Exhibit 10.3
 
 
                           CYTOKINETICS, INCORPORATED
 
                           2004 EQUITY INCENTIVE PLAN
 
      1.    Purposes of the Plan. The purposes of this Plan are:
 
            -     to attract and retain the best available personnel for
                  positions of substantial responsibility,
 
            -     to provide additional incentive to Employees, Directors and
                  Consultants, and
 
            -     to promote the success of the Company's business.
 
            The Plan permits the grant of Incentive Stock Options, Nonstatutory
Stock Options, Restricted Stock, Stock Appreciation Rights, Performance Units
and Performance Shares.
 
      2.    Definitions. As used herein, the following definitions will apply:
 
            (a)   "Administrator" means the Board or any of its Committees as
will be administering the Plan, in accordance with Section 4 of the Plan.
 
            (b)   "Affiliated SAR" means an SAR that is granted in connection
with a related Option, and which automatically will be deemed to be exercised at
the same time that the related Option is exercised.
 
            (c)   "Applicable Laws" means the requirements relating to the
administration of equity-based awards under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Awards are, or will be, granted under
the Plan.
 
            (d) "Award" means, individually or collectively, a grant under the
Plan of Options, SARs, Restricted Stock, Performance Units or Performance
Shares.
 
            (e)   "Award Agreement" means the written or electronic agreement
setting forth the terms and provisions applicable to each Award granted under
the Plan. The Award Agreement is subject to the terms and conditions of the
Plan.
 
            (f)   "Board" means the Board of Directors of the Company.
 
            (g)   "Change in Control" means the occurrence of any of the
following events:
 
                  (i)   Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule
13d-3 of the Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the total voting power represented
by the Company's then outstanding voting securities; or
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                  (ii)  The consummation of the sale or disposition by the
Company of all or substantially all of the Company's assets;
 
                  (iii) A change in the composition of the Board occurring
within a two-year period, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" means directors who
either (A) are Directors as of the effective date of the Plan, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but will not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to the
election of directors to the Company); or
 
                  (iv)  The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or its parent) at
least fifty percent (50%) of the total voting power represented by the voting
securities of the Company or such surviving entity or its parent outstanding
immediately after such merger or consolidation.
 
            (h)   "Code" means the Internal Revenue Code of 1986, as amended.
Any reference to a section of the Code herein will be a reference to any
successor or amended section of the Code.
 
            (i)   "Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 of the Plan.
 
            (j)   "Common Stock" means the common stock of the Company.
 
            (k)   "Company" means Cytokinetics, Incorporated, a Delaware
corporation, or any successor thereto.
 
            (l)   "Consultant" means any person, including an advisor, engaged
by the Company or a Parent or Subsidiary to render services to such entity.
 
            (m)   "Director" means a member of the Board.
 
            (n)   "Disability" means total and permanent disability as defined
in Section 22(e)(3) of the Code, provided that in the case of Awards other than
Incentive Stock Options, the Administrator in its discretion may determine
whether a permanent and total disability exists in accordance with uniform and
non-discriminatory standards adopted by the Administrator from time to time.
 
            (o)   "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. Neither
service as a Director nor payment of a director's fee by the Company will be
sufficient to constitute "employment" by the Company.
 
            (p)   "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
 
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            (q)   "Exchange Program" means a program under which (i) outstanding
Awards are surrendered or cancelled in exchange for Awards of the same type
(which may have lower exercise prices and different terms), Awards of a
different type, and/or cash, and/or (ii) the exercise price of an outstanding
Award is reduced. The terms and conditions of any Exchange Program will be
determined by the Administrator in its sole discretion.
 
            (r)   "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
 
                  (i)   If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value will be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such exchange or system on the day
of determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
 
                  (ii)  If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock will be the mean between the high bid and low asked
prices for the Common Stock on the day of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable;
 
                  (iii) For purposes of any Awards granted on the Registration
Date, the Fair Market Value will be the initial price to the public as set forth
in the final prospectus included within the registration statement in Form S-1
filed with the Securities and Exchange Commission for the initial public
offering of the Company's Common Stock; or
 
                  (iv)  In the absence of an established market for the Common
Stock, the Fair Market Value will be determined in good faith by the
Administrator.
 
            (s)   "Fiscal Year" means the fiscal year of the Company.
 
            (t)   "Freestanding SAR" means a SAR that is granted independently
of any Option.
 
            (u)   "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.
 
            (v)   "Inside Director" means a Director who is an Employee.
 
            (w)   "Nonstatutory Stock Option" means an Option that by its terms
does not qualify or is not intended to qualify as an Incentive Stock Option.
 
            (x)   "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.
 
            (y)   "Option" means a stock option granted pursuant to the Plan.
 
                                                                             -3-
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            (z)   "Optioned Stock" means the Common Stock subject to an Award.
 
            (aa)  "Outside Director" means a Director who is not an Employee.
 
            (bb)  "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
 
            (cc)  "Participant" means the holder of an outstanding Award.
 
            (dd)  "Performance Share" means an Award granted to a Participant
pursuant to Section 9.
 
            (ee)  "Performance Unit" means an Award granted to a Participant
pursuant to Section 9.
 
            (ff)  "Period of Restriction" means the period during which the
transfer of Shares of Restricted Stock are subject to restrictions and
therefore, the Shares are subject to a substantial risk of forfeiture. Such
restrictions may be based on the passage of time, the achievement of target
levels of performance, or the occurrence of other events as determined by the
Administrator.
 
            (gg)  "Plan" means this 2004 Equity Incentive Plan.
 
            (hh)  "Registration Date" means the effective date of the first
registration statement that is filed by the Company and declared effective
pursuant to Section 12(g) of the Exchange Act, with respect to any class of the
Company's securities.
 
            (ii)  "Restricted Stock" means shares of Common Stock issued
pursuant to a Restricted Stock award under Section 7 of the Plan, or issued
pursuant to the early exercise of an Option.
 
            (jj)  "Retirement" means a termination of an Outside Director's
status as a Director when (i) the Outside Director's age is 55 or over and he or
she has continuously been a Director for at least seven (7) years on the date of
such termination or (ii) the Outside Director has continuously been a Director
for at least ten (10) years from the date of such termination.
 
            (kk)  "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
 
            (ll)  "Section 16(b) " means Section 16(b) of the Exchange Act.
 
            (mm)  "Service Provider" means an Employee, Director or Consultant.
 
            (nn)  "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
 
            (oo)  "Stock Appreciation Right" or "SAR" means an Award, granted
alone or in connection with an Option, that pursuant to Section 8 is designated
as a SAR.
 
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            (pp)  "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
 
            (qq)  "Tandem SAR" means a SAR that is granted in connection with a
related Option, the exercise of which will require forfeiture of the right to
purchase an equal number of Shares under the related Option (and when a Share is
purchased under the Option, the SAR will be canceled to the same extent).
 
            (rr)  "Unvested Awards" will mean Options or Restricted Stock that
(i) were granted to an individual in connection with such individual's position
as an Employee and (ii) are still subject to vesting or lapsing of Company
repurchase rights or similar restrictions.
 
      3.    Stock Subject to the Plan.
 
            (a)   Stock Subject to the Plan. Subject to the provisions of
Section 13 of the Plan, the maximum aggregate number of Shares that may be
optioned and sold under the Plan is 3,200,000 Shares plus (i) any Shares
returned to the 1997 Stock Option/Stock Issuance Plan as a result of termination
of options or repurchase of Shares issued under such plan, and (ii) an annual
increase to be added on the first day of the Company's fiscal year beginning in
2005, equal to the lesser of (A) 3,000,000 Shares, (B) 3.5% of the outstanding
Shares on such date or (C) an amount determined by the Board. The Shares may be
authorized, but unissued, or reacquired Common Stock. Shares will not be deemed
to have been issued pursuant to the Plan with respect to any portion of an Award
that is settled in cash. Upon payment in Shares pursuant to the exercise of an
SAR, the number of Shares available for issuance under the Plan will be reduced
only by the number of Shares actually issued in such payment. If the exercise
price of an Option is paid by tender to the Company, or attestation to the
ownership, of Shares owned by the Participant, the number of Shares available
for issuance under the Plan will be reduced by the gross number of Shares for
which the Option is exercised.
 
            (b)   Lapsed Awards. If an Award expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Exchange
Program, the unpurchased Shares which were subject thereto will become available
for future grant or sale under the Plan (unless the Plan has terminated);
provided, however, that Shares that have actually been issued under the Plan,
whether upon exercise of an Award, will not be returned to the Plan and will not
become available for future distribution under the Plan, except that if unvested
Shares are forfeited or repurchased by the Company, such Shares will become
available for future grant under the Plan.
 
            (c)   Share Reserve. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as will be
sufficient to satisfy the requirements of the Plan.
 
      4.    Administration of the Plan.
 
            (a)   Procedure.
 
                  (i)   Multiple Administrative Bodies. Different Committees
with respect to different groups of Service Providers may administer the Plan.
 
                                                                             -5-
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                  (ii)  Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan will be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
 
                  (iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder will be structured to satisfy the requirements for exemption under
Rule 16b-3.
 
                  (iv)  Other Administration. Other than as provided above, the
Plan will be administered by (A) the Board or (B) a Committee, which committee
will be constituted to satisfy Applicable Laws.
 
            (b)   Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator will have the authority, in
its discretion:
 
                  (i)   to determine the Fair Market Value;
 
                  (ii)  to select the Service Providers to whom Awards may be
granted hereunder;
 
                  (iii) to determine the number of Shares to be covered by each
Award granted hereunder;
 
                  (iv)  to approve forms of agreement for use under the Plan;
 
                  (v)   to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Awards may be exercised (which may be based on performance criteria),
any vesting acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Award or the Shares relating thereto,
based in each case on such factors as the Administrator will determine;
 
                  (vi)  to institute an Exchange Program;
 
                  (vii) to construe and interpret the terms of the Plan and
Awards granted pursuant to the Plan;
 
                  (viii) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of satisfying applicable foreign laws;
 
                  (ix)  to modify or amend each Award (subject to Section 17(c)
of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Awards longer than is otherwise
provided for in the Plan;
 
                                                                             -6-
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                  (x)   to allow Participants to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Award that number of Shares having a Fair Market
Value equal to the minimum amount required to be withheld (the Fair Market Value
of the Shares to be withheld will be determined on the date that the amount of
tax to be withheld is to be determined and all elections by a Participant to
have Shares withheld for this purpose will be made in such form and under such
conditions as the Administrator may deem necessary or advisable);
 
                  (xi)  to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Award previously
granted by the Administrator;
 
                  (xii) to allow a Participant to defer the receipt of the
payment of cash or the delivery of Shares that would otherwise be due to such
Participant under an Award
 
                  (xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
 
            (c)   Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations will be final and binding on all
Participants and any other holders of Awards.
 
      5.    Eligibility. Nonstatutory Stock Options, Restricted Stock, Stock
Appreciation Rights, Performance Units and Performance Shares may be granted to
Service Providers. Incentive Stock Options may be granted only to Employees.
 
      6.    Stock Options.
 
            (a)   Limitations.
 
                  (i)   Each Option will be designated in the Award Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Participant during any calendar year
(under all plans of the Company and any Parent or Subsidiary) exceeds $100,000,
such Options will be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options will be taken into account in the order in
which they were granted. The Fair Market Value of the Shares will be determined
as of the time the Option with respect to such Shares is granted.
 
                  (ii)  The following limitations will apply to grants of
Options and Stock Appreciation Rights:
 
                        (1)   No Service Provider will be granted, in any Fiscal
Year, Options to purchase more than 1,500,000 Shares.
 
                        (2)   In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional
1,500,000 Shares, which will not count against the limit set forth in Section
6(a)(2)(ii)(1) above.
 
                                                                             -7-
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                        (3)   The foregoing limitations will be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.
 
                        (4)   If an Option is cancelled in the same Fiscal Year
in which it was granted (other than in connection with a transaction described
in Section 13), the cancelled Option will be counted against the limits set
forth in subsections (1) and (2) above. For this purpose, if the exercise price
of an Option is reduced, the transaction will be treated as a cancellation of
the Option and the grant of a new Option.
 
            (b)   Term of Option. The term of each Option will be stated in the
Award Agreement. In the case of an Incentive Stock Option, the term will be ten
(10) years from the date of grant or such shorter term as may be provided in the
Award Agreement. Moreover, in the case of an Incentive Stock Option granted to a
Participant who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option will be five (5) years from the date of grant or such
shorter term as may be provided in the Award Agreement.
 
            (c)   Option Exercise Price and Consideration.
 
                  (i)  Exercise Price. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option will be determined by the
Administrator, subject to the following:
 
                       (1)   In the case of an Incentive Stock Option
 
                             a)    granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price will be no less than 110% of the
Fair Market Value per Share on the date of grant.
 
                             b)    granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per Share exercise
price will be no less than 100% of the Fair Market Value per Share on the date
of grant.
 
                             c)    Notwithstanding the foregoing, Incentive
Stock Options may be granted with a per Share exercise price of less than 100%
of the Fair Market Value per Share on the date of grant pursuant to a
transaction described in, and in a manner consistent with, Section 424(a) of the
Code.
 
                       (2)   In the case of a Nonstatutory Stock Option, the per
Share exercise price will be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price will be no less than 100% of the Fair Market Value per Share on
the date of grant.
 
                  (ii)  Waiting Period and Exercise Dates. At the time an Option
is granted, the Administrator will fix the period within which the Option may be
exercised and will determine any conditions that must be satisfied before the
Option may be exercised.
 
                                                                             -8-
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            (iii) Form of Consideration. The Administrator will determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator will
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of: (1) cash; (2) check; (3) promissory note;
(4) other Shares, provided Shares acquired directly or indirectly from the
Company, (A) have been owned by the Participant and not subject to substantial
risk of forfeiture for more than six months on the date of surrender, and (B)
have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option will be exercised; (5)
consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan; (6) a reduction in the
amount of any Company liability to the Participant, including any liability
attributable to the Participant's participation in any Company-sponsored
deferred compensation program or arrangement; (7) any combination of the
foregoing methods of payment; or (8) such other consideration and method of
payment for the issuance of Shares to the extent permitted by Applicable Laws.
 
      (d)   Exercise of Option.
 
            (i)   Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder will be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Award Agreement. An Option may not be exercised for a fraction of a
Share.
 
                  An Option will be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Award
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Award Agreement and the Plan. Shares issued
upon exercise of an Option will be issued in the name of the Participant or, if
requested by the Participant, in the name of the Participant and his or her
spouse. Until the Shares are issued (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the Company),
no right to vote or receive dividends or any other rights as a stockholder will
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. The Company will issue (or cause to be issued) such Shares promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are
issued, except as provided in Section 13 of the Plan.
 
            Exercising an Option in any manner will decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
 
            (ii)  Termination of Relationship as a Service Provider. If a
Participant ceases to be a Service Provider, other than upon the Participant's
death or Disability, the Participant may exercise his or her Option within such
period of time as is specified in the Award Agreement to the extent that the
Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Award Agreement). In
the absence of a specified time in the Award Agreement, the Option will remain
exercisable for three (3) months following the Participant's termination. Unless
otherwise provided by the Administrator, if on the
 
 
                                                                             -9-
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date of termination the Participant is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option will revert to
the Plan. If after termination the Participant does not exercise his or her
Option within the time specified by the Administrator, the Option will
terminate, and the Shares covered by such Option will revert to the Plan.
 
            (iii) Disability of Participant. If a Participant ceases to be a
Service Provider as a result of the Participant's Disability, the Participant
may exercise his or her Option within such period of time as is specified in the
Award Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Award Agreement). In the absence of a specified time in the Award
Agreement, the Option will remain exercisable for twelve (12) months following
the Participant's termination. Unless otherwise provided by the Administrator,
if on the date of termination the Participant is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option will
revert to the Plan. If after termination the Participant does not exercise his
or her Option within the time specified herein, the Option will terminate, and
the Shares covered by such Option will revert to the Plan.
 
            (iv)  Death of Participant. If a Participant dies while a Service
Provider, the Option may be exercised following the Participant's death within
such period of time as is specified in the Award Agreement to the extent that
the Option is vested on the date of death (but in no event may the option be
exercised later than the expiration of the term of such Option as set forth in
the Award Agreement), by the Participant's designated beneficiary, provided such
beneficiary has been designated prior to Participant's death in a form
acceptable to the Administrator. If no such beneficiary has been designated by
the Participant, then such Option may be exercised by the personal
representative of the Participant's estate or by the person(s) to whom the
Option is transferred pursuant to the Participant's will or in accordance with
the laws of descent and distribution. In the absence of a specified time in the
Award Agreement, the Option will remain exercisable for twelve (12) months
following Participant's death. Unless otherwise provided by the Administrator,
if at the time of death Participant is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option will
immediately revert to the Plan. If the Option is not so exercised within the
time specified herein, the Option will terminate, and the Shares covered by such
Option will revert to the Plan.
 
      7.    Restricted Stock.
 
            (a)   Grant of Restricted Stock. Subject to the terms and provisions
of the Plan, the Administrator, at any time and from time to time, may grant
Shares of Restricted Stock to Service Providers in such amounts as the
Administrator, in its sole discretion, will determine.
 
            (b)   Restricted Stock Agreement. Each Award of Restricted Stock
will be evidenced by an Award Agreement that will specify the Period of
Restriction, the number of Shares granted, and such other terms and conditions
as the Administrator, in its sole discretion, will determine. Unless the
Administrator determines otherwise, Shares of Restricted Stock will be held by
the Company as escrow agent until the restrictions on such Shares have lapsed.
 
                                                                            -10-
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            (c)   Transferability. Except as provided in this Section 7, Shares
of Restricted Stock may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated until the end of the applicable Period of
Restriction.
 
            (d)   Other Restrictions. The Administrator, in its sole discretion,
may impose such other restrictions on Shares of Restricted Stock as it may deem
advisable or appropriate.
 
            (e)   Removal of Restrictions. Except as otherwise provided in this
Section 7, Shares of Restricted Stock covered by each Restricted Stock grant
made under the Plan will be released from escrow as soon as practicable after
the last day of the Period of Restriction. The Administrator, in its discretion,
may accelerate the time at which any restrictions will lapse or be removed.
 
            (f)   Voting Rights. During the Period of Restriction, Service
Providers holding Shares of Restricted Stock granted hereunder may exercise full
voting rights with respect to those Shares, unless the Administrator determines
otherwise.
 
            (g)   Dividends and Other Distributions. During the Period of
Restriction, Service Providers holding Shares of Restricted Stock will be
entitled to receive all dividends and other distributions paid with respect to
such Shares unless otherwise provided in the Award Agreement. If any such
dividends or distributions are paid in Shares, the Shares will be subject to the
same restrictions on transferability and forfeitability as the Shares of
Restricted Stock with respect to which they were paid.
 
            (h)   Return of Restricted Stock to Company. On the date set forth
in the Award Agreement, the Restricted Stock for which restrictions have not
lapsed will revert to the Company and again will become available for grant
under the Plan.
 
      8.    Stock Appreciation Rights.
 
            (a)   Grant of SARs. Subject to the terms and conditions of the
Plan, a SAR may be granted to Service Providers at any time and from time to
time as will be determined by the Administrator, in its sole discretion. The
Administrator may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any
combination thereof.
 
            (b)   Number of Shares. The Administrator will have complete
discretion to determine the number of SARs granted to any Service Provider.
 
            (c)   Exercise Price and Other Terms. The Administrator, subject to
the provisions of the Plan, will have complete discretion to determine the terms
and conditions of SARs granted under the Plan. However, the exercise price of
Tandem or Affiliated SARs will equal the exercise price of the related Option.
 
            (d)   Exercise of Tandem SARs. Tandem SARs may be exercised for all
or part of the Shares subject to the related Option upon the surrender of the
right to exercise the equivalent portion of the related Option. A Tandem SAR may
be exercised only with respect to the Shares for which its related Option is
then exercisable. With respect to a Tandem SAR granted in connection with an
Incentive Stock Option: (a) the Tandem SAR will expire no later than the
expiration of the
 
 
                                                                            -11-
<PAGE>
underlying Incentive Stock Option; (b) the value of the payout with respect to
the Tandem SAR will be for no more than one hundred percent (100%) of the
difference between the exercise price of the underlying Incentive Stock Option
and the Fair Market Value of the Shares subject to the underlying Incentive
Stock Option at the time the Tandem SAR is exercised; and (c) the Tandem SAR
will be exercisable only when the Fair Market Value of the Shares subject to the
Incentive Stock Option exceeds the Exercise Price of the Incentive Stock Option.
 
            (e)   Exercise of Affiliated SARs. An Affiliated SAR will be deemed
to be exercised upon the exercise of the related Option. The deemed exercise of
an Affiliated SAR will not necessitate a reduction in the number of Shares
subject to the related Option.
 
            (f) Exercise of Freestanding SARs. Freestanding SARs will be
exercisable on such terms and conditions as the Administrator, in its sole
discretion, will determine.
 
            (g)   SAR Agreement. Each SAR grant will be evidenced by an Award
Agreement that will specify the exercise price, the term of the SAR, the
conditions of exercise, and such other terms and conditions as the
Administrator, in its sole discretion, will determine.
 
            (h)   Expiration of SARs. An SAR granted under the Plan will expire
upon the date determined by the Administrator, in its sole discretion, and set
forth in the Award Agreement. Notwithstanding the foregoing, the rules of
Section 6(d) also will apply to SARs.
 
            (i)   Payment of SAR Amount. Upon exercise of an SAR, a Participant
will be entitled to receive payment from the Company in an amount determined by
multiplying:
 
                  (i) The difference between the Fair Market Value of a Share on
the date of exercise over the exercise price; times
 
                  (ii) The number of Shares with respect to which the SAR is
exercised.
 
      At the discretion of the Administrator, the payment upon SAR exercise may
be in cash, in Shares of equivalent value, or in some combination thereof.
 
      9.    Performance Units and Performance Shares.
 
            (a)   Grant of Performance Units/Shares. Performance Units and
Performance Shares may be granted to Service Providers at any time and from time
to time, as will be determined by the Administrator, in its sole discretion. The
Administrator will have complete discretion in determining the number of
Performance Units and Performance Shares granted to each Participant.
 
            (b)   Value of Performance Units/Shares. Each Performance Unit will
have an initial value that is established by the Administrator on or before the
date of grant. Each Performance Share will have an initial value equal to the
Fair Market Value of a Share on the date of grant.
 
            (c)   Performance Objectives and Other Terms. The Administrator will
set performance objectives or other vesting provisions in its discretion which,
depending on the extent to which they are met, will determine the number or
value of Performance Units/Shares that will be
 
 
                                                                            -12-
<PAGE>
paid out to the Service Providers. The time period during which the performance
objectives or other vesting provisions must be met will be called the
"Performance Period." Each Award of Performance Units/Shares will be evidenced
by an Award Agreement that will specify the Performance Period, and such other
terms and conditions as the Administrator, in its sole discretion, will
determine. The Administrator may set performance objectives based upon the
achievement of Company-wide, divisional, or individual goals, applicable federal
or state securities laws, or any other basis determined by the Administrator in
its discretion.
 
            (d)   Earning of Performance Units/Shares. After the applicable
Performance Period has ended, the holder of Performance Units/Shares will be
entitled to receive a payout of the number of Performance Units/Shares earned by
the Participant over the Performance Period, to be determined as a function of
the extent to which the corresponding performance objectives or other vesting
provisions have been achieved. After the grant of a Performance Unit/Share, the
Administrator, in its sole discretion, may reduce or waive any performance
objectives or other vesting provisions for such Performance Unit/Share.
 
            (e)   Form and Timing of Payment of Performance Units/Shares.
Payment of earned Performance Units/Shares will be made as soon as practicable
after the expiration of the applicable Performance Period. The Administrator, in
its sole discretion, may pay earned Performance Units/Shares in the form of
cash, in Shares (which have an aggregate Fair Market Value equal to the value of
the earned Performance Units/Shares at the close of the applicable Performance
Period) or in a combination thereof.
 
            (f)   Cancellation of Performance Units/Shares. On the date set
forth in the Award Agreement, all unearned or unvested Performance Units/Shares
will be forfeited to the Company, and again will be available for grant under
the Plan.
 
      10.   Formula Option Grants to Outside Directors.
 
      All grants of Options to Outside Directors pursuant to this Section will
be automatic and nondiscretionary and will be made in accordance with the
following provisions:
 
            (a)   Type of Option. All Options granted pursuant to this Section
will be Nonstatutory Stock Options and, except as otherwise provided herein,
will be subject to the other terms and conditions of the Plan.
 
            (b)   No Discretion. No person will have any discretion to select
which Outside Directors will be granted Options under this Section or to
determine the number of Shares to be covered by such Options (except as provided
in Sections 10(f) and 13).
 
            (c)   First Option. Each person who first becomes an Outside
Director following the Registration Date will be automatically granted an Option
to purchase 20,000 Shares (the "First Option") on or about the date on which
such person first becomes an Outside Director, whether through election by the
stockholders of the Company or appointment by the Board to fill a vacancy;
provided, however, that an Inside Director who ceases to be an Inside Director,
but who remains a Director, will not receive a First Option.
 
                                                                            -13-
<PAGE>
            (d)   Subsequent Option. Each Outside Director will be automatically
granted an Option to purchase 15,000 Shares (a "Subsequent Option") on each date
of the annual meeting of the stockholders of the Company beginning in 2005, if
as of such date, he or she will have served on the Board for at least the
preceding six (6) months.
 
            (e)   Terms. The terms of each Option granted pursuant to this
Section will be as follows:
 
                  (i)   The term of the Option will be ten (10) years.
 
                  (ii)  The exercise price per Share will be 100% of the Fair
Market Value per Share on the date of grant of the Option.
 
                  (iii) Subject to Section 14, the First Option will vest and
become exercisable as to 33 1/3% of the Shares subject to such First Option on
each anniversary of its date of grant, provided that the Participant continues
to serve as a Director through each such date.
 
                  (iv)  Subject to Section 14, the Subsequent Option will vest
and become exercisable as to 100% of the Shares subject to such Option on the
date of grant, provided that the Participant continues to serve as a Director
through such date.
 
                  (v)   If an Outside Director ceases to be a Director, other
than upon the Outside Director's death, Disability or Retirement, the Outside
Director may exercise his or her Option granted pursuant to this Section 10
within twelve (12) months following such termination to the extent that the
Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option). If an Outside Director ceases to be a
Director as a result of the Outside Director's death, Disability or Retirement,
the Outside Director may exercise his or her Option granted pursuant to this
Section 10 within three years of such termination (but in no event later than
the expiration of the term of such Option as set forth in the Award Agreement).
If on the date of termination the Outside Director is not vested as to his or
her entire Option granted pursuant to this Section 10, the Shares covered by the
unvested portion of the Option will revert to the Plan. If after termination the
Outside Director does not exercise his or her Option within the time specified
herein, the Option will terminate, and the Shares covered by such Option will
revert to the Plan.
 
            (f) Amendment. The Administrator in its discretion may change the
number of Shares subject to the First Options and Subsequent Options.
 
      11.   Leaves of Absence. Unless the Administrator provides otherwise,
vesting of Awards granted hereunder will be suspended during any unpaid leave of
absence. A Service Provider will not cease to be an Employee in the case of (i)
any leave of absence approved by the Company or (ii) transfers between locations
of the Company or between the Company, its Parent, or any Subsidiary. For
purposes of Incentive Stock Options, no such leave may exceed ninety (90) days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, then three months following the 91st day of such
leave any Incentive Stock Option held by the Participant will cease to be
treated as an Incentive Stock Option and will be treated for tax purposes as a
Nonstatutory Stock Option.
 
                                                                            -14-
<PAGE>
      12.   Transferability of Awards. Unless determined otherwise by the
Administrator, an Award may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Participant, only by the Participant. If the Administrator makes an Award
transferable, such Award will contain such additional terms and conditions as
the Administrator deems appropriate.
 
      13.   Adjustments; Dissolution or Liquidation; Merger or Change in
Control.
 
            (a)   Adjustments. In the event that any dividend or other
distribution (whether in the form of cash, Shares, other securities, or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, or exchange
of Shares or other securities of the Company, or other change in the corporate
structure of the Company affecting the Shares occurs, the Administrator, in
order to prevent diminution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, may (in its sole discretion)
adjust the number and class of Shares that may be delivered under the Plan
and/or the number, class, and price of Shares covered by each outstanding Award,
the numerical Share limits in Sections 3 and 6 of the Plan and the number of
Shares issuable pursuant to Section 10.
 
            (b)   Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator will notify each
Participant as soon as practicable prior to the effective date of such proposed
transaction. To the extent it has not been previously exercised, an Award will
terminate immediately prior to the consummation of such proposed action.
 
            (c)   Change in Control. In the event of a Change in Control, each
outstanding Award will be assumed or an equivalent option or right substituted
by the successor corporation or a Parent or Subsidiary of the successor
corporation. In the event that the successor corporation refuses to assume or
substitute for the Award, the Participant will fully vest in and have the right
to exercise all of his or her outstanding Options and Stock Appreciation Rights,
including Shares as to which such Awards would not otherwise be vested or
exercisable, all restrictions on Restricted Stock shall lapse, and, with respect
to Performance Shares and Performance Units, all performance goals will be
deemed achieved at target levels and all other terms and conditions met. In
addition, if an Option or Stock Appreciation Right becomes fully vested and
exercisable in lieu of assumption or substitution in the event of a Change in
Control, the Administrator will notify the Participant in writing or
electronically that the Option or Stock Appreciation Right will be fully vested
and exercisable for a period of time determined by the Administrator in its sole
discretion, and the Option or Stock Appreciation Right will terminate upon the
expiration of such period.
 
            With respect to Awards granted to an Outside Director that are
assumed or substituted for, if on the date of or following such assumption or
substitution the Participant's status as a Director or a director of the
successor corporation, as applicable, is terminated other than upon a voluntary
resignation by the Participant, then the Participant will fully vest in and have
the right to exercise Options and/or Stock Appreciation Rights as to all of the
Optioned Stock, including Shares as to which such Awards would not otherwise be
vested or exercisable, all restrictions on Restricted Stock shall lapse, and,
with respect to Performance Shares and Performance Units, all performance goals
will be deemed achieved at target levels and all other terms and conditions met.
 
                                                                            -15-
<PAGE>
            For the purposes of this subsection (c), an Award will be considered
assumed if, following the Change in Control, the Award confers the right to
purchase or receive, for each Share subject to the Award immediately prior to
the Change in Control, the consideration (whether stock, cash, or other
securities or property) or, in the case of a Stock Appreciation Right upon the
exercise of which the Administrator determines to pay cash or a Performance
Share or Performance Unit which the Administrator can determine to pay in cash,
the fair market value of the consideration received in the merger or Change in
Control by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the Change in Control
is not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of an Option or Stock
Appreciation Right or upon the payout of a Performance Share or Performance
Unit, for each Share subject to such Award (or in the case of Performance Units,
the number of implied shares determined by dividing the value of the Performance
Units by the per share consideration received by holders of Common Stock in the
Change in Control), to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the Change in Control.
 
            Notwithstanding anything in this Section 13(c) to the contrary, an
Award that vests, is earned or paid-out upon the satisfaction of one or more
performance goals will not be considered assumed if the Company or its successor
modifies any of such performance goals without the Participant's consent;
provided, however, a modification to such performance goals only to reflect the
successor corporation's post-Change in Control corporate structure will not be
deemed to invalidate an otherwise valid Award assumption.
 
      14.   No Effect on Employment or Service. Neither the Plan nor any Award
will confer upon a Participant any right with respect to continuing the
Participant's relationship as a Service Provider with the Company, nor will they
interfere in any way with the Participant's right or the Company's right to
terminate such relationship at any time, with or without cause, to the extent
permitted by Applicable Laws.
 
      15. Date of Grant. The date of grant of an Award will be, for all
purposes, the date on which the Administrator makes the determination granting
such Award, or such other later date as is determined by the Administrator.
Notice of the determination will be provided to each Participant within a
reasonable time after the date of such grant.
 
      16.   Term of Plan. Subject to Section 20 of the Plan, the Plan will
become effective upon its adoption by the Board. It will continue in effect for
a term of five (5) years unless terminated earlier under Section 17 of the Plan.
 
      17.   Amendment and Termination of the Plan.
 
            (a)   Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
 
                                                                            -16-
<PAGE>
            (b)   Stockholder Approval. The Company will obtain stockholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
 
            (c)   Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan will impair the rights of any Participant,
unless mutually agreed otherwise between the Participant and the Administrator,
which agreement must be in writing and signed by the Participant and the
Company. Termination of the Plan will not affect the Administrator's ability to
exercise the powers granted to it hereunder with respect to Awards granted under
the Plan prior to the date of such termination.
 
      18.   Conditions Upon Issuance of Shares.
 
            (a)   Legal Compliance. Shares will not be issued pursuant to the
exercise of an Award unless the exercise of such Award and the issuance and
delivery of such Shares will comply with Applicable Laws and will be further
subject to the approval of counsel for the Company with respect to such
compliance.
 
            (b)   Investment Representations. As a condition to the exercise of
an Award, the Company may require the person exercising such Award to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required.
 
      19.   Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, will relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority will not have been obtained.
 
      20.   Stockholder Approval. The Plan will be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval will be obtained in the manner and to the
degree required under Applicable Laws.
 
 
 
                                                                            -17-

 

 

 

 

 

<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>15
<FILENAME>f95504orexv10w2.txt
<DESCRIPTION>EXHIBIT 10.2
<TEXT>
<PAGE>
 
                                                                    Exhibit 10.2
 
                           CYTOKINETICS, INCORPORATED
 
                      1997 STOCK OPTION/STOCK ISSUANCE PLAN
 
                                   ARTICLE ONE
 
                               GENERAL PROVISIONS
 
         I.       PURPOSE OF THE PLAN
 
                  This 1997 Stock Option/Stock Issuance Plan is intended to
promote the interests of Cytokinetics, Incorporated by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for them
to remain in the service of the Corporation.
 
                  Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
 
         II.      STRUCTURE OF THE PLAN
 
                  A.       The Plan shall be divided into two separate equity
programs:
 
                           -        the Discretionary Option Grant Program under
which eligible persons may, at the discretion of the Plan Administrator, be
granted options to purchase shares of Common Stock, and
 
                           -        the Stock Issuance Program under which
eligible persons may, at the discretion of the Plan Administrator, be issued
shares of Common Stock directly, either through the immediate purchase of such
shares or as a bonus for services rendered the Corporation (or any Parent or
Subsidiary).
 
                  B.       The provisions of Articles One and Four shall apply
to all equity programs under the Plan and shall govern the interests of all
persons under the Plan.
 
         III.     ADMINISTRATION OF THE PLAN
 
                  A.       Except as provided in Paragraph B of this Section
III, the Plan shall be administered by the Board or one or more committees
appointed by the Board, provided that (1) beginning with the Section 12
Registration Date, the Primary Committee shall have sole and exclusive authority
to administer the Plan with respect to Section 16 Insiders, and (2)
administration of the Plan may otherwise, at the Board's discretion, be vested
in the Primary Committee or a Secondary Committee.
 
<PAGE>
 
                  B.       Members of the Primary Committee or any Secondary
Committee shall serve for such period of time as the Board may determine and may
be removed by the Board at any time. The Board may also at any time terminate
the functions of any Secondary Committee and reassume all powers and authority
previously delegated to such committee.
 
                  C.       Each Plan Administrator shall, within the scope of
its administrative functions under the Plan, have full power and authority
(subject to the provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for proper administration of the Discretionary Option
Grant and Stock Issuance Programs and to make such determinations under, and
issue such interpretations of, the provisions of such programs and any
outstanding options or stock issuances thereunder as it may deem necessary or
advisable. Decisions of the Plan Administrator within the scope of its
administrative functions under the Plan shall be final and binding on all
parties who have an interest in the Discretionary Option Grant and Stock
Issuance Programs under its jurisdiction or any option or stock issuance
thereunder.
 
                  D.       Service on the Primary Committee or the Secondary
Committee shall constitute service as a Board member, and members of each such
committee shall accordingly be entitled to full indemnification and
reimbursement as Board members for their service on such committee. No member of
the Primary Committee or the Secondary Committee shall be liable for any act or
omission made in good faith with respect to the Plan or any option grants or
stock issuances under the Plan.
 
         IV.      ELIGIBILITY
 
                  A.       The persons eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs are as follows:
 
                                    (i)      Employees,
 
                                    (ii)     non-employee members of the Board
         or the board of directors of any Parent or Subsidiary, and
 
                                    (iii)    consultants and other independent
         advisors who provide services to the Corporation (or any Parent or
         Subsidiary).
 
                  B.       Each Plan Administrator shall, within the scope of
its administrative jurisdiction under the Plan, have full authority to
determine, (i) with respect to the option grants under the Discretionary Option
Grant Program, which eligible persons are to receive option grants, the time or
times when such option grants are to be made, the number of shares to be covered
by each such grant, the status of the granted option as either an Incentive
Option or a Non-Statutory Option, the time or times when each option is to
become exercisable, the vesting schedule (if any) applicable to the option
shares and the maximum term for which the option is to remain outstanding and
(ii) with respect to stock issuances under the Stock Issuance Program, which
eligible persons are to receive stock issuances, the time or times when such
issuances are
 
                                       2.
<PAGE>
 
to be made, the number of shares to be issued to each Participant, the vesting
schedule (if any) applicable to the issued shares and the consideration for such
shares.
 
                  C.       The Plan Administrator shall have the absolute
discretion either to grant options in accordance with the Discretionary Option
Grant Program or to effect stock issuances in accordance with the Stock Issuance
Program.
 
         V.       STOCK SUBJECT TO THE PLAN
 
                  A.       The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The maximum number of shares of Common
Stock initially reserved for issuance over the term of the Plan shall not exceed
2,000,000 shares.
 
                  B.       Shares of Common Stock subject to outstanding options
shall be available for subsequent issuance under the Plan to the extent those
options expire or terminate for any reason prior to exercise in full. Unvested
shares issued under the Plan and subsequently cancelled or repurchased by the
Corporation, at the original issue price paid per share, pursuant to the
Corporation's repurchase rights under the Plan shall not be added back to the
number of shares of Common Stock reserved for issuance under the Plan.
 
                  C.       If any change is made to the Common Stock by reason
of any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of securities
issuable under the Plan, (ii) the number and/or class of securities for which
any one person may be granted stock options, separately exercisable stock
appreciation rights and direct stock issuances under this Plan per calendar
year, and (iii) the number and/or class of securities and the exercise price per
share in effect under each outstanding option under the Plan. Such adjustments
to the outstanding options are to be effected in a manner which shall preclude
the enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
 
                                   ARTICLE TWO
 
                       DISCRETIONARY OPTION GRANT PROGRAM
 
         I.       OPTION TERMS
 
                  Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
 
                  A.       EXERCISE PRICE.
 
                                       3.
<PAGE>
 
                           1.       The exercise price per share shall be fixed
by the Plan Administrator but shall not be less than eighty-five percent (85%)
of the Fair Market Value per share of Common Stock on the option grant date,
provided that the Plan Administrator may fix the exercise price at less than 85%
if the optionee, at the time of the option grant, shall have made a payment to
the Company (including payment made by means of a salary reduction) equal to the
excess of the Fair Market Value of the Common Stock on the option grant date
over such exercise price.
 
                           2.       The exercise price shall become immediately
due upon exercise of the option and may, subject to the provisions of Section I
of Article Four and the documents evidencing the option, be payable in one or
more of the forms specified below:
 
                                    (i)      cash or check made payable to the
         Corporation,
 
                                    (ii)     with respect to the exercise of
         options after the Section 12 Registration Date, shares of Common Stock
         held for the requisite period necessary to avoid a charge to the
         Corporation's earnings for financial reporting purposes and valued at
         Fair Market Value on the Exercise Date, or
 
                                    (iii)    with respect to the exercise of
         options for vested shares after the Section 12 Registration Date and to
         the extent the sale complies with all applicable laws relating to the
         regulation and sale of securities, through a special sale and
         remittance procedure pursuant to which the Optionee shall concurrently
         provide irrevocable written instructions to (a) a
         Corporation-designated brokerage firm to effect the immediate sale of
         the purchased shares and remit to the Corporation, out of the sale
         proceeds available on the settlement date, sufficient funds to cover
         the aggregate exercise price payable for the purchased shares plus all
         applicable Federal, state and local income and employment taxes
         required to be withheld by the Corporation by reason of such exercise,
         and (b) the Corporation to deliver the certificates for the purchased
         shares directly to such brokerage firm in order to complete the sale.
 
                  Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
 
                  B.       EXERCISE AND TERM OF OPTIONS. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in excess
of ten (10) years measured from the option grant date.
 
                  C.       EFFECT OF TERMINATION OF SERVICE.
 
                           1.       The following provisions shall govern the
exercise of any options held by the Optionee at the time of cessation of Service
or death:
 
                                       4.
<PAGE>
 
                                    (i)      Any option outstanding at the time
         of the Optionee's cessation of Service for any reason shall remain
         exercisable for such period of time thereafter as shall be determined
         by the Plan Administrator and set forth in the documents evidencing the
         option (which shall in no event be less than six (6) months in the case
         of death or disability nor less than thirty (30) days in the case of
         any other cessation of Service), provided no such option shall be
         exercisable after the expiration of the option term.
 
                                    (ii)     Any option exercisable in whole or
         in part by the Optionee at the time of death may be subsequently
         exercised by the personal representative of the Optionee's estate or by
         the person or persons to whom the option is transferred pursuant to the
         Optionee's will or in accordance with the laws of descent and
         distribution.
 
                                    (iii)    Subject to clause C.2.(ii) below of
         this Section I, during the applicable post-Service exercise period, the
         option may not be exercised in the aggregate for more than the number
         of vested shares for which the option is exercisable on the date of the
         Optionee's cessation of Service. Upon the expiration of the applicable
         exercise period or (if earlier) upon the expiration of the option term,
         the option shall terminate and cease to be outstanding for any vested
         shares for which the option has not been exercised.
 
                           2.       The Plan Administrator shall have complete
discretion, exercisable either at the time an option is granted or at any time
while the option remains outstanding, to:
 
                                    (i)      extend the period of time for which
         the option is to remain exercisable following the Optionee's cessation
         of Service from the limited exercise period otherwise in effect for
         that option to such greater period of time as the Plan Administrator
         shall deem appropriate, but in no event beyond the expiration of the
         option term, and/or
 
                                    (ii)     permit the option to be exercised,
         during the applicable post-Service exercise period, not only with
         respect to the number of vested shares of Common Stock for which such
         option is exercisable at the time of the Optionee's cessation of
         Service but also with respect to one or more additional installments in
         which the Optionee would have vested had the Optionee continued in
         Service.
 
                  D.       STOCKHOLDER RIGHTS. The holder of an option shall
have no stockholder rights with respect to the shares subject to the option
until such person shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.
 
                  E.       VESTING. The vesting schedule imposed with respect to
any option grant or share issuance shall be as determined by Plan Administrator
and set forth in the documents evidencing such option.
 
                                       5.
<PAGE>
 
                  F.       REPURCHASE RIGHTS. The Plan Administrator shall have
the discretion to grant options which are exercisable for unvested shares of
Common Stock and to reserve the right to repurchase any or all of those unvested
shares should the optionee thereafter cease to be in Service to the Corporation.
The terms upon which such repurchase right shall be exercisable (including the
period and procedure for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Plan Administrator and set forth
in the document evidencing such repurchase right.
 
                  G.       LIMITED TRANSFERABILITY OF OPTIONS. During the
lifetime of the Optionee, options shall be exercisable only by the Optionee and
shall not be assignable or transferable other than by will or by the laws of
descent and distribution following the Optionee's death.
 
         II.      INCENTIVE OPTIONS
 
                  The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Four shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall not be subject to the terms of this Section II.
 
                  A.       ELIGIBILITY. Incentive Options may only be granted to
Employees.
 
                  B.       EXERCISE PRICE. The exercise price per share shall
not be less than one hundred percent (100%) of the Fair Market Value per share
of Common Stock on the option grant date.
 
                  C.       DOLLAR LIMITATION. The aggregate Fair Market Value of
the shares of Common Stock (determined as of the respective date or dates of
grant) for which one or more options granted to any Employee under the Plan (or
any other option plan of the Corporation or any Parent or Subsidiary) may for
the first time become exercisable as Incentive Options during any one calendar
year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
 
                  D.       10% STOCKHOLDER. If any Employee to whom an Incentive
Option is granted is a 10% Stockholder, then the exercise price per share shall
not be less than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock on the option grant date, and the option term shall not
exceed five (5) years measured from the option grant date.
 
         III.     CANCELLATION AND REGRANT OF OPTIONS
 
                  The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected option holders,
the cancellation of any or all outstanding options under the Discretionary
Option Grant Program and to grant in substitution
 
                                       6.
<PAGE>
 
new options covering the same or different number of shares of Common Stock but
with an exercise price per share based on the Fair Market Value per share of
Common Stock on the new grant date.
 
                                  ARTICLE THREE
 
                             STOCK ISSUANCE PROGRAM
 
         I.       STOCK ISSUANCES
 
                  Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.
 
         II.      STOCK ISSUANCE TERMS
 
                  A.       PURCHASE PRICE.
 
                           1.       The purchase price per share shall be fixed
by the Plan Administrator, but shall not be less than eighty-five percent (85%)
of the Fair Market Value per share of Common Stock on the issuance date.
 
                           2.       Subject to the provisions of Section I of
Article Four, shares of Common Stock may be issued under the Stock Issuance
Program for any of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:
 
                                    (i)      cash or check made payable to the
         Corporation, or
 
                                    (ii)     past services rendered to the
         Corporation (or any Parent or Subsidiary).
 
                  B.       VESTING PROVISIONS.
 
                           1.       Shares of Common Stock issued under the
Stock Issuance Program may, in the discretion of the Plan Administrator, be
fully and immediately vested upon issuance or may vest in one or more
installments over the Participant's period of Service or upon attainment of
specified performance objectives. The elements of the vesting schedule
applicable to any unvested shares of Common Stock issued under the Stock
Issuance Program, namely:
 
                                    (i)      the Service period to be completed
         by the Participant or the performance objectives to be attained,
 
                                       7.
<PAGE>
 
                                    (ii)     the number of installments in which
         the shares are to vest,
 
                                    (iii)    the interval or intervals (if any)
         which are to lapse between installments, and
 
                                    (iv)     the effect which death, Permanent
         Disability or other event designated by the Plan Administrator is to
         have upon the vesting schedule,
 
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.
 
                           2.       Any new, substituted or additional
securities or other property (including money paid other than as a regular cash
dividend) which the Participant may have the right to receive with respect to
the Participant's unvested shares of Common Stock by reason of any stock
dividend, stock split, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration shall be issued subject to (i) the
same vesting requirements applicable to the Participant's unvested shares of
Common Stock and (ii) such escrow arrangements as the Plan Administrator shall
deem appropriate.
 
                           3.       The Participant shall have full stockholder
rights with respect to any shares of Common Stock issued to the Participant
under the Stock Issuance Program, whether or not the Participant's interest in
those shares is vested. Accordingly, the Participant shall have the right to
vote such shares and to receive any regular cash dividends paid on such shares.
 
                           4.       Should the Participant cease to remain in
Service while holding one or more unvested shares of Common Stock issued under
the Stock Issuance Program or should the performance objectives not be attained
with respect to one or more such unvested shares of Common Stock, then those
shares shall be immediately surrendered to the Corporation for cancellation, and
the Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.
 
                           5.       The Plan Administrator may in its discretion
waive the surrender and cancellation of one or more unvested shares of Common
Stock which would otherwise occur upon the cessation of the Participant's
Service or the non-attainment of the performance objectives applicable to those
shares. Such waiver shall result in the immediate vesting of the Participant's
interest in the shares as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.
 
                                       8.
<PAGE>
 
                                  ARTICLE FOUR
 
                                  MISCELLANEOUS
 
         I.       FINANCING
 
                  The Plan Administrator may permit any Optionee or Participant
to pay the option exercise price under the Discretionary Option Grant Program or
the purchase price of shares issued under the Stock Issuance Program by
delivering a full-recourse, interest bearing promissory note payable in one or
more installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.
 
         II.      SHARE ESCROW/LEGENDS
 
                  Unvested shares issued under the Plan may, in the Plan
Administrator's discretion, be held in escrow by the Corporation until the
Participant's interest in such shares vests or may be issued directly to the
Participant with restrictive legends on the certificates evidencing those
unvested shares.
 
         III.     CORPORATE TRANSACTION
 
                  A.       Except as otherwise provided in the agreements
evidencing an option, each outstanding option under the Discretionary Option
Grant Program shall automatically accelerate in the event of a Corporate
Transaction so that each such option shall, immediately prior to the effective
date of the Corporate Transaction, become fully exercisable with respect to the
total number of shares of Common Stock at the time subject to such option and
may be exercised for any or all of those shares as fully-vested shares of Common
Stock, provided that an outstanding option shall not so accelerate if and to the
extent: (i) such option is, in connection with the Corporate Transaction, either
to be assumed by the successor corporation (or parent thereof) or to be replaced
with a comparable option to purchase shares of the capital stock of the
successor corporation (or parent thereof), (ii) such option is to be replaced
with a cash incentive program of the successor corporation which preserves the
spread existing on the unvested option shares at the time of the Corporate
Transaction and provides for subsequent payout in accordance with the same
vesting schedule applicable to those option shares or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant. The determination of option comparability under
clause (i) above shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.
 
                  B.       Except as otherwise provided in the agreements
creating the repurchase rights, outstanding repurchase rights, if any, shall
terminate automatically, and the shares of
 
                                       9.
<PAGE>
 
Common Stock subject to those terminated rights shall immediately vest in full,
in the event of any Corporate Transaction, provided that such repurchase right
shall not lapse to the extent: (i) those repurchase rights are to be assigned to
the successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the option is issued or the
repurchase right is created.
 
                  C.       Immediately following the consummation of the
Corporate Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
 
                  D.       Each option which is assumed in connection with a
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities which
would have been issuable to the Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments to reflect such Corporate Transaction shall
also be made to (i) the exercise price payable per share under each outstanding
option, provided the aggregate exercise price payable for such securities shall
remain the same, (ii) the maximum number and/or class of securities available
for issuance over the remaining term of the Plan and (iii) the maximum number
and/or class of securities for which any one person may be granted stock
options, separately exercisable stock appreciation rights and direct stock
issuances under the Plan per calendar year.
 
                  E.       Repurchase rights which are assigned in connection
with a Corporate Transaction shall be exercisable with respect to the property
issued to the Optionee of Participant upon consummation of such Corporate
Transaction in exchange for the Common Stock held by the Optionee or Participant
subject to the repurchase rights immediately prior to the Corporate Transaction.
 
                  F.       Except as otherwise limited by the Plan Administrator
at the time an Option is granted, vesting under outstanding options will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within twenty-four (24)
months following the effective date of any Corporate Transaction in which those
options are assumed or replaced and do not otherwise accelerate. Any options so
accelerated shall remain exercisable for fully-vested shares until the earlier
of (i) the expiration of the option term or (ii) the expiration of the one
(l)-year period measured from the effective date of the Involuntary Termination.
The portion of any Incentive Option accelerated in connection with a Corporate
Transaction or Change in Control shall remain exercisable as an Incentive Option
only to the extent the applicable One Hundred Thousand Dollar limitation is not
exceeded and the provisions governing the exercise and holding period are met.
To the extent such dollar limitation is exceeded, the accelerated portion of
such option shall be exercisable as a Non-Statutory Option under the Federal
tax laws.
 
                  G.       Except as otherwise limited by the Plan Administrator
at the time the option is granted under the Discretionary Option Program or the
repurchase rights are created, the
 
                                      10.
<PAGE>
 
outstanding repurchase rights with respect to shares held by an Optionee or
Participant will automatically lapse and cease to be exercisable in the event
the Optionee's or the Participant's Service subsequently terminates by means of
an Involuntary Termination within twenty-four (24) months following the
effective date of any Corporate Transaction in which those repurchase rights are
assigned or otherwise continue.
 
                  H.       The outstanding options or repurchase rights shall in
no way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
 
         IV.      HOSTILE CHANGE IN CONTROL
 
                  A.       In the event of any Hostile Change in Control, each
outstanding option under the Discretionary Option Grant Program shall
automatically accelerate so that each such option shall, immediately prior to
the effective date of the Hostile Change in Control, become fully exercisable
with respect to the total number of shares of Common Stock at the time subject
to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock.
 
                  B.       Outstanding repurchase rights, if any, shall
terminate automatically, and the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event of any Hostile
Change in Control.
 
         V.       TAX WITHHOLDING
 
                  A.       The Corporation's obligation to deliver shares of
Common Stock upon the exercise of options or the issuance or vesting of such
shares under the Plan shall be subject to the satisfaction of all applicable
Federal, state and local income and employment tax withholding requirements.
 
                  B.       The Plan Administrator may, in its discretion,
provide any or all holders of Non-Statutory Options or unvested shares of Common
Stock under the Plan with the right to use shares of Common Stock in
satisfaction of all or part of the Taxes incurred by such holders in connection
with the exercise of their options or the vesting of their shares. Such right
may be provided to any such holder in either or both of the following formats:
 
                           Stock Withholding: The election to have the
Corporation withhold, from the shares of Common Stock otherwise issuable upon
the exercise of such Non-Statutory Option or the vesting of such shares, a
portion of those shares with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent (100%)) designated by
the holder.
 
                           Stock Delivery: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised or the shares
vest, one or more shares of Common Stock
 
                                      11.
<PAGE>
 
previously acquired by such holder (other than in connection with the option
exercise or share vesting triggering the Taxes) with an aggregate Fair Market
Value equal to the percentage of the Taxes (not to exceed one hundred percent
(100%)) designated by the holder.
 
         VI.      EFFECTIVE DATE AND TERM OF THE PLAN
 
                  A.       The Plan shall become effective immediately upon the
Plan Effective Date. Options may be granted under the Discretionary Option Grant
at any time on or after the Plan Effective Date. However, no options granted
under the Plan may be exercised, and no shares shall be issued under the Plan,
until the Plan is approved by the Corporation's stockholders. If such
stockholder approval is not obtained within twelve (12) months after the Plan
Effective Date, then all options previously granted under this Plan shall
terminate and cease to be outstanding, and no further options shall be granted
and no shares shall be issued under the Plan.
 
                  B.       The Plan shall terminate upon the earliest of (i) the
tenth anniversary of the Plan Effective Date, (ii) the date on which all shares
available for issuance under the Plan shall have been issued as fully-vested
shares or (iii) the termination of all outstanding options in connection with a
Corporate Transaction. Upon such plan termination, all outstanding option grants
and unvested stock issuances shall thereafter continue to have force and effect
in accordance with the provisions of the documents evidencing such grants or
issuances.
 
         VII.     AMENDMENT OF THE PLAN
 
                  A.       The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and obligations with
respect to stock options or unvested stock issuances at the time outstanding
under the Plan unless the Optionee or the Participant consents to such amendment
or modification. In addition, certain amendments may require stockholder
approval if so determined by the Board or pursuant to applicable laws or
regulations.
 
                  B.       Options to purchase shares of Common Stock may be
granted under the Discretionary Option Grant and shares of Common Stock may be
issued under the Stock Issuance Program that are in each instance in excess of
the number of shares then available for issuance under the Plan, provided any
excess shares actually issued under those programs shall be held in escrow until
there is obtained any required approval of an amendment sufficiently increasing
the number of shares of Common Stock available for issuance under the Plan. If
such approval is not obtained within twelve (12) months after the date the first
such excess issuances are made, then (i) any unexercised options granted on the
basis of such excess shares shall terminate and cease to be outstanding and (ii)
the Corporation shall promptly refund to the Optionees and the Participants the
exercise or purchase price paid for any excess shares issued under the Plan and
held in escrow, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held in escrow, and such shares shall
thereupon be automatically cancelled and cease to be outstanding.
 
                                      12.
<PAGE>
 
         VIII.    USE OF PROCEEDS
 
                  Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
 
         IX.      REGULATORY APPROVALS
 
                  A.       The implementation of the Plan, the granting of any
stock option under the Plan and the issuance of any shares of Common Stock (i)
upon the exercise of any granted option or (ii) under the Stock Issuance Program
shall be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the stock
options granted under it and the shares of Common Stock issued pursuant to it.
 
                  B.       No shares of Common Stock or other assets shall be
issued or delivered under the Plan unless and until there shall have been
compliance with all applicable requirements of Federal and state securities
laws, including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any stock exchange (or the Nasdaq National
Market, if applicable) on which Common Stock is then listed for trading.
 
         X.       NO EMPLOYMENT/SERVICE RIGHTS
 
                  Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
 
                [Remainder of This Page Intentionally Left Blank]
 
                                      13.
<PAGE>
 
                                    APPENDIX
 
                  The following definitions shall be in effect under the Plan:
 
         A.       BOARD shall mean the Corporation's Board of Directors.
 
         B.       CODE shall mean the Internal Revenue Code of 1986, as amended.
 
         C.       COMMON STOCK shall mean the Corporation's common stock.
 
         D.       CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
 
                           (i)      a merger or consolidation in which
         securities possessing more than fifty percent (50%) of the total
         combined voting power of the Corporation's outstanding securities are
         transferred to a person or persons different from the persons holding
         those securities immediately prior to such transaction, or
 
                           (ii)     the sale, transfer or other disposition of
         all or substantially all of the Corporation's assets.
 
         E.       CORPORATION shall mean Cytokinetics, Incorporated, a Delaware
corporation, and its successors.
 
         F.       DISCRETIONARY OPTION GRANT PROGRAM shall mean the
discretionary option grant program in effect under the Plan.
 
         G.       EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
 
         H.       EXERCISE DATE shall mean the date on which the Corporation
shall have received written notice of the option exercise.
 
         I.       FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
 
                           (i)      If the Common Stock is at the time traded on
         the Nasdaq National Market, then the Fair Market Value shall be deemed
         equal to the closing selling price per share of Common Stock on the
         date in question, as such price is reported on the Nasdaq National
         Market or any successor system. If there is no closing selling price
         for the Common Stock on the date in question, then the Fair
 
                                      A-1.
<PAGE>
 
         Market Value shall be the closing selling price on the last preceding
         date for which such quotation exists.
 
                           (ii)     If the Common Stock is at the time listed on
         any Stock Exchange, then the Fair Market Value shall be deemed equal to
         the closing selling price per share of Common Stock on the date in
         question on the Stock Exchange determined by the Plan Administrator to
         be the primary market for the Common Stock, as such price is officially
         quoted in the composite tape of transactions on such exchange. If there
         is no closing selling price for the Common Stock on the date in
         question, then the Fair Market Value shall be the closing selling price
         on the last preceding date for which such quotation exists.
 
                           (iii)    For purposes of any option grants made on
         the Underwriting Date, the Fair Market Value shall be deemed to be
         equal to the price per share at which the Common Stock is to be sold in
         the initial public offering pursuant to the Underwriting Agreement.
 
                           (iv)     For purposes of any option grants made prior
         to the Underwriting Date, the Fair Market Value shall be determined by
         the Plan Administrator, after taking into account such factors as it
         deems appropriate.
 
         J.       HOSTILE CHANGE IN CONTROL shall mean a change in ownership or
control of the Corporation effected through either of the following
transactions;
 
                           (i)      the acquisition, directly or indirectly by
         any person or related group of persons (other than the Corporation or a
         person that directly or indirectly controls, is controlled by, or is
         under common control with, the Corporation), of beneficial ownership
         (within the meaning of Rule 13d-3 of the 1934 Act) of securities
         possessing more than fifty percent (50%) of the total combined voting
         power of the Corporation's outstanding securities pursuant to a tender
         or exchange offer made directly to the Corporation's stockholders which
         the Board does not recommend such stockholders to accept, or
 
                           (ii)     a change in the composition of the Board
         over a period of thirty-six (36) consecutive months or less such that a
         majority of the Board members ceases, by reason of one or more
         contested elections for Board membership, to be comprised of
         individuals who either (A) have been Board members continuously since
         the beginning of such period or (B) have been elected or nominated for
         election as Board members during such period by at least a majority of
         the Board members described in clause (A) who were still in office at
         the time the Board approved such election or nomination.
 
         K.       INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
 
                                      A-2.
<PAGE>
 
         L.       INVOLUNTARY TERMINATION shall mean the termination of the
Service of any individual which occurs by reason of:
 
                           (i)      such individual's involuntary dismissal or
         discharge by the Corporation for reasons other than Misconduct, or
 
                           (ii)     such individual's voluntary resignation
         following (A) a change in his or her position with the Corporation
         which materially reduces his or her level of responsibility, (B) a
         reduction in his or her level of compensation (including base salary,
         fringe benefits and participation in any corporate-performance based
         bonus or incentive programs) by more than fifteen percent (15%) or (C)
         a relocation of such individual's place of employment by more than
         fifty (50) miles, provided and only if such change, reduction or
         relocation is effected by the Corporation without the individual's
         consent.
 
         M.       MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
 
         N.       1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
 
         O.       NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.
 
         P.       OPTIONEE shall mean any person to whom an option is granted
under the Discretionary Option Grant Program.
 
         Q.       PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
 
         R.       PARTICIPANT shall mean any person who is issued shares of
Common Stock under the Stock Issuance Program.
 
         S.       PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more.
 
                                      A-3.
<PAGE>
 
         T.       PLAN shall mean the Corporation's 1997 Stock Option/Stock
Issuance Plan, as set forth in this document.
 
         U.       PLAN ADMINISTRATOR shall mean the particular entity, whether
the Primary Committee, the Board or the Secondary Committee, which is authorized
to administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
 
         V.       PLAN EFFECTIVE DATE shall mean the date on which the Plan was
adopted by the Board.
 
         W.       PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders following the Section 12 Registration Date.
 
         X.       SECONDARY COMMITTEE shall mean a committee of two (2) or more
Board members appointed by the Board to administer any aspect of Plan not
required hereunder to be administered by the Primary Committee. The members of
the Secondary Committee may be Board members who are Employees eligible to
receive discretionary option grants or direct stock issuances under the Plan or
any other stock option, stock appreciation, stock bonus or other stock plan of
the Corporation (or any Parent or Subsidiary).
 
         Y.       SECTION 12 REGISTRATION DATE shall mean the date on which the
Common Stock is first registered under Section 12(g) or Section 15 of the 1934
Act.
 
         Z.       SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
 
         AA.      SERVICE shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant or stock issuance.
 
         AB.      STOCK EXCHANGE shall mean either the American Stock Exchange
or the New York Stock Exchange.
 
         AC.      STOCK ISSUANCE AGREEMENT shall mean the agreement entered into
by the Corporation and the Participant at the time of issuance of shares of
Common Stock under the Stock Issuance Program.
 
         AD.      STOCK ISSUANCE PROGRAM shall mean the stock issuance program
in effect under the Plan.
 
                                      A-4.
<PAGE>
 
         AE.      SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
 
         AF.      TAXES shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Non-Statutory Options or
unvested shares of Common Stock in connection with the exercise of those options
or the vesting of those shares.
 
         AG.      10% STOCKHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
 
         AH.      UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
 
         AI.      UNDERWRITING DATE shall mean the date on which the
Underwriting Agreement is executed and priced in connection with an initial
public offering of the Common Stock.
 
                                      A-5.
<PAGE>
 
                           CYTOKINETICS, INCORPORATED
                             STOCK OPTION AGREEMENT
 
                                    RECITALS
 
                  A. The Board of Directors of the Corporation has adopted the
Cytokinetics, Incorporated 1997 Stock Option/Stock Issuance Plan (the "Plan")
for the purpose of attracting and retaining the services of persons who
contribute to the growth and financial success of the Corporation.
 
                  B. Optionee is a person who the Plan Administrator believes
has and will contribute to the growth and financial success of the Corporation
and this Agreement is executed pursuant to and is intended to carry out the
purposes of the Plan.
 
                                    AGREEMENT
 
                  NOW, THEREFORE, it is hereby agreed as follows:
 
                  1. GRANT OF OPTION. Subject to and upon the terms and
conditions set forth in this Agreement, the Corporation hereby grants to
Optionee, as of the grant date (the "Grant Date") specified in the accompanying
Notice of Grant of Stock Option (the "Grant Notice"), a stock option to purchase
up to that number of shares of the Corporation's Common Stock (the "Option
Shares") as is specified in the Grant Notice. The Option Shares shall be
purchasable from time to time during the option term at the option price per
share (the "Option Price") specified in the Grant Notice. Capitalized terms used
herein which are not otherwise defined shall have the meaning ascribed to such
terms in the Plan.
 
                  2. OPTION TERM. This option shall have a maximum term of ten
(10) years measured from the Grant Date and shall expire at the close of
business on the expiration date (the "Expiration Date") specified in the Grant
Notice, unless sooner terminated in accordance with Paragraph 5, 6 or 17.
 
                  3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
 
                  4. DATES OF EXERCISE. This option may not be exercised in
whole or in part at any time prior to the time the Plan is approved by the
Corporation's shareholders in accordance with Paragraph 17. Provided such
shareholder approval is obtained, this option shall thereupon become exercisable
for the Option Shares in one or more installments as is specified in the Grant
Notice. As the option becomes exercisable in one or more installments, the
installments shall accumulate and the option shall remain
 
<PAGE>
 
exercisable for such installments until the Expiration Date or the sooner
termination of the option term under Paragraph 5 or Paragraph 6 of this
Agreement.
 
                  5. SPECIAL TERMINATION OF OPTION TERM. The option term
specified in Paragraph 2 shall terminate (and this option shall cease to be
exercisable) prior to the Expiration Date should any of the following provisions
become applicable:
 
                           (i)      Except as otherwise provided in subparagraph
         (ii) or (iii) below, should Optionee cease to remain in Service while
         this option is outstanding, then the period for exercising this option
         shall be reduced to a three (3)-month period commencing with the date
         of such cessation of Service, but in no event shall this option be
         exercisable at any time after the Expiration Date. Upon the expiration
         of such three (3)-month period or (if earlier) upon the Expiration
         Date, this option shall terminate and cease to be outstanding.
 
                           (ii)     Should Optionee die while this option is
         outstanding, then the personal representative of the Optionee's estate
         or the person or persons to whom the option is transferred pursuant to
         the Optionee's will or in accordance with the law of descent and
         distribution shall have the right to exercise this option. Such right
         shall lapse and this option shall cease to be exercisable upon the
         earlier of (A) the expiration of the twelve (12) month period measured
         from the date of Optionee's death or (B) the Expiration Date. Upon the
         expiration of such twelve (12) month period or (if earlier) upon the
         Expiration Date, this option shall terminate and cease to be
         outstanding.
 
                           (iii)    Should Optionee become permanently disabled
         and cease by reason thereof to remain in Service while this option is
         outstanding, then the Optionee shall have a period of twelve (12)
         months (commencing with the date of such cessation of Service) during
         which to exercise this option, but in no event shall this option be
         exercisable at any time after the Expiration Date. Optionee shall be
         deemed to be permanently disabled if Optionee is unable to engage in
         any substantial gainful activity for the Corporation or the parent or
         subsidiary corporation retaining his/her services by reason of any
         medically determinable physical or mental impairment, which can be
         expected to result in death or which has lasted or can be expected to
         last for a continuous period of not less than twelve (12) months. Upon
         the expiration of such limited period of exercisability or (if earlier)
         upon the Expiration Date, this option shall terminate and cease to be
         outstanding.
 
                           (iv)     During the limited period of exercisability
         applicable under subparagraph (i), (ii) or (iii) above, this option may
         be exercised for any or all of the Option Shares for which this option
         is, at the time of the
 
                                      -2-
<PAGE>
 
         Optionee's cessation of Service, exercisable in accordance with the
         exercise schedule specified in the Grant Notice and the provisions of
         Paragraph 6 of this Agreement.
 
                           (v)      For purposes of this Paragraph 5 and for all
         other purposes under this Agreement:
 
                           A.       The Optionee shall be deemed to remain in
         SERVICE for so long as the Optionee continues to render periodic
         services to the Corporation or any parent or subsidiary corporation,
         whether as an Employee, a non-employee member of the board of
         directors, or an independent contractor or consultant.
 
                           B.       The Optionee shall be deemed to be an
         EMPLOYEE of the Corporation and to continue in the Corporation's employ
         for so long as the Optionee remains in the employ of the Corporation or
         one or more of its parent or subsidiary corporations, subject to the
         control and direction of the employer entity as to both the work to be
         performed and the manner and method of performance.
 
                           C.       A corporation shall be considered to be a
         SUBSIDIARY corporation of the Corporation if it is a member of an
         unbroken chain of corporations beginning with the Corporation, provided
         each such corporation in the chain (other than the last corporation)
         owns, at the time of determination, stock possessing 50% or more of the
         total combined voting power of all classes of stock in one of the other
         corporations in such chain.
 
                           D.       A corporation shall be considered to be a
         PARENT corporation of the Corporation if it is a member of an unbroken
         chain ending with the Corporation, provided each such corporation in
         the chain (other than the Corporation) owns, at the time of
         determination, stock possessing 50% or more of the total combined
         voting power of all classes of stock in one of the other corporations
         in such chain.
 
                  6.       EFFECT OF CORPORATE TRANSACTION.
 
                  A.       Optionee shall automatically vest with respect to a
portion of the Option Shares in the event of a Corporate Transaction so that
such portion shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable with for vested shares of Common Stock,
provided that no Option Shares shall automatically vest in full if and to the
extent: (i) this option is, in connection with the Corporate Transaction, either
to be assumed by the successor corporation (or parent thereof) or to be replaced
with a comparable option to purchase shares of the capital stock of the
successor corporation (or parent thereof), or (ii) such option is to be
 
                                      -3-
<PAGE>
 
replaced with a cash incentive program of the successor corporation which
preserves the spread existing on the unvested option shares at the time of the
Corporate Transaction and provides for subsequent payout in accordance with the
same vesting schedule applicable to those option shares. The determination of
option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be final, binding and conclusive. The
portion of the Option Shares which will automatically vest hereunder shall be a
number of shares equal to the number of unvested Option Shares immediately prior
to the Corporate Transaction multiplied by a fraction, the numerator of which is
the number of complete months of which elapsed after the Vesting Commencement
Date set forth in the Grant Notice and the date of the Corporate Transaction,
and the denominator of which is the number of months required under the Grant
Notice for the rights of Optionee to become fully vested.
 
                  B.       To the extent not previously exercised, this Option
shall terminate and cease to be exercisable upon the consummation of a Corporate
Transaction unless it is expressly assumed by the successor corporation or
parent thereof.
 
                  C.       Option Shares available under any options which are
assumed or replaced in the Corporate Transaction and do not otherwise accelerate
at that time, shall automatically vest in full in the event the Optionee's
Service should subsequently terminated by reason of an Involuntary Termination
within twenty-four (24) months following the effective date of such Corporate
Transaction. Any options so accelerated shall remain exercisable for
fully-vested shares until the earlier of (i) the expiration of the option term
or (ii) the expiration of the one (l)-year period measured from the effective
date of the Involuntary Termination.
 
                  D.       This Agreement shall not in any way affect the right
of the Corporation to adjust, reclassify, reorganize or otherwise make changes
in its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
 
                  6.       EFFECT OF HOSTILE CHANGE IN CONTROL
 
                  In the event of any Hostile Change in Control, Optionee shall
automatically vest in full with respect to all Option Shares so that each such
option shall, immediately prior to the effective date of the Hostile Change in
Control, be fully exercisable for any or all of Option Shares as fully-vested
shares of Common Stock.
 
                  7.       ADJUSTMENT IN OPTION SHARES.
 
                  A. In the event any change is made to the Corporation's
outstanding Common Stock by reason of any stock split, stock dividend,
combination of shares, exchange of shares, or other change affecting the
outstanding Common Stock as a class without receipt of consideration, then
appropriate adjustments shall be made to (i) the total number of Option Shares
subject to this option, (ii) the number of Option Shares
 
                                      -4-
<PAGE>
 
for which this option is to be exercisable from and after each installment date
specified in the Grant Notice and (iii) the Option Price payable per share in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
 
                  B. If this option is to be assumed in connection with a
Corporate Transaction described in Paragraph 6 or is otherwise to remain
outstanding, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply and pertain to the number and class of
securities which would have been issuable to the Optionee in the consummation of
such Corporate Transaction had the option been exercised immediately prior to
such Corporate Transaction, and appropriate adjustments shall also be made to
the Option Price payable per share, provided the aggregate Option Price payable
hereunder shall remain the same.
 
                  8.       PRIVILEGE OF STOCK OWNERSHIP. The holder of this
option shall not have any of the rights of a shareholder with respect to the
Option Shares until such individual shall have exercised the option and paid the
Option Price.
 
                  9.       MANNER OF EXERCISING OPTION.
 
                  A.       In order to exercise this option with respect to all
or any part of the Option Shares for which this option is at the time
exercisable, Optionee (or in the case of exercise after Optionee's death, the
Optionee's executor, administrator, heir or legatee, as the case may be) must
take the following actions:
 
                           (i)      Execute and deliver to the Secretary of the
         Corporation a stock purchase agreement (the "Purchase Agreement") in
         substantially the form of Exhibit B to the Grant Notice.
 
                           (ii)     Pay the aggregate Option Price for the
         purchased shares in one or more forms approved under the Plan.
 
                           (iii)    Furnish to the Corporation appropriate
         documentation that the person or persons exercising the option, if
         other than Optionee, have the right to exercise this option.
 
                  B.       For purposes of this Agreement, the Exercise Date
shall be the date on which the executed Purchase Agreement shall have been
delivered to the Corporation, and the fair market value of a share of Common
Stock on any relevant date shall be determined in accordance with subparagraphs
(i) through (iii) below:
 
                           (i)      If the Common Stock is not at the time
         listed or admitted to trading on any stock exchange but is traded on
         the NASDAQ National Market System, the fair market value shall be the
         closing selling price of one share of Common Stock on the date in
         question, as such price is reported by the National Association of
         Securities Dealers through its
 
                                      -5-
<PAGE>
 
         NASDAQ system or any successor system. If there is no closing selling
         price for the Common Stock on the date in question, then the closing
         selling price on the last preceding date for which such quotation
         exists shall be determinative of fair market value.
 
                           (ii)     If the Common Stock is at the time listed or
         admitted to trading on any stock exchange, then the fair market value
         shall be the closing selling price per share of Common Stock on the
         date in question on the stock exchange determined by the Plan
         Administrator to be the primary market for the Common Stock, as such
         price is officially quoted in the composite tape of transactions on
         such exchange. If there is no reported sale of Common Stock on such
         exchange on the date in question, then the fair market value shall be
         the closing selling price on the exchange on the last preceding date
         for which such quotation exists.
 
                           (iii)    If the Common Stock at the time is neither
         listed nor admitted to trading on any stock exchange nor traded in the
         over-the-counter market, or if the Plan Administrator determines that
         the value determined pursuant to subparagraphs (i) and (ii) above does
         not accurately reflect the fair market value of the Common Stock, then
         such fair market value shall be determined by the Plan Administrator
         after taking into account such factors as the Plan Administrator shall
         deem appropriate.
 
                  C.       As soon after the Exercise Date as practical, the
Corporation shall mail or deliver to Optionee or to the other person or persons
exercising this option a certificate or certificates representing the shares so
purchased and paid for, with the appropriate legends affixed thereto.
 
                  D.       In no event may this option be exercised for any
fractional shares.
 
                  10.      COMPLIANCE WITH LAWS AND REGULATIONS.
 
                  A.       The exercise of this option and the issuance of
Option Shares upon such exercise shall be subject to compliance by the
Corporation and the Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange on which
shares of the Corporation's Common Stock may be listed at the time of such
exercise and issuance.
 
                  B.       In connection with the exercise of this option,
Optionee shall execute and deliver to the Corporation such representations in
writing as may be requested by the Corporation in order for it to comply with
the applicable requirements of Federal and State securities laws.
 
                                      -6-
<PAGE>
 
                  11.      SUCCESSORS AND ASSIGNS. Except to the extent
otherwise provided in Paragraph 3 or 6, the provisions of this Agreement shall
inure to the benefit of, and be binding upon, the successors, administrators,
heirs, legal representatives and assigns of Optionee and the successors and
assigns of the Corporation.
 
                  12.      LIABILITY OF CORPORATION.
 
                  A.       If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without shareholder approval be issued under the Plan, then this option shall be
void with respect to such excess shares, unless shareholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of Article IV,
Section 3, of the Plan.
 
                  B.       The inability of the Corporation to obtain approval
from any regulatory body having authority deemed by the Corporation to be
necessary to the lawful issuance and sale of any Common Stock pursuant to this
option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained. The Corporation, however, shall use its best efforts to
obtain all such approvals.
 
                  13.      NOTICES. Any notice required to be given or delivered
to the Corporation under the terms of this Agreement shall be in writing and
addressed to the Corporation in care of the Corporate Secretary at its principal
corporate offices. Any notice required to be given or delivered to Optionee
shall be in writing and addressed to Optionee at the address indicated below
Optionee's signature line on the Grant Notice. All notices shall be deemed to
have been given or delivered upon personal delivery or upon deposit in the U.S.
mail, postage prepaid and properly addressed to the party to be notified.
 
                  14.      LOANS. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, assist the Optionee in the
exercise of this option by (i) authorizing the extension of a loan to the
Optionee from the Corporation or (ii) permitting the Optionee to pay the option
price for the purchased Common Stock in installments over a period of years. The
terms of any such loan or installment method of payment (including the interest
rate, the requirements for collateral and the terms of repayment) shall be
established by the Plan Administrator in its sole discretion.
 
                  15.      CONSTRUCTION. This Agreement and the option evidenced
hereby are made and granted pursuant to the Plan and are in all respects limited
by and subject to the express terms and provisions of the Plan. All decisions of
the Plan Administrator with respect to any question or issue arising under the
Plan or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
 
                                      -7-
<PAGE>
 
                  16.      GOVERNING LAW. The interpretation, performance, and
enforcement of this Agreement shall be governed by the laws of the State of
California without resort to that State's conflict-of-laws rules.
 
                  17.      SHAREHOLDER APPROVAL. The grant of this option is
subject to approval of the Plan by the Corporation's shareholders within twelve
(12) months after the adoption of the Plan by the Board of Directors.
Notwithstanding any provision of this Agreement to the contrary, this option may
not be exercised in whole or in part until such shareholder approval is
obtained. In the event that such shareholder approval is not obtained, then this
option shall thereupon terminate in its entirety and the Optionee shall have no
further rights to acquire any Option Shares hereunder.
 
                  18.      ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK
OPTION. In the event this option is designated an incentive stock option in the
Grant Notice, the following terms and conditions shall also apply to the grant:
 
                  A.       This option shall cease to qualify for favorable tax
treatment as an incentive stock option under the Federal tax laws if (and to the
extent) this option is exercised for one or more Option Shares: (i) more than
three (3) months after the date the Optionee ceases to be an Employee for any
reason other than death or permanent disability (as defined in Paragraph 5) or
(ii) more than one (1) year after the date the Optionee ceases to be an Employee
by reason of permanent disability.
 
                  B.       Should this option be designated as immediately
exercisable in the Grant Notice, then this option shall not become exercisable
in the calendar year in which granted if (and to the extent) the aggregate fair
market value (determined at the Grant Date) of the Corporation's Common Stock
for which this option would otherwise first become exercisable in such calendar
year would, when added to the aggregate fair market value (determined as of the
respective date or dates of grant) of the Corporation's Common Stock for which
this option or one or more other incentive stock options granted to the Optionee
prior to the Grant Date (whether under the Plan or any other option plan of the
Corporation or its parent or subsidiary corporations) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate. To the extent the exercisability of this option is deferred by
reason of the foregoing limitation, the deferred portion will first become
exercisable in the first calendar year or years thereafter in which the One
Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18.B would not
be contravened.
 
                  C.       Should this option be designated as exercisable in
installments in the Grant Notice, then no installment under this option (whether
annual or monthly) shall qualify for favorable tax treatment as an incentive
stock option under the Federal tax laws if (and to the extent) the aggregate
fair market value (determined at the Grant Date) of the Corporation's Common
Stock for which such installment first becomes exercisable hereunder will, when
added to the aggregate fair market value (determined as of the respective date
or dates of grant) of the Corporation's Common Stock for
 
                                      -8-
<PAGE>
 
which one or more other incentive stock options granted to the Optionee prior to
the Grant Date (whether under the Plan or any other option plan of the
Corporation or any parent or subsidiary corporation) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate.
 
                  19.      WITHHOLDING. Optionee hereby agrees to make
appropriate arrangements with the Corporation or parent or subsidiary
corporation employing Optionee for the satisfaction of all Federal, State or
local income tax withholding requirements and Federal social security employee
tax requirements applicable to the exercise of this option.
 
                                      -9-
<PAGE>
 
                                                         Immediately Exercisable
 
                           CYTOKINETICS, INCORPORATED
                            STOCK PURCHASE AGREEMENT
 
                  AGREEMENT made as of this __ day of_______, 19_, by and among
Cytokinetics, Incorporated, (the "Corporation"),_________________, the holder of
a stock option (the "Optionee") under the Corporation's 1997 Stock Option/Stock
Issuance Plan and _________________, the Optionee's spouse.
 
         I.       EXERCISE OF OPTION
 
                  1.1      EXERCISE. Optionee hereby purchases____________shares
("Purchased Shares") of the Corporation's common stock ("Common Stock") pursuant
to that certain option ("Option") granted Optionee on_____________________,
19____("Grant Date") to purchase up to________________shares of the Common Stock
("Total Purchasable Shares") under the Corporation's 1997 Stock Option/Stock
Issuance Plan (the "Plan") at an option price of $_____________ per share
("Option Price").
 
                  1.2      PAYMENT. Concurrently with the delivery of this
Agreement to the Corporate Secretary of the Corporation, Optionee shall pay the
Option Price for the Purchased Shares in accordance with the provisions of the
agreement between the Corporation and Optionee evidencing the Option (the
"Option Agreement") and shall deliver whatever additional documents may be
required by the Option Agreement as a condition for exercise, together with a
duly-executed blank Assignment Separate from Certificate (in the form attached
hereto as Exhibit I) with respect to the Purchased Shares.
 
                  1.3      DELIVERY OF CERTIFICATES. The certificates
representing the Purchased Shares hereunder shall be held in escrow by the
Corporate Secretary of the Corporation in accordance with the provisions of
Article VII.
 
                  1.4      SHAREHOLDER RIGHTS. Until such time as the
Corporation actually exercises its repurchase right, rights of first refusal or
special purchase right under this Agreement, Optionee (or any successor in
interest) shall have all the rights of a shareholder (including voting and
dividend rights) with respect to the Purchased Shares, including the Purchased
Shares held in escrow under Article VII, subject, however, to the transfer
restrictions of Article IV.
 
         II.      SECURITIES LAW COMPLIANCE
 
                  2.1      EXEMPTION FROM REGISTRATION. The Purchased Shares
have not been registered under the Securities Act of 1933, as amended (the "1933
Act"), and are accordingly being issued to Optionee in reliance upon the
exemption from such registration provided by Rule 701 of the Securities and
Exchange Commission for stock issuances under compensatory
 
<PAGE>
 
benefit plans such as the Plan. Optionee hereby acknowledges previous receipt of
a copy of the documentation for such Plan in the form of Exhibit C to the Notice
of Grant of Stock Option (the "Grant Notice") accompanying the Option Agreement.
 
                  2.2      RESTRICTED SECURITIES.
 
                  A.       Optionee hereby confirms that Optionee has been
informed that the Purchased Shares are restricted securities under the 1933 Act
and may not be resold or transferred unless the Purchased Shares are first
registered under the Federal securities laws or unless an exemption from such
registration is available. Accordingly, Optionee hereby acknowledges that
Optionee is prepared to hold the Purchased Shares for an indefinite period and
that Optionee is aware that Rule 144 of the Securities and Exchange Commission
issued under the 1933 Act is not presently available to exempt the sale of the
Purchased Shares from the registration requirements of the 1933 Act.
 
                  B.       Upon the expiration of the ninety (90)-day period
immediately following the date on which the Corporation first becomes subject to
the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Purchased Shares, to the extent vested under Article
V, may be sold (without registration) pursuant to the applicable requirements of
Rule 144. If Optionee is at the time of such sale an affiliate of the
Corporation for purposes of Rule 144 or was such an affiliate during the
preceding three (3) months, then the sale must comply with all the requirements
of Rule 144 (including the volume limitation on the number of shares sold, the
broker/market-maker sale requirement and the requisite notice to the Securities
and Exchange Commission); however, the two (2)-year holding period requirement
of the Rule will not be applicable. If Optionee is not at the time of the sale
an affiliate of the Corporation nor was such an affiliate during the preceding
three (3) months, then none of the requirements of Rule 144 (other than the
broker/market-maker sale requirement for Purchased Shares held for less than
three (3) years following payment in cash of the Option Price therefor) will be
applicable to the sale.
 
                  C.       Should the Corporation not become subject to the
reporting requirements of the Exchange Act, then Optionee may, provided he/she
is not at the time an affiliate of the Corporation (nor was such an affiliate
during the preceding three (3) months), sell the Purchased Shares (without
registration) pursuant to paragraph (k) of Rule 144 after the Purchased Shares
have been held for a period of three (3) years following the payment in cash of
the Option Price for such shares.
 
                  2.3      DISPOSITION OF SHARES. Optionee hereby agrees that
Optionee shall make no disposition of the Purchased Shares (other than a
permitted transfer under paragraph 4.1) unless and until there is compliance
with all of the following requirements:
 
                           (a)      Optionee shall have notified the Corporation
         of the proposed disposition and provided a written summary of the terms
         and conditions of the proposed disposition.
 
                                      -2-
<PAGE>
 
                           (b)      Optionee shall have complied with all
         requirements of this Agreement applicable to the disposition of the
         Purchased Shares.
 
                           (c)      Optionee shall have provided the Corporation
         with written assurances, in form and substance satisfactory to the
         Corporation, that (i) the proposed disposition does not require
         registration of the Purchased Shares under the 1933 Act or (ii) all
         appropriate action necessary for compliance with the registration
         requirements of the 1933 Act or of any exemption from registration
         available under the 1933 Act (including Rule 144) has been taken.
 
                           (d)      Optionee shall have provided the Corporation
         with written assurances, in form and substance satisfactory to the
         Corporation, that the proposed disposition will not result in the
         contravention of any transfer restrictions applicable to the Purchased
         Shares pursuant to the provisions of the Commissioner Rules identified
         in paragraph 2.5.
 
                  The Corporation shall not be required (i) to transfer on its
books any Purchased Shares which have been sold or transferred in violation of
the provisions of this Article II nor (ii) to treat as the owner of the
Purchased Shares, or otherwise to accord voting or dividend rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
 
                  2.4      RESTRICTIVE LEGENDS. In order to reflect the
restrictions on disposition of the Purchased Shares, the stock certificates for
the Purchased Shares will be endorsed with restrictive legends, including one or
more of the following legends:
 
                           (i)      "The shares represented by this certificate
have not been registered under the Securities Act of 1933. The shares may not be
sold or offered for sale in the absence of (a) an effective registration
statement for the shares under such Act, (b) a 'no action' letter of the
Securities and Exchange Commission with respect to such sale or offer, or (c)
satisfactory assurances to the Corporation that registration under such Act is
not required with respect to such sale or offer."
 
                           (ii)     "The shares represented by this certificate
are unvested and accordingly may not be sold, assigned, transferred, encumbered,
or in any manner disposed of except in conformity with the terms of a written
agreement dated_____________________, 19__ between the Corporation and the
registered holder of the shares (or the predecessor in interest to the shares).
Such agreement grants certain repurchase rights and rights of first refusal to
the Corporation (or its assignees) upon the sale, assignment, transfer,
encumbrance or other disposition of the Corporation's shares or upon termination
of service with the Corporation. The Corporation will upon written request
furnish a copy of such agreement to the holder hereof without charge."
 
                                      -3-
<PAGE>
 
            III.           SPECIAL TAX ELECTION
 
                  3.1      SECTION 83(b) ELECTION APPLICABLE TO THE EXERCISE OF
A NON-STATUTORY STOCK OPTION. If the Purchased Shares are acquired hereunder
pursuant to the exercise of a non-statutory stock option, as specified in the
Grant Notice, then the Optionee understands that under Section 83 of the
Internal Revenue Code of 1986, as amended (the "Code"), the excess of the fair
market value of the Purchased Shares on the date any forfeiture restrictions
applicable to such shares lapse over the Option Price paid for such shares will
be reportable as ordinary income on such lapse date. For this purpose, the term
"forfeiture restrictions" includes the right of the Corporation to repurchase
the Purchased Shares pursuant to the Repurchase Right provided under Article V
of this Agreement. Optionee understands that he/she may elect under Section
83(b) of the Code to be taxed at the time the Purchased Shares are acquired
hereunder, rather than when and as such Purchased Shares cease to be subject to
such forfeiture restrictions. Such election must be filed with the Internal
Revenue Service within thirty (30) days after the date of this Agreement. Even
if the fair market value of the Purchased Shares at the date of this Agreement
equals the Option Price paid (and thus no tax is payable), the election must be
made to avoid adverse tax consequences in the future. THE FORM FOR MAKING THIS
ELECTION IS ATTACHED AS EXHIBIT II HERETO. OPTIONEE UNDERSTANDS THAT FAILURE TO
MAKE THIS FILING WITHIN THE THIRTY (30)-DAY PERIOD WILL RESULT IN THE
RECOGNITION OF ORDINARY INCOME BY THE OPTIONEE AS THE FORFEITURE RESTRICTIONS
LAPSE.
 
                  3.2      CONDITIONAL SECTION 83(b) ELECTION APPLICABLE TO THE
EXERCISE OF AN INCENTIVE STOCK OPTION. If the Purchased Shares are acquired
hereunder pursuant to the exercise of an incentive stock option under the
Federal tax laws, as specified in the Grant Notice, then the following tax
principles shall be applicable to the Purchased Shares:
 
                           A.       For regular tax purposes, no taxable income
         will be recognized at the time the Option is exercised.
 
                           B.       The excess of (i) the fair market value of
         the Purchased Shares on the date the Option is exercised or (if later)
         on the date any forfeiture restrictions applicable to the Purchased
         Shares lapse over (ii) the Option Price paid for the Purchased Shares
         will be includible in the Optionee's taxable income for alternative
         minimum tax purposes.
 
                           C.       If the Optionee makes a disqualifying
         disposition of the Purchased Shares, then the Optionee will recognize
         ordinary income in the year of such disposition equal in amount to the
         excess of (i) the fair market value of the Purchased Shares on the date
         the Option is exercised or (if later) on the date any forfeiture
         restrictions applicable to the Purchased Shares lapse over (ii) the
         Option Price paid for the Purchased Shares. Any additional gain
         recognized upon the disqualifying disposition will be either short-term
         or long-
 
                                      -4-
<PAGE>
 
         term capital gain depending upon the period for which the Purchased
         Shares are held prior to the disposition.
 
                           D.       For purposes of the foregoing, the term
         "forfeiture restrictions" will include the right of the Corporation to
         repurchase the Purchased Shares pursuant to the Repurchase Right
         provided under Article V of this Agreement. The term "disqualifying
         disposition" means any sale or other disposition (1/) of the Purchased
         Shares within two (2) years after the Grant Date or within one (1) year
         after the execution date of this Agreement.
 
                           E.       In the absence of final Treasury Regulations
         relating to incentive stock options, it is not certain whether the
         Optionee may, in connection with the exercise of the Option for any
         Purchased Shares at the time subject to forfeiture restrictions, file a
         protective election under Section 83(b) of the Code which would limit
         (I) the Optionee's alternative minimum taxable income upon exercise and
         (II) the Optionee's ordinary income upon a disqualifying disposition,
         to the excess of (i) the fair market value of the Purchased Shares on
         the date the Option is exercised over (ii) the Option Price paid for
         the Purchased Shares. THE APPROPRIATE FORM FOR MAKING SUCH A PROTECTIVE
         ELECTION IS ATTACHED AS EXHIBIT II TO THIS AGREEMENT AND MUST BE FILED
         WITH THE INTERNAL REVENUE SERVICE WITHIN THIRTY (30) DAYS AFTER THE
         DATE OF THIS AGREEMENT. HOWEVER, SUCH ELECTION IF PROPERLY FILED WILL
         ONLY BE ALLOWED TO THE EXTENT THE FINAL TREASURY REGULATIONS PERMIT
         SUCH A PROTECTIVE ELECTION.
 
                  3.3      OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE
RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER
SECTION 83(b), EVEN IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES
TO MAKE THIS FILING ON HIS/HER BEHALF. This filing should be made by registered
or certified mail, return receipt requested, and Optionee must retain two (2)
copies of the completed form for filing with his or her State and Federal tax
returns for the current tax year and an additional copy for his or her records.
 
---------------------------
 
  1/ Generally, a disposition of shares purchased under an incentive stock
option includes any transfer of legal title, including a transfer by sale,
exchange or gift, but does not include a transfer to the Optionee's spouse, a
transfer into joint ownership with right of survivorship if Optionee remains one
of the joint owners, a pledge, a transfer by bequest or inheritance or certain
tax free exchanges permitted under the Code.
 
                                      -5-
<PAGE>
 
         IV.      TRANSFER RESTRICTIONS
 
                  4.1      RESTRICTION ON TRANSFER. Optionee shall not transfer,
assign, encumber or otherwise dispose of any of the Purchased Shares which are
subject to the Corporation's Repurchase Right under Article V. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise made the subject of disposition
in contravention of the Corporation's First Refusal Right under Article VI. Such
restrictions on transfer, however, shall not be applicable to (i) a gratuitous
transfer of the Purchased Shares made to the Optionee's spouse or issue,
including adopted children, or to a trust for the exclusive benefit of the
Optionee or the Optionee's spouse or issue, provided and only if the Optionee
obtains the Corporation's prior written consent to such transfer, (ii) a
transfer of title to the Purchased Shares effected pursuant to the Optionee's
will or the laws of intestate succession or (iii) a transfer to the Corporation
in pledge as security for any purchase-money indebtedness incurred by the
Optionee in connection with the acquisition of the Purchased Shares.
 
                  4.2      TRANSFEREE OBLIGATIONS. Each person (other than the
Corporation) to whom the Purchased Shares are transferred by means of one of the
permitted transfers specified in paragraph 4.1 must, as a condition precedent to
the validity of such transfer, acknowledge in writing to the Corporation that
such person is bound by the provisions of this Agreement and that the
transferred shares are subject to (i) both the Corporation's Repurchase Right
and the Corporation's First Refusal Right granted hereunder and (ii) the market
stand-off provisions of paragraph 4.4, to the same extent such shares would be
so subject if retained by the Optionee.
 
                  4.3      DEFINITION OF OWNER. For purposes of Articles IV, V,
VI and VII of this Agreement, the term "Owner" shall include the Optionee and
all subsequent holders of the Purchased Shares who derive their chain of
ownership through a permitted transfer from the Optionee in accordance with
paragraph 4.1.
 
                  4.4      MARKET STAND-OFF PROVISIONS.
 
                  A.       In connection with any underwritten public offering
by the Corporation of its equity securities pursuant to an effective
registration statement filed under the 1933 Act, including the Corporation's
initial public offering, Owner shall not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or otherwise dispose
or transfer for value or otherwise agree to engage in any of the foregoing
transactions with respect to, any Purchased Shares without the prior written
consent of the Corporation or its underwriters. Such limitations shall be in
effect for such period of time from and after the effective date of such
registration statement as may be requested by the Corporation or such
underwriters; provided, however, that in no event shall such period exceed one
hundred-eighty (180) days. The limitations of this paragraph 4.4 shall remain in
effect for the two-year period immediately following the effective date of the
Corporation's initial public offering and shall thereafter terminate and cease
to have any force or effect.
 
                                      -6-
<PAGE>
 
                  B.       Owner shall be subject to the market stand-off
provisions of this paragraph 4.4 provided and only if the officers and directors
of the Corporation are also subject to similar arrangements.
 
                  C.       In the event of any stock dividend, stock split,
recapitalization or other change affecting the Corporation's outstanding Common
Stock effected as a class without receipt of consideration, then any new,
substituted or additional securities distributed with respect to the Purchased
Shares shall be immediately subject to the provisions of this paragraph 4.4, to
the same extent the Purchased Shares are at such time covered by such
provisions.
 
                  D.       In order to enforce the limitations of this paragraph
4.4, the Corporation may impose stop-transfer instructions with respect to the
Purchased Shares until the end of the applicable stand-off period.
 
         V.       REPURCHASE RIGHT
 
                  5.1      GRANT. The Corporation is hereby granted the right
(the "Repurchase Right"), exercisable at any time during the sixty (60)-day
period following the date the Optionee ceases for any reason to remain in
Service or (if later) during the sixty (60)-day period following the execution
date of this Agreement, to repurchase at the Option Price all or (at the
discretion of the Corporation and with the consent of the Optionee) any portion
of the Purchased Shares in which the Optionee has not acquired a vested interest
in accordance with the vesting provisions of paragraph 5.3 (such shares to be
hereinafter called the "Unvested Shares"). For purposes of this Agreement, the
Optionee shall be deemed to remain in Service for so long as the Optionee
continues to render periodic services to the Corporation or any parent or
subsidiary corporation, whether as an employee, a non-employee member of the
board of directors, or an independent contractor or consultant.
 
                  5.2      EXERCISE OF THE REPURCHASE RIGHT. The Repurchase
Right shall be exercisable by written notice delivered to the Owner of the
Unvested Shares prior to the expiration of the applicable sixty (60)-day period
specified in paragraph 5.1. The notice shall indicate the number of Unvested
Shares to be repurchased and the date on which the repurchase is to be effected,
such date to be not more than thirty (30) days after the date of notice. To the
extent one or more certificates representing Unvested Shares may have been
previously delivered out of escrow to the Owner, then Owner shall, prior to the
close of business on the date specified for the repurchase, deliver to the
Secretary of the Corporation the certificates representing the Unvested Shares
to be repurchased, each certificate to be properly endorsed for transfer. The
Corporation shall, concurrently with the receipt of such stock certificates
(either from escrow in accordance with paragraph 7.3 or from Owner as herein
provided), pay to Owner in cash or cash equivalents (including the cancellation
of any purchase-money indebtedness), an amount equal to the Option Price
previously paid for the Unvested Shares which are to be repurchased.
 
                                      -7-
<PAGE>
 
                  5.3      TERMINATION OF THE REPURCHASE RIGHT. The Repurchase
Right shall terminate with respect to any Unvested Shares for which it is not
timely exercised under paragraph 5.2. In addition, the Repurchase Right shall
terminate, and cease to be exercisable, with respect to any and all Purchased
Shares in which the Optionee vests in accordance with the vesting schedule
specified in the Grant Notice. All Purchased Shares as to which the Repurchase
Right lapses shall, however, continue to be subject to (i) the First Refusal
Right of the Corporation and its assignees under Article VI, (ii) the market
stand-off provisions of paragraph 4.4 and (iii) the Special Purchase Right under
Article VIII.
 
                  5.4      AGGREGATE VESTING LIMITATION. If the Option is
exercised in more than one increment so that the Optionee is a party to one or
more other Stock Purchase Agreements ("Prior Purchase Agreements") which are
executed prior to the date of this Agreement, then the total number of Purchased
Shares as to which the Optionee shall be deemed to have a fully-vested interest
under this Agreement and all Prior Purchase Agreements shall not exceed in the
aggregate the number of Purchased Shares in which the Optionee would otherwise
at the time be vested, in accordance with the vesting provisions of paragraph
5.3, had all the Purchased Shares been acquired exclusively under this
Agreement.
 
                  5.5      FRACTIONAL SHARES. No fractional shares shall be
repurchased by the Corporation. Accordingly, should the Repurchase Right extend
to a fractional share (in accordance with the vesting provisions of paragraph
5.3) at the time the Optionee ceases Service, then such fractional share shall
be added to any fractional share in which the Optionee is at such time vested in
order to make one whole vested share no longer subject to the Repurchase Right.
 
                  5.6      ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the
event of any stock dividend, stock split, recapitalization or other change
affecting the Corporation's outstanding Common Stock as a class effected without
receipt of consideration, then any new, substituted or additional securities or
other property (including money paid other than as a regular cash dividend)
which is by reason of any such transaction distributed with respect to the
Purchased Shares shall be immediately subject to the Repurchase Right, but only
to the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments to reflect the distribution of such securities or
property shall be made to the number of Purchased Shares and Total Purchasable
Shares hereunder and to the price per share to be paid upon the exercise of the
Repurchase Right in order to reflect the effect of any such transaction upon the
Corporation's capital structure; provided, however, that the aggregate purchase
price shall remain the same.
 
                  5.7      CORPORATE TRANSACTION.
 
                  A.       The Repurchase Rights shall automatically terminate
and cease to be exercisable with respect to a portion of the Purchased Shares
upon the consummation of any Corporate Transaction, provided that such
repurchase right shall not terminate if and to the extent the those repurchase
rights are assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction. The portion of the Purchased Shares
with
 
                                      -8-
<PAGE>
 
respect to which the repurchase rights will terminate shall be a number of
Purchased Shares equal to the total number of Unvested Shares immediately prior
to the Corporate Transaction multiplied by a fraction, the numerator of which is
the number of complete months which elapsed after the Vesting Commencement Date
set forth in the Grant Notice and the date of the Corporate Transaction, and the
denominator of which is the number of months required under the Grant Notice for
all of the Purchased Shares to become fully vested. Any and all repurchase
rights which will not be either assigned or terminate at the time of the
Corporate Transaction may be exercised by the Company immediately prior to the
Corporate Transaction.
 
                  B.       Repurchase rights which are assigned in connection
with a Corporate Transaction shall be exercisable with respect to the property
issued to the Optionee upon consummation of such Corporate Transaction in
exchange for the Common Stock held by the Optionee subject to the repurchase
rights immediately prior to the Corporate Transaction.
 
                  C.       Any Repurchase Rights which are assigned in a
Corporate Transaction and do not otherwise become vested at that time, shall
automatically terminate and cease to be exercisable in the event the Optionee's
Service should subsequently terminate by reason of an Involuntary Termination
within twenty-four (24) months following the effective date of such Corporate
Transaction.
 
                  D.       This Agreement shall not in any way affect the right
of the Corporation to adjust, reclassify, reorganize or otherwise make changes
in its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
 
         VI.      RIGHT OF FIRST REFUSAL
 
                  6.1      GRANT. The Corporation is hereby granted rights of
first refusal (the "First Refusal Right"), exercisable in connection with any
proposed transfer of the Purchased Shares in which the Optionee has vested in
accordance with the vesting provisions of Article V. For purposes of this
Article VI, the term "transfer" shall include any sale, assignment, pledge,
encumbrance or other disposition for value of the Purchased Shares intended to
be made by the Owner, but shall not include any of the permitted transfers under
paragraph 4.1.
 
                  6.2      NOTICE OF INTENDED DISPOSITION. In the event the
Owner desires to accept a bona fide third-party offer for the transfer of any or
all of the Purchased Shares (the shares subject to such offer to be hereinafter
called the "Target Shares"), Owner shall promptly (i) deliver to the Corporate
Secretary of the Corporation written notice (the "Disposition Notice") of the
terms and conditions of the offer, including the purchase price and the identity
of the third-party offeror, and (ii) provide satisfactory proof that the
disposition of the Target Shares to such third-party offeror would not be in
contravention of the provisions set forth in Articles II and IV of this
Agreement.
 
                                      -9-
<PAGE>
 
                  6.3      EXERCISE OF RIGHT. The Corporation shall, for a
period of forty-five (45) days following receipt of the Disposition Notice, have
the right to repurchase any or all of the Target Shares specified in the
Disposition Notice upon the same terms and conditions specified therein or upon
terms and conditions which do not materially vary from those specified therein.
Such right shall be exercisable by delivery of written notice (the "Exercise
Notice") to Owner prior to the expiration of the forty-five (45)-day exercise
period. If such right is exercised with respect to all the Target Shares
specified in the Disposition Notice, then the Corporation (or its assignees)
shall effect the repurchase of the Target Shares, including payment of the
purchase price, not more than ten (10) business days after delivery of the
Exercise Notice; and at such time Owner shall deliver to the Corporation the
certificates representing the Target Shares to be repurchased, each certificate
to be properly endorsed for transfer. To the extent any of the Target Shares are
at the time held in escrow under Article VII, the certificates for such shares
shall automatically be released from escrow and delivered to the Corporation for
purchase. Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation (or its assignees) shall have the right to pay the purchase price in
the form of cash equal in amount to the value of such property. If the Owner and
the Corporation (or its assignees) cannot agree on such cash value within ten
(10) days after the Corporation's receipt of the Disposition Notice, the
valuation shall be made by an appraiser of recognized standing selected by the
Owner and the Corporation (or its assignees) or, if they cannot agree on an
appraiser within twenty (20) days after the Corporation's receipt of the
Disposition Notice, each shall select an appraiser of recognized standing and
the two appraisers shall designate a third appraiser of recognized standing,
whose appraisal shall be determinative of such value. The cost of such appraisal
shall be shared equally by the Owner and the Corporation. The closing shall then
be held on the later of (i) the tenth business day following delivery of the
Exercise Notice or (ii) the tenth business day after such cash valuation shall
have been made.
 
                  6.4      NON-EXERCISE OF RIGHT. In the event the Exercise
Notice is not given to Owner within forty-five (45) days following the date of
the Corporation's receipt of the Disposition Notice, Owner shall have a period
of thirty (30) days thereafter in which to sell or otherwise dispose of the
Target Shares to the third-party offeror identified in the Disposition Notice
upon terms and conditions (including the purchase price) no more favorable to
such third-party offeror than those specified in the Disposition Notice;
provided, however, that any such sale or disposition must not be effected in
contravention of the provisions of Article II of this Agreement. To the extent
any of the Target Shares are at the time held in escrow under Article VII, the
certificates for such shares shall automatically be released from escrow and
surrendered to the Owner. The third-party offeror shall acquire the Target
Shares free and clear of the Corporation's Repurchase Right under Article V and
the Corporation's First Refusal Right hereunder, but the acquired shares shall
remain subject to (i) the securities law restrictions of paragraph 2.2(a) and
(ii) the market stand-off provisions of paragraph 4.4. In the event Owner does
not effect such sale or disposition of the Target Shares within the specified
thirty (30)-day period, the Corporation's First Refusal Right shall continue to
be applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses in accordance with paragraph 6.7.
 
                                      -10-
<PAGE>
 
                  6.5      PARTIAL EXERCISE OF RIGHT. In the event the
Corporation (or its assignees) makes a timely exercise of the First Refusal
Right with respect to a portion, but not all, of the Target Shares specified in
the Disposition Notice, Owner shall have the option, exercisable by written
notice to the Corporation delivered within thirty (30) days after the date of
the Disposition Notice, to effect the sale of the Target Shares pursuant to one
of the following alternatives:
 
                           (i)      sale or other disposition of all the Target
         Shares to the third-party offeror identified in the Disposition Notice,
         but in full compliance with the requirements of paragraph 6.4, as if
         the Corporation did not exercise the First Refusal Right hereunder; or
 
                           (ii)     sale to the Corporation (or its assignees)
         of the portion of the Target Shares which the Corporation (or its
         assignees) has elected to purchase, such sale to be effected in
         substantial conformity with the provisions of paragraph 6.3.
 
                  Failure of Owner to deliver timely notification to the
Corporation under this paragraph 6.5 shall be deemed to be an election by Owner
to sell the Target Shares pursuant to alternative (i) above.
 
                  6.6      RECAPITALIZATION/MERGER.
 
                  (a)      In the event of any stock dividend, stock split,
recapitalization or other transaction affecting the Corporation's outstanding
Common Stock as a class effected without receipt of consideration, then any new,
substituted or additional securities or other property which is by reason of
such transaction distributed with respect to the Purchased Shares shall be
immediately subject to the Corporation's First Refusal Right hereunder, but only
to the extent the Purchased Shares are at the time covered by such right.
 
                  (b)      In the event of any of the following transactions:
 
                                    (i)      a merger or consolidation in which
         the Corporation is not the surviving entity,
 
                                    (ii)     a sale, transfer or other
         disposition of all or substantially all of the Corporation's assets,
 
                                    (iii)    a reverse merger in which the
         Corporation is the surviving entity but in which the Corporation's
         outstanding voting securities are transferred in whole or in part to
         person or persons other than those who held such securities immediately
         prior to the merger, or
 
                                      -11-
 
<PAGE>
 
                                    (iv)     any transaction effected primarily
         to change the State in which the Corporation is incorporated, or to
         create a holding company structure,
 
                           the Corporation's First Refusal Right shall remain in
full force and effect and shall apply to the new capital stock or other property
received in exchange for the Purchased Shares in consummation of the transaction
but only to the extent the Purchased Shares are at the time covered by such
right.
 
                  6.7      LAPSE. The First Refusal Right under this Article VI
shall lapse and cease to have effect upon the earliest to occur of (i) the first
date on which shares of the Corporation's Common Stock are held of record by
more than five hundred (500) persons, (ii) a determination is made by the
Corporation's Board of Directors that a public market exists for the outstanding
shares of the Corporation's Common Stock, or (iii) a firm commitment
underwritten public offering pursuant to an effective registration statement
under the 1933 Act, covering the offer and sale of the Corporation's Common
Stock in the aggregate amount of at least $5,000,000. However, the market
stand-off provisions of paragraph 4.4 shall continue to remain in full force and
effect following the lapse of the First Refusal Right hereunder.
 
         VII.     ESCROW
 
                  7.1      DEPOSIT. Upon issuance, the certificates for any
Unvested Shares purchased hereunder shall be deposited in escrow with the
Corporate Secretary of the Corporation to be held in accordance with the
provisions of this Article VII. Each deposited certificate shall be accompanied
by a duly-executed Assignment Separate from Certificate in the form of Exhibit
I. The deposited certificates, together with any other assets or securities from
time to time deposited with the Corporate Secretary pursuant to the requirements
of this Agreement, shall remain in escrow until such time or times as the
certificates (or other assets and securities) are to be released or otherwise
surrendered for cancellation in accordance with paragraph 7.3. Upon delivery of
the certificates (or other assets and securities) to the Corporate Secretary of
the Corporation, the Owner shall be issued an instrument of deposit
acknowledging the number of Unvested Shares (or other assets and securities)
delivered in escrow.
 
                  7.2      RECAPITALIZATION. All regular cash dividends on the
Unvested Shares (or other securities at the time held in escrow) shall be paid
directly to the Owner and shall not be held in escrow. However, in the event of
any stock dividend, stock split, recapitalization or other change affecting the
Corporation's outstanding Common Stock as a class effected without receipt of
consideration or in the event of a Corporate Transaction, any new, substituted
or additional securities or other property which is by reason of such
transaction distributed with respect to the Unvested Shares shall be immediately
delivered to the Corporate Secretary to be held in escrow under this Article
VII, but only to the extent the Unvested Shares are at the time subject to the
escrow requirements of paragraph 7.1.
 
                                      -12-
 
<PAGE>
 
                  7.3      RELEASE/SURRENDER. The Unvested Shares, together with
any other assets or securities held in escrow hereunder, shall be subject to the
following terms and conditions relating to their release from escrow or their
surrender to the Corporation for repurchase and cancellation:
 
                           (i)      Should the Corporation (or its assignees)
         elect to exercise the Repurchase Right under Article V with respect to
         any Unvested Shares, then the escrowed certificates for such Unvested
         Shares (together with any other assets or securities issued with
         respect thereto) shall be delivered to the Corporation concurrently
         with the payment to the Owner, in cash or cash equivalent (including
         the cancellation of any purchase-money indebtedness), of an amount
         equal to the aggregate Option Price for such Unvested Shares, and the
         Owner shall cease to have any further rights or claims with respect to
         such Unvested Shares (or other assets or securities attributable to
         such Unvested Shares).
 
                           (ii)     Should the Corporation (or its assignees)
         elect to exercise its First Refusal Right under Article VI with respect
         to any vested Target Shares held at the time in escrow hereunder, then
         the escrowed certificates for such Target Shares (together with any
         other assets or securities attributable thereto) shall, concurrently
         with the payment of the paragraph 6.3 purchase price for such Target
         Shares to the Owner, be surrendered to the Corporation, and the Owner
         shall cease to have any further rights or claims with respect to such
         Target Shares (or other assets or securities).
 
                           (iii)    Should the Corporation (or its assignees)
         elect not to exercise its First Refusal Right under Article VI with
         respect to any Target Shares held at the time in escrow hereunder, then
         the escrowed certificates for such Target Shares (together with any
         other assets or securities attributable thereto) shall be surrendered
         to the Owner for disposition in accordance with provisions of paragraph
         6.4.
 
                           (iv)     As the interest of the Optionee in the
         Unvested Shares (or any other assets or securities attributable
         thereto) vests in accordance with the provisions of Article V, the
         certificates for such vested shares (as well as all other vested assets
         and securities) shall be released from escrow and delivered to the
         Owner in accordance with the following schedule:
 
                                    a.       The initial release of vested
                  shares (or other vested assets and securities) from escrow
                  shall be effected within thirty (30) days following the
                  expiration of the initial twelve (12)-month period measured
                  from the Grant Date.
 
                                    b.       Subsequent releases of vested
                  shares (or other vested assets and securities) from escrow
                  shall be effected
 
                                      -13-
 
<PAGE>
 
                  at semi-annual intervals thereafter, with the first such
                  semiannual release to occur eighteen (18) months after the
                  Grant Date.
 
                                    c.       Upon the Optionee's cessation of
                  Service, any escrowed Purchased Shares (or other assets or
                  securities) in which the Optionee is at the time vested shall
                  be promptly released from escrow.
 
                                    d.       Upon any earlier termination of the
                  Corporation's Repurchase Right in accordance with the
                  applicable provisions of Article V, any Purchased Shares (or
                  other assets or securities) at the time held in escrow
                  hereunder shall promptly be released to the Owner as
                  fully-vested shares or other property.
 
                           (v)      All Purchased Shares (or other assets or
         securities) released from escrow in accordance with the provisions of
         subparagraph (iv) above shall nevertheless remain subject to (I) the
         Corporation's First Refusal Right under Article VI until such right
         lapses pursuant to paragraph 6.7, (II) the market stand-off provisions
         of paragraph 4.4 until such provisions terminate in accordance
         therewith and (III) the Special Purchase Right under Article VIII.
 
         VIII.    MARITAL DISSOLUTION OR LEGAL SEPARATION
 
                  8.1      GRANT. In connection with the dissolution of the
Optionee's marriage or the legal separation of the Optionee and the Optionee's
spouse, the Corporation shall have the right (the "Special Purchase Right"),
exercisable at any time during the thirty (30)-day period following the
Corporation's receipt of the required Dissolution Notice under paragraph 8.2, to
purchase from the Optionee's spouse, in accordance with the provisions of
paragraph 8.3, all or any portion of the Purchased Shares which would otherwise
be awarded to such spouse in settlement of any community property or other
marital property rights such spouse may have in such shares.
 
                  8.2      NOTICE OF DECREE OR AGREEMENT. The Optionee shall
promptly provide the Secretary of the Corporation with written notice (the
"Dissolution Notice") of (i) the entry of any judicial decree or order resolving
the property rights of the Optionee and the Optionee's spouse in connection with
their marital dissolution or legal separation or (ii) the execution of any
contract or agreement relating to the distribution or division of such property
rights. The Dissolution Notice shall be accompanied by a copy of the actual
decree of dissolution or settlement agreement between the Optionee and the
Optionee's spouse which provides for the award to the spouse of one or more
Purchased Shares in settlement of any community property or other marital
property rights such spouse may have in such shares.
 
                                      -14-
 
<PAGE>
 
                  8.3      EXERCISE OF SPECIAL PURCHASE RIGHT. The Special
Purchase Right shall be exercisable by delivery of written notice (the "Purchase
Notice") to the Optionee and the Optionee's spouse within thirty (30) days after
the Corporation's receipt of the Dissolution Notice. The Purchase Notice shall
indicate the number of shares to be purchased by the Corporation, the date such
purchase is to be effected (such date to be not less than five (5) business
days, nor more than ten (10) business days, after the date of the Purchase
Notice), and the fair market value to be paid for such Purchased Shares. The
Optionee (or the Optionee's spouse, to the extent such spouse has physical
possession of the Purchased Shares) shall, prior to the close of business on the
date specified for the purchase, deliver to the Corporate Secretary of the
Corporation the certificates representing the shares to be purchased, each
certificate to be properly endorsed for transfer. To the extent any of the
shares to be purchased by the Corporation are at the time held in escrow under
Article VII, the certificates for such shares shall be promptly delivered out of
escrow to the Corporation. The Corporation shall, concurrently with the receipt
of the stock certificates, pay to the Optionee's spouse (in cash or cash
equivalents) an amount equal to the fair market value specified for such shares
in the Purchase Notice.
 
                  If the Optionee's spouse does not agree with the fair market
value specified for the shares in the Purchase Notice, then the spouse shall
promptly notify the Corporation in writing of such disagreement and the fair
market value of such shares shall thereupon be determined by an appraiser of
recognized standing selected by the Corporation and the spouse. If they cannot
agree on an appraiser within twenty (20) days after the date of the Purchase
Notice, each shall select an appraiser of recognized standing, and the two
appraisers shall designate a third appraiser of recognized standing whose
appraisal shall be determinative of such value. The cost of the appraisal shall
be shared equally by the Corporation and the Optionee's spouse. The closing
shall then be held on the fifth business day following the completion of such
appraisal; provided, however, that if the appraised value is more than fifteen
percent (15%) greater than the fair market value specified for the shares in the
Purchase Notice, the Corporation shall have the right, exercisable prior to the
expiration of such five (5)-business-day period, to rescind the exercise of the
Special Purchase Right and thereby revoke its election to purchase the shares
awarded to the spouse.
 
                  8.4      LAPSE. The Special Purchase Right under this Article
VIII shall lapse and cease to have effect upon the earlier to occur of (i) the
first date on which the First Refusal Right under Article VI lapses or (ii) the
expiration of the thirty (30)-day exercise period specified in paragraph 8.3, to
the extent the Special Purchase Right is not timely exercised in accordance with
such paragraph.
 
         IX.      GENERAL PROVISIONS
 
                  9.1      ASSIGNMENT. The Corporation may assign its Repurchase
Right under Article V, its First Refusal Right under Article VI and/or its
Special Purchase Right under Article VIII to any person or entity selected by
the Corporation's Board of Directors, including (without limitation) one or more
shareholders of the Corporation.
 
                                      -15-
 
<PAGE>
 
                  If the assignee of the Repurchase Right is other than a one
hundred percent (100%) owned subsidiary corporation of the Corporation or the
parent corporation owning one hundred percent (100%) of the Corporation, then
such assignee must make a cash payment to the Corporation, upon the assignment
of the Repurchase Right, in an amount equal to the excess (if any) of (i) the
fair market value of the Unvested Shares at the time subject to the assigned
Repurchase Right over (ii) the aggregate repurchase price payable for the
Unvested Shares thereunder.
 
                  9.2      DEFINITIONS. For purposes of this Agreement, the
following provisions shall be applicable in determining the parent and
subsidiary corporations of the Corporation:
 
                           (i)      Any corporation (other than the Corporation)
         in an unbroken chain of corporations ending with the Corporation shall
         be considered to be a parent corporation of the Corporation, provided
         each such corporation in the unbroken chain (other than the
         Corporation) owns, at the time of the determination, stock possessing
         fifty percent (50%) or more of the total combined voting power of all
         classes of stock in one of the other corporations in such chain.
 
                           (ii)     Each corporation (other than the
         Corporation) in an unbroken chain of corporations beginning with the
         Corporation shall be considered to be a subsidiary of the Corporation,
         provided each such corporation (other than the last corporation) in the
         unbroken chain owns, at the time of the determination, stock possessing
         fifty percent (50%) or more of the total combined voting power of all
         classes of stock in one of the other corporations in such chain.
 
                  9.3      No EMPLOYMENT OR SERVICE CONTRACT. Nothing in this
Agreement or in the Plan shall confer upon the Optionee any right to continue in
the Service of the Corporation (or any parent or subsidiary corporation of the
Corporation employing or retaining Optionee) for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any parent or subsidiary corporation of the Corporation employing or
retaining Optionee) or the Optionee, which rights are hereby expressly reserved
by each, to terminate the Optionee's Service at any time for any reason
whatsoever, with or without cause.
 
                  9.4      NOTICES. Any notice required in connection with (i)
the Repurchase Right, the Special Purchase Right or the First Refusal Right or
(ii) the disposition of any Purchased Shares covered thereby shall be given in
writing and shall be deemed effective upon personal delivery or upon deposit in
the United States mail, registered or certified, postage prepaid and addressed
to the party entitled to such notice at the address indicated below such party's
signature line on this Agreement or at such other address as such party may
designate by ten (10) days advance written notice under this paragraph 9.4 to
all other parties to this Agreement.
 
                                      -16-
 
<PAGE>
 
                  9.5      No WAIVER. The failure of the Corporation (or its
assignees) in any instance to exercise the Repurchase Right granted under
Article V, or the failure of the Corporation (or its assignees) in any instance
to exercise the First Refusal Right granted under Article VI, or the failure of
the Corporation (or its assignees) in any instance to exercise the Special
Purchase Right granted under Article VIII shall not constitute a waiver of any
other repurchase rights and/or rights of first refusal that may subsequently
arise under the provisions of this Agreement or any other agreement between the
Corporation and the Optionee or the Optionee's spouse. No waiver of any breach
or condition of this Agreement shall be deemed to be a waiver of any other or
subsequent breach or condition, whether of like or different nature.
 
                  9.6      CANCELLATION OF SHARES. If the Corporation (or its
assignees) shall make available, at the time and place and in the amount and
form provided in this Agreement, the consideration for the Purchased Shares to
be repurchased in accordance with the provisions of this Agreement, then from
and after such time, the person from whom such shares are to be repurchased
shall no longer have any rights as a holder of such shares (other than the right
to receive payment of such consideration in accordance with this Agreement), and
such shares shall be deemed purchased in accordance with the applicable
provisions hereof and the Corporation (or its assignees) shall be deemed the
owner and holder of such shares, whether or not the certificates therefor have
been delivered as required by this Agreement.
 
         X.       MISCELLANEOUS PROVISIONS
 
                  10.1     OPTIONEE UNDERTAKING. Optionee hereby agrees to take
whatever additional action and execute whatever additional documents the
Corporation may in its judgment deem necessary or advisable in order to carry
out or effect one or more of the obligations or restrictions imposed on either
the Optionee or the Purchased Shares pursuant to the express provisions of this
Agreement.
 
                  10.2     AGREEMENT IS ENTIRE CONTRACT. This Agreement
constitutes the entire contract between the parties hereto with regard to the
subject matter hereof. This Agreement is made pursuant to the provisions of the
Plan and shall in all respects be construed in conformity with the express terms
and provisions of the Plan.
 
                  10.3     GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of California, as such
laws are applied to contracts entered into and performed in such State without
resort to that State's conflict-of-laws rules.
 
                  10.4     COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
 
                  10.5     SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall inure to the benefit of, and be binding upon, the Corporation
and its successors and assigns and the
 
                                      -17-
 
<PAGE>
 
Optionee and the Optionee's legal representatives, heirs, legatees,
distributees, assigns and transferees by operation of law, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms and conditions hereof,
 
                  10.6     POWER OF ATTORNEY. Optionee's spouse hereby appoints
Optionee his or her true and lawful attorney in fact, for him or her and in his
or her name, place and stead, and for his or her use and benefit, to agree to
any amendment or modification of this Agreement and to execute such further
instruments and take such further actions as may reasonably be necessary to
carry out the intent of this Agreement. Optionee's spouse further gives and
grants unto Optionee as his or her attorney in fact full power and authority to
do and perform every act necessary and proper to be done in the exercise of any
of the foregoing powers as fully as he or she might or could do if personally
present, with full power of substitution and revocation, hereby ratifying and
confirming all that Optionee shall lawfully do and cause to be done by virtue of
this power of attorney.
 
                                      -18-
 
<PAGE>
 
                  IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first indicated above.
 
                                             Cytokinetics, Incorporated
 
                                             By: _______________________________
 
                                             Title: ____________________________
 
                                    Address: ___________________________________
 
                                             ___________________________________
 
                                             ___________________________________
                                                                  */
                                                         Optionee -
 
                                    Address: ___________________________________
 
                                             ___________________________________
 
                  The undersigned spouse of Optionee has read and hereby
approves the foregoing Stock Purchase Agreement. In consideration of the
Corporation's granting the Optionee the right to acquire the Purchased Shares in
accordance with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms and provisions of such Agreement, including
(specifically) the right of the Corporation (or its assignees) to purchase any
and all interest or right the undersigned may otherwise have in such shares
pursuant to community property laws or other marital property rights.
 
                                             ___________________________________
                                             Optionee's Spouse
 
                                    Address: ___________________________________
 
                                             ___________________________________
----------
*/
- I have executed the Section 83(b) election that was attached hereto as an
Exhibit. As set forth in Article III, I understand that I, and not the
Corporation, will be responsible for completing the form and filing the election
with the appropriate office of the Federal and State tax authorities and that if
such filing is not completed within thirty (30) days after the date of this
Agreement, I will not be entitled to the tax benefits provided by Section 83(b).
 
                                      -19-
 
<PAGE>
 
                                    EXHIBIT I
 
                      ASSIGNMENT SEPARATE FROM CERTIFICATE
 
                  FOR VALUE RECEIVED______________________________ hereby
sell(s), assign(s) and transfer(s) unto Cytokinetics, Incorporated (the
"Corporation"),_____________________(________) shares of the Common Stock of the
Corporation standing in his\her name on the books of the Corporation represented
by Certificate No. ___________________and do hereby irrevocably constitute and
appoint____________________________as Attorney to transfer the said stock on the
books of the Corporation with full power of substitution in the premises.
 
Dated: ________________
 
                           Signature _________________
 
INSTRUCTION: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to enable the Corporation to exercise its
Repurchase Right set forth in the Agreement without requiring additional
signatures on the part of the Optionee.
 
<PAGE>
 
                                                               REPURCHASE RIGHTS
                                   EXHIBIT II
 
                           SECTION 83(b) TAX ELECTION
 
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
 
(1)      The taxpayer who performed the services is:
 
         Name:
         Address:
         Taxpayer Ident. No.:
 
(2)      The property with respect to which the election is being made is
         ____________ shares of the common stock of Cytokinetics, Incorporated.
 
(3)      The property was issued on ___________ ,19 ____.
 
(4)      The taxable year in which the election is being made is the calendar
         year 19____.
 
(5)      The property is subject to a repurchase right pursuant to which the
         issuer has the right to acquire the property at the original purchase
         price if for any reason taxpayer's employment with the issuer is
         terminated. The issuer's repurchase right lapses in a series of annual
         and monthly installments over a four year period ending on __________ ,
         19____.
 
(6)      The fair market value at the time of transfer (determined without
         regard to any restriction other than a restriction which by its terms
         will never lapse) is $ ______ per share.
 
(7)      The amount paid for such property is $ _____ per share.
 
(8)      A copy of this statement was furnished to Cytokinetics, Incorporated
         for whom taxpayer rendered the services underlying the transfer of
         property.
 
(9)      This statement is executed as of: ________________.
 
_______________________          _______________________
Spouse (if any)                         Taxpayer
 
This form must be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
 
<PAGE>
 
         SPECIAL PROTECTIVE ELECTION PURSUANT TO SECTION 83(b) OF THE INTERNAL
         REVENUE CODE WITH RESPECT TO PROPERTY ACQUIRED UPON EXERCISE OF AN
         INCENTIVE STOCK OPTION
 
The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Code. Accordingly, it is the intent of the
Taxpayer to utilize this election to achieve the following tax results:
 
                  1.       The purpose of this election is to have the
alternative minimum taxable income attributable to the purchased shares measured
by the amount by which the fair market value of such shares at the time of their
transfer to the Taxpayer exceeds the purchase price paid for the shares. In the
absence of this election, such alternative minimum taxable income would be
measured by the spread between the fair market value of the purchased shares and
the purchase price which exists on the various lapse dates in effect for the
forfeiture restrictions applicable to such shares. The election is to be
effective to the full extent permitted under the Internal Revenue Code.
 
                  2.       Section 421(a)(1) of the Code expressly excludes from
income any excess of the fair market value of the purchased shares over the
amount paid for such shares. Accordingly, this election is also intended to be
effective in the event there is a "disqualifying disposition" of the shares,
within the meaning of Section 421(b) of the Code, which would otherwise render
the provisions of Section 83(a) of the Code applicable at that time.
Consequently, the Taxpayer hereby elects to have the amount of disqualifying
disposition income measured by the excess of the fair market value of the
purchased shares on the date of transfer to the Taxpayer over the amount paid
for such shares. Since Section 421(a) presently applies to the shares which are
the subject of this Section 83(b) election, no taxable income is actually
recognized for regular tax purposes at this time, and no income taxes are
payable, by the Taxpayer as a result of this election.
 
This form should be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
 
         NOTE: PAGE 2 SHOULD BE ATTACHED ONLY IF YOU ARE EXERCISING AN INCENTIVE
         STOCK OPTION.