Document:

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                                                                    EXHIBIT 10.8
                          ANADYS PHARMACEUTICALS, INC.

                        2004 EMPLOYEE STOCK PURCHASE PLAN

               ADOPTED BY THE BOARD OF DIRECTORS: JANUARY 29, 2004

         In this document, capitalized terms not otherwise defined shall have
the same definitions of such terms as in the Anadys Pharmaceuticals, Inc., 2004
Employee Stock Purchase Plan.

1.       GRANT; OFFERING DATE.

         (a)      The Board hereby authorizes a series of Offerings pursuant to
the terms of this Offering document.

         (b)      The first Offering hereunder (the "Initial Offering") shall
begin on the date the Company's Common Stock is first offered to the public
under a registration statement declared effective under the Securities Act (the
"IPO Date") and shall end twenty-four (24) months following the IPO Date, unless
terminated earlier as provided below. After the Initial Offering, an Offering
shall begin on the day after First Purchase Date of the immediately preceding
Offering. The first day of an Offering is that Offering's "Offering Date."
Except as provided below, each Offering shall be approximately twenty-four (24)
months in duration, with four (4) Purchase Periods which, except for the first
Purchase Period of the Initial Offering (which may be longer or shorter than six
(6) months) shall be approximately six (6) months in length. Except as provided
below, a Purchase Date is the last day of a Purchase Period or of an Offering,
as the case may be. The Initial Offering shall consist of four (4) Purchase
Periods with the First Purchase Period of the Initial Offering ending on
____________ [approximately six (6) months following the IPO Date].

         (c)      Notwithstanding the foregoing: (i) if any Offering Date falls
on a day that is not a Trading Day, then such Offering Date shall instead fall
on the next subsequent Trading Day, and (ii) if any Purchase Date falls on a day
that is not a Trading Day, then such Purchase Date shall instead fall on the
immediately preceding Trading Day.

         (d)      Prior to the commencement of any Offering, the Board may
change any or all terms of such Offering and any subsequent Offerings. The
granting of Purchase Rights pursuant to each Offering hereunder shall occur on
each respective Offering Date unless prior to such date (i) the Board determines
that such Offering shall not occur, or (ii) no shares of Common Stock remain
available for issuance under the Plan in connection with the Offering.

         (e)      If the Company's accountants advise the Company that the
accounting treatment of purchases under the Plan will change or has changed in a
manner that the Company determines is detrimental to its best interests, then
the Company may, in its discretion, take any or all of the following actions:
(i) terminate each Offering hereunder that is then ongoing as of the next
Purchase Date (after the purchase of stock on such Purchase Date) under such
Offering; (ii) set a new Purchase Date for each ongoing Offering and terminate
such Offerings after the

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purchase of stock on such Purchase Date; (iii) amend the Plan and the ongoing
Offering to reduce or eliminate an accounting treatment that is detrimental to
the Company's best interests for such Offerings and (iv) terminate each ongoing
Offering and refund any money contributed back to the participants.

2.       ELIGIBLE EMPLOYEES.

         (a)      Each Eligible Employee who, on the date that is six (6) months
prior to the Offering Date of an Offering hereunder, is (i) an employee of the
Company; (ii) an employee of a Subsidiary incorporated in the United States; or
(iii) an employee of a Subsidiary that is not incorporated in the United States,
provided that the Board or Committee has designated the employees of such
Subsidiary as eligible to participate in the Offering, shall be granted a
Purchase Right on the Offering Date of such Offering.

         (b)      Notwithstanding the foregoing, the following Employees shall
not be Eligible Employees or be granted Purchase Rights under an Offering:

                  (i)      part-time or seasonal Employees whose customary
employment is fifteen (15) hours per week or less or five (5) months per
calendar year or less;

                  (ii)     five percent (5%) stockholders (including ownership
through unexercised and/or unvested stock options) as described in Section 6(c)
of the Plan; or

                  (iii)    Employees in jurisdictions outside of the United
States if, as of the Offering Date of the Offering, the grant of such Purchase
Rights would not be in compliance with the applicable laws of any jurisdiction
in which the Employee resides or is employed.

         (c)      Notwithstanding the foregoing, each person who first becomes
an Eligible Employee during an Offering shall not be able to participate in such
Offering.

3.       PURCHASE RIGHTS.

         (a)      Subject to the limitations herein and in the Plan, a
Participant's Purchase Right shall permit the purchase of the number of shares
of Common Stock purchasable with up to twelve percent (12%) of such
Participant's Earnings paid during the period of such Offering beginning
immediately after such Participant first commences participation; provided,
however, that no Participant may have more than twelve percent (12%) of such
Participant's Earnings applied to purchase shares of Common Stock under all
ongoing Offerings under the Plan and all other plans of the Company and Related
Corporations that are intended to qualify as Employee Stock Purchase Plans.

         (b)      For Offerings hereunder, "Earnings" means the base
compensation paid to a Participant, including all salary, wages (including
amounts elected to be deferred by the Participant, that would otherwise have
been paid, under any cash or deferred arrangement or other deferred compensation
program established by the Company or a Related Corporation), overtime pay,
commissions and bonuses, but excluding all other remuneration paid directly to
such Participant, profit sharing, the cost of employee benefits paid for by the
Company or a Related Corporation, education or tuition reimbursements, imputed
income arising under any

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Company or Related Corporation group insurance or benefit program, traveling
expenses, business and moving expense reimbursements, income received in
connection with stock options, contributions made by the Company or a Related
Corporation under any employee benefit plan, and similar items of compensation.

         (c)      Notwithstanding the foregoing, the maximum number of shares of
Common Stock that a Participant may purchase on any Purchase Date in an Offering
shall be such number of shares as has a Fair Market Value (determined as of the
Offering Date for such Offering) equal to (x) $25,000 multiplied by the number
of calendar years in which the Purchase Right under such Offering has been
outstanding at any time, minus (y) the Fair Market Value of any other shares of
Common Stock (determined as of the relevant Offering Date with respect to such
shares) that, for purposes of the limitation of Section 423(b)(8) of the Code,
are attributed to any of such calendar years in which the Purchase Right is
outstanding. The amount in clause (y) of the previous sentence shall be
determined in accordance with regulations applicable under Section 423(b)(8) of
the Code based on (i) the number of shares previously purchased with respect to
such calendar years pursuant to such Offering or any other Offering under the
Plan, or pursuant to any other Company or Related Corporation plans intended to
qualify as Employee Stock Purchase Plans, and (ii) the number of shares subject
to other Purchase Rights outstanding on the Offering Date for such Offering
pursuant to the Plan or any other such Company or Related Corporation Employee
Stock Purchase Plan.

         (d)      The maximum aggregate number of shares of Common Stock
available to be purchased by all Participants under an Offering shall be the
number of shares of Common Stock remaining available under the Plan on the
Offering Date. If the aggregate purchase of shares of Common Stock upon exercise
of Purchase Rights granted under the Offering would exceed the maximum aggregate
number of shares available, the Board shall make a pro rata allocation of the
shares available in a uniform and equitable manner.

         (e)      Notwithstanding the foregoing, the maximum number of shares of
Common Stock that an Eligible Employee may purchase on any Purchase Date during
any Offering shall not exceed 10,000 shares.

4.       PURCHASE PRICE.

         The purchase price of shares of Common Stock under an Offering shall be
the lesser of: (i) eighty-five percent (85%) of the Fair Market Value of such
shares of Common Stock on the applicable Offering Date, or (ii) eighty-five
percent (85%) of the Fair Market Value of such shares of Common Stock on the
applicable Purchase Date, in each case rounded up to the nearest whole cent per
share. For the Initial Offering, the Fair Market Value of the shares of Common
Stock at the time when the Offering commences shall be the price per share at
which shares are first sold to the public in the Company's initial public
offering as specified in the final prospectus for that initial public offering.

5.       PARTICIPATION.

         (a)      An Eligible Employee may elect to participate in an Offering
on the Offering Date. An Eligible Employee shall elect his or her payroll
deduction percentage on such

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enrollment form as the Company provides. The completed enrollment form must be
delivered to the Company prior to the date participation is to be effective,
unless a later time for filing the enrollment form is set by the Company for all
Eligible Employees with respect to a given Offering. Payroll deduction
percentages must be expressed in whole percentages of Earnings, with a minimum
percentage of one percent (1%) and a maximum percentage of twelve percent (12%).
Except as provided in paragraph (e) below with respect to the Initial Offering,
Contributions may be made only by way of payroll deductions.

         (b)      A Participant may increase or decrease his or her
participation level twice during a Purchase Period. In addition, a Participant
may decrease to zero percent (0%) his or her participation level only once
during a Purchase Period. Any such increase or decrease in participation level
shall be made by delivering a notice to the Company or a designated Subsidiary
in such form as the Company provides prior to the ten (10) day period (or such
shorter period of time as determined by the Company and communicated to
Participants) immediately preceding the next Purchase Date of the Purchase
Period for which it is to be effective.

         (c)      A Participant may withdraw from an Offering and receive a
refund of his or her Contributions (reduced to the extent, if any, such
Contributions have been used to acquire shares of Common Stock for the
Participant on any prior Purchase Date) without interest, at any time prior to
the end of the Offering, excluding only each ten (10) day period immediately
preceding a Purchase Date (or such shorter period of time determined by the
Company and communicated to Participants), by delivering a withdrawal notice to
the Company or a designated Subsidiary in such form as the Company provides. A
Participant who has withdrawn from an Offering shall not again participate in
such Offering, but may participate in subsequent Offerings under the Plan in
accordance with the terms of the Plan and the terms of such subsequent
Offerings.

         (d)      Notwithstanding the foregoing or any other provision of this
Offering document or of the Plan to the contrary, neither the enrollment of any
Eligible Employee in the Plan nor any forms relating to participation in the
Plan shall be given effect until such time as a registration statement covering
the registration of the shares under the Plan that are subject to the Offering
has been filed by the Company and has become effective.

         (e)      Notwithstanding the foregoing or any other provision of this
Offering document or of the Plan to the contrary, with respect to the Initial
Offering only, each Eligible Employee who is employed on the IPO Date
automatically shall be enrolled in the Initial Offering, with a Purchase Right
to purchase up to the number of shares of Common Stock that are purchasable with
twelve percent (12%) of the Eligible Employee's Earnings, subject to the
limitations set forth in Section 3(c)-(e) above. Following the filing of an
effective registration statement pursuant to a Form S-8, such Eligible Employee
shall be provided a certain period of time, as determined by the Company in its
sole discretion, within which to elect to authorize payroll deductions for the
purchase of shares during the Initial Offering (which may be for a percentage
that is less than twelve percent (12%) of the Eligible Employee's Earnings). If
such Eligible Employee elects not to authorize such payroll deductions, the
Eligible Employee instead may purchase shares of Common Stock under the Plan by
delivering a single cash payment for the purchase of such shares to the Company
or a designated Subsidiary prior to the ten (10) day period (or such shorter
period of time as determined by the Company and communicated to

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Participants) immediately preceding the Purchase Date under the Initial
Offering. If an Eligible Employee neither elects to authorize payroll deductions
nor chooses to make a cash payment in accordance with the foregoing sentence,
then the Eligible Employee shall not purchase any shares of Common Stock during
the Initial Offering. After the end of the Initial Offering, in order to
participate in any subsequent Offerings, an Eligible Employee must enroll and
authorize payroll deductions prior to the commencement of the Offering, in
accordance with paragraph (a) above; provided, however, that once an Eligible
Employee enrolls in an Offering and authorizes payroll deductions (including in
connection with the Initial Offering), the Eligible Employee automatically shall
be enrolled for all subsequent Offerings until he or she elects to withdraw from
an Offering pursuant to paragraph (c) above or terminates his or her
participation in the Plan.

6.       PURCHASES; RESTRICTIONS ON TRANSFERABILITY OF SHARES

         (a)      Subject to the limitations contained herein, on each Purchase
Date, each Participant's Contributions (without any increase for interest) shall
be applied to the purchase of whole shares, up to the maximum number of shares
permitted under the Plan and the Offering.

         (b)      Following the exercise of any Purchase Right under the Plan, a
Participant may not sell, dispose of, transfer, or enter into any similar
transaction with the same economic effect as a sale of, any shares of Common
Stock purchased pursuant to the exercise of such Purchase Right for a period of
sixty (60) days after such purchase (or such longer or shorter period of time as
determined by the Company and communicated in writing to Participants). A
Participant may be required to execute and deliver such other agreements as may
be reasonably requested by the Company that are consistent with the foregoing or
that are necessary to give further effect thereto. In order to enforce the
foregoing, the Company may impose stop-transfer instructions with respect to
such shares of Common Stock until the end of such period, or place legends on
stock certificates issued pursuant to the Plan restricting the transfer of such
shares until the end of such period.

7.       NOTICES AND AGREEMENTS.

         Any notices or agreements provided for in an Offering or the Plan shall
be given in writing, in a form provided by the Company, and unless specifically
provided for in the Plan or this Offering, shall be deemed effectively given
upon receipt or, in the case of notices and agreements delivered by the Company,
five (5) days after deposit in the United States mail, postage prepaid.

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8.       EXERCISE CONTINGENT ON STOCKHOLDER APPROVAL.

         The Purchase Rights granted under an Offering are subject to the
approval of the Plan by the stockholders of the Company as required for the Plan
to obtain treatment as an Employee Stock Purchase Plan.

9.       OFFERING SUBJECT TO PLAN.

         Each Offering is subject to all the provisions of the Plan, and the
provisions of the Plan are hereby made a part of the Offering. The Offering is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of an Offering and those of the
Plan (including interpretations, amendments, rules and regulations which may
from time to time be promulgated and adopted pursuant to the Plan), the
provisions of the Plan shall control.<PAGE>

                                                                    EXHIBIT 10.9
                          ANADYS PHARMACEUTICALS, INC.
                 2004 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

                            ADOPTED JANUARY 29, 2004
                   APPROVED BY STOCKHOLDERS FEBRUARY 24, 2004
                       EFFECTIVE DATE: MARCH __, 2004

1.       PURPOSES.

         (a)      ELIGIBLE OPTION RECIPIENTS. The persons eligible to receive
Options are the Non-Employee Directors of the Company.

         (b)      AVAILABLE OPTIONS. The purpose of the Plan is to provide a
means by which Non-Employee Directors may be given an opportunity to benefit
from increases in value of the Common Stock through the granting of Nonstatutory
Stock Options.

         (c)      GENERAL PURPOSE. The Company, by means of the Plan, seeks to
retain the services of its Non-Employee Directors, to secure and retain the
services of new Non-Employee Directors and to provide incentives for such
persons to exert maximum efforts for the success of the Company and its
Affiliates.

2.       DEFINITIONS.

         (a)      "ACCOUNTANT" means the independent public accountants of the
Company.

         (b)      "AFFILIATE" means any parent corporation or subsidiary
corporation of the Company, whether now or hereafter existing, as those terms
are defined in Sections 424(e) and (f), respectively, of the Code.

         (c)      "ANNUAL GRANT" means an Option granted annually to all
Non-Employee Directors who meet the specified criteria pursuant to Section 6(b).

         (d)      "ANNUAL MEETING" means the annual meeting of the stockholders
of the Company.

         (e)      "BOARD" means the Board of Directors of the Company.

         (f)      "CAPITALIZATION ADJUSTMENT" has the meaning ascribed to that
term in Section 11(a).

         (g)      "CHANGE IN CONTROL" means the occurrence, in a single
transaction or in a series of related transactions, of any one or more of the
following events:

                  (i)      any Exchange Act Person becomes the Owner, directly
or indirectly, of securities of the Company representing more than fifty percent
(50%) of the combined voting

                                       1.

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power of the Company's then outstanding securities other than by virtue of a
merger, consolidation or similar transaction. Notwithstanding the foregoing, a
Change in Control shall not be deemed to occur (A) on account of the acquisition
of securities of the Company by an investor, any affiliate thereof or any other
Exchange Act Person from the Company in a transaction or series of related
transactions the primary purpose of which is to obtain financing for the company
through the issuance of equity securities or (B) solely because the level of
Ownership held by any Exchange Act Person (the "Subject Person") exceeds the
designated percentage threshold of the outstanding voting securities as a result
of a repurchase or other acquisition of voting securities by the Company
reducing the number of shares outstanding, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of the
acquisition of voting securities by the Company, and after such share
acquisition, the Subject Person becomes the Owner of any additional voting
securities that, assuming the repurchase or other acquisition had not occurred,
increases the percentage of the then outstanding voting securities Owned by the
Subject Person over the designated percentage threshold, then a Change in
Control shall be deemed to occur;

                  (ii)     there is consummated a merger, consolidation or
similar transaction involving (directly or indirectly) the Company if,
immediately after the consummation of such merger, consolidation or similar
transaction, the stockholders of the Company immediately prior thereto do not
Own, directly or indirectly, either (A) outstanding voting securities
representing more than fifty percent (50%) of the combined outstanding voting
power of the surviving Entity in such merger, consolidation or similar
transaction or (B) more than fifty percent (50%) of the combined outstanding
voting power of the parent of the surviving Entity in such merger, consolidation
or similar transaction, in each case in substantially the same proportion as
their Ownership of the outstanding voting securities of the Company immediately
prior to such transaction;

                  (iii)    the stockholders of the Company approve or the Board
approves a plan of complete dissolution or liquidation of the Company, or a
complete dissolution or liquidation of the Company shall otherwise occur;

                  (iv)     there is consummated a sale, lease, license or other
disposition of all or substantially all of the consolidated assets of the
Company and its Subsidiaries, other than a sale, lease, license or other
disposition of all or substantially all of the consolidated assets of the
Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the
combined voting power of the voting securities of which are Owned by
stockholders of the Company in substantially the same proportion as their
Ownership of the outstanding voting securities of the Company immediately prior
to such sale, lease, license or other disposition; or

                  (v)      individuals who, on the date this Plan is adopted by
the Board, are members of the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the members of the Board; provided,
however, that any new Board member shall, for purposes of this Plan, be
considered as a member of the Incumbent Board if the appointment or election (or
nomination for election) of such new Board member was approved or recommended by
at least fifty percent (50%) of the members of the Incumbent Board, provided
that the members of the Incumbent Board, at the time of such election or
nomination, constitute a majority of the Board).

                                       2.

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

         (i)      "COMMITTEE" means a committee of one or more members of the
Board appointed by the Board in accordance with Section 3(c).

         (j)      "COMMON STOCK" means the common stock of the Company.

         (k)      "COMPANY" means Anadys Pharmaceuticals, Inc., a Delaware
corporation.

         (l)      "CONSULTANT" means any person, including an advisor, (i)
engaged by the Company or an Affiliate to render consulting or advisory services
and who is compensated for such services or (ii) serving as a member of the
Board of Directors of an Affiliate. However, the term "Consultant" shall not
include either Directors of the Company who are not compensated by the Company
for their services as Directors or Directors of the Company who are merely paid
a director's fee by the Company for their services as Directors.

         (m)      "CONTINUOUS SERVICE" means that the Optionholder's service
with the Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated. The Optionholder's Continuous
Service shall not be deemed to have terminated merely because of a change in the
capacity in which the Optionholder renders service to the Company or an
Affiliate as an Employee, Consultant or Director or a change in the entity for
which the Optionholder renders such service, provided that there is no
interruption or termination of the Optionholder's Continuous Service. For
example, a change in status from a Non-Employee Director of the Company to a
Consultant of an Affiliate or an Employee of the Company will not constitute an
interruption of Continuous Service. The Board or the chief executive officer of
the Company, in that party's sole discretion, may determine whether Continuous
Service shall be considered interrupted in the case of any leave of absence
approved by that party, including sick leave, military leave or any other
personal leave.

         (n)      "CORPORATE TRANSACTION" means the occurrence, in a single
transaction or in a series of related transactions, of any one or more of the
following events:

                  (i)      a sale or other disposition of all or substantially
all, as determined by the Board in its discretion, of the consolidated assets of
the Company and its Subsidiaries;

                  (ii)     a sale or other disposition of at least ninety
percent (90%) of the outstanding securities of the Company;

                  (iii)    a merger, consolidation or similar transaction
following which the Company is not the surviving corporation; or

                  (iv)     a merger, consolidation or similar transaction
following which the Company is the surviving corporation but the shares of
Common Stock outstanding immediately preceding the merger, consolidation or
similar transaction are converted or exchanged by virtue of the merger,
consolidation or similar transaction into other property, whether in the form of
securities, cash or otherwise.

         (o)      "DIRECTOR" means a member of the Board of Directors of the
Company.

                                       3.

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         (p)      "DISABILITY" means the inability of a person, in the opinion
of a qualified physician acceptable to the Company, to perform the major duties
of that person's position with the Company or an Affiliate of the Company
because of the sickness or injury of the person.

         (q)      "EMPLOYEE" means any person employed by the Company or an
Affiliate. Service as a Director or payment of a director's fee by the Company
or an Affiliate shall not be sufficient to constitute "employment" by the
Company or an Affiliate.

         (r)      "ENTITY" means a corporation, partnership or other entity.

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

         (t)      "EXCHANGE ACT PERSON" means any natural person, Entity or
"group" (within the meaning of Section 13(d) or 14(d) of the Exchange Act),
except that "Exchange Act Person" shall not include (A) the Company or any
Subsidiary of the Company, (B) any employee benefit plan of the Company or any
Subsidiary of the Company or any trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any Subsidiary of the Company,
(C) an underwriter temporarily holding securities pursuant to an offering of
such securities, or (D) an Entity Owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
Ownership of stock of the Company.

         (u)      "FAIR MARKET VALUE" means, as of any date, the value of the
Common Stock determined as follows:

                  (i)      If the Common Stock is listed on any established
stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap
Market, the Fair Market Value of a share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest
volume of trading in the Common Stock) on the last market trading day prior to
the day of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable.

                  (ii)     In the absence of such markets for the Common Stock,
the Fair Market Value shall be determined in good faith by the Board.

         (v)      "INITIAL GRANT" means an Option granted to a Non-Employee
Director who meets the specified criteria pursuant to Section 6(a).

         (w)      "IPO DATE" means the effective date of the initial public
offering of the Common Stock.

         (x)      "NON-EMPLOYEE DIRECTOR" means a Director who is not an
Employee.

         (y)      "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.

                                       4.

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         (z)      "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.

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

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

         (cc)     "OPTIONHOLDER" means a person to whom an Option is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.

         (dd)     "OWN," "OWNED," "OWNER," "OWNERSHIP" A person or Entity shall
be deemed to "Own," to have "Owned," to be the "Owner" of, or to have acquired
"Ownership" of securities if such person or Entity, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise, has
or shares voting power, which includes the power to vote or to direct the
voting, with respect to such securities.

         (ee)     "PLAN" means this Anadys Pharmaceuticals, Inc. 2004
Non-Employee Directors' Stock Option Plan.

         (ff)     "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange
Act or any successor to Rule 16b-3, as in effect from time to time.

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

         (hh)     "SUBSIDIARY" means, with respect to the Company, (i) any
corporation of which more than fifty percent (50%) of the outstanding capital
stock having ordinary voting power to elect a majority of the board of directors
of such corporation (irrespective of whether, at the time, stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time, directly or
indirectly, Owned by the Company, and (ii) any partnership in which the Company
has a direct or indirect interest (whether in the form of voting or
participation in profits or capital contribution) of more than fifty percent
(50%).

3.       ADMINISTRATION.

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

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

                  (i)      To determine the provisions of each Option to the
extent not specified in the Plan.

                                       5.

<PAGE>

                  (ii)     To construe and interpret the Plan and Options
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 Option 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 an Option as provided in Section
12.

                  (iv)     To terminate or suspend the Plan as provided in
Section 13.

                  (v)      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 and that are not in conflict with the provisions of the
Plan.

         (c)      DELEGATION TO COMMITTEE. The Board may delegate administration
of the Plan to a Committee or Committees of one or more members of the Board,
and the term "COMMITTEE" shall apply to any person or persons to whom such
authority has been delegated. 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, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), 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.

         (d)      EFFECT OF BOARD'S DECISION. All determinations,
interpretations and constructions made by the Board in good faith shall not be
subject to review by any person and shall be final, binding and conclusive on
all persons.

4.       SHARES SUBJECT TO THE PLAN.

         (a)      SHARE RESERVE. Subject to the provisions of Section 11
relating to adjustments upon changes in the Common Stock, the Common Stock that
may be issued pursuant to Options shall not exceed in the aggregate one hundred
twenty-five thousand (125,000) shares of Common Stock, plus an annual increase
to be added once each calendar year on September 1 for a period of ten (10)
years, commencing with September 1, 2004 and ending on (and including) September
1, 2013 (each such day, a "Calculation Date"), equal to the lesser of (i)
one-half of one percent (0.5%) of the shares of Common Stock outstanding on each
such Calculation Date (rounded down to the nearest whole share), (ii) three
hundred thousand (300,000) shares of Common Stock, or (iii) such number of
shares of Common Stock as the Board shall determine.

         (b)      REVERSION OF SHARES TO THE SHARE RESERVE. If any Option shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the shares of Common Stock not acquired under
such Option shall revert to and again become available for issuance under the
Plan. If the exercise price of any Option is satisfied by tendering shares of
Common Stock held by the Optionholder (either by actual delivery or
attestation), then

                                       6.

<PAGE>

the number of such tendered shares shall revert to and again become available
for issuance under the Plan.

         (c)      SOURCE OF SHARES. The shares of Common Stock subject to the
Plan may be unissued shares or reacquired shares, bought on the market or
otherwise.

5.       ELIGIBILITY.

         The Options, as set forth in Section 6, automatically shall be granted
under the Plan to all Non-Employee Directors who meet the criteria specified in
Section 6.

6.       NON-DISCRETIONARY GRANTS.

         (a)      INITIAL GRANTS. Without any further action of the Board, each
person who after the IPO Date is elected or appointed for the first time to be a
Non-Employee Director automatically shall, upon the date of his or her initial
election or appointment to be a Non-Employee Director, be granted an Initial
Grant to purchase twenty thousand (20,000) shares of Common Stock on the terms
and conditions set forth herein.

         (b)      ANNUAL GRANTS. Without any further action of the Board, on the
date of each Annual Meeting, commencing with the Annual Meeting in 2004, each
person who is then a Non-Employee Director automatically shall be granted an
Annual Grant to purchase five thousand (5,000) shares of Common Stock on the
terms and conditions set forth herein; provided, however, that if the person has
not been serving as a Non-Employee Director for the entire period since the
preceding Annual Meeting (or, in the case of an Annual Meeting in 2004, since
April 1, 2003), then the number of shares subject to such Annual Grant shall be
reduced pro rata for each full quarter prior to the date of grant during which
such person did not serve as a Non- Employee Director.

7.       OPTION PROVISIONS.

         Each Option shall be in such form and shall contain such terms and
conditions as required by the Plan. Each Option shall contain such additional
terms and conditions, not inconsistent with the Plan, as the Board shall deem
appropriate. 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 it was granted.

         (b)      EXERCISE PRICE. The exercise price of each Option shall be one
hundred percent (100%) of the Fair Market Value of the stock subject to the
Option on the date the Option is granted.

         (c)      CONSIDERATION. The purchase price of stock acquired pursuant
to an Option may be paid, to the extent permitted by applicable law, in any
combination of (i) cash or check, (ii) delivery to the Company of other Common
Stock or (iii) pursuant to a program developed under Regulation T as promulgated
by the Federal Reserve Board that, prior to the issuance of

                                       7.

<PAGE>

Common Stock, 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. The purchase price of Common Stock acquired
pursuant to an Option that is paid by delivery to the Company of other Common
Stock acquired, directly or indirectly from the Company, shall be paid only by
shares of the Common Stock of the Company that have been held for more than six
(6) months (or such longer or shorter period of time required to avoid a charge
to earnings for financial accounting purposes).

         (d)      TRANSFERABILITY. An Option is transferable by will or by the
laws of descent and distribution. An Option also may be transferable upon
written consent of the Company if, at the time of transfer, a Form S-8
registration statement under the Securities Act is available for the exercise of
the Option and the subsequent resale of the underlying securities. In addition,
an Optionholder may, by delivering written notice to the Company, in a form
provided by or otherwise satisfactory to the Company, designate a third party
who, in the event of the death of the Optionholder, shall thereafter be entitled
to exercise the Option.

         (e)      VESTING. The total number of shares of Common Stock subject to
an Option may, but need not, vest and therefore become exercisable in periodic
installments that may, but need not, be equal. 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 Section 7(e) are subject to any Option provisions governing
the minimum number of shares of Common Stock as to which an Option may be
exercised.

         (f)      TERMINATION OF CONTINUOUS SERVICE. In the event an
Optionholder's Continuous Service terminates for any reason, the Optionholder
may exercise his or her Option (to the extent that the Optionholder was entitled
to exercise it as of the date of termination) but only within such period of
time ending on the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionholder does not exercise his
or her Option within the time specified in the Option Agreement, the Option
shall terminate.

8.       SECURITIES LAW COMPLIANCE.

         The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
grant Options and to issue and sell shares of Common Stock upon exercise of the
Options; provided, however, that this undertaking shall not require the Company
to register under the Securities Act the Plan, any Option or any stock issued or
issuable pursuant to any such Option. 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 stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Options unless and until
such authority is obtained.

9.       USE OF PROCEEDS FROM STOCK.

         Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.

                                       8.

<PAGE>

10.      MISCELLANEOUS.

         (a)      ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall
have the power to accelerate the time at which an Option may first be exercised
or the time during which an Option or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Plan or the Option stating
the time at which it may first be exercised or the time during which it will
vest.

         (b)      STOCKHOLDER RIGHTS. No Optionholder 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 Optionholder has satisfied all
requirements for exercise of the Option pursuant to its terms.

         (c)      NO SERVICE RIGHTS. Nothing in the Plan or any instrument
executed or Option granted pursuant thereto shall confer upon any Optionholder
any right to continue to serve the Company as a Non-Employee Director or shall
affect the right of the Company or an Affiliate to terminate (i) the employment
of an Employee with or without notice and with or without cause, (ii) the
service of a Consultant pursuant to the terms of such Consultant's agreement
with the Company or an Affiliate or (iii) the service of a Director pursuant to
the Bylaws of the Company or an Affiliate, and any applicable provisions of the
corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be.

         (d)      INVESTMENT ASSURANCES. The Company may require an
Optionholder, as a condition of exercising or acquiring stock under any Option,
(i) to give written assurances satisfactory to the Company as to the
Optionholder'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 of exercising the Option; and (ii) to give
written assurances satisfactory to the Company stating that the Optionholder is
acquiring the stock subject to the Option for the Optionholder's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (1) the issuance of the shares upon the
exercise or acquisition of stock under the Option has been registered under a
then currently effective registration statement under the Securities Act or (2)
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 stock.

         (e)      WITHHOLDING OBLIGATIONS. The Optionholder may satisfy any
federal, state or local tax withholding obligation relating to the exercise or
acquisition of stock under an Option by any of the following means (in addition
to the Company's right to withhold from any compensation paid to the
Optionholder by the Company) or by a combination of such means: (i) tendering a
cash payment; (ii) authorizing the Company to withhold shares from the shares of
the Common Stock otherwise issuable to the Optionholder as a result of the
exercise or acquisition

                                       9.

<PAGE>

of stock under the Option; provided, however, that no shares of Common Stock are
withheld with a value exceeding the minimum amount of tax required to be
withheld by law; or (iii) delivering to the Company owned and unencumbered
shares of the Common Stock.

11.      ADJUSTMENTS UPON CHANGES IN COMMON STOCK.

         (a)      CAPITALIZATION ADJUSTMENTS. If any change is made in, or other
events occur with respect to, the stock subject to the Plan, or subject to any
Option, 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 (each a "CAPITALIZATION ADJUSTMENT")), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject both to the
Plan pursuant to Section 4 and to the nondiscretionary Options specified in
Section 6, and the outstanding Options will be appropriately adjusted in the
class(es) and number of securities and price per share of stock subject to such
outstanding Options. The Board shall make such adjustments, and its
determination shall be final, binding and conclusive. (The conversion of any
convertible securities of the Company shall not be treated as a transaction
"without receipt of consideration" by the Company.)

         (b)      DISSOLUTION OR LIQUIDATION. In the event of a dissolution or
liquidation of the Company, then all outstanding Options shall terminate
immediately prior to the completion of such dissolution or liquidation.

         (c)      CORPORATE TRANSACTION. In the event of a Corporate
Transaction, any surviving corporation or acquiring corporation may assume any
or all Options outstanding under the Plan or may substitute similar stock
options for Options outstanding under the Plan (it being understood that similar
stock options include, but are not limited to, options to acquire the same
consideration paid to the stockholders of the Company, as the case may be,
pursuant to the Corporate Transaction). In the event that any surviving
corporation or acquiring corporation does not assume all such outstanding
Options or substitute similar stock options for such outstanding Options, then
with respect to Options that have been neither assumed nor substituted and that
are held by Optionholders whose Continuous Service has not terminated prior to
the effective time of the Corporate Transaction, the vesting of such Options
(and, if applicable, the time at which such Options may be exercised) shall
(contingent upon the effectiveness of the Corporate Transaction) be accelerated
in full to a date prior to the effective time of such Corporate Transaction as
the Board shall determine (or, if the Board shall not determine such a date, to
the date that is five (5) days prior to the effective time of the Corporate
Transaction), and such Options shall terminate on the date that is twelve (12)
months after the effective time of the Corporate Transaction if not exercised
(if applicable) at or prior to such date. With respect to any other Options
outstanding under the Plan that have been neither assumed nor substituted, the
vesting of such Options (and, if applicable, the time at which such Options may
be exercised) shall not be accelerated, unless otherwise provided in a written
agreement between the Company or any Affiliate and the holder of such Options,
and such Options shall terminate if not exercised (if applicable) prior to the
effective time of the Corporate Transaction.

                                      10.

<PAGE>

         (d)      CHANGE OF CONTROL. Upon a Change in Control, the vesting of
Options that are held by Optionholders whose Continuous Service has not
terminated prior to the effective time of the Change in Control (and, if
applicable, the time at which such Options may be exercised) shall (contingent
upon the effectiveness of the Change in Control) be accelerated in full to a
date prior to the effective time of such Change in Control as the Board shall
determine (or, if the Board shall not determine such a date, to the date that is
five (5) days prior to the effective time of the Change in Control), and such
Options shall terminate on the date that is twelve (12) months after the
effective time of the Change in Control if not exercised (if applicable) at or
prior to date. With respect to any other Options outstanding under the Plan, the
vesting of such Options (and, if applicable, the time at which such Options may
be exercised) shall not be accelerated, unless otherwise provided in a written
agreement between the Company or any Affiliate and the holder of such Options,
and such Options shall terminate if not exercised (if applicable) prior to the
effective time of the Change in Control.

12.      AMENDMENT OF THE PLAN AND OPTIONS.

         (a)      AMENDMENT OF PLAN. The Board, at any time and from time to
time, may amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of applicable laws.

         (b)      STOCKHOLDER APPROVAL. The Board, in its sole discretion, may
submit any other amendment to the Plan for stockholder approval.

         (c)      NO IMPAIRMENT OF RIGHTS. Rights under any Option granted
before amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the Optionholder and (ii) the
Optionholder consents in writing.

         (d)      AMENDMENT OF OPTIONS. The Board, at any time, and from time to
time, may amend the terms of any one or more Options, including, but not limited
to, amendments to provide terms more favorable than previously provided in the
agreement evidencing an Option, subject to any specified limits in the Plan that
are not subject to Board discretion; provided, however, that the rights under
any Option shall not be impaired by any such amendment unless (i) the Company
requests the consent of the Optionholder and (ii) the Optionholder consents in
writing.

13.      TERMINATION OR SUSPENSION OF THE PLAN.

         (a)      PLAN TERM. The Board may suspend or terminate the Plan at any
time. No Options may be granted under the Plan while the Plan is suspended or
after it is terminated.

         (b)      NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan
shall not impair rights and obligations under any Option granted while the Plan
is in effect except with the written consent of the Optionholder.

                                      11.

<PAGE>

14.      EFFECTIVE DATE OF PLAN.

         The Plan shall become effective on the IPO Date, but no Option shall be
exercised unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.

15.      CHOICE OF LAW.

         The law of the state of California shall govern all questions
concerning the construction, validity and interpretation of this Plan, without
regard to such state's conflict of laws rules.

                                      12.

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