COLLATERAL THERAPEUTICS INC
S-8, 1998-06-25
COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH
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<PAGE>

    As filed with the Securities and Exchange Commission on June 25, 1998
                                                Registration No. 333-___________

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                --------------
                                   FORM S-8
                            REGISTRATION STATEMENT
                                    UNDER
                          THE SECURITIES ACT OF 1933

                                --------------
                        COLLATERAL THERAPEUTICS, INC.
            (Exact name of registrant as specified in its charter)

            DELAWARE                                       33-0661290
  (State or other jurisdiction                 (IRS Employer Identification No.)
of incorporation or organization)

                           9360 TOWNE CENTER DRIVE
                         SAN DIEGO, CALIFORNIA 92121
             (Address of principal executive offices) (Zip Code)

                                --------------
                        COLLATERAL THERAPEUTICS, INC.
                          1998 STOCK INCENTIVE PLAN
                      1998 EMPLOYEE STOCK PURCHASE PLAN
                          (Full title of the Plans)

                                --------------
                             JACK W. REICH, PH.D.
                     PRESIDENT & CHIEF EXECUTIVE OFFICER
                           CHRISTOPHER J. REINHARD
                    CHIEF OPERATING AND FINANCIAL OFFICER
                        COLLATERAL THERAPEUTICS, INC.
                           9360 TOWNE CENTER DRIVE
                         SAN DIEGO, CALIFORNIA 92121
                   (Name and address of Agent for service)
                                (619) 824-6500
        (Telephone number, including area code, of agent for service)

                                --------------
                       CALCULATION OF REGISTRATION FEE

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                            Proposed          Proposed
            Title of                                        Maximum            Maximum
           Securities                 Amount                Offering          Aggregate        Amount of
             to be                     to be                 Price             Offering       Registration
           Registered               Registered(1)         per Share(2)         Price(2)           Fee
           ----------               ----------            ---------            -----              ---
<S>                                <C>                    <C>            <C>                  <C>
Collateral Therapeutics, Inc.
1998 Stock Incentive Plan
- -------------------------
Common Stock, $0.001 par value     2,296,835 shares           $13.00          $29,858,855      $8,809.00

Collateral Therapeutics, Inc.
1998 Employee Stock Purchase Plan
- ---------------------------------
Common Stock, $0.001 par value        50,000 shares           $13.00             $650,00         $192.00

                                                                         Aggregate Filing Fee  $9,001.00
</TABLE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(1)  This Registration Statement shall also cover any additional shares of
     Common Stock which become issuable under the Collateral Therapeutics, Inc.
     1998 Stock Incentive Plan or 1998 Employee Stock Purchase Plan by reason of
     any stock dividend, stock split, recapitalization or other similar
     transaction effected without the Registrant's receipt of consideration
     which results in an increase in the number of the outstanding shares of the
     Registrant's Common Stock.

(2)  Calculated solely for purposes of this offering under Rule 457(h) of the
     Securities Act of 1933, as amended (the "1933 Act").
<PAGE>

                                   PART II

              INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3.  INCORPORATION OF DOCUMENTS BY REFERENCE

         Collateral Therapeutics, Inc. (the "Registrant") hereby incorporates 
by reference into this Registration Statement the following documents 
previously filed with the Securities and Exchange Commission (the "SEC"):

         (a)  The Registrant's Registration Statement No. 333-51029 on Form S-1
              filed with the SEC on April 24, 1998, together with the amendments
              thereto on Forms S-1/A filed with the SEC on May 7, 1998, June 3, 
              1998, June 19, 1998 and June 24, 1998;

         (b)  The Registrant's prospectus filed with the SEC on June 3, 1998
              under SEC Rule 424(a) in connection with Registrant's Registration
              Statement No. 333-51029, in which there is set forth the audited
              financial statements for the Registrant's fiscal year ended
              December 31, 1997; and

         (c)  The Registrant's Registration Statement No. 000-24505 on Form 8-A
              filed with the SEC on June 22, 1998, in which there is described
              the terms, rights and provisions applicable to the Registrant's
              outstanding Common Stock.

         All reports and definitive proxy or information statements filed 
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities and Exchange 
Act of 1934, as amended, after the date of this Registration Statement and 
prior to the filing of a post-effective amendment which indicates that all 
securities offered hereby have been sold or which de-registers all securities 
then remaining unsold shall be deemed to be incorporated by reference into 
this Registration Statement and to be a part hereof from the date of filing 
of such documents.  Any statement contained in a document incorporated or 
deemed to be incorporated by reference herein shall be deemed to be modified 
or superseded for purposes of this Registration Statement to the extent that 
a statement contained herein or in any subsequently filed document which also 
is deemed to be incorporated by reference herein modifies or supersedes such 
statement.  Any such statement so modified or superseded shall not be deemed, 
except as so modified or superseded, to constitute a part of this 
Registration Statement.

Item 4.  DESCRIPTION OF SECURITIES

         Not Applicable.

Item 5.  INTERESTS OF NAMED EXPERTS AND COUNSEL

         Not Applicable.

Item 6.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.  

         Section 145 of the Delaware General Corporation Law permits 
indemnification of officers and directors of the Registrant under certain 
conditions and subject to certain limitations.  Section 145 of the Delaware 
General Corporation Law also provides that a corporation has the power to 
purchase and maintain insurance on behalf of its officers and directors 
against any liability asserted against such person and incurred by him or her 
in such capacity, or arising out of his or her status as such, whether or not 
the corporation would have the power to indemnify him or her against such 
liability under the provisions of Section 145 of the Delaware General 
Corporation Law.

         Article VII, Section I of the Restated Bylaws of the Registrant 
provides that the Registrant shall indemnify its directors, officers, 
employees and agents to the fullest extent permitted by the Delaware General 
Corporation Law.


                                     II-1
<PAGE>

The rights to indemnity thereunder continue as to a person who has ceased to 
be a director, officer, employee or agent and inure to the benefit of the 
heirs, executors and administrators of such person.  In addition, expenses 
incurred by a director or officer in defending any civil, criminal, 
administrative or investigative action, suit or proceeding by reason of the 
fact that he or she is or was a director or officer of the Registrant (or was 
serving at the Registrant's request as a director or officer of another 
corporation) shall be paid by the Registrant in advance of the final 
disposition of such action, suit or proceeding upon receipt of an undertaking 
by or on behalf of such director or officer to repay such amount if it shall 
ultimately be determined that he or she is not entitled to be indemnified by 
the Registrant as authorized by the relevant section of the Delaware General 
Corporation Law.

         As permitted by Section 102(b)(7) of the Delaware General 
Corporation Law, Article V, Section (A) of the Registrant's Certificate of 
Incorporation provides that a director of the Registrant shall not be 
personally liable for monetary damages or breach of fiduciary duty as a 
director, except for liability for (i) any breach of the director's duty of 
loyalty to the Registrant or its stockholders, (ii) acts or omissions not in 
good faith or which involve intentional misconduct or a knowing violation of 
law, (iii) unlawful payment of dividends or unlawful stock repurchases or 
redemptions under Section 174 of the Delaware General Corporation Law or (iv) 
any transaction from which the director derived any improper personal benefit.

         The Registrant has directors and officers liability insurance now in 
effect which insures directors and officers of the Registrant.

         The Company intends to enter into indemnification agreements under 
Delaware law with each of its directors and executive officers. Generally, 
the indemnification agreements attempt to provide the maximum protection 
permitted by Delaware law as it may be amended from time to time. Moreover, 
the indemnification agreements provide for additional indemnification for 
certain amounts not otherwise covered by directors and officers liability 
insurance. Under such additional indemnification provisions, however, such 
director or executive officer will not be indemnified for settlements not 
approved by the Company. The indemnification agreements provide for the 
Company to advance to the individual any and all reasonable expenses 
(including legal fees and expenses) incurred in investigating or defending 
any such action, suit or proceeding. Also, the individual must repay such 
advances upon a final judicial decision that he or she is not entitled to 
indemnification. The obligations of the Company under these indemnification 
agreements shall continue during the period that such director or officer is 
serving the Company as such and shall continue for so long thereafter as such 
director or officer shall be subject to any possible claim, action, suit or 
proceeding. For six years after the effective time of the acquisition of the 
Company by another entity or the sale of all or substantially all of the 
assets of the Company, the Company shall cause the acquiring or surviving 
corporation to indemnify  such director or officer in accordance with the 
terms of this indemnification agreement and use such acquiring or surviving 
corporation's best efforts to provide director's and officer's liability 
insurance on terms substantially similar to those of the Company's.

         The Underwriting Agreement (Exhibit 1.1 to the Registrant's 
Registration Statement No. 333-51029 on Form S-1, as amended) contains 
provisions by which the Underwriters have agreed to indemnify the Company, 
each person, if any, who controls the Company within the meaning of Section 
15 of the Securities Act, each director of the Company, and each officer of 
the Company who signs this Registration Statement, with respect to 
information furnished in writing by or on behalf of the Underwriters 
specifically for use in the Registration Statement.

Item 7.  EXEMPTION FROM REGISTRATION CLAIMED

         Not Applicable.

Item 8.  EXHIBITS

<TABLE>
<CAPTION>
Exhibit Number      Exhibit
- -------------       -------
<S>                 <C>
      4             Instruments Defining the Rights of Stockholders.  Reference
                    is made to Registrant's Registration Statement No. 000-24505
                    on Form 8-A, together with the exhibits thereto, which is
                    incorporated herein by reference pursuant to Item 3(c).
      5             Opinion and consent of Brobeck, Phleger & Harrison LLP.
     23.1           Consent of Ernst & Young LLP, Independent Auditors.
     23.2           Consent of Brobeck, Phleger & Harrison LLP is contained in
                    Exhibit 5.
     24             Power of Attorney.  Reference is made to page II-4 of this
                    Registration Statement.
     99.1           Collateral Therapeutics, Inc. 1998 Stock Incentive Plan.


                                     II-2
<PAGE>

     99.2           Form of Notice of Grant of Stock Option.
     99.3           Form of Stock Option Agreement.
     99.4           Form of Addendum to Stock Option Agreement (Limited Stock
                    Appreciation Rights).
     99.5           Form of Addendum to Stock Option Agreement (Involuntary
                    Termination Following Change In Control).
     99.6           Form of Stock Issuance Agreement.
     99.7           Form of Addendum to Stock Issuance Agreement (Involuntary
                    Termination Following Change In Control).
     99.8           Form of Notice of Grant (Initial Grant).
     99.9           Form of Notice of Grant (Annual Grant).
     99.10          Form of Automatic Stock Option Agreement. 
     99.11          Collateral Therapeutics, Inc. 1998 Employee Stock Purchase
                    Plan.
     99.12          Form of Enrollment/Change Form.
     99.13          Form of Stock Purchase Agreement.
</TABLE>

Item 9.  UNDERTAKINGS

                     A.   The undersigned Registrant hereby undertakes:  (1) 
to file, during any period in which offers or sales are being made, a 
post-effective amendment to this Registration Statement (i) to include any 
prospectus required by Section 10(a)(3) of the 1933 Act, (ii) to reflect in 
the prospectus any facts or events arising after the effective date of this 
Registration Statement (or the most recent post-effective amendment thereof) 
which, individually or in the aggregate, represent a fundamental change in 
the information set forth in this Registration Statement and (iii) to include 
any material information with respect to the plan of distribution not 
previously disclosed in this Registration Statement or any material change to 
such information in this Registration Statement; PROVIDED, however, that 
clauses (1)(i) and (1)(ii) shall not apply if the information required to be 
included in a post-effective amendment by those clauses is contained in 
periodic reports filed by the Registrant pursuant to Section 13 or Section 
15(d) of the 1934 Act that are incorporated by reference into this 
Registration Statement; (2) that for the purpose of determining any liability 
under the 1933 Act each such post-effective amendment shall be deemed to be a 
new registration statement relating to the securities offered therein and the 
offering of such securities at that time shall be deemed to be the initial 
bona fide offering thereof; and (3) to remove from registration by means of a 
post-effective amendment any of the securities being registered which remain 
unsold at the termination of the Registrant's 1998 Stock Incentive Plan, 
and/or 1998 Employee Stock Purchase Plan.

                     B.   The undersigned Registrant hereby undertakes that, 
for purposes of determining any liability under the 1933 Act, each filing of 
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of 
the 1934 Act that is incorporated by reference into this Registration 
Statement shall be deemed to be a new registration statement relating to the 
securities offered therein, and the offering of such securities at that time 
shall be deemed to be the initial bona fide offering thereof.

                     C.   Insofar as indemnification for liabilities arising 
under the 1933 Act may be permitted to directors, officers or controlling 
persons of the Registrant pursuant to the indemnification provisions 
summarized in Item 6 or otherwise, the Registrant has been advised that, in 
the opinion of the SEC, such indemnification is against public policy as 
expressed in the 1933 Act and is, therefore, unenforceable.  In the event 
that a claim for indemnification against such liabilities (other than the 
payment by the Registrant of expenses incurred or paid by a director, 
officer, or controlling person of the Registrant in the successful defense of 
any action, suit or proceeding) is asserted by such director, officer or 
controlling person in connection with the securities being registered, the 
Registrant will, unless in the opinion of its counsel the matter has been 
settled by controlling precedent, submit to a court of appropriate 
jurisdiction the question whether such indemnification by it is against 
public policy as expressed in the 1933 Act and will be governed by the final 
adjudication of such issue.


                                     II-3
<PAGE>

                                      SIGNATURES

          Pursuant to the requirements of the Securities Act of 1933, as 
amended, the Registrant certifies that it has reasonable grounds to believe 
that it meets all of the requirements for filing on Form S-8, and has duly 
caused this Registration Statement to be signed on its behalf by the 
undersigned, thereunto duly authorized, in the City of San Diego, State of 
California on this 25th day of June, 1998.

                                       COLLATERAL THERAPEUTICS, INC.


                                       By: /s/ JACK W. REICH
                                          ------------------------------------
                                           Jack W. Reich
                                           President and Chief Executive Officer



                                  POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

          That the undersigned officers and directors of Collateral 
Therapeutics, Inc., a Delaware corporation, do hereby constitute and appoint 
Jack W. Reich and Christopher J. Reinhard, and each of them, the lawful 
attorneys-in-fact and agents with full power and authority to do any and all 
acts and things and to execute any and all instruments which said attorneys 
and agents, and any one of them, determine may be necessary or advisable or 
required to enable said corporation to comply with the Securities Act of 
1933, as amended, and any rules or regulations or requirements of the 
Securities and Exchange Commission in connection with this Registration 
Statement.  Without limiting the generality of the foregoing power and 
authority, the powers granted include the power and authority to sign the 
names of the undersigned officers and directors in the capacities indicated 
below to this Registration Statement, to any and all amendments, both 
pre-effective and post-effective, and supplements to this Registration 
Statement, and to any and all instruments or documents filed as part of or in 
conjunction with this Registration Statement or amendments or supplements 
thereof, and each of the undersigned hereby ratifies and confirms that all 
said attorneys and agents, or any one of them, shall do or cause to be done 
by virtue hereof.  This Power of Attorney may be signed in several 
counterparts.

          IN WITNESS WHEREOF, each of the undersigned has executed this Power 
of Attorney as of the date indicated.

          Pursuant to the requirements of the Securities Act of 1933, as 
amended, this Registration Statement has been signed below by the following 
persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature                  Title                                  Date
- ---------                  -----                                  ----
<S>                      <C>                                     <C>
/s/ JACK W. REICH        Director, President and
- ----------------------   Chief Executive Officer                 June 25, 1998
Jack W. Reich            (Principal Executive Officer)



                                     II-4

<PAGE>

<CAPTION>
Signature                    Title                                  Date
- ---------                    -----                                  ----
<S>                          <C>                                     <C>


/s/ CHRISTOPHER J. REINHARD  Director, Chief Operating Officer       June 25, 1998
- ----------------------       and Chief Financial Officer 
Christopher J. Reinhard      (Principal Financial and
                             Accounting Officer)

/s/ CRAIG S. ANDREWS
- ----------------------       Director and Secretary                  June 25, 1998
Craig S. Andrews             


/s/ ROBERT L. ENGLER
- ----------------------       Director, Vice President                June 25, 1998
Robert L. Engler             and Medical Director


/s/ H. KIRK HAMMOND
- ----------------------       Director, Vice President, Research      June 25, 1998
H. Kirk Hammond              


/s/ ELISE G. KLEIN
- ----------------------       Director                                June 25, 1998
Elise G. Klein


/s/ DAVID F. HALE
- ----------------------       Director                                June 25, 1998
David F. Hale


/s/ DAVID E. ROBINSON
- ----------------------       Director                                June 25, 1998
David E. Robinson
</TABLE>

                                     II-5

<PAGE>

                          SECURITIES AND EXCHANGE COMMISSION

                                   WASHINGTON, D.C.


                                       EXHIBITS

                                          TO

                                       FORM S-8

                                        UNDER

                                SECURITIES ACT OF 1933


                            COLLATERAL THERAPEUTICS, INC.


<PAGE>

                                    EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit Number                 Exhibit
- --------------                 -------
<C>                 <S>
     4              Instruments Defining the Rights of Stockholders.  Reference is
                    made to Registrant's Registration Statement No. 000-24505 on
                    Form 8-A, together with the exhibits thereto, which is
                    incorporated herein by reference pursuant to Item 3(c).
     5              Opinion and consent of Brobeck, Phleger & Harrison LLP.
     23.1           Consent of Ernst & Young LLP, Independent Auditors.
     23.2           Consent of Brobeck, Phleger & Harrison LLP is contained in
                    Exhibit 5.
     24             Power of Attorney.  Reference is made to page II-4 of this
                    Registration Statement.
     99.1           Collateral Therapeutics, Inc. 1998 Stock Incentive Plan.
     99.2           Form of Notice of Grant of Stock Option.
     99.3           Form of Stock Option Agreement.
     99.4           Form of Addendum to Stock Option Agreement (Limited Stock
                    Appreciation Rights). 
     99.5           Form of Addendum to Stock Option Agreement (Involuntary
                    Termination Following Change In Control).
     99.6           Form of Stock Issuance Agreement.
     99.7           Form of Addendum to Stock Issuance Agreement (Involuntary
                    Termination Following Change In Control).
     99.8           Form of Notice of Grant (Initial Grant).
     99.9           Form of Notice of Grant (Annual Grant).
     99.10          Form of Automatic Stock Option Agreement. 
     99.11          Collateral Therapeutics, Inc. 1998 Employee Stock 
                    Purchase Plan.
     99.12          Form of Enrollment/Change Form.
     99.13          Form of Stock Purchase Agreement.
</TABLE>


<PAGE>



                                      EXHIBIT 5
                OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP


                                    June 25, 1998




Collateral Therapeutics, Inc. 
9360 Towne Center Drive
San Diego, CA 92121

          Re:  Collateral Therapeutics, Inc. - Registration Statement for 
               Offering of an Aggregate of 2,346,835 Shares of Common Stock

Ladies and Gentlemen:

     We have acted as counsel to Collateral Therapeutics, Inc. a Delaware 
corporation (the "Company"), in connection with the registration on Form S-8 
(the "Registration Statement") under the Securities Act of 1933, as amended, 
of (i) 2,296,835 shares of common stock, par value $0.001 per share, of the 
Company and related stock options for issuance under the Company's 1998 Stock 
Incentive Plan (the "Incentive Plan") and (ii) 50,000 shares of common stock, 
par value $0.001 per share, of the Company issuable under the 1998 Employee 
Stock Purchase Plan (the "Purchase Plan") (collectively, the "Shares").

     This opinion is being furnished in accordance with the requirements of Item
8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.

     We have reviewed the Company's charter documents and the corporate 
proceedings taken by the Company in connection with the establishment of the 
Incentive Plan and Purchase Plan.  Based on such review, we are of the 
opinion that, if, as and when the Shares have been issued and sold (and the 
consideration therefor received) pursuant to (a) the provisions of option 
agreements duly authorized under the Incentive Plan and in accordance with 
the Registration Statement, (b) purchase rights under the Purchase Plan and 
in accordance with the Registration Statement, or (c) duly authorized direct 
stock issuances in accordance with the Incentive Plan and in accordance with 
the Registration Statement, such Shares will be duly authorized, legally 
issued, fully paid and nonassessable.

     We hereby consent to the filing of this opinion as an exhibit to the 
Registration Statement.

     This opinion letter is rendered as of the date first written above and we
disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein.  Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company, the
Incentive Plan, the Purchase Plan or the Shares.


                              Very truly yours,


                          /s/ BROBECK, PHLEGER & HARRISON LLP
                              -------------------------------
                              BROBECK, PHLEGER & HARRISON LLP




<PAGE>

             CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement 
(Form S-8) pertaining to the  1998 Stock Incentive Plan and 1998 Employee 
Stock Purchase Plan of Collateral Therapeutics, Inc. of our report dated 
January 15, 1998, except for Notes 4 and 5, as to which the dates are April 
6, 1998 and May 29, 1998, with respect to the financial statements of 
Collateral Therapeutics, Inc., included in its Registration Statement on Form 
S-1 (No 333-51029), filed with the Securities and Exchange Commission

                            /s/ ERNST & YOUNG LLP

San Diego, California
June 24, 1998





<PAGE>

                         COLLATERAL THERAPEUTICS, INC.
                           1998 STOCK INCENTIVE PLAN


                                 ARTICLE ONE

                              GENERAL PROVISIONS



I.   PURPOSE OF THE PLAN

          This 1998 Stock Incentive Plan is intended to promote the interests
of Collateral Therapeutics, Inc., a California corporation, by providing
eligible persons with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation.

          Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.

     II.  STRUCTURE OF THE PLAN

          A.   The Plan shall be divided into five separate equity programs:

               -    the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock,

               -    the Salary Investment Option Grant Program under which
eligible employees may elect to have a portion of their base salary invested
each year in special option grants,

               -    the Stock Issuance Program under which eligible persons
may, at the discretion of the Plan Administrator, be issued shares of Common
Stock directly, either through the immediate purchase of such shares or as a
bonus for services rendered the Corporation (or any Parent or Subsidiary),

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

               -    the Director Fee Option Grant Program under which non-
employee Board members may elect to have all or any portion of their annual
retainer fee otherwise payable in cash applied to a special option grant.

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

<PAGE>

     III. ADMINISTRATION OF THE PLAN

          A.   Prior to the Section 12 Registration Date, the Discretionary
Option Grant and Stock Issuance Programs shall be administered by the Board.
Beginning with the Section 12 Registration Date, the Primary Committee shall
have sole and exclusive authority to administer the Discretionary Option Grant
and Stock Issuance Programs with respect to Section 16 Insiders.

          B.   Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to participate in
those programs may, at the Board's discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons.

          C.   Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and may be
removed by the Board at any time.  The Board may also at any time terminate the
functions of any Secondary Committee and reassume all powers and authority
previously delegated to such committee.

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

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

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

          G.   Administration of the Automatic Option Grant and Director Fee
Option Grant Programs shall be self-executing in accordance with the terms of
those programs, and no Plan Administrator shall exercise any discretionary
functions with respect to any option grants or stock issuances made under those
programs.

     IV.  ELIGIBILITY

<PAGE>

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

                 (i)     Employees,
     
                (ii)     non-employee members of the Board or the board of
     directors of any Parent or Subsidiary, and
     
               (iii)     consultants and other independent advisors who
     provide services to the Corporation (or any Parent or Subsidiary).
     
          B.   Only Employees who are Section 16 Insiders or other highly
compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program.

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

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

          E.   The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals who
first become non-employee Board members after the Underwriting Date, whether
through appointment by the Board or election by the Corporation's stockholders,
and (ii) those individuals who continue to serve as non-employee Board members
at one or more Annual Stockholders Meetings held after the Underwriting Date,
including individuals serving as non-employee Board members on the Underwriting
Date.  A non-employee Board member who has previously been in the employ of the
Corporation (or any Parent or Subsidiary) shall not be eligible to receive an
option grant under the Automatic Option Grant Program at the time he or she
first becomes a non-employee Board member, but shall be eligible to receive
periodic option grants under the Automatic Option Grant Program while he or she
continues to serve as a non-employee Board member.

          F.   All non-employee Board members shall be eligible to participate
in the Director Fee Option Grant Program.

     V.   STOCK SUBJECT TO THE PLAN

<PAGE>

          A.   The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market.  The maximum number of shares of Common Stock
initially reserved for issuance over the term of the Plan shall not exceed two
million two hundred ninety-six thousand eight hundred thirty-five (2,296,835)
shares, which shall consist of (i) the number of shares which are estimated to
remain available for issuance, as of the Section 12 Registration Date, under
the Predecessor Plan as last approved by the Corporation's stockholders,
including the shares subject to outstanding options under that Predecessor
Plan, and (ii) an additional increase of approximately one million five hundred
thousand (1,500,000) shares authorized by the Board and the stockholders prior
to the Section 12 Registration Date.  To the extent any unvested shares of
Common Stock issued under the Predecessor Plan are repurchased by the
Corporation after the Section 12 Registration Date, at the option exercise
price paid per share, in connection with the holder's termination of service,
those repurchased shares shall be added to the reserve of Common Stock
available for issuance under the Plan, but in no event shall more than 437,100
shares be added to the reserve from such repurchases.

          B.   No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than two hundred fifty thousand (250,000) shares of Common Stock in the
aggregate per calendar year, beginning with the 1998 calendar year.

          C.   Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plan) shall be
available for subsequent issuance under the Plan to the extent (i) those
options expire or terminate for any reason prior to exercise in full or (ii)
the options are cancelled in accordance with the cancellation-regrant
provisions of Article Two.  Unvested shares issued under the Plan and
subsequently cancelled or repurchased by the Corporation (including unvested
shares issued under the Predecessor Plan and repurchased by the Corporation on
or after the Plan Effective Date) at the original issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan.  However,
should the exercise price of an option under the Plan be paid with shares of
Common Stock or should shares of Common Stock otherwise issuable under the Plan
be withheld by the Corporation in satisfaction of the withholding taxes
incurred in connection with the exercise of an option or the vesting of a stock
issuance under the Plan, then the number of shares of Common Stock available
for issuance under the Plan shall be reduced by the gross number of shares for
which the option is exercised or which vest under the stock issuance, and not
by the net number of shares of Common Stock issued to the holder of such option
or stock issuance. Shares of Common Stock underlying one or more stock
appreciation rights exercised under Section V of Article Two of the Plan shall
NOT be available for subsequent issuance under the Plan.

          D.   If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the number and/or class of securities for which any one

<PAGE>

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



<PAGE>

                                  ARTICLE TWO
                                       
                      DISCRETIONARY OPTION GRANT PROGRAM


     I.   OPTION TERMS

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

          A.   EXERCISE PRICE.

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

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

                 (i)     in shares of Common Stock held for the requisite
     period necessary to avoid a charge to the Corporation's earnings for
     financial reporting purposes and valued at Fair Market Value on the
     Exercise Date, or
     
                (ii)     to the extent the option is exercised for vested
     shares, through a special sale and remittance procedure pursuant to
     which the Optionee shall concurrently provide irrevocable
     instructions (A) to a Corporation-designated brokerage firm to effect
     the immediate sale of the purchased shares and remit to the
     Corporation, out of the sale proceeds available on the settlement
     date, sufficient funds to cover the aggregate exercise price payable
     for the purchased shares plus all applicable Federal, state and local
     income and employment taxes required to be withheld by the
     Corporation by reason of such exercise and (B) to the Corporation to
     deliver the certificates for the purchased shares directly to such
     brokerage firm in order to complete the sale.
     
          Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

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

          C.   EFFECT OF TERMINATION OF SERVICE.

<PAGE>

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

                 (i)     Any option outstanding at the time of the
     Optionee's cessation of Service for any reason shall remain
     exercisable for such period of time thereafter as shall be determined
     by the Plan Administrator and set forth in the documents evidencing
     the option, but no such option shall be exercisable after the
     expiration of the option term.
     
                (ii)     Any option exercisable in whole or in part by the
     Optionee at the time of death may be subsequently exercised by the
     personal representative of the Optionee's estate or by the person or
     persons to whom the option is transferred pursuant to the Optionee's
     will or in accordance with the laws of descent and distribution.
     
               (iii)     Should the Optionee's Service be terminated for
     Misconduct, then all outstanding options held by the Optionee shall
     terminate immediately and cease to be outstanding.
     
                (iv)     During the applicable post-Service exercise
     period, the option may not be exercised in the aggregate for more
     than the number of vested shares for which the option is exercisable
     on the date of the Optionee's cessation of Service.  Upon the
     expiration of the applicable exercise period or (if earlier) upon the
     expiration of the option term, the option shall terminate and cease
     to be outstanding for any vested shares for which the option has not
     been exercised.  However, the option shall, immediately upon the
     Optionee's cessation of Service, terminate and cease to be
     outstanding to the extent the option is not otherwise at that time
     exercisable for vested shares.
     
               2.   The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:

                (i)      extend the period of time for which the option is
     to remain exercisable following the Optionee's cessation of Service
     from the limited exercise period otherwise in effect for that option
     to such greater period of time as the Plan Administrator shall deem
     appropriate, but in no event beyond the expiration of the option
     term, and/or
     
                (ii)     permit the option to be exercised, during the
     applicable post-Service exercise period, not only with respect to the
     number of vested shares of Common Stock for which such option is
     exercisable at the time of the Optionee's cessation of Service but
     also with respect to one or more additional installments in which the
     Optionee would have vested had the Optionee continued in Service.
     
          D.   STOCKHOLDER RIGHTS.  The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.

<PAGE>

          E.   REPURCHASE RIGHTS.  The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock.  Should the Optionee cease Service while holding such unvested shares,
the Corporation shall have the right to repurchase, at the exercise price paid
per share, any or all of those unvested shares.  The terms upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall
be established by the Plan Administrator and set forth in the document
evidencing such repurchase right.

          F.   LIMITED TRANSFERABILITY OF OPTIONS.  During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death.  Non-Statutory Options shall
be subject to the same restrictions, except that a Non-Statutory Option may, in
connection with the Optionee's estate plan, be assigned in whole or in part
during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for the Optionee and/or
one or more such family members.  The assigned portion may only be exercised by
the person or persons who acquire a proprietary interest in the option pursuant
to the assignment. The terms applicable to the assigned portion shall be the
same as those in effect for the option immediately prior to such assignment and
shall be set forth in such documents issued to the assignee as the Plan
Administrator may deem appropriate.

     II.  INCENTIVE OPTIONS

          The terms specified below shall be applicable to all Incentive
Options.  Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Seven shall be applicable to Incentive
Options.  Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall NOT be subject to the terms of this Section
II.

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

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

          C.   DOLLAR LIMITATION.  The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000).  To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.

          D.   10% STOCKHOLDER.  If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed
five (5) years measured from the option grant date.

<PAGE>

     III. CHANGE IN CONTROL

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

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

          C.   Immediately following the consummation of the Change in Control,
all outstanding options shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof) or
otherwise continued in full force and effect pursuant to the terms of the
Change in Control transaction.

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

          E.   The Plan Administrator shall have full power and authority
exercisable, either at the time the option is granted or at any time while the
option remains outstanding, to provide for the accelerated vesting of one or
more outstanding options under the Discretionary Option Grant Program upon the
occurrence of a Change in Control, whether or not those options are to be
assumed or otherwise continued in full force and effect pursuant to the terms
of the Change in Control transaction.  In addition, the Plan Administrator may
structure one or more of 


<PAGE>

the Corporation's repurchase rights under the Discretionary Option Grant 
Program so that those rights shall immediately terminate, in whole or in 
part, at the time of a Change in Control and shall not be assignable to the 
successor corporation (or parent thereof), and the shares subject to those 
terminated repurchase rights shall accordingly vest in full at the time of 
such Change in Control.

          F.   The Plan Administrator shall have full power and authority
exercisable, either at the time the option is granted or at any time while the
option remains outstanding, to provide for the accelerated vesting, in whole or
in part, of one or more outstanding options under the Discretionary Option
Grant Program upon the Involuntary Termination of the Optionee's Service within
a designated period (not to exceed eighteen (18) months) following the
effective date of any Change in Control in which those options do not otherwise
accelerate.  In addition, the Plan Administrator may structure one or more of
the Corporation's repurchase rights under the Discretionary Option Grant
Program so that those rights will immediately terminate at the time of such
Involuntary Termination, and the shares subject to those terminated repurchase
rights shall accordingly vest in full at that time.

          G.   The portion of any Incentive Option accelerated in connection
with a Change in Control shall remain exercisable as an Incentive Option only
to the extent the applicable One Hundred Thousand Dollar ($100,000) limitation
is not exceeded.  To the extent such dollar limitation is exceeded, the
accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.

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

     IV.  CANCELLATION AND REGRANT OF OPTIONS

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

     V.   STOCK APPRECIATION RIGHTS

          A.   The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.

          B.   The following terms shall govern the grant and exercise of
tandem stock appreciation rights:

                 (i)     One or more Optionees may be granted the right,
     exercisable upon such terms as the Plan Administrator may establish,
     to elect between the exercise of the underlying option for shares of
     Common Stock and the surrender of that option in exchange for a
     distribution from the Corporation in 

<PAGE>

     an amount equal to the excess of (a) the Fair Market Value (on the option 
     surrender date) of the number of shares in which the Optionee is at the 
     time vested under the surrendered option (or surrendered portion thereof) 
     over (b) the aggregate exercise price payable for such shares.
     
                (ii)     No such option surrender shall be effective
     unless it is approved by the Plan Administrator, either at the time
     of the actual option surrender or at any earlier time.  If the
     surrender is so approved, then the distribution to which the Optionee
     shall be entitled may be made in shares of Common Stock valued at
     Fair Market Value on the option surrender date, in cash, or partly in
     shares and partly in cash, as the Plan Administrator shall in its
     sole discretion deem appropriate.
     
               (iii)     If the surrender of an option is not approved by
     the Plan Administrator, then the Optionee shall retain whatever
     rights the Optionee had under the surrendered option (or surrendered
     portion thereof) on the option surrender date and may exercise such
     rights at any time prior to the LATER of (a) five (5) business days
     after the receipt of the rejection notice or (b) the last day on
     which the option is otherwise exercisable in accordance with the
     terms of the documents evidencing such option, but in no event may
     such rights be exercised more than ten (10) years after the option
     grant date.
     
          C.   The following terms shall govern the grant and exercise of
limited stock appreciation rights:

                 (i)     One or more Section 16 Insiders may be granted
     limited stock appreciation rights with respect to their outstanding
     options.
     
                (ii)     Upon the occurrence of a Hostile Take-Over, each
     individual holding one or more options with such a limited stock
     appreciation right shall have the unconditional right (exercisable
     for a thirty (30)-day period following such Hostile Take-Over) to
     surrender each such option to the Corporation, to the extent the
     option is at the time exercisable for vested shares of Common Stock.
     In return for the surrendered option, the Optionee shall receive a
     cash distribution from the Corporation in an amount equal to the
     excess of (A) the Take-Over Price of the shares of Common Stock which
     are at the time vested under each surrendered option (or surrendered
     portion thereof) over (B) the aggregate exercise price payable for
     such shares.  Such cash distribution shall be paid within five (5)
     days following the option surrender date.
     
               (iii)     The Plan Administrator shall, at the time the
     option with such limited stock appreciation right is granted under
     the Discretionary Option Grant Program, pre-approve any subsequent
     exercise of that right in accordance with the terms of this Paragraph
     C.  Accordingly, no further approval of the Plan Administrator or the
     Board shall be required at the time of the actual option surrender
     and cash distribution.
     
<PAGE>

                (iv)     The balance of the option (if any) shall remain
     outstanding and exercisable in accordance with the documents
     evidencing such option.


<PAGE>

                                 ARTICLE THREE

                    SALARY INVESTMENT OPTION GRANT PROGRAM

     I.   OPTION GRANTS

          The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years (if any) for which the Salary Investment
Option Grant Program is to be in effect and to select the Section 16 Insiders
and other highly compensated Employees eligible to participate in the Salary
Investment Option Grant Program for such calendar year or years.  Each selected
individual who elects to participate in the Salary Investment Option Grant
Program must, prior to the start of each calendar year of participation, file
with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by an amount not less than Ten Thousand Dollars ($10,000.00) nor more than
Fifty Thousand Dollars ($50,000.00).  The Primary Committee shall have complete
discretion to determine whether to approve the filed authorization in whole or
in part.  To the extent the Primary Committee approves the authorization, the
individual who filed that authorization shall automatically be granted an
option under the Salary Investment Option Grant Program on the first trading
day in January of the calendar year for which the salary reduction is to be in
effect.

     II.  OPTION TERMS

          Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Plan Administrator; PROVIDED, however,
that each such document shall comply with the terms specified below.

          A.   EXERCISE PRICE.

               1.   The exercise price per share shall be thirty-three and one-
third percent (33-1/3%) of the Fair Market Value per share of Common Stock on
the option grant date.

               2.   The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program.  Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

          B.   NUMBER OF OPTION SHARES.  The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):

               X = A DIVIDED BY (B X 66-2/3%), where

               X is the number of option shares,
          
               A is the dollar amount of the approved reduction in the
          Optionee's base salary for the calendar year, and

<PAGE>

               B is the Fair Market Value per share of Common Stock on the
          option grant date.
          
          C.   EXERCISE AND TERM OF OPTIONS.  The option shall become
exercisable in a series of twelve (12) successive equal monthly installments
upon the Optionee's completion of each calendar month of Service in the
calendar year for which the salary reduction is in effect.  Each option shall
have a maximum term of ten (10) years measured from the option grant date.

          D.   EFFECT OF TERMINATION OF SERVICE.  Should the Optionee cease
Service for any reason while holding one or more options under this Article
Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the EARLIER of (i) the expiration of the ten (10)-year option
term or (ii) the expiration of the three (3)-year period measured from the date
of such cessation of Service.  Should the Optionee die while holding one or
more options under this Article Three, then each such option may be exercised,
for any or all of the shares for which the option is exercisable at the time of
the Optionee's cessation of Service (less any shares subsequently purchased by
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant
to the Optionee's will or in accordance with the laws of descent and
distribution.  Such right of exercise shall lapse, and the option shall
terminate, upon the EARLIER of (i) the expiration of the ten (10)-year option
term or (ii) the three (3)-year period measured from the date of the Optionee's
cessation of Service.  However, the option shall, immediately upon the
Optionee's cessation of Service for any reason, terminate and cease to remain
outstanding with respect to any and all shares of Common Stock for which the
option is not otherwise at that time exercisable.

     III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
     
          A.   In the event of any Change in Control while the Optionee remains
in Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each
such option shall, immediately prior to the effective date of the Change in
Control, become fully exercisable with respect to the total number of shares of
Common Stock at the time subject to such option and may be exercised for any or
all of those shares as fully-vested shares of Common Stock.  The successor
corporation (or parent thereof) in the Change in Control transaction shall
assume each such outstanding option so that each option under the Salary
Investment Option Grant Program shall remain exercisable for the fully-vested
shares until the EARLIEST to occur of (i) the expiration of the ten (10)-year
option term, (ii) the expiration of the three (3)-year period measured from the
date of the Optionee's cessation of Service or (iii) the surrender of the
option in connection with a Hostile Take-Over.

          B.   Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
outstanding option granted him or her under the Salary Investment Option Grant
Program.  The Optionee shall in return be entitled to a cash distribution from
the Corporation in an amount equal to the excess of (i) the Take-Over Price of
the shares of Common Stock at the time subject to the surrendered option
(whether or not the Optionee is otherwise at the time vested in those shares)
over (ii) the aggregate exercise price payable for such shares.  Such cash
distribution shall be paid within five 

<PAGE>

(5) days following the surrender of the option to the Corporation.  The 
Primary Committee shall, at the time the option with such limited stock 
appreciation right is granted under the Salary Investment Option Grant 
Program, pre-approve any subsequent exercise of that right in accordance with 
the terms of this Paragraph B.  Accordingly, no further approval of the 
Primary Committee or the Board shall be required at the time of the actual 
option surrender and cash distribution.

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

     IV.  REMAINING TERMS

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


<PAGE>

                                 ARTICLE FOUR
                                       
                            STOCK ISSUANCE PROGRAM
                                       
     I.   STOCK ISSUANCE TERMS

          Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.  Shares of Common Stock may also be
issued under the Stock Issuance Program pursuant to share right awards which
entitle the recipients to receive those shares upon the attainment of
designated performance goals.

          A.   PURCHASE PRICE.

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

               2.   Subject to the provisions of Section I of Article Seven,
shares of Common Stock may be issued under the Stock Issuance Program for any
of the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:

                 (i)     cash or check made payable to the Corporation, or
     
                (ii)     past services rendered to the Corporation (or any
     Parent or Subsidiary).
     
          B.   VESTING PROVISIONS.

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

               2.   Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock
and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.

<PAGE>

               3.   The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested.  Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.

               4.   Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares.  To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.

               5.   The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock which
would otherwise occur upon the cessation of the Participant's Service or the
non-attainment of the performance objectives applicable to those shares.  Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares of Common Stock as to which the waiver applies.  Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.

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

     II.  CHANGE IN CONTROL

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

          B.   The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights remain outstanding under the Stock Issuance
Program, to provide that those rights shall automatically terminate upon the
occurrence of a Change in Control and shall not be assignable 

<PAGE>

to the successor corporation (or parent thereof), and the shares of Common 
Stock subject to those terminated rights shall immediately vest at the time 
of such Change in Control.

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

     III. SHARE ESCROW/LEGENDS

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



<PAGE>

                                 ARTICLE FIVE
                                       
                        AUTOMATIC OPTION GRANT PROGRAM

     I.   OPTION TERMS

          A.   GRANT DATES.  Option grants under the Automatic Option Grant
Program shall be made on the dates specified below:

               1.   Each individual who is first elected or appointed as a non-
employee Board member at any time after the Underwriting Date shall
automatically be granted, on the date of such initial election or appointment,
a Non-Statutory Option to purchase fifteen thousand (15,000) shares of Common
Stock, provided that individual has not previously been in the employ of the
Corporation or any Parent or Subsidiary.

               2.   On the date of each Annual Stockholders Meeting held after
the Underwriting Date, each individual who is to continue to serve as an
Eligible Director (including individuals who joined the Board prior to the
Underwriting Date), whether or not that individual is standing for re-election
to the Board at that particular Annual Meeting, shall automatically be granted
a Non-Statutory Option to purchase five thousand (5,000) shares of Common
Stock, provided such individual has served as a non-employee Board member for
at least six (6) months.  There shall be no limit on the number of such five
thousand (5,000)-share option grants any one Eligible Director may receive over
his or her period of Board service, and non-employee Board members who have
previously been in the employ of the Corporation (or any Parent or Subsidiary)
or who have otherwise received a stock option grant from the Corporation prior
to the Underwriting Date shall be eligible to receive one or more such annual
option grants over their period of continued Board service.

          B.   EXERCISE PRICE.

               1.   The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.

               2.   The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.

          C.   OPTION TERM.  Each option shall have a term of ten (10) years
measured from the option grant date.

          D.   EXERCISE AND VESTING OF OPTIONS.  Each option shall be
immediately exercisable for any or all of the option shares.  However, any
shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's
cessation of Board service prior to vesting in those shares.  The shares
subject to each initial fifteen thousand (15,000)-share automatic option grant
shall vest, and the Corporation's repurchase right shall lapse, in a series of
three (3) successive equal annual installments upon the Optionee's completion
of each year of Board service over the three (3)-year period measured 

<PAGE>

from the option grant date.  The shares subject to each annual five thousand 
(5,000)-share automatic option grant shall vest, and the Corporation's 
repurchase right shall lapse, upon the Optionee's completion of one (1) year 
of Board service measured from the option grant date.

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

                 (i)     The Optionee (or, in the event of Optionee's
     death, the personal representative of the Optionee's estate or the
     person or persons to whom the option is transferred pursuant to the
     Optionee's will or in accordance with the laws of descent and
     distribution) shall have a twelve (12)-month period following the
     date of such cessation of Board service in which to exercise each
     such option.
     
                (ii)     During the twelve (12)-month exercise period, the
     option may not be exercised in the aggregate for more than the number
     of vested shares of Common Stock for which the option is exercisable
     at the time of the Optionee's cessation of Board service.
     
               (iii)     Should the Optionee cease to serve as a Board
     member by reason of death or Permanent Disability, then all shares at
     the time subject to the option shall immediately vest so that such
     option may, during the twelve (12)-month exercise period following
     such cessation of Board service, be exercised for all or any portion
     of those shares as fully-vested shares of Common Stock.
     
                (iv)     In no event shall the option remain exercisable
     after the expiration of the option term.  Upon the expiration of the
     twelve (12)-month exercise period or (if earlier) upon the expiration
     of the option term, the option shall terminate and cease to be
     outstanding for any vested shares for which the option has not been
     exercised.  However, the option shall, immediately upon the
     Optionee's cessation of Board service for any reason other than death
     or Permanent Disability, terminate and cease to be outstanding to the
     extent the option is not otherwise at that time exercisable for
     vested shares.

<PAGE>

     II.  CHANGE IN CONTROL/HOSTILE TAKE-OVER
     
          A.   The shares of Common Stock subject to each option outstanding at
the time of a Change in Control but not otherwise vested shall automatically
vest in full so that each such option shall, immediately prior to the effective
date of such Change in Control, become exercisable for all of those shares as
fully-vested shares of Common Stock and may be exercised for all or any portion
of those vested shares.  Immediately following the consummation of the Change
in Control, each automatic option grant shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof) or otherwise continued in full force and effect pursuant to the
terms of the Change in Control transaction.

          B.   All outstanding repurchase rights shall automatically terminate,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Change in Control.

          C.   Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each of
his or her outstanding automatic option grants.  The Optionee shall in return
be entitled to a cash distribution from the Corporation in an amount equal to
the excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over (ii) the aggregate exercise price payable
for such shares.  Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Corporation.  No approval or
consent of the Board or any Plan Administrator shall be required in connection
with such option surrender and cash distribution.

          D.   Each option which is assumed in connection with a Change in
Control (or otherwise continued in full and effect) shall be appropriately
adjusted, immediately after such Change in Control, to apply to the number and
class of securities or other property which would have been issuable to the
Optionee in consummation of such Change in Control had the option been
exercised immediately prior to such Change in Control.  Appropriate adjustments
shall also be made to the exercise price payable per share under each
outstanding option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same.

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

     III. REMAINING TERMS

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

<PAGE>

                                  ARTICLE SIX
                                       
                       DIRECTOR FEE OPTION GRANT PROGRAM

     I.   OPTION GRANTS

          The Plan Administrator shall have the sole and exclusive authority to
determine the calendar year or years (if any) the Director Fee Option Grant
Program is to be in effect.  When the Director Fee Option Grant Program is in
effect, each non-employee Board member may elect to apply all or any portion of
the annual retainer fee otherwise payable in cash for his or her service on the
Board to the acquisition of a special option grant.  Such election must be
filed with the Corporation's Chief Financial Officer prior to first day of the
calendar year for which the annual retainer fee which is the subject of that
election is otherwise payable.  Each non-employee Board member who files such a
timely election shall automatically be granted an option under this Director
Fee Option Grant Program on the first trading day in January in the calendar
year for which the annual retainer fee which is the subject of that election
would otherwise be payable in cash.

     II.  OPTION TERMS

          Each option shall be a Non-Statutory Option governed by the terms and
conditions specified below.

          A.   EXERCISE PRICE.

               1.   The exercise price per share shall be thirty-three and one-
third percent (33-1/3%) of the Fair Market Value per share of Common Stock on
the option grant date.

               2.   The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program.  Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

          B.   NUMBER OF OPTION SHARES.  The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):

               X = A DIVIDED BY (B x 66-2/3%), where

               X is the number of option shares,
          
               A is the portion of the annual retainer fee subject to the
          non-employee Board member's election, and
          
               B is the Fair Market Value per share of Common Stock on the
          option grant date.

<PAGE>

          C.   EXERCISE AND TERM OF OPTIONS.  The option shall become
exercisable in a series of twelve (12) successive equal monthly installments
upon the Optionee's completion of each month of Board service over the twelve
(12)-month period measured from the grant date.  Each option shall have a
maximum term of ten (10) years measured from the option grant date.

          D.   TERMINATION OF BOARD SERVICE.  Should the Optionee cease Board
service for any reason (other than death or Permanent Disability) while holding
one or more options under this Director Fee Option Grant Program, then each
such option shall remain exercisable, for any or all of the shares for which
the option is exercisable at the time of such cessation of Board service, until
the EARLIER of (i) the expiration of the ten (10)-year option term or (ii) the
expiration of the three (3)-year period measured from the date of such
cessation of Board service.  However, each option held by the Optionee under
this Director Fee Option Grant Program at the time of his or her cessation of
Board service shall immediately terminate and cease to remain outstanding with
respect to any and all shares of Common Stock for which the option is not
otherwise at that time exercisable.

          E.   DEATH OR PERMANENT DISABILITY.  Should the Optionee's service as
a Board member cease by reason of death or Permanent Disability, then each
option held by such Optionee under this Director Fee Option Grant Program shall
immediately become exercisable for all the shares of Common Stock at the time
subject to that option, and the option may be exercised for any or all of those
shares as fully-vested shares until the EARLIER of (i) the expiration of the
ten (10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of such cessation of Board service.

          Should the Optionee die after cessation of Board service but while
holding one or more options under this Director Fee Option Grant Program, then
each such option may be exercised, for any or all of the shares for which the
option is exercisable at the time of the Optionee's cessation of Board service
(less any shares subsequently purchased by Optionee prior to death), by the
personal representative of the Optionee's estate or by the person or persons to
whom the option is transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution.  Such right of exercise shall lapse,
and the option shall terminate, upon the EARLIER of (i) the expiration of the
ten (10)-year option term or (ii) the three (3)-year period measured from the
date of the Optionee's cessation of Board service.

     III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
     
          A.   In the event of any Change in Control while the Optionee remains
a Board member, each outstanding option held by such Optionee under this
Director Fee Option Grant Program shall automatically accelerate so that each
such option shall, immediately prior to the effective date of the Change in
Control, become fully exercisable with respect to the total number of shares of
Common Stock at the time subject to such option and may be exercised for any or
all of those shares as fully-vested shares of Common Stock.  The successor
corporation (or parent thereof) in the Change in Control transaction shall
assume each such outstanding option so that each option under the Director Fee
Option Grant Program shall remain exercisable for the fully-vested shares until
the EARLIEST to occur of (i) the expiration of the ten (10)-year option term,
(ii) the expiration of the three (3)-year period measured from the date of the

<PAGE>

Optionee's cessation of Board service or (iii) the surrender of the option in
connection with a Hostile Take-Over.

          B.   Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
outstanding option granted him or her under the Director Fee Option Grant
Program.  The Optionee shall in return be entitled to a cash distribution from
the Corporation in an amount equal to the excess of (i) the Take-Over Price of
the shares of Common Stock at the time subject to each surrendered option
(whether or not the Optionee is otherwise at the time vested in those shares)
over (ii) the aggregate exercise price payable for such shares.  Such cash
distribution shall be paid within five (5) days following the surrender of the
option to the Corporation.  No approval or consent of the Board or any Plan
Administrator shall be required in connection with such option surrender and
cash distribution.

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

     IV.  REMAINING TERMS

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

<PAGE>

                                 ARTICLE SEVEN
                                       
                                 MISCELLANEOUS

     I.   FINANCING

          The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering
a full-recourse, interest bearing promissory note payable in one or more
installments.  The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion.  In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.

     II.  TAX WITHHOLDING

          A.   The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or the issuance or vesting of such shares under
the Plan shall be subject to the satisfaction of all applicable Federal, state
and local income and employment tax withholding requirements.

          B.   The Plan Administrator may, in its discretion, provide any or
all holders of Non-Statutory Options or unvested shares of Common Stock under
the Plan (other than the options granted or the shares issued under the
Automatic Option Grant or Director Fee Option Grant Program) with the right to
use shares of Common Stock in satisfaction of all or part of the Taxes incurred
by such holders in connection with the exercise of their options or the vesting
of their shares.  Such right may be provided to any such holder in either or
both of the following formats:

               STOCK WITHHOLDING:  The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such Non-Statutory Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the percentage of the Taxes
(not to exceed one hundred percent (100%)) designated by the holder.

               STOCK DELIVERY:  The election to deliver to the Corporation, at
the time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.


     III. EFFECTIVE DATE AND TERM OF THE PLAN

<PAGE>

          A.   The Discretionary Option Grant and Stock Issuance Programs shall
become effective immediately on the Plan Effective Date, and the Automatic
Option Grant Program shall become effective on the Underwriting Date.  However,
the Salary Investment Option Grant and Director Fee Option Grant Programs shall
not be implemented until such time as the Primary Committee may deem
appropriate.  Options may be granted under the Discretionary Option Grant or
Automatic Option Grant Program at any time on or after the Plan Effective Date;
however, no options granted under the Plan may be exercised, and no shares
shall be issued under the Plan, until the Plan is approved by the Corporation's
stockholders.  If such stockholder approval is not obtained within twelve (12)
months after the Plan Effective Date, then all options previously granted under
this Plan shall terminate and cease to be outstanding, and no further options
shall be granted and no shares shall be issued under the Plan.

          B.   The Plan shall serve as the successor to the Predecessor Plan,
and no further option grants or direct stock issuances shall be made under the
Predecessor Plan after the Section 12 Registration Date.   All options
outstanding under the Predecessor Plan on the Section 12 Registration Date
shall be incorporated into the Plan at that time and shall be treated as
outstanding options under the Plan. However, each outstanding option so
incorporated shall continue to be governed solely by the terms of the documents
evidencing such option, and no provision of the Plan shall be deemed to affect
or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of Common
Stock.

          C.   One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Changes in Control, may, in the Plan Administrator's discretion, be extended
to one or more options incorporated from the Predecessor Plan which do not
otherwise contain such provisions.

          D.   The Plan shall terminate upon the EARLIEST to occur of (i) April
20, 2008, (ii) the date on which all shares available for issuance under the
Plan shall have been issued as fully-vested shares or (iii) the termination of
all outstanding options in connection with a Change in Control.  Should the
Plan terminate on April 20, 2008, then all option grants and unvested stock
issuances outstanding at that time shall continue to have force and effect in
accordance with the provisions of the documents evidencing such grants or
issuances.

     IV.  AMENDMENT OF THE PLAN

          A.   The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects.  However, no such amendment
or modification shall adversely affect the rights and obligations with respect
to stock options or unvested stock issuances at the time outstanding under the
Plan unless the Optionee or the Participant consents to such amendment or
modification.  In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.

          B.   Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant and Salary Investment Option Grant Programs
and shares of Common Stock may be issued under the Stock Issuance Program that
are in each instance in excess of the number of shares then available for
issuance under the Plan, provided any excess 

<PAGE>

shares actually issued under those programs shall be held in escrow until 
there is obtained stockholder approval of an amendment sufficiently 
increasing the number of shares of Common Stock available for issuance under 
the Plan.  If such stockholder approval is not obtained within twelve (12) 
months after the date the first such excess issuances are made, then (i) any 
unexercised options granted on the basis of such excess shares shall 
terminate and cease to be outstanding and (ii) the Corporation shall promptly 
refund to the Optionees and the Participants the exercise or purchase price 
paid for any excess shares issued under the Plan and held in escrow, together 
with interest (at the applicable Short Term Federal Rate) for the period the 
shares were held in escrow, and such shares shall thereupon be automatically 
cancelled and cease to be outstanding.

     V.   USE OF PROCEEDS

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

     VI.  REGULATORY APPROVALS

          A.   The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any granted option or (ii) under the Stock Issuance Program shall
be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the stock
options granted under it and the shares of Common Stock issued pursuant to it.

          B.   No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing
requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock is then listed for trading.

     VII. NO EMPLOYMENT/SERVICE RIGHTS

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


<PAGE>
                                       
                                   APPENDIX

          The following definitions shall be in effect under the Plan:

          A.   AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option 
grant program in effect under the Plan.

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

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

            (i)     a merger or consolidation in which securities possessing 
     more than fifty percent (50%) of the total combined voting power of the 
     Corporation's outstanding securities are transferred to a person or 
     persons different from the persons holding those securities immediately 
     prior to such transaction, or
     
           (ii)     the sale, transfer or other disposition of all or 
     substantially all of the Corporation's assets  in complete liquidation 
     or dissolution of the Corporation, or
     
          (iii)     the acquisition, directly or indirectly, by any person or 
     related group of persons (other than the Corporation or a person that 
     directly or indirectly controls, is controlled by, or is under common 
     control with, the Corporation) of beneficial ownership (within the 
     meaning of Rule 13d-3 of the 1934 Act) of securities possessing more 
     than fifty percent (50%) of the total combined voting power of the 
     Corporation's outstanding securities pursuant to a tender or exchange 
     offer made directly to the Corporation's stockholders, or
     
           (iv)     a change in the composition of the Board over a period of 
     thirty-six (36) consecutive months or less such that a majority of the 
     Board members ceases, by reason of one or more contested elections for 
     Board membership, to be comprised of individuals who either (A) have 
     been Board members continuously since the beginning of such period or 
     (B) have been elected or nominated for election as Board members during 
     such period by at least a majority of the Board members described in 
     clause (A) who were still in office at the time the Board approved such 
     election or nomination.
     
          D.   CODE shall mean the Internal Revenue Code of 1986, as amended.

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

          F.   CORPORATION shall mean Collateral Therapeutics, Inc., a 
California corporation, and any corporate successor to all or substantially 
of the assets or voting stock of Collateral Therapeutics, Inc. which shall by 
appropriate action adopt the Plan.


<PAGE>

          G.   DIRECTOR FEE OPTION GRANT PROGRAM shall mean the special stock 
option grant in effect for non-employee Board members under Article Six of 
the Plan.

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

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

          J.   EMPLOYEE shall mean an individual who is in the employ of the 
Corporation (or any Parent or Subsidiary), subject to the control and 
direction of the employer entity as to both the work to be performed and the 
manner and method of performance.

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

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

            (i)     If the Common Stock is at the time traded on the Nasdaq 
     National Market, then the Fair Market Value shall be the closing selling 
     price per share of Common Stock on the date in question, as such price 
     is reported by the National Association of Securities Dealers on the 
     Nasdaq National Market. If there is no closing selling price for the 
     Common Stock on the date in question, then the Fair Market Value shall 
     be the closing selling price on the last preceding date for which such 
     quotation exists.
     
           (ii)     If the Common Stock is at the time listed on any Stock 
     Exchange, then the Fair Market Value shall be the closing selling price 
     per share of Common Stock on the date in question on the Stock Exchange 
     determined by the Plan Administrator to be the primary market for the 
     Common Stock, as such price is officially quoted in the composite tape 
     of transactions on such exchange.  If there is no closing selling price 
     for the Common Stock on the date in question, then the Fair Market Value 
     shall be the closing selling price on the last preceding date for which 
     such quotation exists.
     
          (iii)     For purposes of any option grants made on the 
     Underwriting Date, the Fair Market Value shall be deemed to be equal to 
     the price per share at which the Common Stock is to be sold in the 
     initial public offering pursuant to the Underwriting Agreement.
     
           (iv)     For purposes of any option grants made prior to the 
     Underwriting Date, the Fair Market Value shall be determined by the Plan 
     Administrator, after taking into account such factors as it deems 
     appropriate.
     
          M.   HOSTILE TAKE-OVER shall mean the acquisition, directly or 
indirectly, by any person or related group of persons (other than the 
Corporation or a person that directly or 

<PAGE>

indirectly controls, is controlled by, or is under common control with, the 
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the 
1934 Act) of securities possessing more than fifty percent (50%) of the total 
combined voting power of the Corporation's outstanding securities  pursuant 
to a tender or exchange offer made directly to the Corporation's stockholders 
which the Board does not recommend such stockholders to accept.

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

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

            (i)     such individual's involuntary dismissal or discharge
     by the Corporation for reasons other than Misconduct, or
     
           (ii)     such individual's voluntary resignation following (A) a 
     change in his or her position with the Corporation (or Parent or 
     Subsidiary employing the individual) which materially reduces his or her 
     duties and responsibilities or the level of management to which he or 
     she reports, (B) a reduction in his or her level of compensation 
     (including base salary, fringe benefits and target bonus under any 
     corporate-performance based bonus or incentive programs) by more than 
     fifteen percent (15%) or (C) a relocation of such individual's place of 
     employment by more than fifty (50) miles, provided and only if such 
     change, reduction or relocation is effected by the Corporation without 
     the individual's consent.

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

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

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

          S.   OPTIONEE shall mean any person to whom an option is granted 
under the Discretionary Option Grant, Salary Investment Option Grant, 
Automatic Option Grant or Director Fee Option Grant Program.

          T.   PARENT shall mean any corporation (other than the Corporation) 
in an unbroken chain of corporations ending with the Corporation, provided 
each corporation in the unbroken chain (other than the Corporation) owns, at 
the time of the determination, stock 

<PAGE>

possessing fifty percent (50%) or more of the total combined voting power of 
all classes of stock in one of the other corporations in such chain.

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

          V.   PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the 
inability of the Optionee or the Participant to engage in any substantial 
gainful activity by reason of any medically determinable physical or mental 
impairment expected to result in death or to be of continuous duration of 
twelve (12) months or more.  However, solely for purposes of the Automatic 
Option Grant and Director Fee Option Grant Programs, Permanent Disability or 
Permanently Disabled shall mean the inability of the non-employee Board 
member to perform his or her usual duties as a Board member by reason of any 
medically determinable physical or mental impairment expected to result in 
death or to be of continuous duration of twelve (12) months or more.

          W.   PLAN shall mean the Corporation's 1998 Stock Incentive Plan, 
as set forth in this document.

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

          Y.   PLAN EFFECTIVE DATE shall mean April 20, 1998, the date on 
which the Plan was adopted by the Board.

          Z.   PREDECESSOR PLAN shall mean the Corporation's pre-existing 
Stock Option Plan in effect immediately prior to the Section 12 Registration 
Date.

          AA.  PRIMARY COMMITTEE shall mean the committee of two (2) or more 
non-employee Board members appointed by the Board to administer the 
Discretionary Option Grant and Stock Issuance Programs with respect to 
Section 16 Insiders and to administer the Salary Investment Option Grant 
Program solely with respect to the selection of the eligible individuals who 
may participate in such program.

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

          CC.  SECONDARY COMMITTEE shall mean a committee of one or more 
Board members appointed by the Board to administer the Discretionary Option 
Grant and Stock Issuance Programs with respect to eligible persons other than 
Section 16 Insiders.

          DD.  SECTION 12 REGISTRATION DATE shall mean the date on which the 
Common Stock is first registered under Section 12 of the 1934 Act.

<PAGE>

          EE.  SECTION 16 INSIDER shall mean an officer or director of the 
Corporation subject to the short-swing profit liabilities of Section 16 of 
the 1934 Act.

          FF.  SERVICE shall mean the performance of services for the 
Corporation (or any Parent or Subsidiary) by a person in the capacity of an 
Employee, a non-employee member of the board of directors or a consultant or 
independent advisor, except to the extent otherwise specifically provided in 
the documents evidencing the option grant or stock issuance.

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

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

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

          JJ.  SUBSIDIARY shall mean any corporation (other than the 
Corporation) in an unbroken chain of corporations beginning with the 
Corporation, provided each corporation (other than the last corporation) in 
the unbroken chain owns, at the time of the determination, stock possessing 
fifty percent (50%) or more of the total combined voting power of all classes 
of stock in one of the other corporations in such chain.

          KK.  TAKE-OVER PRICE shall mean the GREATER of (i) the Fair Market 
Value per share of Common Stock on the date the option is surrendered to the 
Corporation in connection with a Hostile Take-Over or (ii) the highest 
reported price per share of Common Stock paid by the tender offeror in 
effecting such Hostile Take-Over.  However, if the surrendered option is an 
Incentive Option, the Take-Over Price shall not exceed the clause (i) price 
per share.

          LL.  TAXES shall mean the Federal, state and local income and 
employment tax liabilities incurred by the holder of Non-Statutory Options or 
unvested shares of Common Stock in connection with the exercise of those 
options or the vesting of those shares.

          MM.  10% STOCKHOLDER shall mean the owner of stock (as determined 
under Code Section 424(d)) possessing more than ten percent (10%) of the 
total combined voting power of all classes of stock of the Corporation (or 
any Parent or Subsidiary).

          NN.  UNDERWRITING AGREEMENT shall mean the agreement between the 
Corporation and the underwriter or underwriters managing the initial public 
offering of the Common Stock.

          OO.  UNDERWRITING DATE shall mean the date on which the 
Underwriting Agreement is executed and priced in connection with an initial 
public offering of the Common Stock.


<PAGE>
                                       
                         COLLATERAL THERAPEUTICS, INC.
                        NOTICE OF GRANT OF STOCK OPTION


          Notice is hereby given of the following option grant (the "Option") 
to purchase shares of the Common Stock of Collateral Therapeutics, Inc. (the 
"Corporation"):

          OPTIONEE: ________
                   
          GRANT DATE: ______

                                               VESTING COMMENCEMENT DATE: ____

          EXERCISE PRICE:  $___ per share

          NUMBER OF OPTION SHARES: _______ shares

          EXPIRATION DATE: ______

          TYPE OF OPTION:  _____ Incentive Stock Option

                           _____ Non-Statutory Stock Option

          EXERCISE SCHEDULE:  The Option shall become exercisable for twenty-
          five percent (25%) of the Option Shares upon Optionee's completion of
          one (1) year of Service measured from the Vesting Commencement Date
          and shall become exercisable for the balance of the Option Shares in
          thirty-six (36) successive equal monthly installments upon Optionee's
          completion of each additional month of Service over the thirty-six
          (36) month period measured from the first anniversary of the Vesting
          Commencement Date.  In no event shall the Option become exercisable
          for any additional Option Shares after Optionee's cessation of
          Service.
          
          Optionee understands and agrees that the Option is granted subject 
to and in accordance with the terms of the Collateral Therapeutics, Inc. 1998 
Stock Incentive Plan (the "Plan").  Optionee further agrees to be bound by 
the terms of the Plan and the terms of the Option as set forth in the Stock 
Option Agreement attached hereto as EXHIBIT A.  Optionee hereby acknowledges 
receipt of a copy of the official prospectus for the Plan in the form 
attached hereto as EXHIBIT B.  A copy of the Plan is available upon request 
made to the Corporate Secretary at the Corporation's principal offices.


<PAGE>

          NO EMPLOYMENT OR SERVICE CONTRACT.  Nothing in this Notice or in 
the attached Stock Option Agreement or in the Plan shall confer upon Optionee 
any right to continue in Service for any period of specific duration or 
interfere with or otherwise restrict in any way the rights of the Corporation 
(or any Parent or Subsidiary employing or retaining Optionee) or of Optionee, 
which rights are hereby expressly reserved by each, to terminate Optionee's 
Service at any time for any reason, with or without cause.

          DEFINITIONS.  All capitalized terms in this Notice shall have the 
meaning assigned to them in this Notice or in the attached Stock Option 
Agreement.

DATED: _________________________, 199_


                                   COLLATERAL THERAPEUTICS, INC.


                                   By:

                                   Title:



                                   -----------------------------------------
                                   OPTIONEE

                                   Address:




ATTACHMENTS
EXHIBIT A - STOCK OPTION AGREEMENT
EXHIBIT B - PLAN SUMMARY AND PROSPECTUS

<PAGE>

                                   EXHIBIT A
                                       
                            STOCK OPTION AGREEMENT

<PAGE>


                                   EXHIBIT B
                                       
                          PLAN SUMMARY AND PROSPECTUS



<PAGE>

                         COLLATERAL THERAPEUTICS, INC.
                            STOCK OPTION AGREEMENT


RECITALS

          A.   The Board has adopted the Plan for the purpose of retaining 
the services of selected Employees, non-employee members of the Board or of 
the board of directors of any Parent or Subsidiary and consultants and other 
independent advisors who provide services to the Corporation (or any Parent 
or Subsidiary).

          B.   Optionee is to render valuable services to the Corporation (or 
a Parent or Subsidiary), and this Agreement is executed pursuant to, and is 
intended to carry out the purposes of, the Plan in connection with the 
Corporation's grant of an option to Optionee.

          C.   All capitalized terms in this Agreement shall have the meaning 
assigned to them in the attached Appendix.

          NOW, THEREFORE, it is hereby agreed as follows:

          1.   GRANT OF OPTION.  The Corporation hereby grants to Optionee, 
as of the Grant Date, an option to purchase up to the number of Option Shares 
specified in the Grant Notice.  The Option Shares shall be purchasable from 
time to time during the option term specified in Paragraph 2 at the Exercise 
Price.

          2.   OPTION TERM.  This option shall have a maximum term of ten 
(10) years measured from the Grant Date and shall accordingly expire at the 
close of business on the Expiration Date, unless sooner terminated in 
accordance with Paragraph 5 or 6.

          3.   LIMITED TRANSFERABILITY.  This option shall be neither 
transferable nor assignable by Optionee other than by will or by the laws of 
descent and distribution following Optionee's death and may be exercised, 
during Optionee's lifetime, only by Optionee.  However, if this option is 
designated a Non-Statutory Option in the Grant Notice, then this option may, 
in connection with the Optionee's estate plan, be assigned in whole or in 
part during Optionee's lifetime to one or more members of the Optionee's 
immediate family or to a trust established for the exclusive benefit of the 
Optionee and/or one or more such family members.  The assigned portion shall 
be exercisable only by the person or persons who acquire a proprietary 
interest in the option pursuant to such assignment.  The terms applicable to 
the assigned portion shall be the same as those in effect for this option 
immediately prior to such assignment.



<PAGE>

          4.   DATES OF EXERCISE.  This option shall become exercisable for 
the Option Shares in one or more installments as specified in the Grant 
Notice.  As the option becomes exercisable for such installments, those 
installments shall accumulate and the option shall remain exercisable for the 
accumulated installments until the Expiration Date or sooner termination of 
the option term under Paragraph 5 or 6.

          5.   CESSATION OF SERVICE.  The option term specified in Paragraph 
2 shall terminate (and this option shall cease to be outstanding) prior to 
the Expiration Date should any of the following provisions become applicable:

                    (a)  Should Optionee cease to remain in Service for any 
     reason (other than death, Permanent Disability or Misconduct) while this 
     option is outstanding, then the period for exercising this option shall 
     be reduced to a three (3)-month period commencing with the date of such 
     cessation of Service, but in no event shall this option be exercisable 
     at any time after the Expiration Date.

                    (b)  Should Optionee die while holding this option, then 
     the personal representative of Optionee's estate or the person or 
     persons to whom the option is transferred pursuant to Optionee's will or 
     in accordance with the laws of inheritance shall have the right to 
     exercise this option.  Such right shall lapse, and this option shall 
     cease to be outstanding, upon the EARLIER of (i) the expiration of the 
     twelve (12)-month period measured from the date of Optionee's death or 
     (ii) the Expiration Date.

                    (c)  Should Optionee cease Service by reason of Permanent 
     Disability while this option is outstanding, then the period for 
     exercising this option shall be reduced to a twelve (12)-month period 
     commencing with the date of such cessation of Service, but no event 
     shall this option be exercisable at any time after the Expiration Date.

                    (d)  During the limited period of post-Service 
     exercisability, this option may not be exercised in the aggregate for 
     more than the number of vested Option Shares for which the option is 
     exercisable at the time of Optionee's cessation of Service.  Upon the 
     expiration of such limited exercise period or (if earlier) upon the 
     Expiration Date, this option shall terminate and cease to be outstanding 
     for any otherwise exercisable Option Shares for which the option has not 
     been exercised.  However, this option shall, immediately upon Optionee's 
     cessation of Service for any reason, terminate and cease to be 
     outstanding with respect to any Option Shares for which this option is 
     not otherwise at that time exercisable.

                    (e)  Should Optionee's Service be terminated for 
     Misconduct, then this option shall terminate immediately and cease to 
     remain outstanding.
     
          6.   SPECIAL ACCELERATION OF OPTION.


<PAGE>

               (a)  This option to the extent outstanding at the time of a 
Change in Control transaction but not otherwise fully exercisable, shall 
automatically accelerate so that this option shall, immediately prior to the 
effective date of such Change in Control, become exercisable for all of the 
Option Shares at the time subject to this option and may be exercised for any 
or all of those Option Shares as fully vested shares of Common Stock.  
However, this option shall not become exercisable on such an accelerated 
basis if and to the extent: (i) this option is, in connection with the Change 
in Control, to be assumed by the successor corporation (or parent thereof) or 
otherwise continued in full force and effect pursuant to the terms of the 
Change in Control transaction or (ii) this option is to be replaced with a 
cash incentive program of the successor corporation which preserves the 
spread existing at the time of the Change in Control on the Option Shares for 
which this option is not otherwise at that time exercisable (the excess of 
the Fair Market Value of those Option Shares over the aggregate Exercise 
Price payable for such shares) and provides for subsequent payout in 
accordance with the same option exercise/vesting schedule set forth in the 
Grant Notice.

               (b)  Immediately following the Change in Control, this option 
shall terminate and cease to be outstanding, except to the extent assumed by 
the successor corporation (or parent thereof) or otherwise continued in full 
force and effect pursuant to the terms of the Change in Control transaction.

               (c)  If this option is assumed in connection with a Change in 
Control (or otherwise continued in full force and effect), then this option 
shall be appropriately adjusted, immediately after such Change in Control, to 
apply to the number and class of securities or other property which would 
have been issuable to Optionee in consummation of such Change in Control had 
the option been exercised immediately prior to such Change in Control, and 
appropriate adjustments shall also be made to the Exercise Price, PROVIDED 
the aggregate Exercise Price shall remain the same.

               (d)  This option may also be subject to acceleration in 
accordance with the terms of any special Addendum attached to this Agreement.

               (e)  This Agreement shall not in any 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.

          7.   ADJUSTMENT IN OPTION SHARES.

               Should any change be made to the Common Stock by reason of any 
stock split, stock dividend, recapitalization, combination of shares, 
exchange of shares or other change affecting the outstanding Common Stock as 
a class without the Corporation's receipt of consideration, appropriate 
adjustments shall be made to (i) the total number and/or class of securities 
subject to this option and (ii) the Exercise Price in order to reflect such 
change and thereby preclude a dilution or enlargement of benefits hereunder.



<PAGE>

          8.   STOCKHOLDER RIGHTS.  The holder of this option shall not have 
any stockholder rights with respect to the Option Shares until such person 
shall have exercised the option, paid the Exercise Price and become a holder 
of record of the purchased shares.

          9.   MANNER OF EXERCISING OPTION.

               (a)  In order to exercise this option with respect to all or 
any part of the Option Shares for which this option is at the time 
exercisable, Optionee (or any other person or persons exercising the option) 
must take the following actions:

                      (i)     Execute and deliver to the Corporation a
     Notice of Exercise for the Option Shares for which the option is
     exercised.
     
                     (ii)     Pay the aggregate Exercise Price for the
     purchased shares in one or more of the following forms:
     
                              (A)  cash or check made payable to the
          Corporation; or
          
                              (B)  a promissory note payable to the
          Corporation, but only to the extent authorized by the Plan
          Administrator in accordance with Paragraph 13.
          
                              (C)  shares of Common Stock held by Optionee
          (or any other person or persons exercising the option) for the
          requisite period necessary to avoid a charge to the
          Corporation's earnings for financial reporting purposes and
          valued at Fair Market Value on the Exercise Date; or
          
                              (D)  through a special sale and remittance
          procedure pursuant to which Optionee (or any other person or
          persons exercising the option) shall concurrently provide
          irrevocable instructions (I) to a Corporation-designated
          brokerage firm to effect the immediate sale of the purchased
          shares and remit to the Corporation, out of the sale proceeds
          available on the settlement date, sufficient funds to cover the
          aggregate Exercise Price payable for the purchased shares plus
          all applicable Federal, state and local income and employment
          taxes required to be withheld by the Corporation by reason of
          such exercise and (II) to the Corporation to deliver the
          certificates for the purchased shares directly to such brokerage
          firm in order to complete the sale.
          
          Except to the extent the sale and remittance procedure is
          utilized in connection with the option exercise, payment of
          the Exercise Price must accompany the Notice of Exercise
          delivered to the Corporation in connection with the option
          exercise.

          
<PAGE>

                    (iii)     Furnish to the Corporation appropriate
     documentation that the person or persons exercising the option (if
     other than Optionee) have the right to exercise this option.
     
                     (iv)     Make appropriate arrangements with the
     Corporation (or Parent or Subsidiary employing or retaining Optionee)
     for the satisfaction of all Federal, state and local income and
     employment tax withholding requirements applicable to the option
     exercise.
     
               (b)  As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.

               (c)  In no event may this option be exercised for any fractional
shares.

          10.  COMPLIANCE WITH LAWS AND REGULATIONS.

               (a)  The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.

               (b)  The inability of the Corporation to obtain approval from
any regulatory body having authority deemed by the Corporation to be necessary
to the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Corporation of any liability with respect to the non-issuance
or sale of the Common Stock as to which such approval shall not have been
obtained.  The Corporation, however, shall use its best efforts to obtain all
such approvals.


<PAGE>

          11.  SUCCESSORS AND ASSIGNS.  Except to the extent otherwise 
provided in Paragraphs 3 and 6, the provisions of this Agreement shall inure 
to the benefit of, and be binding upon, the Corporation and its successors 
and assigns and Optionee, Optionee's assigns and the legal representatives, 
heirs and legatees of Optionee's estate.

          12.  NOTICES.  Any notice required to be given or delivered to the 
Corporation under the terms of this Agreement shall be in writing and 
addressed to the Corporation at its principal corporate offices.  Any notice 
required to be given or delivered to Optionee shall be in writing and 
addressed to Optionee at the address indicated below Optionee's signature 
line on the Grant Notice. All notices shall be deemed effective upon personal 
delivery or upon deposit in the U.S. mail, postage prepaid and properly 
addressed to the party to be notified.

          13.  FINANCING.  The Plan Administrator may, in its absolute 
discretion and without any obligation to do so, permit Optionee to pay the 
Exercise Price for the purchased Option Shares by delivering a full-recourse 
promissory note payable to the Corporation.  The terms of any such promissory 
note (including the interest rate, the requirements for collateral and the 
terms of repayment) shall be established by the Plan Administrator in its 
sole discretion.

          14.  CONSTRUCTION.  This Agreement and the option evidenced hereby 
are made and granted pursuant to the Plan and are in all respects limited by 
and subject to the terms of the Plan.  All decisions of the Plan 
Administrator with respect to any question or issue arising under the Plan or 
this Agreement shall be conclusive and binding on all persons having an 
interest in this option.

          15.  GOVERNING LAW.  The interpretation, performance and 
enforcement of this Agreement shall be governed by the laws of the State of 
California without resort to that State's conflict-of-laws rules.

          16.  EXCESS SHARES.  If the Option Shares covered by this Agreement 
exceed, as of the Grant Date, the number of shares of Common Stock which may 
without stockholder approval be issued under the Plan, then this option shall 
be void with respect to those excess shares, unless stockholder approval of 
an amendment sufficiently increasing the number of shares of Common Stock 
issuable under the Plan is obtained in accordance with the provisions of the 
Plan.

          17.  ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION.  In the 
event this option is designated an Incentive Option in the Grant Notice, the 
following terms and conditions shall also apply to the grant:

<PAGE>

                      (a)     This option shall cease to qualify for
     favorable tax treatment as an Incentive Option if (and to the extent)
     this option is exercised for one or more Option Shares: (A) more than
     three (3) months after the date Optionee ceases to be an Employee for
     any reason other than death or Permanent Disability or (B) more than
     twelve (12) months after the date Optionee ceases to be an Employee
     by reason of Permanent Disability.
     
                      (b)     No installment under this option shall
     qualify for favorable tax treatment as an Incentive Option if (and to
     the extent) the aggregate Fair Market Value (determined at the Grant
     Date) of the Common Stock for which such installment first becomes
     exercisable hereunder would, when added to the aggregate value
     (determined as of the respective date or dates of grant) of the
     Common Stock or other securities for which this option or any other
     Incentive Options granted to Optionee prior to the Grant Date
     (whether under the Plan or any other option plan of the Corporation
     or any Parent or Subsidiary) first become exercisable during the same
     calendar year, exceed One Hundred Thousand Dollars ($100,000) in the
     aggregate.  Should such One Hundred Thousand Dollar ($100,000)
     limitation be exceeded in any calendar year, this option shall
     nevertheless become exercisable for the excess shares in such
     calendar year as a Non-Statutory Option.
     
                      (c)     Should the exercisability of this option be
     accelerated upon a Change in Control transaction, then this option
     shall qualify for favorable tax treatment as an Incentive Option only
     to the extent the aggregate Fair Market Value (determined at the
     Grant Date) of the Common Stock for which this option first becomes
     exercisable in the calendar year in which the Change in Control
     occurs does not, when added to the aggregate value (determined as of
     the respective date or dates of grant) of the Common Stock or other
     securities for which this option or one or more other Incentive
     Options granted to Optionee prior to the Grant Date (whether under
     the Plan or any other option plan of the Corporation or any Parent or
     Subsidiary) first become exercisable during the same calendar year,
     exceed One Hundred Thousand Dollars ($100,000) in the aggregate.
     Should the applicable One Hundred Thousand Dollar ($100,000)
     limitation be exceeded in the calendar year of such Change in
     Control, the option may nevertheless be exercised for the excess
     shares in such calendar year as a Non-Statutory Option.
     
                      (d)     Should Optionee hold, in addition to this
     option, one or more other options to purchase Common Stock which
     become exercisable for the first time in the same calendar year as
     this option, then the foregoing limitations on the exercisability of
     such options as Incentive Options shall be applied on the basis of
     the order in which such options are granted.


<PAGE>


                                   EXHIBIT I
                              NOTICE OF EXERCISE


          I hereby notify Collateral Therapeutics, Inc. (the "Corporation")
that I elect to purchase ________ shares of the Corporation's Common Stock
(the "Purchased Shares") at the option exercise price of $ ____________ per
share (the "Exercise Price") pursuant to that certain option (the "Option")
granted to me under the Corporation's 1998 Stock Incentive Plan on 
___________, 199__.

          Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise.  Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the
Exercise Price.



_______________________, 199__
Date

                                                         ---------------------
                              Optionee

                                               Address: 
                                                         ---------------------

                                                         ---------------------

Print name in exact manner
it is to appear on the
stock certificate:
                                                         ---------------------
Address to which certificate
is to be sent, if different
from address above:                      
                              ----------------------------


Social Security Number:
                                                         ---------------------

                                                         ---------------------

Employee Number:                         
                                                         ---------------------


<PAGE>


                                   APPENDIX
                                       
          The following definitions shall be in effect under the Agreement:

          A.   AGREEMENT shall mean this Stock Option Agreement.

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

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

          (i)  a merger or consolidation in which securities
          possessing more than fifty percent (50%) of the total
          combined voting power of the Corporation's outstanding
          securities are transferred to a person or persons different
          from the persons holding those securities immediately prior
          to such transaction, or
          
          (ii) the sale, transfer or other disposition of all or
          substantially all of the Corporation's assets  in complete
          liquidation or dissolution of the Corporation, or
          
          (iii)     the acquisition, directly or indirectly, by any
          person or related group of persons (other than the
          Corporation or a person that directly or indirectly
          controls, is controlled by, or is under common control
          with, the Corporation) of beneficial ownership (within the
          meaning of Rule 13d-3 of the 1934 Act) of securities
          possessing more than fifty percent (50%) of the total
          combined voting power of the Corporation's outstanding
          securities pursuant to a tender or exchange offer made
          directly to the Corporation's stockholders, or
          
          (iv) a change in the composition of the Board over a period
          of thirty-six (36) consecutive months or less such that a
          majority of the Board members ceases, by reason of one or
          more contested elections for Board membership, to be
          comprised of individuals who either (A) have been Board
          members continuously since the beginning of such period or
          (B) have been elected or nominated for election as Board
          members during such period by at least a majority of the
          Board members described in clause (A) who were still in
          office at the time the Board approved such election or
          nomination.
          
          D.   CODE shall mean the Internal Revenue Code of 1986, as amended.

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

          F.   CORPORATION shall mean Collateral Therapeutics, Inc., a Delaware
corporation.


<PAGE>


          G.   EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

          H.   EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.

          I.   EXERCISE PRICE shall mean the exercise price per Option Share as
specified in the Grant Notice.

          J.   EXPIRATION DATE shall mean the date on which the option expires
as specified in the Grant Notice.

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

          (i)  If the Common Stock is at the time traded on the
          Nasdaq National Market, then the Fair Market Value shall be
          deemed equal to the closing selling price per share of
          Common Stock on the date in question, as the price is
          reported by the National Association of Securities Dealers
          on the Nasdaq National Market. If there is no closing
          selling price for the Common Stock on the date in question,
          then the Fair Market Value shall be the closing selling
          price on the last preceding date for which such quotation
          exists.
          
          (ii) If the Common Stock is at the time listed on any Stock
          Exchange, then the Fair Market Value shall be deemed equal
          to the closing selling price per share of Common Stock on
          the date in question on the Stock Exchange determined by
          the Plan Administrator to be the primary market for the
          Common Stock, as such price is officially quoted in the
          composite tape of transactions on such exchange.  If there
          is no closing selling price for the Common Stock on the
          date in question, then the Fair Market Value shall be the
          closing selling price on the last preceding date for which
          such quotation exists.
          
          L.   GRANT DATE shall mean the date of grant of the option as
specified in the Grant Notice.

          M.   GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.

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


<PAGE>


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

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

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

          R.   NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.

          S.   OPTION SHARES shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.

          T.   OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.

          U.   PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

          V.   PERMANENT DISABILITY shall mean the inability of Optionee to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which is expected to result in death
or has lasted or can be expected to last for a continuous period of twelve (12)
months or more.

          W.   PLAN shall mean the Corporation's 1998 Stock Incentive Plan.

          X.   PLAN ADMINISTRATOR shall mean either the Board or a committee of
the Board acting in its capacity as administrator of the Plan.

          Y.   SERVICE shall mean the Optionee's performance of services for
the Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.




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


<PAGE>


          AA.  SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.





<PAGE>

                                       
                                   ADDENDUM
                                      TO
                            STOCK OPTION AGREEMENT


          The following provisions are hereby incorporated into, and are 
hereby made a part of, that certain Stock Option Agreement (the "Option 
Agreement") by and between Collateral Therapeutics, Inc. (the "Corporation") 
and ___________ ("Optionee") evidencing the stock option (the "Option") 
granted this date to Optionee under the terms of the Corporation's 1998 Stock 
Incentive Plan, and such provisions shall be effective immediately with such 
grant date.  All capitalized terms in this Addendum, to the extent not 
otherwise defined herein, shall have the meanings assigned to them in the 
Option Agreement.
                                       
                       LIMITED STOCK APPRECIATION RIGHT
                                       
           1.  Optionee is hereby granted a limited stock appreciation right 
exercisable upon the following terms and conditions:

                 (i)     Optionee shall have the unconditional right, 
     exercisable at any time during the thirty (30)-day period immediately 
     following a Hostile Take-Over, to surrender the Option to the 
     Corporation, to the extent the Option is at the time exercisable for one 
     or more shares of Common Stock.  In return for the surrendered Option, 
     Optionee shall receive a cash distribution from the Corporation in an 
     amount equal to the excess of (A) the Take-Over Price of the shares of 
     Common Stock for which the surrendered option (or surrendered portion) 
     is at the time exercisable over (B) the aggregate Exercise Price payable 
     for such shares.
     
                (ii)     To exercise this limited stock appreciation right, 
     Optionee must, during the applicable thirty (30)-day exercise period, 
     provide the Corporation with written notice of the option surrender in 
     which there is specified the number of Option Shares as to which the 
     Option is being surrendered.  Such notice must be accompanied by the 
     return of Optionee's copy of the Option Agreement, together with any 
     written amendments to such Agreement.  The cash distribution shall be 
     paid to Optionee within five (5) business days following such delivery 
     date.  The exercise of the limited stock appreciation right in 
     accordance with the terms of this Addendum is hereby approved by the 
     Plan Administrator, in advance of such exercise, and no further approval 
     of the Plan Administrator or the Board shall be required at the time of 
     the actual option surrender and cash distribution.  Upon receipt of such 
     cash distribution, the Option shall be cancelled with respect to the 
     Option Shares for which the Option has been surrendered, and Optionee 
     shall cease to have any further right to acquire those Option Shares 
     under the Option Agreement.  The Option shall, however, remain 
     outstanding and exercisable for the balance of the Option Shares (if 
     any) in accordance with the terms of the Option Agreement, and the 
     Corporation shall issue a replacement stock option agreement 
     (substantially in the same form of the surrendered Option Agreement) for 
     those remaining Option Shares.

<PAGE>

               (iii)     In no event may this limited stock appreciation 
     right be exercised when there is not a positive spread between the Fair 
     Market Value of the Option Shares subject to the surrendered option and 
     the aggregate Exercise Price payable for such shares. This limited stock 
     appreciation right shall in all events terminate upon the expiration or 
     sooner termination of the Option term and may not be assigned or 
     transferred by Optionee, except to the extent the Option is transferable 
     in accordance with the provisions of the Option Agreement.
     
          2.   For purposes of this Addendum, the following definitions shall 
be in effect:

                 (i)      A HOSTILE TAKE-OVER shall be deemed to occur upon 
     the acquisition, directly or indirectly, by any person or related group 
     of persons (other than the Corporation or a person that directly or 
     indirectly controls, is controlled by, or is under common control with, 
     the Corporation) of beneficial ownership (within the meaning of Rule 
     13d-3 of the 1934 Act) of securities possessing more than fifty percent 
     (50%) of the total combined voting power of the Corporation's 
     outstanding securities pursuant to a tender or exchange offer made 
     directly to the Corporation's stockholders which the Board does not 
     recommend such stockholders to accept.
     
                (ii)     The TAKE-OVER PRICE per share shall be deemed to be 
     equal to the GREATER of (A) the Fair Market Value per Option Share on 
     the option surrender date or (B) the highest reported price per share of 
     Common Stock paid by the tender offeror in effecting the Hostile 
     Take-Over.  However, if the surrendered Option is designated as an 
     Incentive Option in the Grant Notice, then the Take-Over Price shall not 
     exceed the clause (A) price per share.

<PAGE>

          IN WITNESS WHEREOF, Collateral Therapeutics, Inc. has caused this
Addendum to be executed by its duly-authorized officer as of the Effective Date
specified below.


                              COLLATERAL THERAPEUTICS, INC.


                              By:
                                 ------------------------------------
                              Title: 
                                     --------------------------------




EFFECTIVE DATE: __________________, 199_



<PAGE>

                                                                   EXHIBIT 99.5

                                   ADDENDUM
                                      TO
                            STOCK OPTION AGREEMENT


          The following provisions are hereby incorporated into, and are 
hereby made a part of, that certain Stock Option Agreement (the "Option 
Agreement") by and between Collateral Therapeutics, Inc. (the "Corporation") 
and _____________    ("Optionee") evidencing the stock option (the "Option") 
granted on this date to Optionee under the terms of the Corporation's 1998 
Stock Incentive Plan, and such provisions shall be effective immediately with 
such grant date.  All capitalized terms in this Addendum, to the extent not 
otherwise defined herein, shall have the meanings assigned to them in the 
Option Agreement.

                       INVOLUNTARY TERMINATION FOLLOWING
                               CHANGE IN CONTROL
                                       
          1.   To the extent the Option is, in connection with a Change in 
Control transaction, to be assumed or otherwise continued in full force or 
effect in accordance with Paragraph 6 of the Option Agreement, the Option 
shall not accelerate upon the occurrence of that Change in Control, and the 
Option shall accordingly continue, over Optionee's period of Service after 
the Change in Control, to become exercisable for the Option Shares in one or 
more installments in accordance with the provisions of the Option Agreement. 
However, immediately upon an Involuntary Termination of Optionee's Service 
within eighteen (18) months following such Change in Control, the Option, to 
the extent outstanding at the time but not otherwise fully exercisable, shall 
automatically accelerate so that the Option shall become immediately 
exercisable for all the Option Shares at the time subject to the Option and 
may be exercised for any or all of those Option Shares as fully vested shares.

          2.   The Option as accelerated under Paragraph 1 shall remain so 
exercisable until the EARLIER of (i) the Expiration Date or (ii) the 
expiration of the one (1)-year period measured from the date of the 
Optionee's Involuntary Termination.

          3.   For purposes of this Addendum the following definition shall 
be in effect:

               (i)  An INVOLUNTARY TERMINATION shall mean the termination of 
     Optionee's Service by reason of:
     
                         (A)  Optionee's involuntary dismissal or
          discharge by the Corporation for reasons other than Misconduct,
          or
          
                         (B)  Optionee's voluntary resignation following (A) 
          a change in Optionee's position with the Corporation (or Parent or 
          Subsidiary employing Optionee) which materially reduces Optionee's 
          duties and responsibilities or the level of management to which 
          Optionee reports, (B) a reduction in Optionee's level of 
          compensation (including base salary, fringe benefits and target 
          bonus under any corporate performance based bonus or incentive 
          programs) by more than fifteen 

<PAGE>

          percent (15%) or (C) a relocation of Optionee's place of employment 
          by more than fifty (50) miles, provided and only if such change, 
          reduction or relocation is effected by the Corporation without 
          Optionee's consent.

          4.   The provisions of Paragraph 1 of this Addendum shall govern 
the period for which the Option is to remain exercisable following the 
Involuntary Termination of Optionee's Service within eighteen (18) months 
after the Change in Control and shall supersede any provisions to the 
contrary in Paragraph 5 of the Option Agreement.

          IN WITNESS WHEREOF, Collateral Therapeutics, Inc. has caused this 
Addendum to be executed by its duly-authorized officer as of the Effective 
Date specified below.

                              COLLATERAL THERAPEUTICS, INC.


                              By:
                                 --------------------------------------
                              Title:
                                     ----------------------------------




EFFECTIVE DATE: _____________________, 199_





<PAGE>



                         COLLATERAL THERAPEUTICS, INC.

                           STOCK ISSUANCE AGREEMENT


          AGREEMENT made this ______ day of ____________ 19__, by and between 
Collateral Therapeutics, Inc., a Delaware corporation, and ___________________ 
___________________, a Participant in the Corporation's 1998 Stock Incentive 
Plan.

          All capitalized terms in this Agreement shall have the meaning 
assigned to them in this Agreement or in the attached Appendix.

     A.   PURCHASE OF SHARES

          1.  PURCHASE.  Participant hereby purchases ______ shares of Common 
Stock (the "Purchased Shares") pursuant to the provisions of the Stock 
Issuance Program at the purchase price of $______ per share (the "Purchase 
Price").

          2.  PAYMENT.  Concurrently with the delivery of this Agreement to 
the Corporation, Participant shall pay the Purchase Price for the Purchased 
Shares in cash or check payable to the Corporation and shall deliver a 
duly-executed blank Assignment Separate from Certificate (in the form 
attached hereto as Exhibit I) with respect to the Purchased Shares.

          3.  STOCKHOLDER RIGHTS.  Until such time as the Corporation 
exercises the Repurchase Right, Participant (or any successor in interest) 
shall have all the rights of a stockholder (including voting, dividend and 
liquidation rights) with respect to the Purchased Shares, subject, however, 
to the transfer restrictions of this Agreement.

          4.  ESCROW.  The Corporation shall have the right to hold the 
Purchased Shares in escrow until those shares have vested in accordance with 
the Vesting Schedule.

          5.  COMPLIANCE WITH LAW.  Under no circumstances shall shares of 
Common Stock or other assets be issued or delivered to Participant pursuant 
to the provisions of this Agreement unless, in the opinion of counsel for the 
Corporation or its successors, there shall have been compliance with all 
applicable requirements of Federal and state securities laws, all applicable 
listing requirements of any stock exchange (or the Nasdaq National Market, if 
applicable) on which the Common Stock is at the time listed for trading and 
all other requirements of law or of any regulatory bodies having jurisdiction 
over such issuance and delivery.

<PAGE>

     B.   TRANSFER RESTRICTIONS

          1.  RESTRICTION ON TRANSFER.  Except for any Permitted Transfer, 
Participant shall not transfer, assign, encumber or otherwise dispose of any 
of the Purchased Shares which are subject to the Repurchase Right.

          2.  RESTRICTIVE LEGEND.  The stock certificate for the Purchased 
Shares shall be endorsed with the following restrictive legend:

              "The shares represented by this certificate are unvested and
          subject to certain repurchase rights granted to the Corporation and
          accordingly may not be sold, assigned, transferred, encumbered, or in
          any manner disposed of except in conformity with the terms of a
          written agreement dated ____________, 199_ between the Corporation
          and the registered holder of the shares (or the predecessor in
          interest to the shares).  A copy of such agreement is maintained at
          the Corporation's principal corporate offices."

          3.  TRANSFEREE OBLIGATIONS.  Each person (other than the 
Corporation) to whom the Purchased Shares are transferred by means of a 
Permitted Transfer must, as a condition precedent to the validity of such 
transfer, acknowledge in writing to the Corporation that such person is bound 
by the provisions of this Agreement and that the transferred shares are 
subject to the Repurchase Right to the same extent such shares would be so 
subject if retained by Participant.

     C.   REPURCHASE RIGHT

          1.  GRANT.  The Corporation is hereby granted the right (the 
"Repurchase Right"), exercisable at any time during the ninety (90)-day 
period following the date Participant ceases for any reason to remain in 
Service, to repurchase at the Purchase Price all or any portion of the 
Purchased Shares in which Participant is not, at the time of his or her 
cessation of Service, vested in accordance with the Vesting Schedule or the 
special vesting acceleration provisions of Paragraph C.5 of this Agreement 
(such shares to be hereinafter referred to as the "Unvested Shares").

          2.  EXERCISE OF THE REPURCHASE RIGHT.  The Repurchase Right shall 
be exercisable by written notice delivered to each Owner of the Unvested 
Shares prior to the expiration of the ninety (90)-day exercise period.  The 
notice shall indicate the number of Unvested Shares to be repurchased and the 
date on which the repurchase is to be effected, such date to be not more than 
thirty (30) days after the date of such notice.  The certificates 
representing the Unvested Shares to be repurchased shall be delivered to the 
Corporation on or before the close of business on the date specified for the 
repurchase. Concurrently with the receipt of such stock certificates, the 
Corporation shall pay to Owner, in cash or cash equivalent (including the 
cancellation of any purchase-money indebtedness), an amount equal to the 
Purchase Price previously paid for the Unvested Shares to be repurchased from 
Owner.

          3.  TERMINATION OF THE REPURCHASE RIGHT.  The Repurchase Right 
shall terminate with respect to any Unvested Shares for which it is not 
timely exercised under Paragraph C.2.  In addition, the Repurchase Right 
shall terminate and cease to be exercisable 

<PAGE>

with respect to any and all Purchased Shares in which Participant vests in 
accordance with the following Vesting Schedule:

                 (i)  Upon Participant's completion of one (1) year of
     Service measured from ____________, 199__, Participant shall
     acquire a vested interest in, and the Repurchase Right shall lapse
     with respect to, twenty-five percent (25%) of the Purchased Shares.

                (ii)  Participant shall acquire a vested interest in,
     and the Repurchase Right shall lapse with respect to, the remaining
     Purchased Shares in a series of thirty six (36) successive equal
     monthly installments upon Participant's completion of each additional
     month of Service over the thirty-six (36)-month period measured from
     the initial vesting date under subparagraph (i) above.

          4.  RECAPITALIZATION.  Any new, substituted or additional 
securities or other property (including cash paid other than as a regular 
cash dividend) which is by reason of any Recapitalization distributed with 
respect to the Purchased Shares shall be immediately subject to the 
Repurchase Right and any escrow requirements hereunder, but only to the 
extent the Purchased Shares are at the time covered by such right or escrow 
requirements.  Appropriate adjustments to reflect such distribution shall be 
made to the number and/or class of securities subject to this Agreement and 
to the price per share to be paid upon the exercise of the Repurchase Right 
in order to reflect the effect of any such Recapitalization upon the 
Corporation's capital structure; PROVIDED, however, that the aggregate 
purchase price shall remain the same.

          5.  CHANGE IN CONTROL.

              (a)  Immediately prior to the consummation of any Change in 
Control transaction, the Repurchase Right shall automatically lapse in its 
entirety and the Purchased Shares shall vest in full, except to the extent 
the Repurchase Right is to be assigned to the successor corporation (or 
parent thereof) or is otherwise to continue in full force and effect pursuant 
to the terms of the Change in Control transaction.

              (b)  To the extent the Repurchase Right remains in effect 
following a Change in Control transaction, such right shall apply to the new 
capital stock or other property (including any cash payments) received in 
exchange for the Purchased Shares in consummation of the Change in Control, 
but only to the extent the Purchased Shares are at the time covered by such 
right. Appropriate adjustments shall be made to the price per share payable 
upon exercise of the Repurchase Right to reflect the effect of the Change in 
Control upon the Corporation's capital structure; PROVIDED, however, that the 
aggregate purchase price shall remain the same.  The new securities or other 
property (including cash payments) issued or distributed with respect to the 
Purchased Shares in consummation of the Change in Control shall immediately 
be deposited in escrow with the Corporation (or the successor entity) and 
shall not be released from escrow until Participant vests in such securities 
or other property in accordance with the same Vesting Schedule in effect for 
the Purchased Shares.

<PAGE>

               (c)  The Repurchase Right may also be subject to termination 
in whole or in part on an accelerated basis, and the Purchased Shares subject 
to immediate vesting, in accordance with the terms of any special Addendum 
attached to this Agreement.

     D.   SPECIAL TAX ELECTION

          1.  SECTION 83(b) ELECTION.  Under Code Section 83, the excess of 
the fair market value of the Purchased Shares on the date any forfeiture 
restrictions applicable to such shares lapse over the Purchase Price paid for 
such shares will be reportable as ordinary income on the lapse date.  For 
this purpose, the term "forfeiture restrictions" includes the right of the 
Corporation to repurchase the Purchased Shares pursuant to the Repurchase 
Right.  Participant may elect under Code Section 83(b) to be taxed at the 
time the Purchased Shares are acquired, rather than when and as such 
Purchased Shares cease to be subject to such forfeiture restrictions.  Such 
election must be filed with the Internal Revenue Service within thirty (30) 
days after the date of this Agreement.  Even if the fair market value of the 
Purchased Shares on the date of this Agreement equals the Purchase Price paid 
(and thus no tax is payable), the election must be made to avoid adverse tax 
consequences in the future.  THE FORM FOR MAKING THIS ELECTION IS ATTACHED AS 
EXHIBIT II HERETO. PARTICIPANT UNDERSTANDS THAT FAILURE TO MAKE THIS FILING 
WITHIN THE APPLICABLE THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION 
OF ORDINARY INCOME AS THE FORFEITURE RESTRICTIONS LAPSE.

          2.  FILING RESPONSIBILITY.  PARTICIPANT ACKNOWLEDGES THAT IT IS 
PARTICIPANT'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A 
TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF PARTICIPANT REQUESTS THE 
CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.

     E.   GENERAL PROVISIONS

          1.  NO EMPLOYMENT OR SERVICE CONTRACT.  Nothing in this Agreement 
or in the Plan shall confer upon Participant any right to continue in Service 
for any period of specific duration or interfere with or otherwise restrict 
in any way the rights of the Corporation (or any Parent or Subsidiary 
employing or retaining Participant) or of Participant, which rights are 
hereby expressly reserved by each, to terminate Participant's Service at any 
time for any reason, with or without cause.

          2.  ASSIGNMENT.  The Corporation may assign the Repurchase Right to 
any person or entity selected by the Board, including (without limitation) 
one or more stockholders of the Corporation.

          3.  NOTICES.  Any notice required to be given under this Agreement 
shall be in writing and shall be deemed effective upon personal delivery or 
upon deposit in the U.S. mail, registered or certified, postage prepaid and 
properly addressed to the party entitled to such notice at the address 
indicated below such party's signature line on this Agreement or at such 
other address as such party may designate by ten (10) days advance written 
notice under this paragraph to all other parties to this Agreement.

<PAGE>

          4.  NO WAIVER.  The failure of the Corporation in any instance to 
exercise the Repurchase Right shall not constitute a waiver of any other 
repurchase rights that may subsequently arise under the provisions of this 
Agreement or any other agreement between the Corporation and Participant.  No 
waiver of any breach or condition of this Agreement shall be deemed to be a 
waiver of any other or subsequent breach or condition, whether of like or 
different nature.

          5.  CANCELLATION OF SHARES.  If the Corporation shall make 
available, at the time and place and in the amount and form provided in this 
Agreement, the consideration for the Purchased Shares to be repurchased in 
accordance with the provisions of this Agreement, then from and after such 
time, the person from whom such shares are to be repurchased shall no longer 
have any rights as a holder of such shares (other than the right to receive 
payment of such consideration in accordance with this Agreement).  Such 
shares shall be deemed purchased in accordance with the applicable provisions 
hereof, and the Corporation shall be deemed the owner and holder of such 
shares, whether or not the certificates therefor have been delivered as 
required by this Agreement.

          6.  PARTICIPANT UNDERTAKING.  Participant hereby agrees to take 
whatever additional action and execute whatever additional documents the 
Corporation may deem necessary or advisable in order to carry out or effect 
one or more of the obligations or restrictions imposed on either Participant 
or the Purchased Shares pursuant to the provisions of this Agreement.

          7.  AGREEMENT IS ENTIRE CONTRACT.  This Agreement constitutes the 
entire contract between the parties hereto with regard to the subject matter 
hereof.  This Agreement is made pursuant to the provisions of the Plan and 
shall in all respects be construed in conformity with the terms of the Plan.

          8.  GOVERNING LAW.  This Agreement shall be governed by, and 
construed in accordance with, the laws of the State of California without 
resort to that State's conflict-of-laws rules.

          9.  COUNTERPARTS.  This Agreement may be executed in counterparts, 
each of which shall be deemed to be an original, but all of which together 
shall constitute one and the same instrument.

          10. SUCCESSORS AND ASSIGNS.  The provisions of this Agreement shall 
inure to the benefit of, and be binding upon, the Corporation and its 
successors and assigns and upon Participant, Participant's assigns and the 
legal representatives, heirs and legatees of Participant's estate, whether or 
not any such person shall have become a party to this Agreement and have 
agreed in writing to join herein and be bound by the terms hereof.

          IN WITNESS WHEREOF, the parties have executed this Agreement on the 
day and year first indicated above.

                                       COLLATERAL THERAPEUTICS, INC.

<PAGE>

                                       By:
                                              -----------------------------

                                       Title:
                                              -----------------------------

Address:
         -----------------------------


                                  PARTICIPANT


Address:
         -----------------------------


<PAGE>

                            SPOUSAL ACKNOWLEDGMENT
                                       
          The undersigned spouse of the Participant has read and hereby 
approves the foregoing Stock Issuance Agreement.  In consideration of the 
Corporation's granting the Participant the right to acquire the Purchased 
Shares in accordance with the terms of such Agreement, the undersigned hereby 
agrees to be irrevocably bound by all the terms of such Agreement, including 
(without limitation) the right of the Corporation (or its assigns) to 
purchase any Purchased Shares in which the Participant is not vested at the 
time of his or her termination of Service.


                                       ----------------------------
                                               PARTICIPANT'S SPOUSE

                                       Address:
                                                  --------------------------

                                                  ------------------------

<PAGE>

                                   EXHIBIT I
                     ASSIGNMENT SEPARATE FROM CERTIFICATE
                                       
          FOR VALUE RECEIVED ________________________ hereby sell(s), assign(s)

and transfer(s) unto Collateral Therapeutics, Inc. (the "Corporation"),

_______________________ (       ) shares of the Common Stock of the Corporation

standing in his or her name on the books of the Corporation represented by

Certificate No. ____________________ herewith and do(es) hereby irrevocably

constitute and appoint __________________________ Attorney to transfer the

said stock on the books of the Corporation with full power of substitution in

the premises.



Dated: ___________________, 199__.



                                       Signature ____________________________
















INSTRUCTION:  Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate.  The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Participant.


<PAGE>

                                  EXHIBIT II
                                       
                          SECTION 83(b) TAX ELECTION
                                       
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.

(1)  The taxpayer who performed the services is:
     
     Name:
     Address:
     Taxpayer Ident. No.:

(2)  The property with respect to which the election is being made is
     _____________ shares of the common stock of Collateral Therapeutics, Inc.
     
(3)  The property was issued on ___________________, 199__.

(4)  The taxable year in which the election is being made is the calendar year
     199__.
     
(5)  The property is subject to a repurchase right pursuant to which the issuer
     has the right to acquire the property at the original purchase price if
     for any reason taxpayer's service with the issuer terminates.  The
     issuer's repurchase right lapses in a series of annual and monthly
     installments over a four (4)-year period ending on _________________.
     
(6)  The fair market value at the time of transfer (determined without regard
     to any restriction other than a restriction which by its terms will never
     lapse) is $_______________ per share.
     
(7)  The amount paid for such property is $______________ per share.
     
(8)  A copy of this statement was furnished to Collateral Therapeutics, Inc.
     for whom taxpayer rendered the services underlying the transfer of
     property.
     
(9)  This statement is executed on ________________________, 199__.



_____________________________________________________________________________
Spouse (if any)                            Taxpayer

This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Issuance Agreement.
This filing should be made by registered or certified mail, return receipt
requested.  Participant must retain two (2) copies of the completed form for
filing with his or her Federal and state tax returns for the current tax year
and an additional copy for his or her records.

<PAGE>

                                   APPENDIX


          The following definitions shall be in effect under the Agreement:

          A.   AGREEMENT shall mean this Stock Issuance Agreement.

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

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

            (i)     a merger or consolidation in which securities
     possessing more than fifty percent (50%) of the total combined voting
     power of the Corporation's outstanding securities are transferred to
     a person or persons different from the persons holding those
     securities immediately prior to such transaction, or
     
           (ii)     the sale, transfer or other disposition of all or
     substantially all of the Corporation's assets  in complete
     liquidation or dissolution of the Corporation, or
     
          (iii)     the acquisition, directly or indirectly, by any person
     or related group of persons (other than the Corporation or a person
     that directly or indirectly controls, is controlled by, or is under
     common control with, the Corporation) of beneficial ownership (within
     the meaning of Rule 13d-3 of the 1934 Act) of securities possessing
     more than fifty percent (50%) of the total combined voting power of
     the Corporation's outstanding securities pursuant to a tender or
     exchange offer made directly to the Corporation's stockholders, or
     
           (iv)     a change in the composition of the Board over a period
     of thirty-six (36) consecutive months or less such that a majority of
     the Board members ceases, by reason of one or more contested
     elections for Board membership, to be comprised of individuals who
     either (A) have been Board members continuously since the beginning
     of such period or (B) have been elected or nominated for election as
     Board members during such period by at least a majority of the Board
     members described in clause (A) who were still in office at the time
     the Board approved such election or nomination.
     
          D.   CODE shall mean the Internal Revenue Code of 1986, as amended.

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

<PAGE>

     F.   CORPORATION shall mean Collateral Therapeutics, Inc., a Delaware
corporation.

          G.   OWNER shall mean Participant and all subsequent holders of the
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Participant.

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

          I.   PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

          J.   PARTICIPANT shall mean the person to whom the Purchased Shares
are issued under the Stock Issuance Program.

          K.   PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the
Purchased Shares, PROVIDED AND ONLY IF Participant obtains the Corporation's
prior written consent to such transfer, (ii) a transfer of title to the
Purchased Shares effected pursuant to Participant's will or the laws of
intestate succession following Participant's death or (iii) a transfer to the
Corporation in pledge as security for any purchase-money indebtedness incurred
by Participant in connection with the acquisition of the Purchased Shares.

          L.   PLAN shall mean the Corporation's 1998 Stock Incentive Plan.

          M.   PLAN ADMINISTRATOR shall mean either the Board or a committee of
the Board acting in its administrative capacity under the Plan.

          N.   PURCHASE PRICE shall have the meaning assigned to such term in
Paragraph A.1.

          O.   PURCHASED SHARES shall have the meaning assigned to such term in
Paragraph A.1.

          P.   RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.

          Q.   REPURCHASE RIGHT shall mean the right granted to the Corporation
in accordance with Article C.

          R.   SERVICE shall mean the Participant's performance of services for
the Corporation (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control 


<PAGE>

and direction of the employer entity as to both the work to be performed and 
the manner and method of performance, a non-employee member of the board of 
directors or a consultant.

          S.   STOCK ISSUANCE PROGRAM shall mean the Stock Issuance Program
under the Plan.

          T.   SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

          U.   VESTING SCHEDULE shall mean the vesting schedule specified in
Paragraph C.3, subject to the special vesting acceleration provisions of
Paragraph C.5.

          V.   UNVESTED SHARES shall have the meaning assigned to such term in
Paragraph C.1.




<PAGE>

                                   ADDENDUM
                                      TO
                           STOCK ISSUANCE AGREEMENT


          The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Issuance Agreement (the "Issuance
Agreement") by and between Collateral Therapeutics, Inc. (the "Corporation")
and ____________  ("Participant") evidencing the stock issuance made on this
date to Participant under the terms of the Corporation's 1998 Stock Incentive
Plan, and such provisions shall be effective immediately on such issue date.
All capitalized terms in this Addendum, to the extent not otherwise defined
herein, shall have the meanings assigned to such terms in the Issuance
Agreement.

                       INVOLUNTARY TERMINATION FOLLOWING
                               CHANGE IN CONTROL
                                       
          1.   To the extent the Repurchase Right is assigned to the successor
corporation (or parent thereof) in a Change in Control or is otherwise
continued in full force and effect pursuant to the terms of the Change in
Control transaction, no accelerated vesting of the Purchased Shares shall occur
upon such Change of Control, and the Repurchase Right shall continue to remain
in full force and effect in accordance with the provisions of the Issuance
Agreement.  The Participant shall, over Participant's period of Service
following the Change in Control, continue to vest in the Purchased Shares in
one or more installments in accordance with the provisions of the Issuance
Agreement.

          2.   Immediately upon an Involuntary Termination of Participant's
Service within eighteen (18) months following the Change in Control, the
Repurchase Right shall terminate automatically, and all the Purchased Shares
shall vest in full at that time.

          3.   For purposes of this Addendum, the following definitions shall
be in effect:

               An INVOLUNTARY TERMINATION shall mean the termination of
Participant's Service by reason of:

                 (i)     Participant's involuntary dismissal or discharge
     by the Corporation for reasons other than Misconduct, or
     
                (ii)     Participant's voluntary resignation following (A)
     a change in Participant's position with the Corporation (or Parent or
     Subsidiary employing Participant) which materially reduces
     Participant's duties and responsibilities or the level of management
     to which Participant reports, (B) a reduction in Participant's level
     of compensation (including base salary, fringe benefits and target
     bonus under any corporate performance based bonus or incentive
     programs) by more than fifteen percent (15%) or (C) a relocation of
     Participant's place of employment by more than fifty (50) miles,
     provided and 

<PAGE>

     only if such change, reduction or relocation is effected by the 
     Corporation without Participant's consent.
     
          MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Participant, any unauthorized use or
disclosure by the Participant of confidential information or trade secrets of
the Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by the Participant adversely affecting the business or affairs of
the Corporation (or any Parent or Subsidiary) in a material manner.  The
foregoing definition shall not be deemed to be inclusive of all the acts or
omissions which the Corporation (or any Parent or Subsidiary) may consider as
grounds for the dismissal or discharge of the Participant or other person in
the Service of the Corporation (or any Parent or Subsidiary).

          IN WITNESS WHEREOF, Collateral Therapeutics, Inc. has caused this
Addendum to be executed by its duly-authorized officer as of the Effective Date
specified below.



                                               COLLATERAL THERAPEUTICS, INC.



EFFECTIVE DATE:                   , 199
               -------------------     -


<PAGE>

                                                                  INITIAL GRANT


                         COLLATERAL THERAPEUTICS, INC.
                   NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
                            AUTOMATIC STOCK OPTION
                                       
          Notice is hereby given of the following option grant (the "Option")
to purchase shares of the Common Stock of Collateral Therapeutics, Inc. (the
"Corporation"):

          OPTIONEE:
                    -------------------

          GRANT DATE:
                      -----------------

          Exercise Price:  $                                    per share



          NUMBER OF OPTION SHARES: 15,000 shares

          EXPIRATION DATE:
                           ------------

          TYPE OF OPTION:   Non-Statutory Stock Option

          DATE EXERCISABLE:  Immediately Exercisable


          VESTING SCHEDULE:  The Option Shares shall initially be unvested and
          subject to repurchase by the Corporation at the Exercise Price paid
          per share.  Optionee shall acquire a vested interest in, and the
          Corporation's repurchase right shall accordingly lapse with respect
          to, the Option Shares in a series of three (3) successive equal
          annual installments upon the Optionee's completion of each year of
          service as a member of the Corporation's Board of Directors (the
          "Board") over the three (3)-year period measured from the Grant Date.
          In no event shall any additional Option Shares vest after Optionee's
          cessation of Board service.
          
          Optionee understands and agrees that the Option is granted subject 
to and in accordance with the terms of the automatic option grant program 
under the Collateral Therapeutics, Inc. 1998 Stock Incentive Plan (the 
"Plan"). Optionee further agrees to be bound by the terms of the Plan and the 
terms of the Option as set forth in the Automatic Stock Option Agreement 
attached hereto as EXHIBIT A.

          Optionee hereby acknowledges receipt of a copy of the official
prospectus for the Plan in the form attached hereto as EXHIBIT B.  A copy of
the Plan is available upon request made to the Corporate Secretary at the
Corporation's principal offices.

          REPURCHASE RIGHT.  OPTIONEE HEREBY AGREES THAT ALL UNVESTED OPTION
SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION 

<PAGE>

SHALL BE SUBJECT TO A REPURCHASE RIGHT EXERCISABLE BY THE CORPORATION AND ITS 
ASSIGNS.  THE TERMS OF SUCH RIGHT SHALL BE SPECIFIED IN A STOCK PURCHASE 
AGREEMENT, IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION, EXECUTED BY 
OPTIONEE AT THE TIME OF THE OPTION EXERCISE.

          NO IMPAIRMENT OF RIGHTS.  Nothing in this Notice or the attached
Automatic Stock Option Agreement or in the Plan shall interfere with or
otherwise restrict in any way the rights of the Corporation and the
Corporation's stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.

          DEFINITIONS.  All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Automatic Stock
Option Agreement.

                        , 199
- ------------------------     -
          Date


                                   COLLATERAL THERAPEUTICS, INC.


                                                                      By:

                                   Title:



                                   ---------------------------------------
                                   OPTIONEE

                                                                      Address:



ATTACHMENTS
EXHIBIT A - AUTOMATIC STOCK OPTION AGREEMENT
EXHIBIT B - PLAN SUMMARY AND PROSPECTUS
                                       
                                       

<PAGE>

                                   EXHIBIT A
                                       
                       AUTOMATIC STOCK OPTION AGREEMENT
                                       


<PAGE>

                                   EXHIBIT B
                                       
                          PLAN SUMMARY AND PROSPECTUS



<PAGE>

                                                     ANNUAL GRANT


                         COLLATERAL THERAPEUTICS, INC.
                   NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
                            AUTOMATIC STOCK OPTION


          Notice is hereby given of the following option grant (the "Option")
to purchase shares of the Common Stock of Collateral Therapeutics, Inc. (the
"Corporation"):

          OPTIONEE:
                    -------------------

          GRANT DATE:
                      -----------------

          Exercise Price:  $                    per share



          NUMBER OF OPTION SHARES: 5,000 shares

          EXPIRATION DATE:
                           ------------

          TYPE OF OPTION:   Non-Statutory Stock Option


          DATE EXERCISABLE:  Immediately Exercisable


          VESTING SCHEDULE:  The Option Shares shall initially be unvested and
          subject to repurchase by the Corporation at the Exercise Price paid
          per share.  Optionee shall acquire a vested interest in, and the
          Corporation's repurchase right shall accordingly lapse with respect
          to, the Option Shares upon the Optionee's completion of one (1) year
          of service as a member of the Corporation's Board of Directors (the
          "Board") measured from the Grant Date.  In no event shall any
          additional Option Shares vest after Optionee's cessation of Board
          service.
          
          Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the automatic option grant program under
the Collateral Therapeutics, Inc. 1998 Stock Incentive Plan (the "Plan").
Optionee further agrees to be bound by the terms of the Plan and the terms of
the Option as set forth in the Automatic Stock Option Agreement attached hereto
as EXHIBIT A.

          Optionee hereby acknowledges receipt of a copy of the official
prospectus for the Plan in the form attached hereto as EXHIBIT B.  A copy of
the Plan is available upon request made to the Corporate Secretary at the
Corporation's principal offices.

          REPURCHASE RIGHT.  OPTIONEE HEREBY AGREES THAT ALL UNVESTED OPTION
SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION 


<PAGE>

SHALL BE SUBJECT TO A REPURCHASE RIGHT EXERCISABLE BY THE CORPORATION AND ITS 
ASSIGNS.  THE TERMS OF SUCH RIGHT SHALL BE SPECIFIED IN A STOCK PURCHASE 
AGREEMENT, IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION, EXECUTED BY 
OPTIONEE AT THE TIME OF THE OPTION EXERCISE.

          NO IMPAIRMENT OF RIGHTS.  Nothing in this Notice or the attached
Automatic Stock Option Agreement or in the Plan shall interfere with or
otherwise restrict in any way the rights of the Corporation and the
Corporation's stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.

          DEFINITIONS.  All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Automatic Stock
Option Agreement.

                        , 199
- -----------------------      -
         Date


                                   COLLATERAL THERAPEUTICS, INC.


                                                                      By:

                                   Title:



                                   --------------------------------
                                   OPTIONEE

                                                                      Address:



ATTACHMENTS
EXHIBIT A - AUTOMATIC STOCK OPTION AGREEMENT
EXHIBIT B - PLAN SUMMARY AND PROSPECTUS
                                       
                                       
<PAGE>

                                   EXHIBIT A
                                       
                       AUTOMATIC STOCK OPTION AGREEMENT
                                       

<PAGE>

                                   EXHIBIT B
                                       
                          PLAN SUMMARY AND PROSPECTUS



<PAGE>

                         COLLATERAL THERAPEUTICS, INC.
                       AUTOMATIC STOCK OPTION AGREEMENT


RECITALS

          I.   The Corporation has implemented an automatic option grant 
program under the Plan pursuant to which eligible non-employee members of the 
Board will automatically receive special option grants at periodic intervals 
over their period of Board service in order to provide such individuals with 
a meaningful incentive to continue to serve as members of the Board.

          A.   Optionee is an eligible non-employee Board member, and this 
Agreement is executed pursuant to, and is intended to carry out the purposes 
of, the Plan in connection with the automatic grant of an option to purchase 
shares of Common Stock under the Plan.

          B.   All capitalized terms in this Agreement shall have the meaning 
assigned to them in the attached Appendix.

          NOW, THEREFORE, it is hereby agreed as follows:

          1.   GRANT OF OPTION.  The Corporation hereby grants to Optionee, 
as of the Grant Date, a Non-Statutory Option to purchase up to the number of 
Option Shares specified in the Grant Notice.  The Option Shares shall be 
purchasable from time to time during the option term specified in Paragraph 2 
at the Exercise Price.

          2.   OPTION TERM.  This option shall have a term of ten (10) years 
measured from the Grant Date and shall accordingly expire at the close of 
business on the Expiration Date, unless sooner terminated in accordance with 
Paragraph 5, 6 or 7.

          3.   LIMITED TRANSFERABILITY.  This option may, in connection with 
the Optionee's estate plan, be assigned in whole or in part during Optionee's 
lifetime to one or more members of the Optionee's immediate family or to a 
trust established for the exclusive benefit of the Optionee and/or one or 
more such family members. The assigned portion shall be exercisable only by 
the person or persons who acquire a proprietary interest in the option 
pursuant to such assignment. The terms applicable to the assigned portion 
shall be the same as those in effect for this option immediately prior to 
such assignment. Should the Optionee die while holding this option, then this 
option shall be transferred in accordance with Optionee's will or the laws of 
descent and distribution.


<PAGE>

          4.   EXERCISABILITY/VESTING.

               (a)  This option shall be immediately exercisable for any or 
all of the Option Shares, whether or not the Option Shares are at the time 
vested in accordance with the Vesting Schedule, and shall remain so 
exercisable until the Expiration Date or sooner termination of the option 
term under Paragraph 5, 6 or 7.

               (b)  Optionee shall, in accordance with the Vesting Schedule 
set forth in the Grant Notice, vest in the Option Shares in one or more 
installments over his or her period of Board service.  Vesting in the Option 
Shares may be accelerated pursuant to the provisions of Paragraph 5, 6 or 7. 
In no event, however, shall any additional Option Shares vest following 
Optionee's cessation of service as a Board member.

          5.   CESSATION OF BOARD SERVICE.  Should Optionee's service as a 
Board member cease while this option remains outstanding, then the option 
term specified in Paragraph 2 shall terminate (and this option shall cease to 
be outstanding) prior to the Expiration Date in accordance with the following 
provisions:

               (a)  Should Optionee cease to serve as a Board member for any 
reason (other than death or Permanent Disability) while this option is 
outstanding, then the period for exercising this option shall be reduced to a 
twelve (12)-month period (commencing with the date of such cessation of Board 
service), but in no event shall this option be exercisable at any time after 
the Expiration Date.  During such limited period of exercisability, this 
option may not be exercised in the aggregate for more than the number of 
Option Shares (if any) in which Optionee is vested on the date of his or her 
cessation of Board service. Upon the EARLIER of (i) the expiration of such 
twelve (12)-month period or (ii) the specified Expiration Date, the option 
shall terminate and cease to be exercisable with respect to any vested Option 
Shares for which the option has not been exercised.

               (b)  Should Optionee die within the twelve (12)-month period 
following his or her cessation of Board service and hold this option at the 
time of his or her death, then the personal representative of Optionee's 
estate or the person or persons to whom the option is transferred pursuant to 
Optionee's will or in accordance with the laws of descent and distribution 
shall have the right to exercise this option for any or all of the Option 
Shares in which Optionee is vested at the time of Optionee's cessation of 
Board service (less any Option Shares purchased by Optionee after such 
cessation of Board service but prior to death).  Such right of exercise shall 
terminate, and this option shall accordingly cease to be exercisable for such 
vested Option Shares, upon the EARLIER of (i) the expiration of the twelve 
(12)-month period measured from the date of Optionee's cessation of Board 
service or (ii) the specified Expiration Date.

               (c)   Should Optionee cease service as a Board member by reason
of death or Permanent Disability, then all Option Shares at the time subject to
this option but not otherwise vested shall vest in full so that this option may
be exercised for any or all of the Option Shares as fully vested shares of
Common Stock at any time prior to the EARLIER of (i) the expiration of the
twelve (12)-month period measured from the date of Optionee's cessation of


<PAGE>

Board service or (ii) the specified Expiration Date, whereupon this option 
shall terminate and cease to be outstanding.

               (d)  Upon Optionee's cessation of Board service for any reason 
other than death or Permanent Disability, this option shall immediately 
terminate and cease to be outstanding with respect to any and all Option 
Shares in which Optionee is not otherwise at that time vested in accordance 
with the normal Vesting Schedule or the special vesting acceleration 
provisions of Paragraph 6 or 7 below.

          6.   CHANGE IN CONTROL.

               (a)  In the event of a Change in Control transaction, all 
Option Shares at the time subject to this option but not otherwise vested 
shall automatically vest so that this option shall, immediately prior to the 
specified effective date for the Change in Control, become exercisable for 
all of those Option Shares as fully-vested shares of Common Stock and may be 
exercised for all or any portion of those vested shares.  Immediately 
following the consummation of the Change in Control, this option shall 
terminate and cease to be outstanding, except to the extent assumed by the 
successor corporation or its parent company or otherwise continued in full 
force and effect pursuant to the terms of the Change in Control transaction.

               (b)  If this option is assumed in connection with a Change in 
Control (or otherwise continued in full force and effect), then this option 
shall be appropriately adjusted, immediately after such Change in Control, to 
apply to the number and class of securities or other property which would 
have been issuable to Optionee in consummation of such Change in Control had 
the option been exercised immediately prior to such Change in Control, and 
appropriate adjustments shall also be made to the Exercise Price, PROVIDED 
the aggregate Exercise Price shall remain the same.

          7.        HOSTILE TAKE-OVER.

               (a)  Optionee shall have an unconditional right, exercisable 
at the time during the thirty (30)-day period immediately following the 
consummation of a Hostile Take-Over, to surrender this option to the 
Corporation in exchange for a cash distribution from the Corporation in an 
amount equal to the excess of (i) the Take-Over Price of the Option Shares at 
the time subject to the surrendered option (whether or not those Option 
Shares are otherwise at the time vested) over (ii) the aggregate Exercise 
Price payable for such shares.  This Paragraph 7(a) limited stock 
appreciation right shall in all events terminate upon the expiration or 
sooner termination of the option term and may not be assigned or transferred 
by Optionee.

               (b)  To exercise the Paragraph 7(a) limited stock appreciation
right, Optionee must, during the applicable thirty (30)-day exercise period,
provide the Corporation with written notice of the option surrender in which
there is specified the number of Option Shares as to which the option is being
surrendered.  Such notice must be accompanied by the return of Optionee's copy
of this Agreement, together with any written amendments to such Agreement.  The
cash distribution shall be paid to Optionee within five (5) business days
following such delivery date.  The exercise of such limited stock appreciation
right in accordance with the terms of this Paragraph 7 has been pre-approved
pursuant to the express provisions of


<PAGE>

the Automatic Option Grant Program, and neither the approval of the Plan 
Administrator nor the consent of the Board shall be required at the time of 
the actual option surrender and cash distribution.  Upon receipt of the cash 
distribution, this option shall be cancelled with respect to the shares 
subject to the surrendered option (or the surrendered portion), and Optionee 
shall cease to have any further right to acquire those Option Shares under 
this Agreement.  The option shall, however, remain outstanding for the 
balance of the Option Shares (if any) in accordance with the terms and 
provisions of this Agreement, and the Corporation shall accordingly issue a 
replacement stock option agreement (substantially in the same form as this 
Agreement) for those remaining Option Shares.

          8.   ADJUSTMENT IN OPTION SHARES.  Should any change be made to the 
Common Stock by reason of any stock split, stock dividend, recapitalization, 
combination of shares, exchange of shares or other change affecting the 
outstanding Common Stock as a class without the Corporation's receipt of 
consideration, appropriate adjustments shall be made to (i) the total number 
and/or class of securities subject to this option and (ii) the Exercise Price 
in order to reflect such change and thereby preclude a dilution or 
enlargement of benefits hereunder.

          9.   STOCKHOLDER RIGHTS.  The holder of this option shall not have 
any stockholder rights with respect to the Option Shares until such person 
shall have exercised the option, paid the Exercise Price and become a holder 
of record of the purchased shares.

          10.  MANNER OF EXERCISING OPTION.

               (a)  In order to exercise this option with respect to all or 
any part of the Option Shares for which this option is at the time 
exercisable, Optionee (or any other person or persons exercising the option) 
must take the following actions:

                      (i)     To the extent the option is exercised for 
     vested Option Shares, execute and deliver to the Corporation a Notice of 
     Exercise for the Option Shares for which the option is exercised. To the 
     extent this option is exercised for unvested Option Shares, execute and 
     deliver to the Corporation a Purchase Agreement for those unvested 
     Option Shares.

                     (ii)     Pay the aggregate Exercise Price for the 
     purchased shares in one or more of the following forms:

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

                              (B)  shares of Common Stock held by Optionee 
          (or any other person or persons exercising the option) for the 
          requisite period necessary to avoid a charge to the Corporation's 
          earnings for financial reporting purposes and valued at Fair Market 
          Value on the Exercise Date, or

                              (C)  to the extent the option is exercised
          for vested Option Shares, through a special sale and remittance
          procedure


<PAGE>


          pursuant to which Optionee (or any other person or persons 
          exercising the option) shall concurrently provide irrevocable 
          instructions (I) to a Corporation-designated brokerage firm to 
          effect the immediate sale of the purchased shares and remit to the 
          Corporation, out of the sale proceeds available on the settlement 
          date, sufficient funds to cover the aggregate Exercise Price 
          payable for the purchased shares plus all applicable Federal, state 
          and local income and employment taxes required to be withheld by 
          the Corporation by reason of such exercise and (II) to the 
          Corporation to deliver the certificates for the purchased shares 
          directly to such brokerage firm in order to complete the sale.

                    (iii)   Furnish to the Corporation appropriate 
     documentation that the person or persons exercising the option (if other 
     than Optionee) have the right to exercise this option.

               (b)  Except to the extent the sale and remittance procedure is 
utilized in connection with the option exercise, payment of the Exercise 
Price must accompany the Notice of Exercise (or the Purchase Agreement) 
delivered to the Corporation in connection with the option exercise.

               (c)  As soon after the Exercise Date as practical, the 
Corporation shall issue to or on behalf of Optionee (or any other person or 
persons exercising this option) a certificate for the purchased Option 
Shares, with the appropriate legends affixed thereto.  To the extent any such 
Option Shares are unvested, the certificates for those Option Shares shall be 
endorsed with an appropriate legend evidencing the Corporation's repurchase 
rights and may be held in escrow with the Corporation until such shares vest.

               (d)  In no event may this option be exercised for any 
fractional shares.

          11.  NO IMPAIRMENT OF RIGHTS.  This Agreement shall not in any way 
affect the right of the Corporation to adjust, reclassify, reorganize or 
otherwise make changes in its capital or business structure or to merge, 
consolidate, dissolve, liquidate or sell or transfer all or any part of its 
business or assets.  In addition, this Agreement shall not in any way be 
construed or interpreted so as to affect adversely or otherwise impair the 
right of the Corporation or the stockholders to remove Optionee from the 
Board at any time in accordance with the provisions of applicable law.

          12.  COMPLIANCE WITH LAWS AND REGULATIONS.

               (a)  The exercise of this option and the issuance of the 
Option Shares upon such exercise shall be subject to compliance by the 
Corporation and Optionee with all applicable requirements of law relating 
thereto and with all applicable regulations of any stock exchange (or the 
Nasdaq National Market, if applicable) on which the Common Stock may be 
listed for trading at the time of such exercise and issuance.

               (b)  The inability of the Corporation to obtain approval from
any regulatory body having authority deemed by the Corporation to be necessary
to the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Corporation of

<PAGE>

any liability with respect to the non-issuance or sale of the Common Stock as 
to which such approval shall not have been obtained.  The Corporation, 
however, shall use its best efforts to obtain all such approvals.

          13.  SUCCESSORS AND ASSIGNS.  Except to the extent otherwise 
provided in Paragraph 3 or 6, the provisions of this Agreement shall inure to 
the benefit of, and be binding upon, the Corporation and its successors and 
assigns and Optionee, Optionee's assigns and the legal representatives, heirs 
and legatees of Optionee's estate.

          14.  NOTICES.  Any notice required to be given or delivered to the 
Corporation under the terms of this Agreement shall be in writing and 
addressed to the Corporation at its principal corporate offices.  Any notice 
required to be given or delivered to Optionee shall be in writing and 
addressed to Optionee at the address indicated below Optionee's signature 
line on the Grant Notice. All notices shall be deemed effective upon personal 
delivery or upon deposit in the U.S. mail, postage prepaid and properly 
addressed to the party to be notified.

          15.  CONSTRUCTION.  This Agreement and the option evidenced hereby 
are made and granted pursuant to the Plan and are in all respects limited by 
and subject to the terms of the Plan.

          16.  GOVERNING LAW.  The interpretation, performance and 
enforcement of this Agreement shall be governed by the laws of the State of 
California without resort to that State's conflict-of-laws rules.


<PAGE>



                                        EXHIBIT I

                              NOTICE OF EXERCISE

          I hereby notify Collateral Therapeutics, Inc. (the "Corporation")
that I elect to purchase            shares of the Corporation's Common Stock
(the "Purchased Shares") at the option exercise price of $            per share
(the "Exercise Price") pursuant to that certain option (the "Option") granted
to me under the Corporation's 1998 Stock Incentive Plan on
                    , 199   .

          Concurrently with the delivery of this Exercise Notice to the 
Corporation, I shall hereby pay to the Corporation the Exercise Price for the 
Purchased Shares in accordance with the provisions of my agreement with the 
Corporation (or other documents) evidencing the Option and shall deliver 
whatever additional documents may be required by such agreement as a 
condition for exercise.  Alternatively, I may utilize the special 
broker-dealer sale and remittance procedure specified in my agreement to 
effect payment of the Exercise Price for any Purchased Shares in which I am 
vested at the time of exercise of the Option.



___________________, 199_

Date


                                                                ________
                              Optionee

                                                        Address:________

                                                                ________

Print name in exact manner
it is to appear on the
stock certificate:                                              ________

Address to which certificate
is to be sent, if different
from address above:           _____________________________________

                                                                ________

Social Security Number:                                         ________


<PAGE>

                                   APPENDIX


          The following definitions shall be in effect under the Agreement:

          A.   AGREEMENT shall mean this Automatic Stock Option Agreement.

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

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

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

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

             (iii) the acquisition, directly or indirectly, by any
     person or related group of persons (other than the Corporation or a
     person that directly or indirectly controls, is controlled by, or is
     under common control with, the Corporation) of beneficial ownership
     (within the meaning of Rule 13d-3 of the 1934 Act) of securities
     possessing more than fifty percent (50%) of the total combined voting
     power of the Corporation's outstanding securities pursuant to a
     tender or exchange offer made directly to the Corporation's
     stockholders, or

              (iv) a change in the composition of the Board over a period
     of thirty-six (36) consecutive months or less such that a majority of
     the Board members ceases, by reason of one or more contested
     elections for Board membership, to be comprised of individuals who
     either (A) have been Board members continuously since the beginning
     of such period or (B) have been elected or nominated for election as
     Board members during such period by at least a majority of the Board
     members described in clause (A) who were still in office at the time
     the Board approved such election or nomination.

          D.   COMMON STOCK shall mean shares of the Corporation's common 
stock.

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

          F.   CORPORATION shall mean Collateral Therapeutics, Inc., a 
Delaware corporation.


<PAGE>

          G.   EXERCISE DATE shall mean the date on which the option shall 
have been exercised in accordance with Paragraph 10 of the Agreement.

          H.   EXERCISE PRICE shall mean the exercise price per share as 
specified in the Grant Notice.

          I.   EXPIRATION DATE shall mean the date on which the option 
expires as specified in the Grant Notice.

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

              (i)  If the Common Stock is at the time traded on the
     Nasdaq National Market, then the Fair Market Value shall be the
     closing selling price per share of Common Stock on the date in
     question, as the price is reported by the National Association of
     Securities Dealers on the Nasdaq National Market. If there is no
     closing selling price for the Common Stock on the date in question,
     then the Fair Market Value shall be the closing selling price on the
     last preceding date for which such quotation exists.

              (ii) If the Common Stock is at the time listed on any Stock
     Exchange, then the Fair Market Value shall be the closing selling
     price per share of Common Stock on the date in question on the Stock
     Exchange which serves as the primary market for the Common Stock, as
     such price is officially quoted in the composite tape of transactions
     on such exchange.  If there is no closing selling price for the
     Common Stock on the date in question, then the Fair Market Value
     shall be the closing selling price on the last preceding date for
     which such quotation exists.

          K.   GRANT DATE shall mean the date of grant of the option as 
specified in the Grant Notice.

          L.   GRANT NOTICE shall mean the Notice of Grant of Automatic Stock 
Option accompanying the Agreement, pursuant to which Optionee has been 
informed of the basic terms of the option evidenced hereby.

          M.   HOSTILE TAKEOVER shall mean the acquisition, directly or 
indirectly, by any person or related group of persons (other than the 
Corporation or a person that directly or indirectly controls, is controlled 
by, or is under common control with, the Corporation) of beneficial ownership 
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing 
more than fifty percent (50%) of the total combined voting power of the 
Corporation's outstanding securities  pursuant to a tender or exchange offer 
made directly to the Corporation's stockholders which the Board does not 
recommend such stockholders to accept.


<PAGE>

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

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

          P.   NOTICE OF EXERCISE shall mean the notice of exercise in the 
form of Exhibit I.

          Q.   OPTION SHARES shall mean the number of shares of Common Stock 
subject to the option.

          R.   OPTIONEE shall mean the person to whom the option is granted 
as specified in the Grant Notice.

          S.   PERMANENT DISABILITY shall mean the inability of Optionee to 
perform his or her usual duties as a member of the Board by reason of any 
medically determinable physical or mental impairment which is expected to 
result in death or has lasted or can be expected to last for a continuous 
period of twelve (12) months or more.

          T.   PLAN shall mean the Corporation's 1998 Stock Incentive Plan.

          U.   PURCHASE AGREEMENT shall mean the stock purchase agreement (in 
form and substance satisfactory to the Corporation) which grants the 
Corporation the right to repurchase, at the Exercise Price, any and all 
unvested Option Shares held by Optionee at the time of Optionee's cessation 
of Board service and which precludes the sale, transfer or other disposition 
of any purchased Option Shares while those shares are unvested and subject to 
such repurchase right.

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

          W.   TAKE-OVER PRICE shall mean the GREATER of (i) the Fair Market 
Value per share of Common Stock on the date the option is surrendered to the 
Corporation in connection with a Hostile Take-Over or (ii) the highest 
reported price per share of Common Stock paid by the tender offeror in 
effecting the Hostile Take-Over.

          X.   VESTING SCHEDULE shall mean the vesting schedule specified in 
the Grant Notice, pursuant to which the Option Shares will vest in one or 
more installments over the Optionee's period of Board service, subject to 
acceleration in accordance with the provisions of the Agreement.


<PAGE>

                         COLLATERAL THERAPEUTICS, INC.
                       1998 EMPLOYEE STOCK PURCHASE PLAN


I.   PURPOSE OF THE PLAN

          This Employee Stock Purchase Plan is intended to promote the 
interests of Collateral Therapeutics, Inc., a Delaware corporation, by 
providing eligible employees with the opportunity to acquire a proprietary 
interest in the Corporation through participation in a payroll-deduction 
based employee stock purchase plan designed to qualify under Section 423 of 
the Code.

          Capitalized terms herein shall have the meanings assigned to such 
terms in the attached Appendix.

     II.  ADMINISTRATION OF THE PLAN

          The Plan Administrator shall have full authority to interpret and 
construe any provision of the Plan and to adopt such rules and regulations 
for administering the Plan as it may deem necessary in order to comply with 
the requirements of Code Section 423.  Decisions of the Plan Administrator 
shall be final and binding on all parties having an interest in the Plan.

     III. STOCK SUBJECT TO PLAN

          A.   The stock purchasable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares of Common
Stock purchased on the open market.  The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall not exceed Fifty
Thousand (50,000) shares.

          B.   Should any change be made to the Common Stock by reason of any 
stock split, stock dividend, recapitalization, combination of shares, 
exchange of shares or other change affecting the outstanding Common Stock as 
a class without the Corporation's receipt of consideration, appropriate 
adjustments shall be made to (i) the maximum number and class of securities 
issuable under the Plan, (ii) the maximum number and class of securities 
purchasable per Participant and in the aggregate on any one Purchase Date and 
(iii) the number and class of securities and the price per share in effect 
under each outstanding purchase right in order to prevent the dilution or 
enlargement of benefits thereunder.

     IV.  OFFERING PERIODS

          A.   Shares of Common Stock shall be offered for purchase under the 
Plan through a series of successive offering periods until such time as (i) 
the maximum number of shares of Common Stock available for issuance under the 
Plan shall have been purchased or (ii) the Plan shall have been sooner 
terminated.

<PAGE>

          B.   Each offering period shall be of such duration (not to exceed 
twenty-four (24) months) as determined by the Plan Administrator prior to the 
start date of such offering period.  However, the initial offering period 
shall commence at the Effective Time and terminate on the last business day 
in July 2000.  The next offering period shall commence on the first business 
day in August 2000, and subsequent offering periods shall commence as 
designated by the Plan Administrator.

          C.   Each offering period shall be comprised of a series of one or 
more successive Purchase Intervals.  Purchase Intervals shall run from the 
first business day in February each year to the last business day in July of 
the same year and from the first business day in August each year to the last 
business day in January of the following year.  However, the first Purchase 
Interval in effect under the initial offering period shall commence at the 
Effective Time and terminate on the last business day in January 1999.

          D.   Should the Fair Market Value per share of Common Stock on any 
Purchase Date within an offering period be less than the Fair Market Value 
per share of Common Stock on the start date of that offering period, then 
that offering period shall automatically terminate immediately after the 
purchase of shares of Common Stock on such Purchase Date, and a new offering 
period shall commence on the next business day following such Purchase Date.  
Purchase rights in the new offering period shall automatically be granted to 
the individuals participating in the terminated offering period, and the new 
offering period shall have a duration of twenty (24) months, unless a shorter 
duration is established by the Plan Administrator within five (5) business 
days following the start date of that offering period.

     V.   ELIGIBILITY

          A.   Each individual who is an Eligible Employee on the start date 
of any offering period under the Plan may enter that offering period on such 
start date or on any subsequent Semi-Annual Entry Date within that offering 
period, provided he or she remains an Eligible Employee.

          B.   Each individual who first becomes an Eligible Employee after 
the start date of an offering period may enter that offering period on any 
subsequent Semi-Annual Entry Date within that offering period on which he or 
she is an Eligible Employee.

          C.   The date an individual enters an offering period shall be 
designated his or her Entry Date for purposes of that offering period.

          D.   To participate in the Plan for a particular offering period, 
the Eligible Employee must complete the enrollment forms prescribed by the 
Plan Administrator (including a stock purchase agreement and a payroll 
deduction authorization) and file such forms with the Plan Administrator (or 
its designate) on or before his or her scheduled Entry Date.

     VI.  PAYROLL DEDUCTIONS

          A.   The payroll deduction authorized by the Participant for 
purposes of acquiring shares of Common Stock during an offering period may be 
any multiple of one percent (1%) of the Base Salary paid to the Participant 
during each Purchase Interval within that offering 

<PAGE>

period, up to a maximum of ten percent (10%).  The deduction rate so 
authorized shall continue in effect throughout the offering period, except to 
the extent such rate is changed in accordance with the following guidelines:

                 (i)     The Participant may, at any time during the
     offering period, reduce his or her rate of payroll deduction to
     become effective as soon as possible after filing the appropriate
     form with the Plan Administrator.  The Participant may not, however,
     effect more than one (1) such reduction per Purchase Interval.
     
                (ii)     The Participant may, prior to the commencement of
     any new Purchase Interval within the offering period, increase the
     rate of his or her payroll deduction by filing the appropriate form
     with the Plan Administrator.  The new rate (which may not exceed the
     ten percent (10%) maximum) shall become effective on the start date
     of the first Purchase Interval following the filing of such form.
     
          B.   Payroll deductions shall begin on the first pay day following 
the Participant's Entry Date into the offering period and shall (unless 
sooner terminated by the Participant) continue through the pay day ending 
with or immediately prior to the last day of that offering period.  The 
amounts so collected shall be credited to the Participant's book account 
under the Plan, but no interest shall be paid on the balance from time to 
time outstanding in such account.  The amounts collected from the Participant 
shall not be required to be held in any segregated account or trust fund and 
may be commingled with the general assets of the Corporation and used for 
general corporate purposes.

          C.   Payroll deductions shall automatically cease upon the 
termination of the Participant's purchase right in accordance with the 
provisions of the Plan.

          D.   The Participant's acquisition of Common Stock under the Plan 
on any Purchase Date shall neither limit nor require the Participant's 
acquisition of Common Stock on any subsequent Purchase Date, whether within 
the same or a different offering period.

<PAGE>

     VII. PURCHASE RIGHTS

          A.   GRANT OF PURCHASE RIGHT.  A Participant shall be granted a 
separate purchase right for each offering period in which he or she 
participates.  The purchase right shall be granted on the Participant's Entry 
Date into the offering period and shall provide the Participant with the 
right to purchase shares of Common Stock, in a series of successive 
installments over the remainder of such offering period, upon the terms set 
forth below.  The Participant shall execute a stock purchase agreement 
embodying such terms and such other provisions (not inconsistent with the 
Plan) as the Plan Administrator may deem advisable.

          Under no circumstances shall purchase rights be granted under the 
Plan to any Eligible Employee if such individual would, immediately after the 
grant, own (within the meaning of Code Section 424(d)) or hold outstanding 
options or other rights to purchase, stock possessing five percent (5%) or 
more of the total combined voting power or value of all classes of stock of 
the Corporation or any Corporate Affiliate.

          B.   EXERCISE OF THE PURCHASE RIGHT.  Each purchase right shall be 
automatically exercised in installments on each successive Purchase Date 
within the offering period, and shares of Common Stock shall accordingly be 
purchased on behalf of each Participant (other than Participants whose 
payroll deductions have previously been refunded pursuant to the Termination 
of Purchase Right provisions below) on each such Purchase Date.  The purchase 
shall be effected by applying the Participant's payroll deductions for the 
Purchase Interval ending on such Purchase Date to the purchase of whole 
shares of Common Stock at the purchase price in effect for the Participant 
for that Purchase Date.

          C.   PURCHASE PRICE.  The purchase price per share at which Common 
Stock will be purchased on the Participant's behalf on each Purchase Date 
within the offering period shall be equal to eighty-five percent (85%) of the 
LOWER of (i) the Fair Market Value per share of Common Stock on the 
Participant's Entry Date into that offering period or (ii) the Fair Market 
Value per share of Common Stock on that Purchase Date.

          D.   NUMBER OF PURCHASABLE SHARES.  The number of shares of Common 
Stock purchasable by a Participant on each Purchase Date during the offering 
period shall be the number of whole shares obtained by dividing the amount 
collected from the Participant through payroll deductions during the Purchase 
Interval ending with that Purchase Date by the purchase price in effect for 
the Participant for that Purchase Date.  However, the maximum number of 
shares of Common Stock purchasable per Participant on any one Purchase Date 
shall not exceed One Thousand (1,000) shares, subject to periodic adjustments 
in the event of certain changes in the Corporation's capitalization. In 
addition, the maximum aggregate number of shares of Common Stock purchasable 
by all Participants on any one Purchase Date shall not exceed Twelve Thousand 
Five Hundred (12,500) shares, subject to periodic adjustments in the event of 
certain changes in the Corporation's capitalization.

          E.   EXCESS PAYROLL DEDUCTIONS.  Any payroll deductions not applied 
to the  purchase of shares of Common Stock on any Purchase Date because they 
are not sufficient to purchase a whole share of Common Stock shall be held 
for the purchase of Common Stock on the next Purchase Date.  However, any 
payroll deductions not applied to the purchase of 

<PAGE>

Common Stock by reason of the limitation on the maximum number of shares 
purchasable on the Purchase Date shall be promptly refunded.

          F.   TERMINATION OF PURCHASE RIGHT.  The following provisions shall 
govern the termination of outstanding purchase rights:

                 (i)     A Participant may, at any time prior to the next
     scheduled Purchase Date in the offering period, terminate his or her
     outstanding purchase right by filing the appropriate form with the
     Plan Administrator (or its designate), and no further payroll
     deductions shall be collected from the Participant with respect to
     the terminated purchase right.  Any payroll deductions collected
     during the Purchase Interval in which such termination occurs shall,
     at the Participant's election, be immediately refunded or held for
     the purchase of shares on the next Purchase Date.  If no such
     election is made at the time such purchase right is terminated, then
     the payroll deductions collected with respect to the terminated right
     shall be refunded as soon as possible.
     
                (ii)     The termination of such purchase right shall be
     irrevocable, and the Participant may not subsequently rejoin the
     offering period for which the terminated purchase right was granted.
     In order to resume participation in any subsequent offering period,
     such individual must re-enroll in the Plan (by making a timely filing
     of the prescribed enrollment forms) on or before his or her scheduled
     Entry Date into that offering period.
     
               (iii)     Should the Participant cease to remain an
     Eligible Employee for any reason (including death, disability or change 
     in status) while his or her purchase right remains outstanding, then 
     that purchase right shall immediately terminate, and all of the 
     Participant's payroll deductions for the Purchase Interval in which the 
     purchase right so terminates shall be immediately refunded.  However, 
     should the Participant cease to remain in active service by reason of an 
     approved unpaid leave of absence, then the Participant shall have the 
     right, exercisable up until the last business day of the Purchase 
     Interval in which such leave commences, to (a) withdraw all the payroll 
     deductions collected to date on his or her behalf for that Purchase 
     Interval or (b) have such funds held for the purchase of shares on his 
     or her behalf on the next scheduled Purchase Date.  In no event, 
     however, shall any further payroll deductions be collected on the 
     Participant's behalf during such leave.  Upon the Participant's return 
     to active service (i) within ninety (90) days following the commencement 
     of such leave or, (ii) prior to the expiration of any longer period for 
     which such Participant's right to reemployment with the Corporation is 
     guaranteed by either statute or contract, his or her payroll deductions 
     under the Plan shall automatically resume at the rate in effect at the 
     time the leave began.  However, should the Participant's leave of 
     absence exceed ninety (90) days and his or her re-employment rights not 
     be guaranteed by either statute or contract, then the Participant's 
     status as an Eligible Employee will be deemed to terminate on the 
     ninety-first (91st) day of that leave, and such Participant's purchase 
     right for the offering period in which that leave began shall thereupon 
     terminate.  An individual who returns to active employment 

<PAGE>

     following such a leave shall be treated as a new Employee for purposes 
     of the Plan and must, in order to resume participation in the Plan, 
     re-enroll in the Plan (by making a timely filing of the prescribed 
     enrollment forms) on or before his or her scheduled Entry Date into the 
     offering period.
     
          G.   CHANGE IN CONTROL.  Each outstanding purchase right shall 
automatically be exercised, immediately prior to the effective date of any 
Change in Control by applying the payroll deductions of each Participant for 
the Purchase Interval in which such Change in Control occurs to the purchase 
of whole shares of Common Stock at a purchase price per share equal to 
eighty-five percent (85%) of the LOWER of (i) the Fair Market Value per share 
of Common Stock on the Participant's Entry Date into the offering period in 
which such Change in Control occurs or (ii) the Fair Market Value per share 
of Common Stock immediately prior to the effective date of such Change in 
Control. However, the applicable limitation on the number of shares of Common 
Stock purchasable per Participant shall continue to apply to any such 
purchase, but not the limitation applicable to the maximum number of shares 
of Common Stock purchasable in the aggregate.

          The Corporation shall use its best efforts to provide at least ten 
(10)-days prior written notice of the occurrence of any Change in Control, 
and Participants shall, following the receipt of such notice, have the right 
to terminate their outstanding purchase rights prior to the effective date of 
the Change in Control.

          H.   PRORATION OF PURCHASE RIGHTS.  Should the total number of 
shares of Common Stock to be purchased pursuant to outstanding purchase 
rights on any particular date exceed the number of shares then available for 
issuance under the Plan, the Plan Administrator shall make a pro-rata 
allocation of the available shares on a uniform and nondiscriminatory basis, 
and the payroll deductions of each Participant, to the extent in excess of 
the aggregate purchase price payable for the Common Stock pro-rated to such 
individual, shall be refunded.

          I.   ASSIGNABILITY.  The purchase right shall be exercisable only 
by the Participant and shall not be assignable or transferable by the 
Participant.

          J.   STOCKHOLDER RIGHTS.  A Participant shall have no stockholder 
rights with respect to the shares subject to his or her outstanding purchase 
right until the shares are purchased on the Participant's behalf in 
accordance with the provisions of the Plan and the Participant has become a 
holder of record of the purchased shares.

    VIII. ACCRUAL LIMITATIONS

          A.   No Participant shall be entitled to accrue rights to acquire 
Common Stock pursuant to any purchase right outstanding under this Plan if 
and to the extent such accrual, when aggregated with (i) rights to purchase 
Common Stock accrued under any other purchase right granted under this Plan 
and (ii) similar rights accrued under other employee stock purchase plans 
(within the meaning of Code Section 423) of the Corporation or any Corporate 
Affiliate, would otherwise permit such Participant to purchase more than 
Twenty-Five Thousand Dollars ($25,000) worth of stock of the Corporation or 
any Corporate Affiliate (determined on the basis 


<PAGE>


of the Fair Market Value per share on the date or dates such rights are 
granted) for each calendar year such rights are at any time outstanding.

          B.   For purposes of applying such accrual limitations to the
purchase rights granted under the Plan, the following provisions shall be in
effect:

                 (i)     The right to acquire Common Stock under each
     outstanding purchase right shall accrue in a series of installments
     on each successive Purchase Date during the offering period on which
     such right remains outstanding.
     
                (ii)     No right to acquire Common Stock under any
     outstanding purchase right shall accrue to the extent the Participant
     has already accrued in the same calendar year the right to acquire
     Common Stock under one (1) or more other purchase rights at a rate
     equal to Twenty-Five Thousand Dollars ($25,000) worth of Common Stock
     (determined on the basis of the Fair Market Value per share on the
     date or dates of grant) for each calendar year such rights were at
     any time outstanding.
     
          C.   If by reason of such accrual limitations, any purchase right of
a Participant does not accrue for a particular Purchase Interval, then the
payroll deductions which the Participant made during that Purchase Interval
with respect to such purchase right shall be promptly refunded.

          D.   In the event there is any conflict between the provisions of
this Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.

     IX.  EFFECTIVE DATE AND TERM OF THE PLAN

          A.   The Plan was adopted by the Board on April 20, 1998 and shall
become effective at the Effective Time, PROVIDED no purchase rights granted
under the Plan shall be exercised, and no shares of Common Stock shall be
issued hereunder, until (i) the Plan shall have been approved by the
stockholders of the Corporation and (ii) the Corporation shall have complied
with all applicable requirements of the 1933 Act (including the registration of
the shares of Common Stock issuable under the Plan on a Form S-8 registration
statement filed with the Securities and Exchange Commission), all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is listed for trading and all other
applicable requirements established by law or regulation.  In the event such
stockholder approval is not obtained, or such compliance is not effected,
within twelve (12) months after the date on which the Plan is adopted by the
Board, the Plan shall terminate and have no further force or effect, and all
sums collected from Participants during the initial offering period hereunder
shall be refunded.

          B.   Unless sooner terminated by the Board, the Plan shall terminate
upon the EARLIEST of (i) the last business day in July 2008, (ii) the date on
which all shares available for issuance under the Plan shall have been sold
pursuant to purchase rights exercised under the Plan or (iii) the date on which
all purchase rights are exercised in connection with a Corporate 


<PAGE>


Transaction. No further purchase rights shall be granted or exercised, and no 
further payroll deductions shall be collected, under the Plan following such 
termination.

     X.   AMENDMENT/TERMINATION OF THE PLAN

          A.   The Board may alter, amend, suspend or terminate the Plan at any
time to become effective immediately following the close of any Purchase
Interval.  However, the Plan may be amended or terminated immediately upon
Board action, if and to the extent necessary to assure that the Corporation
will not recognize, for financial reporting purposes, any compensation expense
in connection with the shares of Common Stock offered for purchase under the
Plan, should the financial accounting rules applicable to the Plan at the
Effective Time be subsequently revised so as to require the recognition of
compensation expense in the absence of such amendment or termination.

          B.   In no event may the Board effect any of the following amendments
or revisions to the Plan without the approval of the Corporation's
stockholders: (i) increase the number of shares of Common Stock issuable under
the Plan or the maximum number of shares purchasable per Participant on any one
Purchase Date, except for permissible adjustments in the event of certain
changes in the Corporation's capitalization, (ii) alter the purchase price
formula so as to reduce the purchase price payable for the shares of Common
Stock purchasable under the Plan or (iii) modify eligibility requirements for
participation in the Plan.

     XI.  GENERAL PROVISIONS

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

          B.   All costs and expenses incurred in the administration of the
Plan shall be paid by the Corporation; however, each Plan Participant shall
bear all costs and expenses incurred by such individual in the sale or other
disposition of any shares purchased under the Plan.

          C.   The provisions of the Plan shall be governed by the laws of the
State of California without resort to that State's conflict-of-laws rules.


<PAGE>


                                  SCHEDULE A
                                       
                         CORPORATIONS PARTICIPATING IN
                         EMPLOYEE STOCK PURCHASE PLAN
                           AS OF THE EFFECTIVE TIME
                                       
                         Collateral Therapeutics, Inc.


<PAGE>


                                   APPENDIX

          The following definitions shall be in effect under the Plan:

          A.   BASE SALARY shall mean the regular base salary paid to a
Participant by one or more Participating Companies during such individual's
period of participation in one or more offering periods under the Plan,
calculated before deduction of (A) any income or employment tax withholdings or
(B) any pre-tax contributions made by the Participant to any Code Section
401(k) salary deferral plan or any Code Section 125 cafeteria benefit program
now or hereafter established by the Corporation or any Corporate Affiliate. The
following items of compensation shall NOT be included in Base Salary:  (i) all
overtime payments, bonuses, commissions (other than those functioning as base
salary equivalents), profit-sharing distributions and other incentive-type
payments and (ii) any and all contributions (other than Code Section 401(k) or
Code Section 125 contributions) made on the Participant's behalf by the
Corporation or any Corporate Affiliate under any employee benefit or welfare
plan now or hereafter established.

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

          C.   CHANGE IN CONTROL shall mean any of the following transactions
effecting a change in ownership or control of the Corporation:

            (i)     a merger or consolidation in which securities
     possessing more than fifty percent (50%) of the total combined voting
     power of the Corporation's outstanding securities are transferred to
     a person or persons different from the persons holding those
     securities immediately prior to such transaction,
     
           (ii)     the sale, transfer or other disposition of all or
     substantially all of the assets of the Corporation in complete
     liquidation or dissolution of the Corporation, or
     
          (iii)     the acquisition, directly or indirectly, by any person
     or related group of persons (other than the Corporation or a person
     that directly or indirectly controls, is controlled by, or is under
     common control with, the Corporation), of beneficial ownership
     (within the meaning of Rule 13d-3 of the 1934 Act) of securities
     possessing more than fifty percent (50%) of the total combined voting
     power of the Corporation's outstanding securities pursuant to a
     tender or exchange offer made directly to the Corporation's
     shareholders.
     
          D.   CODE shall mean the Internal Revenue Code of 1986, as amended.

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

          F.   CORPORATE AFFILIATE shall mean any parent or subsidiary
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.


<PAGE>


          G.   CORPORATION shall mean Collateral Therapeutics, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Collateral Therapeutics, Inc. which shall by
appropriate action adopt the Plan.

          H.   EFFECTIVE TIME shall mean the time at which the Underwriting
Agreement is executed and finally priced.  Any Corporate Affiliate which
becomes a Participating Corporation after such Effective Time shall designate a
subsequent Effective Time with respect to its employee-Participants.

          I.   ELIGIBLE EMPLOYEE shall mean any person who is employed by a
Participating Corporation on a basis under which he or she is regularly
expected to render more than twenty (20) hours of service per week for more
than five (5) months per calendar year for earnings considered wages under Code
Section 3401(a).

          J.   ENTRY DATE shall mean the date an Eligible Employee first
commences participation in the offering period in effect under the Plan.  The
earliest Entry Date under the Plan shall be the Effective Time.

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

            (i)     If the Common Stock is at the time traded on the
     Nasdaq National Market, then the Fair Market Value shall be the
     closing selling price per share of Common Stock on the date in
     question, as such price is reported by the National Association of
     Securities Dealers on the Nasdaq National Market or any successor
     system.  If there is no closing selling price for the Common Stock on
     the date in question, then the Fair Market Value shall be the closing
     selling price on the last preceding date for which such quotation
     exists.
     
           (ii)     If the Common Stock is at the time listed on any Stock
     Exchange, then the Fair Market Value shall be the closing selling
     price per share of Common Stock on the date in question on the Stock
     Exchange determined by the Plan Administrator to be the primary
     market for the Common Stock, as such price is officially quoted in
     the composite tape of transactions on such exchange.  If there is no
     closing selling price for the Common Stock on the date in question,
     then the Fair Market Value shall be the closing selling price  on the
     last preceding date for which such quotation exists.


<PAGE>


          (iii)     For purposes of the initial offering period which
     begins at the Effective Time, the Fair Market Value shall be deemed
     to be equal to the price per share at which the Common Stock is sold
     in the initial public offering pursuant to the Underwriting
     Agreement.
     
          L.   1933 ACT shall mean the Securities Act of 1933, as amended.

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

          N.   PARTICIPANT shall mean any Eligible Employee of a Participating
Corporation who is actively participating in the Plan.

          O.   PARTICIPATING CORPORATION shall mean the Corporation and such
Corporate Affiliate or Affiliates as may be authorized from time to time by the
Board to extend the benefits of the Plan to their Eligible Employees.  The
Participating Corporations in the Plan are listed in attached Schedule A.

          P.   PLAN shall mean the Corporation's 1998 Employee Stock Purchase
Plan, as set forth in this document.

          Q.   PLAN ADMINISTRATOR shall mean the committee of two (2) or more
Board members appointed by the Board to administer the Plan.

          R.   PURCHASE DATE shall mean the last business day of each Purchase
Interval.  The initial Purchase Date shall be January 29, 1999.

          S.   PURCHASE INTERVAL shall mean each successive six (6)-month
period within the offering period at the end of which there shall be purchased
shares of Common Stock on behalf of each Participant.

          T.   SEMI-ANNUAL ENTRY DATE shall mean the first business day in
February and August each year on which an Eligible Employee may first enter an
offering period.

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

          V.   UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.





<PAGE>

                            COLLATERAL THERAPEUTICS, INC.
                        EMPLOYEE STOCK PURCHASE PLAN ("ESPP")
                               ENROLLMENT/CHANGE FORM

<TABLE>
<CAPTION>

              Action                                              Complete Sections:
              ------                                              ------------------
<S>                                                             <C>
SECTION 1:     / /  New Enrollment                                2, 3, 7 AND sign attached

 ACTIONS                                                                   Stock Purchase Agreement
               / /  Payroll Deduction Change                      2, 4, 7 
               / /  Terminate Payroll Deductions                  2, 5, 7
               / /  Leave of Absence                              2, 6, 7 
                                                                  
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION 2:    Name

PERSONNEL        --------------------------------------------------------------------------------
DATA                 Last            First             MI                  Dept. 

              Home Address                                             
                          -----------------------------------------------------------------------
                                                       Street

                 --------------------------------------------------------------------------------
                    City                   State                     Zip Code

              Social Security #:  / / / / / / - / / / / - / / / / / / / /

- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION 3:    Effective with the Purchase

NEW           Interval Beginning:                                    Payroll Deduction Amount:  _____% of base salary*
ENROLLMENT    / /  February 1, 199_
              / /  August 1, 199_                                    * Must be a multiple of 1% up to a maximum of 10% of
                                                                     base salary
              / /  Initial Offering Period 

- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION 4:    Effective with the                                     I authorize the following new level of payroll

PAYROLL       Pay Period Beginning:  ______________________________  deduction: % of base salary*
DEDUCTION                             Month, Day and Year   
CHANGE                                                               * Must be a multiple of 1% up to a maximum of 10% of
                                                                     base salary
              NOTE:     You may reduce your rate of payroll deductions once per 6-month purchase interval to become effective as 
                        soon as possible following the filing of the change form.  You may increase your rate of payroll deductions
                        to become effective as of the start date of the next 6-month purchase interval (February 1 or August 1).

- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION 5:     Effective with the                                    Your election to terminate your payroll deductions for the 

TERMINATE      Pay Period Beginning:  __________________________     balance of the offering period cannot be changed, and 
PAYROLL                                  Month, Day and Year         you may not rejoin the offering period at a later date.  You 
DEDUCTIONS                                                           will not be able to resume participation in the ESPP until the
                                                                     start of the next offering period.                    

               In connection with my voluntary termination of payroll deductions, I elect
               the following action regarding my ESPP payroll deductions to date in the
               current purchase interval:

               / /  Purchase shares of Collateral Therapeutics, Inc. on next scheduled purchase date
                            OR
               / /  Refund ESPP payroll deductions collected

     NOTE:     If your employment terminates for any reason or your eligibility status changes (less than 20 hrs/wk or less than 5
               months/yr), you will immediately cease to participate in the ESPP, and your ESPP payroll deductions collected in 
               that purchase interval will automatically be refunded to you.
                                                                                 
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION 6:     In connection with my leave of absence, I elect the following action with respect to my ESPP payroll deductions to 
               date:
LEAVE OF
ABSENCE  
 
               / /  Purchase shares of Collateral Therapeutics, Inc. on next scheduled purchase date
                              OR
               / /  Refund ESPP payroll deductions collected

     NOTE:     If you take an unpaid leave of absence, your payroll deductions will immediately cease.  If you return to active
               status within 90 days after the start of your leave, your payroll deductions will at that time automatically resume
               at the rate in effect for you when your leave began.
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION 7:

AUTHORIZATION

    

- -------------------------------------------------                                        ------------------------------------------
        Date                                                                                        Signature of Employee         


</TABLE>
                                   

<PAGE>



                         COLLATERAL THERAPEUTICS, INC.
                           STOCK PURCHASE AGREEMENT

          I hereby elect to participate in the 1998 Employee Stock Purchase 
Plan (the "ESPP") for the offering period specified below, and I hereby 
subscribe to purchase shares of Common Stock of Collateral Therapeutics, Inc. 
(the "Corporation") in accordance with the provisions of this Agreement and 
the ESPP.  I hereby authorize payroll deductions from each of my paychecks 
following my entry into the offering period in the 1% multiple of my base 
salary (not to exceed a maximum of 10%) specified in my attached Enrollment 
Form.

          The offering period is divided into a series of consecutive 
purchase intervals.  With the exception of the initial purchase interval 
which begins at the time of the initial public offering of the Common Stock 
and ends on January 29, 1999, those purchase intervals will each be of six 
months duration and begin on the first business day of February and August 
each year during the offering period.  My participation will automatically 
remain in effect from one purchase interval to the next in accordance with my 
payroll deduction authorization, unless I withdraw from the ESPP or change 
the rate of my payroll deduction or unless my employment status changes.  I 
may reduce the rate of my payroll deductions on one occasion per purchase 
interval, and I may increase my rate of payroll deductions to become 
effective at the beginning of any subsequent purchase interval.

          My payroll deductions will be accumulated for the purchase of 
shares of the Corporation's Common Stock on the last business day of each 
purchase interval within the offering period.  The purchase price per share 
will be equal to 85% of the LOWER of (i) the fair market value per share of 
Common Stock on my Entry Date into the offering period or (ii) the fair 
market value per share on the purchase date.  I will also be subject to ESPP 
restrictions (i) limiting the maximum number of shares which I may purchase 
per purchase interval, (ii) limiting the maximum number of shares which may 
be purchased in the aggregate per purchase interval and (iii) prohibiting me 
from purchasing more than $25,000 worth of Common Stock for each calendar 
year my purchase right remains outstanding.

          I may withdraw from the ESPP at any time prior to the last business 
day of a purchase interval and elect either to have the Corporation refund 
all my payroll deductions for that interval or to have such payroll 
deductions applied to the purchase of Common Stock at the end of such 
interval.  However, I may not rejoin that particular offering period at any 
later date.  Upon the termination of my employment for any reason, including 
death or disability, or my loss of eligible employee status, my participation 
in the ESPP will immediately cease, and all my payroll deductions for the 
purchase interval in which my employment terminates or my loss of eligibility 
occurs will automatically be refunded.

          If I take an unpaid leave of absence, my payroll deductions will 
immediately cease, and any payroll deductions for the purchase interval in 
which my leave begins will, at my election, either be refunded or applied to 
the purchase of shares of Common Stock at the end of that purchase interval. 
If my re-employment is guaranteed by either law or contract, or if I return 
to active service within ninety (90) days, then upon my return my payroll 
deductions will automatically resume at the rate in effect when my leave 
began. The Corporation will issue a stock certificate for the shares 
purchased on my behalf after the end of each purchase interval.  The 
certificate will be issued in street name and will be deposited directly in 
my Corporation-designated brokerage account. I will notify the Corporation of 
any disposition of shares purchased under the ESPP, and I will satisfy all 
applicable income and employment tax withholding requirements at the time of 
such disposition.

          The Corporation has the right, exercisable in its sole discretion, 
to amend or terminate all outstanding purchase rights under the ESPP at any 
time, with such amendment or termination to become effective immediately 
following the end of any purchase interval.  However, such purchase rights 
may be amended or terminated with an immediate effective date to the extent 
necessary to avoid the Corporation's recognition of compensation expense for 
financial reporting purposes, should the accounting principles applicable to 
the ESPP change.  Upon any such termination, I will cease to have any further 
rights to purchase shares of Common Stock under this Agreement.

          I have read this Agreement and hereby agree to be bound by the 
terms of both this Agreement and the ESPP.  The effectiveness of this 
Agreement is dependent upon my eligibility to participate in the ESPP.

    Date:                    , 199__

                  Signature of Employee

<PAGE>

                                     Printed Name:_________________________


Applicable Offering Period: From Plan Effective Date to the last business day 
in July 2000


Actual Entry Date into Offering Period: ___________________________, 1998




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