Exhibit 10.3  


ANACOR PHARMACEUTICALS, INC.  


2010 EQUITY INCENTIVE PLAN  


1.     GENERAL.  


        (a)    Successor to and Continuation of Prior Plan.    The Plan is intended as the successor to and continuation of
the Anacor Pharmaceuticals, Inc. 2001 Equity Incentive Plan (the "Prior Plan"). Following the Effective Date, no additional stock awards shall be
granted under the Prior Plan. Any
shares remaining available for issuance pursuant to the exercise of options or issuance or settlement of stock awards under the Prior Plan as of the Effective Date (the "Prior
Plan's Available Reserve") shall become available for issuance pursuant to Stock Awards granted hereunder. From and after the Effective Date, all outstanding stock awards
granted under the Prior Plan shall remain subject to the terms of the Prior Plan; provided, however, any shares subject to outstanding stock awards
granted under the Prior Plan that expire or terminate for any reason prior to exercise or settlement or are forfeited because of the failure to meet a contingency or condition required to vest such
shares (the "Returning Shares") shall become available for issuance pursuant to Awards granted hereunder. All Awards granted on or after the Effective
Date of this Plan shall be subject to the terms of this Plan. 


        (b)    Eligible Award Recipients.    The persons eligible to receive Awards are Employees, Directors and Consultants. 


        (c)    Available Awards.    The Plan provides for the grant of the following Awards: (i) Incentive Stock
Options, (ii) Nonstatutory Stock Options, (iii) Stock Appreciation Rights (iv) Restricted Stock Awards, (v) Restricted Stock Unit Awards, (vi) Performance Stock
Awards, (vii) Performance Cash Awards, and (viii) Other Stock Awards. 


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


2.     ADMINISTRATION.  


        (a)    Administration by Board.    The Board shall administer the Plan unless and until the Board delegates
administration of the Plan to a Committee or Committees, as provided in Section 2(c). 



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



          (i)  To determine from time to time (A) which of the persons eligible under the Plan shall be granted Awards;
(B) when and how each Award shall be granted; (C) what type or combination of types of Award shall be granted; (D) the provisions of each Award granted (which need not be
identical), including the time or times when a person shall be permitted to receive cash or Common Stock
pursuant to a Stock Award; (E) the number of shares of Common Stock with respect to which a Stock Award shall be granted to each such person; and (F) the Fair Market Value applicable to
a Stock Award. 


         (ii)  To construe and interpret the Plan and Awards granted under it, and to establish, amend and revoke rules and regulations
for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement or 



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


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


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


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


        (vi)  To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, by adopting
amendments relating to Incentive Stock Options and certain nonqualified deferred compensation under Section 409A of the Code and/or to bring the Plan or Awards granted under the Plan into
compliance therewith, subject to the limitations, if any, of applicable law. However, except as provided in Section 9(a) relating to Capitalization Adjustments, to the extent required by
applicable law or listing requirements, stockholder approval shall be required for any amendment of the Plan that either (A) materially increases the number of shares of Common Stock available
for issuance under the Plan, (B) materially expands the class of individuals eligible to receive Awards under the Plan, (C) materially increases the benefits accruing to Participants
under the Plan or materially reduces the price at which shares of Common Stock may be issued or purchased under the Plan, (D) materially extends the term of the Plan, or (E) expands the
types of Awards available for issuance under the Plan. Except as provided above, rights under any Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless
(1) the Company requests the consent of the affected Participant, and (2) such Participant consents in writing. 


       (vii)  To submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan
intended to satisfy the requirements of (A) Section 162(m) of the Code
regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to Covered Employees, (B) Section 422 of the Code regarding
"incentive stock options" or (C) Rule 16b-3. 


      (viii)  To approve forms of Award Agreements for use under the Plan and to amend the terms of any one or more Awards,
including, but not limited to, amendments to provide terms more favorable to the Participant than previously provided in the Award Agreement, subject to any specified limits in the Plan that are not
subject to Board discretion; provided however, that except with respect to amendments that disqualify or impair the status of an Incentive Stock Option,
a Participant's rights under any Award shall not be impaired by any such amendment unless (A) the Company requests the consent of the affected Participant, and (B) such Participant
consents in writing. Notwithstanding the foregoing, subject to the limitations of applicable law, if any, the Board may amend the terms of any one or more Awards without the affected Participant's
consent if necessary to maintain the qualified status of the Award as an Incentive Stock Option or to bring the Award into compliance with Section 409A of the Code. 


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


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



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        (xi)  To effect, at any time and from time to time, with the consent of any adversely affected Participant, (A) the
reduction of the exercise price (or strike price) of any outstanding Option or SAR under the Plan; (B) the cancellation of any outstanding Option or SAR under the Plan and the grant in
substitution therefor of (1) a new Option or SAR under the Plan or another equity plan of the Company covering the same or a different number of shares of Common Stock, (2) a Restricted
Stock Award, (3) a Restricted Stock Unit Award, (4) an Other Stock Award, (5) cash and/or (6) other valuable consideration (as determined by the Board, in its sole
discretion); or (C) any other action that is treated as a repricing under generally accepted accounting principles. 




        (c)   Delegation to Committee.



          (i)  General.    The Board may delegate some or all of the administration of the Plan to a Committee or Committees.
If administration of the Plan is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been
delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the
Board. The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated. 


         (ii)  Section 162(m) and Rule 16b-3 Compliance.    The Committee may consist solely of two
or more Outside Directors, in accordance with Section 162(m) of the Code, or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3. 




        (d)    Delegation to an Officer.    The Board may delegate to one (1) or more Officers the authority to do one
or both of the following (i) designate Employees who are providing Continuous Service to the Company or any of its Subsidiaries who are not Officers to be recipients of Options and Stock
Appreciation Rights (and, to the extent permitted by applicable law, other Stock Awards) and the terms thereof, and (ii) determine the number of shares of Common Stock to be subject to such
Stock Awards granted to such Employees; provided, however, that the Board resolutions regarding such delegation shall specify the total number of shares
of Common Stock that may be subject to the Stock Awards granted by such Officer and that such Officer may not grant a Stock Award to himself or herself. Notwithstanding the foregoing, the Board may
not delegate authority to an Officer to determine the Fair Market Value pursuant to Section 13(w)(iii) below. 



        (e)    Effect of Board's Decision.    All determinations, interpretations and constructions made by the Board in good
faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons. 


3.     SHARES SUBJECT TO THE PLAN.  


         Share Reserve.    Subject to Section 9(a) relating to Capitalization Adjustments, the aggregate number of shares of Common Stock that
may be
issued pursuant to Stock Awards from and after the Effective Date shall not exceed 2,875,922shares (the "Share Reserve"), which number is the sum of
(i) the number of shares subject to the Prior Plan's Available Reserve, plus an additional number of shares which consists of the Returning Shares, if any, as such shares become available from
time to time in an aggregate amount not to exceed 1,975,922 shares, plus (ii) an additional 900,000 new shares. In addition, the number of shares of Common Stock available for issuance under
the Plan shall automatically increase on January 1st of each year for a period of ten (10) years commencing on January 1, 2012 and ending on (and including)
January 1, 2021, in an amount equal to four percent (4%) of the total number of shares of Common Stock outstanding on December 31st of the preceding calendar year. Notwithstanding
the foregoing, the Board may act prior to the first day of any calendar 


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year,
to provide that there shall be no increase in the share reserve for such calendar year or that the increase in the share reserve for such calendar year shall be a lesser number of shares of
Common Stock than would otherwise occur pursuant to the preceding sentence. For clarity, the limitation in this Section 3(a) is a limitation in the number of shares of Common Stock that may be
issued pursuant to the Plan. Accordingly, this Section 3(a) does not limit the granting of Stock Awards except as provided in Section 7(a). Shares may be issued in connection with a
merger or acquisition as permitted by NASDAQ Listing Rule 5635(c) or, if applicable, NYSE Listed Company Manual Section 303A.08, AMEX Company Guide Section 711 or other applicable
rule, and such issuance shall not reduce the number of shares available for issuance under the Plan. Furthermore, if a Stock Award or any portion thereof (i) expires or otherwise terminates
without all of the shares covered by such Stock Award having been issued or (ii) is settled in cash (i.e., the Participant receives cash rather
than stock), such expiration, termination or settlement shall not reduce (or otherwise offset) the number of shares Common Stock that may be available for issuance under the Plan. 



        (a)    Reversion of Shares to the Share Reserve.    If any shares of common stock issued pursuant to a Stock Award are
forfeited back to the Company because of the failure to meet a contingency or condition required to vest such shares in the Participant, then the shares that are forfeited shall revert to and again
become available for issuance under the Plan. Any shares reacquired by the Company pursuant to Section 8(g) or as consideration for the exercise of an Option shall again become available for
issuance under the Plan. 


        (b)    Incentive Stock Option Limit.    Notwithstanding anything to the contrary in this Section 3 and, subject
to the provisions of Section 9(a) relating to Capitalization Adjustments, the aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock
Options shall be Fifty Million (50,000,000) shares of Common Stock. 


        (c)    Section 162(m) Limitation on Annual Grants.    Subject to the provisions of Section 9(a) relating
to Capitalization Adjustments, at such time as the Plan must contain share limits in order for performance-based equity to be exempt from the one million dollar ($1,000,000) limit on deductibility
under the applicable provisions of Section 162(m) of the Code (subject to any necessary stockholder
approval at such time), a maximum of Two Million (2,000,000) shares of Common Stock subject to Options, Stock Appreciation Rights and Other Stock Awards whose value is determined by reference to an
increase over an exercise or strike price of at least one hundred percent (100%) of the Fair Market Value on the date the Stock Award is granted may be granted to any Participant during any calendar
year. Notwithstanding the foregoing, if any additional Options, Stock Appreciation Rights or Other Stock Awards whose value is determined by reference to an increase over an exercise or strike price
of at least one hundred percent (100%) of the Fair Market Value on the date the Stock Award are granted to any Participant during any calendar year, compensation attributable to the exercise of such
additional Stock Awards shall not satisfy the requirements to be considered "qualified performance-based compensation" under Section 162(m) of the Code unless such additional Stock Awards are
approved by the Company's stockholders. 


        (d)    Source of Shares.    The stock issuable under the Plan shall be shares of authorized but unissued or reacquired
Common Stock, including shares repurchased by the Company on the open market or otherwise. 


4.     ELIGIBILITY.  



        (a)    Eligibility for Specific Stock Awards.    Incentive Stock Options may be granted only to employees of the
Company or a "parent corporation" or "subsidiary corporation" thereof (as such terms are defined in Sections 424(e) and (f) of the Code). Stock Awards other than Incentive Stock Options
may be granted to Employees, Directors and Consultants; provided, however, Nonstatutory Stock Options and SARs may not be granted to Employees,
Directors and Consultants who are 


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providing
Continuous Service only to any "parent" of the Company, as such term is defined in Rule 405, unless the stock underlying such Stock Awards is treated as "service recipient stock"
under Section 409A of the Code because the Stock Awards are granted pursuant to a corporate transaction (such as a spin off transaction) or unless such Stock Awards comply with the distribution
requirements of Section 409A of the Code. 


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


5.     PROVISIONS RELATING TO OPTIONS AND STOCK APPRECIATION RIGHTS.  


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


        (a)    Term.    Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, no Option or SAR
shall be exercisable after the expiration of ten (10) years from the date of its grant or such shorter period specified in the Award Agreement. 


        (b)    Exercise Price.    Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, the
exercise price (or strike price) of each Option or SAR shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option or SAR on the date the
Option or SAR is granted. Notwithstanding the foregoing, an Option or SAR may be granted with an exercise price (or strike price) lower than one hundred percent (100%) of the Fair Market Value of the
Common Stock subject to the Option or SAR if such Option or SAR is granted pursuant to an assumption of or substitution for another option or stock appreciation right pursuant to a Corporate
Transaction and in a manner consistent with the provisions of Sections 409A and, if applicable, 424(a) of the Code. Each SAR will be denominated in shares of Common Stock equivalents. 


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



          (i)  by cash, check, bank draft or money order payable to the Company; 


         (ii)  pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the
issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the
Company from the sales proceeds; 


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



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



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




        (d)    Exercise and Payment of a SAR.    To exercise any outstanding Stock Appreciation Right, the Participant must
provide written notice of exercise to the Company in compliance with the provisions of the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right. The appreciation distribution
payable on the exercise of a Stock Appreciation Right will be not greater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the Stock
Appreciation Right) of a number of shares of Common Stock equal to the number of Common Stock equivalents in which the Participant is vested under such Stock Appreciation Right, and with respect to
which the Participant is exercising the Stock Appreciation Right on such date, over (B) the strike price that will be determined by the Board at the time of grant of the Stock Appreciation
Right. The appreciation distribution in respect to a Stock Appreciation Right may be paid in Common Stock, in cash, in any combination of the two or in any other form of consideration, as determined
by the Board and contained in the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right. 


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



          (i)  Restrictions on Transfer.    An Option or SAR shall not be transferable except by will or by the laws of
descent and distribution and shall be exercisable during the lifetime of the Participant only by the
Participant; provided, however, that the Board may, in its sole discretion, permit transfer of the Option or SAR in a manner that is not prohibited by
applicable tax and securities laws upon the Participant's request. Except as explicitly provided herein, neither an Option nor a SAR may be transferred for consideration. 


         (ii)  Domestic Relations Orders.    Notwithstanding the foregoing, an Option or SAR may be transferred pursuant to a
domestic relations order; provided, however, that if an Option is an Incentive Stock Option, such Option may be deemed to be a Nonstatutory Stock Option
as a result of such transfer. 


       (iii)  Beneficiary Designation.    Notwithstanding the foregoing, the Participant may, by delivering written notice
to the Company, in a form provided by or otherwise satisfactory to the Company and any broker designated by the Company to effect Option exercises, designate a third party who, in the event of the
death of the Participant, shall thereafter be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise. In the absence of such a
designation, the executor or administrator of the Participant's estate shall be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise. 



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        (f)    Vesting Generally.    The total number of shares of Common Stock subject to an Option or SAR may vest and
therefore become exercisable in periodic installments that may or may not be equal. The Option or SAR may be subject to such other terms and conditions on the time or times when it may or may not be
exercised (which may be based on the satisfaction of Performance Goals or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options or SARs may vary. The
provisions of this Section 5(f) are subject to any Option or SAR provisions governing the minimum number of shares of Common Stock as to which an Option or SAR may be exercised. 



        (g)    Termination of Continuous Service.    Except as otherwise provided in the applicable Award Agreement or other
agreement between the Participant and the Company, if a Participant's Continuous Service terminates (other than for Cause or upon the Participant's death or Disability), the Participant may exercise
his or her Option or SAR (to the extent that the Participant was entitled to exercise such Award as of the date of termination of Continuous Service) but only within such period of time ending on the
earlier of (i) the date three (3) months following the termination of the Participant's Continuous Service (or such longer or shorter period specified in the applicable Award Agreement),
or (ii) the expiration of the term of the Option or SAR as set forth in the Award Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Option or
SAR within the time specified herein or in the Award Agreement (as applicable), the Option or SAR shall terminate. 


        (h)    Extension of Termination Date.    If the exercise of an Option or SAR following the termination of the
Participant's Continuous Service (other than for Cause or upon the Participant's death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would
violate the registration requirements under the Securities Act, then the Option or SAR shall terminate on the earlier of (i) the expiration of a total period of three (3) months (that
need not be consecutive) after the termination of the Participant's Continuous Service during which the exercise of the Option or SAR would not be in violation of such registration requirements, or
(ii) the expiration of the term of the Option or SAR as set forth in the applicable Award Agreement. In addition, unless otherwise provided in a Participant's Award Agreement, if the sale of
any Common Stock received upon exercise of an Option or SAR following the termination of the Participant's Continuous Service (other than for Cause) would violate the Company's insider trading policy,
then the Option or SAR shall terminate on the earlier of (i) the expiration of a period equal to the applicable post-termination exercise period after the termination of the
Participant's Continuous Service during which the sale of the Common Stock received upon exercise of the Option or SAR would not be in violation of the Company's insider trading policy, or
(ii) the expiration of the term of the Option or SAR as set forth in the applicable Award Agreement. 


        (i)    Disability of Participant.    Except as otherwise provided in the applicable Award Agreement or other agreement
between the Participant and the Company, if a Participant's Continuous Service terminates as a result of the Participant's Disability, the Participant may exercise his or her Option or SAR (to the
extent that the Participant was entitled to exercise such Option or SAR as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of
(i) the date twelve (12) months following such termination of Continuous Service (or such longer or shorter period specified in the Award Agreement), or (ii) the expiration of the
term of the Option or SAR as set forth in the Award Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR within the time specified herein
or in the Award Agreement (as applicable), the Option or SAR (as applicable) shall terminate. 


        (j)    Death of Participant.    Except as otherwise provided in the applicable Award Agreement or other agreement
between the Participant and the Company, if (i) a Participant's Continuous Service terminates as a result of the Participant's death, or (ii) the Participant dies within the period (if
any) specified in the Award Agreement after the termination of the Participant's Continuous Service for a reason other than death, then the Option or SAR may be exercised (to the extent the
Participant was entitled to exercise such Option or SAR as of the date of death) by the Participant's estate, by a person 


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who
acquired the right to exercise the Option or SAR by bequest or inheritance or by a person designated to exercise the Option or SAR upon the Participant's death, but only within the period ending
on the earlier of (i) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Award Agreement), or (ii) the expiration of the
term of such Option or SAR as set forth in the Award Agreement. If, after the Participant's death, the Option or SAR is not exercised within the time specified herein or in the Award Agreement (as
applicable), the Option or SAR shall terminate. 


        (k)    Termination for Cause.    Except as explicitly provided otherwise in a Participant's Award Agreement, if a
Participant's Continuous Service is terminated for Cause, the Option or SAR shall terminate upon the date on which the event giving rise to the termination occurred, and the Participant shall be
prohibited from exercising his or her Option or SAR from and after the time of such termination of Continuous Service. 



        (l)    Non-Exempt Employees.    No Option or SAR granted to an Employee who is a non-exempt
employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable for any shares of Common Stock until at least six (6) months following the date of grant of
the Option or SAR. Notwithstanding the foregoing, consistent with the provisions of the Worker Economic Opportunity Act, (i) in the event of the Participant's death or Disability,
(ii) upon a Corporate Transaction in which such Option or SAR is not assumed, continued, or substituted, (iii) upon a Change in Control, or (iv) upon the Participant's retirement
(as such term may be defined in the Participant's Award Agreement or in another applicable agreement or in accordance with the Company's then current employment policies and guidelines), any such
vested Options and SARs may be exercised earlier than six months following the date of grant. The foregoing provision is intended to operate so that any income derived by a non-exempt
employee in connection with the exercise or vesting of an Option or SAR will be exempt from his or her regular rate of pay. 


6.     PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS AND SARS.  


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



          (i)  Consideration.    A Restricted Stock Award may be awarded in consideration for (A) cash, check, bank
draft or money order payable to the Company, (B) past services to the Company or an Affiliate, or (C) any other form of legal consideration (including future services) that may be
acceptable to the Board, in its sole discretion, and permissible under applicable law. 


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



       (iii)  Termination of Participant's Continuous Service.    If a Participant's Continuous Service terminates, the
Company may receive through a forfeiture condition or a repurchase right any or all of the shares of Common Stock held by the Participant that have not vested as of the date of termination of
Continuous Service under the terms of the Restricted Stock Award Agreement. 



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


         (v)  Dividends.    A Restricted Stock Award Agreement may provide that any dividends paid on Restricted Stock will
be subject to the same vesting and forfeiture restrictions as apply to the shares subject to the Restricted Stock Award to which they relate. 




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



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


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


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


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


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


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



9







 

        (c)   Performance Awards.



          (i)  Performance Stock Awards.    A Performance Stock Award is a Stock Award that may vest or may be exercised
contingent upon the attainment during a Performance Period of certain Performance Goals. A Performance Stock Award may, but need not, require the completion of a specified period of Continuous
Service. The length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been
attained shall be conclusively determined by the Committee, in its sole discretion. At such time as the Plan must contain share limits in order for performance-based equity awards to be exempt from
the one million dollar ($1,000,000) limit on deductibility under the applicable provisions
of Section 162(m) of the Code, the maximum number of shares covered by an Award that may be granted to any Participant in a calendar year attributable to Stock Awards described in this
Section 6(c)(i) (whether the grant, vesting or exercise is contingent upon the attainment during a Performance Period of the Performance Goals) shall not exceed One Million (1,000,000) shares
of Common Stock (subject to any necessary stockholder approval at such time). The Board may provide for or, subject to such terms and conditions as the Board may specify, may permit a Participant to
elect for, the payment of any Performance Stock Award to be deferred to a specified date or event. In addition, to the extent permitted by applicable law and the applicable Award Agreement, the Board
may determine that cash may be used in payment of Performance Stock Awards. 


         (ii)  Performance Cash Awards.    A Performance Cash Award is a cash award that may be paid contingent upon the
attainment during a Performance Period of certain Performance Goals. A Performance Cash Award may also require the completion of a specified period of Continuous Service. At the time of grant of a
Performance Cash Award, the length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals
have been attained shall be conclusively determined by the Committee, in its sole discretion. At such time as the Plan must contain dollar limits in order for performance-based cash awards to be
exempt from the one million dollar ($1,000,000) limit on deductibility under the applicable provisions of Section 162(m) of the Code, in any calendar year, the Committee may not grant a
Performance Cash Award that has a maximum value that may be paid to any Participant in excess of one million dollars ($1,000,000) (subject to any necessary stockholder approval at such time). The
Board may provide for or, subject to such terms and conditions as the Board may specify, may permit a Participant to elect for, the payment of any Performance Cash Award to be deferred to a specified
date or event. The Committee may specify the form of payment of Performance Cash Awards, which may be cash or other property, or may provide for a Participant to have the option for his or her
Performance Cash Award, or such portion thereof as the Board may specify, to be paid in whole or in part in cash or other property. 


       (iii)  Section 162(m) Compliance.    Unless otherwise permitted in compliance with the requirements of
Section 162(m) of the Code with respect to an Award intended to qualify as "performance-based compensation" thereunder, the Committee shall establish the Performance Goals applicable to, and
the formula for calculating the amount payable under, the Award no later than the earlier of (a) the date ninety (90) days after the commencement of the applicable Performance Period, or
(b) the date on which twenty-five (25%) of the Performance Period has elapsed, and in any event at a time when the achievement of the applicable Performance Goals remains
substantially uncertain. Prior to the payment of any compensation under an Award intended to qualify as "performance-based compensation" under Section 162(m) of the Code, the Committee shall
certify the extent to which any Performance Goals and any other material terms under such Award have been satisfied (other than in cases where such relate solely to the increase in the value of the
Common Stock). Notwithstanding satisfaction of any completion of any 



10







 




Performance
Goals, to the extent specified at the time of grant of an Award to "covered employees" within the meaning of Section 162(m) of the Code, the number of Shares, Options, cash or other
benefits granted, issued, retainable and/or vested under an Award on account of satisfaction of such Performance Goals may be reduced by the Committee on the basis of such further considerations as
the Committee, in its sole discretion, shall determine. 




        (d)    Other Stock Awards.    Other forms of Stock Awards valued in whole or in part by reference to, or otherwise
based on, Common Stock, including the appreciation in value thereof (e.g., options or stock rights with an exercise price or strike price less than 100% of the Fair Market Value of the Common
Stock at the time of grant) may be granted either alone or in addition to Stock Awards provided for under Section 5 and the preceding provisions of this Section 6. Subject to the
provisions of the Plan, the Board shall have sole and complete authority to determine the persons to whom and the time or times at which such Other Stock Awards will be granted, the number of shares
of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock Awards and all other terms and conditions of such Other Stock Awards. 


7.     COVENANTS OF THE COMPANY.  


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



        (b)    Securities Law Compliance.    The Company shall seek to obtain from each regulatory commission or agency having
jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided,
however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to
any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the
lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained. A Participant shall not be eligible for the grant of a Stock Award or the subsequent issuance of Common Stock pursuant to the Stock Award if such grant or issuance would be
in violation of any applicable securities law. 


        (c)    No Obligation to Notify or Minimize Taxes.    The Company shall have no duty or obligation to any Participant
to advise such holder as to the time or manner of exercising such Stock Award. Furthermore, the Company shall have no duty or obligation to warn or otherwise advise such holder of a pending
termination or expiration of a Stock Award or a possible period in which the Stock Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of a Stock Award
to the holder of such Stock Award. 


8.     MISCELLANEOUS.  


        (a)    Use of Proceeds from Sales of Common Stock.    Proceeds from the sale of shares of Common Stock pursuant to
Stock Awards shall constitute general funds of the Company. 



        (b)    Corporate Action Constituting Grant of Stock Awards.    Corporate action constituting a grant by the Company of
a Stock Award to any Participant shall be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter
evidencing the Stock Award is communicated to, or actually received or accepted by, the Participant. 


11









 



































  
        (c)    Stockholder Rights.    No Participant shall be deemed to be the holder of, or to have any of the rights of a
holder with respect to, any shares of Common Stock subject to such Stock Award unless and until (i) such Participant has satisfied all requirements for exercise of the Stock Award pursuant to
its terms, if applicable, and (ii) the issuance of the Common Stock subject to such Stock Award has been entered into the books and records of the Company. 


        (d)    No Employment or Other Service Rights.    Nothing in the Plan, any Stock Award Agreement or any other
instrument executed thereunder or in connection with any Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in
effect at the time the Stock Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without
cause, (ii) the service of a Consultant pursuant to the terms of such Consultant's agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the Bylaws
of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be. 



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



        (f)    Investment Assurances.    The Company may require a Participant, as a condition of exercising or acquiring
Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant's knowledge and experience in financial and business matters and/or to
employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or
together with the purchaser representative, the merits and risks of exercising the Stock Award; and
(ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Stock Award for the Participant's own account and not with any
present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (A) the
issuance of the shares upon the exercise or acquisition of Common Stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act, or
(B) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws.
The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer of the Common Stock. 



        (g)    Withholding Obligations.    Unless prohibited by the terms of a Stock Award Agreement, the Company may, in its
sole discretion, satisfy any federal, state or local tax withholding obligation relating to an Award by any of the following means or by a combination of such means: (i) causing the Participant
to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Award;  provided, however,
that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such
lesser amount as may be necessary to avoid classification of the Stock Award as a liability for financial accounting purposes); (iii) withholding cash from an Award settled in cash;
(iv) withholding payment from any amounts otherwise payable to the Participant; or (v) by such other method as may be set forth in the Award Agreement. 


12







 

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


        (i)    Deferrals.    To the extent permitted by applicable law, the Board, in its sole discretion, may determine that
the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Award may be deferred and may establish programs and procedures for deferral
elections to be made by Participants. Deferrals by Participants will be made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board may provide
for distributions while a Participant is still an employee or otherwise providing services to the Company. The Board is authorized to make deferrals of Awards and determine when, and in what annual
percentages, Participants may receive payments, including lump sum payments, following the Participant's termination of Continuous Service, and implement such other terms and conditions consistent
with the provisions of the Plan and in accordance with applicable law. 


        (j)    Compliance with Section 409A.    To the extent that the Board determines that any Award granted
hereunder is subject to Section 409A of the Code, the Award Agreement evidencing such Award shall
incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code. To the extent applicable, the Plan and Award Agreements shall be
interpreted in accordance with Section 409A of the Code. Notwithstanding anything to the contrary in this Plan (and unless the Award Agreement specifically provides otherwise), if the Shares
are publicly traded and a Participant holding an Award that constitutes "deferred compensation" under Section 409A of the Code is a "specified employee" for purposes of Section 409A of
the Code, no distribution or payment of any amount shall be made upon a "separation from service" before a date that is six (6) months following the date of such Participant's "separation from
service" (as defined in Section 409A of the Code without regard to alternative definitions thereunder) or, if earlier, the date of the Participant's death. 


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


        (a)    Capitalization Adjustments.    In the event of a Capitalization Adjustment, the Board shall appropriately and
proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of securities that
may be issued pursuant to the exercise of Incentive Stock Options pursuant to Section 3(c), (iii) the class(es) and maximum number of securities that may be awarded to any person
pursuant to Sections 3(d) and 6(c)(i) , and (iv) the class(es) and number of securities and price per share of stock subject to outstanding Stock Awards. The Board shall make such
adjustments, and its determination shall be final, binding and conclusive. 


        (b)    Dissolution or Liquidation.    Except as otherwise provided in the Stock Award Agreement, in the event of a
dissolution or liquidation of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to a forfeiture condition or
the Company's right of repurchase) shall terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company's repurchase rights or
subject to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fact that the holder of such Stock Award is providing Continuous Service,  provided, however, that
the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or no longer
subject to repurchase or forfeiture (to the extent such Stock Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion. 



          (i)  Corporate Transaction.    The following provisions shall apply to Stock Awards in the event of a Corporate
Transaction unless otherwise provided in the instrument evidencing the Stock Award or any other written agreement between the Company or any Affiliate and the holder of 



13







 

the
Stock Award or unless otherwise expressly provided by the Board at the time of grant of a Stock Award. In the event of a Corporate Transaction, then, notwithstanding any other provision of the
Plan, the Board shall take one or more of the following actions with respect to Stock Awards, contingent upon the closing or completion of the Corporate Transaction: 


         (ii)  arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation's parent
company) to assume or continue the Stock Award or to substitute a similar stock award for the Stock Award (including, but not limited to, an award to acquire the same consideration paid to the
stockholders of the Company pursuant to the Corporate Transaction); 


       (iii)  arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Common Stock
issued pursuant to the Stock Award to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation's parent company); 


        (iv)  accelerate the vesting of the Stock Award (and, if applicable, the time at which the Stock Award may be exercised) to a
date prior to the effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five (5) days prior to the
effective date of the Corporate Transaction), with such Stock Award terminating if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction; 



         (v)  arrange for the lapse of any reacquisition or repurchase rights held by the Company with respect to the Stock Award; 


        (vi)  cancel or arrange for the cancellation of the Stock Award, to the extent not vested or not exercised prior to the
effective time of the Corporate Transaction, in exchange for such cash consideration, if any, as the Board, in its sole discretion, may consider appropriate; and 


       (vii)  make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of
the property the Participant would have received upon the exercise of the Stock Award immediately prior to the effective time of the Corporate Transaction, over (B) any exercise price payable
by such holder in connection with such exercise. 




        The
Board need not take the same action or actions with respect to all Stock Awards or portions thereof or with respect to all Participants. 


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


10.   TERMINATION OR SUSPENSION OF THE PLAN.  


        (a)    Plan Term.    The Board may suspend or terminate the Plan at any time; provided,
however, that Incentive Stock Options may no longer be granted under the Plan after the day before the tenth (10th) anniversary of the earlier of (i) the date the Plan
is adopted by the Board, or (ii) the date the Plan is approved by the stockholders of the Company. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated. 


        (b)    No Impairment of Rights.    Suspension or termination of the Plan shall not impair rights and obligations under
any Award granted while the Plan is in effect except with the written consent of the affected Participant. 


14







 

11.   EFFECTIVE DATE OF PLAN.  


        The Plan shall become effective on the IPO Date, but no Stock Award shall be exercised (or, in the case of a Restricted Stock Award, Restricted Stock Unit Award,
Performance Stock Award, or Other Stock Award, shall be granted and no Performance Cash Award shall be settled) unless and until the Plan has been approved by the stockholders of the Company, which
approval shall be within twelve (12) months after the date the Plan is adopted by the Board. 


12.   CHOICE OF LAW.  


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


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


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


        (b)   "Award" means a Stock Award or a Performance Cash Award. 


        (c)   "Award Agreement" means a written agreement between the Company and a Participant evidencing the
terms and conditions of an Award. 


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



        (e)   "Capitalization Adjustment" means any change that is made in, or other events that occur with
respect to, the Common Stock subject to the Plan or subject to any Stock Award after the Effective Date without the receipt of consideration by the Company through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, liquidating dividend, combination of shares,
exchange of shares, change in corporate structure or any similar equity restructuring transaction, as that term is used in Statement of Financial Accounting Standards No. 123 (revised).
Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall not be treated as a Capitalization Adjustment. 


        (f)    "Cause" shall have the meaning ascribed to such term in any written agreement between the
Participant and the Company defining such term and, in the absence of such agreement, such term shall mean, with respect to a Participant, the occurrence of any of the following events that has a
material negative impact on the business or reputation of the Company: (i) such Participant's attempted commission of, or participation in, a fraud or act of dishonesty against the Company;
(ii) such Participant's intentional, material violation of any contract or agreement between the Participant and the Company or of any statutory duty owed to the Company; (iii) such
Participant's unauthorized use or disclosure of the Company's confidential information or trade secrets; or (iv) such Participant's gross misconduct. The determination that a termination of the
Participant's Continuous Service is either for Cause or without Cause shall be made by the Company, in its sole discretion. Any determination by the Company that the Continuous Service of a
Participant was terminated with or without Cause for the purposes of outstanding Awards held by such Participant shall have no effect upon any determination of the rights or obligations of the Company
or such Participant for any other purpose. 


15







 

        (g)   "Change in Control" means the occurrence, in a single transaction or in a series of related
transactions, of any one or more of the following events: 



          (i)  any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than
fifty percent (50%) of the combined voting power of the Company's then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a
Change in Control shall not be deemed to occur (A) on account of the acquisition of securities of the Company directly from the Company, (B) on account of the acquisition of securities
of the Company by an investor, any affiliate thereof or any other Exchange Act Person that acquires the Company's securities in a transaction or series of related transactions the primary purpose of
which is to obtain financing for the Company through the issuance of equity securities, or (C) solely because the level of Ownership held by any Exchange Act Person (the
"Subject Person") exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of
voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of
voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not
occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur; 


         (ii)  there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and,
immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either
(A) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar
transaction or (B) more than fifty percent (50%) of the combined outstanding voting power of the
parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the
Company immediately prior to such transaction; 


       (iii)  there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the
consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its
Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions
as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; or 


        (iv)  individuals who, on the date the Plan is adopted by the Board, are members of the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the members of the Board; provided,
however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent
Board then still in office, such new member shall, for purposes of this Plan, be considered as a member of the Incumbent Board. 




        Notwithstanding
the foregoing or any other provision of this Plan, (A) the term Change in Control shall not include a sale of assets, merger or other transaction effected
exclusively for the purpose of changing the domicile of the Company, and (B) the definition of Change in Control (or any analogous term) in an individual written agreement between the Company
or any Affiliate and the Participant shall supersede the foregoing definition with respect to Awards subject to such agreement; provided,  


16







 

 however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply. 


        (h)   "Code" means the Internal Revenue Code of 1986, as amended, including any applicable regulations
and guidance thereunder. 


        (i)    "Committee" means a committee of one (1) or more Directors to whom authority has been
delegated by the Board in accordance with Section 2(c). 


        (j)    "Common Stock" means the common stock of the Company. 


        (k)   "Company" means Anacor Pharmaceuticals, Inc., a Delaware corporation. 



        (l)    "Consultant" means any person, including an advisor, who is (i) engaged by the Company or
an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such
services. However, service solely as a Director, or payment of a fee for such service, shall not cause a Director to be considered a "Consultant" for purposes of the Plan. Notwithstanding the
foregoing, a person is treated as a Consultant under this Plan only if a Form S-8 Registration Statement under the Securities Act is available to register either the offer or the
sale of the Company's securities to such person. 


        (m)  "Continuous Service" means that the Participant's service with the Company or an Affiliate,
whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant's service with the Company or
an Affiliate, shall not terminate a Participant's Continuous Service ; provided, however, if the Entity for which a Participant is rendering services
ceases to qualify as an Affiliate, as determined by the Board, in its sole discretion, such Participant's Continuous Service shall be considered to have terminated on the date such Entity ceases to
qualify as an Affiliate. To the extent permitted by law, the Board or the chief executive officer of the Company, in that party's sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of (i) any leave of absence approved by the Board or Chief Executive Officer, including sick leave, military leave or any other personal leave, or
(ii) transfers between the Company, an Affiliate, or their successors. Notwithstanding the foregoing, a leave of absence shall be treated as Continuous Service for purposes of vesting in a
Stock Award only to such extent as may be provided in the Company's leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as
otherwise required by law. 


        (n)   "Corporate Transaction" means the occurrence, in a single transaction or in a series of related
transactions, of any one or more of the following events: 



          (i)  the consummation of a sale or other disposition of all or substantially all, as determined by the Board, in its sole
discretion, of the consolidated assets of the Company and its Subsidiaries; 



         (ii)  the consummation of a sale or other disposition of at least ninety percent (90%) of the outstanding securities of the
Company; 


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


        (iv)  the consummation of a merger, consolidation or similar transaction following which the Company is the surviving
corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or
similar transaction into other property, whether in the form of securities, cash or otherwise. 




        (o)   "Covered Employee" shall have the meaning provided in Section 162(m)(3) of the Code. 


17







 

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


        (q)   "Disability" means, with respect to a Participant, the inability of such Participant to engage in
any substantial gainful activity 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, as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the Code, and shall be determined by the Board on the basis of such
medical evidence as the Board deems warranted under the circumstances. 


        (r)   "Effective Date" means the effective date of the Plan as set forth in Section 11. 


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



        (t)    "Entity" means a corporation, partnership, limited liability company or other entity. 


        (u)   "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder. 


        (v)   "Exchange Act Person" means any natural person, Entity or "group" (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), except that "Exchange Act Person" shall not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan
of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an
underwriter temporarily holding securities pursuant to a registered public offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or "group" (within the meaning of Section 13(d) or 14(d) of the Exchange
Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company's then
outstanding securities. 


        (w)  "Fair Market Value" means, as of any date, the value of the Common Stock determined as follows: 



          (i)  If the Common Stock is listed on any established stock exchange or traded on any established market, the Fair Market
Value of a share of Common Stock shall be, unless otherwise determined by the Board, the closing sales price for such stock as quoted on such exchange or market (or the exchange or market with the
greatest volume of trading in the Common Stock) on the date of determination, as reported in a source the Board deems reliable. 


         (ii)  Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date of
determination, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. 



       (iii)  In the absence of such markets for the Common Stock, the Fair Market Value shall be determined by the Board in good
faith and in a manner that complies with Sections 409A and 422 of the Code. 




        (x)   "Incentive Stock Option" means an option granted pursuant to Section 5 of the Plan that is
intended to be, and qualifies as, an "incentive stock option" within the meaning of Section 422 of the Code. 



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


18







 

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



        (aa) "Nonstatutory Stock Option" means any option granted pursuant to Section 5 of the Plan
that does not qualify as an Incentive Stock Option. 


        (bb) "Officer" means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act. 


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


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


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


        (ff)  "Other Stock Award" means an award based in whole or in part by reference to the Common Stock
which is granted pursuant to the terms and conditions of Section 6(d). 


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



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



        (ii)   "Own," "Owned,"
"Owner," "Ownership" A person or Entity shall be deemed to "Own," to have "Owned," to be the "Owner" of,
or to have acquired "Ownership" of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power,
which includes the power to vote or to direct the voting, with respect to such securities. 



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


        (kk) "Performance Cash Award" means an award of cash granted pursuant to the terms and conditions of
Section 6(c)(ii). 


        (ll)   "Performance Criteria" means the one or more criteria that the Board shall select for purposes
of establishing the Performance Goals for a Performance Period. The Performance Criteria that shall be used to establish such Performance Goals may be based on any one of, or combination of, the 


19







 



following
as determined by the Board: (i) earnings (including earnings per share and net earnings); (ii) earnings before interest, taxes and depreciation; (iii) earnings before
interest, taxes, depreciation and amortization; (iv) total stockholder return; (v) return on equity or average stockholder's equity; (vi) return on assets, investment, or capital
employed; (vii) stock price; (viii) margin (including gross margin); (ix) income (before or after taxes); (x) operating income; (xi) operating income after taxes;
(xii) pre-tax profit; (xiii) operating cash flow; (xiv) sales or revenue targets; (xv) increases in revenue or product revenue; (xvi) expenses and cost
reduction goals; (xvii) improvement in or attainment of working capital levels; (xiii) economic value added (or an equivalent metric); (xix) market share; (xx) cash flow;
(xxi) cash flow per share; (xxii) share price performance; (xxiii) debt reduction; (xxiv) implementation or completion of projects or processes; (xxv) customer
satisfaction; (xxvi) stockholders' equity; (xxvii) capital expenditures; (xxiii) debt levels; (xxix) operating profit or net operating profit; (xxx) workforce
diversity; (xxxi) growth of net income or operating income; (xxxii) billings; and (xxxiii) to the extent that an Award is not intended to comply with Section 162(m) of the
Code, other measures of performance selected by the Board. 


        (mm)  "Performance Goals" means, for a Performance Period, the one or more goals established by the
Board for the Performance Period based upon the Performance Criteria. Performance Goals may be based on a Company-wide basis, with respect to one or more business units, divisions,
Affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. Unless specified
otherwise by the Board (i) in the Award Agreement at the time the Award is granted or (ii) in such other document setting forth the Performance Goals at the time the Performance Goals
are established, the Board shall appropriately make adjustments in the method of calculating the attainment of Performance Goals for a Performance Period as follows: (1) to exclude
restructuring and/or other nonrecurring charges; (2) to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated Performance Goals; (3) to exclude the
effects of changes to generally accepted accounting principles; (4) to exclude the effects of any statutory adjustments to corporate tax rates; (5) to exclude the effects of any
"extraordinary items" as determined under generally accepted accounting principles; (6) to exclude the dilutive effects of acquisitions or joint ventures; (7) to assume that any business
divested by the Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture; (8) to exclude the effect of any change in the
outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination
or exchange of shares or other similar corporate change, or any distributions to common shareholders other than regular cash dividends; (9) to exclude the effects of stock based compensation
and/or the award of bonuses under the Company's bonus plans and (10) to exclude the effect of any other unusual, non-recurring gain or loss or other extraordinary item. In addition,
the Board retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals and to define the manner of calculating the Performance Criteria
it selects to use for such Performance Period. Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in the Stock
Award Agreement or the written terms of a Performance Cash Award. 


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


        (oo) "Performance Stock Award" means a Stock Award granted under the terms and conditions of
Section 6(c)(i). 


        (pp) "Plan" means this Anacor Pharmaceuticals, Inc. 2010 Equity Incentive Plan. 


20







 

        (qq) "Restricted Stock Award" means an award of shares of Common Stock which is granted pursuant to
the terms and conditions of Section 6(a). 


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



        (ss) "Restricted Stock Unit Award" means a right to receive shares of Common Stock which is granted
pursuant to the terms and conditions of Section 6(b). 


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


        (uu) "Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act or any successor to Rule 16b-3, as in effect from time to time. 


        (vv) "Securities Act" means the Securities Act of 1933, as amended. 


        (ww)  "Stock Appreciation Right" or "SAR" means a
right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 5. 


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


        (yy) "Stock Award" means any right to receive Common Stock granted under the Plan, including an
Incentive Stock Option, a Nonstatutory Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, a Stock Appreciation Right, a Performance Stock Award or any Other Stock Award. 


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


        (aaa)  "Subsidiary" means, with respect to the Company, (i) any corporation of which more than
fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any
other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and
(ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital
contribution) of more than fifty percent (50%). 


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


21












































  ANACOR PHARMACEUTICALS, INC.

STOCK OPTION GRANT NOTICE

(2010 EQUITY INCENTIVE PLAN)  


        Anacor Pharmaceuticals, Inc. (the "Company"), pursuant to its 2010 Equity Incentive Plan
(the "Plan"), hereby grants to Optionholder an option to purchase the number of shares of the Company's Common Stock set forth below. This option is
subject to all of the terms and conditions as set forth herein and in the Option Agreement, the Plan, and the Notice of Exercise, all of which are attached hereto and incorporated herein in their
entirety. 

 






 



			
	Optionholder:	 	 
	 	 	





  
	Date of Grant:	 	 
	 	 	





  
	Vesting Commencement Date:	 	 
	 	 	





  
	Number of Shares Subject to Option:	 	 
	 	 	





  
	Exercise Price (Per Share):	 	 
	 	 	





  
	Total Exercise Price:	 	 
	 	 	





  
	Expiration Date:	 	 
	 	 	





  




 


 






  



									
	Type of Grant:	 	 o	 	 Incentive Stock Option(1)	 	 o	 	 Nonstatutory Stock Option
	
Exercise Schedule:	
 	
 o	
 	
 Same as Vesting Schedule	
 	

 	
 	

 
	
Vesting Schedule:	
 	
[1/4th of the shares vest one year after the Vesting Commencement Date; the balance of the shares vest in a series of thirty-six (36) successive equal monthly installments measured from the first
anniversary of the Vesting Commencement Date.]
	
Payment:	
 	
By one or a combination of the following items (described in the Option Agreement):
	

 	
 	
 o	
 	
By cash or check
	

 	
 	
 o	
 	
By bank draft or money order payable to the Company
	

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

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

 	
 	
 o	
 	
If and only to the extent this option is a Nonstatutory Stock Option, and subject to the Company's consent at the time of exercise, by a "net exercise" arrangement(2)
	
 Additional Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and understands and agrees to, this Stock Option Grant Notice, the Option Agreement and
the Plan. Optionholder further acknowledges that as of the Date of Grant, this Stock Option Grant Notice, the Option Agreement, and the Plan set forth the entire understanding between Optionholder and the Company regarding the acquisition of stock in
the Company and supersede all prior oral and written agreements on that subject with the exception of (i) options previously granted and delivered to Optionholder by the Company, and (ii) the following agreements only:




 


 






 



			
	OTHER AGREEMENTS:	 	 
	 	 	





  
	 	 	





  




 

 




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



	(2)
	An
Incentive Stock Option may not be exercised by a net exercise arrangement. 







 






 



							
	 ANACOR PHARMACEUTICALS, INC.	 	OPTIONHOLDER:
	
 By:	
 	
 	
 	

 	
 	

 
	 	 	





  Signature	 	





  Signature
	
 Title:	
 	
 	
 	
Date:	
 	
 
	 	 	





  	 	 	 	





  
	Date:	 	 	 	 	 	 
	 	 	





  	 	 	 	 
	 ATTACHMENTS: Option Agreement, 2010 Equity Incentive Plan and Notice of Exercise




 

 










































  ATTACHMENT I  


 OPTION AGREEMENT  













































  ATTACHMENT II  


 2010 EQUITY INCENTIVE PLAN  













































  ATTACHMENT III  


 NOTICE OF EXERCISE  








 




































 ANACOR PHARMACEUTICALS, INC.
2010 EQUITY INCENTIVE PLAN


OPTION AGREEMENT
(INCENTIVE STOCK OPTION OR NONSTATUTORY STOCK OPTION)  


        Pursuant to your Stock Option Grant Notice ("Grant Notice") and this Option Agreement,
Anacor Pharmaceuticals, Inc. (the "Company") has granted you an option under its 2010 Equity Incentive Plan (the
"Plan") to purchase the number of shares of the Company's Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant
Notice. Defined terms not explicitly defined in this Option Agreement but defined in the Plan shall have the same definitions as in the Plan. 


        The
details of your option are as follows: 


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


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



        3.    EXERCISE RESTRICTION FOR NON-EXEMPT EMPLOYEES.    In the event that you are
an Employee eligible for overtime compensation under the Fair Labor Standards Act of 1938, as amended (i.e., a
"Non-Exempt Employee"), and except as otherwise provided in the Plan, you may not exercise your option until you have completed at least six
(6) months of Continuous Service measured from the Date of Grant specified in your Grant Notice, notwithstanding any other provision of your option. 



        4.    EXERCISE PRIOR TO VESTING ("EARLY EXERCISE").    If permitted in your Grant Notice
(i.e., the "Exercise Schedule" indicates "Early Exercise Permitted") and subject to the provisions of your option, you may elect at any time that is
both (i) during the period of your Continuous Service and (ii) during the term of your option, to exercise all or part of your option, including the unvested portion of your option;  provided, however, that: 



        (a)   a partial exercise of your option shall be deemed to cover first vested shares of Common Stock and then the earliest
vesting installment of unvested shares of Common Stock; 


        (b)   any shares of Common Stock so purchased from installments that have not vested as of the date of exercise shall be
subject to the purchase option in favor of the Company as described in the Company's form of Early Exercise Stock Purchase Agreement; 



        (c)   you shall enter into the Company's form of Early Exercise Stock Purchase Agreement with a vesting schedule that will
result in the same vesting as if no early exercise had occurred; and 


        (d)   if your option is an Incentive Stock Option, then, to the extent that the aggregate Fair Market Value (determined at the
time of grant) of the shares of Common Stock with respect to which your option plus all other Incentive Stock Options you hold are exercisable for the first time by you during any calendar year (under
all plans of the Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), your option(s) or portions thereof that exceed such limit (according to the order in which they were
granted) shall be treated as Nonstatutory Stock Options. 




        5.    METHOD OF PAYMENT.    Payment of the exercise price is due in full upon exercise of all
or any part of your option. You may elect to make payment of the exercise price in cash or by check or in any other manner permitted by your Grant
Notice, which may include one or more of the following: 


1







 

        (a)   Provided that at the time of exercise the Common Stock is publicly traded, pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds. 



        (b)   Provided that at the time of exercise the Common Stock is publicly traded, by delivery to the Company (either by actual
delivery or attestation) of already-owned shares of Common Stock that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the
date of exercise. "Delivery" for these purposes, in the sole discretion of the Company at the time you exercise your option, shall include delivery to the Company of your attestation of ownership of
such shares of Common Stock in a form approved by the Company. Notwithstanding the foregoing, you may not exercise your option by tender to the Company of Common Stock to the extent such tender would
violate the provisions of any law, regulation or agreement restricting the redemption of the Company's stock. 



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




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


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


        8.    TERM.    You may not exercise your option before the commencement or after the
expiration of its term. The term of your option commences on the Date of Grant and expires, subject to the provisions of Section 5(h) of the Plan, upon the earliest of the following: 



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


        (b)   three (3) months after the termination of your Continuous Service for any reason other than Cause, your Disability
or death, provided that if during any part of such three (3) month period your option is not exercisable solely because of the condition set forth in the section above relating to "Securities
Law Compliance," your option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination
of your Continuous Service; and if (i) you are a Non-Exempt Employee, (ii) your Continuous Service terminates within six (6) months after the Date of Grant specified
in your Grant Notice, and (iii) you have vested in a portion of your option at the time of your termination of Continuous Service, your option shall not expire until the earlier of
(x) the later of (A) the date that is seven (7) months after the Date of Grant specified in your Grant Notice or 



2







 




(B) the
date that is three (3) months after the termination of your Continuous Service, or (y) the Expiration Date; 


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


        (d)   twelve (12) months after your death if you die either during your Continuous Service or within three
(3) months after your Continuous Service terminates for any reason other than Cause; 


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


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




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


        9.     EXERCISE.



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


        (b)   By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to
enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your option, (2) the
lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (3) the disposition of shares of Common Stock acquired upon such
exercise. 


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




        10.    TRANSFERABILITY.    Except as otherwise provided in this Section 10, your option
is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. 



        (a)    Certain Trusts.    Upon receiving written permission from the Board or its duly authorized designee, you may
transfer your option to a trust if you are considered to be the sole beneficial owner (determined under Section 671 of the Code and applicable state law) while the option is held in the trust,
provided that you and the trustee enter into transfer and other agreements required by the Company. 


        (b)   Domestic Relations Orders.    Upon receiving written permission from the Board or its duly authorized designee,
and provided that you and the designated transferee enter into transfer and other agreements required by the Company, you may transfer your option pursuant to a 



3







 




domestic
relations order that contains the information required by the Company to effectuate the transfer. You are encouraged to discuss the proposed terms of any division of this option with the
Company prior to finalizing the domestic relations order to help ensure the required information is contained within the domestic relations order. If this option is an Incentive Stock Option, this
option may be deemed to be a Nonstatutory Stock Option as a result of such transfer. 


        (c)   Beneficiary Designation.    Upon receiving written permission from the Board or its duly authorized designee,
you may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company and any broker designated by the Company to effect option exercises, designate a
third party who, in the event of your death, shall thereafter be entitled to exercise this option and receive the Common Stock or other consideration resulting from such exercise. In the absence of
such a designation, your executor or administrator of your estate shall be entitled to exercise this option and receive, on behalf of your estate, the Common Stock or other consideration resulting
from such exercise. 




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


        12.   WITHHOLDING OBLIGATIONS.



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


        (b)   Upon your request and subject to approval by the Company, in its sole discretion, and in compliance with any applicable
legal conditions or restrictions, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock
having a Fair Market Value, determined by the Company as of the date of exercise,
not in excess of the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of your option as a liability for financial accounting
purposes). If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of your option, share withholding pursuant to the preceding sentence
shall not be permitted unless you make a proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with
respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of your option. Notwithstanding the filing of such
election, shares of Common Stock shall be withheld solely from fully vested shares of Common Stock determined as of the date of exercise of your option that are otherwise issuable to you upon such
exercise. Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility. 


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



4







 

        13.    TAX CONSEQUENCES.    You hereby agree that the Company does not have a duty to design
or administer the Plan or its other compensation programs in a manner that minimizes your tax liabilities. You shall not make any claim against the Company, or any of its Officers, Directors,
Employees or Affiliates related to tax liabilities arising from your option or your other compensation. In particular, you acknowledge that this option is exempt from Section 409A of the Code
only if the exercise price per share specified in the Grant Notice is at least equal to the "fair market value" per share of the Common Stock on the Date of Grant and there is no other impermissible
deferral of compensation associated with the option. 


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


        15.    GOVERNING PLAN DOCUMENT.    Your option is subject to all the provisions of the Plan,
the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted
pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control. 


5








 




































  NOTICE OF EXERCISE  


 2010 EQUITY INCENTIVE PLAN  

 






 



					
	Anacor Pharmaceuticals, Inc.

1020 East Meadow Circle

Palo Alto, California 94303	 	 Date of Exercise:	 	







 




 

 Ladies
and Gentlemen: 


        This
constitutes notice under my stock option that I elect to purchase the number of shares for the price set forth below. 

 






 



									
	Type of option (check one):	 	Incentive	 	o	 	Nonstatutory	 	o
	
Stock option dated:	
 	








 	
 	

 	
 	

 
	
Number of shares as

to which option is

exercised:	
 	








 	
 	

 	
 	

 
	
Shares to be

issued in name of:	
 	








 	
 	

 	
 	

 




 


 






 



											
	Total exercise price:	 	$	 	







 	 	 	 	 
	

 	
 	
Cash payment delivered

herewith:	
 	
$	
 	








 	
 	

 	
 	

 
	

 	
 	
Regulation T Program (cashless exercise)	
 	
$	
 	









 	
 	

 	
 	

 
	

 	
 	
Value of                  shares of Anacor Pharmaceuticals, Inc. common stock pursuant to net
exercise(1):	
 	
$	
 	








 	
 	

 	
 	

 




 

         By
this exercise, I agree (i) to provide such additional documents as you may require pursuant to the terms of the 2010 Equity Incentive Plan, (ii) to provide for the
payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the exercise of this option, and (iii) if this exercise relates to an incentive stock
option, to notify you in writing within fifteen (15) days after the date of any disposition of any of the shares of Common Stock issued upon exercise of this option that occurs within two
(2) years after the date of grant of this option or within one (1) year after such shares of Common Stock are issued upon exercise of this option. 







	(1)
	Anacor
Pharmaceuticals, Inc. must have established net exercise procedures at the time of exercise in order to utilize this payment method and must
expressly consent to your use of net exercise at the time of exercise. An Incentive Stock Option may not be exercised by a net exercise arrangement. 


 






 



			
	 	 	Very truly yours,
	

 	
 	






  




 

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