<PAGE>   1

                                                                     EXHIBIT 4.1

                                   XICOR, INC.

                       1998 NONSTATUTORY STOCK OPTION PLAN
                   (AS AMENDED AND RESTATED DECEMBER 12, 2000)

        1.     Purposes of the Plan. The purposes of this Nonstatutory Stock
               Option Plan are:

               -      to attract and retain the best available personnel for
                      positions of substantial responsibility,

               -      to provide additional incentive to Employees and
                      Consultants, and

               -      to promote the success of the Company's business.

               Options granted under the Plan will be Nonstatutory Stock
               Options.

        2.     Definitions. As used herein, the following definitions shall
               apply:

            (a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.

            (b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.

            (c) "Board" means the Board of Directors of the Company.

            (d) "Code" means the Internal Revenue Code of 1986, as amended.

            (e) "Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 of the Plan.

            (f) "Common Stock" means the Common Stock of the Company.

            (g) "Company" means Xicor, Inc., a California corporation.

            (h) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services to such entity.

            (i) "Director" means a member of the Board.

            (j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.

<PAGE>   2


            (k) "Employee" means any person, excluding Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.

            (l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

            (m) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:

                (i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

                (ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;

                (iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.

            (n) "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option grant. The
Notice of Grant is part of the Option Agreement.

            (o) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

            (p) "Option" means a nonstatutory stock option granted pursuant to
the Plan, that is not intended to qualify as an incentive stock option within
the meaning of Section 422 of the Code and the regulations promulgated
thereunder.

            (q) "Option Agreement" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.

            (r) "Option Exchange Program" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.

            (s) "Optioned Stock" means the Common Stock subject to an Option.


                                      -2-
<PAGE>   3


            (t) "Optionee" means the holder of an outstanding Option granted
under the Plan.

            (u) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.

            (v) "Plan" means this 1998 Nonstatutory Stock Option Plan.

            (w) "Retirement" means a termination of an Optionee's status as a
Service Provider when the Optionee is age 55 or over and has continuously been a
Service Provider for at least ten (10) years on the date of such termination.

            (x) "RIF" means a termination of an Optionee's status as a Service
Provider resulting from a work force reduction or job elimination.

            (y) "Service Provider" means an Employee, Director or Consultant.

            (z) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.

            (aa) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.

        3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 3,250,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.

            If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated).

        4. Administration of the Plan.

            (a) Administration. The Plan shall be administered by (i) the Board
or (ii) a Committee, which committee shall be constituted to satisfy Applicable
Laws.

            (b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:

                (i) to determine the Fair Market Value of the Common Stock;

                (ii) to select the Service Providers to whom Options may be
granted hereunder;

                (iii) to determine whether and to what extent Options are
granted hereunder;


                                      -3-
<PAGE>   4

                (iv) to determine the number of shares of Common Stock to be
covered by each Option granted hereunder;

                (v)to approve forms of agreement for use under the Plan;

                (vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;

                (vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;

                (viii) to institute an Option Exchange Program;

                (ix) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;

                (x) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;

                (xi) to modify or amend each Option (subject to Section 14(b) of
the Plan), including the discretionary authority to extend the post-termination
exercisability period of Options longer than is otherwise provided for in the
Plan;

                (xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option previously
granted by the Administrator;

                (xiii) to determine the terms and restrictions applicable to
Options;

                (xiv) to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option that number of Shares having a Fair Market Value equal to
the amount required to be withheld. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined. All elections by an Optionee to have Shares withheld for
this purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable; and

                (xv) to make all other determinations deemed necessary or
advisable for administering the Plan.


                                      -4-
<PAGE>   5

                (c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.

        5. Eligibility. Options may be granted to Service Providers.

        6. Limitation. Neither the Plan nor any Option shall confer upon an
Optionee any right with respect to continuing the Optionee's relationship as a
Service Provider with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such relationship at any
time, with or without cause.

        7. Term of Plan. The Plan shall become effective upon its adoption by
the Board. It shall continue in effect for ten (10) years, unless sooner
terminated under Section 14 of the Plan.

        8. Term of Option. The term of each Option shall be stated in the Option
Agreement.

        9. Option Exercise Price and Consideration.

            (a) Exercise Price. The per share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be determined by the
Administrator.

            (b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.

            (c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. Such consideration may consist entirely of:

                (i) cash;

                (ii) check;

                (iii) promissory note;

                (iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;

                (v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;

                (vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;

                                      -5-
<PAGE>   6

                (vii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws; or

                (viii) any combination of the foregoing methods of payment.

        10. Exercise of Option.

            (a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. An Option may not be exercised for a fraction of
a Share.

                An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 12 of the Plan.

                Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.

            (b) Termination of Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death,
Disability or as a result of a RIF or Retirement, the Optionee may exercise his
or her Option, but only within such period of time as is specified in the Option
Agreement, and only to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). In the absence of a specified time
in the Option Agreement, the Option shall remain exercisable for three (3)
months following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified by
the Administrator, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.

            (c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option
Agreement, to the extent the Option is vested on the date of termination (but in
no event later than the expiration of the term of such Option as set forth in
the

                                      -6-
<PAGE>   7

Option Agreement). In the absence of a specified time in the Option Agreement,
the Option shall remain exercisable for twelve (12) months following the
Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.

            (d) Death of Optionee. If an Optionee dies while a Service Provider,
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

            (e) Reduction in Force. If the Optionee ceases to be a Service
Provider as a result of a RIF, the Optionee may exercise his or her Option
within such period of time as is specified in the Option Agreement, to the
extent the Option is vested on the date of termination (but in no event later
than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

            (f) Retirement of Optionee. For purposes of Options granted after
January 26, 2000, if the Optionee ceases to be a Service Provider as a result of
his or her Retirement, the Optionee may exercise his or her Option within such
period of time as is specified in the Option Agreement, to the extent the Option
is vested on the date of Retirement (but in no event later than the expiration
of the term of such Option as set forth in the Option Agreement). In the absence
of a specified time in the Option Agreement, the Option shall remain exercisable
for twelve (12) months following the Optionee's termination. If, on the date of
Retirement, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after his or her Retirement, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.

            (g) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.

                                      -7-
<PAGE>   8

        11. Non-Transferability of Options. Unless determined otherwise by the
Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.


        12. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.

            (a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.

            (b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed
action.

            (c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
or right substituted by the successor corporation or a Parent or Subsidiary of
the successor corporation. In the event that the successor corporation refuses
to assume or substitute for the Option, the Optionee shall fully vest in and
have the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an Option
becomes fully vested and exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Administrator shall notify the
Optionee in writing or electronically that the Option shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option shall terminate upon the

                                      -8-
<PAGE>   9

expiration of such period. For the purposes of this paragraph, the Option shall
be considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned
Stock, immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the merger or
sale of assets by holders of Common Stock for each Share held on the effective
date of the transaction (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger or
sale of assets is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option,
for each Share of Optioned Stock to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.

        13. Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.

        14. Amendment and Termination of the Plan.

            (a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.

            (b) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to options granted under the
Plan prior to the date of such termination.

        15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares shall comply with Applicable Laws and shall
be further subject to the approval of counsel for the Company with respect to
such compliance.

        16. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

        17. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

                                      -9-
<PAGE>   10

                                   XICOR, INC.

                    1998 NONSTATUTORY STOCK OPTION AGREEMENT
                   (AS AMENDED AND RESTATED DECEMBER 12, 2000)


I.      NOTICE OF STOCK OPTION GRANT

        NAME

You have been granted a Nonstatutory Stock Option to purchase Common Stock of
Xicor, Inc., (the "Company"), subject to the terms and conditions of the 1998
Nonstatutory Stock Option Plan (the "Plan") and this Agreement, as follows:

        Date of Grant                       ______________________________

        Vesting Commencement Date           ______________________________

        Exercise Price per Share $

        Total Number of Shares Underlying
        Options Granted                     ______________________________

        Expiration Date                     ______________________________

        Vesting Schedule:

        This Option may be exercised, in whole or in part, in accordance with
the following schedule:

        25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 1/36th of the remaining Shares subject to the
Option shall vest each month thereafter on the same day of the month as the
Vesting Commencement Date, subject to the Optionee continuing to be a Service
Provider on such dates.

Termination Period:

This Option may be exercised for three (3) months after Optionee ceases to be a
Service Provider; provided, however, that upon death, Disability or termination
as a result of a RIF or Retirement of the Optionee, this Option may be exercised
for one year after the date of such termination. In no event shall this Option
be exercised later than the Expiration Date as provided above.

<PAGE>   11



II.     AGREEMENT

        1. Grant of Option. The Board hereby grants to the Optionee named in the
Notice of Grant attached as Part I of this Agreement the Option to purchase the
number of Shares, as set forth in the Notice of Grant, at the exercise price per
share set forth in the Notice of Grant (the "Exercise Price"), subject to the
terms and conditions of the Plan and this Agreement.

        2. Exercise of Option.

               (a)    Right to Exercise. This Option is exercisable during its
                      term in accordance with the Vesting Schedule set out in
                      the Notice of Grant and the applicable provisions of the
                      Plan and this Agreement.

               (b)    Method of Exercise. This Option is exercisable by delivery
                      of an exercise notice, in the form attached as Exhibit A
                      (the "Exercise Notice"), which shall state the election to
                      exercise the Option, the number of Shares in respect of
                      which the Option is being exercised (the "Exercised
                      Shares"), and such other representations and agreements as
                      may be required by the Company. The Exercise Notice shall
                      be completed by the Optionee and delivered to the
                      Corporate Controller of the Company or any third party
                      administering the Plan on behalf of the Company. The
                      Exercise Notice shall be accompanied by payment of the
                      aggregate Exercise Price as to all Exercised Shares. This
                      Option shall be deemed to be exercised upon receipt by the
                      Company or the third party administrator of such fully
                      executed Exercise Notice accompanied by such aggregate
                      Exercise Price.

                (c) Legal Compliance. No Shares shall be issued pursuant to the
exercise of this Option unless such issuance and exercise complies with
Applicable Laws. Assuming such compliance, for income tax purposes the Exercised
Shares shall be considered transferred to the Optionee on the date the Option is
exercised with respect to such Exercised Shares.

        3. Method of Payment. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:

               (a)    cash; or

               (b)    check; or

               (c)    delivery of a properly executed exercise notice together
                      with such other documentation as the Administrator and the
                      broker, if applicable, shall require to effect an exercise
                      of the Option and delivery to the Company of the sale or
                      loan proceeds required to pay the exercise price.

        4. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of the Plan and this Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.



                                       2
<PAGE>   12


        5. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.

        6. Tax Consequences. Some of the federal tax consequences relating to
this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.

        7. Exercising the Option. The Optionee may incur regular federal income
tax liability upon exercise of a Nonstatutory Stock Option (an "NSO"). The
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Exercised Shares on the date of exercise over their aggregate Exercise
Price. If the Optionee is an Employee or a former Employee, the Company will be
required to withhold from his or her compensation or collect from Optionee and
pay to the applicable taxing authorities an amount in cash equal to a percentage
of this compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.

        8. Disposition of Shares. If the Optionee holds NSO Shares for at least
one year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.

        9. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Agreement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws, but not
the choice of law rules, of California.

        10. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.


                                       3
<PAGE>   13


        By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Agreement. Optionee has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of the Plan and this Agreement. Optionee hereby
agrees to accept as binding, conclusive and final all decisions or
interpretations of the Board upon any questions relating to the Plan and this
Agreement. Optionee further agrees to notify the Company upon any change in the
residence address indicated below.


OPTIONEE                                    XICOR, INC.

-------------------------------             --------------------------------
Signature                                   By

-------------------------------             --------------------------------
Print Name                                  Title

-------------------------------
Residence Address

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



                                       4
<PAGE>   14



                                    EXHIBIT A
                                   XICOR, INC.
                    1998 NONSTATUTORY STOCK OPTION AGREEMENT
                                 EXERCISE NOTICE

Xicor, Inc.
1511 BuckeyeDrive
Milpitas, CA  95035

Attention:  Corporate Controller

        1. Exercise of Option. Effective as of today, ________________, the
undersigned ("Optionee"), a Service Provider of Xicor, Inc. (the "Company"),
hereby elects to purchase ______________ shares (the "Shares") of the Common
Stock of the Company under and pursuant to the 1998 Nonstatutory Stock Option
Plan (the "Plan") and the Stock Option Agreement (the "Option Agreement") dated
____________________. The purchase price for the Shares shall be $ ______, as
required by the Option Agreement.

        2. Delivery of Payment. Optionee herewith delivers to the Company the
full purchase price for the Shares, plus any federal or state taxes required to
be withheld.

        3. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.

        4. Rights as Shareholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 12 of the
Plan.

        5. Tax Consultation. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.


<PAGE>   15

        6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.


Submitted by:                               Accepted by:

-------------------------------             --------------------------------
Signature                                   By

-------------------------------             --------------------------------
Print Name                                  Its

Address:                                    Address:
                                            1511 Buckeye Drive
-------------------------------             Milpitas, CA 95035

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



                                       2