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                                                                    EXHIBIT 4(f)

                          ALARIS MEDICAL SYSTEMS, INC.
                             1996 STOCK OPTION PLAN

                      (as last amended on October 29, 2002)
          (as further modified to reflect name change on June 30, 2003)

1.    NAME. The name of this plan is the ALARIS Medical Systems, Inc. (formerly
ALARIS Medical, Inc.) 1996 Stock Option Plan.

2.    DEFINITIONS. For the purposes of the Plan, the following terms shall be
defined as set forth below:

      (a) "Affiliate" means any partnership, corporation, firm, joint venture,
association, trust, unincorporated organization or other entity (other than a
Subsidiary) that, directly or indirectly through one or more intermediaries, is
controlled by the Company, where the term "controlled by" means the possession,
direct or indirect, of the power to cause the direction of the management and
policies of such entity, whether through the ownership of voting interests or
voting securities, as the case may be, by contract or otherwise. For purposes of
Section 11 below, "Affiliate" means any partnership, corporation, firm, joint
venture, association, trust, unincorporated organization or other entity that,
directly or indirectly through one or more intermediaries, is "controlled by"
(as defined above) Jeffry M. Picower or the Picower Group (as defined in Section
11(b)(i) below).

      (a) "Board" means the board of directors of the Company.

      (c) "Cause" as applied to any Participant means: (i) the conviction of
such individual for the commission of any felony; (ii) the commission by such
individual of any crime involving moral turpitude (e.g., larceny, embezzlement)
which results in harm to the business, reputation, prospects or financial
condition of the Company, any Subsidiary or Affiliate; or (iii) the willful
neglect, failure or refusal of such individual to carry out his duties, which
results in harm to the business, reputation, prospects or financial condition of
the Company, any Subsidiary or Affiliate, which neglect, failure or refusal
continues for a period of ten consecutive business days following notice
thereof, or ten cumulative business days following successive notices thereof,
to such individual from the Company; provided, however, that such willful
neglect, failure or refusal is not due to the death or disability (i.e., as a
result of an injury or sickness such individual is rendered unable to perform
his duties as an Officer, Employee, consultant or independent contractor, as the
case may be, on a full-time basis for an extended period) of such individual or
illness leading to the death or disability of such individual.

      (d) "Closing Price" means, except as otherwise reasonably determined by
the Committee based on reported prices of a Share, (i) the daily closing price
of a Share as reported in the American Stock Exchange (or the principal exchange
on which the Shares are then traded) composite transactions published in the
Eastern Edition of THE WALL STREET JOURNAL or (ii) if the Shares are traded in
the over-the-counter market, the daily average of the highest bid and lowest
asked prices per Share as reported through the Nasdaq system or any successor
thereto.

      (e) "Code" means the Internal Revenue Code of 1986, as amended from time
to time and the Treasury regulations promulgated thereunder.

      (f) "Committee" means the Board or a committee appointed by the Board to
administer the Plan as provided in Section 4(a).

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      (g) "Common Stock" means the $.01 par value common stock of the Company or
any security of the Company identified by the Committee as having been issued in
substitution or exchange therefor or in lieu thereof.

      (h) "Company" means ALARIS Medical Systems, Inc. (formerly ALARIS Medical,
Inc.), a Delaware corporation.

      (i) "Director" means an individual who: (i) is now, or hereafter becomes,
a member of the Board or of the board of directors of any Subsidiary or
Affiliate; and (ii) is not eligible to participate in the Non-Employee Director
NQSO Plan.

      (j) "Employee" means an individual employed by the Company, a Subsidiary,
or an Affiliate whose wages, if an employee in the United States, are subject to
the withholding of federal income tax under Section 3401 of the Code.

      (k) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute.

      (l) "Fair Market Value" of a Share as of a specified date means, except as
otherwise reasonably determined by the Committee based on reported prices of a
Share, (i) the average of the highest and lowest market prices of a Share on
such date as reported in the American Stock Exchange (or the principal exchange
on which the Shares are then traded) composite transactions published in the
Eastern Edition of THE WALL STREET JOURNAL or, if no trading of Common Stock is
reported for that day, the next preceding day on which trading was reported, or
(ii) if the Shares are traded in the over-the-counter market, the average of the
highest bid and lowest asked prices per Share on the specified date (or the next
preceding date on which trading was reported) as reported through the Nasdaq
system or any successor thereto.

      (m) "ISO" means any stock option granted pursuant to the Plan that is
intended to be and is specifically designated as an "incentive stock option"
within the meaning of Section 422 of the Code.

      (n) "Non-Employee Director NQSO Plan" means the Company's Non-Employee
Director Stock Option Plan, as may be amended from time to time.

      (o) "NQSO" means any stock option granted pursuant to the provisions of
the Plan that is not an ISO.

      (p) "Officer" means an individual elected or appointed by the Board or by
the board of directors of a Subsidiary or Affiliate or chosen in such other
manner as may be prescribed by the by-laws of the Company, a Subsidiary or
Affiliate, as the case may be, to serve as such, or, in the case of an Affiliate
which is not a corporation, any individual elected or appointed to fulfill a
similar function by a body or individual exercising similar authority.

      (q) "Option" means an ISO or a NQSO (including a NQSO which is designated
as a Performance Option) granted under the Plan.

      (r) "Participant" means an individual who is granted an Option under the
Plan.

      (s) "Performance Option" means any NQSO which is designated as a
Performance Option and is subject to the performance vesting provisions set
forth in Section 9(d) and the Stock Option Agreement.

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      (t) "Plan" means this ALARIS Medical Systems, Inc. (formerly ALARIS
Medical, Inc.) 1996 Stock Option Plan, as it may be amended from time to time.

      (u) "Rule 16b-3" means Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act, or any successor or replacement rule
adopted by the Securities and Exchange Commission.

      (v) "Share" means one share of Common Stock, adjusted in accordance with
Section 10(b), if applicable.

      (w) "Stock Option Agreement" means the written agreement between the
Company and the Participant that contains the terms and conditions pertaining to
an Option.

      (x) "Subsidiary" means any corporation of which the Company, directly or
indirectly, is the beneficial owner of fifty percent (50%) or more of the total
combined voting power of all classes of its stock having voting power and which
qualifies as a subsidiary corporation pursuant to Section 424(f) of the Code.

      (y) "Target Date" means the date, as described in Section 9(d), on which a
Target Price is achieved with respect to a Performance Option.

      (z) "Target Price" means a target price of a Share, as determined by the
Committee in its sole and absolute discretion and so designated in the Stock
Option Agreement, upon the attainment of which the applicable Vesting Percentage
portion of a Performance Option shall become vested, as described in Section
9(d).

      (aa) "Ten Percent Stockholder" means a Participant who prior to the grant
of an ISO owned, directly or indirectly within the meaning of Section 424(d) of
the Code, ten percent (10%) or more of the total combined voting power of all
classes of stock of the Company, any Subsidiary or any parent of the Company (as
defined in Section 424(e) of the Code).

      (bb) "Vesting Percentage" means a specified percentage of a Performance
Option, as determined by the Committee in its sole and absolute discretion and
set forth in the Stock Option Agreement, which shall become vested upon the
attainment of a Target Price in accordance with Section 9(d).

3.    PURPOSE. The purpose of the Plan is to enable the Company to provide
incentives, which are linked directly to increases in stockholder value, to
certain key personnel in order that they will be encouraged to promote the
financial success and progress of the Company.

4.    ADMINISTRATION.

      (a) COMPOSITION OF THE COMMITTEE. The Plan shall be administered by the
Board or a committee appointed by the Board. Members of that committee shall not
be entitled to participate in the Plan. Subject to the provisions of the first
sentence of this Section 4(a), the Board may from time to time remove members
from, or add members to, that committee. Vacancies on that committee, however
caused, shall be filled by the Board.

      (b) ACTIONS BY THE COMMITTEE. The Committee shall hold meetings (in person
or telephonically) at such times and places as it may determine. Acts approved
by a majority of the members

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of the Committee present at a meeting at which a quorum is present, or acts
reduced to or approved in writing by a majority of the members of the Committee,
shall be the valid acts of the Committee.

      (c) POWERS OF THE COMMITTEE. Subject to the express terms and conditions
hereof, the Committee shall have the authority to administer the Plan in its
sole and absolute discretion. To this end, the Committee is authorized to
construe and interpret the Plan and to make all other determinations necessary
or advisable for the administration of the Plan, including, but not limited to,
the authority to determine the eligible individuals who shall be granted
Options, the number of Options to be granted, the vesting period, if any, for
all Options granted hereunder, the date on which any Option becomes first
exercisable, the number of Shares subject to each Option, the exercise price for
the Shares subject to each Option, and, whether the Option to be granted is an
ISO or a NQSO. The Committee may delegate to an Officer its authority to grant
Options to eligible individuals under the Plan who are not Officers; provided,
however, that Options to purchase no more than 50,000 Shares may be granted to
any individual in any calendar year pursuant to such delegation of authority.
Any determination, decision or action of the Committee in connection with the
construction, interpretation, administration or application of the Plan shall be
final, conclusive and binding upon all Participants and any person validly
claiming under or through a Participant.

      (d) LIABILITY OF COMMITTEE MEMBERS. No member of the Board or the
Committee will be liable for any action or determination made in good faith by
the Board or the Committee with respect to the Plan or any grant or exercise of
an Option thereunder.

      (e) OPTION ACCOUNTS. The Committee shall maintain or cause to be
maintained a journal in which a separate account for each Participant shall be
established. Whenever an Option is granted to or exercised by a Participant, the
Participant's account shall be appropriately credited or debited. Appropriate
adjustment shall also be made in the journal with respect to each account in the
event of an adjustment pursuant to Section 10(b).

5.    EFFECTIVE DATE AND TERM OF THE PLAN.

      (a) EFFECTIVE DATE OF THE PLAN. The Plan was adopted by the Board on
November 26, 1996, and became effective on such date, subject to approval by the
stockholders of the Company, which was obtained at a meeting held on June 11,
1997. An amendment of the Plan was approved by the Board and became effective on
May 28, 1998, subject to approval by the stockholders of the Company, which was
obtained at a meeting held on June 24, 1998. A further amendment of the Plan was
approved by the Board and became effective on December 23, 1999, subject to
approval by the stockholders of the Company, which was obtained at a meeting
held on May 31, 2000. A further amendment of the Plan was approved by the Board
and became effective on January 1, 2002. The Plan was last amended by the Board
on October 29, 2002, as set forth herein, and became effective on such date,
subject to approval by the stockholders of the Company at a meeting duly called
and held within twelve months following such date.

      (b) TERM OF PLAN. No Option shall be granted pursuant to the Plan on or
after November 26, 2006, but Options theretofore granted may extend beyond that
date.

6.    TYPE OF OPTIONS AND SHARES SUBJECT TO THE PLAN. Options granted under the
Plan may be either ISOs or NQSOs. Each Option that is a Performance Option must
be a NQSO. Each Stock Option Agreement shall specify whether the Option covered
thereby is an ISO or a NQSO and, in the case of a NQSO, whether the Option is a
Performance Option. No Performance Options shall be granted under the Plan on or
after October 29, 2002.

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The maximum aggregate number of Shares that may be issued with respect to
Options under the Plan is 11,000,000 Shares. However, no more than 1,000,000
Shares (subject to adjustment as described below) shall be awarded with respect
to any one or more Options granted to any Participant in any calendar year. The
limitation on the number of Shares which may be granted under the Plan shall be
subject to adjustment as provided in Section 10(b).

If any Option granted under the Plan expires or is terminated for any reason,
any Shares as to which the Option has not been exercised shall again be
available for purchase under Options subsequently granted. At all times during
the term of the Plan, the Company shall reserve and keep available for issuance
such number of Shares as the Company is obligated to issue upon the exercise of
all then outstanding Options.

7.    SOURCE OF SHARES ISSUED UNDER THE PLAN. Common Stock issued under the Plan
may consist, in whole or in part, of authorized or unissued Shares or treasury
Shares, as determined in the sole and absolute discretion of the Committee. No
fractional Shares shall be issued under the Plan.

8.    ELIGIBILITY. The individuals eligible for the grant of Options under the
Plan shall be: (i) all Directors, Officers and Employees; and (ii) such
individuals determined by the Committee to be rendering substantial services as
a consultant or independent contractor to the Company or any Subsidiary or
Affiliate of the Company, as the Committee shall determine from time to time in
its sole and absolute discretion; provided, however, that (i) only Employees of
the Company or any Subsidiary shall be eligible to receive ISOs, and (ii) only
Officers and Employees who are appointed or designated as corporate or
divisional vice presidents or directors of the Company (and such other
categories of Employees and consultants and independent contractors as shall be
specifically approved by the Committee) shall be eligible to receive Performance
Options. Any Participant shall be eligible to be granted more than one Option
hereunder.

9.    OPTIONS.

      (a) GRANT OF OPTIONS. Subject to any applicable requirements of the Code
and any regulations issued thereunder, the date of the grant of an Option shall
be the date on which the Committee determines to grant the Option.

      (b) EXERCISE PRICE OF ISOS AND PERFORMANCE OPTIONS. The exercise price of
each Share subject to an ISO or a Performance Option shall be determined by the
Committee but shall not be less than the Fair Market Value of a Share on the
date of grant of the ISO or Performance Option, as the case may be; provided,
however, except that in the case of a grant of an ISO to a Participant who at
the time such ISO was granted was a Ten Percent Stockholder, the exercise price
shall not be less than 110% of the Fair Market Value of a Share on the date of
grant of the ISO.

      (c) EXERCISE PRICE OF NQSOS (OTHER THAN PERFORMANCE OPTIONS). The exercise
price of each Share subject to a NQSO (other than a Performance Option) shall be
determined by the Committee at the time of grant but shall not be less than the
par value of a Share.

      (d) EXERCISE PERIOD. Each Option granted hereunder shall vest and become
first exercisable as determined by the Committee in its sole and absolute
discretion and set forth in the Stock Option Agreement. Notwithstanding the
foregoing, the vesting schedule applicable to each Performance Option shall be
subject to the following requirements; provided, however, that notwithstanding
the failure to achieve any applicable Target Price(s), an outstanding
Performance Option shall vest on the date that is seven (7) years after the date
of grant of the Performance Option.

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            (i) The Committee shall designate one or more Vesting Percentage(s)
and a Target Price applicable to each such Vesting Percentage(s) with respect to
each Performance Option granted pursuant to this Plan. The total sum of such
designated Vesting Percentage(s), (or, in the case of only one Vesting
Percentage, such Vesting Percentage) shall equal 100% of such Performance
Option.

            (ii) That portion of each Performance Option equal to a designated
Vesting Percentage shall vest and become first exercisable on the date ("Target
Date") on which the Closing Price has equaled or exceeded the Target Price
applicable to such Vesting Percentage with respect to the Shares on each day
(with exception permitted for up to six days) during the ninety calendar day
period preceding such Target Date.

      (e) TERMS AND CONDITIONS. All Options granted pursuant to the Plan shall
be evidenced by a Stock Option Agreement (which need not be the same for each
Participant or Option), approved by the Committee which shall be subject to the
following express terms and conditions and the other terms and conditions as are
set forth in this Section 9, and to such other terms and conditions as shall be
determined by the Committee in its sole and absolute discretion which are not
inconsistent with the terms of the Plan:

            (i) the failure of an Option to vest when due to vest pursuant to
its terms for any reason whatsoever shall cause the unvested Option to expire
and be of no further force or effect;

            (ii) unless terminated earlier pursuant to Sections 9(i) or 11, the
term of any Option granted under the Plan shall be specified in the Stock Option
Agreement but shall be no greater than ten years from the date of grant;
provided, however, that no ISO granted to a Ten Percent Stockholder shall have a
term of more than five years from the date of grant;

            (iii) the Committee shall have the discretion to accelerate vesting
upon termination of employment of a Participant.

            (iv) in the case of an ISO, the aggregate Fair Market Value
(determined as of the time the ISO is granted) of Shares exercisable for the
first time by a Participant during any calendar year (under the Plan and any
other incentive stock option plans of the Company, any Subsidiary or any parent
of the Company (as defined in Section 424(e) of the Code) shall not exceed
$100,000;

            (v) no Option or interest therein may be pledged, hypothecated,
encumbered or otherwise made subject to execution, attachment or similar
process, and no Option or interest therein shall be assignable or transferable
by the holder otherwise than by will or by the laws of descent and distribution
or to a beneficiary upon the death of a Participant, and an Option shall be
exercisable during the lifetime of the holder only by him or by his guardian or
legal representative, except that an Option (other than an ISO) may be
transferred to one or more transferees during the lifetime of the Participant,
and may be exercised by such transferee in accordance with the terms of such
Option, but only if and to the extent such transfers are permitted by the
Committee pursuant to the express terms of the Stock Option Agreement (subject
to any terms and conditions which the Committee may impose thereon). A
transferee or other person claiming any rights under the Plan from or through
any Participant shall be subject to all terms and conditions of the Plan and any
Stock Option Agreement applicable to such Participant, except as otherwise
determined by the Committee, and to any additional terms and conditions deemed
necessary or appropriate by the Committee; and

            (vi) payment for the Shares to be received upon exercise of an
Option may be made in cash or, if so provided by the Committee in the Stock
Option Agreement, in Shares (determined with

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reference to their Fair Market Value on the date of exercise), or any
combination thereof acceptable to the Company.

      (f) ADDITIONAL MEANS OF PAYMENT. Any Stock Option Agreement may, in the
sole and absolute discretion of the Committee, permit payment by any other form
of legal consideration consistent with applicable law and any rules and
regulations relating thereto, including, but not limited to, the execution and
delivery of a full recourse promissory note by the Participant to the Company.

      (g) EXERCISE. The holder of an Option may exercise the same by filing with
the Corporate Secretary of the Company a written election, in such form as the
Committee may determine, specifying the number of Shares with respect to which
such Option is being exercised, and accompanied by payment in full of the
exercise price for such Shares. Notwithstanding the foregoing, the Committee may
specify a reasonable minimum number of Shares that may be purchased on any
exercise of an Option, provided that such minimum number will not prevent the
Participant from exercising the Option with respect to the full number of Shares
as to which the Option is then exercisable.

      (h) WITHHOLDING TAXES. Prior to issuance of the Shares upon exercise of an
Option, the Participant shall pay or make adequate provision for the payment of
any federal, state, local or foreign withholding obligations of the Company or
any Subsidiary or Affiliate of the Company, if applicable. In the event a
Participant shall fail to make adequate provision for the payment of such
obligations, the Company shall have the right to withhold an amount of Shares
otherwise deliverable to the Participant sufficient to pay such withholding
obligations or, in the discretion of the Committee, to refuse to honor the
exercise.

      (i) TERMINATION OF OPTIONS. Options granted under the Plan shall be
subject to the following events of termination, unless otherwise provided in the
Stock Option Agreement:

            (i) in the event a Participant who is a Director (but not an Officer
or Employee) is removed from the Board or the board of directors of a Subsidiary
or an Affiliate, as the case may be, for cause (as contemplated by the charter,
by-laws or other organizational or governing documents), all unexercised Options
held by such Participant on the date of such removal (whether or not vested)
shall expire immediately;

            (ii) in the event the employment of a Participant who is an Officer
or Employee is terminated for Cause, or in the event the services of a
Participant who is a consultant or independent contractor are terminated for
Cause, all unexercised Options held by such Participant on the date of such
termination (whether or not vested) shall expire immediately;

            (iii) in the event a Participant ceases to be a Director, Officer or
Employee as a result of death or disability (within the meaning of the Company's
long-term disability plan as then in effect), the Option shall expire one year
thereafter;

            (iv) in the event the Participant ceases to be a Director, Officer
or Employee after attainment of age 55 and after completing five years of
employment with the Company (measured from the Optionee's most recent date of
hire), the Option shall expire three (3) years thereafter; and

            (v) in the event a Participant is no longer a Director, Officer,
Employee, consultant or independent contractor, other than for the reasons set
forth in Sections 9(i)(i), 9(i)(ii), 9(i)(iii) and 9(i)(iv), all Options which
remain unvested on the date the Participant ceases to be a Director, Officer or
Employee, as the case may be, shall expire immediately, and all Options which
have vested prior to such date shall expire three (3) months thereafter unless
by their terms they expire sooner.

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10.   RECAPITALIZATION.

      (a) CORPORATE FLEXIBILITY. The existence of the Plan and the Options
granted hereunder shall not affect or restrict in any way the right or power of
the Board or the stockholders of the Company, in their sole and absolute
discretion, to make, authorize or consummate any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company, any issue of bonds,
debentures, common stock, preferred or prior preference stock ahead of or
affecting the Company's capital stock or the rights thereof, the dissolution or
liquidation of the Company or any sale or transfer of all or any part of its
assets or business, or any other grant of rights, issuance of securities,
transaction, corporate act or proceeding and notwithstanding the fact that any
such activity, proceeding, action, transaction or other event may have, or be
expected to have, an impact (whether positive or negative) on the value of any
Option or underlying Shares.

      (b) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Except as otherwise
provided in Section 11, in the event of any change in capitalization affecting
the Common Stock of the Company, such as a stock dividend, stock split or
recapitalization, the Committee shall make proportionate adjustments with
respect to: (i) the aggregate number of Shares available for issuance under the
Plan; (ii) the number of Shares available for any individual award; (iii) the
number and exercise price of Shares subject to outstanding Options; provided,
however, that the number of Shares subject to any Option shall always be a whole
number; (iv) the Target Price with respect to any Performance Options; and (v)
such other matters as shall be appropriate in light of the circumstances.

11.   CHANGE OF CONTROL.

      (a) In the event of a Change of Control (as defined below), unless
otherwise determined by the Committee at the time of grant or by amendment (with
the holder's consent) of such grant, all Options (other than Performance
Options) not vested on or prior to the effective time of any such Change of
Control shall vest immediately prior to such effective time. Unless otherwise
determined by the Committee in the Stock Option Agreement or at the time of a
Change of Control, in the event of a Change of Control, all outstanding Options
(including Performance Options) shall terminate and cease to be outstanding
immediately following the Change of Control; provided, however, that no such
Option termination shall occur unless a Participant shall have been given five
business days, following prior written notice, to exercise such Participant's
outstanding vested Options at the effective time of the Change of Control, or at
the discretion of the Committee to receive cash in an amount per Share subject
to such Options equal to the amount by which the price paid for a Share
(determined on a fully diluted basis and taking into account the exercise price,
as determined by the Committee) in the Change of Control exceeds the per share
exercise price of such Options. The Committee in its sole and absolute
discretion may make provisions for the assumption of outstanding Options, or the
substitution for outstanding Options of new incentive awards covering the stock
of a successor corporation or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices so as to prevent
dilution or enlargement of rights.

      (b) A "Change of Control" will be deemed to occur on the date any of the
following events occur:

            (i) any person or persons acting together which would constitute a
"group" for purposes of Section 13(d) of the Exchange Act (other than the
Company, any Subsidiary and Jeffry M. Picower (including, any of his Affiliates
and any lineal descendant of Mr. Picower, any widow or then current spouse of
Mr. Picower or of any such lineal descendant, a trust established principally
for the benefit of any of the foregoing, any entity which is at least 90%
beneficially owned by any of the

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foregoing, and the executor, administrator or personal representative of the
estate of any of the foregoing (any one or more of the foregoing being sometimes
referred to herein as the "Picower Group")) beneficially own (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, securities of the Company
or any Significant Subsidiary (as defined below) representing greater than 10%
of the total combined voting power of the Company or the Significant Subsidiary
entitled to vote in the election of the board of directors of the Company or the
Significant Subsidiary; provided, however, that such event shall not constitute
a Change of Control unless and until the combined voting power of such
securities owned beneficially, directly or indirectly, by such person or persons
is greater than the combined voting power of all such securities owned
beneficially, directly or indirectly, by Mr. Picower and the Picower Group;

            (ii) persons other than the Current Directors (as herein defined)
constitute a majority of the members of the Board (for these purposes, a
"Current Director" means any member of the Board as of November 27, 1996, and
any successor of any such member whose election, or nomination for election by
the Company's stockholders, was approved by at least a majority of the Current
Directors then on the Board or by Mr. Picower or the Picower Group);

            (iii) the consummation of (A) a plan of liquidation of all or
substantially all of the assets of the Company or any Subsidiary owning directly
or indirectly all or substantially all of the consolidated assets of the Company
(a "Significant Subsidiary"), or (B) an agreement providing for the merger or
consolidation of the Company or a Significant Subsidiary (1) in which the
Company or the Significant Subsidiary is not the continuing or surviving
corporation (other than a consolidation or merger with a wholly-owned subsidiary
of the Company in which all shares of Common Stock of the Company or common
stock in the Significant Subsidiary outstanding immediately prior to the
effectiveness thereof are changed into or exchanged for all or substantially all
of the common stock of the surviving corporation and (if the Company ceases to
exist) the surviving corporation assumes all outstanding Options) or (2)
pursuant to which, even though the Company is the continuing or surviving
corporation, the shares of Common Stock of the Company or common stock in the
Significant Subsidiary are converted into cash, securities or other property;
provided, however, that no "Change of Control" shall be deemed to occur as the
result of a consolidation or merger of the Company or a Significant Subsidiary
in which the holders of the shares of Common Stock of the Company immediately
prior to the consolidation or merger have, as a result thereof, directly or
indirectly, at least a majority of the combined voting power of all classes of
voting stock of the continuing or surviving corporation or its parent
immediately after such consolidation or merger or in which the Board immediately
prior to the merger or consolidation would, immediately after the merger or
consolidation, constitute a majority of the board of directors of the continuing
or surviving corporation or its parent; or

            (iv) the consummation of an agreement (or agreements) providing for
the sale or other disposition (in one transaction or a series of transactions)
of all or substantially all of the assets of the Company or a Significant
Subsidiary other than such a sale or disposition immediately after which such
assets will be owned directly or indirectly by the stockholders of the Company
in substantially the same proportions as their ownership of the shares of Common
Stock immediately prior to such sale or disposition.

      (c) Notwithstanding the foregoing provisions of this Section 11, unless
otherwise determined by the Committee at the time of grant or by amendment (with
the holder's consent) of such grant, in the event of a Sale Transaction (as
defined below), all Performance Options not fully vested on or prior to the
effective time of any such Sale Transaction shall vest immediately prior to such
effective time, in whole or in part, if and only to the extent the price to be
paid per Share (determined on a fully diluted basis and taking into account the
exercise price, as determined by the Committee) in the Sale Transaction equals
or exceeds the Target Price with respect to the applicable vesting percentage of
such Performance Option.

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For purposes of this Section 11, a "Sale Transaction" will be deemed to have
occurred on the date any of the following events shall have occurred:

            (i) any person or persons acting together which would constitute a
"group" for purposes of Section 13(d) of the Exchange Act (other than the
Company, any Subsidiary, Jeffry M. Picower and the Picower Group) acquire all or
substantially all of the Common Stock of the Company;

            (ii) the consummation of (A) a plan of liquidation of all or
substantially all of the assets of the Company, or (B) an agreement providing
for the merger or consolidation of the Company (1) in which the Company is not
the continuing or surviving corporation (other than a consolidation or merger
with a wholly-owned subsidiary of the Company in which all shares of Common
Stock outstanding immediately prior to the effectiveness thereof are changed
into or exchanged for all or substantially all of the common stock of the
surviving corporation and (if the Company ceases to exist) the surviving
corporation assumes all outstanding Options) or (2) pursuant to which, even
though the Company is the continuing or surviving corporation, the shares of
Common Stock are converted into cash, securities or other property; provided,
however, that no "Sale Transaction" shall be deemed to occur as the result of a
consolidation or merger of the Company in which the holders of the shares of
Common Stock immediately prior to the consolidation or merger have, as a result
thereof, directly or indirectly, at least a majority of the combined voting
power of all classes of voting stock of the continuing or surviving corporation
or its parent immediately after such consolidation or merger or in which the
Board immediately prior to the merger or consolidation would, immediately after
the merger or consolidation, constitute a majority of the board of directors of
the continuing or surviving corporation or its parent; or

            (iii) the consummation of an agreement (or agreements) providing for
the sale or other disposition (in one transaction or a series of transactions)
of all or substantially all of the assets of the Company other than such a sale
or disposition immediately after which such assets will be owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of the shares of common stock of the Company
immediately prior to such sale or disposition.

12.   SECURITIES LAW REQUIREMENTS. No Shares shall be issued under the Plan
unless and until: (i) the Company and the Participant have taken all actions
required to register the Shares under the Securities Act of 1933, as amended, or
perfect an exemption from the registration requirements thereof; (ii) any
applicable listing requirement of any stock exchange or national market system
on which the Common Stock is listed has been satisfied; and (iii) any other
applicable provision of state or federal law has been satisfied. The Company
shall be under no obligation to register the Shares with the Securities and
Exchange Commission or to effect compliance with the registration or
qualification requirements of any state securities laws or stock exchange.

13.   AMENDMENT AND TERMINATION.

      (a) MODIFICATIONS TO THE PLAN. The Board may, insofar as permitted by law,
from time to time, with respect to any Shares at the time not subject to
Options, suspend or terminate the Plan or revise or amend the Plan in any
respect whatsoever. However, unless the Board specifically otherwise provides,
any revision or amendment that would cause the Plan to fail to comply with
Section 422 or 162(m) of the Code or any other requirement of applicable law or
regulation if such amendment were not approved by the stockholders of the
Company, shall not be effective unless and until such approval is obtained.

                                       10
<PAGE>

      (b) RIGHTS OF PARTICIPANT. No amendment, suspension or termination of the
Plan or of any Option that would adversely affect the right of any Participant
with respect to an Option previously granted under the Plan will be effective
without the written consent of the affected Participant.

14.   MISCELLANEOUS.

      (a) STOCKHOLDERS' RIGHTS. No Participant and no beneficiary or other
person claiming under or through such Participant shall acquire any rights as a
stockholder of the Company by virtue of such Participant having been granted an
Option under the Plan. No Participant and no beneficiary or other person
claiming under or through such Participant will have any right, title or
interest in or to any Shares allocated or reserved under the Plan or subject to
any Option, except as to Shares, if any, that have been issued or transferred to
such Participant. No adjustment shall be made for dividends or distributions or
other rights for which the record date is prior to the date of exercise of an
Option, except as may be provided in the Stock Option Agreement.

      (b) OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the Plan shall
prevent the Board from adopting other compensation arrangements, subject to
stockholder approval if such approval is required. Such other arrangements may
be either generally applicable or applicable only in specific cases.

      (c) TREATMENT OF PROCEEDS. Proceeds realized from the exercise of Options
under the Plan shall constitute general funds of the Company.

      (d) COSTS OF THE PLAN. The costs and expenses of administering the Plan
shall be borne by the Company.

      (e) NO RIGHT TO CONTINUE EMPLOYMENT OR SERVICES. Nothing contained in the
Plan or in any instrument executed pursuant to the Plan will confer upon any
Participant any right to continue to render services to the Company, a
Subsidiary or Affiliate; to continue as a Director, Officer, Employee,
consultant or independent contractor; or affect the right of the Company, a
Subsidiary, an Affiliate, the Board, the board of directors of a Subsidiary or
an Affiliate, the stockholders of the Company or a Subsidiary, or the holders of
interests of an Affiliate, as applicable, to terminate the directorship, office,
employment or consultant or independent contractor relationship, as the case may
be, of any Participant at any time with or without Cause. The term "Cause" as
defined herein is included solely for the purposes of the Plan and is not, and
shall not be deemed to be: (i) a restriction on the right of the Company, a
Subsidiary or Affiliate, as the case may be, to terminate any Officer or
Employee for any reason whatsoever; or (ii) a part of the employment
relationship (whether oral or written, express or implied) of any such
individual.

      (f) SEVERABILITY. The provisions of the Plan shall be deemed severable and
the validity or unenforceability of any provision shall not affect the validity
or enforceability of the other provisions hereof.

      (g) GOVERNING LAW. The Plan and all actions taken thereunder shall be
enforced, governed and construed by and interpreted under the laws of the State
of Delaware applicable to contracts made and to be performed wholly within such
State without giving effect to the principles of conflict of laws thereof.

      (h) HEADINGS. The headings contained in this Plan are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Plan.

                                       11<PAGE>

                                                                    EXHIBIT 4(g)

                           THIRD AMENDED AND RESTATED
                             1988 STOCK OPTION PLAN

      1.    NAME.

      The name of this plan is the Third Amended and Restated 1988 Stock Option
Plan.

      2.    DEFINITIONS.

      For the purposes of the Plan, the following terms shall be defined as set
forth below:

      (a)   "Affiliate" means any partnership, corporation, firm, joint venture,
            association, trust, unincorporated organization or other entity
            (other than a Subsidiary) that, directly or indirectly through one
            or more intermediaries, is controlled by the Company, where the term
            "controlled by" means the possession, direct or indirect, of the
            power to cause the direction of the management and policies of such
            entity, whether through the ownership of voting interests or voting
            securities, as the case may be, by contract or otherwise.

      (b)   "Board" means the board of directors of the Company.

      (c)   "Cause" as applied to any Officer or Employee means: (i) the
            conviction of such individual for the commission of any felony; (ii)
            the commission by such individual of any crime involving moral
            turpitude (e.g., larceny, embezzlement) which results in harm to the
            business, reputation, prospects or financial condition of the
            Company, any Subsidiary or Affiliate; or (iii) the willful neglect,
            failure or refusal of such individual to carry out his duties, which
            results in harm to the business, reputation, prospects or financial
            condition of the Company, any Subsidiary or Affiliate, which
            neglect, failure or refusal continues for a period of ten
            consecutive business days following notice thereof, or ten
            cumulative business days following successive notices thereof, to
            such individual from the Company; provided, however, that such
            willful neglect, failure or refusal is not due to the death or
            disability (i.e., as a result of an injury or sickness such
            individual is rendered permanently unable to perform his duties as
            an Officer or an Employee, as the case may be, on a full-time basis)
            of such individual or illness leading to the death or disability of
            such individual.

      (d)   "Chairman" means the individual appointed by the Board to serve as
            the chairman of the Committee.

      (e)   "Code" means the Internal Revenue Code of 1986, as amended from time
            to time and the Treasury regulations promulgated thereunder.

<PAGE>

      (f)   "Committee" means the committee appointed by the Board to administer
            the Plan as provided in Section 4(a).

      (g)   "Common Stock" means the $.01 par value common stock of the Company
            or any security of the Company identified by the Committee as having
            been issued in substitution or exchange therefor or in lieu thereof.

      (h)   "Company" means Advanced Medical, Inc., a Delaware corporation.

      (i)   "Director" means an individual who: (i) is now, or hereafter
            becomes, a member of the Board or of the board of directors of any
            Subsidiary or Affiliate; and (ii) is not eligible to participate in
            the Non-Employee Director NQSO Plan.

      (j)   "Employee" means an individual employed by the Company, a
            subsidiary, or an Affiliate whose wages are subject to the
            withholding of federal income tax under Section 3401 of the Code.

      (k)   "Exchange Act" means the Securities Exchange Act of 1934, as amended
            from time to time, or any successor statute.

      (l)   "Fair Market Value" of a Share as of a specified date means the
            average of the highest and lowest market prices of a Share on such
            date as reported in the American Stock Exchange composite
            transactions published in the Eastern Edition of The Wall Street
            Journal or, if no trading of Common Stock is reported for that day,
            the next preceding day on which trading was reported. In the event
            the Shares are not then traded on the American Stock Exchange, the
            Fair Market Value of a Share shall be determined by reference to the
            principal market or exchange on which the Shares are then traded.

      (m)   "ISO" means any stock option granted pursuant to the Plan that is
            intended to be and is specifically designated as an "incentive stock
            option" within the meaning of Section 422 of the Code.

      (n)   "Non-Employee Director NQSO Plan" means the Company's Second Amended
            and Restated 1990 Non-Qualified Stock Option Plan for Non-Employee
            Directors.

      (o)   "NQSO" means any stock option granted pursuant to the provisions of
            the Plan that is not an ISO.

      (p)   "Officer" means an individual elected or appointed by the Board or
            by the board of directors of a Subsidiary or Affiliate or chosen in
            such other manner as may be prescribed by the by-laws of the
            Company, a Subsidiary or Affiliate, as the case may be, to serve as
            such, or, in the case of an Affiliate which is not a corporation,
            any individual elected or appointed to

                                      -2-
<PAGE>

            fulfill a similar function by a body or individual exercising
            similar authority.

      (q)   "Option" means an ISO or a NQSO granted under the Plan.

      (r)   "Participant" means an individual who is granted an Option under the
            Plan.

      (s)   "Plan" means this Third Amended and Restated 1988 Stock Option Plan.

      (t)   "Rule 16b-3" means Rule 16b-3 promulgated by the Securities and
            Exchange Commission under the Exchange Act, or any successor or
            replacement rule adopted by the Securities and Exchange Commission.

      (u)   "Share" means one share of Common Stock, adjusted in accordance with
            Section 10(b), if applicable.

      (v)   "Stock Option Agreement" means the written agreement between the
            Company and the Participant that contains the terms and conditions
            pertaining to an option.

      (w)   "Subsidiary" means any corporation of which the Company, directly or
            indirectly, is the beneficial owner of fifty percent (50%) or more
            of the total voting power of all classes of its stock' having voting
            power and which qualifies as a subsidiary corporation pursuant to
            Section 424(f) of the Code.

      (x)   "Ten Percent Shareholder" means a Participant who prior to the grant
            of an ISO owned, directly or indirectly within the meaning of
            Section 424(d) of the Code, ten percent (10%) or more of the total
            combined voting power of all classes of stock of the Company, any
            Subsidiary or any parent of the Company (as defined in Section
            425(e) of the Code).

      3.    PURPOSE.

      The purpose of the Plan is to enable the Company to provide incentives,
which are linked directly to increases in shareholder value, to certain key
personnel in order that they will be encouraged to promote the financial success
and progress of the Company.

      4.    ADMINISTRATION.

      (a)   Composition of the Committee.

      The Plan shall be administered by a Committee appointed by the Board,
consisting of not less than a sufficient number of "disinterested persons" (as
such term is defined in Rule 16b-3), who are also "outside directors" (within
the meaning of Section 162(m) of the Code) so as to qualify the Committee to
administer the Plan as contemplated by Rule 16b-3 and Section 162(m),
respectively. Members of the Committee shall not be entitled to participate in

                                      -3-
<PAGE>

the Plan. Subject to the provisions of the first sentence of this Section 4(a),
the Board may from time to time remove members from, or add members to, the
Committee. Vacancies on the Committee, however caused, shall be filled by the
Board. The Board shall appoint one of the members of the Committee as Chairman.

      (b)   Actions by the Committee.

      The Committee shall hold meetings at such times and places as it may
determine. Acts approved by a majority of the members of the Committee present
at a meeting at which a quorum is present, or acts reduced to or approved in
writing by a majority of the members of the Committee, shall be the valid acts
of the Committee.

      (c)   Powers of the Committee.

      Subject to the express terms and conditions hereof, the Committee shall
have the authority to administer the Plan in its sole and absolute discretion.
To this end, the Committee is authorized to construe and interpret the Plan and
to make all other determinations necessary or advisable for the administration
of the Plan, including, but not limited to, the authority to determine the
eligible individuals who shall be granted Options, the number of Options to be
granted, the vesting period, if any, for all Options granted hereunder, the date
on which any option becomes first exercisable, the number of Shares subject to
each Option, the exercise price for the Shares subject to each option, and,
whether the Option to be granted is an ISO or a NQSO. Any determination,
decision or action of the Committee in connection with the construction,
interpretation, administration or application of the Plan shall be final,
conclusive and binding upon all Participants and any person validly claiming
under or through a Participant.

      (d)   Liability of Committee Members.

      No member of the Board or the Committee will be liable for any action or
determination made in good faith by the Board or the Committee with respect to
the Plan or any grant or exercise of an option thereunder.

      (e)   Option Accounts.

      The Committee shall maintain a journal in which a separate account for
each Participant shall be established. Whenever an Option is granted to or
exercised by a Participant, the Participant's account shall be appropriately
credited or debited. Appropriate adjustment shall also be made in the journal
with respect to each account in the event of an adjustment pursuant to Section
10(b).

      5.    EFFECTIVE DATE AND TERM OF THE PLAN.

      (a)   Effective Date of the Plan.

      The Plan in its original form was adopted by the Board on December 27,
1988. The Plan in its first amended and restated form was adopted by the Board
on July 12, 1990 and became effective on September 7, 1990. The Plan in its
second amended and restated form was adopted by the Compensation Committee of
the Board and approved by the Board and became

                                      -4-
<PAGE>

effective on June 30, 1992. The Plan in its third amended and restated form was
adopted by the Board and became effective on June 28, 1994, subject to approval
by the shareholders of the Company at a meeting duly called and held within
twelve months following such date.

      (b)   Term of Plan.

      No Option shall be granted pursuant to the Plan on or after December 27,
1998, but Options theretofore granted may extend beyond that date.

      6.    TYPE OF OPTIONS AND SHARES SUBJECT TO THE PLAN.

      Options granted under the Plan may be either ISOs or NQSOs. Each Stock
Option Agreement shall specify whether the Option covered thereby is an ISO or a
NQSO.

      The maximum aggregate number of Shares that may be issued under the Plan
is 1,700,200 Shares; provided, however, that no more than 250,000 Shares
(subject to adjustment as described below) shall be awarded to any Participant
in any calendar year. The aggregate number of Shares available for issuance
under the Plan shall be reduced by the number of Shares issued outside of the
Plan pursuant to stock options or otherwise to persons eligible to participate
in the Plan. The limitation on the number of Shares which may be granted under
the Plan shall be subject to adjustment as provided in Section 10(b).

      If any Option granted under the Plan expires or is terminated for any
reason, any Shares as to which the option has not been exercised shall again be
available for purchase under options subsequently granted. At all times during
the term of the Plan, the Company shall reserve and keep available for issuance
such number of Shares as the Company is obligated to issue upon the exercise of
all then outstanding options.

      7.    SOURCE OF SHARES ISSUED UNDER THE PLAN.

      Common Stock issued under the Plan may consist, in whole or in part, of
authorized or unissued Shares or treasury Shares, as determined in the sole and
absolute discretion of the Committee. No fractional Shares shall be issued under
the Plan.

      8.    ELIGIBILITY.

      The individuals eligible for the grant of Options under the Plan shall be:
(i) all Directors, Officers and Employees; and (ii) such individuals determined
by the Committee to be rendering substantial services as a consultant or
independent contractor to the Company or any Subsidiary or Affiliate of the
Company, as the Committee shall determine from time to time in its sole and
absolute discretion; provided, however, that only Employees of the Company or
any Subsidiary shall be eligible to receive ISOs. Any Participant shall be
eligible to be granted more than one Option hereunder.

                                      -5-
<PAGE>

      9.    OPTIONS.

      (a)   Grant of Options.

      Subject to any applicable requirements of the Code and any regulations
issued thereunder, the date of the grant of an Option shall be the date on which
the Committee determines to grant the Option.

      (b)   Exercise Price of ISOs.

      The exercise price of each Share subject to an ISO shall not be less than
the Fair Market Value of a Share on the date of grant of the ISO, except that in
the case of a grant of an ISO to a Participant who at the time such ISO was
granted was a Ten Percent Shareholder, the exercise price shall not be less than
110% of the Fair Market Value of a Share on the date of the grant of the ISO.

      (c)   Exercise Price of NOSQs.

      The exercise price of each Share subject to a NQSO shall be determined by
the Committee at the time of grant but will not be less than the par value of a
Share.

      (d)   Exercise Period.

      Each option granted hereunder shall vest and become first exercisable as
determined by the Committee.

      (e)   Terms and Conditions.

      All Options granted pursuant to the Plan shall be evidenced by a Stock
Option Agreement (which need not be the same for each Participant or Option),
approved by the Committee which shall be subject to the following express terms
and conditions and the other terms and conditions as are set forth' in this
Section 9, and to such other terms and conditions as shall be determined by the
Committee in its sole and absolute discretion which are not inconsistent with
the terms of the Plan:

            (i)   the failure of an Option to vest for any reason whatsoever
                  shall cause the Option to expire and be of no further force or
                  effect;

            (ii)  unless terminated earlier pursuant to Sections 9(i) or 11,
                  the term of any Option granted under the Plan shall be ten
                  years from the date of grant; provided, however, that no ISO
                  granted to a Ten Percent Shareholder shall have a term of more
                  than five years from the date of grant;

            (iii) in the case of an ISO, the aggregate Fair Market Value
                  (determined as of the time the ISO is granted) of Shares
                  exercisable for the first time by a Participant during any
                  calendar year (under the Plan and any other incentive stock
                  option plans of the Company, any

                                      -6-
<PAGE>

                  Subsidiary or any parent of the Company (as defined in Section
                  424(e) of the Code) shall not exceed $100,000;

            (iv)  Options shall not be transferable by the holder otherwise than
                  by will or by the laws of descent and distribution, and shall
                  be exercisable during the lifetime of the holder only by him
                  or by his guardian or legal representative;

            (v)   no Option or interest therein may be transferred, assigned,
                  pledged or hypothecated by the holder during his lifetime
                  whether by operation of law or otherwise, or be made subject
                  to execution, attachment or similar process; and

            (vi)  payment for the Shares to be received upon exercise of an
                  Option may be made in cash, in Shares (determined with
                  reference to their Fair Market Value on the date of exercise)
                  or any combination thereof.

      (f)   Additional Means of Payment.

      Any Stock Option Agreement may, in the sole and absolute discretion of the
Committee, permit payment by any other form of legal consideration consistent
with applicable law and any rules and regulations relating thereto, including,
but not limited to, the execution and delivery of a full recourse promissory
note by the Participant to the Company.

      (g)   Exercise.

      The holder of an option may exercise the same by filing with the Corporate
Secretary of the Company and the Chairman a written election, in such form as
the Committee may determine, specifying the number of Shares with respect to
which such Option is being exercised, and accompanied by payment in full of the
exercise price for such Shares. Notwithstanding the foregoing, the Committee may
specify a reasonable minimum number of Shares that may be purchased on any
exercise of an Option, provided that such minimum number will not prevent the
Participant from exercising the Option with respect to the full number of Shares
as to which the Option is then exercisable.

      (h)   Withholding Taxes.

      Prior to issuance of the Shares upon exercise of an Option, the
Participant shall pay or make adequate provision for the payment of any Federal,
state, local or foreign withholding obligations of the Company or any Subsidiary
or Affiliate of the Company, if applicable. In the event a Participant shall
fail to make adequate provision for the payment of such obligations, the Company
shall have the right to issue a stock certificate for an amount of Shares equal
to the difference obtained by subtracting: (i) the number of Shares, rounded up
for any fraction to the next whole number, that have a Fair Market Value (as of
the date of exercise) equal to such amount as is sufficient to satisfy
applicable federal, state or local withholding obligations; from (ii) the number
of Shares attributable to that portion of the option so exercised. The Company
shall promptly remit, or cause to be remitted, to the appropriate taxing
authorities

                                      -7-
<PAGE>

the amount so withheld. In such cases, although the stock certificate delivered
to the Participant will be for a net number of Shares, such Participant shall be
considered, for tax purposes, to have received the number of Shares equal to the
full number of Shares to which the Option had been exercised.

      (i)   Termination of Options.

      Options granted under the Plan shall be subject to the following events of
termination:

            (i)   in the event a Participant who is a Director is removed from
                  the Board or the board of directors of a Subsidiary or an
                  Affiliate, as the case may be, for cause (as contemplated by
                  the charter, by-laws or other organizational or governing
                  documents), all unexercised Options held by such Participant
                  on the date of such removal (whether or not vested) will
                  expire immediately;

            (ii)  in the event the employment of a Participant who is an Officer
                  or Employee is terminated for Cause, all unexercised Options
                  held by such Participant on the date of such termination of
                  employment (whether or not vested) will expire immediately;
                  and

            (iii) in the event a Participant is no longer a Director,
                  Officer or Employee other than for the reasons set forth in
                  Sections 9(i)(i) or 9(i)(ii), all Options which remain
                  unvested at the time the Participant is no longer a Director,
                  Officer or Employee, as the case may be, shall expire
                  immediately, and all Options which have vested prior to such
                  time shall expire twelve months thereafter unless by their
                  terms they expire sooner.

      10.   RECAPITALIZATION.

      (a)   Corporate Flexibility.

      The existence of the Plan and the Options granted hereunder shall not
affect or restrict in any way the right or power of the Board or the
shareholders of the Company, in their sole and absolute discretion, to make,
authorize or consummate any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of bonds, debentures, common stock,
preferred or prior preference stock ahead of or affecting the Company's capital
stock or the rights thereof, the dissolution or liquidation of the Company or
any sale or transfer of all or any part of its assets or business, or any other
grant of rights, issuance of securities, transaction, corporate act or
proceeding and notwithstanding the fact that any such activity, proceeding,
action, transaction or other event may have, or be expected to have, an impact
(whether positive or negative) on the value of any Option.

                                      -8-
<PAGE>

      (b)   Adjustments Upon Chances in Capitalization.

      Except as otherwise provided in Section 11 and subject to any required
action by the shareholders of the Company, in the event of any change in
capitalization affecting the Common Stock of the Company, such as a stock
dividend, stock split or recapitalization, the Committee, in its sole and
absolute discretion, may make proportionate adjustments with respect to: (i) the
aggregate number of Shares available for issuance under the Plan; (ii) the
number of Shares available for any individual award; (iii) the number and
exercise price of Shares subject to outstanding Options; provided, however, that
the number of Shares subject to any Option shall always be a whole number; and
(iv) such other matters as shall be appropriate in light of the circumstances.

      11.   CHANGE OF CONTROL

      In the event of a Change of Control (as defined below), unless otherwise
determined by the Committee at the time of grant or by amendment (with the
holder's consent) of such grant, all Options not vested on or prior to the
effective time of any such Change of Control shall immediately vest as of such
effective time. The Committee in its discretion may make provisions for the
assumption of outstanding Options, or the substitution for outstanding Options
of new incentive awards covering the stock of a successor corporation or a
parent or subsidiary thereof, with appropriate adjustments as to the number and
kind of shares and prices so as to prevent dilution or enlargement of rights.

      A "Change of Control" will be deemed to occur on the date any of the
following events occur:

      (a)   any person or persons acting together which would constitute a
"group" for purpose of Section 13(d) of the Exchange Act (other than the
Company, any Subsidiary and Jeffrey M. Picower (including, any of his affiliates
and any lineal descendant of Mr. Picower, any spouse of Mr. Picower or of any
such lineal descendant, a trust established principally for the benefit of any
of the foregoing, any entity beneficially owned by the foregoing, and the
executor, administrator or personal representative of the estate of any of the
foregoing)) beneficially own (as defined in Rule 13-3 under the Exchange Act),
directly or indirectly, at least 30% of the total voting power of the Company
entitled to vote generally in the election of the Board of Directors of the
Company;

      (b)   either (i) the Current Directors (as herein defined) cease for any
reason to constitute at least a majority of the members of the Board (for these
purposes, a "Current Director" means any member of the Board as of June 28,
1994, and any successor of a Current Director whose election, or nomination for
election by the Company's shareholders, was approved by at least a majority of
the Current Directors then on the Board) or (ii) at any meeting of the
shareholders of the Company called for the purpose of electing directors, a
majority of the persons nominated by the Board for election as directors fail to
be elected;

      (c)   the shareholders of the Company approve (i) a plan of complete
liquidation of the Company, or (ii) an agreement providing for the merger or
consolidation of the Company (A) in which the Company is not the continuing or
surviving corporation (other than

                                      -9-
<PAGE>

consolidation or merger with IMED Corporation or a wholly-owned subsidiary of
the Company in which all Shares outstanding immediately prior to the
effectiveness thereof are changed into or exchanged for the same consideration)
or (B) pursuant to which the Shares are converted into cash, securities or other
property, except a consolidation or merger of the Company in which the holders
of the Shares immediately prior to the consolidation or merger have, directly or
indirectly, at least a majority of the common stock of the continuing or
surviving corporation immediately after such consolidation or merger or in which
the Board immediately prior to the merger or consolidation would, immediately
after the merger or consolidation, constitute a majority of the board of
directors of the continuing or surviving corporation; or

      (d)   the shareholders of the Company approve an agreement (or agreements)
providing for the sale or other disposition (in one transaction or a series of
transactions) of all or substantially all of the assets of the Company.

      12.   SECURITIES LAW REQUIREMENTS.

      No Shares shall be issued under the Plan unless and until: (i) the Company
and the Participant have taken all actions required to register the Shares under
the Securities Act of 1933, as amended, or perfect an exemption from the
registration requirements thereof; (ii) any applicable listing requirement of
any stock exchange on which the Common Stock is listed has been satisfied; and
(iii) any other applicable provision of state or Federal law has been satisfied.
The Company shall be under no obligation to register the Shares with the
Securities and Exchange Commission or to effect compliance with the registration
or qualification requirements of any state securities laws or stock exchange.

      13.   AMENDMENT AND TERMINATION.

      (a)   Modifications to the Plan.

      The Board may, insofar as permitted by law, from time to time, with
respect to any Shares at the time not subject to Options, suspend or terminate
the Plan or revise or amend the Plan in any respect whatsoever. However, unless
the Board specifically otherwise provides, any revision or amendment that would
cause the Plan to fail to comply with Rule 16b-3, Section 422 or 162(m) of the
Code or any other requirement of applicable law or regulation if such amendment
were not approved by the shareholders of the Company shall not be effective
unless and until such approval is obtained.

      (b)   Rights of Participant.

      No amendment, suspension or termination of the Plan that would adversely
affect the right of any Participant with respect to an Option previously granted
under the Plan will be effective without the written consent of the affected
Participant.

                                      -10-
<PAGE>

      14.   MISCELLANEOUS.

      (a)   Shareholders' Rights

      No Participant and no beneficiary or other person claiming under or
through such Participant shall acquire any rights as a shareholder of the
Company by virtue of such Participant having been granted an Option under the
Plan. No Participant and no beneficiary or other person claiming under or
through such Participant will have any right, title or interest in or to any
Shares, allocated or reserved under the Plan or subject to any Option except as
to Shares, if any, that have been issued or transferred to such Participant. No
adjustment shall be made for dividends or distributions or other rights for
which the record date is prior to the date of exercise of an Option, except as
may be provided in the Stock Option Agreement.

      (b)   Other Compensation Arrangements.

      Nothing contained in the Plan shall prevent the Board from adopting other
compensation arrangements, subject to shareholder approval if such approval is
required. Such other arrangements may be either generally applicable or
applicable only in specific cases.

      (c)   Treatment of Proceeds.

      Proceeds realized from the exercise of Options under the Plan shall
constitute general funds of the Company.

      (d)   Costs of the Plan.

      The costs and expenses of administering the Plan shall be borne by the
Company.

      (e)   No Right to Continue Employment or Services.

      Nothing contained in the Plan or in any instrument executed pursuant to
the Plan will confer upon any Participant any right to continue to render
services to the Company, a Subsidiary or Affiliate; to continue as a Director,
Officer or Employee; or affect the right of the Company, a Subsidiary, an
Affiliate, the Board, the board of directors of a Subsidiary or an Affiliate,
the shareholders of the Company or a Subsidiary, or the holders of interests of
an Affiliate, as applicable, to terminate the directorship, office or
employment, as the case may be, of any Participant at any time with or without
Cause or with or without any other cause, reason or justification. The term
"Cause" as defined herein is included solely for the purposes of the Plan and is
not, and shall not be deemed to be: (i) a restriction on the right of the
Company, a Subsidiary or Affiliate, as the case may be, to terminate any Officer
or Employee for any reason whatsoever; or (ii) a part of the employment
relationship (whether oral or written, express or implied) of any such
individual.

      (f)   Severability.

      The provisions of the Plan shall be deemed severable and the validity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.

                                      -11-
<PAGE>

      (g)   Binding Effect of Plan.

      The Plan amends and restates in its entirety the Company's Second Amended
and Restated 1988 Stock Option Plan which was adopted by the Board on June 30,
1992. The Plan shall inure to the benefit of the Company, its successors and
assigns.

      (h)   No Waiver of Breach.

      No waiver by any party hereto at any time of any breach by another party
hereto of, or compliance with, any condition or provision of the Plan to be
performed by such other party shall be deemed a waiver of the same, any similar
or any dissimilar provisions of conditions at the same or at any prior or
subsequent time.

      (i)   Governing Law.

      The Plan and all actions taken thereunder shall be enforced, governed and
construed by and interpreted under the laws of the State of Delaware applicable
to contracts made and to be performed wholly within such State without giving
effect to the principles of conflict of laws thereof.

      (j)   Headings.

      The headings contained in this agreement are reference purposes only and
shall not affect in any way the meaning or interpretation of this agreement.

      15.   EXECUTION

      To record the adoption of the Plan to read as set forth herein, the
Company has caused its authorized officer to execute the same as of this _____
day of June, 1994.

                                             ADVANCED MEDICAL, INC.

                                             By: /s/ Jeffry M. Picower
                                                 ------------------------------
                                                   Jeffry M. Picower
                                                   Chief Executive Officer

ATTEST:

By: /s/ Joseph W. Kuhn
    ------------------------------
      Joseph W. Kuhn
      Secretary

                                      -12-

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