Exhibit
10.16

    


    Nektar Discretionary
Incentive Compensation Policy

    


    1.0         Purpose

    


    Effective
January 1, 2010, Nektar has adopted the 2010 Nektar Discretionary Incentive
Compensation Policy (the “Policy”).  This Policy supersedes all
previous incentive compensation, bonus, or variable compensation policies and
plans, regardless of the manner in which they were communicated, including
incentive compensation arrangements referenced in offer letters.  This
Policy can provide an eligible employee with additional compensation beyond the
employee's base pay, in recognition of the quality of the employee's individual
performance and Nektar's level of achievement of its corporate objectives and
goals, the amount of which is determined in Nektar’s sole and final
discretion.

    


    2.0         Scope

    


    All
regular full-time and part-time employees, except the Chief Executive Officer,
are eligible to participate in this Policy.  Temporary, contract and
vendor employees are not eligible to participate.

    


    3.0         Policy

    


    3.1           This
Policy is an annual policy, with the performance period from January 1 through
December 31 (the “Performance Period”).

    


    3.2           During
the first quarter of each year, Nektar will review the annual incentive
compensation target for each employee for the Performance Period.  The
incentive compensation target will be a percentage of the employee's base
compensation.  With respect to overtime-exempt employees, "base
compensation" means an employee's annual base salary in effect at the end of the
Performance Period.  With respect to overtime non-exempt employees,
"base compensation" means an employee's base salary or hourly wages, including
overtime, plus any shift differential premium paid pursuant to Nektar's
policies, earned during the Performance Period.

    


    3.3           Annual
incentive compensation target percentages may vary between job classifications,
management levels, and employees at the sole discretion of the
Company.  In all cases, other than the incentive compensation target
percentages of the direct reports to the Chief Executive Officer and “executive
officers” within the meaning of the Securities Exchange Act of 1934, which are
subject to approval by the Organization and Compensation Committee of the Board
of Directors (the “Compensation Committee”), each employee’s annual incentive
target percentage will be determined in the sole and final discretion of
Nektar.  The annual incentive compensation target is merely a goal,
representing the potential target amount that might be paid to an eligible
employee who meets individual performance expectations and Nektar achieves its
corporate objectives and goals.  There is no guarantee that this
annual incentive compensation target percentage, nor any amount, will be paid to
any participating employee in this Policy.  Depending on Nektar's
corporate performance and the eligible employee’s performance, as well as
management discretion, an amount greater or lesser than the incentive
compensation target percentage or amount may be awarded to an eligible
employee.  A participating employee may receive between 0% to 200% of
their annual incentive compensation target depending on the corporate
performance rating determined by the Board of Directors and such employee’s
individual performance as determined in the sole and final discretion of
Nektar.  In all cases, whether an eligible employee is paid any
incentive compensation award, as well as the amount of any such award, is within
Nektar's sole and final discretion.

    


    3.4           The
Board of Directors, in consultation with the Chief Executive Officer, will
establish corporate goals for each annual Performance Period.

    


    3.5           Following
the close of the Performance Period, the Board of Directors, in consultation
with the Chief Executive Officer, will measure and determine Nektar's level of
achievement of its corporate goals for that Performance Period.  Based
on this evaluation, the Board of Directors may determine a percentage at which
Nektar met its corporate goals during the annual Performance Period with a
corporate performance rating ranging from 0% to a maximum of
200%.  This corporate performance percentage rating shall be
established by the Board of Directors, within their sole and final
discretion.  The Board of Directors may, within its sole and final
discretion, determine that Nektar's corporate performance for a Performance
Period does not merit awarding any incentive compensation under this
Policy.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    
       

      Exhibit
10.16

       

    

    3.6           Nektar
management conducts annual reviews of employee performance.  An
eligible employee's performance rating in this review will be used in part to
determine the employee's individual performance rating for the annual
Performance Period.  All determinations of an employee's individual
performance rating are within Nektar's sole and final discretion.

    


    3.7           An
eligible employee with an individual performance rating of "occasionally does
not meet expectations" may be eligible for a reduced incentive compensation
award or no incentive compensation in the sole and final discretion of
Nektar.  An eligible employee with a lower performance rating than
"occasionally does not meet expectations" will not be eligible for an incentive
compensation award in any amount.  An eligible employee whose
performance rating makes him or her eligible for an incentive compensation award
may receive an incentive compensation award of more or less than the eligible
employee’s target amount based on the final corporate performance rating
determined by the Board of Directors and the eligible employee’s individual
performance determined in the sole and final discretion of
Nektar.  The amount of any incentive compensation award to an eligible
employee is within the sole and final discretion of Nektar.

    


    3.8           A
new employee hired during a Performance Period is eligible for an incentive
compensation award under this Policy pro-rated to cover the portion of the
annual Performance Period in which the new employee worked unless otherwise
agreed to in writing by Nektar.

    


    3.9           To
be eligible for an incentive compensation award for any annual Performance
Period, an employee must be actively employed by Nektar from the later of (i) the
beginning of the Performance Period or (ii) entry into an eligible position
prior to December 1 of the Performance Period, and in either case the eligible
employee MUST REMAIN EMPLOYED THROUGH THE PAYMENT DATE OF THE INCENTIVE
COMPENSATION AWARD (IF ANY) PAID TO THE ELIGIBLE EMPLOYEES UNDER THIS POLICY IN
ORDER TO BE ELIGIBLE FOR AN INCENTIVE COMPENSATION AWARD.  Any
incentive compensation award determined payable under this Policy will be paid
during the first calendar quarter of the year following the conclusion of the
annual Performance Period, or as soon as practicable thereafter during the year
following the annual Performance Period.

    


    3.10           Employees
who were on an approved part-time schedule during the annual Performance Period,
and who are still employed by Nektar at the time of payment of the incentive
compensation award to the eligible employees under this Policy for such annual
Performance Period, will be eligible for a pro rata incentive compensation award
for the portion of the annual Performance Period in which they were employed,
subject to the other conditions and limitations set forth in this Policy,
including review of the eligible employee's individual performance as determined
in the sole and final discretion of Nektar.

    


    3.11           Employees
who were on a leave of absence during the annual Performance Period, and who are
still employed by Nektar at the time of payment to the eligible employees under
this Policy for such annual Performance Period, will be eligible for a pro rata
incentive compensation award for the portion of the annual Performance Period in
which they were employed and not on a leave of absence, subject to the other
conditions set forth in this Policy, including review of the eligible employee's
individual performance as determined in the sole and final discretion of
Nektar.

    


    3.12.  Employees
will only have earned and be entitled to an incentive compensation award under
this Policy if ALL of the following conditions are met for the applicable annual
performance period:  (i) the Board of Directors has determined
Nektar’s corporate performance rating as described in Section 3.5, (ii) the
Employee has received an individual performance rating of “occasionally does not
meet expectations” and such Employee’s manager has assigned an individual
performance rating greater than 0% up to a maximum of 200%, and (iii) the
Employee remains employed with Nektar through the payment date of the incentive
compensation awards under this Policy.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    
      Exhibit
10.16

        

    

    3.13           All
determinations related to this Policy, including, but not limited to, whether
any employee is awarded an incentive compensation award, the amount of any
incentive compensation award, whether and to what extent Nektar met its
corporate objectives and goals, and any employee's individual performance
rating, are within Nektar's sole and final discretion and are not
reviewable.

    


    3.14           This
Policy is not contractual and may be changed or withdrawn at any time by a
written communication from both the Senior Vice President, Human Resources and
Chief Executive Officer.  All questions concerning the interpretation
and application of this Policy that are not specifically answered by the terms
of this Policy shall be resolved within Nektar's sole and final
discretion.  This Policy does not alter the terminable at will
relationship between Nektar and the eligible employees participating in this
Policy.