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                                                                    EXHIBIT 10.1

                            COMBIMATRIX CORPORATION
                             1995 STOCK OPTION PLAN

SECTION 1. PURPOSE OF THE PLAN.

     The Combimatrix Corporation 1995 Stock Option Plan is intended to promote
the interests of Combimatrix Corporation, a California corporation, by providing
incentives to certain Employees who are responsible for the management, growth,
or financial success of the Corporation or its Subsidiary Corporations. The plan
will encourage such Employees to acquire a proprietary interest, or to increase
their proprietary interest, in the Corporation and will thereby induce such
Employees to continue to perform services for, and to enhance the welfare of,
the Corporation or its Subsidiary Corporations.

SECTION 2. DEFINITIONS.

     (a) "Award Date" shall mean the date on which an Optionee is granted an
Option.

     (b) "Board" shall mean the Board of Directors of the Corporation, as
constituted from time to time.

     (c) "Code" shall mean the Internal Revenue Code of 1986, as amended.

     (d) "Committee" shall mean a duly appointed committee of the Board as
described in Section 3(a).

     (e) "Corporation" shall mean Combimatrix Corporation, a California
corporation.

     (f) "Employee" shall mean (i) any individual who is an employee of the
Corporation or of a Subsidiary Corporation, (ii) a member of the Board of
Directors of the Corporation or of a Subsidiary Corporation, and (iii) an
independent contractor who performs services as an advisor or consultant for the
Corporation or for a Subsidiary Corporation. Service as an Employee shall be
considered employment for all purposes of the Plan except the second sentence
of Section 4(a).

     (g) "Exercise Price" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option Agreement.

     (h) "Fair Market Value" shall mean the fair market value of a Share, as
determined by the Committee in good faith. Any determination as to fair market
value made pursuant to this Plan shall be determined without regard to any
restriction other than a restriction which, by its terms, will never lapse, and
shall be conclusive and binding on all persons.
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     (i)  "ISO" shall mean an incentive stock option described in Section
422(b) of the Code.

     (j)  "Nonstatutory Option" shall mean a stock option not described in
Section 422(b) of the Code.

     (k)  "Option" shall mean an ISO or Nonstatutory Option granted under the
Plan and entitling the holder to purchase Shares.

     (l)  "Optionee" shall mean an individual who holds an Option.

     (m)  "Parent Corporation" means any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the Corporation
if, at the Award Date, each of the corporations other than the Corporation owns
stock possessing 50 percent or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.

     (n)  "Plan" shall mean this Combimatrix Corporation, 1995 Stock Option
Plan.

     (o)  "Share" shall mean one share of Stock, as adjusted in accordance
with Section 9 (if applicable).

     (p)  "Stock" shall mean the common stock, no par value, of the Corporation.

     (q)  "Stock Option Agreement" shall mean the agreement between the
Corporation and an Optionee, which contains the terms, conditions and
restrictions pertaining to such Optionee's Option.

     (r)  "Subsidiary Corporation" shall mean any corporation, if the
Corporation and/or any of its Subsidiary Corporations own stock possessing not
less than 50 percent of the total combined voting power of all classes of stock
of such corporation. A corporation that attains the status of a Subsidiary
Corporation on a date after the adoption of the Plan shall be  considered a
Subsidiary Corporation as of such date.

SECTION 3. ADMINISTRATION.

     (a)  Committee Membership. The Plan shall be administered by the
Committee. If no Committee has been appointed, the entire Board shall
constitute the Committee. No member of the Committee or of the Board,
when acting in the capacity of director or Committee member, may exercise
discretionary functions as to any matter relating solely to such director or
Committee member's own interests under the Plan. Subject to the foregoing
limitation, any member of the Committee may be removed by the Board at any time
either with or without cause, and any vacancy on the Committee may be filled by
the Board at any time.

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              (b)    Committee Procedures.  The Board shall designate one of
the members of the Committee as chairperson. The Committee may hold meetings at
such times and places as it shall determine. A majority of the members of the
Committee shall constitute a quorum, and the acts of a majority of the
Committee members present at meetings at which a quorum exists, or acts reduced
to or approved in writing by all Committee members, shall be valid acts of the
Committee. In making any determination or in taking or not taking any action
under the Plan, the Committee may obtain and may rely upon the advice of
experts, including professional advisors or consultants to the Corporation. The
Committee may delegate ministerial, non-discretionary functions to any Employee.

              (c)    Committee Responsibilities.  Subject to the provisions of
the Plan, the Committee shall have full authority and discretion to take the
following actions:

              (i)    To interpret and apply the provisions of the Plan or of any
        Option granted thereunder;

              (ii)   To adopt, amend or rescind rules, procedures and forms
        relating to the Plan or to any Option granted thereunder;

              (iii)  To authorize any person to execute, on behalf of the
        Corporation, any instrument required to carry out the purposes of the
        Plan or of any Option granted thereunder;

              (iv)   To determine when Options are to be granted under the Plan;

              (v)    To select the Optionees;

              (vi)   To determine the number of Shares to be made subject to
        each Option;

              (vii)  To prescribe the terms and conditions of each Option,
        including (without limitation) the Exercise Price, the date or dates
        on which an Option becomes exercisable, the installments (if any) in
        which such Option shall become exercisable, the events of termination or
        reversion of such Option and whether such Option is to be classified as
        an ISO or a Nonstatutory Option;

              (viii) To determine whether an outstanding Stock Option Agreement
        should be modified, extended or assumed, subject to applicable legal
        restrictions;

              (ix)   To prescribe the considerations for the grant of each
        Option or other right under the Plan and to determine the sufficiency of
        such consideration; and

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          (x)  To take any other actions deemed necessary or advisable for the
     administration of the Plan.

All decisions, interpretations and other actions of the Committee performed
pursuant to the Plan shall be final and binding on Optionees and all persons
deriving their rights from an Optionee. No member of the Committee shall be
liable for any action that such member has taken or has failed to take in good
faith with respect to the Plan or any Option.

SECTION 4. ELIGIBILITY.

          (a)  General Rule. Only Employees shall be eligible for designation
as Optionees by the Committee. In addition, only individuals who are employed
as employees by the Corporation or by a Subsidiary Corporation shall be
eligible for the grant of ISOs. Mere status as an Employee shall not entitle
any person to receive Options.

          (b)  Ten-Percent Stockholders. An employee of the Corporation or of
any Subsidiary Corporation who, on the Award Date, owns stock possessing more
than 10 percent of the total combined voting power of all classes of stock of
the Corporation, any Subsidiary Corporation, or any Parent Corporation shall
not be eligible for an ISO unless (i), as of the Award Date, the Exercise Price
is at least 110 percent of the Fair Market Value of a Share and (ii) such ISO
by its terms is not exercisable after the expiration of five years from the
Award Date.

          (c)  Attribution Rules. For purposes of Subsection (b) above, in
determining stock ownership, an employee shall be deemed to own the stock owned,
directly or indirectly, by or for that employee's brothers, sisters, spouse,
ancestors and lineal descendants. Any stock owned, directly or indirectly, by or
for a corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its stockholders, partners or beneficiaries. Any stock
with respect to which such employee holds an option shall not be counted.

SECTION 5. STOCK SUBJECT TO PLAN.

          (a)  Basic Limitation. All Shares issued under the Plan shall be
authorized but unissued Shares or treasury Shares. The aggregate number of
Shares issued under the Plan upon exercise of Options shall not exceed ______
Shares, subject to adjustment pursuant to Section 9. The number of Shares that
are subject to Options outstanding at any time under the Plan shall not exceed
the number of Shares that then remain available for issuance under the Plan
unless (i) an amendment to increase the maximum number of Shares issuable under
the Plan is adopted by the Board prior to the initial grant of any such Option
and is thereafter submitted to the Corporation's stockholders for approval and
(ii) each Option so

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granted is not to become exercisable, in whole or in part, at any time prior to
obtaining such stockholder approval.

     (b)  Additional Shares. In the event that any outstanding Option for any
reason expires or is canceled or otherwise terminated, the Shares allocable to
the unexercised portion of such Option shall again be available for subsequent
grants of Options.

SECTION 6.  TERMS AND CONDITIONS OF OPTIONS.

     (a)  Stock Option Agreement. Each Nonstatutory Option and each ISO shall be
evidenced by a Stock Option Agreement in a form acceptable to the Corporation
and signed by the Corporation and the Optionee. Such Option shall be subject to
all applicable terms and conditions of the Plan and shall be subject to any
other terms and conditions which are not inconsistent with the Plan and which
the Committee deems appropriate for inclusion in a Stock Option Agreement. The
provisions of the various Stock Option Agreements need not be identical.

     (b)  Number of Shares. Each Stock Option Agreement shall specify the number
of Shares that are subject to the Option and shall provide for the adjustment of
such number in accordance with Section 9. The Stock Option Agreement shall also
specify whether the Option is an ISO or a Nonstatutory Option. A Stock Option
Agreement for an ISO will also provide that to the extent the Aggregate Fair
Market Value (at the time the ISO was granted) of Stock with respect to which
the ISO is exercisable on the first time by an Employee during any calendar year
exceeds $100,000, the ISOs will be treated as Nonstatutory Options.

     (c)  Exercise Price. Each Stock Option Agreement shall specify the Exercise
Price. The Exercise Price of an ISO shall not be less than 100 percent of the
Fair Market Value of a Share on the Award Date, and a higher percentage may be
required by Section 4(b). The exercise of Nonstatutory Option shall not be less
than 90% of the Fair Market Value of a Share on the Award Date. Subject to the
preceding three sentences, the Exercise Price under any Option shall be
determined by the Committee at its sole discretion. The Exercise Price shall be
payable in a form described in Section 8.

     (d)  Withholding Taxes. As a condition to the exercise of an Option, the
Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations
that may arise in connection with such exercise. The Optionee shall also make
such arrangements as the Committee may require for the satisfaction of any
federal, state, local, or foreign withholding tax obligations that may arise in
connection with the disposition of Shares acquired by exercising an Option.

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     (e) Term. Each Stock Option Agreement shall specify the term of the Option.
The term shall not exceed 10 years from the Award Date, except as otherwise
provided in Section 4(b).

     (f) Exercisability. Each Stock Option Agreement shall specify the date when
all or any installment of the Option is to become exercisable and vest. No
Option shall become exercisable prior to six months after the Award Date.

     (g) Nontransferability. No Option shall be transferable by the Optionee
other than by will or by the laws of descent and distribution. An Option may be
exercised during the lifetime of the Optionee only by the Optionee or by the
Optionee's guardian or legal representative. No Option or interest therein may
be transferred, assigned, pledged or hypothecated by the Optionee during the
Optionee's lifetime, whether by operation of law or otherwise, or be made
subject to execution, attachment or similar process.

     (h) Effect of Termination of Employment. The Committee shall establish in
respect of each Option granted to an Employee the effect of a termination of
employment on the rights and benefits thereunder and in so doing may make
distinctions based upon the cause of termination. The effect of such termination
of employment shall be set forth in the applicable Stock Option Agreement.

     (i) No Rights as a Stockholder. An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by an Option until the date of the issuance of a stock certificate for
such Shares.

     (j) Restrictions on Transfer of Shares. To the extent that an applicable
Stock Option Agreement so provides, any Shares issued upon exercise of an Option
shall be subject to such special forfeiture conditions, rights of repurchase,
rights of first refusal and other transfer restrictions as the Committee may
determine. Such restrictions shall apply in addition to any restrictions that
may apply to holders of Shares generally.

SECTION 7. MODIFICATION, EXTENSION AND ASSUMPTION OF OPTIONS.

     Within the limitations of the Plan, the Committee from time to time may
authorize, either generally or in specific cases only, modification, extension
or assumption of an outstanding Option. Such modification, extension or
assumption may be effected by any legally valid means, including by cancellation
of an outstanding Option and the subsequent regranting of an Option, by
amendment, by substitution of an outstanding Option, or by waiver and may result
in, among other changes, a higher or lower Exercise Price, a greater or lesser
number of Shares that are subject to the Option, different vesting dates, or a
longer or shorter term; provided, however, that no modification, extension or
assumption

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of an Option shall, without the consent of the Optionee, impair the Optionee's
rights or increase the Optionee's obligations under the Option.

SECTION 8. PAYMENT FOR SHARES.

          (a)  General Rule.  The entire Exercise Price of Shares issued under
the Plan shall be payable in lawful money of the United States of America or by
a certified or bank cashier's check, except as provided in Subsections (b), (c),
(d), and (e) below.

          (b)  Surrender of Stock. To the extent an applicable Stock Option
Agreement so provides, payment may be made in whole or in part with Shares which
have already been owned by the Optionee or a representative of the Optionee for
more than six months and which are surrendered to the Corporation in good form
for transfer. Such Shares shall be valued at their Fair Market Value as of the
date when the new Shares are purchased under the Plan.

          (c)  Exercise/Sale. To the extent that an applicable Stock Option
Agreement so provides, payment may be made in whole or in part by the delivery
(on a form prescribed by the Corporation) of an irrevocable direction to a
securities broker approved by the Corporation to sell Shares and to deliver all
or part of the sales proceeds to the Corporation in payment of all or part of
the Exercise Price and any withholding taxes.

          (d)  Exercise/Pledge. To the extent an applicable Stock Option
Agreement so provides, payment may be made in whole or in part by a promissory
note executed by the Optionee in favor of the Corporation, upon terms and
conditions determined by the Committee, and secured by the Stock issuable upon
exercise of such Option in compliance with applicable law (including, without
limitation, state corporate law and federal margin requirements).

          (e)  Other Methods of Payment. To the extent an applicable Stock
Option Agreement so provides, payment may be made in whole or in part by any
other means deemed acceptable by the Committee.

SECTION 9. ADJUSTMENT OF SHARES.

          (a)  General. In the event of a subdivision of the outstanding Stock,
a declaration of a dividend payable in Shares, a declaration of an extraordinary
dividend payable in a form other than Shares in an amount that has a material
effect on the value of Shares, an issuance of Stock or other securities in an
amount that has a material effect on the value of Shares, a combination or
consolidation of the outstanding Stock into a lesser number of Shares, a
recapitalization, a spinoff, a reclassification or a similar occurrence, the
Committee shall make appropriate adjustments in one or more of (i) the number of
Shares available for future grants under Section 5, (ii) the number of Shares

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covered by each outstanding Option, (iii) the Exercise Price under each
outstanding Option or (iv) any other provision in the outstanding Stock Option
Agreements that the Committee deems necessary or advisable to adjust.

          (b)   Reorganizations. In the event that the Corporation is a party to
a merger or other reorganization, or in contemplation of such a merger or other
reorganization, and to the extent that applicable Stock Option Agreements so
provide, the Committee may, in its sole discretion, take one or a combination of
the following actions:

          (i)   provide that Options may be terminated upon payment to Optionees
     of the difference between the Exercise Price and the consideration to be
     received by stockholders of the Corporation for "in-the-money" options and
     that all other Options may be terminated without payment therefor of any
     kind,

          (ii)  provide for the assumption, by the surviving corporation or its
     parent, of some or all of the outstanding Options;

          (iii) if the Corporation is a surviving corporation, direct the
     Corporation to continue some or all of the outstanding Options;

          (iv)  authorize the immediate and full vesting of some or all of the
     outstanding Options, followed by cancellation if not exercised; or

          (v)   take any other action with respect to some or all of the Options
     that the Committee deems necessary or advisable.

          (c)   Reservation of Rights. Except as provided in this Section 9, an
Optionee shall have no rights by reason of (i) any subdivision or consolidation
of shares of stock of any class, (ii) the payment of any dividend or (iii) any
other increase or decrease in the number of shares of stock of any class. The
grant of an Option pursuant to the Plan shall not affect in any way the right or
power of the Corporation to make adjustments, reclassifications, reorganizations
or changes of its capital or business structure, to merge or consolidate or to
dissolve, liquidate, sell or transfer all or any part of its business or assets.

SECTION 10. SECURITIES LAWS.

          Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares comply with (or are exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and

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regulations, and the regulations of any stock exchange on which the
Corporation's securities may then be listed. Optionees may be required by the
Committee, as a condition to exercising any Option, to represent to the
Corporation in writing that the Shares are being acquired by them for investment
only and not with a view to the resale or distribution thereof.

SECTION 11. NO EMPLOYMENT RIGHTS.

        No provision of the Plan, nor any right or Option granted under the
Plan, shall be construed to give any person any right to become, to be treated
as, or to remain an Employee, or be interpreted so as to interfere with the
Corporation's or any Subsidiary Corporation's right to determine the Optionee's
other compensation, including salary.

SECTION 12. DURATION AND AMENDMENTS.

        (a) Term of the Plan. The Plan, as set forth herein, shall become
effective on the date of its adoption by the Board, subject to the approval of
the Corporation's stockholders. In the event that the stockholders fail to
approve the Plan on or before the date 12 months after its adoption by the
Board, (i) the Plan shall terminate, (ii) any Options already granted shall be
canceled and (iii) any Shares already issued under the Plan shall be repurchased
by the Corporation at the original Exercise Price. The Plan shall terminate
automatically 10 years after its adoption by the Board and may be terminated on
any earlier date pursuant to Subsection (b) below.

        (b) Right to Amend or Terminate the Plan. The Board may amend, suspend
or terminate the Plan at any time and for any reason; provided, however, that
any amendment of the Plan which increases the number of Shares available for
issuance under the Plan (except as provided in Section 9), or which materially
changes the class of persons who are eligible for the grant of ISOs, shall be
subject to the approval of the Corporation's stockholders. Unless required by
applicable law, stockholder approval shall not be required for any other
amendment of the Plan.

        (c) Effect of Amendment or Termination. No Shares shall be issued or
sold under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Share previously issued or any Option
previously granted under the Plan (except as provided in Subsection (a) above).

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SECTION 13. GOVERNING LAW.

     The interpretation, performance and enforcement of this Plan shall be
governed by the laws of the State of California.

SECTION 14. EXECUTION.

     To record the adoption of the Plan by the Board, the Corporation has
caused its authorized officer to execute the same.

                                        COMBIMATRIX CORPORATION

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

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                 FIRST AMENDMENT TO THE COMBIMATRIX CORPORATION

                             1995 STOCK OPTION PLAN

                              W I T N E S S E T H:

     WHEREAS, CombiMatrix Corporation (the "Company") presently maintains the
CombiMatrix Corporation 1995 Stock Option Plan which became effective on
____________, 1996 (the "Plan"); and

     WHEREAS, the Company, pursuant to Section 12 of the Plan, has the right to
amend the Plan from time to time subject to certain limitations; and

     WHEREAS, effective September 14, 2000 ("Effective Date"), the Company
changed from being a California corporation to become a Delaware corporation;
and

     WHEREAS, the Company desires to amend the Plan so that the Options (as
defined in the Plan) granted after the Effective Date are subject to the laws of
the state of Delaware.

     NOW, THEREFORE, in order to make certain revisions desired by the Company,
the Plan is hereby amended in the following manner:

        1. Effective as of the Effective Date, the first sentence of Section 1
of the Plan is hereby amended in its entirety to read as follows:

        The CombiMatrix Corporation 1995 Stock Option Plan is intended to
        promote the interest of CombiMatrix Corporation, a Delaware corporation,
        by providing incentives to certain Employees who are responsible for the
        management, growth, or financial success of the Corporation or its
        Subsidiary Corporations.

        2. Effective as of the Effective Date, Section 2.(e) of the Plan is
hereby amended in its entirety to read as follows:

        (e) "Corporation" shall mean CombiMatrix Corporation, a Delaware
        corporation.

        3. Effective as of the Effective Date, Section 13 of the Plan is hereby
amended in its entirety to read as follows:

        Section 13. GOVERNING LAW

        The interpretation, performance and enforcement of this Plan shall be
        governed by the laws of the State of Delaware.

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     IN WITNESS WHEREOF, CombiMatrix Corporation has caused this First Amendment
to the CombiMatrix 1995 Stock Option Plan to be executed on this day of
__________, 2000.

                                       COMBIMATRIX CORPORATION

                                       By:  ____________________________________

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                                                                    EXHIBIT 10.2

                             COMBIMATRIX CORPORATION
                             1998 STOCK OPTION PLAN

1.     THE PLAN.

       1.1 PURPOSE. The purpose of this Plan is to benefit the Company's
stockholders by encouraging high levels of performance by individuals who
contribute to the success of the Company and to enable the Company to attract,
motivate, retain and reward talented and experienced individuals. This purpose
is to be accomplished by providing Eligible Persons with an opportunity to
obtain or increase a proprietary interest in the Company and/or by providing
Eligible Persons with additional incentives to join or remain with the Company.
Capitalized terms are defined in Article 4.

       1.2 ADMINISTRATION.

              1.2.1 COMMITTEE. This Plan shall be administered by the Committee,
       acting by majority vote or unanimous written consent.

              1.2.2 AUTHORITY INTERPRETATION; POWERS OF COMMITTEE. Subject to
       the express provisions of this Plan, the Committee shall have the
       authority:

                     (i) to determine the particular Eligible Persons who will
              receive Options;

                     (ii) to grant Options to Eligible Persons, determine the
              price and amount of securities to be offered or awarded to such
              persons, and determine the other specific terms and conditions of
              such Options, establish the installments (if any) in which such
              Options shall become vested or exercisable (subject to Section
              2.4), or determine that no delayed vesting or exercisability is
              required, determine specific call rights of the Corporation or
              affiliates, establish the events of termination or forfeiture of
              such Options, and impose such other restrictions on Options,
              consistent with the express limits of this Plan, as the Committee
              deems appropriate;

                     (iii) to approve the forms of Option Agreements (which need
              not be identical either as to type of Option or among
              Participants);

                     (iv) to construe and interpret this Plan and agreements
              defining the rights and obligations of the Company and
              Participants under this Plan, to further define the terms used in
              this Plan, and to prescribe, amend, and rescind rules and
              regulations relating to the administration of this Plan;

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                     (v) to cancel, modify, or waive the Company's rights with
              respect to, or modify, discontinue, suspend, or terminate any or
              all outstanding Options held by Participants, subject to any
              required consent under Section 3.6.3 or 3.6.4;

                     (vi) to accelerate the exercisability or the vesting of any
              Option under such circumstances as the Committee shall determine,
              including the occurrence of an Event, or to extend the
              exercisability or extend the term of any or all outstanding
              Options within the maximum 10-year term of Options under Section
              2.3 or (subject to Section 3.10) relax restrictions on transfer of
              benefits under Options; and

                     (vii) to make all other determinations and take such other
              action as contemplated by this Plan or as may be necessary or
              advisable for the administration of this Plan and the effectuation
              of its purposes.

              1.2.3 BINDING DETERMINATIONS; RELIANCE. Subject only to compliance
       with the express provisions hereof, the Board and Committee may act in
       their absolute discretion in matters within their authority under this
       Plan (including, but not limited to, actions under Section 1.2.2) and
       their determinations and interpretations shall be final and binding upon
       all persons. In determining whether to take any action permitted under
       the Plan, the Board or Committee may rely upon the advice of counsel,
       accountants, appraisers and other experts. No director, officer or agent
       of the Company shall be liable for any such action or determination taken
       or made or omitted in good faith.

              1.2.4 DELEGATION. The Committee may delegate ministerial,
       non-discretionary functions to third parties, including officers or
       employees of the Company.

              1.2.5 COMMITTEE ADMINISTRATION. The Board may, at any time (a)
       assume or change the administration of this Plan, (b) change the number
       of members of the Committee, and (c) change the membership of the
       Committee.

       1.3 PARTICIPATION. Options may be granted by the Committee only to those
persons that the Committee determines to be Eligible Persons. An Eligible Person
is not entitled to any Options hereunder. An Eligible Person who has been
granted an Option may, if otherwise eligible, be granted additional Options.

       1.4 SHARES SUBJECT TO THE PLAN. Subject to the provisions of Section 3.2,
the capital stock that may be delivered under this Plan shall be shares of the
Corporation's authorized but unissued Common Stock. The Shares may be delivered
for any lawful consideration, but not for less than the minimum lawful
consideration under California law.

              1.4.1 NUMBER OF SHARES. The aggregate number of Shares that may be
       issued pursuant to all Options granted under this Plan, including ISOs,
       may not exceed _______ shares to all Eligible Persons. The aggregate
       number of Shares that may be subject to Options that are granted during
       any calendar year to any Eligible Person may not exceed _______ shares.
       The foregoing limits are subject to adjustment pursuant to Section 3.2.

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              1.4.2 SHARE RESERVATION; REPLENISHMENT AND REISSUE OF UNVESTED
       OPTIONS. Shares subject to outstanding Options shall be reserved for
       issue. Shares that are subject to or underlie Options which expire or for
       any reason are cancelled or terminated, are forfeited, fail to vest, or
       for any other reason are not paid or delivered under this Plan, as well
       as reacquired Shares, shall again, except to the extent prohibited by
       law, be available and reserved for subsequent Options under this Plan.
       The foregoing sentence does not apply to Shares withheld under Section
       3.5.

       1.5 DOCUMENTATION. Each Option will be evidenced by an Option Agreement
the form of which must be approved by the Committee and signed by the Company,
and, if required by the Committee, by the Participant. The grant of an Option is
made on the Grant Date, unless the Committee specifies a later date. Each Option
shall be subject to the terms and conditions set forth in this Plan, a copy of
which will be provided to the Participant upon execution of an Option Agreement,
and on such other terms and conditions established by the Committee as are not
inconsistent with the specific provisions of this Plan and set forth in the
Option Agreement.

       1.6 TRANSFER AND OTHER LIMITATIONS ON OPTIONS. All Options shall be
subject to transfer and other limitations of Sections 3.1.3 and 3.1.4.

2.     OPTIONS.

       2.1 GRANTS. One or more Options may be granted under this Article 2 to
any Eligible Person. Each Option shall be designated by the Committee in the
applicable Option Agreement as either a NQSO or an ISO. ISOs may be granted to
Eligible Persons who are employed by the Company or a corporation that is a
"parent" or "subsidiary" within the meaning of Section 424(e) and 424(f) of the
Code, respectively.

       2.2 OPTION PRICE. Except as provided in Sections 2.9 and 2.10, the
Purchase Price per Share covered by each Option will be determined by the
Committee at the time of the grant of the Option, but shall not be less than 85%
of the Fair Market Value of the Shares on the Grant Date (as determined
consistent with the requirements of Section 25102(o) of the California Corporate
Securities Law).

       2.3 OPTION PERIOD. Each Option shall expire on a date determined by the
Committee, but not later than 10 years after the Grant Date, and will be subject
to earlier termination as set forth in this Plan or the Option Agreement.

       2.4 VESTING AND EXERCISABILITY. Vesting and exercisability will be
determined by the Committee; provided, however, that any Option granted to
Participants other than officers, directors or consultants of the Company
pursuant to this Plan shall vest at a rate no slower than 20% of the Shares
subject to the Option on the first anniversary of the applicable Grant Date and
as to additional 20% increments on each of the second, third, fourth and fifth
anniversaries of the Grant Date, subject to adjustment pursuant to Section 3.2.
Once vesting occurs, Options shall remain exercisable until the expiration or
earlier termination of the Option.

                                      -3-
<PAGE>   4

       2.5 MANNER OF EXERCISE. An Option shall only be exercisable in respect of
whole Shares, and fractional Share interests shall be disregarded. An Option may
only be exercised as to at least 100 Shares unless the number purchased is the
total number then exercisable under the Option. An exercisable Option may be
exercised, in whole or in part by delivery to the Secretary of the Corporation
of a written notice of election to exercise in a form approved by the Committee,
which notice shall specify the number of shares with respect to which the Option
is being exercised, together with payment of the Purchase Price and any
applicable tax withholding in accordance with Sections 2.7 and 3.5 and
satisfaction of any other conditions of the exercise. The date on which the
Corporation certifies the satisfaction of these conditions by written acceptance
of the notice, which certification shall not be unreasonably delayed or
withheld, shall be deemed to be the exercise date.

       2.6 PAYMENT FORMS. The Purchase Price must be paid in full at the time of
each exercise in cash equivalent or (to the extent authorized and approved by
the Committee or set forth in the applicable Option Agreement) one or a
combination of the following methods: (a) cash equivalent, (b) with shares of
Common Stock already owned by the Participant for at least six months, or (c) a
promissory note in a form and on such terms as the Committee may approve. Any
shares permitted to be used to satisfy the Purchase Price will be valued at
their Fair Market Value on the exercise date.

       2.7 SPECIAL LIMIT ON GRANT AND TERMS OF ISOS.

              2.7.1 $100,000 LIMIT. To the extent that the aggregate Fair Market
       Value of stock with respect to which ISOs first become exercisable by a
       Participant in any calendar year exceeds the $100,000 limit in Section
       422 of the Code, such options shall be treated as nonqualified stock
       options. In reducing the number of options treated as ISOs to meet this
       limit, the Committee may, in the manner and to the extent permitted by
       law, designate which Shares are to be treated as Shares acquired pursuant
       to the exercise of an ISO.

              2.7.2 OTHER CODE LIMITS. There shall be imposed in any Option
       Agreement relating to ISOs such terms and conditions as from time to time
       are required in order that the Option be an "incentive stock option" as
       that term is defined in Section 422 of the Code.

       2.8 ISO NOTICE OF SALE REQUIREMENT. Any employee who exercises an ISO
shall give prompt written notice to the Corporation of any sale or other
transfer of the Shares acquired within one year after the exercise date or two
years after the Grant Date.

       2.9 LIMITS ON 10% HOLDERS. No Options may be granted to any person who,
at the time the Option is granted, owns (or is deemed to own under Section
424(d) of the Code) Shares possessing more than 10% of the total combined voting
power of all classes of stock of the Company, unless the Purchase Price of the
Option is at least 110% of the Fair Market Value of the stock subject to the
Option. In the case of an ISO granted to such a person, such Option by its terms
shall not be exercisable after the expiration of five years from the Grant Date.

                                      -4-
<PAGE>   5

       2.10 OPTION REPRICING/CANCELLATION AND REGRANT/WAIVER OF RESTRICTIONS.
Subject to Section 1.4 and Section 3.6 and the specific limitations on Options
contained in this Plan, the Committee from time to time may authorize, generally
or in specific cases only, for the benefit of any Eligible Person any adjustment
in the Purchase Price, the vesting schedule, the number of Shares subject to,
the restrictions upon, or the term of, an Option granted under this Section 2 by
cancellation of an outstanding Option and a subsequent regranting of an Option,
by amendment, by substitution of an outstanding Option, by waiver or by other
legally valid means. Subject to Section 1.4 and Section 3.6 and the specific
limitations on Options contained in this Plan, such amendment or other action
may, among other changes, result in a Purchase Price which is higher or lower
than the Purchase Price of the original or prior Option (but subject to the
pricing limit on the date of the change), provide for a greater or lesser number
of Shares subject to the Option, or provide for a longer or shorter vesting or
exercise period.

3.     OTHER PROVISIONS.

       3.1 RIGHTS OF ELIGIBLE PERSONS, PARTICIPANTS AND BENEFICIARIES.

              3.1.1 NO BINDING COMMITMENT. Options will not automatically or
       necessarily be granted to each person who is an Eligible Person.

              3.1.2 NO EMPLOYMENT CONTRACT. Nothing contained in this Plan (or
       any document related hereto) shall confer upon any Eligible Person or
       Participant any right to continue in the service or employ of the Company
       or constitute any contract or agreement of service or employment, or
       interfere in any way with the right of the Company to reduce such
       person's compensation or other benefits or to terminate the services or
       employment of such person, with or without cause. Similarly, nothing
       contained in this Plan (or any related document) shall affect any other
       contractual right of any Eligible Person or Participant, except as such
       other right may expressly provide. The Committee may, however, condition
       a grant upon a Participant's commitment to future or continued service.

              3.1.3 LIMITATIONS ON TRANSFERABILITY OF OPTIONS. An exercisable
       Option may be exercised only by, and Shares deliverable pursuant to an
       Option will be delivered only to, the Participant or, if the Participant
       dies, to the Participant's Beneficiary. If a Personal Representative has
       been appointed for a Participant, payment or delivery will be made to the
       Personal Representative. Other than by will or the laws of descent and
       distribution, no Option, benefit payable or Shares deliverable under, or
       interest in, this Plan or in any Option shall be subject in any manner to
       anticipation, alienation, sale, transfer, assignment, pledge, encumbrance
       or charge, and any attempted action or transfer to that end shall be
       void. No such benefit or interest shall be, in any manner, liable for, or
       subject to, debts, contracts, liabilities, engagements or torts of any
       Eligible Person, Participant or Beneficiary. The Company shall disregard
       any attempted transfer, assignment or other alienation prohibited by the
       preceding sentence or other applicable law and shall pay or deliver
       Shares only in accordance with this Plan. Beneficiary designations
       authorized by the Committee are not subject to these restrictions.

                                      -5-
<PAGE>   6

              3.1.4 CORPORATION'S RIGHT TO REPURCHASE SHARES ON TERMINATION OF
       SERVICES. Shares acquired pursuant to an Option are subject to certain
       repurchase rights in favor of the Corporation as set forth in this
       Section 3.1.4. However, nothing in this Section 3.1.4 shall be construed
       so as to create an obligation on the part of the Corporation to
       repurchase any Shares from any Participant. The provisions of this
       Section 3.1.4 shall terminate upon the closing of a bona fide
       underwritten public offering and sale of at least ____% of the
       Corporation's Common Stock, or upon a reorganization or other event
       affecting the Corporation whereby it becomes a registered company in
       respect of its Common Stock under Section 12 of the Exchange Act.

                     (i) Upon a Participant's Termination of Services, the
              Corporation shall have the right to purchase, and such Participant
              shall be obligated to sell, any Shares acquired pursuant to an
              Option, during a 90-day period beginning on either: (i) the date
              of such termination, or (ii) in the case of Shares purchased
              pursuant to the exercise of an Option after a Participant's
              Termination of Services, the date of such exercise (the "CALL
              PERIOD").

                     (ii) The purchase price for Shares repurchased pursuant to
              this Section 3.1.4 shall be the Fair Market Value of such Shares
              (as defined in the Plan) as of the date of the commencement of the
              Call Period. The purchase price shall be paid at the closing
              (which shall occur not later than the 10th day after the
              Corporation exercises its call right and in any event not later
              than the expiration of the Call Period) by check or by virtue of
              the cancellation of purchase money indebtedness for the Shares
              against surrender by the Participant of a stock certificate
              evidencing the Shares with duly endorsed stock powers. No
              adjustments shall be made to the purchase price for fluctuations
              in the Fair Market Value of the Shares during the Call Period.

                     (iii) Subject to the foregoing, the right of the
              Corporation to repurchase and the obligation of a Participant to
              sell the Shares to the Corporation under this Section 3.1.4 shall
              terminate after the expiration of the Call Period.

                     (iv) Notwithstanding any other provisions of the Plan or
              this Section 3.1.4 to the contrary, the Corporation may assign any
              or all of its repurchase rights under this Section 3.1.4 to one or
              more shareholders or successors of the Corporation.

                     (v) Certificates representing all Shares issued under the
              Plan will bear legends referring to the restrictions on transfer
              and the repurchase and call rights of the Corporation set forth
              herein and in the Plan.

              3.1.5 NO TRUST OR FUND. No Participant, Beneficiary or other
       person shall have any right, title or interest in any fund or in any
       specific asset (including Shares) of the Company by reason of any Option.
       Neither this Plan nor any Option under it creates any trust or fiduciary
       relationship of any kind between the Company and any Participant,
       Beneficiary or other person. If a Participant, Beneficiary or other
       person acquires a right

                                      -6-
<PAGE>   7

       to receive anything other than Shares upon exercise of an Option, such
       right will be no greater than the right of any unsecured general creditor
       of the Company.

              3.1.6 CHARTER DOCUMENTS. The Articles of Incorporation and Bylaws
       of the Company, as either of them may be amended from time to time, may
       provide for additional restrictions and limitations with respect to
       Shares (including further restrictions and limitations on the transfer of
       Shares). To the extent that these restrictions and limitations are
       greater than those provided for in this Plan, such restrictions and
       limitations shall apply to Shares acquired pursuant to the exercise of
       Options and are incorporated herein by this reference.

       3.2 ADJUSTMENTS; EARLY TERMINATION. Any discretion with respect to any of
the events described in this Section 3.2 shall be limited to the extent required
by the applicable accounting requirements in the case of a transaction intended
to be accounted for as a pooling of interests transaction.

              3.2.1 ADJUSTMENTS. If the outstanding Shares are changed into or
       exchanged for cash, other property or a different number or kind of
       shares or securities of the Company or of another issuer, or if
       additional Shares or new or different securities are distributed with
       respect to the outstanding Shares, through a reorganization or merger in
       which the Company is a party, or through a combination, consolidation,
       recapitalization, reclassification, stock split, stock dividend, reverse
       stock split, stock consolidation, extraordinary dividend or distribution
       of cash or property to the stockholders of the Company, or if there shall
       occur any other extraordinary corporate transaction or event in respect
       of the Common Stock or a sale of substantially all the assets of the
       Company as an entirety which in the judgment of the Committee materially
       affects the Common Stock, then the Committee shall, in such manner and to
       such extent (if any) as it deems appropriate and equitable, (a)
       proportionately adjust any or all of (i) the number and kind of Shares or
       other consideration that is subject to or may be delivered under this
       Plan and pursuant to outstanding Options, (ii) any performance standards
       appropriate to any outstanding Options, (iii) any exercise or base price
       (and other terms, in the discretion of the Committee, necessarily
       affected by such change) of outstanding Options, and/or (iv) the
       consideration payable with respect to Options granted prior to any such
       change; or (b) in the case of an extraordinary acquisition of Company
       stock, extraordinary dividend or other distribution, merger,
       reorganization, consolidation, combination, sale of assets, split up,
       exchange or spin off, make provision for a cash payment or for the
       substitution or exchange of (i) any or all outstanding Options or the
       cash, securities or property deliverable to the holder of any or all
       outstanding Options, for (ii) cash, property and/or other securities,
       based upon the distribution or consideration payable to holders of the
       Common Stock of the Company upon or in respect of such event; provided,
       however, in each case, that with respect to awards of ISOs, no such
       adjustment shall be made which would cause this Plan to violate Section
       424(a) of the Code or any successor provisions thereto. In any of such
       events, the Committee may take such action sufficiently prior to such
       event if necessary to permit the Participant to realize the benefits
       intended to be conveyed with respect to the underlying Shares in the same
       manner as stockholders generally.

                                      -7-
<PAGE>   8

              3.2.2 ACCELERATION OF OPTIONS UPON AN EVENT. As to any
       Participant, unless prior to an Event the Committee determines that, upon
       its occurrence, there shall be no acceleration of benefits under Options
       or determines that only certain or limited benefits under Options shall
       be accelerated and the extent to which they shall be accelerated, and/or
       establishes a different time in respect of such Event for such
       acceleration, then upon the occurrence of an Event, each Option shall
       become immediately exercisable. The Committee may override the
       limitations on acceleration in this Section 3.2.2 by express provision in
       the Option Agreement and may also accord any Participant a right to
       refuse any acceleration, whether or not pursuant to the Option Agreement
       or otherwise. The Committee may accelerate vesting and exercisability in
       anticipation of an Event or on a case by case or any other basis, in such
       circumstances as it deems appropriate and in the interests of the
       Company. Any acceleration of Options shall comply with applicable
       regulatory requirements, including without limitation Section 422 of the
       Code.

              3.2.3 POSSIBLE EARLY TERMINATION OF ACCELERATED OPTIONS. If any
       Option or other right to acquire Shares under this Plan has been fully
       accelerated as required or permitted by Section 3.2.2 but is not
       exercised or has not vested prior to (i) a dissolution of the Company, or
       (ii) an event described in Section 3.2.1 involving an Event approved by
       the Board, such Option or right shall terminate, subject to any provision
       that has been made by the Committee through a plan of reorganization
       approved by the Board or otherwise for the survival, substitution,
       conversion, assumption, exchange or other settlement and/or adjustment of
       such Option or right pursuant to Section 3.2.1.

       3.3 EFFECT OF TERMINATION OF SERVICES; TERMINATION OF SUBSIDIARY STATUS.
Any Option, to the extent not then vested, shall terminate and become null and
void upon a Termination of Services of the Participant, except as set forth
below or otherwise expressly provided by the Committee in the Option Agreement.
Notwithstanding anything contained in this Section 3.3 to the contrary, all
Options shall be subject to earlier termination pursuant to or as contemplated
by Sections 2.3 and 3.2 of this Plan.

              3.3.1 POST-SERVICE EXERCISE PERIODS ON TERMINATION OTHER THAN FOR
       CAUSE. Except as otherwise expressly provided in Section 2.4, 3.2, 3.3.2
       or 3.3.3 (and, with respect to officers, directors or consultants of the
       Company, except as the Committee may otherwise provide in the applicable
       Option Agreement), a Participant may exercise an Option that is
       exercisable on the date of the Participant's Termination of Services
       ("TERMINATION DATE") and has not been previously exercised and has not
       expired in accordance with its stated term, only to the extent it is
       vested and exercisable on the Termination Date, within the following
       periods:

                     (a) If the Participant incurs a Termination of Services for
              any reason other than Death, Total Disability, or a termination by
              the Company for Cause, the Participant will have 30 days after the
              Termination Date to exercise an Option; and

                                      -8-
<PAGE>   9

                     (b) If the Participant's Termination of Services results
              from the Participant's death or Total Disability, or if the
              Participant dies or suffers a Total Disability within 30 days
              after a termination described in Section 3.3.1(a), the
              Participant, the Participant's Beneficiary or the Participant's
              Personal Representative, as the case may be, will have six months
              after the date of Total Disability or, if earlier, the Termination
              Date.

              3.3.2 TERMINATION OF OPTION ON TERMINATION FOR CAUSE. Any and all
       rights to an Option, whether or not vested, shall expire immediately upon
       a Termination of Services of the Participant by the Company for Cause, as
       determined by the Company in its sole discretion and in accordance with
       applicable law.

              3.3.3 ADJUSTMENTS TO EXERCISABLE PORTION. Notwithstanding the
       foregoing, if a Participant's Termination of Services results from any
       reason other than a termination for Cause, the Committee may, in its
       discretion, increase the portion of the Option exercisable by the
       Participant (or Participant's Beneficiary or Personal Representative, as
       the case may be) or extend the exercisability period upon such terms as
       the Committee shall determine.

              3.3.4 EFFECT OF CESSATION OF SUBSIDIARY STATUS. If an entity
       ceases to be a Subsidiary, such action will be deemed for purposes of
       this Plan to be a Termination of Services of each Eligible Person of that
       entity who does not continue as an Eligible Person of the Company.

              3.3.5 TERMINATION OF CONSULTING OR AFFILIATE SERVICES. If the
       Participant is not an employee but provides services under a written
       contract, or provides services to the Company solely as an employee of a
       designated affiliate of the Corporation (other than a Subsidiary), the
       Committee shall be the sole judge of whether the Participant continues to
       render services to the Company, unless the contract or Option Agreement
       otherwise provides. By written notice to the Participant, the Committee
       may determine whether a Termination of Services of such Participant for
       purposes of this Plan has occurred. In such event (unless the contract or
       Option Agreement otherwise expressly provides), the Participant's
       Termination of Services for purposes of Section 3.3 shall be the date
       which is 10 days after the Committee's mailing of the notice.

       3.4 COMPLIANCE; GOVERNMENT REGULATIONS; SECURITIES LAWS.

              3.4.1 GENERAL. This Plan, the grant, vesting and exercisability of
       Options, the issuance or transfer of Shares, and the payment of money
       pursuant thereto are subject to compliance with all applicable federal
       and state laws and rules and to such approvals by any regulatory or
       governmental agency that may, in the judgment of the Committee, be
       necessary or advisable. These laws and rules include but are not limited
       to those laws and rules regulating the offer, issuance, and sale of
       securities, securities lending, conflicts of interest and tax matters. In
       connection with any stock issuance or transfer, the person acquiring the
       Shares must, if requested, give assurances satisfactory to the Committee
       in respect of such matters as the Board deems desirable to assure
       compliance with all

                                      -9-
<PAGE>   10

       applicable legal requirements (including but not limited to federal and
       state securities law matters).

              3.4.2 COMPLIANCE WITH SECURITIES LAWS. No Participant shall make
       any disposition of all or any portion of Shares acquired upon exercise of
       an Option, except in compliance with applicable federal and state
       securities laws and unless and until:

                     (a) there is then in effect a registration statement under
              the Securities Act of 1933, as amended (the "SECURITIES ACT")
              covering such proposed disposition and such disposition is made in
              accordance with such registration statement; or

                     (b) such disposition is made in accordance with Rule 144
              under the Securities Act; or

                     (c) such Participant notifies the Company of the proposed
              disposition and furnishes the Company with a statement of the
              circumstances surrounding the proposed disposition, and if
              requested by the Company, Participant furnishes the Company with
              an opinion of counsel acceptable to Company's counsel, that such
              disposition will not require registration under the Securities Act
              and will be in compliance with applicable state securities laws.

                     NOTWITHSTANDING ANYTHING ELSE CONTAINED HEREIN OR IN ANY
       RELATED DOCUMENT TO THE CONTRARY, THE COMPANY HAS NO OBLIGATION TO
       REGISTER THE COMMON STOCK OR FILE ANY REGISTRATION STATEMENT UNDER EITHER
       FEDERAL OR STATE SECURITIES LAWS, NOR DOES THE COMPANY MAKE ANY
       REPRESENTATION CONCERNING THE LIKELIHOOD OF A PUBLIC OFFERING OF THE
       COMMON STOCK.

              3.4.3 FINANCIAL STATEMENT DELIVERY. The Company shall deliver
       annually to Participants financial statements of the Company sufficient
       to satisfy the requirements of Section 260.140.46 of the Regulations
       adopted under the California Corporate Securities Law, to the extent (if
       any) applicable to the Participants or this Plan.

              3.4.4 INVESTMENT REPRESENTATIONS. By acceptance and execution of
       his or her Option Agreement and again upon exercise of his or her Option
       (unless the Company is then a Public Company or waives this requirement),
       each Participant makes and agrees to reaffirm the representations
       contained in Appendix A hereto to the Company and acknowledges that the
       Company's reliance on federal and state securities law exemptions from
       registration and qualification is predicated, in part, on such
       representations.

                                      -10-
<PAGE>   11

       3.5 TAX WITHHOLDING. Upon and as a condition precedent to any exercise,
vesting, or payment of any Option, the Company has the right at its option to
require payment through cash withholding of other compensation or (if
withholding would not timely discharge the obligation) by check (in form
acceptable to the Company) payable to the Company of the amount of any taxes
that the Company may be required to withhold with respect to such transaction.
If a tax is required to be withheld in connection with the issuance or transfer
of Shares, the Committee may authorize the Participant to elect, subject to
prior Board approval at or prior to the offset, to have the Company reduce the
number of Shares to be issued by the number of Shares (valued at Fair Market
Value) necessary to accomplish such withholding.

       3.6 AMENDMENT, TERMINATION AND SUSPENSION.

              3.6.1 AMENDMENT, TERMINATION AND SUSPENSION. The Board may, at any
       time, terminate or, from time to time, amend, modify or suspend this
       Plan, in whole or in part. No Option may be granted during the suspension
       of this Plan or after termination of this Plan, but the Committee shall
       retain jurisdiction as to Options then outstanding in accordance with the
       terms of this Plan.

              3.6.2 SHAREHOLDER APPROVAL. No amendment to the Plan shall be
       required to be submitted to the shareholders of the Company for their
       approval unless such shareholder approval of the amendment is required
       pursuant to applicable law.

              3.6.3 AMENDMENT OF OPTIONS. Without limiting any other express
       authority of the Committee under, but subject to the express limits of,
       this Plan, the Committee by agreement or resolution may waive conditions
       of or limitations on Options to Eligible Persons that the Committee in
       the prior exercise of its discretion has imposed, without the consent of
       a Participant, and may make other changes to the terms and conditions of
       Options that do not affect, in any manner materially adverse to the
       Participant, his or her rights and benefits under an Option.

       NOTWITHSTANDING THE FOREGOING PROVISIONS OF THIS SECTION 3.6.3 OR SECTION
       3.6.4, IF THE ACCOUNTING TREATMENT UNDER GENERALLY ACCEPTED ACCOUNTING
       PRINCIPLES OF ANY OPTION GRANTED HEREUNDER WOULD BE MATERIALLY MORE
       ADVERSE TO THE COMPANY WITH RESPECT TO ITS ABILITY TO RAISE ADDITIONAL
       CAPITAL THAN ANTICIPATED AT THE TIME OF APPROVAL OF THIS PLAN OR THE
       OPTION BECAUSE OF A CHANGE IN THOSE PRINCIPLES OR THE INTERPRETATION OR
       APPLICATION THEREOF, THE COMMITTEE MAY, IN THE EXERCISE OF ITS DISCRETION
       AND WITHOUT THE CONSENT OF THE PARTICIPANT, AMEND THE TERMS OF SUCH
       OPTION TO THE EXTENT THE COMMITTEE DEEMS NECESSARY TO ELIMINATE SUCH
       EFFECT.

              3.6.4 LIMITATIONS ON AMENDMENTS TO PLAN AND OPTIONS. Subject to
       Section 3.6.3., no amendment, suspension or termination of this Plan or
       change of or affecting any outstanding Option shall, without written
       consent of the Participant, affect in any manner materially adverse to
       the Participant any rights or benefits of the Participant or obligations
       of the Company under any Option granted under this Plan prior to the
       effective date of such change. Changes contemplated by Section 3.2 or 3.3
       shall not be

                                      -11-
<PAGE>   12

       deemed to constitute changes or amendments requiring Participant consent
       under Section 3.6.3 or Section 3.6.4.

       3.7 PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise expressly
authorized by the Committee or this Plan, a Participant shall not be entitled to
any privilege of stock ownership as to any Shares that the Participant does not
possess or hold of record. No adjustment will be made for dividends or other
rights as a shareholder for which a record date is prior to the date of delivery
of a certificate representing the Shares.

       3.8 EFFECTIVE DATE OF THE PLAN. This Plan will be effective upon its
approval by the Board, subject to approval by the shareholders of the Company
within 12 months after the date of such Board approval.

       3.9 TERM OF THE PLAN. Unless previously terminated by the Board, this
Plan will terminate at the close of business on the date which is the day before
the 10th anniversary of the adoption of the Plan by the Board, and no Option may
be granted under this Plan after that date. Unless otherwise expressly provided
in this Plan or in an applicable Option Agreement, any Option theretofore
granted may extend beyond such date, and all authority of the Board and the
Committee with respect to Options hereunder, including its authority to amend an
Option, shall continue in respect of outstanding Options on that date.

       3.10 GOVERNING LAW. This Plan and all documents related hereto shall be
governed by, and construed in accordance with, the laws of the State of
California. If any provision is held by a court of competent jurisdiction to be
invalid and unenforceable, the remaining provisions of this Plan will continue
to be fully effective.

       3.11 CAPTIONS. Captions and headings are given to the sections and
subsections of this Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of this Plan or any provision thereof.

       3.12 NON-EXCLUSIVITY OF PLAN. Nothing in this Plan shall limit or be
deemed to limit the authority of the Board or the Committee to grant awards or
to authorize any other compensation, with or without reference to the Common
Stock, under any other plan or authority.

       3.13 CONSTRUCTION. At the time of the adoption of this Plan, the Company
is not a Public Company. This Plan, and the granting of Options under this Plan,
is intended to satisfy the requirements of Rule 701 under the Securities Act and
Section 25102(o) of the California Corporate Securities Law and shall be
construed and interpreted in accordance with such intent.

4.     DEFINITIONS.

              "ACACIA GROUP" means (i) Acacia Research Corporation, (ii) any
affiliate of Acacia Research Corporation (as the term "affiliate" and "control"
as used therein are defined in

                                      -12-
<PAGE>   13

Rule 405 under the Securities Act), and (iii) any employee benefit plan (or
related trust) sponsored or maintained by one or more of the foregoing, or their
respective successors.

              "AFFILIATE" of any entity means any other entity controlled by,
controlling or under common control with the subject entity (where "control"
means the possession, direct or indirect, of the power to direct or cause the
direction of the management, policies or actions of the controlled person).

              "BENEFICIARY" means the person(s) or trust(s) entitled by will or
the laws of descent and distribution or properly designated by a Participant on
forms approved by the Committee to receive the benefits specified under this
Plan if the Participant dies.

              "BOARD" means the Board of Directors of the Corporation.

              "CAUSE" means that the Company, acting in good faith, determines
that the Participant: (a) has committed a material breach of the Participant's
duties and responsibilities (other than as a result of incapacity due to a Total
Disability) or any employment agreement with the Company and the breach is
willful or arises out of the Participant's gross negligence; or (b) has been
convicted of a felony, or entered a plea of guilty or nolo contendere with
respect to a felony; or (c) has repeatedly engaged or is engaging in immoderate
use of alcoholic beverages or narcotics or other substance abuse; or (d) has
violated in any material respect any of the legal or regulatory provisions
applicable to the Company or has violated any fiduciary duty or duty of care,
loyalty or confidentiality owed to the Company.

              "CHANGE OF CONTROL" means any of the following events:

              (i) an acquisition by any Person (excluding one or more members of
       the Acacia Group) of beneficial ownership (within the meaning of Rule
       13d-3 under Exchange Act) of or a pecuniary interest in (either
       comprising "ownership of") more than 50% of the Corporation's Common
       Stock or voting securities ("Voting Stock"), after giving effect to any
       new issue in the case of an acquisition from the Corporation, if one or
       more members of the Acacia Group (after giving effect to the acquisition)
       has ownership of ("owns") less than the aggregate amount owned by such
       acquiring Person;

              (ii) the consummation of a complete liquidation or dissolution of
       the Corporation;

              (iii) the consummation of a merger, consolidation, reorganization
       or sale or other disposition of all or substantially all of the Company's
       assets as an entirety (collectively, a "Business Combination"), other
       than a Business Combination (A) in which all or substantially all of the
       holders of Voting Stock hold or receive 50% or more of the voting stock
       of the entity resulting from the Business Combination and (B) after which
       no Person owns more than 50% of the voting stock of the resulting entity
       who did not own directly or indirectly at least that amount of Voting
       Stock immediately before the Business Combination or

                                      -13-
<PAGE>   14

              (iv) the Acacia Group ceases to own, directly or indirectly, at
       least 25% of the Voting Stock or at least 25% of the voting stock of an
       entity resulting from a Business Combination.

              "CODE" means the Internal Revenue Code of 1986, as amended from
time to time.

              "COMMISSION" means the Securities and Exchange Commission.

              "COMMITTEE" shall mean a committee appointed by the Board to
administer this Plan, which committee shall be comprised of two or more
directors. In the absence of such appointment, the Board shall be the Committee.

              "COMMON STOCK" means the Common Stock of the Corporation.

              "COMPANY" means the Corporation, any Subsidiary, and any other
affiliate of the Corporation designated by the Committee.

              "CORPORATION" means CombiMatrix Corporation, a California
corporation, and its successors.

              "ELIGIBLE PERSON" means (i) an officer, a director or a key
employee of the Company; or (ii) any consultant who renders or has rendered bona
fide substantial services to the Company (other than services in connection with
the offering or sale of securities of the Company in a capital raising
transaction) under a written contract with the Company, and who is selected to
participate in the Plan by the Committee.

              "EVENT" means (i) approval by the shareholders of the Corporation
of (A) the dissolution or liquidation of the Corporation, or (B) a Change of
Control described in clause (ii) or (iii) of the definition thereof; or (ii) a
Change of Control described in clause (i) or (iv) of the definition thereof.

              "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time.

              "FAIR MARKET VALUE" on any specified date shall mean the fair
value of such Shares on such date determined in the following manner:

              (i) If the Common Stock is not registered under Section 12 of the
       Exchange Act, or the National Association of Securities Dealers, Inc.
       ("NASD") or a similar organization does not furnish the mean between the
       bid and asked prices for the Common Stock on such date, the fair value of
       the Common Stock as of the date of determination, on a consolidated,
       fully diluted basis, assuming the exercise of any and all outstanding
       rights or options (whether or not vested) to purchase or acquire Common
       Stock, including but not limited to rights under this Plan, as determined
       in good faith by the Committee, based on the most recent available
       quarterly financial statements of the Company and

                                      -14-
<PAGE>   15

       such other factors as the Committee may deem relevant for such purposes.
       Such factors may (and, to the extent required by Section 3.4 shall)
       include but are not limited to, the liquidity of the Common Stock and any
       applicable transfer and other restrictions on the subject shares
       (including call rights of the Corporation to which the shares are
       subject), material developments subsequent to the end of the period
       covered by such financial statements, developments in the Company's
       business, general or specific industry and economic developments, the
       price at which the Shares of the Common Stock recently have traded or
       been sold or purchased, the frequency and volume of trades, the price at
       which securities of reasonably comparable corporations (if any) in the
       same industry are being traded (subject to appropriate adjustments for
       dissimilarities between the corporations being compared), and the
       earnings history, cash flow, book value and prospects of the Company in
       light of market conditions generally and conditions specific to the
       Company.

              (ii) If the Common Stock is registered under Section 12 of the
       Exchange Act: (A) if the stock is listed or admitted to trade on a
       national securities exchange, the closing price of the stock on the
       Composite Tape, as published in the Western Edition of the Wall Street
       Journal, of the principal national securities exchange on which the stock
       is so listed or admitted to trade, on such date, or, if there is no
       trading of the stock on such date, then the closing price of the stock as
       quoted on such Composite Tape on the next preceding date on which there
       was trading in such shares; (B) if the stock is not listed or admitted to
       trade on a national securities exchange, the last price for the stock on
       such date, as furnished by the NASD through the NASDAQ National Market
       Reporting System or a similar organization if the NASD is no longer
       reporting such information; (C) if the stock is not listed or admitted to
       trade on a national securities exchange and is not reported on the
       National Market Reporting System, the mean between the bid and asked
       price for the stock on such date, as furnished by the NASD or a similar
       organization.

              "GRANT DATE" means the date upon which the Committee took the
action granting an Option or such later date as may be set by the Committee.

              "ISO" means an Option which is intended, as evidenced by its
designation, as an incentive stock option within the meaning of Section 422 of
the Code, the award of which contains such provisions (including but not limited
to receipt of stockholder approval of the Plan, if the Option is made prior to
such approval) and is made under such circumstances and to such persons as may
be necessary to comply with that section.

              "NON-EMPLOYEE DIRECTOR" shall mean a member of the Board who is
not an officer or employee of the Corporation.

              "NQSO" means an Option that is designated as a nonqualified stock
option and shall include any Option intended as an ISO that fails to meet
applicable legal requirements. Any Option granted hereunder that is not
designated as an incentive stock option shall be deemed to be designated a NQSO
under this Plan and not an incentive stock option under the Code.

                                      -15-
<PAGE>   16

              "OPTION" means an option to purchase Shares under this Plan.

              "OPTION AGREEMENT" means a writing, approved by the Committee,
setting forth the terms of an Option. Option Agreements for ISOs shall include
any terms and conditions required for incentive stock options under Section 422
of the Code.

              "PARTICIPANT" means an Eligible Person who has been granted an
Option.

              "PERSON" means an association, a corporation, an individual, a
partnership, a trust or any other entity or organization, including a
governmental entity and a "person" as that term is used under Section 13(d) or
14(d) of the Exchange Act.

              "PERSONAL REPRESENTATIVE" means the person or persons who, upon
the Total Disability or incompetence of a Participant, has lawfully acquired on
behalf of the Participant the power to exercise the rights and receive the
benefits specified in this Plan.

              "PLAN" means this CombiMatrix Corporation 1998 Stock Option Plan.

              "PUBLIC COMPANY" means a company the Common Stock of which is
registered under the Exchange Act.

              "PURCHASE PRICE" means the exercise price expressed in dollars
payable by the Participant to the Company upon exercise of an Option in
accordance with the applicable Option Agreement.

              "SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.

              "SHARES" means shares of the Corporation's Common Stock.

              "SUBSIDIARY" means any corporation or other entity at least 50% of
the outstanding voting stock or voting power of which is beneficially owned
directly or indirectly by the Company, subject to Section 3.4 and (in the case
of ISOs) to limitations under Section 422 of the Code.

              "TERMINATION OF SERVICES" means any termination (by reason of
death, Total Disability, or any other reason whatsoever, either with or without
cause, unless otherwise specified) of a Participant's employment with the
Company or, if the person is not an employee and the Participant's services to
the Company are provided (or continue) under a written consulting contract, a
Termination of Services in accordance with Section 3.3.5. Termination of
Services may be deemed by the Committee not to occur if the Participant, after
terminating employment or service in one capacity, continues to provide service
to the Company under a written contract in another consulting capacity
authorized in writing and approved by the Committee. Status as an employee of
the Company is deemed to be in service. Termination of employment shall be
deemed a Termination of Services except as above provided.

                                      -16-
<PAGE>   17

              "TOTAL DISABILITY" means a "permanent and total disability" within
the meaning of Section 22(e)(3) of the Code and such other disabilities,
infirmities, afflictions, or conditions as the Board may include.

                                      -17-
<PAGE>   18

                             COMBIMATRIX CORPORATION
                             1998 STOCK OPTION PLAN

                                   APPENDIX A

                    SECURITIES LAW INVESTMENT REPRESENTATIONS

1.     NO INTENT TO SELL.

              The Participant represents that he/she is acquiring the Option and
if and when he/she exercises the Option will acquire any Shares solely for
his/her own account, for investment purposes only, and not with a view to or an
intent to sell, or to offer for resale in connection with any unregistered
distribution of all or any portion of the Shares within the meaning of the
Securities Act or the security laws of Delaware.

2.     NO RELIANCE ON CORPORATION.

              In evaluating the merits and risks of an investment in the Shares,
the Participant represents that he/she has and will rely upon the advice of
his/her own legal counsel, tax advisors, and/or investment advisors.

3.     RISK OF LOSS.

              The Participant represents that he/she is aware that the Option
may be of no practical value, that any value it may have depends on its vesting
and exercisability as well as an increase in the Fair Market Value of the
underlying Shares from the Grant Date to the date of exercise, and that any
investment in shares of a closely held corporation such as the Corporation is
non-marketable, non-transferable and could require his/her capital to be
invested for an indefinite period of time, possibly without return and at risk
of loss.

4.     RESTRICTIONS ON SHARES.

              The Participant represents that he/she understands that any Shares
acquired on exercise of the Option will be characterized as "restricted
securities" under the federal securities laws since the Shares are being
acquired from the Corporation in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act only in certain limited
circumstances. The Participant acknowledges receiving a copy of Rule 144
promulgated under the Securities Act, as presently in effect, and represents
that he/she is familiar with such rule, and understands the resale limitations
imposed thereby and by the Securities Act and the security law.

                                      A-1
<PAGE>   19

5.     ADDITIONAL RESTRICTIONS.

              The Participant represents that he/she has read and understands
the restrictions and limitations imposed on the Option and any Shares which may
be acquired thereunder, including, but not limited to, the following: (i) the
termination provisions of Sections 3.2.3 and 3.3 of the Plan; (ii) the
non-transferability provisions of Section 3.1.3 of the Plan; and (iii) the
Corporation's repurchase rights of Section 3.1.4 of the Plan.

6.     NO CORPORATION REPRESENTATIONS.

              The Participant represents that at no time was an oral
representation made to him/her relating to the Option or the purchase of Shares
and that he/she was not presented with or solicited by any promotional meeting
or material relating to the Option or the Shares.

7.     SHARE CERTIFICATE LEGEND.

              The Participant represents that he/she understands and
acknowledges that any certificate evidencing the Shares (or evidencing any other
securities issued with respect thereto pursuant to any stock split, stock
dividend, merger or other form of reorganization or recapitalization) if and
when issued shall bear, in addition to any other legends which may be required
by applicable state securities laws, the following legends:

              "THE SALE, ASSIGNMENT, PLEDGE OR OTHER TRANSFER AND VOTING OF THE
              SHARES REPRESENTED BY THIS CERTIFICATE OR ANY INTEREST THEREIN ARE
              SUBJECT TO AN AGREEMENT DATED _________________, ____ (A SIGNED
              COPY OF WHICH IS ON FILE AT THE OFFICE OF COMBIMATRIX
              CORPORATION), AND THE SHARES ARE SUBJECT TO REPURCHASE RIGHTS OF
              THE CORPORATION AS PROVIDED THEREIN.

              THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
              THE SECURITIES ACT OF 1933, AS AMENDED ("ACT") NOR HAVE THEY BEEN
              REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. NO
              TRANSFER OF SUCH SECURITIES WILL BE PERMITTED UNLESS A
              REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH
              TRANSFER, THE TRANSFER IS MADE IN ACCORDANCE WITH RULE 144 UNDER
              THE ACT, OR IN THE OPINION OF COUNSEL TO THE CORPORATION,
              REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH
              TRANSFER TO COMPLY WITH THE ACT AND WITH APPLICABLE STATE
              SECURITIES LAWS."

                                       A-2
<PAGE>   20

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                          Page
                                                                                          ----
<S>                                                                                       <C>
1.      THE PLAN...........................................................................  1

               1.1    Purpose..............................................................  1
               1.2    Administration.......................................................  1
               1.3    Participation........................................................  2
               1.4    Shares Subject to the Plan...........................................  2
               1.5    Documentation........................................................  3
               1.6    Transfer and Other Limitations on Options............................  3

2.      OPTIONS............................................................................  3

               2.1    Grants...............................................................  3
               2.2    Option Price.........................................................  3
               2.3    Option Period........................................................  3
               2.4    Vesting and Exercisability...........................................  3
               2.5    Manner of Exercise...................................................  4
               2.6    Payment Forms........................................................  4
               2.7    Special Limit on Grant and Terms of ISOs.............................  4
               2.8    ISO Notice of Sale Requirement.......................................  4
               2.9    Limits on 10% Holders................................................  4
               2.10   Option Repricing/Cancellation and Regrant/Waiver of Restrictions.....  5

3.      OTHER PROVISIONS...................................................................  5

               3.1    Rights of Eligible Persons, Participants and Beneficiaries...........  5
               3.2    Adjustments; Early Termination.......................................  7
               3.3    Effect of Termination of Services; Termination of Subsidiary
                      Status...............................................................  8
               3.4    Compliance; Government Regulations; Securities Laws..................  9
               3.5    Tax Withholding...................................................... 11
               3.6    Amendment, Termination and Suspension................................ 11
               3.7    Privileges of Stock Ownership........................................ 12
               3.8    Effective Date of the Plan........................................... 12
               3.9    Term of the Plan..................................................... 12
               3.10   Governing Law........................................................ 12
               3.11   Captions............................................................. 12
               3.12   Non-Exclusivity of Plan.............................................. 12
               3.13   Construction......................................................... 12

4.      DEFINITIONS........................................................................ 12

APPENDIX A: SECURITIES LAW INVESTMENT REPRESENTATIONS..................................... A-1
</TABLE>

<PAGE>   21

<TABLE>
<CAPTION>
                                                                                          Page
                                                                                          ----
<S>                                                                                       <C>

APPENDIX B: FORM OF INCENTIVE STOCK OPTION AGREEMENT...................................... B-1

APPENDIX C: FORM OF NONQUALIFIED STOCK OPTION AGREEMENT................................... C-1
</TABLE>

                                       4
<PAGE>   22

                   AMENDMENTS TO THE COMBIMATRIX CORPORATION

                             1998 STOCK OPTION PLAN

     These Amendments to the CombiMatrix Corporation 1998 Stock Option Plan
(the "Plan") were approved by resolutions of the Board of Directors of the
Corporation on July 5, 2000.

1.  Section 1.4.1 of the Plan is hereby deleted in its entirety and is hereby
    replaced in its entirety with the following:

    The aggregate number of Shares that may be issued pursuant to all Options
    granted under this Plan, including ISOs, may not exceed 5,000,000 Shares to
    all Eligible Persons. The aggregate number of Shares that may be subject to
    Options that are granted during any calendar year to any Eligible Person
    may not exceed 5,000,000 Shares. The foregoing limits are subject to
    adjustment pursuant to Section 3.2.

                    [Remainder of page intentionally blank]

<PAGE>   23

                SECOND AMENDMENT TO THE COMBIMATRIX CORPORATION

                             1998 STOCK OPTION PLAN

                              W I T N E S S E T H:

     WHEREAS, CombiMatrix Corporation (the "Company") presently maintains the
CombiMatrix Corporation 1998 Stock Option Plan which became effective on
____________, 1998 (the "Plan"); and

     WHEREAS, the Company, pursuant to Section 3.6 of the Plan, has the right to
amend the Plan from time to time subject to certain limitations; and

     WHEREAS, effective September 14, 2000 ("Effective Date"), the Company
changed from being a California corporation to become a Delaware corporation;
and

     WHEREAS, the Company desires to amend the Plan so that the Options (as
defined in the Plan) granted after the Effective Date are subject to the laws of
the state of Delaware.

     NOW, THEREFORE, in order to make certain revisions desired by the Company,
the Plan is hereby amended in the following manner:

        1. Effective as of the Effective Date, Section 1.4 of the Plan is hereby
amended in its entirety to read as follows:

        1.4     SHARES SUBJECT TO THE PLAN. Subject to the provisions of Section
                3.2, the capital stock that may be delivered under this Plan
                shall be shares of the Corporation's authorized but unissued
                Common Stock. The Shares may be delivered for any lawful
                consideration, but not for less than the minimum lawful
                consideration under Delaware law.

        2. Effective as of the Effective Date, Section 2.2 of the Plan is hereby
amended in its entirety to read as follows:

        2.2     OPTION PRICE. Except as provided in Sections 2.9 and 2.10, the
                Purchase Price per Share covered by each Option will be
                determined by the Committee at the time of the grant of the
                Option, but shall not be less than 85% of the Fair Market Value
                of the Shares on the Grant Date.

        3. Effective as of the Effective Date, Section 2.6 of the Plan is hereby
amended in its entirety to read as follows:

        2.6     PAYMENT FORMS. The Purchase Price must be paid in full at the
                time of each exercise (to the extent authorized and approved by
                the

<PAGE>   24
                Committee or set forth in the applicable Option Agreement): (a)
                cash or immediately available funds (including wire transfer,
                personal check, cashier's checks, postal or express money order
                or bank draft), (b) with shares of Common Stock already owned by
                the Participant for at least six months, or (c) a promissory
                note (but not a non-recourse promissory note) that bears a
                market rate of interest in a form and on such terms as the
                Committee may approve. Any shares permitted to be used to
                satisfy the Purchase Price will be valued at their Fair Market
                Value on the exercise Date. Additionally, in the discretion of
                the Committee, payment for any shares subject to an Option may
                also be made by delivering a properly executed exercise notice
                to the Company, together with a copy of irrevocable instructions
                to a broker to deliver promptly to the Company the amount of
                sale or loan proceeds necessary to pay the purchase price, and,
                if requested, the amount of any federal, state, local or foreign
                withholding taxes. To facilitate the foregoing, the Company may
                enter into agreements for coordinated procedures with one or
                more brokerage firms.

        4. Effective as of the Effective Date, Section 3.4.3 of the Plan is
intentionally omitted from the Plan.

        5. Effective as of the Effective Date, the first sentence in Section
3.10 is hereby amended to read as follows:

        3.10    GOVERNING LAW. This Plan and all documents related hereto shall
                be governed by, and construed in accordance with, the laws of
                the State of Delaware. If any provision is held by a court of
                competent jurisdiction to be invalid and unenforceable, the
                remaining provisions of this Plan will continue to be fully
                effective.

        6. Effective as of the Effective Date, the last sentence of Section 3.13
is hereby amended in its entirety to read as follows:

        This Plan, and the granting of Options under this Plan, is intended to
        satisfy the requirements of Rule 701 under the Securities Act and
        applicable Delaware corporate securities law and shall be construed and
        interpreted in accordance with such intent.

        7. Effective as of the Effective Date, the definition of "Corporation"
under Section 4 of the Plan is hereby amended to read as follows:

        CORPORATION means CombiMatrix Corporation, a Delaware corporation, and
        its successors.

                                      -2-
<PAGE>   25

        8. Effective as of the Effective Date, Appendix A to the Plan shall be
the Appendix A attached hereto.

     IN WITNESS WHEREOF, CombiMatrix Corporation has caused this Second
Amendment to the CombiMatrix 1998 Stock Option Plan to be executed on this
______ day of __________, 2000.

                                       COMBIMATRIX CORPORATION

                                       By:  ____________________________________

                                      -3-
<PAGE>   26

                             COMBIMATRIX CORPORATION
                             1998 STOCK OPTION PLAN

                                   APPENDIX A

                    SECURITIES LAW INVESTMENT REPRESENTATIONS

1. NO INTENT TO SELL.

               The Participant represents that he/she is acquiring the Option
and if and when he/she exercises the Option will acquire any Shares solely for
his/her own account, for investment purposes only, and not with a view to or an
intent to sell, or to offer for resale in connection with any unregistered
distribution of all or any portion of the Shares within the meaning of the
Securities Act or the security laws of Delaware.

2. NO RELIANCE ON CORPORATION.

               In evaluating the merits and risks of an investment in the
Shares, the Participant represents that he/she has and will rely upon the advice
of his/her own legal counsel, tax advisors, and/or investment advisors.

3. RISK OF LOSS.

               The Participant represents that he/she is aware that the Option
may be of no practical value, that any value it may have depends on its vesting
and exercisability as well as an increase in the Fair Market Value of the
underlying Shares from the Grant Date to the date of exercise, and that any
investment in shares of a closely held corporation such as the Corporation is
non-marketable, non-transferable and could require his/her capital to be
invested for an indefinite period of time, possibly without return and at risk
of loss.

4. RESTRICTIONS ON SHARES.

               The Participant represents that he/she understands that any
Shares acquired on exercise of the Option will be characterized as "restricted
securities" under the federal securities laws since the Shares are being
acquired from the Corporation in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act only in certain limited
circumstances. The Participant acknowledges receiving a copy of Rule 144
promulgated under the Securities Act, as presently in effect, and represents
that he/she is familiar with such rule, and understands the resale limitations
imposed thereby and by the Securities Act and the security law.

                                      A-1
<PAGE>   27

5. ADDITIONAL RESTRICTIONS.

               The Participant represents that he/she has read and understands
the restrictions and limitations imposed on the Option and any Shares which may
be acquired thereunder, including, but not limited to, the following: (i) the
termination provisions of Sections 3.2.3 and 3.3 of the Plan; (ii) the
non-transferability provisions of Section 3.1.3 of the Plan; and (iii) the
Corporation's repurchase rights of Section 3.1.4 of the Plan.

6. NO CORPORATION REPRESENTATIONS.

               The Participant represents that at no time was an oral
representation made to him/her relating to the Option or the purchase of Shares
and that he/she was not presented with or solicited by any promotional meeting
or material relating to the Option or the Shares.

7. SHARE CERTIFICATE LEGEND.

               The Participant represents that he/she understands and
acknowledges that any certificate evidencing the Shares (or evidencing any other
securities issued with respect thereto pursuant to any stock split, stock
dividend, merger or other form of reorganization or recapitalization) if and
when issued shall bear, in addition to any other legends which may be required
by applicable state securities laws, the following legends:

               "THE SALE, ASSIGNMENT, PLEDGE OR OTHER TRANSFER AND VOTING OF THE
               SHARES REPRESENTED BY THIS CERTIFICATE OR ANY INTEREST THEREIN
               ARE SUBJECT TO AN AGREEMENT DATED _________________, ____ (A
               SIGNED COPY OF WHICH IS ON FILE AT THE OFFICE OF COMBIMATRIX
               CORPORATION), AND THE SHARES ARE SUBJECT TO REPURCHASE RIGHTS OF
               THE CORPORATION AS PROVIDED THEREIN.

               THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
               THE SECURITIES ACT OF 1933, AS AMENDED ("ACT") NOR HAVE THEY BEEN
               REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
               NO TRANSFER OF SUCH SECURITIES WILL BE PERMITTED UNLESS A
               REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH
               TRANSFER, THE TRANSFER IS MADE IN ACCORDANCE WITH RULE 144 UNDER
               THE ACT, OR IN THE OPINION OF COUNSEL TO THE CORPORATION,
               REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH
               TRANSFER TO COMPLY WITH THE ACT AND WITH APPLICABLE STATE
               SECURITIES LAWS."

                                      A-2

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