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Exhibit 4.2  

ANACOR PHARMACEUTICALS, INC.

A DELAWARE CORPORATION  

 
 

AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT    
    

June 13, 2006  

  

 
 

TABLE OF CONTENTS    
    

	 
	 	 
	 	 
	 	Page

	1.	 	Definitions; Registration Rights	 	1
	 	 	1.1	 	Definitions	 	1
	 	 	1.2	 	Request for Registration	 	3
	 	 	1.3	 	Company Registration	 	4
	 	 	1.4	 	Form S-3 Registration.	 	5
	 	 	1.5	 	Obligations of the Company	 	5
	 	 	1.6	 	Furnish Information	 	7
	 	 	1.7	 	Expenses of Registration	 	7
	 	 	1.8	 	Delay of Registration	 	7
	 	 	1.9	 	Indemnification	 	7
	 	 	1.10	 	Reports Under Securities Exchange Act of 1934	 	10
	 	 	1.11	 	Assignment of Registration Rights	 	10
	 	 	1.12	 	Limitations on Subsequent Registration Rights	 	11
	 	 	1.13	 	Market-Standoff Agreement	 	11
	 	 	1.14	 	Termination of Registration Rights	 	11
	

2.	
 	

Covenants of the Company	
 	

12
	 	 	2.1	 	Delivery of Financial Statements	 	12
	 	 	2.2	 	Budget Approval	 	12
	 	 	2.3	 	Delivery of Progress Reports	 	12
	 	 	2.4	 	Inspection	 	12
	 	 	2.5	 	Right of First Offer	 	12
	 	 	2.6	 	Employee Agreements	 	12
	 	 	2.7	 	Termination of Covenants	 	13
	

3.	
 	

Miscellaneous	
 	

14
	 	 	3.1	 	Entire Agreement	 	14
	 	 	3.2	 	Recapitalizations, Etc.	 	14
	 	 	3.3	 	Successors and Assigns	 	15
	 	 	3.4	 	Amendments and Waivers	 	15
	 	 	3.5	 	Notices	 	15
	 	 	3.6	 	Severability	 	15
	 	 	3.7	 	Delays or Omissions; Remedies Cumulative	 	15
	 	 	3.8	 	Attorneys' Fees	 	15
	 	 	3.9	 	Governing Law	 	16
	 	 	3.10	 	Counterparts	 	16
	 	 	3.11	 	Titles and Subtitles	 	16
	 	 	3.12	 	Aggregation of Stock	 	16
	 	 	3.13	 	Confidentiality	 	16
	 	 	3.14	 	Additional Parties	 	16

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ANACOR PHARMACEUTICALS, INC.

A DELAWARE CORPORATION  

AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT  

        This Amended and Restated Investors' Rights Agreement (this "Agreement") is made as of June 13, 2006, by
and among Anacor Pharmaceuticals, Inc., a Delaware corporation (the "Company"), the investors listed on  Exhibit A hereto (each, an "Investor"), The Pennsylvania State University and Stanford
University. 

R E C I T A L S  

        The Company, certain of the Investors, The Pennsylvania State University and Stanford University have previously entered into an Amended and Restated Investors'
Rights Agreement dated as of April 28, 2005 (the "Prior Rights Agreement"). The Company and certain of the Investors have entered into a
Series D Preferred Stock Purchase Agreement (the "Purchase Agreement") of even date herewith pursuant to which the Company is selling to such
Investors and such Investors are purchasing from the Company shares of the Company's Series D Preferred Stock. A condition to the parties' obligations under the Purchase Agreement is that the
Company and the Investors enter into this Agreement in order to provide the Investors with (i) certain rights to register shares of the Company's Common Stock issuable upon conversion of the
Series D Preferred Stock held by the Investors, (ii) certain rights to receive or inspect information pertaining to the Company, and (iii) a right of first offer with respect to
certain issuances by the Company of its securities as set forth herein. The Company desires to induce the Investors to purchase shares of Series D Preferred Stock pursuant to the Purchase
Agreement by agreeing to the terms and conditions set forth herein. 

A G R E E M E N T  

        The parties hereto agree as follows: 

        A.    Amendment of Prior Rights Agreement; Waiver of Right of First Offer.    Effective and
contingent upon execution of this Agreement by the Company and the holders of at least 60% of the Registrable Securities, as that term is defined in the Prior Rights Agreement, and upon closing of the
transactions
contemplated by the Purchase Agreement, the Prior Rights Agreement is hereby amended and restated in its entirety to read as set forth in this Agreement, and the Company and the holders of the
Registrable Securities hereby agree to be bound by the provisions hereof as the sole agreement of the Company and the holders of the Registrable Securities with respect to registration rights of the
Company's securities and certain other rights, as set forth herein. The holders of Registrable Securities, as that term is defined in the Prior Rights Agreement, on behalf of themselves and all
holders of Registrable Securities pursuant to Section 3.4 of the Prior Rights Agreement, hereby waive any right of first offer, including the notice requirements related thereto, set forth in
Section 2.3 of the Prior Rights Agreement with respect to the issuance of Series D Preferred Stock pursuant to the Purchase Agreement. 

1.     Definitions; Registration Rights.

        1.1    Definitions.    For purposes of this
Agreement:

        (a)   "Board" means the Board of Directors of the Company, as the same shall be constituted from time to time. 

        (b)   "Common Stock" means the common stock, par value $0.001 per share, of the Company. 

        (c)   "Exempt Registration" means a registration statement relating to the sale of securities by the Company pursuant to a
stock option, stock purchase or similar benefit plan or an SEC Rule 145 transaction. 

 

        (d)   "Form S-3" means such form under the Securities Act as in effect on the date hereof or any successor
form under the Securities Act that is intended to be used as a short form for the registration of distribution of secondary shares. 

        (e)   "Holder" means any person owning or having the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.11 of this Agreement. 

        (f)    "Investor Holder" means any Investor and any person owning or having the right to acquire Registrable Securities
originally issued to any Investor or any assignee thereof in accordance with Section 1.11 of this Agreement. 

        (g)   "Major Investor" means any Holder of at least 800,000 Registrable Securities (as appropriately adjusted for stock splits
and the like). 

        (h)   "Person" means any individual, corporation, partnership, limited liability company, trust, business, association or
government or political subdivision thereof, governmental agency or other entity. 

        (i)    "Preferred Stock" means the Series A-1 Preferred Stock, the Series A-2 Preferred
Stock, the Series B Preferred Stock, Series C Preferred Stock and the Series D Preferred Stock of the Company. 

        (j)    "Qualified IPO" means the firm commitment underwritten public offering by the Company of shares of its Common Stock
pursuant to a registration statement on Form S-1 (or any successor form) under the Securities Act, which results in aggregate cash proceeds to the Company of $35,000,000 (net of
underwriting discounts and commissions) at a price per share to the public of at least $3.46 (appropriately adjusted for any stock split, dividend, combination or other recapitalization). 

        (k)   The
terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities
Act and the declaration or ordering of effectiveness of such registration statement or document. 

        (l)    The
term "Registrable Securities" means (i) the shares of Common Stock issuable or issued upon conversion of the
Preferred Stock, provided that shares of Common Stock issued or issuable upon shares of Series D Preferred Stock issued upon exercise of warrants
held by Lighthouse Capital Partners V, LP or its affiliates shall not be Registrable Securities for the purposes of Section 2 hereunder, and (ii) any other shares of Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, the shares listed in clause (i) and this clause (ii); provided, however,
that the foregoing definition shall exclude in all cases any Registrable Securities sold by a Holder in a transaction in which its rights under this Agreement are not assigned. Notwithstanding the
foregoing, securities shall only be treated as Registrable Securities if and so long as they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a
public securities transaction, or (B) sold in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions, and restrictive legends with respect thereto, if any, are removed upon the consummation of such
sale. 

        (m)  The
number of shares of "Registrable Securities then outstanding" shall equal the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are, Registrable Securities. 

        (n)   "SEC" means the Securities and Exchange Commission or any other federal agency at the time administering the Securities
Act. 

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        (o)   "Securities Act" means the Securities Act of 1933, as amended. 

        (p)   "Series A Preferred Stock" means the Series A-1 Preferred Stock and
Series A-2 Preferred Stock of the Company. 

        1.2    Request for Registration.    

        (a)    Initiation.    If the Company shall receive at any time after the earlier of
(i) April 28, 2009, or (ii) six months after the effective date of the first registration statement of the Company pertaining to its Common Stock (other than an Exempt
Registration), a written request from the Investor Holders of at least a majority of the Registrable Securities then outstanding and held by the (i) holders of Series D Preferred Stock
of the Company, (ii) holders of Series C Preferred Stock of the Company or (iii) holders of the Series A Preferred Stock and Series B Preferred Stock of the Company,
(the "Initiating Holders") that the Company file a registration statement under the Securities Act, and if the aggregate offering price to the
public (net of any underwriters' discounts or commissions) shall be reasonably expected by the Company to be at least $5.0 million, then the Company shall, within 10 days of the receipt
thereof, give written notice of such request to all other Holders and shall, subject to the limitations of subsections 1.2(b), (c), (d) and (e), use its reasonable best efforts to effect as
soon as practicable the registration under the Securities Act of all Registrable Securities which the Initiating Holders request to be registered, together with any Registrable Securities of any
Holder joining in such request as are specified in a written notice given by any such Holder to the Company within 20 days after receipt of the Company's notice. 

        (b)    Underwritten Offering.    If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their
request made pursuant to this Section 1.2 and the Company shall include such information in the written notice referred to in Section 1.2(a). The underwriter shall be selected by a
majority in interest of the Initiating Holders and shall be reasonably acceptable to the Company. The right of any Holder to include its Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting. All Holders proposing to distribute Registrable Securities through such underwriting shall (together with the Company as provided in
Section 1.5(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Initiating Holders
shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting
shall be allocated among all participating Holders, including the Initiating Holders, in proportion (rounded to the nearest 100 shares) to the amount of Registrable Securities of the Company then
owned by each Holder; provided, however, that the number of shares of Registrable Securities to be
included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. For purposes of the preceding apportionment, for any participating
Holder that is a partnership, limited liability company or corporation, the partners, retired partners, members, retired members and stockholders of such Holder, or the estates and family members of
any such partners, members, retired partners or retired members and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling
stockholder," and any pro-rata reduction with respect to such "selling stockholder" shall be based upon the aggregate number of shares carrying registration rights
owned by all Persons included in such "selling stockholder," as defined in this sentence. 

        (c)    Company Deferral.    If the Company shall furnish to the Initiating Holders a
certificate signed by the President of the Company stating that in the good faith judgment of the Board, it would be seriously detrimental to the Company and its stockholders for such registration
statement 

3

 

to
be filed and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer such filing for a period of not more than 120 days after
receipt of the request of the Initiating Holders; provided, however, that the Company may not utilize
this right more than once in any 12-month period. 

        (d)    Maximum Number of Registrations.    The Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 1.2 after the Company has effected two registrations pursuant to this Section 1.2 and such registrations have been
declared or ordered effective and the securities offered pursuant to such registrations have been sold. 

        (e)    Lockout Period.    The Company shall not be obligated to effect, or to take any action
to effect, any registration pursuant to this Section 1.2 during the period starting with the date 60 days prior to the Company's good faith estimate of the date of filing of, and ending
on a date 180 days after the effective date of, a registration subject to Section 1.3 hereof; provided that if said registration statement
is not yet effective, the Company shall be actively employing in good faith its reasonable best efforts to cause such registration statement to become effective. 

        1.3    Company Registration.    

        (a)    Initiation.    If (but without any obligation to do so) the Company proposes to
register (including for this purpose a registration effected by the Company for stockholders other than the Holders) any of its stock in connection with the public offering of such securities solely
for cash (other than an Exempt Registration), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within
20 days after receipt by such Holder of the Company's notice, the Company shall, subject to the provisions of Sections 1.3(b) and (c) below, use its reasonable best efforts to cause to
be registered all of the Registrable Securities that each such Holder has requested to be registered. 

        (b)    Underwritten Offering.    In connection with any offering involving an underwriting of
shares of the Company's capital stock, the Company shall not be required under Section 1.3(a) to include any securities of any Holder in such underwriting unless such Holder accepts the terms
of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities to be sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering,
then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not
jeopardize the success of the offering (the securities so included to be apportioned pro rata (to the nearest 100 shares) among the selling stockholders
according to the total amount of securities entitled to be included therein owned by each selling stockholder or in such other proportions as shall mutually be agreed to by such selling stockholders)
but in no event shall the amount of securities of the selling Holders included in the offering be reduced below twenty-five percent (25%) of the total amount of securities included in such
offering, unless such offering is the initial public offering of the Company's securities, in which case, the selling stockholders may be altogether excluded if the underwriters make the determination
described above and no other stockholder's securities are included. For purposes of the preceding apportionment, for any participating Holder that is a partnership, limited liability company or
corporation, the partners, retired partners, members, retired members and stockholders of such Holder, or the estates and family members of any such partners, members, retired partners or members and
any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling stockholder," and any pro-rata reduction with respect to such "selling stockholder" 

4

 

shall
be based upon the aggregate amount of shares carrying registration rights owned by all Persons included in such "selling stockholder," as defined in this sentence. 

        (c)    Right to Terminate Registration.    The Company shall have the right to terminate or
withdraw any registration initiated by it under this Section 1.3 prior to the effectiveness of such registration whether or not any Holder has elected to include Registrable Securities in such
registration. 

        1.4    Form S-3 Registration.    

        (a)    Initiation.    If the Company shall receive from any Holder or Holders a written
request that the Company effect a registration on Form S-3 with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company will promptly
give written notice of the proposed registration to all other Holders and as soon as practicable, subject to the provisions of Section 1.4(b) below, use its reasonable best efforts to effect
such registration of such Holder's or Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 20 days after receipt of such notice from the Company. 

        (b)    Limitations.    Notwithstanding Section 1.4(a) above, the Company shall not be
obligated to effect any such registration pursuant to this Section 1.4 (i) if Form S-3 is not available for such offering by the Holders; (ii) if the Holders,
together with the holders of any other securities of the Company entitled for inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate
price to the public (net of any underwriters' discounts or commissions) of less than $1,000,000; (iii) if the Company shall furnish to the Holders a certificate signed by the President of the
Company stating that in the good faith judgment of the Board, it would be seriously detrimental to the Company and its stockholders for such Form S-3 registration to be effected at
such time, in which event the Company shall have the right to defer the filing of the Form S-3 for a period of not more than 90 days after receipt of the request of the
Holder or Holders under this Section 1.4; provided, however, that the Company shall not utilize
this right more than once in any 12-month period; (iv) if the Company has, within the 12-month period preceding the date of such request, already effected two
registrations on Form S-3 for the Holders pursuant to this Section 1.4; or (v) during the period ending 180 days after the effective date of a registration
statement subject to Section 1.3. Except as otherwise set forth in this Section 1.4, the Holders shall be entitled to request an unlimited number of registrations on
Form S-3. 

        (c)    S-3 Registration Not Demand Registration.    Registrations effected
pursuant to this Section 1.4 shall not be considered or counted as demands for registration or registrations effected pursuant to Section 1.2. 

        (d)    Underwritten Offerings.    The substantive provisions of Section 1.2(b) shall
apply to the registration if it relates to an underwritten offering. 

        1.5    Obligations of the Company.    Whenever required under this Section 1 to effect
the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: 

        (a)   Prepare
and file with the SEC a registration statement with respect to such Registrable Securities and use its reasonable best efforts to cause such registration
statement to become effective, and, in the instances of a registration initiated pursuant to Section 1.2 or 1.4 keep such registration statement effective for up to one hundred twenty
(120) days. 

        (b)   Prepare
and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as
may be necessary to comply with the provisions of the Securities Act. 

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        (c)   Furnish
to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to facilitate the disposition of such Registrable Securities. 

        (d)   Use
its reasonable best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. 

        (e)   In
the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement with the managing underwriter of such offering
in usual and customary form and consistent with the other provisions of this Agreement. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an
agreement. 

        (f)    Notify
each Holder of Registrable Securities covered by the registration statement at any time when the Company becomes aware of the happening of any event as a result
of which the registration statement or the prospectus included in such registration statement or any supplement to the prospectus (as then in effect) contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements there in (in the case of the prospectus, in light of the circumstances under which they were made) not misleading or, if for any
other reason it shall be necessary during such time period to amend or supplement the registration statement or the prospectus in order to comply with the Securities Act, whereupon, in either case,
each Holder shall immediately cease to use such registration statement or prospectus for any purpose and, as promptly as practicable thereafter, the Company shall prepare and file with the SEC, and
furnish without charge to the appropriate Holders and managing underwriters, if any, a supplement or amendment to such registration statement or prospectus which will correct such statement or
omission or effect such compliance and such copies thereof as the Holders and any underwriters may reasonably request. In any such event, the number of days for which such registration statement is
required to be effective hereunder shall be extended accordingly. 

        (g)   Cause
all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange or over-the-counter market on which
similar securities issued by the Company are then listed, if applicable. 

        (h)   Provide
a transfer agent and registrar for such Registrable Securities and a CUSIP number for all such Registrable Securities, in each case not later than the effective
date of such registration. 

        (i)    Use
its reasonable best efforts to furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Section 1, on the date
that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Section 1, if such securities are being sold through underwriters,
or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date,
of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of Registrable Securities and (ii) a letter dated such date, from the independent certified public accountants of the Company,
in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities (to the extent the then applicable standards of professional conduct permit said letter to be addressed to the Holders). 

6

 

        (j)    Notify
each Holder of Registrable Securities covered by the registration statement of (i) the expected effective date of the registration statement and
(ii) the effectiveness on the actual effective date thereof. 

        1.6    Furnish Information.    It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding
itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. The
Company shall have no obligation with respect to any registration requested pursuant to Section 1.2 or Section 1.4 of this Agreement if, as a result of the application of the preceding
sentence, the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number of shares or the
anticipated aggregate offering price required to originally trigger the Company's obligation to initiate such registration as specified in subsection 1.2(a) or subsection 1.4(b), as applicable. 

        1.7    Expenses of Registration.    

        (a)    Demand and S-3 Registration.    All expenses other
than underwriting discounts and commissions incurred in connection with registrations initiated pursuant to Section 1.2 and 1.4, including all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the Company, and the reasonable fees up to a maximum of $30,000 and disbursements of one counsel for the selling Holders selected
by Holders selling a majority of the subject Registrable
Securities with the approval of the Company, which approval shall not be unreasonably withheld, shall be borne by the Company; provided,  however, that the
Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 1.2 or 1.4 if
the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such
expenses on a pro rata basis), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one demand registration
pursuant to Section 1.2; provided further, however, that if at the time of such withdrawal, the
Holders have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request
with reasonable promptness following disclosure by the Company of such material adverse change, then the Holders shall not be required to pay any of such expenses and shall retain their rights
pursuant to Section 1.2 and 1.4, as applicable. 

        (b)    Company Registration.    All expenses other than underwriting
discounts and commissions incurred in connection with registrations of Registrable Securities initiated pursuant to Section 1.3, including (without limitation) all registration, filing, and
qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Company and the reasonable fees up to a maximum of $30,000 and disbursements of one counsel for the selling
Holder or Holders selected by Holders selling a majority of the subject Registrable Securities with the approval of the Company, which approval shall not be unreasonably withheld, shall be borne by
the Company. 

        1.8    Delay of Registration.    No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1. 

        1.9    Indemnification.    In the event any Registrable Securities are included in a
registration statement under this Section 1: 

        (a)    Indemnification by the Company.    To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any or each agent, officer, director, stockholder or 

7

 

partner
of each Holder, any or each grantor or beneficiary of a Holder that is a trust, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of Section 15 of the Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively
a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will pay to each such Holder, underwriter or controlling
person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action;  provided, however, that the indemnity agreement contained in this subsection 1.9(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable to any Holder, underwriter or controlling person for any such loss, claim, damage, liability, or action (1) to the extent that it arises out of or is based upon
a Violation that occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling
person or (2) in the case of a sale directly by a Holder of Registrable Securities (including a sale of such Registrable Securities through any underwriter retained by such Holder engaging in a
distribution solely on behalf of such Holder), such Violation arises out of a material misstatement or omission contained in a preliminary prospectus and corrected in a final or amended prospectus,
and such Holder failed to deliver a copy of the final or amended prospectus at or prior to the confirmation of the sale of the Registrable Securities to the person asserting any such loss, claim,
damage or liability in any case in which such delivery is required by the Securities Act. 

        (b)    Indemnification by the Holders.    To the extent permitted by law, each Holder joining
in registration will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, any underwriter and any controlling person of any such underwriter, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written
information (including, without limitation, written negative responses to inquiries) furnished by such Holder expressly for use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 1.9(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this
Section 1.9(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided, further, that in no event shall any indemnity under this
Section 1.9(b) exceed the net proceeds from the offering received by such Holder, except in the case of willful fraud by such Holder; provided,  further, that the indemnity under this 

8

 

Section 1.9(b)
shall not be deemed to relieve any underwriter of any of its due diligence obligations. 

        (c)    Procedures.    Promptly after receipt by an indemnified party under this
Section 1.9 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying
party under this Section 1.9, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties;  provided,
however, that an indemnified party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to retain one separate counsel, with the reasonable fees and expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented
by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, to the extent prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.9, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.9. No indemnifying party, in the defense of any such claim
or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. The indemnity agreements contained in this Section 1.9
shall not apply to amounts paid in settlement of any loss, claim, damage, liability or action if such settlement is effected without the consent of the indemnifying party, which consent shall not be
unreasonably withheld. 

        (d)    Contribution.    If the indemnification provided for in this Section 1.9 is held
by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu
of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that
resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations; provided, that in no event shall any
contribution by a Holder under this Section 1.9(d) exceed the net proceeds from the offering received by such Holder, except in the case of willful fraud by such Holder. The relative fault of
the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state
a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission. 

        (e)    Underwriting Agreement.    Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions,
the provisions in the underwriting agreement shall control. 

        (f)    Reimbursement.    The contribution required by this Section 1.9 shall be made by
periodic payment during the course of the investigation or defense, as and when bills are submitted to the indemnifying party. 

9

 

        (g)    Survival.    The obligations of the Company and Holders under this Section 1.9
shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1, and otherwise. No indemnifying party, in defense of any such claim or
litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. 

        1.10    Reports Under Securities Exchange Act of 1934.    With a view
to making available to the Holders the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to: 

        (a)   make
and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the first
registration statement filed by the Company for
the offering of its securities to the general public so long as the Company remains subject to the periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act; 

        (b)   take
such action, including the voluntary registration of its Common Stock under Section 12 of the Exchange Act, as is necessary to enable the Holders to use
Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement
filed by the Company for the offering of its equity securities to the general public is declared effective; 

        (c)   file
with the SEC in a timely manner all reports and other documents as may be required of the Company under the Securities Act and the Exchange Act; and 

        (d)   furnish
to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied
with the reporting requirements of SEC Rule 144, the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to such form. 

        1.11    Assignment of Registration Rights.    The rights to cause the Company to register
securities granted Holders under Sections 1.2, 1.3 and 1.4 may be assigned to a transferee or assignee in connection with any transfer or assignment of Registrable Securities by a Holder;  provided that
(a) such transfer may otherwise be effected in accordance with applicable securities laws and restrictions on transfer agreed upon
by the Holder and the Company (including those set forth in the Purchase Agreement), (b) notice of such assignment is given to the Company, (c) such transferee or assignee (i) is
a wholly-owned subsidiary or constituent partner, retired partner, member, retired member or shareholder of such Holder, or a beneficiary or grantor of a Holder that is a trust, or (ii) is a
spouse, ancestor or descendant, or (iii) is a trust for the benefit of such Holder or any spouse, ancestor or descendant of such Holder or (iv) acquires from such Holder at least 250,000
shares of Registrable Securities (as appropriately adjusted for stock splits and the like) and (d) such transferee or assignee agrees in writing, within ten (10) days of the transfer, to
be bound by all provisions of this Agreement. Notwithstanding the foregoing, all assignees and transferees of a Holder who acquire less than 250,000 shares of Registrable Securities (as appropriately
adjusted for stock splits and the like) from such Holder shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action
under Section 1. 

10

 

        1.12    Limitations on Subsequent Registration Rights.    From and after the date of this
Agreement, the Company shall not, without the prior written consent of the Holders of at least a majority of the outstanding Registrable Securities, enter into any agreement with any holder or
prospective holder of any securities of the Company which would allow such holder or prospective holder (a) to include such securities in any registration filed under Section 1.2,1.3 or
1.4 hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of its securities
will not reduce the amount of the Registrable Securities of the Holders which is included or (b) to make a demand registration within 120 days after the effective date of any
registration effected pursuant to Section 1.2. 

        1.13    Market-Standoff Agreement.    

        (a)    Market-Standoff Period; Agreement.    In connection with the
initial public offering of the Company's securities and upon request of the Company or the underwriters managing such offering of the Company's securities, each Holder hereby agrees not to sell, make
any short sale of, loan, grant any option for the purchase of, or otherwise hedge or dispose of any securities of the Company (other than any disposed of in the registration and those acquired by the
Holder in the registration or thereafter in open market transactions) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed
180 days but subject to such extension or extensions of up to 18 days as may be required by the underwriters in order to publish research reports while complying with the
Rule 2711 of the National Association of Securities Dealers, Inc.) from the effective date of such registration as may be requested by the Company or such managing underwriters and to
execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the Company's initial public offering. 

        (b)    Limitations on Lock-Up.    The obligations
described in Section 1.13(a) shall apply only if all executive officers and directors of the Company, and all one-percent and greater security holders (on a basis assuming full
conversion and exercise of all convertible or exercisable securities) enter into similar agreements. If the Company or the underwriter of any public offering of the Company's securities waives or
terminates any standoff or lockup restrictions imposed on any holder of securities of the Company, then such waiver or termination shall be granted to all Holders subject to standoff or lockup
restrictions pro rata based on the number of shares of Common Stock beneficially held by such holder and the Holders. From and after the date of this
Agreement, the Company shall use its best efforts to ensure that all holders of capital stock of the Company agree to be bound by terms substantially similar to those set forth in this
Section 1.13. 

        (c)    Stop-Transfer Instructions.    In order to enforce
the foregoing covenants, the Company may impose stop-transfer instructions with respect to the securities of each Holder (and the securities of every other person subject to the
restrictions in Section 1.13(a)). 

        (d)    Transferees Bound.    Each Holder agrees that it will not
transfer securities of the Company unless each transferee agrees in writing to be bound by all of the provisions of this Section 1.13. 

        1.14    Termination of Registration Rights.    No Holder shall be entitled to exercise any
registration right provided for in this Section 1 after the earlier of (i) five years following the consummation of a Qualified IPO, or (ii) such time as Rule 144 or
another similar exemption under the Securities Act is available for the sale of all of such Holder's shares during a three-month period without registration, without reference to Rule 144(k). 

11

 

2.     Covenants of the Company.

        2.1    Delivery of Financial Statements.    The Company shall deliver to each Major Investor
(other than a Major Investor reasonably deemed by the Board to be a competitor of the Company): 

        (a)   as
soon as practicable, but in any event within 180 days after the end of each fiscal year of the Company, an income statement for such fiscal year, a balance
sheet of the Company and statement of stockholders' equity as of the end of such year, and a statement of cash flows for such year, such year-end financial reports to be in reasonable
detail, prepared in accordance with generally accepted accounting principles ("GAAP"), and audited and certified by an independent public accounting
firm of nationally recognized standing selected by the Company and accompanied by a report and opinion thereon prepared by such accounting firm; 

        (b)   as
soon as practicable, but in any event within 30 days after the end of each of the first three quarters of each fiscal year of the Company, an unaudited profit
or loss statement, a statement of cash flows for such fiscal quarter and an unaudited balance sheet as of the end of such fiscal quarter, complete with variation analysis from budget and prior period; 

        (c)   as
soon as practicable, but in any event within 30 days of the end of each month, an unaudited income statement and a statement of cash flows and balance sheet
for and as of the end of such month, in reasonable detail, complete with variation analysis from budget and prior period; and 

        (d)   as
soon as practicable, but in any event no later than 30 days prior to the end of each fiscal year, a budget and business plan for the next fiscal year, prepared
on a monthly basis, and approved by the Board and, as soon as prepared, any other budgets or revised budgets prepared by the Company; 

        2.2    Budget Approval.    The Company's annual operating budget for each fiscal year
following 2006 shall require the approval of any three of the four members of the Board of Directors of the Company designated by the Rho Nominee, the Aberdare Nominee, the Care Capital Nominee and
the Venrock Nominee pursuant to that certain Amended and Restated Voting Agreement of even date herewith (as each party is defined therein). 

        2.3    Delivery of Progress Reports.    The Company shall deliver to each Major Investor
(other than a Major Investor reasonably deemed by the Board to be a competitor of the Company) as soon as practicable, but in any event within 30 days after the end of each fiscal quarter of
the Company a report from the President of the Company describing the general progress of the Company for such fiscal quarter. 

        2.4    Inspection.    The Company shall permit each Major Investor (except for such Major
Investor reasonably deemed by the Board to be a competitor of the Company), at such Holder's expense, to visit and inspect the Company's properties, to examine its books of account and records and to
discuss the Company's affairs, finances and accounts with its officers, all at such reasonable times as may be requested by the Major Investor;  provided, however, that the Company shall not be obligated pursuant to this Section 2.2 to
provide access to any information which it reasonably considers to be a trade secret. 

        2.5    Books and Records.    The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions pursuant to a system of accounting established and administered in accordance with generally accepted accounting principles
consistently applied (except as noted therein), and will set aside on its books all such proper accruals and reserves as shall be required under generally accepted accounting principles consistently
applied. 

        2.6    Board Expenses.    The Company will pay for the reasonable travel expenses associated
with the attendance of all board meetings by the members of the Board of Directors. 

12

 

        2.7    Right of First Offer.    Subject to applicable securities laws and the terms and
conditions specified in this Section 2.7, the Company hereby grants to each Holder a right of first offer with respect to future sales by the Company of its Shares (as hereinafter defined). A
Holder who chooses to exercise the right of first offer may designate as purchasers under such right itself or its partners, members or affiliates in such proportions as it deems appropriate. 

        Each
time the Company proposes to offer any shares of, or securities convertible into or exercisable for any shares of, any class of its capital stock
("Shares"), the Company shall first make an offering of such Shares to each Holder in accordance with the following provisions: 

        (a)   The
Company shall deliver a written notice ("Notice") to the Holders stating (i) its bona
fide intention to offer such Shares, (ii) the number of such Shares to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such
Shares. 

        (b)   Within
15 days after receipt of the Notice, each Holder may elect to purchase or obtain, at the price and on the terms specified in the Notice, up to that portion
of such Shares which equals the proportion that the number of shares of Common Stock issued and held, or issuable upon conversion and exercise of all convertible or exercisable securities then held,
by such Holder bears to the total number of shares of Common Stock then outstanding (assuming full conversion and exercise of all convertible or exercisable securities);  provided, however, that a Holder's portion may be reduced on a pro
rata basis among all Holders if the Board unanimously determines that such a reduction is necessary to provide a sufficient incentive for a new investor to purchase shares,
which investor may be an existing Holder. The Company shall promptly, in writing, inform each Holder that purchases all the shares available to it (each, a "Fully-Exercising
Investor") of any other Holder's failure to do likewise. During the ten-day period commencing after receipt of such information, each Fully-Exercising Investor
shall be entitled to obtain all or any part of the Shares for which Holders were entitled to subscribe but which were not subscribed for by the Holders;  provided, that if the Fully-Exercising Investors
elect to purchase in the aggregate more than 100% of the aggregate number of such Shares, the number of
such Shares sold to each Fully-Exercising Investor shall be reduced proportionately in accordance with each electing Fully-Exercising Investor's respective pro-rata shares, which for this
purpose shall mean the proportion that the number of shares of Common Stock issued and held, or issuable upon conversion and exercise of all convertible or exercisable securities then held, by such
Fully-Exercising Investor bears to the total number of shares of Common Stock issued and held, or issuable upon conversion and exercise of all convertible or exercisable securities then held by all
Fully-Exercising Investors electing to purchase such available Shares (in such cases, assuming full conversion and exercise of all convertible or exercisable securities). 

        (c)   The
Company may, during the 45-day period following the expiration of the 10-day period provided in subsection 2.7(b) hereof, offer the remaining
un-subscribed portion of the Shares to any person or persons at a price not less than, and upon terms no more favorable to the offeree than those specified in the Notice. If the Company
does not enter into an agreement for the sale of the Shares within such period, or if such agreement is not consummated within 60 days of the execution thereof, the right provided hereunder
shall be deemed to be revived and such Shares shall not be offered unless first re-offered to the Holders in accordance herewith. 

        (d)   The
term "Shares" shall not include (i) securities offered to the public generally pursuant to a registration
statement under the Securities Act, (ii) Common Stock reserved for issuance pursuant to the Company's 2001 Equity Incentive Plan and additional shares of Common Stock (or options therefor)
issued or issuable to employees, consultants and directors, pursuant to other plans or agreements approved by the Board for the primary purpose of soliciting or retaining their services,
(iii) securities issued or issuable pursuant to the conversion or exercise of convertible or exercisable securities that are outstanding as of the date hereof or that are issued in compliance 

13

 

with
this Section, (iv) securities issued or issuable in connection with a bona fide business acquisition of or by the Company, whether by
merger, consolidation, sale of assets, sale or exchange of stock or otherwise, approved by the Board, (v) securities issued or issuable to financial institutions, landlords or lessors in
connection with commercial credit arrangements, real estate transactions, equipment financings or similar transactions, the primary purpose of which it other than to obtain financing for the Company
through the issuance of equity securities, approved by the Board, (vi) the Series D Preferred Stock issued or issuable pursuant to the Purchase Agreement (vii) securities issued
or issuable pursuant to a stock split, stock dividend, combination or like event or (viii) securities issued or issuable pursuant to a strategic alliance or partnering arrangement entered into
primarily for non-capital raising purposes and approved by the Board. 

        2.8    Employee Agreements.    The Company shall cause all of its current and future employees
and consultants (including David Perry and Jacob Platner) to execute confidential information and invention assignment agreements, substantially in the form attached hereto as Exhibit B. Except
as specifically approved by the Board, all shares of Common Stock issued, and all options granted, after the date of this Agreement by the Company to its employees, consultants, officers and
non-investor directors for shares of Common Stock shall (i) be subject to a right of first refusal in favor of the Company, (ii) vest over a four-year period with
one-quarter (25%) vesting at the end of the 12th calendar month following the grant date and 1/48 vesting at the end of each month for the next 36 months of such
employment or other retention, and shall be subject to the right of the Company to repurchase any non-vested stock at the price paid by such stockholder and (iii) be subject to
standard transfer restrictions. The rights of the Company pursuant to (i) and (ii) above shall be assignable by the Company. 

        2.9    Indebtedness.    The Company shall not incur indebtedness in the aggregate principal
amount of more than $5,000,000 under its facility with Lighthouse Capital Partners in without approval of the Company's Board of Directors. 

        2.10    Termination of Covenants.    

        (a)   The
covenants set forth in Sections 2.1 through Section 2.9 shall terminate as to each Holder and be of no further force or effect (i) immediately prior to
the consummation of a Qualified IPO, or (ii) upon the closing of (A) any consolidation or merger of the Company with or into any other corporation or entity, (B) a sale of
substantially all of the assets or stock of the Company or (C) any other transaction
or series of transactions (other than equity financing transactions), provided that, in each of cases (A), (B) and (C), as a result of such
consolidation, merger, sale or other transaction, the stockholders of the Company immediately prior to the closing thereof, and as a result of the consideration issued therein, do not own immediately
after such closing, in approximately the same relative percentages, at least 50% of the voting power of the Company, the surviving entity or its parent. 

        (b)   The
covenants set forth in Sections 2.1 through 2.3 shall terminate as to each Holder and be of no further force or effect when the Company first becomes subject to the
periodic reporting requirements of Sections 13 or 15(d) of the Exchange Act, if this occurs earlier than the events described in Section 2.10(a) above. 

3.     Miscellaneous.

        3.1    Entire Agreement.    This Agreement constitutes the entire agreement among the parties
hereto pertaining to the subject matter hereof, and any and all other written or oral agreements relating to the subject matter hereof existing among any of the parties hereto are expressly canceled. 

        3.2    Recapitalizations, Etc.    The provisions of this Agreement (including any calculation
of share ownership) shall apply, to the full extent set forth herein with respect to the Registrable Securities and to the Common Stock, to any and all shares of capital stock of the Company or any
capital stock, 

14

 

partnership
or member units or any other security evidencing ownership interests in any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be
issued in respect of, in exchange for, or in substitution of the Common Stock by reason of any stock dividend, split, combination, recapitalization, liquidation, reclassification, merger,
consolidation or otherwise. 

        3.3    Successors and Assigns.    Except as otherwise provided in this Agreement, and subject
to the restriction on transfer set forth in the Purchase Agreement, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and
assigns of the parties (including transferees of any of the Preferred Stock or any Common Stock issued upon conversion thereof). Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement. 

        3.4    Amendments and Waivers.    This Agreement may be amended or waived only with the
written consent of the Company and the holders of at least 60% of the Registrable Securities then outstanding. The Investors and their successors and assigns acknowledge that by operation of this
Section 3.4, the holders of at least 60% of the then outstanding Registrable Securities, when acting together with the Company, will have the right and power to diminish or eliminate any rights
or increase any or all obligations under this Agreement. 

        3.5    Notices.    Unless otherwise provided, any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by nationally recognized overnight courier or sent by confirmed fax, or if mailed to a domestic
address, on the third business day after being deposited in the U.S. mail, as certified or registered mail, return receipt requested, with postage prepaid, and addressed to the party to be notified at
such party's address or fax number as set forth below or on Exhibit A hereto or as subsequently modified by written notice. 

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

        3.7    Delays or Omissions; Remedies Cumulative.    No delay or omission to exercise any
right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such
non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must
be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be
cumulative and not alternative. 

        3.8    Attorneys' Fees.    If any action at law or in equity (including arbitration) is
necessary to enforce or interpret the terms of any this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled. 

15

 

        3.9    Governing Law.    This Agreement and all acts and transactions pursuant hereto shall be
governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of laws. 

        3.10    Counterparts.    This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same instrument. 

        3.11    Titles and Subtitles.    The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this Agreement. 

        3.12    Aggregation of Stock.    All shares of Company stock held or acquired by affiliated
Persons (including former and current partners, former and current members and former and current stockholders) shall be aggregated together for the purpose of determining the availability of any
rights under this Agreement. 

        3.13    Confidentiality.    Each Holder agrees that, except with the prior written permission
of the applicable party, it shall at all times keep confidential and not divulge, furnish or make accessible to anyone any confidential information, knowledge or data concerning or relating to the
business or financial affairs of the Company or any other party to which such Holder has been or shall become privy by reason of this Agreement (including Sections 2.1 and 2.3 hereof). The provisions
of this Section 3.13 shall be in addition to, and not in substitution for, the provisions of any separate nondisclosure agreement executed by the parties hereto with respect to the transactions
contemplated hereby. 

        3.14    Additional Parties.    Persons who become "Purchasers" of the Company's
Series D Preferred Stock after the effective date of this Agreement pursuant to and in accordance with the Purchase Agreement and who execute signature pages to this Agreement shall become
parties hereto, and no consent or waiver of any other party hereto, other than the Company, shall be required to add any such additional party. 

[Signature
Pages Follow] 

16

        The parties hereto have executed this Amended and Restated Investors' Rights Agreement as of the date first above written. 

	 	 	COMPANY:
	

 	
 	
ANACOR PHARMACEUTICALS, INC.
	

 	
 	

By:	
 	

/s/ DAVID PERRY

	

 	
 	

Name:	
 	

David Perry
	

 	
 	

Title:	
 	

Chief Executive Officer
	

 	
 	

Address:	
 	

1060 East Meadow Circle

Palo Alto, California 94303

SIGNATURE PAGE TO THE AMENDED AND

RESTATED INVESTORS' RIGHTS AGREEMENT

	 	 	INVESTORS:
	

 	
 	
RHO VENTURES IV, L.P.
	

 	
 	

By:	
 	

Rho Management Ventures IV, L.L.C.,

General Partner
	

 	
 	

By:	
 	

/s/ MARK LESCHLY

	

 	
 	

Name:	
 	

Mark Leschly

	

 	
 	

Title:	
 	

Managing Member

	

 	
 	

Address:	
 	

152 W. 57th Street, 23rd Floor

New York, New York 10019
	

 	
 	
RHO VENTURES IV GmbH & CO.

BETEILIGUNGS KG
	

 	
 	

By:	
 	

Rho Capital Partners Verwaltungs

GmbH, General Partner
	

 	
 	

By:	
 	

/s/ MARK LESCHLY

	

 	
 	

Name:	
 	

Mark Leschly

	

 	
 	

Title:	
 	

Managing Director

	

 	
 	

Address:	
 	

152 W. 57th Street, 23rd Floor

New York, New York 10019

	 	 	RHO VENTURES IV (QP), L.P.
	

 	
 	

By:	
 	

Rho Management Ventures IV, L.L.C.,

General Partner
	

 	
 	

By:	
 	

/s/ MARK LESCHLY

	

 	
 	

Name:	
 	

Mark Leschly

	

 	
 	

Title:	
 	

Managing Member

	

 	
 	

Address:	
 	

152 W. 57th Street, 23rd Floor

New York, New York 10019
	

 	
 	
RHO MANAGEMENT TRUST I
	

 	
 	

By:	
 	

Rho Capital Partners, Inc., as

Investment Adviser
	

 	
 	

By:	
 	

/s/ MARK LESCHLY

	

 	
 	

Name:	
 	

Mark Leschly

	

 	
 	

Title:	
 	

Managing Partner

	

 	
 	

Address:	
 	

152 W. 57th Street, 23rd Floor

New York, New York 10019

	 	 	ABERDARE VENTURES II, L.P.
	

 	
 	

By:	
 	

Aberdare GP II, LLC, its General

Partner
	

 	
 	

By:	
 	

/s/ PAUL H. KLINGENSTEIN

	

 	
 	

Name:	
 	

Paul H. Klingenstein
	

 	
 	

Title:	
 	

Member
	

 	
 	

Address:	
 	

One Embarcadero Center

San Francisco, California 94111
	

 	
 	
ABERDARE VENTURES II

(BERMUDA), L.P.
	

 	
 	

By:	
 	

 
	

 	
 	

By:	
 	

/s/ PAUL H. KLINGENSTEIN

	

 	
 	

Name:	
 	

 
	

 	
 	

Title:	
 	

 
	

 	
 	

Address:	
 	

 
	

 	
 	

/s/ PAUL H. KLINGENSTEIN
 Paul H. Klingenstein
	

 	
 	

/s/ JOHN H. ODDEN
 John H. Odden

	 	 	CARE CAPITAL INVESTMENTS II, LP
	 	 	By:	 	Care Capital II, LLC

as general partner of Care

Capital Investments II, LP
	

 	
 	

By:	
 	

/s/ DAVID R. RAMSAY

	

 	
 	

Name:

(print)	
 	

David R. Ramsay

	

 	
 	

Title:	
 	

Partner

	

 	
 	

Address:	
 	

47 Hulfish Street, Suite 310

Princeton, NJ 08542
	

 	
 	
CARE CAPITAL OFFSHORE INVESTMENTS II, LP
	 	 	By:	 	Care Capital II, LLC

as general partner of Care

Capital Offshore Investments II, LP
	

 	
 	

By:	
 	

/s/ DAVID R. RAMSAY

	

 	
 	

Name:

(print)	
 	

David R. Ramsay

	

 	
 	

Title:	
 	

Partner

	

 	
 	

Address:	
 	

47 Hulfish Street, Suite 310

Princeton, NJ 08542

	 	 	VENROCK PARTNERS, L.P.

by its General Partner, Venrock

Partners Management, LLC
	

 	
 	

By:	
 	

/s/ ANDERS D. HOVE

	

 	
 	

Name:	
 	

Anders D. Hove
	

 	
 	

Title:	
 	

Member
	

 	
 	

Address:	
 	

30 Rockefeller Plaza

Room 5508

New York, NY 10112
	

 	
 	
VENROCK ASSOCIATES IV, L.P.

by its General Partner, Venrock

Management IV, LLC
	

 	
 	

By:	
 	

/s/ ANDERS D. HOVE

	

 	
 	

Name:	
 	

Anders D. Hove
	

 	
 	

Title:	
 	

Member
	

 	
 	

Address:	
 	

30 Rockefeller Plaza

Room 5508

New York, NY 10112
	

 	
 	
VENROCK ENTREPRENEURS

FUND IV, L.P.

by its General Partner, VEF

Management IV, LLC
	

 	
 	

By:	
 	

/s/ ANDERS D. HOVE

	

 	
 	

Name:	
 	

Anders D. Hove
	

 	
 	

Title:	
 	

Member
	

 	
 	

Address:	
 	

30 Rockefeller Plaza

Room 5508

New York, NY 10112

	 	 	RED ABBEY VENTURE

PARTNERS (QP), LP
	 	 	By:	 	Red Abbey Ventures Partners, LLC,

its General Partner
	

 	
 	

By:	
 	

/s/ MATT ZUGA
 Matt Zuga, its Managing Member
	

 	
 	

Address:	
 	

2330 West Joppa Road

Suite 330

Lutherville, MD 21093
	

 	
 	
RED ABBEY VENTURE

PARTNERS, LP
	 	 	By:	 	Red Abbey Ventures Partners, LLC,

its General Partner
	

 	
 	

By:	
 	

/s/ MATT ZUGA
 Matt Zuga, its Managing Member
	

 	
 	

Address:	
 	

2330 West Joppa Road

Suite 330

Lutherville, MD 21093
	

 	
 	
RED ABBEY CEO'S FUND, LP
	 	 	By:	 	Red Abbey Ventures Partners, LLC,

its General Partner
	

 	
 	

By:	
 	

/s/ MATT ZUGA
 Matt Zuga, its Managing Member
	

 	
 	

Address:	
 	

2330 West Joppa Road

Suite 330

Lutherville, MD 21093

	 	 	McAdams-Shapiro Family Trust

dated May 24, 1999
	

 	
 	

By:	
 	

/s/ LUCY SHAPIRO

	

 	
 	

Name:	
 	

Lucy Shapiro

	

 	
 	

Title:	
 	

Trustee

	

 	
 	

Address:	
 	

724 Esplanada Way
Stanford, CA 94305

	 	 	/s/ STEPHEN BENKOVIC
Stephen Benkovic
	

 	
 	

Address:	
 	

771 Teaberry Lane

	 	 	 	 	State College, PA 16803

	 	 	/s/ MARK WEEKS
Mark Weeks
	

 	
 	

Address:	
 	

 

	 	 	 

	

 	
 	
VLG 2006 Investments LLC
	 	 	By:	 	Heller Ehrman LLP, Manager
	

 	
 	

By:	
 	

/s/ MARK ROYER

	 	 	Name:	 	Mark Royer

	 	 	Title:	 	Fund Manager

	 	 	Lighthouse Capital Partners V, LP
	

 	
 	

By:	
 	
Lighthouse Management Partners V,

L.L.C., its general partner
	

 	
 	

By:	
 	

/s/ THOMAS CONNEELY

	

 	
 	

Name:	
 	

Thomas Conneely

	

 	
 	

Title:	
 	

Vice President

	

 	
 	

Address:	
 	

500 Drakes Landing Road
Greenbrae, CA 94904
 Attn: Contract Administration

 
 

EXHIBIT A    
    
    LIST OF INVESTORS    
    

	 	 	Rho Ventures IV, L.P.

152 West 57th, 23rd Floor

New York, NY 10019

fax (212)751-3613	 	 
	

 	
 	

Rho Ventures IV GmbH & Co. Beteiligungs KG

152 West 57th, 23rd Floor

New York, NY 10019

fax (212) 751-3613	
 	

 
	

 	
 	

Rho Ventures IV (QP), L.P.

152 West 57th, 23rd Floor

New York, NY 10019

fax (212)751-3613	
 	

 
	

 	
 	

Rho Management Trust I

152 West 57th, 23rd Floor

New York, NY 10019

fax (212) 751-3613	
 	

 
	

 	
 	

Aberdare Ventures II, L.P.

One Embarcadero Center

San Francisco, CA 94111

fax (415) 392-4264	
 	

 
	

 	
 	

Aberdare Ventures II (Bermuda), L.P.

c/o Aberdare Ventures II, L.P.

One Embarcadero Center

San Francisco, CA 94111

fax (415) 392-4264	
 	

 
	

 	
 	

Paul H. Klingenstein

c/o Aberdare Ventures II, L.P.

One Embarcadero Center

San Francisco, CA 94111

fax (415) 392-4264	
 	

 
	

 	
 	

John H. Odden

c/o Aberdare Ventures II, L.P.

One Embarcadero Center

San Francisco, CA 94111

fax (415) 392-4264	
 	

 
	

 	
 	

Care Capital Investments II, LP

47 Hulfish Street, Suite 310

Princeton, NJ 08542

fax (609) 683-5787	
 	

 
	

 	
 	

Care Capital Offshore Investments II, LP

47 Hulfish Street, Suite 310

Princeton, NJ 08542

fax (609) 683-5787	
 	

 
	 	 	 	 	 

 

	

 	
 	

Venrock Partners, L.P.

30 Rockefeller Plaza, Room 5508

New York, NY 10112	
 	

 
	

 	
 	

Venrock Associates IV, L.P.

30 Rockefeller Plaza, Room 5508

New York, NY 10112	
 	

 
	

 	
 	

Venrock Entrepreneurs Fund IV, L.P.

30 Rockefeller Plaza, Room 5508

New York, NY 10112	
 	

 
	

 	
 	

Red Abbey Venture Partners (QP), LP

2330 West Joppa Road

Suite 330

Lutherville, MD 21093	
 	

 
	

 	
 	

Red Abbey Venture Partners, LP

2330 West Joppa Road

Suite 330

Lutherville, MD 21093	
 	

 
	

 	
 	

Red Abbey CEO's Fund, LP

2330 West Joppa Road

Suite 330

Lutherville, MD 21093	
 	

 
	

 	
 	

Stephen Benkovic

771 Teaberry Lane

State College, PA 16803	
 	

 
	

 	
 	

McAdams-Shapiro Family Trust dated May 24, 1999

724 Esplanada Way

Stanford, CA 94305	
 	

 
	

 	
 	

HEWM/VLG Investments LLC

275 Middlefield Road

Menlo Park, CA 94025	
 	

 
	

 	
 	

VLG Investments 2006 LLC

275 Middlefield Road

Menlo Park, CA 94025	
 	

 
	

 	
 	

Mark B. Weeks

275 Middlefield Road

Menlo Park, CA 94025	
 	

 
	

 	
 	

Lighthouse Capital Partners V, L.P.

500 Drakes Landing Rd.

Greenbrae, CA 94904

Attn: Contracts Administration	
 	

 

2

QuickLinks

AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT

TABLE OF CONTENTS

EXHIBIT A LIST OF INVESTORSQuickLinks
 -- Click here to rapidly navigate through this document

Exhibit 10.1  

 
 

ANACOR PHARMACEUTICALS, INC.
  
    2001 EQUITY INCENTIVE PLAN
  
    (as amended September 3, 2002)
  (as further amended March 8, 2005)
  (as further amended June 5, 2007)    

 
 

TABLE OF CONTENTS    
    

	 
	 	 
	 	Page

	1.	 	Purposes of the Plan	 	1
	2.	 	Definitions	 	1
	3.	 	Stock Subject to the Plan	 	3
	4.	 	Administration of the Plan	 	3
	5.	 	Eligibility	 	5
	6.	 	Limitations	 	5
	7.	 	Term of Plan	 	6
	8.	 	Term of Option	 	6
	9.	 	Option Exercise Price and Consideration	 	6
	10.	 	Exercise of Option	 	7
	11.	 	Non-Transferability of Options and Stock Purchase Rights	 	9
	12.	 	Stock Purchase Rights	 	9
	13.	 	Adjustments upon Changes in Capitalization, Merger or Asset Sale	 	10
	14.	 	Time of Granting Options and Stock Purchase Rights	 	12
	15.	 	Amendment and Termination of the Plan	 	12
	16.	 	Stockholder Approval	 	12
	17.	 	Inability to Obtain Authority	 	13
	18.	 	Reservation of Shares	 	13
	19.	 	Information to Holders and Purchasers	 	13
	20.	 	Repurchase Provisions	 	13
	21.	 	Investment Intent	 	13
	22.	 	Governing Law	 	14

 
 

ANACOR PHARMACEUTICALS, INC.    
    
    2001 EQUITY INCENTIVE PLAN    
    

        1.    Purposes of the Plan.    The purposes of this Anacor Pharmaceuticals, Inc. 2001
Equity Incentive Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees, Directors and Consultants and to
promote the success of the Company's business. Options granted under the Plan may be Incentive Stock Options or Non-Qualified Stock Options, as determined by the Administrator at the time
of grant. Stock Purchase Rights may also be granted under the Plan. 

        2.    Definitions.    As used herein, the following definitions shall apply: 

        (a)   "Acquisition" means (i) any consolidation or merger of the Company with or into any other corporation or other
entity or person in which the stockholders of the Company prior to such consolidation or merger own less than fifty percent (50%) of the continuing or surviving entity's voting power immediately after
such consolidation or merger, excluding any consolidation or merger effected exclusively to change the domicile of the Company; or (ii) a sale of all or substantially all of the assets of the
Company. 

        (b)   "Administrator" means the Board or the Committee responsible for conducting the general administration of the Plan, as
applicable, in accordance with Section 4 hereof. 

        (c)   "Applicable Laws" means the requirements relating to the administration of stock option plans under U.S. state corporate
laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or
jurisdiction where Options or Stock Purchase Rights are granted under the Plan. 

        (d)   "Board" means the Board of Directors of the Company. 

        (e)   "Code" means the Internal Revenue Code of 1986, as amended, or any successor statute or statutes thereto. Reference to
any particular Code section shall include any successor section. 

        (f)    "Committee" means a committee appointed by the Board in accordance with Section 4 hereof. 

        (g)   "Common Stock" means the Common Stock of the Company, with par value $0.001 per share. 

        (h)   "Company" means Anacor Pharmaceuticals, Inc., a Delaware corporation. 

        (i)    "Consultant" means any consultant or adviser if: (i) the consultant or adviser renders bona fide services to the
Company or any Parent or Subsidiary of the Company; (ii) the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain a market for the Company's securities; and (iii) the consultant or adviser has contracted directly with the Company or any
Parent or Subsidiary of the Company to render such services. 

        (j)    "Director" means a member of the Board. 

        (k)   "Employee" means any person, including an Officer or Director, who is an employee (as defined in accordance with
Section 3401(c) of the Code) of the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence
approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such
leave may exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. Neither service as a Director nor payment of a director's fee by the
Company shall be sufficient, by itself, to constitute "employment" by the Company. 

 

        (1)   "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto.
Reference to any particular Exchange Act section shall include any successor section. 

        (m)  "Fair Market Value" means, as of any date, the value of a share of Common Stock determined as follows: 

        (i)    If
the Common Stock is listed on any established stock exchange or a national market system, including, without limitation, the Nasdaq National Market or The Nasdaq
SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for a share of such stock (or the closing bid, if no sales were reported) as quoted on such exchange
or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; 

        (ii)   If
the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high
bid and low asked prices for a share of the Common Stock on the last market trading day prior to the day of determination; or 

        (iii)  In
the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator. 

        (n)   "Holder" means a person who has been granted or awarded an Option or Stock Purchase Right or who holds Shares acquired
pursuant to the exercise of an Option or Stock Purchase Right. 

        (o)   "Incentive Stock Option" means an Option intended to qualify as an incentive stock option within the meaning of
Section 422 of the Code and which is designated as an Incentive Stock Option by the Administrator. 

        (p)   "Independent Director" means a Director who is not an Employee of the Company. 

        (q)   "Non-Qualified Stock Option" means an Option (or portion thereof) that is not designated as an Incentive
Stock Option by the Administrator, or which is designated as an Incentive Stock Option by the Administrator but fails to qualify as an incentive stock option within the meaning of Section 422
of the Code. 

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

        (s)   "Option" means a stock option granted pursuant to the Plan. 

        (t)    "Option Agreement" means a written agreement between the Company and a Holder evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan. 

        (u)   "Parent" means any corporation, whether now or hereafter existing (other than the Company), in an unbroken chain of
corporations ending with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing more than fifty percent of the total combined voting power
of all classes of stock in one of the other corporations in such chain. 

        (v)   "Plan" means the Anacor Pharmaceuticals, Inc. 2001 Equity Incentive Plan. 

        (w)  "Public Trading Date" means the first date upon which Common Stock of the Company is listed (or approved for listing)
upon notice of issuance on any securities exchange or designated 

2

 

(or
approved for designation) upon notice of issuance as a national market security on an interdealer quotation system. 

        (x)   "Restricted Stock" means Shares acquired pursuant to the exercise of an unvested Option in accordance with
Section 10(h) below or pursuant to a Stock Purchase Right granted under Section 12 below. 

        (y)   "Restricted Stock Purchase Agreement" means an agreement granting the Company the right to repurchase Restricted Stock. 

        (z)   "Rule 16b-3" means that certain Rule 16b-3 under the Exchange Act, as such Rule may
be amended from time to time. 

        (aa) "Section 16(b)" means Section 16(b) of the Exchange Act, as such Section may be amended from time to time. 

        (bb) "Securities Act" means the Securities Act of 1933, as amended, or any successor statute or statutes thereto. Reference
to any particular Securities Act section shall include any successor section. 

        (cc) "Service Provider" means an Employee, Director or Consultant. 

        (dd) "Share" means a share of Common Stock, as adjusted in accordance with Section 13 below. 

        (ee) "Stock Purchase Right" means a right to purchase Common Stock pursuant to Section 12 below. 

        (ff)  "Subsidiary" means any corporation, whether now or hereafter existing (other than the Company), in an unbroken chain of
corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing more than fifty percent of the total combined voting
power of all classes of stock in one of the other corporations in such chain. 

        3.    Stock Subject to the Plan.    Subject to the provisions of Section 13 of the
Plan, the shares of stock subject to Options or Stock Purchase Rights shall be Common Stock, initially shares of the Company's Common Stock, par value $0.001 per share. Subject to the provisions of
Section 13 of the Plan, the maximum aggregate number of Shares which may be issued upon exercise of such Options or Stock Purchase Rights is 8,844,441 Shares. Shares issued upon exercise of
Options or Stock Purchase Rights may be authorized but unissued, or reacquired Common Stock. If an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in
full, the Shares not purchased which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). Shares which are delivered by the Holder or
withheld by the Company upon the exercise of an Option or Stock Purchase Right under the Plan, in payment of the exercise price thereof or tax withholding thereon, may again be optioned, granted or
awarded hereunder, subject to the limitations of this Section 3. If Shares of Restricted Stock are repurchased by the Company at their original purchase price, such Shares shall become
available for future grant under the Plan. Notwithstanding the provisions of this Section 3, no Shares may again be optioned, granted or awarded if such action would cause an Incentive Stock
Option to fail to qualify as an Incentive Stock Option under Code Section 422. 

        4.    Administration of the Plan.    

        (a)    Administrator.    Unless and until the Board delegates administration to a Committee as set forth below, the
Plan shall be administered by the Board. The Board may delegate administration of the Plan to a Committee or Committees of one or more members of the Board, and the term "Committee" shall apply to any
person or persons to whom such authority has been 

3

 

delegated.
If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the
power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. Notwithstanding the foregoing, however, from
and after the Public Trading Date, a Committee of the Board shall administer the Plan and the Committee shall consist solely of two or more Independent Directors each of whom is both an "outside
director," within the meaning of Section 162(m) of the Code, and a "non-employee director" within the meaning of Rule 16b-3. Within the scope of such authority,
the Board or the Committee may (i) delegate to a committee of one or more members of the Board who are not Independent Directors the authority to grant awards under the Plan to eligible persons
who are either (1) not then "covered employees," within the meaning of Section 162(m) of the Code and are not expected to be "covered employees" at the time of recognition of income
resulting from such award or (2) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code and/or (ii) delegate to a committee of one or more
members of the Board who are not "non-employee directors," within the meaning of Rule 16b-3, the authority to grant awards under the Plan to eligible persons who are not
then subject to Section 16 of the Exchange Act. The Board may abolish the Committee at any time and re-vest in the Board the administration of the Plan. Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may only be filled by the
Board. 

        (b)    Powers of the Administrator.    Subject to the provisions of the Plan and the specific duties delegated by the
Board to such Committee, and subject to the approval of any relevant authorities, the Administrator shall have the authority in its sole discretion: 

        (i)    to
determine the Fair Market Value; 

        (ii)   to
select the Service Providers to whom Options and Stock Purchase Rights may from time to time be granted hereunder; 

        (iii)  to
determine the number of Shares to be covered by each such award granted hereunder; 

        (iv)  to
approve forms of agreement for use under the Plan; 

        (v)   to
determine the terms and conditions of any Option or Stock Purchase Right granted hereunder (such terms and conditions include, but are not limited to, the exercise
price, the time or times when Options or Stock Purchase Rights may vest or be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions and
any restriction or limitation regarding any Option or Stock Purchase Right or the Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall
determine); 

        (vi)  to
determine whether to offer to buyout a previously granted Option as provided in subsection 10(i) and to determine the terms and conditions of such offer and
buyout (including whether payment is to be made in cash or Shares); 

        (vii) to
prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the
purpose of qualifying for preferred tax treatment under foreign tax laws; 

4

 

        (viii) to
allow Holders to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or Stock
Purchase Right that number of Shares having a Fair Market Value equal to the minimum amount required to be withheld based on the statutory withholding rates for federal and state tax purposes that
apply to supplemental taxable income. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by
Holders to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable; 

        (ix)  to
amend the Plan or any Option or Stock Purchase Right granted under the Plan as provided in Section 15 hereinafter; and 

        (x)   to
construe and interpret the terms of the Plan and awards granted pursuant to the Plan and to exercise such powers and perform such acts as the Administrator deems
necessary or desirable to promote the best interests of the Company which are not in conflict with the provisions of the Plan. 

        (c)    Effect of Administrator's Decision.    All decisions, determinations and interpretations of the Administrator
shall be final and binding on all Holders. 

        5.    Eligibility.    Non-Qualified Stock Options and Stock Purchase Rights may be
granted to Service Providers. Incentive Stock Options may be granted only to Employees. If otherwise eligible, an Employee or Consultant who has been granted an Option or Stock Purchase Right may be
granted additional Options or Stock Purchase Rights. 

        6.    Limitations.    

        (a)   Each
Option shall be designated by the Administrator in the Option Agreement as either an Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market Value of Shares subject to a Holder's Incentive Stock Options and other incentive stock options granted by the Company,
any Parent or Subsidiary, which become exercisable for the first time during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options or
other options shall be treated as Non-Qualified Stock Options. 

        For
purposes of this Section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be
determined as of the time of grant. 

        (b)   Neither
the Plan, any Option nor any Stock Purchase Right shall confer upon a Holder any right with respect to continuing the Holder's employment or consulting
relationship with the Company, nor shall they interfere in any way with the Holder's right or the Company's right to terminate such employment or consulting relationship at any time, with or without
cause. 

        (c)   No
Service Provider shall be granted, in any calendar year, Options or Stock Purchase Rights to purchase more than five hundred thousand (500,000) Shares;  provided, however, that the foregoing limitation
shall not apply prior to the Public Trading Date and, following the Public Trading Date, the foregoing
limitation shall not apply until the earliest of: (i) the first material modification of the Plan (including any increase in the number of shares reserved for issuance under the Plan in
accordance with Section 3); (ii) the issuance of all of the shares of Common Stock reserved for issuance under the Plan; (iii) the expiration of the Plan; (iv) the first
meeting of stockholders at which Directors of the Company are to be elected that occurs after the close of the third calendar year following the calendar year in which occurred the first registration
of an equity security of the Company under Section 12 of the Exchange Act; or (v) such other date required by 

5

 

Section 162(m)
of the Code and the rules and regulations promulgated thereunder. The foregoing limitation shall be adjusted proportionately in connection with any change in the Company's
capitalization as described in Section 13 hereinafter. For purposes of this Section 6(c), if an Option is canceled in the same calendar year it was granted (other than in connection with
a transaction described in Section 13 hereinafter), the canceled Option will be counted against the limit set forth in this Section 6(c). For this purpose, if the exercise price of an
Option is reduced, the transaction shall be treated as a cancellation of the Option and the grant of a new Option. 

        7.    Term of Plan.    The Plan shall become effective upon its initial adoption by the Board
and shall continue in effect until it is terminated under Section 15 of the Plan. No Options or Stock Purchase Rights may be issued under the Plan after the tenth (10th) anniversary of the
earlier of (i) the date upon which the Plan is adopted by the Board or (ii) the date the Plan is approved by the stockholders. 

        8.    Term of Option.    The term of each Option shall be stated in the Option Agreement;  provided, however, that the term shall
be no more than ten (10) years from the date of grant thereof. In the case of an Incentive Stock Option
granted to a Holder who, at the time the Option is granted, owns (or is treated as owning under Code Section 424) stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Option
Agreement. 

        9.    Option Exercise Price and Consideration.    

        (a)   Except
as provided in Section 13 hereof, the per share exercise price for the Shares to be issued upon exercise of an Option shall be such price as is determined
by the Administrator, but shall be subject to the following: 

        (i)    In
the case of an Incentive Stock Option: 

        A.    granted
to an Employee who, at the time of grant of such Option, owns (or is treated as owning under Code Section 424) stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than one hundred ten percent (110%) of the Fair Market Value
per Share on the date of grant. 

        B.    granted
to any other Employee, the per Share exercise price shall be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant. 

        (ii)   In
the case of a Non-Qualified Stock Option: 

        A.    granted
to a Service Provider who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of
the Company or any Parent or Subsidiary, the exercise price shall be no less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of the grant; 

        B.    granted
to any other Service Provider, the per Share exercise price shall be no less than eighty-five percent (85%) of the Fair Market Value per Share on the
date of grant. 

        (iii)  Notwithstanding
the foregoing, Options may be granted with a per Share exercise price other than as required above pursuant to a merger or other corporate transaction. 

        (b)   The
consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in
the case of an 

6

 

Incentive
Stock Option, shall be determined at the time of grant). Such consideration may consist of (1) cash, (2) check, (3) with the consent of the Administrator, a full
recourse promissory note bearing interest (at no less than such rate as is a market rate of interest and shall then preclude the imputation of interest under the Code) and payable upon such terms as
may be prescribed by the Administrator, (4) with the consent of the Administrator, other Shares which (x) in the case of Shares acquired from the Company, have been owned by the Holder
for more than six (6) months and a day on the date of surrender, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which
such Option shall be exercised, (5) with the consent of the Administrator, surrendered Shares then issuable upon exercise of the Option having a Fair Market Value on the date of exercise equal
to the aggregate exercise price of the Option or exercised portion thereof, (6) property of any kind which constitutes good and valuable consideration, (7) with the consent of the
Administrator, delivery of a notice that the Holder has placed a market sell order with a broker with respect to Shares then issuable upon exercise of the Options and that the broker has been directed
to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price, provided, that payment of such
proceeds is then made to the Company upon settlement of such sale, or (8) with the consent of the Administrator, any combination of the foregoing methods of payment. 

        10.    Exercise of Option.    

        (a)    Vesting; Fractional Exercises.    Options granted hereunder shall be vested and exercisable according to the
terms hereof at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement; provided, however, that,
except with regard to Options granted to Officers, Directors or Consultants, in no event shall an Option granted hereunder become vested and exercisable at a rate of less than twenty percent (20%) per
year over five (5) years from the date the Option is granted, subject to reasonable conditions, such as continuing to be a Service Provider. An Option may not be exercised for a fraction of a
Share. 

        (b)    Deliveries upon Exercise.    All or a portion of an exercisable Option shall be deemed exercised upon delivery
to the Secretary of the Company or his or her office of all of the following: 

        (i)    A
written or electronic notice complying with the applicable rules established by the Administrator stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Holder or other person then entitled to exercise the Option or such portion of the Option; 

        (ii)   Such
representations and documents as the Administrator, in its sole discretion, deems necessary or advisable to effect compliance with Applicable Laws. The
Administrator may, in its sole discretion, also
take whatever additional actions it deems appropriate to effect such compliance, including, without limitation, placing legends on share certificates and issuing stop transfer notices to agents and
registrars; 

        (iii)  Upon
the exercise of all or a portion of an unvested Option pursuant to Section 10(h) hereof, a Restricted Stock Purchase Agreement in a form determined by the
Administrator and signed by the Holder or other person then entitled to exercise the Option or such portion of the Option; and 

        (iv)  In
the event that the Option shall be exercised pursuant to Section 10(f) hereof by any person or persons other than the Holder, appropriate proof of the right
of such person or persons to exercise the Option. 

7

  

        (c)    Conditions to Delivery of Share Certificates.    The Company shall not be required to issue or deliver any
certificate or certificates for Shares purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions: 

        (i)    The
admission of such Shares to listing on all stock exchanges on which such class of stock is then listed; 

        (ii)   The
completion of any registration or other qualification of such Shares under any state or federal law, or under the rulings or regulations of the Securities and
Exchange Commission or any other governmental regulatory body which the Administrator shall, in its sole discretion, deem necessary or advisable; 

        (iii)  The
obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its sole discretion, determine to be
necessary or advisable; 

        (iv)  The
lapse of such reasonable period of time following the exercise of the Option as the Administrator may establish from time to time for reasons of administrative
convenience; and 

        (v)   The
receipt by the Company of full payment for such Shares, including payment of any applicable withholding tax, which in the sole discretion of the Administrator may be
in the form of consideration used by the Holder to pay for such Shares under Section 9(b) hereof. 

        (d)    Termination of Relationship as a Service Provider.    If a Holder ceases to be a Service Provider other than by
reason of the Holder's disability or death, such Holder may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the
date of termination; provided, however, that prior to the Public Trading Date, such period of time shall not be less than thirty (30) days (but
in no event later than the expiration of the term of the Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Holder's termination. If, on the date of termination, the Holder is not vested as to his or her entire Option, the Shares covered by the unvested portion of
the Option immediately cease to be issuable under the Option and shall again become available for issuance under the Plan. If, after termination, the Holder does not exercise his or her Option within
the time period specified herein, the Option shall terminate, and the Shares covered by such Option shall again become available for issuance under the Plan. 

        (e)    Disability of Holder.    If a Holder ceases to be a Service Provider as a result of the Holder's disability,
the Holder may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination;  provided, however, that prior
to the Public Trading Date, such period of time shall not be less than six (6) months (but in no event later than
the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve
(12) months following the Holder's termination. If such disability is not a "disability" as such term is defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock Option
such Incentive Stock Option shall automatically cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Non-Qualified Stock Option from and after the
day which is three (3) months and one (1) day following such termination. If, on the date of termination, the Holder is not vested as to his or her entire Option, the Shares covered by
the unvested portion of the Option shall immediately cease to be issuable under the Option and shall again become available for issuance under the Plan. If, after termination, the Holder does not
exercise his or her Option within the time specified herein, the 

8

 

Option
shall terminate, and the Shares covered by such Option shall again become available for issuance under the Plan. 

        (f)    Death of Holder.    If a Holder dies while a Service Provider, the Option may be exercised within such period
of time as is specified in the Option Agreement, provided, however, that prior to the Public Trading Date, such period of time shall not be less than
six (6) months (but in no event later than the expiration of the term of such Option as set forth in the Notice of Grant), by the Holder's estate or by a person who acquires the right to
exercise the Option by bequest or inheritance, but only to the extent that the Option is vested on the date of death. In the absence of a specified time in the Option Agreement, the Option shall
remain exercisable for twelve (12) months following the Holder's termination. If, at the time of death, the Holder is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall immediately cease to be issuable under the Option and shall again become available for issuance under the Plan. The Option may be exercised by the executor or
administrator of the Holder's estate or, if none, by the person(s) entitled to exercise the Option under the Holder's will or the laws of descent or distribution. If the Option is not so exercised
within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall again become available for issuance under the Plan. 

        (g)    Regulatory Extension.    A Holder's Option Agreement may provide that if the exercise of the Option following
the termination of the Holder's status as a Service Provider (other than upon the Holder's death or Disability) would be prohibited at any time solely because the issuance of shares would violate the
registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in Section 8 hereof or
(ii) the expiration of a period of three (3) months after the termination of the Holder's status as a Service Provider during which the exercise of the Option would not be in violation
of such registration requirements. 

        (h)    Early Exercisability.    The Administrator may provide in the terms of a Holder's Option Agreement that the
Holder may, at any time before the Holder's status as a Service Provider terminates, exercise the Option in whole or in part prior to the full vesting of the Option;  provided, however, that subject to
Section 20 hereof, Shares acquired upon exercise of an Option which has not fully vested may be subject to any
forfeiture, transfer or other restrictions as the Administrator may determine in its sole discretion. 

        (i)    Buyout Provisions.    The Administrator may at any time offer to buyout for a payment in cash or Shares, an
Option previously granted, based on such terms and conditions as the Administrator shall establish and communicate to the Holder at the time that such offer is made. 

        11.    Non-Transferability of Options and Stock Purchase Rights.    Options and
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Holder, only by the Holder. 

        12.    Stock Purchase Rights.    

        (a)    Rights to Purchase.    Stock Purchase Rights may be issued either alone, in addition to, or in tandem with
Options granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in
writing of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid, and the time within which
such person must accept such offer; provided, however, that to the extent required to comply with applicable securities laws, the purchase price of such
Shares shall not be less than the purchase price requirements set forth in Section 260.140.42 of Title 10 of the 

9

 

California
Code of Regulations. The offer shall be accepted by execution of a Restricted Stock Purchase Agreement in the form determined by the Administrator. 

        (b)    Repurchase Right.    Unless the Administrator determines otherwise, the Restricted Stock Purchase Agreement
shall grant the Company the right to repurchase Shares acquired upon exercise of a Stock Purchase Right upon the termination of the purchaser's status as a Service Provider for any reason. Subject to
Section 20 hereinafter, the purchase price for Shares repurchased by the Company pursuant to such repurchase right and the rate at which such repurchase right shall lapse shall be determined by
the Administrator in its sole discretion, and shall be set forth in the Restricted Stock Purchase Agreement. 

        (c)    Other Provisions.    The Restricted Stock Purchase Agreement shall contain such other terms, provisions and
conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion. 

        (d)    Rights as a Stockholder.    Once the Stock Purchase Right is exercised, the purchaser shall have rights
equivalent to those of a stockholder and shall be a stockholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment shall be made
for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 13 of the Plan. 

        13.    Adjustments upon Changes in Capitalization, Merger or Asset Sale.    

        (a)   In
the event that the Administrator determines that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property),
recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Common Stock or other securities of the Company, issuance of
warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event, in the Administrator's sole discretion, affects the Common Stock
such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made
available under the Plan or with respect to any Option, Stock Purchase Right or Restricted Stock, then the Administrator shall, in such manner as it may deem equitable, adjust any or all of the
following: 

        (i)    the
number and kind of shares of Common Stock (or other securities or property) with respect to which Options or Stock Purchase Rights may be granted or awarded
(including, but not limited to, adjustments of the limitations in Section 3 on the maximum number and kind of shares which may be issued and adjustments of the maximum number of Shares that may
be purchased by any Holder in any calendar year pursuant to Section 6(c)); 

        (ii)   the
number and kind of shares of Common Stock (or other securities or property) subject to outstanding Options, Stock Purchase Rights or Restricted Stock; and 

        (iii)  the
grant or exercise price with respect to any Option or Stock Purchase Right. 

        (b)   In
the event of any transaction or event described in subsection 13(a) hereof, the Administrator, in its sole discretion, and on such terms and conditions as it deems
appropriate, either by the terms of the Option, Stock Purchase Right or Restricted Stock or by action taken prior to the occurrence of such transaction or event and either automatically or upon the
Holder's request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended by the Company to be made available 

10

 

under
the Plan or with respect to any Option, Stock Purchase Right or Restricted Stock granted or issued under the Plan or to facilitate such transaction or event: 

        (i)    To
provide for either the purchase of any such Option, Stock Purchase Right or Restricted Stock for an amount of cash equal to the amount that could have been obtained
upon the exercise of such Option or Stock Purchase Right or realization of the Holder's rights had such Option, Stock Purchase Right or Restricted Stock been currently exercisable or payable or fully
vested or the replacement of such Option, Stock Purchase Right or Restricted Stock with other rights or property selected by the Administrator in its sole discretion; 

        (ii)   To
provide that such Option or Stock Purchase Right shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the
provisions of such Option or Stock Purchase Right; 

        (iii)  To
provide that such Option, Stock Purchase Right or Restricted Stock be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall
be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number
and kind of shares and prices; 

        (iv)  To
make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Options and Stock Purchase Rights, and/or
in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Options, Stock Purchase Rights or Restricted Stock or Options, Stock Purchase Rights
or Restricted Stock which may be granted in the future; and 

        (v)   To
provide that immediately upon the consummation of such event, such Option or Stock Purchase Right shall not be exercisable and shall terminate;  provided, that for a specified period of time prior to
such event, such Option or Stock Purchase Right shall be exercisable as to all Shares covered
thereby, and the restrictions imposed under an Option Agreement or Restricted Stock Purchase Agreement upon some or all Shares may be terminated and, in the case of Restricted Stock, some or all
shares of such Restricted Stock may cease to be subject to repurchase, notwithstanding anything to the contrary
in the Plan or the provisions of such Option, Stock Purchase Right or Restricted Stock Purchase Agreement. 

        (c)   Subject
to Section 3 hereof, the Administrator may, in its sole discretion, include such further provisions and limitations in any Option, Stock Purchase Right,
Restricted Stock agreement or certificate, as it may deem equitable and in the best interests of the Company. 

        (d)   If
the Company undergoes an Acquisition, then any surviving corporation or entity or acquiring corporation or entity, or affiliate of such corporation or entity, may
assume any Options, Stock Purchase Rights or Restricted Stock outstanding under the Plan or may substitute similar stock awards (including an award to acquire the same consideration paid to the
stockholders in the transaction described in this subsection 13(d)) for those outstanding under the Plan. In the event any surviving corporation or entity or acquiring corporation or entity in an
Acquisition, or affiliate of such corporation or entity, does not assume such Options, Stock Purchase Rights or Restricted Stock or does not substitute similar stock awards for those outstanding under
the Plan, then with respect to (i) Options, Stock Purchase Rights or Restricted Stock held by participants in the Plan whose status as a Service Provider has not terminated prior to such event,
the vesting of such Options, Stock Purchase Rights or Restricted Stock (and, if applicable, the time during which such awards may be exercised) shall be accelerated and made fully exercisable and all
restrictions thereon shall lapse at least ten (10) days prior to the closing of the Acquisition (and the Options or Stock Purchase Rights terminated if not exercised prior to the closing of
such Acquisition), and 

11

 

(ii) any
other Options or Stock Purchase Rights outstanding under the Plan, such Options or Stock Purchase rights shall be terminated if not exercised prior to the closing of the Acquisition. 

        (e)   Notwithstanding
the foregoing, in the event that the Company becomes a party to a transaction that is intended to qualify for "pooling of interests" accounting treatment
and, but for one or more of the provisions of this Plan or any Option Agreement or any Restricted Stock Purchase Agreement would so qualify, then this Plan and any such agreement shall be interpreted
so as to preserve such accounting treatment, and to the extent that any provision of the Plan or any such agreement would disqualify the transaction from pooling of interests accounting treatment
(including, if applicable, an entire Option Agreement or Restricted Stock Purchase Agreement), then such provision shall be null and void. All determinations to be made in connection with the
preceding sentence shall be made by the independent accounting firm whose opinion with respect to "pooling of interests" treatment is required as a condition to the Company's consummation of such
transaction. 

        (f)    The
existence of the Plan, any Option Agreement or Restricted Stock Purchase Agreement and the Options or Stock Purchase Rights granted hereunder shall not affect or
restrict in any way the right or power of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference
stocks whose rights are superior
to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. 

        14.    Time of Granting Options and Stock Purchase Rights.    The date of grant of an Option
or Stock Purchase Right shall, for all purposes, be the date on which the Administrator makes the determination granting such Option or Stock Purchase Right, or such other date as is determined by the
Administrator. Notice of the determination shall be given to each Employee or Consultant to whom an Option or Stock Purchase Right is so granted within a reasonable time after the date of such grant. 

        15.    Amendment and Termination of the Plan.    

        (a)    Amendment and Termination.    The Board may at any time wholly or partially amend, alter, suspend or terminate
the Plan. However, without approval of the Company's stockholders given within twelve (12) months before or after the action by the Board, no action of the Board may, except as provided in
Section 13 hereof, increase the limits imposed in Section 3 on the maximum number of Shares which may be issued under the Plan or extend the term of the Plan under Section 7. 

        (b)    Stockholder Approval.    The Board shall obtain stockholder approval of any Plan amendment to the extent
necessary and desirable to comply with Applicable Laws. 

        (c)    Effect of Amendment or Termination.    No amendment, alteration, suspension or termination of the Plan shall
impair the rights of any Holder, unless mutually agreed otherwise between the Holder and the Administrator, which agreement must be in writing and signed by the Holder and the Company. Termination of
the Plan shall not affect the Administrator's ability to exercise the powers granted to it hereunder with respect to Options, Stock Purchase Rights or Restricted Stock granted or awarded under the
Plan prior to the date of such termination. 

        16.    Stockholder Approval.    The Plan will be submitted for the approval of the Company's
stockholders within twelve (12) months after the date of the Board's initial adoption of the Plan. Options, Stock Purchase Rights or Restricted Stock may be granted or awarded prior to such
stockholder approval, provided that such Options, Stock Purchase Rights and Restricted Stock shall not 

12

 

be
exercisable, shall not vest and the restrictions thereon shall not lapse prior to the time when the Plan is approved by the stockholders, and provided
further that if such approval has not been obtained at the end of said twelve-month period, all Options, Stock Purchase Rights and Restricted Stock previously granted or
awarded under the Plan shall thereupon be canceled and become null and void. 

        17.    Inability to Obtain Authority.    The inability of the Company to obtain authority from
any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 

        18.    Reservation of Shares.    The Company, during the term of this Plan, shall at all times
reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. 

        19.    Information to Holders and Purchasers.    Prior to the Public Trading Date and to the
extent required by Section 260.140.46 of Title 10 of the California Code of Regulations, the Company shall provide to each Holder and to each individual who acquires Shares pursuant to the
Plan, not less frequently than annually during the period such Holder or purchaser has one or more Options or Stock Purchase Rights outstanding, and, in the case of an individual who acquires Shares
pursuant to the Plan, during the period such individual owns such Shares, copies of annual financial statements. Notwithstanding the preceding sentence, the Company shall not be required to provide
such statements to key employees whose duties in connection with the Company assure their access to equivalent information. 

        20.    Repurchase Provisions.    The Administrator in its sole discretion may provide that the
Company may repurchase Shares acquired upon exercise of an Option or Stock Purchase Right upon the occurrence of certain specified events, including, without limitation, a Holder's termination as a
Service Provider, divorce, bankruptcy or insolvency; provided, however, that any such repurchase right shall be set forth in the applicable Option
Agreement or Restricted Stock Purchase Agreement or in another agreement referred to in such agreement and, provided further, that to the extent required by Section 260.140.41 and
Section 260.140.42 of Title 10 of the California Code of Regulations, any such repurchase right set forth in an Option or Stock Purchase Right granted prior to the Public Trading Date to a
person who is not an Officer, Director or Consultant shall be upon the following terms: (i) if the repurchase option gives the Company the right to repurchase the shares upon termination as a
Service Provider at not less than the Fair Market Value of the shares to be purchased on the date of termination of status as a Service Provider, then (A) the right to repurchase shall be
exercised for cash or cancellation of purchase money indebtedness for the shares within ninety (90) days of termination of status as a Service Provider (or in the case of shares issued upon
exercise of Options or Stock Purchase Rights after such date of termination, within ninety (90) days after the date of the exercise) or such longer period as may be agreed to by the
Administrator and the Plan participant and (B) the right terminates when the shares become publicly traded; and (ii) if the repurchase option gives the Company the right to repurchase
the Shares upon termination as a Service Provider at the original purchase price for such Shares, then (A) the right to repurchase at the original purchase price shall lapse at the rate of at
least twenty percent (20%) of the shares per year over five (5) years from the date the Option or Stock Purchase Right is granted (without respect to the date the Option or Stock Purchase Right
was exercised or became exercisable) and (B) the right to repurchase shall be exercised for cash or cancellation of purchase money indebtedness for the shares within ninety (90) days of
termination of status as a Service Provider (or, in the case of shares issued upon exercise of Options or Stock Purchase Rights, after such date of termination, within ninety (90) days after
the date of the exercise) or such longer period as may be agreed to by the Company and the Plan participant. 

        21.    Investment Intent.    The Company may require a Plan participant, as a condition of
exercising or acquiring stock under any Option or Stock Purchase Right, (i) to give written assurances 

13

 

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
Option or Stock Purchase Right; and (ii) to give written assurances satisfactory to the Company stating that the participant is acquiring the stock subject to the Option or Stock Purchase Right
for the participant's own account and not with any present intention of selling or otherwise distributing the stock. The foregoing requirements, and any assurances given pursuant to such requirements,
shall be inoperative if (A) the issuance of the shares upon the exercise or acquisition of stock under the applicable Option or Stock Purchase Right has been registered under a then currently
effective registration statement under the Securities Act or (B) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in
the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the stock. 

        22.    Governing Law.    The validity and enforceability of this Plan shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to otherwise governing principles of conflicts of law. 

14

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ANACOR PHARMACEUTICALS, INC. 2001 EQUITY INCENTIVE PLAN (as amended September 3, 2002) (as further amended March 8, 2005) (as further amended June 5, 2007)

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ANACOR PHARMACEUTICALS, INC. 2001 EQUITY INCENTIVE PLAN

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