Document:

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                                                                   EXHIBIT 10.12

                                   HYSEQ, INC.
                   NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN

1.       PURPOSE

The purpose of the Hyseq, Inc. Non-Qualified Employee Stock Purchase Plan is to
provide eligible Employees of Hyseq, Inc. and its Affiliates with an opportunity
to acquire a proprietary interest in the Company through the purchase of Common
Stock of the Company on a payroll deduction basis. It is believed that
participation in the ownership of the Company will be to the mutual benefit of
the eligible Employees and the Company. This Plan is not intended to constitute
an "employee stock purchase plan" within the meaning of Section 423 of the
Internal Revenue Code of 1986, as amended.

2.    DEFINITIONS

Unless otherwise specified or unless the context otherwise requires, the
following terms, as used in this Plan, have the following meanings. Wherever
appropriate, words used in the singular shall be deemed to include the plural
and vice versa, and the masculine gender shall be deemed to include the feminine
gender.

      (a)  ACCOUNT means the funds accumulated with respect to an Employee as a
      result of deductions from his paycheck for the purpose of purchasing
      Common Stock under the Plan. The funds allocated to an Employee's Account
      shall remain the property of the Employee at all times prior to the
      purchase of the Common Stock, but may be commingled with the assets of the
      Company and used for general corporate purposes. No interest shall be paid
      or accrued on any funds accumulated in the Accounts of Employees.

      (b)  AFFILIATE means a corporation, as defined in Section 424(f) of the
      Code, that is a parent or subsidiary of the Company, direct or indirect.

      (c)  BOARD means the Board of Directors of the Company.

      (d)  CODE means the Internal Revenue Code of 1986, as amended.

      (e)  COMMITTEE means the committee to which the Board delegates the power
      to act under or pursuant to the provisions of the Plan, or the Board if no
      committee is selected.

      (f)  COMMON STOCK means the shares of common stock of the Company, $.001
      par value.

      (g)  COMPANY means Hyseq, Inc., a Nevada corporation, and any corporate
      successor to all or substantially all of the assets or voting stock of the
      Company.
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      (h) COMPENSATION means the compensation paid to an Employee by the
      Company during a payroll period for federal income tax purposes, as
      reported on an Employee's Form W-2 (or comparable reporting form) for
      income tax withholding purposes.

      (i) EFFECTIVE DATE means the date the Plan is adopted by, and made
      effective by, the Board, subject to the limitations of Section 16.

      (j) EMPLOYEE means any person who is employed by the Company or an
      Affiliate on a regular full-time basis. A person shall be considered
      employed on a regular full-time basis if he is customarily employed for
      more than twenty (20) hours per week.

      (k) OFFERING DATE means the date on which the Committee grants Employees
      the option to purchase shares of Common Stock.

      (l) OFFERING PERIOD means the period between the Offering Date and the
      Purchase Date.

      (m) PURCHASE DATE means the date on which the Committee purchases the
      shares of Common Stock, which date shall be the last day of an Offering
      Period.

      (n) PARTICIPANT means an Employee who elects to participate in the Plan.

      (o) PLAN means the Hyseq, Inc. Non-Qualified Employee Stock Purchase Plan.

3.    ELIGIBILITY

All Employees of the Company (excluding, however, any Employee who on the date
the Plan is adopted by the Board is an "executive officer," as defined under the
Securities Exchange Act of 1934, as amended, or any regulations promulgated
thereunder) and, if designated by the Board, any Affiliate, who are employed by
the Company and/or such designated Affiliate shall be eligible to participate in
the Plan on the first Offering Date coincident with or next following the
Employee's completion of ninety (90) continuous days of employment.

4.    ADMINISTRATION

The Plan shall be administered by the Committee, which shall consist of not less
than two (2) members of the Board. Subject to the provisions of the Plan, the
Committee shall be vested with full authority to make, administer, and interpret
such rules and regulations as it deems necessary to administer the Plan, and any
determination, decision, or action of the Committee in connection with the
construction, interpretation, administration, and application of the Plan shall
be final, conclusive, and binding upon all Participants and any and all persons
claiming under or through any Participant. Notwithstanding anything to the
contrary in the Plan, the Committee shall have the discretion to modify the
terms of the Plan with respect to Participants who reside outside of the United
States or who are employed by a subsidiary of the Company that has been formed
under the laws of any foreign country, if such modification is necessary in
order to conform such terms to the requirements of local laws.

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5.    STOCK

      (a)   The Common Stock to be sold to Participants under the Plan may, at
      the election of the Company, be either treasury shares, shares acquired on
      the open market, and/or shares originally issued for such purpose. The
      aggregate number of shares of Common Stock that shall be made available
      for purchase under the Plan shall not exceed fifty thousand (50,000)
      shares, subject to adjustment upon changes in capitalization of the
      Company as provided in subparagraph (b) below. In the event any purchase
      right granted under the Plan expires or terminates for any reason without
      having been exercised in full or ceases for any reason to be exercisable
      in whole or in part, the unpurchased shares subject thereto will again be
      available for purchase by Employees upon the exercise of purchase rights.
      If the total number of shares that otherwise would have been acquired
      under the Plan on any Purchase Date exceeds the number of shares of Common
      Stock then available under the Plan, the Company shall make a pro rata
      allocation of the shares remaining available in as nearly a uniform manner
      as shall be practicable and as it shall determine to be equitable. In such
      event, the payroll deductions to be made pursuant to the Participants'
      authorizations shall be reduced accordingly, or refunded to the
      Participants, as the case may be, and the Company shall give written
      notice of such reduction or refund to each affected Participant.

      (b)   Appropriate adjustments in the aggregate number of shares of Common
      Stock that shall be made available for purchase under the Plan shall be
      made to give effect to any mergers, consolidations, acquisitions,
      reorganizations, stock splits, stock dividends, or other relevant changes
      in the capitalization of the Company occurring after the Effective Date.
      The establishment of the Plan shall not affect in any way the right or
      power of the Company to make adjustments, reclassifications,
      reorganizations, or changes in its capital or business structure or to
      merge, consolidate, dissolve, liquidate, sell, or otherwise transfer all
      or any part of its business or assets. Adjustments under this Section 5
      shall be made in the sole discretion of the Committee, and its decision
      shall be binding and conclusive.

      (c)   A Participant shall not have any interest in shares covered by his
      authorized payroll deduction until shares of Common Stock are acquired for
      his Account.

6.    PARTICIPATION

      (a)   Each Employee may become a Participant in the Plan by authorizing a
      payroll deduction on a form provided by the Committee. Such authorization
      shall become effective on the next Offering Date following the delivery of
      the authorization form to the Committee; provided, (i) that the Employee
      is eligible under Section 3 to participate in the Plan on such Offering
      Date and (ii) that if the authorization form is delivered to the Committee
      less than fifteen (15) days prior to an Offering Date, it shall become
      effective on the first Offering Date that is fifteen (15) or more days
      following delivery of the authorization form to the Committee.

      (b)   At the time an Employee files his authorization for a payroll
      deduction, he shall elect to have deductions made from each paycheck that
      he receives, such deductions to

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      continue until the Participant withdraws from the Plan or otherwise
      becomes ineligible to participate in the Plan. Authorized payroll
      deductions shall be for a minimum of one percent (1%) and a maximum of ten
      percent (10%) of the Participant's Compensation. The deduction rate so
      authorized shall continue in effect through the Offering Period and each
      succeeding Offering Period. A Participant may increase the rate of his
      payroll deduction effective as of any subsequent Offering Date by filing a
      new authorization form with the Company fifteen (15) or more days prior to
      the next Offering Date. A Participant may, at any time during any Offering
      Period, reduce his rate of payroll deduction by filing a new authorization
      form with the Company, which shall become effective as soon as practicable
      after it is filed.

      (c)   All Compensation deductions made for a Participant shall be credited
      to his Account. Except as may otherwise be provided by the Committee under
      Section 4, a Participant may not make any separate cash payment into his
      Account.

7.    PURCHASE OF SHARES

      (a)   On the Offering Date when a Participant's authorization form for a
      deduction becomes effective, and on each succeeding Offering Date
      thereafter, he shall be deemed to have been granted an option to purchase
      as many full shares of Common Stock as he will be able to purchase with
      the Compensation deductions credited to his Account during the payroll
      periods within the applicable Offering Period for which the Compensation
      deductions are made. In addition to the foregoing, any cash dividends paid
      on shares of Common Stock held in his Account shall be added to the
      Account, and used to purchase Common Stock as otherwise provided herein.

      (b)   The purchase price for the shares of Common Stock to be purchased
      with payroll deductions from the Participant shall be equal to the "fair
      market value" of a share of Common Stock on the Purchase Date. Fair market
      value shall be defined as the closing bid price of the Common Stock on the
      largest national securities exchange on which such Common Stock is listed
      at the time the Common Stock is to be valued. If the Common Stock is not
      then listed on any such exchange, the fair market value shall be the
      closing sales price if such is reported or otherwise the mean between the
      closing "Bid" and the closing "Ask" prices, if any, as reported in the
      National Association of Securities Dealers Automated Quotation System
      ("NASDAQ") for the date of valuation, or if none, on the most recent trade
      date thirty (30) days or less prior to the date of valuation for which
      such quotations are reported. If the Common Stock is not then listed on
      any such exchange or quoted in NASDAQ, the fair market value shall be the
      mean between the average of the "Bid" and the average of the "Ask" prices,
      if any, as reported in the National Daily Quotation Service for the date
      of valuation, or, if none, for the most recent trade date thirty (30) days
      or less prior to the date of valuation for which such quotations are
      reported. If the fair market value cannot be determined under the
      preceding three sentences, it shall be determined in good faith by the
      Committee.

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8.    TIME OF PURCHASE

From time to time, the Committee shall grant to each Participant an option to
purchase shares of Common Stock in an amount equal to the number of shares of
Common Stock that the accumulated payroll deductions to be credited to his
Account during the Offering Period may purchase at the applicable purchase
price. Each Offering Period shall be for a specified period of time to be fixed
by the Committee. Each Participant who elects to purchase shares of Common Stock
hereunder shall be deemed to have exercised his option automatically on such
date of purchase. Administrative and commission costs on purchases shall be paid
by the Company. The Committee shall cause to be delivered periodically to each
Participant a statement showing the aggregate number of shares of Common Stock
in his Account, the number of shares of Common Stock purchased for him in the
preceding Offering Period, his aggregate Compensation deductions for the
preceding Offering Period, the price per share paid for the shares of Common
Stock purchased for him during the preceding Offering Period, and the amount of
cash, if any, remaining in his Account at the end of the preceding Offering
Period.

A Participant may request delivery to him of the cash in his Account or of the
shares of Common Stock held in his Account at any time (subject to any
limitations imposed by Section 16(b) of the Securities Exchange Act of 1934),
and the delivery thereof shall be made at such regular time as the Company or
its transfer agent shall determine. If such delivery is required at a time other
than the normal transfer date set by the Company or its transfer agent, the
Participant requesting such transfer shall pay the costs thereof. All of the
cash deposits in his Account shall be paid to him promptly after receipt of
notice of withdrawal, without interest. Shares of Common Stock to be delivered
to a Participant under the Plan shall be registered in the name of the
Participant or, if the Participant so directs in writing to the Committee, in
the name of the Participant and such person(s) as may be designated by the
Participant, to the extent permitted by applicable law, and delivered to the
Participant as soon as practicable after the request for a withdrawal. If a
Participant wishes to sell the shares of Common Stock in his Account, he may
notify the Committee to sell the same, in lieu of a distribution of such shares,
in which event all commission costs incurred in connection with the sale of the
shares of Common Stock shall be borne by the Participant. The Company shall pay
administrative costs associated therewith other than costs arising from a sale
occurring at a time different from the prearranged dates set by the Company or
its transfer agent for making such sales.

9.    CESSATION OF PARTICIPATION

A Participant may cease participation in the Plan at any time by notifying the
Committee in writing of his intent to cease his participation. If such notice is
received by the Committee the Company shall distribute to the Participant all of
his accumulated payroll deductions, without interest. If any Participant ceases
participation in the Plan, no further Compensation deductions shall be made on
his behalf after the effective date of his cessation, except in accordance with
a new authorization form filed with the Committee as provided in Section 6. Upon
ceasing participation in the Plan, a Participant shall not be permitted to
reenter the Plan until six (6) months have elapsed from the date his cessation
becomes effective.

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10.   INELIGIBILITY

An Employee must be employed by the Company or an Affiliate on the Purchase Date
in order to participate in the purchase for that Offering Period. If an option
expires without first having been exercised, all funds credited to the
Participant's Account shall be refunded without interest. If a Participant
becomes ineligible to participate in the Plan at any time, all Compensation
deductions made on behalf of the Participant that have not been used to purchase
shares of Common Stock shall be paid to the Participant within sixty (60) days
after the Committee determines that the Participant is not eligible to
participate in the Plan.

11.   DESIGNATION OF BENEFICIARY

A Participant may file a written designation of a beneficiary who shall receive
any shares of Common Stock (or remaining Compensation deductions) credited to
the Participant's Account under the Plan in the event of such Participant's
death prior to delivery to him of the certificates for such shares (or remaining
Compensation deductions). The designation of a beneficiary may be changed by the
Participant at any time by written notice given in accordance with rules and
procedures established by the Committee. Upon the death of a Participant, and
upon receipt by the Company of proof of the identity and existence, at the
Participant's death, of a beneficiary validly designated by him under the Plan,
the Company shall deliver such shares of Common Stock (or remaining Compensation
deductions) to such beneficiary. In the event of the death of the Participant,
and in the absence of a beneficiary validly designated under the Plan who is
living at the time of such Participant's death, the Company shall deliver such
shares (or remaining Compensation deductions) to the executor or administrator
of the estate of the Participant, or if no such executor or administrator has
been appointed, the Company, in its sole discretion, may deliver such shares (or
remaining Compensation deductions) to the Participant's spouse or to any one or
more dependents or relatives of the Participant, or to such other person or
persons as the Company may designate on behalf of the estate of such deceased
Participant.

12.   TRANSFERABILITY

Neither Compensation deductions nor Plan contributions credited to a
Participant's Account nor any rights with regard to Plan participation or the
right to purchase shares of Common Stock under the Plan may be assigned,
transferred, pledged, or otherwise disposed of in any way by a Participant other
than by will or the laws of descent and distribution; provided, however, that
shares of Common Stock purchased on behalf of a Participant and left in his
Account shall be subject to his absolute control. Any attempted assignment,
transfer, pledge, or other disposition shall be void and without effect.

13.   AMENDMENT OR TERMINATION

The Board may at any time amend the Plan in any respect, or terminate the Plan,
provided that no amendment or termination may decrease the rights of a
Participant during an Offering Period without his consent.

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14.   NOTICES

All notices or other communications by a Participant under or in connection with
the Plan shall be deemed to have been duly given when received in writing by the
Chief Financial Officer of the Company or when received in the form specified by
the Committee at the location and by the person designated by the Committee for
the receipt thereof.

15.   LIMITATIONS

Notwithstanding any other provisions of the Plan:

      (a)  All Employees shall have the same rights and privileges under the
      Plan, except that the amount of Common Stock that may be purchased
      pursuant to the Plan shall bear a uniform relationship to an Employee's
      Compensation. All rules and determinations of the Committee shall be
      uniformly and consistently applied to all persons in similar
      circumstances.

      (b)  Nothing in the Plan shall confer upon any Employee the right to
      continue in the employment of the Company or any Affiliate or affect the
      right that the Company or any Affiliate may have to terminate the
      employment of such Employee.

      (c)  No Participant shall have any right as a stockholder unless and
      until certificates for shares of Common Stock are issued to him or
      allocated to his Account.

      (d)  If under any provision of the Plan that requires a computation of the
      number of shares of Common Stock to be purchased, the number so computed
      is not a whole number of shares of Common Stock, such number of shares of
      Common Stock shall be rounded down to the next whole number.

      (e)  The Plan is intended to provide shares of Common Stock for investment
      and not for resale. The Company does not, however, intend to restrict or
      influence any Participant in the conduct of his own affairs. A
      Participant, therefore, may sell shares of Common Stock purchased under
      the Plan at any time he chooses, subject to compliance with any applicable
      federal or state securities laws or any applicable Company restriction or
      blackout periods; provided, however, that because of certain federal tax
      requirements, each Participant shall agree, by entering the Plan:

           (i)   that the Company may withhold, pursuant to Code ss.ss. 3102,
           3301, and 3402, from his wages and other cash compensation paid to
           him in all payroll periods following in the same calendar year, any
           taxes the Company may become liable for in respect of amounts
           includable in his income as compensation as a result of the
           acquisition of Common Stock under the Plan; and

           (ii)  that he shall repay the Company any amount of taxes the Company
           may become liable for in respect of amounts includable in his income
           as compensation as a result of a purchase of Common Stock under the
           Plan that cannot be satisfied

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           by withholding from the wages and other cash compensation paid to him
           by the Company.

      (f)  This Plan is intended to comply in all respects with applicable law
      and regulations, including with respect to Participants who are officers
      or directors for purposes of Section 16 of the Securities Exchange Act of
      1934, as amended from time to time, Rule 16b-3 of the Securities and
      Exchange Commission. In case any one or more provisions of this Plan shall
      be held invalid, illegal, or unenforceable in any respect under applicable
      law and regulation (including Rule 16b-3), the validity, legality, and
      enforceability of the remaining provisions shall not in any way be
      affected or impaired thereby and the invalid, illegal, or unenforceable
      provision shall be deemed null and void; however, to the extent permitted
      by law, any provision that could be deemed null and void shall first be
      construed, interpreted, or revised retroactively to permit this Plan to be
      construed in compliance with all applicable law (including Rule 16b-3), so
      as to further the intent of this Plan. Notwithstanding anything herein to
      the contrary, with respect to Participants who are officers and directors
      for purposes of Section 16(b) of the Securities Exchange Act of 1934, as
      amended from time to time, and if required to comply with the rules
      promulgated thereunder, such Participants shall not be permitted to direct
      the sale of any Common Stock purchased hereunder until at least six (6)
      months have elapsed from the date of a purchase, unless the Committee
      determines that the sale of the Common Stock otherwise satisfies the then
      current Rule 16b-3 requirements.

16.   EFFECTIVE DATE AND APPROVALS

The Plan shall become effective at a time when:

      (a)   the Plan has been adopted by the Board; and

      (b)   a registration statement on Form S-8 under the Securities Act of
      1933, as amended, has become effective with respect to the Plan; and

      (c)   the Committee has notified the eligible Employees that they may
      commence participation in the Plan.

Unless sooner terminated by the Board, or as set forth above, the Plan shall
terminate upon the earlier of (i) the tenth (10th) anniversary of the adoption
of the Plan by the Board, or (ii) the date on which all shares available for
issuance under the Plan shall have been sold under the Plan.

17.   APPLICABLE LAW

All questions pertaining to the validity, construction, and administration of
the Plan shall be determined in conformity with the laws of Nevada.

Adopted the 8th day of November, 1999.

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                                                                   EXHIBIT 10.13

                                   HYSEQ, INC.
                      SCIENTIFIC ADVISORY BOARD/CONSULTANTS
                                STOCK OPTION PLAN

                                   1. GENERAL

1.1   PURPOSE:

      Hyseq Inc., a Nevada corporation (the "Company"), hereby adopts this
Scientific Advisory Board/Consultants Stock Option Plan. This plan shall be
known as the HYSEQ, INC. SCIENTIFIC ADVISORY BOARD/CONSULTANTS STOCK OPTION PLAN
(the "Plan"). The purpose of the Plan is to foster and promote the long-term
financial success of the Company and materially increase stockholder value by:
(a) motivating superior performance by means of long-term performance related
incentives, (b) encouraging, and providing a means to obtain, an ownership
interest in the Company, (c) attracting and retaining outstanding talent by
providing incentive compensation opportunities competitive with other companies
and (d) enabling certain key non-employees to participate in the long-term
growth and financial success of the Company.

1.2   ADMINISTRATION:

      (a)   The Plan shall be administered by the Compensation Committee of the
Board of Directors of the Company (the "Board") or such other committee of
directors as is designated by the Board (the "Committee"), which shall consist
of two or more members. The members shall be appointed by the Board, and any
vacancy on the Committee shall be filled by the Board.

      (b)   Subject to the limitations of the Plan, the Committee shall have the
sole and complete authority: (i) to interpret the Plan and to adopt, amend and
rescind administrative guidelines and other rules and regulations relating to
the Plan, (ii) to correct any defect or omission or to reconcile any
inconsistency in the Plan or in any award granted hereunder and (iii) to make
all other determinations and to take all other actions necessary or advisable
for the implementation and administration of the Plan. The Committee's
determinations on matters within its authority shall be conclusive and binding
upon the Company and all other persons.

      (c)   All expenses associated with the Plan shall be borne by the Company.

      (d)   The Committee may, to the extent that any such action will not
prevent the Plan from complying with Rule 16b-3, delegate any of its authority
hereunder to such persons as it deems appropriate.

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1.3   PARTICIPATION:

      Participation in the Plan shall be limited only to those individuals
who are non-employee members of the Scientific Advisory Board (the "SAB") of the
Company (each an "SAB Member") or other non-employee consultants of the Company
who are designated by the Board or the Committee as being eligible to be granted
one or more Options under the Plan (a "Participant") . Notwithstanding the
foregoing, Options shall only be granted to consultants under the Plan if (i)
the consultant is a natural person and the consultant provides bona fide
services to the Company which services are not in connection with the offer or
sale of securities in a capital raising transaction, and do not directly or
indirectly promote or maintain a market for the Company's securities, or (ii) if
registration of the shares of Common Stock subject to such options is otherwise
permitted under the Securities Act of 1933 on a Form S-8.

1.4   TYPES OF AWARDS UNDER PLAN:

      Awards under the Plan will be in the form of non-statutory stock options
("Options"), as described in Article 2.

1.5   SHARES SUBJECT TO THE PLAN:

      Shares of stock covered by Options granted under the Plan may be, in
whole or in part, authorized and unissued or treasury shares of the Company's
common stock, $.001 par value per share, or such other shares as may be
substituted pursuant to Section 3.2 ("Common Stock"). The maximum number of
shares of Common Stock which may be issued for all purposes under the Plan shall
be thirty thousand (30,000) (subject to adjustment pursuant to Section 3.2). Any
shares of Common Stock subject to an Option which, for any reason, is canceled
or terminated without having been exercised, shall again be available for
Options under the Plan. No fractional shares shall be issued, and the Committee
shall determine the manner in which fractional share value shall be treated.

1.6   GENDER AND NUMBER:

      Except when otherwise indicated by the context, words in the masculine
gender when used in the Plan shall include the feminine gender, the singular
shall include the plural, and the plural shall include the singular.

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                                2. STOCK OPTIONS

2.1   AWARD OF STOCK OPTIONS:

      (a)  On the later of the (i) the first meeting of the SAB Members
following the effective date of the Plan or (ii) date on which an individual
first becomes an SAB Member, such SAB Member will automatically be awarded a
stock Option (an "Initial Option" or the "Initial Options") under the Plan to
purchase 1,000 shares of Common Stock (subject to adjustment pursuant to Section
3.2). Thereafter, effective on the date of each annual meeting (the "Annual
Meeting") of the stockholders of the Company (the "Stockholders"), commencing
with the Annual Meeting of the Stockholders held in 2001, each SAB Member then
in office who satisfies the conditions set forth in Section 1.3, shall
automatically be awarded an additional stock Option (a "Subsequent Option" or
the "Subsequent Options") to purchase 1,750 shares of Common Stock.

      (b)  In addition to the Initial Option and the Subsequent Option grants
to SAB Members as set forth in Section 2.1a, the Committee may at anytime and
from time to time grant one or more Options to one or more Participants who
satisfies the conditions set forth in Section 1.3, and may designate the number
of shares to be subject to each Option so granted, and the vesting schedule
thereof as provided in Section 2.4(d).

2.2   STOCK OPTION AGREEMENTS:

      The award of an Option shall be evidenced by a signed written agreement
(a "Stock Option Agreement") containing such terms and conditions as the
Committee may from time to time determine.

2.3   OPTION PRICE:

      The purchase price of Common Stock under each Option (the "Option
Price") shall be not less than the Fair Market Value of the Common Stock on the
date the Option is awarded.

2.4   EXERCISE AND TERM OF OPTIONS:

      (a)  Options may be exercised, in whole or in part, by the delivery of
written notice of exercise and payment of the aggregate Option Price for the
shares to be purchased to the Corporate Secretary of the Company. On the date
specified in such written notice, the Company shall accept payment for the
Option shares in cash, by bank or certified check, by wire transfer, or by such
other means as may be approved by the Committee. If approved in advance by the
Committee, payment may also be made (i) by delivering shares of Common Stock
already owned for at least six (6) months by the Participant and which have a
total Fair Market Value on the date of such delivery equal to the Option Price;
(ii) by authorizing the Company to retain Option

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shares that otherwise would be issuable upon exercise of the Option having a
total Fair Market Value on the date of delivery equal to the Option Price; (iii)
by the delivery of cash or the extension of credit by a broker-dealer to whom
the Participant has submitted a notice of exercise or otherwise indicated an
intent to exercise an Option (in accordance with part 220, Chapter II, Title 12
of the Code of Federal Regulations, a so-called "cashless" exercise); or (iv) by
any combination of the foregoing. As soon as practicable after receipt of each
notice and full payment, the Company shall deliver to the Participant a
certificate or certificates representing the acquired shares of Common Stock.

      (b)  Each certificate for shares issued upon exercise of an Option, unless
at the time of exercise such shares are registered with the Securities and
Exchange Commission (the "Commission"), under the Securities Act of 1933, as
amended (the "Act"), shall bear the following legend:

      NO SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THESE SHARES SHALL BE
      MADE EXCEPT PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
      AMENDED, OR PURSUANT TO AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
      THAT REGISTRATION IS NOT REQUIRED.

      Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the Act of
the securities represented thereby) shall also bear the above legend unless, in
the opinion of such counsel as shall be reasonably approved by the Company, the
securities represented thereby need no longer be subject to such restrictions.

      (c) The Initial Option shall become exercisable on the date of grant. The
Initial Option shall continue to be exercisable until the first to occur of the
tenth anniversary of the date of grant or thirty (30) days following the date
the Participant ceases to be a member of the SAB. Each of an SAB Member's
Subsequent Options shall become exercisable on the date of grant (the date of
each Annual Meeting) and shall continue to be exercisable until the first to
occur of the tenth anniversary of the date on which the Subsequent Option(s) was
granted or thirty (30) days following the date the Participant ceases to be an
SAB Member. Notwithstanding the foregoing, in the event that a Participant
ceases to be an SAB Member as the result of his termination for "cause" (as
defined herein), all of the Participant's outstanding Options shall immediately
terminate.

      (d) All Option grants other than the Initial Options and the Subsequent
Options shall become exercisable upon the date or dates prescribed by the
Committee, and the Committee may provide that such Option rights become
exercisable in installments over a period of years, or upon the attainment of
stated goals; provided, however, no Option granted hereunder shall be
exercisable beyond the tenth anniversary of the date the Option is granted. A
Participant who

                                       4

<PAGE>   5

ceases to be engaged as a consultant by the Company for any reason other than
for cause, may exercise any Option granted to such Participant, to the extent
that the right to purchase shares thereunder has become exercisable on the date
the Participant's services are terminated, but only within thirty (30) days
after the date the Participant's services are terminated, or, if earlier, within
the originally prescribed term of the Option, and subject to the condition that
no Option shall be exercisable after the expiration of the term of the Option.
Notwithstanding the foregoing, in the event that a Participant's services are
terminated by the Company for cause, all of the Participant's outstanding
Options shall immediately terminate.

                          3. MISCELLANEOUS PROVISIONS

3.1   NON-TRANSFERABILITY:

      No Option under the Plan, and no interest therein, shall be transferable
by the Participant otherwise than by will or, if the Participant dies intestate,
by the laws of descent and distribution. All Options shall be exercisable or
received during the Participant's lifetime only by the Participant or his legal
representative. Any transfer contrary to this Section 3.1 will nullify the
Option.

3.2   ADJUSTMENTS UPON CERTAIN CHANGES:

      (a) If the outstanding shares of Common Stock are increased, decreased or
changed into, or exchanged for, a different number or kind of shares or
securities of the Company through a reorganization or merger in which the
Company is the surviving entity, or through a combination, recapitalization,
reclassification, stock split, stock dividend, stock consolidation or otherwise,
an appropriate adjustment shall be made in the number and kind of shares that
may be issued pursuant to Options. A corresponding adjustment to the
consideration payable with respect to Options granted prior to any such change
shall also be made. Any such adjustment, however, shall be made without change
in the total payment, if any, applicable to the portion of the Option not
exercised but with a corresponding adjustment in the price for each share.

      (b) Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation
or upon sale of all or substantially all of the Company's property, the Plan
shall terminate, and any outstanding Options shall terminate and be forfeited.
Notwithstanding the foregoing, the Committee may provide in writing in
connection with, or in contemplation of, any such transaction for any or all of
the following alternatives (separately or in combinations): (i) for the
assumption by the successor corporation of the Options theretofore granted or
the substitution by such corporation for such Options of options covering the
stock of the successor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices; (ii) for
the continuance

                                       5
<PAGE>   6
of the Plan by such successor corporation in which event the Plan and the
Options shall continue in the manner and under the terms so provided; or (iii)
for the payment in cash or shares of Common Stock in lieu of and in complete
satisfaction of such Options.

3.3   TAX WITHHOLDING:

      (a)   The Company shall have the power to withhold, or require a
Participant to remit to the Company, an amount sufficient to satisfy any
withholding or other tax due from the Company with respect to any amount payable
and/or shares issuable under the Plan, and the Company may defer such payment or
issuance unless indemnified to its satisfaction.

      (b)   Subject to the consent of the Committee, due to the exercise of an
Option, a Participant may make an irrevocable election (an "Election") to (A)
have shares of Common Stock otherwise issuable upon such exercise withheld, or
(B) tender back to the Company shares of Common Stock received pursuant to such
exercise or (C) deliver back to the Company pursuant to such exercise previously
acquired shares of Common Stock of the Company having a Fair Market Value
sufficient to satisfy all or part of the Participant's estimated tax obligations
associated with the transaction. Such Election must be made by an SAB Member
prior to the date on which the relevant tax obligation arises (the "Tax Date").
The Committee may disapprove of any Election, may suspend or terminate the right
to make Elections, or may provide with respect to any Option under this Plan
that the right to make Elections shall not apply to such Options.

3.4   CONDITIONS ON OPTIONS:

      In addition to the other terms hereof, in the event a Participant's
status as an SAB Member ceases by reason of disability while holding any Option,
the rights of such Participant to any such Option shall be subject to the
conditions that until any such Option is exercised, he shall (a) not engage,
either directly or indirectly, in any manner or capacity as advisor, principal,
agent, partner, officer, director, employee, member of any association or
otherwise, in any business or activity which is at the time competitive with any
business or activity conducted by the Company and (b) be available at reasonable
times for consultations (which shall not require substantial time or effort) at
the request of the Company's management with respect to phases of the business
with which he was actively connected, but such consultations shall not be
required to be performed at any place or places outside of the United States of
America or during usual vacation periods or periods of illness or other
incapacity. In the event that either of the above conditions is not fulfilled,
the Participant shall forfeit all rights to any unexercised Option held on the
date of the breach of condition. Any determination by the Board of the Company,
which shall act upon the recommendation of the Chairman, that the Participant
is, or has, engaged in a competitive business or activity as aforesaid or has
not been available for consultations as aforesaid shall be conclusive.

                                       6
<PAGE>   7
3.5   AMENDMENT, SUSPENSION AND TERMINATION OF PLAN:

      (a)   The Board may suspend or terminate the Plan or any portion thereof
at any time and may amend it from time to time in such respects as the Board may
deem advisable in order that any Options thereunder shall conform to or
otherwise reflect any change in applicable laws or regulations, or to permit the
Company or the Participants to enjoy the benefits of any change in applicable
law or regulations, or in any other respect the Board may deem to be in the best
interests of the Company; provided, however, that any amendment shall be subject
to the approval of the stockholders of the Company at or before the next annual
meeting of the Stockholders if such stockholder approval is required by the
Code, any federal or state law as regulation, the rule of any stock exchange or
automated quotation system on which the Shares maybe listed or quoted, or if the
Board in its discretion, determines to submit such changes to the Plan to its
Stockholders for approval. No such amendment, suspension or termination shall
(A) impair the rights of Participants under outstanding Options without the
consent of the Participants affected thereby or (B) make any change that would
disqualify the Plan, or any other plan of the Company intended to be so
qualified, from the exemption period provided by Rule 16b-3 promulgated under
the Securities Exchange Act of 1934 (the "Exchange Act").

      (b)   The Committee may amend or modify any outstanding Options, in any
manner to the extent that the Committee would have had the authority under the
Plan to initially award such Options, as so modified or amended, including,
without limitation, to change the date or dates as of which such Options may be
exercised. No such amendment or modification shall impair the rights of any
Participant under any such Option without the consent of such Participant.

3.6   DEFINITIONS AND OTHER GENERAL PROVISIONS:

      (a)   The term "disability" as used under the Plan shall mean a finding by
the Committee that a Participant is fully and permanently unable to serve as an
SAB Member of the Company or otherwise unable to perform services on the
Company's behalf because of a physical or mental disability.

      (b)   The term "Fair Market Value" as it relates to Common Stock on any
given date means (i) the mean of the high and low sales prices of the Company's
Common Stock as reported by the Composite Tape of the New York Stock Exchange
(or, if not so reported, on any domestic stock exchanges on which the Common
Stock is then listed); or (ii) if the Common Stock is not listed on any domestic
stock exchange, the mean of the high and low sales prices of the Company's
Common Stock as reported by the National Association of Securities Dealers
Automated Quotation System (or, if not so reported, by the system then regarded
as the most reliable source of such quotations) or, if there are no reported
sales on such date, the mean of the closing bid and asked prices as so reported;
or, (iii) if the Common Stock is listed on a domestic exchange or quoted in the
domestic over-the-counter market, but there are not reported sales or
quotations, as the case may be, on the given date, the value determined pursuant
to (i) or (ii)

                                       7
<PAGE>   8

above using the reported sale prices or quotations on the last previous date on
which so reported; or (iv) if none of the foregoing clauses apply, the fair
value as determined in good faith by the Board or the Committee.

      (c)   The term "cause" as used under the Plan shall be deemed to include
(but shall not be limited to) wrongful appropriation of funds of the Company,
divulging confidential information about the Company to the public, the
commission of a gross misdemeanor or felony, or the performance of any similar
action that the Board or the Committee, in their sole discretion, may deem to be
sufficiently injurious to the interests of the Company to constitute substantial
cause for termination. The determination of the Board or the Committee as to the
existence of cause shall be conclusive and binding upon the Participant and the
Company.

3.7   LISTING, REGISTRATION AND LEGAL COMPLIANCE:

      Each Option shall be subject to the requirement that if at any time the
Committee shall determine, in its discretion, that the listing, registration or
qualification of such Option, or any shares of Common Stock or other property
subject thereto, upon any securities exchange or under any foreign, federal or
state securities or other law or regulation, or the consent or approval of any
governmental body or the taking of any other action to comply with or otherwise
with respect to any such law or regulation, is necessary or desirable as a
condition to or in connection with the granting of such Option or the issue,
delivery or purchase of shares of Common Stock or other property thereunder, no
such Option may be exercised or paid in Common Stock or other property unless
such listing, registration, qualification, consent, approval or other action
shall have been effected or obtained free of any conditions not acceptable to
the Committee and the holder of the Option will supply the Company with such
certificates, representations and information as the Company shall request and
shall otherwise cooperate with the Company in effecting or obtaining such
listing, registration, qualification, consent, approval or other action. In the
case of persons subject to Section 16(b) of the Exchange Act, the Committee may
at any time impose any limitations upon the exercise, delivery or payment of any
Option which, in the discretion of the Committee, are necessary or desirable in
order to comply with said Section 16(b) and the rules and regulations
thereunder. If the Company, as part of an offering of securities or otherwise,
finds it desirable because of foreign, federal or state legal or regulatory
requirements to reduce the period during which Options may be exercised, the
Committee may, in its discretion and without the holders' consent, so reduce
such period on not less than 15 days written notice to the holders thereof.

3.8   LOANS:

      The Committee may provide for the Company to make loans to finance the
exercise of any Option as well as the estimated or actual amount of any taxes
payable by the holder as a result of the exercise or payment of any Option and
may prescribe, or may empower the

                                       8
<PAGE>   9

Company to prescribe, the other terms and conditions (including but not limited
to the interest rate, maturity date and whether the loan will be secured or
unsecured) of any such loan.

3.9   INDEMNIFICATION:

      Each person who is or shall have been a member of the Committee shall be
indemnified and held harmless by the Company against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by him in
connection with or resulting from any claim, action, suit, or proceeding to
which he may be a party or in which he may be involved by reason of any action
taken or failure to act under the Plan and against and from any and all amounts
paid by him in settlement thereof, with the Company's approval, or paid by him
in satisfaction of any judgment in any such action, suit, or proceeding against
him, provided he shall give the Company an opportunity, at its own expense, to
handle and defend the same before he undertakes to handle and defend it on his
own behalf. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under the
Company's Amended and Restated Articles of Incorporation, as amended or Bylaws,
as amended, as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.

3.10  BENEFICIARY DESIGNATION:

      Each Participant under the Plan may name, from time to time, any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his death before he
receives any or all of such benefit. Each designation will revoke all prior
designations by the same Participant, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Participant in writing
with the Committee during his lifetime. In the absence of any such designation,
benefits remaining unpaid at the Participant's death shall be paid to his
estate.

3.11  RIGHTS OF PARTICIPANTS:

      Nothing in the Plan shall interfere with or limit in any way the right
of the Stockholders to terminate the services of any Participant as an SAB
Member of otherwise as a consultant of the Company, nor confer upon any
Participant any right to continue as an SAB Member or other consultant of the
Company for any period of time.

3.12  REQUIREMENTS OF LAW, GOVERNING LAW:

      The granting of Options and the issuance of shares of Common Stock
shall be subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies or national securities exchanges as may
be required. The Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of California. The

                                       9
<PAGE>   10

provisions of the Plan shall be interpreted so as to comply with the conditions
or requirements of Rule 16b-3 under the Exchange Act, unless a contrary
interpretation of any such provisions is otherwise required by applicable law.

3.13  EFFECTIVE DATE:

      This Stock Option Plan, having been approved by the Board shall be
deemed effective as of May 24, 1999. No awards of Options shall be made
hereunder after May 23, 2009.

                                       10

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