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                                                                    EXHIBIT 10.1



                           PILOT THERAPEUTICS, INC.

                            1998 STOCK OPTION PLAN

             (As Amended and Restated Effective December 19, 2000)
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                           PILOT THERAPEUTICS, INC.
                            1998 STOCK OPTION PLAN


1.   Purpose
     -------

     The purpose of the Pilot Therapeutics, Inc. 1998 Stock Option Plan, as
amended and restated (formerly, the Pilot Biotechnologies, Inc. 1998 Stock
Option Plan) (the "Plan"), is to encourage and enable selected employees,
directors, independent contractors, consultants and advisors in the service of
Pilot Therapeutics, Inc. (the "Company") or a related corporation to acquire or
to increase their holdings of common stock of the Company, $0.001 par value per
share (the "Common Stock"), in order to promote a closer identification of their
interests with those of the Company and its shareholders, thereby further
stimulating their efforts to enhance the efficiency, soundness, profitability,
growth and shareholder value of the Company. This purpose will be carried out
through the granting of incentive stock options ("Incentive Options") intended
to qualify under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), and nonqualified stock options ("Nonqualified Options"). Incentive
Options and Nonqualified Options shall be referred to herein collectively as
"Options."

2.   Administration of the Plan
     --------------------------

          (a)  The Plan shall be administered by the Board of Directors of the
     Company (the "Board" or the "Board of Directors"), unless the Board
     delegates all or part of such authority to the Compensation Committee of
     the Board (the "Committee"). For the purposes herein, unless the authority
     of the Board is delegated to the Committee as contemplated by the preceding
     sentence, all references to the "Committee" herein shall be deemed
     references to the Board. To the extent the Company is or becomes subject to
     the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
     Committee shall include no fewer than the minimum number of "non-employee
     directors," as such term is defined in Rule 16b-3 promulgated under the
     Exchange Act, as may be required by Rule 16b-3 or any successor rule,
     unless the Board determines that such Committee composition is not
     necessary or advisable. Further, in the event that the Company becomes
     subject to the requirements of Section 162(m) of the Code, the Committee
     shall, unless the Board determines otherwise, be comprised solely of two or
     more "outside directors," as such term is defined under Section 162(m) or
     the regulations thereunder, or otherwise in accordance with Section 162(m)
     and such regulations.

          (b)  Any action of the Committee may be taken by a written instrument
     signed by all of the members of the Committee and any action so taken by
     written consent shall be as fully effective as if it had been taken by a
     majority of the members at a meeting duly held and called. Subject to the
     provisions of the Plan, the Committee shall have full and final authority,
     in its discretion, to take any action with respect to the Plan including,
     without limitation, the following: (i) to determine the individuals to
     receive Options, the nature of each Option as an Incentive Option or a
     Nonqualified Option, the times when Options shall be granted, the number of
     shares to be subject to each Option, the Option price (determined in
     accordance with Section 6(b)), the Option period, the time or times when
     each Option shall be exercisable and the other terms, conditions,
     restrictions and limitations of an Option; (ii) to prescribe the form or
     forms of the agreements evidencing any Options granted under the Plan
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     ("Option Agreements"); (iii) to establish, amend and rescind rules and
     regulations for the administration of the Plan; and (iv) to construe and
     interpret the Plan, the rules and regulations, and the Option Agreements
     evidencing Options granted under the Plan, to correct any defect, supply
     any omission or reconcile any inconsistency in the Plan or any Option
     Agreement and to make all other determinations deemed necessary or
     advisable for administering the Plan.  In addition, the Committee shall
     have complete authority, in its discretion, to accelerate the date that any
     Option which is not otherwise exercisable shall become exercisable in whole
     or in part, without any obligation to accelerate such date with respect to
     any other Option granted to any person.   All determinations of the
     Committee with respect to the Plan will be final and binding on the Company
     and all persons having or claiming an interest in any Option awarded under
     the Plan.  In addition, the Committee shall have the authority and
     discretion to establish terms and conditions of Options as the Committee
     determines to be necessary or appropriate to conform to the applicable
     requirements or practices of jurisdictions outside of the United States.
     No member of the Board or Committee, as applicable, shall be liable for any
     action or determination made in good faith with respect to the Plan or any
     Option or Option Agreement.

          (c)  Notwithstanding the other provisions of Section 2, the Committee
     may delegate to the Chief Executive Officer or President of the Company the
     authority to grant Options to eligible persons, and to make any or all of
     the determinations reserved for the Committee in the Plan and summarized in
     Section 2(b) with respect to such Options (subject to such terms and
     restrictions as may be established by the Committee); provided, however,
     that, to the extent required by Section 16 of the Exchange Act or Section
     162(m) of the Code, an Optionee, at the time of said grant or other
     determination: (i) is not deemed to be an officer or director of the
     Company within the meaning of Section 16 of the Exchange Act; and (ii) is
     not deemed to be a "covered employee" (as defined in Section 162(m) of the
     Code and related regulations).  To the extent that the Committee has
     delegated authority to grant Options pursuant to this Section 2(c) to the
     Chief Executive Officer or President, references to the Committee shall
     include references to such person, subject, however, to the requirements of
     the Plan, Rule 16b-3 and other applicable law.

3.   Effective Date
     --------------

     The effective date of the Plan shall be December 11, 1998.  The Plan was
amended on April 28, 1999 and amended and restated effective December 19, 2000.
Options may be granted under the Plan on and after the effective date, but not
after December10, 2008.

4.   Options; Shares of Stock Subject to the Plan
     --------------------------------------------

     Both Incentive Options and Nonqualified Options, as designated by the
Committee, may be granted under the Plan. Subject to adjustment as provided in
Section 9, the shares of Common Stock that may be issued and sold pursuant to
Options shall not exceed in the aggregate 900,000 shares of authorized but
unissued or reacquired shares of the Common Stock of the Company. The Company
hereby reserves sufficient authorized shares of Common Stock to provide for the
exercise of Options granted hereunder. Any shares of Common Stock subject to an
Option which, for any reason, expires or is terminated unexercised as to such
shares may again be subject to an Option granted under the Plan. No Optionee may
be granted Options in any calendar year for more than 500,000 shares of Common
Stock (subject to adjustment as provided in Section 9).

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5.   Eligibility
     -----------

     An Option may be granted only to a person who satisfies the following
eligibility requirements on the date the Option is granted:

          (a)  The person is either (i) a employee of the Company or a related
     corporation or (ii) an independent contractor, consultant or advisor
     (collectively, "independent contractors") providing bona fide services to
     the Company or a related corporation. Directors of the Company or a related
     corporation who are otherwise eligible to participate in the Plan may be
     granted Options under the Plan. For this purpose, an individual shall be
     considered to be an "employee" only if there exists between the individual
     and the Company or a related corporation the legal and bona fide
     relationship of employer and employee. In determining whether such a
     relationship exists, the regulations of the United States Treasury
     Department relating to the determination of the employment relationship for
     the purpose of collection of income tax on wages at the source shall be
     applied.

          (b)  With respect to the grant of an Incentive Option, the person is
     an employee who does not own, immediately before the time that the
     Incentive Option is granted, stock possessing more than ten percent (10%)
     of the total combined voting power of all classes of stock of the Company
     or a related corporation; provided, that an individual owning more than ten
     percent (10%) of the total combined voting power of all classes of stock of
     the Company or a related corporation may be granted an Incentive Option if
     the price at which such Option may be exercised is greater than or equal to
     110% of the fair market value of the shares on the date the Option is
     granted and the Option period does not exceed five years. For this purpose,
     an individual will be deemed to own stock which is attributed to him under
     Section 424(d) of the Code.

          (c)  The person, being otherwise eligible under this Section 5, is
     selected by the Committee as a person to whom an Option shall be granted
     (an "Optionee").

6.   Grant of Options; Option Price
     ------------------------------

          (a)  Subject to the limitations of the Plan, the Committee may in its
     sole and absolute discretion grant Options to such eligible persons in such
     numbers, upon such terms and at such times as the Committee shall
     determine.  Both Incentive Options and Nonqualified Options may be granted
     under the Plan; provided, however, that Incentive Options may only be
     granted to employees of the Company or a related corporation.  To the
     extent that a Option is designated as an Incentive Option but does not
     qualify as such under Section 422 of the Code, the Option (or portion
     thereof) shall be treated as a Nonqualified Option.

          (b)  The price per share at which an Option may be exercised (the
     "Option price") shall be established by the Committee at the time the
     Option is granted and shall be set forth in the terms of the Option
     Agreement evidencing the Option; provided, that, (i) the Option price per
     share shall be not less than the par value per share of the Common Stock;
     and (ii) in the case of an Incentive Option, the Option price shall be
     equal to or greater than the fair market value per share of the Common
     Stock on the date the Option is granted. In addition, the following rules
     shall apply:

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               (i)    An Incentive Option shall be considered to be granted on
          the date that the Committee acts to grant the Option, or on any later
          date specified by the Committee as the date of grant of the Option. A
          Nonqualified Option shall be considered to be granted on the date the
          Committee acts to grant the Option or any other date specified by the
          Committee as the date of grant of the Option.

               (ii)   The "fair market value" per share of the Common Stock
          shall be determined in good faith by the Committee, and, unless the
          Committee determines otherwise, the fair market value shall be
          determined in accordance with the following provisions: (A) if the
          shares of Common Stock are listed for trading on the American Stock
          Exchange or the New York Stock Exchange or included in the Nasdaq
          National Market, the fair market value shall be the closing sales
          price of the Common Stock on the American Stock Exchange or the New
          York Stock Exchange or as reported on the Nasdaq National Market (as
          applicable) on the date immediately preceding the date the Option is
          granted or such other date as to which a determination is made (the
          "valuation date"), or, if there is no transaction on such date, then
          on the trading date nearest preceding the valuation date for which
          closing price information is available; (B) if the shares of Common
          Stock are quoted on the Nasdaq Small Cap Market of the Nasdaq Stock
          Market but are not listed for trading on the New York Stock Exchange
          or American Stock Exchange or included in the Nasdaq National Market,
          the average of the closing bid and asked prices on the date
          immediately preceding the valuation date; or (C) if the shares of
          Common Stock are not listed or reported in any of the foregoing, then
          fair market value shall be determined by the Committee in good faith
          in accordance with the applicable provisions of Section 20.2031-2 of
          the Federal Estate Tax Regulations, or in any other manner consistent
          with the Code and accompanying regulations.

               (iii)  In no event shall there first become exercisable by the
          Optionee in any one calendar year Incentive Options granted by the
          Company or any related corporation with respect to shares having an
          aggregate fair market value (determined in accordance with Section
          6(b)(ii) at the time an Option is granted) greater than $100,000;
          provided, that if such limit is exceeded, then the first $100,000 of
          shares to become exercisable in such calendar year will be Incentive
          Options and the Options for shares with a value in excess of $100,000
          that first became exercisable in that calendar year will be
          Nonqualified Options. In the event the Code or the regulations
          promulgated thereunder are amended after the effective date of this
          Plan to provide for a different limit on the fair market value of
          shares permitted to be subject to Incentive Options, then such
          different limit shall be automatically incorporated herein and will
          apply to any Incentive Option granted after the date of such
          amendment.

7.   Option Period and Limitations on the Right to Exercise Options
     --------------------------------------------------------------

          (a)  The term of an Option (the "Option period") shall be determined
     by the Committee when the Option is granted and shall not extend more than
     ten (10) years from the date on which the Option is granted. An Option
     shall be exercisable on such date or dates, during such period, for such
     number of shares, and subject to such conditions as shall be determined by
     the Committee and set forth in the Option Agreement, subject to the right
     of the Committee to accelerate the time when Options may be exercised at
     any time and for any

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     reason. Any Option or portion thereof not exercised before the expiration
     of the Option period shall terminate.

          (b)  An Option may be exercised by giving written notice of at least
     ten (10) days to the Committee or its designee at such place and upon such
     terms and conditions as the Committee shall direct.  Such notice shall
     specify the number of shares to be purchased pursuant to an Option and the
     aggregate purchase price to be paid therefor, and shall be accompanied by
     the payment of such purchase price.  Unless an Option Agreement provides
     otherwise, such payment shall be in cash (or in the form of a check) and,
     where expressly approved for the Optionee by the Committee and where
     permitted by law, payment may also be made:

               (i)   by cancellation of indebtedness of the Company to the
          Optionee;

               (ii)  by surrender of shares of Common Stock (valued at the date
          of exercise at their fair market value by the Committee by applying
          the provisions of Section 6(b)(ii)) that have been owned by Optionee
          for more than six (6) months, have been paid for within the meaning of
          SEC Rule 144 and are otherwise acceptable to the Committee (and, if
          such shares were purchased from the Company by use of a promissory
          note, such note has been fully paid with respect to such shares);

               (iii) by withholding shares of Common Stock (valued at the date
          of exercise at their fair market value by the Committee by applying
          the provisions of Section 6(b)(ii)) otherwise issuable upon exercise
          of the Option;

               (iv)  by tender of a full recourse promissory note having such
          terms as may be approved by the Committee and bearing interest at a
          rate sufficient to avoid imputation of income under Sections 483 and
          1274 of the Code; provided, however, that Optionees who are not
          employees or directors of the Company will not be entitled to purchase
          shares with a promissory note unless the note is adequately secured by
          collateral other than the shares; provided, further, that the portion
          of the purchase price equal to the par value of the shares must be
          paid in cash or other legal consideration permitted by North Carolina
          Business Corporation Act;

               (v)   by waiver of compensation due or accrued to the Optionee
          for services rendered to the Company;

               (vi)  with respect only to purchases upon exercise of an Option
          after a public market for the Common Stock exists:

                     (A)  through a "same day sale" commitment from the Optionee
               and a broker-dealer that is a member of the National Association
               of Securities Dealers (an "NASD Dealer") whereby the Optionee
               irrevocably elects to exercise the Option and to sell a portion
               of the shares so purchased to pay for the exercise price, and
               whereby the NASD Dealer irrevocably commits upon receipt of such
               shares to forward the exercise price directly to the Company; or

                                       5
<PAGE>

                     (B)  through a "margin" commitment from the Optionee and an
               NASD Dealer whereby the Optionee irrevocably elects to exercise
               the Option and to pledge the shares so purchased to the NASD
               Dealer in a margin account as security for a loan from the NASD
               Dealer in the amount of the exercise price, and whereby the NASD
               Dealer irrevocably commits upon receipt of such shares to forward
               the exercise price directly to the Company; or

               (vii) by any combination of the foregoing.

     For the purposes herein, a "public market" for the Common Stock shall be
     deemed to exist (i) upon consummation of a firm commitment underwritten
     public offering of the Common Stock pursuant to an effective registration
     statement under the Securities Act of 1933, as amended (the "Securities
     Act"), or (ii) if the Committee otherwise determines that there is an
     established public market for the Common Stock.

          (c)  Unless the Committee determines otherwise, no Option granted to
     an Optionee who was an employee at the time of grant shall be exercised
     unless the Optionee is, at the time of exercise, an employee as described
     in Section 5(a), and has been an employee continuously since the date the
     Option was granted, subject to the following:

               (i)   An Option shall not be affected by any change in the terms,
          conditions or status of the Optionee's employment, provided that the
          Optionee continues to be an employee of the Company or a related
          corporation.

               (ii)  The employment relationship of an Optionee shall be treated
          as continuing intact for any period that the Optionee is on military
          or sick leave or other bona fide leave of absence; provided, that the
          period of such leave does not exceed ninety (90) days, or, if longer,
          as long as the Optionee's right to re-employment is guaranteed either
          by statute or by contract.  The employment relationship of an Optionee
          shall also be treated as continuing intact while the Optionee is not
          in active service because of disability.  For purposes of the Plan,
          "disability" shall mean the inability of the Optionee to engage in any
          substantial gainful activity by reason of any medically determinable
          physical or mental impairment which can be expected to result in
          death, or which has lasted or can be expected to last for a continuous
          period of not less than twelve (12) months.  The Committee shall
          determine whether an Optionee is disabled within the meaning of this
          paragraph and, if applicable, the date of an Optionee's termination of
          employment or service for any reason (the "termination date").

               (iii) Unless the applicable Option Agreement provides otherwise,
          if the employment of an Optionee is terminated because of disability
          within the meaning of subparagraph (ii) above, or if the Optionee dies
          while he or she is an employee or dies within ninety (90) days after
          the date of termination of his or her employment (the "termination
          date") because of disability, the Option may be exercised only to the
          extent that it was exercisable on the termination date, except that
          the Committee may in its discretion accelerate the date for exercising
          all or any part of the Option which was not otherwise exercisable on
          the termination date.  The Option must be exercised, if at all, prior
          to the first to occur of the following, whichever shall be

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          applicable: (A) in the case of Options granted prior to December 19,
          2000, the close of the period of ninety (90) days next succeeding the
          termination date, and in the case of options granted on or after
          December 19, 2000, the close of the period of twelve (12) months next
          succeeding the termination date (or, in either case, such other time
          period as may be specified in the Option Agreement); or (B) the close
          of the Option period. In the event of the Optionee's death, such
          Option shall be exercisable by such person or persons as shall have
          acquired the right to exercise the Option by will or by the laws of
          intestate succession.

               (iv)  Unless the applicable Option Agreement provides otherwise,
          if the employment of the Optionee is terminated for any reason other
          than disability (as defined in subparagraph (ii) above) or death or
          for "cause," his or her Option may be exercised to the extent
          exercisable on the termination date, except that the Committee may in
          its discretion accelerate the date for exercising all or any part of
          the Option that was not otherwise exercisable on the termination date.
          The Option must be exercised, if at all, prior to the first to occur
          of the following, whichever shall be applicable:  (A) in the case of
          Options granted prior to December 19, 2000, the close of the period of
          thirty (30) days next succeeding the termination date, and in the case
          of options granted on or after December 19, 2000, the close of the
          period of ninety (90) days next succeeding the termination date (or,
          in either case, such other time period as may be specified in the
          Option Agreement); or (B) the close of the Option period.  If the
          Optionee dies following such termination of employment and prior to
          the earlier of the dates specified in (A) or (B) of this subparagraph
          (iv), the Optionee shall be treated as having died while employed
          under subparagraph (iii) immediately preceding (treating for this
          purpose the Optionee's date of termination of employment as the
          termination date).  In the event of the Optionee's death, such Option
          shall be exercisable by such person or persons as shall have acquired
          the right to exercise the Option by will or by the laws of intestate
          succession.

               (v)   Unless the applicable Option Agreement provides otherwise,
          if the employment of the Optionee is terminated for "cause," his or
          her Option shall lapse and no longer be exercisable as of the
          effective time of his or her termination of employment, as determined
          by the Committee. For purposes of this subparagraph (v) and
          subparagraph (iv) and Section 7(d), the Optionee's termination shall
          be for "cause" if such termination results from any one or more of the
          following events, circumstances or occurrences: (A) the Optionee's
          material breach of any written employment, consulting, advisory,
          proprietary information, nondisclosure or other agreement with the
          Company and his or her subsequent failure to cure such breach to the
          satisfaction of the Committee within the cure period provided in such
          agreement, if any; (B) the Optionee's conviction of, or entry of a
          plea of guilty or nolo contendere to, a felony or any misdemeanor
          involving moral turpitude if the Committee reasonably determines that
          such conviction or plea materially adversely affects the Company; (C)
          the commission of an act of fraud or dishonesty by the Optionee if the
          Board reasonably determines that such act materially adversely affects
          the Company; or (D) Optionee's intentional damage or destruction of
          substantial property of the Company. The determination of "cause"
          shall be made by the Committee and its determination shall be final
          and conclusive.

                                       7
<PAGE>

               (vi) Notwithstanding the foregoing, the Committee shall have
          authority, in its sole discretion, to accelerate the date for
          exercising all or any part of an Option held by an employee that was
          not otherwise exercisable on the termination date, extend the period
          during which an Option may be exercised, modify the other terms and
          conditions of exercise, or any combination of the foregoing; provided
          that, in the event that any such extension or modification shall cause
          an Incentive Option to be designated as a Nonqualified Option, no such
          extension or modification shall be made without the consent of the
          Optionee.

          (d)  Unless the applicable Option Agreement provides otherwise, an
     Option granted to an Optionee who was an independent contractor or non-
     employee director of the Company or a related corporation at the time of
     grant (and who does not thereafter become an employee, in which case he
     shall be subject to the provisions of Section 7(c) herein) may be exercised
     (unless the termination was for cause) only to the extent exercisable on
     the date of the Optionee's termination of service to the Company or a
     related corporation as determined by the Committee, and must be exercised,
     if at all, prior to the first to occur of the following, as applicable: (A)
     the close of the period of ninety (90) days next succeeding the termination
     date (or such other time period as may be specified in the Option
     Agreement); or (B) the close of the Option period. If the services of an
     independent contractor are terminated for cause or a non-employee director
     is removed for cause (as defined in Section 7(c)(v) herein), the Option
     shall lapse and no longer be exercisable as of the effective time of his
     termination of services, as determined by the Committee. Notwithstanding
     the foregoing, the Committee may in its sole discretion accelerate the date
     for exercising all or any part of an Option held by an independent
     contractor or non-employee director that was not otherwise exercisable on
     the termination date, extend the period during which such an Option may be
     exercised, modify the other terms and conditions of exercise, or any
     combination of the foregoing.

          (e)  A certificate or certificates for shares of Common Stock acquired
     upon exercise of an Option will be issued in the name of the Optionee (or
     his beneficiary) and delivered to the Optionee (or his beneficiary) as soon
     as practical following receipt of notice of exercise and payment of the
     Option price.  An Optionee or his legal representative, legatees or
     distributees shall not be deemed to be the holder of any shares subject to
     an Option unless and until certificates for such shares are issued to him
     or them under the Plan.

          (f)  Nothing in the Plan shall confer upon the Optionee any right to
     continue in the service of the Company or a related corporation as an
     employee, director, advisor, consultant or independent contractor, as the
     case may be, or to interfere in any way with the right of the Company or a
     related corporation to terminate the Optionee's employment or service at
     any time.

8.   Nontransferability of Options and Shares
     ----------------------------------------

     Incentive Options granted pursuant to the Plan shall not be transferable
(including by pledge or hypothecation) other than by will or the laws of
intestate succession. Nonqualified Options granted pursuant to the Plan shall
not be transferable (including by pledge or hypothecation) other than by will or
the laws of intestate succession, except as may be permitted by the Committee in
a manner consistent with the registration provisions of the Securities Act. In
connection with any permitted transfer of an Option, the Committee may condition
such transfer on the imposition of

                                       8
<PAGE>

transfer restrictions, rights of first refusal and other similar restrictions it
deems advisable. Except in the case of permitted transfers of Nonqualified
Options in accordance with this Section 8, an Option shall be exercisable during
the Optionee's lifetime only by him. To the extent required by Section 16 of the
Exchange Act, shares acquired upon the exercise of an Option shall not, without
the consent of the Committee, be transferable (including by pledge or
hypothecation) until the expiration of six months after the date the Option was
granted.

9.   Dilution or Other Adjustments
     -----------------------------

     If the number of outstanding shares of Common Stock of the Company is
changed as a result of a reorganization, recapitalization, stock dividend, stock
split, reverse stock split, subdivision, combination, reclassification or other
change in the capital stock structure of the Company without consideration, then
the Committee shall make such adjustments to the exercise price and number of
shares subject to Options, to the number of shares reserved for issuance and
issuable under the Plan, and to any provisions of this Plan as the Committee
deems equitable to prevent dilution or enlargement of Options or otherwise
advisable to reflect such change.

10.  Assumption or Replacement of Options
     ------------------------------------

          (a)  Except to the extent an individual Option Agreement provides
     otherwise, the following provisions set forth in this Section 10(a) shall
     apply:

               (1)  In the event of (i) a dissolution or liquidation of the
          Company, (ii) a merger or consolidation in which the Company is not
          the surviving corporation (other than a merger or consolidation into a
          wholly owned subsidiary, a reincorporation of the Company in a
          different jurisdiction, or other transaction in which there is no
          substantial change in the shareholders of the Company or their
          relative stock holdings and in which the Options granted under this
          Plan are assumed, converted or replaced by the successor corporation
          on the terms provided in this Section 10, which assumption will be
          binding on all Optionees), (iii) a merger in which the Company is the
          surviving corporation but after which the shareholders of the Company
          immediately prior to such merger (other than any shareholder which
          merges, or which owns or controls another corporation which merges,
          with the Company in such merger) cease to own their shares or other
          equity interests in the Company, or (iv) the sale of substantially all
          of the assets of the Company, any or all outstanding Options may be
          assumed, converted or replaced by the successor corporation (if any)
          on the terms provided in this Section 10, which assumption, conversion
          or replacement will be binding on all Optionees.

               (2)  In order to assume, convert or replace outstanding Options,
          the successor corporation may either substitute equivalent Options or
          provide substantially similar consideration to Optionees as was
          provided to shareholders in the transaction (after taking into account
          the existing provisions of the Options).  The successor corporation
          may also issue, in place of outstanding shares of Common Stock of the
          Company held by the Optionee, substantially similar shares or other
          property subject to repurchase restrictions and other provisions no
          less favorable to the Optionee than those which applied to such
          outstanding shares under this Plan and the Option Agreement
          immediately prior to such transaction or event described in this
          Section 10(a).

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<PAGE>

               (3)  In the event such successor corporation (if any) refuses to
          assume or substitute Options as provided above pursuant to a
          transaction described in Section 10(a)(1), then notwithstanding any
          other provision in this Plan to the contrary, (i) all such Options
          outstanding as of the date the Company's shareholders act to approve
          the first event or transaction described in Section 10(a)(1) to occur
          shall become fully exercisable whether or not all or a portion of such
          Options were then otherwise exercisable; and (ii) the Company (or the
          surviving or successor corporation, as the case may be) shall provide
          Optionees with an opportunity prior to the closing or effective time
          of the applicable transaction or event to exercise such Options and,
          upon consummation of such transaction or event, such Options shall
          expire (subject to such conditions as the Committee may determine).

          (b)  Subject to any greater rights granted to Optionees under the
     foregoing provisions of this Section 10, in the event of the occurrence of
     any transaction described in Section 10(a), any outstanding Options will be
     treated as provided in the applicable agreement or plan of merger,
     consolidation, dissolution, liquidation or sale of assets.

          (c)  The Company, from time to time, also may substitute or assume
     outstanding options granted by another company, whether in connection with
     an acquisition of such other company or otherwise, by either (i) granting
     an Option under this Plan in substitution of such other company's options
     or (ii) assuming such option as if it had been granted under this Plan if
     the terms of such assumed option could be applied to an Option granted
     under this Plan.  Such substitution or assumption will be permissible if
     the holder of the substituted or assumed option would have been eligible to
     be granted an Option under this Plan if the other company had applied the
     rules of this Plan to such grant.  In the event the Company assumes an
     option granted by another company, unless otherwise determined by the
     Committee, the terms and conditions of such option will remain unchanged
     (except that the exercise price and the number and nature of shares
     issuable upon exercise of any such option will be adjusted appropriately
     pursuant to Section 424(a) of the Code).  In the event the Company elects
     to grant a new Option rather than assuming an existing option, such new
     Option may be granted with a similarly adjusted exercise price.

11.  Withholding
     -----------

     Prior to the delivery or transfer of any certificate for shares upon the
exercise of an Option or any other benefit conferred under the Plan, the Company
shall require the recipient of shares to pay to the Company in cash the amount
of any local, state or federal withholding tax or other amount required by any
governmental authority to be withheld and paid over by the Company to such
authority for the account of such Optionee. Notwithstanding the foregoing, the
Committee may, in its sole discretion, allow the Optionee to satisfy such
obligation in whole or in part, and any other local, state or federal income tax
obligations relating to the exercise of an Option, by electing to have the
Company withhold shares of Common Stock from the shares to which the Optionee is
entitled in accordance with such procedures as may be established by the
Committee.

                                      10
<PAGE>

12.  Certain Definitions
     -------------------

     For purposes of the Plan, the following terms shall have the meanings
indicated:

          (a)  "Related corporation" means any parent, subsidiary or predecessor
     of the Company.

          (b)  "Parent" or "parent corporation" shall mean any corporation
     (other than the Company) in an unbroken chain of corporations ending with
     the Company if, at the time that the Option is granted, each corporation
     other than the Company owns stock possessing fifty percent (50%) or more of
     the total combined voting power of all classes of stock in another
     corporation in the chain.

          (c)  "Subsidiary" or "subsidiary corporation" means any corporation
     (other than the Company) in an unbroken chain of corporations beginning
     with the Company if, at the time that the Option is granted, each
     corporation other than the last corporation in the unbroken chain owns
     stock possessing fifty percent (50%) or more of the total combined voting
     power of all classes of stock in another corporation in the chain.

          (d)  "Predecessor" or "predecessor corporation" means a corporation
     which was a party to a transaction described in Section 424(a) of the Code
     (or which would be so described if a substitution or assumption under that
     Section had occurred) with the Company, or a corporation which is a parent
     or subsidiary of the Company, or a predecessor of any such corporation.

     In general, terms used in the Plan shall, where appropriate, be given the
meaning ascribed to them under the provisions of the Code applicable to
Incentive Options.

13.  Stock Option Agreement
     ----------------------

     The grant of any Option under the Plan shall be evidenced by the execution
of an Option Agreement between the Company and the Optionee.  Such Option
Agreement shall set forth the date of grant of the Option, the Option price, the
Option period, the designation of the Option as an Incentive Option or a
Nonqualified Option, and the time or times when and the conditions upon the
happening of which the Option shall become exercisable.  Such Option Agreement
shall also set forth the restrictions, if any, with respect to which the shares
to be purchased thereunder shall be subject, and such other terms and conditions
as the Committee shall determine that are consistent with the provisions of the
Plan and applicable law and regulations.

14.  Legal Restrictions on Options and Shares
     ----------------------------------------

          (a)  An Option will not be effective unless such Option is in
     compliance with all applicable federal and state securities laws, rules and
     regulations of any governmental body, and the requirements of any stock
     exchange or automated quotation system upon which the shares of Common
     Stock may then be listed or quoted, as they are in effect on the date of
     grant of the Option and also on the date of exercise or other issuance.
     Notwithstanding any other provision in this Plan, the Company will have no
     obligation to issue, deliver or transfer certificates for shares under this
     Plan or to take any other action with respect to the Plan prior to (i)
     obtaining any approvals from governmental agencies that the Company
     determines are

                                      11
<PAGE>

     necessary or advisable, and (ii) compliance with any exemption, completion
     of any registration or other qualification of such shares under any state
     or federal law or ruling of any governmental body that the Company
     determines to be necessary or advisable. The Company will be under no
     obligation to register the shares of Common Stock with the SEC or to effect
     compliance with the exemption, registration, qualification or listing
     requirements of any state securities laws, stock exchange or automated
     quotation system, and the Company will have no liability for any inability
     or failure to do so.

          (b)  The Company may impose such restrictions on any shares acquired
     upon exercise of Options granted under the Plan as it may deem advisable,
     including, without limitation, restrictions necessary to ensure compliance
     with the Securities Act, under the requirements of any applicable stock
     exchange, automated quotation system or self-regulatory organization and
     under any blue sky or state securities laws applicable to such shares.  The
     Company may cause a restrictive legend to be placed on any certificate
     issued pursuant to the exercise of an Option in such form as may be
     prescribed from time to time by applicable laws and regulations or as may
     be advised by legal counsel to the Company.

15.  Amendment or Termination
     ------------------------

          (a)  The Plan may be amended or terminated at any time by action of
     the Board; provided, that (i) the approval of the shareholders of the
     Company shall be required for any amendment to the Plan for which
     shareholder approval is required under applicable law; and (ii) the
     approval of the Committee shall be required for any amendment that would
     have the effect of reducing the Committee's authority or rights under the
     Plan.

          (b)  The Committee may amend, modify, extend, renew or terminate
     outstanding Options or authorize the grant of new Options in substitution
     therefor; provided, that no outstanding Option shall be amended, modified,
     extended, renewed or terminated without the consent of the Optionee if such
     action would adversely impair the Optionee's rights with respect to such
     Option.

          (c)  The Committee may reduce the exercise price of outstanding
     Options without the consent of Optionees by a written notice to them;
     provided, that the exercise price shall not be reduced below the minimum
     exercise price that would be permitted under Section 6(b)(ii) for Options
     granted on the date the action is taken to reduce the exercise price.

16.  Applicable Law
     --------------

     The Plan shall be construed and enforced according to the laws of the State
of North Carolina, without regard to the principles of conflicts of laws.

                                      12
<PAGE>

17.  Section 16(b) Compliance
     ------------------------

     To the extent that participants in the Plan are subject to Section 16(b) of
the Exchange Act, it is the intention of the Company that transactions under the
Plan shall comply with Rule 16b-3 under the Exchange Act and, if any Plan
provision is later found not to be in compliance with Section 16 of the Exchange
Act, the provision shall be deemed null and void, and in all events the Plan
shall be construed in favor of Plan transactions meeting the requirements of
Rule 16b-3 or successor rules applicable to the Plan.

18.  Shareholder Approval
     --------------------

     The Plan is subject to the approval of the shareholders of the Company,
which approval must occur, if at all, within twelve months of the effective date
of the Plan.  All Incentive Options granted prior to shareholder approval shall
be conditioned upon such approval, and no Incentive Option shall be exercisable
prior to such approval.

19.  Code Section 162(m) Performance-Based Compensation Compliance
     -------------------------------------------------------------

     To the extent that Section 162(m) of the Code is applicable, the Committee
shall have discretion to determine the extent, if any, that Options conferred
under the Plan to covered employees, as such term is defined in Section 162(m)
of the Code and related regulations, are intended to comply with the qualified
performance-based compensation exception to employer compensation deductions set
forth in Section 162(m) of the Code.

20.  Unfunded Plan; Not a Retirement Plan
     -------------------------------------

     (a)  Neither an Optionee nor any other person shall, by reason of the Plan,
acquire any right in or title to any assets, funds or property of the Company or
any related corporation including, without limitation, any specific funds,
assets or other property which the Company or any related corporation, in their
discretion, may set aside in anticipation of a liability under the Plan.  An
Optionee shall have only a contractual right to the Common Stock or amounts, if
any, distributable or payable under the Plan, unsecured by any assets of the
Company or any related corporation.  Nothing contained in the Plan shall
constitute a guarantee that the assets of such corporations shall be sufficient
to pay any benefits to any person.

     (b)  In no event shall any amounts accrued, distributable or payable under
the Plan be treated as compensation for the purpose of determining the amount of
contributions or benefits to which any person shall be entitled under any
retirement plan sponsored by the Company or a related corporation that is
intended to be a qualified plan within the meaning of Section 401(a) of the
Code.

                                      13
<PAGE>

     IN WITNESS WHEREOF, this Pilot Therapeutics, Inc. 1998 Stock Option Plan,
as amended and restated by the authority of the Board of Directors of the
Company, is executed in behalf of the Company, the 19th day of December, 2000.


                                   PILOT THERAPEUTICS, INC.


                                   By: /s/ Floyd H. Chilton
                                       ---------------------------
                                           Floyd H. Chilton
                                           Chief Executive Officer
Attest:


/s/ Beth Fordham-Meier
-----------------------------
Beth Fordham-Meier, Secretary

[Corporate Seal]

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