Document:

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                                                                    EXHIBIT 10.2

                                  VIRAGE, INC.

                             1995 STOCK OPTION PLAN

        1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

               1.1 ESTABLISHMENT. The Virage, Inc. 1995 Stock Option Plan (the
"PLAN") is hereby established effective as of March 13, 1995.

               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 to motivate 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
terminated by the Board or until 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, prior to
March 13, 2005.

        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" shall also mean 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 Virage, Inc., a Delaware corporation,
or any successor corporation thereto.

                      (e) "CONSULTANT" means any person, including an advisor,
engaged by a Participating Company to render services other than as an Employee
or a Director.

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                      (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, 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 common-law employee (including
officers and Directors who are also common-law employees) of a Participating
Company; provided, however, that neither service as a Director nor payment of a
director's fee shall be sufficient to constitute employment for this purpose.

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

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

                      (k) "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 sole
discretion; provided, however, that for purposes of establishing the exercise
price of an Option pursuant to Section 6.1, the value of a share of Stock shall
be determined in accordance with Section 260.140.50 of Title 10 of the
California Code of Regulations.

                      (l) "OPTION" means a right to purchase Stock (subject to
adjustment as provided in Section 5.2) pursuant to the terms and conditions of
the Plan. An Option may be either (i) an Option intended to be an "INCENTIVE
STOCK OPTION" within the meaning of Section 422(b) of the Code or (ii) a
"NONSTATUTORY STOCK OPTION" which is not intended to, or does not, qualify as an
Incentive Stock Option.

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

                      (n) "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.

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

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

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

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

                      (s) "SECTION 162(m)" means Section 162(m) of the Code, as
amended by the Revenue Reconciliation Act of 1993 (P.L. 103-66).

                      (t) "SERVICE" means the Optionee's employment or service
with the Participating Company Group, whether in the capacity of an Employee, a
Director or a Consultant. The 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. 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.

                      (u) "STOCK" means the common stock, without par value, of
the Company, as adjusted from time to time in accordance with Section 5.2.

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

                      (w) "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, including any duly appointed Committee of 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. Any officer of a Participating Company
shall have the authority to act on behalf of the Company with respect to any
matter, right, obligation, 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, or election.

               3.2 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 sole discretion:

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                      (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 and conditions of each Option
(which need not be identical), including, without limitation, the exercise price
of the Option, the method of payment for shares purchased upon the exercise of
the Option, the method for satisfaction of any tax withholding obligation
arising in connection with the Option, including by the withholding or delivery
of shares of stock, the timing and terms of the exercisability and vesting of
the Option, the time of the expiration of the Option, the effect of the
Optionee's termination of employment or Service, and all other terms and
conditions of the Option not inconsistent with the terms of the Plan;

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

                      (f) to amend, modify, extend, or renew, or grant a new
Option in substitution for, any Option or to waive any restrictions or
conditions applicable to any Option or the exercise thereof;

                      (g) to amend the exercisability or vesting of any Option,
including with respect to the period following an Optionee's termination of
employment or 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

                      (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 and
any Option as the Board may deem advisable, to the extent consistent with the
Plan and applicable law.

               3.3 DISINTERESTED ADMINISTRATION. 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 by the Board in compliance with the "disinterested
administration" requirements of Rule 16b-3.

        4. ELIGIBILITY AND OPTION LIMITATIONS.

               4.1 ELIGIBLE PERSONS. Options may be granted only to Employees,

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Consultants, and Directors. For purposes of the foregoing sentence, "Employees"
shall include prospective Employees to whom Options are granted in connection
with written offers of employment with the Participating Company Group, and
"Consultants" shall include prospective Consultants to whom Options are granted
in connection with written offers of engagement with the Participating Company
Group. Eligible persons may be granted more than one (1) Option.

               4.2 DIRECTORS SERVING ON COMMITTEE. At any time that any class of
equity security of the Company is registered pursuant to Section 12 of the
Exchange Act, no member of a Committee established to administer the Plan in
compliance with the "disinterested administration" requirements of Rule 16b-3,
while a member, shall be eligible to be granted an Option.

               4.3 OPTION GRANT RESTRICTIONS. A Director may only be granted a
Nonstatutory Stock Option unless the Director is also an Employee. An individual
who is a Consultant, or who is a prospective Employee or prospective Consultant,
may only be granted a Nonstatutory Stock Option.

               4.4 FAIR MARKET VALUE LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time the Option is granted) of
stock with respect to which Incentive Stock Options are exercisable by an
Optionee for the first time during any calendar year (under all stock option
plans of the Participating Company Group, including the Plan) exceeds One
Hundred Thousand Dollars ($100,000), such options shall be treated as
Nonstatutory Stock Options. This Section 4.4 shall be applied by taking
Incentive Stock Options into account in the order in which they were granted. If
the Code is amended to provide for a different limitation from that set forth in
this Section 4.4, such different limitation shall be deemed incorporated herein
effective as of the date and with respect to such Options as required 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 4.4, separate certificates representing each such portion
shall be issued upon the exercise of the Option.

        5. SHARES SUBJECT TO PLAN.

               5.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 5.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be One Million Seven Hundred Eighty Thousand
Seven Hundred Twenty (1,780,720) and shall consist of authorized but unissued
shares of Stock. In the event that any outstanding Option for any reason expires
or is terminated or canceled or shares of Stock acquired, subject to repurchase,
upon the exercise of an Option are repurchased by the Company, the shares of
Stock allocable to the unexercised portion of such Option, or such repurchased
or reacquired shares of Stock, shall again be available for issuance under the
Plan.

               5.2 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 and in the exercise price of
any outstanding Options. If a majority of the shares which are of the same class
as the

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shares that are subject to outstanding Options are exchanged for, converted
into, or otherwise become (whether or not pursuant to a Transfer of Control (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 of the outstanding Options
shall be adjusted in a fair and equitable manner as determined by the Board, in
its sole discretion. Notwithstanding the foregoing, any fractional share
resulting from an adjustment pursuant to this Section 5.2 shall be rounded up or
down to the nearest whole number, as determined by the Board, 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.

        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, which 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 sole 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 date the Option is granted, (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
date the Option is granted, 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 date the
Option is granted. 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 EXERCISE PERIOD. Options shall be exercisable at such time or
times 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 date such Option is
granted, (b) no Incentive Stock Option granted to a Ten Percent Owner Optionee
shall be exercisable after the expiration of five (5) years after the date such
Option is granted, and (c) no Option granted to a prospective Employee or
prospective Consultant may become exercisable prior to the date on which such
individual commences Service with a Participating Company. Subject to this
Section 6.2 and Sections 6.5 and 8 below, an Option must become exercisable at
the rate of no less than 20% for each full year which occurs after the date of
grant of the Option, unless the grant of the Option and issuance of Stock upon
the exercise of the Option may occur in compliance with an exemption from the
requirement to qualify such securities under the California Corporate Securities
Law of 1968, as amended.

               6.3 PAYMENT OF EXERCISE PRICE.

                      (a) FORMS OF PAYMENT AUTHORIZED. Except as otherwise
provided

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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 of shares of Stock owned by the
Optionee having a Fair Market Value (determined 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 the assignment of the proceeds of a sale
of 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 "SAME-DAY SALE"), (iv) by the
Optionee's promissory note in a form approved by the Company, (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 adoption 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) TENDER OF STOCK. Notwithstanding the foregoing, an
Option may not be exercised by tender to the Company of shares of Stock to the
extent such tender of Stock 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 of shares of Stock unless such shares either have been
owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company.

                      (c) SAME-DAY SALE. 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 Same-Day Sale.

                      (d) PAYMENT BY PROMISSORY NOTE. No promissory note shall
be permitted if an exercise using a promissory note would be a violation of any
law. Any permitted promissory note shall be due and payable not more than four
(4) years after the Option is exercised, and interest shall be payable at least
annually and at a rate at least equal to the minimum interest rate necessary to
avoid imputed interest pursuant to all applicable sections of the Code. 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, in the event 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 shares the Fair Market Value of which is 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.
Alternatively, in its sole discretion, the Company shall have the right to
require the

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Optionee, through payroll withholding or otherwise, to make adequate provision
for any such tax withholding obligations of the Participating Company Group
arising in connection with the Option. 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.

               6.5 EFFECT OF TERMINATION OF SERVICE. An Option, to the extent
unexercised and exercisable on the date on which the Optionee's Service
terminates, shall remain exercisable for such period of time following the
Optionee's termination of Service as shall be determined by the Board, in its
sole discretion, upon the grant or subsequent amendment of the Option; provided,
however, that such period of time shall be no less than (a) six (6) months if
the Optionee's Service terminates by reason of the Optionee's death or
Disability, or (b) thirty (30) days if the Optionee's Service terminates for any
other reason or no reason. Notwithstanding the foregoing, in no event shall an
Option be exercisable after the expiration of its term as set forth in the
Option Agreement evidencing such Option.

        7. STANDARD FORMS OF OPTION AGREEMENT.

               7.1 INCENTIVE STOCK OPTIONS. Unless otherwise provided for by the
Board at the time an Option is granted, an Option designated as an "Incentive
Stock Option" shall comply with and be subject to the terms and conditions set
forth in the form of Incentive Stock Option Agreement attached hereto as Exhibit
A.

               7.2 NONSTATUTORY STOCK OPTIONS. Unless otherwise provided for by
the Board at the time an Option is granted, an Option designated as a
"Nonstatutory Stock Option" shall comply with and be subject to the terms and
conditions set forth in the form of Nonstatutory Stock Option Agreement attached
hereto as Exhibit B.

               7.3 STANDARD TERM OF OPTIONS. Except as otherwise provided in
Section 6.2 or by the Board in the grant of an Option, any Option granted
hereunder shall be exercisable for a term of ten (10) years.

               7.4 AUTHORITY TO VARY TERMS. The Board shall have the authority
from time to time to vary the terms of any of the standard forms 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
such revised or amended standard form or forms of Option Agreement shall be in
accordance with the terms of the Plan. Such authority shall include, but not by
way of limitation, the authority to grant Options which are immediately
exercisable subject to the Company's right to repurchase any unvested shares of
Stock acquired by an Optionee upon the exercise of an Option in the event such
Optionee's employment or Service with the Participating Company Group is
terminated for any reason, with or without cause.

        8. TRANSFER OF CONTROL.

               8.1 DEFINITION. A "TRANSFER OF CONTROL" shall be deemed to have
occurred in the event any of the following occurs with respect to the Company:

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                      (a) the direct or indirect sale or exchange by the
shareholders of the Company of all or substantially all of the stock of the
Company where the shareholders of the Company before such sale or exchange do
not retain, directly or indirectly, as a result of their ownership of shares of
the Company's stock prior to such event, beneficial ownership of at least a
majority of the voting stock of the Company after such sale or exchange;

                      (b) a merger or consolidation where the shareholders of
the Company before such merger or consolidation do not retain, directly or
indirectly, as a result of their ownership of shares of the Company's stock
prior to such event, beneficial ownership of at least a majority of the voting
stock of the Company after such merger or consolidation;

                      (c) the sale, exchange, or transfer of all or
substantially all of the assets of the Company (other than a sale, exchange, or
transfer to one or more Subsidiary Corporations of the Company);

                      (d) a liquidation or dissolution of the Company.

               8.2 EFFECT OF TRANSFER OF CONTROL ON OPTIONS. In the event of a
Transfer of Control, the Board, in its sole discretion, may arrange with the
surviving, continuing, successor, or purchasing corporation or parent
corporation thereof, as the case may be (the "ACQUIRING CORPORATION"), for the
Acquiring Corporation to either assume the Company's rights and obligations
under outstanding Options or substitute substantially equivalent options for the
Acquiring Corporation's stock for outstanding Options. Any Options which are
neither assumed or substituted for by the Acquiring Corporation in connection
with the Transfer of Control nor exercised as of the date of the Transfer of
Control shall terminate and cease to be outstanding effective as of the date of
the Transfer of Control.

        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 persons whose duties in connection with the Company assure them
access to equivalent information.

        10. NONTRANSFERABILITY 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.

        11. TRANSFER OF COMPANY'S RIGHTS. In the event any Participating Company
assigns, other than by operation of law, to a third person, other than another
Participating Company, any of the Participating Company's rights to repurchase
any shares of Stock acquired upon the exercise of an Option, the assignee shall
pay to the assigning Participating Company the value of such right as determined
by the Company in the Company's sole discretion. Such consideration shall be
paid in cash. In the event such repurchase right is exercisable at the time of
such assignment, the value of such right shall be not less than the fair market
value of the shares of Stock which may be repurchased under such right (as
determined by the Company)

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minus the repurchase price of such shares. The requirements of this Section 11
regarding the minimum consideration to be received by the assigning
Participating Company shall not inure to the benefit of the Optionee whose
shares of Stock are being repurchased. Failure of a Participating Company to
comply with the provisions of this Section 11 shall not constitute a defense or
otherwise prevent the exercise of the repurchase right by the assignee of such
right.

        12. INDEMNIFICATION. In addition to such other rights of indemnification
as they may have as members of the Board, members of the Board and any officers
to whom authority to act for the Board 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 negligence or 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.

        13. TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or amend
the Plan at any time. However, subject to changes in the law or other legal
requirements that would permit otherwise, without the approval of the Company's
shareholders, there shall be (a) no increase in the total number of shares of
Stock that may be issued under the Plan (except by operation of the provisions
of Section 5.2), (b) no change in the class of persons eligible to receive
Incentive Stock Options, (c) no expansion in the class of persons eligible to
receive Nonstatutory Stock Options, (d) no extension of the period during which
Options may be granted under the Plan, and (e) if a class of any equity security
of the Company is registered pursuant to Section 12 of the Exchange Act, no
amendment to the Plan which, in the opinion of the Board, would require
shareholder approval in order to comply with Rule 16b-3. In any event, no
termination or amendment of the Plan may adversely affect any then outstanding
Option or any unexercised portion thereof, 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 or government regulation.

        14. Shareholder Approval. The Plan or any increase in the maximum number
of shares of Stock issuable thereunder as provided in Section 5.1 (the "Maximum
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 Maximum 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 Maximum Shares, as
the case may be.

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        IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing Virage, Inc. 1995 Stock Option Plan was duly adopted by the
Board on March 13, 1995.

                                            /s/ Cameron Jay Rains
                                            ------------------------------------
                                            Cameron Jay Rains, Secretary

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                                    EXHIBIT A

                                STANDARD FORM OF

                                  VIRAGE, INC.

                        INCENTIVE STOCK OPTION AGREEMENT

<PAGE>   13

                                    EXHIBIT B

                                STANDARD FORM OF

                                  VIRAGE, INC.

                       NONSTATUTORY STOCK OPTION AGREEMENT<PAGE>   1
                                                                   EXHIBIT 10.3

                                  VIRAGE, INC.
                             1997 STOCK OPTION PLAN

        1.     ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

               1.1 ESTABLISHMENT.  The Virage, Inc. 1997 Stock Option
Plan (the "PLAN") is hereby established effective as of December 4, 1997.

               1.2 PURPOSE. The purpose of the Plan is to advance the interests
of the Participating Company Group and its stockholders 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
stockholders 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 Virage, Inc., a Delaware corporation,
or any successor corporation thereto.

                      (e) "CONSULTANT" means any person, including an advisor,
engaged by a Participating Company to render services other than as an Employee
or a Director.

                                       1

<PAGE>   2

                      (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.

                      (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 sole
discretion, or by the Company, in its sole discretion, if such determination is
expressly allocated to the Company herein, subject to the following:

                      (i) If, on such date, there is a public market for the
Stock, the Fair Market Value of a share of Stock shall be the closing sale 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 Small-Cap 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 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 sole discretion.

                      (ii) If, on such date, there is no public market for the
Stock, the Fair Market Value of a share of Stock shall be as determined by the
Board 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.

                                       2

<PAGE>   3
                      (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.

                      (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.

                      (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. The 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 sole 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.

                                       3
<PAGE>   4
                      (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. 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.

               3.2 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.

               3.3 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 sole 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

                                       4
<PAGE>   5
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, renew, reprice or
otherwise adjust the exercise price of, or grant a new Option in substitution
for, 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

                      (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 consistent with the Plan
and applicable law.

        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 Nine Hundred Forty-Two Thousand Nine
Hundred Ninety-Five (942,995) and shall consist of authorized but unissued or
reacquired shares of Stock or any combination thereof; provided, however, that
such number shall be increased automatically by a number of shares equal to the
number of shares subject to any option outstanding under the Company's 1995
Stock Option Plan which expires or which is terminated, canceled or repurchased,
provided that in no event will the maximum aggregate number of shares of stock
that may be issued under the Plan exceed Five Million Four Hundred Ninety-Eight
Thousand Thirty-Four (5,498,034) subject to adjustment as provided for in
Section 4.2. 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. 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

                                       5

<PAGE>   6

issuable 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 stockholders 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 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 sole discretion. Notwithstanding the
foregoing, any fractional share resulting from an adjustment pursuant to this
Section 4.2 shall be rounded up or down to the nearest whole number, as
determined by the Board, 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.

               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 portion
of such options which exceeds 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

                                       6

<PAGE>   7
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 sole 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 EXERCISE PERIOD. 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 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 have a term of ten (10) years from the effective date of grant
of the Option.

                                       7

<PAGE>   8
               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 the assignment 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) by the
Optionee's promissory note in a form approved by the Company, (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 adoption 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) 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 to the
ownership, of Stock 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 or
were not acquired, directly or indirectly, from the Company.

                      (c) 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.

                      (d) 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.

                                       8
<PAGE>   9

               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 sole 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
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 sole 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.

               6.6    EFFECT OF TERMINATION OF SERVICE.

                      (a) OPTION EXERCISABILITY. Subject to earlier termination
of the Option as otherwise provided herein, an Option shall be exercisable after
an Optionee's termination of Service as follows:

                      (i) DISABILITY. If the Optionee's Service with the
Participating Company Group is terminated 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 twelve (12) months (or such longer or shorter period of time as
determined by the Board, in its sole discretion, which in no event shall be less
than six (6) months) 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 is terminated 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 twelve
(12) months (or such longer or shorter period of time as determined by the
Board, in its sole discretion, which in no event shall be less than six (6)
months) after the date on which the Optionee's Service terminated, but in any
event no later than the Option Expiration Date. The

                                       9
<PAGE>   10
 Optionee's Service shall be deemed to have terminated on account of death if
the Optionee dies within three (3) months after the Optionee's termination of
Service.

                             (iii) OTHER TERMINATION OF SERVICE. If the
Optionee's Service with the Participating Company Group terminates for any
reason, except Disability or death, 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 within three (3) months (or such
longer or shorter period of time as determined by the Board, in its sole
discretion, which in no event shall be less than thirty (30) days) 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 11 below, the Option shall remain exercisable until three
(3) months 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.

        7.     STANDARD FORMS OF OPTION AGREEMENT.

               7.1 INCENTIVE STOCK OPTIONS. Unless otherwise provided by the
Board at the time the Option is granted, an Option designated as an "INCENTIVE
STOCK OPTION" shall comply with and be subject to the terms and conditions set
forth in the form of Incentive Stock Option Agreement adopted by the Board
concurrently with its adoption of the Plan and as amended from time to time.

               7.2 NONSTATUTORY STOCK OPTIONS. Unless otherwise provided by the
Board at the time the Option is granted, an Option designated as a "NONSTATUTORY
STOCK OPTION" shall comply with and be subject to the terms and conditions set
forth in the form of Nonstatutory Stock Option Agreement adopted by the Board
concurrently with its adoption of the Plan and as amended from time to time.

               7.3 AUTHORITY TO VARY TERMS. The Board shall have the authority
from time to time to vary the terms of any of the standard forms 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.

                                       10

<PAGE>   11

        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 stockholders 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, the
"TRANSACTION") wherein the stockholders 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 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 parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may 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. For purposes of this
Section 8.2, an Option shall be deemed assumed if, following the Change in
Control, the Option confers the right to purchase in accordance with its terms
and conditions, for each share of Stock subject to the Option immediately prior
to the Change in Control, the consideration (whether stock, cash or other
securities or property) to which a holder of a share of Stock on the effective
date of the Change in Control was entitled. 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 exercise of an
Option prior to the Change in Control and any consideration received

                                       11
<PAGE>   12

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 sole 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 persons whose
duties in connection with the Company assure them access to equivalent
information.

        10.    NONTRANSFERABILITY 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.

        11.    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.

        12.    INDEMNIFICATION.

                                       12
<PAGE>   13
               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.

        13.    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 stockholders, 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 stockholders under any applicable law, regulation or rule. In any
event, no termination or amendment of the Plan may adversely affect any then
outstanding Option or any unexercised portion thereof, 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.

        14.    SHAREHOLDER APPROVAL.

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

                                       13
<PAGE>   14
        IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing Virage, Inc. 1997 Stock Option Plan was duly adopted by the
Board on December 4, 1997.

                                        /s/ Frank Pao
                                        ----------------------------------------
                                        Secretary

                                       14

<PAGE>   15

                                STANDARD FORM OF

                                  VIRAGE, INC.

                             IMMEDIATELY EXERCISABLE

                        INCENTIVE STOCK OPTION AGREEMENT

<PAGE>   16

                                STANDARD FORM OF

                                  VIRAGE, INC.

                             IMMEDIATELY EXERCISABLE

                       NONSTATUTORY STOCK OPTION AGREEMENT

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