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                                                                    EXHIBIT 10.3

                            SGX PHARMACEUTICALS, INC.

                           2005 EQUITY INCENTIVE PLAN

                INITIALLY APPROVED BY BOARD ON: AUGUST 30, 2005
              INITIALLY APPROVED BY STOCKHOLDERS: OCTOBER 31, 2005
                        TERMINATION DATE: AUGUST 29, 2015

1.    GENERAL.

      (a) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive Stock
Awards are Employees, Directors and Consultants.

      (b) AVAILABLE STOCK AWARDS. The Plan provides for the grant of the
following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) Stock Purchase Awards, (iv) Restricted Stock Awards, (v) Stock
Appreciation Rights, (vi) Restricted Stock Unit Awards, and (vii) Other Stock
Awards.

      (c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to secure
and retain the services of the group of persons eligible to receive Awards as
set forth in Section 1(a), to provide incentives for such persons to exert
maximum efforts for the success of the Company and any Affiliate and to provide
a means by which such eligible recipients may be given an opportunity to benefit
from increases in value of the Common Stock through the granting of Stock
Awards.

2.    DEFINITIONS.

      As used in the Plan, the following definitions shall apply to the
capitalized terms indicated below:

      (a) "2000 PLAN" means the Company's 2000 Equity Incentive Plan.

      (b) "AFFILIATE" means, at the time of determination, any "parent" or
"subsidiary" as such terms are defined in Rule 405 of the Securities Act. The
Board shall have the authority to determine the time or times at which "parent"
or "subsidiary" status is determined within the foregoing definition.

      (c) "AWARD" means a Stock Award or a Performance Cash Award.

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

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

      (f) "CAUSE" means with respect to a Participant, the occurrence of any of
the following: (i) such Participant's commission of any felony or any crime
involving fraud, dishonesty or moral turpitude under the laws of the United
States or any state thereof; (ii) such

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Participant's attempted commission of, or participation in, a fraud or act of
dishonesty against the Company; (iii) such Participant's intentional, material
violation of any contract or agreement between the Participant and the Company
or of any statutory duty owed to the Company; (iv) such Participant's
unauthorized use or disclosure of the Company's confidential information or
trade secrets; or (v) such Participant's gross misconduct. The determination
that a termination of the Participant's Continuous Service is either for Cause
or without Cause shall be made by the Company in its sole discretion. Any
determination by the Company that the Continuous Service of a Participant was
terminated by reason of dismissal without Cause for the purposes of outstanding
Awards held by such Participant shall have no effect upon any determination of
the rights or obligations of the Company or such Participant for any other
purpose.

      (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 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 and, 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 proportions 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;

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            (iv) there is consummated a sale, lease, exclusive 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 proportions 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 if the appointment or election (or nomination for election) of any new
Board member was approved or recommended by a majority vote of the members of
the Incumbent Board then still in office, such new member shall, for purposes of
this Plan, be considered as a member of the Incumbent Board.

      The term Change in Control shall not include a sale of assets, merger or
other transaction effected exclusively for the purpose of changing the domicile
of the Company.

      Notwithstanding the foregoing or any other provision of this Plan, the
definition of Change in Control (or any analogous term) in an individual written
agreement between the Company or any Affiliate and the Participant shall
supersede the foregoing definition with respect to Stock Awards subject to such
agreement where such agreement provides for acceleration of vesting of such
Stock Awards in the event of a Change in Control; provided, however, that if no
definition of Change in Control or any analogous term is set forth in such an
individual written agreement, the foregoing definition shall apply.

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

      (i) "COMMITTEE" means a committee of one (1) or more Directors to whom
authority has been delegated by the Board in accordance with Section 3(c).

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

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

      (l) "CONSULTANT" means any person, including an advisor, who is (i)
engaged by the Company or an Affiliate to render consulting or advisory services
and is compensated for such services, or (ii) serving as a member of the board
of directors of an Affiliate and is compensated for such services. However,
service solely as a Director, or payment of a fee for such service, shall not
cause a Director to be considered a "Consultant" for purposes of the Plan.

      (m) "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. A change in the capacity in which the Participant
renders service to the Company or an Affiliate as an Employee, Consultant or
Director or a change in the entity for which the Participant renders such
service, provided that there is no interruption or termination of the
Participant's service with the Company or an Affiliate, shall not terminate a
Participant's Continuous Service. For example, a change in status from an
employee of the Company to a consultant to an Affiliate or

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to a Director shall not constitute an interruption of Continuous Service. To the
extent permitted by law, 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. Notwithstanding the foregoing, a leave of absence shall be
treated as Continuous Service for purposes of vesting in a Stock Award only to
such extent as may be provided in the Company's leave of absence policy, in the
written terms of any leave of absence agreement or policy applicable to the
Participant, or as otherwise required by law.

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

            (iv) the consummation of 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) "COVERED EMPLOYEE" shall have the meaning provided in Section
162(m)(3) of the Code and the regulations promulgated thereunder.

      (p) "DIRECTOR" means a member of the Board.

      (q) "DISABILITY" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.

      (r) "EMPLOYEE" means any person employed by the Company or an Affiliate.
However, service solely as a Director, or payment of a fee for such services,
shall not cause a Director to be considered an "Employee" for purposes of the
Plan.

      (s) "ENTITY" means a corporation, partnership, limited liability company
or other entity.

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

      (u) "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 (i) the Company or any Subsidiary of the
Company, (ii) any employee benefit plan of the Company or any Subsidiary of the
Company or any trustee or other fiduciary holding

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securities under an employee benefit plan of the Company or any Subsidiary of
the Company, (iii) an underwriter temporarily holding securities pursuant to an
offering of such securities, (iv) 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; or (v) any natural person, Entity or "group"
(within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of
the effective date of the Plan as set forth in Section 13, is the Owner,
directly or indirectly, of securities of the Company representing more than
fifty percent (50%) of the combined voting power of the Company's then
outstanding securities.

      (v) "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 date in
question, as reported in The Wall Street Journal or such other source as the
Board deems reliable. Unless otherwise provided by the Board, if there is no
closing sales price (or closing bid if no sales were reported) for the Common
Stock on the date in question, then the Fair Market Value shall be the closing
selling price (or closing bid if no sales were reported) on the last preceding
date for which such quotation exists.

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

      (w) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
"incentive stock option" within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

      (x) "IPO DATE" means the date of the underwriting agreement between the
Company and the underwriter(s) managing the initial public offering of the
Common Stock, pursuant to which the Common Stock is priced for the initial
public offering.

      (y) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current employee or officer of the Company or an Affiliate, does not receive
compensation, either directly or indirectly, from the Company or an Affiliate
for services rendered as a consultant or in any capacity other than as a
Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("REGULATION S-K")), does not possess an interest in any other transaction for
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.

      (z) "NONSTATUTORY STOCK OPTION" means any Option other than an Incentive
Stock Option.

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      (aa) "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.

      (bb) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option to purchase shares of Common Stock granted pursuant to the Plan.

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

      (dd) "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if permitted under the terms of this Plan, such other person who
holds an outstanding Option.

      (ee) "OTHER STOCK AWARD" means an award based in whole or in part by
reference to the Common Stock which is granted pursuant to the terms and
conditions of Section 7(e).

      (ff) "OTHER STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of an Other Stock Award evidencing the terms and conditions
of an Other Stock Award grant. Each Other Stock Award Agreement shall be subject
to the terms and conditions of the Plan.

      (gg) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury Regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" who receives
compensation for prior services (other than benefits under a tax-qualified
retirement plan) during the taxable year, has not been an officer of the Company
or an "affiliated corporation," and does not receive remuneration from the
Company or an "affiliated corporation," either directly or indirectly, in any
capacity other than as a Director, or (ii) is otherwise considered an "outside
director" for purposes of Section 162(m) of the Code.

      (hh) "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.

      (ii) "PARTICIPANT" means a person to whom an Award is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Stock
Award.

      (jj) "PERFORMANCE CASH AWARD" means an award of cash granted pursuant to
the terms and conditions of Section 7(e)(ii).

      (kk) "PERFORMANCE CRITERIA" means the one or more criteria that the Board
shall select for purposes of establishing the Performance Goals for a
Performance Period. The Performance Criteria that shall be used to establish
such Performance Goals may be based on any one of, or combination of, the
following: (i) earnings per share; (ii) earnings before interest, taxes and
depreciation; (iii) earnings before interest, taxes, depreciation and
amortization; (iv) total

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stockholder return; (v) return on equity; (vi) return on assets, investment, or
capital employed; (vii) operating margin; (viii) gross margin; (ix) operating
income; (x) net income (before or after taxes); (xi) net operating income; (xii)
net operating income after tax; (xiii) pre-tax profit; (xiv) operating cash
flow; (xv) sales or revenue targets; (xvi) increases in revenue or product
revenue; (xvii) expenses and cost reduction goals; (xviii) improvement in or
attainment of working capital levels; (xix) economic value added (or an
equivalent metric); (xx) market share; (xxi) cash flow; (xxii) cash flow per
share; (xxiii) share price performance; (xxiv) debt reduction; (xxv)
implementation or completion of projects or processes; (xxvi) customer
satisfaction; (xxvii); stockholders' equity; and (xxviii) other measures of
performance selected by the Board. Partial achievement of the specified criteria
may result in the payment or vesting corresponding to the degree of achievement
as specified in the Stock Award Agreement or the written terms of a Performance
Cash Award. The Board shall, in its sole discretion, define the manner of
calculating the Performance Criteria it selects to use for such Performance
Period.

      (ll) "PERFORMANCE GOALS" means, for a Performance Period, the one or more
goals established by the Board for the Performance Period based upon the
Performance Criteria. Performance Goals may be based on a Company-wide basis,
with respect to one or more business units, divisions, Affiliates, or business
segments, and in either absolute terms or relative to the performance of one or
more comparable companies or a relevant index. At the time of the grant of any
Award, the Board is authorized to determine whether, when calculating the
attainment of Performance Goals for a Performance Period: (i) to exclude
restructuring and/or other nonrecurring charges; (ii) to exclude exchange rate
effects, as applicable, for non-U.S. dollar denominated net sales and operating
earnings; (iii) to exclude the effects of changes to generally accepted
accounting standards required by the Financial Accounting Standards Board; (iv)
to exclude the effects of any statutory adjustments to corporate tax rates; and
(v) to exclude the effects of any "extraordinary items" as determined under
generally accepted accounting principles. In addition, the Board retains the
discretion to reduce or eliminate the compensation or economic benefit due upon
attainment of Performance Goals.

      (mm) "PERFORMANCE PERIOD" means the period of time selected by the Board
over which the attainment of one or more Performance Goals will be measured for
the purpose of determining a Participant's right to and the payment of a Stock
Award or a Performance Cash Award. Performance Periods may be of varying and
overlapping duration, at the sole discretion of the Board.

      (nn) "PERFORMANCE STOCK AWARD" means a Stock Award granted under the terms
and conditions of Section 7(e)(i).

      (oo) "PLAN" means this SGX Pharmaceuticals, Inc. 2005 Equity Incentive
Plan.

      (pp) "RESTRICTED STOCK AWARD" means an award of shares of Common Stock
which is granted pursuant to the terms and conditions of Section 7(b).

      (qq) "RESTRICTED STOCK AWARD AGREEMENT" means a written agreement between
the Company and a holder of a Restricted Stock Award evidencing the terms and
conditions of a Restricted Stock Award grant. Each Restricted Stock Award
Agreement shall be subject to the terms and conditions of the Plan.

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      (rr) "RESTRICTED STOCK UNIT AWARD" means a right to receive shares of
Common Stock which is granted pursuant to the terms and conditions of Section
7(c).

      (ss) "RESTRICTED STOCK UNIT AWARD AGREEMENT" means a written agreement
between the Company and a holder of a Restricted Stock Unit Award evidencing the
terms and conditions of a Restricted Stock Unit Award grant. Each Restricted
Stock Unit Award Agreement shall be subject to the terms and conditions of the
Plan.

      (tt) "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.

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

      (vv) "STOCK APPRECIATION RIGHT" means a right to receive the appreciation
on Common Stock that is granted pursuant to the terms and conditions of Section
7(d).

      (ww) "STOCK APPRECIATION RIGHT AGREEMENT" means a written agreement
between the Company and a holder of a Stock Appreciation Right evidencing the
terms and conditions of a Stock Appreciation Right grant. Each Stock
Appreciation Right Agreement shall be subject to the terms and conditions of the
Plan.

      (xx) "STOCK AWARD" means any right granted under the Plan, including an
Incentive Stock Option, a Nonstatutory Stock Option, a Stock Purchase Award, a
Restricted Stock Award, a Stock Appreciation Right, a Restricted Stock Unit
Award, a Performance Stock Award or any Other Stock Award.

      (yy) "STOCK AWARD AGREEMENT" means a written agreement between the Company
and a Participant evidencing the terms and conditions of a Stock Award grant.
Each Stock Award Agreement shall be subject to the terms and conditions of the
Plan.

      (zz) "STOCK PURCHASE AWARD" means an award of shares of Common Stock which
is granted pursuant to the terms and conditions of Section 7(a).

      (aaa) "STOCK PURCHASE AWARD AGREEMENT" means a written agreement between
the Company and a holder of a Stock Purchase Award evidencing the terms and
conditions of a Stock Purchase Award grant. Each Stock Purchase Award Agreement
shall be subject to the terms and conditions of the Plan.

      (bbb) "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%).

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      (ccc) "TEN PERCENT STOCKHOLDER" means a person who Owns (or is deemed to
Own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any Affiliate.

3.    ADMINISTRATION.

      (a) ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration of the Plan to a Committee or
Committees, 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 from time to time (A) which of the persons eligible
under the Plan shall be granted Awards; (B) when and how each Award shall be
granted; (C) what type or combination of types of Award shall be granted; (D)
the provisions of each Award granted (which need not be identical), including
the time or times when a person shall be permitted to receive cash or Common
Stock pursuant to a Stock Award; and (E) the number of shares of Common Stock
with respect to which a Stock Award shall be granted to each such person.

            (ii) To construe and interpret the Plan and 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 or in the written
terms of a Performance Cash Award, in a manner and to the extent it shall deem
necessary or expedient to make the Plan or Award fully effective.

            (iii) To settle all controversies regarding the Plan and Awards
granted under it.

            (iv) To accelerate the time at which a Stock Award may first be
exercised or the time during which an Award or any part thereof will vest in
accordance with the Plan, notwithstanding the provisions in the Award stating
the time at which it may first be exercised or the time during which it will
vest.

            (v) To suspend or terminate the Plan at any time. Suspension or
termination of the Plan shall not impair rights and obligations under any Stock
Award granted while the Plan is in effect except with the written consent of the
affected Participant.

            (vi) To amend the Plan, subject to the limitations, if any, of
applicable law. However, except as provided in Section 11(a) relating to
Capitalization Adjustments, no amendment shall be effective unless approved by
the stockholders of the Company to the extent stockholder approval is necessary
to satisfy applicable law or applicable exchange listing requirements. Rights
under any Award 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
affected Participant, and (ii) such Participant consents in writing.

            (vii) To submit any amendment to the Plan for stockholder approval,
including, but not limited to, amendments to the Plan intended to satisfy the
requirements of Section 162(m) of the Code and the regulations thereunder
regarding the exclusion of performance-based

                                       9.
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compensation from the limit on corporate deductibility of compensation paid to
Covered Employees.

            (viii) To amend the Plan in any respect the Board deems necessary or
advisable to provide eligible Employees with the maximum benefits provided or to
be provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options or to bring the Plan or Incentive
Stock Options granted under it into compliance therewith.

            (ix) To amend the terms of any one or more Awards, including, but
not limited to, amendments to provide terms more favorable than previously
provided in the Award Agreement, subject to any specified limits in the Plan
that are not subject to Board discretion; provided, however, that the rights
under any Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the affected Participant, and (ii) such
Participant consents in writing.

            (x) 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 or Awards.

            (xi) To adopt such procedures and sub-plans as are necessary or
appropriate to permit participation in the Plan by Employees, Directors or
Consultants who are foreign nationals or employed outside the United States.

            (xii) To effect, at any time and from time to time, with the consent
of any adversely affected Optionholder, (1) the reduction of the exercise price
of any outstanding Option under the Plan, (2) the cancellation of any
outstanding Option under the Plan and the grant in substitution therefor of (a)
a new Option under the Plan or another equity plan of the Company covering the
same or a different number of shares of Common Stock, (b) a Restricted Stock
Award (including a stock bonus), (c) a Stock Appreciation Right, (d) Restricted
Stock Unit, (e) an Other Stock Award, (f) cash and/or (g) other valuable
consideration (as determined by the Board, in its sole discretion), or (3) any
other action that is treated as a repricing under generally accepted accounting
principles.

      (c)   DELEGATION TO COMMITTEE.

            (i) GENERAL. The Board may delegate some or all of the
administration of the Plan to a Committee or Committees. If administration of
the Plan is delegated to a Committee, the Committee shall have, in connection
with the administration of the Plan, the powers theretofore possessed by the
Board that have been delegated to the Committee, including the power to delegate
to a subcommittee of the Committee 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 retain the authority to
concurrently administer the Plan with the Committee and may, at any time, revest
in the Board some or all of the powers previously delegated.

                                      10.
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            (ii) SECTION 162(M) AND RULE 16B-3 COMPLIANCE. In the sole
discretion of the Board, the Committee may consist solely of two or more Outside
Directors, in accordance with Section 162(m) of the Code, or solely of two or
more Non-Employee Directors, in accordance with Rule 16b-3. In addition, the
Board or the Committee, in its sole discretion, may (a) delegate to a Committee
of Directors who need not be Outside Directors the authority to grant Awards to
eligible persons who are either (i) not then Covered Employees and are not
expected to be Covered Employees at the time of recognition of income resulting
from such Stock Award, or (ii) not persons with respect to whom the Company
wishes to comply with Section 162(m) of the Code, or (b) delegate to a Committee
of Directors who need not be Non-Employee Directors the authority to grant Stock
Awards to eligible persons who are not then subject to Section 16 of the
Exchange Act.

      (d) DELEGATION TO AN OFFICER. The Board may delegate to one or more
Officers the authority to do one or both of the following (i) designate
Employees who are not Officers to be recipients of Awards and the terms thereof,
and (ii) determine the number of shares of Common Stock to be subject to such
Stock Awards granted to such Employees; provided, however, that the Board
resolutions regarding such delegation shall specify the total number of shares
of Common Stock that may be subject to the Stock Awards granted by such Officer
and that such Officer may not grant a Stock Award to himself or herself.
Notwithstanding anything to the contrary in this Section 3(d), the Board may not
delegate to an Officer authority to determine the Fair Market Value of the
Common Stock pursuant to Section 2(v)(ii) above.

      (e) 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.

      (f) ARBITRATION. Any dispute or claim concerning any Awards granted (or
not granted) pursuant to the Plan or any disputes or claims relating to or
arising out of the Plan shall be fully, finally and exclusively resolved by
binding and confidential arbitration conducted pursuant to the Commercial
Arbitration Rules of the American Arbitration Association in San Diego,
California. The Company shall pay all arbitration fees. In addition to any other
relief, the arbitrator may award to the prevailing party recovery of its
attorneys' fees and costs. By accepting an Award, Participants and the Company
waive their respective rights to have any such disputes or claims tried by a
judge or jury.

4.    SHARES SUBJECT TO THE PLAN.

      (a) Subject to the provisions of Section 11(a) relating to Capitalization
Adjustments, the number of shares of Common Stock that may be issued pursuant to
Stock Awards shall not exceed, in the aggregate, seven hundred fifty thousand
(750,000) shares of Common Stock, plus the number of shares of Common Stock
remaining available for future issuance under the 2000 Plan that are not covered
by outstanding stock options under the 2000 Plan as of the IPO Date; provided,
however, that such share reserve shall be increased from time to time by a
number of shares equal to the number of shares of Common Stock that (i) are or
become issuable pursuant to options outstanding under the Company's 2000 Plan as
of the IPO Date, or were previously or become issued but remain subject to the
Company's repurchase right under the terms of the 2000 Plan, and (ii) but for
the termination of the 2000 Plan as of the effective date of the Plan, would
otherwise have reverted to the share reserve of the 2000 Plan pursuant to the
terms thereof. In addition, the number of shares of Common Stock available for
issuance under the Plan shall automatically increase on

                                      11.
<PAGE>

January 1st of each year commencing in 2007 and ending on (and including)
January 1, 2015, in an amount equal to the lesser of (i) three and one half
percent (3 1/2 %) of the total number of shares of Common Stock outstanding on
December 31st of the preceding calendar year (rounded up to the nearest whole
share), or (ii) five hundred thousand (500,000) shares of Common Stock.
Notwithstanding the foregoing, the Board or a Committee may act prior to the
first day of any calendar year, to provide that there shall be no increase in
the share reserve for such calendar year or that the increase in the share
reserve for such calendar year shall be a lesser number of shares of Common
Stock than would otherwise occur pursuant to the preceding sentence. Shares may
be issued in connection with a merger or acquisition as permitted by the
applicable listing exchange rules and such issuance shall not reduce the number
of shares available for issuance under the Plan.

      (b) REVERSION OF SHARES TO THE SHARE RESERVE. If any (i) Stock Award shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, (ii) shares of Common Stock issued to a
Participant pursuant to a Stock Award are forfeited to or repurchased by the
Company, including any repurchase or forfeiture caused by the failure to meet a
contingency or condition required for the vesting of such shares, (iii) shares
of Common Stock are cancelled in accordance with the cancellation and regrant
provisions of Section 3(b), or (iv) Stock Award is settled in cash, then the
shares of Common Stock not issued under such Stock Award, or forfeited to or
repurchased by the Company, shall revert to and again become available for
issuance under the Plan. If any shares subject to a Stock Award are not
delivered to a Participant because the Stock Award is exercised through a
reduction of shares subject to the Stock Award (i.e., "net exercised") or an
appreciation distribution in respect of a Stock Appreciation Right is paid in
shares of Common Stock, the number of subject to the Stock Award that are not
delivered to the Participant shall remain available for subsequent issuance
under the Plan. If any shares subject to a Stock Award are not delivered to a
Participant because such shares are withheld in satisfaction of the withholding
of taxes incurred in connection with the exercise of an Option, Stock
Appreciation Right, or the issuance of shares under a Stock Purchase Award,
Restricted Stock Award, Restricted Stock Unit Award, or Other Stock Award, the
number of shares that are not delivered to the Participant shall remain
available for subsequent issuance under the Plan. If the exercise price of any
Stock Award is satisfied by tendering shares of Common Stock held by the
Participant (either by actual delivery or attestation), then the number of
shares so tendered shall remain available for subsequent issuance under the
Plan.

      (c) INCENTIVE STOCK OPTION LIMIT. Notwithstanding anything to the contrary
in this Section 4(b), subject to the provisions of Section 11(a) relating to
Capitalization Adjustments the aggregate maximum number of shares of Common
Stock that may be issued pursuant to the exercise of Incentive Stock Options
shall be five million (5,000,000) shares of Common Stock.

      (d) SOURCE OF SHARES. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Company.

                                      12.
<PAGE>

5.    ELIGIBILITY.

      (a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options may be
granted only to Employees. Stock Awards other than Incentive Stock Options may
be granted to Employees, Directors and Consultants.

      (b) TEN PERCENT STOCKHOLDERS. A Ten Percent Stockholder shall not be
granted an Incentive Stock Option unless the exercise price of such Option is at
least one hundred ten percent (110%) of the Fair Market Value of the Common
Stock on the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.

     (c) SECTION 162(M) LIMITATION ON ANNUAL GRANTS. Subject to the provisions
of Section 11(a) relating to Capitalization Adjustments, at such time as the
Company may be subject to the applicable provisions of Section 162(m) of the
Code, no Employee shall be eligible to be granted during any calendar year Stock
Awards whose value is determined by reference to an increase over an exercise or
strike price of at least one hundred percent (100%) of the Fair Market Value of
the Common Stock on the date the Stock Award is granted covering more than two
hundred fifty thousand (250,000) shares of Common Stock; provided, however, that
solely in connection with the initiation of employment, an Employee may be
granted such Stock Awards covering an additional three hundred seventy-five
thousand (375,000) shares of Common Stock in that calendar year.

      (d) CONSULTANTS. A Consultant shall not be eligible for the grant of a
Stock Award if, at the time of grant, a Form S-8 Registration Statement under
the Securities Act ("FORM S-8") is not available to register either the offer or
the sale of the Company's securities to such Consultant because of the nature of
the services that the Consultant is providing to the Company, because the
Consultant is not a natural person, or because of any other rule governing the
use of Form S-8.

6.    OPTION PROVISIONS.

      Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
shall be issued for shares of Common Stock purchased on exercise of each type of
Option. If an Option is not specifically designated as an Incentive Stock
Option, then the Option shall be a Nonstatutory Stock Option. The provisions of
separate Options need not be identical; provided, however, that each Option
Agreement shall include (through incorporation of provisions hereof by reference
in the Option Agreement or otherwise) the substance of each of the following
provisions:

      (a) TERM. Subject to the provisions of Section 5(b), no Option shall be
exercisable after the expiration of ten (10) years from the date of its grant or
such shorter period specified in the Option Agreement.

      (b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the provisions
of Section 5(b) regarding Ten Percent Stockholders, the exercise price of each
Incentive Stock Option shall be not less than one hundred percent (100%) of the
Fair Market Value of the

                                      13.
<PAGE>

Common Stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, an Incentive Stock Option may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner consistent with the provisions of Section 424(a) of the Code.

      (c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. The exercise price of
each Nonstatutory Stock Option shall be not less than one hundred percent (100%)
of the Fair Market Value of the Common Stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock
Option may be granted with an exercise price lower than one hundred percent
(100%) of the Fair Market Value of the Common Stock if such Option is granted
pursuant to an assumption or substitution for another option in a manner
consistent with the provisions of Section 424(a) of the Code.

      (d) CONSIDERATION. The purchase price of Common Stock acquired pursuant to
the exercise of an Option shall be paid, to the extent permitted by applicable
law and as determined by the Board in its sole discretion, by any combination of
the methods of payment set forth below. The Board shall have the authority to
grant Options that do not permit all of the following methods of payment (or
otherwise restrict the ability to use certain methods) and to grant Options that
require the consent of the Company to utilize a particular method of payment.
The methods of payment permitted by this Section 6(d) are:

            (i) by cash or check;

            (ii) bank draft or money order payable to the Company;

            (iii) pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board that, prior to the issuance of 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;

            (iv) by delivery to the Company (either by actual delivery or
attestation) of shares of Common Stock;

            (v) by a "net exercise" arrangement pursuant to which the Company
will reduce the number of shares of Common Stock issued upon exercise by the
largest whole number of shares with a Fair Market Value that does not exceed the
aggregate exercise price; provided, however, that the Company shall accept a
cash or other payment from the Participant to the extent of any remaining
balance of the aggregate exercise price not satisfied by such reduction in the
number of whole shares to be issued; provided, further, that shares of Common
Stock will no longer be outstanding under an Option and will not be exercisable
thereafter to the extent that (a) shares are used to pay the exercise price
pursuant to the "net exercise," (b) shares are delivered to the Participant as a
result of such exercise, and (c) shares are withheld to satisfy tax withholding
obligations; or

            (vi) in any other form of legal consideration that may be acceptable
to the Board.

                                      14.
<PAGE>

      (e) TRANSFERABILITY OF OPTIONS. The Board may, in its sole discretion,
impose such limitations on the transferability of Options as the Board shall
determine. In the absence of such a determination by the Board to the contrary,
the following restrictions on the transferability of Options shall apply:

            (i) RESTRICTIONS ON TRANSFER. An Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the Optionholder;
provided, however, that the Board may, in its sole discretion, permit transfer
of the Option in a manner consistent with applicable tax and securities laws
upon the Optionholder's request.

            (ii) DOMESTIC RELATIONS ORDERS. Notwithstanding the foregoing, an
Option may be transferred pursuant to a domestic relations order.

            (iii) BENEFICIARY DESIGNATION. Notwithstanding the foregoing, the
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.

      (f) VESTING GENERALLY. The total number of shares of Common Stock subject
to an Option may vest and therefore become exercisable in periodic installments
that may or may not be equal. The Option may be subject to such other terms and
conditions on the time or times when it may or may not be exercised (which may
be based on the satisfaction of Performance Goals or other criteria) as the
Board may deem appropriate. The vesting provisions of individual Options may
vary. The provisions of this Section 6(f) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.

      (g) TERMINATION OF CONTINUOUS SERVICE. In the event that an Optionholder's
Continuous Service terminates (other than for Cause or upon the Optionholder's
death or Disability), the Optionholder may exercise his or her Option (to the
extent that the Optionholder was entitled to exercise such Option as of the date
of termination of Continuous Service) but only within such period of time ending
on the earlier of (i) the date three (3) months following the termination of the
Optionholder's Continuous Service (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination of Continuous Service, the
Optionholder does not exercise his or her Option within the time specified
herein or in the Option Agreement (as applicable), the Option shall terminate.

      (h) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement may
provide that if the exercise of the Option following the termination of the
Optionholder's Continuous Service (other than for Cause or upon the
Optionholder's death or Disability) would be prohibited at any time solely
because the issuance of shares of Common Stock would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of a period of three (3) months after the
termination of the Optionholder's Continuous Service during which the exercise
of the Option would not be in

                                      15.
<PAGE>

violation of such registration requirements, or (ii) the expiration of the term
of the Option as set forth in the Option Agreement.

      (i) DISABILITY OF OPTIONHOLDER. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination of Continuous
Service), but only within such period of time ending on the earlier of (i) the
date twelve (12) months following such termination of Continuous Service (or
such longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
after termination of Continuous Service, the Optionholder does not exercise his
or her Option within the time specified herein or in the Option Agreement (as
applicable), the Option shall terminate.

      (j) DEATH OF OPTIONHOLDER. In the event that (i) an Optionholder's
Continuous Service terminates as a result of the Optionholder's death, or (ii)
the Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
option upon the Optionholder's death, but only within the period ending on the
earlier of (i) the date eighteen (18) months following the date of death (or
such longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of such Option as set forth in the Option Agreement. If,
after the Optionholder's death, the Option is not exercised within the time
specified herein or in the Option Agreement (as applicable), the Option shall
terminate.

      (k) TERMINATION FOR CAUSE. Except as explicitly provided otherwise in an
Optionholder's Option Agreement, in the event that an Optionholder's Continuous
Service is terminated for Cause, the Option shall terminate upon the termination
date of such Optionholder's Continuous Service, and the Optionholder shall be
prohibited from exercising his or her Option from and after the time of such
termination of Continuous Service.

      (l) NON-EXEMPT EMPLOYEES. No Option granted to an Employee that is a
non-exempt employee for purposes of the Fair Labor Standards Act shall be first
exercisable for any shares of Common Stock until at least six months following
the date of grant of the Option. The foregoing provision is intended to operate
so that any income derived by a non-exempt employee in connection with the
exercise or vesting of an Option will be exempt from his or her regular rate of
pay.

7.    PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

      (a) STOCK PURCHASE AWARDS. Each Stock Purchase Award Agreement shall be in
such form and shall contain such terms and conditions as the Board shall deem
appropriate. To the extent consistent with the Company's Bylaws, at the Board's
election, shares of Common Stock may be (x) held in book entry form subject to
the Company's instructions until any restrictions relating to the Stock Purchase
Award lapse; or (y) evidenced by a certificate, which certificate shall be held
in such form and manner as determined by the Board. The terms and

                                      16.
<PAGE>

conditions of Stock Purchase Award Agreements may change from time to time, and
the terms and conditions of separate Stock Purchase Award Agreements need not be
identical, provided, however, that each Stock Purchase Award Agreement shall
include (through incorporation of the provisions hereof by reference in the
Agreement or otherwise) the substance of each of the following provisions:

            (i) PURCHASE PRICE. At the time of the grant of a Stock Purchase
Award, the Board will determine the price to be paid by the Participant for each
share subject to the Stock Purchase Award which amount shall not be less than
50% of the Fair Market Value of the Common Stock subject to such Stock Award on
the date such Stock Award is granted. To the extent required by applicable law,
the price to be paid by the Participant for each share of the Stock Purchase
Award will not be less than the par value of a share of Common Stock.

            (ii) CONSIDERATION. At the time of the grant of a Stock Purchase
Award, the Board will determine the consideration permissible for the payment of
the purchase price of the Stock Purchase Award. The purchase price of Common
Stock acquired pursuant to the Stock Purchase Award shall be paid either: (a) in
cash or by check at the time of purchase, (b) by past services actually
rendered, or future services to be rendered, to the Company or an Affiliate, or
(c) in any other form of legal consideration that may be acceptable to the Board
in its sole discretion and permissible under applicable law.

            (iii) VESTING. Shares of Common Stock acquired under a Stock
Purchase Award may be subject to a share repurchase right or option in favor of
the Company in accordance with a vesting schedule to be determined by the Board.

            (iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the event
that a Participant's Continuous Service terminates, the Company shall have the
right, but not the obligation, to repurchase or otherwise reacquire, any or all
of the shares of Common Stock held by the Participant that have not vested as of
the date of termination under the terms of the Stock Purchase Award Agreement.
At the Board's election, the price paid for all shares of Common Stock so
repurchased or reacquired by the Company may be at the lesser of: (a) the Fair
Market Value on the relevant date, or (b) the Participant's original cost for
such shares. The Company shall not be required to exercise its repurchase or
reacquisition option until at least six (6) months (or such longer or shorter
period of time necessary to avoid a charge to earnings for financial accounting
purposes) have elapsed following the Participant's purchase of the shares of
Common Stock acquired pursuant to the Stock Purchase Award unless otherwise
determined by the Board or provided in the Stock Purchase Award Agreement.

            (v) TRANSFERABILITY. Rights to purchase or receive shares of Common
Stock granted under a Stock Purchase Award shall be transferable by the
Participant only upon such terms and conditions as are set forth in the Stock
Purchase Award Agreement, as the Board shall determine in its sole discretion,
and so long as Common Stock awarded under the Stock Purchase Award remains
subject to the terms of the Stock Purchase Award Agreement.

      (b) RESTRICTED STOCK AWARDS. Each Restricted Stock Award Agreement shall
be in such form and shall contain such terms and conditions as the Board shall
deem appropriate. To the extent consistent with the Company's Bylaws, at the
Board's election, shares of Common

                                      17.
<PAGE>

Stock may be (x) held in book entry form subject to the Company's instructions
until any restrictions relating to the Restricted Stock Award lapse; or (y)
evidenced by a certificate, which certificate shall be held in such form and
manner as determined by the Board. The terms and conditions of Restricted Stock
Award Agreements may change from time to time, and the terms and conditions of
separate Restricted Stock Award Agreements need not be identical, provided,
however, that each Restricted Stock Award Agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:

            (i) CONSIDERATION. A Restricted Stock Award may be awarded in
consideration for (a) past services actually rendered, or future services to be
rendered, to the Company or an Affiliate, or (b) any other form of legal
consideration that may be acceptable to the Board in its sole discretion and
permissible under applicable law.

            (ii) VESTING. Shares of Common Stock awarded under the Restricted
Stock Award Agreement may be subject to forfeiture to the Company in accordance
with a vesting schedule to be determined by the Board.

            (iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the event
a Participant's Continuous Service terminates, the Company may receive via a
forfeiture condition, any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination of Continuous
Service under the terms of the Restricted Stock Award Agreement.

            (iv) TRANSFERABILITY. Rights to acquire shares of Common Stock under
the Restricted Stock Award Agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the Restricted Stock
Award Agreement, as the Board shall determine in its sole discretion, so long as
Common Stock awarded under the Restricted Stock Award Agreement remains subject
to the terms of the Restricted Stock Award Agreement.

      (c) RESTRICTED STOCK UNIT AWARDS. Each Restricted Stock Unit Award
Agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate. The terms and conditions of Restricted Stock
Unit Award Agreements may change from time to time, and the terms and conditions
of separate Restricted Stock Unit Award Agreements need not be identical,
provided, however, that each Restricted Stock Unit Award Agreement shall include
(through incorporation of the provisions hereof by reference in the Agreement or
otherwise) the substance of each of the following provisions:

            (i) CONSIDERATION. At the time of grant of a Restricted Stock Unit
Award, the Board will determine the consideration, if any, to be paid by the
Participant upon delivery of each share of Common Stock subject to the
Restricted Stock Unit Award. The consideration to be paid (if any) by the
Participant for each share of Common Stock subject to a Restricted Stock Unit
Award may be paid in any form of legal consideration that may be acceptable to
the Board in its sole discretion and permissible under applicable law.

                                      18.
<PAGE>

            (ii) VESTING. At the time of the grant of a Restricted Stock Unit
Award, the Board may impose such restrictions or conditions to the vesting of
the Restricted Stock Unit Award as it, in its sole discretion, deems
appropriate.

            (iii) PAYMENT. A Restricted Stock Unit Award may be settled by the
delivery of shares of Common Stock, their cash equivalent, any combination
thereof or in any other form of consideration, as determined by the Board and
contained in the Restricted Stock Unit Award Agreement.

            (iv) ADDITIONAL RESTRICTIONS. At the time of the grant of a
Restricted Stock Unit Award, the Board, as it deems appropriate, may impose such
restrictions or conditions that delay the delivery of the shares of Common Stock
(or their cash equivalent) subject to a Restricted Stock Unit Award to a time
after the vesting of such Restricted Stock Unit Award.

            (v) DIVIDEND EQUIVALENTS. Dividend equivalents may be credited in
respect of shares of Common Stock covered by a Restricted Stock Unit Award, as
determined by the Board and contained in the Restricted Stock Unit Award
Agreement. At the sole discretion of the Board, such dividend equivalents may be
converted into additional shares of Common Stock covered by the Restricted Stock
Unit Award in such manner as determined by the Board. Any additional shares
covered by the Restricted Stock Unit Award credited by reason of such dividend
equivalents will be subject to all the terms and conditions of the underlying
Restricted Stock Unit Award Agreement to which they relate.

            (vi) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Except as
otherwise provided in the applicable Restricted Stock Unit Award Agreement, such
portion of the Restricted Stock Unit Award that has not vested will be forfeited
upon the Participant's termination of Continuous Service.

            (vii) COMPLIANCE WITH SECTION 409A OF THE CODE. Notwithstanding
anything to the contrary set forth herein, any Restricted Stock Unit Award
granted under the Plan that is not exempt from the requirements of Section 409A
of the Code shall contain such provisions so that such Restricted Stock Unit
Award will comply with the requirements of Section 409A of the Code. Such
restrictions, if any, shall be determined by the Board and contained in the
Restricted Stock Unit Award Agreement evidencing such Restricted Stock Unit
Award. For example, such restrictions may include, without limitation, a
requirement that any Common Stock that is to be issued in a year following the
year in which the Restricted Stock Unit Award vests must be issued in accordance
with a fixed pre-determined schedule.

      (d) STOCK APPRECIATION RIGHTS. Each Stock Appreciation Right Agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. Stock Appreciation Rights may be granted as stand-alone
Stock Awards or in tandem with other Stock Awards. The terms and conditions of
Stock Appreciation Right Agreements may change from time to time, and the terms
and conditions of separate Stock Appreciation Right Agreements need not be
identical; provided, however, that each Stock Appreciation Right Agreement shall
include (through incorporation of the provisions hereof by reference in the
Agreement or otherwise) the substance of each of the following provisions:

                                      19.
<PAGE>

            (i) TERM. No Stock Appreciation Right shall be exercisable after the
expiration of ten (10) years from the date of its grant or such shorter period
specified in the Stock Appreciation Right Agreement.

            (ii) STRIKE PRICE. Each Stock Appreciation Right will be denominated
in shares of Common Stock equivalents. The strike price of each Stock
Appreciation Right granted as a stand-alone or tandem Stock Award shall not be
less than one hundred percent (100%) of the Fair Market Value of the Common
Stock equivalents subject to the Stock Appreciation Right on the date of grant.

            (iii) CALCULATION OF APPRECIATION. The appreciation distribution
payable on the exercise of a Stock Appreciation Right will be not greater than
an amount equal to the excess of (a) the aggregate Fair Market Value (on the
date of the exercise of the Stock Appreciation Right) of a number of shares of
Common Stock equal to the number of share of Common Stock equivalents in which
the Participant is vested under such Stock Appreciation Right, and with respect
to which the Participant is exercising the Stock Appreciation Right on such
date, over (b) the strike price that will be determined by the Board at the time
of grant of the Stock Appreciation Right.

            (iv) VESTING. At the time of the grant of a Stock Appreciation
Right, the Board may impose such restrictions or conditions to the vesting of
such Stock Appreciation Right as it, in its sole discretion, deems appropriate.

            (v) EXERCISE. To exercise any outstanding Stock Appreciation Right,
the Participant must provide written notice of exercise to the Company in
compliance with the provisions of the Stock Appreciation Right Agreement
evidencing such Stock Appreciation Right.

            (vi) PAYMENT. The appreciation distribution in respect to a Stock
Appreciation Right may be paid in Common Stock, in cash, in any combination of
the two or in any other form of consideration, as determined by the Board and
contained in the Stock Appreciation Right Agreement evidencing such Stock
Appreciation Right.

            (vii) TERMINATION OF CONTINUOUS SERVICE. In the event that a
Participant's Continuous Service terminates (other than for Cause), the
Participant may exercise his or her Stock Appreciation Right (to the extent that
the Participant was entitled to exercise such Stock Appreciation Right as of the
date of termination) but only within such period of time ending on the earlier
of (a) the date three (3) months following the termination of the Participant's
Continuous Service (or such longer or shorter period specified in the Stock
Appreciation Right Agreement), or (b) the expiration of the term of the Stock
Appreciation Right as set forth in the Stock Appreciation Right Agreement. If,
after termination, the Participant does not exercise his or her Stock
Appreciation Right within the time specified herein or in the Stock Appreciation
Right Agreement (as applicable), the Stock Appreciation Right shall terminate.

            (viii) TERMINATION FOR CAUSE. Except as explicitly provided
otherwise in an Participant's Stock Appreciation Right Agreement, in the event
that a Participant's Continuous Service is terminated for Cause, the Stock
Appreciation Right shall terminate upon the

                                      20.
<PAGE>

termination date of such Participant's Continuous Service, and the Participant
shall be prohibited from exercising his or her Stock Appreciation Right from and
after the time of such termination of Continuous Service.

            (ix) COMPLIANCE WITH SECTION 409A OF THE CODE. Notwithstanding
anything to the contrary set forth herein, any Stock Appreciation Rights granted
under the Plan that are not exempt from the requirements of Section 409A of the
Code shall contain such provisions so that such Stock Appreciation Rights will
comply with the requirements of Section 409A of the Code. Such restrictions, if
any, shall be determined by the Board and contained in the Stock Appreciation
Right Agreement evidencing such Stock Appreciation Right. For example, such
restrictions may include, without limitation, a requirement that a Stock
Appreciation Right that is to be paid wholly or partly in cash must be exercised
and paid in accordance with a fixed pre-determined schedule.

            (x) NON-EXEMPT EMPLOYEES. No Stock Appreciation Right granted to an
Employee that is a non-exempt employee for purposes of the Fair Labor Standards
Act shall be first exercisable until at least six months following the date of
grant of the Stock Appreciation Right. The foregoing provision is intended to
operate so that any income derived by a non-exempt employee in connection with
the exercise of a Stock Appreciation Right will be exempt from his or her
regular rate of pay.

      (e) PERFORMANCE AWARDS.

            (i) PERFORMANCE STOCK AWARDS. A Performance Stock Award is a Stock
Award that may be granted, may vest, or may be exercised based upon the
attainment during a Performance Period of certain Performance Goals. A
Performance Stock Award may, but need not, require the completion of a specified
period of Continuous Service. The length of any Performance Period, the
Performance Goals to be achieved during the Performance Period, and the measure
of whether and to what degree such Performance Goals have been attained shall be
conclusively determined by the Committee in its sole discretion. The maximum
benefit to be received by any Participant in any calendar year attributable to
Stock Awards described in this Section 7(e) shall not exceed the value of five
hundred thousand (500,000) shares of Common Stock.

            (ii) PERFORMANCE CASH AWARDS. A Performance Cash Award is a cash
award that may be granted upon the attainment during a Performance Period of
certain Performance Goals. A Performance Cash Award may also require the
completion of a specified period of Continuous Service. The length of any
Performance Period, the Performance Goals to be achieved during the Performance
Period, and the measure of whether and to what degree such Performance Goals
have been attained shall be conclusively determined by the Committee in its sole
discretion. The maximum benefit to be received by any Participant in any
calendar year attributable to cash awards described in this Section 7(e) shall
not exceed one million dollars ($1,000,000).

      (f) OTHER STOCK AWARDS. Other forms of Stock Awards valued in whole or in
part by reference to, or otherwise based on, Common Stock may be granted either
alone or in addition to Stock Awards provided for under Section 6 and the
preceding provisions of this Section 7. Subject to the provisions of the Plan,
the Board shall have sole and complete authority to

                                      21.
<PAGE>

determine the persons to whom and the time or times at which such Other Stock
Awards will be granted, the number of shares of Common Stock (or the cash
equivalent thereof) to be granted pursuant to such Other Stock Awards and all
other terms and conditions of such Other Stock Awards.

8.    COVENANTS OF THE COMPANY.

      (a) AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.

      (b) 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 Stock Awards and to issue and sell shares of Common
Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock 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 that counsel for the
Company deems necessary for the lawful issuance and sale of Common Stock under
the Plan, the Company shall be relieved from any liability for failure to issue
and sell Common Stock upon exercise of such Stock Awards unless and until such
authority is obtained.

9.    USE OF PROCEEDS FROM SALES OF COMMON STOCK.

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

10.   MISCELLANEOUS.

      (a) CORPORATE ACTION CONSTITUTING GRANT OF STOCK AWARDS. Corporate action
constituting an offer by the Company of Common Stock to any Participant under
the terms of a Stock Award shall be deemed completed as of the date of such
corporate action, unless otherwise determined by the Board, regardless of when
the instrument, certificate, or letter evidencing the Stock Award is actually
received or accepted by the Participant.

      (b) STOCKHOLDER RIGHTS. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares of
Common Stock subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.

      (c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan, any Stock
Award Agreement or other instrument executed thereunder or in connection with
any Award granted pursuant to the Plan shall confer upon any Participant any
right to continue to serve the Company or an Affiliate in the capacity in effect
at the time the Stock Award was granted 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

                                      22.
<PAGE>

applicable provisions of the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be.

      (d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
any Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof that exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options, notwithstanding
any contrary provision of the applicable Option Agreement(s).

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

      (f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a
Stock Award Agreement, the Company may, in its sole discretion, satisfy any
federal, state or local tax withholding obligation relating to a Stock Award by
any of the following means (in addition to the Company's right to withhold from
any compensation paid to the Participant by the Company) or by a combination of
such means: (i) causing the Participant to tender a cash payment; (ii)
withholding shares of Common Stock from the shares of Common Stock issued or
otherwise issuable to the Participant in connection with the Stock Award; or
(iii) by such other method as may be set forth in the Stock Award Agreement.

      (g) ELECTRONIC DELIVERY. Any reference herein to a "written" agreement or
document shall include any agreement or document delivered electronically or
posted on the Company's intranet.

11.   ADJUSTMENTS UPON CHANGES IN COMMON STOCK; OTHER CORPORATE EVENTS.

      (a) CAPITALIZATION ADJUSTMENTS. If any change is made in, or other events
occur with respect to, the Common Stock subject to the Plan or subject to any
Stock Award after the

                                      23.
<PAGE>

IPO Date 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 Board shall appropriately
adjust: (i) the class(es) and maximum number of securities subject to the Plan
pursuant to Section 4(a), (ii) the class(es) and maximum number of securities by
which the share reserve is to increase automatically each year pursuant to
Section 4(a), (iii) the class(es) and number of securities subject to each stock
award under the 2000 Plan that are added from time to time to the share reserve
under the Plan pursuant to Section 4(a), (iv) the class(es) and maximum number
of securities that may be issued pursuant to the exercise of Incentive Stock
Options pursuant to Section 4(c), (v) the class(es) and maximum number of
securities that may be awarded to any person pursuant to Section 5(c) and
7(e)(i) , and (vi) the class(es) and number of securities and price per share of
stock subject to outstanding Stock Awards. The Board shall make such
adjustments, and its determination shall be final, binding and conclusive.
(Notwithstanding the foregoing, 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, all outstanding Stock Awards (other than Stock
Awards consisting of vested and outstanding shares of Common Stock not subject
to the Company's right of repurchase) shall terminate immediately prior to the
completion of such dissolution or liquidation, and the shares of Common Stock
subject to the Company's repurchase option may be repurchased by the Company
notwithstanding the fact that the holder of such Stock Award is providing
Continuous Service, provided, however, that the Board may, in its sole
discretion, cause some or all Stock Awards to become fully vested, exercisable
and/or no longer subject to repurchase or forfeiture (to the extent such Stock
Awards have not previously expired or terminated) before the dissolution or
liquidation is completed but contingent on its completion.

      (c) CORPORATE TRANSACTION. The following provisions shall apply to Stock
Awards in the event of a Corporate Transaction unless otherwise provided in the
instrument evidencing the Stock Award or any other written agreement between the
Company or any Affiliate and the holder of the Stock Award or unless otherwise
expressly provided by the Board at the time of grant of a Stock Award.

            (i) STOCK AWARDS MAY BE ASSUMED. In the event of a Corporate
Transaction, any surviving corporation or acquiring corporation (or the
surviving or acquiring corporation's parent company) may assume or continue any
or all Stock Awards outstanding under the Plan or may substitute similar stock
awards for Stock Awards outstanding under the Plan (including but not limited
to, awards to acquire the same consideration paid to the stockholders of the
Company pursuant to the Corporate Transaction), and any reacquisition or
repurchase rights held by the Company in respect of Common Stock issued pursuant
to Stock Awards may be assigned by the Company to the successor of the Company
(or the successor's parent company, if any), in connection with such Corporate
Transaction. A surviving corporation or acquiring corporation (or its parent)
may choose to assume or continue only a portion of a Stock Award or substitute a
similar stock award for only a portion of a Stock Award.

                                      24.
<PAGE>

the terms of any assumption, continuation or substitution shall be set by the
Board in accordance with the provisions of Section 3.

            (ii) STOCK AWARDS HELD BY CURRENT PARTICIPANTS. In the event of a
Corporate Transaction in which the surviving corporation or acquiring
corporation (or its parent company) does not assume or continue such outstanding
Stock Awards or substitute similar stock awards for such outstanding Stock
Awards, then with respect to Stock Awards that have not been assumed, continued
or substituted and that are held by Participants whose Continuous Service has
not terminated prior to the effective time of the Corporate Transaction
(referred to as the "CURRENT PARTICIPANTS"), the vesting of such Stock Awards
(and, if applicable, the time at which such Stock Awards 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 Stock Awards shall terminate if not exercised (if
applicable) at or prior to the effective time of the Corporate Transaction, and
any reacquisition or repurchase rights held by the Company with respect to such
Stock Awards shall lapse (contingent upon the effectiveness of the Corporate
Transaction).

            (iii) STOCK AWARDS HELD BY PERSONS OTHER THAN CURRENT PARTICIPANTS.
In the event of a Corporate Transaction in which the surviving corporation or
acquiring corporation (or its parent company) does not assume or continue such
outstanding Stock Awards or substitute similar stock awards for such outstanding
Stock Awards, then with respect to Stock Awards that have not been assumed,
continued or substituted and that are held by persons other than Current
Participants, the vesting of such Stock Awards (and, if applicable, the time at
which such Stock Award may be exercised) shall not be accelerated and such Stock
Awards (other than a Stock Award consisting of vested and outstanding shares of
Common Stock not subject to the Company's right of repurchase) shall terminate
if not exercised (if applicable) prior to the effective time of the Corporate
Transaction; provided, however, that any reacquisition or repurchase rights held
by the Company with respect to such Stock Awards shall not terminate and may
continue to be exercised notwithstanding the Corporate Transaction.

            (iv) PAYMENT FOR STOCK AWARDS IN LIEU OF EXERCISE. Notwithstanding
the foregoing, in the event a Stock Award will terminate if not exercised prior
to the effective time of a Corporate Transaction, the Board may provide, in its
sole discretion, that the holder of such Stock Award may not exercise such Stock
Award but will receive a payment, in such form as may be determined by the
Board, equal in value to the excess, if any, of (a) the value of the property
the holder of the Stock Award would have received upon the exercise of the Stock
Award, over (b) any exercise price payable by such holder in connection with
such exercise.

            (v) CHANGE IN CONTROL. A Stock Award may be subject to additional
acceleration of vesting and exercisability upon or after a Change in Control as
may be provided in the Stock Award Agreement for such Stock Award or as may be
provided in any other written agreement between the Company or any Affiliate and
the Participant, but in the absence of such provision, no such acceleration
shall occur.

                                      25.
<PAGE>

12.   TERMINATION OR SUSPENSION OF THE PLAN.

      (a) PLAN TERM. Unless sooner terminated by the Board pursuant to Section
3, the Plan shall automatically terminate on the day before the tenth (10th)
anniversary of the date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier. No Awards may be granted
under the Plan while the Plan is suspended or after it is terminated.

      (b) NO IMPAIRMENT OF RIGHTS. Termination of the Plan shall not impair
rights and obligations under any Award granted while the Plan is in effect
except with the written consent of the affected Participant.

13.   EFFECTIVE DATE OF PLAN.

      This Plan shall become effective on the IPO Date, but no Stock Award shall
be exercised (or, in the case of a Stock Purchase Award, Restricted Stock Award,
Restricted Stock Unit Award, or Other Stock Award, shall be granted) under this
Plan unless and until this 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.

14.   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.

                                      26.
<PAGE>
                            SGX PHARMACEUTICALS, INC.
                           2005 EQUITY INCENTIVE PLAN

                             STOCK OPTION AGREEMENT
              (INCENTIVE STOCK OPTION OR NONSTATUTORY STOCK OPTION)

      Pursuant to your Stock Option Grant Notice ("GRANT NOTICE") and this Stock
Option Agreement, SGX Pharmaceuticals, Inc. (the "COMPANY") has granted you an
option under its 2005 Equity Incentive Plan (the "PLAN") to purchase the number
of shares of the Company's Common Stock indicated in your Grant Notice at the
exercise price indicated in your Grant Notice. Capitalized terms not explicitly
defined in this Stock Option Agreement but defined in the Plan shall have the
same definitions as in the Plan.

      The details of your option are as follows:

      1. VESTING. Subject to the limitations contained herein, your option will
vest as provided in your Grant Notice, provided that vesting will cease upon the
termination of your Continuous Service.

      2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common
Stock subject to your option and your exercise price per share referenced in
your Grant Notice may be adjusted from time to time for Capitalization
Adjustments.

      3. METHOD OF PAYMENT. Payment of the exercise price is due in full upon
exercise of all or any part of your option. You may elect to make payment of the
exercise price in cash or by check or in any other manner PERMITTED BY YOUR
GRANT NOTICE, which may include one or more of the following:

            (a) In the Company's sole discretion at the time your option is
exercised and provided that at the time of exercise the Common Stock is publicly
traded and quoted regularly in The Wall Street Journal, pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board that,
prior to the issuance of 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.

            (b) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company's reported earnings (generally six (6)
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise.
"Delivery" for these purposes, in the sole discretion of the Company at the time
you exercise your option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by
the Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender

                                       1.
<PAGE>

would violate the provisions of any law, regulation or agreement restricting the
redemption of the Company's stock.

            (c) Provided that at the time of exercise the Company has adopted
FAS 123, as revised, by a "net exercise" arrangement pursuant to which the
Company will reduce the number of shares of Common Stock issued upon exercise of
your option by the largest whole number of shares with a Fair Market Value that
does not exceed the aggregate exercise price; provided, however, the Company
shall accept a cash or other payment from you to the extent of any remaining
balance of the aggregate exercise price not satisfied by such holding back of
whole shares; provided, however, shares of Common Stock will no longer be
outstanding under your option and will not be exercisable thereafter to the
extent that (1) shares are used to pay the exercise price pursuant to the "net
exercise," (2) shares are delivered to you as a result of such exercise, and (3)
shares are withheld to satisfy tax withholding obligations.

      4. WHOLE SHARES. You may exercise your option only for whole shares of
Common Stock.

      5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, you may not exercise your option unless the shares of Common
Stock issuable upon such exercise are then registered under the Securities Act
or, if such shares of Common Stock are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the registration
requirements of the Securities Act. The exercise of your option also must comply
with other applicable laws and regulations governing your option, and you may
not exercise your option if the Company determines that such exercise would not
be in material compliance with such laws and regulations.

      6. TERM. You may not exercise your option before the commencement of its
term or after its term expires. The term of your option commences on the Date of
Grant and expires upon the earliest of the following:

            (a) immediately upon the termination of your Continuous Service for
Cause;

            (b) three (3) months after the termination of your Continuous
Service for any reason other than Cause, Disability, or death or as a result of
Termination After Change in Control (defined below), provided that if during any
part of such three- (3-) month period you may not exercise your option solely
because of the condition set forth in the preceding paragraph relating to
"Securities Law Compliance," your option shall not expire until the earlier of
the Expiration Date or until it shall have been exercisable for an aggregate
period of three (3) months after the termination of your Continuous Service;

            (c) twelve (12) months after the termination of your Continuous
Service due to your Disability;

            (d) eighteen (18) months after your death if you die either during
your Continuous Service or within three (3) months after your Continuous Service
terminates for any reason other than Cause;

            (e) the Expiration Date indicated in your Grant Notice; or

                                       2.
<PAGE>

            (f) the day before the tenth (10th) anniversary of the Date of
Grant.

      If your option is an Incentive Stock Option, note that to obtain the
federal income tax advantages associated with an Incentive Stock Option, the
Code requires that at all times beginning on the date of grant of your option
and ending on the day three (3) months before the date of your option's
exercise, you must be an employee of the Company or an Affiliate, except in the
event of your death or your permanent and total disability, as defined in
Section 22(e) of the Code. (The definition of disability in Section 22(e) of the
Code is different from the definition of the Disability under the Plan). The
Company has provided for extended exercisability of your option under certain
circumstances for your benefit but cannot guarantee that your option will
necessarily be treated as an Incentive Stock Option if you continue to provide
services to the Company or an Affiliate as a Consultant or Director after your
employment terminates or if you otherwise exercise your option more than three
(3) months after the date your employment with the Company or an Affiliate
terminates.

      7. EXERCISE.

            (a) You may exercise the vested portion of your option during its
term by delivering a Notice of Exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require.

            (b) By exercising your option you agree that, as a condition to any
exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
your option, or (2) the disposition of shares of Common Stock acquired upon such
exercise.

            (c) If your option is an Incentive Stock Option, by exercising your
option you agree that you will notify the Company in writing within fifteen (15)
days after the date of any disposition of any of the shares of the Common Stock
issued upon exercise of your option that occurs within two (2) years after the
date of your option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of your option.

      8. TRANSFERABILITY.

            (a) If your option is an Incentive Stock Option, your option is not
transferable, except by will or by the laws of descent and distribution, and is
exercisable during your life only by you. Notwithstanding the foregoing, by
delivering written notice to the Company, in a form satisfactory to the Company,
you may designate a third party who, in the event of your death, shall
thereafter be entitled to exercise your option.

            (b) If your option is a Nonstatutory Stock Option, your option is
not transferable, except (i) by will or by the laws of descent and distribution,
(ii) with the prior written approval of the Company, by instrument to an inter
vivos or testamentary trust, in a form accepted by the Company, in which the
option is to be passed to beneficiaries upon the death of

                                       3.
<PAGE>

the trustor (settlor) and (iii) with the prior written approval of the Company,
by gift, in a form accepted by the Company, to a permitted transferee under Rule
701 of the Securities Act.

      9. OPTION NOT A SERVICE CONTRACT. Your option is not an employment or
service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or an
Affiliate, their respective stockholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.

      10. WITHHOLDING OBLIGATIONS.

            (a) At the time you exercise your option, in whole or in part, or at
any time thereafter as requested by the Company, you hereby authorize
withholding from payroll and any other amounts payable to you, and otherwise
agree to make adequate provision as instructed by the Company (including by
means of a "cashless exercise" pursuant to a program developed under Regulation
T as promulgated by the Federal Reserve Board to the extent instructed by the
Company), for any sums required to satisfy the federal, state, local and foreign
tax withholding obligations of the Company or an Affiliate, if any, which arise
in connection with the exercise of your option.

            (b) The Company may, in its sole discretion, and in compliance with
any applicable legal conditions or restrictions, withhold from fully vested
shares of Common Stock otherwise issuable to you upon the exercise of your
option a number of whole shares of Common Stock having a Fair Market Value,
determined by the Company as of the date of exercise, not in excess of the
minimum amount of tax required to be withheld by law (or such lower amount as
may be necessary to avoid variable award accounting). Any adverse consequences
to you arising in connection with such share withholding procedure shall be your
sole responsibility.

            (c) You may not exercise your option unless the tax withholding
obligations of the Company and/or any Affiliate are satisfied. Accordingly, you
may not be able to exercise your option when desired even though your option is
vested, and the Company shall have no obligation to issue a certificate for such
shares of Common Stock or release such shares of Common Stock from any escrow
provided for herein unless such obligations are satisfied.

      11. NOTICES. Any notices provided for in your option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by mail by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the last
address you provided to the Company.

      12. GOVERNING PLAN DOCUMENT. Your option is subject to all the provisions
of the Plan, the provisions of which are hereby made a part of your option, and
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 your option and those of the
Plan, the provisions of the Plan shall control except as expressly provided
herein.

                                       4.
<PAGE>
                            SGX PHARMACEUTICALS, INC.
                            STOCK OPTION GRANT NOTICE
                          (2005 EQUITY INCENTIVE PLAN)

SGX Pharmaceuticals, Inc. (the "COMPANY"), pursuant to its 2005 Equity Incentive
Plan (the "PLAN"), hereby grants to Optionholder an option to purchase the
number of shares of the Company's Common Stock set forth below. This option is
subject to all of the terms and conditions as set forth herein and in the Stock
Option Agreement, the Plan and the Notice of Exercise, all of which are attached
hereto and incorporated herein in their entirety.

      Optionholder:
                                                  --------------------
      Date of Grant:
                                                  --------------------
      Vesting Commencement Date:
                                                  --------------------
      Number of Shares Subject to Option:
                                                  --------------------
      Exercise Price (Per Share):
                                                  --------------------
      Total Exercise Price:
                                                  --------------------
      Expiration Date:
                                                  --------------------

TYPE OF GRANT:      [ ] Incentive Stock Option(1)  [ ] Nonstatutory Stock Option

EXERCISE SCHEDULE:  Same as Vesting Schedule

VESTING SCHEDULE:   [1/4th of the shares vest one year after the Vesting
                    Commencement Date and 1/48th of the shares vest monthly
                    thereafter over the next three years.]

                    [OTHER]

PAYMENT:            By one or a combination of the following items (described in
                    the Stock Option Agreement and/or the Plan):

                    [ ] By cash or check

                    [ ] Pursuant to a Regulation T Program if the Shares are
                        publicly traded

                    [ ] By delivery of already-owned shares if the Shares are
                        publicly traded

                    [ ] Net exercise if the Company has adopted FAS 123, as
                        revised, at the time of such exercise

ADDITIONAL TERMS/ACKNOWLEDGEMENTS: The undersigned Optionholder acknowledges
receipt of, and understands and agrees to, this Stock Option Grant Notice, the
Stock Option Agreement and the Plan. Optionholder further acknowledges that as
of the Date of Grant, this Stock Option Grant Notice, the Stock Option Agreement
and the Plan set forth the entire understanding between Optionholder and the
Company regarding the acquisition of stock in the Company and supersede all
prior oral and written agreements on that subject with the exception of (i)
options previously granted and delivered to Optionholder under the Plan, and
(ii) the following agreements only:

      OTHER AGREEMENTS:
                                        ----------------------------------------

SGX PHARMACEUTICALS, INC.                    OPTIONHOLDER:

By:
   -------------------------------------     ------------------------------
                 Signature                              Signature

Title:                                       Date:
      ----------------------------------          -------------------------

Date:
     -----------------------------------

ATTACHMENTS: Stock Option Agreement, 2005 Equity Incentive Plan and Notice of
             Exercise

----------

(1) If this is an Incentive Stock Option, it (plus other outstanding Incentive
Stock Options) cannot be first exercisable for more than $100,000 in value
(measured by exercise price) in any calendar year. Any excess over $100,000 is a
Nonstatutory Stock Option.

<PAGE>

                                  ATTACHMENT I

                             STOCK OPTION AGREEMENT

<PAGE>

                                  ATTACHMENT II

                           2005 EQUITY INCENTIVE PLAN

<PAGE>

                                 ATTACHMENT III

                               NOTICE OF EXERCISE<PAGE>
                                                                    EXHIBIT 10.4

                            SGX PHARMACEUTICALS, INC.
                        2005 EMPLOYEE STOCK PURCHASE PLAN

          INITIALLY ADOPTED BY THE BOARD OF DIRECTORS: AUGUST 30, 2005
              INITIALLY APPROVED BY STOCKHOLDERS: OCTOBER 31, 2005

1.    PURPOSE.

      (a) The purpose of the Plan is to provide a means by which Employees of
the Company and certain designated Related Corporations may be given an
opportunity to purchase shares of the Common Stock of the Company.

      (b) The Company, by means of the Plan, seeks to secure and retain the
services of current and new Employees and to provide incentives for such persons
to exert maximum efforts for the success of the Company and its Related
Corporations.

      (c) The Company intends that the Purchase Rights be considered options
issued under an Employee Stock Purchase Plan.

2.    DEFINITIONS.

      As used in the Plan and any Offering, unless otherwise specified, the
following terms have the meanings set forth below:

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

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

      (c) "COMMITTEE" means a committee appointed by the Board in accordance
with Section 3(c) of the Plan.

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

      (e) "COMPANY" means SGX Pharmaceuticals, Inc., a Delaware corporation.

      (f) "CONTRIBUTIONS" means the payroll deductions and other additional
payments that a Participant contributes to fund the exercise of a Purchase
Right. A Participant may make payments not through payroll deductions only if
specifically provided for in the Offering, and then only if the Participant has
not already had the maximum permitted amount withheld through payroll deductions
during the Offering.

      (g) "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, lease, license or other disposition of all or
substantially all of the consolidated assets of the Company;

                                     - 1 -
<PAGE>
            (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.

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

      (i) "ELIGIBLE EMPLOYEE" means an Employee who meets the requirements set
forth in the Offering for eligibility to participate in the Offering, provided
that such Employee also meets the requirements for eligibility to participate
set forth in the Plan.

      (j) "EMPLOYEE" means any person, including Officers and Directors, who is
employed for purposes of Section 423(b)(4) of the Code by the Company or a
Related Corporation. Neither service as a Director nor payment of a director's
fee shall be sufficient to make an individual an Employee of the Company or a
Related Corporation.

      (k) "EMPLOYEE STOCK PURCHASE PLAN" means a plan that grants Purchase
Rights intended to be options issued under an "employee stock purchase plan," as
that term is defined in Section 423(b) of the Code.

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

      (m) "FAIR MARKET VALUE" means the value of a security, as determined in
good faith by the Board. If the security is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of the security, unless otherwise determined by the Board,
shall be the closing sales price (rounded up where necessary to the nearest
whole cent) for such security (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 relevant security of the Company) on the Trading Day
that is immediately prior to the relevant determination date, as reported in The
Wall Street Journal or such other source as the Board deems reliable. Unless
otherwise provided by the Board, if there is no closing sales price (or closing
bid if no sales were reported) for the security on the date in question, then
the Fair Market Value shall be the closing selling price (or closing bid if no
sales were reported) on the last preceding date for which such quotation exists.

      (n) "IPO DATE" means the date of the underwriting agreement between the
Company and the underwriter(s) managing the initial public offering of the
Common Stock, pursuant to which the Common Stock is priced for the initial
public offering.

      (o) "OFFERING" means the grant of Purchase Rights to purchase shares of
Common Stock under the Plan to Eligible Employees.

                                       2.
<PAGE>
      (p) "OFFERING DATE" means a date selected by the Board for an Offering to
commence.

      (q) "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.

      (r) "PARTICIPANT" means an Eligible Employee who holds an outstanding
Purchase Right granted pursuant to the Plan.

      (s) "PLAN" means this SGX Pharmaceuticals, Inc. 2005 Employee Stock
Purchase Plan.

      (t) "PURCHASE DATE" means one or more dates during an Offering established
by the Board on which Purchase Rights shall be exercised and as of which
purchases of shares of Common Stock shall be carried out in accordance with such
Offering.

      (u) "PURCHASE PERIOD" means a period of time specified within an Offering
beginning on the Offering Date or on the next day following a Purchase Date
within an Offering and ending on a Purchase Date. An Offering may consist of one
or more Purchase Periods.

      (v) "PURCHASE RIGHT" means an option to purchase shares of Common Stock
granted pursuant to the Plan.

      (w) "RELATED CORPORATION" 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.

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

      (y) "TRADING DAY" means any day on which the exchange(s) or market(s) on
which shares of Common Stock are listed, whether it be an established stock
exchange, the Nasdaq National Market, the Nasdaq SmallCap Market or otherwise,
is open for trading.

3.    ADMINISTRATION.

      (a) The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in Section 3(c). Whether or
not the Board has delegated administration, the Board shall have the final power
to determine all questions of policy and expediency that may arise in the
administration of the Plan.

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

            (i) To determine when and how Purchase Rights to purchase shares of
Common Stock shall be granted and the provisions of each Offering of such
Purchase Rights (which need not be identical).

                                       3.
<PAGE>
            (ii) To designate from time to time which Related Corporations of
the Company shall be eligible to participate in the Plan.

            (iii) To construe and interpret the Plan and Purchase Rights, and to
establish, amend and revoke rules and regulations for the administration of the
Plan. The Board, in the exercise of this power, may correct any defect, omission
or inconsistency in the Plan, in a manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective.

            (iv) To amend the Plan as provided in Section 15.

            (v) Generally, to exercise such powers and to perform such acts as
it deems necessary or expedient to promote the best interests of the Company and
its Related Corporations and to carry out the intent that the Plan be treated as
an Employee Stock Purchase Plan.

            (vi) To adopt such procedures and sub-plans as are necessary or
appropriate to permit participation in the Plan by Employees who are foreign
nationals or employed outside the United States.

      (c) The Board may delegate administration of the Plan to a Committee of
the Board composed of one (1) or more members of the Board. If administration of
the Plan is delegated to a Committee, the Committee shall have, in connection
with the administration of the Plan, the powers theretofore possessed by the
Board, 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 some or all
of the powers previously delegated. If administration is delegated to a
Committee, references to the Board in this Plan and in the Offering document
shall thereafter be deemed to be to the Board or the Committee, as the case may
be.

      (d) 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 OF COMMON STOCK SUBJECT TO THE PLAN.

      Subject to the provisions of Section 14(a) relating to adjustments upon
changes in Common Stock, the stock that may be sold pursuant to Purchase Rights
granted under the Plan shall not exceed in the aggregate three hundred
seventy-five thousand (375,000) shares of Common Stock, plus an annual increase
to be added on the first day of each Company fiscal year, beginning in 2007 and
ending in (and including) 2015, equal to the lesser of: (i) one percent (1%) of
the total number of shares of Common Stock outstanding on December 31st of the
preceding year (rounded to the nearest whole share), (ii) one hundred fifty
thousand (150,000) shares of Common Stock, or (iii) an amount determined by the
Board or a Committee.

5.    GRANT OF PURCHASE RIGHTS; OFFERING.

      (a) The Board may from time to time grant or provide for the grant of
Purchase Rights to purchase shares of Common Stock under the Plan to Eligible
Employees in an Offering (consisting of one or more Purchase Periods) on an
Offering Date or Offering Dates selected by

                                       4.
<PAGE>
the Board. Each Offering shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate, which shall comply with the
requirement of Section 423(b)(5) of the Code that all Employees granted Purchase
Rights shall have the same rights and privileges. The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation of the provisions of this Plan by
reference in the document comprising the Offering or otherwise) the period
during which the Offering shall be effective, which period shall not exceed
twenty-seven (27) months beginning with the Offering Date, and the substance of
the provisions contained in Sections 6 through 9, inclusive.

      (b) If a Participant has more than one Purchase Right outstanding under
the Plan, unless he or she otherwise indicates in agreements or notices
delivered hereunder: (i) each agreement or notice delivered by that Participant
shall be deemed to apply to all of his or her Purchase Rights under the Plan,
and (ii) a Purchase Right with a lower exercise price (or an earlier-granted
Purchase Right, if different Purchase Rights have identical exercise prices)
shall be exercised to the fullest possible extent before a Purchase Right with a
higher exercise price (or a later-granted Purchase Right if different Purchase
Rights have identical exercise prices) shall be exercised.

6.    ELIGIBILITY.

      (a) Purchase Rights may be granted only to Employees of the Company or, as
the Board may designate as provided in Section 3(b), to Employees of a Related
Corporation. Except as provided in Section 6(b), an Employee shall not be
eligible to be granted Purchase Rights under the Plan unless, on the Offering
Date, such Employee has been in the employ of the Company or the Related
Corporation, as the case may be, for such continuous period preceding such
Offering Date as the Board may require, but in no event shall the required
period of continuous employment be greater than two (2) years. In addition, the
Board may provide that no Employee shall be eligible to be granted Purchase
Rights under the Plan unless, on the Offering Date, such Employee's customary
employment with the Company or the Related Corporation is more than twenty (20)
hours per week and/or more than five (5) months per calendar year.

      (b) The Board may provide that each person who, during the course of an
Offering, first becomes an Eligible Employee shall, on a date or dates specified
in the Offering which coincides with the day on which such person becomes an
Eligible Employee or which occurs thereafter, receive a Purchase Right under
that Offering, which Purchase Right shall thereafter be deemed to be a part of
that Offering. Such Purchase Right shall have the same characteristics as any
Purchase Rights originally granted under that Offering, as described herein,
except that:

            (i) the date on which such Purchase Right is granted shall be the
"Offering Date" of such Purchase Right for all purposes, including determination
of the exercise price of such Purchase Right;

            (ii) the period of the Offering with respect to such Purchase Right
shall begin on its Offering Date and end coincident with the end of such
Offering; and

                                       5.
<PAGE>
            (iii) the Board may provide that if such person first becomes an
Eligible Employee within a specified period of time before the end of the
Offering, he or she shall not receive any Purchase Right under that Offering.

      (c) No Employee shall be eligible for the grant of any Purchase Rights
under the Plan if, immediately after any such Purchase Rights are granted, such
Employee owns stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or of any Related
Corporation. For purposes of this Section 6(c), the rules of Section 424(d) of
the Code shall apply in determining the stock ownership of any Employee, and
stock which such Employee may purchase under all outstanding Purchase Rights and
options shall be treated as stock owned by such Employee.

      (d) As specified by Section 423(b)(8) of the Code, an Eligible Employee
may be granted Purchase Rights under the Plan only if such Purchase Rights,
together with any other rights granted under all Employee Stock Purchase Plans
of the Company and any Related Corporations, do not permit such Eligible
Employee's rights to purchase stock of the Company or any Related Corporation to
accrue at a rate which exceeds twenty five thousand dollars ($25,000) of Fair
Market Value of such stock (determined at the time such rights are granted, and
which, with respect to the Plan, shall be determined as of their respective
Offering Dates) for each calendar year in which such rights are outstanding at
any time.

      (e) Officers of the Company and any designated Related Corporation, if
they are otherwise Eligible Employees, shall be eligible to participate in
Offerings under the Plan. Notwithstanding the foregoing, the Board may provide
in an Offering that Employees who are highly compensated Employees within the
meaning of Section 423(b)(4)(D) of the Code shall not be eligible to
participate.

7.    PURCHASE RIGHTS; PURCHASE PRICE.

      (a) On each Offering Date, each Eligible Employee, pursuant to an Offering
made under the Plan, shall be granted a Purchase Right to purchase up to that
number of shares of Common Stock purchasable either with a percentage or with a
maximum dollar amount, as designated by the Board, but in either case not
exceeding fifteen percent (15%), of such Employee's Earnings (as defined by the
Board in each Offering) during the period that begins on the Offering Date (or
such later date as the Board determines for a particular Offering) and ends on
the date stated in the Offering, which date shall be no later than the end of
the Offering.

      (b) The Board shall establish one (1) or more Purchase Dates during an
Offering as of which Purchase Rights granted pursuant to that Offering shall be
exercised and purchases of shares of Common Stock shall be carried out in
accordance with such Offering.

      (c) In connection with each Offering made under the Plan, the Board may
specify a maximum number of shares of Common Stock that may be purchased by any
Participant on any Purchase Date during such Offering. In connection with each
Offering made under the Plan, the Board may specify a maximum

                                       6.
<PAGE>
aggregate number of shares of Common Stock that may be purchased by all
Participants pursuant to such Offering. In addition, in connection with each
Offering that contains more than one Purchase Date, the Board may specify a
maximum aggregate number of shares of Common Stock that may be purchased by all
Participants on any Purchase Date under the Offering. If the aggregate purchase
of shares of Common Stock issuable upon exercise of Purchase Rights granted
under the Offering would exceed any such maximum aggregate number, then, in the
absence of any Board action otherwise, a pro rata allocation of the shares of
Common Stock available shall be made in as nearly a uniform manner as shall be
practicable and equitable.

      (d) The purchase price of shares of Common Stock acquired pursuant to
Purchase Rights shall be not less than the lesser of:

            (i) an amount equal to eighty-five percent (85%) of the Fair Market
Value of the shares of Common Stock on the Offering Date; or

            (ii) an amount equal to eighty-five percent (85%) of the Fair Market
Value of the shares of Common Stock on the applicable Purchase Date.

8.    PARTICIPATION; WITHDRAWAL; TERMINATION.

      (a) A Participant may elect to authorize payroll deductions pursuant to an
Offering under the Plan by completing and delivering to the Company, within the
time specified in the Offering, an enrollment form (in such form as the Company
may provide). Each such enrollment form shall authorize an amount of
Contributions expressed as a percentage of the submitting Participant's Earnings
(as defined in each Offering) during the Offering (not to exceed the maximum
percentage specified by the Board). Each Participant's Contributions shall
remain the property of the Participant at all times prior to the purchase of
Common Stock, but such Contributions may be commingled with the assets of the
Company and used for general corporate purposes except where applicable law
requires that Contributions be deposited with an independent third party. To the
extent provided in the Offering, a Participant may begin making Contributions
after the beginning of the Offering. To the extent provided in the Offering, a
Participant may thereafter reduce (including to zero) or increase his or her
Contributions. To the extent specifically provided in the Offering, in addition
to making Contributions by payroll deductions, a Participant may make
Contributions through the payment by cash or check prior to each Purchase Date
of the Offering.

      (b) During an Offering, a Participant may cease making Contributions and
withdraw from the Offering by delivering to the Company a notice of withdrawal
in such form as the Company may provide. Such withdrawal may be elected at any
time prior to the end of the Offering, except as provided otherwise in the
Offering. Upon such withdrawal from the Offering by a Participant, the Company
shall distribute to such Participant all of his or her accumulated Contributions
(reduced to the extent, if any, such Contributions have been used to acquire
shares of Common Stock for the Participant) under the Offering, and such
Participant's Purchase Right in that Offering shall thereupon terminate. A
Participant's withdrawal from an Offering shall have no effect upon such
Participant's eligibility to participate in any other Offerings under the Plan,
but such Participant shall be required to deliver a new enrollment form in order
to participate in subsequent Offerings.

                                       7.
<PAGE>
      (c) Purchase Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon a Participant ceasing to be an Employee for any
reason or for no reason (subject to any post-employment participation period
required by law) or other lack of eligibility. The Company shall distribute to
such terminated or otherwise ineligible Employee all of his or her accumulated
Contributions (reduced to the extent, if any, such Contributions have been used
to acquire shares of Common Stock for the terminated or otherwise ineligible
Employee) under the Offering.

      (d) Purchase Rights shall not be transferable by a Participant otherwise
than by will, the laws of descent and distribution, or a beneficiary designation
as provided in Section 13. During a Participant's lifetime, Purchase Rights
shall be exercisable only by such Participant.

      (e) Unless otherwise specified in an Offering, the Company shall have no
obligation to pay interest on Contributions.

9.    EXERCISE.

      (a) On each Purchase Date during an Offering, each Participant's
accumulated Contributions shall be applied to the purchase of shares of Common
Stock up to the maximum number of shares of Common Stock permitted pursuant to
the terms of the Plan and the applicable Offering, at the purchase price
specified in the Offering. No fractional shares shall be issued upon the
exercise of Purchase Rights unless specifically provided for in the Offering.

      (b) If any amount of accumulated Contributions remains in a Participant's
account after the purchase of shares of Common Stock and such remaining amount
is less than the amount required to purchase one share of Common Stock on the
final Purchase Date of an Offering, then such remaining amount shall be held in
such Participant's account for the purchase of shares of Common Stock under the
next Offering under the Plan, unless such Participant withdraws from such next
Offering, as provided in Section 8(b), or is not eligible to participate in such
Offering, as provided in Section 6, in which case such amount shall be
distributed to such Participant after the final Purchase Date, without interest.
If the amount of Contributions remaining in a Participant's account after the
purchase of shares of Common Stock is at least equal to the amount required to
purchase one (1) whole share of Common Stock on the final Purchase Date of the
Offering, then such remaining amount shall be distributed in full to such
Participant at the end of the Offering.

      (c) No Purchase Rights may be exercised to any extent unless the shares of
Common Stock to be issued upon such exercise under the Plan are covered by an
effective registration statement pursuant to the Securities Act and the Plan is
in material compliance with all laws applicable to the Plan. If on a Purchase
Date during any Offering hereunder the shares of Common Stock are not so
registered or the Plan is not in such compliance, no Purchase Rights or any
Offering shall be exercised on such Purchase Date, and the Purchase Date shall
be delayed until the shares of Common Stock are subject to such an effective
registration statement and the Plan is in such compliance, except that the
Purchase Date shall not be delayed more than twelve (12) months and the Purchase
Date shall in no event be more than twenty-seven (27) months from the Offering
Date. If, on the Purchase Date under any Offering hereunder, as delayed to the
maximum extent permissible, the shares of Common Stock are not registered and
the Plan is not

                                       8.
<PAGE>
in such compliance, no Purchase Rights or any Offering shall be exercised and
all Contributions accumulated during the Offering (reduced to the extent, if
any, such Contributions have been used to acquire shares of Common Stock) shall
be distributed to the Participants.

10.   COVENANTS OF THE COMPANY.

      The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of Common Stock upon
exercise of the Purchase Rights. If, after commercially reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority that counsel for the Company deems necessary for the lawful issuance
and sale of shares of Common Stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell shares of Common Stock upon
exercise of such Purchase Rights unless and until such authority is obtained.

11.   USE OF PROCEEDS FROM SHARES OF COMMON STOCK.

      Proceeds from the sale of shares of Common Stock pursuant to Purchase
Rights shall constitute general funds of the Company.

12.   RIGHTS AS A STOCKHOLDER.

      A Participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, shares of Common Stock subject to
Purchase Rights unless and until the Participant's shares of Common Stock
acquired upon exercise of Purchase Rights are recorded in the books of the
Company (or its transfer agent).

13.   DESIGNATION OF BENEFICIARY.

      (a) A Participant may file a written designation of a beneficiary who is
to receive any shares of Common Stock and/or cash, if any, from the
Participant's account under the Plan in the event of such Participant's death
subsequent to the end of an Offering but prior to delivery to the Participant of
such shares of Common Stock or cash. In addition, a Participant may file a
written designation of a beneficiary who is to receive any cash from the
Participant's account under the Plan in the event of such Participant's death
during an Offering. Any such designation shall be on a form provided by or
otherwise acceptable to the Company.

      (b) The Participant may change such designation of beneficiary at any time
by written notice to the Company. In the event of the death of a Participant and
in the absence of a beneficiary validly designated under the Plan who is living
at the time of such Participant's death, the Company shall deliver such shares
of Common Stock and/or cash to the executor or administrator of the estate of
the Participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its sole discretion, may deliver
such shares of Common Stock and/or cash to the spouse or to any one or more
dependents or relatives of the Participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company may
designate.

                                       9.
<PAGE>
14.   ADJUSTMENTS UPON CHANGES IN SECURITIES; CORPORATE TRANSACTIONS.

      (a) If any change is made in the shares of Common Stock, subject to the
Plan, or subject to any Purchase Right, 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 shall be appropriately adjusted in the
type(s), class(es) and maximum number of shares of Common Stock subject to the
Plan pursuant to Section 4, and the outstanding Purchase Rights shall be
appropriately adjusted in the type(s), class(es), number of shares and purchase
limits of such outstanding Purchase Rights. The Board shall make such
adjustments, and its determination shall be final, binding and conclusive.
(Notwithstanding the foregoing, 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 a Corporate Transaction, then: (i) any surviving or
acquiring corporation may continue or assume Purchase Rights outstanding under
the Plan or may substitute similar rights (including a right to acquire the same
consideration paid to stockholders in the Corporate Transaction) for those
outstanding under the Plan, or (ii) if any surviving or acquiring corporation
does not continue or assume such Purchase Rights or does not substitute similar
rights for Purchase Rights outstanding under the Plan, then, the Participants'
accumulated Contributions shall be used to purchase shares of Common Stock
within ten (10) business days prior to the Corporate Transaction under the
ongoing Offering, and the Participants' Purchase Rights under the ongoing
Offering shall terminate immediately after such purchase.

15.   AMENDMENT OF THE PLAN.

      (a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 14 relating to adjustments upon changes
in securities and except as to amendments solely to benefit the administration
of the Plan, to take account of a change in legislation or to obtain or maintain
favorable tax, exchange control or regulatory treatment for Participants or the
Company or any Related Corporation, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary for the Plan to satisfy the requirements of Section 423 of the Code
or other applicable laws or regulations.

      (b) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Employee Stock Purchase Plans
or to bring the Plan and/or Purchase Rights into compliance therewith.

      (c) The rights and obligations under any Purchase Rights granted before
amendment of the Plan shall not be impaired by any amendment of the Plan except:
(i) with the consent of the person to whom such Purchase Rights were granted, or
(ii) as necessary to comply with any laws or governmental regulations
(including, without limitation, the provisions of the Code and the regulations
promulgated thereunder relating to Employee Stock Purchase Plans).

                                      10.
<PAGE>
16.   TERMINATION OR SUSPENSION OF THE PLAN.

      (a) The Board in its discretion may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate at the time that all of
the shares of Common Stock reserved for issuance under the Plan, as increased
and/or adjusted from time to time, have been issued under the terms of the Plan.
No Purchase Rights may be granted under the Plan while the Plan is suspended or
after it is terminated.

      (b) Any benefits, privileges, entitlements and obligations under any
Purchase Rights while the Plan is in effect shall not be impaired by suspension
or termination of the Plan except (i) as expressly provided in the Plan or with
the consent of the person to whom such Purchase Rights were granted, (ii) as
necessary to comply with any laws, regulations, or listing requirements, or
(iii) as necessary to ensure that the Plan and/or Purchase Rights comply with
the requirements of Section 423 of the Code.

17.   EFFECTIVE DATE OF PLAN.

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

18.   MISCELLANEOUS PROVISIONS.

      (a) The Plan and Offering do not constitute an employment contract.
Nothing in the Plan or in the Offering shall in any way alter the at will nature
of a Participant's employment or be deemed to create in any way whatsoever any
obligation on the part of any Participant to continue in the employ of the
Company or a Related Corporation, or on the part of the Company or a Related
Corporation to continue the employment of a Participant.

      (b) The provisions of the Plan shall be governed by the law of the State
of California without resort to that state's conflicts of laws rules.

                                      11.
<PAGE>
                            SGX PHARMACEUTICALS, INC.

                        2005 EMPLOYEE STOCK PURCHASE PLAN
                                    OFFERING

              ADOPTED BY THE BOARD OF DIRECTORS: AUGUST 30, 2005

      In this document, capitalized terms not otherwise defined shall have
the same definitions of such terms as in the SGX Pharmaceuticals, Inc. 2005
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 closing date of the initial public offering of the Company's Common Stock
under a registration statement declared effective under the Securities Act (the
"IPO Date") and shall end approximately 24 months following IPO Date, unless
terminated earlier as provided below. After the Initial Offering, an additional
new Offering shall begin on the day after the 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 shall
be six (6) months in length, except for the first and second Purchase Periods of
the Initial Offering which may be longer or shorter and 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 approximately 6 months following IPO date
and the second Purchase Period of the Initial Offering ending approximately 12
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) Notwithstanding anything in this Section 1 to the contrary, if on the
first day of a Purchase Period during an Offering the Fair Market Value of the
shares of Common Stock is less

                                       1.
<PAGE>
than it was on the Offering Date for that Offering, that day shall become the
next Offering Date, the Offering that would otherwise have continued in effect
shall immediately terminate and the Employees who were enrolled in the
terminated Offering shall automatically be enrolled in the new Offering that
starts such day.

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

2.    ELIGIBLE EMPLOYEES.

      (a) Each Eligible Employee who, on the date that is fourteen (14) days
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
twenty (20) hours per week or less;

            (ii) part-time or seasonal Employees whose customary employment is
five (5) months per calendar year or less;

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

            (iv) 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 ongoing Offering shall not be able to participate in
such Offering.

3.    PURCHASE RIGHTS.

      (a) Subject to the limitations set forth 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 fifteen percent (15%) of such
Participant's Earnings paid during the period of such Offering

                                       2.
<PAGE>
beginning immediately after such Participant first commences participation;
provided, however, that no Participant may have more than fifteen percent (15%)
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 and overtime pay (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), but excluding all
of the following: (i) all commissions, bonuses, and other remuneration paid
directly to such Participant, (ii) profit sharing, (iii) the cost of employee
benefits paid for by the Company or a Related Corporation, (iv) education or
tuition reimbursements, (v) imputed income arising under any Company or a
Related Corporation group insurance or benefit program, (vi) traveling expenses,
(vii) business and moving expense reimbursements, (viii) income received in
connection with stock options, (ix) contributions made by the Company or a
Related Corporation under any employee benefit plan, and (x) other 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 shall not
exceed seven thousand five hundred (7,500) shares.

                                       3.
<PAGE>
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 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 fifteen
percent (15%). Except as provided in paragraph (f) 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
at any time during an Offering with such change to be effective commencing as of
the next 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 Period for which it is to
commence.

      (c) A Participant may decrease (including a decrease to zero percent (0%))
his or her participation level no more than twice during a Purchase Period (and
the second decrease in participation level must be to zero percent (0%)). Any
such change in participation level shall be made by delivering a notice to the
Company or a designated Related Corporation 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. Such
change will become effective as soon as administratively practicable following
the Company's receipt of the notice.

      (d) 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

                                       4.
<PAGE>
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.

      (e) 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.

      (f) 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 fifteen percent (15%)
of the Eligible Employee's Earnings, subject to the limitations set forth in
Section 3(c) - 3(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
fifteen percent (15%) 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 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.

      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.

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

                                       5.
<PAGE>
agreements delivered by the Company, five (5) days after deposit in the United
States mail, postage prepaid.

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.

                                       6.

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