Document:

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                                                                    EXHIBIT 10.6
                               CELL PATHWAYS, INC.

                           1997 EQUITY INCENTIVE PLAN

                           ADOPTED SEPTEMBER 13, 1993
                      AMENDED AND RESTATED OCTOBER 14, 1997
                              AMENDED JUNE 22, 1998
                              AMENDED MAY 31, 2000
                            AMENDED JANUARY 10, 2001

1.       PURPOSES.

         (a) The Cell Pathways, Inc. 1993 Stock Option Plan was originally
adopted by the Board of Directors of Cell Pathways, Inc., a Delaware corporation
(the "Company") in 1993, and is hereby continued, amended and restated with the
name of the Cell Pathways, Inc. 1997 Equity Incentive Plan (the "Plan"). The
purpose of the Plan is to provide a means by which selected Employees and
Directors of and Consultants to the Company, and its Affiliates, may be given an
opportunity to benefit from increases in value of the stock of the Company
through the granting of (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses, (iv) rights to purchase restricted stock, and (v)
stock appreciation rights, all as defined below.

         (b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.

         (c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
be either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof, or (iii) stock
appreciation rights granted pursuant to Section 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.

2.       DEFINITIONS.

         (a) "AFFILIATE" means any parent corporation or subsidiary corporation,
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) of the Plan.

                                       1.
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         (e) "COMPANY" means Cell Pathways, Inc., a Delaware corporation.

         (f) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT" means a
right granted pursuant to subsection 8(b)(2) of the Plan.

         (g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.

         (h) "CONTINUOUS SERVICE" means that the service of an individual to the
Company, whether as an Employee, Director or Consultant, is not interrupted or
terminated. The Board or the chief executive officer of the Company may
determine, in that party's sole discretion, whether Continuous Service shall be
considered interrupted in the case of: (i) any leave of absence approved by the
Board or the chief executive officer of the Company, including sick leave,
military leave, or any other personal leave; or (ii) transfers between the
Company, Affiliates or their successors.

         (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.

         (k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.

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

         (m) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows:

                  (1) 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 Company's 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.

                  (2) In the absence of such markets for the common stock, the
Fair Market Value shall be determined in good faith by the Board.

                                       2.
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         (n) "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.

         (o) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT" means
a right granted pursuant to subsection 8(b)(3) of the Plan.

         (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.

         (q) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
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 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 a stock option granted pursuant to the Plan.

         (u) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee 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) "OPTIONEE" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.

         (w) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the 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.

                                       3.
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         (x) "PLAN" means this 1997 Equity Incentive Plan.

         (y) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect with respect to the Company at the time discretion
is being exercised regarding the Plan.

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

         (aa) "STOCK APPRECIATION RIGHT" means any of the various types of
rights which may be granted under Section 8 of the Plan.

         (bb) "STOCK AWARD" means any right granted under the Plan, including
any Option, any stock bonus, any right to purchase restricted stock, and any
Stock Appreciation Right.

         (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) "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means a right
granted pursuant to subsection 8(b)(1) of the Plan.

3.       ADMINISTRATION.

         (a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).

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

                  (1) 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; whether a Stock Award will be an Incentive Stock Option,
a Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, a Stock Appreciation Right, or a combination of the foregoing; 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; whether a person shall be permitted to receive stock upon
exercise of an Independent Stock Appreciation Right; and the number of shares
with respect to which a Stock Award shall be granted to each such person.

                  (2) 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.

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                  (3) To amend the Plan or a Stock Award as provided in Section
14.

                  (4) 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) The Board may delegate administration of the Plan to a committee of
the Board composed of not fewer than two (2) members (the "Committee"), all of
the members of which Committee may be, in the discretion of the Board,
Non-Employee Directors and/or Outside Directors. 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 of two (2) or more Outside Directors 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 such a
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. Additionally, prior to the Listing Date, and
notwithstanding anything to the contrary contained herein, the Board may
delegate administration of the Plan to a committee 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. Notwithstanding anything in this Section 3 to the
contrary, the Board or the Committee may delegate to a committee of one or more
members of the Board the authority to grant Stock Awards to eligible persons who
(1) are not then subject to Section 16 of the Exchange Act and/or (2) are either
(i) 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 (ii) not
persons with respect to whom the Company wishes to comply with Section 162(m) of
the Code.

4.       SHARES SUBJECT TO THE PLAN.

         (a) Subject to the provisions of Section 13 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
shall not exceed in the aggregate Five Million Six Hundred Thousand (5,600,000)
shares of the Company's common stock, including all shares authorized since the
inception of the Plan in 1993. If any Stock Award shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in full,
the stock not acquired under such Stock Award shall revert to and again become
available for issuance under the Plan. Shares subject to Stock Appreciation
Rights exercised in accordance with Section 8 of the Plan shall not be available
for subsequent issuance under the Plan.

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

                                       5.
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5.       ELIGIBILITY.

         (a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be granted
only to Employees, Directors or Consultants.

         (b) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person 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 unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of such stock at the date of
grant and such Option is not exercisable after the expiration of five (5) years
from the date of grant.

         (c) Subject to the provisions of Section 13 relating to adjustments
upon changes in stock, no person shall be eligible to be granted Options and
Stock Appreciation Rights covering more than one million five hundred thousand
(1,500,000) shares of the Company's common stock in any calendar year. This
subsection 5(c) shall not apply prior to the Listing Date and, following the
Listing Date, shall not apply until (i) the earliest of: (A) the first material
modification of the Plan (including any increase to the number of shares
reserved for issuance under the Plan in accordance with Section 4); (B) the
issuance of all of the shares of common stock reserved for issuance under the
Plan; (C) the expiration of the Plan; or (D) the first meeting of stockholders
at which directors 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 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. 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. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.

         (b) PRICE. The exercise price of each 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
Option (whether an Incentive Stock Option or 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.

                                       6.
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         (c) 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 or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment arrangement, except that payment of the common
stock's "par value" (as defined in the Delaware General Corporation Law) shall
not be made by deferred payment, or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other common stock
of the Company) with the person to whom the Option is granted or to whom the
Option is transferred pursuant to subsection 6(d), or (C) in any other form of
legal consideration that may be acceptable to the Board.

         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.

         (d) TRANSFERABILITY. 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 person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option shall
only be transferable by the Optionee upon such terms and conditions as are set
forth in the Option Agreement for such Nonstatutory Stock Option, as the Board
or the Committee shall determine in its discretion. The person to whom the
Option is granted 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 Optionee, shall thereafter be entitled to exercise the Option.

         (e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. 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 provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.

         (f) TERMINATION OF CONTINUOUS SERVICES. In the event an Optionee's
Continuous Service terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination) within such
period of time specified in the Option Agreement, or (ii) the expiration of the
term of the Option as set forth in the Option Agreement. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance under the Plan. If,

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after termination, the Optionee does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.

         An Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Service (other
than upon the Optionee's death or disability) would result in liability under
Section 16(b) of the Exchange 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 tenth (10th) day after the last date on which such
exercise would result in such liability under Section 16(b) of the Exchange Act.
Finally, an Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Service (other
than upon the Optionee'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 the first
paragraph of this subsection 6(f), or (ii) the expiration of a period of three
(3) months after the termination of the Optionee's Continuous Service during
which the exercise of the Option would not be in violation of such registration
requirements.

         (g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Service terminates as a result of the Optionee's disability, the Optionee may
exercise his or her Option (to the extent that the Optionee was entitled to
exercise it as of the date of termination), but only within such period of time
specified in the Option Agreement, or the expiration of the term of the Option
as set forth in the Option Agreement. If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.

         (h) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option Agreement after the termination of,
the Optionee's Continuous Service, the Option may be exercised (to the extent
the Optionee was entitled to exercise the Option as of the date of death) by the
Optionee'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
Optionee's death pursuant to subsection 6(d), but only within the period
specified in the Option Agreement, or the expiration of the term of such Option
as set forth in the Option Agreement. If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.

                                       8.
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         (i) EARLY EXERCISE. The Option Agreement may, but need not, include a
provision whereby the Optionee may elect at any time during Continuous Service
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. Any unvested shares so purchased may be
subject to a repurchase right in favor of the Company or to any other
restriction the Board determines to be appropriate.

         (j) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the Board
or Committee shall have the authority (but not an obligation) to include as part
of any Option Agreement a provision entitling the Optionee to a further Option
(a "Re-Load Option") in the event the Optionee exercises the Option evidenced by
such an 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 (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) shall 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) shall 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 which is an Incentive Stock Option and which is
granted to a 10% stockholder (as described in subsection 5(b)), shall have an
exercise price which is equal to one hundred ten percent (110%) of the Fair
Market Value of the stock subject to the Re-Load Option on the date of exercise
of the original Option and shall have a term which is no longer than five (5)
years.

         Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee 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 exercisability of
Incentive Stock Options described in subsection 12(e) of the Plan 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 limits on the grants of Options under subsection
5(c) and shall be subject to such other terms and conditions as the Board or
Committee may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.

                                       9.
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7.       TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.

         Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the terms
and conditions of separate agreements need not be identical, but each stock
bonus or 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 as appropriate:

         (a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such Stock Award Agreement. Notwithstanding the
foregoing, the Board or the Committee may determine that eligible participants
in the Plan may be awarded stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.

         (b) TRANSFERABILITY. Rights under a stock bonus or restricted stock
purchase agreement shall be transferable by the grantee only upon such terms and
conditions as are set forth in the applicable Stock Award Agreement, as the
Board or the Committee shall determine in its discretion, so long as stock
awarded under such Stock Award Agreement remains subject to the terms of the
agreement.

         (c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment arrangement, except that payment of the common stock's "par
value" (as defined in the Delaware General Corporation Law) shall not be made by
deferred payment, or other arrangement with the person to whom the stock is
sold; or (iii) in any other form of legal consideration that may be acceptable
to the Board or the Committee in its discretion. Notwithstanding the foregoing,
the Board or the Committee to which administration of the Plan has been
delegated may award stock pursuant to a stock bonus agreement in consideration
for past services actually rendered to the Company or for its benefit.

         (d) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.

         (e) TERMINATION OF 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 stock held by that person which have not vested as
of the date of termination under the terms of the stock bonus or restricted
stock purchase agreement between the Company and such person.

                                      10.
<PAGE>   11

8.       STOCK APPRECIATION RIGHTS.

         (a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation Rights under the
Plan to Employees or Directors of or Consultants to, the Company or its
Affiliates. To exercise any outstanding Stock Appreciation Right, the holder
must provide written notice of exercise to the Company in compliance with the
provisions of the Stock Award Agreement evidencing such right. Except as
provided in subsection 5(c), no limitation shall exist on the aggregate amount
of cash payments the Company may make under the Plan in connection with the
exercise of a Stock Appreciation Right.

         (b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:

                  (1) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock
Appreciation Rights will be granted appurtenant to an Option, and shall, except
as specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains.
Tandem Stock Appreciation Rights will require the holder to elect between the
exercise of the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation distribution. The
appreciation distribution payable on the exercised Tandem Right shall be in cash
(or, if so provided, in an equivalent number of shares of stock based on Fair
Market Value on the date of the Option surrender) in an amount up to the excess
of (A) the Fair Market Value (on the date of the Option surrender) of the number
of shares of stock covered by that portion of the surrendered Option in which
the Optionee is vested over (B) the aggregate exercise price payable for such
vested shares.

                  (2) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights
will be granted appurtenant to an Option and may apply to all or any portion of
the shares of stock subject to the underlying Option and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains. A
Concurrent Right shall be exercised automatically at the same time the
underlying Option is exercised with respect to the particular shares of stock to
which the Concurrent Right pertains. The appreciation distribution payable on an
exercised Concurrent Right shall be in cash (or, if so provided, in an
equivalent number of shares of stock based on Fair Market Value on the date of
the exercise of the Concurrent Right) in an amount equal to such portion as
shall be determined by the Board or the Committee at the time of the grant of
the excess of (A) the aggregate Fair Market Value (on the date of the exercise
of the Concurrent Right) of the vested shares of stock purchased under the
underlying Option which have Concurrent Rights appurtenant to them over (B) the
aggregate exercise price paid for such shares.

                  (3) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights
will be granted independently of any Option and shall, except as specifically
set forth in this Section 8, be subject to the same terms and conditions
applicable to Nonstatutory Stock Options as set forth in Section 6. They shall
be denominated in share equivalents. The appreciation distribution payable

                                      11.
<PAGE>   12

on the exercised Independent Right shall be not greater than an amount equal to
the excess of (A) the aggregate Fair Market Value (on the date of the exercise
of the Independent Right) of a number of shares of Company stock equal to the
number of share equivalents in which the holder is vested under such Independent
Right, and with respect to which the holder is exercising the Independent Right
on such date, over (B) the aggregate Fair Market Value (on the date of the grant
of the Independent Right) of such number of shares of Company stock. The
appreciation distribution payable on the exercised Independent Right shall be in
cash or, if so provided, in an equivalent number of shares of stock based on
Fair Market Value on the date of the exercise of the Independent Right.

9.       CANCELLATION AND RE-GRANT OF OPTIONS.

         (a) The Board or the Committee shall have the authority to effect, at
any time and from time to time, (i) the repricing of any outstanding Options
and/or any Stock Appreciation Rights under the Plan and/or (ii) with the consent
of the affected holders of Options and/or Stock Appreciation Rights, the
cancellation of any outstanding Options and/or any Stock Appreciation Rights
under the Plan and the grant in substitution therefor of new Options and/or
Stock Appreciation Rights under the Plan covering the same or different numbers
of shares of stock, but having an exercise price per share not less than the
Fair Market Value or, in the case of a 10% stockholder (as described in
subsection 5(b)) receiving a new grant of an Incentive Stock Option, not less
than one hundred ten percent (110%) of the Fair Market Value) per share of stock
on the new grant date. Notwithstanding the foregoing, the Board or the Committee
may grant an Option and/or Stock Appreciation Right with an exercise price lower
than that set forth above if such Option and/or Stock Appreciation Right is
granted as part of a transaction to which section 424(a) of the Code applies.

         (b) Shares subject to an Option or Stock Appreciation Right canceled
under this Section 9 shall continue to be counted against the maximum award of
Options and Stock Appreciation Rights permitted to be granted pursuant to
subsection 5(c) of the Plan. The repricing of an Option and/or Stock
Appreciation Right under this Section 9, resulting in a reduction of the
exercise price, shall be deemed to be a cancellation of the original Option
and/or Stock Appreciation Right and the grant of a substitute Option and/or
Stock Appreciation Right; in the event of such repricing, both the original and
the substituted Options and Stock Appreciation Rights shall be counted against
the maximum awards of Options and Stock Appreciation Rights permitted to be
granted pursuant to subsection 5(c) of the Plan. The provisions of this
subsection 9(b) shall be applicable only to the extent required by Section
162(m) of the Code.

10.      COVENANTS OF THE COMPANY.

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

         (b) The Company shall seek to obtain from each regulatory commission or
agency

                                      12.
<PAGE>   13

having jurisdiction over the Plan such authority as may be required to issue and
sell shares of stock upon exercise of the Stock Award; provided, however, that
this undertaking shall not require the Company to register under the Securities
Act either 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.

11.      USE OF PROCEEDS FROM STOCK.

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

12.      MISCELLANEOUS.

         (a) 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 pursuant to subsection 6(e), 7(d) or 8(b),
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) Neither an Employee, Director or Consultant nor any person to whom
a Stock Award is transferred under subsection 6(d), 7(b), or 8(b) 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 person
has satisfied all requirements for exercise of the Stock Award pursuant to its
terms.

         (c) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Director, Consultant or
other holder of Stock Awards any right to continue in the employ of the Company
or any Affiliate (or to continue acting as a Director or Consultant) or shall
affect the right of the Company or any Affiliate to terminate the employment of
any Employee with or without cause, the right of the Company's Board of
Directors and/or the Company's stockholders to remove any Director as provided
in the Company's By-Laws and the provisions of the Delaware General Corporation
Law, or the right to terminate the relationship of any Consultant subject to the
terms of such Consultant's agreement with the Company or Affiliate of the
Company.

         (d) 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 Optionee 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) The Company may require any person to whom a Stock Award is
granted, or any

                                      13.
<PAGE>   14

person to whom a Stock Award is transferred pursuant to subsection 6(d), 7(b) or
8(b), as a condition of exercising or acquiring stock under any Stock Award, (1)
to give written assurances satisfactory to the Company as to such person'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 (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person'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, shall be inoperative if (i) 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
(ii) 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) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted 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 or by a combination of such
means: (1) tendering a cash payment; (2) 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
(3) delivering to the Company owned and unencumbered shares of the common stock
of the Company.

13.      ADJUSTMENTS UPON CHANGES IN STOCK.

         (a) If any change is made in the stock subject to the Plan, or subject
to any Stock Award (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 type(s) 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 during any calendar year pursuant to subsection 5(c), and
the outstanding Stock Awards will be appropriately adjusted in the type(s) and
number of securities and price per share of stock subject to such outstanding
Stock Awards. Such adjustments shall be made by the Board or the Committee, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company".)

         (b) If at any time while unexercised Options remain outstanding under
this Plan (a) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than

                                      14.
<PAGE>   15

the Company or any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, any person acquiring securities from the
Company solely pursuant to written agreement with the Company, or any
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock in the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
20% or more of the combined voting power of the Company's then outstanding
securities, (b) during any period of two consecutive years commencing the day
after the first election of directors following termination of the stockholder
voting provisions of the Company's Stockholders' Agreement dated as of December
10, 1992, as amended, individuals who at the beginning of such period constitute
the Board and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction described
in clauses (a), (c) or (d) of this Section 13(b)) whose election by the board or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute at least
a majority thereof, (c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation where no person within the meaning of subsection (a) above becomes
the "beneficial owner" (as defined above) of 20% or more of the resulting voting
power and where the voting securities of the Company outstanding immediately
prior thereto continue to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or controlling entity) more
than 50% of the combined voting power of the voting securities of the Company or
such surviving or controlling entity outstanding immediately after such merger
or consolidation, or (d) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets (each of (a),
(b), (c) and (d) an "Acceleration Event"), then each outstanding Option that has
not theretofore become vested and/or exercisable according to its terms shall
become vested and/or exercisable.

         Upon the occurrence of an Acceleration Event, the Committee shall
provide for cancellation of the unexercised portions of all Options outstanding
as of the Cancellation Date; provided, however, that (i) in the event of a
transaction described in clause (c) that is treated as a pooling of interests
for accounting purposes, if required for such accounting treatment, outstanding
options shall not be cancelled but, instead, the surviving corporation (or the
parent of the surviving corporation) shall assume outstanding options (or grant
options in substitution for the outstanding options) on terms comparable to the
outstanding options, and (ii) in the event of a transaction described in clause
(c) that is not treated as a pooling of interests for accounting purposes, the
Committee may determine that outstanding options will not be cancelled and that
the surviving corporation (or the parent of the surviving corporation) shall
assume outstanding options (or grant options in substitution for the outstanding
options) on terms comparable to the outstanding options.

         "Cancellation Date" shall mean (i) the 60th day following the
occurrence of any

                                      15.
<PAGE>   16

Acceleration Event described in clause (a) or (b) of the first sentence of this
Section 13(b), and (ii) the closing of any merger, consolidation, liquidation or
sale of assets stockholder approval of which constituted an Acceleration Event
under clause (c) or (d) of the first sentence of this Section 13(b). Upon
cancellation of any Option pursuant to this Section 13(b) following an
Acceleration Event under clause (a), (b) or (d) of the first sentence hereof,
the Company shall make, and upon cancellation of any Option pursuant to this
Section 13(b) following an Acceleration Event under clause (c) of the first
sentence hereof, the Company may make, in exchange therefor, a cash payment
under such Option in an amount equal to the product of the number of shares
covered by the unexercised portion of the Option multiplied by the difference
between the per share exercise price of such Option and (i) in the case of a
transaction described in clause (a) or (b) of this Section 13(b), the highest
Fair Market Value of such share at any time during the 60-day period immediately
preceding the Cancellation Date, and (ii) in the case of a transaction described
in clause (c) or (d) of this Section 13(b), the Fair Market Value of such share
on the Cancellation Date.

         The instrument evidencing any Option may also provide for acceleration
of otherwise unexercisable portions of any Option upon other specified events or
occurrences as the Committee shall determine, such as involuntary terminations
of the Optionee's employment following certain changes in the control of the
Company.

14.      AMENDMENT OF THE PLAN AND STOCK AWARDS.

         (a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:

                  (i) Increase the number of shares reserved for Stock Awards
under the Plan;

                  (ii) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to satisfy the requirements of Section 422 of the
Code); or

                  (iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code or to comply with the requirements of Rule 16b 3.

         (b) 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 promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.

                                      16.
<PAGE>   17

         (c) 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) Rights and obligations 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 person to whom the Stock Award was
granted and (ii) such person consents in writing.

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

15.      TERMINATION OR SUSPENSION OF THE PLAN.

         (a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on October 12, 2007, which shall be
within ten (10) years from the date the Plan is adopted by the Board or approved
by 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) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except with the written consent of the person to whom the Stock Award was
granted.

16.      EFFECTIVE DATE OF PLAN.

         The Plan shall become effective as determined by the Board, but no
Stock Awards granted under the Plan shall be exercised 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.

                                      17.<PAGE>   1
                                                                    EXHIBIT 10.7

                               CELL PATHWAYS, INC.

                        INCENTIVE STOCK OPTION AGREEMENT

         STOCK OPTION AGREEMENT ("Agreement") made as of November 29, 2000 by
and between CELL PATHWAYS, INC., a Delaware corporation ("Company"), and
_______, a resident of the State of Pennsylvania ("Grantee").

         The Parties Hereto Do Hereby Agree As Follows:

         1. Grant of Option. The Company considers it desirable and in its best
interest that Grantee as an employee and/or director of the Company be given an
inducement to acquire a proprietary interest in the Company and an added
incentive to advance the interests of the Company by being granted an option to
purchase shares of the Company's Common Stock, $0.01 par value ("Common Stock"),
in accordance with the Company's 1997 Equity Incentive Plan, as amended (the
"Plan"). In consideration of Grantee's rendering services ("Services") as an
employee, director and/or consultant of the Company during the requisite vesting
periods, and in further consideration of the agreements set forth herein, the
Company therefore hereby grants to Grantee the right, privilege and option
("Option") to purchase an aggregate of ____ shares of Common Stock (the
"Optioned Shares") at the price ("Exercise Price") of $ ____per share thereof,
in the manner and subject to the conditions hereinafter provided. This Option
shall be treated as an incentive stock option under the Internal Revenue Code of
1986, as amended (the "Code").

         2. Option Exercise Period. This Option may be exercised, with respect
to vested shares, from the time such shares have vested pursuant to Section 3
hereof until the termination of the option pursuant to Section 5 hereof. This
option shall not be exercisable under this Section 2 to the extent such exercise
would cause the aggregate fair market value of any shares subject to incentive
stock options granted to Grantee by the Company or any affiliate (valued as of
their grant date) which would become exercisable for the first time during any
calendar year to exceed $100,000.

         3. Option Vesting Period. The Optioned Shares shall vest based upon the
following fifty (50) month schedule:

                  a. First Anniversary: On the last business day prior to the
         first anniversary of the date of this Agreement, twenty-four percent
         (24%) of the Optioned Shares shall vest, provided that Grantee
         continues to render Services to the Company or a subsidiary of the
         Company on such date. Failure of the Grantee to continue to render
         Services to the Company or a subsidiary during the period ending on the
         last business day prior to said first anniversary shall mean that no
         Optioned Shares shall vest, regardless of whether the cessation of
         Services is at the election of the Grantee for any reason, is at the
         election of the Company for any reason, or is the result of death,
         disability or other intervening cause.

                  b. Monthly Vesting Thereafter: After the first anniversary of
         the date of this Agreement, another two percent (2%) of the Optioned
         Shares will vest at the end of each succeeding month, provided that
         Grantee continues to render Services to the Company or a subsidiary of
         the Company on such date. If Grantee shall not continue to render
         Services to the Company or a subsidiary for the full fifty (50) month
         vesting period, there shall be vested

<PAGE>   2

         at the cessation of Services only those Optioned Shares which were
         vested as of the last vesting event (first anniversary or last full
         completed month after the first anniversary).

         4. Method of Exercise. As to those Optioned Shares that have vested,
the Option may be exercised by the Grantee executing, dating and delivering to
the Secretary of the Company at the Company's principal place of business a
written Option Exercise Notice in the form of Exhibit A attached hereto,
accompanied by a check made payable to the Company in the amount of the
aggregate Exercise Price for the number of shares for which the Option is then
being exercised. If the Company is required to withhold on account of any
present or future tax imposed as a result of such exercise, the notice of
exercise shall be accompanied by a check made payable to the Company in the
amount of such withholding.

         5. Termination of Option. Except as otherwise stated in this Agreement
or as the parties may otherwise agree, the Option (to the extent not theretofore
exercised) shall terminate and expire at 5:00 p.m., Philadelphia time, on the
first to occur of (i) the day immediately prior to the 10th anniversary of the
date of this Agreement, and (ii) the ninetieth day following the day on which
Grantee ceases for any reason to render Services to the Company or its
subsidiaries

         6. Transfer of Option. Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
sold, assigned, pledged, hypothecated or otherwise transferred or disposed of in
any way, whether by operation of law or otherwise, and during the Grantee's
lifetime shall be exercisable only by the Grantee or his guardian or legal
representative.

         7. Capitalization Adjustments. Subject to the provisions of the Plan,
if the outstanding shares of stock or other securities of the class then subject
to the Option are increased or decreased, or are changed into or exchanged for a
different number or kind of Company shares or other Company securities, in any
such case as a result of one or more recapitalizations, stock splits, reverse
stock splits, stock dividends or the like, then appropriate adjustments shall be
made in the number and/or kind of Company shares or other Company securities for
which the unexercised portion of this Option may thereafter be exercised, all
without any change in the aggregate Exercise Price applicable to the unexercised
portion of the Option, but with a corresponding adjustment in the Exercise Price
per share of other unit. No fractional share of Company stock shall be issued
under the Option in connection with any such adjustment. Such adjustments shall
be made by or under authority of the Company's Board of Directors or duly
authorized Committee thereof, whose determinations as to what adjustments shall
be made, and the extent thereof, shall be final, binding and conclusive.

         8. Certain Transactions. If at any time while this Option remains
outstanding:

                                       2.
<PAGE>   3

                  a. any "person" (as such term is used in Sections 13(d) and
         14(d) of the Exchange Act) other than the Company, any trustee or other
         fiduciary holding securities under an employee benefit plan of the
         Company, any person acquiring securities from the Company solely
         pursuant to written agreement with the Company, or any corporation
         owned, directly or indirectly, by the stockholders of the Company in
         substantially the same proportions as their ownership of stock in the
         Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
         under the Exchange Act), directly or indirectly, of securities of the
         Company representing 20% or more of the combined voting power of the
         Company's then outstanding securities, or

                  b. during any period of two consecutive years commencing the
         day after the first election of directors following termination of the
         stockholder voting provisions of the Company's Stockholders' Agreement
         dated as of December 10, 1992, as amended, individuals who at the
         beginning of such period constitute the Board, and any new director
         (other than a director designated by a person who has entered into an
         agreement with the Company to effect a transaction described in clauses
         (a), (c) or (d) of this Section) whose election by the Board or
         nomination for election by the Company's stockholders was approved by a
         vote of at least two-thirds of the directors then still in office who
         either were directors at the beginning of the period or whose election
         or nomination for election was previously so approved, cease for any
         reason to constitute at least a majority thereof, or

                  c. the stockholders of the Company approve a merger or
         consolidation of the Company with any other corporation, other than a
         merger or consolidation where no person within the meaning of
         subsection (a) above becomes the "beneficial owner" (as defined above)
         of 20% or more of the resulting voting power and where the voting
         securities of the Company outstanding immediately prior thereto
         continue to represent (either by remaining outstanding or by being
         converted into voting securities of the surviving or controlling
         entity) more than 50% of the combined voting power of the voting
         securities of the Company or such surviving or controlling entity
         outstanding immediately after such merger or consolidation, or

                  d. the stockholders of the Company approve a plan of complete
         liquidation of the Company or an agreement for the sale or disposition
         by the Company of all or substantially all of the Company's assets,

(each of (a), (b), (c) and (d) above, an "Acceleration Event"), then the Option
shall become vested and may be exercised as to all Optioned Shares for which it
has not previously been exercised, and all Optioned Shares for which the Option
has been exercised but which have not yet vested shall vest.

         Upon the occurrence of an Acceleration Event the Company's Stock Option
Committee shall provide for cancellation of the unexercised portion of the
Option as of the Cancellation Date; provided, however, that (i) if the Option
has been held for less than six months then for purposes of such cancellation
the Acceleration Event and/or Cancellation Date shall be restricted in such
manner as the Company's Stock Option Committee may determine necessary to comply
with the conditions and requirements of Rule 16b-3; (ii) in the event of a
transaction described in clause (c) that is

                                       3.
<PAGE>   4

treated as a pooling of interests for accounting purposes, if required for such
accounting treatment, outstanding options shall not be cancelled but, instead,
the surviving corporation (or the parent of the surviving corporation) shall
assume outstanding options (or grant options in substitution for the outstanding
options) on terms comparable to the outstanding options; and (iii) in the event
of a transaction described in clause (c) that is not treated as a pooling of
interests for accounting purposes, the Committee may determine that outstanding
options will not be cancelled and that the surviving corporation (or the parent
of the surviving corporation) shall assume outstanding options (or grant options
in substitution for the outstanding options) on terms comparable to the
outstanding options.

         "Cancellation Date" shall mean (i) the 60th day following the
occurrence of any Acceleration Event described in clause (a) or (b) of the first
sentence hereof, and (ii) the closing of any merger, consolidation, liquidation
or sale of assets stockholder approval of which constituted an Acceleration
Event under clause (c) or (d) of the first sentence hereof. Upon cancellation of
the Option pursuant to an Acceleration Event under clause (a), (b) or (d) of the
first sentence hereof, the Company shall make, and upon cancellation of the
Option following an Acceleration Event under clause (c) of the first sentence
hereof, the Company may make, in exchange therefor, a cash payment under the
Option in an amount equal to the product of the number of Optioned Shares
covered by the unexercised portion of the Option multiplied by the difference
between the Exercise Price and (i) in the case of a transaction described in
clause (a) or (b) of the first sentence hereof, the highest fair market value of
an Optioned Share at any time during the 60-day period immediately preceding the
Cancellation Date, and (ii) in the case of a transaction described in clause (c)
or (d) of the first sentence hereof, the fair market value of an Optioned Share
on the Cancellation Date. The "fair market value" of Optioned Shares shall be
determined by the Company's Stock Option Committee by reference to any national
securities market on which the Optioned Shares may then be trading, or as
otherwise determined by the Company's Stock Option Committee.

         9. Securities Laws. Grantee hereby represents and agrees for himself,
and for his transferees by will or the laws of descent and distribution, that
unless a registration statement under the Securities Act of 1933, as amended, is
in effect as to shares purchased upon any exercise of the Option, (i) any and
all shares so purchased shall be acquired for his personal account and not with
a view to or for sale in connection with any distribution, and (ii) each notice
of the exercise of any portion of the Option shall be accompanied by a
representation and warranty in writing, signed by the person entitled to
exercise the same, that the shares are being so acquired in good faith for his
personal account and not with a view to or for sale in connection with any
distribution. Notwithstanding anything else contained in this Agreement, no
share of stock or other securities shall be issued pursuant to any exercise of
the Option unless and until, in the opinion of counsel for the Company, such
securities may be issued and delivered without causing the Company to be in
violation of or incur any liability under any federal, state or other securities
laws, any requirement of any securities exchange listing agreement to which the
Company may be a party, or any other requirement of law or of any regulatory
body having jurisdiction over the Company.

         10. Stock Restrictions. No shares of stock or other securities issued
upon exercise of the Option may be sold, assigned, pledged, hypothecated or
otherwise transferred or disposed of in any way unless and until, in the opinion
of counsel for the Company, such securities may be so transferred

                                       4.
<PAGE>   5

or disposed of without causing the Company to be in violation of or incur any
liability under any federal, state or other securities laws, any requirement of
any securities exchange listing agreement to which the Company may be a party,
or any other requirement of law or of any regulatory body having jurisdiction
over the Company.

         11. Restrictive Legends. Unless and until otherwise permitted by this
Section 11, or unless in the opinion of counsel for the Company such legend is
not required, each certificate for stock or other securities issued pursuant to
exercise of this Option shall be stamped or otherwise imprinted with a legend in
substantially the following form:

         "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, ARE HELD FOR INVESTMENT PURPOSES ONLY
         AND MAY NOT BE SOLD, TRANSFERRED OR DISTRIBUTED AT ANY TIME UNLESS A
         REGISTRATION STATEMENT IS FILED WITH THE SECURITIES AND EXCHANGE
         COMMISSION PURSUANT TO THE SECURITIES ACT OF 1933 COVERING SUCH SHARES
         OR UNLESS, IN THE OPINION OF COUNSEL FOR THE COMPANY, SUCH A
         REGISTRATION STATEMENT IN NOT REQUIRED".

The Company may order its stock transfer agents to stop the transfer of any
shares of stock or other securities bearing the legend set forth in this Section
11 until the conditions of Section 10 hereof with respect to the transfer of
such stock or other securities have been satisfied.

         12. Stock Option Plan. The Option is subject to, and the Company and
Grantee agree to be bound by, all of the terms and conditions of the Plan
(including the clarifying amendment considered by the Committee on November 29,
2000 and adopted by the Board on January 10, 2001), as the same shall have been
amended from time to time in accordance with the terms thereof, provided that no
such amendment shall deprive Grantee, without his consent, of this Option or any
of his rights hereunder. Pursuant to the Plan, the Company's Stock Option
Committee is vested with final authority to interpret and construe the Plan and
the Option, and is authorized to adopt rules and regulations for carrying out
the Plan. A copy of the Plan in its present form is available for inspection
during business hours by Grantee or other persons entitled to exercise this
Option at the Company's principal office.

         13. No Employment or Stockholder Rights. Neither this Agreement nor the
establishment of the Plan shall be construed to (i) give Grantee any right to
become employed by, or continue to be an employee or director of, or consultant
to, the Company or any of its subsidiaries, (ii) give Grantee any benefits not
specifically provided by this Agreement, or (iii) in any manner limit the right
of the Company or any of its subsidiaries to modify, amend or terminate the Plan
or any of its other benefit plans. Employment may be terminated by the Grantee
or by the Company at any time for any reason, in which event shares will vest or
fail to vest in accordance with Section 3 hereof. Grantee shall not have any
rights as a stockholder of the Company with respect to any of the Optioned
Shares until such time as such shares have been issued upon exercise.

                                       5.
<PAGE>   6

         14. Notices. Any notice to be given to the Company shall be addressed
to the Company in care of its Secretary at its principal office, and any notice
to be given to Grantee shall be addressed to him at the address given beneath
his signature hereto or at such other address as Grantee may hereafter designate
in writing to the Company.

         15. Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, other than its conflict of laws provisions.

         IN WITNESS WHEREOF, the Company has entered into this Agreement and
granted the Option as of the date of this Agreement first written above.

                            CELL PATHWAYS, INC.

                            By__________________________________________________
                            Martha E. Manning
                            Senior Vice President, General Counsel and Secretary

                            ACCEPTED:

                            ____________________________________________________

                            ____________________________________________________
                            Street Address

                            ____________________________________________________
                            City and State

                                       6.
<PAGE>   7

EXHIBIT A

                             OPTION EXERCISE NOTICE

To:  Cell Pathways, Inc.

Attention:  Secretary

         The undersigned hereby exercises his/her option to acquire shares of
Common Stock (the "Securities") pursuant to the option granted to the
undersigned in that certain Stock Option Agreement (the "Agreement") dated
             , 19__, by and between Cell Pathways, Inc. (the "Company") and the
undersigned, and in connection with this exercise does hereby tender herewith as
provided in the Agreement the full Exercise Price (as defined in the Agreement)
with respect to the Securities, and does hereby represent and warrant to the
Company that the Securities are being acquired in good faith for the
undersigned's own account and not with a view to or for sale in connection with
any distribution.

         IN WITNESS WHEREOF, the undersigned has signed this Option Exercise
Notice as of the date written below.

                           ____________________________________________________
                           Signature

                           ____________________________________________________
                           Print Name

                           ____________________________________________________
                           Date

                                       7.

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