Document:

Exhibit 4.3

 

THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES LAWS.  NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN
OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION
LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS WARRANT.

 

INTARCIA THERAPEUTICS, INC.

 

WARRANT TO PURCHASE SHARES

OF SERIES E CONVERTIBLE PREFERRED STOCK

 

THIS CERTIFIES THAT, for
value received,                                        
and its assignees are entitled to subscribe for and purchase up to such number of fully paid and nonassessable shares of the Series Preferred
(as adjusted pursuant to Section 4 hereof, the “Shares”) of INTARCIA
THERAPEUTICS, INC., a Delaware corporation (the “Company”) as determined below,
at the purchase price of $0.51 per share (such price, as it may be adjusted
from time to time as specified in Section 4 hereof, is herein referred to
as the “Warrant Price”), subject to the provisions and upon the terms and
conditions hereinafter set forth.  As used
herein, (a) the term “Series Preferred” shall mean the Company’s
presently authorized Series E Convertible Preferred Stock, $0.001 par
value per share, and any stock into or for which such Series E Convertible
Preferred Stock may hereafter be converted or exchanged, and after the
automatic conversion of the Series E Convertible Preferred Stock to Common
Stock shall mean the Company’s common stock, $0.001 par value per share (“Common
Stock”), (b) the term “Date of Grant” shall mean April 15, 2005, and (c) the
term “Other Warrants” shall mean any other warrants issued by the Company in
connection with the transaction with respect to which this Warrant was issued,
and any warrant issued upon transfer or partial exercise of or in lieu of this
Warrant.  The term “Warrant” as used
herein shall be deemed to include Other Warrants unless the context clearly
requires otherwise.  This Warrant is
issued in connection with that certain Term Loan and Security Agreement of even
date herewith among the Company, Silicon Valley Bank and Horizon Technology
Funding Company LLC (the “Loan Agreement”).

 

A.                                   Number
of Shares.    This Warrant shall be exercisable at any
time during the Exercise Period (as defined below) for the Initial Shares plus
the Additional Shares (if any).  As used
herein:

 

“Initial
Shares” means                           
shares of the Series Preferred.

 

“Additional
Shares” means such number of additional shares of the Series Preferred as
shall equal (a) (i)      , multiplied by (ii) the
amount each Term Advance (as defined in the Loan Agreement), divided by (b) the
Warrant Price in effect on and as of the date of such Term Advance.  This Warrant shall automatically become
exercisable for Additional Shares in the foregoing manner upon the date of each
Term Advance, and “Additional Shares” as used herein shall

 

 

refer
to the cumulative number of all such Additional Shares for which this Warrant
becomes so exercisable.

 

“Shares”
means the Initial Shares together with all Additional Shares (if any).

 

1.                                       Term.
 The purchase right represented by this
Warrant is exercisable, in whole or in part, at any time and from time to time
from the Date of Grant through the date that is ten (10) years after the
Date of Grant (the “Exercise Period”).

 

2.                                       Method of Exercise; Payment; Issuance of New
Warrant.  Subject to Section 1 hereof, the
purchase right represented by this Warrant may be exercised by the holder
hereof, in whole or in part and from time to time during the Exercise Period,
at the election of the holder hereof, by (a) the surrender of this Warrant
(with the notice of exercise substantially in the form attached hereto as Exhibit A-1
duly completed and executed) at the principal office of the Company and by the
payment to the Company, by certified or bank check, or by wire transfer to an
account designated by the Company (a “Wire Transfer”) of an amount equal to the
then applicable Warrant Price multiplied by the number of Shares then being
purchased; (b) if in connection with a registered public offering of the
Company’s securities in which the holder hereof is a selling stockholder, the
surrender of this Warrant (with the notice of exercise substantially in the
form attached hereto as Exhibit A-2 duly completed and executed) at
the principal office of the Company together with notice of arrangements
reasonably satisfactory to the Company for payment to the Company either by
certified or bank check or by Wire Transfer from the proceeds of the sale of
shares to be sold by the holder in such registered public offering of an amount
equal to the then applicable Warrant Price per share multiplied by the number
of Shares then being purchased; or (c) exercise of the “net issuance”
right provided for in Section 10.2 hereof. 
In the event of any exercise of the rights represented by this Warrant,
a certificate or certificates for the shares of stock so purchased shall be
issued and delivered to the holder hereof within a reasonable time after the
rights represented by this Warrant have been so exercised and, unless this Warrant
has been fully exercised or expired, a new Warrant representing the portion of
the Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof within a reasonable time
after the rights represented by this Warrant have been so exercised; provided,
however, at such time as the Company is subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended, if requested by the
holder of this Warrant, the Company shall cause its transfer agent to deliver
the certificate representing Shares issued upon exercise of this Warrant to a
broker or other person (as directed by the holder exercising this Warrant)
within the time period required to settle any trade made by the holder after
exercise of this Warrant.  The person or
persons in whose name(s) any certificate(s) representing shares of Series Preferred
shall be issuable upon exercise of this Warrant shall be deemed to have become
the holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed
to have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is surrendered and payment of the Warrant Price
was made, except that, if the date of such surrender and payment is a date when
the stock transfer books of the Company are closed, such person shall be deemed
to have become the holder of such shares at the close of business on the next
succeeding date on which the stock transfer books are open.

 

2

 

3.                                       Stock Fully Paid; Reservation of Shares.  All
Shares that may be issued upon the exercise of the rights represented by this
Warrant will, upon issuance pursuant to the terms and conditions herein, be
fully paid and nonassessable, and free from all preemptive rights, liens and
charges with respect to the issue thereof. 
During the Exercise Period, the Company will at all times have
authorized, and reserved for the purpose of the issue upon exercise of the
purchase rights evidenced by this Warrant, a sufficient number of shares of its
Series Preferred to provide for the exercise of the rights represented by
this Warrant and a sufficient number of shares of its Common Stock to provide
for the conversion of the Shares into Common Stock.

 

4.                                       Adjustment of Warrant Price and Number of Shares.  The
number and kind of securities purchasable upon the exercise of this Warrant and
the Warrant Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:

 

(a)                                  Reclassification
or Merger.  In case of (i) any
reclassification, recapitalization or change of securities of the class
issuable upon exercise of this Warrant (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or (ii) any merger of the Company
with or into another corporation (other than (x) a merger with another
corporation in which the Company is the acquiring and the surviving corporation
and which does not result in any reclassification or change of outstanding
securities issuable upon exercise of this Warrant, (y) a merger or
consolidation of the Company into or with another entity in which the
consideration received by the stockholders of the Company consists solely of
cash or cash equivalents, or (z) a merger or consolidation of the Company into
or with another entity (A) whose shares are publicly traded and which has
a market capitalization of not less than $500,000,000, and (B) where the
value of the consideration per Share that would be received by the holder
hereof were the holder to exercise this Warrant as of immediately prior to the
closing thereof is not less than five (5) times the then-effective Warrant
Price (a “Large Cap Merger”)), or (iii) any sale of all or substantially
all of the assets of the Company (other than to another entity (A) whose
shares are publicly traded and which has a market capitalization of not less
than $500,000,000, and (B) where the value of the consideration per Share
that would be received by the holder hereof were the holder to exercise this
Warrant as of immediately prior to the closing thereof is not less than five (5) times
the then-effective Warrant Price (a “Large Cap Sale” and collectively with a
Large Cap Merger, a “Large Cap Transaction”)), the Company, or such successor
or purchasing entity, as the case may be, shall duly execute and deliver to the
holder of this Warrant a new Warrant (in form and substance reasonably
satisfactory to the holder of this Warrant), so that the holder of this Warrant
shall have the right to receive upon exercise of this Warrant, at a total
purchase price not to exceed that payable upon the exercise of the unexercised
portion of this Warrant, and in lieu of the shares of Series Preferred
theretofore issuable upon exercise of this Warrant, (i) the kind and
amount of shares of stock, other securities, money and property receivable upon
such reclassification, change, merger or sale by a holder of the number of
shares of Series Preferred then purchasable under this Warrant, or (ii) in
the case of such a merger or sale in which the consideration paid consists all
or in part of assets other than securities of the successor or purchasing
corporation, at the option of the holder of this Warrant, the securities of the
successor or purchasing corporation having a value at the time of the
transaction equivalent to the value of the Series Preferred purchasable
upon exercise of this Warrant at the time of the transaction.  Any new Warrant shall provide for adjustments
that shall be as nearly equivalent as may be practicable to the

 

3

 

adjustments provided for
in this Section 4.  The provisions
of this Section 4(a) shall similarly apply to successive
reclassifications, changes, mergers and sales. 
Anything to the contrary in this Warrant notwithstanding, in the event
of any Large Cap Transaction, or any merger or consolidation of the Company
into or with another entity or a sale of assets by the Company in which the
consideration received by the Company’s stockholders consists solely of cash or
cash equivalents, the rights represented by this Warrant shall terminate and be
of no further force or effect as of immediately following the closing of such
Large Cap Transaction, merger, consolidation or sale to the extent such rights
shall not have been exercised prior to or as at such closing.

 

(b)                                 Subdivision
or Combination of Shares.  If the
Company at any time while this Warrant remains outstanding and unexpired shall
subdivide or combine its outstanding shares of Series Preferred, the
Warrant Price shall be proportionately decreased and the number of Shares
issuable hereunder shall be proportionately increased in the case of a
subdivision and the Warrant Price shall be proportionately increased and the
number of Shares issuable hereunder shall be proportionately decreased in the
case of a combination.

 

(c)                                  Stock
Dividends and Other Distributions. 
If the Company at any time while this Warrant is outstanding and
unexpired shall (i) pay a dividend with respect to Series Preferred
payable in Series Preferred, then the Warrant Price shall be adjusted,
from and after the date of determination of shareholders entitled to receive
such dividend or distribution, to that price determined by multiplying the
Warrant Price in effect immediately prior to such date of determination by a
fraction (A) the numerator of which shall be the total number of shares of
Series Preferred outstanding immediately prior to such dividend or
distribution, and (B) the denominator of which shall be the total number
of shares of Series Preferred outstanding immediately after such dividend
or distribution; or (ii) make any other distribution with respect to Series Preferred
(except any distribution specifically provided for in Sections 4(a) and
4(b)), then, in each such case, provision shall be made by the Company such
that the holder of this Warrant shall receive upon exercise of this Warrant a
proportionate share of any such dividend or distribution as though it were the
holder of the Series Preferred (or Common Stock issuable upon conversion
thereof) as of the record date fixed for the determination of the shareholders
of the Company entitled to receive such dividend or distribution.

 

(d)                                 Adjustment
of Number of Shares.  Upon each
adjustment in the Warrant Price, the number of Shares of Series Preferred
purchasable hereunder shall be adjusted, to the nearest whole share, to the
product obtained by multiplying the number of Shares purchasable immediately
prior to such adjustment in the Warrant Price by a fraction, the numerator of
which shall be the Warrant Price immediately prior to such adjustment and the
denominator of which shall be the Warrant Price immediately thereafter.

 

(e)                                  Antidilution
Rights.  The other antidilution
rights applicable to the Shares of Series Preferred purchasable hereunder
are set forth in the Company’s Certificate of Incorporation, as amended through
the Date of Grant (the “Charter”).  Such
antidilution rights shall not be amended, restated, modified or waived without
the prior written consent of the holder hereof unless such amendment,
restatement, modification or waiver affects the rights associated with the
Shares in the same manner as such amendment, restatement, modification or
waiver affects the rights associated

 

4

 

with all other
outstanding shares of the Series Preferred.  The Company shall promptly provide the holder
hereof with any restatement, amendment, modification or waiver of the Charter
promptly after the same has been made.

 

5.                                       Notice of Adjustments.  Whenever
the Warrant Price or the number of Shares purchasable hereunder shall be
adjusted pursuant to Section 4 hereof, the Company shall make a
certificate signed by an executive officer of the Company setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Warrant
Price and the number of Shares purchasable hereunder after giving effect to
such adjustment, and shall cause a copy of such certificate to be mailed
(without regard to Section 13 hereof, by first class mail, postage
prepaid) to the holder of this Warrant within a reasonable period following
such event requiring the adjustment.  In
addition, whenever the conversion price or conversion ratio of the Series Preferred
shall be adjusted, the Company shall make a certificate signed by an executive
officer of the Company setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the conversion price or ratio of the Series Preferred
after giving effect to such adjustment, and shall cause a copy of such
certificate to be mailed (without regard to Section 13 hereof, by first
class mail, postage prepaid) to the holder of this Warrant within a reasonable
period following such event requiring the adjustment.

 

6.                                       Fractional Shares.  No
fractional shares of Series Preferred will be issued in connection with
any exercise hereunder, but in lieu of such fractional shares the Company shall
make a cash payment therefor based on the fair market value of the Series Preferred
on the date of exercise as reasonably determined in good faith by the Company’s
Board of Directors.

 

7.                                       Compliance with Act; Disposition of Warrant or
Shares of Series Preferred.

 

(a)                                  Compliance
with Act.  The holder of this
Warrant, by acceptance hereof, agrees that this Warrant, and the shares of Series Preferred
to be issued upon exercise hereof and any Common Stock issued upon conversion
thereof are being acquired for investment and that such holder will not offer,
sell or otherwise dispose of this Warrant, or any shares of Series Preferred
to be issued upon exercise hereof or any Common Stock issued upon conversion
thereof except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the “Act”) or any applicable state
securities laws.  Upon exercise of this
Warrant, unless the Shares being acquired are registered under the Act and any
applicable state securities laws or an exemption from such registration is
available, the holder hereof shall confirm in writing that the shares of Series Preferred
so purchased (and any shares of Common Stock issued upon conversion thereof)
are being acquired for investment and not with a view toward distribution or
resale in violation of the Act and shall confirm such other matters related
thereto as may be reasonably requested by the Company.  This Warrant and all shares of Series Preferred
issued upon exercise of this Warrant and all shares of Common Stock issued upon
conversion thereof (unless registered under the Act and any applicable state
securities laws) shall be stamped or imprinted with a legend in substantially
the following form:

 

“THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.  NO SALE

 

5

 

OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE
REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR
OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS
ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS
OF SECTION 7 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED,
DIRECTLY OR INDIRECTLY.”

 

Said legend shall be
removed by the Company, upon the request of a holder, at such time as the
restrictions on the transfer of the applicable security shall have
terminated.  In addition, in connection
with the issuance of this Warrant, the holder specifically represents to the
Company by acceptance of this Warrant as follows:

 

(1)                                  The
holder is aware of the Company’s business affairs and financial condition, and
has acquired information about the Company sufficient to reach an informed and
knowledgeable decision to acquire this Warrant. 
The holder is acquiring this Warrant for its own account for investment
purposes only and not with a view to, or for the resale in connection with, any
“distribution” thereof in violation of the Act.

 

(2)                                  The
holder understands that this Warrant has not been registered under the Act in
reliance upon a specific exemption therefrom, which exemption depends upon,
among other things, the bona fide nature of the holder’s investment intent as
expressed herein.

 

(3)                                  The
holder further understands that this Warrant must be held indefinitely unless
subsequently registered under the Act and qualified under any applicable state
securities laws, or unless exemptions from registration and qualification are
otherwise available.  The holder is aware
of the provisions of Rule 144, promulgated under the Act.

 

(4)                                  The
holder is an “accredited investor” as such term is defined in Rule 501 of
Regulation D promulgated under the Act.

 

(b)                                 Disposition
of Warrant or Shares.  With respect
to any offer, sale or other disposition of this Warrant or any shares of Series Preferred
acquired pursuant to the exercise of this Warrant prior to registration of such
Warrant or shares, the holder hereof agrees to give written notice to the
Company prior thereto, describing in reasonable detail the manner thereof,
together with a written opinion of such holder’s counsel, or other evidence, if
reasonably satisfactory to the Company, to the effect that such offer, sale or
other disposition may be effected without registration or qualification (under
the Act as then in effect or any federal or state securities law then in
effect) of this Warrant or such shares of Series Preferred or Common Stock
and indicating whether or not under the Act certificates for this Warrant or
such shares of Series Preferred to be sold or otherwise disposed of
require any restrictive legend as to applicable restrictions on transferability
in order to ensure compliance with such law 
Upon receiving such written notice and reasonably satisfactory opinion
or other evidence, the Company shall within a reasonable time period following
such written notice notify such holder if such holder may sell or otherwise
dispose of this Warrant or such shares of Series Preferred or Common
Stock, all in accordance with the terms of the written notice

 

6

 

delivered to the
Company.  If a determination has been
made pursuant to this Section 7(b) that the opinion of counsel for
the holder or other evidence is not reasonably satisfactory to the Company, the
Company shall so notify the holder within a reasonable time period following
such written notice with details thereof after such determination has been
made.  Each certificate representing this
Warrant or the shares of Series Preferred thus transferred shall bear a
legend as to the applicable restrictions on transferability in order to ensure
compliance with such laws, unless in the aforesaid opinion of counsel for the
holder, such legend is not required in order to ensure compliance with such
laws.  The Company may issue stop
transfer instructions to its transfer agent in connection with such
restrictions.

 

(c)                                  Applicability
of Restrictions.  Neither any
restrictions of any legend described in this Warrant nor the requirements of Section 7(b) above
shall apply to any transfer of, or grant of a security interest in, this
Warrant (or the Series Preferred or Common Stock obtainable upon exercise
thereof) or any part hereof (i) to a partner of the holder if the holder
is a partnership or to a member of the holder if the holder is a limited
liability company, (ii) to a partnership of which the holder is a partner
or to a limited liability company of which the holder is a member, or (iii) to
any affiliate of the holder if such affiliate is an “accredited investor” as
defined in Regulation D promulgated under the Act; provided, however,
in any such transfer, if applicable, the transferee shall agree in writing to
be bound by the terms of this Warrant as if an original holder hereof.

 

8.                                       Rights as Shareholders; Information.  No holder
of this Warrant, as such, shall be entitled to vote or receive dividends or be
deemed the holder of Series Preferred or any other securities of the
Company which may at any time be issuable upon the exercise hereof for any
purpose, nor shall anything contained herein be construed to confer upon the
holder of this Warrant, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until
this Warrant shall have been exercised and the Shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.

 

9.                                       Registration Rights.  The
Holder will become a party to that certain Amended and Restated Investors’
Rights Agreement dated as of November 19, 2004, (the “Investor Rights
Agreement”), to include any Common Stock of the Company issued and issuable
upon conversion of the Shares issued and issuable pursuant to this Warrant or
upon exercise of this Warrant in the definition of “Registrable Securities” for
purposes of Sections 1.3, 1.4, 1.5, 1.7, 1.8, 1.9, 1.10, 1.11, 1.12, 1.13,
1.15, 1.16, 2.1, 2.2, 2.3 and 3 thereof. 
The registration rights are assignable by the holder of this Warrant
only in connection with a permitted transfer of this Warrant or the Shares.

 

10.                                 Additional Rights.

 

10.1                           Acquisition
Transactions.  The Company shall
provide the holder of this Warrant with at least twenty (20) days’ written
notice prior to closing thereof of the terms and conditions of any of the
following transactions (to the extent the Company has notice thereof): (i) the
sale, lease, exchange, conveyance or other disposition of all or substantially
all of the Company’s property or business, or (ii) its merger into or
consolidation with any other corporation (other than a wholly-

 

7

 

owned subsidiary
of the Company), or any transaction (including a merger or other
reorganization) or series of related transactions, in which more than 50% of
the voting power of the Company is disposed of.

 

10.2                           Right
to Convert Warrant into Stock:  Net
Issuance.

 

(a)                                  Right
to Convert.  In addition to and
without limiting the rights of the holder under the terms of this Warrant, the
holder shall have the right to convert this Warrant or any portion thereof (the
“Conversion Right”) into shares of Series Preferred as provided in this Section 10.2
at any time or from time to time during the Exercise Period in which the fair
market value of one share of the Series Preferred is greater than the
Warrant Price (at the date of calculation as set forth below).  Upon exercise of the Conversion Right with
respect to a particular number of shares subject to this Warrant (the “Converted
Warrant Shares”), the Company shall deliver to the holder (without payment by
the holder of any exercise price or any cash or other consideration) that
number of shares of fully paid and nonassessable Series Preferred as is
determined according to the following formula:

 

X =   B - A  

           Y

 

	
   

  	
  Where:

  	
  X =

  	
   

  	
  the number of shares of Series Preferred that
  shall be issued to holder

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Y =

  	
   

  	
  the fair market value of one share of Series Preferred

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A =

  	
   

  	
  the
  aggregate Warrant Price of the specified number of Converted Warrant Shares
  immediately prior to the exercise of the Conversion Right (i.e., the number of Converted Warrant Shares multiplied by the Warrant Price)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B =

  	
   

  	
  the
  aggregate fair market value of the specified number of Converted Warrant
  Shares (i.e., the number of Converted Warrant
  Shares multiplied by the fair market value of
  one Converted Warrant Share)

  

 

No fractional shares
shall be issuable upon exercise of the Conversion Right, and, if the number of
shares to be issued determined in accordance with the foregoing formula is
other than a whole number, the Company shall pay to the holder an amount in
cash equal to the fair market value of the resulting fractional share on the
Conversion Date (as hereinafter defined). 
For purposes of Section 10 of this Warrant, shares issued pursuant
to the Conversion Right shall be treated as if they were issued upon the
exercise of this Warrant.

 

(b)                                 Method
of Exercise.  The Conversion Right
may be exercised by the holder by the surrender of this Warrant at the
principal office of the Company together with a written statement (which may be
in the form of Exhibit A-1 or Exhibit A-2 hereto)
specifying that the holder thereby intends to exercise the Conversion Right and
indicating the number of shares subject to this Warrant which are being
surrendered (referred to in Section 10.2(a) hereof as the Converted
Warrant Shares) in exercise of the Conversion Right.  Such conversion shall be effective upon
receipt by the Company of this Warrant together with the aforesaid written
statement, or on such later date as is

 

8

 

specified therein (the “Conversion
Date”), and, at the election of the holder hereof, may be made contingent upon
the closing of the sale of the Company’s Common Stock to the public in a public
offering pursuant to a Registration Statement under the Act (a “Public Offering”).  Certificates for the shares issuable upon
exercise of the Conversion Right and, if applicable, a new warrant evidencing
the balance of the shares remaining subject to this Warrant, shall be issued as
of the Conversion Date and shall be delivered to the holder within a reasonable
period of time following the Conversion Date.

 

(c)                                  Determination
of Fair Market Value.  For purposes
of this Section 10.2, “fair market value” of a share of Series Preferred
(or Common Stock if the Series Preferred has been automatically converted
into Common Stock) as of a particular date (the “Determination Date”) shall
mean:

 

(i)                                     If
the Conversion Right is exercised in connection with and contingent upon a
Public Offering, and if the Company’s Registration Statement relating to such
Public Offering (“Registration Statement”) has been declared effective by the
Securities and Exchange Commission, then the initial “Price to Public”
specified in the final prospectus with respect to such offering.

 

(ii)                                  If
the Conversion Right is not exercised in connection with and contingent upon a
Public Offering, then as follows:

 

(A)                              If
traded on a securities exchange, the fair market value of the Common Stock
shall be deemed to be the average of the closing prices of the Common Stock on
such exchange over the five (5) trading days immediately prior to the
Determination Date, and the fair market value of the Series Preferred
shall be deemed to be such fair market value of the Common Stock multiplied by
the number of shares of Common Stock into which each share of Series Preferred
is then convertible;

 

(B)                                If
traded on the Nasdaq Stock Market or other over-the-counter system, the fair
market value of the Common Stock shall be deemed to be the average of the
closing bid prices of the Common Stock over the five trading days immediately
prior to the Determination Date, and the fair market value of the Series Preferred
shall be deemed to be such fair market value of the Common Stock multiplied by
the number of shares of Common Stock into which each share of Series Preferred
is then convertible; and

 

(C)                                If
there is no public market for the Common Stock, then fair market value shall be
determined by the Company’s Board of Directors in good faith.

 

In making a determination under clauses (A) or (B) above, if
on the Determination Date, five (5) trading days had not passed since the
Company’s initial public offering of its Common Stock effected pursuant to a
registration statement on Form S-1 (or its successor) filed under
the Act (“IPO”), then the fair market value of the Common Stock shall be the
average closing prices or closing bid prices, as applicable, for the shorter
period beginning on and including the date of the IPO and ending on the trading
day prior to the Determination Date (or if such period includes only

 

9

 

one (1) trading day the closing price or closing bid price, as
applicable, for such trading day).  If
closing prices or closing bid prices are no longer reported by a securities
exchange or other trading system, the closing price or closing bid price shall
be that which is reported by such securities exchange or other trading system
at 4:00 p.m. New York City time on the applicable trading day.

 

10.3                           Exercise
Prior to Expiration.  To the extent
this Warrant is not previously exercised as to all of the Shares subject
hereto, and if the fair market value of one (1) share of the Series Preferred
is greater than the Warrant Price then in effect, this Warrant shall be deemed
automatically exercised pursuant to Section 10.2 above (even if not
surrendered) immediately before its expiration. 
For purposes of such automatic exercise, the fair market value of one (1) share
of the Series Preferred upon such expiration shall be determined pursuant
to Section 10.2(c).  To the extent
this Warrant or any portion thereof is deemed automatically exercised pursuant
to this Section 10.3, the Company agrees to promptly notify the holder
hereof of the number of Shares, if any, the holder hereof is to receive by
reason of such automatic exercise.

 

11.                                 Representations and Warranties.  The
Company represents and warrants to the holder of this Warrant as of the date
hereof as follows:

 

(a)                                  This
Warrant has been duly authorized and executed by the Company and is a valid and
binding obligation of the Company enforceable in accordance with its terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and the rules of law or principles at equity
governing specific performance, injunctive relief and other equitable remedies.

 

(b)                                 The
rights, preferences, privileges and restrictions granted to or imposed upon the
Series Preferred and the holders thereof are as set forth in the Charter,
and on the Date of Grant, each share of the Series Preferred represented
by this Warrant is convertible into one share of Common Stock.

 

(c)                                  The
execution and delivery of this Warrant are not, and the issuance of the Shares
upon exercise of this Warrant in accordance with the terms hereof will not be,
inconsistent with the Company’s Charter or by-laws, do not and will not to the
Company’s knowledge contravene any law, governmental rule or regulation,
judgment or order applicable to the Company, and do not and will not conflict
with or contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration or filing with or the taking of any action in
respect of or by, any Federal, state or local government authority or agency or
other person, except for the filing of notices pursuant to federal and state
securities laws, which filings will be effected by the time required thereby.

 

(d)                                 There
are no actions, suits, audits, investigations or proceedings pending or, to the
knowledge of the Company, threatened against the Company in any court or before
any governmental commission, board or authority which, if adversely determined,
could have a material adverse effect on the ability of the Company to perform
its obligations under this Warrant.

 

10

 

(e)                                  The
number of shares of Common Stock of the Company outstanding on the date hereof,
on a fully diluted basis (assuming the conversion of all outstanding
convertible securities and the exercise of all outstanding options and
warrants), does not exceed 251,647,179 shares.

 

12.                                 Modification and Waiver.  This
Warrant and any provision hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of the same is sought.

 

13.                                 Notices.  Any notice, request,
communication or other document required or permitted to be given or delivered
to the holder hereof or the Company shall be delivered, or shall be sent by
certified or registered mail, postage prepaid, to each such holder at its
address as shown on the books of the Company or to the Company at the address
indicated therefor on the signature page of this Warrant. All such notices
shall be deemed effectively given: (a) upon personal delivery to the party
to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next
business day, (c) five (5) days after having been sent by registered
or certified mail, return receipt requested, postage prepaid, or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt.

 

14.                                 Binding Effect on Successors.  Subject
to the provisions of Section 4(a) above, this Warrant shall be
binding upon any entity succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company’s assets, and all of the
obligations of the Company relating to the Series Preferred issuable upon
the exercise or conversion of this Warrant shall survive the exercise,
conversion and termination of this Warrant and all of the covenants and
agreements of the parties shall inure to the benefit of the successors and
assigns of the parties hereto.

 

15.                                 Lost Warrants or Stock Certificates.  The
Company covenants to the holder hereof that, upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant or any stock certificate and, in the case of any such loss, theft
or destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant or stock certificate, the Company will make and deliver a new
Warrant or stock certificate, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant or stock certificate.

 

16.                                 Descriptive Headings.  The
descriptive headings of the various Sections of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant.  The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.

 

17.                                 Governing Law.  This Warrant shall be construed
and enforced in accordance with, and the rights of the parties shall be
governed by, the laws of the State of California.

 

18.                                 Survival of Representations, Warranties and
Agreements.  All representations and warranties of the
Company and the holder hereof contained herein shall survive the Date of Grant,
the exercise or conversion of this Warrant (or any part hereof).  All agreements of the Company and

 

11

 

the
holder hereof contained herein shall survive indefinitely until, by their
respective terms, they are no longer operative.

 

19.                                 Remedies.  In case any one or more of the
covenants and agreements contained in this Warrant shall have been breached,
the holders hereof (in the case of a breach by the Company), or the Company (in
the case of a breach by a holder), may proceed to protect and enforce their or
its rights either by suit in equity and/or by action at law, including, but not
limited to, an action for damages as a result of any such breach and/or an
action for specific performance of any such covenant or agreement contained in
this Warrant.

 

20.                                 No Impairment of Rights.  The
Company will not, by amendment of its Charter or through any other means, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant
against impairment.

 

21.                                 Severability.  The invalidity or
unenforceability of any provision of this Warrant in any jurisdiction shall not
affect the validity or enforceability of such provision in any other
jurisdiction, or affect any other provision of this Warrant, which shall remain
in full force and effect.

 

22.                                 Recovery of Litigation Costs.  If any
legal action or other proceeding is brought for the enforcement of this
Warrant, or because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of this Warrant, the
successful or prevailing party or parties shall be entitled to recover
reasonable attorneys’ fees and other reasonable costs incurred in that action
or proceeding, in addition to any other relief to which it or they may be
entitled.

 

23.                                 Entire Agreement; Modification.  This
Warrant constitutes the entire agreement between the parties pertaining to the subject
matter contained in it and supersedes all prior and contemporaneous agreements,
representations, and undertakings of the parties, whether oral or written, with
respect to such subject matter.

 

24.                                 Acceptance. 
Receipt of this Warrant by
the holder shall constitute acceptance of and agreement to all of the terms and
conditions contained herein.

 

25.                                 Market Stand-Off
Agreement.  Holder shall 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 Common Stock (or other
securities) of the Company held by holder, for a period of time specified by
the managing underwriter(s) (not to exceed one hundred eighty (180) days) following
the effective date of the initial registration statement of the Company filed
under the Act; provided, that all officers and directors of the Company
and all holders of two percent (2%) or more of the Company’s outstanding Common
Stock (determined on an as-converted, as-exercised basis) shall have entered
into similar agreements with the Company. 
Holder agrees to execute and deliver such other agreements as may be
reasonably requested by the Company and/or the managing underwriter(s) which
are consistent with the foregoing or which are necessary to

 

12

 

give
further effect thereto.  In order to
enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to such Common Stock (or other securities) until the
end of such period.  The underwriters of
the Company’s stock are intended third party beneficiaries of this Section 25
and shall have the right, power and authority to enforce the provisions hereof
as though they were a party hereto.

 

[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]

[SIGNATURE PAGE FOLLOWS]

 

13

 

The Company has caused
this Warrant to be duly executed and delivered as of the Date of Grant
specified above.

 

	
   

  	
  INTARCIA THERAPEUTICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:
  

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  2000
  Powell Street, Suite 1640

  
	
   

  	
   

  	
  Emeryville,
  California 94608

  
					

 

14

 

EXHIBIT A-1

 

NOTICE OF EXERCISE

 

To:                              [COMPANY]
(the “Company”)

 

1.                                       The
undersigned hereby:

 

o                                    elects
to purchase             
shares of [Series Preferred Stock] [Common Stock] of the Company pursuant
to the terms of the attached Warrant, and tenders herewith payment of the
purchase price of such shares in full, or

 

o                                    elects
to exercise its net issuance rights pursuant to Section 10.2 of the
attached Warrant with respect to                Shares
of [Series Preferred Stock] [Common Stock].

 

2.                                       Please
issue a certificate or certificates representing             
shares in the name of the undersigned or in such other name or names as are
specified below:

 

 

 

(Name)

 

 

 

(Address)

 

3.                                       The
undersigned represents that the aforesaid shares are being acquired for the
account of the undersigned for investment and not with a view to, or for resale
in connection with, the distribution thereof and that the undersigned has no
present intention of distributing or reselling such shares, all except as in
compliance with applicable securities laws.

 

	
   

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Date)

  	
   

  	
   

  

 

 

EXHIBIT A-2

 

NOTICE OF EXERCISE

 

To:                              [COMPANY]
(the “Company”)

 

1.                                       Contingent
upon and effective immediately prior to the closing (the “Closing”) of the
Company’s public offering contemplated by the Registration Statement on Form S    ,
filed            ,
200   , the undersigned hereby:

 

o                                    elects
to purchase                  shares
of [Series Preferred Stock] [Common Stock] of the Company (or such lesser
number of shares as may be sold on behalf of the undersigned at the Closing)
pursuant to the terms of the attached Warrant, or

 

o                                    elects
to exercise its net issuance rights pursuant to Section 10.2 of the
attached Warrant with respect to               Shares
of [Series Preferred Stock] [Common Stock].

 

2.                                       Please
deliver to the custodian for the selling shareholders a stock certificate
representing such           shares.

 

3.                                       The
undersigned has instructed the custodian for the selling shareholders to
deliver to the Company $            or,
if less, the net proceeds due the undersigned from the sale of shares in the
aforesaid public offering.  If such net
proceeds are less than the purchase price for such shares, the undersigned
agrees to deliver the difference to the Company prior to the Closing.

 

 

	
   

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Date)Exhibit
10.4

 

INTARCIA
THERAPEUTICS, INC.

 

2005 Equity Incentive Plan

 

Adopted:                   ,
2005

Approved By Stockholders:                 ,
2005

Termination Date:                 ,
2015

 

1.                                      General.

 

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

 

(b)                                  Available Stock Awards.  The Plan provides for the grant of the
following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) Stock Purchase Awards, (iv) Stock Bonus Awards, (v) Stock
Appreciation Rights, (vi) Stock Unit Awards, and (vii) Other Stock Awards.

 

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

 

2.                                      Definitions.

 

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

 

(a)                                  “Affiliate” means (i) any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company, provided
each corporation in the unbroken chain (other than the Company) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain, and (ii) any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company, provided each
corporation (other than the last corporation) in the unbroken chain owns, at
the time of the determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.  The Board
shall have the authority to determine (i) the time or times at which the
ownership tests are applied, and (ii) whether “Affiliate” includes entities
other than corporations within the foregoing definition.

 

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

 

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

 

1

 

(d)                                  “Cause”
means, with respect to a Participant, the occurrence of any of the following:
(i) such Participant’s commission of any felony or any crime involving fraud,
dishonesty or moral turpitude under the laws of the United States or any state
thereof; (ii) such Participant’s attempted commission of, or participation in,
a fraud or act of dishonesty against the Company; (iii) such Participant’s
intentional, material violation of any material contract or agreement between
the Participant and the Company or any statutory duty owed to the Company; (iv)
such Participant’s unauthorized use or disclosure of the Company’s confidential
information or trade secrets; or (v) such Participant’s gross misconduct.  The determination that a termination is for
Cause shall be made by the Company in its sole discretion.  Any determination by the Company that the
Continuous Service of a Participant was terminated by reason of dismissal
without Cause for the purposes of outstanding Stock Awards held by such
Participant shall have no effect upon any determination of the rights or
obligations of the Company or such Participant for any other purpose.

 

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

 

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

 

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

 

2

 

(iii)                            the
stockholders of the Company approve or the Board approves a plan of complete
dissolution or liquidation of the Company, or a complete dissolution or
liquidation of the Company shall otherwise occur;

 

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

 

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

 

The
term Change in Control shall not include a sale of assets, merger or other
transaction effected exclusively for the purpose of changing the domicile of
the Company.

 

Notwithstanding
the foregoing or any other provision of this Plan, the definition of Change in
Control (or any analogous term) in an individual written agreement between the
Company or any Affiliate and the Participant shall supersede the foregoing
definition with respect to Stock Awards subject to such agreement; provided, however, that if no definition
of Change in Control or any analogous term is set forth in such an individual
written agreement, the foregoing definition shall apply.

 

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

 

(g)                                 “Committee” means a committee of one (1) or more members
of the Board to whom authority has been delegated by the Board in accordance
with Section 3(c).

 

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

 

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

 

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

 

(k)                                “Continuous Service” means that the Participant’s
service with the Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated. 
A change in the capacity in which the Participant renders service to the
Company or an Affiliate as an Employee, Consultant or Director or a change in
the entity for which the Participant renders

 

3

 

such service,
provided that there is no interruption or termination of the Participant’s
service with the Company or an Affiliate, shall not terminate a Participant’s
Continuous Service.  For example, a
change in status from an employee of the Company to a consultant to an
Affiliate or to a Director shall not constitute an interruption of Continuous
Service.  To the extent permitted by law,
the Board or the chief executive officer of the Company, in that party’s sole
discretion, may determine whether Continuous Service shall be considered
interrupted in the case of any leave of absence approved by that party,
including sick leave, military leave or any other personal leave.  Notwithstanding the foregoing, a leave of
absence shall be treated as Continuous Service for purposes of vesting in a
Stock Award only to such extent as may be provided in the Company’s leave of
absence policy or in the written terms of the Participant’s leave of absence.

 

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

 

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

 

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

 

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

 

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

 

(m)                              “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.

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

(t)                                    “Fair Market Value” means, as of any date, the value of
the Common Stock determined as follows:

 

(i)                                    If
the Common Stock is listed on any established stock exchange 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 date in question, as reported in The Wall Street Journal or such other source as the Board deems
reliable.  Unless otherwise provided by
the Board, if there is no closing sales price (or closing bid if no sales were
reported) for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price (or closing bid if no sales were
reported) on the last preceding date for which such quotation exists.

 

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

 

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

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

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

 

(cc)                            “Other Stock Award”
means an award based in whole or in part by reference to the Common Stock which
is granted pursuant to the terms and conditions of Section 7(e).

 

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

 

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

 

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

 

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

 

(hh)                          “Performance Criteria”
means the one or more criteria that the Board shall select for purposes of
establishing the Performance Goals for a Performance Period.  The Performance Criteria that shall be used
to establish such Performance Goals may be based on any one of, or combination
of, the following: (i) earnings per share; (ii) earnings before interest, taxes
and depreciation; (iii) earnings before interest, taxes, depreciation and
amortization (EBITDA); (iv) net earnings; (v) total shareholder return; (vi)
return on equity; (vii) return on assets, investment,

 

6

 

or capital
employed; (viii) operating margin; (ix) gross margin; (x) operating income;
(xi) net income (before or after taxes); (xii) net operating income; (xiii) net
operating income after tax; (xiv) pre- and after-tax income; (xv) pre-tax
profit; (xvi) operating cash flow; (xvii) sales or revenue targets; (xviii)
increases in revenue or product revenue; (xix) expenses and cost reduction
goals; (xx) improvement in or attainment of expense levels; (xxi) improvement
in or attainment of working capital levels; (xxii) economic value added (or an
equivalent metric); (xxiii) market share; (xxiv) cash flow; (xxv) cash flow per
share; (xxvi) share price performance; (xxvii) debt reduction; (xxviii)
implementation or completion of projects or processes; (xxix) customer
satisfaction; (xxx) total stockholder return; (xxxi) stockholders’ equity; and
(xxxii) other measures of performance selected by the Board.  Partial achievement of the specified criteria
may result in the payment or vesting corresponding to the degree of achievement
as specified in the Stock Award Agreement. 
The Board shall, in its sole discretion, define the manner of
calculating the Performance Criteria it selects to use for such Performance
Period.

 

(ii)                                “Performance Goals”
means the one or more goals established by the Board for the Performance Period
based upon the Performance Criteria. 
Performance Goals may be based on a Company-wide basis, with respect to
one or more business units, divisions, Affiliates, or business segments, and in
either absolute terms or relative to the performance of one or more comparable
companies or a relevant index.  The Board
is authorized to make adjustments in the method of calculating the attainment
of Performance Goals for a Performance Period as follows: (i) to exclude restructuring
and/or other nonrecurring charges; (ii) to exclude exchange rate effects, as
applicable, for non-U.S. dollar denominated net sales and operating earnings;
(iii) to exclude the effects of changes to generally accepted accounting
standards required by the Financial Accounting Standards Board; (iv) to exclude
the effects of any statutory adjustments to corporate tax rates; and (v) to
exclude the effects of any “extraordinary items” as determined under generally
accepted accounting principles.  The
Board also retains the discretion to reduce or eliminate the compensation or
economic benefit due upon attainment of Performance Goals.

 

(jj)                                “Performance Period”
means the one or more periods of time, which may be of varying and overlapping
durations, as the Board may select, over which the attainment of one or more
Performance Goals will be measured for the purpose of determining a Participant’s
right to and the payment of a Stock Award.

 

(kk)                        “Plan” means this Intarcia Therapeutics, Inc. 2005
Equity Incentive Plan.

 

(ll)                                “Prior Plans” means the Company’s 2002 Equity Incentive
Plan and 1998 Stock Option Plan in effect immediately prior to the effective
date of the Plan as set forth in Section 14.

 

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

 

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

 

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

 

(pp)                            “Stock Appreciation Right
Agreement” means a written agreement between the Company and a
holder of a Stock Appreciation Right evidencing the terms and conditions of a

 

7

 

Stock Appreciation
Right grant.  Each Stock Appreciation
Right Agreement shall be subject to the terms and conditions of the Plan.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

8

 

3.                                      Administration.

 

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

 

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

 

(i)                                    To
determine from time to time (1) which of the persons eligible under the Plan
shall be granted Stock Awards; (2) when and how each Stock Award shall be
granted; (3) what type or combination of types of Stock Award shall be granted;
(4) 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 (5) the number of shares of Common Stock
with respect to which a Stock Award shall be granted to each such person.

 

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

 

(iii)                            To
effect, at any time and from time to time, with the consent of any adversely
affected Optionholder, (1) the reduction of the exercise price of any
outstanding Option under the Plan; (2) the cancellation of any outstanding
Option under the Plan and the grant in substitution therefor of (a) a new
Option under the Plan or another equity plan of the Company covering the same
or a different number of shares of Common Stock, (b) a Stock Purchase Award,
(c) a Stock Bonus Award, (d) a Stock Appreciation Right, (e) a Stock Unit Award,
(f) an Other Stock Award, (g) cash, and/or (h) other valuable consideration (as
determined by the Board, in its sole discretion); or (3) any other action that
is treated as a repricing under generally accepted accounting principles.

 

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

 

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

 

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

 

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

 

(c)                                  Delegation
to Committee.

 

(i)                                    General.  The Board may delegate some or all of the
administration of the Plan to a Committee or Committees.  If administration is delegated to a
Committee, the

 

9

 

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

 

(ii)                                Section 162(m) and Rule 16b-3 Compliance.  In the sole discretion of the Board, the
Committee may consist solely of two or more Outside Directors, in accordance
with Section 162(m) of the Code, and/or solely of two or more Non-Employee
Directors, in accordance with Rule 16b-3. 
In addition, the Board or the Committee, in its sole discretion, may (1)
delegate to a committee of one or more members of the Board who need not be
Outside Directors the authority to grant Stock Awards to eligible persons who
are either (a) not then Covered Employees and are not expected to be Covered
Employees at the time of recognition of income resulting from such Stock Award,
or (b) not persons with respect to whom the Company wishes to comply with
Section 162(m) of the Code, and/or (2) delegate to a committee of one or more
members of the Board who need not be Non-Employee Directors the authority to
grant Stock Awards to eligible persons who are not then subject to Section 16
of the Exchange Act.

 

(d)                                  Delegation to an Officer.  The Board may delegate to one or more
Officers of the Company the authority to do one or both of the following (i)
designate Officers and Employees of the Company or any of its Subsidiaries to
be recipients of Stock Awards and the terms thereof, and (ii) determine the
number of shares of Common Stock to be subject to such Stock Awards granted to
such Officers and Employees of the Company; provided,
however, that the Board resolutions regarding such delegation shall
specify the total number of shares of Common Stock that may be subject to the
Stock Awards granted by such Officer and that such Officer may not grant a
Stock Award to himself or herself. 
Notwithstanding anything to the contrary in this Section 3(d), the Board
may not delegate to an Officer authority to determine the Fair Market Value of
the Common Stock pursuant to Section 2(t)(ii) above.

 

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

 

4.                                      Shares Subject to the Plan.

 

(a)                                  Share
Reserve.  Subject to the provisions
of Section 11(a) relating to Capitalization Adjustments, the number of shares
of Common Stock that may be issued pursuant to Stock Awards shall not exceed,
in the aggregate, one million six hundred thousand (1,600,000) shares of Common
Stock; provided, however, that
such share reserve shall be increased from time to time by the number of shares
of Common Stock that (i) are issuable pursuant to stock awards outstanding
under the Company’s Prior Plans as of the IPO Date, and (ii) but for the
termination of the Prior Plans as of the IPO Date, would otherwise have
reverted to the share reserve of the Prior Plans.  In addition, the number of shares of Common
Stock available for issuance under the Plan shall automatically increase on
January 1st of each year

 

10

 

commencing in 2006
and ending on (and including) January 1, 2015, in an amount equal to the lesser
of (i) two and one half percent (2.5%) of the total number of shares of Common
Stock outstanding on December 31st of the preceding calendar year, or (ii) seven
hundred twenty-five thousand (725,000) shares of Common Stock.  Notwithstanding the foregoing, the Board may
act prior to the first day of any calendar year, to provide that there shall be
no increase in the share reserve for such calendar year or that the number of
shares by which the share reserve for such calendar year is increased shall be
a number of shares that is equal to or less than the number of shares of Common
Stock that would otherwise be determined pursuant to the preceding sentence.  In the event that the Board does not act to
establish the size of the share reserve increase for a calendar year pursuant
to the preceding sentence, the Board shall be deemed to have provided for no
increase in the share reserve for such year.

 

(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, if any shares of Common Stock
issued to a Participant pursuant to a Stock Award are forfeited to or
repurchased by the Company, including, but not limited to, any repurchase or
forfeiture caused by the failure to meet a contingency or condition required
for the vesting of such shares, or if any shares of Common Stock are cancelled
in accordance with the cancellation and regrant provisions of Section 3(b)(iii),
then the shares of Common Stock not issued under such Stock Award, or forfeited
to or repurchased by the Company, shall revert to and again become available
for issuance under the Plan.  If any
shares subject to a Stock Award are not delivered to a Participant because such
shares are withheld for the payment of taxes or the Stock Award is exercised
through a reduction of shares subject to the Stock Award (i.e., “net exercised”), the number of
shares that are not delivered to the Participant shall remain available for
issuance under the Plan.  If the exercise
price of any Stock Award is satisfied by tendering shares of Common Stock held
by the Participant (either by actual delivery or attestation), then the number
of shares so tendered shall remain available for issuance under the Plan.  Notwithstanding anything to the contrary in
this Section 4(b), subject to the provisions of Section 11(a) relating to
Capitalization Adjustments the aggregate maximum number of shares of Common
Stock that may be issued pursuant to the exercise of Incentive Stock Options
shall be one million six hundred thousand (1,600,000) shares of Common Stock
plus the amount of any increase in the number of shares that may be available
for issuance pursuant to Stock Awards pursuant to Section 4(a).

 

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

 

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

 

11

 

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

 

(c)                                  Section 162(m) Limitation on Annual Grants.  Subject to the provisions of Section 11(a)
relating to Capitalization Adjustments, at such time as the Company may be
subject to the applicable provisions of Section 162(m) of the Code, no Employee
shall be eligible to be granted Stock Awards whose value is determined by
reference to an increase over an exercise or strike price of at least one
hundred percent (100%) of the Fair Market Value of the Common Stock on the date
the Stock Award is granted covering more than eight hundred thousand (800,000)
shares of Common Stock during any calendar year.

 

(d)                                  Consultants.  A Consultant shall not be eligible for the
grant of a Stock Award if, at the time of grant, a Form S-8 Registration
Statement under the Securities Act (“Form S-8”) is not available to register
either the offer or the sale of the Company’s securities to such Consultant
because of the nature of the services that the Consultant is providing to the
Company, because the Consultant is not a natural person, or because of any
other rule governing the use of Form S-8.

 

6.                                      Option Provisions.

 

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

 

(a)                                  Term.  The Board shall determine the term of an
Option; provided, however,  that subject to the provisions of Section 5(b)
regarding Ten Percent Stockholders, no Incentive Stock Option shall be
exercisable after the expiration of ten (10) years from the date of grant.

 

(b)                                  Exercise
Price of an Incentive Stock Option. 
Subject to the provisions of Section 5(b) regarding Ten Percent
Stockholders, the exercise price of each Incentive Stock Option shall be not
less than 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 consistent with 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 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, 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

 

12

 

assumption or
substitution for another option in a manner consistent with the provisions of
Section 424(a) of the Code.

 

(d)                                  Consideration.  The purchase price of Common Stock acquired
pursuant to the exercise of an Option shall be paid, to the extent permitted by
applicable law and as determined by the Board in its sole discretion, by any
combination of the methods of payment set forth below.  The Board shall have the authority to grant
Options that do not permit all of the following methods of payment (or
otherwise restrict the ability to use certain methods) and to grant Options
that require the consent of the Company to utilize a particular method of
payment.  The methods of payment
permitted by this Section 6(d) are:

 

(i)                                    by
cash or check;

 

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

 

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

 

(iv)                               by
a “net exercise” arrangement pursuant to which the Company will reduce the
number of shares of Common Stock issued upon exercise by the largest whole
number of shares with a Fair Market Value that does not exceed the aggregate
exercise price; provided, however,
the Company shall accept a cash or other payment from the Participant to the
extent of any remaining balance of the aggregate exercise price not satisfied
by such holding back of whole shares; provided,
however, shares of Common Stock will no longer be outstanding under
an Option and will not be exercisable thereafter to the extent that (i) shares
are used to pay the exercise price pursuant to the “net exercise,” (ii) shares
are delivered to the Participant as a result of such exercise, and (iii) shares
are withheld to satisfy tax withholding obligations;

 

(v)                                   according
to a deferred payment or similar arrangement with the Optionholder; provided, however, that interest shall
compound at least annually and shall be charged at the minimum rate of interest
necessary to avoid (i) the imputation of interest income to the Company and
compensation income to the Optionholder under any applicable provisions of the
Code, and (ii) the treatment of the Option as a variable award for financial
accounting purposes; or

 

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

 

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

 

13

 

(i)                                    Restrictions
on Transfer.  An 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.

 

(ii)                                Domestic
Relations Orders.  Notwithstanding
the foregoing, an Option may be transferred pursuant to a domestic relations
order.

 

(iii)                            Beneficiary
Designation.  Notwithstanding the
foregoing, the Optionholder may, by delivering written notice to the Company,
in a form provided by or otherwise satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.

 

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

 

(g)                                 Termination of Continuous Service.  In the event that 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 of Continuous Service) but only within such period of time ending
on the earlier of (i) the date three (3) months following the termination of
the 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 of Continuous Service, the Optionholder does not
exercise his or her Option within the time specified herein or in the Option
Agreement (as applicable), the Option shall terminate.

 

(h)                                 Extension of Termination Date.  An Optionholder’s Option Agreement may
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 or upon a Change in Control) 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 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, or
(ii) the expiration of the term of the Option as set forth in the Option
Agreement.

 

(i)                                    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
of Continuous Service), but only within such period of time ending on the
earlier of (i) the date twelve (12) months following such termination of
Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the

 

14

 

term of the Option
as set forth in the Option Agreement. 
If, after termination of Continuous Service, the Optionholder does not
exercise his or her Option within the time specified herein or in the Option
Agreement (as applicable), the Option shall terminate.

 

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

 

(k)                                Early Exercise.  The Option may 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 shall not be required to exercise
its repurchase option until at least six (6) months (or such longer or shorter
period of time necessary to avoid a charge to earnings for financial accounting
purposes) have elapsed following exercise of the Option unless the Board
otherwise specifically provides in the Option.

 

7.                                      Provisions of Stock Awards other than Options.

 

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

 

(i)                                    Purchase Price.  At the time of the grant of a Stock Purchase
Award, the Board will determine the price to be paid by the Participant for
each share subject to the Stock Purchase Award. 
To the extent required by applicable law, the price to be paid by the
Participant for each share of the Stock Purchase Award will not be less than
the par value of a share of Common Stock.

 

15

 

(ii)                                Consideration.  At the time of the grant of a Stock Purchase
Award, the Board will determine the consideration permissible for the payment
of the purchase price of the Stock Purchase Award.  The purchase price of Common Stock acquired
pursuant to the Stock Purchase Award shall be paid either: (i) in cash or by
check at the time of purchase, (ii) at the discretion of the Board, according
to a deferred payment or other similar arrangement with the Participant, (iii)
by past or future services rendered to the Company or an Affiliate, or (iv) in
any other form of legal consideration that may be acceptable to the Board in
its sole discretion and permissible under applicable law.

 

(iii)                            Vesting. Shares of Common Stock
acquired under a Stock Purchase Award may be subject to a share repurchase
right or option in favor of the Company in accordance with a vesting schedule
to be determined by the Board.

 

(iv)                               Termination of Participant’s Continuous
Service. In the event that a Participant’s Continuous Service
terminates, the Company shall have the right, but not the obligation, to
repurchase or otherwise reacquire, any or all of the shares of Common Stock held
by the Participant that have not vested as of the date of termination under the
terms of the Stock Purchase Award Agreement. 
At the Board’s election, the price paid for all shares of Common Stock
so repurchased or reacquired by the Company may be at the lesser of: (i) the
Fair Market Value on the relevant date, or (ii) the Participant’s original cost
for such shares.  The Company shall not
be required to exercise its repurchase or reacquisition option until at least
six (6) months (or such longer or shorter period of time necessary to avoid a
charge to earnings for financial accounting purposes) have elapsed following
the Participant’s purchase of the shares of stock acquired pursuant to the
Stock Purchase Award unless otherwise determined by the Board or provided in
the Stock Purchase Award Agreement.

 

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

 

(b)                                  Stock
Bonus Awards.  Each Stock Bonus Award
Agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate.  At the
Board’s election, shares of Common Stock may be (i) held in book entry form
subject to the Company’s instructions until any restrictions relating to the
Stock Bonus Award lapse; or (ii) evidenced by a certificate, which certificate
shall be held in such form and manner as determined by the Board.  The terms and conditions of Stock Bonus Award
Agreements may change from time to time, and the terms and conditions of
separate Stock Bonus Award Agreements need not be identical, provided, however, that each Stock Bonus
Award 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 Award may be awarded in
consideration for (i) past or future services rendered to the Company or an
Affiliate, or (ii) any other form of legal consideration that may be acceptable
to the Board in its sole discretion and permissible under applicable law.

 

16

 

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

 

(iii)                            Termination
of Participant’s Continuous Service. 
In the event a Participant’s Continuous Service terminates, the Company
may receive via a forfeiture condition, any or all of the shares of Common
Stock held by the Participant which have not vested as of the date of
termination of Continuous Service under the terms of the Stock Bonus Award
Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

(v)                                   Dividend Equivalents.  Dividend equivalents may be
credited in respect of shares of Common Stock covered by a Stock Unit Award, as
determined by the Board and contained in the Stock Unit Award Agreement.  At the sole discretion of the Board, such
dividend equivalents may be converted into additional shares of Common Stock
covered by the

 

17

 

Stock Unit Award
in such manner as determined by the Board. 
Any additional shares covered by the Stock Unit Award credited by reason
of such dividend equivalents will be subject to all the terms and conditions of
the underlying Stock Unit Award Agreement to which they relate.

 

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

 

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

 

(i)                                    Strike Price and Calculation of Appreciation.  Each Stock Appreciation Right will be
denominated in shares of Common Stock equivalents.  The appreciation distribution payable on the
exercise of a Stock Appreciation Right will be not greater than an amount equal
to the excess of (i) the aggregate Fair Market Value (on the date of the
exercise of the Stock Appreciation Right) of a number of shares of Common Stock
equal to the number of share of Common Stock equivalents in which the
Participant is vested under such Stock Appreciation Right, and with respect to
which the Participant is exercising the Stock Appreciation Right on such date,
over (ii) an amount (the strike price) that will be determined by the Board at
the time of grant of the Stock Appreciation Right.

 

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

 

(iii)                            Exercise.  To exercise any outstanding Stock
Appreciation Right, the Participant must provide written notice of exercise to
the Company in compliance with the provisions of the Stock Appreciation Right
Agreement evidencing such Stock Appreciation Right.

 

(iv)                               Payment.  The appreciation distribution in respect to a
Stock Appreciation Right may be paid in Common Stock, in cash, in any
combination of the two or in any other form of consideration, as determined by
the Board and contained in the Stock Appreciation Right Agreement evidencing
such Stock Appreciation Right.

 

(v)                                   Termination of Continuous Service.  In the event that a Participant’s Continuous
Service terminates, the Participant may exercise his or her Stock Appreciation
Right (to the extent that the Participant was entitled to exercise such Stock
Appreciation Right as of the date of termination) but only within such period
of time ending on the earlier of (i) the date three (3) months following the
termination of the Participant’s Continuous Service (or such longer or shorter
period specified in the Stock Appreciation Right Agreement), or (ii) the
expiration of the term of the Stock Appreciation Right as set forth in the
Stock Appreciation Right Agreement.  If,

 

18

 

after termination,
the Participant does not exercise his or her Stock Appreciation Right within
the time specified herein or in the Stock Appreciation Right Agreement (as
applicable), the Stock Appreciation Right shall terminate.

 

(e)                                  Other Stock Awards.  Other forms of Stock Awards valued in whole
or in part by reference to, or otherwise based on, Common Stock may be granted
either alone or in addition to Stock Awards provided for under Section 6 and
the preceding provisions of this Section 7. 
Subject to the provisions of the Plan, the Board shall have sole and
complete authority to determine the persons to whom and the time or times at
which such Other Stock Awards will be granted, the number of shares of Common
Stock (or the cash equivalent thereof) to be granted pursuant to such Other
Stock Awards and all other terms and conditions of such Other Stock Awards.

 

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
that counsel for the Company deems necessary for the lawful issuance and sale
of Common Stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell Common Stock upon exercise of such Stock
Awards unless and until such authority is obtained.

 

9.                                      Use of Proceeds from Sales of Common Stock.

 

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

 

10.                               Miscellaneous.

 

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

 

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

 

19

 

(c)                                  No
Employment or Other Service Rights. 
Nothing in the Plan, any Stock Award Agreement or other instrument
executed thereunder or any 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 any Affiliates) exceeds one hundred
thousand dollars ($100,000), the Options or portions thereof that exceed such
limit (according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options, notwithstanding any contrary provision of the
applicable Option Agreement(s).

 

(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 (i) the issuance of the shares upon the
exercise or acquisition of Common Stock under the Stock Award has been
registered under a then currently effective registration statement under the
Securities Act, or (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 Common Stock.

 

(f)                                    Withholding
Obligations.  To the extent provided
by the terms of a Stock Award Agreement, the Company may, in its sole
discretion, satisfy any federal, state or local tax withholding obligation
relating to 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) causing the Participant to
tender a cash payment; (ii) withholding shares of Common Stock from the shares
of Common Stock issued or otherwise issuable to the Participant in connection
with the Stock Award; or (iii) by such other method as may be set forth in the
Stock Award Agreement.

 

20

 

(g)                                 Electronic
Delivery.  Any reference herein to a “written”
agreement or document shall include any agreement or document delivered
electronically or posted on the Company’s intranet.

 

(h)                                 Performance Stock Awards.    A Stock Award may be granted, may vest, or may
be exercised based upon service conditions, upon the attainment during a
Performance Period of certain Performance Goals, or both.  The length of any Performance Period, the
Performance Goals to be achieved during the Performance Period, and the measure
of whether and to what degree such Performance Goals have been attained shall
be conclusively determined by the Board in its sole discretion.  The maximum benefit to be received by any
individual in any calendar year attributable to Stock Awards described in this
Section 10(h) shall not exceed the value of eight hundred thousand (800,000)
shares of Common Stock.

 

11.                               Adjustments upon Changes in Common Stock;
Corporate Transactions.

 

(a)                                  Capitalization
Adjustments.  If any change is made
in, or other events occur with respect to, the Common Stock subject to the Plan
or subject to any Stock Award after the effective date of the Plan set forth in
Section 14 without the receipt of consideration by the Company (through merger,
consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by
the Company (each a “Capitalization
Adjustment”)), the Board shall appropriately adjust: (i) the
class(es) and maximum number of securities subject to the Plan pursuant to
Section 4(a), (ii) the class(es) and maximum number of securities by which the share
reserve is to increase automatically each year pursuant to Section 4(a), (iii)
the class(es) and number of securities subject to each outstanding stock award
under the Prior Plans that are added from time to time to the share reserve
under the Plan pursuant to Section 4(a), (iv) the class(es) and maximum number
of securities that may be issued pursuant to the exercise of Incentive Stock
Options pursuant to Section 4(b), (v) the class(es) and maximum number of
securities that may be awarded to any person pursuant to Sections 5(c) and 10(h),
and (vi) the class(es) and number of securities and price per share of stock
subject to outstanding Stock Awards.  The
Board shall make such adjustments, and its determination shall be final,
binding and conclusive.  (Notwithstanding
the foregoing, 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, all outstanding Stock Awards (other
than Stock Awards consisting of vested and outstanding shares of Common Stock
not subject to the Company’s right of repurchase) shall terminate immediately
prior to the completion of such dissolution or liquidation, and the shares of
Common Stock subject to the Company’s repurchase option may be repurchased by
the Company notwithstanding the fact that the holder of such Stock Award is
providing Continuous Service, provided,
however, that the Board may, in its sole discretion, cause some or
all Stock Awards to become fully vested, exercisable and/or no longer subject
to repurchase or forfeiture (to the extent such Stock Awards have not
previously expired or terminated) before the dissolution or liquidation is
completed but contingent on its completion.

 

21

 

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

 

(i)                                    Stock Awards May Be Assumed.  In the event of a Corporate Transaction, any
surviving corporation or acquiring corporation (or the surviving or acquiring
corporation’s parent company) may assume or continue any or all Stock Awards
outstanding under the Plan or may substitute similar stock awards for Stock
Awards outstanding under the Plan (including but not limited to, awards to
acquire the same consideration paid to the stockholders of the Company pursuant
to the Corporate Transaction), and any reacquisition or repurchase rights held
by the Company in respect of Common Stock issued pursuant to Stock Awards may
be assigned by the Company to the successor of the Company (or the successor’s
parent company, if any), in connection with such Corporate Transaction.  A surviving corporation or acquiring
corporation may choose to assume or continue only a portion of a Stock Award or
substitute a similar stock award for only a portion of a Stock Award.  The terms of any assumption, continuation or
substitution shall be set by the Board in accordance with the provisions of
Section 3.

 

(ii)                                Stock Awards Held by Participants and Recent
Participants.  In the event of
a Corporate Transaction in which the surviving corporation or acquiring
corporation (or its parent company) does not assume or continue such
outstanding Stock Awards or substitute similar stock awards for such
outstanding Stock Awards, then with respect to Stock Awards that have not been
assumed, continued or substituted and that are held by Participants whose
Continuous Service has not terminated more than three (3) months prior to the
effective time of the Corporate Transaction (referred to as the “Participants and Recent Participants”),
the vesting of such Stock Awards (and, if applicable, the time at which such
Stock Awards may be exercised) shall (contingent upon the effectiveness of the
Corporate Transaction) be accelerated in full to a date prior to the effective
time of such Corporate Transaction as the Board shall determine (or, if the
Board shall not determine such a date, to the date that is five (5) days prior
to the effective time of the Corporate Transaction), and such Stock Awards
shall terminate if not exercised (if applicable) at or prior to the effective
time of the Corporate Transaction, and any reacquisition or repurchase rights
held by the Company with respect to such Stock Awards shall lapse (contingent
upon the effectiveness of the Corporate Transaction).

 

(iii)                            Stock Awards Held by Other Former
Participants.  In the event of
a Corporate Transaction in which the surviving corporation or acquiring
corporation (or its parent company) does not assume or continue such
outstanding Stock Awards or substitute similar stock awards for such
outstanding Stock Awards, then with respect to Stock Awards that have not been
assumed, continued or substituted and that are held by persons other than
Participants and Recent Participants, the vesting of such Stock Awards (and, if
applicable, the time at which such Stock Award may be exercised) shall not be
accelerated and such Stock Awards (other than a Stock Award consisting of
vested and outstanding shares of Common Stock not subject to the Company’s
right of repurchase) shall terminate if not exercised (if applicable) prior to
the effective time of the Corporate Transaction; provided, however, that any reacquisition or repurchase
rights held by the Company with respect to such Stock Awards shall not
terminate and may continue to be exercised notwithstanding the Corporate
Transaction.

 

22

 

(iv)                               Payment for Stock Awards in Lieu of Exercise.  Notwithstanding the foregoing, in the event a
Stock Award will terminate if not exercised prior to the effective time of a
Corporate Transaction, the Board may provide, in its sole discretion, that the
holder of such Stock Award may not exercise such Stock Award but will receive a
payment, in such form as may be determined by the Board, equal in value to the
excess, if any, of (i) the value of the property the holder of the Stock Award
would have received upon the exercise of the Stock Award, over (ii) any
exercise price payable by such holder in connection with such exercise.

 

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

 

12.                               Amendment of the Plan and Stock Awards.

 

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

 

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

 

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

 

(d)                                  No
Impairment of Rights.  Rights under
any Stock Award granted before amendment of the Plan shall not be impaired by
any amendment of the Plan unless (i) the Company requests the consent of the
affected Participant, and (ii) such 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, including, but not limited to, amendments to provide terms more
favorable than previously provided in the Stock Award Agreement, subject to any
specified limits in the Plan that are not subject to Board discretion; 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 affected Participant, and (ii) such Participant consents in
writing.

 

23

 

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
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 affected Participant.

 

14.                               Effective Date of Plan.

 

No
Stock Award shall be exercised (or, in the case of a Stock Purchase Award,
Stock Bonus Award, Stock Unit Award, or Other Stock Award shall be granted)
unless and until (i) 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, and (ii) the IPO Date has occurred.

 

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.

 

24

 

Intarcia Therapeutics, Inc.

2005 Equity Incentive Plan

 

Option Grant Notice

 

 

Intarcia
Therapeutics, Inc. (the “Company”), pursuant to its 2005 Equity Incentive Plan
(the “Plan”),
hereby grants to Optionholder an option to purchase the number of shares of the
Company’s Common Stock set forth below. 
This option is subject to all of the terms and conditions as set forth
herein and in the Option Agreement, the Plan and the Notice of Exercise, all of
which are attached hereto and incorporated herein in their entirety.

 

	
  Optionholder:

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
   

  
	
  Vesting Commencement
  Date:

  	
   

  	
   

  
	
  Number of Shares
  Subject to Option:

  	
   

  	
   

  
	
  Exercise Price (Per
  Share):

  	
   

  	
   

  
	
  Total Exercise Price:

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
   

  

 

	
  Type of Grant:

  	
   

  	
  Incentive
  Stock Option(1)

  	
  Nonstatutory Stock
  Option

  
	
   

  	
   

  	
   

  
	
  Exercise Schedule:

  	
   

  	
  [Initial Grant: 1/4th
  of the shares vest and become exercisable one year after the Vesting
  Commencement Date; the balance of the shares vest and become exercisable in a
  series of thirty-six (36) successive equal monthly installments measured from
  the first anniversary of the Vesting Commencement Date.]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [Refresher Grant: The shares vest and become exercisable in a series of
  forty-eight (48) successive equal monthly installments over the four (4)-year
  period measured from the Vesting Commencement Date.]

  
	
   

  	
   

  	
   

  
	
  Payment:

  	
   

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

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ý                                    By
  cash or check

  
	
   

  	
   

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

  
	
   

  	
   

  	
  ý                                    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 Option Grant
Notice, the Option Agreement and the Plan. 
Optionholder further acknowledges that as of the Date of Grant, this
Option Grant Notice, the Option Agreement and the Plan set forth the entire
understanding between Optionholder and the Company regarding the acquisition of
stock in the Company and supersede all prior oral and written agreements on
that subject with the exception of (i) options previously granted and delivered
to Optionholder under the Plan, and (ii) the following agreements only:

 

	
  Other Agreements:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Intarcia
  Therapeutics, Inc.

  	
   

  	
  Optionholder:

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Signature

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
							

 

Attachments: 
Option Agreement, 2005 Equity Incentive Plan and Notice of Exercise

 

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

 

 

Intarcia Therapeutics, Inc.

2005 Equity Incentive Plan

 

Option Agreement

(Incentive Stock Option or Nonstatutory Stock Option)

 

Pursuant to your Option Grant Notice (“Grant Notice”) and
this Option Agreement, Intarcia Therapeutics, Inc. (the “Company”) has granted you an option under its
2005 Equity Incentive Plan (the “Plan”) to purchase the number of shares of
the Company’s Common Stock indicated in your Grant Notice at the exercise price
indicated in your Grant Notice.  Defined
terms not explicitly defined in this Option Agreement but defined in the Plan
shall have the same definitions as in the Plan.

 

The details of your option are as follows:

 

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

 

2.                                      Number of Shares and Exercise Price.  The number of shares of Common Stock subject
to your option and your exercise price per share referenced in your Grant
Notice may be adjusted from time to time for Capitalization Adjustments.

 

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

 

a.                                       In
the Company’s sole discretion at the time your option is exercised and provided
that at the time of exercise the Common Stock is publicly traded and quoted
regularly in The Wall Street Journal, pursuant
to a program developed under Regulation T as promulgated by the Federal Reserve
Board that, prior to the issuance of Common Stock, results in either the
receipt of cash (or check) by the Company or the receipt of irrevocable
instructions to pay the aggregate exercise price to the Company from the sales
proceeds.

 

b.                                       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, by delivery to
the Company (either by actual delivery or attestation) of already-owned shares
of Common Stock either that you have held for the period required to avoid a
charge to the Company’s reported earnings (generally six (6) months) or that
you did not acquire, directly or indirectly from the Company, that are owned
free and clear of any liens, claims, encumbrances or security interests, and
that are valued at Fair Market Value on the date of exercise.  “Delivery” for these purposes, in the sole
discretion of the Company at the time you exercise your option, shall include
delivery to the Company of your attestation of ownership of such shares of
Common Stock in a form approved by the Company. 
Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender would

 

 

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

 

4.                                      Whole Shares.  You may exercise your option only for whole
shares of Common Stock.

 

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

 

6.                                      Term.  You may not exercise your option before the
commencement or after the expiration of its term.  The term of your option commences on the Date
of Grant and expires upon the earliest of the following:

 

a.                                       three
(3) months after the termination of your Continuous Service for any reason
other than your Disability or death, provided that if during any part of such
three (3) month period your option is not exercisable solely because of the
condition set forth in Section 5, your option shall not expire until the earlier
of the Expiration Date or until it shall have been exercisable for an aggregate
period of three (3) months after the termination of your Continuous Service;

 

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

 

c.                                       eighteen
(18) months after your death if you die either during your Continuous Service
or within three (3) months after your Continuous Service terminates;

 

d.                                       the
Expiration Date indicated in your Grant Notice; or

 

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

 

If your option is an Incentive Stock Option, note that
to obtain the federal income tax advantages associated with an Incentive Stock
Option, the Code requires that at all times beginning on the date of grant of
your option and ending on the day three (3) months before the date of your
option’s exercise, you must be an employee of the Company or an Affiliate,
except in the event of your death or your permanent and total disability, as
defined in Section 22(e) of the Code. 
(The definition of disability in Section 22(e) of the Code is different
from the definition of the Disability under the Plan).  The Company has provided for extended
exercisability of your option under certain circumstances for your benefit but
cannot guarantee that your option will necessarily be treated as an Incentive
Stock Option if you continue to provide services to the Company or an Affiliate
as a Consultant or Director after your employment terminates or if you
otherwise exercise your option more than three (3) months after the date your
employment with the Company or an Affiliate terminates.

 

 

7.                                      Exercise.

 

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

 

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

 

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

 

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.  In addition, you may transfer your option to
a trust if you are considered to be the sole beneficial owner (determined under
Section 671 of the Code and applicable state law) while the option is held in
the trust, provided that you and the trustee enter into transfer and other
agreements required by the Company.

 

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

 

10.                               Withholding Obligations.

 

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

 

b.                                       Upon
your request and subject to approval by the Company, in its sole discretion,
and compliance with any applicable legal conditions or restrictions, the
Company may

 

 

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

 

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

 

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

 

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

 

 

Notice Of Exercise

 

	
  Intarcia Therapeutics, Inc.

  	
   

  
	
  2000 Powell St., Ste. 1640

  	
   

  
	
  Emeryville, CA 94608

  	
  Date of Exercise:

  	
   

  
	
   

  	
   

  	
   

  
	
  Ladies and Gentlemen:

  	
   

  

 

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

 

	
  Type of option
  (check one):

  	
   

  	
   ̈
  Incentive

  	
   

  	
   ̈
  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:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Value of              
  shares of Intarcia Therapeutics, Inc. Common
  Stock delivered herewith(2):

  	
   

  	
  $

  	
   

  	
   

  

 

By
this exercise, I agree (i) to provide such additional documents as you may
require pursuant to the terms of the Intarcia
Therapeutics, Inc.  2005 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.

 

Very truly yours,

 

 

(2)                                  Shares
must meet the public trading requirements set forth in the option.  Shares must be valued in accordance with the
terms of the option being exercised, must have been owned for the minimum
period required in the option, and must be owned free and clear of any liens,
claims, encumbrances or security interests. 
Certificates must be endorsed or accompanied by an executed assignment
separate from certificate.

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