Document:

Exhibit 10.26

                        RUSH FINANCIAL TECHNOLOGIES, INC.
                               a Texas Corporation

                             STOCK PURCHASE WARRANT
                  To Purchase 3,571,429 Shares of Common Stock
                            Par Value $0.01 per share
                                 August 26, 2005

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN ACQUIRED FOR INVESTMENT, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY SHALL HAVE BEEN RECEIVED BY THE
COMPANY TO THE EFFECT THAT SUCH SALE, TRANSFER OR ASSIGNMENT WILL NOT BE IN
VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND
REGULATIONS THEREUNDER, OR APPLICABLE STATE SECURITIES LAWS.

     1.   Basic Terms. This certifies that, for value received, Bonanza Master
Fund, Ltd. (the "Holder") is entitled, subject to the terms and conditions of
this Warrant, until the expiration date, to purchase 3,571,429 whole shares of
Common Stock, par value $0.01 per share (the "Common Stock"), of Rush Financial
Technologies, Inc., a Texas corporation (the "Company") from the Company. The
Warrants are exercisable at the purchase price of $0.21 per share (the "Purchase
Price") immediately after completion of this offering through August 26, 2010,
upon delivery of this Warrant to the Company with "Form of Election to Purchase"
in the form of Exhibit "A," duly executed, and payment of the Purchase Price (in
cash or by cashier's check payable to the order of the Company) for each share
purchased. This Warrant shall be exercisable at any time, in whole or in part,
from the date hereof until 5:00 p.m. Dallas, Texas time on August 26, 2010,
except if the Company's Common Stock trades at or above a volume weighted
average price of $1.00 per share on ten consecutive trade days, the Company may,
with five (5) days' notice, require the holder to exercise the Election to
Purchase.

         The Warrants, if not exercised, will expire at 5:00 p.m. on August 26,
2010. The Warrants contain provisions providing for adjustment of the exercise
price and the number and type of securities issuable upon exercise upon the
occurrence of any recapitalization, reclassification, stock dividend, stock
split, stock combination or similar transaction. The Warrants grant to the
holder certain registration rights for the securities issuable upon exercise.
The Warrants also provide that, except as permitted by the rules of the NASD,
they may not be sold during the offering, or sold, transferred, assigned,
pledged or hypothecated, or be the subject of any hedging, short sale,
derivative, put or call transaction that would result in the effective economic
disposition of the securities by any person for a period of 180 days immediately
following the date of effectiveness or commencement of the sale of shares in the
offering.

     2.   Company's Covenants as to Common Stock. Shares deliverable on the
exercise of this Warrant shall, at delivery, be fully paid and non-assessable,
and free from taxes, liens and charges with respect to their purchase. The
Company shall take any necessary steps to assure that the par value per share of

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the Common Stock is at all times equal to or less than the then- current
Purchase Price per share of the Common Stock issuable pursuant to this Warrant.
The Company shall at all times reserve and hold available sufficient shares of
Common Stock to satisfy all conversion and purchase rights of outstanding
convertible securities, options and warrants.

     3.   Method of Exercise; Fractional Shares. The purchase rights represented
by this Warrant are exercisable at the option of the Holder in whole or in part,
from time to time, within the period above specified; provided, however, that
purchase rights are not exercisable with respect to a fraction of a share of
Common Stock. In lieu of issuing a fraction of a share remaining after exercise
of this Warrant as to all full shares covered hereby, the Company shall either:
(1) pay therefor cash equal to the same fraction of the then-current Warrant
purchase price per share or, at its option; (2) issue scrip for the fraction, in
registered or bearer form approved by the Board of Directors of the Company,
which shall entitle the Holder to receive a certificate for a full share of
Common Stock on surrender of scrip aggregating a full share. Scrip may become
void after a reasonable period (but not less than six months after the
expiration date of this Warrant) determined by the Board of Directors and
specified in the scrip. In case of the exercise of this Warrant for less than
all the shares purchasable, the Company shall cancel the Warrant and execute and
deliver a new Warrant of like tenor and date for the balance of the shares
purchasable. Upon the date of receipt by the Company of an exercise of the
Warrant ("Exercise Date"), the Warrant shall be deemed to have been exercised as
to the number of shares so purchased, and the person so exercising the Warrant
shall become a holder of record of shares of Common Stock on the Exercise Date.

     4.   Adjustments of Shares and Purchase Price. The initial number of shares
of Common Stock purchasable upon exercise of this Warrant and the Purchase Price
shall be subject to adjustment from time to time after the date hereof as
follows:

          A.   Recapitalization or Reclassification of Common Stock. In case the
     Company shall at any time prior to the exercise or termination of this
     Warrant effect a recapitalization or reclassification of such character
     that its Common Stock shall be changed into or become exchangeable for a
     larger or smaller number of shares, then, upon the effective date thereof,
     the number of shares of Common Stock that the Holder of this Warrant shall
     be entitled to purchase upon exercise hereof shall be increased or
     decreased, as the case may be, in direct proportion to the increase or
     decrease in such number of shares of Common Stock by reason of such
     recapitalization or reclassification, and the Exercise Price of such
     recapitalized or reclassified Common Stock shall, in the case of an
     increase in the number of shares, be proportionately decreased and, in the
     case of a decrease in the number of shares, be proportionately increased.

          B.   Consolidation, Merger or Sale. In case the Company shall, at any
     time prior to the exercise of this Warrant, or the expiration of the
     Exercise Period, whichever first occurs, consolidate or merge with any
     other corporation (unless the Company shall be the surviving entity), or
     transfer all or substantially all of its assets to any other corporation
     preparatory to a dissolution, then the Company shall, as a condition
     precedent to such transaction, cause effective provision to be made so that
     the Holder of this Warrant, upon the exercise thereof after the effective
     date of such transaction, shall be entitled to receive the kind and amount
     of shares, evidences of indebtedness, and/or other property receivable on
     such transaction by a holder of the number of shares of Common Stock as to
     which the Warrant was exercisable immediately prior to such transaction
     (without giving effect to any restriction upon such exercise); and, in any
     such case, appropriate provision shall be made with respect to the rights
     and interests of the Holder hereof to the effect that the provisions of

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     this Warrant shall thereafter be applicable (as nearly as may be
     practicable) with respect to any shares, evidences of indebtedness, or
     other securities or assets thereafter deliverable upon exercise of this
     Warrant.

          C.   Notice of Adjustment. Whenever the number of shares of Common
     Stock purchasable upon exercise of this Warrant shall be adjusted as
     provided herein, the Company shall file with its corporate records a
     certificate of its Chief Financial Officer setting forth the computation
     and the adjusted number of shares of Common Stock purchasable hereunder
     resulting from such adjustments, and a copy of such certificate shall be
     mailed to the Holder. Any such certificate or letter shall be conclusive
     evidence as to the correctness of the adjustment or adjustments referred to
     therein and shall be available for inspection by the holders of the
     Warrants on any day during normal business hours.

     5.   Limited Rights of Holder. This Warrant does not entitle the Holder to
any voting rights or other rights as a shareholder of the Company, or to any
other rights whatsoever except the rights herein expressed. No dividends are
payable or will accrue on this Warrant or the shares purchasable hereunder
until, and except to the extent that, this Warrant is exercised.

     6.   Exchange for Other Denominations. This Warrant is exchangeable, on its
surrender by the registered owner to the Company, for new Warrants of like tenor
and date representing in the aggregate the right to purchase the number of
shares purchasable hereunder in denominations designated by the registered owner
at the time of surrender.

     7.   Transfer. Holder acknowledges that this Warrant and the shares of
Common Stock or other securities into which this Warrant is exercisable have not
been registered under the Securities Act of 1933, or any state securities laws,
but have been and will be issued pursuant to exemptions therefrom. Accordingly,
Holder acknowledges and agrees that this Warrant and the securities acquired by
it upon exercise hereof may be transferred or assigned to another party only in
accordance with a valid registration statement or an exemption from registration
under the Securities Act and any applicable state securities laws.

     Subject to applicable securities laws, this Warrant and all rights
hereunder are transferable by the Holder hereof in person or by duly authorized
attorney on the books of the Company upon surrender of this Warrant at the
principal offices of the Company, together with the Form of Assignment attached
hereto as Exhibit "B," duly executed. Absent any such transfer, the Company may
deem and treat the registered Holder of this Warrant at any time as the absolute
owner hereof for all purposes, and shall not be affected by any notice to the
contrary.

     8.   Registration Rights. If, at any time during the Exercise Period, the
Company shall prepare and file one or more registration statements under the Act
with respect to a public offering of equity or debt securities of the Company,
or of any such securities of the Company held by its security holders, other
than a registration statement on Forms S-4, S-8, or similar form, the Company
will include in any such registration statement such information as is required,
and such number of shares of Common Stock held by, or shares of Common Stock
underlying outstanding Warrants held by, the Holder to permit a public offering
of such shares of Common Stock as required; provided, however, that if, in the
written opinion of the Company's managing underwriter, if any, for such
offering, the inclusion of the shares requested to be registered, when added to

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the securities being registered by the Company or the selling security
holder(s), would exceed the maximum amount of the Company's securities that can
be marketed without otherwise materially and adversely affecting the entire
offering, then the Company may exclude from such offering that portion of the
shares required to be so registered so that the total number of securities to be
registered is within the maximum number of shares that, in the opinion of the
managing underwriter, may be marketed without otherwise materially and adversely
affecting the entire offering; also provided, that the Company shall be required
to include in the offering and in the following order: first, the pro rata
number of securities requested by the Holder of this Warrant, along with all
other holders of warrants issued in this series; and, second, the pro rata
number of securities requested by all other holders of securities requesting
registration pursuant to other registration rights. The Company shall use its
best efforts to obtain promptly the effectiveness of such registration statement
and maintain the effectiveness thereof for at least 180 days and to register or
qualify the subject shares of Common Stock underlying this Warrant for sale in
up to five (5) states identified by such Holder. The Company shall bear all fees
and expenses other than the fees and expenses of Holder's counsel incurred in
the preparation and filing of such registration statement and related state
registrations, to the extent permitted by applicable law, and the furnishing of
copies of the preliminary and final prospectus thereof to such Holder.

     9.   Recognition of Registered Owner. Prior to due presentment for
registration of transfer of this Warrant, the Company may treat the registered
owner as the person exclusively entitled to receive notices and otherwise to
exercise rights hereunder.

     10.  Notice and Effect of Dissolution, etc. In case a voluntary or
involuntary dissolution, liquidation, or winding up of the Company (other than
in connection with the consolidation or merger covered by Section 4 above) is at
any time proposed, the Company shall give at least 30 days' prior written notice
to the Holder. Such notice shall contain: (1) the date on which the transaction
is to take place; (2) the record date (which shall be at least 30 days after the
giving of the notice) as of which holders of Common Shares will be entitled to
receive distributions as a result of the transaction; (3) a brief description of
the transaction; (4) a brief description to be made to the holders of Common
Shares as a result of the transaction; and (5) an estimate of the fair value of
the distributions. On the date of the transaction, it if actually occurs, this
Warrant and all rights hereunder shall terminate.

     11.  Method of Giving Notice; Extent Required. Notices shall be given by
first class mail, postage prepaid, addressed to the Holder at the address of the
owner appearing in the records of the Company or to the Company at its principal
office, or at such other addresses as to which either the Holder or the Company
gives the other written notice as provided herein.

     12.  Entire Agreement. This Warrant, including the exhibits and documents
referred to herein which are a part hereof, contain the entire understanding of
the parties hereto with respect to the subject matter, and may be amended only
by a written instrument executed by the parties hereto or their successors or
assigns. Any paragraph headings contained in this Agreement are for reference
purposes only, and shall not affect in any way the meaning or interpretation of
this Warrant.

     13.  Governing Law. This Warrant is governed by, interpreted under, and
construed in all respects in accordance with the substantive laws of the State
of Texas, without regard to the conflicts of law provision thereof, and
irrespective of the place of domicile or residence of the parties. In the event
of a controversy arising out of the interpretation, construction, performance or

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breach of this Warrant, the parties hereby agree and consent to the jurisdiction
and venue of the Courts of the State of Texas, or the United States District
Court for the Northern District of Texas, and further agree and consent that all
personal service of process in any such action or preceding outside the State of
Texas shall be tantamount to service in person in Texas.

         Witness the signature of its authorized officer.

                                    RUSH FINANCIAL TECHNOLOGIES, INC.

                                    By:
                                       -----------------------------------------
                                        D. M. (Rusty) Moore, Jr., President

                                       15exv10w27

 

EXHIBIT 10.27

CONNETICS CORPORATION

NON-QUALIFIED STOCK OPTION AGREEMENT

     Connetics Corporation, a Delaware corporation (“Connetics” or the “Corporation”), hereby
grants to Scott William Meggs (the “Optionee”) an option to purchase 30,000 shares of Common Stock
(the “Option”) subject to the following terms and conditions of this Non-Qualified Stock Option
Agreement (the “Option Agreement”):

I. NOTICE OF STOCK OPTION GRANT

	 	 	 
	SCOTT WILLIAM MEGGS
	 	 
	3160 Porter Drive
	 	 
	Palo Alto, CA 94304
	 	 
	 
	 	 
	Date of Grant

	 	August 5, 2005
	 
	 	 
	Vesting Commencement Date

	 	August 1, 2005
	 
	 	 
	Exercise Price per Share

	 	$17.61
	 
	 	 
	Total Number of Shares of Common
	 	 
	Stock Subject to the Option (the “Shares”)

	 	30,000 Shares
	 
	 	 
	Total Exercise Price

	 	$528,300.00
	 
	 	 
	Type of Option:

	 	Nonstatutory Stock Option
	 
	 	 
	Term/Expiration Date:

	 	August 5, 2015

     Vesting Schedule:

     This Option may be exercised, in whole or in part, in accordance with the following schedule:

     1/8 of the Shares subject to the Option shall vest six months after the Vesting Commencement
Date, and 1/48 of the Shares subject to the Option shall vest each month thereafter, subject to the
Optionee continuing to be a Service Provider on such dates.

     Termination Period:

     This Option may be exercised for (3) three months after the Optionee ceases to be a Service
Provider for any reason other than death or Disability. In the event the Optionee ceases to be a
Service Provider as the result of death or Disability, this Option may be exercised for (12) twelve
months after the Optionee ceases to be a Service Provider. In no event shall this Option be
exercised later than the Term/Expiration Date as provided above.

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II. AGREEMENT

     1. Grant of Option. The Corporation hereby grants to the Optionee named in the Notice
of Stock Option Grant (the “Notice”) attached as Part I of this Option Agreement an option (the
“Option”) to purchase the number of Shares, as set forth in the Notice, at the exercise price per
share set forth in the Notice (the “Exercise Price”), subject to the terms and conditions of the
Notice and this Option Agreement.

          This Option is subject to and conditioned upon Optionee’s acceptance of the Option by
returning to the Corporation an executed original of this Option Agreement. This Option shall be
null and void and of no force and effect, unless the Optionee executes and returns to the
Corporation this Option Agreement.

          This Option is granted as an inducement material to the Optionee’s entering into service with
the Corporation as an Employee. The Grantee has not previously been a Service Provider of the
Company or any Parent or Subsidiary of the Company.

          This Option is not intended to be an incentive stock option under Section 422 of the Code.

     2. Exercise of Option.

          (a) Right to Exercise. This Option is exercisable during its term in accordance with
the Vesting Schedule set out in the Notice and the applicable provisions of this Option Agreement.

          (b) Method of Exercise. This Option is exercisable by delivery of an exercise notice
or by such other procedure as specified from time to time by the Board, which shall state the
election to exercise the Option and the number of Shares in respect of which the Option is being
exercised (the “Exercised Shares”). The exercise notice shall be completed by the Optionee and
delivered to Connetics in person, by certified mail, or by such other method (including electronic
transmission) as determined from time to time by the Board. The exercise notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option
shall be deemed to be exercised upon receipt by Connetics of such fully executed exercise notice
accompanied by such aggregate Exercise Price.

          No Shares shall be issued pursuant to the exercise of this Option unless such issuance and
exercise complies with Applicable Laws. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date the Option is
exercised with respect to such Exercised Shares.

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     3. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:

          (c) cash; or

          (d) check; or

          (e) consideration received by Connetics under a cashless exercise program implemented by
Connetics in connection with this Option Agreement; or

          (f) surrender of other Shares which (i) in the case of Shares acquired upon exercise of an
option, have been owned by the Optionee for more than six (6) months on the date of surrender, and
(ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares.

     4. Non-Transferability of Option. This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by the Optionee. The terms of this Option Agreement shall be binding
upon the executors, administrators, heirs, successors and assigns of the Optionee.

     5. No Obligation to Exercise Option. The grant and acceptance of this Option imposes
no obligation on the Optionee to exercise it.

     6. No Obligation to Continue Business Relationship. The Corporation and any its’
subsidiaries are not by this Option obligated to continue to maintain a business relationship with
the Optionee.

     7. Term of Option. This Option may be exercised only within the term set out in the
Notice, and may be exercised during such term only in accordance with the terms of this Option
Agreement.

     8. Tax Consequences. Some of the federal tax consequences relating to this Option, as
of the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE
TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE
EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

          (g) Exercising the Option. The Optionee may incur regular federal income tax
liability upon exercise of the Option. The Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Exercised Shares on the date of exercise over their aggregate Exercise Price.
If the Optionee is an Employee or a former Employee, Connetics will be required to withhold from
his or her compensation or collect from Optionee and pay to the applicable taxing authorities an
amount in cash equal to a percentage of this compensation income at the time of exercise, and may
refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.

3

 

          (h) Disposition of Shares. The Optionee holds the Shares acquired upon exercise of
the Option for at least one year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.

     9. No Rights as Stockholder until Exercise. The Optionee shall have no rights as a
stockholder with respect to the Shares until a stock certificate has been issued to the Optionee
and is fully paid for in accordance with paragraph 3. With respect to certain changes in the
capitalization of the Corporation, no adjustment shall be made for dividends or similar rights for
which the record date is prior to the date such stock certificate is issued.

     10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale.

          (a) Changes in Capitalization. Subject to any required action by the stockholders of
Connetics, the number of shares of Common Stock covered by the Option as well as the Exercise Price
shall be proportionately adjusted for any increase or decrease in the number of issued shares of
Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by Connetics; provided, however,
that conversion of any convertible securities of Connetics shall not be deemed to have been
“effected without receipt of consideration.” Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except as expressly provided
in this Option Agreement, no issuance by Connetics of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock subject to an Option.

          (b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of Connetics, the Board shall notify the Optionee prior to the effective date of such
proposed transaction. The Board in its discretion may permit the Optionee to exercise the Option
prior to such transaction as to all of the Shares, including Shares as to which the Option would
not otherwise be vested and exercisable. To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed action.

          (i) Merger or Asset Sale. In the event of a merger of Connetics with or into another
corporation, or the sale of substantially all of the assets of Connetics, the Option shall be
assumed or an equivalent option or right substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall fully vest in and have the right to
exercise the Option as to all of the Shares, including Shares as to which it would not otherwise be
vested and exercisable. If an Option becomes fully vested and exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall notify the Optionee in
writing or electronically that the Option shall be fully vested and exercisable for a period of
time as determined by the Board, and the Option shall terminate upon the expiration of such period.
For the purposes of this paragraph, the Option shall be considered assumed if, following the
merger or sale of assets, the option confers the right to purchase or receive, for each Share
subject to the Option immediately prior to the merger or sale of assets, the consideration

4

 

(whether stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration chosen by the holders
of a majority of the outstanding shares of Common Stock); provided, however, that if such
consideration received in the merger or sale of assets is not solely common stock of the successor
corporation or its Parent, the Board may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option, for each Share subject to the
Option, to be solely common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the merger or sale of
assets.

     11. Entire Agreement; Governing Law. This Option Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and supersedes in its entirety
all prior undertakings and agreements of Connetics and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee’s interest except by means of a writing
signed by Connetics and Optionee. This agreement is governed by the internal substantive laws, but
not the choice of law rules, of California.

     12. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE
VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE OF THIS AGREEMENT IS EARNED ONLY BY CONTINUING
AS A SERVICE PROVIDER AT THE WILL OF CONNETICS (AND NOT THROUGH THE ACT OF BEING HIRED, BEING
GRANTED AN OPTION OR PURCHASING SHARES UNDER THIS AGREEMENT). OPTIONEE FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED UNDER THIS AGREEMENT AND THE VESTING
SCHEDULE SET FORTH IN THIS AGREEMENT DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH OPTIONEE’S RIGHT OR CONNETICS’ RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS A
SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

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III. DEFINITIONS

          A. “Applicable Laws” means the requirements relating to the administration of stock
options 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 the Optionee may be resident.

          B. “Board” means the Board of Directors of Connetics.

          C. “Code” means the Internal Revenue Code of 1986, as amended.

          D. “Common Stock” means the common stock of Connetics.

          E. “Corporation” means Connetics Corporation, a Delaware corporation.

          F. “Consultant” means any person, including an advisor, engaged by Connetics or a
Parent or Subsidiary to render services to such entity.

          G. “Director” means a member of the Board.

          H. “Disability” means total and permanent disability as defined in Section 22(e)(3) of
the Code.

          I. “Employee” means any person, including Officers and Directors, employed by
Connetics or any Parent or Subsidiary of Connetics. A Service Provider shall not cease to be an
Employee in the case of (i) any leave of absence approved by Connetics or (ii) transfers between
locations of Connetics or between Connetics, its Parent, any Subsidiary, or any successor. Neither
service as a Director nor payment of a director’s fee by Connetics shall be sufficient to
constitute “employment” by Connetics.

          J. “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          K. “Fair Market Value” means, as of any date, the value 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 such stock (or the closing bid, if no sales were reported)
as quoted on such exchange or system on the date of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized securities dealer but
selling prices are not reported, the Fair Market Value of a Share of Common

6

 

Stock shall be the mean between the high bid and low asked prices for the Common
Stock on the date of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable; or

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

          L. “Officer” means a person who is an officer of Connetics within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated under the Exchange Act.

          M. “Parent” means a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code.

          N. “Service Provider” means an Employee, Director or Consultant.

          O. “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing,
as defined in Section 424(f) of the Code.

7

 

     By your signature and the signature of Connetics’ representative below, you and Connetics
agree that this Option is granted under and governed by the terms and conditions of the this Option
Agreement. Optionee has reviewed this Option Agreement in its’ entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option Agreement and fully understands all
provisions of this Option Agreement. Optionee hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Board upon any questions relating to this Option
Agreement. Optionee further agrees to notify Connetics upon any change in the residence address
indicated below.

	 	 	 
	OPTIONEE:

	 	CONNETICS CORPORATION
	 
	 	 
	 
	 	 
	     /s/ Scott William Meggs

	 	     /s/ Thomas G. Wiggans
	 

Signature

	 	 

By: Thomas G. Wiggans
	 
	 	 
	     Scott William Meggs

	 	     Chief Executive Officer
	 

Print Name

	 	 

Title
	 
	 	 
	 

Residence Address
	 	 
	 
	 	 
	 

	 	 

8

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