<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>a00919exv10w1.txt
<DESCRIPTION>EXHIBIT 10.1
<TEXT>
<PAGE>
 
                                                                    EXHIBIT 10.1
 
                          NEUROCRINE BIOSCIENCES, INC.
 
                            2003 INCENTIVE STOCK PLAN
 
                   AS AMENDED MAY 25, 2004 AND AUGUST 2, 2004
 
1. PURPOSE OF THE PLAN. The purposes of this Incentive Stock Plan are to attract
and retain the best available personnel, to provide additional incentive to the
employees of Neurocrine Biosciences, Inc. (the "Company") and to promote the
success of the Company's business. Options granted hereunder may be either
Incentive Stock Options or Nonstatutory Stock Options, at the discretion of the
Board and as reflected in the terms of the written option agreement. The Board
also has the discretion to grant Restricted Stock Awards and Stock Bonus Awards.
 
2. DEFINITIONS.
 
            (a) "Award" shall mean any right granted under the Plan, including
an Option, a Restricted Stock Award and a Stock Bonus Award.
 
            (b) "Board" shall mean the Committee, if one has been appointed, or
the Board of Directors of the Company, if no Committee is appointed.
 
            (c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
 
            (d) "Committee" shall mean the Committee appointed by the Board in
accordance with Section 4(a) of the Plan, if one is appointed.
 
            (e) "Common Stock" shall mean the common stock of the Company, par
value $.001 per share.
 
            (f) "Company" shall mean Neurocrine Biosciences, Inc.
 
            (g) "Consultant" shall mean any natural person who is engaged by the
Company or any Parent or Subsidiary to render bona fide consulting services and
is compensated for such consulting services, and any Director whether
compensated for such services or not.
 
            (h) "Continuous Status as an Employee or Consultant" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant, as applicable. Continuous Status as an Employee or Consultant shall
not be considered interrupted in the case of sick leave, military leave, or any
other leave of absence approved by the Board; provided that such leave is for a
period of not more than ninety (90) days or reemployment upon the expiration of
such leave is guaranteed by contract or statute.
 
            (i) "Director" means a member of the Board.
 
<PAGE>
 
            (j) "Employee" shall mean any persons, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
 
            (k) "Incentive Stock Option" shall mean an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
 
            (l) "Nonstatutory Stock Option" shall mean an Option not intended to
qualify as an Incentive Stock Option.
 
            (m) "Option" shall mean a stock option granted pursuant to the Plan.
 
            (n) "Optioned Stock" shall mean the Common Stock subject to an
Option.
 
            (o) "Optionee" shall mean an Employee or Consultant who receives an
Option.
 
            (p) "Outside Director" means a Director who is not an Employee.
 
            (q) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
 
            (r) "Performance Criteria" shall mean the following business
criteria with respect to the Company, any Subsidiary or any division or
operating unit: (a) net income, (b) pre-tax income, (c) operating income, (d)
cash flow, (e) earnings per share, (f) return on equity, (g) return on invested
capital or assets, (h) cost reductions or savings, (i) funds from operations,
(j) appreciation in the fair market value of Common Stock, and (k) earnings
before any one or more of the following items: interest, taxes, depreciation or
amortization; each as determined in accordance with generally accepted
accounting principles or subject to such adjustments as may be specified by the
Board.
 
            (s) "Plan" shall mean this 2003 Incentive Stock Plan.
 
            (t) "Purchaser" shall mean an Employee or Consultant who exercises a
Restricted Stock Award or receives a Stock Bonus Award.
 
            (u) "Restricted Stock Award" shall mean a right to purchase Common
Stock pursuant to Section 11 of the Plan.
 
            (v) "Section 162(m) Participant" shall mean any key Employee
designated by the Board as a key Employee whose compensation for the fiscal year
in which the key Employee is so designated or a future fiscal year may be
subject to the limit on deductible compensation imposed by Section 162(m) of the
Code.
 
            (w) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
 
                                      -2-
 
<PAGE>
 
            (x) "Stock Bonus Award" shall mean the right to receive a bonus of
Common Stock for past services pursuant to Section 12 of the Plan.
 
            (y) "Subsidiary" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
 
3. STOCK SUBJECT TO THE PLAN.
 
      (a)   Subject to the provisions of Section 14 of the Plan, the maximum
aggregate number of shares under the Plan is two million three hundred thousand
(2,300,000) shares of Common Stock. The Shares may be authorized but unissued,
or reacquired Common Stock. If an Award should expire or become unexercisable
for any reason without having been exercised in full, then the unpurchased
Shares which were subject thereto shall, unless the Plan shall have been
terminated, become available for future grant or sale under the Plan.
Notwithstanding any other provision of the Plan, shares issued under the Plan
and later repurchased by the Company shall not become available for future grant
or sale under the Plan.
 
      (b) The following limitations shall apply to grants of Awards to
Employees:
 
                  (i) No Employee shall be granted, in any fiscal year of the
            Company, Awards pursuant to which more than an aggregate of two
            hundred and fifty thousand (250,000) Shares are issuable to such
            Employee.
 
                  (ii) In connection with his or her initial employment, an
            Employee may be granted Awards to purchase and/or receive up to an
            additional two hundred and fifty thousand (250,000) Shares which
            shall not count against the limit set forth in subsection (i) above.
 
                  (iii) The foregoing limitations shall be adjusted
            proportionately in connection with any change in the Company's
            capitalization as described in Section 14.
 
                  (iv) If an Option is canceled in the same fiscal year of the
            Company in which it was granted (other than in connection with a
            transaction described in Section 14), the canceled Option shall be
            counted against the limit set forth in subsection (i) above.
 
4. ADMINISTRATION OF THE PLAN.
 
      (a) Procedure.
 
                  (i) Multiple Administrative Bodies. The Plan may be
            administered by different Committees with respect to different
            groups of Employees and Consultants.
 
                  (ii) Section 162(m). To the extent that the Board determines
            it to be desirable to qualify Awards granted hereunder as
            "performance-based compensation"
 
                                      -3-
 
<PAGE>
 
            within the meaning of Section 162(m) of the Code, the Plan shall 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 shall be structured to satisfy the
            requirements for exemption under Rule 16b-3.
 
                  (iv) Other Administration. Other than as provided above, the
            Plan shall be administered by (A) the Board or (B) a Committee,
            which committee shall be constituted to satisfy applicable laws.
 
      (b) Powers of the Board. Subject to the provisions of the Plan, the Board
shall have the authority, in its discretion: (i) to grant Incentive Stock
Options, Nonstatutory Stock Options, Restricted Stock Awards or Stock Bonus
Awards; (ii) to determine, upon review of relevant information and in accordance
with Section 7 of the Plan, the fair market value of the Common Stock; (iii) to
determine the exercise price per share of each Award to be granted, if any,
which exercise price shall be determined in accordance with Section 7 of the
Plan; (iv) to determine the Employees or Consultants to whom, and the time or
times at which, Awards shall be granted and, subject to the limitations of
Section 3(b) above, the number of shares to be represented by each Award; (v) to
interpret the Plan; (vi) to prescribe, amend and rescind rules and regulations
relating to the Plan; (vii) to determine the terms and provisions of each Award
granted (which need not be identical) and, with the consent of the holder
thereof, modify or amend any provisions (including provisions relating to
exercise price) of any Award; (viii) to accelerate or defer (with the consent of
the Optionee) the exercise date of any Option, consistent with the provisions of
Section 5 of the Plan; (ix) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Award previously
granted by the Board; (x) to allow Optionees 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 statutory minimum amount required to be withheld. The fair
market value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by an Award
holder to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Board may deem necessary or advisable; and (xi) to
make all other determinations deemed necessary or advisable for the
administration of the Plan.
 
      (c) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees,
Purchasers and any other holders of any Awards granted under the Plan.
 
      (d) Provisions Applicable to Section 162(m) Participants.
 
                  (i) The Board, in its discretion, may determine whether an
            Award is to qualify as performance-based compensation as described
            in Section 162(m)(4)(C) of the Code.
 
                                      -4-
 
<PAGE>
 
                  (ii) Notwithstanding anything in the Plan to the contrary, the
            Board may grant any Award to a Section 162(m) Participant, including
            a Restricted Stock Award or Stock Bonus Award the restrictions with
            respect to which lapse upon the attainment of performance goals
            which are related to one or more of the Performance Criteria.
 
                  (iii) To the extent necessary to comply with the
            performance-based compensation requirements of Section 162(m)(4)(C)
            of the Code, with respect to any Restricted Stock Award or Stock
            Bonus Award granted under the Plan to one or more Section 162(m)
            Participants, no later than ninety (90) days following the
            commencement of any fiscal year in question or any other designated
            fiscal period or period of service (or such other time as may be
            required or permitted by Section 162(m) of the Code), the Board
            shall, in writing, (i) designate one or more Section 162(m)
            Participants, (ii) select the Performance Criteria applicable to the
            fiscal year or other designated fiscal period or period of service,
            (iii) establish the various performance targets, in terms of an
            objective formula or standard, and amounts of such Restricted Stock
            Awards and Stock Bonus Awards, as applicable, which may be earned
            for such fiscal year or other designated fiscal period or period of
            service, and (iv) specify the relationship between Performance
            Criteria and the performance targets and the amounts of such
            Restricted Stock Awards and Stock Bonus Awards, as applicable, to be
            earned by each Section 162(m) Participant for such fiscal year or
            other designated fiscal period or period of service. Following the
            completion of each fiscal year or other designated fiscal period or
            period of service, the Board shall certify in writing whether the
            applicable performance targets have been achieved for such fiscal
            year or other designated fiscal period or period of service. In
            determining the amount earned by a Section 162(m) Participant, the
            Board shall have the right to reduce (but not to increase) the
            amount payable at a given level of performance to take into account
            additional factors that the Board may deem relevant to the
            assessment of individual or corporate performance for the fiscal
            year or other designated fiscal period or period of service.
 
                  (iv) Furthermore, notwithstanding any other provision of the
            Plan, any Award which is granted to a Section 162(m) Participant and
            is intended to qualify as performance-based compensation as
            described in Section 162(m)(4)(C) of the Code shall be subject to
            any additional limitations set forth in Section 162(m) of the Code
            (including any amendment to Section 162(m) of the Code) or any
            regulations or rulings issued thereunder that are requirements for
            qualification as performance-based compensation as described in
            Section 162(m)(4)(C) of the Code, and the Plan shall be deemed
            amended to the extent necessary to conform to such requirements.
 
5. ELIGIBILITY.
 
      (a) Awards may be granted to Employees and Consultants, provided that
Incentive Stock Options may only be granted to Employees. An Employee or
Consultant who has been granted an Award may, if such Employee or Consultant is
otherwise eligible, be granted additional Awards.
 
                                      -5-
 
<PAGE>
 
Each Outside Director shall be eligible to be automatically granted Options at
the times and in the manner set forth in Section 10.
 
      (b) Each Option shall be designated in the written option 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 Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company) exceeds one hundred thousand dollars
($100,000), such Options shall be treated as Nonstatutory Stock Options.
 
      (c) For purposes of Section 5(b), Options shall be taken into account in
the order in which they were granted, and the fair market value of the Shares
shall be determined as of the time the Option with respect to such Shares is
granted.
 
      (d) The Plan shall not confer upon any Optionee or Purchaser any right
with respect to continuation of employment by or the rendition of consulting
services to the Company, nor shall it interfere in any way with his or her right
or the Company's right to terminate his or her employment or services at any
time, with or without cause.
 
6. TERM OF PLAN. The Plan shall become effective upon the earlier to occur of
its adoption by the Board or its approval by vote of holders of a majority of
the outstanding shares of the Company entitled to vote on the adoption of the
Plan. It shall continue in effect until terminated under Section 15 of the Plan.
Notwithstanding the foregoing, no Incentive Stock Option may be granted under
this Plan after the first to occur of (a) the expiration of ten (10) years from
the date the Plan is adopted by the Board or (b) the expiration of ten (10)
years from the date the Plan is approved by the Company's stockholders under
Section 20.
 
7. EXERCISE PRICE AND CONSIDERATION.
 
      (a) The per Share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be no less than one hundred percent (100%) of the
fair market value per Share on the date of grant; provided, however, that in the
case of an Incentive Stock Option granted to an Employee who, at the time of
grant of such Incentive Stock Option, 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 shall be no less than one
hundred and ten percent (110%) of the fair market value per Share on the date of
grant. Notwithstanding the foregoing, Options may be granted with a per Share
exercise price of less than one hundred percent (100%) of the fair market value
per Share on the date of grant pursuant to a merger or other corporate
transaction.
 
      (b) The fair market value shall be determined by the Board in its
discretion; provided, however, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid and
asked prices (or the closing price per share if the Common Stock is listed on
the National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System) of the Common Stock for the date of grant, as reported
in the Wall Street Journal (or, if not so reported, as otherwise reported by the
NASDAQ System) or, in the event the
 
                                      -6-
 
<PAGE>
 
Common Stock is listed on a stock exchange, the fair market value per Share
shall be the closing price on such exchange on the date of grant of the Option
or Restricted Stock Award, as reported in the Wall Street Journal.
 
      (c) The consideration to be paid for the Shares to be issued upon exercise
of an Award, including the method of payment, shall be determined by the Board
(and in the case of an Incentive Stock Option, shall be determined at the time
of grant) and to the extent permitted under applicable laws may consist entirely
of cash, check, promissory note, other Shares of Common Stock which (i) either
have been owned by the Optionee for more than six (6) months on the date of
surrender or were not acquired directly or indirectly, from the Company, and
(ii) have a fair market value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised, or any
combination of such methods of payment, or such other consideration and method
of payment for the issuance of Shares to the extent permitted under applicable
law.
 
8. TERM OF OPTION. The term of each Option shall be the term stated in the
Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. In the case of an Incentive Stock
Option granted to an Optionee who, at the time the 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 term of the Option shall
be five (5) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement.
 
9. EXERCISE OF OPTION.
 
      (a) Procedure for Exercise; Rights as a Shareholder.
 
            (i)   Any Option granted hereunder shall be exercisable at such
                  times and under such conditions as determined by the Board,
                  including performance criteria with respect to the Company
                  and/or the Optionee, and as shall be permissible under the
                  terms of the Plan.
 
            (ii)  An Option may not be exercised for a fraction of a Share.
 
            (iii) An Option shall be deemed to be exercised when written notice
                  of such exercise has been given to the Company in accordance
                  with the terms of the Option by the person entitled to
                  exercise the Option and full payment for the Shares with
                  respect to which the Option is exercised has been received by
                  the Company. Full payment may, as authorized by the Board,
                  consist of any consideration and method of payment allowable
                  under Section 7 of the Plan. Until the issuance (as evidenced
                  by the appropriate entry on the books of the Company or of a
                  duly authorized transfer agent of the Company) of the stock
                  certificate evidencing such Shares, no right to vote or
                  receive dividends or any other rights as a stockholder shall
                  exist with respect to the Optioned Stock, notwithstanding the
                  exercise of the Option. Upon an Optionee's request, the
                  Company shall issue (or cause to be issued) such stock
                  certificate promptly upon exercise of the Option. To the
                  extent an Option designated as an
 
                                      -7-
 
<PAGE>
 
                  Incentive Stock Option at grant that is treated as the
                  exercise of a Nonstatutory Stock Option pursuant to Section
                  5(b), the Company shall issue a separate stock certificate
                  evidencing the Shares treated as acquired upon exercise of an
                  Incentive Stock Option and a separate stock certificate
                  evidencing the Shares treated as acquired upon exercise of a
                  Nonstatutory Stock Option and shall identify each such
                  certificate accordingly in its stock transfer records. No
                  adjustment will be made for a dividend or other right for
                  which the record date is prior to the date the stock
                  certificate is issued, except as provided in Section 14 of the
                  Plan.
 
            (iv)  Exercise of an Option in any manner shall result in a decrease
                  in the number of Shares which thereafter may be 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.
 
      (b) Termination of Status as an Employee or Consultant. In the event of
termination of an Optionee's Continuous Status as an Employee or Consultant (as
the case may be), such Optionee may, but only within such period of time as is
determined by the Board, with such determination in the case of an Incentive
Stock Option not exceeding three (3) months and in the case of Nonstatutory
Stock Option not exceeding six (6) months after the date of termination
(provided that such period shall be three (3) months in the case of an Option
granted to an Outside Director pursuant to Section 10), with such determination
in the case of an Incentive Stock Option being made at the time of grant of the
Option, exercise the Option to the extent that such Employee or Consultant was
entitled to exercise it at the date of such termination (but in no event later
than the date of expiration of the term of such Option as set forth in the
Option Agreement). To the extent that such Employee or Consultant was not
entitled to exercise the Option at the date of such termination, or if such
Employee or Consultant does not exercise such Option (which such Employee or
Consultant was entitled to exercise) within the time specified herein, the
Option shall terminate.
 
      (c) Disability of Optionee. Notwithstanding the provisions of Section 8(b)
above, in the event of termination of an Optionee's Continuous Status as an
Employee or Consultant as a result of such Employee's or Consultant's total and
permanent disability (as defined in Section 22(e)(3) of the Code), such Employee
or Consultant may, but only within six (6) months (twelve (12) months in the
case of an Option granted to an Outside Director pursuant to Section 10) (or
such other period of time not exceeding twelve (12) months as in determined by
the Board, with such determination in the case of an Incentive Stock Option
being made at the time of grant of the Option) from the date of such termination
(but in no event later than the date of expiration of the term of such Option as
set forth in the Option Agreement), exercise the Option to the extent the right
to exercise would have accrued had the Optionee continued Continuous Status as
an Employee or Consultant for a period of six (6) months following termination
of Continuous Status by reason of disability. To the extent that such Employee
or Consultant was not entitled to exercise an Option in this period, or if such
Employee or Consultant does not exercise such Option (which such Employee or
Consultant was entitled to exercise) within the time specified herein, the
Option shall terminate.
 
                                      -8-
 
<PAGE>
 
      (d) Retirement of Optionee. Notwithstanding the provisions of Section 9(b)
above, in the event of termination of an Employee Optionee's Continuous Status
as an Employee as a result of such Employee's retirement from the Company at age
fifty five (55) or greater after having Continuous Status for (5) years or more,
all Options held by such Optionee shall vest and such Employee may, but only
within three (3) years from the date of such termination (but in no event later
than the date of expiration of the term of such Option as set forth in the
Option Agreement), exercise the Option to the extent such Employee was entitled
to exercise it at the date of such termination.
 
      (e) Death of Optionee. In the event of the death of an Optionee:
 
            (i)   during the term of the Option who is at the time of his or her
                  death an Employee or Consultant of the Company and who shall
                  have been in Continuous Status as an Employee or Consultant
                  since the date of grant of the Option, the Option may be
                  exercised, at any time within six (6) months (twelve (12)
                  months in the case of an Option granted to an Outside Director
                  pursuant to Section 10) (or at such later time as may be
                  determined by the Board but in no event later than the date of
                  expiration of the term of such Option as set forth in the
                  Option Agreement), by the Optionee's estate or by a person who
                  acquired the right to exercise the Option by bequest or
                  inheritance, but only to the extent that the right to exercise
                  would have accrued had the Optionee continued living and
                  remained in Continuous Status as an Employee or Consultant six
                  (6) months (or such other period of time as in determined by
                  the Board) after the date of death; or
 
            (ii)  within thirty (30) days (or such other period of time not
                  exceeding three (3) months as is determined by the Board, with
                  such determination in the case of an Incentive Stock Option
                  being made at the time of grant of the Option) after the
                  termination of Continuous Status as an Employee or Consultant,
                  the Option may be exercised, at any time within six (6) months
                  (twelve (12) months in the case of an Option granted to an
                  Outside Director pursuant to Section 10) (or such other period
                  of time as is determined by the Board at the time of grant of
                  the Option) following the date of death (but in no event later
                  than the date of expiration of the term of such Option as set
                  forth in the Option Agreement), by the Optionee's estate or by
                  a person who acquired the right to exercise the Option by
                  bequest or inheritance, but only to the extent that the right
                  to exercise that had accrued at the date of termination.
 
10. AUTOMATIC GRANTING OF OPTIONS TO OUTSIDE DIRECTORS.
 
      (a) First Option Grants. Unless otherwise determined by the Board, each
new Outside Director shall be automatically granted an Option to purchase twenty
thousand (20,000) Shares (a "First Option") on the date on which such person
first becomes a Director, whether through election by the stockholders of the
Company or appointment by the Board to fill a vacancy.
 
                                      -9-
 
<PAGE>
 
      (b) Subsequent Option Grants. Unless otherwise determined by the Board,
each Outside Director and the Chairman of the Board of Directors shall be
automatically granted an annual Option (a "Subsequent Option") to purchase, in
the case of an Outside Director, twelve thousand (12,000) Shares, and in the
case of the Chairman of the Board of Directors, fifteen thousand (15,000)
Shares, each on the date of each annual meeting of the stockholders of the
Company, if on such date, he or she shall have served on the Board for at least
six (6) months.
 
      (c) Terms of Options Granted to Outside Directors. Options granted to
Outside Directors pursuant to this Section 10 shall have a per Share exercise
price of no less than one hundred percent (100%) of the fair market value per
Share on the date of grant. Subject to Section 9, the term of each Option
granted to an Outside Director pursuant to this Section 10 shall be ten (10)
years from the date of grant thereof. First Options and Subsequent Options shall
become exercisable in cumulative monthly installments of 1/12 of the Shares
subject to such Option on each of the monthly anniversaries of the date of grant
of the Option, commencing with the first such monthly anniversary, such that
each such Option shall be one hundred percent (100%) vested on the first
anniversary of its date of grant.
 
11. RESTRICTED STOCK AWARDS.
 
      (a) Rights to Purchase. After the Board determines that it will offer an
Employee or Consultant a Restricted Stock Award, it shall deliver to the offeree
a stock purchase agreement setting forth the terms, conditions and restrictions
relating to the offer. Such agreement shall further specify the number of Shares
which such person shall be entitled to purchase, and the time within which such
person must accept such offer, which shall in no event exceed six (6) months
from the date upon which the Board or its Committee made the determination to
grant the Restricted Stock Award. The offer shall be accepted by execution of a
stock purchase agreement in the form determined by the Board.
 
      (b) Purchase Price. The Board shall establish the purchase price, if any,
and form of payment for each Restricted Stock Award; provided, however, that
such purchase price shall be no less than one hundred percent (100%) of the fair
market value per Share on the date of grant; provided, further, however, that
the purchase price per Share may be reduced on a dollar-for-dollar basis to the
extent the Restricted Stock Award is granted to the Purchaser in lieu of cash
compensation otherwise payable to the Purchaser. In all cases, legal
consideration shall be required for each issuance of a Restricted Stock Award.
 
      (c) Issuance of Shares. Forthwith after payment therefor, the Shares
purchased shall be duly issued; provided, however, that the Board may require
that the Purchaser make adequate provision for any Federal and State withholding
obligations of the Company as a condition to the Purchaser purchasing such
Shares.
 
      (d) Repurchase Option. Unless the Board determines otherwise, the stock
purchase agreement shall grant the Company a repurchase option exercisable upon
the voluntary or involuntary termination of the Purchaser's employment with the
Company for any reason (including death or disability). Subject to applicable
laws, if the Board so determines, the purchase price for
 
                                      -10-
 
<PAGE>
 
shares repurchased may be paid by cancellation of any indebtedness of the
Purchaser to the Company. Subject to Section 4(d) with respect to Restricted
Stock Awards granted to Section 162(m) Participants, the repurchase option shall
lapse at such rate as the Board may determine.
 
      (e) Other Provisions. The stock purchase agreement shall contain such
other terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Board.
 
12. STOCK BONUS AWARDS.
 
      (a) Terms of Award. After the Board determines that it will offer an
Employee or Consultant a Stock Bonus Award, it shall deliver to the offeree a
stock bonus agreement setting forth the terms, conditions and restrictions
relating to the offer and the number of shares to be awarded. The offer shall be
accepted by execution of a stock bonus agreement in the form determined by the
Board.
 
      (b) Purchase Price. The Board shall establish the purchase price, if any,
and form of payment for each Stock Bonus Award; provided, however, that such
purchase price shall be no less than one hundred percent (100%) of the fair
market value per Share on the date of grant; provided, further, however, that
the purchase price per Share may be reduced on a dollar-for-dollar basis to the
extent the Stock Bonus Award is granted to the Purchaser in lieu of cash
compensation otherwise payable to the Purchaser.
 
      (c) Issuance of Shares. Forthwith after payment therefor, the Shares
purchased shall be duly issued; provided, however, that the Board may require
that the Purchaser make adequate provision for any Federal and State withholding
obligations of the Company as a condition to the Purchaser purchasing such
Shares.
 
      (d) Repurchase Option. Unless the Board determines otherwise, the stock
bonus agreement shall grant the Company a repurchase option exercisable upon the
voluntary or involuntary termination of the Purchaser's employment with the
Company for any reason (including death or disability). Subject to applicable
laws, if the Board so determines, the purchase price for shares repurchased may
be paid by cancellation of any indebtedness of the Purchaser to the Company.
Subject to Section 4(d) with respect to Stock Bonus Awards granted to Section
162(m) Participants, the repurchase option shall lapse at such rate as the Board
may determine.
 
      (e) Other Provisions. The stock bonus agreement shall contain such other
terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Board.
 
13. NON-TRANSFERABILITY OF AWARDS. Unless determined otherwise by the Board, 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 Optionee, only by the Optionee.
If the Board makes an Award transferable, such Award shall contain such
additional terms and conditions as the Board deems appropriate.
 
                                      -11-
 
<PAGE>
 
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
 
      (a) Changes in Capitalization. Subject to any action by the Company
required by applicable law or regulations or the requirements of the Nasdaq
Stock Market or an established stock exchange on which the Company's securities
are traded, and subject to Section 14(d), the number and kind of shares of
Common Stock (or other securities or property) covered by each outstanding
Award, and the number and kind of shares of Common Stock (or other securities or
property) which have been authorized for issuance under the Plan but as to which
no Awards have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Award, as well as the price per share of Common
Stock (or other securities or property) covered by each such outstanding Award,
shall be adjusted proportionately to the extent the Board determines that any
increase, decrease or adjustment in the number or kind of issued shares of
Common Stock (or other securities or property), dividend, distribution, stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, reorganization, merger, consolidation, split-up, repurchase,
liquidation, dissolution, or sale, transfer, exchange or other disposition of
all or substantially all of the assets of the Company, exchange of Common Stock
or other securities of the Company, or other similar corporate transaction or
event, in the Board's sole discretion, affects the Common Stock such that an
adjustment is determined by the Board to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to an Award. Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Award.
 
      (b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Board shall notify the Optionee or Purchaser
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Award shall terminate immediately prior to
the consummation of such proposed action.
 
      (c) Merger or Asset Sale. In the event of a merger, sale of all or
substantially all of the assets of the Company, tender offer or other
transaction or series of related transactions resulting in a change of ownership
of more than fifty percent (50%) of the voting securities of the Company
("Change in Control") approved by the majority of the members of the Board on
the Board prior to the commencement of such Change in Control, each outstanding
Option shall be assumed or an equivalent option or right substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation;
provided, however, in the event that within one year of the date of the
completion of the Change in Control, the successor corporation or a Parent or
Subsidiary of the successor corporation terminates the employment of an Optionee
without Cause (as defined below), such Optionee shall fully vest in and have the
right to exercise the options assumed or substituted for the Option as to all of
the Optioned Stock, including Shares as to which it would not otherwise be
exercisable. In the event that the successor corporation refuses to assume or
substitute for the Option, the Optionee shall fully vest in and have the right
to exercise the Option as to all of the Optioned Stock, including Shares as to
which it would not otherwise be exercisable. If an Option becomes fully vested
and exercisable in lieu of assumption or substitution in the event of a Change
 
                                      -12-
 
<PAGE>
 
of Control, the Board shall notify the Optionee in writing or electronically
that the Option shall be fully vested and exercisable for a period of fifteen
(15) days from the date of such notice, and the Option shall terminate upon the
expiration of such period. For the purposes of this paragraph, the Option shall
be considered assumed if, following the Change of Control, the option confers
the right to purchase, for each Share of Optioned Stock subject to the Option
immediately prior to the Change in Control, the consideration (whether stock,
cash, or other securities or property) received in the Change of 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 of Control
is not solely common stock of the successor corporation or its Parent, the Board
may, with the consent of the successor corporation, provide for the
consideration to be received upon the exercise of the Option, for each Share of
Optioned Stock subject to the Option, 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 of Control. For
purposes of this paragraph, termination shall be for "Cause" in the event of the
occurrence of any of the following: (a) any intentional action or intentional
failure to act by employee which was performed in bad faith and to the material
detriment of the successor corporation or its Parent or Subsidiary; (b) employee
willfully and habitually neglects the duties of employment; or (c) employee is
convicted of a felony crime involving moral turpitude, provided that in the
event that any of the foregoing events is capable of being cured, the successor
corporation or its Parent or Subsidiary shall provide written notice to the
employee describing the nature of such event and the employee shall thereafter
have five (5) business days to cure such event.
 
      In the event of a Change in Control which is not approved by the majority
of the members of the Board on the Board prior to the commencement of a Change
in Control, each Optionee shall fully vest in and have the right to exercise all
outstanding Options as to all of the Optioned Stock, including Shares as to
which it would not otherwise be exercisable.
 
      (d) With respect to Awards which are granted to Section 162(m)
Participants and are intended to qualify as performance-based compensation under
Section 162(m)(4)(C), no adjustment or action described in this Section 14 or in
any other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause such Award to fail to so qualify under Section
162(m)(4)(C), or any successor provisions thereto.
 
15. DATE OF GRANTING AWARDS. The date of grant of an Award shall, for all
purposes, be the date on which the Board makes the determination granting such
Award. Notice of the determination shall be given to each Employee or Consultant
to whom an Award is so granted within a reasonable time after the date of such
grant.
 
16. AMENDMENT AND TERMINATION OF THE PLAN.
 
      (a) Amendment and Termination. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee or
Purchaser under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Section
 
                                      -13-
 
<PAGE>
 
422 of the Code (or any other applicable laws or regulation, the requirements of
the Nasdaq Stock Market or an established stock exchange), the Company shall
obtain stockholder approval of any Plan amendment in such a manner and to such a
degree as required.
 
         (b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Awards already granted, and such Awards
shall remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Optionee or the
Purchaser, as applicable, and the Board, which agreement must be in writing and
signed by the Optionee or the Purchaser, as applicable, and the Company.
 
17. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued pursuant to
the exercise of an Award unless the exercise of such Award and the issuance and
delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of the Nasdaq Stock Market or any stock exchange upon which the
Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
 
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 by any of the aforementioned
relevant provisions of law.
 
18. RESERVATION OF SHARES. The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. 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, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
 
19. AWARD AGREEMENTS. Options shall be evidenced by written option agreements in
such form as the Board shall approve. Upon the exercise of a Restricted Stock
Award or a Stock Bonus Award, the Purchaser shall sign a stock purchase
agreement or stock bonus agreement in such form as the Board shall approve.
 
20. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to approval
by the stockholders of the Company within twelve (12) months before or after the
date the Plan is adopted. Such stockholder approval shall be obtained in the
degree and manner required under applicable laws and the rules of the Nasdaq
Stock Market or any stock exchange upon which the Common Stock is listed.
 
                                      -14-
 
<PAGE>
 
21. TOLLED VESTING DURING LEAVE OF ABSENCE. Unless otherwise determined by the
Board, upon an Employee's approved leave of absence (whether sick leave,
military leave, personal leave or any other leave pursuant to which an
employee's active and continuous service to the Company is interrupted,
collectively, a "Leave") the continued vesting of his or her Award shall be
subject to this Section 21. In the event of an Employee's Leave, the vesting of
any Award granted to such Employee shall continue for the first ninety (90) days
of such Leave. To the extent an Employee's Leave continues for more than ninety
(90) days and a termination of Continuous Status as an Employee does not occur,
the vesting of any Award granted to such Employee shall be tolled during the
remainder of such Leave. Upon the Employee's return to service following a
Leave, the vesting of any Award granted to such Employee which was tolled during
such Leave shall recommence in accordance with the original vesting schedule
applicable to such Award; provided that the vesting commencement date of such
Award shall be appropriately adjusted to reflect the period for which vesting
was tolled."
 
                                             "COMPANY"
 
                                             NEUROCRINE BIOSCIENCES, INC., A
                                             DELAWARE CORPORATION
 
                                             By: /s/ Paul W. Hawran
                                                ______________________________
 
                                             Name: Paul W. Hawran
                                                  ____________________________
 
                                             Title: Executive Vice President and
                                                    Chief Financial Officer
                                                   ___________________________
 
                                      -15-
 
</TEXT>
</DOCUMENT>