EXHIBIT 10.5  COMBIMATRIX CORPORATION  2006 STOCK INCENTIVE PLAN  (as amended January 31, 2008)  ARTICLE
ONE  GENERAL
PROVISIONS  I.PURPOSE OF THE PLAN  This CombiMatrix Corporation 2006 Stock Incentive Plan
is intended to promote the interests of CombiMatrix Corporation, a Delaware
corporation, by providing eligible persons in the Corporations Service 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
such Service.  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 three separate equity incentive programs:  ·the Discretionary
Option/Stock Appreciation Right Grant Program under which eligible persons may,
at the discretion of the Plan Administrator, be granted options to purchase
shares of Common Stock,  ·the Stock Issuance
Program under which eligible persons may, at the discretion of the Plan
Administrator, be issued shares of Common Stock directly, either through the
immediate purchase of such shares or as a bonus for services rendered the
Corporation (or any Parent or Subsidiary),  ·the Automatic Option
Grant Program under which eligible non-employee Board members shall
automatically receive option grants at designated intervals over their period
of continued Board Service, and  B.The provisions of
Articles One and Five shall apply to all equity incentive programs under the
Plan and shall govern the interests of all persons under the Plan.  III.ADMINISTRATION OF THE PLAN  A.The Committee shall
have sole and exclusive authority to administer the Discretionary Option Grant
and Stock Issuance Programs with respect to Section 16 Insiders. 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 Committee, or the Board may retain the power to
administer those programs with respect to all such persons. Other than with
respect to Section 16 Insiders, the Board may also appoint an Executive
Officer Committee to administer the Discretionary Option Program and Stock
Issuance Program, subject to the applicable limitations and requirements of the
Delaware Corporate Law.  However, any
discretionary option grants or stock issuances to members of the Committee must
be authorized and approved by a disinterested majority of the Board.  B.Members of the
Committee or, if applicable, the Executive Officer Committee, shall serve for
such period of time as the Board may determine and may be removed by the Board
at any time.


C.The Plan Administrator
shall, within the scope of its administrative functions under the Plan, have
full power and authority (subject to the provisions of the Plan) to establish
such rules and regulations as it may deem appropriate for proper
administration of the Discretionary Option Grant and Stock Issuance Programs
and to make such determinations under, and issue such interpretations of, the
provisions of those programs and any outstanding options or stock issuances
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan
shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction
or any stock option or stock issuance thereunder.  D.Service on the
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 Committee or, if applicable, the Executive Officer 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.  E.Administration of the
Automatic Option Grant Program shall be self-executing in accordance with the
terms of those programs, and no Plan Administrator shall exercise any
discretionary functions with respect to any option grants or stock issuances
made under those programs.  IV.ELIGIBILITY  A.The persons eligible
to participate in the Discretionary Option Grant and Stock Issuance Programs
are as follows:  (i)Employees,  (ii)non-employee members of
the Board or the board of directors of any Parent or Subsidiary, and  (iii)consultants and other
independent advisors who provide services to the Corporation (or any Parent or
Subsidiary).  B.The Plan Administrator
shall, within the scope of its administrative jurisdiction under the Plan, have
full authority to determine, (i) with respect to the option grants under
the Discretionary Option Grant Program, which eligible persons are to receive
such grants, the time or times when those 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, if, and the extent to
which, each option is to be exercisable at a different time or times than those
times set forth in Section I.B.1. of Article Two of the Plan, 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 such issuances, the time or times when the issuances are to be made,
the number of shares to be issued to each Participant, the vesting schedule (if
any) applicable to the issued shares and the consideration for such shares.  C.The Plan Administrator
shall have the absolute discretion either to grant options in accordance with
the Discretionary Option/Stock Appreciation Right Grant Program or to effect
stock issuances in accordance with the Stock Issuance Program.  D.The individuals who
shall be eligible to participate in the Automatic Option Grant Program shall be
limited to (i) those individuals who first become non-employee Board
members after the Plan Effective Date, whether through appointment by the Board
or election by the Corporations stockholders, and (ii) those individuals
who continue to serve as non-employee Board members on the first business day
in each calendar year following the Plan Effective Date and during the term of
the Plan, including any individuals who first became non-employee Board members
prior to such 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 option grant under the Automatic Option
Grant Program at the time he or she first becomes a non-employee Board member,
but shall be eligible to receive periodic option grants under the Automatic
Option Grant Program while he or she continues to serve as a non-employee Board
member.  2


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
number of shares of Common Stock initially reserved for issuance over the term
of the Plan shall not exceed 8,100,000 shares of Common Stock.  For purposes of clarification, the shares of
Common Stock subject to the Assumed Options are not included in the 8,100,000
share of Common Stock reserved hereunder for issuance pursuant to this
paragraph, though the shares of Common Stock subject to the Assumed Options may
become available for grant under this Plan to the extent provided in Article One,
Section V.D. below.  B.The number of shares
of Common Stock available for issuance under the Plan shall automatically
increase on the first trading day of January each calendar year during the
term of the Plan, beginning with calendar year 2007, by an amount equal to
three percent (3%) of the total number of shares of Common Stock outstanding on
the last trading day in December of the immediately preceding calendar
year.  The maximum aggregate number of
shares of Common Stock that may be issued under the Plan (as adjusted for all
such annual increases) through Incentive Options shall be 30,000,000 shares of
Common Stock.  C.At such time as stock option or stock
appreciation rights granted under the Plan may qualify as performance-based
compensation under Code Section 162(m), no one person participating in the
Plan may receive stock options or separately exercisable stock appreciation
rights for more than 200,000 shares of Common Stock in the aggregate per
calendar year.  At such time as direct
stock issuances or share right awards granted under the Plan may qualify as
performance-based compensation under Code Section 162(m), no one person
participating in the Plan may receive direct stock issuances or share right
awards for more than 200,000 shares of Common Stock in the aggregate per
calendar year. In addition, the maximum dollar value payable to any one
Participant with respect to awards granted under Article Five, Section VIII.B.
is $1,000,000 per calendar year.  D.Shares of Common Stock
subject to outstanding options, Assumed Options or stock appreciation rights
shall be available for subsequent issuance under the Plan to the extent such
shares are not issued pursuant to such options, Assumed Options or stock
appreciation rights prior to the expiration, termination or cancellation of
such options, Assumed Options or stock appreciation rights for any reason.  Shares of Common Stock subject to outstanding
share right awards shall be available for subsequent issuance under the Plan to
the extent those share right awards expire, terminate or are cancelled for any
reason prior to the issuance of all shares of Common Stock subject to such
share right awards. Unvested shares issued under the Plan and subsequently
cancelled, forfeited or repurchased by the Corporation, at a price per share
not greater than the original issue price paid per share, pursuant to the
Corporations repurchase rights under the Plan shall be added back to the
number of shares of Common Stock reserved for issuance under the Plan.  In addition, (i) should no shares of
Common Stock be delivered upon the exercise of a stock appreciation right or (ii) should
the exercise price of an option under the Plan or an Assumed Option be paid
with shares of Common Stock (either shares previously held by the individual
exercising the option or shares deducted from the option) or (iii) should
shares of Common Stock otherwise issuable under the Plan or pursuant to or an
Assumed Option be withheld by the Corporation in satisfaction of the
withholding taxes incurred in connection with the exercise of an option, an
Assumed Option or stock appreciation right or in connection with a stock
issuance (including a share right award) under the Plan, then the number of
shares of Common Stock available for issuance under the Plan shall be reduced
by the net number of shares issued to the holder of the award, and not by the
gross number of shares of Common Stock for which the option, Assumed Option or
stock appreciation right is exercised or which vest or are issued pursuant to
the stock issuance (including a share right award).  E.If any change is made
to the Common Stock by reason of any stock split, stock dividend,
recapitalization, merger, reorganization, 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 by the Plan Administrator to (i) the maximum number, type
and/or class of securities issuable under the Plan, (ii) the maximum
number, type and/or class of securities for which any one person may be granted
(x) stock options and separately exercisable stock appreciation rights and
(y) direct stock issuances and share right awards under the Plan per
calendar year, (iii) the number, type and/or class of securities for which
grants are subsequently to be made under the Automatic Option Grant Program to
new and continuing non-employee Board members, (iv) the number, type
and/or class of securities and the exercise price per share in effect under
each outstanding option and stock appreciation right under the Plan, (v) the
number, kind and/or class of securities under each share right award, and (vi) the
maximum number, type and/or class of securities by which the share reserve is
to increase automatically each calendar year pursuant to the provisions of Section V.B.
of this Article One.  3


Such adjustments to the
outstanding awards are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.  ARTICLE
TWO  DISCRETIONARY
OPTION/STOCK APPRECIATION RIGHT GRANT PROGRAM  I.OPTION TERMS  Each option
shall be evidenced by one or more documents in the form approved by the Plan
Administrator; provided, however, that each such document shall comply with the
terms specified below. Each document evidencing an Incentive Option shall, in
addition, be subject to the provisions of the Plan applicable to such options.  A.EXERCISE PRICE.  1.The exercise price
per share shall be fixed by the Plan Administrator but shall not be less than
one hundred percent (100%) of the Fair Market Value per share of Common Stock
on the option grant date.  2.The exercise price
shall become immediately due upon exercise of the option and shall, subject to
the provisions of the documents evidencing the option, be payable in one or
more of the forms specified below:  (i)cash
or check made payable to the Corporation, or  (ii)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 (including the cancellation of shares of Common Stock subject
to the option), or  (iii)to the extent the option
is exercised for vested shares, through a special sale and remittance procedure
pursuant to which the Optionee shall concurrently provide irrevocable
instructions 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, or  (iv)Any other form of legal
consideration, as determined by the Plan Administrator and specifically
included in the stock option agreement.  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.  1.Each option shall
vest and 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.  4


2.Notwithstanding any
other provision of the Plan, no option shall have a term in excess of ten (10) years
measured from the option grant date.  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:  (i)Termination of
Service.  Subject to earlier
termination of the option as otherwise provided in the Plan and unless
otherwise specifically provided by the Plan Administrator with respect to an
option and set forth in the award agreement (either at grant or by amendment at
a later time), an option shall remain exercisable, to the extent vested, after
a Optionees termination of Service only during the applicable time period determined
in accordance with this Section and thereafter shall terminate and no
longer be exercisable:  (A)Death or Permanent
Disability.  If the Optionees
Service terminates because of the death or Permanent Disability of the
Optionee, the option, to the extent unexercised, vested and exercisable on the
date on which the Optionees Service terminated, may be exercised by the Optionee
(or the Optionees legal representative or estate, as applicable) at any time
prior to the expiration of twelve (12) months (or such other period of time as
determined by the Plan Administrator, in its discretion) after the date on
which the Optionees Service terminated, but in any event only with respect to
the unexercised and vested portion of the option and not after the maximum term
of the option.  (B)Termination for
Misconduct.  Notwithstanding any
other provision of the Plan to the contrary, if the Optionees Service is
terminated for Misconduct or should the Optionee otherwise engage in Misconduct
while holding one or more outstanding options, then all such options shall
terminate immediately and cease to be outstanding.  (C)Other Termination of
Service.  If the Optionees Service
terminates for any reason, except Permanent Disability, death or Misconduct,
the option, to the extent unexercised, vested and exercisable by the Optionee
on the date on which the Optionees Service terminated, may be exercised by the
Optionee at any time prior to the expiration of ninety (90) days (or such
longer or shorter period of time as determined by the Plan Administrator, in
its discretion) after the date on which the Optionees Service terminated, but
in any event only with respect to the unexercised and vested portion of the
option and not the maximum term of the option.  (ii)Any option held by the
Optionee at the time of death and exercisable in whole or in part at that time
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 the laws of descent and distribution or by the
Optionees designated beneficiary or beneficiaries of that option.  (iii)During the applicable
post-Service exercise period, the option may not be exercised in the aggregate
for more than the number of vested shares for which the option is exercisable
on the date of the Optionees cessation of Service. Upon the expiration of the
applicable exercise period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be outstanding for any vested
shares for which the option has not been exercised. However, the option shall,
immediately upon the Optionees cessation of Service, terminate and cease to be
outstanding to the extent the option is not otherwise at that time exercisable
for vested shares.  2.The Plan
Administrator shall have complete discretion, exercisable either at the time an
option is granted or at any time while the option remains outstanding, to:  (i)            extend the period of time for which
the option is to remain exercisable following the Optionees cessation of
Service from the limited exercise period otherwise in effect for that option to
such greater period of time as the Plan Administrator shall deem appropriate,
but in no event beyond the expiration of the option term and in no event to
such extent to make the option subject to Section 409A (unless given the
prior consent of the Optionee), and/or  5


(ii)permit the option to be
exercised, during the applicable post-Service exercise period, not only with
respect to the number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionees cessation of Service but also with
respect to one or more additional installments in which the Optionee would have
vested had the Optionee continued in Service.  D.STOCKHOLDER RIGHTS.
The holder of an option shall have no stockholder rights with respect to the
shares subject to the option until such person shall have exercised the option,
paid the exercise price and become a holder of record of the purchased shares.  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, but not the obligation, to repurchase any
or all of those unvested shares at a price per share equal to the lower of (i) the exercise price
paid per share or (ii) the Fair Market Value per share of Common Stock at
the time of the Optionees cessation of Service.  The terms upon which such repurchase right
shall be exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be established by
the Plan Administrator and set forth in the document evidencing such repurchase
right.  F.LIMITED
TRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, Incentive
Options shall be exercisable only by the Optionee and shall not be assignable
or transferable other than by will or the laws of descent and distribution
following the Optionees death. Non-Statutory Options shall be subject to the
same limitation, except as otherwise determined by the Plan Administrator,
including an assignment to the Optionees Immediate Family.  To the extent that a Non-Statutory Option is
assigned, 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. Notwithstanding the foregoing, the Optionee may also
designate one or more persons as the beneficiary or beneficiaries of his or her
outstanding options under this Article Two, and those options shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionees death while holding those
options. Such beneficiary or beneficiaries shall take the transferred options
subject to all the terms and conditions of the applicable agreement evidencing
each such transferred option, including (without limitation) the limited time
period during which the option may be exercised following the Optionees death.  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 and Two shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall not be subject to the terms of this Section II.  A.ELIGIBILITY. Incentive
Options may only be granted to Employees.  B.EXERCISE PRICE. The
exercise price per share shall not be less than one hundred percent (100%) of
the Fair Market Value per share of Common Stock on the option grant date.  C.DOLLAR LIMITATION. The
aggregate Fair Market Value of the shares of Common Stock (determined as of the
respective date or dates of grant) for which one or more options granted to any
Employee under the Plan (or any other option plan of the Corporation or any
Parent or Subsidiary) may for the first time become exercisable as Incentive
Options during any one calendar year shall not exceed the sum of One Hundred
Thousand Dollars ($100,000). To the extent the Employee holds two (2) or
more such options which become exercisable for the first time in the same
calendar year, the foregoing limitation on the exercisability of such options as
Incentive Options shall be applied on the basis of the order in which such
options are granted.  6


To the extent that the
options exceed this limit, the excess amount shall be considered Non-Statutory
Options.  D.FAILURE TO QUALIFY AS
INCENTIVE OPTION.  To the extent that any
option governed by this Plan does not qualify as an Incentive Option, by reason
of the dollar limitation described in Section II.C of this Article Two
or for any other reason, such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.  E.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.  III.STOCK APPRECIATION RIGHT TERMS  The
Plan Administrator may grant stock appreciation rights either in conjunction
with all or part of any option or without regard to any option, in each case
upon such terms and conditions as the Plan Administrator may establish in its
sole discretion, not inconsistent with the provisions of the Plan.  Each stock appreciation right 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.  A.RIGHT TO PAYMENT.  1.Each stock
appreciation right shall confer on the Participant to whom it is granted a
right to receive, upon exercise thereof, the excess of (A) the Fair Market
Value of one share of Common Stock on the date of exercise over (B) the
per share strike price of the stock appreciation right.  2.The Plan
Administrator shall determine the method of settlement, form of consideration
payable in settlement and method by or forms in which shares of Common Stock
will be delivered or deemed to be delivered to Participants.  3.The strike price per
share shall be fixed by the Plan Administrator but shall not be less than one
hundred percent (100%) of the Fair Market Value per share of Common Stock on
the stock appreciation right grant date.  B.EXERCISE AND TERM OF
STOCK APPRECIATION RIGHTS. Each stock appreciation right 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 stock appreciation right.  However, no stock appreciation right shall
have a term in excess of ten (10) years measured from the stock
appreciation right grant date.  C.EFFECT OF TERMINATION
OF SERVICE.  1.The following
provisions shall govern the exercise of any stock appreciation rights held by
the Participant at the time of cessation of Service or death:  (i)Any stock appreciation
right outstanding at the time of the Participant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 stock appreciation right, but no such stock appreciation right shall be
exercisable after the expiration of the stock appreciation right term.  7


(ii)Any stock appreciation
right held by the Participant at the time of death and exercisable in whole or
in part at that time may be subsequently exercised by the personal
representative of the Participants estate or by the person or persons to whom
the stock appreciation right is transferred pursuant to the Participants will
or the laws of inheritance or by the Participants designated beneficiary or
beneficiaries of that stock appreciation right.  (iii)Should the Participants
Service be terminated for Misconduct or should the Participant otherwise engage
in Misconduct while holding one or more outstanding stock appreciation rights
under this Article Two, then all those stock appreciation rights shall
terminate immediately and cease to be outstanding.  (iv)During the applicable
post-Service exercise period, the stock appreciation right may not be exercised
in the aggregate for more than the number of vested shares for which the stock
appreciation right is exercisable on the date of the Participants cessation of
Service.  Upon the expiration of the
applicable exercise period or (if earlier) upon the expiration of the stock
appreciation right term, the stock appreciation right shall terminate and cease
to be outstanding for any vested shares for which the stock appreciation right
has not been exercised.  However, the
stock appreciation right shall, immediately upon the Participants cessation of
Service, terminate and cease to be outstanding to the extent the stock
appreciation right is not otherwise at that time exercisable for vested shares.  2.The Plan Administrator
shall have complete discretion, exercisable either at the time an stock
appreciation right is granted or at any time while the stock appreciation right
remains outstanding, to:  (i)extend the period of
time for which the stock appreciation right is to remain exercisable following
the Participants cessation of Service from the limited exercise period
otherwise in effect for that stock appreciation right to such greater period of
time as the Plan Administrator shall deem appropriate, but in no event beyond
the expiration of the stock appreciation right term, and/or  (ii)permit the stock
appreciation right 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 stock appreciation right is exercisable at the time of the
Participants cessation of Service but also with respect to one or more
additional installments in which the Participant would have vested had the
Participant continued in Service.  D.STOCKHOLDER
RIGHTS.  The holder of an stock
appreciation right shall have no stockholder rights with respect to the shares
subject to the stock appreciation right until such person shall have exercised
the stock appreciation right, received shares of common stock in connection
with such exercise and become a holder of record of the purchased shares.  8


E.LIMITED
TRANSFERABILITY OF STOCK APPRECIATION RIGHTS. 
During the lifetime of the Participant, stock appreciation rights shall
be exercisable only by the Participant and shall not be assignable or
transferable other than by will or the laws of inheritance following the
Participants death, except that the Plan Administrator may structure one or
more stock appreciation rights under the Discretionary Option/Stock
Appreciation Right Grant Program so that each such stock appreciation right may
be assigned in whole or in part during the Participants lifetime to one or
more members of the Participants family or to a trust established exclusively
for one or more such family members or to Participants former spouse, to the
extent such assignment is in connection with the Participants estate plan or
pursuant to a domestic relations order. 
The assigned portion may only be exercised by the person or persons who
acquire a proprietary interest in the stock appreciation right pursuant to the
assignment.  The terms applicable to the
assigned portion shall be the same as those in effect for the stock
appreciation right immediately prior to such assignment and shall be set forth
in such documents issued to the assignee as the Plan Administrator may deem
appropriate.  Notwithstanding the
foregoing, the Participant may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding stock appreciation
rights under this Article Two, and those stock appreciation rights shall,
in accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Participants death while holding those
stock appreciation rights.  Such
beneficiary or beneficiaries shall take the transferred stock appreciation
rights subject to all the terms and conditions of the applicable agreement
evidencing each such transferred stock appreciation right, including (without
limitation) the limited time period during which the stock appreciation right
may be exercised following the Participants death.  IV.CHANGE IN CONTROL/HOSTILE TAKE-OVER  A.Except as otherwise
provided in this Section IV, none of the outstanding options or stock
appreciation rights under the Discretionary Option/Stock Appreciation Right
Grant Program shall vest in whole or in part on an accelerated basis upon the
occurrence of a Change in Control, and those options and stock appreciation
rights may be assumed, continued or substituted for by any successor
corporation in the Change in Control.  B.Except as otherwise
provided in this Section IV, none of the outstanding repurchase rights
under the Discretionary Option/Stock Appreciation Right Grant Program shall
terminate on an accelerated basis upon the occurrence of a Change in Control,
and those rights shall be assignable to any successor corporation in the Change
in Control.  C.Unless an option or
stock appreciation right is assumed, continued or substituted for by the
successor corporation (or parent thereof) or otherwise continued in full force
and effect pursuant to the terms of the Change in Control transaction, if a
Change in Control occurs while the Optionee remains in Service, the shares of
Common Stock at the time subject to each outstanding option or stock
appreciation right held by such Optionee but not otherwise vested shall
automatically accelerate so that each such option or stock appreciation right
shall, immediately prior to the effective date of the Change in Control, vest
and become exercisable for all the shares of Common Stock at the time subject
to such option or stock appreciation right and may be exercised for any or all
of those shares as fully vested shares of Common Stock.   The Corporation shall provide each holder of
an option or a stock appreciation right that is accelerated in accordance with
this paragraph at least five (5) business days notice of the vesting
acceleration.  Immediately following the
consummation of the Change in Control, each option or stock appreciation right
shall terminate and cease to be outstanding, except to the extent assumed or
substituted for by the successor corporation (or parent thereof) or otherwise
continued in full force and effect pursuant to the express terms of the Change
in Control transaction.  D.The Plan Administrator
shall have the discretionary authority to structure one or more options or
stock appreciation rights grants under the Discretionary Option/Stock Appreciation
Right Grant Program so that the vesting and exercisability of each option or
stock appreciation right shall automatically accelerate in whole or in part,
either (i) immediately prior to the effective date of that Change in
Control or Hostile Takeover, and become exercisable for all the shares of
Common Stock at the time or (ii) upon an event occurring after the Change
in Control or Hostile Takeover (including a termination of employment).    In addition, the Plan Administrator may
structure one or more of the Corporations repurchase rights so that those
rights shall immediately terminate, in whole or in part, with respect to any
shares held by the Participant (and the shares subject to those terminated repurchase
rights shall accordingly vest in full ) either (i) immediately prior to
the effective date of that Change in Control or Hostile Takeover, or (ii) upon
an event occurring after the Change in Control or Hostile Takeover (including a
termination of employment).  9


E.Each option which is
assumed or substituted for in connection with a Change in Control or otherwise
continued in effect shall be appropriately adjusted, immediately after such
Change in Control, to apply to the number and class of securities which would
have been issuable to the Optionee in consummation of such Change in Control
had the option been exercised immediately prior to such Change in Control.
Appropriate adjustments to reflect such Change in Control shall also be made to
(i) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
the same, (ii) the maximum number, type and/or class of securities
available for issuance over the remaining term of the Plan, (iii) the
maximum number, type and/or class of securities by which the share reserve is
to increase each calendar year pursuant to the automatic share increase
provisions of the Plan and (iv) the maximum number, type and/or class of
securities for which any one person may be granted options, separately
exercisable stock appreciation rights and direct stock issuances or share right
awards under the Plan per calendar year. 
To the extent the actual holders of the Corporations outstanding Common
Stock receive cash consideration for their Common Stock in consummation of the
Change in Control transaction, the successor corporation may, in connection
with the assumption of the outstanding options under the Discretionary Option
Grant Program, substitute one or more shares of its own common stock (or those
of its parent) with a fair market value equivalent to the cash consideration
paid per share of Common Stock in such Change in Control transaction.  F.Unless otherwise
determined by the Plan Administrator and expressly set forth in the documents
evidencing the option, each option outstanding under the Discretionary
Option/Stock Appreciation Right Grant Program at the time of a Hostile
Take-Over but not otherwise exercisable for all the shares of Common Stock
subject to such option at that time shall, immediately prior to the effective
date of a Hostile Take-Over, automatically vest and become exercisable for all
the shares of Common Stock at that time subject to such options on an
accelerated basis and may be exercised for any or all of such shares as fully
vested shares of Common Stock. In addition, all of the Corporations repurchase
rights under the Discretionary Option/Stock Appreciation Right Grant Program
shall terminate automatically upon the consummation of such Hostile Take-Over,
and the shares subject to those terminated rights shall thereupon immediately
vest in full, except to the extent such accelerated vesting is precluded by
limitations imposed by the Plan Administrator at the time the repurchase right
is issued.  Each option so accelerated
shall remain exercisable for fully vested shares of Common Stock until the
expiration or sooner termination of the option term.  G.The portion of any
Incentive Option accelerated in connection with a Change in Control or Hostile
Take-Over shall remain exercisable as an Incentive Option only to the extent
the applicable One Hundred Thousand Dollar ($100,000) limitation is not
exceeded. To the extent such dollar limitation is exceeded, the excess 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/Stock Appreciation Right 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.  V.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/Stock Appreciation Right Grant Program (including
outstanding options incorporated from the Predecessor Plans) and to grant (i) in
substitution new options or stock appreciation rights covering the same or a
different number of shares of Common Stock but with an exercise price per share
calculated based upon the Fair Market Value per share of Common Stock on the
new grant date; (ii) stock issuances (including share right awards); (iii) cash;
or (iv) other property.  10


ARTICLE
THREE  STOCK
ISSUANCE PROGRAM  I.STOCK ISSUANCE TERMS  Shares of Common Stock
may be issued under the Stock Issuance Program through direct and immediate
issuances without any intervening option grants. Each such stock issuance shall
be evidenced by a Stock Issuance Agreement which complies with the terms
specified below. Shares of Common Stock may also be issued under the Stock
Issuance Program pursuant to share right awards which entitle the recipients to
receive those shares upon the attainment of designated performance goals.  A.PURCHASE
PRICE.  1.The
purchase price per share shall be fixed by the Plan Administrator, but shall
not be less than any legal limit required under state law.  2.Shares
of Common Stock may be issued under the Stock Issuance Program for any of the
following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:  (i)cash
or check made payable to the Corporation for one hundred percent of the Fair
Market Value of the shares of Common Stock to be purchased,  (ii)past
services rendered to the Corporation (or any Parent or Subsidiary),  (iii)services
to be rendered to the Corporation (or any Parent or Subsidiary) during the
vesting period, or  (iv)any
other form of legal consideration that may be acceptable to the Plan
Administrator.  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 shall be determined by the Plan Administrator and
incorporated into the Stock Issuance Agreement. Shares of Common Stock may also
be issued under the Stock Issuance Program pursuant to share right awards which
entitle the recipients to receive those shares upon the attainment of
designated performance goals or in one or more installments over the
Participants period of Service. Upon the attainment of such performance goals
or Service period, fully vested shares of Common Stock shall be issued in
satisfaction of those share right awards.  2.Any
new, substituted or additional securities or other property (including money
paid other than as a regular cash dividend) which the Participant may have the
right to receive with respect to the Participants unvested shares of Common
Stock by reason of any stock dividend, stock split, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporations receipt of
consideration shall be issued subject to (i) the same vesting requirements
applicable to the Participants unvested shares of Common Stock and (ii) such
escrow arrangements as the Plan Administrator shall deem appropriate.  11


3.The
Participant shall have full stockholder rights with respect to any shares of
Common Stock issued to the Participant under the Stock Issuance Program,
whether or not the Participants interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares.  4.Should
the Participant cease to remain in Service while holding one or more unvested
shares of Common Stock issued under the Stock Issuance Program or should the
performance objectives not be attained with respect to one or more such
unvested shares of Common Stock, then those shares shall be immediately
surrendered to the Corporation for cancellation, and the Participant shall have
no further stockholder rights with respect to those shares.  To the extent the surrendered shares were
previously issued to the Participant for consideration paid in cash or cash
equivalent (including the Participants purchase-money indebtedness), the
Corporation shall repay to the Participant the lowerof (i) the cash consideration paid for the surrendered
shares or (ii) the Fair Market Value of those shares at the time of
cancellation.  5.The
Plan Administrator may in its discretion waive the surrender and cancellation
of one or more unvested shares of Common Stock which would otherwise occur upon
the cessation of the Participants Service or the non-attainment of the
performance objectives applicable to those shares. Such waiver shall result in
the immediate vesting of the Participants interest in the shares of Common
Stock as to which the waiver applies. Such waiver may be effected at any time,
whether before or after the Participants cessation of Service or the
attainment or non-attainment of the applicable performance objectives.  6.Outstanding
share right awards under the Stock Issuance Program shall automatically
terminate, and no shares of Common Stock shall actually be issued in
satisfaction of those awards, if the performance goals or Service requirements
established for such awards are not attained. The Plan Administrator, however,
shall have the discretionary authority to issue shares of Common Stock under
one or more outstanding share right awards as to which the designated
performance goals or Service requirements have not been attained.  II.CHANGE IN CONTROL/HOSTILE TAKE-OVER  A.Except
as otherwise provided in this Section II, none of the outstanding
repurchase rights under the Stock Issuance Program shall terminate on an
accelerated basis upon the occurrence of a Change in Control, and those rights
shall be assignable to any successor corporation in the Change in Control.  Except as otherwise provided in this Section II,
none of the outstanding share right awards under the Stock Issuance Program
shall vest in whole or in part on an accelerated basis upon the occurrence of a
Change in Control, and those share right awards may be assumed, continued or
substituted for by any successor corporation in the Change in Control.  B.To
the extent that the outstanding repurchase rights under the Stock Issuance
Program are not assigned to any successor corporation in the Change in Control
and are not continued by the Corporation, such outstanding repurchase rights
under the Stock Issuance Program shall terminate immediately prior to and
contingent upon the occurrence of the Change in Control.  C.Unless
a share right award is assumed or substituted for by the successor corporation
(or parent thereof) or otherwise continued in full force and effect pursuant to
the terms of the Change in Control transaction, if a Change in Control occurs
while the Participant remains in Service, the shares of Common Stock at the
time subject to each a share right award held by such Participant but not
otherwise vested shall automatically accelerate so that each such Participant
shall, immediately prior to the effective date of the Change in Control, vest
for all the shares of Common Stock at the time subject to such share right
award  and such fully vested shares of
Common Stock shall be delivered to the Participant immediately prior to and
contingent upon the Change in Control. 
The Corporation shall provide each holder of a share right award that is
accelerated in accordance with this paragraph at least five (5) business
days notice of the vesting acceleration. 
Immediately following the consummation of the Change in Control, each
option or stock appreciation right shall terminate and cease to be outstanding,
except to the extent assumed or substituted for by the successor corporation
(or parent thereof) or otherwise continued in full force and effect pursuant to
the express terms of the Change in Control transaction.  12


D.To
the extent a share right award is not assumed, continued or substituted for by
the successor corporation (or parent thereof) or otherwise continued in full
force and effect pursuant to the terms of the Change in Control transaction,
then such share right award shall become fully vested and shares of Common
Stock deliverable under the share right award shall be delivered immediately
prior to and contingent upon the Change in Control.  The Corporation shall provide each holder of
a share right award that is accelerated in accordance with this paragraph at
least five (5) business days notice of the vesting acceleration.  E.Immediately
following the consummation of the Change in Control, all outstanding share
right awards under the Stock Issuance Program shall terminate and cease to be
outstanding, except to the extent assumed, continued or substituted for by the
successor corporation (or parent thereof) or otherwise continued in full force
and effect pursuant to the terms of the Change in Control transaction.  F.All
of the Corporations outstanding repurchase rights under the Stock Issuance
Program shall terminate automatically, and all the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event
of any Hostile Take-Over, except to the extent such accelerated vesting is
precluded by other limitations imposed in the Stock Issuance Agreement.  All the shares of Common Stock subject to
outstanding share right awards shall immediately vest in full, in the event of
any Hostile Take-Over, except to the extent such accelerated vesting is precluded
by other limitations imposed in the Share Right Award Agreement.  G.The
Plan Administrator may, in its discretion, structure one or more of the
Corporations repurchase rights so that those rights shall immediately
terminate, in whole or in part, with respect to any shares held by the
Participant (and the shares subject to those terminated repurchase rights shall
accordingly vest in full) either (i) immediately prior to the effective
date of that Change in Control or Hostile Takeover, or (ii) upon an event
occurring after the Change in Control or Hostile Takeover (including a
termination of a Participants Service).  
In addition, the Plan Administrator shall have the discretionary
authority to structure one or more share right awards grants under the Stock
Issuance Program so that the vesting of each share right shall automatically
accelerate in whole or in part, either (i) immediately prior to the
effective date of that Change in Control or Hostile Takeover, or (ii) upon
an event occurring after the Change in Control or Hostile Takeover (including a
termination of employment).  H.Each
share right award which is assumed or substituted for in connection with a
Change in Control or otherwise continued in effect shall be appropriately
adjusted, immediately after such Change in Control, to convert the number and
class of securities which would have been issuable to the Participant in
consummation of such Change in Control had the shares of Common Stock subject
to the share right award been issued immediately prior to such Change in
Control to the type and amount of consideration received by the holders of
Common Stock in the Change in Control. 
To the extent the actual holders of the Corporations outstanding Common
Stock receive cash consideration for their Common Stock in consummation of the
Change in Control, the successor corporation may, in connection with the
assumption or substitution of the outstanding share right awards under the
Stock Issuance Program, substitute one or more shares of its own common stock
or that of any parent or publicly traded Subsidiary, with a fair market value
equivalent to the cash consideration paid per share of Common Stock in such
Change in Control transaction.  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.  13


ARTICLE
FOUR  AUTOMATIC
OPTION GRANT PROGRAM  I.OPTION TERMS  A.GRANT
DATES. Option grants shall be made on the dates specified below:  1.Each
individual who is first elected or appointed as a non-employee Board member at
any time 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 3,000 shares of Common Stock, provided that individual has not
previously been in the employ of the Corporation or any Parent or Subsidiary.  2.On
the first business day in each calendar year following the Plan Effective Date
and during the term of the Plan, each non-employee Board member then in office,
shall automatically be granted a Non-Statutory Option to purchase 3,000 shares
of Common Stock, provided such individual has served as a non-employee Board
member for at least six (6) months. There shall be no limit on the number
of such option grants any one non-employee Board member may receive over his or
her period of Service on the Board, and non-employee Board members who have
previously been in the employ of the Corporation (or any Parent or Subsidiary)
or who joined the Board prior to the Plan Effective Date shall be eligible to receive
one or more such annual option grants over their period of continued Board
Service.  B.EXERCISE
PRICE.  1.The
exercise price per share shall be equal to one hundred percent (100%) of the
Fair Market Value per share of Common Stock on the option grant date.  2.The
exercise price shall be payable in one or more of the alternative forms
authorized under the Discretionary Option Grant Program. Except to the extent
the sale and remittance procedure specified thereunder is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.  C.OPTION
TERM. Each option shall have a maximum term of ten (10) years measured
from the option grant date.  D.EXERCISE
AND VESTING OF OPTIONS.  Each option
granted pursuant to this Automatic Option Grant Program shall become
exercisable in a series of four (4) equal quarterly installments upon the
Optionees completion of each three (3) months of continuous Service as a
Board member over the 12-month period measured from the option grant date.  E.LIMITED
TRANSFERABILITY OF OPTIONS. Each option under this Article Four may be
assigned in whole or in part during the Optionees lifetime to one or more
members of the Optionees Immediate Family or to a trust established
exclusively for the Optionee or one or more Members of the Optionees Immediate
Family or to Optionees former spouse, to the extent such assignment is in
connection with the Optionees estate plan or pursuant to 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 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. The Optionee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding options under this Article Four,
and those options shall, in accordance with such designation, automatically be
transferred to such beneficiary or beneficiaries upon the Optionees death
while holding those options. Such beneficiary or beneficiaries shall take the
transferred options subject to all the terms and conditions of the applicable
agreement evidencing each such transferred option, including (without
limitation) the limited time period during which the option may be exercised
following the Optionees death.  14


F.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 for any reason:  (i)The
Optionee (or, in the event of Optionees death, the personal representative of
the Optionees estate or the person or persons to whom the option is
transferred pursuant to the Optionees will or the laws of descent and
distribution or the designated beneficiary or beneficiaries of such option)
shall have a six (6)-month period following the date of such cessation of Board
Service in which to exercise each such option.  (ii)During
the six (6)-month post-Service exercise period, the option may not be exercised
in the aggregate for more than the number of vested shares of Common Stock for
which the option is exercisable at the time of the Optionees cessation of
Board Service.  (iii)In
no event shall the option remain exercisable after the expiration of the option
term. Upon the expiration of the six (6)-month post-Service exercise period or
(if earlier) upon the expiration of the option term, the option shall terminate
and cease to be outstanding for any 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, terminate and cease to be outstanding to the
extent the option is not otherwise at that time exercisable.  II.CHANGE IN CONTROL/ HOSTILE TAKE-OVER  A.In
the event of any Change in Control while the Optionee remains a Board member,
the shares of Common Stock at the time subject to each outstanding option held
by such Optionee under the Automatic Option Grant Program but not otherwise
vested shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Change in Control, vest and
become 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. Immediately following the consummation of the Change in
Control, each automatic option grant shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof) or otherwise continued in full force and effect pursuant to the
express terms of the Change in Control transaction.  B.In
the event of a Hostile Take-Over while the Optionee remains a Board member, the
shares of Common Stock at the time subject to each option outstanding under the
Automatic Option Grant Program but not otherwise vested shall automatically
accelerate so that each such option shall, immediately prior to the effective
date of the Hostile Take-Over, vest and become 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. Each such option
shall remain exercisable for such fully-vested option shares until the
expiration or sooner termination of the option term or the surrender of the
option in connection with that Hostile Take-Over.  C.All
outstanding repurchase rights under the Automatic Option Grant Program shall
automatically terminate, and the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event of any Change in
Control or Hostile Take-Over.  D.Upon
the occurrence of a Hostile Take-Over, the Optionee shall have a thirty
(30)-day period in which to surrender to the Corporation each of his or her
outstanding automatic option grants.  The
Optionee shall in return be entitled to a cash payment from the Corporation in
an amount equal to the excess of (i) the Take-Over Price of the shares of
Common Stock at the time subject to each surrendered option (whether or not the
Optionee is otherwise at the time vested in those shares) over (ii) the
aggregate exercise price payable for such shares. Such cash payment shall be
paid within five (5) days following the surrender of the option to the
Corporation.  The Plan Administrator
shall, at the time the option with such limited stock appreciation right is
granted under the Automatic Option Grant Program, pre-approve any subsequent
exercise of that right in accordance with the terms of this Paragraph D.  Accordingly, no further approval of the Plan
Administrator or the Board shall be required at the time of the actual option
surrender and cash payment.  15


E.Each
option which is assumed in connection with a Change in Control or otherwise
continued in full force and effect shall be appropriately adjusted, immediately
after such Change in Control, to apply to the number and class of securities
which would have been issuable to the Optionee in consummation of such Change
in Control had the option been exercised immediately prior to such Change in
Control. Appropriate adjustments shall also be made to the exercise price
payable per share under each outstanding option, provided the aggregate
exercise price payable for such securities shall remain the same.  To the extent the actual holders of the
Corporations outstanding Common Stock receive cash consideration for their
Common Stock in consummation of the Change in Control transaction, the
successor corporation may, in connection with the assumption of the outstanding
options under the Automatic Option Grant Program, substitute one or more shares
of its own common stock with a fair market value equivalent to the cash
consideration paid per share of Common Stock in such Change in Control
transaction.  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.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.  ARTICLE
FIVE  MISCELLANEOUS  I.NO FRACTIONAL SHARES  No fractional shares of
Common Stock shall be issued or delivered pursuant to the Plan, and the Plan
Administrator shall determine whether cash shall be paid in lieu of any
fractional shares or whether such fractional shares or any rights thereto shall
be canceled, terminated or otherwise eliminated.  II.TAX WITHHOLDING  A.The
Corporations obligation to deliver shares of Common Stock upon a stock
issuance, or the exercise of options or stock appreciation rights or the
issuance or vesting of such shares under the Plan shall be subject to the
satisfaction of all applicable income and employment tax withholding
requirements.  The Corporation shall also
make appropriate arrangements to satisfy all applicable foreign tax withholding
requirements which may be imposed in connection with the grant or exercise of
options or stock appreciation rights under the Plan or the issuance or vesting
of shares of Common Stock under the Plan.  B.The
Plan Administrator may, in its discretion, provide in the respective award
agreement that (i) the Corporation, in its discretion, may determine that
shares of Common Stock from the award be withheld by the Corporation in
satisfaction of all or part of the Withholding Taxes which may become payable
in connection with the an award granted under the Plan (pursuant to Article Five
Section II.B.1.) and (ii) any or all Optionees or Participants under
the Plan (other than the non-employee Board members) with the right to use
shares of Common Stock in satisfaction of all or part of the Withholding Taxes
to which such individuals may become subject in connection with the grant or
exercise of their options or stock appreciation rights or the issuance or
vesting of their shares.  Such right to
an individual 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 options or stock appreciation rights or the issuance or
the vesting of such shares, a portion of those shares with an aggregate Fair
Market Value equal to the percentage of the Withholding Taxes (not to exceed
one hundred percent (100%) of the minimum Withholding Taxes required be law)
designated by the holder.  16


2.Stock
Delivery:  The election to deliver to
the Corporation, at the time the option or stock appreciation right is granted
or exercised or the shares are issued or vest, one or more shares of Common
Stock previously acquired by such holder (other than in connection with the
option or stock appreciation right exercise or share vesting triggering the
Withholding Taxes) with an aggregate Fair Market Value equal to the percentage
of the Withholding Taxes (not to exceed one hundred percent (100%) of the
minimum Withholding Taxes required be law) designated by the holder.  III.EFFECTIVE DATE AND TERM OF THE PLAN  A.The
Plan shall become effective immediately upon the Plan Effective Date.  Options may be granted under the
Discretionary Option/Stock Appreciation Right Grant Program at any time on or
after the Plan Effective Date, and the initial option grants under the
Automatic Option Grant Program shall be made on the Plan Effective Date to any
non-employee Board members eligible for such grants at that time. However, no
options granted under the Plan may be exercised, and no shares shall be issued
under the Plan, until the Plan is approved by the Corporations stockholders.
If such stockholder approval is not obtained within twelve (12) months after
the Plan Effective Date, then all options previously granted under this Plan
shall terminate and cease to be outstanding, and no further options shall be
granted and no shares shall be issued under the Plan.  B.The
Plan shall terminate upon the earliest of (i) the tenth anniversary of the
Plan Effective Date, (ii) the tenth anniversary of the approval of the
Plan by the Corporations stockholders, (iii) the date on which all shares
available for issuance under the Plan shall have been issued as fully-vested
shares or (iv) the termination of all outstanding awards in connection
with a Change in Control.  Upon such Plan
termination, all option grants and unvested stock issuances outstanding at that
time shall thereafter continue to have force and effect in accordance with the
provisions of the documents evidencing such grants or issuances.  IV.AMENDMENT OF THE PLAN  A.The
Board shall have complete and exclusive power and authority to amend or modify
the Plan or any outstanding award granted under the Plan in any or all
respects.  However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options, stock appreciation rights or unvested stock issuances at the
time outstanding, including share right awards, under the Plan unless the
Optionee or the Participant consents to such amendment or modification.  Notwithstanding the foregoing, any amendment
to either increase the number of shares that may be issued under the Plan or
the Persons eligible to receive awards under the Plan shall require stockholder
approval.  In addition, certain
amendments may require stockholder approval pursuant to applicable laws or
regulations.  B.Options
to purchase shares of Common Stock may be granted under the Discretionary
Option/Stock Appreciation Right Grant Program 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 shall be held in escrow
until there is obtained stockholder approval of an amendment sufficiently
increasing the number of shares of Common Stock available for issuance under
the Plan. If such stockholder approval is not obtained within twelve (12)
months after the date the first such excess issuances are made, then (i) any
unexercised options granted on the basis of such excess shares shall terminate
and cease to be outstanding and (ii) the Corporation shall promptly refund
to the Optionees and the Participants the exercise or purchase price paid for
any excess shares issued under the Plan and held in escrow, together with
interest (at the short term applicable 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.  17


VI.REGULATORY APPROVALS  A.The
implementation of the Plan, the granting of any stock option under the Plan and
the issuance of any shares of Common Stock (i) upon the exercise of any
granted option or (ii) under the Stock Issuance Program shall be subject
to the Corporations procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.  B.No
shares of Common Stock or other assets shall be issued or delivered under the
Plan unless and until there shall have been compliance with all applicable
requirements of Federal and state securities laws, including the filing and
effectiveness of the Form S-8 registration statement for the shares of
Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.  VII.NO EMPLOYMENT/SERVICE RIGHTS  Nothing in the Plan shall
confer upon any Optionee or 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 any Optionee or 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.  VIII.SECTION 162(M)  A.STOCK
OPTIONS AND STOCK APPRECIATION RIGHTS.  It is the intent of the
Corporation that any options or stock appreciation rights granted under the
Plan to a covered employee (as that term is defined in Section 162(m) of
the Code) with an exercise price of not less than the Fair Market Value per
share of Common Stock on the date of grant shall qualify as qualified
performance-based compensation (within the meaning of Treas. Reg.
§ 1.162-27(e)) to the extent that options or stock appreciation rights
granted under the Plan may qualify as qualified performance-based compensation
and the Plan shall be interpreted consistently with such intent.  In furtherance of the foregoing, if and to
the extent that the Corporation intends that an option or a stock appreciation
right granted under the Plan to any covered employee shall qualify as qualified
performance-based compensation, all decisions regarding the grant of such
option or stock appreciation right shall be made only by members of the
Committee who qualify as outside directors within the meaning of Treas. Reg.
§ 1.162-27(e)(3).  B.PERFORMANCE
AWARDS.  The Plan
Administrator shall also have the discretionary authority, consistent with Code
Section 162(m), to structure (i) cash bonuses, (ii) stock
options, (iii) stock appreciation rights and (iv) stock issuances,
including share right awards, so that (x) the cash bonuses are only payable,
(y) the shares of Common Stock received upon exercise of the stock option
or stock appreciation right and (z) the shares of Common Stock subject to
such stock issuances shall only vest or be issuable upon the achievement of
certain pre-established objective corporate performance goals based on one or
more of the following criteria: (1) earnings per share; (2) revenues
or margins; (3) cash flow; (4) operating margin; (5) return on
net assets, investment, capital, or equity; (6) direct contribution; (7) net
income; pretax earnings; (8) earnings before interest and taxes; earnings
before interest, taxes, depreciation and amortization; earnings after interest
expense and before extraordinary or special items; operating income; income
before interest income or expense, unusual items and income taxes, local, state
or federal and excluding budgeted and actual bonuses which might be paid under
any ongoing bonus plans of the Company; (9) working capital; (10) management
of fixed costs or variable costs; (11) identification or consummation of
investment opportunities or completion of specified projects in accordance with
corporate business plans, including strategic mergers, acquisitions or
divestitures; (12) total shareholder return; and (13) debt reduction.
In addition, such performance goals may be based upon the attainment of
specified levels of the Corporations performance under one or more of the
measures described above relative to the performance of other entities and may
also be based on the performance of any of the Corporations business units or
divisions or any Parent or Subsidiary. Performance goals may include a minimum
threshold level of performance below which no award will be earned, levels of
performance at which specified portions of an award will be earned and a
maximum level of performance at which an award will be fully earned.  18


In furtherance of the
foregoing, if and to the extent that the Corporation intends that an award
granted under the Plan pursuant to this paragraph to any covered employee shall
qualify as qualified performance-based compensation, all decisions regarding
the grant of such award shall be made only by members of the Committee who
qualify as outside directors within the meaning of Treas. Reg.
§ 1.162-27(e)(3).  19


APPENDIX  The following
definitions shall be in effect under the Plan:  A.ASSUMED
OPTIONS shall mean the stock options assumed by the Corporation from Acacia
Research that were exercisable for Acacia Research - CombiMatrix stock and
which include, but are not limited to, the options outstanding as of the date
of the Transaction that were granted under the Acacia Research Corporation 2002
CombiMatrix Stock Incentive Plan, the CombiMatrix Corporation 1998 Stock Option
Plan, the CombiMatrix Corporation 2000 Stock Awards Plan and the Acacia
Research Corporation 1996 Stock Option Plan.  B.AUTOMATIC
OPTION GRANT PROGRAM shall mean the automatic option grant program in effect
under Article Four of the Plan.  C.BOARD
shall mean the Corporations Board of Directors.  D.CERTIFICATE
OF INCORPORATION shall mean the Certificate of Incorporation of CombiMatrix
Corporation filed with the Delaware Secretary of State on the Plan Effective
Date and all subsequent amendments, supplements, modifications and replacements
thereof.  E.CHANGE
IN CONTROL shall mean a change in ownership or control of the Corporation
effected through any of the following transactions:  (i)a
stockholder-approved 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)a
sale, transfer or other disposition of all or substantially all of the
Corporations assets to an entity which is not a Subsidiary of the Corporation,
or  (iii)the acquisition, directly or indirectly by any
person or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3
of the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporations outstanding securities
pursuant to a tender or exchange offer made directly to the Corporations
stockholders.  F.CODE
shall mean the Internal Revenue Code of 1986, as amended.  G.COMMITTEE
shall mean the committee of two (2) or more non-employee Board members
appointed by the Board to administer the Discretionary Option/Stock
Appreciation Right Grant Program with respect to Section 16 Insiders.  H.COMMON
STOCK shall mean the Corporations Common Stock (as defined in the Certificate
of Incorporation).  I.CORPORATION
shall mean CombiMatrix Corporation, a Delaware corporation, and any corporate
successor to all or substantially all of the assets or voting stock of
CombiMatrix Corporation, which shall by appropriate action adopt the Plan.  J.DISCRETIONARY
OPTION/STOCK APPRECIATION RIGHT GRANT PROGRAM shall mean the Discretionary
Option/Stock Appreciation Right Grant Program in effect under Article Two
of the Plan.  A1


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.EXECUTIVE
OFFICER COMMITTEEshall mean the committee
comprised of two (2) or more executive officers of the Corporation
appointed by the Board to administer the Discretionary Option/Stock
Appreciation Right Grant Program and Stock Issuance Program with respect to
persons other than Section 16 Insiders, but subject to the applicable
limitations and requirements of the Delaware Corporate Law.  M.EXERCISE
DATE shall mean the date on which the Corporation shall have received written
notice of the option exercise.  N.FAIR
MARKET VALUE per share of Common Stock on any relevant date shall be determined
in accordance with the following provisions:  (i)If
the Common Stock is at the time traded on the Nasdaq National Market, then the
Fair Market Value shall be the closing selling price per share of Common Stock
on the date in question, as such price is reported on the Nasdaq National
Market. If there is no closing selling price for the Common Stock on the date
in question, then the Fair Market Value shall be the closing selling price on
the last preceding date for which such quotation exists.  (ii)If
the Common Stock is at the time listed on any Stock Exchange, then the Fair
Market Value shall be the closing selling price per share of Common Stock on
the date in question on the Stock Exchange determined by the Plan Administrator
to be the primary market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange. If there is no
closing selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.  (iii)If
the Common Stock is at the time not traded on the Nasdaq National Market or
listed on any Stock Exchange, but is regularly traded in any over-the-counter
market, then the Fair Market Value shall be the average of the bid and asked
prices per share of Common Stock in such over-the-counter market on the date in
question.  If there are no bid and asked
prices on the date in question, then the Fair Market Value shall be the average
of the bid and asked prices in such over-the-counter market on the last
preceding date for which such prices exist.  (iv)If
the Common Stock is at the time not traded as described in (i), (ii) or (iii) above,
then the Fair Market Value of a share of Common Stock shall be determined by
the Plan Administrator, after taking into account such factors as it deems
appropriate.  O.HOSTILE
TAKE-OVER shall mean either of the following events effecting a change in
control or ownership of the Corporation:  (i)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  (ii)a
change in the composition of the Board over a period of thirty-six (36)
consecutive months or less such that a majority of the Board members ceases, by
reason of one or more contested elections for Board membership, to be comprised
of individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of the
Board members described in clause (A) who were still in office at the time
the Board approved such election or nomination.  A2


P.IMMEDIATE
FAMILY shall mean any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law and shall include adoptive
relationships.  Q.INCENTIVE
OPTION shall mean an option which satisfies the requirements of Code Section 422.  R.MISCONDUCT
shall, with respect to any Participant, have the meaning specified in the
Participants award agreement.  In the
absence of any definition in the award agreement, Misconduct shall have the
equivalent meaning or the same meaning as misconduct or cause set forth in
any employment, consulting or other agreement for the performance of services
between the Participant and the Corporation or, in the absence of any such
agreement or any such definition in such agreement, such term 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).  S.1934
ACT shall mean the Securities Exchange Act of 1934, as amended.  T.NON-STATUTORY
OPTION shall mean an option not intended to satisfy the requirements of Code Section 422.  U.OPTIONEE
shall mean any person to whom an option is granted under the Discretionary
Option Grant Program, the Automatic Option Grant Program.  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.PARTICIPANT
shall mean any person who is issued shares of Common Stock under the Stock
Issuance Program.  X.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 which can be expected to
result in death or to be of continuous duration of twelve (12) months or more.
However, solely for purposes of the Automatic Option Grant 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.  Y.PLAN
shall mean the Corporations 2006 Stock Incentive Plan, as set forth in this
document.  Z.PLAN
ADMINISTRATOR shall mean the particular body, whether the Committee or the
Board, 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.  AA.PLAN EFFECTIVE
DATE shall mean the date on which the Plan is approved by the stockholders of
the Corporation.  A3


BB.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.  CC.SERVICE
shall mean the performance of services for the Corporation (or any Parent or
Subsidiary) by a person in the capacity of an Employee, a non-employee member
of the board of directors or a consultant or independent advisor, except to the
extent otherwise specifically provided in the documents evidencing the option
grant or stock issuance.  DD.STOCK
EXCHANGE shall mean either the, Nasdaq National Market, the American Stock
Exchange or the New York Stock Exchange.  EE.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.  FF.STOCK
ISSUANCE PROGRAM shall mean the stock issuance program in effect under Article Three
of the Plan.  GG.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.  HH.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, if applicable, (ii) the highest
reported price per share of Common Stock paid by the tender offeror in
effecting the Hostile Take-Over through the acquisition of such Common Stock.
However, if the surrendered option is an Incentive Option, the Take-Over Price
shall not exceed the price per share described in clause (i) above.  II.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).  JJ.WITHHOLDING
TAXES shall mean the minimum Federal, state and local income and employment
withholding taxes to which the holder of options or unvested shares of Common
Stock may become subject in connection with the exercise of those options or
the vesting of those shares.  A4