITY; ENFORCEABILITY. Immediately upon the Effective Date,
or as soon as possible thereafter, ROCHE shall discontinue any opposition,
challenge, compulsory licensing application or the like with respect to the
CHIRON Licensed Patents, except as permitted under the HIV Agreement.

     5.2 FURTHER NEGOTIATION. The parties agree to continue good faith
negotiations, on a non-exclusive basis, promptly following the Effective Date to
determine whether, and if so under what terms and provisions, a license by
CHIRON to ROCHE in Blood Screening may be extended beyond the terms provided
herein. If such good faith negotiations fail to produce an agreement on such
terms and provisions prior to December 31, 2000, the parties agree to engage the
services of a third-party mediator mutually agreeable to the parties, the costs
and expenses of which shall be borne equally. The parties agree to continue such
negotiations in the manner recommended by the mediator; provided, however, that
neither party shall be obligated to continue any negotiations under this Section
5.2 beyond February 28, 2001.

     5.3 TRANSITION PLAN. If the parties fail to reach agreement on the terms
and provisions of an expanded license, Roche agrees to use reasonable commercial
diligence promptly and in good faith to carry out a reasonable transition plan
developed as provided below in this Section 5.3 (the "Transition Plan"). The
Transition Plan is intended to permit and require Roche to discontinue the sale
of Chiron Licensed Products to Existing Customers and to assure an efficient
transition of services of Existing Customers for such products to Chiron or its
designee, all while avoiding confusion and disruption of the market place and
any hazard to the safety of the blood supply. The parties agree to work together
in good faith to develop and implement a transition plan so as to ensure the
uninterrupted nucleic acid detection testing for HCV and HIV, as the case may
be, of blood, plasma and blood components by Existing Customers. To that end,
within thirty (30) days of the termination of the negotiations provided for
under Section 5.2 but in any event no later than March 31, 2001, ROCHE shall
prepare and deliver to CHIRON a schedule setting forth for each Existing
Customer the approximate volume tested, the number and location of testing sites
and, subject to Section 7.1, the anticipated expiration of the applicable
Existing Agreement or Existing Offer and such other information as Chiron may
reasonably request. Promptly following receipt of this schedule, CHIRON will
propose a formal transition plan to ROCHE and the parties will meet and confer
in good faith to develop a detailed and mutually agreed transition plan, which
plan may include reasonable reimbursement to ROCHE of its out-of-pocket expenses
associated with its implementation, not to exceed $1 million. To the extent that
the parties are unable to agree on a transition plan by June 15, 2001, Chiron
may determine the Transition Plan, provided that it acts reasonably and in

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good faith and provided further that no Transition Plan not agreed to by Roche
may impose upon Roche an obligation to breach any Existing Agreements, any
agreements arising from Existing Offers in Japan or any agreement that expires
on or before December 31, 2001 and arises from an Existing Offer to the extent
permitted by and consistent with this Agreement. ROCHE covenants and agrees to
not default on any of its obligations to provide CHIRON Licensed Products to
Existing Customers under Existing Agreements, any agreements arising from
Existing Offers in Japan or agreements arising from Existing Offers during the
development and implementation of a Transition Plan. Further, consistent with
the Transition Plan, ROCHE shall use reasonable commercial efforts to achieve
the earliest practical termination of Existing Agreements the terms of which
extend beyond October 31, 2001, including permitting CHIRON at its request to
negotiate with the Existing Customers under such agreements to obtain, and, if
CHIRON so elects, for CHIRON to purchase and pay for, such early termination,
provided that CHIRON can meet the requirements of such customer for Products on
a volume and virus-detection basis to replace the CHIRON Licensed Products
provided by ROCHE under each such agreement with substantially similar Products
(the "Replacement Products") as permitted under applicable law. At CHIRON's
request, ROCHE will voluntarily terminate its IND with respect to HCV in the
United States and corresponding regulatory application in other jurisdictions,
if necessary to permit such early termination of such agreements, to the extent
that ROCHE lawfully and contractually may do so, and provided that CHIRON has
received any necessary regulatory approvals in the United States to provide
Replacement Product to all affected Existing Customers, whether by amending
CHIRON's IND to include the affected ROCHE clinical sites or under an approved
BLA or otherwise, and corresponding approvals in other jurisdictions. If
regulatory approval or permission from a customer is required for such
termination of ROCHE's IND or any expansion of CHIRON's IND, the parties will
cooperate and seek such approval or permission within thirty (30) days following
completion of negotiations but in no event later than May 1, 2001 and use their
respective reasonable commercial efforts to obtain any such approval or
permission at the earliest practical time.

     5.4 COMPULSORY LICENSING. ROCHE covenants and agrees on behalf of itself
and its Affiliates to not seek, nor support any third party in seeking,
compulsory licensing of the CHIRON Licensed Patents in any jurisdiction. As used
in this Section, "support" shall have the same meanings as in Section 7.2(b).

                                    ARTICLE 6
                         REPRESENTATIONS AND WARRANTIES

     6.1 CORPORATE AUTHORITY. Each party represents and warrants to the other
party that it has the necessary corporate authority to enter into this
Agreement.

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     6.2 RIGHT TO GRANT. CHIRON represents and warrants that it has the right to
grant the license granted in Article 2 hereof and that it is the sole owner of
the CHIRON Licensed Patents, subject to licenses existing as of the Effective
Date.

     6.3 COMPLETE PATENT LIST. CHIRON represents and warrants to ROCHE that,
to the best of its knowledge and belief, Exhibit B contains a complete list,
as of the Effective Date, of all patents and patent applications owned by,
licensed to (with a right to sublicense), or otherwise controlled by CHIRON
or its Affiliates containing claims Directed to HCV and/or Directed to HIV in
Blood Screening. To the extent that any other patent or patent application
owned by, licensed to (with a right to sublicense), or otherwise controlled
by CHIRON or its Affiliates and filed on or before the Effective Date
contains a claim Directed to HCV and/or Directed to HIV in Blood Screening,
such patent or patent application shall be automatically added to the CHIRON
Licensed Patents. Upon ROCHE's written request, not more frequently than
annually, CHIRON shall provide ROCHE with an updated Exhibit B and a report
of the prosecution status of applications within CHIRON Licensed Patents.

     6.4 EXCLUSIONS. Nothing contained in this Agreement shall be construed as:

     (a) A representation or warranty by any party hereto as to the validity of
     any patent rights which are the subject of this Agreement;

     (b) A representation or warranty that anything made, used, imported,
     offered for sale, sold or otherwise disposed of under any of the patent
     rights which are the subject of this Agreement is or will be free from
     infringement of patents of third parties or of patents of either party that
     are not Directed to HCV and/or Directed to HIV;

     (c) An obligation to bring or prosecute actions or suits against third
     parties for infringement of any patent rights which are the subject of this
     Agreement;

     (d) A grant of any right to bring or prosecute actions or suits against
     third parties for infringement of any patent rights which are the subject
     of this Agreement; or

     (e) A grant, by implication, estoppel or otherwise, of any license, option,
     covenant or right other than those which are expressly stated herein,
     including without limitation (i) any license under any patent or patent
     application (or claim thereof) not within the CHIRON Licensed Patents, or
     (ii) any covenant by CHIRON or ROCHE not to sue under any such patent or
     patent application (or claim thereof).

                                                                              14
<PAGE>

     6.5 FURTHER ROCHE ASSURANCE. ROCHE acknowledges that the inclusion of ROCHE
Affiliates within the license granted pursuant to Section 2.1 is intended to
enable ROCHE to utilize the manufacturing and sales capabilities of its
Affiliates in connection with the manufacture and sale of CHIRON Licensed
Products in a manner substantially similar to the involvement of such Affiliates
in the manufacture and sale of ROCHE's products generally. ROCHE shall not,
directly or indirectly, take any action having or intended to have the effect of
sublicensing ROCHE's rights under any of the CHIRON Licensed Patents, other than
to a BONA FIDE Affiliate, including, without limitation, by creating Affiliates
specifically in connection with CHIRON Licensed Products, or through other third
party arrangements such as joint ventures, collaborations, or distribution
arrangements with distributors. ROCHE and its Affiliates are licensed hereunder
to sell and distribute CHIRON Licensed Products only under the label, name and
trademark rights owned by, licensed to or otherwise controlled by ROCHE or its
Affiliates, and only through the sales force of ROCHE or its Affiliates, or
through Authorized Distributors. ROCHE and its Affiliates are not licensed to
perform OEM manufacturing of CHIRON Licensed Products for a third party other
than an Authorized Distributor; to supply CHIRON Licensed Products for resale to
any third party other than an Authorized Distributor; to permit any Authorized
Distributor or other third party to sell any CHIRON Licensed Products under
another third party label, name or trademark or to permit any Authorized
Distributor or other third party to sell any CHIRON Licensed Products under the
Authorized Distributor's or any third party's own label, name or trademark for
use on an instrument bearing the label name or trademark of a party other than
ROCHE or its Affiliates; provided, however, that nothing in this Section 6.5
shall be construed to limit the rights of ROCHE or its Affiliates to engage in
activities with such third parties, to the extent such third parties have
obtained rights under the CHIRON Licensed Patents permitting such activities.

     6.6 LIMITATION OF WARRANTY. EXCEPT AS SPECIFICALLY SET FORTH HEREIN, NO
PARTY MAKES ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, ARISING
BY LAW OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

                                    ARTICLE 7
                              TERM AND TERMINATION

     7.1 TERM. This Agreement shall be in effect from the Effective Date until
the last expiration of a current term (measured as of the Effective Date) of an
Existing Agreement, unless earlier terminated pursuant to Section 7.2 below;
provided, however, that except as otherwise expressly provided in the Transition
Plan or as otherwise agreed in writing by the Parties the licenses granted under
Sections 2.1 and 2.3 shall expire on the earlier of (a) October 31, 2001, as to
Existing Customers

                                                                              15
<PAGE>

under Existing Agreements not containing current terms that extend beyond such
date, (b) December 31, 2001, as to Existing Customers under agreements arising
from Existing Offers, (c) June 30, 2002, as to Existing Customers not located in
Japan under Existing Agreements containing current terms that extend beyond
October 31, 2001, and (d) December 31, 2003, as to Existing Customers located in
Japan; provided, however, that as to subparagraphs (c) and (d) above, such
expiration shall be effective only in such jurisdictions in which CHIRON has
received regulatory approval to offer and sell Products and is able to serve the
requirements of the Existing Customers.

     7.2 TERMINATION BY CHIRON. CHIRON may terminate this Agreement only upon
any of the following grounds:

     (a) ROCHE's or its Affiliate's material breach of this Agreement,
     including, without limitation, a breach resulting from ROCHE's or its
     Affiliate's failure to pay any sums due hereunder, where such breach shall
     not have been remedied within thirty (30) days of the receipt of a written
     notification from CHIRON identifying the breach and requiring its remedy;
     whereupon termination under this Section 7.2(a) shall be effective upon the
     expiration of such thirty (30) day cure period, subject to Section 7.5; or

     (b) ROCHE or its Affiliates challenge to the validity or enforceability of
     a claim of a patent containing a claim within the CHIRON Licensed Patents,
     or support a challenge by a third party to the validity or enforceability
     of any such claim within CHIRON Licensed Patents if such challenge could
     invalidate or impair the enforceability of a claim that relates to activity
     that is licensed to ROCHE hereunder or Roche or its Affiliates make
     application seeking compulsory licensing under a claim within the CHIRON
     Licensed Patents or support an application by a third party seeking
     compulsory licensing of such claim within the CHIRON Licensed Patents,
     (except to the extent any such support of a third party is required by law
     or compulsory judicial process), then immediately upon receipt of a written
     notification from CHIRON, subject to Section 7.6, this Agreement shall
     terminate; provided, however, that in an ADR proceeding brought by ROCHE or
     CHIRON with respect to infringement of (1) a claim within the CHIRON
     Licensed Patents by a future CHIRON Licensed Product or (2) a claim within
     a future patent or application Directed to HCV or Directed to HIV and
     within CHIRON Licensed Patents by a current or future CHIRON Licensed
     Product, Roche may present validity evidence as part of its argument for
     proper claim construction without being deemed to have challenged validity
     or enforceability within the meaning of this sentence. As utilized in this
     Section, "support" of a third party challenge or application shall mean any
     of (i) financial support of a third party, (ii) delivery of information to
     a third party under an obligation of confidentiality, or (iii) active
     participation in any proceeding initiated by a third party, were such third
     party is challenging the validity or enforceability of any such claims
     within CHIRON Licensed Patents or seeking compulsory licensing of any such
     claims within the CHIRON Licensed Patents.

                                                                              16
<PAGE>

     7.3 ENFORCEMENT AFTER TERMINATION. Upon valid termination of this Agreement
under Section 7.2, ROCHE and its Affiliates shall have no further rights under
CHIRON Licensed Patents and CHIRON shall not be limited to its remedies under
this Agreement, to the extent of such termination.

     7.4 ACCRUED RIGHTS. Termination of this Agreement for whatever reason shall
not affect any rights which have accrued prior to termination, including without
limitation royalty obligations occurring during the Term, calculated in
accordance with Article 3 and Exhibit A.

     7.5 ROCHE CHALLENGE TO SECTION 7.2(a) TERMINATION. In the event ROCHE
provides written notification to CHIRON prior to expiration of the thirty (30)
day notice/cure period referenced in Section 7.2(a) that ROCHE disputes whether
the grounds for termination under Section 7.2(a) are present, such dispute shall
be submitted to ADR pursuant to Article 10. The thirty (30) day notice/cure
period shall be suspended during the pendancy of such ADR, provided that during
the pendancy of the ADR, ROCHE shall continue to make any disputed payments to
CHIRON, on the condition that CHIRON shall repay ROCHE the amounts of such
disputed payments if ROCHE prevails in the ADR, plus interest at the rate
described in Section 4.8, and provided further that, if applicable, ROCHE
suspends its support of any third party challenge to the validity or
enforceability of any claims within the CHIRON Licensed Patents. Notwithstanding
anything in this Section 7.5 to the contrary, ROCHE may submit a dispute
concerning a method by which amounts payable by ROCHE and its Affiliates to
CHIRON hereunder are calculated only one time, and any resolution from the ADR
shall bind the parties as to such calculation method thereafter.

     7.6 ROCHE CHALLENGE TO SECTION 7.2(b) TERMINATION. In the event that ROCHE,
within thirty (30) days of receiving notice of termination by CHIRON for the
grounds set forth in Section 7.2(b) above, provides written notice to CHIRON
that ROCHE disputes whether such grounds are present, such dispute shall be
submitted to ADR pursuant to Article 10 and termination of this Agreement shall
be suspended during the pendancy of the ADR, provided that ROCHE suspends its
action, suit or proceeding (other than an ADR proceeding between the parties as
permitted by Section 7.2(b) and Article 10) challenging the validity or
enforceability, of or an application for a compulsory license under, a claim of
a patent within the CHIRON Licensed Patents or its support of such action by a
Third Party and continues to perform all of its material obligations hereunder.

     7.7 AUDIT RESULTS NOT GROUNDS FOR TERMINATION. CHIRON's request for an
audit under Section 4.5 shall not be treated as a notice of breach under Section
7.2(a). In the event such audit determines there has been an underpayment by
ROCHE, such underpayment shall not constitute grounds for termination by CHIRON
under Section 7.2(a) unless: (a) ROCHE has failed to rectify such underpayment
in accordance with Section 4.8; (b) ROCHE has failed

                                                                              17
<PAGE>

to rectify such underpayment after notification and opportunity to cure under
Section 7.2(a); and (c) any ADR requested by ROCHE, pursuant to Section 7.5, and
directed to any dispute concerning such underpayment, results in a determination
favorable to CHIRON and Roche has failed to rectify such underpayment.
Notwithstanding the foregoing, ROCHE shall continue to make the disputed
payments to CHIRON, on the condition that CHIRON shall repay ROCHE the amounts
of such disputed payments with respect to which ROCHE prevails in the ADR, plus
interest at the rate described in Section 4.8.

     7.8 SURVIVAL. The following provisions of this Agreement shall survive
termination or expiration of this Agreement, in accordance with their respective
terms: Article 1; Sections 4.5, 4.6, 4.7, 4.8, 5.3, 5.4, 6.6, 7.4 and 7.8;
Articles 8, 9, and 10; Sections 11.3 through 11.6 and 11.9 through 11.14; and
Section 13.1.

                                    ARTICLE 8
                                 CONFIDENTIALITY

     8.1 OBLIGATION. From time to time during the Term, CHIRON and ROCHE may
provide to each other information concerning patents, patent applications,
license agreements and other confidential or proprietary information related to
this Agreement (the "Information"). Each party receiving the Information (the
"Receiving Party") shall during the Term and for a period of three (3) years
after termination hereof: (a) maintain the Information in confidence; (b) not
disclose the Information to any third party, other than employees, agents or
consultants of the Receiving Party, its Affiliates or permitted sublicensees who
have a need to know the Information and who are bound by confidentiality
obligations to the Receiving Party no less restrictive than those contained
herein; and (c) not use the Information for any purpose not directly related to
performance hereunder or otherwise authorized under this Agreement.

     8.2 EXCLUSIONS. The obligations of this Article 8 shall not apply to any
Information which: (a) is or which becomes generally known to the public by
publication or by means other than a breach of a duty by the Receiving Party;
(b) is otherwise known by the Receiving Party at the time of disclosure by
the other party; (c) otherwise becomes available to the Receiving Party from
a third party not in breach of confidentiality obligations to the other
party; or (d) is developed by or for the Receiving Party independent of any
disclosure from the other party. The Receiving Party also shall be permitted
to make disclosures of Information which are reasonably necessary in
connection with a possible grant of a permitted sublicense by the Receiving
Party or in due diligence related to a possible acquisition, merger,
consolidation, substantial asset transfer or similar transaction of the
Receiving Party, provided that the recipient is bound to the Receiving Party
by confidentiality obligations with respect to the Information no less
restrictive than those contained herein. Nothing herein shall prevent the
Receiving Party from making such disclosures of Information as are reasonably
required by law, regulation (including 37 C.F.R. Section 1.56), or order of
any court or

                                                                              18
<PAGE>

governmental agency; provided that the Receiving Party has provided reasonable
advance notice to allow the disclosing party the opportunity to seek a
protective order or otherwise contest, prevent or limit such disclosure.

     8.3 RETURN OF INFORMATION. Upon termination of this Agreement for any
reason, the Receiving Party shall return, or at the option of the disclosing
party, certify destruction of, all Information and copies thereof; provided that
the Receiving Party may retain one copy thereof in its law department files
solely for evidentiary and regulatory purposes.

     8.4 DISCLOSURE OF AGREEMENTS AND TERMS. Either party may disclose the terms
of this Agreement.

                                    ARTICLE 9
                                    INDEMNITY

     9.1 ROCHE INDEMNITY. ROCHE shall indemnify, defend and hold harmless CHIRON
and its Affiliates and their officers, directors, shareholders, employees,
representatives and agents, against any claim, demand, loss, damage or injury,
including reasonable attorneys' fees, asserted by a third party, arising from,
relating to, or otherwise in respect of, (a) the manufacture, use or sale of
CHIRON Licensed Products, or (b) any breach by ROCHE or its Affiliates of any
representation, warranty or covenant under this Agreement; provided, however,
that such indemnity shall not extend to damages arising directly from any breach
or willful or negligent act of CHIRON or its Affiliates.

     9.2 CHIRON INDEMNITY. CHIRON shall indemnify, defend and hold harmless
ROCHE and its Affiliates and their officers, directors, shareholders, employees,
representatives and agents, against any claim, demand, loss, damage or injury,
including reasonable attorneys' fees, asserted by a third party, arising from,
relating to, or otherwise in respect of, any breach by CHIRON or its Affiliates
of any representation, warranty or covenant under this Agreement; provided,
however, that such indemnity shall not extend to damages arising directly from
any breach or willful or negligent act of ROCHE or its Affiliates.

     9.3 INDEMNIFICATION PROCEDURES. In the event either party claims
indemnification pursuant to this Article 9, the indemnified party shall promptly
notify the indemnifying party in writing upon becoming aware of any claim to
which such indemnification may apply. Delay in providing such notice shall
constitute a waiver of the indemnifying party's indemnity obligations hereunder
only if the indemnifying party's ability to defend such claim is materially
impaired thereby. The indemnifying party shall have the right to assume and
solely control the defense of the claim at its own expense. If the right to
assume and solely control the defense is exercised, the indemnified party shall
have the right to participate in, but not to control, such defense at its own
expense, and the indemnifying party's indemnity obligations shall be deemed not
to include

                                                                              19
<PAGE>

attorneys' fees and litigation expenses incurred by the indemnified party after
the assumption of the defense by the indemnifying party. If the indemnifying
party does not assume the defense of the claim, the indemnified party may defend
the claim at the indemnifying party's expense. The indemnified party shall not
settle or compromise the claim without the prior written consent of the
indemnifying party, and the indemnifying party shall not settle or compromise
the claim in any manner which would have an adverse effect on the indemnified
party without the consent of the indemnified party, which consent, in each case,
shall not be unreasonably withheld. The indemnified party shall reasonably
cooperate with the indemnifying party and shall make available to the
indemnifying party all pertinent information under the control of the
indemnified party, all at the expense of the indemnifying party.

     9.4 SUNSET. The provisions of Sections 9.1 and 9.2 shall continue in effect
on a claim-by-claim basis, after the termination of this Agreement, only until
the expiration of the last to expire statute of limitations applicable to such
claim.

     9.5 LIMITATION OF LIABILITY. Neither party shall be liable to the other for
any consequential, special, indirect or exemplary damages or for the loss of
profits arising from the performance or nonperformance of this Agreement or any
acts or omissions associated herewith.

                                   ARTICLE 10
                         ALTERNATIVE DISPUTE RESOLUTION

     The parties recognize that BONA-FIDE disputes may from time to time arise
which relate to any aspect of this Agreement, including, without limitation, any
of the parties' rights and/or obligations hereunder, and including, without
limitation, disputes relating to the interpretation, form, validity, performance
and/or termination of this Agreement or relating to infringement, scope, claims
construction, or (without limiting the effect of Section 7.2(b)) validity or
enforceability of the Licensed Patents. In the event of the occurrence of any
dispute, a party may, by notice to the other party, have such dispute referred
to their respective employees designated below or their successors, for
attempted resolution by good faith negotiations within ninety (90) days after
such notice is received. Said designated officers are as follows:

      For ROCHE:
      PRESIDENT
      ROCHE MOLECULAR SYSTEMS, INC.

      For CHIRON:
      PRESIDENT

                                                                              20
<PAGE>

      BLOOD TESTING

     In the event the designated officers, after such good faith negotiations,
are not able to resolve such dispute within such ninety (90) day period, or any
agreed extension thereof, a party may invoke the provisions for binding ADR as
set forth in Paragraph 9 of the Settlement Agreement. Neither party shall seek
recourse against the other hereunder in any court or other forum, except as
permitted by Paragraph 9 of the Settlement Agreement or as may be necessary to
enforce a determination made in ADR pursuant to this Article 10 and Paragraph 9
of the Settlement Agreement.

                                   ARTICLE 11
                                  MISCELLANEOUS

     11.1 ASSIGNMENT.

          (a) ROCHE and its Affiliates may not assign or transfer any rights
under this Agreement without the prior written consent of CHIRON, except to an
ROCHE Affiliate, and then only for so long as the assignee remains an ROCHE
Affiliate, or as part of the sale or transfer of all or substantially all of
ROCHE's and all of its Affiliates' assets and businesses to which this Agreement
relates. In the case of a permitted assignment or transfer, the performance of
the assignee shall be guaranteed by ROCHE.

          (b) CHIRON and its Affiliates may not assign or transfer any rights
under this Agreement without the prior written consent of ROCHE, except to a
CHIRON Affiliate, and then only for so long as the assignee remains a CHIRON
Affiliate, or as part of the sale or transfer of all or substantially all of
CHIRON's and all of its Affiliates' assets and businesses to which this
Agreement relates. In the case of a permitted assignment or transfer, the
performance of the assignee shall be guaranteed by CHIRON.

     11.2 FORCE MAJEURE. A party hereto shall not be liable for, nor shall this
Agreement be terminable or cancelable by reason of, any delay or default in any
such party's performance hereunder, to the extent that such default or delay is
caused by events beyond such party's reasonable control including, but not
limited to: acts of God; regulation, law or action of any government or agency
thereof; war or insurrection; civil commotion; labor disturbances; epidemic; or
failure of suppliers, public utilities or common carriers. Each party shall give
prompt notice to the other party of such cause, and shall take whatever
reasonable steps are necessary to relieve the effect of such cause as rapidly as
possible.

     11.3 SEVERABILITY. In the event that any one or more of the provisions of
this Agreement should for any reason be held by any court or authority having
jurisdiction over this Agreement or over the parties hereto to be invalid,
illegal or

                                                                              21
<PAGE>

unenforceable, such provision or provisions shall be reformed to approximate as
nearly as possible the intent of the parties, in such jurisdiction; elsewhere,
this Agreement shall not be affected.

     11.4 ENTIRE AGREEMENT. This Agreement together with the Exhibits,
Attachments and Schedules constitutes the entire agreement among the parties
relating to the subject matter of this Agreement. There are no other
understandings, representations or warranties of any kind.

     11.5 AMENDMENT. This Agreement shall not be altered, extended or modified
except by written agreement of the parties.

     11.6 WAIVER. Failure by a party hereunder to enforce any right under this
Agreement shall not be construed as a waiver of such right or any other rights
under this Agreement; nor shall a waiver by a party hereunder in one or more
instances be construed as constituting a continuing waiver or as a waiver in
other instances.

     11.7 COSTS. Each of the parties hereto shall be responsible for its
respective legal and other costs incurred in relation to the preparation of this
Agreement.

     11.8 COUNTERPARTS. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same instrument. Facsimile copies
of signatures for a party shall be deemed to be originals for purposes of
execution of the Agreement and for determining the Effective Date.

     11.9 NOTICES.

          (a) Any notice or other document to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if personally
delivered or sent by first class mail, or express or air mail or other postal
service, or by certified mail, return receipt requested.

          (b) Any notice required by this Agreement shall be forwarded to the
respective addresses and marked for the attention of the persons set forth below
unless such addresses subsequently change by written notice to the other party:

ROCHE:      F. Hoffmann-La Roche Ltd.
            Grenzacherstrasse 124
            Basel
            Bale 4002
            Switzerland
            Attn.: Head of Diagnostics Division

                                                                              22
<PAGE>

Copy to:    General Counsel
            Roche Molecular systems, Inc.
            1145 Atlantic Avenue
            Alameda, CA  94501

CHIRON:     Chiron Corporation
            4560 Horton Street
            Emeryville, California 94608
            Attn.: President, Blood Testing

Copy to:    General Counsel
            Chiron Corporation
            4560 Horton Street
            Emeryville, CA 94608

          (c) Any such notice or other document shall be deemed to have been
effective when received by the addressee. To prove the giving of a notice or
other document it shall be sufficient to show that it was received.

     11.10 GOVERNING LAW. All matters affecting the interpretation, form,
validity, performance and termination of this Agreement shall be decided and
interpreted under the laws of the State of New York, excluding any choice of law
rules which may direct application of the laws of any other jurisdiction.

     11.11 RELATIONSHIP OF THE PARTIES. The relationship of the parties under
this Agreement is that of independent contractors. Nothing contained in this
Agreement is intended or is to be construed so as to constitute the parties as
partners, joint venturers or agents of the other. Neither party or its
Affiliates has any express or implied right or authority under this Agreement to
assume or create any obligations or make any representations or warranties on
behalf of or in the name of the other party or its Affiliates.

     11.12 HEADINGS. The headings of the Articles and Sections in this Agreement
have been inserted for convenience only and do not constitute part of this
Agreement.

     11.13 NO TRADEMARK RIGHTS. No right, express or implied, is granted by this
Agreement to either party to use in any manner the name, trade name or trademark
of the other party in connection with the performance of this Agreement.

     11.14 NO IMPLIED LICENSES. No license, express or implied, is granted by
this Agreement to either party, other than the license granted under Section
2.1.

                                   ARTICLE 12
                     FIELD RESTRICTIONS AND OTHER COVENANTS

                                                                              23
<PAGE>

     12.1 ROCHE COVENANT REGARDING THE FIELD AND THE TRANSPLANTATION FIELD.

     (a) ROCHE and its Affiliates shall not label or promote any CHIRON Licensed
Product labeled or promoted for use in Blood Screening in any respect for use in
the Field or the Transplantation Field and ROCHE shall use commercially
reasonable efforts to prevent its Authorized Distributors from labeling or
promoting any CHIRON Licensed Products labeled or promoted for use in Blood
Screening in any respect for use in the Field or the Transplantation Field.

     (b) Further, ROCHE and its Affiliates and Authorized Distributors shall
include on or with each CHIRON Licensed Product labeled or promoted for use in
Blood Screening a statement to the effect that the CHIRON Licensed Product is
not for use for testing in the Field or the Transplantation Field, using
language to be determined by ROCHE and approved in advance in writing by CHIRON,
which approval shall not be unreasonably withheld. The location of such notice
shall be the product insert of such CHIRON Licensed Products or such other
reasonably prominent location to be determined by ROCHE.

     (c) In the event that ROCHE or CHIRON becomes aware of any material use in
the Field or the Transplantation Field, of CHIRON Licensed Products labeled or
promoted for use in Blood Screening, such party will promptly notify the other
in writing of the relevant facts and, if so requested by CHIRON, ROCHE will (i)
meet and confer with CHIRON in good faith to determine what steps either or both
should take to abate such infringing use and (ii) notify in writing any of its
customers that engages in such infringing use that use of the relevant CHIRON
Licensed Product in the Field or the Transplantation Field may infringe one or
more of the CHIRON Licensed Patents.

     (d) Nothing in this Section 12.1 shall apply to any product to the extent
that ROCHE's activity and that of its Affiliates with respect to such product is
either for or through an entity licensed in the Field or the Transportation
Field under the CHIRON Licensed Patents.

     12.2 ROCHE COVENANT REGARDING PRODUCT LABELING. ROCHE and its Affiliates
shall use their commercially reasonable efforts to include on or with each
CHIRON Licensed Product a statement as to the number of Units contained within
each such CHIRON Licensed Product, using such language to be determined by ROCHE
and approved in advance in writing by CHIRON, with approval shall not be
unreasonably withheld. The location of such statement shall be product insert of
such CHIRON Licensed Products or such other reasonably prominent location to be
determined by ROCHE.

                                                                              24
<PAGE>

     12.3 PATENT MARKING. ROCHE and its Affiliates shall use their commercially
reasonable efforts to include a patent notice on each CHIRON Licensed Product to
identify those of the CHIRON Licensed Patents which such CHIRON Licensed
Product, but for the licenses granted herein, would infringe one or more Valid
Claims (or for which royalties are being paid); provided, however,
identification of CHIRON Licensed Patents on a CHIRON Licensed Product shall in
no way be deemed to be an admission by ROCHE or its Affiliates, or raise a
presumption, that such CHIRON Licensed Product is in fact covered by such CHIRON
Licensed Patent.

                                   ARTICLE 13
                          EUROPEAN COMMUNITY PROVISIONS

     13.1 COMPETITION NOTIFICATION. If either party (the "Notifying Party")
elects to file a notification with respect to this Agreement (a "Notification")
with the Competition Directorate of Commission of European Community (the
"Commission") in accordance with regulations established by the Commission, the
Notifying Party shall provide a non-confidential version of the final draft to
the other party for comment at least thirty (30) days before making the filing
and shall consider in good faith the modification thereto, if any, that the
other party may propose. The other party shall execute all documents reasonably
required by the Notifying Party and shall otherwise reasonably cooperate in
connection with the Notification. The Notifying Party shall bear all costs
incurred by it relating to the Notification.

     13.2 REFORMATION. If, at any time during the Term, either party receives a
request or other communication from the Commission with respect to the
Notification (a "Request"), such party shall promptly inform the other of the
nature of the Request. In the event that the Commission indicates in a Statement
of Objection(s) that this Agreement will violate the provisions of Article 81 or
82 of the Treaty of Rome, then the parties shall amend this Agreement by making
those minimal modifications necessary to satisfy the concerns of the Commission
as set forth in the Statement of Objection(s). Notwithstanding the foregoing,
the parties agree that ROCHE shall retain substantially the same license rights
at substantially the same royalties as specified under this Agreement.

                                                                              25
<PAGE>

IN WITNESS WHEREOF this Agreement has been executed by duly authorized officers
of CHIRON and ROCHE as of the Effective Date.

CHIRON CORPORATION

By:     /s/ SEAN P. LANCE
        -----------------------------------
        Sean P. Lance

Title:  Chairman and Chief Executive Officer

Date:   October 10, 2000

F. HOFFMANN-LA ROCHE LTD

By:    /s/ HEINO VON PRONDZYNSKI
       ------------------------------------

Title: Head of Diagnostics

Date:  10/10/2000

By:    /s/ S. SCHWAN
       ------------------------------------

Title: Head of Diagnostics Finance

Date:  10/10/2000

ROCHE MOLECULAR SYSTEMS, INC.

By:    /s/ KATHY ORDONEZ
       ------------------------------------

Title: President & CEO, Roche Molecular Systems, Inc.

Date:  October 10, 2000

                                                                              26
<PAGE>

                                       EXHIBIT A
                                       ---------
                                COMPENSATION TO CHIRON
                                ----------------------

1.     EARNED ROYALTY.

       In consideration of the license granted pursuant to Section 2.1, ROCHE
shall pay earned royalties per Unit Shipped, calculated for each category of
CHIRON Licensed Product (a "Product Category") as follows (the "Earned
Royalty"):

Existing Agreements                     Per Unit Shipped
-------------------                     ----------------

HCV Qualitative Assay:                    $0.85
HIV Qualitative Assay:                     0.25

Existing Offers                         Per Unit Shipped
-------------------                     ----------------

HCV Qualitative Assay:                    $1.50
HIV Qualitative Assay:                     0.25

Notwithstanding the above, the Earned Royalty rates per Unit Shipped to
Existing Customers located in Japan for HCV Qualitative Assay shall be $0.65,
and to Existing Customers located in any jurisdiction other than Japan under
Existing Agreements shall be $0.85, only until December 31, 2001. The Earned
Royalty rate shall be $1.75 in all such cases for Units Shipped after
December 31, 2001 through December 31, 2002. After December 31, 2002, the
Earned Royalty rate shall be $2.50 in all such cases. However, such increased
Earned Royalty rates after December 31, 2001 and December 31, 2002 shall
apply to Existing Customers located in the United States, Canada or Japan
only if (a) in the United States or Canada, CHIRON has received regulatory
approval to offer and sell products, or in Japan, CHIRON has submitted an
application for, and is diligently pursuing, regulatory approval to offer and
sell Products in such jurisdiction and (b) CHIRON has affirmed to ROCHE in
writing its ability and willingness to meet the requirements of the Existing
Customers in such jurisdiction.

Notwithstanding anything to the contrary in the Agreement or this Exhibit A,
Earned Royalties shall be paid on Products Shipped in Blood Screening after
the Effective Date in the United States under investigational new drug (IND)
status and, similarly, on Products Shipped in any other jurisdiction for
investigational or other pre-licensure use.

Earned Royalties shall be payable quarterly commencing with the Calendar
Quarter commencing on January 1, 2001, within sixty (60) days following the
end of each Calendar Quarter. Such payment shall be accompanied by a report
pursuant to Article 4.

Earned Royalties are nonrefundable and fully earned when paid.

                                                                              1
<PAGE>

Earned Royalties with respect to Products sold or Shipped from the Effective
Date to December 31, 2000, have been pre-paid pursuant to the HCV Agreement
up to a maximum of $3,000,000. To the extent that Earned Royalties otherwise
payable with respect to that period exceed $3,000,000, the excess shall be
paid with the royalty report due for the Calendar Quarter commencing
January 1, 2001.

2.    SINGLE ROYALTY PER CHIRON LICENSED PRODUCT. Only one payment of Earned
Royalty shall be due with respect to any Unit of CHIRON Licensed Product
Shipped, irrespective of the number of patents or Valid Claims in the CHIRON
Licensed Patents covering such CHIRON Licensed Product.

3.    DISPUTE RESOLUTION. Any dispute between CHIRON and ROCHE regarding
whether any adjustment to or credits against Earned Royalties under this
Exhibit A is appropriate, and which the parties fail to resolve themselves,
may only be resolved by resort to the ADR provisions of Article 10. Until
such dispute is resolved, ROCHE shall pay CHIRON the Earned Royalty provided
for herein without benefit of the applicable disputed adjustment on the
condition that CHIRON shall repay ROCHE the amounts of such disputed payments
if ROCHE prevails in the ADR, plus interest at the rate described in Section
4.8.

                                                                              2

<PAGE>

                            EXHIBIT B - BLOOD SCREENING
                                    PAGE 1 OF 4

                                CHIRON HCV PATENTS

                               FOUNDATIONAL PATENTS

                       [**CONFIDENTIAL TREATMENT REQUESTED**]

<PAGE>

                            EXHIBIT B - BLOOD SCREENING
                                    PAGE 2 OF 4

                              NON-FOUNDATIONAL PATENTS
                       [**CONFIDENTIAL TREATMENT REQUESTED**]

<PAGE>

                            EXHIBIT B - BLOOD SCREENING
                                    PAGE 3 OF 4

<PAGE>

                            EXHIBIT B - BLOOD SCREENING
                                    PAGE 4 OF 4

                                CHIRON HIV PATENTS

                               FOUNDATIONAL PATENTS

                       [**CONFIDENTIAL TREATMENT REQUESTED**]

                              NON-FOUNDATIONAL PATENTS

                       [**CONFIDENTIAL TREATMENT REQUESTED**]

<PAGE>

                                     EXHIBIT C

                                 BLOOD SCREENING

                                  FORM OF REPORT

                          [To Be Agreed To By The Parties.]

<PAGE>

                                   Exhibit D

                                Blood Screening

                           Chiron Licensed Products

PRODUCT CODES, BS KITS:

<TABLE>
<CAPTION>

DESCRIPTION                          SAP/PART NO.
-------------------------------------------------

<S>                                  <C>

CONFIDENTIAL TREATMENT REQUESTED
CONFIDENTIAL TREATMENT REQUESTED     CONFIDENTIAL TREATMENT REQUESTED
CONFIDENTIAL TREATMENT REQUESTED     CONFIDENTIAL TREATMENT REQUESTED

CONFIDENTIAL TREATMENT REQUESTED     CONFIDENTIAL TREATMENT REQUESTED

CONFIDENTIAL TREATMENT REQUESTED*
CONFIDENTIAL TREATMENT REQUESTED     CONFIDENTIAL TREATMENT REQUESTED
CONFIDENTIAL TREATMENT REQUESTED     CONFIDENTIAL TREATMENT REQUESTED

</TABLE>

*CONFIDENTIAL TREATMENT REQUESTED.

<PAGE>

                                    EXHIBIT E

                             Schedule of Countries

                      Schedule 1              Denmark
                                              Finland
                                              France
                                              Germany
                                              Italy
                                              Japan
                                              The Netherlands
                                              Norway
                                              Sweden
                                              Thailand
                                              Turkey

                      Schedule 2              Austria
                                              Ireland
                                              Spain
                                              New Zealand<PAGE>

                                                                 Exhibit 10.501

                          CHIRON 1991 STOCK OPTION PLAN

  [AS AMENDED AUGUST 14, 1993,  APRIL 11, 1994,  FEBRUARY 24, 1995,  MARCH 8,
1996, FEBRUARY 28, 1997, AUGUST 7, 1998, AUGUST 20, 1999, FEBRUARY 25, 2000, AND
                              SEPTEMBER 21, 2000]

I.       PURPOSES

         This  Chiron  1991 Stock  Option  Plan  ("Plan")  is intended to enable
Chiron   Corporation   ("Corporation")  to  attract  and  retain  the  following
individuals  by offering them  incentives  and rewards,  in the form of options,
restricted  shares,  share rights,  share units and performance units ("awards")
which will encourage them to acquire a proprietary  interest in the Corporation,
to  continue  in the  service of the  Corporation  or its  subsidiaries,  and to
provide  incentive to build value for  stockholders:  (a)  employees  (including
officers  and  directors)  of  the   Corporation  and  its   subsidiaries,   (b)
non-employee members of the Board of Directors of the Corporation ("Board"), and
(c) consultants and independent  contractors who perform  valuable  services for
the Corporation and its subsidiaries.

         In addition,  the Plan is intended to permit the Corporation to satisfy
its obligations in connection  with options it assumed  pursuant to the terms of
the  Agreement  and Plan of  Merger  dated as of July 21,  1991 by and among the
Corporation,   Chiron  Acquisition  Subsidiary,   Inc.,  and  Cetus  Corporation
("Agreement").  Upon consummation of the transactions described in the Agreement
("Merger"),  the Plan superseded Cetus Corporation's Amended and Restated Common
Stock Option Plan and Cetus Corporation's  Non-Employee  Directors' Stock Option
Plan ("Cetus Prior Plans").  Upon  stockholder  approval in December 1991,  this
Plan superseded the following  Chiron prior plans:  the Protos  Corporation 1988
Stock  Option  Plan  (upon  the  merger  of  Protos  into  Chiron),  the  Chiron
Ophthalmics,  Inc. 1986 Stock Option Plan (upon the merger of Chiron Ophthalmics
into a wholly owned subsidiary of Chiron),  the Corporation's  1982 Stock Option
Plan and the Corporation's 1984 Non-Qualified  Stock Option Plan  (collectively,
"Chiron Prior Plans").

II.      ADMINISTRATION

         The Plan will be administered by a committee or committees appointed by
the Board and  consisting of one or more members of the Board or a  subcommittee
or  subcommittees  thereof.  The  Board  may  delegate  the  responsibility  for
administration  of the Plan with respect to designated  classes of award holders
to  different  committees,  subject  to  such  limitations  as the  Board  deems
appropriate,  and each committee may similarly delegate its  responsibilities to
one or more subcommittees. Members of a committee or subcommittee will serve for
such  term as the Board or  committee  may  determine,  and will be  subject  to
removal  by the  Board  at any  time.  With  respect  to any  matter,  the  term
"Committee," when used in this Plan, will refer to the committee or subcommittee
that has been delegated authority with respect to such matter.

         In determining  the composition of any committee or  subcommittee,  the
Board or  committee,  as the case may be,  shall  consider the  desirability  of
compliance  with  the  compositional  requirements  of  (i)  Rule  16b-3  of the
Securities and Exchange Commission with respect to award holders who are subject
to the trading  restrictions of Section 16(b) of the Securities  Exchange Act of
1934 ("1934 Act") with respect to securities of the Corporation and (ii) Section
162(m) of the

<PAGE>

Internal Revenue Code ("Code") with respect to performance  units, but shall not
be bound by such compliance.

         (a)  AUTHORITY.  Each  Committee will have full authority to administer
the Plan within the scope of its delegated responsibilities, including authority
to interpret  and construe  any  relevant  provision of the Plan,  to adopt such
rules and regulations as it may deem  necessary,  and to determine the terms and
conditions  of  awards  made  under  the Plan  (which  need  not be  identical).
Decisions of a Committee made within the discretion delegated to it by the Board
will be final and binding on all persons who have an interest in the Plan.

III.  ELIGIBILITY FOR AWARDS

         (a) DISCRETIONARY  AWARDS.  From time to time the Committee may, in its
discretion,  select  individuals from among the following  categories to receive
awards under the Plan:

         (1) EMPLOYEES. The Committee may select employees of the Corporation or
         its parent or subsidiaries (including officers, whether or not they are
         also members of the Board).

         (2) CONSULTANTS AND INDEPENDENT  CONTRACTORS.  The Committee may select
         consultants  and  independent   contractors   whose  services  tend  to
         contribute  materially to the success of the Corporation or a parent or
         subsidiary  or whose  services  may  reasonably  be  anticipated  to so
         contribute.

         (3)  DIRECTORS.  The Committee  may select  members of the Board or the
         board of directors of a parent or subsidiary  that are not employees of
         the  Corporation,  parent or  subsidiaries  for awards in  addition  to
         awards made in accordance with the Plan's automatic grant provisions.

         (b) PERFORMANCE UNITS.  Corporate  vice-presidents  and other executive
officers of the Corporation or a parent or subsidiary ("162(m) executives") will
be eligible to receive  performance  units in addition  to, or in lieu of, other
discretionary awards granted under the Plan.

         (c) AUTOMATIC GRANTS. Members of the Board who are not employees of the
Corporation or a subsidiary  will receive  awards in accordance  with the Plan's
automatic grant provisions.

         (d) SUBSTITUTE  OPTIONS.  Upon consummation of the Merger,  outstanding
options  under  the  Cetus  Prior  Plans   (including   related   Limited  Stock
Appreciation  Rights) were  converted,  in the manner and at the exchange  ratio
specified in the Agreement,  into substitute  options under this Plan to acquire
Common Stock (as defined below).  Upon stockholder  approval and, with regard to
the Protos prior plan  options and the Chiron  Ophthalmics  prior plan  options,
consummation of the relevant mergers, outstanding options under the Chiron Prior
Plans were converted into options under this Plan.  These options  preserved the
exercise price of the  outstanding  options as adjusted,  in the case of options
under the Protos Corporation 1988 Stock

                                       2
<PAGE>

Option Plan and the Chiron  Ophthalmics,  Inc.  1986 Stock Option Plan, to
reflect the substitution of Common Stock. These options also preserved the
other terms and conditions of the outstanding options; provided,  however,
that on the Effective  Date of this Plan,  outstanding  automatic  option
grants  under the Corporation's  1982 Stock Option Plan were  conformed,
other than to extend the term,  to the  Automatic  Option  Grants  under this
Plan.  Collectively,  these options are referred to as "Substitute Options."

IV.      STOCK SUBJECT TO THE PLAN

         (a)      CLASS.  The  stock  subject  to  awards  under the Plan is
(i) the Corporation's  authorized  but  unissued or  reacquired  Common
Stock  ("Common Stock"),  or (ii) shares of one or more series of the
Corporation's  authorized but unissued or reacquired  Restricted Common
Stock, in the aggregate,  "Company Stock." In connection  with the grant of
awards under the Plan, the  Corporation may repurchase shares in the open
market or otherwise.

         (b)      AGGREGATE AMOUNT

                  (1) SHARES.  Subject to adjustment  under  Sections IV (c) and
         IV(b)(3),  the aggregate maximum number of shares of Company Stock that
         may be subject to awards under the Plan is 50,262,347 (comprised of the
         original  number of shares  authorized  under the Plan,  including  the
         number  of  shares of  Company  Stock  remaining  for  issuance  on the
         Effective Date of this Plan under the  Corporation's  1982 Stock Option
         Plan and the Corporation's 1984  Non-Qualified  Stock Option Plan, plus
         all annual increases  thereto through January 1, 1997, plus an increase
         of  13,000,000  shares  by  amendment  effective  February  28,  1997).
         Notwithstanding the foregoing,  as of the first day of each fiscal year
         beginning  after  January  1,  1997 the  aggregate  number of shares of
         Company  Stock  that may be  subject  to awards  under the Plan will be
         increased  by 1.50% of the number of Chiron  Common  Equivalent  Shares
         outstanding  as of last day of the  preceding  fiscal year.  Subject to
         adjustment under Section IV(c), the maximum number of shares of Company
         Stock  with  respect to which  awards  may be  granted to any  employee
         during the term of the Plan is 4,000,000 shares.  Subject to adjustment
         under Sections IV(c) and IV(b)(3),  not more than 50,262,347  shares of
         Company  Stock,  increased,  as of the  first day of each  fiscal  year
         beginning  after  January  1,  1997,  by 1.50% of the  number of Chiron
         Common  Equivalent  Shares  outstanding as of December 31, 1996, may be
         subject to Incentive  Options (as defined below) granted under the Plan
         after the Effective  Date.  "Chiron Common  Equivalent  Shares" are the
         total  number of  outstanding  shares of  Common  Stock  plus the total
         number of shares of Common Stock  issuable upon  conversion or exercise
         of outstanding  warrants,  options and  convertible  securities.  In no
         event  will more than  2,000,000  shares of  Restricted  Common  Stock,
         whether in a single series or in multiple series,  be subject to awards
         under the Plan.

                  (2) RESTRICTED COMMON STOCK. Shares of Restricted Common Stock
         may be  issued  under  the  Plan in one or more  separate  series.  The
         rights, preferences and privileges,  together with the restrictions and
         limitations  and the number of  shares,  of each  series of  Restricted
         Common  Stock  issuable  under  the  Plan  will  be  set  forth  in the
         Corporation's  Certificate  of  Determination  of Preferences of Common
         Stock ("Certificate")

                                       3
<PAGE>

as in effect  from  time to time  during  the term of the  Plan.  Shares of each
series of  Restricted  Common Stock will be  convertible  or  exchangeable  into
shares of Common  Stock in  accordance  with the  terms  and  provisions  of the
Certificate applicable to that series.

                  (3)  REUSE OF  SHARES.  If any  outstanding  option  under the
         Chiron Prior Plans,  the Cetus Prior Plans or this Plan  (including the
         Substitute Options) expires or is terminated or canceled for any reason
         (including pursuant to Section X of the Plan but other than pursuant to
         surrender of the option for a cash payment in  accordance  with Section
         XIII of the Plan) before being  exercised for the full number of shares
         to which it  applies,  then the  shares  allocable  to the  unexercised
         portion of such option will not be charged  against the  limitations of
         Section IV(b)(1) and will become available for subsequent  grants under
         the Plan.  To the extent that a share right or share unit expires or is
         terminated,  or is canceled or forfeited  for any reason  without being
         paid in cash or shares of Company Stock, any remaining shares allocable
         to the unpaid  portion  of such share  right or share unit shall not be
         charged  against the  limitations  of Section  IV(b)(1) and will become
         available again for subsequent  grants under the Plan.  Unvested shares
         issued  under  the  Plan  and  subsequently  cancelled,   forfeited  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 Section  IV(b)(1).  Shares  subject to any
         option or  portion  of an option  surrendered  in  accordance  with the
         "Surrender  of Options for Cash or Stock"  provisions  of this Plan and
         shares  for  which a cash  payment  is made  in  lieu  thereof  under a
         restricted  share,  share unit or share right will not be available for
         subsequent  awards under the Plan.  If the exercise  price of an option
         under  the Plan is paid with  shares  of  Common  Stock or if shares of
         Common  Stock  otherwise  issuable  under the Plan are  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 Section  IV(b)(1) 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.

         (c)  ADJUSTMENTS.  In the event any change is made to the Company Stock
subject to the Plan (whether by reason of merger, consolidation, reorganization,
recapitalization,  stock dividend,  stock split, combination of shares, exchange
of shares,  or other change in corporate or capital structure of the Corporation
affecting  the  outstanding  Common Stock as a class  without the  Corporation's
receipt of consideration) then, unless such change results in the termination of
all awards,  the Committee will make  appropriate  adjustments to (i) the number
and/or class of  securities  available  under the Plan,  (ii) the number  and/or
class of  securities  for which any one person may be granted  awards  under the
Plan,  (iii) the number and/or class of  securities  to be made under  automatic
grants to non-employee directors, and (iv) the number and/or class of securities
and,  where  applicable,  price per share of securities  subject to  outstanding
awards. Such adjustments are to be effected in a manner which shall preclude the
enlargement  or  dilution  of rights and  benefits of awards and shall be final,
binding and conclusive.

                                       4
<PAGE>

V.       TERMS AND CONDITIONS OF DISCRETIONARY OPTIONS

         Discretionary  stock  options  granted  under  the  Plan  may,  in  the
Committee's discretion,  be either incentive stock options ("Incentive Options")
qualifying  under  Section 422 of the Internal  Revenue Code of 1986, as amended
("Internal  Revenue  Code"),  or nonstatutory  options.  Individuals who are not
employees  of  the  Corporation  or  its   subsidiaries   may  only  be  granted
nonstatutory  options.  Options will be evidenced by instruments in such form as
the Committee may from time to time approve.  These  instruments will conform to
the following terms and conditions and, in the discretion of the Committee,  may
contain such other terms,  conditions and  restrictions as are not  inconsistent
with the following:

         (a)      OPTION PRICE.  The option price per share will be fixed by
the Committee,  but in no event  will  the  option  price  per  share  be
less  than eighty-five  percent  (85%) of the Fair Market Value of the option
shares on the date of the option grant;  provided,  however,  that in no
event will the option price per share of an Incentive  Option be less than
one hundred  percent (100%) of the Fair Market Value of the option  shares on
the date of the option  grant. However,  the  Committee  may grant  options
with an option price per share less than eighty-five  percent (85%) of the
Fair Market Value of the option shares on the date of the option grant in
substitution for the outstanding  options of the acquired  company in a
merger,  if such options are granted with an option price per share  which
preserves  the option  price of the  outstanding  options,  as adjusted for
the merger. Notwithstanding the foregoing,  Substitute Options will have an
option  price per share  determined  pursuant to Section  III(d) of this Plan.

         (b)      NUMBER OF SHARES, TERM AND EXERCISE

                  (1) TERM AND NUMBER.  Each option  granted under the Plan will
                  be exercisable on such date or dates,  during such period, and
                  for such  number of shares of Company  Stock as the  Committee
                  determines  and sets forth in the  instrument  evidencing  the
                  option.  No  option  granted  under  the  Plan  will  have  an
                  expiration  date that is more than 10 years  after the date of
                  the option grant.

                  (2) EXERCISE.  After any option granted under the Plan becomes
                  exercisable,  it may be exercised by delivering notice in such
                  form to such person as the  Corporation  may  designate at any
                  time  prior  to the  termination  of such  option.  Except  as
                  authorized by the  Committee in accordance  with Section VIII,
                  the option price for the number of shares for which the option
                  is exercised will become due and payable upon exercise.

                  (3) PAYMENT.  The option price will be payable in full in cash
                  (including  cash  equivalents);  provided,  however,  that the
                  Committee may,  either at the time the option is granted or at
                  the time it is exercised and subject to such limitations as it
                  may  determine,  authorize  payment of all or a portion of the
                  option  price  in  one  or  a  combination  of  the  following
                  alternative forms

                  (i) a promissory note authorized pursuant to Section VIII;

                                       5
<PAGE>

                  (ii) full  payment in shares of Common  Stock valued as of the
                  exercise  date and held for the  requisite  period  to avoid a
                  charge to the Corporation's earnings; 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 provide irrevocable instructions,  in
                  such form and pursuant to such  procedures as the  Corporation
                  shall specify, 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.

         (c) TERMINATION OF SERVICES.  The Committee will determine and set
forth in each option  whether the option will  continue to be  exercisable,
and the terms and conditions of such exercise, on and after the date that an
optionee ceases to be employed by, or to provide services to, the Corporation
or its subsidiaries. The date of termination  of an optionee's  employment or
services will be determined by the Committee, which determination will be
final.

         (d) INCENTIVE OPTIONS. Options granted under the Plan that are intended
to be Incentive  Options will be subject to the following  additional  terms and
conditions:

                           (1)  DOLLAR  LIMITATION.   To  the  extent  that  the
                  aggregate  Fair Market Value  (determined as of the respective
                  date or  dates of  grant)  of  shares  with  respect  to which
                  options that are granted  after 1986 and that would  otherwise
                  be Incentive Options are exercisable for the first time by any
                  individual  during  any  calendar  year under the Plan (or any
                  other  plan  of  the  Corporation,   a  parent  or  subsidiary
                  corporation  or  predecessor   thereof)  exceeds  the  sum  of
                  $100,000 (or such greater amount as may be permitted under the
                  Internal  Revenue Code),  whether by reason of acceleration or
                  otherwise,  such  options  will not be  treated  as  Incentive
                  Options. In making such a determination, options will be taken
                  into account in the order in which they were granted.

                           (2)  10%  STOCKHOLDER.  If any  employee  to  whom an
                  Incentive  Option is to be granted  pursuant to the provisions
                  of the  Plan  is,  on the date of  grant,  the  owner of stock
                  (determined  with  application  of the  ownership  attribution
                  rules  of  Section  424(d)  of  the  Internal   Revenue  Code)
                  possessing  more than ten percent (10%) of the total  combined
                  voting  power of all  classes of stock of his or her  employer
                  corporation or of its parent or subsidiary  corporation  ("10%
                  Stockholder"),  then the  following  special  provisions  will
                  apply to the option granted to such individual:

                                       6
<PAGE>

                           (i) The option  price per share of the stock  subject
                           to such  Incentive  Option  will not be less than one
                           hundred ten percent  (110%) of the Fair Market  Value
                           of the option shares on the date of grant; and

                           (ii) The  option  will not have a term in  excess  of
                           five (5) years from the date of grant.

                           (3)  PARENT  AND  SUBSIDIARY.  For  purposes  of this
                  Section   V(d),    "parent    corporation"   and   "subsidiary
                  corporation" will have the meaning  attributed to those terms,
                  as they are used in  Section  422(b) of the  Internal  Revenue
                  Code.

         (e)      WITHHOLDING

                           (1)  OBLIGATION.   The  Corporation's  obligation  to
                  deliver stock certificates upon the exercise of an option will
                  be  subject  to  the  option  holder's   satisfaction  of  all
                  applicable federal,  state and local income and employment tax
                  withholding requirements.

                           (2)  PAYMENT.  In the event that an option  holder is
                  required to pay to the  Corporation  an amount with respect to
                  income  and   employment   tax   withholding   obligations  in
                  connection  with exercise of an option,  the Committee may, in
                  its discretion and subject to such limitations and rules as it
                  may adopt, permit the option holder to satisfy the obligation,
                  in whole or in part,  by  delivering  shares of  Common  Stock
                  already held by the option holder or by making an  irrevocable
                  election  that a  portion  of the  total  value of the  shares
                  subject  to the  option be paid in the form of cash in lieu of
                  the issuance of Company  Stock,  and that such cash payment be
                  applied to the satisfaction of the withholding obligations.

VI.  DISCRETIONARY  RESTRICTED SHARES, SHARE RIGHTS, SHARE UNITS AND PERFORMANCE
UNITS

         (a)      NATURE OF AWARDS

                           (1)  RESTRICTED  SHARES.  A restricted  share granted
                  under the Plan shall consist of shares of Company  Stock,  the
                  retention  and  transfer  of which is subject  to such  terms,
                  conditions  and  restrictions  (whether  based on  performance
                  standards  or periods of service or  otherwise  and  including
                  repurchase   and/or   forfeiture   rights   in  favor  of  the
                  Corporation)  as the  Committee  shall  determine.  The terms,
                  conditions and  restrictions  to which  restricted  shares are
                  subject shall be evidenced by  instruments in such form as the
                  Committee  may from  time to time  approve  and may vary  from
                  grant  to  grant.   The  Committee  shall  have  the  absolute
                  discretion to determine whether any consideration  (other than
                  the services of the potential  award holder) is to be received
                  by  the  Corporation  or  its   subsidiaries  as  a  condition
                  precedent to the issuance of restricted shares.

                                       7
<PAGE>

                           (2) SHARE  RIGHTS.  A share right  granted  under the
                  Plan  shall  consist  of the  right,  subject  to such  terms,
                  conditions  and  restrictions  (whether  based on  performance
                  standards  or periods of service or  otherwise),  to receive a
                  share  of  Company   Stock   (together   with  cash   dividend
                  equivalents   if  so  determined  by  the  Committee)  as  the
                  Committee   shall   determine   and  shall  be   evidenced  by
                  instruments  in such  form as the  Committee  may from time to
                  time approve. The Committee shall have the absolute discretion
                  to  determine  whether  any  consideration   (other  than  the
                  services of the  potential  award holder) is to be received by
                  the Corporation or its  subsidiaries as a condition  precedent
                  to the issuance of shares pursuant to share rights. The terms,
                  conditions and  restrictions to which share rights are subject
                  may vary from grant to grant.

                           (3) SHARE UNITS.  A share unit granted under the Plan
                  shall  consist of the right to receive an amount in cash equal
                  to the Fair Market Value of one share of Company  Stock on the
                  date of valuation  of the unit  (together  with cash  dividend
                  equivalents  if so  determined  by the  Committee)  less  such
                  amount,  if any, as the Committee  shall specify.  The date of
                  valuation  and  payment  of cash  under a share  unit  and the
                  conditions,  if any,  to which  such  payment  will be subject
                  (whether based on performance  standards or periods of service
                  or otherwise) shall be determined by the Committee. The terms,
                  conditions and  restrictions  to which share units are subject
                  may vary from grant to grant.

         (b) WITHHOLDING.  The Committee may require,  or permit an award holder
to  elect,  that a  portion  of the total  value of the  shares of Common  Stock
subject to  restricted  shares or share rights held by one or more award holders
be paid in the form of cash in lieu of the  issuance  of Company  Stock and that
such cash payment be applied to the satisfaction of the federal, state and local
income and employment  tax  withholding  obligations  that arise at the time the
restricted  shares and share rights  become free of all  restrictions  under the
Plan.

         (c) CASH  PAYMENTS.  The  Committee  may provide  award holders with an
election to receive a percentage of the total value of the Company Stock subject
to restricted  shares or share rights in the form of a cash payment,  subject to
such terms, conditions and restrictions as the Committee shall specify.

         (d) ELECTIVE AND TANDEM  AWARDS.  The  Committee  may award  restricted
shares,  share rights, and share units independently of other compensation or in
lieu of  compensation  that would  otherwise  be paid in cash or stock  options,
whether at the election of the potential  award holder or otherwise.  The number
of restricted  shares,  share rights or share units to be awarded in lieu of any
cash  compensation  amount or number of stock options shall be determined by the
Committee  in its  sole  discretion  and  need  not be  equal  to such  foregone
compensation in Fair Market Value. In addition, restricted shares, share rights,
and share units may be awarded in tandem with stock  options,  so that a portion
of such award becomes payable or becomes free of restrictions only if and to the
extent that the tandem  options are not exercised or are  forfeited,  subject to
such terms and conditions as the Committee may specify.

                                       8
<PAGE>

         (e) MODIFICATION OF AWARDS. Except to the extent an award is granted as
a performance  unit, the Committee may, in its sole discretion,  modify or waive
any  or  all  of  the  terms,  conditions  or  restrictions  applicable  to  any
outstanding restricted share, share right or share unit; provided, however, that
no such  modification  or waiver shall,  without the consent of the holder of an
outstanding award, adversely affect the holder's rights thereunder.

         (f) PERFORMANCE UNITS. Effective March 8, 1996, the Committee may grant
restricted shares, share rights and share units to 162(m) executives that comply
with the requirements of Code Section 162(m).

Performance  units will  become  payable or vest upon  attainment  of  specified
performance goals over a specified performance period.

                           (1) PERFORMANCE  GOALS.  The Committee will determine
                  the Corporation  performance goal or goals that must be met to
                  achieve the maximum  payout within the shorter of the first 90
                  days  of the  specified  performance  period  over  which  the
                  performance  goal or goals  will be  measured,  or 25% of such
                  performance  period.  The Committee may establish a goal based
                  on  more  than  one  performance  criteria,  or may  establish
                  multiple   goals,   but  any  payout  must  be  based  on  the
                  satisfaction  of at least one goal.  The Committee may provide
                  for different levels of payouts based on relative  performance
                  toward a performance goal.

                           (2) PERFORMANCE  CRITERIA.  Performance  units may be
                  based on one or more of the  following  performance  criteria:
                  total  shareholder  return;  the  achievement  of a  specified
                  closing or average closing price of Common Stock; the absolute
                  or percentage increase in the closing or average closing price
                  of Common Stock and/or one or more of the  following  measures
                  of the Corporation's net income for the specified  performance
                  period  determined  in  accordance  with  generally   accepted
                  accounting   principles   as   consistently   applied  by  the
                  Corporation:  absolute net income or a percentage  or absolute
                  dollar  increase  in  net  income,  earnings  per  share  or a
                  percentage or absolute  dollar increase in earnings per share,
                  or return  on assets  employed  or equity or a  percentage  or
                  absolute  dollar  increase  in return on  assets  employed  or
                  equity;  or the  Corporation's  absolute  gross  revenues or a
                  percentage or absolute  dollar  increase in gross revenues for
                  the specified performance period determined in accordance with
                  generally  accepted  accounting   principles  as  consistently
                  applied  by the  Corporation.  The  awards  may  based  on the
                  Corporation's   performance   alone,   or  the   Corporation's
                  performance  may  be  measured  against   variously   weighted
                  published benchmark indices that the Committee  determines are
                  representative of the Corporation's  peer group, which indices
                  may include the Standard & Poor's Health Care Composite Index,
                  the Standard & Poor's Health Care  Diversified  Index, and the
                  AMEX Biotechnology Index, among others.

For purposes of this Plan, net income and gross revenues shall be net income and
gross revenues of the Corporation and its consolidated  subsidiaries as reported
by the Corporation and certified by its independent public accountants,  but the
Committee  in fixing any goal may  exclude any or all of the

                                       9
<PAGE>

following if they have a material effect on annual net income or gross revenues:
events or  transactions  that are  either  unusual  in nature or  infrequent  in
occurrence (such as  restructuring/reorganization  charges, the purchase or sale
of in process technology,  the sale or discontinuance of a business segment, the
sale of investment securities,  losses from litigation, the cumulative effect of
changes in accounting principles and natural disasters),  depreciation, interest
or taxes.

                  (3) REDUCTION OR  CANCELLATION  OF  PERFORMANCE  UNITS.  Final
         payouts are subject to the approval of the Committee, which may reserve
         the absolute discretion to reduce or cancel any payout thereunder.

VII.     AUTOMATIC AWARDS TO DIRECTORS

         (a) OPTIONS. Effective March 8, 1996, non-employee members of the Board
("Eligible  Directors")  will  automatically  be  granted  nonstatutory  options
("Automatic  Options")  to  purchase  the  number  of  shares  of  Common  Stock
determined as set forth below (subject to adjustment under Section IV(c) hereof)
on the dates and terms set forth below:

         (1) OPTION  GRANTS.  On the last business day of the second  quarter of
         each fiscal year of the  Corporation  ("Automatic  Grant  Date"),  each
         continuing  Eligible Director  (including each Eligible Director who is
         newly elected or appointed on the Automatic Grant Date) will receive an
         Automatic  Option to  purchase  that  number of whole  shares of Common
         Stock determined by dividing $100,000 by the Average Stock Price on the
         Automatic Grant Date.

         (2)  PRO-RATA  OPTION  GRANTS.  Each  person  who is newly  elected  or
         appointed  as an Eligible  Director  on a date other than an  Automatic
         Grant Date, will receive,  on the date of such election or appointment,
         an  Automatic  Option to purchase a pro-rata  number of whole shares of
         Common Stock determined by multiplying $8,333.33 by the number of whole
         calendar months between the date of the Eligible Director's election or
         appointment and the next Automatic Grant Date, and dividing that number
         by the  Average  Stock  Price of a share of  Common  Stock on the grant
         date.

         (3)  ADVISORY  COUNSELLORS.  Advisory  Counsellors  of  Cetus  will not
         qualify for Automatic Option Grants.

         (4) TERMS AND CONDITIONS.  The terms and conditions  applicable to each
         Automatic Option Grant will be as follows:

                  (i)  PRICE.  The  option  price per share will be equal to one
         hundred  percent (100%) of the Fair Market Value of one share of Common
         Stock on the date of grant;

                  (ii) TERM. Each Automatic  Option will have a term of ten (10)
         years,  measured from the date of grant, and will be exercisable at any
         time  during  the  term  for  all or any  part of the  covered  shares;
         provided,  however, that no Automatic Options may be exercised prior to
         approval of the Plan by the Corporation's stockholders.

                                       10
<PAGE>

                  (iii)  REPURCHASE.  The shares  purchased  under the Automatic
         Options  will  be  subject  to  repurchase  by the  Corporation  at the
         original  exercise  price in the event an  optionee  ceases to  provide
         services to the  Corporation  or its  subsidiaries  as a  director,  an
         employee, a consultant or an independent contractor.  The Corporation's
         repurchase  rights  will  lapse,  and the  optionee's  interest  in the
         purchased  shares will vest,  in a series of equal annual  installments
         over the five-year  period  measured from the grant date,  provided the
         optionee  continues  to  provide  such  services.   In  addition,   the
         Corporation's  repurchase  right  will lapse in its  entirety,  and the
         Automatic  Options will become fully vested,  should one or more of the
         following  events occur while the optionee is providing  such services:
         (A) the optionee's death, or (B) the optionee's permanent disability.

                  (iv)  PAYMENT.  Upon  exercise of the  Automatic  Option,  the
         option price for the purchased  shares will become payable  immediately
         in cash or in shares of Common  Stock that the optionee has held for at
         least  six (6)  months.  Payment  may  also be  made by  delivery  of a
         properly   executed   exercise   notice   together   with   irrevocable
         instructions  to a broker to promptly  deliver to the  Corporation  the
         amount of sale or loan proceeds to pay the option price.

                  (v)  CESSATION.  In the event the  optionee  ceases to provide
         services to the  Corporation  or its  subsidiaries  as a  director,  an
         employee,  a consultant  or an  independent  contractor,  the Automatic
         Option may be exercised, within the term of the Automatic Option, for a
         period of three (3)  months  after the date of such  cessation  (twelve
         (12) months in the case of cessation by reason of disability or death).
         In the case of death, the Automatic Option may be exercised within such
         period by the estate or heirs of the optionee.

                  (b) SHARE RIGHTS.  Effective March 8, 1996, Eligible Directors
         will  automatically be granted share rights  ("Automatic Share Rights")
         to receive the number of shares of Common Stock determined as set forth
         below  (subject to adjustment  under Section IV(c) hereof) on the dates
         and terms set forth below:

                  (1) NEW  DIRECTORS.  Each newly elected or appointed  Eligible
         Director will be granted,  on the date of such election or appointment,
         an  Automatic  Share  Right to  purchase  that  number of whole  shares
         determined by dividing  $40,000 by the Average Stock Price on the grant
         date.

                  (2)      CONTINUING DIRECTORS.

                           (i) FULL GRANTS. Subject to Subsection  VII(b)(2)(ii)
                  below,   on  each  Automatic   Grant  Date,   each  incumbent,
                  continuing  Eligible  Director  will be granted  an  Automatic
                  Share Right to receive  that number of whole  shares of Common
                  Stock  determined  by dividing  $25,000 by the  Average  Stock
                  Price  on  the  Automatic  Grant  Date.   Notwithstanding  the
                  foregoing, on the Automatic Grant Date occurring in June 1996,
                  each continuing  Eligible Director elected or appointed before
                  March 8, 1996,  will be granted an  Automatic  Share  Right to
                  receive  that number of whole shares  determined  by using the
                  $40,000 in lieu of the $25,000 figure.

                                       11
<PAGE>

                           (ii)  PRO-RATA  GRANTS.  If an  Eligible  Director is
                  newly  elected or  appointed on a date other than an Automatic
                  Grant Date,  on the  immediately  succeeding  Automatic  Grant
                  Date,  such  Eligible  Director  will be  granted  a  pro-rata
                  Automatic Share Right to receive the number of whole shares of
                  Common Stock  determined  by  multiplying  the number of whole
                  calendar  months  since the  Eligible  Director's  election or
                  appointment  by  $2,083.33  and  dividing  the  product by the
                  Average Stock Price on the Automatic Grant Date.

                  (3) ADVISORY  COUNSELLORS.  Advisory Counsellors of Cetus will
         not qualify for Automatic Share Rights.

                  (4) TERMS AND CONDITIONS.  The terms and conditions applicable
         to each Automatic Share Right will be as follows:

                           (i) TERM. Each Automatic Share Right will have a term
                  of five (5) years, measured from the grant date.

                           (ii) VESTING.  The Automatic Share Right will vest in
                  a  series  of equal  annual  installments  over the  five-year
                  period  measured  from the grant date,  provided  the Eligible
                  Director  continues to provide  services to the Corporation or
                  its subsidiaries as a director,  an employee,  a consultant or
                  an  independent  contractor.  Shares of Common  Stock  will be
                  issued in  satisfaction  of the  Automatic  Share Right as the
                  Automatic  Share Right vests.  In addition,  full vesting will
                  occur should one or more of the  following  events occur while
                  the Eligible  Director is  providing  such  services:  (A) the
                  Eligible  Director's  death,  or (B) the  Eligible  Director's
                  permanent disability.

                           (iii) CESSATION.  In the event the Eligible  Director
                  ceases  to  provide   services  to  the   Corporation  or  its
                  subsidiaries  as a director,  an employee,  a consultant or an
                  independent  contractor,   the  Automatic  Share  Right  shall
                  terminate with respect to the unvested portion of the Award.

         (c)  COST-OF-LIVING  INCREASES.  Each dollar value used in this Article
VII will be subject to annual  cost-of-living  increases.  The increases will be
based on the Consumer Price Index, and will occur  automatically  beginning with
the 1997 Automatic Grant Date.

         (d) AVERAGE STOCK PRICE.  Average Stock Price means the average closing
price of one share of Common  Stock as  reported on the Nasdaq  National  Market
System for the previous  twelve month period ending on the last day of the month
before the grant date of the award.

VIII.    LOANS AND INSTALLMENT PAYMENTS

         In order to assist an award  holder  (including  an employee  who is an
officer or director of the  Corporation) in the acquisition of shares of Company
Stock  pursuant to an award  granted  under the Plan (other than pursuant to the
Automatic Option Grant provisions of this Plan), the

                                       12
<PAGE>

Committee may authorize, at either the time of the grant of an award or the time
of the acquisition of Company Stock pursuant to the award (i) the extension of a
loan to the  award  holder by the  Corporation,  (ii) the  payment  by the award
holder of the purchase price, if any, of the Company Stock in  installments,  or
(iii) the  guarantee by the  Corporation  of a loan obtained by the award holder
from a third party. The terms of any loans,  guarantees or installment payments,
including  the  interest  rate and terms of  repayment,  will be  subject to the
discretion of the Committee.  Loans,  installment payments and guarantees may be
granted without security, the maximum credit available being the purchase price,
if any, of the Company Stock acquired plus the maximum  federal and state income
and  employment  tax  liability  that may be  incurred  in  connection  with the
acquisition.

IX.      ASSIGNABILITY

         No award granted under the Plan is  assignable or  transferable  by the
award holder other than by Will or by the laws of descent and distribution,  and
during the  lifetime of the award  holder,  only the award  holder may  exercise
options or exercise the rights  provided  under awards  granted  under the Plan.
However,  if and to the extent that the  Committee so  authorizes at the time an
award is granted or amended,  an option  (other than an option  designated as an
Incentive  Option) or other award may be assigned in whole or in part during the
grantee's  lifetime to one or more of the grantee's  family members or an entity
substantially  owned,  benefiting or controlled by the grantee or one or more of
grantee's  family  members if and to the extent that the Securities and Exchange
Commission  Form S-8  Registration  Statement would continue to be available for
the exercise of the award and resale of the underlying securities following such
assignment.  The terms  applicable to the assigned  portion shall be the same as
those in effect for the award  immediately prior to such assignment and shall be
set forth in such  documents  issued to the assignee as the  Committee  may deem
appropriate.

X.       CANCELLATION AND NEW GRANT OF OPTIONS

         The Committee  will 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 Plan, a Cetus Prior Plan or a Chiron
Prior Plan (other than options granted under automatic  option grant  provisions
of these plans) and to grant in substitution therefor new options under the Plan
covering the same or different numbers of shares, but having an option price per
share not less than  eighty-five  percent  (85%) of the Fair Market Value on the
new grant  date or, in the case of an  Incentive  Option,  one  hundred  percent
(100%) of the Fair  Market  Value on the new grant  date (or,  in the case of an
Incentive Option granted to a 10% Stockholder, one hundred ten percent (110%) of
such Fair Market Value).

XI.      ACCELERATION AND TERMINATION OF AWARDS

         (a)  ACCELERATION.  In the event of an  agreement  to dispose of all or
substantially all of the assets or outstanding  capital stock of the Corporation
by means of a sale, merger,  reorganization,  or liquidation, each award will be
automatically  accelerated  so that (1) options  become fully  exercisable  with
respect  to the total  number  of shares  purchasable  under  the  options;  (2)
restrictions  on  restricted  shares  will be  eliminated,  and the shares  will
immediately vest; and (3)

                                       13
<PAGE>

share  rights and share  units will  immediately  vest and become  payable.  The
Committee may also provide for the automatic  termination  of repurchase  rights
upon the occurrence of such an event.

         (b) NO ACCELERATION.  No acceleration of awards will occur if the terms
of the agreement require as a prerequisite to the consummation of any such sale,
merger,  reorganization  or  liquidation  that  each such  award  will be either
assumed by the  successor  corporation  or parent  thereof or be replaced with a
comparable  award  subject  to shares  of the  successor  corporation  or parent
thereof.  The determination of such comparability will be made by the Committee,
and its determination will be final,  binding and conclusive.  Upon consummation
of  the  sale,  merger,   reorganization  or  liquidation  contemplated  by  the
agreement, all awards, whether or not accelerated, will terminate unless assumed
pursuant to a written agreement by the successor corporation or parent thereof.

         (c) CORPORATE STRUCTURE. The grant of awards under this Plan will 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.

XII.  VALUATION

         With  regard to all  Substitute  Options,  Fair  Market  Value  will be
determined in  accordance  with the relevant  option plan  documents on the date
that the outstanding  options were granted.  With regard to awards granted under
this Plan, for all valuation purposes under the Plan, the Fair Market Value of a
share of Common  Stock or  Restricted  Common  Stock (as the case may be) on any
relevant date will be determined in accordance with the following provisions:

         (a) If the Common Stock or  Restricted  Common Stock is not at the time
listed  or  admitted  to  trading  on any stock  exchange,  but is traded in the
over-the-counter  market,  the Fair Market Value will be the average between the
reported  high price and the  reported low price of one share of Common Stock or
Restricted  Common  Stock  (as the case may be) on the date in  question  in the
over-the-counter market, as such prices are reported by the National Association
of Securities Dealers through its NASDAQ system or any successor system.

         (b) If the  Common  Stock  or  Restricted  Common  Stock is at the time
listed or admitted to trading on any stock exchange,  then the Fair Market Value
will be the average  between the reported  high price and the reported low price
of one share of Common Stock or Restricted  Common Stock (as the case may be) on
the date in question on the stock  exchange  that is the primary  market for the
stock, as such prices are officially quoted on such exchange.

         (c) If the Common Stock or Restricted Common Stock (as the case may be)
is at the time neither  listed nor admitted to trading on any stock exchange nor
traded in the  over-the-counter  market,  or if the  Committee  determines  that
neither  subparagraph  (a) nor subparagraph (b) above reflects Fair Market Value
of the stock and the award was not  granted  pursuant  to the  Plan's  Automatic
Award provisions, then the Fair Market Value will be determined by the Committee
after taking into account such factors as the Committee deems appropriate, or in
the case of Automatic Awards, by an independent third party valuation.

                                       14
<PAGE>

XIII.    SURRENDER OF OPTIONS FOR CASH OR STOCK

         (a) STOCK APPRECIATION  RIGHTS.  If, and only if the Committee,  in its
discretion,  elects to implement an option surrender program under the Plan, one
or more option  holders may, upon such terms and conditions as the Committee may
establish at the time of the option grant or at any time thereafter,  be granted
the right to surrender  all or part of an  unexercised  option in exchange for a
distribution equal in amount to the difference between (i) the Fair Market Value
(at date of surrender) of the shares for which the surrendered option or portion
thereof is at the time  exercisable and (ii) the aggregate  option price payable
for such shares.  The  distribution  to which an option holder becomes  entitled
under this  Section may be made in shares of Common Stock or  Restricted  Common
Stock, valued at Fair Market Value at the date of surrender,  in cash, or partly
in shares and partly in cash, as the Committee,  in its sole  discretion,  deems
appropriate.  The option surrender  provisions of this Section will not apply to
options granted pursuant to the Automatic Option Grant provisions of this Plan.

         (b) LIMITED STOCK APPRECIATION  RIGHTS. If outstanding options of Cetus
for which Substitute  Options are issued pursuant to Section III(d) have Limited
Stock Appreciation Rights ("LSARs") attached thereto,  then each such LSAR shall
be  honored  by  the  Corporation  in  accordance  with  its  terms  and  remain
exercisable  for a period of 60 days  following  the date that  stockholders  of
Cetus approve the Merger;  provided,  however,  that if the LSAR was  originally
granted within 6 months of the date that Cetus stockholders  approve the Merger,
then the LSAR will be exercisable  for a period of 60 days following  expiration
of such six-month period.  Upon expiration of the applicable 60-day period, each
such LSAR not previously  exercised shall expire.  Upon exercise of an LSAR, the
related  option  will be  cancelled,  and Chiron  will pay to the LSAR holder an
amount  in cash for each  share  with  respect  to which  the LSAR is  exercised
determined in accordance with the terms of the Cetus Prior Plans.

XIV.  REPURCHASE RIGHTS

         The  Committee  may, in its  discretion,  establish as a term of one or
more awards  granted under the Plan that the  Corporation  (or its assigns) will
have the right,  exercisable  upon the award holder's  termination of employment
with, or cessation of services for, the  Corporation  and its  subsidiaries,  to
repurchase  at the original  price paid,  if any, for such shares of (1) Company
Stock acquired by the award holder  pursuant to the granted award, or (2) Common
Stock into which acquired Restricted Common Stock may have been converted or for
which Restricted Common Stock may have been exchanged. Any such repurchase right
will be  exercisable  by the  Corporation  (or its assigns)  upon such terms and
conditions (including provisions for the expiration of such right in one or more
installments)  as the Committee may specify in the  instrument  evidencing  such
right.  The Committee will also have full power and authority to provide for the
automatic  termination of the  Corporation's  repurchase  rights, in whole or in
part,  thereby  accelerating  the vesting of any or all of the purchased  shares
(other than purchased shares obtained pursuant to the Automatic Award provisions
of this Plan) upon the occurrence of any change in control  specified in Article
XI.

XV.      RIGHT OF FIRST REFUSAL

                                       15
<PAGE>

         The  Committee  may, in its  discretion,  establish as a term of one or
more awards  granted  under the Plan that the  Corporation  has a right of first
refusal  with respect to the  proposed  disposition  by the award holder (or any
successor in interest by reason of purchase,  gift or other mode of transfer) of
any shares of (1) Company  Stock  acquired by the award  holder  pursuant to the
granted award, or (2) Common Stock into which purchased  Restricted Common Stock
may have been converted or for which acquired  Restricted  Common Stock may have
been  exchanged.  Any such right of first  refusal  will be  exercisable  by the
Corporation or its assigns in accordance with the terms and conditions specified
in the instrument evidencing such right.

XVI.     EFFECTIVE DATE AND TERM OF PLAN

         (a) EFFECTIVE DATE. The Plan became effective on December 10, 1991, the
date  that it was  approved  by the  Corporation's  stockholders.  The  Plan was
subsequently amended on several occasions and, as amended through March 8, 1996,
was approved by the  Corporation's  stockholders  on May 16, 1996.  The Plan was
further amended on February 28, 1997, and as amended  through  February 28, 1997
was approved by the  Corporation's  stockholders  on May 15, 1997.  The Plan was
further amended on September 21, 2000, to allow the Corporation to grant options
in connection with a merger with an option price per share less than eighty-five
percent  (85%) of the Fair Market Value of the option  shares on the grant date,
in substitution  for the outstanding  options of the acquired  company,  if such
price is intended to preserve the option price of the  outstanding  options,  as
adjusted for the merger.

         (b) TERM. Incentive Options may be granted under the Plan until May 14,
2007,  and may not be issued  under the Plan after  that  date.  Subject to this
limitation,  the Committee may grant awards under the Plan at any time after the
Effective Date of the Plan and before the Plan is terminated by the Board.

XVII.    AMENDMENT OR DISCONTINUANCE

         (a) BOARD.  The Board may amend,  suspend  or  discontinue  the Plan in
whole or in part at any time; provided,  however,  that (a) except to the extent
necessary to qualify as Incentive  Options any or all options  granted under the
Plan that are intended to so qualify,  such action may not,  without the consent
of the award holder,  adversely  affect rights and  obligations  with respect to
awards  outstanding under the Plan; (b) certain amendments may, as determined by
the Board in its sole  discretion,  require  stockholder  approval  pursuant  to
applicable laws or regulations.

         (b)  COMMITTEE.  The  Committee  will have full power and  authority to
modify or waive any or all of the terms,  conditions or restrictions  applicable
to any outstanding award (other than Automatic Option Grants), to the extent not
inconsistent with the Plan.

         (c) SUBSTITUTE OPTIONS. Substitute Options will be subject to amendment
in accordance with the terms of this Plan.

XVIII.     NO OBLIGATION

                                       16
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         Nothing contained in the Plan (or in any award granted under this Plan,
a Chiron  Prior Plan or a Cetus  Prior Plan)  shall  confer  upon any  employee,
consultant, or independent contractor any right to continue in the employ of, or
to provide  services  to, the  Corporation  or any  affiliate  or  constitute  a
contract or  agreement  of  employment  or for the  provision  of  services,  or
interfere in any way with the right of the Corporation or an affiliate to reduce
such employee's,  consultant's or independent contractor's compensation from the
rate in existence  at the time of the granting of an award or to terminate  such
employee's,  consultant's or independent  contractor's employment or services at
any time,  with or without  cause;  but nothing  contained in the Plan or in any
award granted under this Plan shall affect any contractual rights of an employee
pursuant to a written employment agreement.

XIX.     USE OF PROCEEDS

         The cash  proceeds  received  by the  Corporation  pursuant  to  awards
granted under the Plan will be used for general corporate purposes.

XX.      COMPLIANCE

         (a)  FEDERAL  AND STATE  LAWS.  No  option  may be  exercised,  and the
Corporation will not be obligated to issue stock under any award unless,  in the
opinion of  counsel  for the  Corporation,  such  exercise  and  issuance  is in
compliance with all applicable federal and state securities laws. As a condition
to the grant of any award,  or to the  issuance  of stock  under any award,  the
Committee may require that the award holder agree to comply with such provisions
of federal and state  securities  laws as may be applicable to such grant, or to
the sale of stock  acquired  pursuant  to the Plan,  and that the  award  holder
deliver  to  the  Corporation  a  written  agreement,   in  form  and  substance
satisfactory to the Corporation and its counsel, implementing such agreement.

         (b)  INFORMATION.  The  Corporation  will  furnish to each award holder
participating  in the Plan (other  than a key  employee or a director) a copy of
the Corporation's Annual Report to Stockholders for the most recent fiscal year,
and additional  copies will be furnished,  without charge, to such award holders
upon request to the Secretary of the Corporation.

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                                   APPENDIX A

            SPECIAL PROVISIONS RELATED TO 1995 CIBA-GEIGY TRANSACTION

         Those persons  holding  options to acquire shares of Common Stock under
the  Corporation's  1991 Stock  Option Plan on November 20, 1994 are granted the
following rights ("Rights") with respect to each such option:

                  (i) the right to receive  upon the closing of the tender offer
         contemplated  under the Investment  Agreement entered into on such date
         among the Corporation and Ciba-Geigy  Limited,  Ciba-Geigy  Corporation
         and Ciba Biotech Partnership, Inc. (the "Closing") a cash payment equal
         to (A) 37.33% of the number of shares of Common  Stock with  respect to
         which each such option would first become  exercisable in calendar year
         1995  multiplied by (B) the  difference  between $117 per share and the
         exercise price per share of such option with respect to such shares and

                  (ii) with  respect  to the  remaining  shares of Common  Stock
         subject to each such option,  the right,  exercisable at any time after
         the later of the Closing or the date that such an option first  becomes
         exercisable  with respect to such shares,  to surrender that portion of
         such  option  relating  to 37.33% of such  shares in return  for a cash
         payment  equal  (A) to the  difference  between  $117 per share and the
         exercise price per share of such option multiplied by (B) the number of
         shares with  respect to which such option is so  surrendered.  However,
         the grant and exercise of any such right with respect to any officer or
         director  subject to Section 16 of the Securities  Exchange Act of 1934
         shall be subject to stockholder approval of the grant of such rights at
         the Corporation's 1995 stockholder  meeting.  The grant of such rights,
         which are made with  respect to 1,858,776  optioned  shares shall be in
         addition  to, and shall not count  against,  the  aggregate  and annual
         limits on the number of shares with respect to which other awards under
         the Plan may be made to all individuals and/or a single individual.

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