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                                                                    EXHIBIT 10.1

                          EXCLUSIVE LICENSE AGREEMENT

        THIS AGREEMENT, effective as of the first day of May 1995 (hereinafter
"Effective Date"), by and between CORNELL RESEARCH FOUNDATION, INC., having
offices at Cornell Business & Technology Park, 20 Thornwood Drive, Suite 105,
Ithaca, New York 14850, hereinafter referred to as "FOUNDATION" and EDEN
BIOSCIENCE CORPORATION, having offices at 5795 N.E. Minder, Poulsbo, Washington
98370, hereinafter referred to as "LICENSEE".

                         W I T N E S S E T H  T H A T:

        WHEREAS, United States Patent Application No. 08/200,724, entitled
"Elicitors of the Hypersensitive Response in Plants" (CRF D-1172), was filed in
the U.S. Patent & Trademark Office on February 2, 1994, a copy of which is
appended as Exhibit A and Patent Application No. 08/200,724 is a continuation of
U.S. Patent Application No. 07/907,935 filed on 1 September 1992 and the foreign
equivalent PCT/US93/06243 was filed on 30 June 1993 covering all EPC countries
and Japan; and

        WHEREAS, United States Patent Application No. 08/062,024, entitled
"Pseudomonas Syringae pv. syringae hrpz Gene (CRF D-1425), was filed in the U.S.
Patent & Trademark Office on 17 May 1993, a copy of which is appended as Exhibit
B and the foreign equivalent PCT/US94/05014 was filed on 5 May 1994 covering all
EPC countries and Japan; and

        WHEREAS, FOUNDATION intends to file a United States Patent Application
entitled "Harpin-Induced Systemic Acquired Resistance (SAR) to Plant Pathogens,"
now Invention Disclosure CRF D-1654, a copy of which is appended as Exhibit C,
and FOUNDATION intends to file foreign equivalents, where appropriate, of said
Invention Disclosure; and

        WHEREAS, FOUNDATION intends to file a United States Patent Application
entitled "Erwina chrysanthemi Elicitor of the Hypersensitive Response in
Plants," now Invention Disclosure CRF D-1732, a copy of which is appended as
Exhibit D, and FOUNDATION intends to file foreign equivalents, where
appropriate, of said Invention Disclosure; and

        WHEREAS, the inventions disclosed and claimed in Exhibits A, B, C and D
are, or will be assigned to FOUNDATION and FOUNDATION is a wholly owned
subsidiary corporation of Cornell University and holds the ownership interests
of patents issued on inventions made by Cornell University's staff and
administers licenses in a manner consistent with the patent policy of Cornell
University; and

        WHEREAS, FOUNDATION represents that it is, or will be assignee of the
above-identified patent applications and any patents issuing thereon and has the
right to grant licenses under said patent applications and patents issuing
thereon; and

        WHEREAS, the work leading to the inventions disclosed and to be claimed
in Exhibits A, B, C and D were supported in part by an agency of the U.S.
Government,

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

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FOUNDATION is obligated to comply with the U.S. Office of Management & Budgets
Circular No. A-124, or 37 CFR Part 401; and

        WHEREAS, Drs. Steven Beer, Alan Collmer and their colleagues at Cornell
University have developed proprietary biological materials and processes
relating to the field of plant disease and some of these materials and processes
are or will be claimed and covered in said patent applications of Exhibits A, B,
C and D and other such materials and processes are not claimed in said patent
applications but are proprietary to FOUNDATION; and

        WHEREAS, LICENSEE is desirous of securing a license under the
discoveries and inventions embodied in said patent applications and patents
issuing thereon as well as the discoveries and inventions embodied in said
related proprietary biological processes and materials to make, have made, use
and sell Licensed Products in the United States and throughout the world; and

        WHEREAS, FOUNDATION is willing to grant a license in said patent
applications and any patents issuing thereon as well as the discoveries and
inventions embodied in said related proprietary biological processes and
materials to LICENSEE upon the terms and conditions hereinafter set forth; and

        NOW, THEREFORE, in consideration of the covenants and obligations
hereinafter set forth, the parties hereto hereby agree as follows:

I.      DEFINITIONS

        The following definitions will apply throughout this agreement:

        1. Licensed Patent Application shall mean U.S. Patent Application Serial
No. 08/200,724 attached as Exhibit A and any continuation, continuation-in-part,
or divisional applications thereof as well as foreign counterparts thereof and
U.S. Patent Application Serial No. 08/062,024 attached as Exhibit B and any
continuation, continuation-in-part, or divisional applications thereof as well
as foreign counterparts thereof and any U.S. Patent Application based on
Invention Disclosure CRF D-1654 attached as Exhibit C and any continuation,
continuation-in-part, or divisional applications thereof as well as foreign
counterparts thereof and any U.S. Patent Application based on Invention
Disclosure CRF D-1732 attached as Exhibit D and any continuation,
continuation-in-part, or divisional applications thereof as well as foreign
counterparts thereof.

        2. Licensed Patent shall mean any U.S. Patents issuing from a Licensed
Patent Application, and all reissues thereof as well as foreign counterparts
thereof.

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

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        3. Licensed Biological Material shall mean that biological material
including genes, proteins and peptide fragments, expression systems, cells and
antibodies developed in the Cornell University Laboratories of Drs. Steven Beer,
Alan Collmer and their colleagues and which is directly related to the
inventions described in Licensed Patents or Licensed Patent Applications and
which is listed and described in Exhibit E or added to Exhibit E at a later time
by written mutual agreement of the parties.

        FOUNDATION and LICENSEE acknowledge that, to the best of their
knowledge, said list of Exhibit E is complete.

        4. Licensed Products shall mean any product or use claimed in a Licensed
Patent Application or Licensed Patent or any product or use which incorporates
or otherwise utilizes Licensed Biological Material.

        5. License Year shall mean each twelve (12) month period beginning on
the Effective Date of this Agreement first written above and thereafter on the
anniversary date thereof.

        6. LICENSEE shall mean the above named company and any of its affiliates
in which it owns or controls at least 50% of the voting stock.

        7. Net Sales Price shall mean [*].

II.     GRANT

        Subject only to the rights of and obligations to the U.S. Government as
set forth in U.S. Office of Management & Budget Circular A-124 or 37 CFR Part
401;

        The FOUNDATION hereby grants to the LICENSEE for the term set forth
below and under the royalty basis set forth below, an exclusive license to the
Licensed Patent Applications, Licensed Patents and Licensed Biological Materials
to make, have made, use and sell Licensed Products in the United States and
throughout the world. The term "exclusive license" as used hereinabove shall
mean that FOUNDATION shall not issue a license to another, within the period of
exclusivity set forth hereinafter or any agreed upon extension thereof.
FOUNDATION shall not make, have made, use or sell Licensed Products. Cornell
University researchers shall

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

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retain the royalty-free right to use Licensed Patent Applications, Licensed
Patents and Licensed Biological Materials for internal research purposes and
such use shall not prohibit such researchers from producing inventions and, if
such inventions are made solely by said Cornell University researchers, such
inventions shall be the property of FOUNDATION. If such inventions are made
jointly by said Cornell University researchers and employees of LICENSEE, such
inventions shall be the joint property of FOUNDATION and LICENSEE.

III.    TO HAVE MADE

        The right of LICENSEE to make Licensed Products includes the right to
have made by contract with third parties within a country where LICENSEE is
licensed and patent protection for Licensed Products exists or is pending. Such
contractual arrangements with third parties shall be subject to and conditioned
upon appropriate supervision and quality assurance and control of the third
party by LICENSEE and the third party shall respect all rights of FOUNDATION and
to supply all production of Licensed Products exclusively to LICENSEE or its
designee(s).

IV.     PAYMENTS MADE IN CONSIDERATION OF THE EXECUTION OF THIS LICENSE
        AGREEMENT

        FOUNDATION hereby acknowledges a payment, due upon approval of this
Agreement by the Board of Directors of FOUNDATION (or at least by the Executive
Committee of that Board), of four hundred thousand (400,000) equity shares of
common stock in LICENSEE which amount equals seven and fourteen hundredths
percent (7.14%) of LICENSEE'S total issued stock as of Effective Date, made by
LICENSEE as a consideration for entering into this Agreement, which sum will not
be considered as an advance payment on royalties due hereunder. It is understood
by the parties that said equity shares in LICENSEE held by FOUNDATION shall be
non-voting and FOUNDATION shall take no management role in LICENSEE.

        If said approval by the Board of Directors of FOUNDATION is not obtained
within six (6) months of the Effective Date, FOUNDATION and LICENSEE agree to
renegotiate alternative financial terms as consideration for entering into this
Agreement.

        The parties acknowledge that LICENSEE may, upon termination of this
Agreement, cancel said equity shares according to the following schedule:

        1)      Upon termination of this Agreement at any time up to [*] from
                the Effective Date, LICENSEE may cancel up to [*] of the total
                equity

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REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

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                shares which were issued to FOUNDATION and approved by
                FOUNDATION'S Board of Directors.

        2)      Upon termination of this Agreement at any time from [*] from
                the Effective Date up to [*], LICENSEE may cancel up to [*]
                of the total equity shares which were issued to FOUNDATION and
                approved by FOUNDATION'S Board of Directors.

        3)      Upon termination of this Agreement at any time from [*] until
                [*] LICENSEE may cancel up to [*] of the total equity shares
                which were issued to FOUNDATION and approved by FOUNDATION's
                Board of Directors.

        4)      Upon termination of this Agreement at any time from [*] to
                [*], LICENSEE may cancel up to [*] of the total equity
                shares which were issued to FOUNDATION and approved by
                FOUNDATION'S Board of Directors.

        5)      Upon termination of this Agreement at any time from [*] to
                [*], LICENSEE may cancel up to [*] of the total equity
                shares which were issued to FOUNDATION and approved by
                FOUNDATION'S Board of Directors.

        6)      Upon termination of this Agreement at any time after [*]
                LICENSEE may not cancel any of the total equity shares which
                were issued to FOUNDATION and approved by FOUNDATION'S Board of
                Directors.

        As additional consideration, LICENSEE will fund research activity in the
Cornell University laboratories of Dr. Steven Beer and his colleagues at a level
not less than [*] in License Year 1 and [*] in each of License Year 2 and
License Year 3. Said funding shall be contingent upon a mutually agreed workplan
and budget for said research activity and such amounts are inclusive of all
costs including direct and indirect costs.

        Any inventions made using the research funding, described above,
provided to Dr. Beer and his colleagues by LICENSEE which are dominated by the
claims of Licensed Patent Applications or Licensed Patents shall, to the extent
possible considering FOUNDATION'S obligations to third parties, be subject to
the terms and conditions of this Agreement and shall be included herein by
letter amendment to this Agreement.

        Any inventions made using the research funding provided to Dr. Beer by
LICENSEE which are not dominated by the claims of Licensed Patent Applications
or

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

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Licensed Patents shall not be subject to the terms and conditions of this
Agreement. FOUNDATION shall provide LICENSEE the first opportunity to negotiate
to obtain an exclusive license in such inventions and will not offer any third
party any license having more favorable terms and conditions unless those terms
and conditions have first been offered to and refused by LICENSEE.

V.      FOREIGN PATENTS AND PAYMENT OF COSTS

        As the opportunity to continue prosecution of foreign counterpart
applications of United States Patent Applications No. 08/200,724 and No.
08/062,024 and to file foreign counterpart applications on the U.S. patent
applications to be filed on Invention Disclosures CRF D-1654 and CRF D-1732
exists, LICENSEE may designate foreign countries where counterpart applications
shall be filed. Title to such foreign patent applications shall be in
FOUNDATION. LICENSEE agrees to pay for all expenses incurred in the preparation,
filing, prosecution, renewal and continuation of Licensed Patents and Licensed
Patent Applications in said designated countries including all taxes, official
fees and attorney's fees, as well as a [*] administrative fee assessed by
FOUNDATION. Notwithstanding the foregoing, LICENSEE may elect in writing to be
released from its license in any of the Licensed Patents and Applications in
foreign countries at any time after initial filing costs have been paid, in
which event it shall thereafter have no obligation to reimburse FOUNDATION for
any future expenses relating to such patent or patent application. Upon approval
of this Agreement by the FOUNDATION's Board of Directors, LICENSEE shall
reimburse FOUNDATION for all direct and documentable foreign patent costs
incurred to date, plus said [*] administrative fee assessed by FOUNDATION.

VI.     PAYMENT OF U.S. PATENT COSTS

        Where renewal fees are due on a Licensed Patent in the United States and
LICENSEE remains exclusively licensed or is the sole nonexclusive licensee,
LICENSEE agrees to reimburse FOUNDATION for the costs of said renewal within
thirty (30) days of Notice thereof to LICENSEE by FOUNDATION.

        Where Licensed Patent Applications are pending in the United States
LICENSEE agrees to pay all direct and documentable prosecution costs for such
Licensed Patent Applications at least through an appeal to the U.S. Patents &
Trademark Office Board of Appeals plus a [*] administrative fee assessed by
FOUNDATION.

        Notwithstanding the foregoing, LICENSEE may elect in writing to be
released from its license in any of the Licensed Patents and Applications in the
United States at any time after initial filing costs have been paid, in which
event it shall thereafter have

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REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

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no obligation to reimburse FOUNDATION for any future expenses relating to such
patent or patent application.

        Upon approval of this Agreement by FOUNDATION's Board of Directors,
LICENSEE shall reimburse FOUNDATION for all direct and documentable costs
related to Licensed U.S. Patent Applications incurred to date, plus a [*]
administrative fee assessed by FOUNDATION; such amount, including equivalent
Foreign Patent costs described hereinabove is expected to approximate [*] as
of the Effective Date.

VII.    PATENT PROSECUTION MANAGEMENT

        The parties acknowledge the importance of cooperating on the ongoing
management of prosecution of Licensed Patent Applications. FOUNDATION agrees to
utilize patent counsel selected by FOUNDATION and reasonably approved by
LICENSEE for the purpose of filing and prosecuting Licensed Patent Applications.
FOUNDATION further agrees to consult with LICENSEE in a timely manner concerning
(i) the scope and content of Licensed Patent Applications (ii) the strategy and
tactics of patent prosecution, (iii) content of proposed responses to official
actions of the United States Patent and Trademark Office and foreign patent
offices during prosecution of such patent applications and (iv) cost of patent
prosecution. For purposes of this paragraph, "timely shall mean whenever
possible, sufficiently in advance of any patent prosecution decision by the
FOUNDATION so as to allow LICENSEE to meaningfully review such decision or
written response and provide comments to FOUNDATION in advance of such decision
or deadline so that LICENSEE's comments can be considered and incorporated into
FOUNDATION's decision or written response.

        Additionally, it is FOUNDATION's intent to transfer responsibility for
management of patent prosecution and maintenance activity on Licensed Patent
Applications and Licensed Patents to LICENSEE two (2) years from the Effective
Date. Such transfer shall be contingent upon LICENSEE's agreement to utilize
patent counsel selected by LICENSEE and reasonably approved by FOUNDATION for
the purpose of filing and prosecuting Licensed Patent Applications and
maintaining Licensed Patents. Upon such transfer, LICENSEE shall further agree
to consult with FOUNDATION in a timely manner concerning (i) the scope and
content of Licensed Patent Applications (ii) the strategy and tactics of patent
prosecution and (iii) content of proposed responses to official actions of the
United States Patent and Trademark Office and foreign patent offices during
prosecution of such patent applications. For purposes of this paragraph,
"timely" shall mean sufficiently in advance of any patent prosecution decision
by the LICENSEE so as to allow FOUNDATION to meaningfully review such decision
or written response and provide comments to

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REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

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LICENSEE in advance of such decision or deadline so that FOUNDATION's comments
can be considered and incorporated into LICENSEE's decision or written response.
Such transfer shall also be contingent upon LICENSEE's demonstration to
FOUNDATION that it can and will comply with the following:

        a)      all documents related to the prosecution of Licensed Patent
                Applications shall show Cornell Research Foundation as the
                Assignee of record;

        b)      LICENSEE shall ensure that FOUNDATION be provided copies of all
                correspondence and documents related to said patent prosecution
                and maintenance management;

        c)      LICENSEE shall ensure that all maintenance fees on all Licensed
                Patents be paid and that in no event shall Licensed Patents be
                allowed to lapse for failure to pay such fees without the
                concurrence of FOUNDATION on such lapse.

        Although it is FOUNDATION's intention to allow LICENSEE to continue said
responsibility for patent prosecution and maintenance for the duration of this
exclusive license Agreement, FOUNDATION reserves the right to reassume such
responsibility if it can show that LICENSEE's efforts are insufficient in
carrying out such activities.

        Should the exclusive license granted hereunder to LICENSEE become
non-exclusive, FOUNDATION shall have the responsibility for filing, prosecuting
and maintaining all Licensed Patent Applications and Licensed Patents at its own
expense.

VIII.   ROYALTIES AND MINIMUM ROYALTIES TO BE PAID DURING THE LICENSE AGREEMENT

        LICENSEE will pay to the FOUNDATION a royalty of [*] of the Net Sales
Price of Licensed Products made, used or sold by LICENSEE in the United States
and throughout the world.

        LICENSEE'S obligation to pay the [*] royalty rate upon each such
product shall cease in a particular country:

                (i)     if the applicable claims in the Licensed Patent in any
                        particular country are held invalid by an unappealed or
                        unappealable decision of a court of competent
                        jurisdiction in that particular country, or

                (ii)    upon expiration of the last said Licensed Patent; or

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

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                (iii)   if FOUNDATION abandons its patent solicitation efforts
                        for all Licensed Patent Applications and no Licensed
                        Patent is in force.

        Provided however, should no Licensed Patent issue and all Licensed
Patent Applications are abandoned but LICENSEE utilizes a Licensed Biological
Material to make, use or sell Licensed Products, LICENSEE will pay to FOUNDATION
a royalty of [*] of the Net Sales Price of Licensed Products made, used or
sold by LICENSEE in the United States and throughout the world.

        Beginning with the fifth License Year, each License Year LICENSEE shall
pay FOUNDATION a minimum annual royalty payment according to the following
schedule:
               [*]

        Such payments shall be made quarterly throughout the License Year and
such moneys will be considered as a credit for the royalties due for that
License Year under this Agreement and the royalty reports should reflect the use
of such credit. Such provision is to be construed as an annual minimum royalty
payment requirement and none of the minimum royalty payments are refundable or
applicable to succeeding License Years.

        In License Years 5, 6 and 7, LICENSEE may credit the direct and
documentable costs it has expended on research and development of transgenic
organism applications of Licensed Patent Applications and Licensed Patents
against up to [*] of minimum annual royalties owed for those License Years.

        In the event LICENSEE is required to pay royalties to a third party in
order to make, use or sell Licensed Products, FOUNDATION shall review the
minimum annual royalty payment obligation described hereinabove and agrees to
negotiate in good faith with LICENSEE to make adjustments in such payment
obligations.

        In any event, sales from non-transgenic plant applications must
constitute at least [*] of the total minimum annual royalty payment
obligation.

        In the event that this Agreement is converted to a field-of-use
exclusive license, non-exclusive license or semi-exclusive license in the field
of transgenic organisms according to the "TERM" (IX) and "DUE DILIGENCE" (X)
Sections hereinbelow, the minimum annual royalty payments described hereinabove
shall be reduced by [*].

        It is acknowledged and agreed that the minimum annual royalty payment
shall be allocated between the field of non-transgenic applications and the
field of transgenic organisms in the ratio of [*] of the minimum annual
royalty payment is

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

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allocated to the field of non-transgenic applications and [*] is allocated to
the field of transgenic organisms) and the sole remedy of FOUNDATION for
nonpayment of either portion of such minimum annual royalty payment shall be
(after notice of such nonpayment and opportunity to cure) termination of the
license rights for the field of use to which the portion of the payment applies.

IX.     FAVORED NATIONS

        If FOUNDATION grants a non-exclusive license to others under a Licensed
Patent Application or Licensed Patent, such licenses will not be granted at a
royalty rate which is more favorable than the rate herein granted to LICENSEE
unless such more favorable rates are extended to LICENSEE. This Favored Nations
clause does not apply to license agreements which are in settlement of patent
litigation.

X.      ACCOUNTING AND PAYMENT SCHEDULE

        Payment, reporting and financial accounting shall be on a quarterly
basis and LICENSEE will deliver to the FOUNDATION within ninety (90) days after
the end of each quarter of the License Year a report in writing setting forth
sales of Licensed Products (including a negative report if appropriate) and will
accompany such report with an appropriate payment of royalty or minimum royalty
due for such period. LICENSEE will keep accurate records, certified by it,
showing the information by which LICENSEE arrived at a royalty determination and
will permit a person appointed by the FOUNDATION and acceptable to LICENSEE to
make such inspection of said records as may be necessary to verify royalty
reports made by LICENSEE.

        Conversion from foreign currencies, if any, shall be based upon the
conversion rate on the date that payment in due.

        Payments which are delayed beyond the sixty (60) days after the end of
the quarter in which they become due shall be subject to a [*] per annum
interest charge.

XI.     TERM

        The aforesaid exclusive license under Licensed Patent Applications,
Licensed Patents and Licensed Biological Material shall last for a period ending
on the expiration date of the last to expire Licensed Patent or, should only
Licensed Biological Materials be licensed, then for a period of fifteen (15)
years from the date of this Agreement.

        By mutual agreement of FOUNDATION and LICENSEE, this Agreement may be
converted into a field-of-use exclusive license. Said field-of-use exclusive
license

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

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would only rescind LICENSEE's rights to make, use and sell Licensed Products in
the field of transgenic organisms.

XII.    DUTY OF DILIGENCE

        LICENSEE shall exercise reasonable due diligence to affect the
introduction of Licensed Products into the commercial market as soon as
practical. LICENSEE agrees to develop and exploit Licensed Products with
reasonable diligence by manufacture and sale of Licensed Products for the
duration of the term of this Agreement. LICENSEE further agrees to maintain
quality control over Licensed Products and generally attend to proper, safe,
fair, lawful and reasonable development and exploitation of the market for
Licensed Products. Failure of LICENSEE to materially comply with the provisions
of this Paragraph shall be considered a material breach of this Agreement.

        LICENSEE's reasonable due diligence obligations shall include the
expressed pursuit to affect introduction of Licensed Products into the field of
transgenic organisms. In order for LICENSEE to retain the exclusive license in
the field of transgenic organisms, LICENSEE must accomplish one of the following
within [*] of the Effective Date:

        [*]

        [*]

        [*]

        In the event LICENSEE fails to accomplish at least one of the
alternatives described above, FOUNDATION may, at its sole discretion, convert
this Agreement to a field-of-use exclusive license which shall wholly rescind
LICENSEE's rights to make, use and sell Licensed Products in the field of
transgenic organisms. Alternatively, in the event LICENSEE fails to accomplish
at least one of the alternatives described above, FOUNDATION may, at its sole
discretion, convert this Agreement to a non-exclusive or semi-exclusive license
in the field of transgenic organisms. In the event of such conversion from
exclusive to said field-of-use exclusive or non-exclusive or semi-exclusive
license, FOUNDATION shall be free to license others in the field of transgenic
organisms.

XIII.   INFRINGEMENT OF LICENSED PATENT RIGHTS BY THIRD PARTIES

        In the event that any infringement of a Licensed Patent shall come to
the attention of the FOUNDATION or LICENSEE, then FOUNDATION and LICENSEE

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

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shall duly inform each other. FOUNDATION, shall, in its sole discretion
determine whether or not to prosecute a patent infringement action. If
FOUNDATION determines and elects not to prosecute a patent infringement action,
then LICENSEE may cause legal proceedings against the alleged infringer at its
own expense and in the name of FOUNDATION, if necessary, if there is a showing
of substantial likelihood of infringement and that no other action for
infringement is pending at the time so that only one such lawsuit is pending at
any time.

        LICENSEE may defray the expenses of any such lawsuit to the extent of
[*] of royalties payable by LICENSEE during the course of and directly related
to such legal proceedings. Out of any damages or awards recovered by LICENSEE in
such action conducted by LICENSEE, LICENSEE will first recover its expenses for
conducting said litigation beyond the costs defrayed by withheld royalties.
FOUNDATION will then recover all royalties up to the [*] of royalties payable by
LICENSEE to FOUNDATION and withheld by LICENSEE to defray costs of such lawsuit.
FOUNDATION will also recover any expenses which it incurred on behalf of the
litigation. Any amount remaining belongs to LICENSEE, if LICENSEE conducts the
litigation, provided that on such amount LICENSEE shall pay FOUNDATION a royalty
as provided for in VIII above. If FOUNDATION conducts the litigation, at its own
expense, out of any amount recovered, FOUNDATION shall first recover any
expenses which it incurred on behalf of the litigation, next LICENSEE shall
recover direct and documentable losses including opportunity costs caused by
said infringement and any amount remaining shall belong to FOUNDATION.

        In any proceedings, FOUNDATION shall be entitled to employ, at its own
expense, counsel and control the course of litigation if, in FOUNDATION's sole
discretion, LICENSEE's defense of patent rights is insufficient, or if LICENSEE
fails to carry on vigorous prosecution of said patent rights.

        In the event LICENSEE seeks, with justifiable cause, to prosecute more
than one lawsuit at a time, FOUNDATION will not unreasonably withhold permission
where such actions are conducted entirely at LICENSEE's expense including
reimbursement of FOUNDATION's expenses incurred on behalf of such action.

        In any action brought by LICENSEE, LICENSEE undertakes to indemnify for
and hold FOUNDATION harmless from any damages, costs or expenses incurred by
reason of such litigation.

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

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XIV.    ASSIGNMENT

        The rights and obligations of the LICENSEE are not assignable but with
one exception which is that those rights and obligations may be assigned in
connection with the sale of all or substantially all of the assets of LICENSEE
to a third party.

XV.     SUBLICENSING

        LICENSEE may grant sublicenses under Licensed Patent Applications,
Licensed Patents and Licensed Biological Material with prior approval of
FOUNDATION, which approval shall not be withheld unless FOUNDATION can show a
substantial likelihood that such sublicensee would not perform its obligations
under sublicense agreement or that the sublicensee is an organization of a
character such that FOUNDATION and Cornell University may encounter a
substantial risk of substantial, long term and public criticism as a public
institution for providing its proprietary technology to such an organization,
e.g. more than internal student and/or faculty protestors and likely to cause
long term problems. Upon written notification of FOUNDATION by LICENSEE of its
intent to sublicense, FOUNDATION shall have thirty (30) days within which to
notify LICENSEE of FOUNDATION's disapproval of such sublicense and to provide
the reasons of such disapproval, after which such approval shall be deemed
given. LICENSEE agrees that said sublicensees are obligated in writing to all
terms and conditions of this Agreement beneficial to or protective of FOUNDATION
and that LICENSEE shall guarantee compliance of the sublicense on all such
provisions.

        Sublicense royalty income may be credited against LICENSEE's minimum
annual royalty payment obligations described in "ROYALTIES . . . Section VII,
hereinabove.

XVI.    TERMINATION

        In the event FOUNDATION finds LICENSEE to be in substantial
noncompliance with any of the material terms and conditions of this Agreement,
FOUNDATION shall so notify LICENSEE in writing. LICENSEE shall have six months
after receipt of such notification within which to remedy such noncompliance to
the satisfaction of FOUNDATION. If LICENSEE does not remedy a material
noncompliance within said six month period, FOUNDATION may terminate this
License Agreement. Upon giving such notice, LICENSEE shall have no obligations
for minimum royalties, patent expenses or research funding beyond the
termination date.

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                                                         PAGE 13

<PAGE>   14

        LICENSEE may terminate this License Agreement by giving notice of its
intentions to do so six (6) months before termination.

        Upon termination of this Agreement, any sublicensee that is not then in
material breach shall have its sublicense converted to a direct license from
FOUNDATION under the terms and conditions of this Agreement, as further limited
and restricted by the terms of the original sublicense.

XVII.   ARBITRATION AND JURISDICTION

        All disputes over the meaning and interpretation of this Agreement shall
be resolved by conciliation and mediation and if mediation is unsuccessful then
disputes shall be finally settled by an Arbitrator selected by FOUNDATION and
LICENSEE. If FOUNDATION and LICENSEE cannot agree on an Arbitrator, then
disputes shall be resolved by an Arbitration Panel comprising one arbitrator
appointed by FOUNDATION, one arbitrator appointed by LICENSEE, and a Chairman of
the Arbitration Panel appointed by the first two arbitrators. Any such
arbitration proceeding shall be conducted in accordance with generally accepted
arbitration rules; shall be held in the State of New York, unless otherwise
agreed by the parties; and judgment upon the arbitration award may be entered in
any court having jurisdiction.

        In order to initiate procedures for dispute resolution by conciliation,
mediation and arbitration either party may give written notice to the other of
intention to resolve a dispute, and absent satisfactory resolution, then to
arbitrate. Such notice shall contain a statement setting forth the nature of the
dispute and the resolution sought. If, within thirty (30) days of such notice a
resolution by conciliation between the parties themselves or by mediation has
not been achieved to the satisfaction of both parties, and if within sixty (60)
days from said written notice an Arbitrator or Arbitration Panel has not been
appointed with an arbitration schedule satisfactory to both parties, then either
party may proceed with judicial remedies.

        The FOUNDATION reserves the right and power to proceed with direct
judicial remedies against LICENSEE without conciliation, mediation or
arbitration for breach of the royalty payment and sales reporting provisions of
this Agreement after giving written notice of such breach to LICENSEE followed
by an opportunity period of thirty (30) days in which to cure such breach. In
collecting overdue royalty payments and securing compliance with reporting
obligations, FOUNDATION may use all judicial remedies available.

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                                                         PAGE 14

<PAGE>   15

XVIII.  OTHER

        LICENSEE agrees that it will not use the indicia or names FOUNDATION or
of Cornell University or any of their personnel in advertising, promotion, or
labeling of Licensed Products without prior written approval of the FOUNDATION.

        Title to all Licensed Biological Materials remains with FOUNDATION and
LICENSEE's rights in Licensed Biological Materials is by way of bailment with
rights sufficient to carry out the purposes of this Agreement. Upon termination
of this Agreement for cause by FOUNDATION, LICENSEE shall return all Licensed
Biological Materials, progeny and derivatives thereof, in whatever form, to
FOUNDATION or certify their destruction, at the option of FOUNDATION. Upon the
natural termination of this Agreement, LICENSEE may continue to use Licensed
Biological Materials without accounting to or recourse by FOUNDATION.

        FOUNDATION makes no representations other than those specified in the
WHEREAS clauses. FOUNDATION MAKES NO EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

        FOUNDATION by this Agreement makes no representation as to the
patentability and/or breadth of the inventions and/or discoveries involved in a
Licensed Patent. FOUNDATION by this Agreement makes no representation as to
patents now held or which will be held by others in the field of the Licensed
Products for a particular purpose.

        LICENSEE agrees to defend, indemnify and hold FOUNDATION harmless from
and against all liability, demands, damages, expenses or losses for death,
personal injury, illness or property damage (including reasonable attorney's
fees) arising (a) out of use by LICENSEE or its transferees of inventions
licensed or information furnished under this Agreement, or (b) out of any use,
sale or other disposition by LICENSEE or its transferees of products made by use
of such inventions or information. As used in this clause, "FOUNDATION" includes
its Trustees, Officers, Agents and Employees, and those of Cornell University,
and "LICENSEE" includes its Affiliates, Subsidiaries, Contractors and
Sub-Contractors.

        In discharge of the above and with respect to Licensed Products,
LICENSEE shall secure and maintain product liability insurance commensurate with
the reasonable standards of the industry. Upon written request from FOUNDATION,
LICENSEE shall provide FOUNDATION with evidence of such insurance coverage.

        This Agreement shall be interpreted under the Laws of the State of New
York.

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                                                         PAGE 15

<PAGE>   16

        Reports, notices and other communications to the FOUNDATION shall be
addressed to:

               H. Walter Haeussler, President
               CORNELL RESEARCH FOUNDATION, INC.
               Cornell Business & Technology Park
               20 Thornwood Drive, Suite 105
               Ithaca, New York 14850

and notices and other communications to the LICENSEE to:

               Jerry L. Butler, President
               Eden Bioscience Corporation
               5795 N.E. Minder
               Poulsbo, Washington 98370

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

ATTEST:                                   CORNELL RESEARCH FOUNDATION, INC.

                                          By      /s/ H. Walter Haeussler
---------------------------------               --------------------------------
                                                  H. Walter Haeussler
                                          Title   President
                                                --------------------------------
                                          Date
                                                --------------------------------
ATTEST:

                                          By      /s/ Jerry L. Butler
                                                --------------------------------
                                                  Jerry L. Butler
                                          Title   President
---------------------------------               --------------------------------

                                          Date
                                                --------------------------------

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                                                         PAGE 16

<PAGE>   17
                                   Exhibit E
                         Licensed Biological Materials

[*].

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

<PAGE>   18
                                AMENDMENT TO THE
                           EXCLUSIVE LICENSE AGREEMENT

             BETWEEN EDEN BIOSCIENCE AND CORNELL RESEARCH FOUNDATION
                  WHICH WAS EFFECTIVE THE FIRST DAY OF MAY 1995

               THIS AMENDMENT (effective as of the first day of February 1997)
to that Exclusive License Agreement referenced above, by and between CORNELL
RESEARCH FOUNDATION, INC., having offices at Cornell Business & Technology Park,
20 Thornwood Drive, Suite 105, Ithaca, New York 14850, hereinafter referred to
as "FOUNDATION" and EDEN BIOSCIENCE CORPORATION, having offices at 5795 N.E.
Minder, Poulsbo, Washington 98370, hereinafter referred to as "LICENSEE".

                                WITNESSETH THAT:

               WHEREAS, FOUNDATION and LICENSEE have previously entered into the
Exclusive License Agreement (effective date of 1 May 1995) which this Amendment
is attached thereto, in which FOUNDATION granted certain exclusive rights in
several patentable technologies developed at Cornell University to LICENSEE; and

               WHEREAS, FOUNDATION and LICENSEE mutually agree that said
Exclusive License Agreement should be modified to include additional patentable
technologies to those described in said Exclusive License Agreement; and

               WHEREAS, FOUNDATION and LICENSEE also agree that said Exclusive
License Agreement should be modified as defined hereinbelow; and

               NOW, THEREFORE, in consideration of the covenants and obligations
hereinafter set forth, the parties hereto hereby agree as follows:

PRIMACY OF AMENDMENT

               The parties agree that the terms and conditions of this Amendment
shall take precedence over those contained in the Exclusive License Agreement.

WHEREAS

               The Whereas clauses of the Exclusive License Agreement shall be
entirely replaced with the following:

               WHEREAS, United States Patent Application No. 08/200,724 entitled
"Elicitors of the Hypersensitive Response in Plants" (CRF D-1172), was filed in
the U.S. Patent & Trademark Office on February 2, 1994, a copy of which is
appended as Exhibit A and

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

<PAGE>   19

Patent Application No. 08/200,724 is a continuation of U.S. Patent Application
No. 07/907,935 filed on 1 September 1992 and the foreign equivalent
PCT/US93/06243 was filed on 30 June 1993 covering all EPC countries and Japan;
and

               WHEREAS, United States Patent Application No. 08/062,024 entitled
"Pseudomonas Syringae pv. syringae hrpz Gene" (CRF D-1425), was filed in the
U.S. Patent & Trademark Office on 17 May 1993, a copy of which is appended as
Exhibit B and the foreign equivalent PCT/US94/05014 was filed on 5 May 1994
covering all EPC countries and Japan; and

               WHEREAS, United States Patent Application No. 08/475,775,
entitled "Hypersensitive Response Induced Resistance in Plants" (CRF D-1654),
was filed in the U.S. Patent & Trademark Office on 7 June 1995, a copy of which
is appended as Exhibit C and the foreign equivalent PCT/US96/08819 was filed on
5 June 1996 covering all EPC countries and Japan; and

               WHEREAS, United States Patent Application No. 08/484,358,
entitled "Hypersensitive Response Elicitor From Erwinia Crysanthemi" (CRF
D-1732), was filed in the U.S. Patent & Trademark Office on 7 June 1995, a copy
of which is appended as Exhibit D; and

               WHEREAS, FOUNDATION intends to file a United States Patent
application entitled "Harpin Seed Treatment," now Invention Disclosure CRF
D-1940, a copy of which is appended as Exhibit E, and FOUNDATION intends to file
foreign equivalents, where appropriate, of said Invention Disclosure; and

               WHEREAS, FOUNDATION intends to file a United States Patent
Application entitled [*], Now Invention Disclosure [*], a copy of which is
appended as Exhibit F. and FOUNDATION intends to file foreign equivalents, where
appropriate, of said Invention Disclosure; and

               WHEREAS, FOUNDATION intends to file a United States Patent
Application entitled "Fragments of Harpin," now Invention Disclosure CRF D-1956,
a copy of which is appended as Exhibit G. and FOUNDATION intends to file foreign
equivalents, where appropriate, of said Invention Disclosure; and

               WHEREAS, FOUNDATION intends to file a United States Patent
Application entitled "Enhancement of Plant Growth By Harpin," now Invention
Disclosure CRF D-2018, a copy of which is appended as Exhibit H. and FOUNDATION
intends to file foreign equivalents, where appropriate, of said Invention
Disclosure; and

               WHEREAS, FOUNDATION intends to file a United States Patent
Application entitled "Harpin Results in Reduced Insect Larval Feeding on
Plants," now Invention Disclosure CRF D-2028, a copy of which is appended as
Exhibit I, and FOUNDATION intends to file foreign equivalents, where
appropriate, of said Invention Disclosure; and

               WHEREAS, the inventions disclosed and claimed in Exhibits A, B.
C, D, E, F. G. H and I are, or will be assigned to FOUNDATION and FOUNDATION is
a wholly owned subsidiary corporation of Cornell University and holds the
ownership interests of patents issued on inventions made by Cornell University's
staff and

[*] DESIGNATES OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                       -2-
<PAGE>   20
administers licenses in a manner consistent with the patent policy of Cornell
University; and

               WHEREAS, FOUNDATION represents that it is, or will be assignee of
the above-identified patent applications and any patents issuing thereon and has
the right to grant licenses under said patent applications and patents issuing
thereon; and

               WHEREAS, the work leading to the inventions disclosed and to be
claimed in Exhibits A, B. C, D, E, F. G. H and I were supported in part by an
agency of the U.S. Government, FOUNDATION is obligated to comply with the U.S.
Office of Management & Budgets Circular No. A124, or 37 CFR Part 401; and

               WHEREAS, Drs. Steven Beer, Alan Collmer and their colleagues at
Cornell University have developed proprietary biological materials and processes
relating to the field of plant disease and some of these materials and processes
are or will be claimed and covered in said patent applications of Exhibits A, B.
C, D, E, F. G. H and I and other such materials and processes are not claimed in
said patent applications but are proprietary to FOUNDATION; and

               WHEREAS, LICENSEE is desirous of securing a license under the
discoveries and inventions embodied in said patent applications and patents
issuing thereon as well as the discoveries and inventions embodied in said
related proprietary biological processes and materials to make, have made, use
and sell Licensed Products in the United States and throughout the world; and

               WHEREAS, FOUNDATION is willing to grant a license in said patent
applications and any patents issuing thereon as well as the discoveries and
inventions embodied in said related proprietary biological processes and
materials to LICENSEE upon the terms and conditions hereinafter set forth; and

               NOW, THEREFORE, in consideration of the covenants and obligations
hereinafter set forth, the parties hereto hereby agree as follows:

DEFINITIONS

               The Definitions section (I) of the Exclusive License Agreement
shall be entirely replaced-with the following:

               1. LICENSED PATENT APPLICATION shall mean U.S. Patent Application
Serial No. 08/200,724 attached as Exhibit A and any continuation,
continuation-in-part, or divisional applications thereof as well as foreign
counterparts thereof and U.S. Patent Application Serial No. 08/062,024 attached
as Exhibit B and any continuation, continuation in-part, or

[*] DESIGNATES  OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                       -3-
<PAGE>   21

               divisional applications thereof as well as foreign counterparts
               thereof and U.S. Patent Application Serial No. 08/475,775
               attached as Exhibit C and any continuation, continuation-in-part,
               or divisional applications thereof as well as foreign
               counterparts attached as Exhibit D and any continuation,
               continuation in-part, or divisional applications thereof as well
               as foreign counterparts thereof and any U.S. Patent Application
               based on Invention Disclosure CRF D-1940 attached as Exhibit E
               and any continuations continuation in-part, or divisional
               applications thereof as well as foreign counterparts thereof and
               any U.S. Patent Application based on Invention Disclosure [*]
               attached as Exhibit F and any continuation, continuation in-part,
               or divisional applications thereof as well as foreign
               counterparts thereof and any U.S. Patent Application based on
               Invention Disclosure CRF D-1956 attached as Exhibit G and any
               continuation, continuation in-part, or divisional applications
               thereof as well as foreign counterparts thereof and any U.S.
               Patent Application based on Invention Disclosure CRF D-2018
               attached as Exhibit H and any continuation, continuation in-part,
               or divisional applications thereof as well as foreign
               counterparts thereof and any U.S. Patent Application based on
               Invention Disclosure CRF D-2028 attached as Exhibit I and any
               continuation, continuation in-part, or divisional applications
               thereof as well as foreign counterparts thereof.

            2. LICENSED PATENT shall mean any U.S. Patents issuing from a
               Licensed Patent Application, and all reissues thereof as well as
               foreign counterparts thereof.

            3. LICENSED BIOLOGICAL MATERIAL shall mean that biological
               material including genes, proteins and peptide fragments,
               expression systems, cells and antibodies developed in the Cornell
               University Laboratories of Drs. Steven Beer, Alan Collmer and
               their colleagues and which is directly related to the inventions
               described in Licensed Patents or Licensed Patent Applications and
               which is listed and described in Exhibit J or added to Exhibit J
               at a later time by written mutual agreement of the parties.
               FOUNDATION and LICENSEE acknowledge that, to the best of their
               knowledge, said list of Exhibit J is complete. Licensed Products
               shall mean any product or use claimed in a Licensed Patent
               Application or Licensed Patent or any product or use which
               incorporates or otherwise utilizes Licensed Biological Material.

            5. LICENSE YEAR shall mean each twelve (12) month period
               beginning on the Effective Date of this Agreement first written
               above and thereafter on the anniversary date thereof.

[*] DESIGNATES  OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                      -4-
<PAGE>   22
            6. LICENSEE shall mean the above named company and any of its
               affiliates in which it owns or controls at least 50% of the
               voting stock..

            7. NET SALES PRICE shall mean [*]

FUTURE INVENTIONS

               The following new section is added to the May 1995 Exclusive
License Agreement:

               "Inventions" or "future inventions" shall refer to those
inventions and discoveries, made subsequent to the Effective Date of the May 95
Exclusive License Agreement, which are technologically related to Licensed
Patent Applications or Licensed Patents or which arise from research at Cornell
University funded by LICENSEE and which are:

               a) made solely by employees of Cornell University; or

               b) made jointly by employees of Cornell University.

               Future inventions made solely by employees of Cornell University
shall be the sole property of FOUNDATION.

               Future inventions made solely by employees of LICENSEE shall be
the sole property of LICENSEE and LICENSEE shall have no obligation to
FOUNDATION with regard to such property.

               Future inventions which are made jointly by employees of Cornell
University and LICENSEE shall be the joint property of FOUNDATION and LICENSEE.

               FOUNDATION and LICENSEE agree to notify each other, in a timely
manner, in writing, of any future inventions. FOUNDATION and LICENSEE shall
cooperate to determine inventorship of such inventions but final determination
of inventorship shall be made by that patent counsel responsible for prosecuting
License Applications or other patent counsel mutually agreed upon by the
parties.

               Disposition of the rights in future inventions shall be
determined based on inventorship, LICENSEE'S funding of the research at Cornell
which produced the

[*] DESIGNATES  OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                      -5-
<PAGE>   23
               invention and the relationship of potential patent claims of the
               invention to the claims of Licensed Patents or Licensed Patent
               Applications according to the following scheme:

               1.0 FUTURE INVENTION MADE SOLELY BY CORNELL INVENTORS USING
                   LICENSEE'S FUNDING SHALL BE DISPOSED OF AS FOLLOWS:

                   1.1 If the potential patent claims of such invention would be
                       dominated by claims of Licensed Patent Applications or
                       Licensed Patents, FOUNDATION shall, at the request of
                       LICENSEE, and subject to FOUNDATION'S obligations to
                       third parties, add such invention to the Licensed Patent
                       Applications of the May 95 Exclusive License Agreement.

                   1.2 If the potential patent claims of such invention would
                       not be dominated by claims of Licensed Patent
                       Applications or Licensed Patents, FOUNDATION shall,
                       subject to FOUNDATION'S obligations to third parties,
                       grant LICENSEE a first right of refusal on an exclusive
                       license under mutually agreeable terms.

               2.0 FUTURE INVENTION MADE SOLELY BY CORNELL INVENTORS BUT NOT
                   USING LICENSEE'S FUNDING OF CORNELL RESEARCH SHALL BE
                   DISPOSED OF AS FOLLOWS:

                   2.1 If the potential patent claims of such invention would be
                       dominated by claims of Licensed Patent Applications or
                       Licensed Patents, FOUNDATION shall, at the request of
                       LICENSEE, and subject to FOUNDATION'S obligations to
                       third parties, grant LICENSEE a first right of refusal on
                       a license under mutually agreeable terms.

                   2.2 If the potential patent claims of such invention would
                       not be dominated by claims of Licensed Patent
                       Applications or Licensed Patents, LICENSEE shall have no
                       inherent rights therein and disposition of such invention
                       would be solely at FOUNDATION'S discretion.

               3.0 FUTURE INVENTIONS THAT ARE JOINTLY MADE BY EMPLOYEES OF
                   CORNELL AND LICENSEE IN WHICH THE CORNELL PORTION WAS MADE
                   USING LICENSEE'S FUNDING OF CORNELL RESEARCH SHALL BE
                   DISPOSED OF AS FOLLOWS:

                   3.1 If the potential patent claims of such invention would be
                       dominated by claims of Licensed Patent Applications or
                       Licensed Patents, FOUNDATION shall, at the request of
                       LICENSEE, and subject to

               [*] DESIGNATES  OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT
               TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE
               COMMISSION.

                                      -6-
<PAGE>   24
                       FOUNDATION'S obligations to third parties, add such
                       invention to the Licensed Patent Applications of the May
                       95 Exclusive License Agreement.

                   3.2 If the potential patent claims of such invention would
                       not be dominated by claims of Licensed Patent
                       Applications or Licensed Patents, FOUNDATION shall,
                       subject to FOUNDATION'S obligations to third parties,
                       grant LICENSEE a first right of refusal on an exclusive
                       license under mutually agreeable terms.

               4.0 FUTURE INVENTIONS THAT ARE JOINTLY MADE BY EMPLOYEES OF
                   CORNELL AND LICENSEE IN WHICH THE CORNELL PORTION WAS NOT
                   MADE USING LICENSEE'S FUNDING OF CORNELL RESEARCH SHALL BE
                   DISPOSED OF AS FOLLOWS:

                   4.1 If the potential patent claims of such invention would be
                       dominated by claims of Licensed Patent Applications or
                       Licensed Patents, FOUNDATION shall, at the request of
                       LICENSEE, and subject to FOUNDATION'S obligations to
                       third parties, grant LICENSEE a first right of refusal to
                       a license under mutually agreeable terms.

                   4.2 If the potential patent claims of such invention would
                       not be dominated by claims of Licensed Patent
                       Applications or Licensed Patents, FOUNDATION shall,
                       subject to FOUNDATION'S obligations to third parties,
                       grant LICENSEE a first right of refusal on a license
                       under mutually agreeable terms.

               PAYMENTS MADE IN CONSIDERATION OF THE EXECUTION OF THIS LICENSE
                   AGREEMENT

                   On page 9, section IV of the May 95 Exclusive License
               Agreement, subparagraph 6) shall be followed by an additional
               subparagraph 7) as follows:

                   7)  In the event LICENSEE develops or acquires technology
                       which could avoid the equity vesting schedule described
                       above, such equity shall then fully vest in FOUNDATION
                       without regard to the milestone schedule described
                       hereinabove.

[*] DESIGNATES  OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                      -7-
<PAGE>   25

                                    EXHIBITS

               The Exhibits of the Exclusive License Agreement have been
          expanded and renumbered as follows:

            Exhibit A:  CRF D-1172, US Patent Application No. 08/200,724
                        "Elicitors of the Hypersensitive Response in Plants"

            Exhibit B   CRF D-1425, US Patent Application No. 08/062,024
                        "Pseudomonas Syringae pv. syringae hrpz Gene"

            Exhibit C   CRF D-1654, US Patent Application No. 08/475,775
                        "Hypersensitive Response Induced Resistance in Plants"

            Exhibit D   CRF D-1732, US Patent Application No. 08/484,358
                        "Hypersensitive Response Elicitor From Erwinia
                        Crysanthemi

            Exhibit E   CRF D-1940, US Patent Application No. (TBA)
                        "Harpin Seed Treatment"

            Exhibit F    [*]

            Exhibit G    CRF D-1956, US Patent Application No. (TBA)
                         "Fragments of Harpin"

            Exhibit H    CRF D-2018, US Patent Application No. (TBA)
                         "Enhancement of Plant Growth by Harpin"

            Exhibit I    CRF D-2028, US Patent Application No. (TBA)
                         "Harpin Results In Reduced Insect Larval Feeding
                         On Plants"

            Exhibit J    Licensed Biological Material

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

          ATTEST:                     CORNELL RESEARCH FOUNDATION, INC.

                                      By    /s/ Richard S. Cahoon
-------------------------               ----------------------------------------
                                            Richard S. Cahoon
                                      Title Vice President
                                           -------------------------------------
                                      Date
                                          --------------------------------------

ATTEST:                               EDEN BIOSCIENCE CORPORATION

                                      By    /s/ Jerry L. Butler
-------------------------               ----------------------------------------
                                      Name  Jerry L. Butler
                                          --------------------------------------
                                      Title President
                                           -------------------------------------
                                      Date
                                          --------------------------------------

[*] DESIGNATES OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                       -8-
<PAGE>   26

                                   Exhibit F

[*].

[*] DESIGNATES  OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                       -9-

<PAGE>   27

                                   Exhibit J
                          Licensed Biological Material

[*].

[*] DESIGNATES  OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                      -10-

<PAGE>   28
                                AMENDMENT TO THE
                          EXCLUSIVE LICENSE AGREEMENT

            between Eden Bioscience and Cornell Research Foundation
                 which was effective the first day of May 1995

     THIS AMENDMENT (effective as of the first day of October 1998) to that
Exclusive License Agreement referenced above (hereinafter the "Agreement"), by
and between CORNELL RESEARCH FOUNDATION, INC., having offices at Cornell
Business & Technology Park, 20 Thornwood Drive, Suite 105, Ithaca, New York
14850, hereinafter referred to as "FOUNDATION" and EDEN BIOSCIENCE CORPORATION,
having offices at 11816 N. Creek Parkway, Bothell, Washington 98011-8205,
hereinafter referred to as "LICENSEE."

                        W I T N E S S E T H   T H A T :

     WHEREAS, FOUNDATION and LICENSEE have previously entered into the
Agreement, effective 1 May 1995, to which this Amendment shall become a part
thereof, in which FOUNDATION granted certain exclusive rights in several
patentable technologies developed at Cornell University to LICENSEE; and

     WHEREAS, FOUNDATION and LICENSEE mutually agree that the Agreement should
be modified such that the Licensed Patent Applications and Licensed Patents of
the Agreement shall be expanded to include the additional Licensed Patent
Applications listed in Exhibit 1 and any patent applications or patents which
derive therefrom including any divisional, continuation, continuations-in-part,
reissues and foreign equivalents thereof, which list may be modified from time
to time; and

     WHEREAS, FOUNDATION and LICENSEE also agree that the Agreement should be
further modified as defined hereinbelow; and

     NOW, THEREFORE, in consideration of the covenants and obligations
hereinafter set forth, the parties hereto hereby agree as follows:

                              PRIMACY OF AMENDMENT

     The parties agree that the terms and conditions of this Amendment shall
take precedence over those contained in the Agreement.

<PAGE>   29
                                  DEFINITIONS

     The Definitions section (1) of the Agreement shall be entirely replaced
with the following:

     1.   LICENSED PATENT APPLICATION shall mean those Licensed Patent
          Applications of the Agreement as well as those U.S. Patent
          Applications listed in Exhibit 1 and any regular, continuation,
          continuation-in-part, or divisional applications thereof as well as
          foreign counterparts thereof as well as any future modifications to
          Exhibit 1 by mutual written agreement of the parties.

     2.   LICENSED PATENT shall mean any U.S. Patents issuing from a Licensed
          Patent Application, and all reissues thereof as well as foreign
          counterparts thereof.

     3.   LICENSED BIOLOGICAL MATERIAL shall mean that biological material
          including genes, proteins and peptide fragments, expression systems,
          cells and antibodies developed in the Cornell University Laboratories
          of Drs. Steven Beer, Alan Collmer and their colleagues and which is
          directly related to the inventions described in Licensed Patents or
          Licensed Patent Applications and which is listed and described in
          Exhibit 2 or added to Exhibit 2 at a later time by written mutual
          agreement of the parties. FOUNDATION and LICENSEE acknowledge that, to
          the best of their knowledge, said list of Exhibit 2 is complete as of
          the Effective Date.

     4.   LICENSED PRODUCTS shall mean any product or use claimed in a Licensed
          Patent Application or Licensed Patent or any product or use which
          incorporates or otherwise utilizes Licensed Biological Material.

     5.   LICENSE YEAR shall mean each twelve (12) month period beginning on
          the Effective Date of this Agreement first written above and
          thereafter on the anniversary date thereof.

     6.   LICENSEE shall mean the above named company and any of its affiliates
          in which it owns or controls at least 50% of the voting stock.

     7.   NET SALES PRICE shall mean [*]

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                      -2-
<PAGE>   30

     8.   [*] shall mean [*] and any regular continuation,
continuation-in-part, or divisional applications thereof as well as foreign
counterparts thereof. Title to such patents and patent applications is held by
FOUNDATION.

                                     GRANT

     The following paragraph shall be appended to the Grant, Section II on page
6 of the Agreement:

     FOUNDATION also hereby grants to LICENSEE the non-exclusive, royalty-free
right to [*]

                               FUTURE INVENTIONS

     The following new section is added to the Agreement:

     "Inventions" or "future inventions" shall refer to those inventions and
discoveries, made subsequent to the Effective Date of the Agreement, which are
related to the gene cluster map of Exhibit 3 or to Licensed Patent Applications
or Licensed Patents or which arise from research at Cornell University funded
by LICENSEE and which are:

     a)   made solely by employees of Cornell University; or

     b)   made jointly by employees of Cornell University.

     Future inventions made solely by employees of Cornell University shall be
the sole property of FOUNDATION.

     Future inventions made solely by employees of LICENSEE shall be the sole
property of LICENSEE and LICENSEE shall have no obligation to FOUNDATION with
regard to such property.

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                      -3-
<PAGE>   31
     Future inventions which are made jointly by employees of Cornell
University and LICENSEE shall be the joint property of FOUNDATION and LICENSEE.

     If either FOUNDATION or LICENSEE conclude that an invention may fall
within the terms of this Agreement, FOUNDATION and LICENSEE agree to notify
each other, in a timely manner, in writing, of any such future inventions.
FOUNDATION and LICENSEE shall cooperate to determine inventorship of such
inventions but final determination of inventorship shall be made by that patent
counsel responsible for prosecuting Licensed Patent Applications or other
patent counsel mutually agreed upon by the parties. FOUNDATION agrees to
maintain as confidential, all information of LICENSEE which is provided to
FOUNDATION for said purpose of determining inventorship and which is clearly
marked as confidential.

     Disposition of the rights in future inventions shall be determined based
on inventorship, LICENSEE's funding of the research at Cornell which produced
the invention and the relationship of potential patent claims of the invention
to the claims of Licensed Patents or Licensed Patent Applications according to
the following scheme.

1.0  Future invention made solely by Cornell inventors using LICENSEE's funding
     shall be disposed of as follows:

     1.1  If the potential patent claims of such invention would be dominated by
          claims of Licensed Patent Applications or Licensed Patents, FOUNDATION
          shall, at the request of LICENSEE, and subject to FOUNDATION's
          obligations to third parties, add such invention to the Licensed
          Patent Applications of the May 1995 Exclusive License Agreement.

     1.2  If the potential patent claims of such invention would not be
          dominated by claims of Licensed Patent Applications or Licensed
          Patents, FOUNDATION shall, subject to FOUNDATION's obligations to
          third parties, grant LICENSEE a first right of refusal on an exclusive
          license under mutually agreeable terms.

2.0  Future invention made solely by Cornell inventors but not using LICENSEE'S
     funding of Cornell research shall be disposed of as follows:

     2.1  If the potential patent claims of such invention would be dominated by
          claims of Licensed Patent Applications or Licensed Patents, FOUNDATION
          shall, at the request of LICENSEE, and subject to

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                      -4-

<PAGE>   32
          FOUNDATION's obligations to third parties, grant LICENSEE a first
          right of refusal on a license under mutually agreeable terms.

     2.2  If the potential patent claims of such invention would not be
          dominated by claims of Licensed Patent Applications or Licensed
          Patents, LICENSEE shall have no inherent rights therein and
          disposition of such invention would be solely at FOUNDATION'S
          discretion.

3.0  Future inventions that are jointly made by employees of Cornell and
     LICENSEE in which the Cornell portion was made using LICENSEE's funding of
     Cornell research shall be disposed of as follows:

     3.1  If the potential patent claims of such invention would be dominated by
          claims of Licensed Patent Applications or Licensed Patents, FOUNDATION
          shall, at the request of LICENSEE, and subject to FOUNDATION's
          obligations to third parties, add such invention to the Licensed
          Patent Applications of the May 95 Exclusive License Agreement.

     3.2  If the potential patent claims of such invention would not be
          dominated by claims of Licensed Patent Applications or Licensed
          Patents, FOUNDATION shall, SUBJECT TO FOUNDATION'S obligations to
          third parties, grant LICENSEE a first right of refusal on an exclusive
          license under mutually agreeable terms.

4.0  Future inventions that are jointly made by employees of Cornell and
     LICENSEE in which the Cornell portion was not made using LICENSEE's
     funding of Cornell research shall be disposed of as follows:

     4.1  If the potential patent claims of such invention would be dominated by
          claims of Licensed Patent Applications or Licensed Patents, FOUNDATION
          shall, at the request of LICENSEE, and subject to FOUNDATION's
          obligations to third parties, grant LICENSEE a first right of refusal
          to a license under mutually agreeable terms.

     4.2  If the potential patent claims of such invention would not be
          dominated by claims of Licensed Patent Applications or Licensed
          Patents, FOUNDATION shall, subject to FOUNDATION's obligations to
          third parties, grant LICENSEE a first right of refusal on a license
          under mutually agreeable terms.

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                      -5-

<PAGE>   33
                     PAYMENTS MADE IN CONSIDERATION OF THE
                      EXECUTION OF THIS LICENSE AGREEMENT

     On page 7, section IV of the Agreement, the second paragraph shall be
replaced entirely with the following paragraph:

          It is understood by the parties that FOUNDATION shall take no
          management role in LICENSEE.

     Notwithstanding the equity vesting provisions and schedule defined in
Section IV of the Agreement, the parties hereby agree that the full amount of
equity in LICENSEE owed to FOUNDATION, shall fully and immediately vest in
FOUNDATION upon execution of this Amendment.

                   ROYALTIES AND MINIMUM ROYALTIES TO BE PAID
                          DURING THE LICENSE AGREEMENT

     The language of Section VIII of the Agreement notwithstanding, the parties
agree to modify the royalty terms as follows:

     LICENSEE shall pay to the FOUNDATION a royalty of [*] of the Net Sales
     Price of Licensed Products. However, LICENSEE may request an adjustment in
     said future royalty and, if LICENSEE can justify the need for such
     adjustment, FOUNDATION shall consider such adjustment, although it shall
     have no obligation to do so. Further, the royalty on any transgenic
     Licensed Product shall be determined on a case-by-case basis BY FOUNDATION
     and LICENSEE such that LICENSEE's ability to profitably make, use and sell
     such transgenic Licensed Product shall not be unduly impaired and, in any
     event, such royalty on said transgenic Licensed Product shall not exceed
     [*]. The parties acknowledge the value of LICENSEE's continued support of
     research conducted at Cornell University and, in consideration of such
     support, FOUNDATION agrees to credit any such monies provided to Cornell
     University beyond the [*] provided to Cornell from 1 May through 30
     April 1999 against any future royalties owed by LICENSEE as described in
     the RESEARCH SUPPORT section, hereinbelow.

     The parties agree that any royalty owned to FOUNDATION by LICENSEE on the
sale of any Licensed Product which is based entirely on a Licensed Patent
Application or Licensed Patent which is jointly owned by FOUNDATION and
LICENSEE, shall be reduced by [*]. If such a Licensed Product is based
partially on a jointly owned Licensed Patent Application or Licensed Patent as
well as on a

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                      -6-
<PAGE>   34
Licensed Patent Application or Licensed Patent which is solely owned by
FOUNDATION, such royalty owed shall be reduced by [*].

                               DUTY OF DILIGENCE

     The language of Section XII of the Agreement notwithstanding, the parties
agree to modify the terms and conditions of LICENSEE's duty of diligence as
follows:

     LICENSEE's obligation to pursue introduction of transgenic Licensed
     Products has been satisfied by providing unrestricted research support to
     Cornell University of [*] for the period May 1998 through April 1999.

                                RESEARCH SUPPORT

     LICENSEE agrees to provide one year of research support to Cornell
University of an amount not less than [*] beginning in May of 1998. Such money
shall not be creditable against future royalties. However, any such research
support beyond the [*] paid from 1 May 1998 through 30 April 1999 may be
credited against future royalty owed by LICENSEE as described hereinabove.

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

ATTEST:                       CORNELL RESEARCH FOUNDATION, INC.

                              By     /s/ Richard S. Cahoon
                                --------------------------------------
                                     Richard S. Cahoon
                              Title: Vice President
-------------------                 ----------------------------------
                              Date:
                                   -----------------------------------

ATTEST:                       EDEN BIOSCIENCE CORPORATION

                              By     /s/ Jerry L. Butler
                                --------------------------------------
                                     Jerry L. Butler
                              Title: President
-------------------                 ----------------------------------
                              Date:
                                   -----------------------------------

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                      -7-
<PAGE>   35
                                   EXHIBIT 1

     The following U.S. Patent Applications and any regular, divisional,
continuation, continuation-in-part applications and foreign equivalents are
hereby Licensed Patent Applications as defined in the Agreement.

1.      CRF D-1940, US Patent Application No. 08/984,207, filed 12/03/97 as
        "Hypersensitive Response Induced Resistance in Plants by Seed
        Treatment"; Inventors: D. Qui, Z. Wei, S. Beer.

[*]

3.      CRF D-1956, US Patent Application No. (TBA: derived from provisional
        No. 60/048,109 filed 05/30/97), filed on 5/28/98 as "Hypersensitive
        Response Elicitor Fragments Eliciting a Hypersensitive Response and
        Uses Thereof"; Inventors: R. Laby, S. Beer, A Collmer, Z. Wei.

[*]

5.      CRF D-2028, US Patent Application No. (TBA: derived from provisional
        patent application no. 60/039,226), filed on ??/??/98 as "Insect
        Control With a Hypersensitive Response Elicitor"; Inventors: T. Zitter,
        Z. Wei.

[*]

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                      -8-

<PAGE>   36

                                   EXHIBIT 2

[*].

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                      -9-

<PAGE>   37

                                   EXHIBIT 3

[*].

[*] DESIGNATES  OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

<PAGE>   38

                                   AMENDMENT 3
                                       TO

                               CORNELL UNIVERSITY
                          OFFICE OF SPONSORED PROGRAMS

                               AGREEMENT NO. 28574

SCHEDULE

        The purpose of this Amendment is to extend the Subcontract period for an
additional period of performance beginning May 1, 1996 and ending April 30,
1999; and, to increase the estimated cost by [*] from [*] to [*]. This
Amendment consists of the Schedule which is made a part of this Amendment for
all purposes

CHANGES

Replace Article 4, with:

        4.     Period of Performance. The Period of performance of this
               Agreement will be May 1, 1996 through April 30, 1999.

Replace Article 6, with:

        6.     Cost and Payments:

               6.1    It is agreed to and understood by the parties that the
                      University shall be reimbursed for all costs incurred in
                      connection with the Project up to the amount of [*] (the
                      "Project Cost"). It is estimated that the amount
                      designated as the Project Cost is sufficient to support
                      Project expenses.

               6.2    The Sponsor shall not be liable for any payment in excess
                      of the Project Cost unless this Agreement is modified in
                      writing. Within ninety (90) days after the termination of
                      this Agreement the University shall submit a final
                      financial report setting forth costs incurred. The report
                      shall be accompanied by a check in the amount, if any, of
                      the excess of funds advanced over costs incurred.

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                       -1-
<PAGE>   39

               6.3    All checks shall be made payable to Cornell University and
                      sent to the address specified in Article 19, Notices.
                      Payment shall be made by the Sponsor according to the
                      following schedule.

                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]

Except as modified above, all terms and conditions of the Subcontract shall
remain unchanged and in full force and effect.

IN WITNESS WHEREOF, the parties have cause these presents to be executed in
duplicate on the dates indicated below.

UNIVERSITY                                   EDEN BIOSCIENCE CORP.

/s/ Jeff Bugliari                            /s/ Jerry L. Butler
-----------------------------------          -----------------------------------
Grant and Contract Officer                   Jerry L. Butler President and CEO

               7/22/98                                      8/7/98
-----------------------------------          -----------------------------------
Date                                         Date

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                      -2-
<PAGE>   40

                                 AMENDMENT NO. 4
                                       TO

                               CORNELL UNIVERSITY
                          OFFICE OF SPONSORED PROGRAMS

                               AGREEMENT NO. 28574

SCHEDULE

        The purpose of this Amendment is to extend the Subcontract period for an
additional period of performance beginning May 1, 1996 and ending April 30,
2000; and to increase the estimated cost by [*] increasing the total
Subcontract to [*].

CHANGES

Replace Article 4 with:

        4.     Period of Performance. The period of performance of this
               agreement will be May 1, 1996 through April 30, 2000.

Replace Article 6 with:

        6.     Cost and Payments:

               6.1    It is agreed to and understood by the parties that the
                      University shall be reimbursed for all costs incurred in
                      connection with the Project up to the amount of [*] (the
                      "Project Cost"). It is estimated that the amount
                      designated as the Project Cost is sufficient to support
                      Project expenses.

               6.2    The Sponsor shall not be liable for any payment in excess
                      of the Project Cost unless this Agreement is modified in
                      writing. Within 90 days after the termination of this
                      Agreement, the University shall submit a final financial
                      report setting forth costs incurred. The report shall be
                      accompanied by a check in the amount, if any, of the
                      excess of funds advanced over costs incurred.

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                      -1-
<PAGE>   41

               6.3    All checks shall be made payable to Cornell University and
                      sent to the address specified in Article 19, Notices.
                      Payment shall be made by the Sponsor according to the
                      following schedule.

                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]
                     [*]                                   [*]

Except as modified above, all terms and conditions of the Subcontract shall
remain unchanged and in full force and effect.

IN WITNESS WHEREOF, the parties have caused these presents to be executed in
duplicate on the dates indicated below

UNIVERSITY                                   EDEN BIOSCIENCE CORP.

/s/ John T. Desch                            /s/ Jerry L. Butler
-----------------------------------          -----------------------------------
John T. Desch                                Jerry L. Butler
Sr. Grant and Contract Officer               President

               4/22/99                                      4/22/99
-----------------------------------          -----------------------------------
Date                                         Date

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                      -2-
<PAGE>   42

                                 AMENDMENT NO. 5
                                       TO

                               CORNELL UNIVERSITY
                          OFFICE OF SPONSORED PROGRAMS

                               AGREEMENT NO. 28574

SCHEDULE

        The purpose of this Amendment is to extend the Subcontract period for an
additional period of performance beginning May 1, 1996 and ending April 30,
2001; and to increase the estimated cost by [*], increasing the total
Subcontract to [*].

CHANGES

Replace Article 4 with:

        4      Period of Performance

               The period of performance of this agreement will be May 1, 1996
               through April 30, 2001.

Replace Article 6 with:

        6.     Cost and Payments

               6.1    It is agreed to and understood by the parties that the
                      University shall be reimbursed for all costs incurred in
                      connection with the Project up to the amount of [*] (the
                      "Project Cost"). It is estimated that the amount
                      designated as the Project Cost is sufficient to support
                      Project expenses.

               6.2    The Sponsor shall not be liable for any payment in excess
                      of the Project Cost unless this Agreement is modified in
                      writing. Within 90 days after the termination of this
                      Agreement, the University shall submit a final financial
                      report setting forth costs incurred. The report shall be
                      accompanied by a check in the amount, if any, of the
                      excess of funds advanced over costs incurred.

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

<PAGE>   43

               6.3    All checks shall be made payable to Cornell University and
                      sent to the address specified in Article 19, Notices.
                      Payment shall be made by the Sponsor according to the
                      following schedule.

                      [*]                                  [*]
                      [*]                                  [*]
                      [*]                                  [*]
                      [*]                                  [*]
                      [*]                                  [*]
                      [*]                                  [*]
                      [*]                                  [*]
                      [*]                                  [*]
                      [*]                                  [*]
                      [*]                                  [*]
                      [*]                                  [*]
                      [*]                                  [*]
                      [*]                                  [*]
                      [*]                                  [*]
                      [*]                                  [*]

        Except as modified above, all terms and conditions of the Subcontract
shall remain unchanged and in full force and effect.

        IN WITNESS WHEREOF, the parties have caused these presents to be
executed in duplicate on the dates indicated below.

CORNELL UNIVERSITY                           EDEN BIOSCIENCE CORP.

/s/ John T. Desch                            /s/ Jerry L. Butler
-------------------------------------        -----------------------------------
Name:  John T. Desch                         Name:  Jerry L. Butler
Title: Sr. Grant and Contract Officer        Title: President and CEO
       Office of Sponsored Programs

               4/17/2000                                    4/10/2000
-------------------------------------        -----------------------------------
Date                                         Date

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

                                      -2-
<PAGE>   44
                 [CORNELL RESEARCH FOUNDATION, INC. LETTERHEAD]

                                  July 2, 2000

Mr. Jerry Butler
President and CEO
Eden Bioscience Corporation
11816 North Creek Parkway
Bothell, WA   98011-8205

        RE:    OUR REF: [*] - Beer et al.
               LICENSE AMENDMENT
               TO THE EXCLUSIVE LICENSE AGREEMENT BY AND BETWEEN EDEN BIOSCIENCE
               CORPORATION AND CORNELL RESEARCH FOUNDATION EFFECTIVE MAY 1, 1995
               AND AMENDED OCTOBER 1, 1998 (HEREINAFTER "LICENSE")

        Effective the first day of June, 2000, the undersigned parties agree
that this Amendment hereby modifies the License as follows:

        "The provisional patent application [*] entitled [*] invented by
David Bauer and Steven Beer and assigned to Cornell Research Foundation was
filed in the United States Patent and Trademark Office on [*] and said
application is hereby added to the list of "Licensed Applications."

        Notwithstanding the grant of rights conveyed to Eden Bioscience
Corporation in the License, Cornell Research Foundation retains the right to
license third parties the right to make, use and sell products covered by said
provisional patent application.

        IN WITNESS THEREOF, the parties have caused this instrument to be
executed in duplicate as of the day and year of the last signature below.

Cornell Research Foundation, Inc.            Eden Bioscience Corporation

      /s/ Richard S. Cahoon                             /s/ J. Butler
-----------------------------------          -----------------------------------
By    Richard S. Cahoon                      By        J. Butler
  ---------------------------------            ---------------------------------
Title   Vice President                       Title        President
     ------------------------------               ------------------------------
Date     June 2, 2000                        Date        June 23, 2000
     ------------------------------               ------------------------------

[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
<PAGE>   45
                 [CORNELL RESEARCH FOUNDATION, INC. LETTERHEAD]

                                  July 2, 2000

Mr. Jerry Butler
President and CEO
Eden Bioscience Corporation
11816 North Creek Parkway
Bothell, WA   98011-8205

        RE:    OUR REF: [ * ] - Beer et al.
               LICENSE AMENDMENT
               TO THE EXCLUSIVE LICENSE AGREEMENT BY AND BETWEEN EDEN BIOSCIENCE
               CORPORATION AND CORNELL RESEARCH FOUNDATION EFFECTIVE MAY 1, 1995
               AND AMENDED OCTOBER 1, 1998 (HEREINAFTER "LICENSE")

        Effective the first day of June, 2000, the undersigned parties agree
that this Amendment hereby modifies the License as follows:

        "The provisional patent application [ * ] entitled [ * ] invented by
David Bauer and Steven Beer and assigned to Cornell Research Foundation was
filed in the United States Patent and Trademark Office on [ * ] and said
application is hereby added to the list of "Licensed Applications."

        IN WITNESS THEREOF, the parties have caused this instrument to be
executed in duplicate as of the day and year of the last signature below.

Cornell Research Foundation, Inc.            Eden Bioscience Corporation

      /s/ Richard S. Cahoon                             /s/ J. Butler
-----------------------------------          -----------------------------------
By    Richard S. Cahoon                      By        J. Butler
  ---------------------------------            ---------------------------------
Title   Vice President                       Title        President
     ------------------------------               ------------------------------
Date     June 2, 2000                        Date        June 23, 2000
     ------------------------------               ------------------------------

[ * ] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.<PAGE>   1
                                                                    EXHIBIT 10.3

                           EDEN BIOSCIENCE CORPORATION

           1995 COMBINED INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN

                               SECTION 1. PURPOSE

        The purpose of the 1995 Combined Incentive and Nonqualified Stock Option
Plan (the "Plan") is to enable Eden Bioscience Corporation (the "Company") to
attract and retain the services of people with training, experience and ability
and to provide additional incentive to such persons by granting them an
opportunity to participate in the ownership of the Company.

                        SECTION 2. STOCK SUBJECT TO PLAN

        The stock subject to this Plan shall be the Company's Common Stock, par
value $.0025 per share (the "Common Stock"), presently authorized but unissued
or now held or subsequently acquired by the Company. Subject to adjustment as
provided in Section 10, the aggregate amount of Common Stock reserved for
issuance or delivery upon exercise of all options granted under this Plan shall
not exceed 3,250,000 shares of Common Stock. If any option granted under this
Plan shall expire or terminate for any reason without having been exercised in
full, the unpurchased shares subject thereto shall thereupon again be available
for purposes of this Plan.

                            SECTION 3. ADMINISTRATION

        The Plan shall be administered by the Board of Directors of the Company,
in accordance with the following terms and conditions:

        3.1 General Authority. Subject to the express provisions of the Plan,
the Board of Directors shall have the authority, in its discretion, to determine
all matters relating to options to be granted under the Plan, including the
selection of individuals to be granted options, the number of shares to be
subject to each option, the exercise price, the term, whether such options shall
be immediately exercisable or shall become exercisable in increments over time,
and all other terms and conditions thereof. Grants under this Plan to persons
eligible need not be identical in any respect, even when made simultaneously.
The Board of Directors may from time to time adopt rules and regulations
relating to the administration of the Plan. The interpretation and construction
by the Board of Directors of any terms or provisions of this Plan or any option
issued hereunder, or of any rule or regulation promulgated in connection
herewith, or of any rule or regulation promulgated in

<PAGE>   2

connection herewith, shall be conclusive and binding on all interested parties.
The Board of Directors in its sole discretion, may grant incentive stock options
("Incentive Stock Options") as such term is defined in Section 422 of the
Internal Revenue Code of 1986, as amended, (the "Code") and/or nonqualified
stock options ("Nonqualified Stock Options"). A Nonqualified Stock Option is a
stock option which is not an Incentive Stock Option. The type of option granted,
whether an Incentive Stock Option or a Nonqualified Stock Option shall be
clearly identified by the Board of Directors when granted. The term option when
used in this Plan refers to Incentive Stock Options and Nonqualified Stock
Options, collectively.

        3.2 Directors. A member of the Board of Directors shall be eligible to
participate in or receive or hold options under this Plan; provided, however,
that no member of the Board of Directors shall vote with respect to the granting
of an option hereunder to himself or herself, as the case may be.

        3.3 Delegation to a Committee. Notwithstanding the foregoing, the Board
of Directors, if it so determines, may delegate to a committee of the Board of
Directors any or all authority for the administration of the Plan, and
thereafter references to the Board of Directors in this Plan shall be deemed to
be references to the committee to the extent provided in the resolution
establishing the committee.

        3.4 Persons Subject to Section 16(b). Notwithstanding anything in the
Plan to the contrary, the of Directors, in its absolute discretion, may
bifurcate the Plan so as to restrict, limit or condition the use of any
provision of the Plan to participants who are officers or directors subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, (the "1934
Act") without so restricting, limiting or conditioning the Plan with respect to
other participants.

        3.5 Full-Recourse Loans to Optionees. The Board of Directors, in its
absolute discretion, may provide that the Company loan to Optionees sufficient
funds to exercise any option granted under the Plan and/or to pay withholding
tax due upon exercise of such option. The Board of Directors shall have the
authority to make such determinations at the time of grant or exercise and shall
establish repayment terms thereof, including installments, maturity and interest
rate; provided, however, that repayment of any Company loan to the Optionee
shall be secured by delivery of a full-recourse promissory note for the loan
amount executed by the Optionee, together with any other form of security
determined by the Board of Directors. The amount of any full-recourse promissory
note delivered in connection with an Incentive Stock Option shall bear interest
at a rate specified by the Board of Directors but in no case less than the rate
required to avoid imputation of interest (taking into account any

                                      -2-
<PAGE>   3

exceptions to the imputed interest rules) for federal income tax purposes.

                             SECTION 4. ELIGIBILITY

        Options may be granted only to persons who, at the time the option is
granted, are employees or directors of, or consultants or independent
contractors to, the Company or any of its present or future parent or subsidiary
corporations (as those terms are used in Section 422(a)(2) and (d)(1) and
Section 424(e) and (f) of the Code, hereafter a "Parent" or "Subsidiary"). Any
individual to whom an option is granted under this Plan shall be referred to
hereinafter as "Optionee". Any Optionee may receive one or more grants for
options as the Board of Directors as shall from time to time determine, and such
determinations may be different as to different Optionees and may vary as to
different grants. Optionees who are not employees will only be eligible to
receive Nonqualified Stock Options.

                   SECTION 5. TERMS AND CONDITIONS OF OPTIONS

        Options granted under this Plan shall be evidenced by written agreements
which shall contain such terms, conditions, limitations and restrictions as the
Board of Directors shall deem advisable and which are not inconsistent with this
Plan. Each option granted hereunder shall clearly indicate whether it is an
Incentive Stock Option or Nonqualified Stock Option. Notwithstanding the
foregoing, all such options shall include or incorporate by reference the
following terms and conditions:

        5.1 Number of Shares; Price. The maximum number of shares that may be
purchased pursuant to the exercise of each option and the price per share at
which such option is exercisable (the "exercise price") shall be as established
by the Board of Directors, provided that the exercise price of Incentive Stock
Options shall not be less than the fair market value per share of the Common
Stock at the time the option is granted, as determined in good faith by the
Board of Directors. The exercise price of Nonqualified Stock Options may be
greater or less than the fair market value per share of the Common Stock at the
time the option is granted.

        5.2 Duration of Options. Subject to the restrictions contained in
Section 9, the term of each option shall be established by the Board of
Directors and, if not so established, shall be ten years from the date it is
granted, but in no event shall the term of any Incentive Stock Option exceed ten
years.

        5.3 Exercisability. Each option shall prescribe the installments, if
any, in which an option granted under the Plan shall become exercisable. The
Board of Directors, in its absolute discretion, may waive or accelerate any
installment requirement contained in outstanding options. In no case may an
option be exercised

                                      -3-
<PAGE>   4

as to less than 100 shares at any one time (or the remaining shares covered by
the option if less than 100) during the term of the option. Only whole shares
shall be issued pursuant to the exercise of any option.

        5.4 Incentive Stock Option. Any option which is issued as an Incentive
Stock Option under this Plan, shall, notwithstanding any other provisions of
this Plan or the option terms to the contrary, contain all of the terms,
conditions, restrictions, rights and limitations required to be an Incentive
Stock Option, and any provision to the contrary shall be disregarded.

                    SECTION 6. NONTRANSFERABILITY OF OPTIONS

        Options granted under this Plan and the rights and privileges conferred
hereby may not be transferred, assigned, pledged or hypothecated in any manner
(whether by operation of law or otherwise) other than by will or the applicable
laws of descent and distribution, and shall not be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of any option under this Plan or any right or
privilege conferred hereby, contrary to the provisions hereof, or upon the sale
or levy or any attachment or similar process, such option thereupon shall
terminate and become null and void. During an Optionee's lifetime, any options
granted under this Plan are personal to him or her and are exercisable solely by
such Optionee. Notwithstanding the foregoing, and to the extent permitted by
Section 422 of the Code, the Board of Directors, in its sole discretion, may
permit such transfer, assignment and exercisability and may permit an Optionee
to designate a beneficiary who may exercise the option after the Optionee's
death; provided, however, that any option so transferred or assigned shall be
subject to all the same terms and conditions contained in the instrument
evidencing the option.

        SECTION 7. CERTAIN LIMITATIONS REGARDING INCENTIVE STOCK OPTIONS

        The grant of Incentive Stock Options shall be subject to the following
special limitations:

        7.1 Limitation on Amount of Grants. In no event shall any Optionee be
granted Incentive Stock Options that in the aggregate (together with all other
Incentive Stock Options granted by the Company or any Parents or Subsidiaries)
entitle the Optionee to purchase, in any calendar year during which such options
first become exercisable, stock of the Company, any Parent or any Subsidiary
having a fair market value (determined as of the time such options are granted)
in excess of $100,000. No limitation shall apply to Nonqualified Stock Options.

                                      -4-
<PAGE>   5

        7.2 Grants to 10% Shareholders. Incentive Stock Options may be granted
to a person owning more than 10% of the total combined voting power of all
classes of stock of the Company and any Parent or Subsidiary only if (i) the
exercise price is at least 110% of the fair market value of the stock at the
time of grant, and (ii) the option is not exercisable after the expiration of
five years from the date of grant.

                         SECTION 8. EXERCISE OF OPTIONS

        Options shall be exercised in accordance with the following terms and
conditions:

        8.1 Procedure. Options shall be exercised by delivery to the Company of
written notice of the number of shares with respect to which the option is
exercised.

        8.2 Payment. Payment of the option price shall be made in full within
three business days of the notice of exercise of the option and shall be in cash
or bank-certified or cashier's checks, or personal check if permitted by the
Board of Directors. To the extent permitted by applicable laws and regulations
(including, but not limited to, federal tax and securities laws and
regulations), an option may be exercised by (a) tendering (either actually or,
if and so long as the Common Stock is registered under Section 12(b) or 12(g) of
the Exchange Act, by attestation) shares of Common Stock already owned by the
Optionee for at least six months (or any shorter period necessary to avoid a
charge to the Company's earnings for financial reporting purposes) having a fair
market value on the day prior to the exercise date equal to the aggregate option
exercise price or (b) if and so long as the Common Stock is registered under
Section 12(b) or 12(g) of the Exchange Act, delivery of a properly executed
exercise notice, together with irrevocable instructions, to (i) a brokerage firm
designated by the Company to deliver promptly to the Company the aggregate
amount of sale or loan proceeds to pay the option exercise price and any
withholding tax obligations that may arise in connection with the exercise and
(ii) the Company to deliver the certificates for such purchased shares directly
to such brokerage firm, all in accordance with the regulations of the Federal
Reserve Board. In addition, the exercise price for shares purchased under an
option may be paid, either singly or in combination with one or more of the
alternative forms of payment authorized by this Section 8.2, by such other
consideration as the Board of Directors may permit.

        8.3 Federal Withholding Tax Requirements. Upon exercise of an option,
the Optionee shall, upon notification of the amount due and prior to or
concurrently with the delivery of the certificates representing the shares, pay
to the Company amounts necessary to satisfy any applicable federal, state and
local withholding tax requirements or shall otherwise make arrangements
satisfactory to the Company for such requirements. Such arrangements may include
payment of the appropriate

                                      -5-
<PAGE>   6
 withholding tax in shares of stock of the Company having a fair market value
equal to such withholding tax (up to the employer's minimum required tax
withholding rate), either through delivery of shares held by the Optionee (up to
the employer's minimum required tax withholding rate to the extent the
surrendered shares have been held less than six months) or by reduction in the
number of shares to be delivered to the Optionee upon exercise of such option.

           SECTION 9. TERMINATION OF EMPLOYMENT, DISABILITY AND DEATH

        9.1 General. If the employment of the Optionee by the Company, a Parent
or a Subsidiary shall terminate by retirement or for any reason other than
death, disability or cause as hereinafter provided, the option may be exercised
by the Optionee at any time prior to the expiration of three months after the
date of such termination of employment (unless by its terms the option sooner
terminates or expires), but only if, and to the extent the Optionee was entitled
to exercise the option at the date of such termination.

        9.2 Disability. If the employment of the Optionee by the Company, a
Parent or a Subsidiary is terminated because of the Optionee's disability (as
herein defined), the option may be exercised by the Optionee at any time prior
to the expiration of one year after the date of such termination (unless by its
terms the option sooner terminates or expires), but only if, and to the extent
the Optionee was entitled to exercise the Option at the date of such
termination. For purposes of this section, an Optionee will be considered to be
disabled if the Optionee is unable to engage in any substantial gainful activity
by reason of any medically determinable mental or physical impairment which can
be expected to result in death or which has lasted or can be expected to last a
continuous period of not less than 12 months.

        9.3 Death. In the event of the death of an Optionee while in the employ
of the Company, a Parent or a Subsidiary, the option shall be exercisable on or
prior to the expiration of one year after the date of such death (unless by its
terms the option sooner terminates and expires), but only if and to the extent
the Optionee was entitled to exercise the option at date of such death and only
by the Optionee's personal representative if then subject to administration as
part of the Optionee's estate, or by the person or persons to whom such
Optionee's rights under the option shall have passed by the Optionee's will or
by the applicable laws of descent and distribution.

        9.4 Termination for Cause. If the Optionee's employment with the
Company, a Parent or a Subsidiary is terminated for cause, any option granted
hereunder shall automatically terminate as of the first advice or discussion
thereof, and such Optionee shall thereupon have no right to purchase any shares
pursuant to such option. "Termination for Cause" shall mean dismissal for
dishonesty, conviction or confession of a crime punishable by law (except minor
violations), intoxication while at work,

                                      -6-
<PAGE>   7

fraud, misconduct or disclosure of confidential information.

        9.5 Waiver or Extension of Time Periods. The Board of Directors shall
have the authority, prior to or within the times specified in this Section 9 for
the exercise of any such option, to extend such time period or waive in its
entirety any such time period to the extent that such time period expires prior
to the expiration of the term of such option. In addition, the Board of
Directors may grant, pursuant to a specific resolution adopted at the time of
grant, modify or eliminate the time periods specified in this Section 9.
However, no Incentive Stock Option may be exercised after the expiration of ten
years from the date such option is granted. If an Optionee holding an Incentive
Stock Option exercises such option, by permission, after the expiration of the
time period specified in this Section 9, the option will no longer be treated as
an Incentive Stock Option under the Code and shall automatically be converted
into a Nonqualified Stock Option.

        9.6 Termination of Options. To the extent that the option of any
deceased Optionee or of any Optionee whose employment is terminated shall not
have been exercised within the limited periods prescribed in this Section 9, all
further rights to purchase shares pursuant to such option shall cease and
terminate at the expiration of such period. No Incentive Stock Option may be
exercised after the expiration of ten (10) years from the date such option is
granted, notwithstanding any provision to the contrary.

        9.7 Non-Employee Optionees. Options granted to optionees who are not
employees of the Company, a Parent or a Subsidiary at the time of grant shall
not be subject to the provisions of this Section 9, except as specifically
provided in the option.

                                      -7-
<PAGE>   8

                         SECTION 10. OPTION ADJUSTMENTS

        10.1 Adjustments Upon Changes in Capitalization. The aggregate number
and class of shares on which options may be granted under this Plan, the number
and class of shares covered by each outstanding option and the exercise price
per share thereof (but not the total price), and all such options, shall each be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock of the Company resulting from a split-up or consolidation
of shares or any like capital adjustment, or the payment of any stock dividend,
or any other increase or decrease in the number of shares of Common Stock of the
Company without the receipt of consideration by the Company.

        10.2 Effect of Certain Transactions. Except as provided in subsection
10.3, upon a merger, consolidation, acquisition of property or stock,
reorganization or liquidation of the Company, as a result of which the
shareholders of the Company receive cash, stock or other property in exchange
for their shares of Common Stock, any option granted hereunder shall terminate,
provided that the Optionee shall have the right immediately prior to any such
merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation to exercise his or her option in whole or in part
whether or not the vesting requirements set forth in the option agreement have
been satisfied.

        10.3 Conversion of Options on Stock for Stock Exchange. If the
shareholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any
transaction involving a merger, consolidation, acquisition of property or stock
or reorganization, all options granted hereunder shall terminate in accordance
with the provision of subsection 10.2 unless the Board of Directors and the
corporation issuing the Exchange Stock, in their sole discretion and subject to
any required action by the shareholders of the Company and such corporation,
agree that all such options granted hereunder are converted into options to
purchase shares of Exchange Stock. The amount and price of such options shall be
determined by adjusting the amount and price of the options granted hereunder in
the same proportion as used for determining the number of shares of Exchange
Stock the holders of the Common Stock receive in such merger, consolidation,
acquisition of property or stock, separation or reorganization. The vesting
schedule set forth in the option agreement shall continue to apply to the
options granted for the Exchange Stock.

        10.4 Acceleration. Except as otherwise provided in the instrument
evidencing the option, any options that are converted into options to purchase
shares of Exchange Stock shall automatically become 100% vested and exercisable
in the event that an Optionee's employment or service relationship should
terminate in contemplation of or

                                      -8-
<PAGE>   9

within three years after a transaction in which shareholders of the Company
receive Exchange Stock, unless such employment or service relationship is
terminated for Cause (as defined below) or by the Participant voluntarily
without Good Reason (as defined below).

        For purposes of the foregoing, "Cause" means, unless otherwise defined
in an employment or services agreement between the Company and an Optionee,
dishonesty, fraud, misconduct, unauthorized use or disclosure of confidential
information or trade secrets, or conviction or confession of a crime punishable
by law (except minor violations), in each case as determined by the Board of
Directors, and its determination shall be conclusive and binding.

        "Good Reason" means the occurrence of any of the following events or
conditions and the failure of another corporation to a transaction (the
"Successor Corporation") to cure such event or condition within 30 days after
receipt of written notice from the Optionee:

        (a) a change in the Optionee's status, title, position or
responsibilities (including reporting responsibilities) that, in the Optionee's
reasonable judgment, represents a substantial reduction in the status, title,
position or responsibilities as in effect immediately prior thereto; the
assignment to the Optionee of any duties or responsibilities that, in the
Optionee's reasonable judgment, are materially inconsistent with such status,
title, position or responsibilities; or any removal of the Optionee from or
failure to reappoint or reelect the Optionee to any of such positions, except in
connection with the termination of the Optionee's employment for Cause, as a
result of his or her disability or death, or by the Optionee other than for Good
Reason;

        (b) a reduction in the Optionee's annual base salary;

        (c) the Successor Corporation's requiring the Optionee (without the
Optionee's consent) to be based at any place outside a 50-mile radius of his or
her place of employment prior to a transaction, except for reasonably required
travel on the Successor Corporation's business that is not materially greater
than such travel requirements prior to the transaction;

        (d) the Successor Corporation's failure to (i) continue in effect any
material compensation or benefit plan (or the substantial equivalent thereof) in
which the Optionee was participating at the time of a transaction, including,
but not limited to, the Plan, or (ii) provide the Optionee with compensation and
benefits substantially

                                      -9-
<PAGE>   10

equivalent (in terms of benefit levels and/or reward opportunities) to those
provided for under each material employee benefit plan, program and practice as
in effect immediately prior to the transaction;

        (e) any material breach by the Successor Corporation of its obligations
to the Optionee under the Plan or any substantially equivalent plan of the
Successor Corporation; or

        (f) any purported termination of the Optionee's employment or service
relationship for Cause by the Successor Corporation that is not in accordance
with the definition of Cause under the Plan.

        10.5 Fractional Shares. In the event of any adjustment in the number of
shares covered by any option, any fractional shares resulting from such
adjustment shall be disregarded and each such option shall cover only the number
of full shares resulting from such adjustment.

        10.6 Determination of Board f Directors to be Final. All such
adjustments shall be made by the Board of Directors and its determination as to
what adjustments shall be made, and the extent thereof, shall be final, binding
and conclusive.

                       SECTION 11. SECURITIES REGULATIONS

        11.1 Compliance. Shares shall not be issued with respect to an option
granted under this Plan unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, any applicable state
securities laws, the Securities Act of 1933, as amended, the 1934 Act, the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the shares may then be listed, and shall further be subject
to the approval of counsel for the company with respect to such compliance.
Inability of the Company to obtain from any regulatory body having jurisdiction,
the authority deemed by the Company's counsel to be necessary for the lawful
issuance and sale of any shares hereunder, shall relieve the Company of any
liability in respect of the nonissuance or sale of such shares as to which such
requisite authority shall not have been obtained.

        11.2 Representations by Optionee. As a condition to the exercise of an
option, the Company may require the Optionee to represent and warrant at the
time of any such exercise that the shares are being purchased only for
investment and without any present intention to sell or distribute such shares,
if, in the opinion of counsel for the Company, such representation is required
by any relevant provision of the laws referred to in Section 11.1. At the option
of the Company, a stop transfer order

                                      -10-
<PAGE>   11

against any records of the Company, and a legend indicating that the stock may
not be pledged, sold or otherwise transferred unless an opinion of counsel was
provided (concurred in by counsel for the Company) stating that such transfer is
not in violation of any applicable law or regulation, may be stamped on the
stock certificate in order to assure exemption from registration. The Board of
Directors may also require such other action or agreement by the Optionees as
may from time to time be necessary to comply with the federal and state
securities laws. This provision shall not obligate the Company to undertake
registration of options or stock hereunder.

                          SECTION 12. EMPLOYMENT RIGHTS

        Nothing in this Plan or any option or right granted pursuant hereto
shall confer upon any Optionee any right to be continued in the employment of
the Company, a Parent or any Subsidiary of the Company or to remain a director,
or to interfere in any way with the right of the Company, a Parent or any
Subsidiary, in its sole discretion, to terminate such Optionee's employment at
any time or to remove the Optionee as a director at any time.

                      SECTION 13. AMENDMENT AND TERMINATION

        13.1 Action by Shareholders. The Plan may be terminated, modified or
amended by the shareholders of the Company.

        13.2 Action by Board of Directors. The Board of Directors may also
terminate the Plan, or modify or amend the Plan in such respects as it shall
deem advisable in order to conform to any changes in law or regulation
applicable thereto, or in other respects; provided, however, that the Board of
Directors may not, without further approval by the shareholders of the Company:

               (i)       Change the number of shares in the aggregate which may
be sold pursuant to options granted under the Plan;

               (ii)      Except as provided in Section 9.5, increase the period
during which options may be granted or exercised; or

               (iii)     Change the terms of the Plan which causes the Plan to
lose its qualification as an incentive stock option plan under Section 422 of
the Code.

        No termination, suspension or amendment of the Plan may, without the
consent of each Optionee to whom any option shall theretofore have been granted,
adversely affect the rights of such Optionees under such options.

        13.3 Automatic Termination. Unless the Plan shall theretofore have been

                                      -11-
<PAGE>   12

terminated as herein provided, this Plan shall terminate ten (10) years from the
earlier of: (i) the date on which the Plan is adopted; or (ii) the date on which
this Plan is approved by the shareholders of the Company. No option may be
granted after such termination, or during any suspension of this Plan. The
amendment or termination of this Plan shall not, without the consent of the
Optionee, alter or impair any rights or obligations under any option theretofore
granted under this Plan.

                     SECTION 14. EFFECTIVE DATE OF THE PLAN

        This Plan shall become effective on the date of its adoption by the
Board of Directors of the Company and options may be granted immediately
thereafter but no option may be exercised under the Plan unless and until the
Plan shall have been approved by the shareholders within 12 months after the
date of adoption of the Plan by the Board of Directors. If such approval is not
obtained within such period the Plan and any options granted thereunder shall be
null and void.

        Approved by the Board of Directors on April 11, 1995 and approved by
shareholders on May 8, 1995. Amendment to Section 2 to increase authorized
number of shares to 1,250,000 approved by the Board on March 20, 1997 and
approved by the shareholders on December 9, 1997; amendment to Section 2 to
increase authorized shares to 1,750,000 approved by the Board on July 27, 1998
and approved by the shareholders on December 29, 1998; amendment to Section 2 to
increase authorized shares to 2,250,000 approved by the Board on October 25,
1999 and approved by the shareholders on December 16, 1999; and further amended
and restated by the Board on July 6, 2000 to increase authorized shares to
3,250,000 and to make various other technical amendments. Amendments approved by
the shareholders on August 9, 2000.

                                      -12-

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