Document:

<PAGE>
                                                                   EXHIBIT 10.38

                              INTELLECTUAL PROPERTY
                         MORTGAGE AND SECURITY AGREEMENT

         This Intellectual Property Mortgage and Security Agreement (this
"Agreement") is made as of September 28, 2001 by and between Applied Imaging
Corp., a Delaware corporation ("Debtor"), and Silicon Valley Bank, a California
banking corporation ("Secured Party").

                                    RECITALS
                                    --------

         A.  Secured Party has agreed to lend to Debtor certain funds (the
"Loans"), pursuant to a Loan and Security Agreement dated as of even date
herewith (as amended, restated, supplemented, or otherwise modified from time to
time, the "Loan Agreement") and Debtor desires to borrow such funds from Secured
Party.

         B.  In order to induce Secured Party to make the Loans, Debtor has
agreed to grant a security interest in certain intangible property to Secured
Party for purposes of securing the obligations of Debtor to Secured Party.

         NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:

         1.  Mortgage and Grant of Security Interest. As collateral security for
             ---------------------------------------
the prompt and complete payment and performance of all of Debtor's present or
future indebtedness, obligations and liabilities to Secured Party, Debtor hereby
grants, transfers, and conveys a security interest and mortgage to Secured
Party, as security, but not as an ownership interest, in and to Debtor's entire
right, title and interest in, to and under the following (all of which shall
collectively be called the "Collateral"):

             (a) All of present and future United States registered copyrights
and copyright registrations, including, without limitation, the registered
copyrights, maskworks, software, computer programs and other works of authorship
subject to United States copyright protection listed in Exhibit A-1 to this
                                                        -----------
Agreement (and including all of the exclusive rights afforded a copyright
registrant in the United States under 17 U.S.C. (S)106 and any exclusive rights
which may in the future arise by act of Congress or otherwise) and all present
and future applications for copyright registrations (including applications for
copyright registrations of derivative works and compilations) (collectively, the
"Registered Copyrights"), and any and all royalties, payments, and other amounts
payable to Debtor in connection with the Registered Copyrights, together with
all renewals and extensions of the Registered Copyrights, the right to recover
for all past, present, and future infringements of the Registered Copyrights,
and all computer programs, computer databases, computer program flow diagrams,
source codes, object codes and all tangible property embodying or incorporating
the Registered Copyrights, and all other rights of every kind whatsoever
accruing thereunder or pertaining thereto.

             (b) All present and future copyrights, maskworks, software,
computer programs and other works of authorship subject to (or capable of
becoming subject to) United States copyright protection which are not registered
in the United States Copyright Office (the "Unregistered Copyrights"), whether
now owned or hereafter acquired, including without limitation the Unregistered
Copyrights listed in Exhibit A-2 to this Agreement, and any and all royalties,
                     -----------
payments, and other amounts payable to Debtor in connection with the
Unregistered Copyrights, together with all renewals and extensions of the
Unregistered Copyrights, the right to recover for all past, present, and future
infringements of the Unregistered Copyrights, and all computer programs,
computer databases, computer program flow diagrams, source codes, object codes
and all tangible property embodying or incorporating the Unregistered
Copyrights, and all other rights of every kind whatsoever accruing thereunder or
pertaining thereto. The Registered Copyrights and the Unregistered Copyrights
collectively are referred to herein as the "Copyrights."

                                      -1-

<PAGE>

          (c) All right, title and interest in and to any and all present and
future license agreements with respect to the Copyrights, including without
limitation the license agreements listed in Exhibit A-3 to this Agreement (the
                                            -----------
"Licenses").

          (d) All present and future accounts, accounts receivable and other
rights to payment arising from, in connection with or relating to the
Copyrights.

          (e) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or hereafter
existing, created, acquired or held;

          (f) Any and all design rights which may be available to Debtor now or
hereafter existing, created, acquired or held;

          (g) All patents, patent applications and like protections including,
without limitation, improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same, including without limitation
the patents and patent applications set forth on Exhibit B attached hereto
                                                 ---------
(collectively, the "Patents");

          (h) Any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of Debtor connected with and symbolized by
such trademarks, including without limitation those set forth on Exhibit C
                                                                 ---------
attached hereto (collectively, the "Trademarks"); provided, however, that
                                                  --------  -------
Secured Party shall not acquire any interest in any intent to use a federal
trademark application for a trademark, servicemark, or other mark filed on
Debtor's behalf prior to the filing under applicable law of a verified statement
of use (or equivalent) for such mark that is the subject of such application;

          (i) Any and all claims for damages by way of past, present and future
infringements of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;

          (j) All licenses or other rights to use any of the Copyrights, Patents
or Trademarks, and all license fees and royalties arising from such use to the
extent permitted by such license or rights;

          (k) All amendments, extensions, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and

          (l) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.

       2. Authorization and Request. Debtor authorizes and requests that the
          -------------------------
Register of Copyrights and the Commissioner of Patents and Trademarks record
this Agreement.

       3. Covenants and Warranties. Debtor represents, warrants, covenants and
          ------------------------
agrees as follows:

          (a) Debtor is now the sole owner of the Collateral, except for (i)
non-exclusive licenses granted by Debtor to its customers in the ordinary course
of business, and (ii) "Permitted Exclusive Assay Provider Licenses" (as such
term is defined in the Loan Agreement).

                                      -2-

<PAGE>

          (b) Listed on Exhibits A-1 and A-2 are all copyrights owned by Debtor,
in which Debtor has an interest, or which are used in Debtor's business.

          (c) Each employee, agent and/or independent contractor who has
participated in the creation of the property constituting the Collateral has
either executed an assignment of his or her rights of authorship to Debtor or is
an employee of Debtor acting within the scope of his or her employment and was
such an employee at the time of said creation.

          (d) [intentionally omitted]

          (e) Debtor shall undertake all reasonable measures to cause its
employees, agents and independent contractors to assign to Debtor all rights of
authorship to any copyrighted material in which Debtor has or may subsequently
acquire any right or interest.

          (f) Performance of this Agreement does not conflict with or result in
a breach of any agreement to which Debtor is bound, except to the extent that
certain intellectual property agreements prohibit the assignment of the rights
thereunder to a third party without the licensor's or other party's consent and
this Agreement constitutes an assignment.

          (g) During the term of this Agreement, Debtor will not transfer or
otherwise encumber any interest in the Collateral, except for Permitted Liens
(as such term is defined in the Loan Agreement) and non-exclusive licenses
granted by Debtor in the ordinary course of business or as set forth in this
Agreement;

          (h) Each of the Patents, Trademarks, and Copyrights is valid and
enforceable, and no part of the Collateral has been judged invalid or
unenforceable, in whole or in part, and no claim has been made that any part of
the Collateral violates the rights of any third party;

          (i) Debtor shall promptly advise Secured Party of any material adverse
change in the composition of the Collateral, including but not limited to any
subsequent ownership right of the Debtor in or to any Trademark, Patent or
Copyright not specified in this Agreement;

          (j) Debtor shall (i) protect, defend and maintain the validity and
enforceability of the Trademarks, Patents and Copyrights, (ii) use its best
efforts to detect infringements of the Trademarks, Patents and Copyrights and
promptly advise Secured Party in writing of material infringements detected and
(iii) not allow any Trademarks, Patents, or Copyrights to be abandoned,
forfeited or dedicated to the public without the written consent of Secured
Party, which shall not be unreasonably withheld unless Debtor determines that
reasonable business practices suggest that abandonment is appropriate;

          (k) Section 9(3) of the Schedule to the Loan Agreement hereby is
incorporated herein, mutatis mutandis;

          (l) This Agreement creates, and in the case of after acquired
Collateral, this Agreement will create at the time Debtor first has rights in
such after acquired Collateral, in favor of Secured Party a valid and perfected
first priority security interest (subject only to Permitted Liens (if any) that
are specifically entitled pursuant to applicable law, or specifically
acknowledged in writing by Secured Party, to have priority over Secured Party's
security interests) in the Collateral in the United States securing the payment
and performance of the obligations evidenced by the Loan Agreement upon making
the filings referred to in clause (m) below;

          (m) To its knowledge, except for, and upon, the filing with the United
States

                                      -3-

<PAGE>

Patent and Trademark office with respect to the Patents and Trademarks and the
Register of Copyrights with respect to the Copyrights necessary to perfect the
security interests and mortgage created hereunder and except as has been already
made or obtained, no authorization, approval or other action by, and no notice
to or filing with, any U.S. governmental authority or U.S. regulatory body is
required either (i) for the grant by Debtor of the security interest granted
hereby or for the execution, delivery or performance of this Agreement by Debtor
in the U.S. or (ii) for the perfection in the United States or the exercise by
Secured Party of its rights and remedies thereunder;

          (n) All information heretofore, herein or hereafter supplied to
Secured Party by or on behalf of Debtor with respect to the Collateral is
accurate and complete in all material respects.

          (o) Debtor shall not enter into any agreement that would materially
impair or conflict with Debtor's obligations hereunder without Secured Party's
prior written consent, which consent shall not be unreasonably withheld. Debtor
shall not permit the inclusion in any material contract to which it becomes a
party of any provisions that could or might in any way prevent the creation of a
security interest in Debtor's rights and interest in any property included
within the definition of the Collateral acquired under such contracts, except
that certain contracts may contain anti-assignment provisions that could in
effect prohibit the creation of a security interest in such contracts.

          (p) Upon any executive officer of Debtor obtaining actual knowledge
thereof, Debtor will promptly notify Secured Party in writing of any event that
materially adversely affects the value of any material Collateral, the ability
of Debtor to dispose of any material Collateral or the rights and remedies of
Secured Party in relation thereto, including the levy of any legal process
against any of the Collateral.

       4. Secured Party's Rights. Secured Party shall have the right, but not
          ----------------------
the obligation, to take, at Debtor's sole expense, any actions that Debtor is
required under this Agreement to take but which Debtor fails to take, after
fifteen (15) days' notice to Debtor. Debtor shall reimburse and indemnify
Secured Party for all reasonable costs and reasonable expenses incurred in the
reasonable exercise of its rights under this section 4.

       5. Inspection Rights. Debtor hereby grants to Secured Party and its
          -----------------
employees, representatives and agents the right to visit, during reasonable
hours upon prior reasonable written notice to Debtor, and any of Debtor's plants
and facilities that manufacture, install or store products (or that have done so
during the prior six-month period) that are sold utilizing any of the
Collateral, and to inspect the products and quality control records relating
thereto upon reasonable written notice to Debtor and as often as may be
reasonably requested, but not more than one (1) in every six (6) months;
provided, however, nothing herein shall entitle Secured Party access to Debtor's
trade secrets and other proprietary information.

       6. Further Assurances; Attorney in Fact.
          -------------------------------------

          (a) Debtor will, subject to any prior licenses, encumbrances and
restrictions and prospective licenses, make, execute, acknowledge and deliver,
and file and record in the proper filing and recording places in the United
States, all such instruments, including, appropriate financing and continuation
statements and collateral agreements and filings with the United States Patent
and Trademarks Office and the Register of Copyrights, and take all such action
as may reasonably be deemed necessary or advisable, or as requested by Secured
Party, to perfect Secured Party's security interest in all Copyrights, Patents
and Trademarks and otherwise to carry out the intent and purposes of this
Agreement, or for assuring and confirming to Secured Party the grant or
perfection of a security interest in all Collateral.

                                      -4-

<PAGE>

         (b)  Upon the occurrence and during the continuation of an Event of
Default, Debtor hereby irrevocably appoints Secured Party as Debtor's
attorney-in-fact, with full authority in the place and stead of Debtor and in
the name of Debtor, Secured Party or otherwise, from time to time in Secured
Party's good faith business judgment, upon Debtor's failure or inability to do
so, to take any action and to execute any instrument which Secured Party may
deem necessary or advisable in Secured Party's good faith business judgment to
accomplish the purposes of this Agreement, including:

              (i)  To modify, in Secured Party's good faith business judgment,
this Agreement without first obtaining Debtor's approval of or signature to such
modification by amending Exhibit A-1, Exhibit A-2, Exhibit A-3, Exhibit B and
Exhibit C, thereof, as appropriate, to include reference to any right, title or
interest in any Copyrights, Patents or Trademarks acquired by Debtor after the
execution hereof or to delete any reference to any right, title or interest in
any Copyrights, Patents or Trademarks in which Debtor no longer has or claims
any right, title or interest; and

              (ii) To file, in Secured Party's good faith business judgment, one
or more financing or continuation statements and amendments thereto, relative to
any of the Collateral without the signature of Debtor where permitted by law.

     7.  Events of Default. The occurrence and continuation of any of the
         -----------------
following shall constitute an Event of Default under this Agreement:

         (a) An Event of Default occurs and is continuing under the Loan
Agreement; or

         (b) Debtor breaches any warranty or agreement made by Debtor in this
Agreement and such breach is not cured within 5 Business Days of such breach.

     8.  Remedies. Upon the occurrence and continuation of an Event of Default,
         --------
Secured Party shall have the right to exercise all the remedies of a secured
party under the California Uniform Commercial Code, including without limitation
the right to require Debtor to assemble the Collateral and any tangible property
in which Secured Party has a security interest and to make it available to
Secured Party at a place designated by Secured Party. Secured Party shall have a
nonexclusive, royalty free license to use the Copyrights, Patents and Trademarks
to the extent reasonably necessary to permit Secured Party to exercise its
rights and remedies upon the occurrence and continuation of an Event of Default.
Debtor will pay any expenses (including reasonable attorney's fees) incurred by
Secured Party in connection with the exercise of any of Secured Party's rights
hereunder, including without limitation any expense incurred in disposing of the
Collateral. All of Secured Party's rights and remedies with respect to the
Collateral shall be cumulative.

     9.  Indemnity. Debtor agrees to defend, indemnify and hold harmless Secured
         ---------
Party and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party in
connection with the transactions contemplated by this Agreement, and (b) all
losses or expenses in any way suffered, incurred, or paid by Secured Party as a
result of or in any way arising out of, following or consequential to
transactions between Secured Party and Debtor, whether under this Agreement or
otherwise (including without limitation, reasonable attorneys fees and
reasonable expenses), except for losses arising from or out of Secured Party's
gross negligence or willful misconduct.

     10. Release. At such time as Debtor shall completely satisfy all of the
         -------
obligations secured hereunder, Secured Party shall execute and deliver to Debtor
all lien releases and other instruments as may be reasonably necessary or proper
to terminate Secured Party's security

                                      -5-

<PAGE>

interest in the Collateral, subject to any disposition of the Collateral which
may have been made by Secured Party pursuant to this Agreement. For the purpose
of this Agreement, the obligations secured hereunder shall be deemed to continue
if Debtor enters into any bankruptcy or similar proceeding at a time when any
amount paid to Secured Party could be ordered to be repaid as a preference or
pursuant to a similar theory, and shall continue until it is finally determined
that no such repayment can be ordered.

     11. No Waiver. No course of dealing between Debtor and Secured Party, nor
         ---------
any failure to exercise nor any delay in exercising, on the part of Secured
Party, any right, power, or privilege under this Agreement or under the Loan
Agreement or any other agreement, shall operate as a waiver. No single or
partial exercise of any right, power, or privilege under this Agreement or under
the Loan Agreement or any other agreement by Secured Party shall preclude any
other or further exercise of such right, power, or privilege or the exercise of
any other right, power, or privilege by Secured Party.

     12. Rights Are Cumulative. All of Secured Party's rights and remedies with
         ---------------------
respect to the Collateral whether established by this Agreement, the Loan
Agreement, or any other documents or agreements, or by law shall be cumulative
and may be exercised concurrently or in any order.

     13. Course of Dealing. No course of dealing, nor any failure to exercise,
         -----------------
nor any delay in exercising any right, power or privilege hereunder shall
operate as a waiver thereof.

     14. Attorneys' Fees. If any action relating to this Agreement is brought by
         ---------------
either party hereto against the other party, the prevailing party shall be
entitled to recover reasonable attorneys fees, costs and disbursements.

     15. Amendments. This Agreement may be amended only by a written instrument
         ----------
signed by both parties hereto. To the extent that any provision of this
Agreement conflicts with any provision of the Loan Agreement, the provision
giving Secured Party greater rights or remedies shall govern, it being
understood that the purpose of this Agreement is to add to, and not detract
from, the rights granted to Secured Party under the Loan Agreement. This
Agreement, the Loan Agreement, and the documents relating thereto comprise the
entire agreement of the parties with respect to the matters addressed in this
Agreement.

     16. Severability. The provisions of this Agreement are severable. If any
         ------------
provision of this Agreement is held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such provision, or part thereof, in such jurisdiction, and shall not in any
manner affect such provision or part thereof in any other jurisdiction, or any
other provision of this Agreement in any jurisdiction.

     17. California Law and Jurisdiction. This Agreement shall be governed by
         -------------------------------
the laws of the State of California, without regard for choice of law
provisions. Debtor and Secured Party consent to the nonexclusive jurisdiction of
any state or federal court located in Santa Clara County, California.

     18. Confidentiality. In handling any confidential information, Secured
         ---------------
Party shall exercise the same degree of care that it exercises with respect to
its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that the disclosure of this information may be
made (i) to the affiliates of the Secured Party, (ii) to prospective transferee
or purchasers of an interest in the obligations secured hereby, provided that
they have entered into a comparable confidentiality agreement in favor of Debtor
and have delivered a copy to Debtor, (iii) as required by law, regulation, rule
or order, subpoena judicial order or similar order and (iv) as may be required
in connection with the examination, audit or similar investigation of Secured

                                      -6-

<PAGE>

Party.

         19. WAIVER OF RIGHT TO JURY TRIAL. SECURED PARTY AND DEBTOR EACH HEREBY
             -----------------------------
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO: (I) THIS AGREEMENT; OR (II) ANY OTHER PRESENT
OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN SECURED PARTY AND DEBTOR; OR (III) ANY
CONDUCT, ACTS OR OMISSIONS OF SECURED PARTY OR DEBTOR OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH
SECURED PARTY OR DEBTOR; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE.

[remainder of page intentionally left blank; signature page follows]

                                      -7-

<PAGE>

     20. Counterparts. This Agreement may be executed in two or more
         ------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.

                                       DEBTOR:

                                       APPLIED IMAGING CORP.

                                       By: /s/ Barry Hotchkies
                                          -----------------------------
                                       Title: CFO
                                              -------------------------
                                       Name (please print):
                                           BARRY HOTCHKIES
                                       --------------------------------

                                       Address of Debtor:

                                       2380 Walsh Avenue
                                       Santa Clara, CA  95051

                                       SECURED PARTY:

                                       SILICON VALLEY BANK

                                       By: /s/ Chitra Suriyanarayanan
                                           ----------------------------
                                       Title: Account Manager
                                              -------------------------
                                       Name (please print):
                                       CHITRA SURIYANARAYANAN
                                       --------------------------------

                                       Address of Secured Party:

                                       3003 Tasman Drive
                                       Santa Clara, California 95054

                                      -8-

<PAGE>

STATE OF _________________ )
                           ) ss.
COUNTY OF ________________ )

         On _____________________, 200__, before me, __________________________
_________________________________________, Notary Public, personally appeared
_______________________________________________________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.

         Witness my hand and official seal.

                           ___________________________

                                     (Seal)

STATE OF __________________ )
                            ) ss.
COUNTY OF ________________  )

         On _____________________, 200__, before me, __________________________
_________________________________________, Notary Public, personally appeared
_______________________________________________________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.

         Witness my hand and official seal.

                           __________________________

                                     (Seal)

                                      -9-

<PAGE>

                                  EXHIBIT "A-1"

                              REGISTERED COPYRIGHTS
                              ---------------------
 (including copyrights that are the subject of an application for registration)

                                     [NONE]

<PAGE>

                                  EXHIBIT "A-2"

                             UNREGISTERED COPYRIGHTS
                             -----------------------

                                     [NONE]

<PAGE>

                                  EXHIBIT "A-3"

                        DESCRIPTION OF LICENSE AGREEMENTS
                        ---------------------------------

                                     [NONE]

<PAGE>

                                   EXHIBIT "B"

                                     PATENTS
                                     -------
   (Including patents that are the subject of an application for registration)

<TABLE>
<CAPTION>
============================================================================================
                  PATENT                 COUNTRY APPLICATION/SERIAL FILING DATE  STATUS
                                                      NUMBER
<S>                                      <C>     <C>                <C>         <C>
--------------------------------------------------------------------------------------------
METHOD FOR SEPARATING RARE CELLS FROM A    AU        16898/95         01/23/95  Issued
POPULATION OF CELLS                                  692838

--------------------------------------------------------------------------------------------
METHOD FOR SEPARATING RARE CELLS FROM A    CA        2182371          01/23/95  Issued
POPULATION OF CELLS
--------------------------------------------------------------------------------------------
METHOD FOR SEPARATING RARE CELLS FROM A    EP        95908660.4       01/23/95  Published
POPULATION OF CELLS
--------------------------------------------------------------------------------------------
METHOD FOR SEPARATING RARE CELLS FROM A    JP        7-520135         01/23/95  Issued
POPULATION OF CELLS                                  2977906

--------------------------------------------------------------------------------------------
METHOD FOR SEPARATING RARE CELLS FROM A    PC        95/00961         01/23/95  Published
POPULATION OF CELLS
--------------------------------------------------------------------------------------------
METHOD FOR SEPARATING RARE CELLS FROM A    US        08/190327        01/31/94  Issued
POPULATION OF CELLS                                  5432054
--------------------------------------------------------------------------------------------
DENSITY GRADIENT MEDIUM FOR THE            AU        18337/95         01/23/95  Issued
SEPARATION OF CELLS                                  680738
--------------------------------------------------------------------------------------------
DENSITY GRADIENT MEDIUM FOR THE            CA        2182367          01/23/95  Pending
SEPARATION OF CELLS
--------------------------------------------------------------------------------------------
DENSITY GRADIENT MEDIUM FOR THE            CH        95910120.5       01/23/95  Issued
SEPARATION OF CELLS                                  CH 0739229
--------------------------------------------------------------------------------------------
DENSITY GRADIENT MEDIUM FOR THE            DE        95910120.5       01/23/95  Issued
SEPARATION OF CELLS                                  DE 0739229
--------------------------------------------------------------------------------------------
DENSITY GRADIENT MEDIUM FOR THE            DK        95910120.5       01/23/95  Issued
SEPARATION OF CELLS                                  DK 0739229
--------------------------------------------------------------------------------------------
DENSITY GRADIENT MEDIUM FOR THE            EP        95910120.5       01/23/95  Nat'l Phase
SEPARATION OF CELLS                                  0739229
--------------------------------------------------------------------------------------------
DENSITY GRADIENT MEDIUM FOR THE            FR        95910120.5       01/23/95  Issued
SEPARATION OF CELLS                                  FR 0739229
--------------------------------------------------------------------------------------------
DENSITY GRADIENT MEDIUM FOR THE            GB        95910120.5       01/23/95  Issued
SEPARATION OF CELLS                                  GB 0739229
--------------------------------------------------------------------------------------------
DENSITY GRADIENT MEDIUM FOR THE            IT        95910120.5       01/23/95  Issued
SEPARATION OF CELLS                                  IT 0739229
--------------------------------------------------------------------------------------------
DENSITY GRADIENT MEDIUM FOR THE            JP        7-520133         01/23/95  Issued
SEPARATION OF CELLS                                  3017291
--------------------------------------------------------------------------------------------
DENSITY GRADIENT MEDIUM FOR THE            NL        95910120.5       01/23/95  Issued
SEPARATION OF CELLS                                  NL 0739229
--------------------------------------------------------------------------------------------
DENSITY GRADIENT MEDIUM FOR THE            PC        95/00956         01/23/95  Published
SEPARATION OF CELLS
--------------------------------------------------------------------------------------------
DENSITY GRADIENT MEDIUM FOR THE            US        08/189509        01/31/94  Issued
SEPARATION OF CELLS                                  5489386
--------------------------------------------------------------------------------------------
Centrifuge Tube & Adaptor                  AU        16899/95         01/23/95  Issued
                                                     680346

--------------------------------------------------------------------------------------------
Centrifuge Tube & Adaptor                  CA        2182365          01/23/95  Issued
                                                     2182365

--------------------------------------------------------------------------------------------
Centrifuge Tube & Adaptor                  EP        95908661.2       01/23/95  Published

--------------------------------------------------------------------------------------------
Centrifuge Tube & Adaptor                  JP        7-520136         01/23/95  Pending

--------------------------------------------------------------------------------------------
Centrifuge Tube & Adaptor                  PC        95/00962         01/23/95  Published

--------------------------------------------------------------------------------------------
Centrifuge Tube & Adaptor                  US        08/189249        01/31/94  Issued
                                                     5422018

--------------------------------------------------------------------------------------------
METHOD FOR ANALYZING DNA FROM A RARE CELL  US        08/956349        10/23/97  Issued
IN A CELLPOPULATION                                  6087134
--------------------------------------------------------------------------------------------
Use of Anti-Embryonic Hemoglobin           AU        49200/97         10/20/97  Issued
Antibodies to IdentifyFetal Cells                    735380
--------------------------------------------------------------------------------------------
Use of Anti-Embryonic Hemoglobin           CA        2269327          10/20/97  Pending
Antibodies to IdentifyFetal Cells
--------------------------------------------------------------------------------------------
Use of Anti-Embryonic Hemoglobin           EP        97911938.5       10/20/97  Published
Antibodies to IdentifyFetal Cells
--------------------------------------------------------------------------------------------
Use of Anti-Embryonic Hemoglobin           HK        00108086.8       10/20/97  Published
Antibodies to IdentifyFetal Cells
--------------------------------------------------------------------------------------------
Use of Anti-Embryonic Hemoglobin           IL        129382           10/20/97  Pending
Antibodies to IdentifyFetal Cells
============================================================================================
</TABLE>

<PAGE>

                              EXHIBIT "B" - PATENTS
                      APPLIED IMAGING CORP. - CONFIDENTIAL
<TABLE>
<CAPTION>
============================================================================================
                  PATENT                 COUNTRY APPLICATION/SERIAL FILING DATE  STATUS
                                                      NUMBER
<S>                                      <C>     <C>                <C>         <C>
--------------------------------------------------------------------------------------------
Use of Anti-Embryonic Hemoglobin           JP        10-519694        10/20/97  Pending
Antibodies to IdentifyFetal Cells
--------------------------------------------------------------------------------------------
Use of Anti-Embryonic Hemoglobin           KR        1999-7003439     10/20/97  Published
Antibodies to IdentifyFetal Cells
--------------------------------------------------------------------------------------------
Use of Anti-Embryonic Hemoglobin           MX        993697           10/20/97  Pending
Antibodies to IdentifyFetal Cells
--------------------------------------------------------------------------------------------
Use of Anti-Embryonic Hemoglobin           PC        97/19447         10/20/97  Nat'l Phase
Antibodies to IdentifyFetal Cells
--------------------------------------------------------------------------------------------
Use of Anti-Embryonic Hemoglobin           RU        99110373.14      10/20/97  Issued
Antibodies to IdentifyFetal Cells
--------------------------------------------------------------------------------------------
Use of Anti-Embryonic Hemoglobin           US        08/734556        10/21/96  Issued
Antibodies to IdentifyFetal Cells                    5731156
--------------------------------------------------------------------------------------------
Use of Anti-Embryonic Hemoglobin           IL                         10/20/97  Pending
Antibodies to IdentifyFetal Cells
--------------------------------------------------------------------------------------------
Use of Anti-Embryonic Hemoglobin           US        09/101364        07/07/98  Issued
Antibodies to IdentifyFetal Cells                    5962234

--------------------------------------------------------------------------------------------
MULTIFLUOR-FLUORESCENCE IN-SITU            US        08/901543        07/28/97  Issued
HYBRIDIZATION (M-FISH)IMAGING TECHNIQUES             5880473
USING MULTIPLE MULTIBAND FILTERS WITH..
--------------------------------------------------------------------------------------------
MULTIFLUOR-FLUORESCENCE IN-SITU            US        09/222550        12/29/98  Issued
HYBRIDIZATION (M-FISH) IMAGING TECHNIQUES            6225636
USING MULTIPLE MULTIBAND FILTERS WITH...
--------------------------------------------------------------------------------------------
IDENTIFICATION OF OBJECTS OF INTEREST      AU        74828/98         05/12/98  Accepted
USING MULTIPLE ILLUMINATION SCHEMES &
FINDING OVERLAP OF FEATURES IN...
--------------------------------------------------------------------------------------------
IDENTIFICATION OF OBJECTS OF INTEREST      CA        2289930          05/12/98  Pending
USING MULTIPLE ILLUMINATION SCHEMES &
FINDING OVERLAP OF FEATURES IN...
--------------------------------------------------------------------------------------------
IDENTIFICATION OF OBJECTS OF INTEREST      EP        98922230.2       05/12/98  Pending
USING MULTIPLE ILLUMINATION SCHEMES &
FINDING OVERLAP OF FEATURES IN...
--------------------------------------------------------------------------------------------
IDENTIFICATION OF OBJECTS OF INTEREST      HK        00105518.2       05/12/98  Published
USING MULTIPLE ILLUMINATION SCHEMES &
FINDING OVERLAP OF FEATURES IN...
--------------------------------------------------------------------------------------------
IDENTIFICATION OF OBJECTS OF INTEREST      IL        132747           05/12/98  Pending
USING MULTIPLE ILLUMINATION SCHEMES &
FINDING OVERLAP OF FEATURES IN...
--------------------------------------------------------------------------------------------
IDENTIFICATION OF OBJECTS OF INTEREST      JP        10-549451        05/12/98  Pending
USING MULTIPLE ILLUMINATION SCHEMES &
FINDING OVERLAP OF FEATURES IN...
--------------------------------------------------------------------------------------------
IDENTIFICATION OF OBJECTS OF INTEREST      NO        19995542         05/12/98  Pending
USING MULTIPLE ILLUMINATION SCHEMES &
FINDING OVERLAP OF FEATURES IN...
--------------------------------------------------------------------------------------------
IDENTIFICATION OF OBJECTS OF INTEREST      PC        98/09689         05/12/98  Nat'l Phase
USING MULTIPLE ILLUMINATION SCHEMES &
FINDING OVERLAP OF FEATURES IN...
--------------------------------------------------------------------------------------------
IDENTIFICATION OF OBJECTS OF INTEREST      US        09/072502        05/04/98  Issued
USING MULTIPLE ILLUMINATION SCHEMES &                6169816
FINDING OVERLAP OF FEATURES IN...
--------------------------------------------------------------------------------------------
Identification of Objects of Interest      PC        00/31369         11/15/00  Published
Using Illumination Schemes & Finding
Overlap of Features in Corresponding
--------------------------------------------------------------------------------------------
Identification of Objects of Interest      US        09/443949        11/19/99  Pending
Using Illumination Schemes & Finding                 6259807
Overlap of Features in Corresponding
--------------------------------------------------------------------------------------------
Identification of Objects of Interest      US        09/901584        07/09/01  Pending
Using Multiple Illumination Schemes &
Finding Overlap of Features in...
--------------------------------------------------------------------------------------------
CROSS-SPECIES CHROMOSOME PAINTING          CA        2282788          02/27/98  Pending

--------------------------------------------------------------------------------------------
CROSS-SPECIES CHROMOSOME PAINTING          EP        98907137.8       02/27/98  Pending

--------------------------------------------------------------------------------------------
CROSS-SPECIES CHROMOSOME PAINTING          GB        9811526.4        02/27/98  Issued
                                                     2325302

--------------------------------------------------------------------------------------------
CROSS-SPECIES CHROMOSOME PAINTING          JP                         02/27/98  Pending

============================================================================================
</TABLE>

November 6, 2001

<PAGE>

                              EXHIBIT "B" - PATENTS
                      APPLIED IMAGING CORP. - CONFIDENTIAL
<TABLE>
<CAPTION>
============================================================================================
                  PATENT                 COUNTRY APPLICATION/SERIAL FILING DATE  STATUS
                                                      NUMBER
<S>                                      <C>     <C>                <C>         <C>
--------------------------------------------------------------------------------------------
CROSS-SPECIES CHROMOSOME PAINTING          PC        IB98/00439       02/27/98  Pending

--------------------------------------------------------------------------------------------
CROSS-SPECIES CHROMOSOME PAINTING          US        09/032346        02/27/98  Issued
                                                     6255465

--------------------------------------------------------------------------------------------
Chromosome-Specific Paint Probes           US        09/337013        06/30/99  Issued
                                                     6270971

--------------------------------------------------------------------------------------------
Cross-Species Chromosome Painting          US        09/851598        05/08/01  Pending

--------------------------------------------------------------------------------------------
Method for Detection of Analytes in a      PC        00/26841         09/29/00  Published
Sample

--------------------------------------------------------------------------------------------
Method for Detection of Analytes in a      US        09/411352        10/01/99  Pending
Sample

--------------------------------------------------------------------------------------------
AUTOMATIC FOCUSING SYSTEM USING FOCAL      US        07/931944        08/18/92  Issued
LENGTH-CHANGING ELEMENT                              5254845
--------------------------------------------------------------------------------------------
High Efficiency Methods for Combined       US        09/592120        06/12/00  Pending
Immunocytochemistry & In Situ
Hybridization
--------------------------------------------------------------------------------------------
Systems for Retaining Biological           US        60/265747        01/31/01  Pending
Compounds on a Viewing Slide
--------------------------------------------------------------------------------------------
High Efficiency Method for Combined        US                                   Unfiled
Immunocytochemistry and In Situ
Hybridization
--------------------------------------------------------------------------------------------
Automated Scanning Method for Pathology    US        60/298227        06/12/01  Pending
Samples
--------------------------------------------------------------------------------------------
Tumor Cell Enrichment System               US                                   Unfiled

============================================================================================
</TABLE>

November 6, 2001

<PAGE>

                                   EXHIBIT "C"

                                   TRADEMARKS
                                   ----------
 (including trademarks that are the subject of an application for registration)

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Mark            Country  Serial/Application Filing Date Status
----            -------  ------------------ ----------- -------
                              Number
                              ------
<S>             <C>      <C>                <C>         <C>
-------------------------------------------------------------------------------------
CVCHROMOSCAN       US         75/570,129    10/14/98    Pending
-------------------------------------------------------------------------------------
CVCHROMOFLUOR      US         75/570,126    10/14/98    Pending
-------------------------------------------------------------------------------------
CYTOVISION         US         2359443       10/14/98    Registered (Issued 6/20/00)
-------------------------------------------------------------------------------------
RXFISH             EM         791533        4/7/98      Registered (Issued 6/29/99)
-------------------------------------------------------------------------------------
RXFISH             IL         119012        4/8/98      Registered (Issued 6/7/99)
-------------------------------------------------------------------------------------
RXFISH             JP         4270936       4/17/98     Registered (Issued 5/7/99)
-------------------------------------------------------------------------------------
RXFISH             US         75/455,614    3/24/98     Registered (Issued 4/4/00)
-------------------------------------------------------------------------------------
RXFISH & DESIGN    US         75/455,613    3/24/98     Registered (Issued 4/4/00)
-------------------------------------------------------------------------------------
CYTONET            EM         2285617       7/4/01      Pending
-------------------------------------------------------------------------------------
CYTOTALK           US         76/210,989    2/16/2001   Pending
-------------------------------------------------------------------------------------
POWERGENE          US         74/530,333    5/27/94     Registered (Issued 7/23/96)
-------------------------------------------------------------------------------------
POWERGENE          EM         2005726       12/18/00    Pending
-------------------------------------------------------------------------------------
CYTOTALK           EM         2062164       1/30/01     Pending
-------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------
</TABLE><PAGE>
                                                                    EXHIBIT 10.1

                              AMENDED AND RESTATED
                                MICROISLET, INC.
                             2000 STOCK OPTION PLAN

         1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

                  1.1 ESTABLISHMENt. The Amended and Restated MicroIslet, Inc.
2000 Stock Option Plan (the "PLAN") was established on November 7, 2000, and
amended and restated on April 24, 2002.

                  1.2 PURPOSE. The purpose of the Plan is to advance the
interests of the Participating Company Group and its shareholders by providing
an incentive to attract, retain and reward persons performing services for the
Participating Company Group and by motivating such persons to contribute to the
growth and profitability of the Participating Company Group.

                  1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the agreements
evidencing Options granted under the Plan have lapsed. However, all Options
shall be granted, if at all, within ten (10) years from the earlier of the date
the Plan is adopted by the Board or the date the Plan is duly approved by the
shareholders of the Company.

         2. DEFINITIONS AND CONSTRUCTION.

                  2.1 DEFINITIONS. Whenever used herein, the following terms
shall have their respective meanings set forth below:

                           (a) "BOARD" means the Board of Directors of the
Company. If one or more Committees have been appointed by the Board to
administer the Plan, "BOARD" also means such Committee(s).

                           (b) "CODE" means the Internal Revenue Code of 1986,
as amended, and any applicable regulations promulgated thereunder.

                           (c) "COMMITTEE" means the Compensation Committee or
other committee of the Board duly appointed to administer the Plan and having
such powers as shall be specified by the Board. Unless the powers of the
Committee have been specifically limited, the Committee shall have all of the
powers of the Board granted herein, including, without limitation, the power to
amend or terminate the Plan at any time, subject to the terms of the Plan and
any applicable limitations imposed by law.

                           (d) "COMPANY" means MicroIslet, Inc., a Delaware
corporation, or any successor corporation thereto.

                                       1
<PAGE>

                           (e) "CONSULTANT" means a person engaged to provide
consulting or advisory services (other than as an Employee or a Director) to a
Participating Company, provided that the identity of such person, the nature of
such services or the entity to which such services are provided would not
preclude the Company from offering or selling securities to such person pursuant
to the Plan in reliance on either the exemption from registration provided by
Rule 701 under the Securities Act or, if the Company is required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act, registration on a Form S-8
Registration Statement under the Securities Act.

                           (f) "DIRECTOR" means a member of the Board or of the
board of directors of any other Participating Company.

                           (g) "DISABILITY" means the inability of the Optionee,
in the opinion of a qualified physician acceptable to the Company, to perform
the major duties of the Optionee's position with the Participating Company Group
because of the sickness or injury of the Optionee.

                           (h) "EMPLOYEE" means any person treated as an
employee (including an officer or a Director who is also treated as an employee)
in the records of a Participating Company and, with respect to any Incentive
Stock Option granted to such person, who is an employee for purposes of Section
422 of the Code; provided, however, that neither service as a Director nor
payment of a director's fee shall be sufficient to constitute employment for
purposes of the Plan. The Company shall determine in good faith and in the
exercise of its discretion whether an individual has become or has ceased to be
an Employee and the effective date of such individual's employment or
termination of employment, as the case may be. For purposes of an individual's
rights, if any, under the Plan as of the time of the Company's determination,
all such determinations by the Company shall be final, binding and conclusive,
notwithstanding that the Company or any court of law or governmental agency
subsequently makes a contrary determination.

                           (i) "EXCHANGE ACT" means the Securities Exchange Act
of 1934, as amended.

                           (j) "FAIR MARKET VALUE" means, as of any date, the
value of a share of Stock or other property as determined by the Board, in its
discretion, or by the Company, in its discretion, if such determination is
expressly allocated to the Company herein, subject to the following:

                                (i) If, on such date, the Stock is listed on a
national or regional securities exchange or market system, the Fair Market Value
of a share of Stock shall be the closing price of a share of Stock (or the mean
of the closing bid and asked prices of a share of Stock if the Stock is so
quoted instead) as quoted on the Nasdaq National Market, The Nasdaq SmallCap
Market or such other national or regional securities exchange or market system
constituting the primary market for the Stock, as reported in The Wall Street

                                       2
<PAGE>

Journal or such other source as the Company deems reliable. If the relevant date
does not fall on a day on which the Stock has traded on such securities exchange
or market system, the date on which the Fair Market Value shall be established
shall be the last day on which the Stock was so traded prior to the relevant
date, or such other appropriate day as shall be determined by the Board, in its
discretion.

                                (ii) If, on such date, the Stock is not listed
on a national or regional securities exchange or market system, the Fair Market
Value of a share of Stock shall be as determined by the Board in good faith
without regard to any restriction other than a restriction which, by its terms,
will never lapse.

                           (k) "INCENTIVE STOCK OPTION" means an Option intended
to be (as set forth in the Option Agreement) and which qualifies as an incentive
stock option within the meaning of Section 422(b) of the Code.

                           (l) "INSIDER" means an officer or a Director of the
Company or any other person whose transactions in Stock are subject to Section
16 of the Exchange Act.

                           (m) "NONSTATUTORY STOCK OPTION" means an Option not
intended to be (as set forth in the Option Agreement) or which does not qualify
as an Incentive Stock Option.

                           (n) "OPTION" means a right to purchase Stock (subject
to adjustment as provided in Section 4.2) pursuant to the terms and conditions
of the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory
Stock Option.

                           (o) "OPTION AGREEMENT" means a written agreement
between the Company and an Optionee setting forth the terms, conditions and
restrictions of the Option granted to the Optionee and any shares acquired upon
the exercise thereof. An Option Agreement may consist of a form of "Notice of
Grant of Stock Option" and a form of "Stock Option Agreement" incorporated
therein by reference, or such other form or forms as the Board may approve from
time to time.

                           (p) "OPTIONEE" means a person who has been granted
one or more Options.

                           (q) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.

                           (r) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation.

                           (s) "PARTICIPATING COMPANY GROUP" means, at any point
in time, all corporations collectively which are then Participating Companies.

                           (t) "RULE 16B-3" means Rule 16b-3 under the Exchange
Act, as amended from time to time, or any successor rule or regulation.

                                       3
<PAGE>

                           (u) "SECURITIES ACT" means the Securities Act of
1933, as amended.

                           (v) "SERVICE" means an Optionee's employment or
service with the Participating Company Group, whether in the capacity of an
Employee, a Director or a Consultant. An Optionee's Service shall not be deemed
to have terminated merely because of a change in the capacity in which the
Optionee renders Service to the Participating Company Group or a change in the
Participating Company for which the Optionee renders such Service, provided that
there is no interruption or termination of the Optionee's Service. Furthermore,
an Optionee's Service with the Participating Company Group shall not be deemed
to have terminated if the Optionee takes any military leave, sick leave, or
other bona fide leave of absence approved by the Company; provided, however,
that if any such leave exceeds ninety (90) days, on the ninety-first (91st) day
of such leave the Optionee's Service shall be deemed to have terminated unless
the Optionee's right to return to Service with the Participating Company Group
is guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise designated by the Company or required by law, a leave of absence shall
not be treated as Service for purposes of determining vesting under the
Optionee's Option Agreement. The Optionee's Service shall be deemed to have
terminated either upon an actual termination of Service or upon the corporation
for which the Optionee performs Service ceasing to be a Participating Company.
Subject to the foregoing, the Company, in its discretion, shall determine
whether the Optionee's Service has terminated and the effective date of such
termination.

                           (w) "STOCK" means the common stock of the Company, as
adjusted from time to time in accordance with Section 4.2.

                           (x) "SUBSIDIARY CORPORATION" means any present or
future "subsidiary corporation" of the Company, as defined in Section 424(f) of
the Code.

                           (y) "TEN PERCENT OWNER OPTIONEE" means an Optionee
who, at the time an Option is granted to the Optionee, owns stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of a Participating Company within the meaning of Section 422(b)(6) of the
Code.

                  2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.

         3. ADMINISTRATION.

                  3.1 ADMINISTRATION BY THE BOARD. The Plan shall be
administered by the Board. All questions of interpretation of the Plan or of any
Option shall be determined by the Board, and such determinations shall be final
and binding upon all persons having an interest in the Plan or such Option.

                                       4
<PAGE>

                  3.2 AUTHORITY OF OFFICERS. Any officer of a Participating
Company shall have the authority to act on behalf of the Company with respect to
any matter, right, obligation, determination or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
determination or election.

                  3.3 POWERS OF THE BOARD. In addition to any other powers set
forth in the Plan and subject to the provisions of the Plan, the Board shall
have the full and final power and authority, in its discretion:

                           (a) to determine the persons to whom, and the time or
times at which, Options shall be granted and the number of shares of Stock to be
subject to each Option;

                           (b) to designate Options as Incentive Stock Options
or Nonstatutory Stock Options;

                           (c) to determine the Fair Market Value of shares of
Stock or other property;

                           (d) to determine the terms, conditions and
restrictions applicable to each Option (which need not be identical) and any
shares acquired upon the exercise thereof, including, without limitation, (i)
the exercise price of the Option, (ii) the method of payment for shares
purchased upon the exercise of the Option, (iii) the method for satisfaction of
any tax withholding obligation arising in connection with the Option or such
shares, including by the withholding or delivery of shares of stock, (iv) the
timing, terms and conditions of the exercisability of the Option or the vesting
of any shares acquired upon the exercise thereof, (v) the time of the expiration
of the Option, (vi) the effect of the Optionee's termination of Service with the
Participating Company Group on any of the foregoing, and (vii) all other terms,
conditions and restrictions applicable to the Option or such shares not
inconsistent with the terms of the Plan;

                           (e) to approve one or more forms of Option Agreement;

                           (f) to amend, modify, extend, cancel or renew any
Option or to waive any restrictions or conditions applicable to any Option or
any shares acquired upon the exercise thereof;

                           (g) to accelerate, continue, extend or defer the
exercisability of any Option or the vesting of any shares acquired upon the
exercise thereof, including with respect to the period following an Optionee's
termination of Service with the Participating Company Group;

                           (h) to prescribe, amend or rescind rules, guidelines
and policies relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the Board deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be granted
Options; and

                                       5
<PAGE>

                           (i) to correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Option Agreement and to make all
other determinations and take such other actions with respect to the Plan or any
Option as the Board may deem advisable to the extent not inconsistent with the
provisions of the Plan or applicable law.

                  3.4 ADMINISTRATION WITH RESPECT TO INSIDERS. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b-3.

                  3.5 INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to whom authority to
act for the Board or the Company is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any right granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60) days
after the institution of such action, suit or proceeding, such person shall
offer to the Company, in writing, the opportunity at its own expense to handle
and defend the same.

         4. SHARES SUBJECT TO PLAN.

                  4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment
as provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be Four Million (4,000,000) and shall consist
of authorized but unissued or reacquired shares of Stock or any combination
thereof. If an outstanding Option for any reason expires or is terminated or
canceled or if shares of Stock are acquired upon the exercise of an Option
subject to a Company repurchase option and are repurchased by the Company at the
Optionee's exercise price, the shares of Stock allocable to the unexercised
portion of such Option or such repurchased shares of Stock shall again be
available for issuance under the Plan. However, except as adjusted pursuant to
Section 4.2, in no event shall more than One Million (1,000,000) shares of Stock
be available for issuance pursuant to the exercise of Incentive Stock Options
(the "ISO SHARE ISSUANCE LIMIT"). Notwithstanding the foregoing, at any such
time as the offer and sale of securities pursuant to the Plan is subject to
compliance with Section 260.140.45 of Title 10 of the California Code of
Regulations ("SECTION 260.140.45"), the total number of shares of Stock issuable

                                       6
<PAGE>

upon the exercise of all outstanding Options (together with options outstanding
under any other stock option plan of the Company) and the total number of shares
provided for under any stock bonus or similar plan of the Company shall not
exceed thirty percent (30%) (or such other higher percentage limitation as may
be approved by the shareholders of the Company pursuant to Section 260.140.45)
of the then outstanding shares of the Company as calculated in accordance with
the conditions and exclusions of Section 260.140.45.

                  4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event
of any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, appropriate adjustments shall be made in the number and class of shares
subject to the Plan and to any outstanding Options, in the ISO Share Issuance
Limit set forth in Section 4.1, and in the exercise price per share of any
outstanding Options. If a majority of the shares which are of the same class as
the shares that are subject to outstanding Options are exchanged for, converted
into, or otherwise become (whether or not pursuant to an Ownership Change Event,
as defined in Section 8.1) shares of another corporation (the "NEW SHARES"), the
Board may unilaterally amend the outstanding Options to provide that such
Options are exercisable for New Shares. In the event of any such amendment, the
number of shares subject to, and the exercise price per share of, the
outstanding Options shall be adjusted in a fair and equitable manner as
determined by the Board, in its discretion. Notwithstanding the foregoing, any
fractional share resulting from an adjustment pursuant to this Section 4.2 shall
be rounded down to the nearest whole number, and in no event may the exercise
price of any Option be decreased to an amount less than the par value, if any,
of the stock subject to the Option. The adjustments determined by the Board
pursuant to this Section 4.2 shall be final, binding and conclusive.

         5. ELIGIBILITY AND OPTION LIMITATIONS.

                  5.1 PERSONS ELIGIBLE FOR OPTIONS. Options may be granted only
to Employees, Consultants, and Directors. For purposes of the foregoing
sentence, "Employees," "Consultants" and "Directors" shall include prospective
Employees, prospective Consultants and prospective Directors to whom Options are
granted in connection with written offers of an employment or other service
relationship with the Participating Company Group. Eligible persons may be
granted more than one (1) Option. However, eligibility in accordance with this
Section shall not entitle any person to be granted an Option, or, having been
granted an Option, to be granted an additional Option.

                  5.2 OPTION GRANT RESTRICTIONS. Any person who is not an
Employee on the effective date of the grant of an Option to such person may be
granted only a Nonstatutory Stock Option. An Incentive Stock Option granted to a
prospective Employee upon the condition that such person become an Employee
shall be deemed granted effective on the date such person commences Service with
a Participating Company, with an exercise price determined as of such date in
accordance with Section 6.1.

                  5.3 FAIR MARKET VALUE LIMITATION. To the extent that options
designated as Incentive Stock Options (granted under all stock option plans of
the Participating Company Group, including the Plan) become exercisable by an
Optionee for the first time during any calendar year for stock having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000), the portions

                                       7
<PAGE>

of such options which exceed such amount shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5.3, options designated as Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of stock shall be determined as of the time the option
with respect to such stock is granted. If the Code is amended to provide for a
different limitation from that set forth in this Section 5.3, such different
limitation shall be deemed incorporated herein effective as of the date and with
respect to such Options as required or permitted by such amendment to the Code.
If an Option is treated as an Incentive Stock Option in part and as a
Nonstatutory Stock Option in part by reason of the limitation set forth in this
Section 5.3, the Optionee may designate which portion of such Option the
Optionee is exercising. In the absence of such designation, the Optionee shall
be deemed to have exercised the Incentive Stock Option portion of the Option
first. Separate certificates representing each such portion shall be issued upon
the exercise of the Option.

         6. TERMS AND CONDITIONS OF OPTIONS.

                  Options shall be evidenced by Option Agreements specifying the
number of shares of Stock covered thereby, in such form as the Board shall from
time to time establish. No Option or purported Option shall be a valid and
binding obligation of the Company unless evidenced by a fully executed Option
Agreement. Option Agreements may incorporate all or any of the terms of the Plan
by reference and shall comply with and be subject to the following terms and
conditions:

                  6.1 EXERCISE PRICE. The exercise price for each Option shall
be established in the discretion of the Board; provided, however, that (a) the
exercise price per share for an Incentive Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the
Option, (b) the exercise price per share for a Nonstatutory Stock Option shall
be not less than eighty-five percent (85%) of the Fair Market Value of a share
of Stock on the effective date of grant of the Option, and (c) no Option granted
to a Ten Percent Owner Optionee shall have an exercise price per share less than
one hundred ten percent (110%) of the Fair Market Value of a share of Stock on
the effective date of grant of the Option. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted with an exercise price lower than the minimum exercise price set forth
above if such Option is granted pursuant to an assumption or substitution for
another option in a manner qualifying under the provisions of Section 424(a) of
the Code.

                  6.2 EXERCISABILITY AND TERM OF OPTIONS. Options shall be
exercisable at such time or times, or upon such event or events, and subject to
such terms, conditions, performance criteria and restrictions as shall be
determined by the Board and set forth in the Option Agreement evidencing such
Option; provided, however, that (a) no Option shall be exercisable after the
expiration of ten (10) years after the effective date of grant of such Option,
(b) no Incentive Stock Option granted to a Ten Percent Owner Optionee shall be
exercisable after the expiration of five (5) years after the effective date of
grant of such Option, (c) no Option granted to a prospective Employee,
prospective Consultant or prospective Director may become exercisable prior to

                                       8
<PAGE>

the date on which such person commences Service with a Participating Company,
and (d) with the exception of an Option granted to an officer, Director or
Consultant, no Option shall become exercisable at a rate less than twenty
percent (20%) per year over a period of five (5) years from the effective date
of grant of such Option, subject to the Optionee's continued Service. Subject to
the foregoing, unless otherwise specified by the Board in the grant of an
Option, any Option granted hereunder shall terminate ten (10) years after the
effective date of grant of the Option, unless earlier terminated in accordance
with its provisions.

                  6.3 PAYMENT OF EXERCISE PRICE.

                           (a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the exercise price for the number of shares
of Stock being purchased pursuant to any Option shall be made (i) in cash, by
check or cash equivalent, (ii) by tender to the Company, or attestation to the
ownership, of shares of Stock owned by the Optionee having a Fair Market Value
(as determined by the Company without regard to any restrictions on
transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company) not less than
the exercise price, (iii) by delivery of a properly executed notice together
with irrevocable instructions to a broker providing for the assignment to the
Company of the proceeds of a sale or loan with respect to some or all of the
shares being acquired upon the exercise of the Option (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System) (a "CASHLESS EXERCISE"), (iv) provided that the Optionee is an Employee
(unless otherwise not prohibited by law, including, without limitation, any
regulation promulgated by the Board of Governors of the Federal Reserve System)
and in the Company's sole discretion at the time the Option is exercised, by
delivery of the Optionee's promissory note in a form approved by the Company for
the aggregate exercise price, provided that, if the Company is incorporated in
the State of Delaware, the Optionee shall pay in cash that portion of the
aggregate exercise price not less than the par value of the shares being
acquired, (v) by such other consideration as may be approved by the Board from
time to time to the extent permitted by applicable law, or (vi) by any
combination thereof. The Board may at any time or from time to time, by approval
of or by amendment to the standard forms of Option Agreement described in
Section 7, or by other means, grant Options which do not permit all of the
foregoing forms of consideration to be used in payment of the exercise price or
which otherwise restrict one or more forms of consideration.

                           (b) LIMITATIONS ON FORMS OF CONSIDERATION.

                                (i) TENDER OF STOCK. Notwithstanding the
foregoing, an Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock to the extent such tender or
attestation would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock.
Unless otherwise provided by the Board, an Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock unless such
shares either have been owned by the Optionee for more than six (6) months (and
not used for another Option exercise by attestation during such period) or were
not acquired, directly or indirectly, from the Company.

                                       9
<PAGE>

                                (ii) CASHLESS EXERCISE. The Company reserves, at
any and all times, the right, in the Company's sole and absolute discretion, to
establish, decline to approve or terminate any program or procedures for the
exercise of Options by means of a Cashless Exercise.

                                (iii) PAYMENT BY PROMISSORY NOTE. No promissory
note shall be permitted if the exercise of an Option using a promissory note
would be a violation of any law. Any permitted promissory note shall be on such
terms as the Board shall determine at the time the Option is granted. The Board
shall have the authority to permit or require the Optionee to secure any
promissory note used to exercise an Option with the shares of Stock acquired
upon the exercise of the Option or with other collateral acceptable to the
Company. Unless otherwise provided by the Board, if the Company at any time is
subject to the regulations promulgated by the Board of Governors of the Federal
Reserve System or any other governmental entity affecting the extension of
credit in connection with the Company's securities, any promissory note shall
comply with such applicable regulations, and the Optionee shall pay the unpaid
principal and accrued interest, if any, to the extent necessary to comply with
such applicable regulations.

                  6.4 TAX WITHHOLDING. The Company shall have the right, but not
the obligation, to deduct from the shares of Stock issuable upon the exercise of
an Option, or to accept from the Optionee the tender of, a number of whole
shares of Stock having a Fair Market Value, as determined by the Company, equal
to all or any part of the federal, state, local and foreign taxes, if any,
required by law to be withheld by the Participating Company Group with respect
to such Option or the shares acquired upon the exercise thereof. Alternatively
or in addition, in its discretion, the Company shall have the right to require
the Optionee, through payroll withholding, cash payment or otherwise, including
by means of a Cashless Exercise, to make adequate provision for any such tax
withholding obligations of the Participating Company Group arising in connection
with the Option or the shares acquired upon the exercise thereof. The Fair
Market Value of any shares of Stock withheld or tendered to satisfy any such tax
withholding obligations shall not exceed the amount determined by the applicable
minimum statutory withholding rates. The Company shall have no obligation to
deliver shares of Stock or to release shares of Stock from an escrow established
pursuant to the Option Agreement until the Participating Company Group's tax
withholding obligations have been satisfied by the Optionee.

                  6.5 REPURCHASE RIGHTS. Shares issued under the Plan may be
subject to a right of first refusal, one or more repurchase options, or other
conditions and restrictions as determined by the Board in its discretion at the
time the Option is granted. The Company shall have the right to assign at any
time any repurchase right it may have, whether or not such right is then
exercisable, to one or more persons as may be selected by the Company. Upon
request by the Company, each Optionee shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder and
shall promptly present to the Company any and all certificates representing
shares of Stock acquired hereunder for the placement on such certificates of
appropriate legends evidencing any such transfer restrictions.

                                       10
<PAGE>

                  6.6 EFFECT OF TERMINATION OF SERVICE.

                           (a) OPTION EXERCISABILITY. Subject to earlier
termination of the Option as otherwise provided herein and unless otherwise
provided by the Board in the grant of an Option and set forth in the Option
Agreement, an Option shall be exercisable after an Optionee's termination of
Service only during the applicable time period determined in accordance with
this Section 6.6 and thereafter shall terminate:

                                (i) DISABILITY. If the Optionee's Service with
the Participating Company Group terminates because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of six (6) months (or such longer period of time as determined by the
Board, in its discretion) after the date on which the Optionee's Service
terminated, but in any event no later than the date of expiration of the
Option's term as set forth in the Option Agreement evidencing such Option (the
"OPTION EXPIRATION DATE").

                                (ii) DEATH. If the Optionee's Service with the
Participating Company Group terminates because of the death of the Optionee, the
Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee's legal
representative or other person who acquired the right to exercise the Option by
reason of the Optionee's death at any time prior to the expiration of six (6)
months (or such longer period of time as determined by the Board, in its
discretion) after the date on which the Optionee's Service terminated, but in
any event no later than the Option Expiration Date. The Optionee's Service shall
be deemed to have terminated on account of death if the Optionee dies within
three (3) months (or such longer period of time as determined by the Board, in
its discretion) after the Optionee's termination of Service.

                                (iii) TERMINATION AFTER CHANGE IN CONTROL. The
Board may, in its discretion, provide in any Option Agreement that if the
Optionee's Service with the Participating Company Group ceases as a result of
"Termination After Change in Control" (as defined in such Option Agreement),
then (1) the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of three (3) months (or such longer period of time as determined by
the Board, in its discretion) after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date, and (2)
the exercisability and vesting of the Option and any shares acquired upon the
exercise thereof shall be accelerated effective as of the date on which the
Optionee's Service terminated to such extent, if any, as shall have been
determined by the Board, in its discretion, and set forth in the Option
Agreement. Notwithstanding the foregoing, if it is determined that the
provisions or operation of this Section 6.6(a)(iii) would preclude treatment of
a Change in Control as a "pooling-of-interests" for accounting purposes and
provided further that in the absence of the preceding sentence such Change in
Control would be treated as a "pooling-of-interests" for accounting purposes,
then this Section 6.6(a)(iii) shall be void AB INITIO, and the vesting and
exercisability of the Option shall be determined under any other applicable
provision of the Plan or the Option Agreement evidencing such Option.

                                (iv) OTHER TERMINATION OF SERVICE. If the
Optionee's Service with the Participating Company Group terminates for any
reason, except Disability, death or Termination After Change in Control, the
Option, to the extent unexercised and exercisable by the Optionee on the date on
which the Optionee's Service terminated, may be exercised by the Optionee at any

                                       11
<PAGE>

time prior to the expiration of three (3) months (or such longer period of time
as determined by the Board, in its discretion) after the date on which the
Optionee's Service terminated, but in any event no later than the Option
Expiration Date.

                           (b) EXTENSION IF EXERCISE PREVENTED BY LAW.
Notwithstanding the foregoing, if the exercise of an Option within the
applicable time periods set forth in Section 6.6(a) is prevented by the
provisions of Section 10 below, the Option shall remain exercisable until three
(3) months (or such longer period of time as determined by the Board, in its
discretion) after the date the Optionee is notified by the Company that the
Option is exercisable, but in any event no later than the Option Expiration
Date.

                           (c) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(B).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 6.6(a) of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date.

                  6.7 TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, an Option shall be exercisable only by the Optionee or the Optionee's
guardian or legal representative. No Option shall be assignable or transferable
by the Optionee, except by will or by the laws of descent and distribution.
Notwithstanding the foregoing, to the extent permitted by the Board, in its
discretion, and set forth in the Option Agreement evidencing such Option, a
Nonstatutory Stock Option shall be assignable or transferable subject to the
applicable limitations, if any, described in Section 260.140.41 of Title 10 of
the California Code of Regulations, Rule 701 under the Securities Act, and the
General Instructions to Form S-8 Registration Statement under the Securities
Act.

         7. STANDARD FORMS OF OPTION AGREEMENT.

                  7.1 OPTION AGREEMENT. Unless otherwise provided by the Board
at the time the Option is granted, an Option shall comply with and be subject to
the terms and conditions set forth in the form of Option Agreement approved by
the Board concurrently with its adoption of the Plan and as amended from time to
time.

                  7.2 AUTHORITY TO VARY TERMS. The Board shall have the
authority from time to time to vary the terms of any standard form of Option
Agreement described in this Section 7 either in connection with the grant or
amendment of an individual Option or in connection with the authorization of a
new standard form or forms; provided, however, that the terms and conditions of
any such new, revised or amended standard form or forms of Option Agreement are
not inconsistent with the terms of the Plan.

                                       12
<PAGE>

         8. CHANGE IN CONTROL.

                  8.1 DEFINITIONS.

                           (a) An "OWNERSHIP CHANGE EVENT" shall be deemed to
have occurred if any of the following occurs with respect to the Company: (i)
the direct or indirect sale or exchange in a single or series of related
transactions by the shareholders of the Company of more than fifty percent (50%)
of the voting stock of the Company; (ii) a merger or consolidation in which the
Company is a party; (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or (iv) a liquidation or
dissolution of the Company.

                           (b) A "CHANGE IN CONTROL" shall mean an Ownership
Change Event or a series of related Ownership Change Events (collectively, a
"TRANSACTION") wherein the shareholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or, in the case of a Transaction
described in Section 8.1(a)(iii), the corporation or corporations to which the
assets of the Company were transferred (the "TRANSFEREE CORPORATION(S)"), as the
case may be. For purposes of the preceding sentence, indirect beneficial
ownership shall include, without limitation, an interest resulting from
ownership of the voting stock of one or more corporations which, as a result of
the Transaction, own the Company or the Transferee Corporation(s), as the case
may be, either directly or through one or more subsidiary corporations. The
Board shall have the right to determine whether multiple sales or exchanges of
the voting stock of the Company or multiple Ownership Change Events are related,
and its determination shall be final, binding and conclusive.

                  8.2 EFFECT OF CHANGE IN CONTROL ON OPTIONS. In the event of a
Change in Control, the surviving, continuing, successor, or purchasing
corporation or other business entity or parent thereof, as the case may be (the
"ACQUIRING CORPORATION"), may, without the consent of any Optionee, either
assume the Company's rights and obligations under outstanding Options or
substitute for outstanding Options substantially equivalent options for the
Acquiring Corporation's stock. In the event the Acquiring Corporation elects not
to assume or substitute for outstanding Options in connection with a Change in
Control, any unexercisable or unvested portions of outstanding Options and any
shares acquired upon the exercise thereof held by Optionees whose Service has
not terminated prior to such date shall be immediately exercisable and vested in
full as of the date ten (10) days prior to the date of the Change in Control.
The exercise or vesting of any Option and any shares acquired upon the exercise
thereof that was permissible solely by reason of this Section 8.2 shall be
conditioned upon the consummation of the Change in Control. Any Options which
are neither assumed or substituted for by the Acquiring Corporation in
connection with the Change in Control nor exercised as of the date of the Change
in Control shall terminate and cease to be outstanding effective as of the date
of the Change in Control. Notwithstanding the foregoing, shares acquired upon

                                       13
<PAGE>

exercise of an Option prior to the Change in Control and any consideration
received pursuant to the Change in Control with respect to such shares shall
continue to be subject to all applicable provisions of the Option Agreement
evidencing such Option except as otherwise provided in such Option Agreement.
Furthermore, notwithstanding the foregoing, if the corporation the stock of
which is subject to the outstanding Options immediately prior to an Ownership
Change Event described in Section 8.1(a)(i) constituting a Change in Control is
the surviving or continuing corporation and immediately after such Ownership
Change Event less than fifty percent (50%) of the total combined voting power of
its voting stock is held by another corporation or by other corporations that
are members of an affiliated group within the meaning of Section 1504(a) of the
Code without regard to the provisions of Section 1504(b) of the Code, the
outstanding Options shall not terminate unless the Board otherwise provides in
its discretion.

         9. PROVISION OF INFORMATION.

                  At least annually, copies of the Company's balance sheet and
income statement for the just completed fiscal year shall be made available to
each Optionee and purchaser of shares of Stock upon the exercise of an Option.
The Company shall not be required to provide such information to key employees
whose duties in connection with the Company assure them access to equivalent
information.

         10. COMPLIANCE WITH SECURITIES LAW.

                  The grant of Options and the issuance of shares of Stock upon
exercise of Options shall be subject to compliance with all applicable
requirements of federal, state and foreign law with respect to such securities.
Options may not be exercised if the issuance of shares of Stock upon exercise
would constitute a violation of any applicable federal, state or foreign
securities laws or other law or regulations or the requirements of any stock
exchange or market system upon which the Stock may then be listed. In addition,
no Option may be exercised unless (a) a registration statement under the
Securities Act shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (b) in the opinion
of legal counsel to the Company, the shares issuable upon exercise of the Option
may be issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company's legal counsel to be necessary to the lawful issuance and
sale of any shares hereunder shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of any
Option, the Company may require the Optionee to satisfy any qualifications that
may be necessary or appropriate, to evidence compliance with any applicable law
or regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.

         11. TERMINATION OR AMENDMENT OF PLAN.

                  The Board may terminate or amend the Plan at any time.
However, subject to changes in applicable law, regulations or rules that would
permit otherwise, without the approval of the Company's shareholders, there
shall be (a) no increase in the maximum aggregate number of shares of Stock that
may be issued under the Plan (except by operation of the provisions of Section
4.2), (b) no change in the class of persons eligible to receive Incentive Stock
Options, and (c) no other amendment of the Plan that would require approval of
the Company's shareholders under any applicable law, regulation or rule. No

                                       14
<PAGE>

termination or amendment of the Plan shall affect any then outstanding Option
unless expressly provided by the Board. In any event, no termination or
amendment of the Plan may adversely affect any then outstanding Option without
the consent of the Optionee, unless such termination or amendment is required to
enable an Option designated as an Incentive Stock Option to qualify as an
Incentive Stock Option or is necessary to comply with any applicable law,
regulation or rule.

         12. SHAREHOLDER APPROVAL.

                  The Plan or any increase in the maximum aggregate number of
shares of Stock issuable thereunder as provided in Section 4.1 (the "AUTHORIZED
SHARES") shall be approved by the shareholders of the Company within twelve (12)
months of the date of adoption thereof by the Board. Options granted prior to
shareholder approval of the Plan or in excess of the Authorized Shares
previously approved by the shareholders shall become exercisable no earlier than
the date of shareholder approval of the Plan or such increase in the Authorized
Shares, as the case may be.

         IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing sets forth the MicroIslet, Inc. 2000 Stock Option Plan as
duly adopted by the Board on ______________, 2000.

                                            ------------------------------------
                                            Secretary

                                       15
<PAGE>

                                  PLAN HISTORY
                                  ------------

November 7, 2000  Board adopts Plan, with an initial reserve of 1,000,000
                  shares.

November 7, 2000  Shareholders approve Plan, with an initial reserve of
                  1,000,000 shares.

April 17, 2002    Board approves an increase to the shares of Stock reserved
                  under the Plan from 3,125,500 (on a post 3.1255 for 1 stock
                  split basis) to 4,000,000.

April 24, 2002    Shareholders approve an increase to the shares of Stock
                  reserved under the Plan from 3,125,500 (on a post 3.1255 for 1
                  stock split basis) to 4,000,000.

April 24, 2002    Plan assumed by MicroIslet, Inc., a Nevada corporation
                  (formerly known as ALD Services, Inc.), pursuant to Merger
                  Agreement and Plan of Reorganization dated April 22, 2002.

May 9, 2002       Board of MicroIslet, Inc. a Nevada corporation, adopts Plan
                  and reserves 4,000,000 shares for issuance under Plan; becomes
                  successor to MicroIslet, Inc., a Delaware corporation, under
                  Plan.

May 28, 2002      Stockholders of MicroIslet, Inc., a Delaware corporation,
                  approve Plan, but NOT a Section 162(m) limit grant limit. ---
                  (Note: Stockholders also approve name change of ALD Services,
                  Inc. to MicroIslet, Inc.)

[________, 200_]  [IMPORTANT NOTE: At first annual stockholders meeting
                  following close of 3rd calendar year following the calendar
                  year of IPO (unless plan is materially amended at an earlier
                  date), obtain public company stockholder approval of amendment
                  to plan to add Section 162(m) grant limit. See Treas. Reg.
                  1.162-27(f) (private to public company transition rule).]

                                       16
<PAGE>

                                STANDARD FORMS OF

                                MICROISLET, INC.

                         NOTICE OF GRANT OF STOCK OPTION

                                       AND

                             STOCK OPTION AGREEMENT

                           [(IMMEDIATELY EXERCISABLE)]

                                       17

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