<PAGE>   1

                                                                   EXHIBIT 10.15

                            LINE OF CREDIT AGREEMENT

        THIS LINE OF CREDIT AGREEMENT (the "Agreement"), is entered into as of
the 10th day of November, 2000, by and between Hyseq, Inc., a Nevada corporation
("Borrower"), and Dr. George B. Rathmann ("Lender").

                                     RECITAL

        Borrower desires to obtain from Lender a line of credit (the "Line of
Credit"), making available to Borrower a principal amount of twenty million
dollars ($20,000,000).

                                    AGREEMENT

        NOW, THEREFORE, Lender and Borrower hereby agree as follows:

                                   ARTICLE I.

                                 LINE OF CREDIT

        1.1 Advances. Subject to the terms and conditions of this Agreement,
Lender hereby agrees to make advances (each, an "Advance", and collectively, the
"Advances"), to Borrower from time to time up to and including November 29,
2002. The aggregate amount of all outstanding Advances shall not exceed twenty
million dollars ($20,000,000) (the "Credit Limit"). Proceeds of Advances shall
be used for working capital and general corporate purposes of Borrower.

        1.2 Borrowing and Repayment. Borrower may from time to time during the
term of this Agreement borrow, partially or wholly repay its outstanding
borrowings, and reborrow; provided however, that the total outstanding Advances
shall not at any time exceed the Credit Limit. Each time Borrower desires an
Advance, Borrower shall submit to Lender a drawing request in substantially the
form of Exhibit B attached hereto ("Drawing Request"), setting forth the amount
requested to be borrowed. Borrower may submit Drawing Requests no more
frequently than once each week.

        1.3 Promissory Note. Borrower's obligation to repay the Advances and
accrued interest thereon shall be evidenced by a convertible promissory notice
substantially in the form attached hereto as Exhibit A (the "Note"), which may
be converted into shares of Borrower's common stock, par value $0.001 per share
(the "Common Stock"), at any time up to and including the Maturity Date (as
defined in Section 1.7 herein). The shares of Common Stock to be issued upon the
conversion of the Note are the "Note Shares". Borrower shall execute and deliver
to Lender the Note concurrently with the execution and delivery of this
Agreement. Borrower authorizes Lender to record on the schedule annexed to the
Note, the date and amount of each Advance made by Lender, the Prime Rate (as
defined in Section 1.4 herein) when each Advance is made, and each payment or
prepayment of the Advances, and agrees that all such notations shall constitute
prima facie evidence of the matters noted. Borrower further authorizes Lender to
attach to and make a part of the Note continuations of the schedule as
necessary. No failure to make any such notations, nor any errors in making any
such notations, shall affect the validity of Borrower's obligations to



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<PAGE>   2

repay the Advances or Borrower's obligations under any of the Loan Documents (as
defined in Section 2.1 herein).

        1.4 Interest and Fees. Subject to Section 1.5, the outstanding principal
balance of the Line of Credit shall bear interest at a rate per annum equal to
one percent (1%) above the Prime Rate in effect from time to time. The term
"Prime Rate" shall mean at any time the rate of interest most recently announced
by Bank of America National Trust and Savings Association (or such other
financial institution as may be designated by Lender with Borrower's consent,
which consent will not be unreasonably withheld) (the "Reference Bank"), as its
Prime Rate. Each change in the rate of interest shall become effective on the
date each Prime Rate change is announced by the Reference Bank.

        1.5 Default Interest. At all times when an Event of Default has occurred
and is continuing, the outstanding principal balance of the Line of Credit shall
bear interest at a rate per annum equal to two percent (2%) above the Prime Rate
in effect from time to time (the "Default Rate"). In addition, to the extent
permitted by applicable law, any interest payments, fees or other amounts owed
hereunder and not paid when due, in each case whether at stated maturity, by
notice of prepayment, by acceleration or otherwise, shall bear interest at the
Default Rate. Payment or acceptance of the Default Rate is not a permitted
alternative to timely payment and shall not constitute a waiver of any Event of
Default or otherwise prejudice or limit any rights or remedies of Lender.

        1.6 Expiration Date. The Line of Credit shall expire, and Lender shall
have no further obligation to make any Advances to Borrower upon the earlier of
(i) a Change of Control, or (ii) November 30, 2002, the "Expiration Date". The
passage of the Expiration Date does not affect Borrower's repayment obligation.
For purposes of this Section 1.6, a "Change of Control" means (i) Borrower's
sale of all or substantially all of its assets, or (ii) any transaction or
series of related transactions to which Borrower is a party (including, without
limitation, any reorganization, merger or consolidation) that will result in the
holders of Borrower's outstanding voting equity securities immediately prior to
such transaction holding fewer than fifty per cent (50%) of the voting equity
securities of the surviving entity immediately following such transaction(s).

        1.7 Computation and Repayment. Borrower shall pay to the order of
Lender, at any place which Lender designates from time to time in writing, in
lawful money of the United States of America, the principal amount of the
Advances and accrued interest thereon. Interest on the principal amount
outstanding under the Advances shall be computed on the basis of a 360-day year,
actual days elapsed. Except as otherwise set forth in this Agreement, the
outstanding principal amount of the Advances on the Expiration Date shall be
repaid in forty eight (48) equal monthly installments, beginning on the
Expiration Date, and continuing on the first business day of each successive
calendar month until paid in full. Any and all outstanding principal amount,
accrued interest and applicable fees, costs and charges, if any, shall be paid
in full to Lender on the date which is forty eight (48) months after the
Expiration Date, the "Maturity Date".

        1.8 Limitation on Repayment by Note Shares. Notwithstanding any term to
the contrary contained in any of the Loan Documents, Borrower may not repay
Advances, interest accrued thereon and any attendant costs, fees and charges in
the form of Note Shares in excess of an aggregate value of twenty million
dollars ($20,000,000).



                                       2
<PAGE>   3

        1.9 Application of Payments. Lender shall apply all payments received
from Borrower pursuant to this Agreement as follows: first, to the payment of
applicable fees, costs and charges, if any; second, to accrued and unpaid
interest then due and owing; and third, to the outstanding principal amount of
the Advances.

                                   ARTICLE II.

                                   BORROWER'S
                         REPRESENTATIONS AND WARRANTIES

        Borrower makes the following representations and warranties to Lender,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge of all obligations of Borrower to
Lender, subject to this Agreement.

        2.1 Authorization and Validity. This Agreement, the Note, and each other
document, contract and instrument required by or at any time delivered to Lender
in connection with this Agreement (collectively, the "Loan Documents"), have
been duly authorized by Borrower, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower, enforceable in accordance with their
respective terms, except as limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally.

        2.2 No Violation. The execution, delivery and performance by Borrower of
each of the Loan Documents to which it is a party do not violate any provision
of any law or regulation, or contravene any provision of Borrower's Certificate
of Incorporation or Bylaws, or will not result in a breach of or constitute a
default under any contract, obligation, indenture or other instrument to which
Borrower is a party or by which Borrower or any of its properties may be bound.

        2.3 Litigation. Except as disclosed to Lender, there is no action,
proceeding or investigation pending or threatened, or any basis therefor known
to Borrower, that questions the validity of this Agreement or the right of
Borrower to enter into this Agreement, or that would have, either individually
or in the aggregate, a Material Adverse Effect. "Material Adverse Effect" shall
mean a material adverse effect upon Borrower's business, operation, properties,
assets or condition (financial or otherwise). There is no judgment, decree or
order of any court in effect against Borrower, and Borrower is not in default
with respect to any order of any governmental authority to which Borrower is a
party or by which Borrower is bound.

        2.4 Governmental Consent. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of Borrower is
required in connection with the consummation of the transactions contemplated by
this Agreement.

        2.5 No Events of Default. Except as disclosed to Lender, Borrower is not
in default under any debt or material obligation of Borrower and no event has
occurred which would become an event of default under any such debt or material
obligation with or without the giving of notice, the lapse of time, or both.



                                       3
<PAGE>   4

        2.6 Existence and Authority. Borrower is a corporation duly organized
and validly existing under the laws of the State of Nevada. Borrower has the
corporate power and authority, rights and franchises to own its properties and
to carry on its business as now conducted. Borrower has the corporate power and
authority to borrow the Advances and to enter into and perform its obligations
under this Agreement and the other Loan Documents.

                                  ARTICLE III.

                                    LENDER'S
                         REPRESENTATIONS AND WARRANTIES

        Lender makes the following representations and warranties to Borrower,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge of all obligations of Lender to
Borrower, subject to this Agreement.

        3.1 Lender hereby represents and warrants to Borrower as follows:

                (a) Lender understands and acknowledges that the offering and
sale of the Note Shares pursuant to the Note will not be registered under the
Securities Act of 1933, as amended (the "Securities Act".

                (b) Lender covenants that in no event will he make any
disposition of any of the Note Shares, except in accordance with an effective
registration statement under the Securities Act, or Rule 144 (or any successor
rule) as promulgated thereunder.

                (c) Lender acknowledges and understands that the Note Shares
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available, and that
Borrower is under no obligation to register the Note Shares.

                (d) Lender represents that he is an "accredited investor" as
such term is defined in Regulation D promulgated under the Securities Act.

                                   ARTICLE IV.

                              CONDITIONS PRECEDENT

        The obligation of Lender to make any Advances to Borrower under this
Agreement is subject to satisfaction of the conditions precedent of Section 4.1
and 4.2.

        4.1 Documentation. Lender shall have received, in form and substance
satisfactory to Lender, this Agreement, the Note, a Drawing Request and such
other documents and instruments as Lender may reasonably request, all duly
executed by Borrower.

        4.2 Conditions to Each Advance. As of the date of each Drawing Request,
except as disclosed to Lender:



                                       4
<PAGE>   5

                (a) all of Borrower's representations and warranties contained
in this Agreement shall be true, correct and complete in all material respects
to the same extent as though made on and as of that date;

                (b) no Event of Default (as defined in Section 6.1) shall have
occurred and shall continue, or shall result from, making the Advance;

                (c) no law or regulation shall prohibit, and no order, judgment
or decree of any court, arbitrator or governmental authority shall purport to
enjoin or restrain Lender from making the Advance; and

                (d) no change having a Material Adverse Effect on Borrower,
either individually or in the aggregate, shall have occurred since the date of
this Agreement.

        4.3 Conditions to Issuance of Note Shares. The obligation of Borrower to
issue the Note is subject to satisfaction of the condition precedent of this
Section 4.3. As of the date of the issuance of the Note Shares all of Lender's
representations and warranties contained in this Agreement shall be true,
correct and complete in all material respect to the same extent as though made
on and as of that date.

                                   ARTICLE V.

                              AFFIRMATIVE COVENANTS

        Borrower covenants that so long as any of the Advances, or any portion
thereof, remain outstanding or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Lender under any of the Loan
Documents remain outstanding, and until payment in full of all obligations of
Borrower subject hereto, Borrower shall:

        5.1 Punctual Payments. Pay the principal amount of the Advances,
interest, fees, charges or other liabilities due to Lender under the Loan
Documents at or before the times, at the place and in the manner specified in
the Loan Documents.

        5.2 Accounting Records. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied
and in a manner otherwise acceptable to Lender, and permit any representative of
Lender, at any reasonable time, to inspect, audit and examine such books and
records, to make copies of the same, and to inspect the properties of Borrower.

        5.3 Compliance With Laws. Comply with the requirements of all laws,
rules, regulations and orders of any governmental authority applicable to
Borrower or its business.

        5.4 Performance and Compliance with Other Agreements. Perform and comply
in all material respects with each of the provisions of each material indenture,
contract and other agreement by which Borrower or any of its properties is
bound.



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<PAGE>   6

        5.5 Taxes and Other Liabilities. Pay and discharge when due any and all
indebtedness, obligations, assessments and taxes, both real or personal and
including federal and state income taxes, which in the aggregate the nonpayment
of which would have a Material Adverse Effect, except such as Borrower may in
good faith contest or as to which a bona fide dispute may arise, so long as
provision is made to the satisfaction of Lender for eventual payment thereof if
it is found that payment is an obligation of Borrower.

        5.6 Notices of Lender. Within ten (10) days after Borrower has actual
knowledge of the occurrence of each such event or matter, give written notice to
Lender of: (i) the occurrence of any Event of Default (defined below), or any
condition, event or act which would become an Event of Default with or without
the giving of notice; or (ii) the commencement, or threatened commencement in
which Borrower has received written notice, of any litigation, arbitration or
other proceeding against Borrower which could result in a Material Adverse
Effect.

                                   ARTICLE VI.

                                EVENTS OF DEFAULT

        6.1 The occurrence of any of the following shall constitute an "Event of
Default" under this Agreement:

                (a) Borrower shall fail to pay within five (5) business days of
the date due any principal, interest, fees or other amounts payable under any of
the Loan Documents.

                (b) Any financial statement or certificate furnished to Lender
in connection with this Agreement or any representation or warranty made or
deemed made by Borrower hereunder shall prove to be false, incorrect or
incomplete in any material respect when furnished, made or deemed made.

                (c) Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein (other than those
referred to in Sections 6.1(a) and (b) above), and with respect to any such
default which by its nature can be cured, such default shall continue for a
period of twenty (20) days from its occurrence.

                (d) Any material default in the payment or performance of any
material obligation, or any defined event of default, under the terms of any
contract or instrument (other than the Loan Documents), pursuant to which
Borrower has incurred any debt or other liability to any person or entity,
including Lender.

                (e) Any default in the payment or performance of any obligation,
or any defined event of default, under any of the Loan Documents other than this
Agreement.

                (f) Borrower shall become insolvent, or shall suffer or consent
to or apply for the appointment of a receiver, trustee, custodian or liquidator
of itself or any of its property, or shall generally fail to pay its debts as
they become due, or shall make a general assignment for the benefit of
creditors; Borrower shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with creditors or
any other relief under the Bankruptcy Reform Act, Title 11 of the United States
Code, as amended or recodified



                                       6
<PAGE>   7

from time to time or any successor statute ("Bankruptcy Code"), or under any
state or federal law granting relief to debtors, whether now or hereafter in
effect; or any involuntary petition or proceeding pursuant to said Bankruptcy
Code or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors is filed or commenced against
Borrower, or Borrower shall file an answer admitting the jurisdiction of the
court and the material allegations of any involuntary petition; or shall be
adjudicated a bankrupt, or an order for relief shall be entered by any court of
competent jurisdiction under said Bankruptcy Code or any other applicable state
or federal law relating to bankruptcy, reorganization or other relief for
debtors.

        6.2 Acceleration. If an Event of Default shall occur, (a) any
indebtedness of Borrower under any of the Loan Documents, any term thereof to
the contrary notwithstanding, shall (at Lender's option and without notice)
become immediately due and payable without presentment, demand, protest or
notice of dishonor, all of which are hereby expressly waived by Borrower; (b)
the obligation, if any, of Lender to permit further borrowings hereunder shall
immediately cease and terminate; and (c) Lender shall have all rights, powers
and remedies available under each of the Loan Documents, or accorded by law,
including without limitation the right to resort to any or all security for any
of the Advances and to exercise any or all of the rights of a beneficiary or
secured party pursuant to applicable law. All rights, powers and remedies of
Lender in connection with each of the Loan Documents may be exercised at any
time by Lender and from time to time after the occurrence of an Event of
Default, are cumulative and not exclusive, and shall be in addition to any other
rights, powers or remedies provided by law or equity. Notwithstanding the
foregoing, the occurrence of an Event of Default shall not extinguish Borrower's
right to convert any amount owed to Lender into the Note Shares, as provided for
in Section 1.3 herein.

                                  ARTICLE VII.

                               GENERAL PROVISIONS

        7.1 No Waiver. No delay, failure or discontinuance of Lender in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Lender of any breach of or default under any of the Loan Documents must
be in writing and shall be effective only to the extent expressly set forth in
such writing.

        7.2 Notices. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following addresses:

        BORROWER:       Hyseq, Inc.
                        670 Almanor Avenue
                        Sunnyvale, California 94085
                        Facsimile:  (408) 524-8145
                        Attn: Legal Department



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<PAGE>   8

        LENDER:         Dr. George B. Rathmann
                        5404 Lake Washington Blvd., N.E., Apt. I
                        Kirkland, Washington  98033

or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
overnight courier, upon the earlier to the date of receipt or two (2) days after
delivery to the courier; (c) if sent by mail, upon the earlier of the date of
receipt or five (5) days after deposit in the U.S. mail, first class and postage
prepaid; or (d) if sent by telecopy, upon receipt.

        7.3 Indemnity, Costs, Expenses and Attorneys' Fees. Borrower shall
indemnify Lender against, hold Lender harmless from, and pay to Lender
immediately upon demand, the full amount of all costs and expenses, including
reasonable attorneys' fees, incurred by Lender in connection with (a) Lender's
administration of this Agreement and each of the other Loan Documents, and the
preparation of this Agreement and the other Loan Documents and any amendments
and waivers hereto and thereto, (b) the enforcement of Lender's rights and/or
the collection of any amounts which become due to Lender under any of the Loan
Documents (including in connection with any bankruptcy, reorganization,
"work-out" or similar circumstance or proceeding), and (c) the prosecution or
defense of any claim or action in any way related to any of the Loan Documents
or the transactions contemplated thereby, including without limitation any
action for declaratory relief.

        7.4 Successors; Assignment. This Agreement shall be binding on and inure
to the benefit of the heirs, executors, administrators, legal representatives,
successors and assigns of the parties; provided however, that Borrower may not
assign or transfer its interest hereunder without the prior written consent of
Lender. Lender reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, Lender's rights and
benefits under this Agreement, the Note and each of the other Loan Documents. In
connection therewith, Lender may disclose all documents and information which
Lender now has or may hereafter acquire relating to any of the Advances,
Borrower or its business, or any collateral required hereunder or granted in
connection herewith.

        7.5 Entire Agreement; Counterparts; Amendment. This Agreement and each
of the other Loan Documents constitute the entire agreement between Borrower and
Lender with respect to the Advances and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be executed in any number of counterparts and may be
amended or modified only by a written instrument executed by each party hereto.

        7.6 No Third Party Beneficiaries. This Agreement is made and entered
into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.



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<PAGE>   9

        7.7 Severability of Provisions. If any provision of this Agreement shall
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.

        7.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California, except to the
extent that Lender has greater rights or remedies under federal law, in which
case such choice of California state law shall not be deemed to deprive Lender
of such rights and remedies as may be available under federal law.

        7.9 Arbitration. All disputes arising in connection with this Agreement
shall be finally settled by arbitration. The arbitration shall be held in San
Jose, California, and conducted in accordance with the Rules of the American
Arbitration Association. Judgment upon the award rendered may be entered in any
court having jurisdiction, or application may be made to such court for a
judicial acceptance of the award and an order or enforcement. Each party shall
bear its own expenses of the arbitration, but the arbitrator's fees and costs
shall be borne equally between the parties participating in the arbitration.


                            [Signature Page Follows]



                                       9
<PAGE>   10

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first written above.

                                                  HYSEQ, INC.

                                                  /s/ Mark E. Gitter
                                                  ------------------------------
                                                  By: Mark E. Gitter
                                                  Title: Chief Financial Officer


                                                  DR. GEORGE B. RATHMANN

                                                  /s/ George B. Rathmann
                                                  ------------------------------


                   Signature Page to Line of Credit Agreement



<PAGE>   11

                                    EXHIBIT A

                       FORM OF CONVERTIBLE PROMISSORY NOTE



                THE SECURITIES REPRESENTED BY THIS NOTE HAVE BEEN ACQUIRED FOR
                INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
                OF 1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
                ABSENCE OF SUCH REGISTRATION UNLESS SUCH SALE OR TRANSFER IS
                EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
                REQUIREMENTS OF SAID ACT.

                           CONVERTIBLE PROMISSORY NOTE

    Sunnyvale, California
    November 10, 2000

        $20,000,000.00

        FOR VALUE RECEIVED, Hyseq, Inc., a Nevada corporation (the "Borrower"),
promises to pay to the order of Dr. George B. Rathmann, ("Lender") the lesser of
(i) $20,000,000 and (ii) the outstanding principal amount of all Advances made
by Lender under that certain Line of Credit Agreement, dated as of November 10,
2000, by and between the Borrower and Lender (the "Agreement").

        The principal amount hereof is payable at the times and in the amounts
set forth in the Agreement. Borrower also promises to pay interest on the
Advances from the date of this Note until paid in full at the rates and at the
times determined in accordance with the Agreement. This Note is subject to
repayment and prepayments at the option of Borrower as, and to the extent,
provided in the Agreement.

        This Note is issued pursuant to and entitled to the benefits of the
Agreement to which reference is hereby made for a more complete statement of the
terms and conditions under which the Advances evidenced hereby were made and are
to be repaid. Capitalized terms used herein without definition shall have the
meanings set forth in the Agreement.

        Borrower shall pay all payments of principal and of interest on the
Advances to the order of Lender at such plan as Lender may from time to time
designate in writing, in lawful money of the United States of America.

        Notwithstanding the foregoing, and subject to the limitation set forth
in Section 1.8 of the Agreement, the total amount outstanding on this Note may,
at any time up to and including the Maturity Date and at the sole option of
Borrower, upon notice to Lender (the "Conversion Notice"), be converted into
that number of shares of Borrower's Common Stock as shall equal the quotient
obtained by dividing the amount outstanding on this Note by the fair market
value of a



                                      A-1
<PAGE>   12

share of the Common Stock on the date of the Conversion Notice. The fair market
value of a shares of Common Stock on the date of the Conversion Notice shall be
determined as follows:

                (i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the fair market value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid if no sales were reported), as quoted
on such exchange or market on the date of the Conversion Notice, or if the date
of the Conversion Notice was not a trading day, the day prior to the date of the
Conversion Notice, as reported in The Wall Street Journal or such other reliable
source; or

                (ii) In the absence of such a public market for the Common
Stock, the fair market value as determined in good faith by Borrower's Board of
Directors (with the Lender abstaining from such determination if he is then a
member of Borrower's Board of Directors).

                The Note Shares to be issued to Lender upon the conversion of
this Note will not be registered under the Securities Act, or qualified under
any state securities laws on the grounds that the offering and sale of the Note
Shares as contemplated by the Loan Documents are exempt from registration under
the Securities Act and any applicable state securities laws.

                The certificate(s) representing the Note Shares shall bear the
following legend:

                THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
                REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
                HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
                CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE
                OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE
                REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
                IN A FORM SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS
                NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
                UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.

        Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note and all other obligations of Borrower under the
Agreement, together with all accrued but unpaid interest thereon, may
automatically become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Agreement.

        This Note shall be governed by and construed and enforced in accordance
with the internal laws of the State of California, without regard to conflicts
of laws provisions. The terms of this Note are subject to amendment only in the
manner provided in the Agreement.

        The obligation of the Borrower to pay the principal of and interest on
the Advances at the place, and at the times, and in the currency prescribed in
this Note and in the Agreement is absolute and unconditional.

        Borrower promises to pay all costs and expenses, including all
attorneys' fees and expenses, all as provided in the Agreement, actually
incurred in the collection and enforcement of this Note,



                                      A-2
<PAGE>   13

including any such costs, expenses or fees actually incurred in any appeal in
connection with the collection and enforcement of this Note. Borrower and
endorsers of this Note hereby consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.

        IN WITNESS WHEREOF, Borrower has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year and at the
place first above written.

                                       BORROWER

                                       HYSEQ, INC.


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



                 Signature Page to Convertible Promissory Note
<PAGE>   14

                       TRANSACTIONS ON LINE OF CREDIT NOTE

<TABLE>
<CAPTION>
                                                    Outstanding
                     Amount of      Amount of        Principal
                     Loan Made    Principal Paid      Balance        Notation
       Date          This Date      This Date        This Date       Made By
       ----          ---------    --------------    -----------      --------
       <S>           <C>          <C>               <C>              <C>
</TABLE>


                     Schedule to Convertible Promissory Note



<PAGE>   15

                                    EXHIBIT B

                             FORM OF DRAWING REQUEST


                               [HYSEQ LETTERHEAD]


                        _________________________, 20___


Dr. George B. Rathmann
5404 Lake Washington Blvd., N.E., Apt. I
Kirkland, Washington  98033

                Re:     Drawing Request

Dear Dr. Rathmann:

        Please take notice that pursuant to that certain Line of Credit
Agreement, (the "Agreement"), dated as of November 10, 2000, Hyseq, Inc., (the
"Borrower") desires to borrow on Advance of ____________________ Dollars
($________) from Dr. George B. Rathmann, (the "Lender"), on
______________________, 20_____. Capitalized terms not otherwise defined shall
have the meanings assigned to them in the Agreement.

        The Borrower hereby certifies that as of the date of this Drawing
Request, except as disclosed to Lender:

                (a) all of Borrower's representations and warranties contained
in the Agreement shall be true, correct and complete in all material respects to
the same extent as though made on and as of the date hereof;

                (b) no Event of Default shall have occurred and shall continue,
or shall result from, making the Advance;

                (c) no law or regulation shall prohibit, and no order, judgment
or decree of any court, arbitrator or governmental authority shall purport to
enjoin or restrain Lender from making the Advance; and

                (d) no change having a Material Adverse Effect on Borrower,
either individually or in the aggregate, shall have occurred since the date of
the Agreement.

                                       HYSEQ, INC.
                                       By:
                                          --------------------------------------
                                            Name:
                                            Title:



                                      B-1