Exhibit 10.2
 
                            COMBINATORX, INCORPORATED
                               2004 INCENTIVE PLAN
 
1.   DEFINED TERMS
 
     Exhibit A, which is incorporated by reference, defines the terms used in
the Plan and sets forth certain operational rules related to those terms.
 
2.   PURPOSE
 
     The Plan has been established to advance the interests of the Company by
providing for the grant to Participants of Stock-based and other incentive
Awards.
 
3.   ADMINISTRATION
 
     The Administrator has discretionary authority, subject only to the express
provisions of the Plan, to interpret the Plan; determine eligibility for and
grant Awards; determine, modify or waive the terms and conditions of any Award;
prescribe forms, rules and procedures; and otherwise do all things necessary to
carry out the purposes of the Plan. In the case of any Award that is not
exempted from the deduction limitations of Section 162(m) by reason of Treas.
Regs. Section 1.162-27(f) and that is intended to be eligible for the
performance-based compensation exception under Section 162(m), the Administrator
will exercise its discretion consistent with qualifying the Award for that
exception. Determinations of the Administrator made under the Plan will be
conclusive and will bind all parties.
 
4.   LIMITS ON AWARDS UNDER THE PLAN
 
     (a)  NUMBER OF SHARES. A maximum of 3,000,000 shares of Stock may be
delivered in satisfaction of Awards under the Plan. The number of shares of
Stock delivered in satisfaction of Awards shall, for purposes of the preceding
sentence, be determined net of shares of Stock withheld by the Company, or
tendered to the Company, in payment of the exercise price of the Award or in
satisfaction of tax withholding requirements with respect to the Award. The
limit set forth in this Section 4(a) shall be construed to comply with Section
422 of the Code and regulations thereunder. To the extent consistent with the
requirements of Section 422 of the Code and regulations thereunder, and with
other applicable legal requirements (including applicable stock exchange or
similar requirements), Stock issued under awards of an acquired company that are
converted, replaced, or adjusted in connection with the acquisition shall not
reduce the number of shares available for Awards under the Plan.
 
     (b)  TYPE OF SHARES. Stock delivered by the Company under the Plan may be
authorized but unissued Stock or previously issued Stock acquired by the
Company. No fractional shares of Stock will be delivered under the Plan.
 
     (c)  ADDITIONAL LIMITS. The maximum number of shares of Stock for which
Stock Options may be granted to any person in any calendar year
and the maximum number of shares of Stock subject to SARs granted to any person
in any calendar year will each be 2,900,000. The maximum number of shares
subject to other Awards granted to any person in any calendar year
 
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will be 2,900,000 shares. The maximum amount payable to any person in any year
under Cash Awards will be $5,000,000. The foregoing provisions will be construed
in a manner consistent with Section 162(m) to the extent the requirements of
Section 162(m) are not rendered inapplicable by reason of Treas. Regs. Section
1.162-27(f).
 
5.   ELIGIBILITY AND PARTICIPATION
 
     The Administrator will select Participants from among those key Employees
and directors of, and consultants and advisors to, the Company or its Affiliates
who, in the opinion of the Administrator, are in a position to make a
significant contribution to the success of the Company and its Affiliates.
Eligibility for ISOs is limited to employees of the Company or of a "parent
corporation" or "subsidiary corporation" of the Company as those terms are
defined in Section 424 of the Code.
 
6.   RULES APPLICABLE TO AWARDS
 
     (a)  ALL AWARDS
 
          (1)  AWARD PROVISIONS. The Administrator will determine the terms of
all Awards, subject to the limitations provided herein. By accepting any Award
granted hereunder, the Participant agrees to the terms of the Award and the
Plan. Notwithstanding any provision of this Plan to the contrary, awards of an
acquired company that are converted, replaced or adjusted in connection with the
acquisition may contain terms and conditions that are inconsistent with the
terms and conditions specified herein as determined by the Administrator.
 
          (2)  TERM OF PLAN. No Awards may be made after December  , 2014, but
previously granted Awards may continue beyond that date in accordance with their
terms.
 
          (3)  TRANSFERABILITY. Neither ISOs nor, except as the Administrator
otherwise expressly provides, other Awards may be transferred other than by will
or by the laws of descent and distribution, and during a Participant's lifetime
ISOs (and, except as the Administrator otherwise expressly provides, other
non-transferable Awards requiring exercise) may be exercised only by the
Participant.
 
          (4)  VESTING, ETC. The Administrator may determine the time or times
at which an Award will vest or become exercisable and the terms on which an
Award requiring exercise will remain exercisable. Without limiting the
foregoing, the Administrator may at any time accelerate the vesting or
exercisability of an Award, regardless of any adverse or potentially adverse tax
consequences resulting from such acceleration. Unless the Administrator
expressly provides otherwise, immediately upon the cessation of the
Participant's Employment an Award requiring exercise will cease to be
exercisable and will terminate, and all other Awards to the extent not already
vested will be forfeited, except that:
 
               (A) subject to (B) and (C) below, all Stock Options and SARs held
     by the Participant or the Participant's permitted transferee, if any,
     immediately prior to the cessation of the Participant's Employment, to the
     extent then exercisable, will remain exercisable for the lesser of (i) a
     period of three months or (ii) the period ending on the latest date on
     which such Stock Option or SAR could have been exercised without regard
 
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     to this Section 6(a)(4), and will thereupon terminate;
 
               (B) all Stock Options and SARs held by a Participant or the
     Participant's permitted transferee, if any, immediately prior to the
     Participant's death, to the extent then exercisable, will remain
     exercisable for the lesser of (i) the one year period ending with the first
     anniversary of the Participant's death or (ii) the period ending on the
     latest date on which such Stock Option or SAR could have been exercised
     without regard to this Section 6(a)(4), and will thereupon terminate; and
 
               (C) all Stock Options and SARs held by a Participant or the
     Participant's permitted transferee, if any, immediately prior to the
     cessation of the Participant's Employment will immediately terminate upon
     such cessation if the Administrator in its sole discretion determines that
     such cessation of Employment has resulted for reasons which cast such
     discredit on the Participant as to justify immediate termination of the
     Award.
 
          (5)  TAXES. The Administrator will make such provision for the
withholding of taxes as it deems necessary. The Administrator may, but need not,
hold back shares of Stock from an Award or permit a Participant to tender
previously owned shares of Stock in satisfaction of tax withholding requirements
(but not in excess of the minimum withholding required by law).
 
          (6)  DIVIDEND EQUIVALENTS, ETC. The Administrator may provide for the
payment of amounts in lieu of cash dividends or other cash distributions with
respect to Stock subject to an Award.
 
          (7)  RIGHTS LIMITED. Nothing in the Plan will be construed as giving
any person the right to continued employment or service with the Company or its
Affiliates, or any rights as a stockholder except as to shares of Stock actually
issued under the Plan. The loss of existing or potential profit in Awards will
not constitute an element of damages in the event of termination of Employment
for any reason, even if the termination is in violation of an obligation of the
Company or Affiliate to the Participant.
 
          (8)  CERTAIN PERFORMANCE AWARDS. This Section 6(a)(8) applies to any
Performance Award that is not exempted from the deduction limitations of Section
162(m) by reason of Treas. Regs. Section 1.162-27(f) and that is intended to
qualify as performance-based for the purposes of Section 162(m), other than a
Stock Option or SAR. In the case of any Performance Award to which this Section
6(a)(8) applies, the Plan and such Award will be construed to the maximum extent
permitted by law in a manner consistent with qualifying the Award for such
exception. With respect to such Performance Awards, the Administrator will
preestablish, in writing, one or more specific Performance Criteria no later
than 90 days after the commencement of the period of service to which the
performance relates (or at such earlier time as is required to qualify the Award
as performance-based under Section 162(m)). Prior to grant, vesting or payment
of the Performance Award, as the case may be, the Administrator will certify
whether the applicable Performance Criteria have been attained and such
determination will be final and conclusive.
 
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          (9)  SECTION 409A OF THE CODE. To the extent any grant of an Award
under the Plan would, in the determination of the Administrator, be likely to
result in a deferral of compensation subject to the requirements of Section 409A
of the Code, the Administrator may adjust the terms of the Award and otherwise
administer the Award in such manner as the Administrator deems necessary or
appropriate to achieve the objective of satisfying the requirements of said
Section 409A; PROVIDED, that the Administrator shall not be obligated to take
any action hereunder that in the determination of the Administrator would
adversely affect the interests of the Company.
 
     (b)  AWARDS REQUIRING EXERCISE
 
          (1)  TIME AND MANNER OF EXERCISE. Unless the Administrator expressly
provides otherwise, an Award requiring exercise by the holder will not be deemed
to have been exercised until the Administrator receives a notice of exercise (in
form acceptable to the Administrator) signed by the appropriate person and
accompanied by any payment required under the Award. If the Award is exercised
by any person other than the Participant, the Administrator may require
satisfactory evidence that the person exercising the Award has the right to do
so.
 
          (2)  EXERCISE PRICE. The Administrator will determine the exercise
price (or the base value from which appreciation is to be measured, in the case
of a SAR) of each Award requiring exercise. However, the exercise price or base
value, as the case may be, may not be less than the fair market value of the
Stock subject to the Award, determined as of the date of grant. No such Award,
once granted, may be repriced other than in accordance with the applicable
Nasdaq stockholder approval requirements.
 
          (3)  PAYMENT OF EXERCISE PRICE. Where the exercise of an Award is to
be accompanied by payment, the Administrator may determine the required or
permitted forms of payment, subject to the following: all payments will be by
cash or check acceptable to the Administrator, or, if so permitted by the
Administrator and if legally permissible, (i) through the delivery of shares of
Stock that have been outstanding for at least six months (unless the
Administrator approves a shorter period) and that have a fair market value equal
to the exercise price, (ii) by delivery to the Company of a promissory note of
the person exercising the Award, payable on such terms as are specified by the
Administrator, (iii) through a broker-assisted exercise program acceptable to
the Administrator, (iv) by other means acceptable to the Administrator, or (v)
by any combination of the foregoing permissible forms of payment. The delivery
of shares in payment of the exercise price under clause (a)(i) above may be
accomplished either by actual delivery or by constructive delivery through
attestation of ownership, subject to such rules as the Administrator may
prescribe.
 
     (c)  AWARDS NOT REQUIRING EXERCISE
 
     Restricted Stock and Unrestricted Stock, whether delivered outright or
under Awards of Stock Units or other Awards that do not require exercise, may be
made in exchange for such lawful consideration, including services, as the
Administrator determines.
 
7.   EFFECT OF CERTAIN TRANSACTIONS
 
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     (a)  MERGERS, ETC.
 
     Except as otherwise provided in an Award, the following provisions shall
apply in the event of a Covered Transaction. In the event of a Covered
Transaction in which there is an acquiring or surviving entity, the
Administrator may provide for the assumption of some or all outstanding Awards,
or for the grant of new awards in substitution therefor, by the acquiror or
survivor or an affiliate of the acquiror or survivor, in each case on such terms
and subject to such conditions as the Administrator determines. In the event of
a Covered Transaction (whether or not there is an acquiring or surviving entity)
where there is no such assumption or substitution, each Stock Option, SAR and
other Award requiring exercise will become fully exercisable, and the delivery
of shares of Stock issuable under each outstanding Award of Stock Units
(including Restricted Stock Units) will be accelerated and such shares will be
issued, prior to the Covered Transaction, in each case on a basis that gives the
holder of the Award a reasonable opportunity, as determined by the
Administrator, following exercise of the Award or the issuance of the shares, as
the case may be, to participate as a stockholder in the Covered Transaction, and
the Award will terminate upon consummation of the Covered Transaction. Any
shares of Stock issued pursuant to the preceding sentence in satisfaction of an
Award may, in the discretion of the Administrator, contain such restrictions, if
any, as the Administrator deems appropriate to reflect any performance or other
vesting conditions to which the Award was subject. In the case of Restricted
Stock, the Administrator may require that any amounts delivered, exchanged or
otherwise paid in respect of such Stock in connection with the Covered
Transaction be placed in escrow or otherwise made subject to such restrictions
as the Administrator deems appropriate to carry out the intent of the Plan.
 
     (b)  CHANGES IN AND DISTRIBUTIONS WITH RESPECT TO THE STOCK
 
          (1)  BASIC ADJUSTMENT PROVISIONS. In the event of a stock dividend,
stock split or combination of shares (including a reverse stock split),
recapitalization or other change in the Company's capital structure, the
Administrator will make appropriate adjustments to the maximum number of shares
specified in Section 4(a) that may be delivered under the Plan, to the maximum
number of shares specified in Section 4(a) that may be issued upon the exercise
of ISOs, to the maximum number of shares specified in Section 4(a) that may be
issued with respect to Stock Options that are not ISOs, and to the maximum share
limits described in Section 4(c), and will also make appropriate adjustments to
the number and kind of shares of stock or securities subject to Awards then
outstanding or subsequently granted, any exercise prices relating to Awards and
any other provision of Awards affected by such change.
 
          (2)  CERTAIN OTHER ADJUSTMENTS. The Administrator may also make
adjustments of the type described in Section 7(b)(1) above to take into account
distributions to stockholders other than those provided for in Section 7(a) and
7(b)(1), or any other event, if the Administrator determines that adjustments
are appropriate to avoid distortion in the operation of the Plan and to preserve
the value of Awards made hereunder, having due regard for the qualification of
ISOs under Section 422 of the Code and with the performance-based compensation
rules of Section 162(m), where applicable.
 
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          (3)  CONTINUING APPLICATION OF PLAN TERMS. References in the Plan to
shares of Stock will be construed to include any stock or securities resulting
from an adjustment pursuant to this Section 7.
 
8.   LEGAL CONDITIONS ON DELIVERY OF STOCK
 
     The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove any restriction from shares of Stock previously
delivered under the Plan until: (i) the Company is satisfied that all legal
matters in connection with the issuance and delivery of such shares have been
addressed and resolved; (ii) if the outstanding Stock is at the time of delivery
listed on any stock exchange or national market system, the shares to be
delivered have been listed or authorized to be listed on such exchange or system
upon official notice of issuance; and (iii) all conditions of the Award have
been satisfied or waived. If the sale of Stock has not been registered under the
Securities Act of 1933, as amended, the Company may require, as a condition to
exercise of the Award, such representations or agreements as counsel for the
Company may consider appropriate to avoid violation of such Act. The Company may
require that certificates evidencing Stock issued under the Plan bear an
appropriate legend reflecting any restriction on transfer applicable to such
Stock, and the Company may hold the certificates pending lapse of the applicable
restrictions.
 
9.   AMENDMENT AND TERMINATION
 
     The Administrator may at any time or times amend the Plan or any
outstanding Award for any purpose which may at the time be permitted by law, and
may at any time terminate the Plan as to any future grants of Awards; PROVIDED,
that except as otherwise expressly provided in the Plan the Administrator may
not, without the Participant's consent, alter the terms of an Award so as to
affect adversely the Participant's rights under the Award, unless the
Administrator expressly reserved the right to do so at the time of the Award.
Amendment to the Plan shall be conditioned upon stockholder approval only to the
extent, if any, such approval is required by law (including the Code and
applicable stock exchange requirements), as determined by the Administrator.
 
10.  OTHER COMPENSATION ARRANGEMENTS
 
     The existence of the Plan or the grant of any Award will not in any way
affect the Company's right to Award a person bonuses or other compensation in
addition to Awards under the Plan.
 
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                                    EXHIBIT A
 
                               DEFINITION OF TERMS
 
     The following terms, when used in the Plan, will have the meanings and be
subject to the provisions set forth below:
 
     "ADMINISTRATOR": The Compensation Committee, except that the Compensation
Committee may delegate (i) to one or more of its members such of its duties,
powers and responsibilities as it may determine; (ii) to one or more officers of
the Company the power to grant rights or options to the extent permitted by
Section 157(c) of the Delaware General Corporation Law; (iii) to one or more
officers of the Company the authority to allocate other Awards among such
persons (other than officers of the Company) eligible to receive Awards under
the Plan as such delegated officer or officers determine consistent with such
delegation; PROVIDED, that with respect to any delegation described in this
clause (iii) the Compensation Committee (or a properly delegated member or
members of such Committee) shall have authorized the issuance of a specified
number of shares of Stock under such Awards and shall have specified the
consideration, if any, to be paid therefor; and (iv) to such Employees or other
persons as it determines such ministerial tasks as it deems appropriate. In the
event of any delegation described in the preceding sentence, the term
"Administrator" shall include the person or persons so delegated to the extent
of such delegation.
 
     "AFFILIATE": Any corporation or other entity owning, directly or
indirectly, 50% or more of the outstanding Stock of the Company, or in which the
Company or any such corporation or other entity owns, directly or indirectly,
50% of the outstanding capital stock (determined by aggregate voting rights) or
other voting interests.
 
     "AWARD":  Any or a combination of the following:
 
          (i) Stock Options.
 
          (ii) SARs.
 
          (iii) Restricted Stock.
 
          (iv) Unrestricted Stock.
 
          (v)  Stock Units, including Restricted Stock Units.
 
          (vi) Performance Awards.
 
          (vii) Cash Awards.
 
          (viii) Awards (other than Awards described in (i) through (vii) above)
     that are convertible into or otherwise based on Stock.
 
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     "BOARD":  The Board of Directors of the Company.
 
     "CASH AWARD":  An Award denominated in cash.
 
     "CODE": The U.S. Internal Revenue Code of 1986 as from time to time amended
and in effect, or any successor statute as from time to time in effect.
 
     "COMPENSATION COMMITTEE": The Compensation Committee of the Board;
PROVIDED, that until a Compensation Committee shall have been appointed, the
Board shall discharge the duties and shall exercise the authority of the
Compensation Committee hereunder and all references herein to the Compensation
Committee shall be deemed to refer to the Board.
 
     "COMPANY":  Combinatorx, Incorporated.
 
     "COVERED TRANSACTION": Any of (i) a consolidation, merger, or similar
transaction or series of related transactions, including a sale or other
disposition of stock, in which the Company is not the surviving corporation or
which results in the acquisition of all or substantially all of the Company's
then outstanding common stock by a single person or entity or by a group of
persons and/or entities acting in concert, (ii) a sale or transfer of all or
substantially all the Company's assets, or (iii) a dissolution or liquidation of
the Company. Where a Covered Transaction involves a tender offer that is
reasonably expected to be followed by a merger described in clause (i) (as
determined by the Administrator), the Covered Transaction shall be deemed to
have occurred upon consummation of the tender offer.
 
     "EFFECTIVE DATE": The first business day preceding the date of the initial
public offering of the Stock.
 
     "EMPLOYEE": Any person who is employed by the Company or an Affiliate.
 
     "EMPLOYMENT": A Participant's employment or other service relationship with
the Company and its Affiliates. Employment will be deemed to continue, unless
the Administrator expressly provides otherwise, so long as the Participant is
employed by, or otherwise is providing services in a capacity described in
Section 5 to the Company or its Affiliates. If a Participant's employment or
other service relationship is with an Affiliate and that entity ceases to be an
Affiliate, the Participant's Employment will be deemed to have terminated when
the entity ceases to be an Affiliate unless the Participant transfers Employment
to the Company or its remaining Affiliates.
 
     "ISO": A Stock Option intended to be an "incentive stock option" within the
meaning of Section 422 of the Code. Each option granted pursuant to the Plan
will be treated as providing by its terms that it is to be a non-incentive
option unless, as of the date of grant, it is expressly designated as an ISO.
 
     "PARTICIPANT": A person who is granted an Award under the Plan.
 
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     "PERFORMANCE AWARD": An Award subject to Performance Criteria. The
Committee in its discretion may grant Performance Awards that are intended to
qualify for the performance-based compensation exception under Section 162(m)
(or that are exempt from the deduction limitations of Section 162(m) by reason
of Treas. Regs. Section 1.162-27(l)) and Performance Awards that are not
intended so to qualify.
 
     "PERFORMANCE CRITERIA": Specified criteria, other than the mere
continuation of Employment or the mere passage of time, the satisfaction of
which is a condition for the grant, exercisability, vesting or full enjoyment of
an Award. For purposes of Awards that are intended to qualify for the
performance-based compensation exception under Section 162(m), a Performance
Criterion will mean an objectively determinable measure of performance relating
to any or any combination of the following (measured either absolutely or by
reference to an index or indices and determined either on a consolidated basis
or, as the context permits, on a divisional, subsidiary, line of business,
project or geographical basis or in combinations thereof): sales; revenues;
assets; expenses; earnings before or after deduction for all or any portion of
interest, taxes, depreciation, or amortization, whether or not on a continuing
operations or an aggregate or per share basis; return on equity, investment,
capital or assets; one or more operating ratios; borrowing levels, leverage
ratios or credit rating; market share; capital expenditures; cash flow; stock
price; stockholder return; sales of particular products or services; customer
acquisition or retention; acquisitions and divestitures (in whole or in part);
joint ventures and strategic alliances; spin-offs, split-ups and the like;
reorganizations; or recapitalizations, restructurings, financings (issuance of
debt or equity) or refinancings. A Performance Criterion and any targets with
respect thereto determined by the Administrator need not be based upon an
increase, a positive or improved result or avoidance of loss. To the extent
consistent with the requirements for satisfying the performance-based
compensation exception under Section 162(m), to the extent applicable, the
Administrator may provide in the case of any Award intended to qualify for such
exception that one or more of the Performance Criteria applicable to such Award
will be adjusted in an objectively determinable manner to reflect events (for
example, but without limitation, acquisitions or dispositions) occurring during
the performance period that affect the applicable Performance Criterion or
Criteria.
 
     "PLAN": The Combinatorx, Incorporated 2004 Incentive Plan as from time to
time amended and in effect.
 
     "RESTRICTED STOCK": An Award of Stock for so long as the Stock remains
subject to restrictions requiring that it be redelivered or offered for sale to
the Company if specified conditions are not satisfied.
 
     "RESTRICTED STOCK UNIT": A Stock Unit that is, or as to which the delivery
of Stock or cash in lieu of Stock is, subject to the satisfaction of specified
performance or other vesting conditions.
 
     "SECTION 162(m)":  Section 162(m) of the Code.
 
     "SARs": Rights entitling the holder upon exercise to receive cash or Stock,
as the Administrator determines, equal to a function (determined by the
Administrator using such
 
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factors as it deems appropriate) of the amount by which the Stock has
appreciated in value since the date of the Award.
 
     "STOCK":  Common Stock of the Company, par value $.001 per share.
 
     "STOCK UNIT": An unfunded and unsecured promise, denominated in shares of
Stock, to deliver Stock or cash measured by the value of Stock in the future.
 
     "STOCK OPTIONS": Options entitling the recipient to acquire shares of Stock
upon payment of the exercise price.
 
     "UNRESTRICTED STOCK": An Award of Stock not subject to any restrictions
under the terms of the Award.
 
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