Prepared by MERRILL CORPORATION




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Exhibit 10.31    
  


AXYS PHARMACEUTICALS, INC.  


 1997 NON-OFFICER EQUITY INCENTIVE PLAN  


 Adopted September 4, 1997; amended October 16, 1998  


1.  Purposes.  


    (a) The purpose of the Plan is to provide a means by which selected Employees and Consultants may be given an
opportunity to benefit from increases in value of the common stock of the Company ("Common Stock") through the granting of (i) Nonstatutory Stock Options, (ii) stock bonuses and
(iii) rights to purchase restricted stock. 


    (b) The Company, by means of the Plan, seeks to retain the services of persons who are now Employees or Consultants, to
secure and retain the services of new Employees and Consultants and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates. 


    (c) The Company intends that the Stock Awards issued under the Plan shall, in the discretion of the Board, be either
(iv) Nonstatutory Stock Options granted pursuant to Section 6 hereof or (v) stock bonuses or rights to purchase restricted stock granted pursuant to Section 7 hereof. All
Options shall be in such form as issued pursuant to Section 6. 


2.  Definitions.  


    (a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f) respectively, of the Code, or such other parent corporation or subsidiary corporation designated by the
Board. 


    (b) "Board" means the Board of Directors of the Company. 


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


    (d) "Committee" means a committee appointed by the Board in accordance
with subsection 3(c) of the Plan. 


    (e) "Company" means Axys Pharmaceuticals, Inc., a Delaware
corporation. 


    (f)  "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for such services, provided that the term "Consultant" shall not include a Director. 


    (g) "Continuous Status as an Employee or Consultant" means that the
service relationship, whether as an Employee or a Consultant, is not interrupted or terminated. Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of:
(i) sick leave; (ii) military leave; (iii) any other leave of absence approved by the Board, provided that such leave is for a period of not more than ninety (90) days,
unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time; or (iv) in the
case of transfers between locations of the Company or between the Company, its Affiliates or its successor. 


    (h) "Director" means a member of the Board. 


    (i)  "Disability" means total and permanent disability as defined in
Section 22(e) of the Code. 


    (j)  "Employee" means any person employed by the Company or any
Affiliate of the Company. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient to constitute "employment" by the Company. 


    (k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended. 








    (l)  "Fair Market Value" means, as of any date, the value of the Common
Stock of the Company as determined in good faith by the Board. 


    (m) "Nonstatutory Stock Option" means an Option not intended to qualify
as an incentive stock option pursuant to Section 422 of the Code and the regulations promulgated thereunder. 



    (n) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. 


    (o) "Option" means a Nonstatutory Stock Option granted pursuant to the
Plan. 


    (p) "Option Agreement" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan. 



    (q) "Optionee" means a person to whom an Option is granted pursuant to
the Plan. 


    (r) "Plan" means this Axys Pharmaceuticals, Inc. 1997
Non-Officer Equity Incentive Plan. 


    (s) "Share" means a share of Common Stock of the Company. 



    (t) "Stock Award" means any right granted under the Plan, including any
Option, any stock bonus and any right to purchase restricted stock. 


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


    (v) "Stock Award Agreement" means an Option Agreement or other written
agreement between the Company and a holder of a Stock Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock Award Agreement shall be subject to the terms and
conditions of the Plan. 


3.  Administration.  


    (a) The Plan shall be administered by the Board unless and until the Board delegates administration to a Committee, as
provided in subsection 3(c). 


    (b) The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan: 



    (i)  To determine from time to time which of the persons eligible under the Plan shall be granted Stock Awards; when and
how each Stock Award shall be granted; whether a Stock Award will be an Option, a stock bonus, a right to purchase restricted stock or a combination of the foregoing; the provisions of each Stock
Award granted (which need not be identical), including the time or times when a person shall be permitted to receive Shares pursuant to a Stock Award and the number of Shares with respect to which a
Stock Award shall be granted to each such person. 


    (ii) To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective. 


    (iii) To amend the Plan or a Stock Award as provided in Section 12. 


    (iv) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote
the best interests of the Company which are not in conflict with the provisions of the Plan. 




    (c) The Board may delegate administration of the Plan to a committee or committees ("Committee") of one or more members
of the Board. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board (and references
in this Plan to the Board shall thereafter be to the 








Committee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time
and revest in the Board the administration of the Plan. 


4.  Shares Subject To The Plan.  


    (a) Subject to the provisions of Section 11 relating to adjustments upon changes in the Common Stock, the Shares
that may be issued pursuant to Stock Awards shall not exceed in the aggregate One Million (1,000,000) Shares. If any Stock Award shall for any reason expire or otherwise terminate, in whole or in
part, without having been exercised in full (or vested in the case of restricted stock), the Shares not acquired under such Stock Award shall revert to and again become available for issuance under
the Plan. 


    (b) The Shares subject to the Plan may be unissued Shares or reacquired Shares bought on the market or otherwise. 


5.  Eligibility.  


    Stock Awards may be granted only to Employees or Consultants who are not, at the time of such grants, (vi) Directors or (vii) Officers then
subject to Section 16 of the Exchange Act. 


6.  Option Provisions.  


    Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The provisions of separate Options need not
be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions: 


    (a) Term. No Option shall be exercisable after the expiration of ten
(10) years from the date of grant, or such longer or shorter term as may be provided in the Option Agreement. 



    (b) Price. The exercise price of each Option shall be as determined by
the Board and shall be set forth in the Option Agreement; provided, however, that in no event shall the exercise price be less than eighty-five percent (85%) of the Fair Market Value on
the date of grant. 


    (c) Consideration. The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall be determined by the Board and may consist entirely of (viii) cash or check, (ix) promissory note (except that
payment of the Share's "par value," as defined in the Delaware General Corporation Law, shall not be made by deferred payment), (x) other Shares having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which the Option shall be exercised, including by delivering to the Company an attestation of ownership of owned and unencumbered
Shares in a form approved by the Company, (xi) payment pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board which, prior to the issuance of the
Shares, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds,
(xii) any combination of such methods of payment or (xiii) such other consideration and method of payment for the issuance of Shares to the extent permitted under applicable law. In
making its determination as to the type of consideration to accept, the Board shall consider if acceptance of such consideration may be reasonably expected to benefit the Company. In the case of any
deferred payment arrangement, interest shall be charged at the minimum rate of interest necessary to avoid the treatment as interest, under any applicable provisions of the Code, of any amounts other
than amounts stated to be interest under the deferred payment arrangement. 


    (d) Transferability. An Option may be transferred to the extent provided
in the Option Agreement, in which case the Option may be transferred upon such terms and conditions as are set forth in the Option, as the Board or the Committee shall determine in its discretion,
including (without limitation) pursuant to a "domestic relations order" within the meaning of such rules, regulations or interpretations of the Securities and Exchange Commission as are applicable for
purposes of Section 16 







of the Exchange Act. Notwithstanding the foregoing, the person to whom an Option is granted may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionee, shall thereafter be entitled to exercise the Option. 


    (e) Vesting. The total number of Shares subject to an Option may, but
need not, be allotted in periodic installments (which may, but need not, be equal). The Option Agreement may provide that from time to time during each of such installment periods, the Option may
become exercisable ("vest") with respect to some or all of the Shares allotted to that period, and may be exercised with respect to some or all of the Shares allotted to such period and/or any prior
period as to which the Option became vested but was not fully exercised. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based
on performance or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this subsection 6(e) are subject to any Option provisions
governing the minimum number of Shares as to which an Option may be exercised. 


    (f)  Termination of Employment or Consulting Relationship. In the event
an Optionee's Continuous Status as an Employee or Consultant terminates (other than upon the Optionee's death or Disability), the Optionee may, but only within ninety (90) days (or such other
period of time as is determined by the Board) after the date of such termination, exercise his or her Option, which shall in no event be later than the expiration of the term of the Option as set
forth in the Option Agreement (the "Post-Termination Exercise Period") and only to the extent that the Optionee was entitled to exercise the Option on the date the Optionee's Continuous
Status as an Employee or Consultant terminates. The Board may at any time extend the Post-Termination Exercise Period and provide for continued vesting during such extended period. If, as
of the date of termination, the Optionee is not entitled to exercise his or her entire Option, the Shares covered by the unexercisable portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time specified in the Option Agreement or as otherwise determined above, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan. Notwithstanding the foregoing, the Board shall have the power to permit an Option to vest, in whole or in part, during the Post-Termination Exercise
Period. 


    An
Optionee's Option Agreement may also provide that if the exercise of the Option following the termination of the Optionee's Continuous Status as an Employee or Consultant (other
than upon the Optionee's death or disability) would be prohibited at any time solely because the issuance of Shares would violate the registration requirements under the Securities Act, then the
Option shall terminate on the earlier of (xiv) the expiration of the term of the Option set forth in the first paragraph of this subsection 6 (f), or (xv) the expiration of a period of
ninety (90) days after the termination of the Optionee's Continuous Status as an Employee or Consultant during which the exercise of the Option would not be in violation of such registration
requirements. 


    (g) Disability of Optionee. In the event an Optionee's Continuous Status
as an Employee or consultant terminates as a result of the Optionee's Disability, the Optionee may exercise his or her Option (to the extent that the Optionee was entitled to exercise it as of the
date of termination), but only within such period of time ending on the earlier of (xvi) the date twelve (12) months following such termination or (xvii) the expiration of the
term of the Option as set forth in the Option Agreement. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option, the Shares covered by the unexercisable portion of the Option shall revert to and again become available for issuance
under the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert
to and again become available for issuance under the Plan. 







    (h) Death of Optionee. In the event of the death of an Optionee during
Optionee's Continuous Status as an Employee or Consultant, the Option may be exercised (to the extent the Optionee was entitled to exercise the Option as of the date of death) by the Optionee's
estate, by a person who acquired the right to exercise the Option by bequest or inheritance, but only within the period ending on the earlier of (xviii) the date twelve (12) months
following the date of death or (xix) the expiration of the term of such Option as set forth in the Option Agreement. If, at the time of death, the Optionee was not entitled to exercise his or
her entire Option, the Shares covered by the unexercisable portion of the Option shall revert to and again become available for issuance under the Plan. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to and again become available for issuance under the Plan. 


    (i)  Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee or Consultant to exercise the Option as to any part or all of the Shares subject to the Option prior to the full vesting of the Option. Any
unvested Shares so purchased may be subject to a repurchase right in favor of the Company or to any other restriction the Board determines to be appropriate. 


7.  Terms Of Stock Bonuses And Purchases Of Restricted Stock.  


    Each stock bonus or restricted stock purchase agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus or restricted stock purchase agreements may change from time to time, and the terms and conditions of separate agreements need not be identical, but each stock
bonus or restricted stock purchase agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions as
appropriate: 


    (a) Purchase Price. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine and designate in such agreement. Notwithstanding the foregoing, the Board may determine that eligible participants in the Plan may
be awarded stock pursuant to a stock bonus agreement in consideration for past services actually rendered to the Company or for its benefit. 


    (b) Transferability. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws of descent and distribution so long as stock awarded under such agreement remains subject to the terms of any restrictive covenant
(such as a repurchase option or reacquisition option) in favor of the Company. 


    (c) Consideration. The purchase price of Shares acquired pursuant to a
stock purchase agreement shall be paid either: (xx) in cash at the time of purchase, (xxi) at the discretion of the Board, according to a deferred payment or other arrangement with the
person to whom the Shares are sold, except that
payment of the common stock's "par value" (as defined in the Delaware General Corporation Law) shall not be made by deferred payment, or (xxii) in any other form of legal consideration that may
be acceptable to the Board in its discretion. Notwithstanding the foregoing, the Board to which administration of the Plan has been delegated may award stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its benefit. 


    (d) Vesting. Shares sold or awarded under the Plan may, but need not, be
subject to a repurchase option or reacquisition option in favor of the Company in accordance with a vesting schedule to be determined by the Board. 


    (e) Termination of Continuous Status as an Employee or Consultant. In
the event a Participant's Continuous Status as an Employee or Consultant terminates, the Company may repurchase or otherwise reacquire any or all of the Shares held by that person which have not
vested as of the date of termination under the terms of the stock bonus or restricted stock purchase agreement between the Company and such person. 







8.  Covenants Of The Company.  


    (a) During the terms of the Stock Awards, the Company shall keep available at all times the number of Shares required to
satisfy such Stock Awards. 


    (b) The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell Shares under Stock Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act either the Plan,
any Stock Award or any Shares issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance and sale of Shares under the Plan, the Company shall be relieved from any liability for failure to issue and sell Shares
upon exercise of such Stock Awards unless and until such authority is obtained. 


9.  Use Of Proceeds From Shares.  


    Proceeds from the sale of Shares pursuant to Stock Awards shall constitute general funds of the Company. 


10.  Miscellaneous.  


    (a) The Board shall have the power to accelerate the time at which all or any part of a Stock Award may first be
exercised or the time during which a Stock Award or any part thereof will vest, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during
which it will vest. 


    (b) No Employee, Consultant or any person to whom an Option is transferred in accordance with the Plan shall be deemed
to be the holder of, or to have any of the rights of a holder with respect to, any Shares subject to such Option unless and until such person has satisfied all requirements for exercise of the Option
pursuant to its terms. 


    (c) Nothing in the Plan or any instrument executed or Stock Award granted pursuant thereto shall confer upon any
Employee, Consultant or other holder of Stock Awards any right to continue in the employ of the Company or any Affiliate or to continue serving as a Consultant or shall affect the right of the Company
or any Affiliate to terminate the employment or consulting relationship with or without notice and with or without cause. 


    (d) The Company may require any person to whom a Stock Award is granted, or any person to whom a Stock Award is
transferred in accordance with the Plan, as a condition of exercising or acquiring Shares under any Stock Award, (xxiii) to give written assurances satisfactory to the Company as to such
person's knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial
and business matters, and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks associated with the Stock Award, and (xxiv) to give
written assurances satisfactory to the Company stating that such person is acquiring the Shares subject to the Stock Award for such person's own account and not with any present intention of selling
or otherwise distributing the Shares. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (i) the issuance of the Shares upon the
exercise or acquisition of Shares under the Stock Award has been registered under a then currently effective registration statement under the Securities Act, or (ii) as to any particular
requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of
counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to
comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Shares. 


    (e) To the extent provided by the terms of a Stock Award Agreement, the person to whom a Stock Award is granted may
satisfy any federal, state or local tax withholding obligation relating to the 








exercise or acquisition of Shares under a Stock Award by any of the following means or by a combination of such means: (xxv) tendering a cash payment, (xxvi) authorizing the Company to
withhold Shares from the Shares otherwise issuable to the participant as a result of the exercise or acquisition of Shares under the Stock Award or (xxvii) delivering to the Company owned and
unencumbered Shares, including by delivering to the Company an attestation of ownership of owned and unencumbered Shares in a form approved by the Company. 



11.  Adjustments Upon Changes In Stock. 


    (a) If any change is made in the Shares subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend,
combination of Shares, exchange of Shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of Shares subject to the Plan pursuant to subsection 4(a), and the outstanding Stock Awards will be appropriately adjusted in the class(es) and number of Shares and price
per Share subject to such outstanding Stock Awards. Such adjustments shall be made by the Board, the determination of which shall be final, binding and conclusive. (The conversion of any convertible
securities of the Company shall not be treated as a "transaction not involving the receipt of consideration by the Company.") 


    (b) In the event of the proposed dissolution or liquidation of the Company, the Board shall notify the Optionee or
participant at least fifteen (15) days prior to such proposed action. To the extent it has not been previously exercised, the Stock Award will terminate immediately prior to the consummation of
such proposed action. In the event of a Change in Control of the Company, the Stock Award shall be assumed or an equivalent Stock Award shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation. 


    (c) For purposes of this Plan, "Change in Control" means: (1) a sale of all or substantially all of the assets of
the Company, (2) a merger or consolidation in which the Company is not the surviving corporation, (3) a reverse merger in which the Company is the surviving corporation but Shares
outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (4) the acquisition by any
person, entity or group within the meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or any Affiliate of the Company) of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or
comparable successor rule) of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors. 


12.  Amendment Of The Plan and Stock Awards.  


    (a) The Board at any time, and from time to time, may amend the Plan. 


    (b) The Board, in its sole discretion, may submit the Plan and/or any amendment to the Plan for stockholder approval. 


    (c) Rights and obligations under any Stock Award granted before amendment of the Plan shall not be impaired by any such
amendment unless (xxviii) the Company requests the consent of the person to whom the Stock Award was granted and (xxix) such person consents in writing. 


    (d) The Board at any time may amend the terms of any one or more Stock Awards; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such amendment unless (xxx) the Company requests the consent of the person to whom the Stock Award was granted and
(xxxi) such person consents in writing. 






13.  Termination Or Suspension Of The Plan.  


    (a) The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate when all
Shares reserved for issuance under the Plan have been issued and all such issued
Shares are no longer subject to a repurchase option or a reacquisition option in favor of the Company. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is
terminated. 


    (b) Rights and obligations under any Stock Award granted while the Plan is in effect shall not be impaired by suspension
or termination of the Plan, except with the written consent of the person to whom the Stock Award was granted. 



14.  Effective Date Of Plan.  


    The Plan shall become effective on              , 1997. 









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Exhibit 10.31