Exhibit
10.2


METABASIS THERAPEUTICS, INC.


AMENDED AND RESTATED 2001 EQUITY INCENTIVE PLAN


Amendment and Restatement Adopted
by Board on June 6, 2001


Amendment and Restatement
Approved by Stockholders on July 23, 2001


Amendment Adopted by Board on
November 29, 2001


Amendment Adopted by Board on
August 21, 2002


Amendments Approved by
Stockholders on October 30, 2002


Amendment and Restatement Adopted
by Board on May 6, 2004


Amendment and Restatement
Approved by Stockholders on May 10, 2004


Amendment Adopted by Board on
January 17, 2007


Termination
Date:  May 10, 2014


1.             PURPOSES.


(a)           Amendment and Restatement.  The Plan amends and restates the Company’s
Amended and Restated 2001 Equity Incentive Plan adopted by the Board on June 6,
2001, as amended on November 29, 2001 and August 21, 2002 (the “Prior Plan”).  All outstanding options granted under the
Prior Plan shall remain subject to the terms of the Prior Plan.  All options granted subsequent to the
adoption of this Plan by the Board shall be subject to the terms of the Plan.


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


(c)           Available Stock Awards.  The purpose of the Plan is to provide a means
by which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of the
following Stock Awards:  (i) Incentive
Stock Options, (ii) Nonstatutory Stock Options, (iii) Restricted Stock Awards,
(iv) Stock Appreciation Rights, (v) Phantom Stock Awards and (vi) Other Stock
Awards.


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


2.             DEFINITIONS.


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


(b)           “Board”
means the Board of Directors of the Company.



 1
 









(c)            “Capitalization
Adjustment” has the meaning ascribed to that term
in Section 11(a).


(d)           “Cause”
means, with respect to a Participant, the
occurrence of any of the following:  (i)
such Participant’s conviction of any felony or any crime involving fraud or
dishonesty which, in the Board’s sole discretion, materially affects the
business of the Company; (ii) such Participant’s participation (whether by
affirmative act or omission) in a fraud, act of dishonesty or other act of
misconduct against the Company and/or its Affiliates which, in the Board’s sole
discretion, materially affects the business of the Company; (iii) conduct by
such Participant which, based upon a good faith and reasonable factual
investigation by the Company (or, if such Participant is an Officer, by the
Board), demonstrates such Participant’s gross unfitness to serve; (iv) such
Participant’s violation of any statutory or fiduciary duty, or duty of loyalty,
owed to the Company and/or its Affiliates; (v) such Participant’s breach of any
material term of any material contract between such Participant and the Company
and/or its Affiliates; and (vi) such Participant’s repeated violation of any
material Company policy.  Notwithstanding
the foregoing, such Participant’s Disability shall not constitute Cause as set
forth herein.  The determination that a
termination is for Cause shall be by the Committee in its sole and exclusive
judgment and discretion.


(e)           “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 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 by an investor, any affiliate
thereof or any other Exchange Act Person from the Company 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 (B)  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 50% of the combined outstanding voting power of the surviving
Entity in such merger, consolidation or similar transaction or (B) more than 50% of the combined outstanding voting
power of the parent of the surviving Entity in such merger, consolidation or
similar



 2
 









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, 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
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 this 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, 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 Stock
Awards subject to such agreement (it being understood, 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).


(f)            “Code”
means the Internal Revenue Code of 1986, as amended.


(g)           “Committee”
means a committee of one or more members of the Board appointed by the Board in
accordance with Section 3(c).


(h)           “Common Stock”
means the common stock of the Company.


(i)            “Company”
means Metabasis Therapeutics, Inc., a Delaware corporation.


(j)            “Consultant”
means any person, including an advisor, (i) engaged by the Company or an
Affiliate to render consulting or advisory services and who is compensated for
such services or (ii) serving as a member of the Board of Directors of an
Affiliate and who is compensated for such services.  However, the term “Consultant” shall not
include Directors who are not compensated by the Company for their services as
Directors, and the payment of a director’s fee by the Company for services as a
Director shall not cause a Director to be considered a “Consultant” for
purposes of the Plan.


(k)           “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.  For



 3
 









example, a change in status from an Employee of the
Company to a Consultant of an Affiliate or to a Director shall not constitute
an interruption of Continuous Service. 
The Board or the chief executive officer of the Company, in that party’s
sole discretion, may determine whether Continuous Service shall be considered
interrupted in the case of any leave of absence approved by that party,
including sick leave, military leave or any other personal leave.  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 or in the written terms of the Participant’s leave of absence.


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


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


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


(iv)          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.


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


(n)           “Director”
means a member of the Board.


(o)           “Disability”
means the permanent and total disability of a person within the meaning of
Section 22(e)(3) of the Code.


(p)           “Employee”
means any person employed by the Company or an Affiliate.  Service as a Director or payment of a
director’s fee by the Company or an Affiliate shall not be sufficient to constitute
“employment” by the Company or an Affiliate.


(q)           “Entity”
means a corporation, partnership or other entity.


(r)           “Exchange Act”
means the Securities Exchange Act of 1934, as amended.


(s)           “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
(A) the Company or any Subsidiary of the Company, (B) any employee benefit plan
of the Company or any Subsidiary of the Company or any trustee or other
fiduciary holding



 4
 









securities under an employee benefit plan of the
Company or any Subsidiary of the Company, (C) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (D) 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.


(t)            “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, the Fair Market Value of a share
of Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported, and in each case rounded up where necessary to
the nearest whole cent) as quoted on such exchange (or the exchange with the
greatest volume of trading in the Common Stock) on the day of determination, as
reported in The Wall Street Journal
or such other source as the Board deems reliable.  Unless otherwise provided by the Board, if
there is no closing sales price (or closing bid, if no sales were reported) for
the Common Stock on the day of determination, then the Fair Market Value shall
be the closing sales price (or the closing bid, if no sales were reported, and
in each case rounded up where necessary to the nearest whole cent) on the last
preceding date for which such quotation exists.


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


(u)            “Incentive Stock Option”
means an Option intended to qualify as an incentive stock option within the
meaning of Section 422 of the Code and the regulations promulgated
thereunder.


(v)            “IPO Date” means the effective
date of the initial public offering of the Common Stock.


(w)           “Non-Employee Director”
means a Director who either (i) is not a current Employee or
Officer of the Company or its parent or a subsidiary, does not receive
compensation, either directly or indirectly, from the Company or its parent or
a subsidiary, for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act (“Regulation
S-K”)), does not possess an interest in any other transaction
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.


(x)           “Nonstatutory Stock Option”
means an Option not intended to qualify as an Incentive Stock Option.


(y)           “Officer”
means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.


(z)           “Option”
means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant
to the Plan.



 5
 









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


(bb)         “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.


(cc)         “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 7(d).


(dd)         “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 individual Other Stock Award grant.  Each Other Stock Award Agreement shall be
subject to the terms and conditions of the Plan.


(ee)         “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.


(ff)           “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.


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


(hh)         “Phantom Stock Award” means
a right to receive shares of Common Stock which is granted pursuant to the
terms and conditions of Section 7(b).


(ii)           “Phantom Stock Award
Agreement” means a written agreement between the
Company and a holder of a Phantom Stock Award evidencing the terms and
conditions of an individual Phantom Stock Award grant.  Each Phantom Stock Award Agreement shall be
subject to the terms and conditions of the Plan.


(jj)           “Plan”
means this Metabasis Therapeutics, Inc. Amended and Restated 2001 Equity
Incentive Plan.


(kk)        “Restricted Stock Award” means an
award of shares of Common Stock which is granted pursuant to the terms and
conditions of Section 7(a).



 6
 









(ll)           “Restricted Stock Award Agreement”
means an agreement between the Company and a holder of a Restricted Stock Award
evidencing the terms and conditions of an individual Restricted Stock Award
grant.  Each Restricted Stock Award
Agreement shall be subject to the terms and conditions of the Plan.


(mm)       “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.


(nn)         “Securities Act”
means the Securities Act of 1933, as amended.


(oo)         “Stock Appreciation Right” means
a right to receive the appreciation of Common Stock that is granted pursuant to
the terms and conditions of Section 7(c).


(pp)         “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 an individual Stock Appreciation Right grant.  Each Stock Appreciation Right Agreement shall
be subject to the terms and conditions of the Plan.


(qq)         “Stock Award”
means any right granted under the Plan, including an Option, a Restricted Stock
Award, a Stock Appreciation Right, a Phantom Stock Award or any Other Stock
Award.


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


(ss)          “Subsidiary”
means, with respect to the Company, (i) any corporation of which more than 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 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 50%.


(tt)           “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 10% of the total combined voting power of all
classes of stock of the Company or of any of its Affiliates.


3.             ADMINISTRATION.


(a)           Administration by Board.  The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
Section 3(c).


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


(i)            To determine from
time to time which of the persons eligible under the Plan shall be granted
Stock Awards; when and how each Stock Award shall be granted; what



 7
 









type or combination of
types of Stock Award shall be granted; the provisions of each Stock Award
granted (which need not be identical), including the time or times when a
person shall be permitted to receive Common Stock pursuant to a Stock Award;
and the number of shares of Common Stock with respect to which a Stock Award
shall be granted to each such person.


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


(iii)         To effect, at any
time and from time to time, with the consent of any adversely affected
Optionholder, (1) the reduction of the exercise price of any outstanding Option
under the Plan, (2) the cancellation of any outstanding Option under the Plan
and the grant in substitution therefor of (A) a new Option under the Plan or
another equity plan of the Company covering the same or a different number of
shares of Common Stock, (B) a Restricted Stock Award (including a stock bonus),
(C) a Stock Appreciation Right, (D) a Phantom Stock Award (E) an Other Stock
Award, (F) cash and/or (G) other valuable consideration (as determined by the
Board, in its sole discretion), or (3) any other action that is treated as a
repricing under generally accepted accounting principles.


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


(v)            To terminate or
suspend the Plan as provided in Section 13.


(vi)          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.


(c)           Delegation
to Committee.


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


(ii)           Section 162(m) and Rule 16b-3
Compliance.  In the
discretion of the Board, the Committee may consist solely of two or more
Outside Directors, in accordance with Section 162(m) of the Code, and/or solely
of two or more Non-Employee Directors, in accordance with Rule 16b-3.  In addition, the Board or the Committee, in
their discretion, may (1) delegate to a committee of one or more members of the
Board who need not be Outside Directors the authority to grant Stock Awards to
eligible persons who are either (a) not then



 8
 









Covered Employees and are
not expected to be Covered Employees at the time of recognition of income
resulting from such Stock Award, or (b) not persons with respect to whom the
Company wishes to comply with Section 162(m) of the Code, and/or (2) delegate
to a committee of one or more members of the Board who need not be Non-Employee
Directors the authority to grant Stock Awards to eligible persons who are not
then subject to Section 16 of the Exchange Act.


(d)           Delegation to
an Officer.  The Board may
delegate to one or more Officers of the Company the authority to do one or both
of the following (i) designate Officers and Employees of the Company or any of
its Subsidiaries to be recipients of Stock Awards and (ii) determine the number
of shares of Common Stock to be subject to such Stock Awards granted to such
Officers and Employees of the Company; 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 of the Common Stock.


(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.


4.             SHARES
SUBJECT TO THE PLAN.


(a)           Share Reserve.  Subject to the provisions of Section 11(a)
relating to Capitalization Adjustments, the shares of Common Stock that may be
issued pursuant to Stock Awards shall not exceed in the aggregate 2,213,995
shares of Common Stock, plus an annual increase to be added on the first day of
the fiscal year of the Company for a period commencing on the first day of the
fiscal year that begins on January 1, 2005 and ending on (and including) the
first day of the fiscal year that begins on January 1, 2014 (each such day, a “Calculation
Date”), equal to the lesser of (i) 3% of the fully diluted (i.e. assuming
exercise for or conversion into Common Stock of all then outstanding options,
warrants and convertible securities of the Company) shares of Common Stock
outstanding on each such Calculation Date (rounded down to the nearest whole
share); or (ii) 1,000,000 shares of Common Stock.  Notwithstanding the foregoing, the Board may
act, prior to the first day of any fiscal year of the Company, to increase the
share reserve by such number of shares of Common Stock as the Board shall
determine, which number shall be less than each of (i) and (ii).


(b)           Reversion of Shares to the Share
Reserve.  If any Stock
Award shall for any reason expire or otherwise terminate, in whole or in part,
without having been exercised in full, or if any shares of Common Stock issued
to a Participant pursuant to a Stock Award are forfeited back to or repurchased
by the Company, including, but not limited to, any repurchase or forfeiture
caused by the failure to meet a contingency or condition required for the
vesting of such shares, then the shares of Common Stock not acquired under such
Stock Award, or forfeited back to or repurchased by the Company, shall revert
to and again become available for issuance under the Plan.  If any shares subject to a Stock Award are
not delivered to a Participant because such shares are withheld for the payment
of taxes or the Stock Award is exercised through a reduction of shares subject
to the Stock Award (i.e., “net
exercised”), the number of shares that are not delivered to the Participant as
a result thereof shall revert to and again become available



 9
 









for issuance under the Plan.  If the exercise price of any Stock Award is
satisfied by tendering shares of Common Stock held by the Participant (either
by actual delivery or attestation), then the number of such tendered shares
shall revert to and again become available for issuance under the Plan.  Notwithstanding anything to the contrary in
this Section 4(b), subject to the provisions of Section 11(a) relating to
Capitalization Adjustments the aggregate maximum number of shares of Common
Stock that may be issued as Incentive Stock Options shall be 11,000,000 shares
of Common Stock.


(c)           Source of Shares.  The shares of Common Stock subject to the Plan
may be unissued shares or reacquired shares, bought on the market or otherwise.


5.             ELIGIBILITY.


(a)           Eligibility for Specific Stock Awards.  Incentive Stock Options may be granted only
to Employees.  Stock Awards other than
Incentive Stock Options may be granted to Employees, Directors and Consultants.


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


(c)           Section 162(m) Limitation on Annual
Grants.  Subject to the
provisions of Section 11(a) relating to Capitalization Adjustments, no Employee
shall be eligible to be granted Options covering more than 1,000,000 shares of Common Stock during any
calendar year, and no Employee shall be eligible to be granted Stock
Appreciation Rights covering more than 1,000,000 shares of Common Stock during
any calendar year.


(d)           Consultants.  A Consultant shall not be eligible for the
grant of a Stock Award if, at the time of grant, a Form S-8 Registration
Statement under the Securities Act (“Form S-8”) is not available to register
either the offer or the sale of the Company’s securities to such Consultant
because of the nature of the services that the Consultant is providing to the
Company, because the Consultant is not a natural person, or because of any
other rule governing the use of Form S-8, unless the Company determines both
(i) that such grant (A) shall be registered in another manner under the
Securities Act (e.g., on a Form S-3 Registration
Statement) or (B) does not require registration under the Securities Act in
order to comply with the requirements of the Securities Act, if applicable, and
(ii) that such grant complies with the securities laws of all other relevant
jurisdictions.


6.             OPTION
PROVISIONS.


Each Option shall be in such form and shall contain
such terms and conditions as the Board shall deem appropriate.  All Options shall be separately designated
Incentive Stock Options or Nonstatutory Stock Options at the time of grant,
and, if certificates are issued, a separate certificate or certificates shall
be issued for shares of Common Stock purchased on exercise of each type of
Option.  The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:



 10

















(a)           Term.  The Board shall determine the term of an
Option; provided that, subject to
the provisions of Section 5(b) regarding Ten Percent Stockholders, no Incentive
Stock Option shall be exercisable after the expiration of ten years from the
date on which it was granted.


(b)           Exercise Price of an Incentive Stock
Option.  Subject to the
provisions of Section 5(b) regarding Ten Percent Stockholders, the exercise
price of each Incentive Stock Option shall be not less than 100% of the Fair
Market Value of the Common Stock subject to the Option on the date the Option
is granted.  Notwithstanding the
foregoing, an Incentive Stock Option may be granted with an exercise price
lower than that set forth in the preceding sentence if such Option is granted
pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.


(c)           Exercise Price of a Nonstatutory
Stock Option.  The
Board, in its discretion, shall determine the exercise price of each
Nonstatutory Stock Option.


(d)           Consideration.  The purchase price of Common Stock acquired
pursuant to an Option shall be paid, to the extent permitted by applicable law,
either (i) in cash at the time the Option is exercised or (ii) at the
discretion of the Board at the time of the grant of the Option (or subsequently
in the case of a Nonstatutory Stock Option) (1) by delivery to the Company of
other Common Stock, (2) according to a deferred payment or other similar
arrangement with the Optionholder, (3) by a “net exercise” of the Option (as
further described below), (4) 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 or (5) in any other form of legal consideration that may be
acceptable to the Board.  Unless
otherwise specifically provided in the Option, the purchase price of Common
Stock acquired pursuant to an Option that is paid by delivery to the Company of
other Common Stock acquired, directly or indirectly from the Company, shall be
paid only by shares of the Common Stock of the Company that have been held for
more than six months (or such longer or shorter period of time required to
avoid a charge to earnings for financial accounting purposes).  At any time that the Company is incorporated
in Delaware, payment of the Common Stock’s “par value,” as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.


In the case of any deferred payment arrangement,
interest shall be compounded at least annually and shall be charged at the
minimum rate of interest necessary to avoid (1) the treatment as interest,
under any applicable provisions of the Code, of any amounts other than amounts
stated to be interest under the deferred payment arrangement and (2) the
treatment of the Option as a variable award for financial accounting purposes.


In the case of a “net exercise” of an Option, the
Company will not require a payment of the exercise price of the Option from the
Participant but will reduce the number of shares of Common Stock issued upon
the exercise by the largest number of whole shares that has a Fair Market Value
that does not exceed the aggregate exercise price.  With respect to any remaining balance of the
aggregate exercise price, the Company shall accept a cash payment from the
Participant.  The shares of Common Stock
so used to pay the exercise price of an Option under a “net exercise” will be
considered to have resulted from the exercise of the Option, and



 11
 









accordingly,
the Option will not again be exercisable with respect to such shares, the
shares actually delivered to the Participant, and any shares withheld for
purposes of tax withholding.


(e)           Transferability of an Incentive Stock
Option.  An Incentive
Stock Option shall not be transferable except by will or by the laws of descent
and distribution and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. 
Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form provided by or otherwise satisfactory to
the Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.


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


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


(h)           Termination of Continuous Service.  In the event that an Optionholder’s Continuous
Service terminates (for reasons other than Cause or upon the Optionholder’s
death or Disability), the Optionholder may exercise his or her Option (to the
extent that the Optionholder was entitled to exercise such Option as of the
date of termination) but only within such period of time ending on the earlier
of (i) the date three months following the termination of the Optionholder’s
Continuous Service (or such longer or shorter period specified in the Option
Agreement or (ii) the expiration of the term of the Option as set forth in the
Option Agreement.  If, after termination,
the Optionholder does not exercise his or her Option within the time specified
in the Option Agreement, the Option shall terminate.


(i)            Extension of Termination Date.  An Optionholder’s Option Agreement may also
provide that if the exercise of the Option following the termination of the
Optionholder’s Continuous Service (for reasons other than Cause or upon the
Optionholder’s death or Disability) would be prohibited at any time solely
because the issuance of shares of Common Stock would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in the Option
Agreement or (ii) the expiration of a period of three months after the
termination of the Optionholder’s Continuous Service during which the exercise
of the Option would not be in violation of such registration requirements.



 12
 









(j)            Disability of Optionholder.  In the event that an Optionholder’s
Continuous Service terminates as a result of the Optionholder’s Disability, the
Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise such Option as of the date of
termination), but only within such period of time ending on the earlier of (i)
the date 12 months following such termination (or such longer or shorter period
specified in the Option Agreement or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. 
If, after termination, the Optionholder does not exercise his or her
Option within the time specified herein, the Option shall terminate.


(k)           Death of Optionholder.  In the event that (i) an Optionholder’s
Continuous Service terminates as a result of the Optionholder’s death or (ii)
the Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder’s Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder’s estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
option upon the Optionholder’s death pursuant to Section 6(e) or 6(f), but only
within the period ending on the earlier of (1) the date 18 months following the
date of death (or such longer or shorter period specified in the Option
Agreement or (2) the expiration of the term of such Option as set forth in the
Option Agreement.  If, after death, the
Option is not exercised within the time specified herein, the Option shall
terminate.


(l)            Termination for Cause.  In the event an Optionholder’s Continuous
Service is terminated for Cause, the Option shall terminate upon the
termination date of such Optionholder’s Continuous Service and the Optionholder
is prohibited from exercising his or her Option as of the time of such
termination.


(m)          Early Exercise.  The Option may, but need not, include a
provision whereby the Optionholder may elect at any time before the
Optionholder’s Continuous Service terminates to exercise the Option as to any
part or all of the shares of Common Stock subject to the Option prior to the
full vesting of the Option.  Any unvested
shares of Common Stock so purchased may be subject to a repurchase option in
favor of the Company or to any other restriction the Board determines to be
appropriate.  The Company will not
exercise its repurchase option until at least six months (or such longer or
shorter period of time required to avoid a charge to earnings for financial
accounting purposes) have elapsed following exercise of the Option unless the
Board otherwise specifically provides in the Option.


7.             PROVISIONS
OF STOCK AWARDS OTHER THAN OPTIONS.


(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.  At the Board’s
election, shares of Common Stock may be (i) held in book entry form subject to
the Company’s instructions until any restrictions relating to the Restricted
Stock Award lapse; or (ii) 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



 13
 









include (through incorporation of the provisions
hereof by reference in the agreement or otherwise) the substance of each of the
following provisions:


(i)            Purchase Price.  At the time of the grant of a Restricted
Stock Award, the Board will determine the price to be paid by the Participant
for each share subject to the Restricted Stock Award.  To the extent required by law, the price to
be paid by the Participant for each share of the Restricted Stock Award will
not be less than the par value of a share of Common Stock.  A Restricted Stock Award may be awarded as a
stock bonus (i.e., with no cash
purchase price to be paid) to the extent permissible under applicable law.


(ii)           Consideration.  At the time of the grant of a Restricted
Stock Award, the Board will determine the consideration permissible for the
payment of the purchase price of the Restricted Stock Award.  The purchase price of Common Stock acquired
pursuant to the Restricted Stock Award shall be paid in one of the following
ways: (i) in cash at the time of purchase; (ii) at the discretion of the Board,
according to a deferred payment or other similar arrangement with the
Participant; (iii) by services rendered or to be rendered to the Company; or
(iv) in any other form of legal consideration that may be acceptable to the
Board; provided, however, that at
any time that the Company is incorporated in Delaware, the Common Stock’s “par
value,” as defined in the Delaware General Corporation Law, shall not be paid
by deferred payment and must be paid in a form of consideration that is
permissible under the Delaware Corporation Law.


(iii)         Vesting. Shares of
Common Stock acquired under a Restricted Stock Award may, but need not, be
subject to a share repurchase option in favor of the Company in accordance with
a vesting schedule to be determined by the Board.


(iv)          Termination of Participant’s
Continuous Service. In the event that a Participant’s
Continuous Service terminates, the Company shall have the right, but not the
obligation, to repurchase or otherwise reacquire any or all of the shares of
Common Stock held by the Participant that have not vested as of the date of
termination under the terms of the Restricted Stock Award Agreement.  At the Board’s election, the repurchase right
may be at the least of: (i) the Fair Market Value on the relevant date; (ii)
the Participant’s original cost; or (iii) if the Participant paid the purchase
price for the shares of Common Stock with services rendered, then for no
consideration.  The Company will not
exercise its repurchase option until at least six months (or such longer or
shorter period of time required to avoid a charge to earnings for financial
accounting purposes) have elapsed following the purchase of the restricted
stock unless otherwise determined by the Board or provided in the Restricted
Stock Award Agreement.


(v)            Transferability.
Rights to purchase or receive shares of Common Stock granted under a Restricted
Stock Award 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 discretion, and so long as Common Stock awarded
under the Restricted Stock Award remains subject to the terms of the Restricted
Stock Award Agreement.


(b)           Phantom Stock.  Each Phantom Stock 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 Phantom Stock Award Agreements may change from time to
time, and the terms



 14
 









and conditions of separate Phantom Stock Award
Agreements need not be identical, provided,
however, that each Phantom Stock Award Agreement shall include
(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 Phantom Stock
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 Phantom
Stock Award. To the extent required by applicable law, the consideration to be
paid by the Participant for each share of Common Stock subject to a Phantom
Stock Award will not be less than the par value of a share of Common Stock.  Such consideration may be paid in any form
permitted under applicable law.


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


(iii)         Payment.  A
Phantom Stock Award may be settled by the delivery of shares of Common Stock,
their cash equivalent, or any combination of the two, as the Board deems
appropriate.


(iv)          Additional Restrictions.  At the time of the grant of
a Phantom Stock 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 Phantom Stock Award after the
vesting of such Award.


(v)            Dividend Equivalents.  Dividend equivalents may be
credited in respect of shares of Common Stock covered by a Phantom Stock Award,
as determined by the Board and contained in the Phantom Stock Award
Agreement.  At the discretion of the Board,
such dividend equivalents may be converted into additional shares of Common
Stock covered by the Phantom Stock Award by dividing (1) the aggregate amount
or value of the dividends paid with respect to that number of shares of Common
Stock covered by the Phantom Stock Award then credited by (2) the Fair Market
Value per share of Common Stock on the payment date for such dividend, or in
such other manner as determined by the Board. 
Any additional shares covered by the Phantom Stock Award credited by
reason of such dividend equivalents will be subject to all the terms and
conditions of the underlying Phantom Stock Award Agreement to which they
relate.


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


(c)           Stock Appreciation Rights.  Each Stock Appreciation
Right Agreement shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. 
The terms and conditions of Stock Appreciation Right Agreements may
change from time to time, and the terms and conditions of separate Stock Appreciation
Right Agreements need not be identical, but each Stock Appreciation Right
Agreement shall include (through incorporation of



 15
 









the provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions:


(i)            Strike Price and Calculation of Appreciation.  Each Stock Appreciation Right will be
denominated in share of Common Stock equivalents.  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 share 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) an amount that will be determined by the Committee at the time of
grant of the Stock Appreciation Right.


(ii)           Vesting.  At the time of the grant of
a Stock Appreciation Right, the Board may impose such restrictions or
conditions to the vesting of such Stock Appreciate Right as it, in its absolute
discretion, deems appropriate.


(iii)         Exercise.  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.


(iv)          Payment.  The
appreciation distribution in respect of a Stock Appreciation Right may be paid
in Common Stock, in cash, or 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.


(v)            Termination of Continuous Service.  In the event that a Participant’s Continuous
Service terminates, the Participant may exercise his or her Stock Appreciation
Right (to the extent that the Participant was entitled to exercise such Stock
Appreciation Right as of the date of termination) but only within such period
of time ending on the earlier of (i) the date three months following the
termination of the Participant’s Continuous Service (or such longer or shorter
period specified in the Stock Appreciation Right Agreement) or (ii) the
expiration of the term of the Stock Appreciation Right as set forth in the
Stock Appreciation Right Agreement.  If,
after termination, the Participant does not exercise his or her Stock
Appreciation Right within the time specified in the Stock Appreciation Right
Agreement, the Stock Appreciation Right shall terminate.


(d)           Other Stock Awards. 
Other forms of Stock Awards valued in whole or in part by reference to,
or otherwise based on, Common Stock may be granted either alone or in addition
to Stock Awards provided for under Section 6 and the preceding provisions of
this Section 7.  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 Awards and all other terms
and conditions of such Awards.



 16

















8.             COVENANTS
OF THE COMPANY.


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


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


9.             USE
OF PROCEEDS FROM STOCK.


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


10.          MISCELLANEOUS.


(a)           Acceleration of Exercisability and
Vesting.  The Board
shall have the power to accelerate the time at which a Stock Award may first be
exercised or the time during which a Stock Award or any part thereof will vest
in accordance with the Plan, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.


(b)           Stockholder Rights.  No Participant shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
of Common Stock subject to such Stock Award unless and until such Participant
has satisfied all requirements for exercise of the Stock Award pursuant to its
terms.


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


(d)           Incentive Stock Option $100,000
Limitation.  To the extent
that the aggregate Fair Market Value (determined at the time of grant) of
Common Stock with respect to which Incentive Stock Options are exercisable for
the first time by any Optionholder during any



 17
 









calendar year (under all plans of the Company and its
Affiliates) exceeds $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 a Stock
Award Agreement.


(e)           Investment Assurances.  The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant’s
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the
Participant is acquiring Common Stock subject to the Stock Award for the
Participant’s own account and not with any present intention of selling or
otherwise distributing the Common Stock. 
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (1) the issuance of the shares of Common
Stock upon the exercise or acquisition of Common Stock under the Stock Award
has been registered under a then currently effective registration statement
under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws.  The Company may, upon advice of counsel to
the Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the
transfer of the Common Stock.


(f)            Withholding Obligations.  To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of Common
Stock under a Stock Award by any of the following means (in addition to the
Company’s right to withhold from any compensation paid to the Participant by
the Company) or by a combination of such means: 
(i) tendering a cash payment; (ii) authorizing the Company to withhold
shares of Common Stock from the shares of Common Stock otherwise issuable to
the Participant as a result of the exercise or acquisition of Common Stock
under the Stock Award; provided, however,
that no shares of Common Stock are withheld with a value exceeding the minimum
amount of tax required to be withheld by law (or such lesser amount as may be
necessary to avoid variable award accounting); or (iii) delivering to the
Company owned and unencumbered shares of Common Stock.


11.          ADJUSTMENTS
UPON CHANGES IN STOCK.


(a)           Capitalization Adjustments.  If any change is made in, or other event
occurs with respect to, the Common Stock subject to the Plan or subject to any
Stock Award without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by
the Company (each a “Capitalization
Adjustment”), the Plan will be appropriately adjusted in the class(es)
and maximum number of securities subject to the Plan pursuant to Sections 4(a)
and 4(b) and the



 18
 









maximum number of securities subject to award to any
person pursuant to Section 5(c), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of securities and price per
share of Common Stock subject to such outstanding Stock Awards.  The Board shall make such adjustments, and
its determination shall be final, binding and conclusive.  (The conversion of any convertible securities
of the Company shall not be treated as a transaction “without receipt of
consideration” by the Company.)


(b)           Dissolution or Liquidation.  In the event of a dissolution or liquidation
of the Company, then all outstanding Stock Awards shall terminate immediately
prior to the completion of such dissolution or liquidation.


(c)           Corporate Transaction.  In the event of a Corporate Transaction, any
surviving corporation or acquiring corporation may assume or continue any or
all Stock Awards outstanding under the Plan or may substitute similar stock
awards for Stock Awards outstanding under the Plan (it being understood that
similar stock awards include, but are not limited to, awards to acquire the
same consideration paid to the stockholders or the Company, as the case may be,
pursuant to the Corporate Transaction), and any reacquisition or repurchase
rights held by the Company in respect of Common Stock issued pursuant to Stock
Awards may be assigned by the Company to the successor of the Company (or the
successor’s parent company), if any, in connection with such Corporate
Transaction.  In the event that any
surviving corporation or acquiring corporation does not assume or continue all
such outstanding Stock Awards or substitute similar stock awards for all such
outstanding Stock Awards, then with respect to Stock Awards that have not been
assumed, continued or substituted and that are held by Participants whose
Continuous Service has not terminated prior to the effective time of the
Corporate Transaction, the vesting of such Stock Awards (and, if applicable,
the time at which such Stock Awards may be exercised) shall (contingent upon
the effectiveness of the Corporate Transaction) be accelerated in full 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 days prior to the effective time of the Corporate Transaction),
such Stock Awards shall terminate if not exercised (if applicable) at or prior
to such effective time, and any reacquisition or repurchase rights held by the
Company with respect to such Stock Awards shall (contingent upon the
effectiveness of the Corporate Transaction) lapse.  With respect to any other Stock Awards
outstanding under the Plan that have not been assumed, continued or
substituted, the vesting of such Stock Awards (and, if applicable, the time at
which such Stock Award may be exercised) shall not be accelerated, unless
otherwise provided in a written agreement between the Company or any Affiliate
and the holder of such Stock Award, and such Stock Awards shall terminate if
not exercised (if applicable) prior to the effective time of the Corporate
Transaction.


(d)           Change in Control.  A Stock Award held by any Participant whose
Continuous Service has not terminated prior to the effective time of a Change
in Control may be subject to additional acceleration of vesting and
exercisability upon or after such event 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.



 19
 









12.          AMENDMENT
OF THE PLAN AND STOCK AWARDS.


(a)           Amendment of Plan.  The Board at any time, and from time to time,
may amend the Plan.  However, except as
provided in Section 11(a) relating to Capitalization Adjustments, no amendment
shall be effective unless approved by the stockholders of the Company to the
extent stockholder approval is necessary to satisfy applicable law.


(b)           Stockholder Approval.  The Board, in its sole discretion, may submit
any other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to Covered Employees.


(c)           Contemplated Amendments.  It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.


(d)           No Impairment of Rights.  Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the
Participant consents in writing.


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


13.          TERMINATION
OR SUSPENSION OF THE PLAN.


(a)           Plan Term.  The Board may suspend or terminate the Plan
at any time.  Unless sooner terminated,
the Plan shall terminate on May    , 2014.  No Stock Awards may be granted under the Plan
while the Plan is suspended or after it is terminated.


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


14.          EFFECTIVE
DATE OF PLAN.


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



 20
 









15.          CHOICE
OF LAW.


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



 21

















METABASIS
THERAPEUTICS, INC.


AMENDED AND
RESTATED 2001 EQUITY INCENTIVE PLAN


STOCK OPTION
AGREEMENT

(INCENTIVE STOCK OPTION OR NONSTATUTORY STOCK OPTION)


Pursuant to your Stock Option
Grant Notice (“Grant
Notice”) and this Stock Option Agreement, Metabasis Therapeutics, Inc. (the “Company”) has granted
you an option under its Amended and
Restated 2001 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 Stock 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.             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:


(a)           In the Company’s
sole discretion at the time your option is exercised and provided that at the
time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, 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 and quoted regularly
in The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company’s reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
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



 1
 









would violate the provisions of any law, regulation or
agreement restricting the redemption of the Company’s stock.


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


5.             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.


6.             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 upon the earliest of the following:


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


(b)           three months after
the termination of your Continuous Service for any reason other than your
Disability or death, provided that if during any part of such three-month
period your option is not exercisable solely because of the condition set forth
in Section 5, 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
months after the termination of your Continuous Service;


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


(d)           18 months after
your death if you die either during your Continuous Service or within three
months after your Continuous Service terminates;


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


(f)            the day before the
tenth 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 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 your permanent and total
disability, as defined in Section 22(e) of the Code.  (The definition of disability in Section
22(e) of the Code is different from the definition of the Disability under the
Plan).  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



 2
 









Company or an Affiliate as a
Consultant or Director after your employment terminates or if you otherwise
exercise your option more than three months after the date your employment with
the Company or an Affiliate terminates.


7.             EXERCISE.


(a)           You may exercise
the vested portion of your option 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 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 years after the date of your option grant or within one
year after such shares of Common Stock are transferred upon exercise of your
option.


8.             TRANSFERABILITY.


(a)           If your option is
an Incentive Stock Option, 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.  Notwithstanding the
foregoing, by delivering written notice to the Company, in a form satisfactory
to the Company, you may designate a third party who, in the event of your
death, shall thereafter be entitled to exercise your option.


(b)           If your option is a
Nonstatutory Stock Option, your option is not transferable, except (i) by will
or by the laws of descent and distribution, (ii) with the prior written
approval of the Company, by instrument to an inter vivos or testamentary trust,
in a form accepted by the Company, in which the option is to be passed to
beneficiaries upon the death of the trustor (settlor) and (iii) with the prior
written approval of the Company, by gift, in a form accepted by the Company, to
a permitted transferee under Rule 701 of the Securities Act. Notwithstanding
the foregoing, by delivering written notice to the Company, in a form
satisfactory to the Company, you may designate a third party who, in the event
of your death, shall thereafter be entitled to exercise your option.


9.             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



 3
 









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.


10.          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 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 variable award accounting).  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 or release such shares of
Common Stock from any escrow provided for herein unless such obligations are
satisfied.


11.          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 days after deposit in the United States mail, postage prepaid, addressed
to you at the last address you provided to the Company.


12.          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.



 4