Document:

<PAGE>   1
                                                                    EXHIBIT 10.6

                            INDEMNIFICATION AGREEMENT

         THIS INDEMNIFICATION AGREEMENT is made as of _________, _____, by and
between LEXICON GENETICS INCORPORATED, a Delaware corporation (the "Company"),
and ___________ ("Indemnitee").

         WHEREAS, the Certificate of Incorporation and Bylaws of the Company
provide for the indemnification of its directors and executive officers to the
maximum extent permitted from time to time under applicable law and, along with
the Delaware General Corporation Law, contemplate that the Company may enter
into agreements with respect to such indemnification; and

         WHEREAS, the Board of Directors of the Company has concluded that it is
reasonable, prudent and in the best interests of the Company's stockholders for
the Company to contractually obligate itself to indemnify certain of its
Authorized Representatives (defined below) so that they will serve or continue
to serve with greater certainty that they will be adequately protected;

         NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Indemnitee hereby agree as follows:

         1. Definitions. For purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following terms
shall have the following respective meanings:

                  "Authorized Representative" means (i) a director, officer,
         employee, agent or fiduciary of the Company or any Subsidiary and (ii)
         a person serving at the request of the Company or any Subsidiary as a
         director, officer, employee, fiduciary or other representative of
         another Enterprise.

                  "Enterprise" means any corporation, partnership, limited
         liability company, association, joint venture, trust, employee benefit
         plan or other entity.

                  "Expenses" means all expenses, including (without limitation)
         reasonable fees and expenses of counsel.

                  "Liabilities" means all liabilities, including (without
         limitation) the amounts of any judgments, fines, penalties, excise
         taxes and amounts paid in settlement.

                  "Proceeding" means any threatened, pending or completed claim,
         action (including any action by or in the right of the Company), suit
         or proceeding (whether formal or informal, or civil, criminal,
         administrative, legislative, arbitrative or investigative) in respect
         of which Indemnitee is, was or at any time becomes, or is threatened to
         be made, a party, witness, subject or target, by reason of the fact
         that Indemnitee is or was an Authorized Representative or a prospective
         Authorized Representative.

                  "Subsidiary" means, at any time, (i) any corporation of which
         at least a majority of the outstanding voting stock is owned by the
         Company at such time, directly or indirectly through subsidiaries, and
         (ii) any other Enterprise in which the Company, directly or indirectly,
         owns more than a 50% equity interest at such time.

<PAGE>   2

         2. Interpretation. (a) In this Agreement, unless a clear contrary
intention appears:

                  (i) the singular number includes the plural number and vice
         versa;

                  (ii) reference to any gender includes each other gender;

                  (iii) the words "herein," "hereof" and "hereunder" and other
         words of similar import refer to this Agreement as a whole and not to
         any particular Section or other subdivision;

                  (iv) unless the context indicates otherwise, reference to any
         Section means such Section hereof; and

                  (v) the words "including" (and with correlative meaning
         "include") means including, without limiting the generality of any
         description preceding such term.

         (b) The Section headings herein are for convenience only and shall not
affect the construction hereof.

         (c) No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.

         (d) In the event of any ambiguity, vagueness or other similar matter
involving the interpretation or meaning of this Agreement, this Agreement shall
be liberally construed so as to provide to Indemnitee the full benefits
contemplated hereby.

         (e) If the indemnification to which Indemnitee is entitled as respects
any aspect of any claim varies between two or more provisions of this Agreement,
that provision providing the most comprehensive indemnification shall apply.

          3. Limitation on Personal Liability. To the fullest extent permitted
by applicable law, Indemnitee shall not be personally liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a director
of the Company, provided that the foregoing shall not eliminate or limit the
liability of Indemnitee (i) for any breach of Indemnitee's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law relating to unlawful
dividend payments and unlawful stock purchases or redemptions or (iv) for any
transaction from which Indemnitee derived an improper personal benefit.

         4. Indemnity. (a) Subject to the following provisions of this
Agreement, the Company shall hold harmless and indemnify Indemnitee against all
Expenses and Liabilities actually incurred by Indemnitee in connection with any
Proceeding; provided, however, that no indemnity shall be paid by the Company
pursuant to this Agreement:

                                       2
<PAGE>   3

                  (i) for amounts actually paid to Indemnitee pursuant to one or
         more policies of directors and officers liability insurance maintained
         by the Company or pursuant to a trust fund, letter of credit or other
         security or funding arrangement provided by the Company; provided,
         however, that if it should subsequently be determined that Indemnitee
         is not entitled to retain any such amount, this clause (i) shall no
         longer apply to such amount;

                  (ii) in respect of remuneration paid to Indemnitee if it shall
         be determined by a final judgment or other final adjudication that
         payment of such remuneration was in violation of applicable law;

                  (iii) on account of Indemnitee's conduct which is finally
         adjudged to constitute willful misconduct or to have been knowingly
         fraudulent, deliberately dishonest or from which the Indemnitee derives
         an improper personal benefit; or

                  (iv) on account of any suit in which final judgment is
         rendered against Indemnitee for an accounting of profits made from the
         sale or purchase by Indemnitee of securities of the Company pursuant to
         the provisions of Section 16(b) of the Securities Exchange Act of 1934,
         as amended.

         (b) If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for only a portion (but not, however, for the
total amount) of any Expenses or Liabilities actually incurred by Indemnitee in
connection with any Proceeding, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses and Liabilities to which Indemnitee
is entitled. If the indemnification provided for herein in respect of any
Expenses or Liabilities actually incurred by Indemnitee in connection with any
Proceeding is finally determined by a court of competent jurisdiction to be
prohibited by applicable law, then the Company, in lieu of indemnifying
Indemnitee, shall contribute to the amount paid or payable by Indemnitee as a
result of such Expenses and Liabilities in such proportion as is appropriate to
reflect (i) the relative benefits received by the Company on the one hand and
Indemnitee on the other hand from the events, circumstances, conditions,
happenings, actions or transactions from which such Proceeding arose, (ii) the
relative fault of the Company (including its other Authorized Representatives)
on the one hand and of Indemnitee on the other hand in connection with the
events, circumstances and happenings which resulted in such Expenses and
Liabilities, such relative fault to be determined by reference to, among other
things, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent the events, circumstances and/or happenings
resulting in such Expenses and Liabilities, and (iii) any other relevant
equitable considerations, it being agreed that it would not be just and
equitable if such contribution were determined by pro rata or other method of
allocation which does not take into account the foregoing equitable
considerations.

         (c) The indemnification provided herein shall be applicable only to
Proceedings commenced after the date hereof, regardless, however, of whether
they arise from acts, omissions, facts or circumstances occurring before or
after the date hereof.

         (d) The indemnification provided herein shall be applicable whether or
not negligence of Indemnitee is alleged or proved, and regardless of whether
such negligence be contributory or sole.

         (e) Amounts paid by the Company to Indemnitee under this Section 4 are
subject to refund by Indemnitee as provided in Section 8.

                                       3
<PAGE>   4

         5. Notification and Defense of Claims. (a) Promptly after the receipt
by Indemnitee of notice of the commencement of any Proceeding, Indemnitee will,
if a claim in respect thereof is to be made against the Company under this
Agreement, notify the Company of the commencement of such Proceeding; provided,
however, that the omission to so notify the Company will not relieve the Company
(i) from any liability which it may have to Indemnitee under this Agreement
unless, and then only to the extent that, such omission results in insufficient
time being available to permit the Company or its counsel to effectively defend
against or make timely response to any loss, claim, damage, liability or expense
resulting from such Proceeding or otherwise has a material adverse effect on the
Company's ability to promptly deal with such loss, claim, damage, liability or
expense or (ii) from any liability which it may have to Indemnitee otherwise
than under this Agreement.

         (b) The following provisions shall apply with respect to any such
Proceeding as to which Indemnitee notifies the Company of the commencement
thereof:

                  (i) The Company shall be entitled to participate therein at
         its own expense.

                  (ii) Except as otherwise provided below, to the extent it may
         elect to do so, the Company (jointly with any other indemnifying party
         similarly notified) will be entitled to assume the defense thereof,
         with counsel of its own selection reasonably satisfactory to
         Indemnitee. After notice from the Company to Indemnitee of its election
         so to assume the defense thereof, the Company will not be liable to
         Indemnitee under this Agreement for any Expenses subsequently incurred
         by Indemnitee in connection with the defense of such Proceeding other
         than reasonable costs of investigation or as otherwise provided below.
         Indemnitee shall have the right to employ separate counsel in such
         Proceeding but the fees and expenses of such counsel incurred after
         notice from the Company of its assumption of the defense thereof shall
         be at the expense of Indemnitee unless (A) the employment of separate
         counsel by Indemnitee has been authorized by the Company; (B)
         Indemnitee shall have reasonably concluded that there may be a conflict
         of interest between the Company and Indemnitee in the conduct of the
         defense of such Proceeding; or (C) the Company shall not in fact have
         employed counsel to assume the defense of such Proceeding, in each of
         which cases the reasonable fees and expenses of Indemnitee's counsel
         shall be borne by the Company. The Company shall not be entitled to
         assume the defense of any Proceeding brought by or on behalf of the
         Company or as to which Indemnitee shall have made the conclusion
         provided for in (B) above. Nothing in this subparagraph (ii) shall
         affect the obligation of the Company to indemnify Indemnitee against
         Expenses and Liabilities paid in settlement for which it is otherwise
         obligated hereunder.

                  (iii) The Company shall not be liable to indemnify Indemnitee
         under this Agreement for any amounts paid in settlement of any
         Proceedings or claims effected without its prior written consent. The
         Company shall not settle any Proceeding or claim in any manner which
         would impose any penalty or limitation on Indemnitee without
         Indemnitee's prior written consent. Neither the Company nor Indemnitee
         will unreasonably withhold or delay its consent to any proposed
         settlement.

         6. Advancement of Expenses, Etc. If requested to do so by Indemnitee
with respect to any Proceeding, the Company shall advance to or for the benefit
of Indemnitee, prior to the final disposition of such Proceeding, the Expenses
actually incurred by Indemnitee in investigating, defending or appealing such
Proceeding. Any judgments, fines or amounts to be paid in settlement of any
Proceeding shall also be

                                       4
<PAGE>   5

advanced by the Company upon request by Indemnitee. Advances made by the Company
under this Section 6 are subject to refund by Indemnitee as provided in Section
8.

         7. Right of Indemnitee to Bring Suit. (a) If a claim for
indemnification or a claim for an advance under this Agreement is not paid in
full by the Company within 30 days after receipt by the Company from Indemnitee
of a written request or demand therefor, Indemnitee may bring suit against the
Company to recover the unpaid amount of the claim. If, in any such action,
Indemnitee makes a prima facie showing of entitlement to indemnification under
this Agreement, the Company shall have the burden of proving that
indemnification is not required under this Agreement. The only defense to any
such action shall be that indemnification is not required by this Agreement.

         (b) In the event that any action is instituted by Indemnitee to enforce
Indemnitee's rights or to collect monies due to Indemnitee under this Agreement
and if Indemnitee is successful in such action, the Company shall reimburse
Indemnitee for all Expenses incurred by Indemnitee with respect to such action.

         8. Repayment Obligation of Indemnitee. If the Company advances or pays
any amount to Indemnitee under Section 4, 6 or 7 and if it shall thereafter be
finally adjudicated that Indemnitee was not entitled to be indemnified hereunder
for all or any portion of such amount, Indemnitee shall promptly repay such
amount or such portion thereof, as the case may be, to the Company. If the
Company advances or pays any amount to Indemnitee under Section 4, 6 or 7 and if
Indemnitee shall thereafter receive all or a portion of such amount under one or
more policies of directors and officers liability insurance maintained by the
Company or pursuant to a trust fund, letter of credit or other security or
funding arrangement provided by the Company, Indemnitee shall promptly repay
such amount or such portion thereof, as the case may be, to the Company.

         9. Changes in Law. If any change after the date of this Agreement in
any applicable law, statute or rule expands the power of the Company to
indemnify Authorized Representatives, such change shall be within the purview of
Indemnitee's rights and the Company's obligations under this Agreement. If any
change after the date of this Agreement in any applicable law, statute or rule
narrows the right of the Company to indemnify an Authorized Representative, such
change shall, to the fullest extent permitted by applicable law, leave this
Agreement and the parties' rights and obligations hereunder unaffected.

         10. Continuation of Indemnity. All agreements and obligations of the
Company hereunder shall continue during the period Indemnitee is an Authorized
Representative, and shall continue after Indemnitee has ceased to occupy such
position or have such relationship so long as Indemnitee shall be subject to any
possible Proceeding.

         11. Nonexclusivity. The indemnification and other rights provided by
any provision of this Agreement shall not be deemed exclusive of any other
rights to which Indemnitee may be entitled under (i) any statutory or common
law, (ii) the Company's Certificate of incorporation, (iii) the Company's
Bylaws, (iv) any other agreement or (v) any vote of stockholders or
disinterested directors or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while occupying any of the
positions or having any of the relationships referred to in this Agreement.
Nothing in this Agreement shall in any manner affect, impair or compromise any
indemnification Indemnitee has or may have by virtue of any agreement previously
entered into between Indemnitee and the Company.

                                       5
<PAGE>   6

         12. Severability. If any provision of this Agreement shall be held to
be invalid, illegal or unenforceable, (i) the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be in any
way affected or impaired thereby and (ii), to the fullest extent possible, the
provisions of this Agreement shall be construed so as to give effect to the
intent manifested by the provision held invalid, illegal or unenforceable. Each
provision of this Agreement is a separate and independent portion of this
Agreement.

         13. Modification and Waiver. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties. No waiver of any of the provisions of this Agreement shall be binding
unless executed in writing by the person making the waiver nor shall such waiver
constitute a continuing waiver.

         14. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be addressed (i) if to the Company, at
its principal office address as shown on the signature page hereof or such other
address as it may have designated by written notice to Indemnitee for purposes
hereof, directed to the attention of the Secretary and (ii) if to Indemnitee, at
Indemnitee's address as shown on the signature page hereof or to such other
address as Indemnitee may have designated by written notice to the Company for
purposes hereof. Each such notice or other communication shall be deemed to have
been duly given if (i) delivered by hand and receipted for by the party to whom
said notice or other communication shall have been directed, (ii) transmitted by
facsimile transmission, at the time that receipt of such transmission is
confirmed, or (iii) mailed by certified or registered mail with postage prepaid,
on the third business day after the date on which it is so mailed.

         15. Governing Law. This Agreement shall be deemed to be a contract made
under, and shall be governed by and construed and enforced in accordance with,
the internal laws of the State of Delaware without regard to principles of
conflicts of law.

         16. Heirs, Successors and Assigns. (a) This Agreement shall be binding
upon, inure to the benefit of and be enforceable by (i) Indemnitee and
Indemnitee's personal or legal representatives, executors, administrators,
heirs, devisees and legatees and (ii) the Company and its successors and
assigns. This Agreement shall not inure to the benefit of any other person or
Enterprise.

         (b) The Company agrees to require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used herein, the term "Company" shall include any successor
to its business and/or assets as aforesaid which executes and delivers the
assumption and agreement provided for in this Section 16 or which otherwise
becomes bound by all terms and provisions of this Agreement by operation of law.

                                       6
<PAGE>   7

         ENTERED into on the day and year first above written.

                                   THE COMPANY:

                                   LEXICON GENETICS INCORPORATED

                                   By:
                                       -----------------------------------------
                                          Arthur T. Sands, M.D., Ph.D.
                                          President and Chief Executive Officer
                                          Address:
                                          4000 Research Forest Drive
                                          The Woodlands, Texas 77381
                                          Telecopier: (281) 364-0155

                                   INDEMNITEE:

                                   ---------------------------------------------
                                   [Name of Indemnitee]
                                   Address:
                                   c/o Lexicon Genetics Incorporated
                                   4000 Research Forest Drive
                                   The Woodlands, Texas 77381
                                   Telecopier: (281) 364-0155

                                       7<PAGE>   1
                                                                    EXHIBIT 10.7

                          LEXICON GENETICS INCORPORATED

                           2000 EQUITY INCENTIVE PLAN

1.      PURPOSES.

        (a) AMENDMENT AND RESTATEMENT OF INITIAL PLAN. The Plan initially was
established as the 1995 Stock Option Plan, effective as of September 13, 1995
(the "Initial Plan"). The Initial Plan, as amended hereby, is amended and
restated in its entirety and renamed the 2000 Equity Incentive Plan, effective
as of its adoption. The terms of this Plan shall supersede the Initial Plan in
its entirety; provided, however, that nothing herein shall operate or be
construed as modifying the terms of an incentive stock option granted under the
Initial Plan in a manner that would treat the option as being a new grant for
purpose of Section 424(h) of the Code (as hereafter defined).

        (b) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive
Stock Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.

        (c) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a
means by which eligible recipients of Stock Awards may be given an opportunity
to benefit from increases in value of the Common Stock through the granting of
the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.

        (d) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.

2.      DEFINITIONS.

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

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

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

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

        (e) "COMMON STOCK" means the common stock, par value $.001 per share, of
the Company.
<PAGE>   2

        (f) "COMPANY" means Lexicon Genetics Incorporated, a Delaware
corporation.

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

        (h) "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. The Participant's Continuous Service shall not be
deemed to have terminated merely because of 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 Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.

        (i) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.

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

        (k) "DISABILITY" means (i) before the Listing Date, the inability of a
person, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of that person's position with the Company or an
Affiliate of the Company because of the sickness or injury of the person and
(ii) after the Listing Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.

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

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

                                       2
<PAGE>   3

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

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

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

        (o) "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.

        (p) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system.

        (q) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation (directly or indirectly) from the Company or its parent
for a subsidiary 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 as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.

        (r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.

        (s) "OFFICER" means (i) before the Listing Date, any person designated
by the Company as an officer and (ii) on and after the Listing Date, 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.

        (t) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.

                                       3
<PAGE>   4

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

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

        (w) "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" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services 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.

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

        (y) "PLAN" means this Lexicon Genetics Incorporated 2000 Equity
Incentive Plan.

        (z) "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.

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

        (bb) "STOCK AWARD" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.

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

        (dd) "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 of any of its Affiliates.

                                       4
<PAGE>   5

3.      ADMINISTRATION.

        (a) ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 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 which of the persons eligible
        under the Plan shall be granted Stock Awards; when and how each Stock
        Award shall be granted; what type or combination of types of Stock Award
        shall be granted; the provisions of each Stock Award granted (which need
        not be identical), including the time or times when a person shall be
        permitted to receive Common Stock pursuant to a Stock Award; and 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 Stock Awards granted
        under it, and to establish, amend and revoke rules and regulations for
        its administration. The Board, in the exercise of this power, may
        correct any defect, omission or inconsistency in the Plan or in any
        Stock Award Agreement, in a manner and to the extent it shall deem
        necessary or expedient to make the Plan fully effective.

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

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

        (c)    DELEGATION TO COMMITTEE.

                (i) GENERAL. The Board may delegate administration of the Plan
        to a Committee or Committees of one (1) or more members of the Board,
        and the term "Committee" shall apply to any person or persons to whom
        such authority has been delegated. If administration is delegated to a
        Committee, the Committee shall have, in connection with the
        administration of the Plan, the powers theretofore possessed by the
        Board, including the power to delegate to a subcommittee any of the
        administrative powers the Committee is authorized to exercise (and
        references in this Plan to the Board shall thereafter be to the
        Committee or subcommittee), subject, however, to such resolutions, not
        inconsistent with the provisions of the Plan, as may be adopted from
        time to time by the Board. The Board may abolish the Committee at any
        time and revest in the Board the administration of the Plan.

               (ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY TRADED.
        At such time as the Common Stock is publicly

                                       5
<PAGE>   6

        traded, in the discretion of the Board, a Committee may consist solely
        of two or more Outside Directors, in accordance with Section 162(m) of
        the Code, and/or solely of two or more Non-Employee Directors, in
        accordance with Rule 16b-3. Within the scope of such authority, the
        Board or the Committee may (1) delegate to a committee of one or more
        members of the Board who are not Outside Directors the authority to
        grant Stock Awards to eligible persons who are either (a) 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 (b) not
        persons with respect to whom the Company wishes to comply with Section
        162(m) of the Code, and/or (2) delegate to a committee of one or more
        members of the Board who are not 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) EFFECT OF BOARD'S DECISION. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.

4.      SHARES SUBJECT TO THE PLAN.

        (a) SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate Three Million, Seven
Hundred Fifty Thousand (3,750,000) shares.

        (b)    EVERGREEN SHARE RESERVE INCREASE.

               (i) Notwithstanding subsection 4(a) hereof on each January 1 (the
        "Calculation Date") for a period of ten (10) years, commencing on
        January 1, 2001, the aggregate number of shares of Common Stock that is
        available for issuance under the Plan shall automatically be increased
        by that number of shares equal to the greater of (1) five percent (5%)
        of the Diluted Shares Outstanding or (2) the number of shares of Common
        Stock subject to Stock Awards granted during the prior 12-month period;
        provided, however, that the Board, from time to time, may provide for a
        lesser increase in the aggregate number of shares of Common Stock that
        is available for issuance under the Plan.

               (ii) Subject to the provisions of Section 11 hereof relating to
        adjustments upon changes in securities, the increase in the maximum
        aggregate number of shares of Common Stock that is available for
        issuance pursuant to Stock Awards granted under the Plan shall not
        exceed Twenty Million (20,000,000) shares.

               (iii) "Diluted Shares Outstanding" shall mean, as of any date,
        (1) the number of outstanding shares of Common Stock of the Company on
        such Calculation Date, plus (2) the number of shares of Common Stock
        issuable upon

                                       6
<PAGE>   7

        such Calculation Date assuming the conversion of all outstanding
        Preferred Stock and convertible notes, plus (3) the additional number of
        dilutive Common Stock equivalent shares outstanding as the result of any
        options or warrants outstanding during the fiscal year, calculated using
        the treasury stock method.

        (c) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the shares of Common Stock not acquired under
such Stock Award shall revert to and again become available for issuance under
the Plan.

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

5.      ELIGIBILITY.

        (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 at 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. Subject to the provisions of Section 11
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than One Million
(1,000,000) shares during any calendar year. This subsection 5(c) shall not
apply prior to the Listing Date and, following the Listing Date, this subsection
5(c) shall not apply until (i) the earliest of: (1) the first material
modification of the Plan (including any increase in the number of shares of
Common Stock reserved for issuance under the Plan in accordance with Section 4);
(2) the issuance of all of the shares of Common Stock reserved for issuance
under the Plan; (3) the expiration of the Plan; or (4) the first meeting of
stockholders at which Directors are to be elected that occurs after the close of
the third calendar year following the calendar year in which occurred the first
registration of an equity security under Section 12 of the Exchange Act; or (ii)
such other date required by Section 162(m) of the Code and the rules and
regulations promulgated thereunder.

        (d)    CONSULTANTS.

               (i) Prior to the Listing Date, a Consultant shall not be eligible
        for the grant of a Stock Award if, at the time of grant, either the
        offer or the sale of the Company's securities to such Consultant is not
        exempt under Rule 701 of the Securities Act ("Rule 701") because of the
        nature of the services that the Consultant is providing to the Company,
        or because the Consultant is not a natural

                                       7
<PAGE>   8

        person, or as otherwise provided by Rule 701, unless the Company
        determines that such grant need not comply with the requirements of Rule
        701 and will satisfy another exemption under the Securities Act as well
        as comply with the securities laws of all other relevant jurisdictions.

               (ii) From and after the Listing Date, 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, or because the Consultant is
        not a natural person, or as otherwise provided by the rules governing
        the use of Form S-8, unless the Company determines both (i) that such
        grant (A) shall be registered in another manner under the Securities Act
        (e.g., on a Form S-3 Registration Statement) or (B) does not require
        registration under the Securities Act in order to comply with the
        requirements of the Securities Act, if applicable, and (ii) that such
        grant complies with the securities laws of all other relevant
        jurisdictions.

               (iii) Rule 701 and Form S-8 generally are available to
        consultants and advisors only if (i) they are natural persons; (ii) they
        provide bona fide services to the issuer, its parents, its
        majority-owned subsidiaries or majority-owned subsidiaries of the
        issuer's parent; and (iii) the services are not in connection with the
        offer or sale of securities in a capital-raising transaction, and do not
        directly or indirectly promote or maintain a market for the issuer's
        securities.

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
will be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:

        (a) TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Option granted prior to the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was granted,
and no Incentive Stock Option granted on or after the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was granted.

        (b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 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 Common Stock subject to the Option on the
date the Option is

                                       8
<PAGE>   9

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 satisfying the provisions of Section 424(a) of the Code.

        (c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Nonstatutory Stock Option granted prior to the Listing Date shall
be not less than eighty-five percent (85%) of the Fair Market Value of the
Common Stock subject to the Option on the date the Option is granted. The
exercise price of each Nonstatutory Stock Option granted on or after the Listing
Date shall be not less than eighty-five percent (85%) 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 that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.

        (d) CONSIDERATION. The purchase price of Common Stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
similar arrangement with the Optionholder or (3) in any other form of legal
consideration that may be acceptable to the Board. Unless otherwise specifically
provided in the Option, the purchase price of Common Stock acquired pursuant to
an Option that is paid by delivery to the Company of other Common Stock
acquired, directly or indirectly from the Company, shall be paid only by shares
of the Common Stock of the Company that have been held for more than six (6)
months (or such longer or shorter period of time required to avoid a charge to
earnings for financial accounting purposes). At any time that the Company is
incorporated in Delaware, payment of the Common Stock's "par value," as defined
in the Delaware General Corporation Law, shall not be made by deferred payment.

        In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.

        (e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
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. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.

                                       9
<PAGE>   10

        (f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory Stock
Option granted prior to the Listing Date shall not be transferable except by
will or by the laws of descent and distribution, and to the extent provided in
the Option Agreement and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. A Nonstatutory Stock Option granted on or
after the Listing Date shall be transferable to the extent provided in the
Option Agreement. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock 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.
Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.

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

        (h) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than 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) 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, which period shall not be less than thirty (30) days for Options
granted prior to the Listing Date unless such termination is for cause), or (ii)
the expiration of the term of the Option as set forth in the Option Agreement.
If, after termination, the Optionholder does not exercise his or her Option
within the time specified in the Option Agreement, the Option shall terminate.

        (i) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement
may also provide that if the exercise of the Option following the termination of
the Optionholder's Continuous Service (other than 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 the term of the Option set forth in subsection 6(a) or (ii) 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 violation of such registration requirements.

        (j) DISABILITY OF OPTIONHOLDER. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the

                                       10
<PAGE>   11

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), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement, which period shall not be less than six (6) months for
Options granted prior to the Listing Date) or (ii) the expiration of the term of
the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.

        (k) DEATH OF OPTIONHOLDER. In the event (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 by a person designated to exercise the option
upon the Optionholder's death pursuant to subsection 6(e) or 6(f), but only
within the period ending on the earlier of (1) the date eighteen (18) months
following the date of death (or such longer or shorter period specified in the
Option Agreement, which period shall not be less than six (6) months for Options
granted prior to the Listing Date) or (2) the expiration of the term of such
Option as set forth in the Option Agreement. If, after death, the Option is not
exercised within the time specified herein, the Option shall terminate.

        (l) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares of Common Stock subject to the Option prior to the full vesting of
the Option. Subject to the "Repurchase Limitation" in subsection 10(g), any
unvested shares of Common Stock so purchased may be subject to a repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate. Provided that the "Repurchase Limitation" in subsection 10(g)
is not violated, the Company will not exercise its repurchase option until at
least six (6) months (or such longer or shorter period of time required to avoid
a charge to earnings for financial accounting purposes) have elapsed following
exercise of the Option unless the Board otherwise specifically provides in the
Option.

        (m) RIGHT OF REPURCHASE. Subject to the "Repurchase Limitation" in
subsection 10(g), the Option may, but need not, include a provision whereby the
Company may elect, prior to the Listing Date, to repurchase all or any part of
the vested shares of Common Stock acquired by the Optionholder pursuant to the
exercise of the Option. Provided that the "Repurchase Limitation" in subsection
10(g) is not violated, the Company will not exercise its repurchase option until
at least six (6) months (or such longer or shorter period of time required to
avoid a charge to earnings for financial accounting purposes) have elapsed
following exercise of the Option unless the Board otherwise specifically
provides in the Option.

                                       11
<PAGE>   12

        (n) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionholder of
the intent to transfer all or any part of the shares of Common Stock received
upon the exercise of the Option. Except as expressly provided in this subsection
6(n), such right of first refusal shall otherwise comply with any applicable
provisions of the Bylaws of the Company.

        (o)    RE-LOAD OPTIONS.

               (i) Without in any way limiting the authority of the Board to
        make or not to make grants of Options hereunder, the Board shall have
        the authority (but not an obligation) to include as part of any Option
        Agreement a provision entitling the Optionholder to a further Option (a
        "Re-Load Option") in the event the Optionholder exercises the Option
        evidenced by the Option Agreement, in whole or in part, by surrendering
        other shares of Common Stock in accordance with this Plan and the terms
        and conditions of the Option Agreement. Unless otherwise specifically
        provided in the Option, the Optionholder shall not surrender shares of
        Common Stock acquired, directly or indirectly from the Company, unless
        such shares have been held for more than six (6) months (or such longer
        or shorter period of time required to avoid a charge to earnings for
        financial accounting purposes).

               (ii) Any such Re-Load Option shall (1) provide for a number of
        shares of Common Stock equal to the number of shares of Common Stock
        surrendered as part or all of the exercise price of such Option; (2)
        have an expiration date which is the same as the expiration date of the
        Option the exercise of which gave rise to such Re-Load Option; and (3)
        have an exercise price which is equal to one hundred percent (100%) of
        the Fair Market Value of the Common Stock subject to the Re-Load Option
        on the date of exercise of the original Option. Notwithstanding the
        foregoing, a Re-Load Option shall be subject to the same exercise price
        and term provisions heretofore described for Options under the Plan.

               (iii) Any such Re-Load Option may be an Incentive Stock Option or
        a Nonstatutory Stock Option, as the Board may designate at the time of
        the grant of the original Option; provided, however, that the
        designation of any Re-Load Option as an Incentive Stock Option shall be
        subject to the one hundred thousand dollar ($100,000) annual limitation
        on the exercisability of Incentive Stock Options described in subsection
        10(d) and in Section 422(d) of the Code. There shall be no Re-Load
        Options on a Re-Load Option. Any such Re-Load Option shall be subject to
        the availability of sufficient shares of Common Stock under subsection
        4(a) and the "Section 162(m) Limitation" on the grants of Options under
        subsection 5(c) and shall be subject to such other terms and conditions
        as the Board may determine which are not inconsistent with the express
        provisions of the Plan regarding the terms of Options.

                                       12
<PAGE>   13

7.      PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

        (a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus agreements may change from time to time,
and the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus 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 stock bonus may be awarded in consideration
        for past services actually rendered to the Company or an Affiliate for
        its benefit.

               (ii) VESTING. Subject to the "Repurchase Limitation" in
        subsection 10(h), shares of Common Stock awarded under the stock bonus
        agreement may, but need not, be subject to a share repurchase option in
        favor of the Company in accordance with a vesting schedule to be
        determined by the Board.

               (iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject to
        the "Repurchase Limitation" in subsection 10(g), in the event a
        Participant's Continuous Service terminates, the Company may reacquire
        any or all of the shares of Common Stock held by the Participant which
        have not vested as of the date of termination under the terms of the
        stock bonus agreement.

               (iv) TRANSFERABILITY. For a stock bonus award made before the
        Listing Date, rights to acquire shares of Common Stock under the stock
        bonus agreement shall not be transferable except by will or by the laws
        of descent and distribution and shall be exercisable during the lifetime
        of the Participant only by the Participant. For a stock bonus award made
        on or after the Listing Date, rights to acquire shares of Common Stock
        under the stock bonus agreement shall be transferable by the Participant
        only upon such terms and conditions as are set forth in the stock bonus
        agreement, as the Board shall determine in its discretion, so long as
        Common Stock awarded under the stock bonus agreement remains subject to
        the terms of the stock bonus agreement.

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

                                       13
<PAGE>   14

               (i) PURCHASE PRICE. Subject to the provisions of subsection 5(b)
        regarding Ten Percent Stockholders, the purchase price under each
        restricted stock purchase agreement shall be such amount as the Board
        shall determine and designate in such restricted stock purchase
        agreement. Such purchase price shall not be less than eighty-five
        percent (85%) of the Common Stock's Fair Market Value on the date such
        award is made or at the time the purchase is consummated.

               (ii) CONSIDERATION. The purchase price of Common Stock acquired
        pursuant to the restricted stock purchase agreement shall be paid
        either: (i) in cash at the time of purchase; (ii) at the discretion of
        the Board, according to a deferred payment or other similar arrangement
        with the Participant; or (iii) in any other form of legal consideration
        that may be acceptable to the Board in its discretion; provided,
        however, that at any time that the Company is incorporated in Delaware,
        then payment of the Common Stock's "par value," as defined in the
        Delaware General Corporation Law, shall not be made by deferred payment.

               (iii) VESTING. Subject to the "Repurchase Limitation" in
        subsection 10(g), shares of Common Stock acquired under the restricted
        stock purchase agreement may, but need not, be subject to a share
        repurchase 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. Subject to
        the "Repurchase Limitation" in subsection 10(g), in the event a
        Participant's Continuous Service terminates, the Company may repurchase
        or otherwise reacquire any or all of the shares of Common Stock held by
        the Participant which have not vested as of the date of termination
        under the terms of the restricted stock purchase agreement.

               (v) TRANSFERABILITY. For a restricted stock award made before the
        Listing Date, rights to acquire shares of Common Stock under the
        restricted stock purchase agreement shall not be transferable except by
        will or by the laws of descent and distribution and shall be exercisable
        during the lifetime of the Participant only by the Participant. For a
        restricted stock award made on or after the Listing Date, rights to
        acquire shares of Common Stock under the restricted stock purchase
        agreement shall be transferable by the Participant only upon such terms
        and conditions as are set forth in the restricted stock purchase
        agreement, as the Board shall determine in its discretion, so long as
        Common Stock awarded under the restricted stock purchase agreement
        remains subject to the terms of the restricted stock purchase agreement.

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.

                                       14
<PAGE>   15

        (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 which 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 STOCK.

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

10.     MISCELLANEOUS.

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

        (b) 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 or any
instrument executed or Stock Award granted pursuant thereto 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 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
its Affiliates)

                                       15
<PAGE>   16

exceeds one hundred thousand dollars ($100,000), the Options or portions thereof
which exceed such limit (according to the order in which they were granted)
shall be treated as Nonstatutory Stock Options.

        (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 (1) the issuance of the shares of
Common Stock 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 (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Common Stock.

        (f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of Common
Stock under 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) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Stock Award, provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of Common Stock.

        (g) REPURCHASE LIMITATION. The terms of any repurchase option shall be
specified in the Stock Award and may be either at Fair Market Value at the time
of repurchase or at not less than the original purchase price.

11.     ADJUSTMENTS UPON CHANGES IN STOCK.

        (a) CAPITALIZATION ADJUSTMENTS. If any change is made in the Common
Stock subject to the Plan, or subject to any Stock Award, without the receipt of

                                       16
<PAGE>   17

consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person pursuant to subsection 5(c), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of securities
and price per share of Common Stock subject to such outstanding Stock Awards.
The Board shall make such adjustments, and its determination shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a transaction "without receipt of consideration"
by the Company.)

        (b) CHANGE IN CONTROL -- DISSOLUTION OR LIQUIDATION. In the event of a
dissolution or liquidation of the Company, then all outstanding Stock Awards
shall terminate immediately prior to such event.

        (c) CHANGE IN CONTROL -- ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER. In the event of (i) a sale, lease or other disposition of all or
substantially all of the assets of the Company, (ii) a merger or consolidation
in which the Company is not the surviving corporation or (iii) a reverse merger
in which the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then any surviving corporation or acquiring corporation shall assume
any Stock Awards outstanding under the Plan or shall substitute similar stock
awards (including an award to acquire the same consideration paid to the
stockholders in the transaction described in this subsection 11(c) for those
outstanding under the Plan). In the event any surviving corporation or acquiring
corporation refuses to assume such Stock Awards or to substitute similar stock
awards for those outstanding under the Plan, then with respect to Stock Awards
held by Participants whose Continuous Service has not terminated, the vesting of
such Stock Awards (and, if applicable, the time during which such Stock Awards
may be exercised) shall be accelerated in full, and the Stock Awards shall
terminate if not exercised (if applicable) at or prior to such event. With
respect to any other Stock Awards outstanding under the Plan, such Stock Awards
shall terminate if not exercised (if applicable) prior to such event.

12.     AMENDMENT OF THE PLAN AND STOCK AWARDS.

        (a) AMENDMENT OF PLAN. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.

                                       17
<PAGE>   18

        (b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other 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 compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.

        (c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the Board
may 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 and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.

        (d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock 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 Participant and (ii) the Participant
consents in writing.

        (e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.

13.     TERMINATION OR SUSPENSION OF THE PLAN.

        (a) PLAN TERM. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall 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 Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.

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

14.     EFFECTIVE DATE OF PLAN.

        The Plan shall become effective as determined by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.

                                       18
<PAGE>   19

15.     CHOICE OF LAW.

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

                                       19

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00001-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00001-of-00352.parquet"}]]