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                                                                   EXHIBIT 10.2

                        INTERMUNE PHARMACEUTICALS, INC.

                           1999 EQUITY INCENTIVE PLAN

                 ADOPTED JUNE 1, 1999, AMENDED DECEMBER 31, 1999
           APPROVED BY SHAREHOLDERS JUNE 1, 1999, AND JANUARY 3, 2000
                         TERMINATION DATE: MAY 31, 2009

1.       PURPOSES.

         (a)      ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to
receive Stock Awards are the Employees, Directors and Consultants of the Company
and its Affiliates.

         (b)      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) stock bonuses and (iv) rights to acquire restricted stock.

         (c)      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.

         (c)      "CODE" means the Internal Revenue Code of 1986, as amended.

         (d)      "COMMITTEE" means a Committee appointed by the Board in
accordance with subsection 3(c).

         (e)      "COMMON STOCK" means the common stock of the Company.

         (f)      "COMPANY" means InterMune Pharmaceuticals, Inc., a California
corporation.

         (g)      "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) who is a member of the Board of
Directors of an Affiliate. However, the term "Consultant" shall not include
either Directors of the Company who are not compensated

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by the Company for their services as Directors or Directors of the Company who
are merely paid a director's fee by the Company for their services as Directors.

         (h)      "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. The Participant's Continuous Service shall not be
deemed to have terminated merely because of 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 Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director of the
Company will 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.

         (i)      "COVERED EMPLOYEE" means the chief executive officer and the
four (4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.

         (j)      "DIRECTOR" means a member of the Board of Directors of the
Company.

         (k)      "DISABILITY" means (i) before the Listing Date, the
inability of a person, in the opinion of a qualified physician acceptable to the
Company, to perform the major duties of that person's position with the Company
or an Affiliate of the Company because of the sickness or injury of the person
and (ii) after the Listing Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.

         (l)      "EMPLOYEE" means any person employed by the Company or an
Affiliate. Mere 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.

         (m)      "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

         (n)      "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 the Nasdaq National Market or the Nasdaq SmallCap
Market, 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) as
quoted on such exchange or market (or the exchange or market with the
greatest volume of trading in the Common Stock) on the last market trading
day prior to the day of determination, as reported in THE WALL STREET JOURNAL
or such other source as the Board deems reliable.

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

                  (iii)    Prior to the Listing Date, the value of the Common
Stock shall be determined in a manner consistent with Section 260.140.50 of
Title 10 of the California Code of Regulations.

         (o)      "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.

         (p)      "LISTING DATE" means the first date upon which any security of
the Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.

         (q)      "NON-EMPLOYEE DIRECTOR" means a Director of the Company who
either (i) is not a current Employee or Officer of the Company or its parent or
a subsidiary, does not receive compensation (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 as to which disclosure would be required under Item
404(a) of Regulation S-K and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K; or (ii)
is otherwise considered a "non-employee director" for purposes of Rule 16b-3.

         (r)      "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.

         (s)      "OFFICER" means (i) before the Listing Date, any person
designated by the Company as an officer and (ii) on and after the Listing Date,
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.

         (t)      "OPTION" means an Incentive Stock Option or a Nonstatutory
Stock Option granted pursuant to the Plan.

         (u)      "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.

         (v)      "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.

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         (w)      "OUTSIDE DIRECTOR" means a Director of the Company 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" receiving compensation for prior services (other than benefits
under a tax qualified pension plan), was not an officer of the Company or an
"affiliated corporation" at any time and is not currently receiving direct or
indirect remuneration from the Company or an "affiliated corporation" for
services 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.

         (x)      "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.

         (y)      "PLAN" means this InterMune Pharmaceuticals, Inc. 1999 Equity
Incentive Plan.

         (z)      "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.

         (aa)     "SECURITIES ACT" means the Securities Act of 1933, as amended.

         (bb)     "STOCK AWARD" means any right granted under the Plan,
including an Option, a stock bonus and a right to acquire restricted stock.

         (cc)     "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.

         (dd)     "TEN PERCENT SHAREHOLDER" 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 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 subsection 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 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 stock pursuant to a Stock Award; and the number of shares with respect
to which a Stock Award shall be granted to each such person.

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

                  (iv)     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 which 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)     COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY
TRADED. At such time as the Common Stock is publicly traded, in the discretion
of the Board, a 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. Within the scope of such
authority, the Board or the Committee may (i) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (1) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (2) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (ii)
delegate to a committee of one or more members of the Board who are not
Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.

4.       SHARES SUBJECT TO THE PLAN.

         (a)      SHARE RESERVE. Subject to the provisions of Section 11
relating to adjustments upon changes in stock, the stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate two million
(2,000,000) shares of Common Stock.

         (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

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(or vested in the case of Restricted Stock), the stock not acquired under such
Stock Award shall revert to and again become available for issuance under the
Plan. If any Common Stock acquired pursuant to the exercise of an Option shall
for any reason be repurchased by the Company under an unvested share repurchase
option provided under the Plan, the stock repurchased by the Company under such
repurchase option shall not revert to and again become available for issuance
under the Plan.

         (c)      SOURCE OF SHARES. The stock subject to the Plan may be
unissued shares or reacquired shares, bought on the market or otherwise.

         (d)      SHARE RESERVE LIMITATION. Prior to the Listing Date, at no
time shall the total number of shares issuable upon exercise of all outstanding
Options and the total number of shares provided for under any stock bonus or
similar plan of the Company exceed the applicable percentage as calculated in
accordance with the conditions and exclusions of Section 260.140.45 of Title 10
of the California Code of Regulations, based on the shares of the Company which
are outstanding at the time the calculation is made.

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 SHAREHOLDERS. No Ten Percent Shareholder shall be
eligible for the grant of an Incentive Stock Option unless the exercise price of
such Option is at least one hundred ten percent (110%) of the Fair Market Value
of the Common Stock at the date of grant and the Option is not exercisable after
the expiration of five (5) years from the date of grant.

                  Prior to the Listing Date, no Ten Percent Shareholder shall be
eligible for the grant of a Nonstatutory Stock Option unless the exercise price
of such Option is at least one hundred ten percent (110%) of the Fair Market
Value of the Common Stock at the date of grant.

                  Prior to the Listing Date, no Ten Percent Shareholder shall be
eligible for a restricted stock award unless the purchase price of the
restricted stock is at least one hundred percent (100%) of the Fair Market Value
of the Common Stock at the date of grant.

         (c)      SECTION 162(m) LIMITATION. Subject to the provisions of
Section 11 relating to adjustments upon changes in stock, no employee shall be
eligible to be granted Options covering more than two hundred fifty thousand
(250,000) shares of the Common Stock during any calendar year. This subsection
5(c) shall not apply prior to the Listing Date and, following the Listing Date,
this subsection 5(c) shall not apply until (i) the earliest of: (1) the first
material modification of the Plan (including any increase in the number of
shares reserved for issuance under the Plan in accordance with Section 4); (2)
the issuance of all of the shares of Common Stock reserved for issuance under
the Plan; (3) the expiration of the Plan; or (4) the first meeting of
shareholders at which Directors of the Company are to be elected that occurs
after the close of the third calendar year following the calendar year in which
occurred the first registration of an

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equity security under Section 12 of the Exchange Act; or (ii) such other date
required by Section 162(m) of the Code and the rules and regulations promulgated
thereunder.

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 a separate certificate or certificates will be issued for shares
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:

         (a)      TERM. Subject to the provisions of subsection 5(b) regarding
Ten Percent Shareholders, no Option shall be exercisable after the expiration of
ten (10) years from the date it was granted.

         (b)      EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the 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. Subject to the
provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise
price of each Nonstatutory Stock Option granted prior to the Listing Date shall
be not less than eighty-five percent (85%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option granted on or after the Listing Date shall be not
less than eighty-five percent (85%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. Notwithstanding the
foregoing, a Nonstatutory 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.

         (d)      CONSIDERATION. The purchase price of stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, 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) by (1) delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock) with the Participant or (3) 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, payment
of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.

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         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 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.

         (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 provisions
of this subsection 6(e), the Optionholder may, by delivering written notice to
the Company, in a form 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 granted prior to the Listing Date 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. A Nonstatutory
Stock Option granted on or after the Listing Date 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 provisions of this subsection 6(f), the
Optionholder may, by delivering written notice to the Company, in a form
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 which 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 subsection 6(g) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.

         (h)      MINIMUM VESTING PRIOR TO THE LISTING DATE. Notwithstanding the
foregoing subsection 6(g), Options granted prior to the Listing Date shall
provide for vesting of the total number of shares at a rate of at least twenty
percent (20%) per year over five (5) years from the date the Option was granted,
subject to reasonable conditions such as continued employment. However, in the
case of such Options granted to Officers, Directors or Consultants, the Option
may become fully exercisable, subject to reasonable conditions such as continued
employment, at any time or during any period established by the Company; for
example, the vesting provision of the Option may provide for vesting of less
than twenty percent (20%) per year of the total number of shares subject to the
Option.

         (i)      TERMINATION OF CONTINUOUS SERVICE. In the event an
Optionholder's Continuous Service terminates (other than 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 it as of the date of
termination) but only within such period of time ending on the earlier of (i)
the

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date three (3) months following the termination of the Optionholder's Continuous
Service (or such longer or shorter period specified in the Option Agreement,
which, for Options granted prior to the Listing Date, shall not be less than
thirty (30) days, unless such termination is for cause), 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.

         (j)      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 (other than upon the
Optionholder's death or Disability) would be prohibited at any time solely
because the issuance of shares 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 subsection 6(a) or (ii) the
expiration of a period of three (3) 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.

         (k)      DISABILITY OF OPTIONHOLDER. In the event 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 it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period specified in the
Option Agreement, which, for Options granted prior to the Listing Date, shall
not be less than six (6) months) 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.

         (l)      DEATH OF OPTIONHOLDER. In the event (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 the 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 subsection 6(e) or 6(f), but only within
the period ending on the earlier of (1) the date eighteen (18) months following
the date of death (or such longer or shorter period specified in the Option
Agreement, which, for Options granted prior to the Listing Date, shall not be
less than six (6) months) 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.

         (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 subject to the Option prior to the full vesting of the
Option. Subject to the "Repurchase Limitation" in subsection 10(h), any unvested

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shares so purchased may be subject to an unvested share repurchase option in
favor of the Company or to any other restriction the Board determines to be
appropriate.

         (n)      RIGHT OF REPURCHASE. Subject to the "Repurchase Limitation" in
subsection 10(h), the Option may, but need not, include a provision whereby the
Company may elect, prior to the Listing Date, to repurchase all or any part of
the vested shares acquired by the Optionholder pursuant to the exercise of the
Option.

         (o)      RIGHT OF FIRST REFUSAL. The Option may, but need not, include
a provision whereby the Company may elect, prior to the Listing Date, to
exercise a right of first refusal following receipt of notice from the
Optionholder of the intent to transfer all or any part of the shares exercised
pursuant to the Option. Except as expressly provided in this subsection 6(o),
such right of first refusal shall otherwise comply with any applicable
provisions of the Bylaws of the Company.

         (p)      RE-LOAD OPTIONS. Without in any way limiting the authority of
the Board to make or not to make grants of Options hereunder, the Board shall
have the authority (but not an obligation) to include as part of any Option
Agreement a provision entitling the Optionholder to a further Option (a "Re-Load
Option") in the event the Optionholder exercises the Option evidenced by the
Option Agreement, in whole or in part, by surrendering other shares of Common
Stock in accordance with this Plan and the terms and conditions of the Option
Agreement. Any such Re-Load Option shall (i) provide for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) have an expiration date which is the same as the expiration
date of the Option the exercise of which gave rise to such Re-Load Option; and
(iii) have an exercise price which is equal to one hundred percent (100%) of the
Fair Market Value of the Common Stock subject to the Re-Load Option on the date
of exercise of the original Option. Notwithstanding the foregoing, a Re-Load
Option shall be subject to the same exercise price and term provisions
heretofore described for Options under the Plan.

                  Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollars ($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares under subsection 4(a) and
the "Section 162(m) Limitation" on the grants of Options under subsection 5(c)
and shall be subject to such other terms and conditions as the Board may
determine which are not inconsistent with the express provisions of the Plan
regarding the terms of Options.

7.       PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

         (a)      STOCK BONUS AWARDS. Each stock bonus 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 bonus agreements may change from
time to time, and the terms and

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conditions of separate stock bonus agreements need not be identical, but each
stock bonus agreement shall include (through incorporation of provisions hereof
by reference in the agreement or otherwise) the substance of each of the
following provisions:

                  (i)      CONSIDERATION. A stock bonus shall be awarded in
consideration for past services actually rendered to the Company for its
benefit.

                  (ii)     VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock awarded under the stock bonus
agreement 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.

                  (iii)    TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE.
Subject to the "Repurchase Limitation" in subsection 10(h), in the event a
Participant's Continuous Service terminates, the Company may reacquire any or
all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the stock bonus
agreement.

                  (iv)     TRANSFERABILITY. For a stock bonus award made
before the Listing Date, rights to acquire shares under the stock bonus
agreement 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. For a stock bonus award made on or after
the Listing Date, rights to acquire shares under the stock bonus agreement
shall be transferable by the Participant only upon such terms and conditions
as are set forth in the stock bonus agreement, as the Board shall determine
in its discretion, so long as stock awarded under the stock bonus agreement
remains subject to the terms of the stock bonus agreement.

         (b)      RESTRICTED STOCK AWARDS. Each restricted stock purchase
agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate. The terms and conditions of the restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate restricted stock purchase agreements need not be
identical, but each restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:

                  (i)      PURCHASE PRICE. Subject to the provisions of
subsection 5(b) regarding Ten Percent Shareholders, the purchase price under
each restricted stock purchase agreement shall be such amount as the Board shall
determine and designate in such restricted stock purchase agreement. For
restricted stock awards made prior to the Listing Date, the purchase price shall
not be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made or at the time the purchase is consummated. For
restricted stock awards made on or after the Listing Date, the purchase price
shall not be less than eighty-five percent (85%) of the stock's Fair Market
Value on the date such award is made or at the time the purchase is consummated.

                                       11
<PAGE>

                  (ii)     CONSIDERATION. The purchase price of stock acquired
pursuant to the restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Board, according to
a deferred payment or other arrangement with the Participant; or (iii) in any
other form of legal consideration that may be acceptable to the Board in its
discretion; provided, however, that at any time that the Company is incorporated
in Delaware, then payment of the Common Stock's "par value," as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.

                  (iii)    VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock acquired under the restricted stock
purchase agreement 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.
Subject to the "Repurchase Limitation" in subsection 10(h), in the event a
Participant's Continuous Service terminates, the Company may repurchase or
otherwise reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.

                  (v)      TRANSFERABILITY. For a restricted stock award made
before the Listing Date, rights to acquire shares under the restricted stock
purchase agreement 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. For a restricted stock award made on or
after the Listing Date, rights to acquire shares under the restricted stock
purchase agreement shall be transferable by the Participant only upon such terms
and conditions as are set forth in the restricted stock purchase agreement, as
the Board shall determine in its discretion, so long as stock awarded under the
restricted stock purchase agreement remains subject to the terms of the
restricted stock purchase agreement.

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 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 stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such Stock Awards unless and until such authority is
obtained.

                                       12
<PAGE>

9.       USE OF PROCEEDS FROM STOCK.

         Proceeds from the sale of 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)      SHAREHOLDER 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
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 or other holder of Stock Awards 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 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
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.

         (e)      INVESTMENT ASSURANCES. The Company may require a Participant,
as a condition of exercising or acquiring 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 the stock subject to the Stock Award for the Participant's own
account and not with any present intention of selling or otherwise distributing
the stock. The foregoing requirements, and any assurances given pursuant to such
requirements,

                                       13
<PAGE>

shall be inoperative if (iii) the issuance of the shares upon the exercise or
acquisition of stock under the Stock Award has been registered under a then
currently effective registration statement under the Securities Act or (iv) 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 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
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 from the shares of the Common Stock
otherwise issuable to the participant as a result of the exercise or acquisition
of stock under the Stock Award; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.

         (g)      INFORMATION OBLIGATION. Prior to the Listing Date, to the
extent required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to Participants at
least annually. This subsection 10(g) shall not apply to key Employees whose
duties in connection with the Company assure them access to equivalent
information.

         (h)      REPURCHASE LIMITATION. The terms of any repurchase option
shall be specified in the Stock Award and may be either at Fair Market Value at
the time of repurchase or at not less than the original purchase price. To the
extent required by Section 260.140.41 and Section 260.140.42 of Title 10 of the
California Code of Regulations, any repurchase option contained in a Stock Award
granted prior to the Listing Date to a person who is not an Officer, Director or
Consultant shall be upon the terms described below:

                  (i)      FAIR MARKET VALUE. If the repurchase option gives
the Company the right to repurchase the shares upon termination of employment
at not less than the Fair Market Value of the shares to be purchased on the
date of termination of Continuous Service, then (i) the right to repurchase
shall be exercised for cash or cancellation of purchase money indebtedness
for the shares within ninety (90) days of termination of Continuous Service
(or in the case of shares issued upon exercise of Stock Awards after such
date of termination, within ninety (90) days after the date of the exercise)
or such longer period as may be agreed to by the Company and the Participant
(for example, for purposes of satisfying the requirements of Section
1202(c)(3) of the Code regarding "qualified small business stock") and (ii)
the right terminates when the shares become publicly traded.

                  (ii)     ORIGINAL PURCHASE PRICE. If the repurchase option
gives the Company the right to repurchase the shares upon termination of
Continuous Service at the original purchase price, then (i) the right to
repurchase at the original purchase price shall lapse at the rate of at

                                       14
<PAGE>

least twenty percent (20%) of the shares per year over five (5) years from the
date the Stock Award is granted (without respect to the date the Stock Award was
exercised or became exercisable) and (ii) the right to repurchase shall be
exercised for cash or cancellation of purchase money indebtedness for the shares
within ninety (90) days of termination of Continuous Service (or in the case of
shares issued upon exercise of Options after such date of termination, within
ninety (90) days after the date of the exercise) or such longer period as may be
agreed to by the Company and the Participant (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code regarding
"qualified small business stock").

         (i)      CANCELLATION AND RE-GRANT OF OPTIONS.

                  (i)      AUTHORITY TO REPRICE. The Board shall have the
authority to effect, at any time and from time to time, (i) the repricing of any
outstanding Options under the Plan and/or (ii) with the consent of any adversely
affected holders of Options, the cancellation of any outstanding Options under
the Plan and the grant in substitution therefor of new Options under the Plan
covering the same or different numbers of shares of Common Stock. The exercise
price per share shall be not less than that specified under the Plan for newly
granted Stock Awards. Notwithstanding the foregoing, the Board may grant an
Option with an exercise price lower than that set forth above if such Option is
granted as part of a transaction to which Section 424(a) of the Code applies.

                  (ii)     EFFECT OF REPRICING UNDER SECTION 162(m) OF THE CODE.
Shares subject to an Option which is amended or canceled in order to set a lower
exercise price per share shall continue to be counted against the maximum award
of Options permitted to be granted pursuant to subsection 5(c). The repricing of
an Option under this subsection 10(i) resulting in a reduction of the exercise
price shall be deemed to be a cancellation of the original Option and the grant
of a substitute Option; in the event of such repricing, both the original and
the substituted Options shall be counted against the maximum awards of Options
permitted to be granted pursuant to subsection 5(c). The provisions of this
subsection 10(i)(b) shall be applicable only to the extent required by Section
162(m) of the Code.

11.      ADJUSTMENTS UPON CHANGES IN STOCK.

         (a)      CAPITALIZATION ADJUSTMENTS. If any change is made in the 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), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person pursuant to subsection 5(c), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of securities
and price per share of stock subject to such outstanding Stock Awards. The
Board, the determination of which shall be final, binding and conclusive, shall
make such adjustments. (The conversion of any convertible securities of the
Company shall not be treated as a transaction "without receipt of consideration"
by the Company.)

                                       15
<PAGE>

         (b)      CHANGE IN CONTROL--DISSOLUTION OR LIQUIDATION. In the event of
a dissolution or liquidation of the Company, then such Stock Awards shall be
terminated if not exercised (if applicable) prior to such event.

         (c)      CHANGE IN CONTROL--ASSET SALE, MERGER, CONSOLIDATION OR
REVERSE MERGER. In the event of (i) a sale of substantially all of the assets of
the Company, (ii) a merger or consolidation in which the Company is not the
surviving corporation or (iii) a reverse merger in which the Company is the
surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise, then any surviving
corporation or acquiring corporation shall assume any Stock Awards outstanding
under the Plan or shall substitute similar stock awards (including an award to
acquire the same consideration paid to the shareholders in the transaction
described in this subsection 11(c) for those outstanding under the Plan. In the
event any surviving corporation or acquiring corporation refuses to assume such
Stock Awards or to substitute similar stock awards for those outstanding under
the Plan, then with respect to Stock Awards held by Participants whose
Continuous Service has not terminated, the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full, and the Stock Awards shall terminate if not exercised (if
applicable) at or prior to such event. With respect to any other Stock Awards
outstanding under the Plan, such Stock Awards shall terminate if not exercised
(if applicable) prior to such event.

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 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the shareholders of the Company to the extent shareholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.

         (b)      SHAREHOLDER APPROVAL. The Board may, in its sole discretion,
submit any other amendment to the Plan for shareholder 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 certain executive officers.

         (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.

                                       16
<PAGE>

         (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 the day before the
tenth (10th) anniversary of the date the Plan is adopted by the Board or
approved by the shareholders of the Company, whichever is earlier. 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 as determined by the Board, 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 shareholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.

                                       17

<PAGE>

                         INTERMUNE PHARMACEUTICALS INC.

                     EARLY EXERCISE STOCK PURCHASE AGREEMENT
                      UNDER THE 1999 EQUITY INCENTIVE PLAN

         THIS AGREEMENT is made by and between INTERMUNE PHARMACEUTICALS INC., a
California corporation (the "Company"), and ____________________ ("Purchaser").

                                   WITNESSETH:

         WHEREAS, Purchaser holds a stock option dated _________________________
to purchase shares of common stock ("Common Stock") of the Company (as amended,
the "Option") pursuant to the Company's 1999 Equity Incentive Plan (the "Plan");
and

         WHEREAS, the Option consists of a Stock Option Grant Notice and a Stock
Option Agreement; and

         WHEREAS, Purchaser desires to exercise the Option on the terms and
conditions contained herein; and

         WHEREAS, Purchaser wishes to take advantage of the early exercise
provision of the Purchaser's Option and therefore to enter into this Agreement;

         NOW, THEREFORE, IT IS AGREED between the parties as follows:

         1.       INCORPORATION OF PLAN AND OPTION BY REFERENCE. This Agreement
is subject to all of the terms and conditions as set forth in the Plan and the
Option. If there is a conflict between the terms of this Agreement and/or the
Option and the terms of the Plan, the terms of the Plan shall control. If there
is a conflict between the terms of this Agreement and the terms of the Option,
the terms of the Option shall control. Defined terms not explicitly defined in
this Agreement but defined in the Plan shall have the same definitions as in the
Plan. Defined terms not explicitly defined in this Agreement or the Plan but
defined in the Option shall have the same definitions as in the Option.

         2.       PURCHASE AND SALE OF COMMON STOCK.

                  (a)      AGREEMENT TO PURCHASE AND SELL COMMON STOCK.
Purchaser hereby  agrees to purchase from the Company, and the Company hereby
agrees to sell to Purchaser, an aggregate of ________________ (__________)
shares of Common Stock at $______ per share, for an aggregate purchase price
of $____________, payable as follows:

         Cash ...............................................................$

                                      -1-
<PAGE>

                  (b)      CLOSING. The closing hereunder, including payment
for and delivery of the Common Stock, shall occur at the offices of the
Company immediately following the execution of this Agreement, or at such
other time and place as the parties may mutually agree; PROVIDED, HOWEVER,
that if shareholder approval of the Plan is required before the Option may be
exercised, then the Option may not be exercised, and the closing shall be
delayed, until such shareholder approval is obtained. If such shareholder
approval is not obtained within the time limit specified in the Plan, then
this Agreement shall be null and void.

         3.       UNVESTED SHARE REPURCHASE OPTION

                  (a)      REPURCHASE OPTION. In the event Purchaser's
Continuous Service terminates, then the Company shall have an irrevocable
option (the "Repurchase Option") for a period of ninety (90) days after said
termination (or in the case of shares issued upon exercise of the Option
after such date of termination, within ninety (90) days after the date of the
exercise), or such longer period as may be agreed to by the Company and the
Purchaser, to repurchase from Purchaser or Purchaser's personal
representative, as the case may be, those shares that Purchaser received
pursuant to the exercise of the Option that have not as yet vested as of such
termination date in accordance with the Vesting Schedule indicated on
Purchaser's Stock Option Grant Notice (the "Unvested Shares"). The Vesting
Schedule is set forth, in addition, in the "Vesting Schedule" attached hereto
as an exhibit and incorporated herein by reference.

                  (b)      SHARES REPURCHASABLE AT PURCHASER'S ORIGINAL
EXERCISE PRICE. The Company may repurchase all or any of the Unvested Shares
at a price ("Option Price") equal to the Purchaser's Exercise Price for such
shares of _______________________ ($______) per share as indicated on
Purchaser's Stock Option Grant Notice.

         4.       EXERCISE OF REPURCHASE OPTION. The Repurchase Option shall
be exercised by written notice signed by an Officer of the Company and
delivered or mailed as provided herein. Such notice shall identify the number
of shares of Common Stock to be purchased and shall notify Purchaser of the
time, place and date for settlement of such purchase, which shall be
scheduled by the Company within the term of the Repurchase Option set forth
above. The Company shall be entitled to pay for any shares of Common Stock
purchased pursuant to its Repurchase Option at the Company's option in cash
or by offset against any indebtedness owing to the Company by Purchaser
(including without limitation any Note given in payment for the Common
Stock), or by a combination of both. Upon delivery of such notice and payment
of the purchase price in any of the ways described above, the Company shall
become the legal and beneficial owner of the Common Stock being repurchased
and all rights and interest therein or related thereto, and the Company shall
have the right to transfer to its own name the Common Stock being repurchased
by the Company, without further action by Purchaser.

         5.       CAPITALIZATION ADJUSTMENTS TO COMMON STOCK. In the event of
a "Capitalization Adjustment" affecting the Company's outstanding Common
Stock as a class as designated in the Plan, then any and all new, substituted
or additional securities or other property to which Purchaser is entitled by
reason of Purchaser's ownership of Common Stock shall be immediately subject
to the Repurchase Option and be included in the word "Common Stock" for all
purposes of the Repurchase Option with the same force and effect as the
shares of the

                                      -2-
<PAGE>

Common Stock presently subject to the Repurchase Option, but only to the extent
the Common Stock is, at the time, covered by such Repurchase Option. While the
total Option Price shall remain the same after each such event, the Option Price
per share of Common Stock upon exercise of the Repurchase Option shall be
appropriately adjusted.

         6.       CHANGE IN CONTROL. In the event of a "Change in Control" as
designated in the Plan, then the Repurchase Option may be assigned by the
Company to the successor of the Company (or such successor's parent company),
if any, in connection with such Change in Control. To the extent the
Repurchase Option remains in effect following such Change in Control, it
shall apply to the new capital stock or other property received in exchange
for the Common Stock in consummation of the Change in Control, but only to
the extent the Common Stock was at the time covered by such right.
Appropriate adjustments shall be made to the price per share payable upon
exercise of the Repurchase Option to reflect the Change in Control upon the
Company's capital structure; provided, however, that the aggregate Option
Price shall remain the same.

         7.       ESCROW OF UNVESTED COMMON STOCK. As security for
Purchaser's faithful performance of the terms of this Agreement and to insure
the availability for delivery of Purchaser's Common Stock upon exercise of
the Repurchase Option herein provided for, Purchaser agrees, at the closing
hereunder, to deliver to and deposit with the Secretary of the Company or the
Secretary's designee ("Escrow Agent"), as Escrow Agent in this transaction,
three (3) stock assignments duly endorsed (with date and number of shares
blank) in the form attached hereto as an exhibit, together with a certificate
or certificates evidencing all of the Common Stock subject to the Repurchase
Option; said documents are to be held by the Escrow Agent and delivered by
said Escrow Agent pursuant to the Joint Escrow Instructions of the Company
and Purchaser set forth in an exhibit, attached hereto and incorporated by
this reference, which instructions shall also be delivered to the Escrow
Agent at the closing hereunder.

         8.       RIGHTS OF PURCHASER. Subject to the provisions of the
Option, Purchaser shall exercise all rights and privileges of a shareholder
of the Company with respect to the shares deposited in escrow. Purchaser
shall be deemed to be the holder of the shares for purposes of receiving any
dividends that may be paid with respect to such shares and for purposes of
exercising any voting rights relating to such shares, even if some or all of
such shares have not yet vested and been released from the Company's
Repurchase Option.

         9.       LIMITATIONS ON TRANSFER. In addition to any other
limitation on transfer created by applicable securities laws, Purchaser shall
not sell, assign, hypothecate, donate, encumber or otherwise dispose of any
interest in the Common Stock while the Common Stock is subject to the
Repurchase Option. After any Common Stock has been released from the
Repurchase Option, Purchaser shall not sell, assign, hypothecate, donate,
encumber or otherwise dispose of any interest in the Common Stock except in
compliance with the provisions herein and applicable securities laws.
Furthermore, the Common Stock shall be subject to any right of first refusal
in favor of the Company or its assignees that may be contained in the
Company's Bylaws.

                                      -3-
<PAGE>

         10.      RESTRICTIVE LEGENDS. All certificates representing the
Common Stock shall have endorsed thereon legends in substantially the
following forms (in addition to any other legend which may be required by
other agreements between the parties hereto):

                  (a)      "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO AN OPTION SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE
REGISTERED HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH
IS ON FILE AT THE PRINCIPAL OFFICE OF THIS COMPANY. ANY TRANSFER OR ATTEMPTED
TRANSFER OF ANY SHARES SUBJECT TO SUCH OPTION IS VOID WITHOUT THE PRIOR
EXPRESS WRITTEN CONSENT OF THE COMPANY."

                  (b)      "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."

                  (c)      "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE COMPANY AND/OR ITS
ASSIGNEE(S) AS PROVIDED IN THE BYLAWS OF THE COMPANY."

                  (d)      Any legend required by appropriate blue sky
officials.

         11.      INVESTMENT REPRESENTATIONS. In connection with the purchase
of the Common Stock, Purchaser represents to the Company the following:

                  (a)      Purchaser is aware of the Company's business
affairs and financial condition and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to acquire the
Common Stock. Purchaser is acquiring the Common Stock for investment for
Purchaser's own account only and not with a view to, or for resale in
connection with, any "distribution" thereof within the meaning of the
Securities Act.

                  (b)      Purchaser understands that the Common Stock has
not been registered under the Securities Act by reason of a specific
exemption therefrom, which exemption depends upon, among other things, the
bona fide nature of Purchaser's investment intent as expressed herein.

                  (c)      Purchaser further acknowledges and understands
that the Common Stock must be held indefinitely unless the Common Stock is
subsequently registered under the Securities Act or an exemption from such
registration is available. Purchaser further acknowledges and understands
that the Company is under no obligation to register the Common Stock.
Purchaser understands that the certificate evidencing the Common Stock will
be imprinted with a legend that prohibits the transfer of the Common Stock
unless the Common Stock is registered or such registration is not required in
the opinion of counsel for the Company.

                                      -4-
<PAGE>

                  (d)      Purchaser is familiar with the provisions of Rules
144 and 701, under the Securities Act, as in effect from time to time, which,
in substance, permit limited public resale of "restricted securities"
acquired, directly or indirectly, from the issuer thereof (or from an
affiliate of such issuer), in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of issuance of the securities, such
issuance will be exempt from registration under the Securities Act. In the
event the Company becomes subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the securities exempt under
Rule 701 may be sold by Purchaser ninety (90) days thereafter, subject to the
satisfaction of certain of the conditions specified by Rule 144 and the
market stand-off provision described in Section 12 below.

         In the event that the sale of the Common Stock does not qualify under
Rule 701 at the time of purchase, then the Common Stock may be resold by
Purchaser in certain limited circumstances subject to the provisions of Rule
144, which requires, among other things: (i) the availability of certain public
information about the Company and (ii) the resale occurring following the
required holding period under Rule 144 after the Purchaser has purchased, and
made full payment of (within the meaning of Rule 144), the securities to be
sold.

                  (e)      Purchaser further understands that at the time
Purchaser wishes to sell the Common Stock there may be no public market upon
which to make such a sale, and that, even if such a public market then
exists, the Company may not be satisfying the current public current
information requirements of Rule 144 or 701, and that, in such event,
Purchaser would be precluded from selling the Common Stock under Rule 144 or
701 even if the minimum holding period requirement had been satisfied.

         12.      MARKET STAND-OFF AGREEMENT. By exercising the Option
Purchaser agrees that the Company (or a representative of the underwriters)
may, in connection with any underwritten registration of the offering of any
securities of the Company under the Securities Act, require that the
Purchaser not sell, dispose of, transfer, make any short sale of, grant any
option for the purchase of, or enter into any hedging or similar transaction
with the same economic effect as a sale, any shares of Common Stock or other
securities of the Company held by Purchaser, for a period of time specified
by the underwriter(s) (not to exceed one hundred eighty (180) days) following
the effective date of the registration statement of the Company filed under
the Securities Act. Purchaser further agrees to execute and deliver such
other agreements as may be reasonably requested by the Company and/or the
underwriter(s) that are consistent with the foregoing or that are necessary
to give further effect thereto. In order to enforce the foregoing covenant,
the Company may impose stop-transfer instructions with respect to Purchaser's
Common Stock until the end of such period.

         13.      SECTION 83(b) ELECTION. Purchaser understands that Section
83(a) of the Code, taxes as ordinary income the difference between the amount
paid for the Common Stock and the fair market value of the Common Stock as of
the date any restrictions on the Common Stock lapse. In this context,
"restriction" includes the right of the Company to buy back the Common Stock
pursuant to the Repurchase Option set forth above. Purchaser understands that
Purchaser may elect to be taxed at the time the Common Stock is purchased,
rather than when

                                      -5-
<PAGE>

and as the Repurchase Option expires, by filing an election under Section 83(b)
(an "83(b) Election") of the Code with the Internal Revenue Service within
thirty (30) days from the date of purchase. Even if the fair market value of the
Common Stock at the time of the execution of this Agreement equals the amount
paid for the Common Stock, the 83(b) Election must be made to avoid income under
Section 83(a) in the future. Purchaser understands that failure to file such an
83(b) Election in a timely manner may result in adverse tax consequences for
Purchaser. Purchaser further understands that Purchaser must file an additional
copy of such 83(b) Election with his or her federal income tax return for the
calendar year in which the date of this Agreement falls. Purchaser acknowledges
that the foregoing is only a summary of the effect of United States federal
income taxation with respect to purchase of the Common Stock hereunder, and does
not purport to be complete. Purchaser further acknowledges that the Company has
directed Purchaser to seek independent advice regarding the applicable
provisions of the Code, the income tax laws of any municipality, state or
foreign country in which Purchaser may reside, and the tax consequences of
Purchaser's death. Purchaser assumes all responsibility for filing an 83(b)
Election and paying all taxes resulting from such election or the lapse of the
restrictions on the Common Stock.

         14.      REFUSAL TO TRANSFER. The Company shall not be required (a)
to transfer on its books any shares of Common Stock of the Company which
shall have been transferred in violation of any of the provisions set forth
in this Agreement or (b) to treat as owner of such shares or to accord the
right to vote as such owner or to pay dividends to any transferee to whom
such shares shall have been so transferred.

         15.      NO EMPLOYMENT RIGHTS. This Agreement is not an employment
contract and nothing in this Agreement shall affect in any manner whatsoever
the right or power of the Company (or a parent or subsidiary of the Company)
to terminate Purchaser's employment for any reason at any time, with or
without cause and with or without notice.

         16.      MISCELLANEOUS.

                  (a)      NOTICES. Any notice required or permitted
hereunder shall be given in writing and shall be deemed effectively given
upon personal delivery or sent by telegram or fax or upon deposit in the
United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to the other party hereto at such party's address
hereinafter shown below its signature or at such other address as such party
may designate by ten (10) days' advance written notice to the other party
hereto.

                  (b)      SUCCESSORS AND ASSIGNS. This Agreement shall inure
to the benefit of the successors and assigns of the Company and, subject to
the restrictions on transfer herein set forth, be binding upon Purchaser,
Purchaser's successors, and assigns. The Company may assign the Repurchase
Option hereunder at any time or from time to time, in whole or in part.

                  (c)      ATTORNEYS' FEES; SPECIFIC PERFORMANCE. Purchaser
shall reimburse the Company for all costs incurred by the Company in
enforcing the performance of, or protecting its rights under, any part of
this Agreement, including reasonable costs of investigation and attorneys'
fees. It is the intention of the parties that the Company, upon exercise of
the

                                      -6-
<PAGE>

Repurchase Option and payment of the Option Price, pursuant to the terms of this
Agreement, shall be entitled to receive the Common Stock, in specie, in order to
have such Common Stock available for future issuance without dilution of the
holdings of other shareholders. Furthermore, it is expressly agreed between the
parties that money damages are inadequate to compensate the Company for the
Common Stock and that the Company shall, upon proper exercise of the Repurchase
Option, be entitled to specific enforcement of its rights to purchase and
receive said Common Stock.

                  (d)      GOVERNING LAW; VENUE. This Agreement shall be
governed by and construed in accordance with the laws of the State of
California. The parties agree that any action brought by either party to
interpret or enforce any provision of this Agreement shall be brought in, and
each party agrees to, and does hereby, submit to the jurisdiction and venue
of, the appropriate state or federal court for the district encompassing the
Company's principal place of business.

                  (e)      FURTHER EXECUTION. The parties agree to take all
such further action(s) as may reasonably be necessary to carry out and
consummate this Agreement as soon as practicable, and to take whatever steps
may be necessary to obtain any governmental approval in connection with or
otherwise qualify the issuance of the securities that are the subject of this
Agreement.

                  (f)      INDEPENDENT COUNSEL. Purchaser acknowledges that
this Agreement has been prepared on behalf of the Company by Cooley Godward
LLP, counsel to the Company and that Cooley Godward LLP does not represent,
and is not acting on behalf of, Purchaser. Purchaser has been provided with
an opportunity to consult with Purchaser's own counsel with respect to this
Agreement.

                  (g)      ENTIRE AGREEMENT; AMENDMENT. This Agreement
constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes and merges all prior agreements or
understandings, whether written or oral. This Agreement may not be amended,
modified or revoked, in whole or in part, except by an agreement in writing
signed by each of the parties hereto.

                  (h)      SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, the parties
agree to renegotiate such provision in good faith. In the event that the
parties cannot reach a mutually agreeable and enforceable replacement for
such provision, then (i) such provision shall be excluded from this
Agreement, (ii) the balance of the Agreement shall be interpreted as if such
provision were so excluded and (iii) the balance of the Agreement shall be
enforceable in accordance with its terms.

                  (i)      COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute one instrument.

                                      -7-
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as

                                          INTERMUNE PHARMACEUTICALS, INC.

                                          By:
                                             ----------------------------------
                                          Title:
                                                -------------------------------
                                          Address:       294 West Bayshore Road
                                                         Palo Alto, CA 94303

                                          -------------------------------------

                                          Address:

ATTACHMENTS:

Exhibit A         Assignment Separate from Certificate
Exhibit B         Joint Escrow Instructions
Exhibit C         Vesting Schedule

                                      -8-
<PAGE>

                                    EXHIBIT A

                   STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE

<PAGE>

                   STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE

         FOR VALUE RECEIVED, _______________________ hereby sells, assigns and
transfers unto InterMune Pharmaceuticals, Inc., a California corporation (the
"Company"), pursuant to the Repurchase Option under that certain Early Exercise
Stock Purchase Agreement, dated _____________________ by and between the
undersigned and the Company (the "Agreement"), _______________ (_______________)
shares of Common Stock of the Company standing in the undersigned's name on the
books of the Company represented by Certificate No(s). _______________ and does
hereby irrevocably constitute and appoint the Company's Secretary attorney to
transfer said Common Stock on the books of the Company with full power of
substitution in the premises. This Assignment may be used only in accordance
with and subject to the terms and conditions of the Agreement, in connection
with the repurchase of shares of Common Stock issued to the undersigned pursuant
to the Agreement, and only to the extent that such shares remain subject to the
Company's Repurchase Option under the Agreement.

Dated: _______________   (do not date now)

                                    --------------------------------------------
                                    (Signature)

                                    --------------------------------------------
                                    (Print Name)

[INSTRUCTION: Please do not fill in the date or any other blanks other than the
"Signature" line and the "Print Name" line. The purpose of this Assignment is to
enable the Company to exercise its Repurchase Option set forth in the Agreement
without requiring additional signatures on the part of Purchaser.]

                                       1.
<PAGE>

                   STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE

         FOR VALUE RECEIVED, _______________________ hereby sells, assigns and
transfers unto InterMune Pharmaceuticals, Inc., a California corporation (the
"Company"), pursuant to the Repurchase Option under that certain Early Exercise
Stock Purchase Agreement, dated _____________________ by and between the
undersigned and the Company (the "Agreement"), _______________ (_______________)
shares of Common Stock of the Company standing in the undersigned's name on the
books of the Company represented by Certificate No(s). _______________ and does
hereby irrevocably constitute and appoint the Company's Secretary attorney to
transfer said Common Stock on the books of the Company with full power of
substitution in the premises. This Assignment may be used only in accordance
with and subject to the terms and conditions of the Agreement, in connection
with the repurchase of shares of Common Stock issued to the undersigned pursuant
to the Agreement, and only to the extent that such shares remain subject to the
Company's Repurchase Option under the Agreement.

Dated: _______________   (do not date now)

                                    --------------------------------------------
                                    (Signature)

                                    --------------------------------------------
                                    (Print Name)

[INSTRUCTION: Please do not fill in the date or any other blanks other than the
"Signature" line and the "Print Name" line. The purpose of this Assignment is to
enable the Company to exercise its Repurchase Option set forth in the Agreement
without requiring additional signatures on the part of Purchaser.]

                                       2.
<PAGE>

                   STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE

         FOR VALUE RECEIVED, ______________________ hereby sells, assigns and
transfers unto InterMune Pharmaceuticals, Inc., a California corporation (the
"Company"), pursuant to the Repurchase Option under that certain Early Exercise
Stock Purchase Agreement, dated ______________________ by and between the
undersigned and the Company (the "Agreement"), _______________ (_______________)
shares of Common Stock of the Company standing in the undersigned's name on the
books of the Company represented by Certificate No(s). _______________ and does
hereby irrevocably constitute and appoint the Company's Secretary attorney to
transfer said Common Stock on the books of the Company with full power of
substitution in the premises. This Assignment may be used only in accordance
with and subject to the terms and conditions of the Agreement, in connection
with the repurchase of shares of Common Stock issued to the undersigned pursuant
to the Agreement, and only to the extent that such shares remain subject to the
Company's Repurchase Option under the Agreement.

Dated: _______________   (do not date now)

                                    --------------------------------------------
                                    (Signature)

                                    --------------------------------------------
                                    (Print Name)

[INSTRUCTION: Please do not fill in the date or any other blanks other than the
"Signature" line and the "Print Name" line. The purpose of this Assignment is to
enable the Company to exercise its Repurchase Option set forth in the Agreement
without requiring additional signatures on the part of Purchaser.]

                                       1.
<PAGE>

                                    EXHIBIT B

                            JOINT ESCROW INSTRUCTIONS

<PAGE>

                            JOINT ESCROW INSTRUCTIONS

Secretary of Intermune Pharmaceuticals, Inc.
Cooley Godward LLP
Five Palo Alto Square
Palo Alto, CA 94306

Dear Sir or Madam:

         As Escrow Agent for both INTERMUNE PHARMACEUTICALS, INC., a California
corporation ("Company"), and the undersigned purchaser of Common Stock of the
Company ("Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Early Exercise
Stock Purchase Agreement ("Agreement"), dated ____________________, to which a
copy of these Joint Escrow Instructions is attached as Exhibit B, in accordance
with the following instructions:

         1.       In the event the Company or an assignee shall elect to
exercise the Repurchase Option set forth in the Agreement, the Company or its
assignee will give to Purchaser and you a written notice specifying the number
of shares of Common Stock to be purchased, the purchase price, and the time for
a closing hereunder at the principal office of the Company. Purchaser and the
Company hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.

         2.       At the closing you are directed (a) to date any stock
assignments necessary for the transfer in question, (b) to fill in the number of
shares being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of Common Stock to be transferred, to the Company against
the simultaneous delivery to you of the purchase price (which may include
suitable acknowledgment of cancellation of indebtedness) of the number of shares
of Common Stock being purchased pursuant to the exercise of the Repurchase
Option.

         3.       Purchaser irrevocably authorizes the Company to deposit with
you any certificates evidencing shares of Common Stock to be held by you
hereunder and any additions and substitutions to said shares as specified in the
Agreement. Purchaser does hereby irrevocably constitute and appoint you as the
Purchaser's attorney-in-fact and agent for the term of this escrow to execute
with respect to such securities and other property all documents of assignment
and/or transfer and all stock certificates necessary or appropriate to make all
securities negotiable and complete any transaction herein contemplated.

         4.       This escrow shall terminate upon expiration or exercise in
full of the Repurchase Option, whichever occurs first.

         5.       If at the time of termination of this escrow you should have
in your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of same

                                      -1-
<PAGE>

to Purchaser and shall be discharged of all further obligations hereunder;
PROVIDED, HOWEVER, that if at the time of termination of this escrow you are
advised by the Company that the property subject to this escrow is the subject
of a pledge or other security agreement, you shall deliver all such property to
the pledgeholder or other person designated by the Company.

         6.       Except as otherwise provided in these Joint Escrow
Instructions, your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.

         7.       You shall be obligated only for the performance of such duties
as are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by you
to be genuine and to have been signed or presented by the proper party or
parties or their assignees. You shall not be personally liable for any act you
may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for
Purchaser while acting in good faith and any act done or omitted by you pursuant
to the advice of your own attorneys shall be conclusive evidence of such good
faith.

         8.       You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case you obey or comply with any such order, judgment or decree of any
court, you shall not be liable to any of the parties hereto or to any other
person, firm or corporation by reason of such compliance, notwithstanding any
such order, judgment or decree being subsequently reversed, modified, annulled,
set aside, vacated or found to have been entered without jurisdiction.

         9.       You shall not be liable in any respect on account of the
identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.

         10.      You shall not be liable for the outlawing of any rights under
any statute of limitations with respect to these Joint Escrow Instructions or
any documents deposited with you.

         11.      Your responsibilities as Escrow Agent hereunder shall
terminate if you shall cease to be Secretary of the Company or if you shall
resign by written notice to each party. In the event of any such termination,
the Company may appoint any officer or assistant officer of the Company as
successor Escrow Agent and Purchaser hereby confirms the appointment of such
successor or successors as the Purchaser's attorney-in-fact and agent to the
full extent of your appointment.

         12.      If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.

         13.      It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities, you are authorized and

                                      -2-
<PAGE>

directed to retain in your possession without liability to anyone all or any
part of said securities until such dispute shall have been settled either by
mutual written agreement of the parties concerned or by a final order, decree or
judgment of a court of competent jurisdiction after the time for appeal has
expired and no appeal has been perfected, but you shall be under no duty
whatsoever to institute or defend any such proceedings.

         14.      Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, including
delivery by express courier or five days after deposit in the United States Post
Office, by registered or certified mail with postage and fees prepaid, addressed
to each of the other parties hereunto entitled at the following addresses, or at
such other addresses as a party may designate by ten days' advance written
notice to each of the other parties hereto:

         COMPANY:           Intermune Pharmaceuticals, Inc.
                            3294 West Bayshore Road
                            Palo Alto, CA 94303

         PURCHASER:

         ESCROW AGENT:      Secretary
                            Cooley Godward LLP
                            Five Palo Alto Square
                            Palo Alto, CA 94306

         15.      By signing these Joint Escrow Instructions you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.

         16.      You shall be entitled to employ such legal counsel and other
experts (including without limitation the firm of Cooley Godward LLP) as you may
deem necessary properly to advise you in connection with your obligations
hereunder. You may rely upon the advice of such counsel, and may pay such
counsel reasonable compensation therefor. The Company shall be responsible for
all fees generated by such legal counsel in connection with your obligations
hereunder.

         17.      This instrument shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns. It
is understood and agreed that references to "you" or "your" herein refer to the
original Escrow Agent and to any and all successor Escrow Agents. It is
understood and agreed that the Company may at any time or from time to time
assign its rights under the Agreement and these Joint Escrow Instructions in
whole or in part.

         18.      This Agreement shall be governed by and interpreted and
determined in accordance with the laws of the State of California, as such laws
are applied by California courts to contracts made and to be performed entirely
in California by residents of that state.

                                      -3-
<PAGE>

                                            Very truly yours,

                                            INTERMUNE PHARMACEUTICALS, INC.

                                            By:
                                               ---------------------------------
                                            Title:
                                                  ------------------------------

                                            PURCHASER:

                                            ------------------------------------

ESCROW AGENT:

------------------------------------------

                                      -4-
<PAGE>

                                    EXHIBIT C

                                VESTING SCHEDULE

<PAGE>

                                VESTING SCHEDULE

<TABLE>
<CAPTION>
                                                                     NUMBER OF UNVESTED SHARES
                                                                            SUBJECT
          IF PURCHASER'S                   NUMBER OF SHARES              TO THE COMPANY'S
     CONTINUOUS SERVICE ENDS;                   VESTED                   REPURCHASE OPTION:
-------------------------------------     -----------------          -------------------------
<S>                                       <C>                        <C>
On or before                                   __shares

After ____________ but on or before
___________

After ____________ but on or before
________________
</TABLE>

____________ shall vest monthly thereafter. The number of shares in the
foregoing schedule is subject to adjustment in the event of stock splits,
combinations, and the like.

                                      -1-

<PAGE>

                         INTERMUNE PHARMACEUTICALS, INC.
                           1999 EQUITY INCENTIVE PLAN

                             STOCK OPTION AGREEMENT
                   (INCENTIVE AND NONSTATUTORY STOCK OPTIONS)

         Pursuant to the Stock Option Grant Notice ("Grant Notice") and this
Stock Option Agreement, InterMune Pharmaceuticals, Inc. (the "Company") has
granted you an option under its 1999 Equity Incentive Plan (the "Plan") to
purchase the number of shares of the Company's Common Stock indicated in the
Grant Notice at the exercise price indicated in the 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 the 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
subject to your option and your exercise price per share referenced in the Grant
Notice may be adjusted from time to time for Capitalization Adjustments, as
provided in the Plan.

         3.       EXERCISE PRIOR TO VESTING ("EARLY EXERCISE"). If permitted in
your Grant Notice (i.e., the "Exercise Schedule" indicates that "Early Exercise"
of your option is 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 nonvested 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, as
provided in the Plan, 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

                                       1
<PAGE>

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.

         4.       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 THE 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 which, 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 that either have been held for
the period required to avoid a charge to the Company's reported earnings
(generally six months) or were not acquired, 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 your option is exercised, 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, your option may not be exercised
by tender to the Company of Common Stock to the extent such tender would
constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company's stock.

         5.       WHOLE SHARES. Your option may only be exercised for whole
shares.

         6.       SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, your option may not be exercised unless the shares
issuable upon exercise of your option are then registered under the Securities
Act or, if such shares 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 must also comply
with other applicable laws and regulations governing the option, and the option
may not be exercised if the Company determines that the exercise would not be in
material compliance with such laws and regulations.

         7.       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;

                                       2
<PAGE>

                  (b)      three (3) months after the termination of your
Continuous Service for any reason other than Cause, Disability or death,
provided that if during any part of such three- (3-) month period the option is
not exercisable solely because of the condition set forth in paragraph 6, the
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;

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

                  (d)      eighteen (18) months after your death if you die
either during your Continuous Service or within three (3) months after your
Continuous Service terminates for reason other than Cause;

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

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

         For purposes of your option, "Cause" means your misconduct, including
but not limited to: (i) your conviction of any felony or any crime involving
moral turpitude or dishonesty, (ii) your participation in a fraud or act of
dishonesty against the Company, (iii) your conduct that, based upon a good faith
and reasonable factual investigation and determination by the Board,
demonstrates your gross unfitness to serve, or (iv) your intentional, material
violation of any contract between the Company and you or any statutory duty of
yours to the Company that you do not correct within thirty (30) days after
written notice to you thereof. Your physical or mental disability shall not
constitute "Cause."

         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 the option and
ending on the day three (3) months before the date of the option's exercise, you
must be an employee of the Company or an Affiliate, except in the event of your
death or your 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 provide services to the Company or an Affiliate as a Consultant
or Director or if you exercise your option more than three (3) months after the
date your employment with the Company or an Affiliate terminates.

         8.       TERMS OF 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.

                                       3
<PAGE>

                  (b)      By exercising your option you agree that, as a
condition to any exercise of your option, the Company may require you to enter
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 are subject at the time of exercise, or (3) the disposition of shares
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.

                  (d)      By exercising your option you agree that the Company
(or a representative of the underwriters) may, in connection with the first
underwritten registration of the offering of any securities of the Company under
the Securities Act, require that you not sell, dispose of, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic effect as a sale, any shares of
Common Stock or other securities of the Company held by you, for a period of
time specified by the underwriter(s) (not to exceed one hundred eighty (180)
days) following the effective date of the registration statement of the Company
filed under the Securities Act. You further agree to execute and deliver such
other agreements as may be reasonably requested by the Company and/or the
underwriter(s) which are consistent with the foregoing or which are necessary to
give further effect thereto. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to your Common Stock
until the end of such period.

         9.       TRANSFERABILITY. 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.

         10.      RIGHT OF FIRST REFUSAL. Shares of Common Stock that you
acquire upon exercise of your option are subject to any right of first refusal
that may be described in the Company's bylaws in effect at such time the Company
elects to exercise its right. The Company's right of first refusal shall expire
on the Listing Date.

         11.      RIGHT OF REPURCHASE. To the extent provided in the Company's
bylaws as amended from time to time, the Company shall have the right to
repurchase all or any part of the shares of Common Stock you acquire pursuant to
the exercise of your option.

         12.      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 shareholders, Boards of Directors,
Officers

                                       4
<PAGE>

or Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.

         13.      WITHHOLDING OBLIGATIONS.

                  (a)      At the time your option is exercised, 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 your option.

                  (b)      Upon your request and subject to approval by the
Company, in its sole discretion, and compliance with any applicable conditions
or restrictions of law, 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. 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)      Your option is not exercisable 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 or release such shares from any escrow provided
for herein.

         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 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

<PAGE>

                               NOTICE OF EXERCISE

InterMune Pharmaceuticals, Inc.
3294 W. Bayshore Road                                          Date of Exercise:
Palo Alto, CA 94303

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):

         Stock option dated:

         Number of shares as
         to which option is
         exercised:

         Certificates to be
         issued in name of:

         Total exercise price:                       $

         Cash payment delivered
         herewith:                                   $

         By this exercise, I agree (i) to provide such additional documents as
you may require pursuant to the terms of the 1999 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.

         I hereby make the following certifications and representations with
respect to the number of shares of Common Stock of the Company listed above (the
"Shares"), which are being acquired by me for my own account upon exercise of
the Option as set forth above:

         I acknowledge that the Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and are deemed to
constitute "restricted securities" under Rule 701 and "control securities" under
Rule 144 promulgated under the Securities Act. I warrant and represent to the
Company that I have no present intention of distributing or selling said Shares,
except as permitted under the Securities Act and any applicable state securities
laws.

                                       1.
<PAGE>

         I further acknowledge that I will not be able to resell the Shares for
at least ninety days (90) after the stock of the Company becomes publicly traded
(I.E., subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934) under Rule 701 and that more restrictive
conditions apply to affiliates of the Company under Rule 144.

         I further acknowledge that all certificates representing any of the
Shares subject to the provisions of the Option shall have endorsed thereon
appropriate legends reflecting the foregoing limitations, as well as any legends
reflecting restrictions pursuant to the Company's Articles of Incorporation,
Bylaws and/or applicable securities laws.

         I further agree that, if required by the Company (or a representative
of the underwriters) in connection with the first underwritten registration of
the offering of any securities of the Company under the Securities Act, I will
not sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date of the registration statement of the
Company filed under the Securities Act as may be requested by the Company or the
representative of the underwriters. I further agree that the Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such period.

                                                 Very truly yours,

                                                 -------------------------------

                                       2.

<PAGE>

                         INTERMUNE PHARMACEUTICALS, INC.
                            STOCK OPTION GRANT NOTICE
                           1999 EQUITY INCENTIVE PLAN

InterMune Pharmaceuticals, Inc. (the "Company"), pursuant to its 1999 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
Stock 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:

EXERCISE SCHEDULE:  / / Same as Vesting Schedule    / / Early Exercise Permitted

                    VESTING SCHEDULE:

PAYMENT:            By one or a combination of the following items (described
                    in the Stock Option Agreement):

                               By cash or check
                               Pursuant to a Regulation T Program if the Shares
                               are publicly traded
                               By delivery of already-owned shares if the Shares
                               are publicly traded

ADDITIONAL TERMS/ACKNOWLEDGEMENTS: The undersigned Optionholder acknowledges
receipt of, and understands and agrees to, this Grant Notice, the Stock Option
Agreement and the Plan. Optionholder further acknowledges that as of the Date of
Grant, this Grant Notice, the Stock 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 under the Plan, and (ii) the following agreements
only:

         OTHER AGREEMENTS:                   ----------------------------------

INTERMUNE PHARMACEUTICALS, INC.              OPTION HOLDER:

By:
   ----------------------------------        ----------------------------------
            Signature                                    Signature

Title:                                       Date:
      -------------------------------            ------------------------------
Date:
     --------------------------------

ATTACHMENTS:  Stock Option Agreement, 1999 Equity Incentive Plan and Notice
of Exercise

<PAGE>

                                  ATTACHMENT I

                             STOCK OPTION AGREEMENT

<PAGE>

                                  ATTACHMENT II

                           1999 EQUITY INCENTIVE PLAN

<PAGE>

                                 ATTACHMENT III

                               NOTICE OF EXERCISE<PAGE>

                                                                  Exhibit 10.3
                         INTERMUNE PHARMACEUTICALS, INC.

                           2000 EQUITY INCENTIVE PLAN

                            ADOPTED JANUARY 31, 2000
                APPROVED BY STOCKHOLDERS _______________, ______
                       TERMINATION DATE: JANUARY 30, 2010

1.       PURPOSES.

         (a) The Plan is intended to supersede and replace the Company's 1999
Equity Incentive Plan.

         (b) The persons eligible to receive Stock Awards are the Employees,
Directors and Consultants of the Company and its Affiliates.

         (c) 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) stock
bonuses and (iv) rights to acquire restricted stock.

         (d) 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.

         (c) "CODE" means the Internal Revenue Code of 1986, as amended.

         (d) "COMMITTEE" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).

         (e) "COMMON STOCK" means the common stock of the Company.

         (f) "COMPANY" means InterMune Pharmaceuticals, Inc., a Delaware
corporation.

         (g) "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) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors who are not compensated by the Company

                                      1.

<PAGE>

for their services as Directors or Directors who are merely paid a director's
fee by the Company for their services as Directors.

         (h) "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. The Participant's Continuous Service shall not be
deemed to have terminated merely because of 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. For example, a change in status without interruption
from an Employee of the Company to a Consultant of an Affiliate or a Director
will 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.

         (i) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) 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.

         (j) "DIRECTOR" means a member of the Board of Directors of the Company.

         (k) "DISABILITY" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.

         (l) "EMPLOYEE" means any person employed by the Company or an
Affiliate. Mere 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.

         (m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

         (n) "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 the Nasdaq National Market or the Nasdaq SmallCap Market,
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) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in the Common Stock) on the last market trading day prior to the day
of determination, as reported in THE WALL STREET JOURNAL or such other source as
the Board deems reliable.

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

                                      2.

<PAGE>

         (o) "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.

         (p) "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 (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 as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.

         (q) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.

         (r) "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.

         (s) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.

         (t) "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.

         (u) "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.

         (v) "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" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services 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.

         (w) "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.

         (x) "PLAN" means this InterMune Pharmaceuticals, Inc. 2000 Equity
Incentive Plan.

         (y) "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.

         (z) "SECURITIES ACT" means the Securities Act of 1933, as amended.

                                      3.

<PAGE>

         (aa) "STOCK AWARD" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.

         (bb) "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.

         (cc) "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 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
subsection 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; the exercise price and acceptable types of
consideration for payment of the exercise price for each Stock Award; what
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 amend the Plan or a Stock Award as provided in

                  (iv) To terminate or suspend the Plan as provided in

                  (v) 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 which 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 (1) 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

                                      4.

<PAGE>

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) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY
TRADED. At such time as the Common Stock is publicly traded, in the discretion
of the Board, a 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. Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (a) not then 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 are not
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) 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 relating to
adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate two million
(2,000,000) shares of Common Stock plus an annual increase to be added each
January 1, commencing with January 1, 2001, equal to three percent (3%) of the
total number of shares of Common Stock outstanding (on a fully diluted, as
converted basis) on such January 1. Notwithstanding the foregoing, the Board may
designate a smaller number of shares of Common Stock to be added to the share
reserve as of a particular January 1.

         (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, the shares of Common Stock not acquired under
such Stock Award shall revert to and again become available for issuance under
the Plan.

         (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.

         (d) INCENTIVE STOCK OPTION SHARES. Subject to the provisions of Section
11 relating to adjustments upon changes in Common Stock, the aggregate number of
shares of Common Stock issued under the Plan pursuant to the exercise of all
Incentive Stock Options granted under the Plan shall not exceed ten million
(10,000,000) shares of Common Stock.

                                      5.

<PAGE>

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 one hundred ten percent (110%) of the Fair Market Value of the Common
Stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.

         (c) SECTION 162(m) LIMITATION. Subject to the provisions of Section 11
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than one million
(1,000,000) shares of Common Stock during any calendar year.

         (d) CONSULTANTS.

                  (i) 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, or because the
Consultant is not a natural person, or as otherwise provided by the rules
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.

                  (ii) Form S-8 generally is available to consultants and
advisors only if (i) they are natural persons; (ii) they provide bona fide
services to the issuer, its parents, its majority-owned subsidiaries or
majority-owned subsidiaries of the issuer's parent; and (iii) the services are
not in connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market for
the issuer's securities.

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
will 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:

         (a) TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Incentive Stock Option shall be exercisable after the
expiration of ten (10) years from the date it was granted.

                                      6.

<PAGE>

         (b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(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 exercise price
of each Nonstatutory Stock Option shall be not less than fifty percent (50%) of
the Fair Market Value of the Common Stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, a Nonstatutory 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.

         (d) CONSIDERATION. The purchase price of Common Stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board (1) by delivery to the Company of other Common
Stock, (2) according to a deferred payment or other similar arrangement with the
Optionholder or (3) 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 (6) months (or such longer or
shorter period of time required to avoid a charge to the Company's 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 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.

         (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 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 Option Agreement 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

                                      7.

<PAGE>

lifetime of the Optionholder only by the Optionholder. Notwithstanding the
foregoing, the Optionholder may, by delivering written notice to the Company,
in a form 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 subsection 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 an Optionholder's
Continuous Service terminates (other than 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 (3) 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 (other than 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 (3) 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.

         (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 twelve (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 (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

                                      8.

<PAGE>

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 subsection 6(e) or 6(f), but
only within the period ending on the earlier of (1) the date eighteen (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) 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 (6) 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.

         (m) RE-LOAD OPTIONS.

                  (i) Without in any way limiting the authority of the Board to
make or not to make grants of Options hereunder, the Board shall have the
authority (but not an obligation) to include as part of any Option Agreement a
provision entitling the Optionholder to a further Option (a "Re-Load Option") in
the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Unless otherwise specifically provided in the Option, the Optionholder shall not
surrender shares of Common Stock acquired, directly or indirectly from the
Company, unless such shares have been held for more than six (6) months (or such
longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes).

                  (ii) Any such Re-Load Option shall (1) provide for a number of
shares of Common Stock equal to the number of shares of Common Stock surrendered
as part or all of the exercise price of such Option; (2) have an expiration date
which is the same as the expiration date of the Option the exercise of which
gave rise to such Re-Load Option; and (3) have an exercise price which is equal
to one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Re-Load Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option shall be subject to the same
exercise price and term provisions heretofore described for Options under the
Plan.

                  (iii) Any such Re-Load Option may be an Incentive Stock Option
or a Nonstatutory Stock Option, as the Board may designate at the time of the
grant of the original Option; PROVIDED, HOWEVER, that the designation of any
Re-Load Option as an Incentive Stock Option shall be subject to the one hundred
thousand dollar ($100,000) annual limitation on the exercisability of Incentive
Stock Options described in subsection 10(d) and in Section 422(d) of the Code.
There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option
shall be subject to the availability of sufficient shares of Common Stock under
subsection 4(a)

                                      9.

<PAGE>

and the "Section 162(m) Limitation" on the grants of Options under subsection
5(c) and shall be subject to such other terms and conditions as the Board may
determine which are not inconsistent with the express provisions of the Plan
regarding the terms of Options.

7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

         (a) STOCK BONUS AWARDS. Each stock bonus 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 bonus agreements may change from
time to time, and the terms and conditions of separate stock bonus agreements
need not be identical, but each stock bonus agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:

                  (i) CONSIDERATION. A stock bonus may be awarded in
consideration for past services actually rendered to the Company or an Affiliate
for its benefit.

                  (ii) VESTING. Shares of Common Stock awarded under the stock
bonus agreement 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.

                  (iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the
event a Participant's Continuous Service terminates, the Company may reacquire
any or all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the stock bonus
agreement.

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

         (b) RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:

                  (i) PURCHASE PRICE. The purchase price under each
restricted stock purchase agreement shall be such amount as the Board shall
determine and designate in such restricted stock purchase agreement. The
purchase price shall not be less than fifty percent (50%) of the Common
Stock's Fair Market Value on the date such award is made or at the time the
purchase is consummated.

                  (ii) CONSIDERATION. The purchase price of Common Stock
acquired pursuant to the restricted stock purchase agreement shall be paid
either: (i) in cash at the time of purchase; (ii) at the discretion of the
Board, according to a deferred payment or other similar

                                      10.

<PAGE>

arrangement with the Participant; or (iii) in any other form of legal
consideration that may be acceptable to the Board in its discretion;
PROVIDED, HOWEVER, that at any time that the Company is incorporated in
Delaware, then payment of the Common Stock's "par value," as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.

                  (iii) VESTING. Shares of Common Stock acquired under the
restricted stock purchase agreement 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 a Participant's Continuous Service terminates, the Company may repurchase
or otherwise reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.

                  (v) TRANSFERABILITY. Rights to acquire shares of Common Stock
under the restricted stock purchase agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the
restricted stock purchase agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the restricted stock purchase
agreement remains subject to the terms of the restricted stock purchase
agreement.

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

                                      11.

<PAGE>

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 calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.

         (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

                                      12.

<PAGE>

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 (iii) delivering to the Company
owned and unencumbered shares of Common Stock of the Company that have been
held for more than six (6) months (or such longer or shorter period of time
required to avoid a charge to the Company's earnings for financial accounting
purposes).

11.      ADJUSTMENTS UPON CHANGES IN STOCK.

         (a) CAPITALIZATION ADJUSTMENTS. If any change is made in 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), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a), the maximum aggregate number of securities that may
be issued pursuant to the exercise of Incentive Stock Options under subsection
4(d), the maximum number of securities subject to award to any person pursuant
to subsection 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 such event.

         (c) CHANGE IN CONTROL. In the event of (i) a sale, lease or other
disposition of all or substantially all of the securities or assets of the
Company, (ii) a merger or consolidation in which the Company is not the
surviving corporation or (iii) a reverse merger in which the Company is the
surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise, then any surviving
corporation or acquiring corporation may assume any Stock Awards outstanding
under the Plan or may substitute similar stock awards (including an award to
acquire the same consideration paid to the Stockholders in the transaction
described in this subsection 11(c)) for those outstanding under the Plan. In the
event any surviving corporation or acquiring corporation does not assume such
Stock Awards or substitute similar stock awards for those outstanding under the
Plan, then with respect to Stock Awards held by Participants whose Continuous
Service has not terminated, the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full, and the Stock Awards shall terminate if not exercised (if
applicable)

                                      13.

<PAGE>

at or prior to such event. With respect to any other Stock Awards outstanding
under the Plan, such Stock Awards shall terminate if not exercised (if
applicable) prior to such event.

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 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the Stockholders of the Company to the extent Stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.

         (b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion, 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 certain executive officers.

         (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 the day before the tenth
(10th) anniversary of the date the Plan is approved by the Board or the
stockholders of the Company, whichever is earlier. 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 upon the effective date of the
Company's first registered offering of its Common Stock to the public, but no
Stock Award shall be exercised (or, in the

                                      14.

<PAGE>

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
twelve (12) months before or after the date the Plan is adopted by the Board.

15.      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
such state's conflict of laws rules.

                                      15.
<PAGE>

                         INTERMUNE PHARMACEUTICALS, INC.
                            STOCK OPTION GRANT NOTICE
                           2000 EQUITY INCENTIVE PLAN

InterMune Pharmaceuticals, Inc. (the "Company"), pursuant to its 2000 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
Stock 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:     / /  Incentive Stock Option    / /  Nonstatutory Stock Option

EXERCISE SCHEDULE: Same as Vesting Schedule

VESTING SCHEDULE:  _________  of the shares vest one year after the Vesting
                              Commencement Date.
                   _________  of the shares vest monthly thereafter over the
                              next ____ years.

PAYMENT:           By one or a combination of the following items (described in
                   the Stock Option Agreement):

                                By cash or check
                                Pursuant to a Regulation T Program if the Shares
                                are publicly traded
                                By delivery of already-owned shares if the
                                Shares are publicly traded

ADDITIONAL TERMS/ACKNOWLEDGEMENTS: The undersigned Optionholder acknowledges
receipt of, and understands and agrees to, this Grant Notice, the Stock Option
Agreement and the Plan. Optionholder further acknowledges that as of the Date of
Grant, this Grant Notice, the Stock 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 under the Plan, and (ii) the following agreements
only:

         OTHER AGREEMENTS:
                                ---------------------------------------------
                                ---------------------------------------------

INTERMUNE PHARMACEUTICALS, INC.             OPTIONHOLDER:

By:
   ---------------------------------------  ------------------------------------
                  Signature                                Signature

Title:                                      Date:
      ------------------------------------       ------------------------------
Date:
      ------------------------------------

ATTACHMENTS: Stock Option Agreement, 2000 Equity Incentive Plan and Notice of
Exercise

                                      16.
<PAGE>

                                  ATTACHMENT I

                             STOCK OPTION AGREEMENT

                                      17.
<PAGE>

                                  ATTACHMENT II

                           2000 EQUITY INCENTIVE PLAN

                                      18.
<PAGE>

                                 ATTACHMENT III

                               NOTICE OF EXERCISE

                                      19.
<PAGE>

                         INTERMUNE PHARMACEUTICALS, INC.
                           2000 EQUITY INCENTIVE PLAN

                             STOCK OPTION AGREEMENT
                   (INCENTIVE AND NONSTATUTORY STOCK OPTIONS)

         Pursuant to the Stock Option Grant Notice ("Grant Notice") and this
Stock Option Agreement, InterMune Pharmaceuticals, Inc. (the "Company") has
granted you an option under its 2000 Equity Incentive Plan (the "Plan") to
purchase the number of shares of the Company's Common Stock indicated in the
Grant Notice at the exercise price indicated in the 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 the 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 subject to
your option and your exercise price per share referenced in the Grant Notice may
be adjusted from time to time for Capitalization Adjustments, as provided in the
Plan.

         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 THE 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
which, 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 that either have been held for the period
required to avoid a charge to the Company's reported earnings (generally six
months) or were not acquired, 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 your option is
exercised, 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, your option may not be exercised by tender to the
Company of Common Stock to the extent such tender would constitute

                                      20.
<PAGE>

a violation of the provisions of any law, regulation or agreement restricting
the redemption of the Company's stock.

         4.       WHOLE SHARES. Your option may only be exercised for whole
shares.

         5.       SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, your option may not be exercised unless the shares
issuable upon exercise of your option are then registered under the Securities
Act or, if such shares 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 must also comply
with other applicable laws and regulations governing the option, and the option
may not be exercised if the Company determines that the exercise would not be in
material compliance with such laws and regulations.

         6.       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 (3) months after the termination of your Continuous
Service for any reason other than Cause, Disability or death, provided that if
during any part of such three- (3-) month period the option is not exercisable
solely because of the condition set forth in paragraph 6, the 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;

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

                  (d) eighteen (18) months after your death if you die either
during your Continuous Service or within three (3) months after your Continuous
Service terminates for reason other than Cause;

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

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

         For purposes of your option, "Cause" means your misconduct, including
but not limited to: (i) your conviction of any felony or any crime involving
moral turpitude or dishonesty, (ii) your participation in a fraud or act of
dishonesty against the Company, (iii) your conduct that, based upon a good faith
and reasonable factual investigation and determination by the Board,
demonstrates your gross unfitness to serve, or (iv) your intentional, material
violation of any contract between the Company and you or any statutory duty of
yours to the Company that you do not correct within thirty (30) days after
written notice to you thereof. Your physical or mental disability shall not
constitute "Cause."

         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

                                      21.
<PAGE>

beginning on the date of grant of the option and ending on the day three (3)
months before the date of the option's exercise, you must be an employee of
the Company or an Affiliate, except in the event of your death or your
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 provide services to the Company or an Affiliate as a Consultant or
Director or if you exercise your option more than three (3) months after the
date your employment with the Company or an Affiliate terminates.

         7.       TERMS OF 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 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 are subject at the time of exercise, or (3) the disposition of shares
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.

                  (d) By exercising your option you agree that the Company (or a
representative of the underwriters) may, in connection with the first
underwritten registration of the offering of any securities of the Company under
the Securities Act, require that you not sell, dispose of, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic effect as a sale, any shares of
Common Stock or other securities of the Company held by you, for a period of
time specified by the underwriter(s) (not to exceed one hundred eighty (180)
days) following the effective date of the registration statement of the Company
filed under the Securities Act. You further agree to execute and deliver such
other agreements as may be reasonably requested by the Company and/or the
underwriter(s) which are consistent with the foregoing or which are necessary to
give further effect thereto. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to your Common Stock
until the end of such period.

         8.       TRANSFERABILITY. 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.

                                      22.
<PAGE>

         9.       RIGHT OF REPURCHASE. To the extent provided in the Company's
bylaws as amended from time to time, the Company shall have the right to
repurchase all or any part of the shares of Common Stock you acquire pursuant to
the exercise of your option.

         10.      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 shareholders, 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.

         11.      WITHHOLDING OBLIGATIONS.

                  (a) At the time your option is exercised, 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 your option.

                  (b) Upon your request and subject to approval by the Company,
in its sole discretion, and compliance with any applicable conditions or
restrictions of law, 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. 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) Your option is not exercisable 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 or release such shares from any escrow provided for herein.

         12.      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

                                      23.
<PAGE>

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.

         13.      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.

                                      24.
<PAGE>

                               NOTICE OF EXERCISE

InterMune Pharmaceuticals, Inc.
3294 W. Bayshore Road                                 Date of Exercise:_________
Palo Alto, CA 94303

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 / /     Nonstatutory / /

         Stock option dated:

         Number of shares as
         to which option is
         exercised:

         Certificates to be
         issued in name of:

         Total exercise price:              $

         Cash payment delivered
         herewith:                          $

         By this exercise, I agree (i) to provide such additional documents as
you may require pursuant to the terms of the 2000 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.

         I hereby make the following certifications and representations with
respect to the number of shares of Common Stock of the Company listed above (the
"Shares"), which are being acquired by me for my own account upon exercise of
the Option as set forth above:

         I acknowledge that all certificates representing any of the Shares
subject to the provisions of the Option shall have endorsed thereon
appropriate legends, as well as any legends reflecting restrictions pursuant
to the Company's Articles of Incorporation, Bylaws and/or applicable
securities laws.

                                      25.
<PAGE>

         I further agree that, if required by the Company (or a representative
of the underwriters) in connection with the first underwritten registration of
the offering of any securities of the Company under the Securities Act, I will
not sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date of the registration statement of the
Company filed under the Securities Act as may be requested by the Company or the
representative of the underwriters. I further agree that the Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such period.

                                                       Very truly yours,

                                                       -------------------------

                                      26.

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