ENDOSONICS CORP, S-8, 1997-07-28

ENDOSONICS CORP
S-8, 1997-07-28
ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS

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<PAGE> 1
As filed with the Securities and Exchange Commission on July 28, 1997
Registration No. 333-___________

================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933

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

ENDOSONICS CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 68-0028500
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)

2870 KILGORE ROAD
RANCHO CORDOVA, CALIFORNIA 95670
(Address of principal executive offices) (Zip Code)

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

ENDOSONICS CORPORATION
RESTATED 1988 STOCK OPTION PLAN
CERTAIN OPTION GRANT TO MR. SALQUIST PURSUANT
TO A WRITTEN COMPENSATION AGREEMENT

CARDIOMETRICS, INC.
1995 STOCK INCENTIVE PLAN
(Full title of the Plans)

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

REINHARD J. WARNKING
CHIEF EXECUTIVE OFFICER
ENDOSONICS CORPORATION
2870 KILGORE ROAD, RANCHO CORDOVA, CALIFORNIA, 95670
(Name and address of agent for service)
(916) 638-8008
(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 Price Fee
---------- ------------- --------- ----- ---
<S> <C> <C> <C> <C>

ENDOSONICS CORPORATION
RESTATED 1988 STOCK OPTION PLAN
- -------------------------------
Common Stock,
$0.001 par value 1,900,000 shares $12.4375(2) $23,631,250(2) $7,160.98

OPTION GRANT TO MR. SALQUIST
- ----------------------------
Common Stock,
$0.001 par value 25,000 shares $12.75(3) $318,750(3) $97

</TABLE>

<PAGE> 2

<TABLE>

<S> <C> <C> <C> <C>
CARDIOMETRICS, INC.
1995 STOCK INCENTIVE PLAN
- -------------------------
Common Stock,
$0.001 par value 128,500 shares $3.04(4) $390,640(4) $118.38(4)

</TABLE>

Aggregate Filing Fee $7,376

================================================================================

(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the EndoSonics Corporation
Restated 1988 Stock Option Plan, the Option Grant to Mr. Salquist and
the Cardiometrics, Inc. 1995 Stock Incentive Plan by reason of any
stock dividend, stock split, recapitalization or other similar
transaction effected without the receipt of consideration which results
in an increase in the number of the outstanding shares of Common Stock
of EndoSonics Corporation.

(2) Calculated solely for purposes of this offering under Rule 457(h) of
the Securities Act of 1933, as amended (the "1933 Act"), on the basis
of the average of the high and low selling prices per share of Common
Stock of Endosonics Corporation on July 22, 1997 as reported by the
Nasdaq National Market.

(3) Calculated solely for purposes of this offering under Rule 457(h) of
the 1933 Act on the basis of the exercise price of the option.

(4) Calculated solely for purposes of this offering under Rule 457(h) of
the 1933 Act on the basis of the weighted average exercise price of the
outstanding options.

================================================================================

<PAGE> 3

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference

Endosonics Corporation (the "Registrant") hereby incorporates by
reference into this Registration Statement the following documents previously
filed with the Securities and Exchange Commission (the "Commission"):

(a) The Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996 filed with the Commission on
March 19, 1997, as amended on June 13, 1997;

(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1997 filed with the Commission on May
15, 1997;

(d) The Registrant's Registration Statement No. 0-19880 on Form
8-A filed with the Commission on February 21, 1992, together
with the amendment thereto filed with the Commission on
February 27, 1992, 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 Exchange Act of
1934, as amended (the "1934 Act") 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 deregisters 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 by reference
herein shall be deemed to be modified or superseded for purposes of this
Registration Statement to the extent that a statement contained in any
subsequently filed document that also is or 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

Pursuant to the provisions of Section 145 of the General
Corporation Law of Delaware ("Delaware Law"), every Delaware corporation has
power to indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent

<PAGE> 4

of the Registrant or of any corporation, partnership, joint venture, trust or
other enterprise for which he is or was serving in such capacity at the request
of the Registrant, against any and all expenses, judgments, fines and amounts
paid in settlement and reasonably incurred by him in connection with such
action, suit or proceeding. The power to indemnify applies only if such person
acted in good faith and in a manner he reasonably believed to be in the best
interests, or not opposed to the best interests, of the corporation, and with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful.

The power to indemnify applies to threatened, pending or completed
actions or suits brought by or in the right of the corporation as well, but only
to the extent of defense and settlement expenses and not to any satisfaction of
a judgment or settlement of the claim itself, and with the further limitation
that in such actions no indemnification shall be made in the event of any
adjudication of negligence or misconduct unless the court, in its discretion,
determines that in light of all the circumstances indemnification should apply.

To the extent any of the persons referred to in the two immediately
preceding paragraphs is successful in the defense of the actions referred to
therein, such person is entitled pursuant to Section 145 to indemnification as
described above. Section 145 also permits a corporation to advance litigation
expenses upon the corporation's receipt of any undertaking by or on behalf of
any such director or officer to repay such advances in the event no right to
indemnification is subsequently shown. A corporation may also obtain insurance
at its expense to insure against any liability asserted against any person
referred to in the immediately preceding paragraphs.

The Registrant has entered into indemnification agreements with all of
its current directors which provide for indemnification to the fullest extent
permitted by Delaware Law, including Section 145 thereof. Such agreements have
been approved by the Registrant's stockholders. The Registrant's stockholders
also approved the use of similar agreements which may be entered into from time
to time with future directors and/or future officers of the Registrant.

Item 7. Exemption from Registration Claimed

Not Applicable.

Item 8. Exhibits

Exhibit Number Exhibit
- -------------- -------

4 Instruments Defining Rights of Shareholders. Reference is made
to Registrant's Registration Statement No. 0-18225 on Form
8-A, together with the amendment thereto filed with the
Commission on February 27, 1992, which is incorporated herein
by reference pursuant to Item 3(d).

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 is contained in Exhibit
5.

24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.

99.1 Restated 1988 Stock Option Plan.

99.2 Form of Notice of Grant of Stock Option and Stock Option
Agreement (incorporated by reference to Exhibit 99.2 of
Registration Statement No. 33-67734).

99.3 Form of Addendum to Stock Option Agreement (Limited Stock
Appreciation Rights) (incorporated by reference to Exhibit
99.3 of Registration Statement No. 33-67734).

II-2

<PAGE> 5

99.4 Form of Non-Statutory Stock Option Agreement (Non-Employee
Director Automatic Stock Option) (incorporated by reference to
Exhibit 99.4 of Registration Statement No. 33-93330).

99.5 Form of Notice of Grant of Stock Option and Stock Option
Agreement for Dutch Option Grant.

99.6 Form of Stock Purchase Agreement -- Mandatory Resale
Provisions under Dutch Law.

99.7 Written Compensation Agreement between Registrant and Roger
Salquist.

99.8 Non-Statutory Stock Option Agreement between Registrant and
Roger Salquist.

99.9 Cardiometrics, Inc. 1995 Stock Incentive Plan.

99.10 Form of Notice of Grant used in connection with the
Cardiometrics, Inc. 1995 Stock Incentive Plan.

99.11 Form of Stock Option Agreement used in connection with the
Cardiometrics, Inc. 1995 Stock Incentive Plan.

99.12 Form of Stock Option Assumption and Conversion Agreement in
connection with the assumption of outstanding options under
the Cardiometrics, Inc. 1995 Stock Incentive Plan.

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 paragraphs 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 upon the termination of the Registrant's
Restated 1988 Stock Option Plan, the expiration of the option granted to Mr.
Salquist, the termination of the Cardiometrics, Inc. 1995 Stock Incentive Plan
and/or the Cardiometrics, Inc. 1985 Stock Option 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 indemnity provisions summarized in Item 6 or
otherwise, the Registrant has been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the

II-3

<PAGE> 6

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-4

<PAGE> 7

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 Rancho Cordova, State of California, on this
28th day of July 1997.

ENDOSONICS CORPORATION

By: /s/ Reinhard J. Warnking
--------------------------------------
Reinhard J. Warnking
President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

That the undersigned officers and directors of Endosonics Corporation,
a Delaware corporation, do hereby constitute and appoint Reinhard J. Warnking
the lawful attorney-in-fact and agent with full power and authority to do any
and all acts and things and to execute any and all instruments which said
attorney and agent determines 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
all that said attorney and agent 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.

Signature Title Date
- --------- ----- ----

<S> <C> <C>
/s/ Reinhard J. Warnking President, Chief Executive Officer July 28, 1997
- --------------------------- and Director (Principal
Reinhard J. Warnking Executive Officer)

</TABLE>

II-5

<PAGE> 8

Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Donald D. Huffman
- ------------------------- Vice President, Finance July 28, 1997
Donald D. Huffman and Administration and
Chief Financial Officer
(Principal Executive Officer)
Financial & Accounting Officer)

/s/ Roger Salquist
- ------------------------- Director July 28, 1997
Roger Salquist

/s/ Michael R. Henson
- ------------------------- Director July 28, 1997
Michael R. Henson

/s/ Thomas J. Cable
- ------------------------- Director July 28, 1997
Thomas J. Cable

/s/ William G. Davis
- ------------------------- Director July 28, 1997
William G. Davis

/s/ Edward M. Leonard
- ------------------------- Director July 28, 1997
Edward M. Leonard

</TABLE>

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<PAGE> 9

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

EXHIBITS

FORM S-8

UNDER

SECURITIES ACT OF 1933

ENDOSONICS CORPORATION

<PAGE> 10

EXHIBIT INDEX

Exhibit Number Exhibit

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 is contained in Exhibit
5.

24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.

99.1 Restated 1988 Stock Option Plan.

99.2 Form of Notice of Grant of Stock Option and Stock Option
Agreement (incorporated by reference to Exhibit 99.2 of
Registration Statement No. 33-67734).

99.3 Form of Addendum to Stock Option Agreement (Limited Stock
Appreciation Rights) (incorporated by reference to Exhibit
99.3 of Registration Statement No. 33-67734).

99.4 Form of Non-Statutory Stock Option Agreement (Non-Employee
Director Automatic Stock Option) (incorporated by reference to
Exhibit 99.4 of Registration Statement No. 33-93330).

99.5 Form of Notice of Grant of Stock Option and Stock Option
Agreement for Dutch Option Grant.

99.6 Form of Stock Purchase Agreement -- Mandatory Resale
Provisions under Dutch Law.

99.7 Written Compensation Agreement between Registrant and Roger
Salquist.

99.8 Non-Statutory Stock Option Agreement between Registrant and
Roger Salquist.

99.9 Cardiometrics, Inc. 1995 Stock Incentive Plan.

99.10 Form of Notice of Grant used in connection with the
Cardiometrics, Inc. 1995 Stock Incentive Plan.

99.11 Form of Stock Option Agreement used in connection with the
Cardiometrics, Inc. 1995 Stock Incentive Plan.

99.12 Form of Stock Option Assumption and Conversion Agreement in
connection with the assumption of outstanding options under
the Cardiometrics, Inc. 1995 Stock Incentive Plan.

II-2

<PAGE> 1

EXHIBIT 5

Opinion and Consent of Brobeck, Phleger & Harrison

July 28, 1997

ENDOSONICS CORPORATION
2870 Kilgore Road
Rancho Cordova, CA 95670

Re: Endosonics Corporation (the "Company") Registration Statement
on Form S-8 for Offering of an aggregate of 2,053,500 Shares
of Common Stock

Ladies and Gentlemen:

We refer to your registration on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of (i) an additional
1,900,000 shares of Common Stock to be issued under the Endosonics Corporation
Restated 1988 Stock Option Plan (the "1988 Plan"), (ii) 25,000 shares of Common
Stock to be issued pursuant to a Written Compensation Agreement between the
Company and Mr. Salquist (the "Salquist Option") and (iii) 128,500 shares of
Common Stock issuable under the Cardiometrics, Inc. 1995 Stock Incentive Plan as
assumed by the Company (the "Assumed Plan Options"). We advise you that, in our
opinion, when such shares have been issued and sold pursuant to the applicable
provisions of the Restated 1988 Plan, the Salquist Option and the Assumed Plan
Options and in accordance with the Registration Statement, such shares will be
validly issued, fully paid and non-assessable shares of the Company's Common
Stock.

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

Very truly yours,

/s/ Brobeck, Phleger & Harrison LLP
-----------------------------------
BROBECK, PHLEGER & HARRISON LLP

<PAGE> 1
EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the EndoSonics Corporation Restated 1988 Stock Option
Plan, Certain Option Grant To Mr. Salquist Pursuant To A Written Compensation
Agreement, Cardiometrics, Inc. 1995 Stock Incentive Plan, and 1985 Stock
Option Plan of our report dated February 14, 1997, with respect to the
consolidated financial statements and schedule of EndoSonics Corporation
included in its Annual Report (Form 10-K/A) for the year ended December 31,
1996, filed with the Securities and Exchange Commission.

/s/ Ernst & Young LLP
Sacramento, California
July 28, 1997

<PAGE> 1
EXHIBIT 99.1

ENDOSONICS CORPORATION

RESTATED 1988 STOCK OPTION PLAN

(As Amended and Restated through April 18, 1997)

ARTICLE ONE
GENERAL PROVISIONS

I. PURPOSES OF THE PLAN

A. This Restated 1988 Stock Option Plan (the "Plan") is
intended to promote the interests of Endosonics Corporation, a Delaware
corporation (the "Company"), by providing a method whereby eligible individuals
may be offered incentives and rewards which will encourage them to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Company and continue to render services to the Company (or its parent or
subsidiary corporations).

B. For purposes of the Plan, the following provisions
shall be applicable in determining the parent and subsidiary corporations of
the Company:

Any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company shall be
considered to be a PARENT corporation of the Company, provided each
such corporation in the unbroken chain (other than the Company) 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.

Each corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company shall be
considered to be a SUBSIDIARY of the Company, provided each such
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> 2
II. STRUCTURE OF THE PLAN

A. Option Programs. The Plan shall be divided into two
separate components: the Discretionary Option Grant Program described in
Article Two and the Automatic Option Grant Program described in Article Three.
Under the Discretionary Option Grant Program, eligible individuals may, at the
discretion of the Plan Administrator, be granted options to purchase shares of
Common Stock in accordance with the provisions of Article Two. Under the
Automatic Option Grant Program, each eligible member of the Company's Board of
Directors (the "Board") will automatically receive an option grant to purchase
shares of Common Stock in accordance with the provisions of Article Three.

B. General Provisions. Unless the context clearly
indicates otherwise, the provisions of Articles One and Four of the Plan shall
apply to both the Discretionary Option Grant Program and the Automatic Option
Grant Program and shall accordingly govern the interests of all individuals
under the Plan.

III. ADMINISTRATION OF THE PLAN

A. The Plan shall be administered in accordance with the
following standards:

(i) The Board shall appoint a committee
(the "Committee") of two (2) or more non-employee Board members to
administer the Discretionary Option Grant Program with respect to all
individuals who are subject to the short-swing profit restrictions of
Section 16 of the Securities Exchange Act of 1934, as amended (the
"1934 Act"). The Committee shall have the sole and exclusive
authority to administer the Discretionary Option Grant Program with
respect to all such individuals.

(ii) Administration of the Discretionary
Option Grant Program with respect to all other key employees,
consultants and independent advisors eligible to participate in the
Plan shall be subject to separate and concurrent administration by
both the Board and the Committee. Accordingly, either the Board or the
Committee may from time to time make discretionary option grants to
such individuals upon such terms and conditions as either deem
appropriate, subject to the express terms of the Plan.

B. Members of the Committee shall serve for such period
of time as the Board may determine and shall be subject to removal by the Board
at any time.

C. Administration of the Automatic Option Grant Program
shall be self-executing in accordance with the terms and conditions of Article
Three.

2
<PAGE> 3
D. The term "Plan Administrator" as used from time to
time in this plan document shall mean the particular entity, whether the
Committee or the Board, which is authorized to administer the Discretionary
Option Grant Program with respect to one or more classes of eligible
individuals, to the extent such entity is carrying out its administrative
functions under the Plan with respect to those individuals.

E. The Plan Administrator shall have full power and
authority (subject to the express provisions of the Plan) to establish such
rules and regulations as it may deem appropriate for the proper administration
of the plan functions within the scope of its administrative authority and to
make any and all determinations with respect to those functions which it may
deem necessary or advisable. All decisions of the Plan Administrator within
the scope of its administrative authority under the Plan shall be final and
binding on all parties who have an interest in the Plan or any outstanding
option granted pursuant to such authority.

IV. ELIGIBILITY FOR OPTION GRANTS

A. The persons eligible to participate in the Option
Grant Program under Article Two of the Plan shall be limited to the following:

(i) officers and other key employees of
the Company (or its parent or subsidiary corporations) who render
services which contribute to the management, growth and financial
success of the Company (or its parent or subsidiary corporations);

(ii) those consultants or other
independent advisors who provide valuable services to the Company (or
its parent or subsidiary corporations); and

(iii) non-employee members of the Board or
the board of directors of any parent or subsidiary corporation of the
Company.

B. Non-employee members of the Board shall also be
eligible to receive automatic option grants pursuant to the provisions of
Article Three.

C. The Plan Administrator shall have full authority to
make discretionary option grants under the Plan to the eligible individuals
within the scope of its administrative functions under the Plan and to
determine the number of shares to be covered by each such grant, whether the
granted option is to be an incentive stock option ("Incentive Option") which
satisfies the requirements of Section 422 of the Internal Revenue Code or a
non-statutory option not intended to meet such requirements, the time or times
at which each such option is to become exercisable, and the maximum term for
which the option is to remain outstanding.

3.
<PAGE> 4
V. STOCK SUBJECT TO THE PLAN

A. The stock issuable under the Plan shall be shares of
the Company's authorized but unissued or reacquired Common Stock. The
aggregate number of shares which may be issued over the term of the Plan shall
not exceed 4,100,000 shares.(1) The total number of shares issuable under the
Plan shall be subject to adjustment from time to time in accordance with the
provisions of this Section V.

B. In no event may the maximum number of shares of
Common Stock for which any one individual participating in the Plan may be
granted stock options and separately exercisable stock appreciation rights
exceed 550,000 shares in the aggregate over the remaining term of the Plan.
For purposes of this limitation, no stock options or stock appreciation rights
granted prior to January 1, 1994 shall be taken into account. Such limitation
shall be subject to periodic adjustment in accordance with the provisions of
this Section V.

C. Should an outstanding option expire or terminate for
any reason prior to exercise in full (including any option cancelled in
accordance with the cancellation-regrant provisions of Section IV of Article
Two of the Plan), the shares subject to the portion of the option not so
exercised shall be available for subsequent option grant under the Plan. In
addition, any unvested shares issued under the Plan and subsequently
repurchased by the Company, at the option exercise price paid per share,
pursuant to the Company'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 under the Plan. However, shares subject to any option
or portion thereof surrendered or cancelled in accordance with Section V of
Article Two or Section III of Article Three shall not be available for
subsequent option grant under the Plan. 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 Company 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.

__________________________________

(1) Includes (i) the 1,250,000-share increase authorized by the Board on
September 13, 1995 and approved by the stockholders at the 1996 Annual
Stockholders Meeting and (ii) the 650,000-share increase authorized by
the Board on April 18, 1997, subject to stockholder approval at the
1997 Annual Meeting.

4.
<PAGE> 5
D. If any change is made to the outstanding
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
Company's receipt of consideration, then appropriate adjustments shall
be made to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the maximum number and/or class of securities for
which any one individual may be granted stock options and separately
exercisable stock appreciation rights under the Plan after December
31, 1993, (iii) the number and/or class of securities and price per
share in effect under each outstanding option under the Plan and (iv)
the number and/or class of securities to be made the subject of each
subsequent automatic grant. Such adjustments to the outstanding
options shall preclude the enlargement or dilution of rights and
benefits under such options.

5.
<PAGE> 6
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM

I. TERMS AND CONDITIONS OF OPTIONS

Options granted pursuant to this Article Two shall be
authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or non-statutory
options. Individuals who are not Employees may only be granted non- statutory
options under this Article Two. Each option granted shall be evidenced by one
or more instruments in the form approved by the Plan Administrator. Each such
instrument shall, however, comply with the terms and conditions specified
below, and each instrument evidencing an Incentive Option shall, in addition,
be subject to the applicable provisions of Section II of this Article Two.

A. Option Price.

1. The option price per share shall be fixed by
the Plan Administrator. In no event, however, shall the option price per share
be less than eighty-five percent (85%) of the fair market value per share of
Common Stock on the date of the option grant.

2. The option price shall become immediately due
upon exercise of the option and shall, subject to the provisions of Section VI
of this Article Two and the instrument evidencing the grant, be payable as
follows:

- in cash or check drawn to the Company's
order; or

- in shares of Common Stock held by the
optionee for the requisite period necessary to avoid a charge to the
Company's earnings for financial reporting purposes and valued at fair
market value on the Exercise Date (as such term is defined below).

- through a broker-dealer sale and remittance
procedure pursuant to which the optionee shall provide irrevocable
instructions (I) to a Company designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Company, out
of the sale proceeds available on the settlement date, sufficient
funds to cover the aggregate option price payable for the purchased
shares plus all applicable Federal and State income and employment
taxes required to be withheld by the Company in connection with such
purchase and (II) to the Company to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete
the sale transaction.

6.
<PAGE> 7
For purposes of this subparagraph 2, the Exercise
Date shall be the date on which written notice of the option exercise is
delivered to the Company. Except to the extent the sale and remittance
procedure is utilized in connection with the exercise of the option, payment of
the option price for the purchased shares must accompany such notice.

3. The fair market value per share of Common
Stock on any relevant date under the Plan shall be determined in accordance
with the following provisions:

- If the Common Stock is not at the time listed
or admitted to trading on any stock exchange but is traded on the
Nasdaq National Market, the fair market value shall be the closing
selling price of one 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 closing selling price on the last preceding date
for which such quotation exists shall be determinative of fair market
value.

- If the Common Stock is at the time listed or
admitted to trading on any national 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 reported sale of Common Stock on
such exchange on the date in question, then the fair market value
shall be the closing selling price on the exchange on the last
preceding date for which such quotation exists.

- If the Common Stock is at the time neither
listed nor admitted to trading on any stock exchange nor traded in the
over-the-counter market, then the fair market value shall be
determined by the Committee after taking into account such factors as
the Committee shall deem appropriate.

B. Term and Exercise of Options.

Each option granted under this Article Two 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
instrument evidencing the option grant. No such option, however, shall have a
maximum term in excess of ten (10) years from the grant date.

7.
<PAGE> 8
C. Termination of Service.

1. Except to the extent otherwise provided
pursuant to Section VII of this Article Two, the following provisions shall
govern the exercise period applicable to any options held by the optionee at
the time of cessation of Service or death.

- Should the optionee cease to remain in
Service for any reason other than death or permanent disability, then
the period for which each outstanding option held by such optionee is
to remain exercisable shall be limited to the three (3)-month period
following the date of such cessation of Service.

- In the event such Service terminates by
reason of permanent disability (as defined in Section 22(e)(3) of the
Internal Revenue Code), then the period for which each outstanding
option held by the optionee is to remain exercisable shall be limited
to the twelve (12)-month period following the date of such cessation
of Service.

- Should the optionee die while in Service or
during the three (3)-month period following his or her cessation of
Service, then the period for which each of his or her outstanding
options is to remain exercisable shall be limited to the twelve
(12)-month period following the date of the optionee's death. During
such limited period, the option may be 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.

- Under no circumstances, however, shall any
such option be exercisable after the specified expiration date of the
option term.

- During the applicable limited post-Service
exercise period, no option may be exercised in the aggregate for more
than the number of shares for which the option is exercisable on the
date of the optionee's cessation of Service. Upon the expiration of
such limited exercise period or (if earlier) upon the expiration of
the option term, the option shall terminate and cease to be
exercisable. However, the option shall, immediately upon the
optionee's cessation of Service, terminate and cease to be outstanding
with respect to any option shares for which the option is not at that
time exercisable.

2. The Plan Administrator shall have complete
discretion, exercisable either at the time the option is granted or at any time
while the option remains outstanding, to permit one or more options held by the
optionee under this Article Two to be exercised, during the limited period of
exercisability provided under subparagraph 1

8.
<PAGE> 9
above, not only with respect to the number of shares for which each such option
is exercisable at the time of the optionee's cessation of Service but also with
respect to one or more subsequent installments of purchasable shares for which
the option would otherwise have become exercisable had such cessation of
Service not occurred.

3. For purposes of the foregoing provisions of this Section I.C (and
for all other purposes under the Plan):

- The optionee shall be deemed to remain in the
SERVICE of the Company for so long as such individual renders services
on a periodic basis to the Company (or any parent or subsidiary
corporation) in the capacity of an Employee, a non-employee member of
the Board or an independent consultant or advisor.

- The optionee shall be considered to be an
EMPLOYEE for so long as such individual remains in the employ of the
Company or one or more of its parent or subsidiary corporations,
subject to the control and direction of the employer entity not only
as to the work to be performed but also as to the manner and method of
performance.

D. Stockholder Rights.

An optionee shall have no stockholder rights with
respect to any shares covered by the option until such individual shall have
exercised the option and paid the option price for the purchased shares.

E. Repurchase Rights.

The shares of Common Stock acquired upon the exercise of
options granted under the Plan may be subject to one or more repurchase rights
of the Company in accordance with the following provisions:

1. The Plan Administrator may in its discretion
determine that it shall be a term and condition of one or more options
exercised under the Plan that the Company (or its assignees) shall have the
right, exercisable upon the optionee's cessation of Service, to repurchase at
the option price any or all of the unvested shares of Common Stock at the time
held by the optionee. Any such repurchase right shall be exercisable by the
Company (or its assignees) upon such terms and conditions (including the
establishment of the appropriate vesting schedule and other provision for the
expiration of such right in one or more installments over the optionee's period
of Service) as the Plan Administrator may specify in the instrument evidencing
such right.

9.
<PAGE> 10
2. The Plan Administrator may assign the Company's
repurchase rights under subparagraph E.1 above to any person or entity selected
by the Plan Administrator, including one or more stockholders of the Company.

3. All of the Company's outstanding repurchase rights
shall automatically terminate, and all shares subject to such terminated rights
shall immediately vest in full, upon the occurrence of any Corporate
Transaction under Section III of this Article Two, except to the extent (i) the
Company's outstanding repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with the Corporate Transaction or
(ii) such termination of repurchase rights and acceleration of vesting are
precluded by other limitations imposed by the Plan Administrator at the time of
the option grant.

F. Limited Transferability of Options. During the
lifetime of the optionee, Incentive Options shall be exercisable only by the
optionee and shall not be assignable or transferable other than by will or by
the laws of descent and distribution following the optionee's death. However,
Non-Statutory Options may, in connection with the optionee's estate plan, be
assigned in whole or in part during the optionee's lifetime to one or more
members of the optionee's immediate family or to a trust established
exclusively for one or more such family members. The assigned portion may only
be exercised by the person or persons who acquire a proprietary interest in the
option pursuant to the assignment. The terms applicable to the assigned
portion shall be the same as those in effect for the option immediately prior
to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate. Should the optionee
die while holding one or more Non-Statutory Options, then those options shall
be transferred in accordance with the optionee's will or the laws of descent
and distribution.

II. INCENTIVE OPTIONS

The terms and conditions specified below shall be applicable
to all Incentive Options granted under this Article Two. Incentive Options may
only be granted to individuals who are Employees of the Company. Options which
are specifically designated as non- statutory options when issued under the
Plan shall not be subject to such terms and conditions.

A. Option Price. The option price per share of the
Common Stock subject to an Incentive Option shall in no event be less
than one hundred percent (100%) of the fair market value of such
Common Stock on the grant date.

B. Dollar Limitation. The aggregate fair market value
(determined as of the respective date or dates of grant) of the Common
Stock for which one or more options granted to any Employee under this
Plan (or any other option plan of the Company or its parent or
subsidiary corporations) may for the first time become exercisable as
incentive stock options under the Federal

10.
<PAGE> 11
tax laws during any one calendar year shall not exceed the sum of One
Hundred Thousand Dollars ($100,000). To the extent the Employee holds
two 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 stock options under the
Federal tax laws shall be applied on the basis of the order in which
such options are granted.

C. 10% Stockholder. If any individual to whom an
Incentive Option is granted is the owner of stock (as determined under
Section 424(d) of the Internal Revenue Code) possessing ten percent
(10%) or more of the total combined voting power of all classes of
stock of the Company or any one of its parent or subsidiary
corporations ("10% Stockholder"), then the option 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 grant date and the
option term shall not exceed five (5) years, measured from the grant
date.

Except as modified by the preceding provisions of this Section
II, the provisions of the Plan shall apply to all Incentive Options granted
hereunder.

III. CORPORATE TRANSACTIONS/CHANGES IN CONTROL

A. In the event of any of the following
stockholder-approved transactions (a "Corporate Transaction"):

(i) a merger or consolidation in which
the Company is not the surviving entity, except for a transaction the
principal purpose of which is to change the State of the Company's
incorporation,

(ii) the sale, transfer or other
disposition of all or substantially all of the assets of the Company,
or

(iii) any reverse merger in which the
Company is the surviving entity but in which fifty percent (50%) or
more of the Company's outstanding voting stock is transferred to
holders different from those who held the stock immediately prior to
such merger,

the exercisability of each option outstanding under
this Article Two shall automatically accelerate so that each such option shall,
immediately prior to the specified effective date for the Corporate
Transaction, become fully exercisable with respect to the total number of
shares of Common Stock at the time subject to such option and may be exercised
for all or any portion of such shares. However, an outstanding option under
this Article Two shall not so accelerate if and to the extent: (i) such option
is, in connection with the Corporate Transaction, either to be assumed by the
successor corporation or parent thereof or be replaced with a comparable option
to purchase shares of the capital stock of

11.
<PAGE> 12
the successor corporation or parent thereof, (ii) such option is to be replaced
with a cash incentive program of the successor corporation based on the option
spread at the time of the Corporate Transaction, or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator
at the time of grant. The determination of option comparability under clause
(i) above shall be made by the Committee, and its determination shall be final,
binding and conclusive.

B. Immediately following the consummation of the
Corporate Transaction, all outstanding options under this Article Two shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation or its parent company.

C. Each outstanding option under this Article Two which
is assumed in connection with the Corporate Transaction or is otherwise to
continue in effect shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply and pertain to the number and class of
securities which would have been issuable, in consummation of such Corporate
Transaction, to an actual holder of the same number of shares of Common Stock
as are subject to such option immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the option price payable per
share, provided the aggregate option price payable for such securities shall
remain the same. In addition, the class and number of securities available for
issuance under the Plan on both an aggregate and per participant basis
following the consummation of the Corporate Transaction shall be appropriately
adjusted.

D. The options outstanding under this Article Two shall
in no way affect the right of the Company 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.

E. The Plan Administrator shall have the discretionary
authority, exercisable either at the time the option is granted or at any time
while the option remains outstanding, to provide for the automatic acceleration
of one or more outstanding options under this Article Two upon the occurrence
of a Change in Control. The Plan Administrator shall also have full power and
authority to condition any such option acceleration upon the subsequent
termination of the optionee's Service within a specified period following the
Change in Control.

F. For purposes of this Section III, a Change in Control
shall be deemed to occur in the event:

12.
<PAGE> 13
combined voting power of the Company's outstanding securities pursuant
to a tender or exchange offer made directly to the Company's
stockholders which the Board does not recommend such stockholders to
accept; or

(ii) there is a change in the composition
of the Board over a period of twenty-four (24) consecutive months or
less such that a majority of the Board members (rounded up to the next
whole number) cease, by reason of one or more proxy contests for the
election of Board members, 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 two-thirds of the Board members
described in clause (A) who were still in office at the time such
election or nomination was approved by the Board.

G. Any options accelerated in connection with the Change
in Control shall remain fully exercisable until the expiration or sooner
termination of the option term.

H. The exercisability as incentive stock options under
the Federal tax laws of any options accelerated under this Section III in
connection with a Corporate Transaction or Change in Control shall remain
subject to the dollar limitation of Section II.

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 optionees, the
cancellation of any or all outstanding options under this Article Two and to
grant in substitution new options under the Plan covering the same or different
numbers of shares of Common Stock but having an option price per share not less
than eighty-five percent (85%) of the fair market value of the Common Stock on
the new grant date (or one hundred percent (100%) of such fair market value in
the case of an Incentive Option or one hundred ten percent (110%) of such fair
market value in the case of an Incentive Option granted to a 10% Stockholder).

V. STOCK APPRECIATION RIGHTS

A. Provided and only if the Plan Administrator
determines in its discretion to implement the stock appreciation right
provisions of this Section V, one or more optionees may be granted the right,
exercisable upon such terms and conditions as the Plan Administrator may
establish, to surrender all or part of an unexercised option under this Article
Two in exchange for a distribution from the Company in an amount equal to the
excess of (i) 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 (ii) the aggregate
option price payable for such vested shares.

13.
<PAGE> 14
B. No surrender of an option shall be effective
hereunder unless it is approved by the Plan Administrator. If the surrender is
so approved, then the distribution to which the optionee shall accordingly
become entitled under this Section V 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.

C. If the surrender of an option is rejected 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
(i) five (5) business days after the receipt of the rejection notice or (ii)
the last day on which the option is otherwise exercisable in accordance with
the terms of the instrument evidencing such option, but in no event may such
rights be exercised more than ten (10) years after the date of the option
grant.

D. Each officer of the Company subject to the
short-swing profit restrictions of the Federal securities laws may, in the Plan
Administrator's sole discretion, be granted limited stock appreciation rights
in tandem with his or her outstanding options under this Article Two. Upon the
occurrence of a Hostile Take-Over effected at any time after the Company's
outstanding Common Stock is registered under Section 12(g) of the 1934 Act,
each outstanding option with such a limited stock appreciation right shall
automatically be cancelled and the optionee shall in return be entitled to a
cash distribution from the Company 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
cancelled option (whether or not the option is otherwise at the time
exercisable for such shares) over (ii) the aggregate exercise price payable for
such shares. The cash distribution payable upon such cancellation shall be
made within five (5) days following the consummation of the Hostile Take-Over.
The Plan Administrator shall pre-approve, at the time the limited stock
appreciation right is granted, the subsequent exercise of that right in
accordance with the terms of the grant and the provisions of this Section V.D.
No additional approval of the Plan Administrator or the Board shall be required
at the time of the actual option cancellation and cash distribution.

E. For purposes of Section V.D, the following
definitions shall be in effect:

A Hostile Take-Over shall be deemed to occur
in the event any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company) directly
or indirectly acquires 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 Company's
outstanding securities pursuant to a tender or exchange offer made
directly to the Company's stockholders which the Board does not
recommend such stockholders to accept.

14.
<PAGE> 15
The Take-Over Price per share shall be deemed
to be equal to the greater of (a) the fair market value per share on
the date of cancellation, as determined pursuant to the valuation
provisions of Section I.A.3 of this Article Two, or (b) the highest
reported price per share paid in effecting such Hostile Take-Over.
However, if the cancelled option is an Incentive Option, the Take-Over
Price shall not exceed the clause (a) price per share.

F. The shares of Common Stock subject to any option
surrendered or cancelled for an appreciation distribution pursuant to this
Section V shall NOT be available for subsequent option grant under the Plan.

VI. LOANS OR INSTALLMENT PAYMENT

The Plan Administrator may assist any optionee (including any
officer) in the exercise of one or more outstanding options under this Article
Two by (a) authorizing the extension of a loan to such optionee from the
Company or (b) permitting the optionee to pay the option price for the
purchased Common Stock in installments over a period of years. The terms of
any loan or installment method of payment (including the interest rate and
terms of repayment) will be established by the Plan Administrator in its sole
discretion. Loans and installment payments may be granted without security or
collateral, but the maximum credit available to the optionee shall not exceed
the sum of (i) the aggregate option price of the purchased shares (less the par
value) plus (ii) any Federal and State income and employment tax liability
incurred by the optionee in connection with the exercise of the option.

VII. EXTENSION OF EXERCISE PERIOD

Each entity serving as Plan Administrator shall have full
power and authority, within the scope of its administrative functions under the
Plan, to extend the period of time for which any option granted under this
Article Two is to remain exercisable following the optionee's cessation of
Service or death from the limited period in effect under Section I.C.1 of this
Article Two to such greater period of time as the Plan Administrator shall deem
appropriate; provided, however, that in no event shall such option be
exercisable after the specified expiration date of the option term.

15.
<PAGE> 16
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM

I. ELIGIBILITY

A. Eligible Optionees. The individuals eligible to
receive automatic option grants pursuant to the provisions of this Article
Three shall be limited to the following:

(i) each individual who is serving as a
non-employee member of the Board on March 4, 1992; and

(ii) each individual who is first appointed or
elected as a non-employee Board member at any time after March 4,
1992.

II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS

A. Grant Dates. Option grants will be made under this
Article Three on the dates specified below:

(i) Each individual who served as a non-employee
Board member on March 4, 1992 was automatically granted on such date a
non-statutory stock option to purchase 5,000 shares of Common Stock
upon the terms and conditions of this Article Three.

(ii) Each individual who was first appointed or
elected as a non-employee Board member after March 4, 1992 but prior
to March 29, 1995 was automatically granted on the date of such
appointment or election a non-statutory stock option to purchase 5,000
shares of Common Stock upon the terms and conditions of this Article
Three.

(iii) Each individual who was serving as a
non-employee Board member on March 29, 1995 was automatically granted
on such date a non-statutory stock option to purchase 10,000 shares of
Common Stock upon the terms and conditions of this Article Three.

(iv) Each individual who is first appointed or
elected as a non-employee Board member after March 29, 1995 shall
automatically be granted on the date of such appointment or election a
non-statutory stock option to purchase 10,000 shares of Common Stock
upon the terms and conditions of this Article Three.

16.
<PAGE> 17
(v) On the date of each Annual Stockholders
Meeting after March 4, 1992, each individual who is re- elected as a
non-employee member of the Board at such Annual Meeting (including
individuals who were initially elected as non- employee Board members
prior to March 4, 1992) shall receive an automatic option grant under
the Plan for 5,000 shares of Common Stock, provided such individual
has been a member of the Board for at least six (6) months.

The 5,000-share and 10,000-share limitation on the automatic
option grants to be made to each non-employee Board member shall be subject to
periodic adjustment pursuant to the applicable provisions of paragraph V.C of
Article One.

B. Exercise Price. 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 automatic grant date.

C. Payment. The exercise price shall be payable in one
of the alternative forms specified below:

(i) payment in cash or check made payable to the
Company's order; or

(ii) payment in shares of Common Stock held for
the requisite period necessary to avoid a charge to the Company's
reported earnings and valued at fair market value on the Exercise Date
(as such term is defined below).

(iii) through a broker-dealer sale and remittance
procedure pursuant to which the optionee shall provide irrevocable
instructions (I) to the Company designated broker-dealer to effect the
immediate sale of the purchased shares and remit to the Company, out
of the sale proceeds, an amount equal to the aggregate option price
payable for the purchased shares and (II) to the Company to deliver
the certificates for the purchased shares directly to such
broker-dealer.

For purposes of this subparagraph, the Exercise Date shall be
the date on which written notice of the option exercise is delivered to the
Company, and the fair market value per share of Common Stock on any relevant
date shall be determined in accordance with the provisions of paragraph I.A.3
of Article Two. Except to the extent the sale and remittance procedure
specified above is utilized for the exercise of the option, payment of the
exercise price for the purchased shares must accompany such notice.

D. Option Term. Each automatic grant under this Article
Three shall have a maximum term of ten (10) years measured from the automatic
grant date.

17.
<PAGE> 18

E. Exercisability.

1. Except as provided in subparagraph 2 below,
each automatic option shall become exercisable for the option shares in four
(4) equal annual installments commencing one year after the grant date. As the
option becomes exercisable for one or more installments of the option shares,
the installments shall accumulate, and the option shall remain exercisable for
the accumulated installments until the expiration or sooner termination of the
option term. The option, however, shall not become exercisable for any
additional option shares following the optionee's cessation of Board service,
except to the extent the option is otherwise to become exercisable in
accordance with the provisions of Section II.E.2 of this Article Three.

2. Should the optionee die or become permanently
disabled (as defined in Section 22(e)(3) of the Internal Revenue Code) while
serving as a Board member, then the option shall accelerate in full and become
exercisable for all of the shares of Common Stock at the time subject to the
option.

F. Limited Transferability. The option may, in
connection with the optionee's estate plan, be assigned in whole or in part
during the optionee's lifetime to one or more members of the optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate. Should the optionee die while holding one or more
options under this Article Three, then those options shall be transferred in
accordance with the optionee's will or the laws of descent and distribution.

G. Effect of Termination of Board Membership.

1. Should the optionee cease to be a Board
member for any reason (other than death) while holding an automatic option
grant under this Article Three, then such optionee shall have a six (6)-month
period following the date of such cessation of Board membership in which to
exercise such option for any or all of the shares of Common Stock for which the
option is exercisable at the time the optionee ceases service as a Board
member. However, each such option shall immediately terminate and cease to be
outstanding, at the time of such cessation of Board service, with respect to
any shares for which the option is not otherwise at that time exercisable.

2. Should the optionee die while serving as a
Board member or during the six (6)-month period following his or her cessation
of Board service, then the option may subsequently be exercised, for any or all
of the shares of Common Stock for

18.
<PAGE> 19
which the option is exercisable at the time of the optionee's cessation of
Board membership, 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.
Any such exercise must, however, occur within twelve (12) months after the date
of the optionee's death. However, each such option shall immediately terminate
and cease to be outstanding, at the time of the optionee's cessation of Board
service, with respect to any shares for which the option is not otherwise at
that time exercisable.

3. In no event shall any automatic grant under
this Article Three remain exercisable after the specified expiration date of
the ten (10)-year option term. Upon the expiration of the applicable exercise
period in accordance with subparagraphs 1 and 2 above or (if earlier) upon the
expiration of the ten (10)-year option term, the automatic grant shall
terminate and cease to be outstanding for all shares for which such option was
exercisable at the time of the optionee's cessation of Board service but for
which that option was not subsequently exercised.

H. Stockholder Rights. The holder of an automatic
option grant under this Article Three shall have no stockholder rights with
respect to any shares covered by such option until such individual shall have
exercised the option and paid the exercise price.

I. Remaining Terms. The remaining terms and conditions
of each automatic option grant shall be as set forth in the prototype Directors
Automatic Option Grant Agreement attached as Exhibit A to the Plan.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

A. In the event of a Corporate Transaction (as such term
is defined in Section III.A of Article Two), then the exercisability of each
automatic option grant outstanding under this Article Three shall automatically
accelerate so that each such option shall, immediately prior to the specified
effective date for the Corporate Transaction, become fully exercisable with
respect to the total number of shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of those shares.
Immediately following the consummation of the Corporate Transaction, all
automatic option grants under this Article Three shall terminate and cease to
be outstanding, except to the extent assumed by the successor corporation or
its parent company.

B. In connection with any Change in Control (as such
term is defined in Section III.F of Article Two above), the exercisability of
each automatic option grant at the time outstanding under this Article Three
shall automatically accelerate so that each such option shall, immediately
prior to the specified effective date for 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 all or any portion of such
shares.

19.
<PAGE> 20
C. Upon the occurrence of a Hostile Take-Over (as such
terms is defined in Section V.E of Article Two above), each outstanding
automatic option grant under this Article Three shall automatically be
cancelled in return for a cash distribution from the Company in an amount equal
to the excess of (i) the Take-Over Price (as such term is defined below) of the
shares of Common Stock at the time subject to the cancelled option (whether or
not the option is otherwise at the time exercisable for such shares) over (ii)
the aggregate exercise price payable for such shares. The cash distribution
payable upon such cancellation shall be made within five (5) days following the
consummation of the Hostile Take-Over. Stockholder approval of this 1997
restatement of the Plan shall constitute pre-approval of each option
subsequently granted with such an automatic cancellation provision and the
subsequent cancellation of that option in accordance with the provisions of
this Section III.C. No additional approval of the Plan Administrator or the
Board shall be required at the time of the actual option cancellation and cash
distribution. The Take-Over Price per share shall be deemed to be equal to the
greater of (a) the fair market value per share on the date of cancellation, as
determined pursuant to the valuation provisions of Section I.A.3 of Article
Two, or (b) the highest reported price per share paid in effecting such Hostile
Take-Over.

D. The shares of Common Stock subject to each option
cancelled in connection with the Hostile Take-Over shall NOT be available for
subsequent issuance under this Plan.

E. The automatic option grants outstanding under this
Article Three shall in no way affect the right of the Company 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.

20.
<PAGE> 21
ARTICLE FOUR
MISCELLANEOUS

I. AMENDMENT OF THE PLAN

The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects whatsoever.
However, no such amendment or modification shall, without the consent of the
holders, adversely affect rights and obligations with respect to options at the
time outstanding under the Plan. In addition, certain amendments may require
stockholder approval pursuant to applicable laws or regulations.

II. TAX WITHHOLDING

A. The Company's obligation to deliver shares or cash
upon the exercise of stock options or stock appreciation rights granted under
the Plan shall be subject to the satisfaction of all applicable Federal, State
and local income and employment tax withholding requirements.

B. Each entity serving as Plan Administrator may, within
the scope of its administrative functions under the Plan and upon such terms
and conditions as it may in its sole discretion deem appropriate (including the
applicable safe-harbor provisions of SEC Rule 16b-3), provide any or all
holders of outstanding option grants under Article Two of the Plan with the
election to have the Company withhold, from the shares of Common Stock
otherwise issuable upon the exercise of such options, a portion of such shares
with an aggregate fair market value equal to the designated percentage (any
multiple of five percent (5%) specified by the optionee) of the Federal and
State income and employment taxes ("Taxes") incurred in connection with the
acquisition of such shares. In lieu of such direct withholding, one or more
optionees may also be granted the right to deliver shares of Common Stock to
the Company in satisfaction of such Taxes. The withheld or delivered shares
shall be valued at the Fair Market Value on the applicable determination date
for such Taxes.

III. EFFECTIVE DATE AND TERM OF PLAN

A. The Plan was initially adopted in final form by the
Board on October 20, 1988 and approved by the Company's stockholders on April
5, 1989, pursuant to which an aggregate of 1,600,000 shares of Common Stock
(400,000 after giving effect to the 1992 Reverse Stock Split) were authorized
for issuance. The Board restated the Plan in March 1991 to increase the number
of shares issuable over the term of the Plan by 1,000,000 shares (250,000 after
giving effect to the 1992 Reverse Stock Split) and the restatement and increase
were approved by the stockholders in March 1991. In January 1992, the Board
restated the Plan to conform the Plan to the requirements of Rule 16b-3 and
such 1992 restatement was effective on the first date on which the shares of
the Company's Common

21.
<PAGE> 22
Stock were registered under Section 12(g) of the 1934 Act. The Board
subsequently amended the Plan on May 7, 1992 to increase the number of shares
issuable thereunder by 300,000 shares and on August 13, 1992 the stockholders
approved a restatement of the Plan to (i) include the 300,000-share increase
previously approved by the Board and (ii) to increase the frequency of
automatic grants made to non-employee Board members. The Board approved such
restatement on August 13, 1992. The Board again amended the Plan effective
October 28, 1992 to provide for bifurcated administration of the Discretionary
Option Grant Program.

On February 10, 1993, the Board adopted a new restatement of
the Plan to (i) increase the number of shares issuable thereunder by 400,000
shares and (ii) provide for the acceleration of options under the Automatic
Option Grant Program in the event of the non-employee Board member's death or
permanent disability. The restatement was approved by the stockholders at the
Annual Stockholders Meeting held on May 25, 1993.

On February 8, 1994, the Board adopted another restatement of
the Plan to (i) increase the number of shares issuable thereunder by 450,000
shares and (ii) impose a limitation on the maximum number of shares for which
any one individual participating in the Plan may be granted stock options and
separately exercisable stock appreciation rights after December 31, 1993. The
restatement was approved by the stockholders at the 1994 Annual Stockholders
Meeting.

On January 9, 1995, the Board adopted an amendment to the Plan
to increase the number of shares issuable thereunder by 400,000 shares, and
such increase was approved by the stockholders at the 1995 Annual Stockholders
Meeting.

On March 29, 1995, the Board adopted an amendment to the Plan
to (i) grant a 10,000 share option to each existing non-employee Board member
under the Automatic Option Grant Program and (ii) increase the number of shares
of Common Stock for which option grants are to be made under the Automatic
Option Grant Program to each newly elected or appointed non-employee Board
member to 10,000 shares. The amendment was approved by the stockholders at the
1995 Annual Stockholders Meeting.

On September 13, 1995, the Board adopted an amendment to the
Plan to increase the number of shares issuable thereunder by an additional
1,250,000 shares. The amendment was approved by the stockholders at the 1996
Annual Stockholders Meeting.

On November 5, 1996, the Board adopted an amendment to the
Plan which renders the non-employee Board members eligible to receive option
grants under the Discretionary Option Grant Program in effect under Article Two
of the Plan. This amendment shall become effective immediately upon approval
by the stockholders at the 1997 Annual Stockholders Meeting. Options may be
granted on the basis of such amendment at any time on or after November 5,
1996, but no such option shall become

22.
<PAGE> 23
exercisable in whole or in part unless and until the amendment is approved by
the stockholders at the 1997 Annual Meeting.

The Plan was amended and restated by the Board on April 18,
1997 (the "1997 Restatement") to effect the following changes: (i) increase the
maximum number of shares of Common Stock authorized for issuance over the term
of the Plan from 3,450,000 shares to 4,100,000 shares, (ii) allow unvested
shares issued under the Plan and subsequently repurchased by the Company at the
option exercise price paid per share to be reissued under the Plan, (iii)
remove certain restrictions on the eligibility of non-employee Board members to
serve as Plan Administrator, (iv) extend the term of the Plan from October 19,
1998 to December 31, 2002 and (v) effect a series of additional changes to the
provisions of the Plan (including the stockholder approval requirements, the
transferability of Non-Statutory Options and the elimination of the six
(6)-month holding period requirement as a condition to the exercise of stock
appreciation rights) in order to take advantage of the recent amendments to
Rule 16b-3 of the Securities and Exchange Commission which exempts certain
officer and director transactions under the Plan from the short-swing liability
provisions of the federal securities laws. The 1997 Restatement is subject to
stockholder approval at the 1997 Annual Meeting, and no option grants made on
the basis of the 650,000-share increase shall become exercisable in whole or in
part unless and until the 1997 Restatement is approved by the stockholders.
Should such stockholder approval not be obtained, then any options granted on
the basis of the 650,000-share increase shall terminate without ever becoming
exercisable for those shares, and no further option grants issuances shall be
made on the basis of such share increase. However, option grants may continue
to be made pursuant to the provisions of the Plan as in effect immediately
prior to the 1997 Restatement until the original October 19, 1998 expiration
date. All option grants made prior to the 1997 Restatement shall remain
outstanding in accordance with the terms and conditions of the respective
instruments evidencing those options or issuances, and nothing in the 1997
Restatement shall be deemed to modify or in any way affect those outstanding
options or issuances. Subject to the foregoing limitations, the Plan
Administrator may make option grants under the Plan at any time before the date
fixed herein for the termination of the Plan.

B. The provisions of each restatement of, and amendment
to, the Plan shall apply only to options granted under the Plan from and after
the effective date of such restatement or amendment. All options issued and
outstanding under the Plan immediately prior to the adoption of each
restatement or amendment shall continue to be governed by the terms and
conditions of the Plan (and the instrument evidencing each such option) as in
effect on the date each such option was previously granted, and nothing in a
subsequent restatement or amendment shall be deemed to affect or otherwise
modify the rights or obligations of the holders of such options with respect to
the acquisition of shares of Common Stock thereunder.

23.
<PAGE> 24
C. The Plan shall terminate upon the earlier of (i)
December 31, 2002(2) or (ii) the date on which all shares available for
issuance under the Plan have been issued pursuant to the exercise of options
granted under Article Two or Article Three. If the date of termination is
determined under clause (i) above, then no options outstanding on such date
shall be affected by the termination of the Plan, and such securities shall
thereafter continue to have force and effect in accordance with the provisions
of the stock option agreements evidencing such options.

D. Options may be granted under this Plan to purchase
shares of Common Stock in excess of the number of shares then available for
issuance under the Plan, provided each option granted is not to become
exercisable, in whole or in part, at any time prior to stockholder approval of
an amendment authorizing a sufficient increase in the number of shares issuable
under the Plan.

IV. USE OF PROCEEDS

Any cash proceeds received by the Company from the sale of
shares pursuant to options granted under the Plan shall be used for general
corporate purposes.

V. REGULATORY APPROVALS

The implementation of the Plan, the granting of any option
hereunder, and the issuance of stock upon the exercise or surrender of any such
option shall be subject to the procurement by the Company of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the options granted under it and the stock issued pursuant to it.

VI. NO EMPLOYMENT/SERVICE RIGHTS

Neither the action of the Company in establishing or restating
the Plan, nor any action taken by the Plan Administrator hereunder, nor any
provision of the restated Plan shall be construed so as to grant any individual
the right to remain in the employ or Service of the Company (or any parent or
subsidiary corporation) for any period of specific duration, and the Company
(or any parent or subsidiary corporation retaining the services of such
individual) may terminate such individual's employment or Service at any time
and for any reason, with or without cause.

__________________________________

(2) The extension of the term of the Plan from October 19, 1998 to
December 31, 2002 is subject to stockholder approval at the 1997
Annual Meeting.

24.
<PAGE> 25
Exhibit A

Form of Director Automatic Option Grant Agreement

<PAGE> 1
EXHIBIT 99.5

DUTCH OPTION GRANT

ENDOSONICS CORPORATION
NOTICE OF GRANT OF STOCK OPTION

Notice is hereby given of the following stock option grant
(the "Option") to purchase shares of the Common Stock of Endosonics Corporation
(the "Company"):

OPTIONEE: __________________________________________________

GRANT DATE: ________________________________________________

OPTION PRICE: ____________________________________ per share

NUMBER OF OPTION SHARES: _______________________ shares

EXPIRATION DATE: __________________________________________

TYPE OF OPTION: Non-Statutory Stock Option

DATE EXERCISABLE: Immediately exercisable.

Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the Endosonics Corporation
Restated 1988 Stock Option 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 understands that
any Option Shares purchased under the Option will be subject to the terms set
forth in the Stock Purchase Agreement attached hereto as Exhibit B.

Optionee hereby acknowledges receipt of a copy of the Official
Plan Prospectus in the form attached hereto as Exhibit C.

MANDATORY RESALE. OPTIONEE HEREBY AGREES THAT THE OPTION
SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO MANDATORY
RESALE TO THE CORPORATION IN WHOLE OR IN PART IN ACCORDANCE WITH THE TERMS AND
PROVISIONS SPECIFIED IN THE ATTACHED STOCK PURCHASE AGREEMENT SHOULD OPTIONEE
CEASE SERVICE (AS SUCH TERM IS DEFINED IN SUCH STOCK PURCHASE AGREEMENT) PRIOR
TO COMPLETION OF FORTY-EIGHT (48) MONTHS OF SERVICE WITH THE COMPANY MEASURED
FROM THE GRANT DATE OF THE OPTION.

<PAGE> 2
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 the Service of the Company for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Company (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.

Dated: _____________________, 199__

ENDOSONICS CORPORATION

By:
___________________________________

Title: ______________________________

_____________________________________
OPTIONEE

Address: _____________________________________

_____________________________________

ATTACHMENTS:
EXHIBIT A: STOCK OPTION AGREEMENT
EXHIBIT B: STOCK PURCHASE AGREEMENT
EXHIBIT C: 1988 STOCK OPTION PLAN SUMMARY AND PROSPECTUS

2.
<PAGE> 3
EXHIBIT A

STOCK OPTION AGREEMENT
<PAGE> 4
EXHIBIT B

STOCK PURCHASE AGREEMENT
<PAGE> 5
EXHIBIT C

1988 STOCK OPTION PLAN SUMMARY AND PROSPECTUS

<PAGE> 1
EXHIBIT 99.6

MANDATORY RESALE PROVISIONS UNDER DUTCH LAW

ENDOSONICS CORPORATION
STOCK PURCHASE AGREEMENT

AGREEMENT made as of this ___ day of _________ 19____, by and
among Endosonics Corporation, a California corporation (the "Corporation"), and
________________________________, the holder of an option (the "Optionee")
under the Corporation's Restated 1988 Stock Option Plan.

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

A. EXERCISE OF OPTION

1. EXERCISE. Optionee hereby purchases _____________
shares of Common Stock (the "Purchased Shares") pursuant to that certain option
(the "Option") granted Optionee on ____________________, 199__ (the "Grant
Date") to purchase up to _______________ shares of Common Stock under the Plan
(the "Total Option Shares") at the exercise price of $______ per share (the
"Exercise Price").

2. PAYMENT. Concurrently with the delivery of this
Agreement to the Corporation, Optionee shall pay the Exercise Price for the
Purchased Shares in accordance with the provisions of the Option Agreement and
shall deliver whatever additional documents may be required by the Option
Agreement as a condition for exercise, together with 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. Optionee (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.

B. TRANSFER RESTRICTIONS

1. RESTRICTION ON TRANSFER. Except for any Permitted
Transfer, Optionee shall not transfer, assign, encumber or otherwise dispose of
any of the Purchased Shares while those shares remain subject to the mandatory
resale provisions of Article C.
<PAGE> 2
2. TRANSFEREE OBLIGATIONS. Each person 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 will remain subject to the mandatory resale
provisions of Article C, to the same extent such shares would be so subject if
retained by Optionee.

3. RESTRICTIVE LEGEND. The stock certificates for the
Purchased Shares shall be endorsed with the following legend restricting the
transferability of those share while they remain subject to the mandatory
resale provisions of Article C:

"The shares represented by this certificate are
subject to certain mandatory resale provisions pursuant to which the
shares must be resold to the Corporation in the event the registered
holder of such shares (or his predecessor in interest) terminates
service with the Corporation prior to the completion of a designated
period of service. Accordingly the shares may not be sold,
transferred, assigned or encumbered in any manner while the shares
remain subject to those mandatory resale provisions, except for the
limited transfers specifically authorized pursuant to the terms of the
written stock purchase 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."

C. MANDATORY RESALE

1. RESALE. Upon Optionee's cessation of Service for any
reason within the forty-eight (48)-month period measured from the Grant Date,
the Purchased Shares must be resold in whole or in part to the Corporation in
accordance with the provisions of this Article C. The actual number of
Purchased Shares to be so resold shall be determined under Paragraph C.2, and
each Owner of those Purchased Shares shall be obligated to resell such shares
in accordance with the requirements of Paragraph C.3.

2. RESALE SHARES. The number of Purchased Shares which
must be resold to the Corporation in connection with the Optionee's cessation
of Service (the "Resale Shares") shall be determined in accordance with the
following schedule:

- All the Purchased Shares shall constitute
Resale Shares to be resold to the Corporation if Optionee ceases Service within
twelve (12) months after the Grant Date.

2
<PAGE> 3
- Upon the Optionee's completion of twelve
(12)-months of Service measured from the Grant Date, the number of Purchased
Shares to be treated as Resale Shares shall be reduced by an amount equal to
twenty-five percent (25%) of the Total Option Shares.

- Upon the Optionee's completion of each
additional month of Service over the thirty-six (36)-month period measured from
the first anniversary of the Grant Date, the number of Purchased Shares to
treated as Resale Shares shall be reduced by an additional amount equal to one
forty-eight (1/48th) of the Total Option Shares.

If the Option is exercised in more than one increment
so that Optionee is a party to one or more other Stock Purchase Agreements (the
"Prior Purchase Agreements") which are executed prior to the date of this
Agreement, then the total number of Purchased Shares to be treated as Resale
Shares under this Agreement and all Prior Purchase Agreements shall be
determined through the application of the foregoing schedule to the aggregate
number of Purchased Shares under this Agreement and all Prior Purchase
Agreements, as if all the Purchased Shares (including those acquired under the
Prior Purchase Agreements) had been acquired exclusively under this Agreement.

3. CLOSING OF RESALE. Within three business (3) days
after Optionee's cessation of Service, each Owner of the Resale Shares shall
deliver to the Corporation the certificates for those shares, each properly
endorsed for transfer to the Corporation. Concurrently with the receipt of such
stock certificates, the Corporation shall pay to Owner, in cash or cash
equivalents, the Resale Price for the Resale Shares determined under Paragraph
C.4.

4. RESALE PRICE. To the extent the Purchased Shares are
resold to the Corporation pursuant to this Article C, the Resale Price per
share payable by the Corporation for those Shares shall be equal to the Fair
Market Value per share of Common Stock on the date on which Optionee ceased
Service.

5. PENALTY PAYMENT. Should Optionee cease Service for
any reason prior to the completion of forty-eight (48) months of Service
measured from the Grant Date, then Optionee shall, in connection with the
resale of one or more Purchased Shares to the Corporation pursuant to this
Article C, pay to the Corporation, in cash or cash equivalent at the time of
the closing of the resale under Paragraph C. 3, a penalty fee ("Penalty Fee")
in an amount per Resale Share equal to eighty percent (80%) of the excess of
(i) the Fair Market Value per share of Common Stock on the date on which
Optionee ceased Service over (ii) the Exercise Price paid per Purchased Share.
To the extent Optionee is the Owner of the Resale Shares at the time of the
closing, payment of the Penalty Fee may, at Optionee's election, be effected
through the Corporation's offset of that amount from the Resale Price otherwise
payable to Optionee for those Resale Shares at the closing.

3.
<PAGE> 4
6. 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 mandatory resale
provisions of this Article C, but only to the extent the Purchased Shares are
at the time subject to those provisions. Appropriate adjustments to reflect
the effect of such Recapitalization upon the Corporation's capital structure
shall be made to (i) the number and/or class of Resale Shares subject to this
Agreement, (ii) the Resale Price per share to be paid upon the resale of those
shares to the Corporation and (iii) the Exercise Price for purposes of the
Penalty Fee calculation; provided, however, that the aggregate Resale Price
shall remain the same.

7. CORPORATE TRANSACTION.

(a) Immediately prior to the consummation of any
Corporate Transaction, the mandatory resale provisions of this Article C shall
automatically lapse in their entirety, except to the extent the rights and
obligations of the Corporation under those resale provisions are to be assigned
to the successor corporation (or parent thereof) in connection with the
Corporate Transaction.

(b) To the extent the mandatory resale provisions
remain in effect following a Corporate Transaction, those resale provisions
shall apply to the new capital stock or other property (including any cash
payment) received in exchange for the Purchased Shares in consummation of the
Corporate Transaction, but only to the extent the Purchased Shares are at the
time subject to those resale provisions. Appropriate adjustments to reflect
the effect of the Corporate Transaction upon the Corporation's capital
structure shall be made to (i) the Resale Price per share to be paid upon the
resale of the Resale Shares and (ii) the Exercise Price for purposes of the
Penalty Fee calculation; provided, however, that the aggregate Resale Price
shall remain the same.

D. GENERAL PROVISIONS

1. ASSIGNMENT. The Corporation may assign its rights
and obligations to purchase the Resale Rights under this Article C to any
person or entity selected by the Board, including (without limitation) one or
more stockholders of the Corporation.

2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this
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.

4.
<PAGE> 5
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.

4. NO WAIVER. 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 Resale Shares to be resold to the
Corporation in accordance with the provisions of this Agreement, then from and
after such time, the person who is obligated to resell those shares 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.

E. MISCELLANEOUS PROVISIONS

1. OPTIONEE UNDERTAKING. Optionee 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 Optionee or the
Purchased Shares pursuant to the provisions of this Agreement.

2. 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.

3. 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.

5.
<PAGE> 6
4. 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 Optionee, Optionee's permitted assigns
and the legal representatives, heirs and legatees of Optionee'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.

ENDOSONICS CORPORATION

By:
_____________________________________

Title:
__________________________________

Address:
________________________________

________________________________

________________________________________
OPTIONEE

Address:
________________________________

________________________________________

6.
<PAGE> 7
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE

FOR VALUE RECEIVED ______________________ hereby sell(s),
assign(s) and transfer(s) unto Endosonics Corporation, 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:
________________

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 Optionee.

<PAGE> 8
APPENDIX

The following definitions shall be in effect under the
Agreement:

A. AGREEMENT shall mean this Stock Purchase Agreement.

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

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

D. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions:

(i) a merger or consolidation in which the
Corporation is not the surviving entity, except for a transaction the
principal purpose of which is to change the state of incorporation,

(ii) the sale, transfer or other disposition of
all or substantially all of the assets of the Corporation, or

(iii) any reverse merger in which the Corporation
is the surviving entity but in which fifty percent (50%) or more of
the Corporation's outstanding voting stock is transferred to holders
different from those who held the stock immediately prior to such
merger.

E. CORPORATION shall mean Endosonics Corporation, a California
corporation.

F. EXERCISE PRICE shall have the meaning assigned to such term in
Paragraph A.1.

G. FAIR MARKET VALUE of a share of Common Stock on any relevant
date shall be determined as follows:

(i) If the Common Stock is not at the time listed
or admitted to trading on any stock exchange but is traded on the
Nasdaq National Market, 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 closing selling price on the last preceding date
for which such quotation exists shall be determinative of Fair Market
Value.

A-1.
<PAGE> 9
(ii) If the Common Stock is at the time listed or
admitted to trading on any national 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 reported sale of Common Stock on
such exchange on the date in question, then the Fair Market Value
shall be the closing selling price on the exchange on the last
preceding date for which such quotation exists.

H. GRANT DATE shall have the meaning assigned to such term in
Paragraph A.1.

I. GRANT NOTICE shall mean the Notice of Grant of Stock Option
pursuant to which Optionee has been informed of the basic terms of the Option.

J. OPTION shall have the meaning assigned to such term in
Paragraph A.1.

K. OPTION AGREEMENT shall mean all agreements and other documents
evidencing the Option.

L. OPTIONEE shall mean the person to whom the Option is granted
under the Plan.

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

N. 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.

O. PENALTY FEE shall mean the payment required of the Optionee
upon the mandatory resale of the Resale Shares to the Corporation due to
Optionee's failure to complete a forty-eight (48)-month period of Service
measured from the Grant Date.

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

A-2.
<PAGE> 10
Q. PLAN shall mean the Corporation's Restated 1988 Stock Option
Plan.

R. PLAN ADMINISTRATOR shall mean either the Board or a committee
of Board members, to the extent the committee is at the time responsible for
administration of the Plan.

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

T. 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.

U. RESALE PRICE shall mean the price payable per share of Common
Stock for each Purchased Share to be resold to the Corporation pursuant to this
Agreement.

V. RESALE SHARES shall mean the Purchased Shares which must be
resold to the Corporation in accordance with Article C.

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

X. 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.

A-3.

<PAGE> 1
EXHIBIT 99.7

COMPENSATION AGREEMENT

Agreement dated as of the 5th day of November 1996 by and between Roger
Salquist ("Optionee") and Endosonics Corporation, a Delaware corporation
("Company").

W I T N E S S E T H

WHEREAS, the Company deems it advisable to provide Optionee with a
special equity incentive to attract and retain his services as Chairman of the
Company's Board of Directors.

NOW, THEREFORE, the parties hereto agree as follows:

1. On November 5, 1996, Optionee was granted an option to purchase
25,000 shares of the Company's Common Stock (the "Option") upon the terms and
conditions set forth in the Stock Option Agreement (the "Option Agreement")
attached hereto as Exhibit A.

2. Company and Optionee acknowledge and agree that the Option is
granted as compensation for the services Optionee is to render as Chairman of
the Company's Board of Directors and not for any capital-raising purposes or in
connection with any capital-raising activities.

3. This agreement is intended to constitute a written compensation
contract for purposes of registering the shares of Common Stock issuable under
the Option on a Form S-8 registration statement to be filed with the Securities
and Exchange Commission.

4. Nothing in this agreement or in the attached Stock Option Agreement
shall be deemed to impair or otherwise restrict the rights of the Company or the
stockholders to remove the Optionee from the Board of Directors at any time
pursuant to the provisions of applicable law.

IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the date first above written.

OPTIONEE: ENDOSONICS CORPORATION

By:
- -------------------------- ----------------------------------
Roger Salquist
Title:
-------------------------------

<PAGE> 1
EXHIBIT 99.8

AUTOMATIC OPTION GRANT

ENDOSONICS CORPORATION

NON-STATUTORY STOCK OPTION AGREEMENT

AGREEMENT made this 5th day of November, 1996 by and between
Endosonics Corporation, a corporation organized and existing under the laws of
the State of Delaware (the "Company"), and Roger Salquist (the "Optionee").

WITNESSETH:

RECITALS

A. The Company's Board of Directors (the "Board") has
adopted the Company's Restated 1988 Stock Option Plan (the "Plan") for the
purpose of attracting and retaining the services of employees, consultants and
non-employee Board members who contribute to the management, growth and
financial success of the Company or its parent or subsidiary corporations.

B. The Optionee is a non-employee Board member who is
entitled to receive an option to acquire shares of the Company's common stock
(the "Common Stock") pursuant to the automatic option grant program implemented
for non-employee Board members under the Plan. This Agreement is executed
pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the automatic option grant made to such Optionee thereunder.

C. The granted option is intended to be a non-statutory
stock option which does not satisfy the requirements of Section 422 of the
Internal Revenue Code.

D. For purposes of this Agreement, the following
definitions shall be in effect:

Board Member: The Optionee shall be deemed to be a Board
Member for so long as such individual continues to serve as a member of
the Company's Board of Directors.

<PAGE> 2
Fair Market Value: The Fair Market Value per share of Common
Stock on any date in question shall be determined in accordance with the
following provisions:

(i) If the Common Stock is not at the time listed
or admitted to trading on any stock exchange but is traded on the Nasdaq
National Market, then the market value shall be the closing selling
price per share of Common Stock on the date in question, as such prices
are reported by the National Association of Securities Dealers on Nasdaq
National Market System. If there is no reported closing selling price
on the date in question, then the closing selling price on the last
preceding date for which such quotation exists shall be determinative of
fair market value.

(ii) If the Common Stock is at the time listed or
admitted to trading 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 serving 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 reported sale of
Common Stock on such exchange on the date in question, then the fair
market value shall be the closing selling price on the exchange on the
last preceding date for which such quotation exists.

TERMS

1. GRANT OF OPTION. Pursuant to the provisions of
Article Three of the Plan, there is hereby automatically granted to the
Optionee, on November 5, 1996 (the "Grant Date"), a stock option to purchase up
to 10,000 shares of Common Stock (the "Option Shares") upon the terms and
conditions set forth in this Agreement and in the Plan (including Article Three
thereof). The Option Shares shall be purchasable in accordance with such terms
and conditions at the purchase price of $12.75 per share (the "Option 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 November 4, 2006 (the "Expiration Date"), unless
sooner terminated in accordance with Paragraph 5 or 7A of this Agreement.

3. LIMITED TRANSFERABILITY. This option, together with
the special stock appreciation right provided under Paragraph 7.C, shall not be
transferable or assignable by the Optionee except for a transfer of this option
by will or by the laws of inheritance following the Optionee's death.
Accordingly, this option, together with the special stock appreciation right
provided under Paragraph 7.C, may be exercised, during the Optionee's

2.
<PAGE> 3
lifetime, only by the Optionee. Any attempt to assign, pledge, transfer,
hypothecate or otherwise dispose of this option, and any levy of execution,
attachment or similar process on this option, shall be null and void.

4. EXERCISABILITY.

A. Except as provided in Paragraph 4B below, this option
shall become exercisable for the Option Shares in a series of installments as
follows:

(i) The option shall become exercisable for
twenty-five percent (25%) of the Option Shares upon the Optionee's
completion of twelve (12) months of continuous service as a Board
Member measured from the Grant Date.

(ii ) The option shall become exercisable for an
additional twenty-five percent (25%) of the Option Shares upon the
Optionee's completion of twenty-four (24) months of continuous service
as a Board Member measured from the Grant Date.

(iii) The option shall become exercisable for an
additional twenty-five percent (25%) of the Option Shares upon the
Optionee's completion of thirty-six (36) months of continuous service
as a Board Member measured from the Grant Date.

(iv ) The option shall become exercisable for the
balance of the Option Shares upon the Optionee's completion of
forty-eight (48) months of continuous service as a Board Member
measured from the Grant Date.

B. Should the Optionee die or become permanently
disabled (as defined in Section 22(e)(3) of the Internal Revenue Code) while
serving as a Board Member, then the option shall accelerate in full and become
exercisable for all of the Option Shares subject to the option at the time of
such death or permanent disability.

C. Once this option becomes exercisable for one or more
installments of the Option Shares, those installments shall accumulate, and
this option shall remain exercisable for the accumulated installments until the
Expiration Date or sooner termination of the option term under Paragraph 5 or
Paragraph 7A of this Agreement.

D. This option shall not become exercisable for any
additional Option Shares following the Optionee's cessation of service as a
Board Member.

3.
<PAGE> 4
5. CESSATION OF BOARD MEMBERSHIP. Should the 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 exercisable) prior to the Expiration Date in accordance with the
following provisions:

(i) Should the Optionee cease service as a Board
Member for any reason (other than death) while holding this option, then
the period for exercising this option shall be reduced to the six
(6)-month period commencing with the date of such cessation of service.
During such limited period of exercisability, this option may not be
exercised for more than the number of Option Shares (if any) for which
it is exercisable on the date the Optionee ceased service as a Board
Member. Upon the expiration of such six (6)-month period, the option
shall terminate and cease to be outstanding.

(ii) Should the Optionee die either while serving
as a Board Member or during the six (6)-month period following the
cessation of service as a Board Member, then 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 inheritance) shall have the right to exercise this option for
any or all of the Option Shares for which this option is exercisable on
the date the Optionee ceased service as a Board Member, less any Option
Shares subsequently purchased by the Optionee prior to death. Such
right shall lapse, and this option shall cease to be outstanding, upon
the expiration of the twelve (12)-month period measured from the date of
the Optionee's death.

(iii) In no event may this option be exercised at
any time after the specified Expiration Date.

(iv ) Upon the Optionee's cessation of Board service
for any reason, this option shall immediately terminate and cease to be
outstanding with respect to any and all Option Shares for which such
option is not otherwise at that time exercisable in accordance with the
normal exercise provisions of Paragraphs 4.A and 4.B or the special
acceleration provisions of Paragraph 7.

6. ADJUSTMENT IN OPTION SHARES. If any change is made
to the Company's outstanding 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 Company's
receipt of consideration, appropriate adjustments shall automatically be made
to the class and/or number of securities subject to this option and the Option
Price payable per share in order to reflect such transaction or change and
thereby preclude the dilution or enlargement of benefits hereunder.

4.
<PAGE> 5

7. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE
TAKE-OVER.

A. In the event of any of the following stockholder-approved
transactions (a "Corporate Transaction"):

(i) a merger or consolidation in which the Company
is not the surviving entity, except for a transaction the principal
purpose of which is to change the State of the Company's incorporation,

(ii ) the sale, transfer or other disposition of
all or substantially all of the assets of the Company, or

(iii) any reverse merger in which the Company is the
surviving entity but in which fifty percent (50%) or more of the
Company's outstanding voting stock is transferred to holders different
from those who held the stock immediately prior to such merger,

this option (if outstanding at the time but not
otherwise fully exercisable) shall automatically accelerate so that such option
shall, immediately prior to the specified effective date for the Corporate
Transaction, become fully exercisable for all of the Option Shares and may be
exercised for all or any portion of such shares. Upon the consummation of the
Corporate Transaction, this option shall terminate and cease to be outstanding.

B. Should there occur any Change in Control of the
Company, then this option (if outstanding at the time but not otherwise fully
exercisable) shall automatically accelerate so that such option shall,
immediately prior to the specified effective date for the Change in Control,
become fully exercisable for all the Option Shares and may be exercised for all
or any portion of such shares at any time prior to the Expiration Date or
sooner termination of the option term under Paragraph 5 or Paragraph 7A of this
Agreement. For purposes of this Agreement, a CHANGE IN CONTROL shall be deemed
to occur in the event:

(i) any person or related group of persons (other
than the Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company) directly or
indirectly acquires beneficial ownership (within the meaning of Rule
13d-3 of the Securities Exchange Act of 1934, as amended (the "1934
Act") of securities possessing more than twenty-five percent (25%) of
the total combined voting power of the Company's outstanding securities
pursuant to a tender or exchange offer which the Board does not
recommend the Company's stockholders to accept; or

5.
<PAGE> 6
(ii ) there is a change in the composition of the
Board over a period of twenty-four (24) consecutive months or less such
that a majority of the Board members (rounded up to the next whole
number) ceases, by reason of one or more proxy contests for the election
of Board members, 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 two-thirds of the Board members described in
clause (A) who were still in office at the time such election or
nomination was approved by the Board.

C. Should a Hostile Take-Over of the Company occur at
any time after this option has been outstanding for a period of at least six
(6) months measured from the Grant Date, then this option (if outstanding at
the time) shall automatically be cancelled upon the effective date of such
Hostile Take-Over, and the Optionee shall, in exchange, receive a cash
distribution from the Company. Such distribution shall be in an amount equal
to the excess of (i) the Take-Over Price of the shares of Common Stock at the
time subject to this option (whether or not the option is otherwise at the time
exercisable for such shares) over (ii) the aggregate Option Price payable for
such shares. The cancellation of this option and the cash distribution to be
paid in connection therewith is hereby pre-approved by the Plan Administrator.
Accordingly, the cash distribution shall be made to the Optionee within five
(5) days following the effective date of the Hostile Take-Over, and no further
consent of the or the Plan Administrator or the Board shall be required at the
time of the actual cancellation and cash distribution. For purposes of this
Paragraph 7C, the following definitional provisions shall be in effect:

A HOSTILE TAKE-OVER shall be deemed to occur in the
event (i) any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company) directly
or indirectly acquires 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 Company's
outstanding securities pursuant to a tender or exchange offer which
the Board does not recommend the Company's stockholders to accept and
(ii) more than fifty percent (50%) of the securities so acquired in
such tender or exchange offer are accepted from holders other than
Company officers and directors participating in the Plan.

The TAKE-OVER PRICE per share shall be deemed to be equal to
the greater of (a) the Fair Market Value per share of Common Stock on
the date of the option cancellation or (b) the highest reported price
per share paid in effecting the Hostile Take-Over.

6.
<PAGE> 7
D. This Agreement shall not in any way affect the right
of the Company 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.

E. If this option is assumed in connection with a
Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and class
of securities which would have been issuable to Optionee in consummation of
such Corporate Transaction had the option been exercised immediately prior to
such Corporate Transaction, and appropriate adjustments shall also be made to
the Option Price, provided the aggregate Option Price shall remain the same.

8. PRIVILEGE OF STOCK OWNERSHIP. The Optionee shall not
have any stockholder rights with respect to the Option Shares until such
individual shall have exercised the option and paid the Option Price for the
purchased shares.

9. MANNER OF EXERCISING OPTION.

A. In order to exercise this option for one or more
Option Shares for which this option is at the time exercisable, the Optionee
(or in the case of exercise after the Optionee's death, the Optionee's
executor, administrator, heir or legatee, as the case may be) must take the
following actions:

(i) Execute and deliver to the Secretary of the
Company a written notice of exercise (the "Exercise Notice"), in
substantially the form of Exhibit I attached hereto, in which there is
specified the number of Option Shares for which the option is exercised.

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

- full payment in cash or check made payable
to the Company's order;

- full payment in shares of Common Stock held
by the Optionee for the requisite period necessary to avoid a
charge to the Company's earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise Date;

- full payment through a broker-dealer sale
and remittance procedure pursuant to which the Optionee shall
provide irrevocable written instructions (I) to a designated
brokerage firm to effect the immediate sale of the purchased
shares and remit to the

7.
<PAGE> 8
Company, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate Option Price
payable for the purchased shares and (II) to the Company to
deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale transaction.

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

B. For purposes of this Agreement, the Exercise Date
shall be the date on which the Exercise Notice shall have been delivered to the
Company. Except to the extent the sale and remittance procedure specified
above may be utilized in connection with the exercise of this option, payment
of the Option Price for the purchased shares must accompany such notice.

C. As soon as practical after the exercise of this
option in accordance with the provisions of this Agreement, the Company shall
mail or deliver to or on behalf of the Optionee (or to the other person or
persons exercising this option) a stock certificate representing the purchased
shares.

D. In no event may this option be exercised for any fractional shares.

10. LEGALITY OF ISSUANCE. The Company shall not be
obligated to sell or issue any Option Shares pursuant to this Agreement if such
sale or issuance might, in the opinion of the Company and the Company's
counsel, constitute a violation by the Company of any applicable law or
regulation.

11. BINDING EFFECT. Subject to the limitations set forth
in Paragraph 3 of this Agreement, this Agreement shall be binding upon, and
shall inure to the benefit of, (i) the executors, administrators, heirs, legal
representatives and assigns of the Optionee and (ii) the successors and assigns
of the Company.

12. NO IMPAIRMENT OF RIGHTS. Nothing in this Agreement
or in the Plan shall be deemed to impair or otherwise restrict the rights of
the Company or the stockholders to remove the Optionee from the Board at any
time pursuant to the provisions of applicable law.

13. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of California applicable
to contracts entered into and wholly to be performed within the State of
California by residents of such State.

8.
<PAGE> 9
14. NOTICES. All notices and other communications under
this Agreement shall be in writing. Unless and until the Optionee is notified
in writing to the contrary, all notices, communications and documents directed
to the Company and related to this Agreement, if not delivered by hand, shall
be mailed, addressed as follows:

Endosonics Corporation
2870 Kilgore Road
Rancho Cordova, CA 95670

Unless and until the Company is notified in writing to the
contrary, all notices, communications and documents intended for the Optionee
and related to this Agreement, if not delivered by hand, shall be mailed to the
Optionee's last known address as shown on the Company's books.

Notices and communications shall be mailed by first class
mail, postage prepaid; documents shall be mailed by registered mail, return
receipt requested, postage prepaid. All mailings and deliveries related to
this Agreement shall be deemed received only when actually received, unless
properly mailed by registered mail, return receipt requested, in which event
they shall be deemed received two (2) days after the date of mailing.

15. CONSTRUCTION. This Agreement and the option
evidenced hereby are issued pursuant to the automatic grant program in effect
for non-employee Board members under Article Three of the Plan and shall be
subject to the express terms and provisions of the Plan applicable to such
automatic grants. Such terms and provisions are hereby incorporated into this
Agreement and made a part hereof as if expressly included in this Agreement.

9.
<PAGE> 10
IN WITNESS WHEREOF, Endosonics Corporation has caused this
Agreement to be executed on its behalf by its duly-authorized officer and the
Optionee has executed this Agreement, all on the day and year first above
written.

ENDOSONICS CORPORATION

By _________________________________________

Title: ____________________________________

____________________________________________
ROGER SALQUIST, OPTIONEE

Address __________________________________

___________________________________________

10.
<PAGE> 11
EXHIBIT I

NOTICE OF EXERCISE OF STOCK OPTION

I hereby notify Endosonics Corporation (the "Company") that I
elect to purchase _________ shares of the Company's Common Stock (the
"Purchased Shares") pursuant to that certain option (the "Option") granted to
me on November 5, 1996 to purchase up to 10,000 shares of such Common Stock at
an option price of $12.75 per share (the "Option Price").

Concurrently with the delivery of this Exercise Notice to the
Secretary of the Company, I shall pay to the Company the Option Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Company 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 option price for the purchased shares.

- --------------------------- -----------------------------
Date Roger Salquist, 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> 1
EXHIBIT 99.9

CARDIOMETRICS, INC.
1995 STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS

I. PURPOSE OF THE PLAN

This 1995 Stock Incentive Plan is intended to promote the
interests of Cardiometrics, Inc., a Delaware corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for
them to remain in the service of the Corporation.

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 four separate equity
programs:

1. 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,

2. the Salary Investment Option Grant Program
under which the Corporation's officers and other highly-compensated employees
may elect to have a portion of their base salary reduced each year in return
for options to purchase shares of Common Stock,

3. 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 to the Corporation (or any Parent or
Subsidiary), and

4. the Automatic Option Grant Program under
which Eligible Directors shall automatically receive option grants at periodic
intervals to purchase shares of Common Stock.

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

III. ADMINISTRATION OF THE PLAN

A. The Primary Committee shall have sole and exclusive
authority to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to
<PAGE> 2

Section 16 Insiders. No non-employee Board member shall be eligible to serve
on the Primary Committee if such individual has, during the twelve (12)-month
period immediately preceding the date of his or her appointment to the
Committee or (if shorter) the period commencing with the Section 12(g)
Registration Date and ending with the date of his or her appointment to the
Primary Committee, received an option grant or direct stock issuance under the
Plan or any other stock option, stock appreciation, stock bonus or other stock
plan of the Corporation (or any Parent or Subsidiary), other than pursuant to
the Automatic Option Grant Program.

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

C. Members of the Primary Committee or any Secondary
Committee shall serve for such period of time as the Board may determine and
shall be subject to removal 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 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 each 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 or Stock Issuance Program under its jurisdiction or
any stock option or stock issuance outstanding thereunder.

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

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

2
<PAGE> 3

IV. ELIGIBILITY

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

1. Employees,

2. non-employee members of the Board (other than
those serving as members of the Primary Committee) or the board of directors of
any Parent or Subsidiary, and

3. consultants or other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).

B. Only the Corporation's officers and other
highly-compensated Employees shall be eligible to participate in the Salary
Investment Option Grant Program.

C. The Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority (subject to the
provisions of the Plan) 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 at which 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 to be paid by the
Participant for such shares. The Primary Committee shall have sole and
exclusive authority to select the individuals eligible to participate in the
Salary Investment Option Grant Program, but all options granted under such
program shall be made solely in accordance with the express terms and
conditions of Article Three of the Plan.

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 eligible to receive option grants
under the Automatic Option Grant Program shall be limited to (i) those
individuals who first become non-employee Board members on or after the Plan
Effective Date, whether through appointment by the Board or election by the
Corporation's stockholders, and (ii) those individuals who are re-elected to
serve as non-employee Board members at one or more Annual Stockholders Meetings
held after the Plan Effective 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 initial 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

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Automatic Option Grant Program upon his or her subsequent re-election to the
Board at one or more Annual Stockholders Meetings.

V. STOCK SUBJECT TO THE PLAN

A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares
repurchased by the Corporation on the open market. The maximum number of
shares of Common Stock which may be issued over the term of the Plan shall not
exceed 1,399,914 shares. Such authorized share reserve is comprised of the
number of shares which remained available for issuance, as of the Plan
Effective Date, under the Predecessor Plans as last approved by the
Corporation's stockholders, including the shares subject to the outstanding
options incorporated into the Plan, plus an increase of 225,000 shares approved
by the Board on April 3, 1996, subject to stockholder approval.

B. No one person participating in the Plan may receive
options, separately exercisable stock appreciation rights and direct stock
issuances for more than 200,000 shares of Common Stock per calendar year,
except that for the calendar year in which such person first commences Service,
the limit shall be increased to 300,000 shares.

C. Shares of Common Stock subject to outstanding options
shall be available for subsequent issuance under the Plan to the extent (i) the
options (including any options incorporated from the Predecessor Plans) 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. All shares issued under the Plan (including shares issued upon exercise
of options incorporated from the Predecessor Plans), whether or not those
shares are subsequently repurchased by the Corporation pursuant to its
repurchase rights under the Plan, shall reduce on a share-for-share basis the
number of shares of Common Stock available for subsequent issuance under the
Plan. In addition, should the exercise price of an option under the Plan
(including any option incorporated from the Predecessor Plans) be paid with
shares of Common Stock or should shares of Common Stock otherwise issuable
under the Plan be withheld by the Corporation in satisfaction of the
withholding taxes incurred in connection with the exercise of an option or the
vesting of a stock issuance under the Plan, then the number of shares of Common
Stock available for issuance under the Plan shall be reduced by the gross
number of shares for which the option is exercised or which vest under the
stock issuance, and not by the net number of shares of Common Stock issued to
the holder of such option or stock issuance.

D. 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/or class of
securities issuable under the Plan, (ii) the maximum number and/or class of
securities for which any one person may be granted options, separately
exercisable stock appreciation rights and direct stock issuances per calendar
year, (iii) the number and/or class of securities for which automatic option
grants are to be subsequently made per Eligible Director under the Automatic
Option Grant Program and (iv) the number and/or class of securities and the
exercise price per

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<PAGE> 5

share in effect under each outstanding option (including any option
incorporated from the Predecessor Plans) in order to prevent the dilution or
enlargement of benefits thereunder. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.

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<PAGE> 6

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 eighty-five percent (85%)
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 Six and the documents evidencing the option, be payable in one or
more of the forms specified below:

a) cash or check made payable to the
Corporation,

b) 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

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

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.

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<PAGE> 7

C. EFFECT OF TERMINATION OF SERVICE.

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

a) 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.

b) 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.

c) 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.

d) Should the Optionee's Service be
terminated for Misconduct, then all outstanding options held by the Optionee
shall terminate immediately and cease to be outstanding.

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

a) extend the period of time for which
the option is to remain exercisable following the Optionee's cessation of
Service from the 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

b) 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.

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<PAGE> 8

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, the option shall be exercisable only by the Optionee
and shall not be assignable or transferable other than by will or by the laws
of descent and distribution following the Optionee's death. However, a
Non-Statutory Option may be assigned in whole or in part during Optionee's
lifetime in accordance with the terms of a Qualified Domestic Relations Order.
The assigned portion may only be exercised by the person or persons who acquire
a proprietary interest in the option pursuant to such Qualified Domestic
Relations Order. 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 Six 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
(determined as of the respective date or dates of grant) of the shares of
Common Stock 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.

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<PAGE> 9

III. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. In the event of any Corporate Transaction, each
outstanding option shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable for all the shares of Common Stock at the time subject
to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. However, an outstanding option shall not
so accelerate if and to the extent: (i) such option is, in connection with the
Corporate Transaction, either to be assumed by the successor corporation (or
parent thereof) or to be replaced with a comparable option to purchase shares
of the capital stock of the successor corporation (or parent thereof), (ii)
such option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing on the unvested option shares
at the time of the Corporate Transaction and provides for subsequent payout in
accordance with the same vesting schedule applicable to such option or (iii)
the acceleration of such option is subject to other limitations imposed by the
Plan Administrator at the time of the option grant. The determination of
option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be final, binding and conclusive.

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

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

D. Each option which is assumed in connection with a
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities which
would have been issuable to the Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to (i) the number and
class of securities available for issuance under the Plan following the
consummation of such Corporate Transaction, (ii) the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same, and (iii) the maximum number
of securities and/or class of securities for which any one person may be
granted stock options, separately exercisable stock appreciation rights and
direct stock issuances under the Plan per calendar year.

E. Any options which are assumed or replaced in the
Corporate Transaction and do not otherwise accelerate at that time shall
automatically accelerate (and any of the Corporation's outstanding repurchase
rights which do not otherwise terminate at the time of the Corporate
Transaction shall automatically terminate and the shares of Common Stock
subject to

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<PAGE> 10

those terminated rights shall immediately vest in full) in the event the
Optionee's Service should subsequently terminate by reason of an Involuntary
Termination within twelve (12) months following the effective date of such
Corporate Transaction. Any options so accelerated shall remain exercisable for
fully-vested shares until the earlier of (i) the expiration of the option term
or (ii) the expiration of the one (1)-year period measured from the effective
date of the Involuntary Termination.

F. The Plan Administrator shall have the discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to (i) provide for the automatic acceleration of
one or more outstanding options (and the automatic termination of one or more
outstanding repurchase rights with the immediate vesting of the shares of
Common Stock subject to those rights) upon the occurrence of a Change in
Control or (ii) condition any such option acceleration (and the termination of
any outstanding repurchase rights) upon the subsequent Involuntary Termination
of the Optionee's Service within a specified period following the effective
date of such Change in Control. Any options accelerated in connection with a
Change in Control shall remain fully exercisable until the expiration or sooner
termination of the option term.

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

H. The grant of options under the Discretionary 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. 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 Plans) 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:

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<PAGE> 11

1. 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 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.

2. No such option surrender shall be effective
unless it is approved by the Plan Administrator. 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.

3. If the surrender of an option is rejected 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:

1. One or more Section 16 Insiders may be
granted limited stock appreciation rights with respect to their outstanding
options.

2. Upon the occurrence of a Hostile Take-Over,
each individual holding one or more options with such a limited stock
appreciation right in effect for at least six (6) months 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.

3. Neither the approval of the Plan
Administrator nor the consent of the Board shall be required in connection with
such option surrender and cash distribution.

4. The balance of the option (if any) shall
continue in full force and effect in accordance with the documents evidencing
such option.

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<PAGE> 12

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
Corporation's officers and other highly compensated Employees who are to
participate in the Salary Investment Option Grant Program for those 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 Primary Committee (or its
designate) an irrevocable authorization directing the Corporation to reduce his
or her base salary for that calendar year by a designated multiple of one
percent (1%). However, the minimum amount of such salary reduction must be not
less than five percent (5%) of the individual's current rate of annual base
salary and must not be more than twenty five percent (25%) of such base salary.
Each selected individual who files a proper salary reduction authorization
shall automatically be granted an option under this Salary Investment Option
Grant Program on the first trading day in January of the calendar year for
which that 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 Primary Committee; provided,
however, that each such document shall comply with the terms specified below.

A. EXERCISE PRICE.

1. 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. 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 / (B x 66-2/3%), where

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<PAGE> 13

X is the number of option shares,

A is the dollar amount by which the Optionee's base salary is
to be reduced for the calendar year, and

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 expiration of the ten (10)-year option term.
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 expiration of the ten
(10)-year option term. 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. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. Should any Corporate Transaction be effected while
the Optionee remains in Service, then each outstanding option held by such
Optionee under the Salary Investment Option Grant Program shall automatically
accelerate so that each such option shall, immediately prior to the effective
date of the Corporate Transaction, become fully exercisable with respect to the
total number of shares of Common Stock at the time subject to such option and
may be exercised for any or all of those shares as fully-vested shares of
Common Stock. Each such outstanding option shall be assumed by the successor
corporation (or parent thereof) in the Corporate Transaction and shall remain
exercisable for the fully-vested shares until the expiration of the ten
(10)-year option term.

B. Should any Change in Control occur while the Optionee
remains in Service, then each outstanding option held by such Optionee under
the 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

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<PAGE> 14

any or all of those shares as fully-vested shares of Common Stock. The option
shall remain so exercisable until the expiration of the ten (10)-year option
term.

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.

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<PAGE> 15

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.

A. PURCHASE PRICE.

1. The purchase price per share shall be fixed
by the Plan Administrator, but shall not be less than eighty-five percent (85%)
of the Fair Market Value per share of Common Stock on the issuance date.

2. Subject to the provisions of Section I of
Article Six, 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:

a) cash or check made payable to the
Corporation, or

b) past services rendered to the
Corporation (or any Parent or Subsidiary).

B. VESTING PROVISIONS.

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

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

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

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

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

<PAGE> 16

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

2. Any new, substituted or additional securities
or other property (including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect to his or her
unvested shares 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 and (ii) such escrow
arrangements as the Plan Administrator shall deem appropriate.

3. The Participant shall have full stockholder
rights with respect to any shares of Common Stock issued to him or her under
the Stock Issuance Program, whether or not his or her 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 (or other assets attributable thereto) which would otherwise occur upon
cessation of 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.

II. CORPORATE TRANSACTION/CHANGE IN CONTROL

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

<PAGE> 17

To the extent any repurchase/cancellation rights applicable to
the Participant's outstanding shares under the Stock Issuance Program are
assigned in the Corporate Transaction, those rights shall automatically
terminate, and the shares subject to those terminated rights shall immediately
vest in full, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within twelve (12) months
following the effective date of such Corporate Transaction.

The Plan Administrator shall have the discretion, exercisable
either at the time the unvested shares are issued or at any time while the
Corporation's repurchase/cancellation rights remain outstanding, to (i) provide
for the automatic termination of one or more outstanding
repurchase/cancellation rights and the immediate vesting of the shares subject
to those rights upon the occurrence of a Change in Control or (ii) condition
any such accelerated vesting upon the subsequent Involuntary Termination of the
Participant's Service within a specified period following the effective date of
such Change in Control.

III. SHARE ESCROW/LEGENDS

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

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<PAGE> 18

ARTICLE FIVE

AUTOMATIC OPTION GRANT PROGRAM

I. OPTION TERMS

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

1. Each Eligible Director who is first elected
or appointed as a non-employee Board member on or after the Plan Effective Date
shall automatically be granted, on the date of such initial election or
appointment, a Non-Statutory Option to purchase 5,000 shares of Common Stock,
provided such 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 Plan Effective Date, each individual who is to continue
to serve as a non-employee Board member shall automatically be granted a
Non-Statutory Option to purchase an additional 2,500 shares of Common Stock,
provided such individual has served as a non-employee Board member for a period
of at least six (6) months. There shall be no limit on the number of such
2,500-share option grants any one Eligible Director may receive over his or her
period of 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. Each initial
5,000-share grant shall vest, and the Corporation's repurchase right shall
lapse, in a series of twenty-four (24) successive equal monthly installments
over the Optionee's period of continued service as a Board member, with the
first such installment to vest upon the Optionee's completion of one (1) month
of Board service measured from the option grant date. Each annual 2,500-share
grant shall vest, and the Corporation's repurchase right shall lapse in a
series of twelve (12) successive equal monthly installments over the Optionee's
period of continued service as a Board member, measured from the option grant
date.

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<PAGE> 19

E. EFFECT OF 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:

1. The Optionee (or, in the event of
the 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 the Optionee's
cessation of Board service in which to exercise each such option.

2. 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.

3. 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.

4. 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.

II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

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

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

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<PAGE> 20

until the expiration or sooner termination of the option term or the cash-out
of the option in connection with a Hostile Take-Over.

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 automatic option held by him or her for a period of at least
six (6) months. 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 (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. The shares of Common Stock subject to each option
surrendered in connection with the Hostile Take-Over shall not be available for
subsequent option grant under this Plan.

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

F. 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. AMENDMENT OF THE AUTOMATIC OPTION GRANT PROGRAM

The provisions of this Automatic Option Grant Program,
together with the option grants outstanding thereunder, may not be amended at
intervals more frequently than once every six (6) months, other than to the
extent necessary to comply with applicable Federal income tax laws and
regulations.

IV. 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.

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<PAGE> 21

ARTICLE SIX

MISCELLANEOUS

I. FINANCING

A. The Plan Administrator may permit any Optionee or
Participant to pay the option exercise price under the Discretionary Option
Grant or Salary Investment Option Grant Program or the purchase price of shares
issued under the Stock Issuance Program by delivering a 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. Promissory notes may be authorized with
or without security or collateral. In all events, the maximum credit available
to the Optionee or Participant may not 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.

B. The Plan Administrator may, in its discretion,
determine that one or more such promissory notes shall be subject to
forgiveness by the Corporation in whole or in part upon such terms as the Plan
Administrator may deem appropriate.

II. TAX WITHHOLDING

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

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

1. 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.

2. 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

21
<PAGE> 22

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

A. The Plan shall become effective on the Plan Effective
Date, and the initial options under the Automatic Option Grant Program shall be
made to the Eligible Directors at that time.

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

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

D. On April 3, 1996, the Board approved an increase in
the number of shares issuable under the Plan by 225,000 shares to 1,399,914
shares, subject to approval by the Corporation's stockholders at the 1996
Annual Stockholders Meeting. No options may be exercised and no shares may be
issued on the basis of the 225,000 share increase prior to stockholder approval
of such increase. Should stockholder approval not be obtained, then any
options granted on the basis of such share increase shall expire. Except as so
limited, the Plan Administrator may grant options at any time before expiration
of the Plan. The provisions in the 1996 restatement of the Plan shall apply
only to options and stock awards granted under the Plan from and after the
effective date of such restatement. All options and stock awards granted under
the Plan immediately prior to the effective date of such restatement shall
continue to be governed by the terms and conditions of the Plan (and the
instrument evidencing each such option or stock award) as in effect on the date
each such option or stock award was previously granted, and nothing in the 1996
restatement shall be deemed to affect or otherwise modify the rights or
obligations of the holders of such options or stock awards with respect to the
acquisition of shares of Common Stock thereunder.

E. The Plan shall terminate upon the earliest of (i)
September 30, 2005, (ii) the date on which all shares available for issuance
under the Plan shall have been issued pursuant to the exercise of the options
or the issuance of shares (whether vested or unvested) under the Plan or (iii)
the termination of all outstanding options in connection with a Corporate
Transaction. Upon such Plan termination, all outstanding stock options and
unvested stock issuances shall continue to have force and effect in accordance
with the provisions of the documents evidencing such options or issuances.

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<PAGE> 23

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, (i) no
such amendment or modification shall adversely affect the rights and
obligations with respect to options, stock appreciation rights or unvested
stock issuances at the time outstanding under the Plan unless the Optionee or
the Participant consents to such amendment or modification, and (ii) any
amendment made to the Automatic Option Grant Program (or any options
outstanding thereunder) shall be in compliance with the limitations of that
program. In addition, the Board shall not, without the approval of the
Corporation's stockholders, (i) materially increase the maximum number of
shares issuable under the Plan, the number of shares for which options may be
granted under the Automatic Option Grant Program or the maximum number of
shares for which any one person may be granted options, separately exercisable
stock appreciation rights and direct stock issuances in the aggregate per
calendar year, except for permissible adjustments in the event of certain
changes in the Corporation's capitalization, (ii) materially modify the
eligibility requirements for Plan participation or (iii) materially increase
the benefits accruing to Plan participants.

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 shares actually
issued under those programs are 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
option or stock appreciation right under the Plan and the issuance of any
shares of Common Stock (i) upon the exercise of any option or stock
appreciation right 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 options and stock
appreciation rights granted under it and the shares of Common Stock issued
pursuant to it.

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<PAGE> 24

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> 25

APPENDIX

The following definitions shall be in effect under the Plan:

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

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

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

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

2. 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 such election or nomination was approved by the Board.

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

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

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

1. 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

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

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<PAGE> 26

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

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

I. DOMESTIC RELATIONS ORDER shall mean any judgment,
decree or order (including approval of a property settlement agreement) which
provides or otherwise conveys, pursuant to applicable State domestic relations
laws (including community property laws), marital property rights to any spouse
or former spouse of the Optionee.

J. 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.

K. 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.

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

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

1. If the Common Stock is at the time traded on
the Nasdaq National Market, then the Fair Market Value shall be the closing
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 price for the
Common Stock on the date in question, then the Fair Market Value shall be the
closing price on the last preceding date for which such quotation exists.

2. 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.

3. For purposes of any option grants made on the
Plan Effective Date, 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.

<PAGE> 27

N. HOSTILE TAKE-OVER shall mean a change in ownership of
the Corporation effected through the following transaction:

1. 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, and

2. more than fifty percent (50%) of the
securities so acquired are accepted from persons other than Section 16
Insiders.

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

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

1. such individual's involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or

2. such individual's voluntary resignation
following (A) a change in his or her position with the Corporation which
materially reduces his or her level of responsibility, (B) a reduction in his
or her level of compensation (including base salary, fringe benefits and
participation in 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.

Q. 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).

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

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

<PAGE> 28

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

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

W. 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 the purposes of
the Automatic Option Grant Program, Permanent Disability or Permanently
Disabled shall mean the inability of the non-employee Board member to perform
his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.

X. PLAN shall mean the Corporation's 1995 Stock
Incentive Plan, as set forth in this document.

Y. 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.

Z. PLAN EFFECTIVE DATE shall mean the date on which the
Underwriting Agreement is executed and the initial public offering price of the
Common Stock is established.

AA. PREDECESSOR PLANS shall mean the Corporation's
existing 1985 Stock Option Plan and the interim 1995 Stock Option Plan.

BB. 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.

CC. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a
Domestic Relations Order which substantially complies with the requirements of
Code Section 414(p). The Plan Administrator shall have the sole discretion to
determine whether a Domestic Relations Order is a Qualified Domestic Relations
Order.

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<PAGE> 29

DD. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the
special equity incentive program in effect under the Plan pursuant to which
selected individuals may apply a portion of their base salary to the
acquisition of below-market option grants.

EE. SECONDARY COMMITTEE shall mean a committee of two (2)
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.

FF. 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.

GG. SECTION 12(G) REGISTRATION DATE shall mean the first
date on which the Common Stock is registered under Section 12(g) of the 1934
Act.

HH. SERVICE shall mean the provision of services to 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.

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

JJ. 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.

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

LL. 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.

MM. 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.

NN. 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.

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<PAGE> 30

OO. 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).

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

<PAGE> 1

EXHIBIT 99.10

CARDIOMETRICS, 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 Cardiometrics, 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 with
respect to (i) 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 (ii) the balance of the
Option Shares in thirty-six (36) successive equal monthly
installments upon Optionee's completion of each 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 Cardiometrics, Inc. 1995
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.

<PAGE> 2

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> 3
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.

________________________, 199__

Date

CARDIOMETRICS, INC.

By:______________________________

Title:___________________________

_________________________________
OPTIONEE

Address:_________________________

_________________________________

ATTACHMENTS

Exhibit A - Stock Option Agreement

Exhibit B - Plan Summary and Prospectus

<PAGE> 4
EXHIBIT A

STOCK OPTION AGREEMENT

<PAGE> 5
EXHIBIT B

PLAN SUMMARY AND PROSPECTUS

<PAGE> 1

EXHIBIT 99.11

CARDIOMETRICS, 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 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 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 also be assigned in whole or in part during Optionee's lifetime in
accordance with the terms of a Qualified Domestic Relations Order. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary interest in the option pursuant to such Qualified Domestic
Relations Order. The terms applicable to the assigned portion shall be the
same as those in effect for this 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.

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.

<PAGE> 2

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:

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

(ii) Should Optionee die while this option is
outstanding, 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. Such right
shall lapse, and this option shall cease to be outstanding, upon the
earlier of (A) the expiration of the twelve (12)-month period
measured from the date of Optionee's death or (B) the Expiration Date.

(iii) Should Optionee cease Service by reason of
Permanent Disability while this option is outstanding, then Optionee
shall have a period of twelve (12) months (commencing with the date of
such cessation of Service) during which to exercise this option. In
no event shall this option be exercisable at any time after the
Expiration Date.

(iv) Should Optionee's Service be terminated for
Misconduct, then this option shall terminate immediately and cease to
remain outstanding.

(v) During the applicable post-Service exercise
period, 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 exercise period or (if earlier) upon the Expiration
Date, this option shall terminate and cease to be outstanding for any
vested 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 in which Optionee is not otherwise at
that time vested or for which this option is not otherwise at that
time exercisable.

(vi) In the event of a Corporate Transaction, the
provisions of Paragraph 6 shall govern the period for which this
option is to remain exercisable following Optionee's cessation of
Service and shall supersede any provisions to the contrary in this
paragraph.

2
<PAGE> 3
6. SPECIAL ACCELERATION OF OPTION.

(a) This option, to the extent outstanding at the
time of a Corporate Transaction but not otherwise fully exercisable, shall
automatically accelerate so that this option shall, immediately prior to the
effective date of the Corporate Transaction, 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. No such
acceleration of this option, however, shall occur if and to the extent: (i)
this option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation (or parent thereof) or to be replaced with
a comparable option to purchase shares of the capital stock of the successor
corporation (or parent thereof) or (ii) this option is to be replaced with a
cash incentive program of the successor corporation which preserves the spread
existing on the Option Shares at the time of the Corporate Transaction (the
excess of the Fair Market Value of those Option Shares over the aggregate
Exercise Price payable for such shares) and provides for subsequent pay-out in
accordance with the option exercise schedule set forth in the Grant Notice.
The determination of option comparability under clause (i) shall be made by the
Plan Administrator, and such determination shall be final, binding and
conclusive.

(b) Immediately following the Corporate
Transaction, this option, to the extent not previously exercised, shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.

(c) If this option is assumed in connection with
a Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and class
of securities which would have been issuable to Optionee in consummation of
such Corporate Transaction had the option been exercised immediately prior to
such Corporate Transaction, and appropriate adjustments shall also be made to
the Exercise Price, provided the aggregate Exercise Price shall remain the
same.

(d) Upon an Involuntary Termination of Optionee's
Service within twelve (12) months following a Corporate Transaction in which
this option is assumed or replaced, this option, to the extent outstanding at
such time but not otherwise fully exercisable, shall automatically accelerate
so that this option shall immediately become fully exercisable for all 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 at any
time prior to the earlier of (i) the Expiration Date or (ii) the expiration of
the one (1)-year period measured from the effective date of the Involuntary
Termination.

(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

3
<PAGE> 4

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.

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;

(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 written 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 transaction.

Except to the extent the sale and remittance
procedure is utilized in connection with the option exercise,
payment of the Exercise

4
<PAGE> 5

Price must accompany the Notice of Exercise delivered to the
Corporation in connection with the option exercise.

(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.

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.

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

5
<PAGE> 6

Option Shares by delivering a 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:

(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 Corporate 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

6
<PAGE> 7

Corporate Transaction 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 Corporate
Transaction, 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.

18. LEAVE OF ABSENCE. The following provisions shall
apply upon the Optionee's commencement of an authorized leave of absence:

(a) The exercise schedule in effect under the
Grant Notice shall be frozen as of the first day of the authorized leave, and
the option shall not become exercisable for any additional installments of the
Option Shares during the period Optionee remains on such leave.

(b) Should Optionee resume active Employee status
within sixty (60) days after the start date of the authorized leave, Optionee
shall, for purposes of the exercise schedule set forth in the Grant Notice,
receive Service credit for the entire period of such leave. If Optionee does
not resume active Employee status within such sixty (60)-day period, then no
Service credit shall be given for the period of the leave.

(c) If the option is designated as an Incentive
Stock Option in the Grant Notice, then the following additional provision shall
apply:

If the leave of absence continues for more
than ninety (90) days, then the option shall automatically
convert to a Non-Statutory Option under the federal tax laws
on the ninety-first (91st) day of such leave, unless the
Optionee's reemployment rights are guaranteed by statute or by
written agreement. Following any such conversion of the
option, all subsequent exercises of such option, whether
effected before or after Optionee's return to active Employee
status, shall result in an immediate taxable event, and the
Corporation shall be required to collect from Optionee the
federal, state and local income and employment withholding
taxes applicable to such exercise.

(d) In no event shall this option become
exercisable for any additional Option Shares or otherwise remain outstanding if
Optionee does not resume Employee status prior to the Expiration Date of the
option term.

7
<PAGE> 8
EXHIBIT I

NOTICE OF EXERCISE

I hereby notify Cardiometrics, 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 1995 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> 9

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

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

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

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

(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.

F. CORPORATION shall mean Cardiometrics, Inc., a Delaware
corporation.

G. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or
order (including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.

H. 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.

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

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

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

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

A-1
<PAGE> 10

(iii) 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 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.

(iv) 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.

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

N. 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.

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

P. INVOLUNTARY TERMINATION shall mean the termination of
Optionee's Service which occurs by reason of:

(v) Optionee's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or

(vi) 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
level of responsibility, (B) a reduction in Optionee's level of
compensation (including base salary, fringe benefits and participation
in corporate-performance based bonus or incentive programs) by more
than fifteen 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.

Q. 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

A-2
<PAGE> 11

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).

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

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

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

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

V. 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.

W. 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.

X. PLAN shall mean the Corporation's 1995 Stock Incentive Plan.

Y. PLAN ADMINISTRATOR shall mean either the Board or a committee
of Board members, to the extent the committee is at the time responsible for
the administration of the Plan.

Z. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic
Relations Order which substantially complies with the requirements of Code
Section 414(p). The Plan Administrator shall have the sole discretion to
determine whether a Domestic Relations Order is a Qualified Domestic Relations
Order.

AA. 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.

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

CC. 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

A-3
<PAGE> 12

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.

A-4

<PAGE> 1
STOCK OPTION ASSUMPTION AND CONVERSION AGREEMENT

OPTIONEE: 1-
GRANT DATE: 2-
NUMBER OF CARDIOMETRICS SHARES: 3-
ORIGINAL EXERCISE PRICE PER SHARE: 4-

WHEREAS, the undersigned Optionee was previously granted the
stock option described above (the "Option") to purchase shares of the common
stock of Cardiometrics, Inc. ("Cardiometrics") pursuant to the Cardiometrics
1995 Stock Incentive Plan (the "Plan").

WHEREAS, Cardiometrics has been acquired by EndoSonics
Corporation, a Delaware corporation ("EndoSonics"), pursuant to the Agreement
and Plan of Reorganization dated as of January 26, 1997 (the "Reorganization
Agreement") by and among EndoSonics, River Acquisition Corporation, a
wholly-owned EndoSonics subsidiary ("EndoSonics Sub"), and Cardiometrics.

WHEREAS, the Reorganization Agreement was approved by an
affirmative vote of a majority of the Cardiometrics stockholders on July 23,
1997 ("Merger Effective Date"), and EndoSonics Sub was merged into Cardiometrics
(the "Merger") at that time so that Cardiometrics has become a wholly-owned
EndoSonics subsidiary.

WHEREAS, in consummation of the Merger, each Cardiometrics
stockholder received cash and securities with an aggregate value of $8.2765
("Merger Consideration") for each share of Cardiometrics common stock held of
record by such stockholder. The actual components of the Merger Consideration
were as follows:

(i) $3.00 in cash (the "Cash Consideration"),

(ii) a 0.1364 fractional interest in
CardioVascular Dynamics common stock valued
at $1.0196 (the "CVD Consideration"), and

(iii) a 0.35 fractional interest in EndoSonics
common stock valued at $4.2569 (the
"EndoSonics Consideration").

WHEREAS, the Option was outstanding on the Merger Effective
Date and eligible for assumption in accordance with the provisions of the Plan
and the agreement evidencing the Option (the "Option Agreement").

<PAGE> 2
WHEREAS, pursuant to Section 5.10 of the Reorganization
Agreement, all options outstanding under the Plan on the Merger Effective Date,
including the Option, were (i) assumed in part by EndoSonics so that the assumed
portion would be exercisable for shares of EndoSonics common stock, at the rate
of 0.35 shares of EndoSonics common stock for each share of Cardiometrics common
stock subject to the Option at the time of the Merger (the "Exchange Ratio), at
an adjusted exercise price per share and (ii) converted in part into the right
to receive a payment from EndoSonics (the "Conversion Payment") partly in cash
and partly in the form of shares of the common stock of Cardio Vascular
Dynamics, Inc., a Delaware corporation ("CVD").

WHEREAS, certain adjustments to the assumed portion of the
Option are necessary to reflect the effect of the assumption of that Option by
EndoSonics in connection with the merger.

NOW, THEREFORE, it is hereby agreed as follows:

1. EndoSonics hereby assumes part of the Option and all the
duties and obligations of Cardiometrics with respect to that part of the Option.
The portion of the Option hereby assumed shall cover the number of shares of
EndoSonics common stock indicated below which EndoSonics hereby agrees to issue
upon (i) the exercise of that Option in accordance with the provisions of the
Option Agreement (as supplemented hereby) and (ii) the payment of the adjusted
exercise price per share set forth below.

<TABLE>
<CAPTION>
CARDIOMETRICS ASSUMED OPTION
STOCK OPTION

# OF SHARES # SHARES
CARDIOMETRICS EXERCISE ENDOSONICS ADJUSTED EXERCISE
COMMON STOCK PRICE/SHARE COMMON STOCK PRICE/SHARE
------------ ----------- ------------ -----------

2. The number of shares of EndoSonics common stock purchasable
under the Assumed Option has been adjusted to reflect the Exchange Ratio at
which the outstanding shares of Cardiometrics common stock have been converted
into shares of EndoSonics common stock upon the Merger Effective Date, with the
number of such EndoSonics shares rounded down to the next whole share. The
exercise price payable per share of EndoSonics common stock under the Assumed
Option has been adjusted first to

<PAGE> 3
reflect the Exchange Ratio and then to reflect the portion of the aggregate
exercise price in effect under the Option immediately prior to the Merger which
has been allocated to Optionee's right to the Conversion Payment and then
rounded up to the next whole cent.

3. The intent of such adjustments is to assure that the spread
(calculated immediately prior to the Merger Effective Date) between the
aggregate fair market value of the EndoSonics shares purchasable under the
Assumed Option and the aggregate exercise price (as adjusted hereunder) payable
for those shares will, when added to the Conversion Payment, equal the spread
which existed immediately prior to the Merger Effective Date between the then
aggregate fair market value of the Cardiometrics common stock subject to the
Option and the aggregate exercise price in effect at such time under the Option.
Such adjustments are also designed to preserve, on a per share basis immediately
after the Merger Effective Date, the same ratio of fair market value per option
share to exercise price per share which existed under the Option immediately
prior to the Merger Effective Date.

4. EndoSonics hereby agrees to convert the balance of the
Option into the right to receive the Conversion Payment in the form of cash and
CVD common stock in an amount determined in accordance with the following
provisions:

First, the number of shares of Cardiometrics common
stock subject to the Option immediately prior to the Merger Effective
Date shall be multiplied by the sum of $3.00 (the Cash Consideration)
and $1.0196 (the CVD Consideration), and

Then, that dollar amount shall be reduced by an
amount equal to the difference between the total exercise price in
effect for the Option immediately prior to the Merger Effective Date
and the total adjusted exercise price payable for the shares of
EndoSonics common stock subject to the Assumed Option.

5. The Conversion Payment for the Option shall be in the
amount indicated below and shall be paid to Optionee within thirty (30) days
after the Merger Effective Date. The payment shall be made in cash and CVD
common stock in the same ratio as the value of each of those components of
Merger Consideration ($3.00 and $1.0196, respectively) bears to the $4.0196 of
total consideration paid per share of Cardiometrics common stock in the form of
cash and CVD common stock in consummation of the Merger. However, EndoSonics
shall withhold all applicable federal, state and local income and employment
withholding taxes from the cash portion of such payment.

3.
<PAGE> 4
<TABLE>
<CAPTION>
CARDIOMETRICS CONVERSION PAYMENT
STOCK OPTION

# SHARES TOTAL # SHARES
CARDIOMETRICS CASH CVD
COMMON STOCK PAYMENT COMMON STOCK
------------ ------- ------------

6. All references to the "Corporation" in the Option Agreement
shall be deemed to refer to EndoSonics, all references to "Common Stock" shall
be deemed to refer to the shares of EndoSonics common stock now subject to the
Assumed Option, all references to "Board" shall be deemed to refer to the Board
of Directors of EndoSonics, and all references to the "Plan Administrator" shall
be deemed to refer to the Compensation Committee of the Board. For purposes of
determining the holding period of any shares of EndoSonics common stock
delivered in payment of the exercise price of the Assumed Option, the period for
which such shares were held as Cardiometrics common stock prior to the Merger
Effective Date shall be taken into account.

7. The Assumed Option shall continue to have a maximum ten
(10)-year term measured from the original grant date of the Option, and all
references to the "Grant Date" in the Option Agreement shall continue to relate
to that original grant date. The Assumed Option, however, shall be subject to
earlier termination in accordance with Paragraph 5 of the Option Agreement
should the Optionee's Service with the Corporation terminate. However, for all
purposes of the Option Agreement, the Optionee shall be deemed to continue in
"Service" or "Service Provider" status (as applicable to the Option Agreement)
for so long as such individual continues in the service of EndoSonics or any
EndoSonics parent or subsidiary corporation now or hereafter existing, including
(without limitation) Cardiometrics, as an employee, non-employee member of the
board of directors or an independent consultant or advisor.

8. By reason of the Reorganization Agreement, the Option
accelerated upon the consummation of the Merger, and the Assumed Option is now
immediately exercisable for all the option shares and may be exercised for any
or all of those shares as fully-vested shares of EndoSonics common stock.

<PAGE> 5
9. All notices to the Company required or permitted to be
given to the Company pursuant to the provisions of the Option Agreement shall be
given to EndoSonics at the following address:

EndoSonics Corporation
2870 Kilgore Road
Rancho Cordova, CA 95670
Attention: Ms. Kathy Redd

10. Except to the extent specifically modified by this Stock
Option Assumption and Conversion Agreement, all of the terms and conditions of
the Option Agreement as in effect immediately prior to the Merger Effective Date
shall continue in full force and effect and shall not in any way be amended,
revised or otherwise affected by this Stock Option Assumption and Conversion
Agreement.

IN WITNESS WHEREOF, EndoSonics has caused this Stock Option
Assumption and Conversion Agreement to be executed on its behalf by its
duly-authorized officer as of the 23rd day of July 1997.

ENDOSONICS CORPORATION

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

ACKNOWLEDGMENT

The undersigned acknowledges receipt of the foregoing Stock
Option Assumption and Conversion Agreement and understands that all rights and
liabilities with respect to the Option as assumed in part by EndoSonics
Corporation and converted in part to the right to receive from EndoSonics
Corporation cash and shares of Cardio Vascular Dynamics, Inc. common stock are
as set forth in the Option Agreement, the Plan and such Stock Option Assumption
and Conversion Agreement.

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

Dated: , 1997
--------------------