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Exhibit 10.2  

 
 

PROMETHEUS LABORATORIES INC.    
    
    1997 STOCK INCENTIVE PLAN    
    

ARTICLE I

PURPOSE OF PLAN  

        The Company has adopted this Plan to promote the interests of the Company and its shareholders by using investment interests in the Company to attract and retain
key personnel and highly qualified directors, to encourage and reward their contributions to the performance of the Company, and to align their interests with the interests of the Company's
shareholders. 

ARTICLE II

EFFECTIVE DATE AND TERM OF PLAN  

        2.1    Term of Plan.    This Plan became effective as of the Effective
Date and shall continue in effect until the Expiration Date, at which time this Plan shall automatically terminate. 

        2.2    Effect on Awards.    Awards may be granted during the Plan
Term, but no Awards may be granted after the Plan Term. Notwithstanding the foregoing, each Award properly granted under this Plan during the Plan Term shall remain in effect after termination of this
Plan until such Award has been exercised, terminated or expired in accordance with its terms and the terms of this Plan. 

        2.3    Shareholder Approval.    This Plan shall be approved by the
Company's shareholders within 12 months after the Effective Date. The effectiveness of any Awards granted prior to such shareholder approval shall be subject to such shareholder approval. 

ARTICLE III

SHARES SUBJECT TO PLAN  

        3.1    Number of Shares.    The maximum number of shares of Common
Stock that may be issued pursuant to Awards granted under this Plan shall be 460,000, subject to adjustment as set forth in Section 3.4. 

        3.2    Source of Shares.    The Common Stock to be issued under this
Plan will be made available, at the discretion of the Board, either from authorized but unissued shares of Common Stock or from previously issued shares of Common Stock reacquired by the Company,
including, without limitation, shares purchased on the open market. 

        3.3    Availability of Unused Shares.    Shares of Common Stock
subject to unexercised portions of any Award granted under this Plan that expire, terminate or are canceled, and shares of Common Stock issued pursuant to an Award under this Plan that are reacquired
by the Company pursuant to the terms of the Award under which such shares were issued, will again become available for the grant of further Awards under this Plan. 

        3.4    Adjustment Provisions.    

        (a)    Adjustments.    If (i) the outstanding shares of Common
Stock of the Company are increased, decreased or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are
distributed in respect of such shares of Common Stock (or any stock or securities received with respect to such Common Stock), through merger, consolidation, sale or exchange of all or substantially
all of the properties of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, spin-off or other distribution with respect to
such shares of Common Stock (or any stock or securities received with respect to such Common Stock), or (ii) the value of the outstanding shares of Common Stock of the Company is reduced by
reason of an extraordinary cash dividend, an appropriate and proportionate adjustment may be made in (1) the maximum number and kind of 

 

shares
subject to this Plan as provided in Section 3.1, (2) the number and kind of shares or other securities subject to then outstanding
Awards, and/or (3) the price for each share or other unit of any other securities subject to then outstanding Awards. 

        (b)    No Fractional Interests.    No fractional interests will be
issued under the Plan resulting from any adjustments. 

        (c)    Adjustments Related to Company Stock.    To the extent any
adjustments relate to stock or securities of the Company, such adjustments shall be made by the Administering Body, whose determination in that respect shall be final, binding and conclusive. 

        (d)    Right to Make Adjustment.    The grant of an Award pursuant to
this Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to
consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets. 

        (e)    Limitations.    No adjustment to the terms of an Incentive
Stock Option shall be made unless such adjustment either (i) would not cause the Option to lose its status as an Incentive Stock Option or (ii) is agreed to in writing by the
Administering Body and the Recipient. 

        3.5    Reservation of Shares.    The Company will at all times reserve
and keep available such number of shares of Common Stock as shall equal at least the number of shares of Common Stock subject to then outstanding Awards issuable in shares of Common Stock under this
Plan. 

ARTICLE IV

ADMINISTRATION OF PLAN  

        4.1    Administering Body.    

        (a)    Plan Administration.    This Plan shall be administered by the
Board or by a Committee of the Board appointed pursuant to Section 4.1(b). 

        (b)    Administration by Committee.    

        (i)    The
Board in its sole discretion may from time to time appoint a Committee of not less than two Board members to administer this Plan and, subject to applicable law, to
exercise all of the powers, authority and discretion of the Board under this Plan. The Board may from time to time increase or decrease (but not below two) the number of members of the Committee,
remove from membership on the Committee all or any portion of its members, and/or appoint such person or persons as it desires to fill any vacancy existing on the Committee, whether caused by removal,
resignation or otherwise. The Board may disband the Committee at any time and revest in the Board the administration of this Plan. 

        (ii)   Notwithstanding
the foregoing provisions of this Section 4.1(b) to the contrary, upon the Company becoming an
Exchange Act Registered Company, (A) the Board shall appoint the Committee; (B) this Plan shall be administered by the Committee; and (C) each of the Committee's members shall be
a Non-Employee Director. 

        (iii)  The
Committee shall report to the Board the names of Eligible Persons granted Awards, the number of shares of Common Stock covered by each Award, and the terms and
conditions of each such Award. 

        4.2    Authority of Administering Body.    

        (a)    Authority to Interpret Plan.    Subject to the express
provisions of this Plan, the Administering Body shall have the power to interpret and construe this Plan and any Award Documents or other documents defining the rights and obligations of the Company
and Recipients 

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hereunder
and thereunder, to determine all questions arising hereunder and thereunder, to adopt and amend such rules and regulations for the administration hereof and thereof as it may deem desirable,
and otherwise to carry out the terms of this Plan and such Award Documents and other documents. The interpretation and construction by the Administering Body of any provisions of this Plan or of any
Award shall be conclusive and binding. Any action taken by, or inaction of, the Administering Body relating to this Plan or any Awards shall be within the absolute discretion of the Administering Body
and shall be conclusive and binding upon all persons. Subject only to compliance with the express provisions hereof, the Administering Body may act in its absolute discretion in matters related to
this Plan and any and all Awards. 

        (b)    Authority to Grant Awards.    Subject to the express provisions
of this Plan, the Administering Body may from time to time in its discretion select the Eligible Persons to whom, and the time or times at which, Awards shall be granted or sold, the nature of each
Award, the number of shares of Common Stock or the number of rights that make up or underlie each Award, the period for the exercise of each Award, and such other terms and conditions applicable to
each individual Award as the Administering Body shall determine. The Administering Body may grant at any time new Awards to an Eligible Person who has previously received Awards or other grants
(including other stock options) whether such prior Awards or such other grants are still outstanding, have previously been exercised as a whole or in part, or are canceled in connection with the
issuance of new Awards. The Administering Body may grant Awards singly or in combination or in tandem with other Awards as it determines in its discretion. The purchase price, exercise price, initial
value and any and all other terms and conditions of the Awards may be established by the Administering Body without regard to existing Awards or other grants. 

        (c)    Procedures.    Any action of the Administering Body with
respect to the administration of this Plan shall be taken pursuant to a majority vote of the authorized number of members of the Administering Body or by the unanimous written consent of its members;  provided, however,
 that (i) if the Administering Body is the Committee and consists of two members, then actions of the Administering Body must
be unanimous, and (ii) if the Administering Body is the Board, actions taken at a meeting of the Board shall be valid if approved by directors constituting a majority of the required quorum for
such meeting. 

        4.3    No Liability.    No member of the Board or the Committee or any
designee thereof will be liable for any action or inaction with respect to this Plan or any Award or any transaction arising under this Plan or any Award except in circumstances constituting bad faith
of such member. 

        4.4    Amendments.    

        (a)    Plan Amendments.    The Administering Body may, insofar as
permitted by applicable law, rule or regulation, from time to time suspend or discontinue this Plan or revise or amend it in any respect whatsoever, and this Plan as so revised or amended will govern
all Awards hereunder, including those granted before such revision or amendment; provided, however, that no such revision or amendment shall alter,
impair or diminish any rights or obligations under any Award theretofore granted under this Plan without the written consent of the Recipient to whom such Award was granted. Without limiting the
generality of the foregoing, the Administering Body is authorized to amend this Plan to comply with or take advantage of amendments to applicable laws, rules or regulations, including amendments to
the Securities Act, Exchange Act or the IRC or any rules or regulations promulgated thereunder. No shareholder approval of any amendment or revision shall be required unless (i) such approval
is required by applicable law, rule or regulation or (ii) an amendment or revision to this Plan would materially increase the number of shares subject to this Plan (as adjusted under  Section 3.4), materially modify the requirements as to eligibility for participation in this Plan, extend the final date upon which Awards may be
granted under this Plan, or otherwise materially increase the benefits accruing to Recipients in a manner 

3

 

not
specifically contemplated herein, or affect this Plan's compliance with Rule 16b-3 or applicable provisions of or regulations under the IRC, and shareholder approval of the
amendment or revision is required to comply with Rule 16b-3 or applicable provisions of or rules under the IRC. 

        (b)    Award Amendments.    The Administering Body may, with the
written consent of a Recipient, make such modifications in the terms and conditions of an Award as it deems advisable. Without limiting the generality of the foregoing, the Administering Body may, in
its discretion with the written consent of the Recipient, at any time and from time to time after the grant of any Award accelerate or extend the vesting or exercise period of any Award as a whole or
in part, and adjust or reduce the purchase or exercise price of Awards held by such Recipient by cancellation of such Awards and granting of Awards at lower purchase or exercise prices or by
modification, extension or renewal of such Awards. In the case of Incentive Stock Options, Recipients acknowledge that extensions of the exercise period may result in the loss of the favorable tax
treatment afforded incentive stock options under Section 422 of the IRC. 

        (c)    Limitation.    Except as otherwise provided in this Plan or in
the applicable Award Document, no amendment, revision, suspension or termination of this Plan will, without the written consent of the Recipient, alter, terminate, impair or adversely affect any right
or obligation under any Award previously granted under this Plan. 

        4.5    Other Compensation Plans.    The adoption of this Plan shall
not affect any other stock option, incentive or other compensation plans in effect for the Company, and this Plan shall not preclude the Company from establishing any other forms of incentive or other
compensation for employees, directors, advisors or consultants of the Company, whether or not approved by shareholders. 

        4.6    Plan Binding on Successors.    This Plan shall be binding upon
the successors and assigns of the Company. 

        4.7    References to Successor Statutes, Regulations and Rules.    Any
reference in this Plan to a particular statute, regulation or rule shall also refer to any successor provision of such statute, regulation or rule. 

        4.8    Issuances for Compensation Purposes Only.    This Plan
constitutes a compensatory benefit plan. Awards to eligible employees or directors shall be made for any lawful consideration, including compensation for services rendered, promissory notes or
otherwise. Awards to consultants and advisors shall be made only in exchange for bona fide services rendered by such consultants or advisors and such
services must not be in connection with the offer and sale of securities in a capital-raising transaction. 

        4.9    Invalid Provisions.    In the event that any provision of this
Plan is found to be invalid or otherwise unenforceable under any applicable law, such invalidity or unenforceability shall not be construed as rendering any other provisions contained herein invalid
or unenforceable, and all such other provisions shall be given full force and effect to the same extent as though the invalid and unenforceable provision were not contained herein. 

        4.10    Governing Law.    This Agreement shall be governed by and
interpreted in accordance with the internal laws of the State of California, without giving effect to the principles of the conflicts of laws thereof. 

ARTICLE V

GENERAL AWARD PROVISIONS  

        5.1    Participation in Plan.    

        (a)    Eligibility to Receive Awards.    A person shall be eligible to
receive grants of Awards under this Plan if, at the time of the grant of the Award, such person is an Eligible Person. 

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        (b)    Eligibility to Receive Incentive Stock Options.    Incentive
Stock Options may be granted only to Eligible Persons meeting the employment requirements of Section 422 of the IRC. 

        (c)    Awards to Foreign Nationals.    Notwithstanding anything to the
contrary herein, the Administering Body may, in order to fulfill the purposes of this Plan, modify grants of Awards to Recipients who are foreign nationals or employed outside of the United States to
recognize differences in applicable law, tax policy or local custom. 

        5.2    Award Documents.    Each Award granted under this Plan shall be
evidenced by an agreement duly executed on behalf of the Company and by the Recipient or, in the Committee's discretion, a confirming memorandum issued by the Company to the Recipient, setting forth
such terms and conditions applicable to the Award as the Committee may in its discretion determine. Award Documents may but need not be identical and shall comply with and be subject to the terms and
conditions of this Plan, a copy of which shall be provided to each Recipient and incorporated by reference into each Award Document. Any Award Document may contain such other terms, provisions and
conditions not inconsistent with this Plan as may be determined by the Committee. In case of any conflict between this Plan and any Award Document, this Plan shall control. 

        5.3    Exercise of Stock Options.    No Stock Option shall be
exercisable except in respect of whole shares, and fractional share interests shall be disregarded. Not less than 100 shares of Common Stock (or such other amount as is set forth in the applicable
Award Documents) may be purchased at one time and Stock Options must be exercised in multiples of 100 unless the number purchased is the total number at the time available for purchase under the terms
of the Stock Option. A Stock Option shall be deemed to be exercised when the Secretary or other designated official of the Company receives written notice of such exercise from the Recipient, together
with payment of the exercise price made in accordance with Section 5.4 and any amounts required under  Section 5.11. Notwithstanding any other
provision of this Plan, the Administering Body may impose, by rule and/or in Award Documents, such
conditions upon the exercise of Stock Options (including, without limitation, conditions limiting the time of exercise to specified periods) as may be required to satisfy applicable regulatory
requirements, including, without limitation, Rule 16b-3 and Rule 10b-5 under the Exchange Act, and any amounts required under  Section 5.12 or other applicable section of or regulation
under the IRC. 

        5.4    Payment For Awards.    

        (a)    Payment of Exercise Price.    The exercise price or other
payment for an Award shall be payable upon the exercise of a Stock Option or upon other purchase of shares pursuant to an Award granted hereunder by delivery of legal tender of the United States or
payment of such other consideration as the Administering Body may from time to time deem acceptable in any particular instance. 

        (b)    Company Assistance.    The Company may assist any person to
whom an Award is granted hereunder (including, without limitation, any officer or director of the Company) in the payment of the purchase price or other amounts payable in connection with the receipt
or exercise of that Award, by lending such amounts to such person on such terms and at such rates of interest and upon such security (if any) as shall be approved by the Administering Body. 

        (c)    Cashless Exercise.    In the discretion of the Administering
Body, Awards may be exercised by capital stock of the Company delivered in transfer to the Company by or on behalf of the person exercising the Award and duly endorsed in blank or accompanied by stock
powers duly endorsed in blank, with signatures guaranteed in accordance with the Exchange Act if required by the Administering Body, or retained by the Company from the stock otherwise issuable upon
exercise or surrender of vested and/or exercisable Awards or other equity Awards previously granted to the Recipient and being exercised (if applicable) (in either case valued at Fair Market Value as
of the exercise date); or such other consideration as the Administering Body may from 

5

 

time
to time in the exercise of its discretion deem acceptable in any particular instance; provided, however, that the Administering Body may, in the
exercise of its discretion, (i) allow exercise of an Award in a broker-assisted or similar transaction in which the exercise price is not received by the Company until promptly after exercise,
and/or (ii) allow the Company to loan the exercise price to the person entitled to exercise the Award, if the exercise will be followed by a prompt sale of some or all of the underlying shares
and a portion of the sale proceeds is dedicated to full payment of the exercise price and amounts required pursuant to Section 5.11. 

        5.5    No Employment Rights.    Nothing contained in this Plan (or in
Award Documents or in any other documents related to this Plan or to Awards granted hereunder) shall confer upon any Eligible Person or Recipient any right to continue in the employ of the Company or
any Affiliated Entity or constitute any contract or agreement of employment or engagement, or interfere in any way with the right of the Company or any Affiliated Entity to reduce such person's
compensation or other benefits or to terminate the employment or engagement of such Eligible Person or Recipient, with or without cause. Except as expressly provided in this Plan or in any statement
evidencing the grant of an Award pursuant to this Plan, the Company shall have the right to deal with each Recipient in the same manner as if this Plan and any such statement evidencing the grant of
an Award pursuant to this Plan did not exist, including, without limitation, with respect to all matters related to the hiring, discharge, compensation and conditions of the employment or engagement
of the Recipient. Any question(s) as to whether and when there has been a termination of a Recipient's employment or engagement, the reason (if any) for such termination, and/or the consequences
thereof under the terms of this Plan or any statement evidencing the grant of an Award pursuant to this Plan shall be determined by the Administering Body and the Administering Body's determination
thereof shall be final and binding. 

        5.6    Restrictions Under Applicable Laws and Regulations.    

        (a)    Government Approvals.    All Awards granted under this Plan
shall be subject to the requirement that, if at any time the Company shall determine, in its discretion, that the listing, registration or qualification of the shares subject to Awards granted under
this Plan upon any securities exchange or under any federal, state or foreign law, or the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such an Award or the issuance, if any, or purchase of shares in connection therewith, such Award may not be exercised as a whole or in part unless and until such
listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company. During the term of this Plan, the Company will use
its reasonable efforts to seek to obtain from the appropriate regulatory agencies any requisite qualifications, consents, approvals or authorizations in order to issue and sell such number of shares
of its Common Stock as shall be sufficient to satisfy the requirements of this Plan. The inability of the Company to obtain from any such regulatory agency having jurisdiction thereof the
qualifications, consents, approvals or authorizations deemed by the Company to be necessary for the lawful issuance and sale of any shares of its Common Stock hereunder shall relieve the Company of
any liability in respect of the nonissuance or sale of such stock as to which such requisite authorization shall not have been obtained. 

        (b)    No Registration Obligation.    The Company shall be under no
obligation to register or qualify the issuance of Awards or underlying shares under the Securities Act or applicable state securities laws. Unless the issuance of Awards and underlying shares have
been registered under the Securities Act and qualified or registered under applicable state securities laws, the Company shall be under no obligation to issue any Awards or underlying shares of Common
Stock covered by any Award unless the Awards and underlying shares may be issued pursuant to applicable exemptions from such registration or qualification requirements. In connection with any such
exempt issuance, the Administering Body may require the Recipient to provide a written representation and undertaking to the Company, satisfactory in form and scope to the Company 

6

 

and
upon which the Company may reasonably rely, that such Recipient is acquiring such Awards and underlying shares for such Recipient's own account as an investment and not with a view to, or for sale
in connection with, the distribution of any such shares of stock, and that such person will make no transfer of the same except in compliance with any rules and regulations in force at the time of
such transfer under the Securities Act and other applicable law, and that if shares of stock are issued without such registration, a legend to this effect (together with any other legends deemed
appropriate by the Administering Body) may be endorsed upon the securities so issued. The Company may also order its transfer agent to stop transfers of such shares. The Administering Body may also
require the Recipient to provide the Company such information and other documents as the Administering Body may request in order to satisfy the Administering Body as to the investment sophistication
and experience of the Recipient and as to any other conditions for compliance with any such exemptions from registration or qualification. 

        5.7    Additional Conditions.    Any Award may also be subject to such
other provisions (whether or not applicable to any other Award or Recipient) as the Administering Body determines appropriate, including, without limitation, provisions to assist the Recipient in
financing the purchase of Common Stock through the exercise of Stock Options, provisions for the forfeiture of or restrictions on resale or other disposition of shares of Common Stock acquired under
any form of benefit, provisions giving the Company the right to repurchase shares of Common Stock acquired under any form of benefit in the
event the Recipient elects to dispose of such shares, and provisions to comply with federal and state securities laws and federal and state income tax withholding requirements. 

        5.8    No Privileges of Stock Ownership.    Except as otherwise set
forth herein, a Recipient or a permitted transferee of an Award shall have no rights as a shareholder with respect to any shares issuable or issued in connection with the Award until the date of the
receipt by the Company of all amounts payable in connection with exercise of the Award and performance by the Recipient of all obligations thereunder. Status as an Eligible Person shall not be
construed as a commitment that any Award will be granted under this Plan to an Eligible Person or to Eligible Persons generally. No person shall have any right, title or interest in any fund or in any
specific asset (including shares of capital stock) of the Company by reason of any Award granted hereunder. Neither this Plan (or any documents related hereto) nor any action taken pursuant hereto
shall be construed to create a trust of any kind or a fiduciary relationship between the Company and any person. To the extent that any person acquires a right to receive an Award hereunder, such
right shall be no greater than the right of any unsecured general creditor of the Company. 

        5.9    Nonassignability.    No Award granted under this Plan shall be
assignable or transferable except (a) by will or by the laws of descent and distribution or (b) subject to the final sentence of this  Section 5.9, upon dissolution of marriage pursuant to
a qualified domestic relations order or, in the discretion of the Administering Body and
under circumstances that would not adversely affect the interests of the Company, pursuant to a nominal transfer that does not result in a change in beneficial ownership. During the lifetime of a
Recipient, an Award granted to such person shall be exercisable only by the Recipient (or the Recipient's permitted transferee) or such person's guardian or legal representative. Notwithstanding the
foregoing, (i) no Award owned by a Recipient subject to Section 16 of the Exchange Act may be assigned or transferred in any manner inconsistent with Rule 16b-3 and
(ii) Incentive Stock Options (or other Awards subject to transfer restrictions under the IRC) may not be assigned or transferred in violation of Section 422(b)(5) of the IRC (or any
comparable or successor provision) or the regulations thereunder, and nothing herein is intended to allow such assignment or transfer. 

        5.10    Information To Recipients.    

        (a)    Provision of Information.    The Administering Body in its sole
discretion shall determine what, if any, financial and other information shall be provided to Recipients and when such 

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financial
and other information shall be provided after giving consideration to applicable federal and state laws, rules and regulations, including, without limitation, applicable federal and state
securities laws, rules and regulations. 

        (b)    Confidentiality.    The furnishing of financial and other
information that is confidential to the Company shall be subject to the Recipient's agreement that the Recipient shall maintain the confidentiality of such financial and other information, shall not
disclose such information to third parties, and shall not use the information for any purpose other than evaluating an investment in the Company's securities under this Plan. The Administering Body
may impose other restrictions on the access to and use of such confidential information and may require a Recipient to acknowledge the Recipient's obligations under this  Section 5.10(b) (which
acknowledgment shall not be a condition to Recipient's obligations under this  Section 5.10(b). 

        5.11    Withholding Taxes.    Whenever the granting, vesting or
exercise of any Award granted under this Plan, or the transfer of any shares issued upon exercise of any Award, gives rise to tax or tax withholding liabilities or obligations, the Administering Body
shall have the right to require the Recipient to remit to the Company an amount sufficient to satisfy any federal, state and local withholding tax requirements prior to issuance of such shares. The
Administering Body may, in the exercise of its discretion, allow satisfaction of tax withholding requirements by accepting delivery of stock of the Company or by withholding a portion of the stock
otherwise issuable in connection with an Award. 

        5.12    Legends on Awards and Stock Certificates.    Each Award
Document and each certificate representing shares acquired upon vesting or exercise of an Award shall be endorsed with all legends, if any, required by applicable federal and state securities and
other laws to be placed on the Award Document and/or the certificate. The Award Documents and share certificates shall also contain legends reflecting the restrictions and rights contained in  Article VIII as long as such restrictions and rights are applicable. The determination of which legends, if any, shall be placed upon Award
Documents or the certificates shall be made by the Administering Body in its sole discretion and such decision shall be final and binding. 

        5.13    Effect of Termination of Employment on Awards.    

        (a)    Termination for Just Cause.    Subject to  Section 5.13(c) and except as otherwise
provided in a written agreement between the Company and the Recipient, which may be entered into at any
time before or after termination of employment, in the event of a Just Cause Dismissal of a Recipient all of the Recipient's unexercised Stock Options, whether or not vested, shall expire and become
unexercisable as of the date of such Just Cause Dismissal. 

        (ii)    Termination Other Than for Just Cause.    Subject to  Section 5.13(c) and except
as otherwise provided in a written agreement between the Company and the Recipient, which may be entered into at any
time before or after termination of employment, in the event of a Recipient's termination of employment for: 

        (i)    any
reason other than for Just Cause Dismissal, death, Permanent Disability or normal retirement, the Recipient's Stock Options, whether or not vested, shall expire and
become unexercisable as of the earlier of (A) the date such Stock Options would expire in accordance with their terms had the
Recipient remained employed and (B) three calendar months after the date of employment termination in the case of Incentive Stock Options, or six calendar months after the date of employment
termination in the case of Nonqualified Stock Options. 

        (ii)   death
or Permanent Disability, the Recipient's unexercised Options shall, whether or not vested, expire and become unexercisable as of the earlier of (A) the
date such Stock 

8

 

Options
would expire in accordance with their terms had the Recipient remained employed and (B) 12 months after the date of employment termination. 

        (c)    Alteration of Vesting and Exercise Periods.    Notwithstanding
anything to the contrary in Section 5.13(a) or Section 5.13(b), the Administering Body may
in its discretion designate shorter or longer periods to exercise Stock Options following a Recipient's termination of employment; provided, however,
that any shorter periods determined by the Administering Body shall be effective only if provided for in the instrument that evidences the grant to the Recipient of such Stock Options or if such
shorter period is agreed to in writing by the Recipient. Notwithstanding anything to the contrary herein, Stock Options shall be exercisable by a Recipient (or the Recipient's successor in interest)
following such Recipient's termination of employment only to the extent that installments thereof had become exercisable on or prior to the date of such termination; provided,
however, that the Administering Body may, in its discretion, elect to accelerate the vesting of all or any portion of any Stock Options that had not become exercisable on or
prior to the date of such termination. 

        (d)    Leave of Absence.    In the case of any employee on an approved
leave of absence, the Administering Body may make such provision respecting continuance of a Stock Option as the Administering Body in its discretion deems appropriate, except that in no event shall a
Stock Option be exercisable after the date such Stock Options would expire in accordance with its terms had the Recipient remained continuously employed. 

        5.14    Special Provisions Regarding California Permitted
Plan.    Notwithstanding any provisions of this Plan to the contrary, during any period that this Plan constitutes a California Permitted Plan, the terms of any
Awards granted during such period shall comply with the California Commissioner's guidelines for options granted to and share purchases by employees, directors and consultants as set forth in the
California Securities Rules §§ 260.140.41 and 260.140.42 in effect at the time the California Commissioner issues the qualification permit for this Plan, unless and to the
extent any such compliance is waived by the California Commissioner. As of the Effective Date, such guidelines require, among other matters (i) that the option exercise price of Stock Options
be not less than 85% of the fair value of the underlying shares as of the grant date of the Stock Option, with the exercise price to be not less than 110% of the fair value as of such date in the case
of Stock Options granted to Significant Shareholders; (ii) the right to exercise a Stock Option at a rate of at least 20% per year over a five-year period commencing with the option
grant date; (iii) in the case of stock purchases, a purchase price of at least 85% of the fair value of the shares at the time the stock purchase right is granted or consummated, with the price
to be 100% of the fair value of the shares at
such dates in the case of stock purchases by Significant Shareholders; and (iv) that Recipients receive financial statements of the Company at least annually. 

        5.15    Lock-Up Agreements.    Each Recipient agrees as a
condition to receipt of an Award that, in connection with an Initial Public Offering and upon the request of the Company and the principal underwriter in such public offering, any shares of Common
Stock acquired or that may be acquired upon exercise or vesting of an Award may not be sold, offered for sale or otherwise disposed of without the prior written consent of the Company or such
underwriter, as the case may be, for a period of not more than 180 days after the effective date of the registration statement of such Initial Public Offering. 

9

   ARTICLE VI

AWARDS  

        6.1    Stock Options.    

        (a)    Nature of Stock Options.    Stock Options may be Incentive
Stock Options or Nonqualified Stock Options. 

        (b)    Option Exercise Price.    The exercise price for each Stock
Option shall be determined by the Administering Body as of the date such Stock Option is granted. The exercise price may be greater than or less than the Fair Market Value of the Common Stock subject
to the Option, provided that in no event shall the exercise price be less than the par value of the shares of Common Stock subject to the Stock Option. The Administering Body may, with the consent of
the Recipient and subject to compliance with statutory or administrative requirements applicable to Incentive Stock Options, amend the terms of any Stock Option to provide that the exercise price of
the shares remaining subject to the Stock Option shall be reestablished at a price not less than 100% of the Fair Market Value of the Common Stock on the effective date of the amendment. No
modification of any other term or provision of any Stock Option which is amended in accordance with the foregoing shall be required, although the Administering Body may, in its discretion, make such
further modifications of any such Stock Option as are not inconsistent with this Plan. 

        (c)    Option Period and Vesting.    Stock Options granted hereunder
shall vest and may be exercised as determined by the Administering Body, except that exercise of such Stock Options after termination of the Recipient's employment shall be subject to  Section 5.13.
Each Stock Option granted hereunder and all rights or obligations thereunder shall expire on such date as shall be determined by
the Administering Body, but not later than 10 years after the date the Stock Option is granted and shall be subject to earlier termination as provided herein or in the Award Document. The
Administering Body may in its discretion at any time and from time to time after the grant of a Stock Option accelerate vesting of such Option as a whole or part by increasing the number of shares
then purchasable, provided that the total number of shares subject to such Stock Option may not be increased. Except as otherwise provided herein, a Stock Option shall become exercisable, as a whole
or in part, on the date or dates specified by the Administering Body and thereafter shall remain exercisable until the expiration or earlier termination of the Stock Option. 

        (d)    Special Provisions Regarding Incentive Stock Options.    

        (i)    Notwithstanding
anything in this Section 6.1 to the contrary, the exercise price and vesting period of any Stock
Option intended to qualify as an Incentive Stock Option shall comply with the provisions of Section 422 of the IRC and the regulations thereunder. As of the Effective Date, such provisions
require, among other matters, that (A) the exercise price must not be less than the Fair Market Value of the underlying stock as of the date the Incentive Stock Option is granted, and not less
than 110% of the Fair Market Value as of such date in the case of a grant to a Significant Shareholder; and (B) that the Incentive Stock Option not be exercisable after the expiration of five
years from the date of grant in the case of an Incentive Stock Option granted to a Significant Shareholder. 

        (ii)   The
aggregate Fair Market Value (determined as of the respective date or dates of grant) of the Common Stock for which one or more Options granted to any Recipient
under this Plan (or any other option plan of the Company or any of its subsidiaries or affiliates) may for the first time become exercisable as Incentive Stock Options under the federal tax laws
during any one calendar year shall not exceed $100,000. 

        (iii)  Any
Options granted as Incentive Stock Options pursuant to this Plan that for any reason fail or cease to qualify as such shall be treated as Nonqualified Stock
Options. 

10

 

        6.2    Performance Awards.    

        (a)    Grant of Performance Award.    The Administering Body shall
determine in its discretion the performance criteria (which need not be identical and may be established on an individual or group basis) governing Performance Awards, the terms thereof, and the form
and time of payment of Performance Awards. 

        (b)    Payment of Award.    Upon satisfaction of the conditions
applicable to a Performance Award, payment will be made to the Recipient in cash, in shares of Common Stock valued at Fair Market Value, or in a combination of Common Stock and cash, as the
Administering Body in its discretion may determine. 

        (c)    Expiration of Performance Awards.    If a Recipient's
employment with the Company is terminated for any reason other than normal retirement, death or Permanent Disability prior to the time a Performance Award or any portion thereof becomes payable, all
of the Recipient's rights under the
unvested portion of the Performance Award shall expire and terminate unless otherwise determined by the Administering Body. In the event of termination of employment by reason of normal retirement,
death or Permanent Disability, the Administering Body may, in its discretion, determine what unvested portions, if any, of the Performance Award should be paid to the Recipient. 

        6.3    Restricted Stock.    

        (a)    Award of Restricted Stock.    The Administering Body shall
determine the Purchase Price (if any), the terms of payment of the Purchase Price, the restrictions upon the Restricted Stock, and when such restrictions shall lapse. 

        (b)    Requirements of Restricted Stock.    All shares of Restricted
Stock granted or sold pursuant to this Plan will be subject to the following conditions: 

        (i)    No Transfer.    The shares may not be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, alienated or encumbered until the restrictions are removed or expire; 

        (ii)   Certificates.    The Administering Body may require that the certificates representing
Restricted Stock granted or sold to a Recipient pursuant to this Plan remain in the physical custody of an escrow holder or the Company until all restrictions are removed or expire; 

        (iii) Restrictive Legends.    Each certificate representing Restricted Stock granted or
sold to a Recipient pursuant to this Plan will bear such legend or legends making reference to the restrictions imposed upon such Restricted Stock as the Administering Body in its discretion deems
necessary or appropriate to enforce such restrictions; and 

        (iv)  Other Restrictions.    The Administering Body may impose such other conditions on
Restricted Stock as the Administering Body may deem advisable, including, without limitation, restrictions under the Securities Act, under the Exchange Act, under the requirements of any stock
exchange upon which such Restricted Stock or shares of the same class are then listed and under any blue sky or other securities laws applicable to such shares. 

        (c)    Lapse of Restrictions.    The restrictions imposed upon
Restricted Stock will lapse in accordance with such terms or other conditions as are determined by the Administering Body. 

        (d)    Rights of Recipient.    Subject to the provisions of  Section 6.3(b) and any
restrictions imposed upon the Restricted Stock, the Recipient will have all rights of a shareholder with respect to the
Restricted Stock granted or sold to such Recipient under this Plan, including, without limitation, the right to vote the shares and receive all dividends and other distributions paid or made with
respect thereto. 

11

 

        (e)    Termination of Employment.    Unless the Administering Body in
its discretion determines otherwise, upon a Recipient's termination of employment for any reason, all of the Recipient's Restricted Stock remaining subject to restrictions imposed pursuant to this
Plan on the date of such termination of employment shall be repurchased by the Company at the Purchase Price (if any). 

        6.4    Stock Appreciation Rights.    

        (a)    Granting of Stock Appreciation Rights.    The Administering
Body may at any time and from time to time approve the grant to Eligible Persons of Stock Appreciation Rights, related or unrelated to Stock Options. 

        (b)    SARs Related to Options.    

        (i)    A
Stock Appreciation Right granted in connection with a Stock Option granted under this Plan will entitle the holder of the related Stock Option, upon exercise of the
Stock Appreciation Right, to surrender such Stock Option, or any portion thereof to the extent previously vested but unexercised, with respect to the number of shares as to which such Stock
Appreciation Right is exercised, and to receive payment of an amount computed pursuant to Section 6.4(b)(iii). Such Stock Option will, to the
extent surrendered, then cease to be exercisable. 

        (ii)   A
Stock Appreciation Right granted in connection with a Stock Option hereunder will be exercisable at such time or times, and only to the extent that, the related Stock
Option is exercisable, and will not be transferable except to the extent that such related Stock Option may be transferable. 

        (iii)  Upon
the exercise of a Stock Appreciation Right related to a Stock Option, the Recipient will be entitled to receive payment of an amount determined by multiplying:
(A) the difference obtained by subtracting the exercise price of a share of Common Stock specified in the related Stock Option from the Fair Market Value of a share of Common Stock on the date
of exercise of such Stock Appreciation Right (or as of such other date or as of the occurrence of such event as may have been specified in the
instrument evidencing the grant of the Stock Appreciation Right), by (B) the number of shares as to which such Stock Appreciation Right is exercised. 

        (c)    SARs Unrelated to Options.    The Administering Body may grant
Stock Appreciation Rights unrelated to Stock Options to Eligible Persons. Section 6.4(b)(iii) shall be used to determine the amount payable at
exercise under such Stock Appreciation Right, except that in lieu of the Option exercise price specified in the related Stock Option the initial base amount specified in the Award shall be used. 

        (d)    Limits.    Notwithstanding the foregoing, the Administering
Body, in its discretion, may place a dollar limitation on the maximum amount that will be payable upon the exercise of a Stock Appreciation Right under this Plan. 

        (e)    Payments.    Payment of the amount determined under the
foregoing provisions may be made solely in whole shares of Common Stock valued at their Fair Market Value on the date of exercise of the Stock Appreciation Right or, alternatively, at the sole
discretion of the Administering Body, in cash or in a combination of cash and shares of Common Stock as the Administering Body deems advisable. The Administering Body has full discretion to determine
the form in which payment of a Stock Appreciation Right will be made and to consent to or disapprove the election of a Recipient to receive cash in full or partial settlement of a Stock Appreciation
Right. If the Administering Body decides to make full payment in shares of Common 

12

 

Stock,
and the amount payable results in a fractional share, payment for the fractional share will be made in cash. 

        (f)    Rule 16b-3.    The Administering Body may,
at the time a Stock Appreciation Right is granted, impose such conditions on the exercise of the Stock Appreciation Right as may be required to satisfy the requirements of
Rule 16b-3 (or any other comparable provisions in effect at the time or times in question). 

        6.5    Stock Payments.    The Administering Body may approve Stock
Payments of the Company's Common Stock to any Eligible Person for all or any portion of the compensation (other than base salary) or other payment that would otherwise become payable by the Company to
the Eligible Person in cash. 

        6.6    Dividend Equivalents.    The Administering Body may grant
Dividend Equivalents to any Recipient who has received a Stock Option, SAR or other Award denominated in shares of Common Stock. Such Dividend Equivalents shall be effective and shall entitle the
recipients thereof to payments during the Applicable Dividend Period. Dividend Equivalents may be paid in cash, Common Stock or other Awards; the amount of Dividend Equivalents paid other than in cash
shall be determined by the
Administering Body by application of such formula as the Administering Body may deem appropriate to translate the cash value of dividends paid to the alternative form of payment of the Dividend
Equivalent. Dividend Equivalents shall be computed as of each dividend record date and shall be payable to recipients thereof at such time as the Administering Body may determine. 

        6.7    Stock Bonuses.    The Administering Body may issue shares of
Common Stock to Eligible Persons as bonuses for services rendered or for any other valid consideration on such terms and conditions as the Administering Body may determine. 

        6.8    Stock Sales.    The Administering Body may sell to Eligible
Persons shares of Common Stock on such terms and conditions as the Administering Body may determine. 

        6.9    Phantom Stock.    The Administering Body is authorized to grant
Awards of Phantom Stock. Phantom Stock is a cash bonus granted under this Plan measured by the Fair Market Value of a specified number of shares of Common Stock on a specified date, or measured by the
excess of such Fair Market Value over a specified minimum, which may but need not include a Dividend Equivalent. 

        6.10    Other Stock-Based Benefits.    The Administering Body is
authorized to grant Other Stock-Based Benefits. Other Stock-Based Benefits are any arrangements granted under this Plan not otherwise described above that (a) by their terms might involve the
issuance or sale of Common Stock or (b) involve a benefit that is measured, as a whole or in part, by the value, appreciation, dividend yield or other features attributable to a specified
number of shares of Common Stock. 

ARTICLE VII

RECAPITALIZATIONS AND REORGANIZATIONS  

        7.1    Corporate Transactions Not Involving a Change in
Control.    Subject to the provisions of Article VIII, if the Company shall consummate any Reorganization not
involving a Change in Control in which holders of shares of Common Stock are entitled to receive in respect of such shares any securities, cash or other consideration (including, without limitation, a
different number of shares of Common Stock), each Award outstanding under this Plan shall thereafter be exercisable, in accordance with this Plan, only for the kind and amount of securities, cash
and/or other consideration receivable upon such Reorganization by a holder of the same number of shares of Common Stock as are subject to that Award immediately prior to such Reorganization, and any
adjustments will be made in the sole discretion of the Administering Body to the terms of the Award as the Administering Body may deem appropriate to give effect to the Reorganization. 

13

 

        7.2    Corporate Transactions Involving a Change in Control.    

        (a)    Acceleration of Awards.    If a Change in Control occurs and in
connection with such Change in Control any Recipient's employment with the Company is terminated, then, subject to the terms of any written employment agreement between the Company and the Recipient
and the specific terms of any Award, such Recipient shall have the right to exercise or receive the full benefit of the Recipient's Awards granted under this Plan as a whole or in part during the
applicable time period provided in Section 5.13, without regard to any vesting or performance requirements or other milestones. 

        (b)    Employment Termination.    For purposes of this Section, but
without limitation, a Recipient's employment with the Company will be deemed to have been terminated in connection with a Change in Control if (i) the Recipient is removed from the Recipient's
employment with the Company by, or resigns the Recipient's employment upon the request of, a Person exercising practical voting control over the Company following the Change in Control or a person
acting upon authority or at the instruction of such Person, or (ii) the Recipient's position is eliminated as a result of a reduction in force made to reduce over-capacity or
unnecessary duplication of personnel within 90 days after the consummation of the Change in Control. 

        7.3    Provision for Awards Upon Change in Control.    As of the
effective time and date of any Change in Control, this Plan and any then outstanding Awards (whether or not vested) shall automatically terminate unless (a) provision is made in writing in
connection with such transaction for the continuance of this Plan and for the assumption of such Awards, or for the substitution for such Awards of new awards covering the securities of a successor
entity or an affiliate thereof, with appropriate adjustments as to the number and kind of securities and exercise prices, in which event this Plan and such outstanding Awards shall continue or be
replaced, as the case may be, in the manner and under the terms so provided; or (b) the Board otherwise shall provide in writing for such adjustments as it deems appropriate in the terms and
conditions of the then-outstanding Awards (whether or not vested), including, without limitation, (i) accelerating the vesting of outstanding Awards, and/or (ii) providing
for the cancellation of Awards and their automatic conversion into the right to receive the securities, cash or other consideration that a holder of the shares underlying such Awards would have
been entitled to receive upon consummation of such Change in Control had such shares been issued and outstanding immediately prior to the effective date and time of the Change in Control (net of the
appropriate option exercise prices). If, pursuant to the foregoing provisions of this Section 7.3, this Plan and the Awards shall terminate by
reason of the occurrence of a Change in Control without provision for any of the action(s) described in clause (a) or (b) hereof, then any Recipient holding outstanding Awards shall have
the right, at such time immediately prior to the consummation of the Change in Control as the Board shall designate, to exercise the Recipient's Awards to the full extent not theretofore exercised,
including any installments which have not yet become vested. 

ARTICLE VIII

SHARE TRANSFER RESTRICTIONS AND REPURCHASE RIGHTS  

        8.1    Company's Right of First Refusal.    

        (a)    Exercise of Right.    If a Recipient or the Recipient's legal
representative (a "Transferor") desires to transfer all or any part of any shares acquired pursuant to an Award granted under this Plan to any person
other than the Company (an "Offeree"), the Transferor shall (i) obtain in writing an irrevocable and unconditional bona
fide offer (an "Offer") for the purchase thereof from the Offeree; and (ii) give written notice (an
"Option Notice") to the Company setting forth the Recipient's desire to transfer such shares, which Option Notice shall be accompanied by a copy of the
offer and shall set forth at least the name and address of the Offeree and the price and terms 

14

 

of
the bona fide offer. Upon receipt of an Option Notice, the Company shall have an assignable option to purchase all (but not less than all) of such
shares (the "Company Option Shares") specified in the Option Notice, which the Company may exercise by giving to the Transferor, within 30 days
after receipt of the Option Notice, a written election to purchase the Company Option Shares. If the Company elects to purchase the Company Option Shares, it shall be obligated to purchase, and the
Optionee shall be obligated to sell to the Company (or its assignee), the Company Option Shares at the price and on the terms indicated in the offer, within 30 days from the date of delivery by
the Company of such notice of election. The Recipient shall deliver or cause to be delivered to the Company the share certificate or certificates representing the shares being purchased, duly endorsed
and free and clear of any and all liens, charges, encumbrances and other adverse interests, and the Company shall deliver or cause to be delivered to the Recipient a check in the amount of the
purchase price. 

        (b)    Sale of Option Shares to Offeree.    At any time during the
60 days following expiration the Company's 30-day option to purchase Company Option Shares, the Transferor may sell to the Offeree, pursuant to the terms of the Offer, all of the
Company Option Shares not purchased or agreed to be purchased by the Company or its assignee; provided, however, that the Transferor shall not sell such
Company Option Shares to the Offeree if the Offeree is a competitor of the Company and
the Company gives written notice to the Transferor, within 30 days of its receipt of the Option Notice, stating that the Transferor shall not sell such Company Option Shares to the Offeree; and  provided, further,
 that prior to the sale of such Company Option Shares to the Offeree, the Offeree shall execute an agreement with the Company pursuant
to which the Offeree agrees to be subject to the restrictions set forth in this Section 8.1. If such Company Option Shares are not sold to the
Offeree within such 60-day period, the unsold Company Option Shares shall remain subject to the terms of this Section 8.1 and may not
be sold by the Transferee absent the provision of a new Option Notice. 

        (c)    Failure to Deliver Company Option Shares.    If the Transferor
fails or refuses to deliver on a timely basis duly endorsed certificates representing Company Option Shares to be sold to the Company or its assignee pursuant to this  Section 8.1, the Company shall
have the right to deposit the purchase price for such Company Option Shares in a special account with any bank or
trust company in the State of California, giving notice of such deposit to the Transferor, whereupon such Company Option Shares shall be deemed to have been purchased by the Company or its assignee.
All such monies shall be held by the bank or trust company for the benefit of the Transferor. All monies deposited with the bank or trust company remaining unclaimed for six years after the date of
deposit shall be repaid by the bank or trust company to the Company on demand, and the Transferor shall thereafter look only to the Company for payment. 

        8.2    Company's Right of Repurchase.    

        (a)    Right of Repurchase.    The Company shall have the right (the
"Repurchase Right") to repurchase from a Recipient all, but not less than all, of the shares of Common Stock acquired pursuant to Awards granted under
this Plan and then owned by such Recipient, upon the occurrence of any Repurchase Event (as defined in Section 8.2(b)). The Repurchase Right may
be exercised by the Company at any time within 90 days following the date the Company obtains actual knowledge of a Repurchase Event (the "Repurchase
Period"). The Repurchase Right shall be exercised by the Company by giving the Recipient written notice on or before the last day of the Repurchase Period of the Company's
intention to exercise the Repurchase Right. The repurchase price shall be equal to the greater of (i) the price paid for such shares by the Recipient pursuant to the Award Documents(s) for such
shares, or (ii) the Fair Market Value thereof as of the date of the Repurchase Event. The Company may assign the Repurchase Right to one or more Persons. Upon timely exercise of the Repurchase
Right, the Recipient shall deliver to the Company the share certificate or certificates representing the shares being repurchased, duly 

15

 

endorsed
and free and clear of any and all liens, charges, encumbrances and other adverse interests, and the Company shall deliver or cause to be delivered to the Recipient a check in the amount of
the repurchase price. If shares are not purchased under the Repurchase Right, the Recipient and the Recipient's successor-in-interest, if any, will hold any such shares in such
entity's possession subject to all of the provisions of this Plan. 

        (b)    Repurchase Events.    The Company shall have the Repurchase
Right upon the occurrence of any of the following events (each a "Repurchase Event"): 

        (i)    Termination
of an employee-Recipient's employment with the Company, voluntarily or involuntarily, for any reason whatsoever (with or without cause), including death,
Permanent Disability or retirement; 

        (ii)   Distribution
of shares held by the Recipient to the Recipient's spouse as such spouse's joint or community interest pursuant to a decree of dissolution, operation of
law, divorce, property settlement agreement or for any other reason; or 

        (iii)  Cessation
of a director-Recipient's service to the Company as a member of the Board for any reason whatsoever, including death, resignation, removal or failure to be
reelected. 

        8.3    Adjustments for Changes in Capital Structure.    If there shall
be any change in the Common Stock of the Company through merger, consolidation, reorganization, recapitalization, share dividend, share split, combination or exchange of shares, or the like, the
restrictions contained in this Article shall apply with equal force to additional and/or substitute securities, if any, received by a Recipient in exchange for, or by virtue of the Recipient's
ownership of, shares of Common Stock acquired in connection with an Award under this Plan. 

        8.4    Termination of Article VIII.    This Article, and the
rights and obligations of the Company and Recipients hereunder, shall terminate upon the earlier of (a) the Company becoming an Exchange Act Registered Company; (b) the consummation of
the Company's Initial Public Offering; or (c) immediately prior to the consummation of a Change in Control (unless the Incumbent Board at such time determines that this Article shall not
terminate by reason of such Change in Control). 

ARTICLE IX

DEFINITIONS  

        Capitalized terms used in this Plan and not otherwise defined shall have the meanings set forth below: 

        "Administering Body" shall mean the Board as long as no Committee has been appointed and is in effect and shall mean the Committee once
the Committee has been appointed and is in effect. 

        "Affiliated Entity" means any Parent Corporation or Subsidiary Corporation. 

        "Applicable Dividend Period" means (i) the period between the date a Dividend Equivalent is granted and the date the related Stock
Option, SAR, or other Award is exercised, terminates, or is converted to Common Stock, or (ii) such other time as the Administering Body may specify in the written instrument evidencing the
grant of the Dividend Equivalent. 

        "Award" means any Stock Option, Performance Award, Restricted Stock, Stock Appreciation Right, Stock Payment, Stock Bonus, Stock Sale,
Phantom Stock, Dividend Equivalent, or Other Stock-Based Benefit granted or sold to an Eligible Person under this Plan. 

        "Award Document" means the agreement or confirming memorandum setting forth the terms and conditions of an Award. 

16

   
        "Board" means the Board of Directors of the Company. 

        "California Commissioner" means the Commissioner of Corporations of the State of California. 

        "California Permitted Plan" means this Plan when at any time the issuance of securities under this Plan is not exempt from qualification
under the California Securities Law and the issuance of securities under this Plan is subject to a qualification permit issued by the California Commissioner. 

        "California Securities Law" means the California Corporate Securities Law of 1968, as amended. 

        "California Securities Rules" means the Rules of the California Commissioner adopted under the California Securities Law. 

        "Change in Control" means the following and shall be deemed to occur if any of the following events occur: 

        (i)    Any
Person becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either the then
outstanding shares of Common Stock or the combined voting power of the Company's then outstanding securities entitled to vote generally in the election of directors; or 

        (ii)   Individuals
who, as of the effective date hereof, constitute the Board of Directors of the Company (the "Incumbent
Board") cease for any reason to constitute at least a majority of the Board of Directors of the Company, provided that any individual who becomes a director after the effective
date hereof whose election, or nomination for election by the Company's shareholders, is approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be
considered to be a member of the Incumbent Board unless that individual was nominated or elected by any Person having the power to exercise, through beneficial ownership, voting agreement and/or
proxy, 20% or more of either the then outstanding shares of Common Stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of
directors, in which case that individual shall not be considered to be a member of the Incumbent Board unless such individual's
election or nomination for election by the Company's shareholders is approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board; or 

        (iii)  Consummation
by the Company of the sale or other disposition by the Company of all or substantially all of the Company's assets or a Reorganization of the Company with
any other person, corporation or other entity, other than 

        (A)  a
Reorganization that would result in the voting securities of the Company outstanding immediately prior thereto (or, in the case of a reorganization or merger or
consolidation that is preceded or accomplished by an acquisition or series of related acquisitions by any Person, by tender or exchange offer or otherwise, of voting securities representing 5% or more
of the combined voting power of all securities of the Company, immediately prior to such acquisition or the first acquisition in such series of acquisitions) continuing to represent, either by
remaining outstanding or by being converted into voting securities of another entity, more than 50% of the combined voting power of the voting securities of the Company or such other entity
outstanding immediately after such reorganization or merger or consolidation (or series of related transactions involving such a reorganization or merger or consolidation), or 

        (B)  a
Reorganization effected to implement a recapitalization or reincorporation of the Company (or similar transaction) that does not result in a material change in
beneficial ownership of the voting securities of the Company or its successor; or 

17

 

        (iv)  Approval
by the shareholders of the Company or an order by a court of competent jurisdiction of a plan of liquidation of the Company. 

        "Commission" means the Securities and Exchange Commission. 

        "Committee" means the committee appointed by the Board to administer this Plan pursuant to  Section 4.1. 

        "Common Stock" means the common stock of the Company, as constituted on the Effective Date of this Plan, and as thereafter adjusted as a
result of any one or more events requiring adjustment of outstanding Awards under Section 3.4. 

        "Company" means Prometheus Laboratories Inc., a California corporation. 

        "Dividend Equivalent" means a right granted by the Company under Section 6.5 to a
holder of a Stock Option, Stock Appreciation Right or other Award denominated in shares of Common Stock to receive from the Company during the Applicable Dividend Period payments equivalent to the
amount of dividends payable to holders of the number of shares of Common Stock underlying such Stock Option, Stock Appreciation Right, or other Award. 

        "Effective Date" means April 10, 1997, which is the date this Plan was adopted by the Board. 

        "Eligible Person" shall include directors, officers, employees, consultants and advisors of the Company or of any Affiliated Entity. 

        "Exchange Act" means the Securities Exchange Act of 1934, as amended. 

        "Exchange Act Registered Company" means that the Company has any class of any equity security registered pursuant to Section 12 of
the Exchange Act. 

        "Expiration Date" means the tenth anniversary of the Effective Date. 

        "Fair Market Value" of a share of the Company's capital stock as of a particular date shall be: (i) if the stock is listed on an
established stock exchange or exchanges (including for this purpose, the Nasdaq National Market), the mean between the highest and lowest sale prices of the stock quoted for such date in the
Transactions Index of each such exchange as averaged with such mean price as reported on any and all other exchanges, as published in The Wall Street
Journal and determined by the Administering Body, or, if no sale price was quoted in any such Index for such date, then as of the next preceding date on which such a sale price
was quoted; or (ii) if the stock is not then listed on an exchange or the Nasdaq National Market, the average of the closing bid and asked prices per share for the stock in the
over-the-counter market as quoted on The Nasdaq Small Cap Market on such date (in the case of (i) or (ii), subject to adjustment as and if necessary and appropriate to
set an exercise price not less than 100% of the fair market value of the stock on the date an option is granted); or (iii) if the stock is not then listed on an exchange or quoted in the
over-the-counter market, an amount determined in good faith by the Administering Body; provided, however, that (A) when
appropriate, the Administering in determining Fair Market Value of capital stock of the Company may take into account such other factors as it may deem appropriate under the circumstances and
(B) if the stock is traded on the Nasdaq Small Cap Market and both sales prices and bid and asked prices are quoted or available, the Administering Body may elect to determine Fair Market Value
under either clause (i) or (ii) above. Notwithstanding the foregoing, the Fair Market Value of capital stock for purposes of grants of Incentive Stock Options
shall be determined in compliance with applicable provisions of the IRC. The Fair Market Value of rights or property other than capital stock of the Company means the fair market value thereof as
determined by the Committee on the basis of such factors as it may deem appropriate. 

        "Incentive Stock Option" means a Stock Option that qualifies as an incentive stock option under Section 422 of the IRC. 

18

 

        "Initial Public Offering" means the Company's first public distribution of Common Stock pursuant to an underwritten offering under a
registration statement declared effective under the Securities Act. 

        "IRC" means the Internal Revenue Code of 1986, as amended. 

        "Just Cause Dismissal" shall mean a termination of a Recipient's employment for any of the following reasons: (i) the Recipient
violates any reasonable rule or regulation of the Board, the Company's Chief Executive Officer or the Recipient's superiors that results in damage to the Company or which, after written notice to do
so, the Recipient fails to correct within a reasonable time; (ii) any willful misconduct or gross negligence by the Recipient in the responsibilities assigned to the Recipient; (iii) any
willful failure to perform the Recipient's job as required to meet Company objectives; (iv) any wrongful conduct of a Recipient which has an adverse impact on the Company or which constitutes a
misappropriation of Company assets; (v) the Recipient's performing services for any other person or entity which competes with the Company while the Recipient is employed by the Company,
without the written approval of the Chief Executive Officer of the Company; or (vi) any other conduct that the Administering Body determines constitutes Just Cause for Dismissal;  provided, however,
that if a Recipient is party to an employment agreement with the Company providing for just cause dismissal (or some comparable
notion) of Recipient from Recipient's employment with the Company, "Just Cause Dismissal" for purposes of this Plan shall have the same meaning as ascribed thereto or to such comparable notion in such
employment agreement. 

        "Non-Employee Director" means any director of the Company who qualifies as a "non-employee director" within the
meaning of Rule 16b-3. 

        "Nonqualified Stock Option" means a Stock Option that is not an Incentive Stock Option. 

        "Other Stock-Based Benefits" means an Award granted under Section 6.10 of this
Plan. 

        "Parent Corporation" means any Parent Corporation as defined in Section 424(e) of the IRC. 

        "Payment Event" means the event or events giving rise to the right to payment of a Performance Award. 

        "Performance Award" means an Award, payable in cash, Common Stock or a combination thereof, that vests and becomes payable over a period
of time upon attainment of performance criteria established in connection with the grant of the Award. 

        "Permanent Disability" shall mean that the Recipient becomes physically or mentally incapacitated or disabled so that the Recipient is
unable to perform substantially the same services as the Recipient performed prior to incurring such incapacity or disability (the Company, at its option and expense, being entitled to retain a
physician to confirm the existence of such incapacity or disability, and the determination of such physician to be binding upon the Company and the Recipient), and such incapacity or disability
continues for a period of three consecutive months or six months in any 12-month period or such other period(s) as may be determined by the Committee with respect to any Award, provided
that for purposes of determining the period during which an Incentive Stock Option may be exercised pursuant to Section 5.13(ii) hereof,
Permanent Disability shall mean "permanent and total disability" as defined in Section 22(e) of the IRC. 

        "Person" means any person, entity or group, within the meaning of Section 13(d) or 14(d) of the Exchange Act, but excluding
(i) the Company and its subsidiaries, (ii) any employee stock ownership or other employee benefit plan maintained by the Company that is qualified under ERISA and (iii) an
underwriter or underwriting syndicate that has acquired the Company's securities solely in connection with a public offering thereof. 

        "Phantom Stock" means an Award granted under Section 6.9 of this Plan. 

        "Plan" means this 1997 Stock Incentive Plan of the Company. 

19

 

        "Plan Term" means the period during which this Plan remains in effect (commencing the Effective Date and ending on the Expiration Date). 

        "Purchase Price" means the purchase price (if any) to be paid by a Recipient for Restricted Stock as determined by the Committee (which
price shall be at least equal to the minimum price required under applicable laws and regulations for the issuance of Common Stock which is nontransferable and subject to a substantial risk of
forfeiture until specific conditions are met). 

        "Recipient" means a person who has received an Award under this Plan. 

        "Reorganization" means any merger, consolidation or other reorganization. 

        "Restricted Stock" means Common Stock that is the subject of an Award made under  Section 6.3 and that is nontransferable and subject to a substantial risk
of forfeiture until specific conditions are met, as set forth in this
Plan and in any statement evidencing the grant of such Award. 

        "Rule 16b-3" means Rule 16b-3 under the Exchange Act. 

        "Securities Act" means the Securities Act of 1933, as amended. 

        "Significant Shareholder" is an individual who, at the time a Stock Option is granted to such individual under this Plan, owns more than
ten percent (10%) of the combined voting power of all classes of stock of the Company or of any Parent Corporation or Subsidiary Corporation (after application of the attribution rules set forth in
Section 424(d) of the IRC). 

        "Stock Appreciation Right" or "SAR" means a right granted under  Section 6.4 to receive a payment that
is measured with reference to the amount by which the Fair Market Value of a specified number of shares of
Common Stock appreciates from a specified date, such as the date of grant of the SAR, to the date of exercise. 

        "Stock Bonus" means an issuance or delivery of unrestricted or restricted shares of Common Stock under  Section 6.7 of this Plan as a bonus for services
rendered or for any other valid consideration under applicable law. 

        "Stock Payment" means a payment in shares of the Company's Common Stock to replace all or any portion of the compensation (other than base
salary) that would otherwise become payable to a Recipient. 

        "Stock Option" means a right to purchase stock of the Company granted under  Section 6.1 of this Plan. 

        "Stock Sale" means a sale of Common Stock to an Eligible Person under Section 6.8
of this Plan. 

        "Subsidiary Corporation" means any Subsidiary Corporation as defined in Section 425(f) of the IRC. 

20

   
[PROMETHEUS LOGO] 

PROMETHEUS
LABORATORIES INC.

1997 STOCK INCENTIVE PLAN 

STOCK
OPTION AGREEMENT 

        THIS
STOCK OPTION AGREEMENT (this "Agreement") is made effective as of the Option Grant Date set forth below, by and between PROMETHEUS LABORATORIES INC., a California corporation (the
"Company"), and                        ("Optionee"). Terms not otherwise defined in this Agreement shall have the meanings
ascribed to them in the Prometheus Laboratories Inc. 1997 Stock Incentive Plan (the
"Plan"). The parties agree as follows: 

        1.    Governing Plan.    Optionee has received a copy of the Plan. This Agreement is subject in all respects to the
applicable provisions of the Plan, which are incorporated herein by reference. In the case of any conflict between the provisions of the Plan and this Agreement, the provisions of the Plan shall
control. 

        2.    Grant of Option.    The Company hereby grants to Optionee a stock option (the "Option") to purchase shares of
the Company's Common Stock upon the following terms and conditions: 

	Option Grant Date:	 	 
	

Type of Option (Incentive/Nonqualified):	
 	

Incentive Stock Option
	

Number of Shares of Common Stock:	
 	

            Shares
	

Purchase Price Per Share:	
 	

 
	

Vesting Schedule:	
 	

1/4th of Shares

1/48th of Shares on First Day of Each Month Thereafter (until all Shares have vested)

        3.    Term and Termination.    The unexercised portion of the Option (whether or not vested) shall automatically
expire and become unexercisable on the earliest to occur of (a) the date of Optionee's Just Cause Dismissal; (b) twelve (12) months after the date of Optionee's death, Permanent
Disability or normal retirement; (c) three (3) months after the date Optionee's employment terminates for any reason other than Just Cause Dismissal, death, Permanent Disability or normal
retirement; or (d) the tenth (10th) anniversary of the Option Grant Date. 

        4.    Governing Law.    This Agreement shall be governed by, interpreted under, and construed and enforced in
accordance with the internal laws, and not the laws pertaining to conflicts or choice of laws, of the State of California applicable to agreements made or to be performed wholly within the State of
California. 

        IN
WITNESS WHEREOF, the Company and Optionee have executed this Agreement effective as of the Option Grant Date. 

	The Company:	 	Optionee:
	

PROMETHEUS LABORATORIES INC.	
 	

 
	

By:	

	
 	

	5739 PACIFIC CENTER BLVD.

SAN DIEGO, CA 92121-4203	 	TOLL-FREE: (888) 473-5727

www.prometheus-labs.com	 	TEL: (619) 824-0895
 FAX: (619) 824-0896

21

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Exhibit 10.3  

 
  PROMETHEUS LABORATORIES INC.
  2000 EQUITY INCENTIVE PLAN    
    
    Adopted February 17, 2000
  Approved By Shareholders April 13, 2000
  Termination Date:
February 16, 2010    
    

1.    PURPOSES.    

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

        (b)    Available Stock Awards.    The purpose of the Plan is to
provide a means by which eligible recipients of Stock Awards may be given an opportunity to benefit from increases in value of the Common Stock through the granting of the following Stock Awards:
(i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) stock bonuses, and (iv) rights to acquire restricted stock. 

        (c)    General Purpose.    The Company, by means of the Plan, seeks to
retain the services of the group of persons eligible to receive Stock Awards, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates. 

2.    DEFINITIONS.    

        (a)   "Affiliate" means any parent corporation or subsidiary corporation of the Company, whether now or
hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code. 

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

        (c)   "Cause" means the occurrence of any of, but not limited to, the following: (i) conviction
of the Participant of any felony or any crime involving fraud or dishonesty; (ii) the Participant's participation (whether by affirmative act or omission) in a fraud, act of dishonesty or other
act of misconduct against the Company and/or its Affiliates; (iii) conduct by the Participant which, based upon a good faith and reasonable factual investigation by the Company (or, if the
Participant is an Officer, by the Board), demonstrates the Participant's unfitness to serve; (iv) the Participant's violation of any statutory or fiduciary duty, or duty of loyalty owed to the
Company and/or its Affiliates; (v) the Participant's violation of state or federal law in connection with the Participant's performance of his/her job which has an adverse effect on the Company
and/or its Affiliates; and (vi) the Participant's violation of Company policy which has a material adverse effect on the Company and/or its Affiliates. Notwithstanding the foregoing, the
Participant's Disability shall not constitute Cause as set forth herein. The determination that a termination is for Cause shall be by the Committee in their sole and exclusive judgment and
discretion. 

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

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

        (f)    "Common Stock" means the common stock of the Company. 

        (g)   "Company" means Prometheus Laboratories, Inc., a California corporation. 

        (h)   "Consultant" means any person, including an advisor, (i) engaged by the Company or an
Affiliate to render consulting or advisory services and who is compensated for such services or (ii) who is a member of the Board of Directors of an Affiliate. However, the term "Consultant"
shall not 

1

 

include
either Directors who are not compensated by the Company for their services as Directors or Directors who are merely paid a director's fee by the Company for their services as Directors. 

        (i)    "Continuous Service" means that the Participant's service with the Company or an Affiliate,
whether as an Employee, Director or Consultant, is not interrupted or terminated. The Participant's Continuous Service shall not be deemed to have terminated merely because of a change in the capacity
in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that
there is no interruption or termination of the Participant's Continuous Service. For example, a change in status from an Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that party's sole discretion, may determine whether Continuous Service shall be considered
interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave. 

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

        (k)   "Director" means a member of the Board of Directors of the Company. 

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

        (m)  "Employee" means any person employed by the Company or an Affiliate. Mere service as a Director
or payment of a director's fee by the Company or an Affiliate shall not be sufficient to constitute "employment" by the Company or an Affiliate. 

        (n)   "Exchange Act" means the Securities Exchange Act of 1934, as amended. 

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

        (i)    If the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq
SmallCap Market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market
(or the exchange or market with the greatest volume of trading in the Common Stock) on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable. 

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

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

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

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

2

 

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

        (s)   "Nonstatutory Stock Option" means an Option not intended to qualify as an Incentive Stock Option. 

        (t)    "Officer" means (i) before the Listing Date, any person designated by the Company as an
officer and (ii) on and after the Listing Date, a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder. 

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

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

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

        (x)   "Outside Director" means a Director who either (i) is not a current employee of the
Company or an "affiliated corporation" (within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an "affiliated
corporation" receiving compensation for prior services (other than benefits under a tax qualified pension plan), was not an officer of the Company or an "affiliated corporation" at any time and is not
currently receiving direct or indirect remuneration from the Company or an "affiliated corporation" for services in any capacity other than as a Director or (ii) is otherwise considered an
"outside director" for purposes of Section 162(m) of the Code. 

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

        (z)   "Plan" means this Prometheus Laboratories, Inc. 2000 Equity Incentive Plan. 

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

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

        (cc) "Stock Award" means any right granted under the Plan, including an Option, a stock bonus and a
right to acquire restricted stock. 

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

        (ee) "Ten Percent Shareholder" means a person who owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any of its Affiliates. 

3

 

3.    ADMINISTRATION.    

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

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

        (i)    To determine from time to time which of the persons eligible under the Plan shall be granted Stock Awards; when and how
each Stock Award shall be granted; what type or combination of types of Stock Award shall be granted; the provisions of each Stock Award granted (which need not be identical), including the time or
times when a person shall be permitted to receive Common Stock pursuant to a Stock Award; and the number of shares of Common Stock with respect to which a Stock Award shall be granted to each such
person. 

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

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

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

        (c)    Delegation to Committee.    

        (i)    General.    The Board may delegate administration of the Plan
to a Committee or Committees of one (1) or more members of the Board, and the term "Committee" shall apply to any person or persons to whom such authority has been delegated. If administration
is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however,
to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. 

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

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

4

 

4.    SHARES SUBJECT TO THE PLAN.    

        (a)    Share Reserve.    Subject to the provisions of
Section 11 relating to adjustments upon changes in Common Stock, the Common Stock that may be issued pursuant to Options shall not exceed in the aggregate twelve million one hundred eighty
thousand (12,180,000) shares of Common Stock; provided, however, that there shall be subtracted from this number shares outstanding pursuant to option exercises (both before and after the adoption of
this Plan) under the Company's 1997 Stock Incentive Plan. 

        (b)    Reversion of Shares to the Share Reserve.    If any Stock Award
under this Plan shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, the shares of Common Stock not acquired under such Stock Award shall
revert to and again become available for issuance under this Plan. 

        (c)    Source of Shares.    The shares of Common Stock subject to the
Plan may be unissued shares or reacquired shares, bought on the market or otherwise. 

        (d)    Share Reserve Limitation.    Prior to the Listing Date and to
the extent then required by Section 260.140.45 of Title 10 of the California Code of Regulations, the total number of shares of Common Stock issuable upon exercise of all outstanding Options
and the total number of shares of Common Stock provided for under any stock bonus or similar plan of the Company shall not exceed the applicable percentage as calculated in accordance with the
conditions and exclusions of Section 260.140.45 of Title 10 of the California Code of Regulations, based on the shares of Common Stock of the Company that are outstanding at the time the
calculation is made.(1) 

	(1)
	Section 260.140.45
generally provides that the total number of shares issuable upon exercise of all outstanding options (exclusive of certain rights) and the total number of
shares called for under any stock bonus or similar plan shall not exceed a number of shares which is equal to 30% of the then outstanding shares of the issuer (convertible preferred or convertible
senior common shares counted on an as if converted basis), exclusive of shares subject to promotional waivers under Section 260.141, unless a percentage higher than 30% is approved by at least
two-thirds of the outstanding shares entitled to vote. 

5.    ELIGIBILITY.    

        (a)    Eligibility for Specific Stock Awards.    Incentive Stock
Options may be granted only to Employees. Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants. 

        (b)    Ten Percent Shareholders.    

        (i)    A Ten Percent Shareholder shall not be granted an Incentive Stock Option unless the exercise price of such Option is at
least one hundred ten percent (110%) of the Fair Market Value of the Common Stock at the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of
grant. 

        (ii)   Prior to the Listing Date, a Ten Percent Shareholder shall not be granted a Nonstatutory Stock Option unless the
exercise price of such Option is at least (i) one hundred ten percent (110%) of the Fair Market Value of the Common Stock at the date of grant or (ii) such lower percentage of the Fair
Market Value of the Common Stock at the date of grant as is permitted by Section 260.140.41 of Title 10 of the California Code of Regulations at the time of the grant of the Option. 

        (iii) Prior to the Listing Date, a Ten Percent Shareholder shall not be granted a restricted stock award unless the purchase
price of the restricted stock is at least (i) one hundred percent (100%) of the Fair Market Value of the Common Stock at the date of grant or (ii) such lower 

5

 

percentage
of the Fair Market Value of the Common Stock at the date of grant as is permitted by Section 260.140.41 of Title 10 of the California Code of Regulations at the time of the grant of
the Option. 

        (c)    Section 162(m) Limitation.    Subject to the provisions
of Section 11 relating to adjustments upon changes in the shares of Common Stock, no Employee shall be eligible to be granted Options covering more than five hundred thousand (500,000) shares
of Common Stock during any calendar year. This subsection 5(c) shall not apply prior to the Listing Date and, following the Listing Date, this subsection 5(c) shall not apply until (i) the
earliest of: (1) the first material modification of the Plan (including any increase in the number of shares of Common Stock reserved for issuance under the Plan in accordance with
Section 4); (2) the issuance of all of the shares of Common Stock reserved for issuance under the Plan; (3) the expiration of the Plan; or (4) the first meeting of
shareholders at which Directors are to be elected that occurs after the close of the third calendar year following the calendar year in which occurred the first registration of an equity security
under Section 12 of the Exchange Act; or (ii) such other date required by Section 162(m) of the Code and the rules and regulations promulgated thereunder. 

        (d)    Consultants.    

        (i)    Prior to the Listing Date, a Consultant shall not be eligible for the grant of a Stock Award if, at the time of grant,
either the offer or the sale of the Company's securities to such Consultant is not exempt under Rule 701 of the Securities Act ("Rule 701") because of the nature of the services that the
Consultant is providing to the Company, or because the Consultant is not a natural person, or as otherwise provided by Rule 701, unless the Company determines that such grant need not comply
with the requirements of Rule 701 and will satisfy another exemption under the Securities Act as well as comply with the securities laws of all other relevant jurisdictions. 

        (ii)   From and after the Listing Date, a Consultant shall not be eligible for the grant of a Stock Award if, at the time of
grant, a Form S-8 Registration Statement under the Securities Act ("Form S-8") is not available to register either the offer or the sale of the Company's
securities to such Consultant because of the nature of the services that the Consultant is providing to the Company, or because the Consultant is not a natural person, or as otherwise provided by the
rules governing the use of Form S-8, unless the Company determines both (i) that such grant (A) shall be registered in another manner under the Securities Act (e.g.,
on a Form S-3 Registration Statement) or (B) does not require registration under the Securities Act in order to comply with the requirements of the Securities Act, if
applicable, and (ii) that such grant complies with the securities laws of all other relevant jurisdictions. 

        (iii) Rule 701 and Form S-8 generally are available to consultants and advisors only if
(i) they are natural persons; (ii) they provide bona fide services to the issuer, its parents, its majority-owned subsidiaries or majority-owned subsidiaries of the issuer's parent; and
(iii) the services are not in connection with the offer or sale of securities in a capital-raising transaction, and do not directly or indirectly promote or maintain a market for the issuer's
securities. 

6.    OPTION PROVISIONS.    

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

        (a)    Term.    Subject to the provisions of subsection 5(b) regarding
Ten Percent Shareholders, no Option granted prior to the Listing Date shall be exercisable after the expiration of ten (10) years from the date it was granted, and no Incentive Stock Option
granted on or after the Listing Date shall be exercisable after the expiration of ten (10) years from the date it was granted. 

6

   
        (b)    Exercise Price of an Incentive Stock Option.    Subject to the
provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise price of each Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the
Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code. 

        (c)    Exercise Price of a Nonstatutory Stock Option.    Subject to
the provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise price of each Nonstatutory Stock Option granted prior to the Listing Date shall be not less than
eighty-five percent (85%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. The exercise price of each Nonstatutory Stock Option granted
on or after the Listing Date shall be not less than eighty-five percent (85%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption
or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code. 

        (d)    Consideration.    The purchase price of Common Stock acquired
pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised or (ii) at the discretion of
the Board at the time of the grant of the Option (or subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the Company of other Common Stock, (2) according to a
deferred payment or other similar arrangement with the Optionholder or (3) in any other form of legal consideration that may be acceptable to the Board. Unless otherwise specifically provided
in the Option, the purchase price of Common Stock acquired pursuant to an Option that is paid by delivery to the Company of other Common Stock acquired, directly or indirectly from the Company, shall
be paid only by shares of the Common Stock of the Company that have been held for more than six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes). At any time that the Company is incorporated in Delaware, payment of the Common Stock's "par value," as defined in the Delaware General Corporation Law, shall not be
made by deferred payment. 

        In
the case of any deferred payment arrangement, interest shall be compounded at least annually and shall be charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement. 

        (e)    Transferability of an Incentive Stock Option.    An Incentive
Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option. 

        (f)    Transferability of a Nonstatutory Stock Option.    A
Nonstatutory Stock Option granted prior to the Listing Date shall not be transferable except by will or by the laws of descent and distribution and, to the extent provided in the Option Agreement, to
such further extent as permitted by Section 260.140.41(d) of Title 10 of the California Code of Regulations at the time of the grant of the Option, and shall be exercisable during the lifetime
of the Optionholder only by the Optionholder. A Nonstatutory Stock Option granted on or after the Listing Date shall be transferable to the extent provided in the Option Agreement. If the Nonstatutory
Stock Option does not provide for transferability, then the Nonstatutory Stock Option shall not be transferable except by will or by the 

7

 

laws
of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option. 

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

        (h)    Minimum Vesting Prior to the Listing Date.    Notwithstanding
the foregoing subsection 6(g), to the extent that the following restrictions on vesting are required by Section 260.140.41(f) of Title 10 of the California Code of Regulations at the time of
the grant of the Option, then: 

        (i)    Options granted prior to the Listing Date to an Employee who is not an Officer, Director or Consultant shall provide for
vesting of the total number of shares of Common Stock at a rate of at least twenty percent (20%) per year over five (5) years from the date the Option was granted, subject to reasonable
conditions such as continued employment; and 

        (ii)   Options granted prior to the Listing Date to Officers, Directors or Consultants may be made fully exercisable, subject
to reasonable conditions such as continued employment, at any time or during any period established by the Company. 

        (i)    Termination of Continuous Service.    

        (i)    Termination for Cause.    In the event an Optionholder's
Continuous Service is terminated for Cause, the Optionholder's Option shall terminate as of the date of such termination. 

        (ii)    Termination Other Than for Cause.    In the event an
Optionholder's Continuous Service terminates for reasons other than Cause (and other than upon the Optionholder's death or Disability), the Optionholder may exercise his or her Option (to the extent
that the Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (i) the date three (3) months
following the termination of the Optionholder's Continuous Service (or such longer or shorter period specified in the Option Agreement, which period shall not be less than thirty (30) days for
Options granted prior to the Listing Date unless such termination is for cause), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination,
the Optionholder does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate. 

        (j)    Extension of Termination Date.    An Optionholder's Option
Agreement may also provide that if the exercise of the Option following the termination of the Optionholder's Continuous Service (other than upon the Optionholder's death or Disability) would be
prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of
(i) the expiration of the term of the Option set forth in subsection 6(a) or (ii) the expiration of a period of three (3) months after the termination of the Optionholder's
Continuous Service during which the exercise of the Option would not be in violation of such registration requirements. 

        (k)    Disability of Optionholder.    In the event that an
Optionholder's Continuous Service terminates as a result of the Optionholder's Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise
such Option as of the date of termination), but only within such period of time ending on the earlier of (i) the date twelve 

8

 

(12) months
following such termination (or such longer or shorter period specified in the Option Agreement, which period shall not be less than six (6) months for Options granted prior
to the Listing Date) or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within
the time specified herein, the Option shall terminate. 

        (l)    Death of Optionholder.    In the event (i) an
Optionholder's Continuous Service terminates as a result of the Optionholder's death or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the
termination of the Optionholder's Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date
of death) by the Optionholder's estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Optionholder's
death pursuant to subsection 6(e) or 6(f), but only within the period ending on the earlier of (1) the date eighteen (18) months following the date of death (or such longer or shorter
period specified in the Option Agreement, which period shall not be less than six (6) months for Options granted prior to the Listing Date) or (2) the expiration of the term of such
Option as set forth in the Option Agreement. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate. 

        (m)    Early Exercise.    The Option may, but need not, include a
provision whereby the Optionholder may elect at any time before the Optionholder's Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to
the Option prior to the full vesting of the Option. Subject to the "Repurchase Limitation" in subsection 9(h), any unvested shares of Common Stock so purchased may be subject to a repurchase option in
favor of the Company or to any other restriction the Board determines to be appropriate. 

        (n)    Right of Repurchase.    Subject to the "Repurchase Limitation"
in subsection 9(h), the Option may, but need not, include a provision whereby the Company may elect, prior to the Listing Date, to repurchase all or any part of the vested shares of Common Stock
acquired by the Optionholder pursuant to the exercise of the Option. 

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

7.    PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.    

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

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

        (ii)    Vesting.    Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock awarded under the stock bonus agreement may, but need not, be subject to a share repurchase option in favor of the Company in accordance with a vesting
schedule to be determined by the Board. 

9

 

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

        (iv)    Transferability.    For a stock bonus award made before the
Listing Date, rights to acquire shares of Common Stock under the stock bonus agreement shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable
during the lifetime of the Participant only by the Participant. For a stock bonus award made on or after the Listing Date, rights to acquire shares of Common Stock under the stock bonus agreement
shall be transferable by the Participant only upon such terms and conditions as are set forth in the stock bonus agreement, as the Board shall determine in its discretion, so long as Common Stock
awarded under the stock bonus agreement remains subject to the terms of the stock bonus agreement. 

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

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

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

        (iii)    Vesting.    Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock acquired under the restricted stock purchase agreement may, but need not, be subject to a share repurchase option in favor of the Company in accordance with a
vesting schedule to be determined by the Board. 

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

        (v)    Transferability.    For a restricted stock award made before
the Listing Date, rights to acquire shares of Common Stock under the restricted stock purchase agreement shall not be transferable except by will or by the laws of descent and distribution and shall
be exercisable during the lifetime of the Participant only by the Participant. For a restricted stock award made on 

10

 

or
after the Listing Date, rights to acquire shares of Common Stock under the restricted stock purchase agreement shall be transferable by the Participant only upon such terms and conditions as are
set forth in the restricted stock purchase agreement, as the Board shall determine in its discretion, so long as Common Stock awarded under the restricted stock purchase agreement remains subject to
the terms of the restricted stock purchase agreement. 

8.    COVENANTS OF THE COMPANY.    

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

        (b)    Securities Law Compliance.    The Company shall seek to obtain
from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the
Stock Awards; provided, however, that
this undertaking shall not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Common
Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained. 

9.    USE OF PROCEEDS FROM STOCK.    

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

10.    MISCELLANEOUS.    

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

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

        (c)    No Employment or other Service Rights.    Nothing in the Plan
or any instrument executed or Stock Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time
the Stock Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause,
(ii) the service of a Consultant pursuant to the terms of such Consultant's agreement with the Company or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be. 

        (d)    Incentive Stock Option $100,000 Limitation.    To the extent
that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any
calendar year (under all plans of the Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or portions thereof which exceed such limit (according to the order in
which they were granted) shall be treated as Nonstatutory Stock Options. 

11

 

        (e)    Investment Assurances.    The Company may require a
Participant, as a condition of exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant's knowledge and
experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters
and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Option for the Participant's own account and not with any present intention of selling or otherwise
distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (1) the issuance of the shares of Common Stock upon
the exercise or acquisition of Common Stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act or (2) as to any
particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the Common Stock. 

        (f)    Withholding Obligations.    To the extent provided by the terms
of a Stock Award Agreement, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under a Stock Award by any of the
following means (in addition to the Company's right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) tendering a cash payment;
(ii) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock
under the Stock Award, provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering to the
Company owned and unencumbered shares of Common Stock. 

        (g)    Information Obligation.    Prior to the Listing Date, to the
extent required by Section 260.140.46 of Title 10 of the California Code of Regulations, the Company shall deliver financial statements to Participants at least annually. This subsection 9(g)
shall not apply to key Employees whose duties in connection with the Company assure them access to equivalent information. 

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

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

12

 

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

11.    ADJUSTMENTS UPON CHANGES IN STOCK.    

        (a)    Capitalization Adjustments.    If any change is made in the
Common Stock subject to the Plan, or subject to any Stock Award, without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation,
stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately adjusted in the class(es) and maximum number of securities subject to the Plan pursuant to subsection 4(a) and the maximum
number of securities subject to award to any person pursuant to subsection 5(c), and the outstanding Stock Awards will be appropriately adjusted in the class(es) and number of securities and price per
share of Common Stock subject to such outstanding
Stock Awards. The Board shall make such adjustments, and its determination shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as
a transaction "without receipt of consideration" by the Company.) 

        (b)    Dissolution or Liquidation.    In the event of a dissolution or
liquidation of the Company, then all outstanding Stock Awards shall terminate immediately prior to such event. 

        (c)    Asset Sale, Merger, Consolidation or Reverse Merger.    In the
event of (i) a sale, lease or other disposition of all or substantially all of the assets of the Company, (ii) a merger or consolidation in which the Company is not the surviving
corporation or (iii) a reverse merger in which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or otherwise (individually, a "Corporate Transaction"), then any surviving corporation or acquiring corporation shall assume any
Stock Awards outstanding under the Plan or shall substitute similar stock awards (including an award to acquire the same consideration paid to the shareholders in the Corporate Transaction for those
outstanding under the Plan). In the event any surviving corporation or acquiring corporation refuses to assume such Stock Awards or to substitute similar options for those outstanding under the Plan,
then with respect to Stock Awards held by Participants whose Continuous Service has not terminated, the vesting of such Stock Awards (and, if applicable, the time during which such Stock Awards may be
exercised) shall be accelerated in full, and the Stock Awards shall terminate if not exercised at or prior to the Corporate Transaction. With respect to any other Stock Awards outstanding under the
Plan, such Stock Awards shall terminate if not exercised at or prior to the Corporate Transaction. 

        (d)    Change in Control.    If (i) a Change in Control occurs
and (ii) at any time or from time to time during the period beginning one (1) month prior to the date of such Change in Control and ending eighteen (18) months after the date of
such Change in Control the Continuous Service of a Participant terminates due to an involuntary termination (not including death or Disability) without Cause or due to a Constructive Termination
(defined below), then with respect to Stock Awards held 

13

 

by
such Participant, the vesting of Stock Awards held by such Participant (and, if applicable, the time during which such Stock Awards may be exercised) shall be accelerated in full; provided,
however, that to the extent such potential acceleration would cause a contemplated Change in Control transaction that would otherwise be eligible to be accounted for as a
"pooling-of-interests" transaction to become ineligible for such accounting treatment under generally accepted accounting principles as determined in good faith by the
Accountants prior to such Change of Control, such acceleration and/or exercisability shall not occur. 

        For
purposes of this Section 11, the following terms shall have the meanings set forth below: 

        "Accountants"
means the Company's independent accounting firm then engaged by the Company. 

        "Change
in Control" means: (i) a dissolution or liquidation of the Company; (ii) a sale of all or substantially all of the assets of the Company; (iii) a merger or
consolidation in which the Company is not the surviving corporation and in which beneficial ownership of securities of the Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the election of Directors has changed; (iv) a reverse merger in which the Company is the surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, and in which beneficial ownership of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of Directors has changed; (v) an acquisition by any person, entity or group within the
meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the Company or
subsidiary of the Company or other entity controlled by the Company) of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of Directors; or (vi) in the event that the
individuals who, as of the date of adoption of the Plan, are members of the Company's Board (the "Incumbent Board"), cease for any reason to constitute at least fifty percent (50%) of the Board. (If
the election, or nomination for election by the Company's stockholders, of any new Director is approved by a vote of at least fifty percent (50%) of the Incumbent Board, such new Director shall be
considered to be a member of the Incumbent Board in the future.) 

        "Constructive
Termination" means the occurrence of any of the following events or conditions: (i) (A) a change in the Participant's status, title, position or responsibilities
(including reporting responsibilities) which represents an adverse change from the Participant's status, title, position or responsibilities as in effect at any time within ninety (90) days
preceding the date of a Change in Control or at any time thereafter; (B) the assignment to the Participant of any duties or responsibilities which are inconsistent with the Participant's
status, title, position or responsibilities as in effect at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter; or (C) any removal of
the Participant from or failure to reappoint or reelect the Participant to any of such offices or positions, except in connection with the termination of the Participant's Continuous Service for
Cause, as a result of the Participant's Disability or death or by the Participant other than as a result of Constructive Termination; (ii) a reduction in the Participant's annual base
compensation; or (iii) the Company's requiring the Participant to relocate to any place outside a fifty (50) mile radius of the Participant's current work site, excluding in any event
reasonably required travel on the business of the Company or its Affiliates. 

        (e)    Parachute Payments.    In the event that any acceleration of
vesting and/or exercisability of Stock Awards provided for in subsection 11(d) and benefits otherwise payable to a Participant (i) constitute "parachute payments" within the meaning of
Section 280G of the Code, or any comparable successor provisions, and (ii) but for this subsection would be subject to the excise tax 

14

 

imposed
by Section 4999 of the Code, or any comparable successor provisions (the "Excise Tax"), then such Participant's benefits hereunder shall be either 

        (i)    provided to such Participant in full, or 

        (ii)   provided to such Participant as to such lesser extent which would result in no portion of such benefits being subject to
the Excise Tax, 

whichever
of the foregoing amounts, when taking into account applicable federal, state, local and foreign income and employment taxes, the Excise Tax, and any other applicable taxes, results in the
receipt by such Participant, on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under the Excise Tax.
Unless the Company and such Participant otherwise agree in writing, any determination required under this subsection shall be made in writing in good faith by the Accountants. In the event of a
reduction of benefits hereunder, the Participant shall be given the choice of which benefits to reduce. For purposes of making the calculations required by this subsection, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of the Code, and other applicable legal
authority. The Company and the Participant shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this
subsection. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this subsection. 

        If,
notwithstanding any reduction described in this subsection, the IRS determines that the Participant is liable for the Excise Tax as a result of the receipt of the payment of benefits
as described above, then the Participant shall be obligated to pay back to the Company, within thirty (30) days after a final IRS determination or in the event that the Participant challenges
the final IRS determination, a final judicial determination, a portion of the payment equal to the "Repayment Amount." The Repayment Amount with respect to the payment of benefits shall be the
smallest such amount, if any, as shall be required to be paid to the Company so that the Participant's net after-tax proceeds with respect to any payment of benefits (after taking into
account the payment of the Excise Tax and all other applicable taxes imposed on such payment) shall be maximized. The Repayment Amount with respect to the payment of benefits shall be zero if a
Repayment Amount of more than zero would not result in the Participant's net after-tax proceeds with respect to the payment of such benefits being maximized. If the Excise Tax is not
eliminated pursuant to this paragraph, the Participant shall pay the Excise Tax. 

        Notwithstanding
any other provision of this subsection 11(e), if (i) there is a reduction in the payment of benefits as described in this subsection, (ii) the IRS later
determines that the Participant is liable for the Excise Tax, the payment of which would result in the maximization of the Participant's net after-tax proceeds (calculated as if the
Participant's benefits had not previously been reduced), and (iii) the Participant pays the Excise Tax, then the Company shall pay to the Participant those benefits which were reduced pursuant
to this subsection contemporaneously or as soon as administratively possible after the Participant pays the Excise Tax so that the Participant's net after-tax proceeds with respect to the
payment of benefits is maximized. 

        If
the Participant either (i) brings any action to enforce rights pursuant to this subsection 11(e), or (ii) defend any legal challenge to his or her rights hereunder, the
Participant shall be entitled to recover attorneys' fees and costs incurred in connection with such action, regardless of the outcome of such action; provided, however, that in the event such action
is commenced by the Participant, the court finds the claim was brought in good faith. 

15

   12.    AMENDMENT OF THE PLAN AND STOCK AWARDS.    

        (a)    Amendment of Plan.    The Board at any time, and from time to
time, may amend the Plan. However, except as provided in Section 11 relating to adjustments upon changes in Common Stock, no amendment shall be effective unless approved by the shareholders of
the Company to the extent shareholder approval is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities exchange listing
requirements. 

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

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

        (d)    No Impairment of Rights.    Rights under any Stock Award granted before amendment of the Plan shall not be
impaired by any amendment of the Plan unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing. 

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

13.    TERMINATION OR SUSPENSION OF THE PLAN.    

        (a)    Plan Term.    The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall
terminate on the day before the tenth (10th) anniversary of the date the Plan is adopted by the Board or approved by the shareholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated. 

        (b)    No Impairment of Rights.    Suspension or termination of the Plan shall not impair rights and obligations under
any Stock Award granted while the Plan is in effect except with the written consent of the Participant. 

14.    EFFECTIVE DATE OF PLAN.    

        The
Plan shall become effective as determined by the Board, but no Stock Award shall be exercised unless and until the Plan has been approved by the shareholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board. 

15.    CHOICE OF LAW.    

        The
law of the State of California shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state's conflict of laws
rules. 

16

 
PROMETHEUS LABORATORIES INC.  

NOTICE
OF GRANT OF STOCK OPTION 

        Notice
is hereby given of the following stock option grant (the "Option") to purchase shares of the Common Stock of Prometheus Laboratories Inc. (the "Company"): 

	Optionee:	 	    

	

Grant Date:	
 	

    

	

Exercise Price:	
 	

    
	

per share
	

Number of Option Shares:	
 	

    
	

shares
	

Expiration Date:	
 	

 	
 	

 	

 
	 	 	    

	

Type of Option:	
 	

    
	
 	

Incentive Stock Option(2)
	

    	
 	

    
	
 	

Non-Statutory Stock Option

	(2)
	If
this is an incentive stock option, it (plus your other outstanding incentive stock options) cannot be first exercisable for more
than $100,000 in any calendar year. Any excess over $100,000 is a non-statutory stock option. 

Exercise
Schedule:    The Option shall become exercisable and vest for twenty-five percent (25%) of the Option Shares upon an Optionee's completion of one (1) year of
service measured from the Grant Date and shall become exercisable and vest for 1/48th of the Option Shares in successive equal monthly installments over the Optionee's
completion of each additional month of Continuous Service over the three (3)-year period of Continuous Service measured from the first anniversary of the Grant Date. In no event shall the
Option vest or become exercisable for any additional Option Shares after the Optionee's cessation of Continuous Service. 

Method
of Payment:    Optionee may elect to make payment of the Exercise Price by one or a combination of the following (as described in the Stock Option Agreement): (i) by cash or
check; (ii) pursuant to a Regulation T Program if the Common Stock is publicly traded; or (iii) by delivery of already-owned shares of Common Stock, if the Common Stock is
publicly traded. 

        Optionee
understands and agrees that the Option is granted subject to and in accordance with the terms of the Prometheus Laboratories Inc. 2000 Equity Incentive Plan (the "Plan").
Optionee further agrees to be bound by the terms of the Plan and the terms of the Option as set forth in the Stock Option Agreement attached hereto. 

        No Employment or Service Contract.    Nothing in this Notice or in the attached Stock Option Agreement
or in the Plan shall confer upon Optionee any right to continue in Continuous Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company
(or any parent or subsidiary employing or retaining Optionee) or of Optionee, which rights are hereby expressly reserved by each, to terminate Optionee's Continuous Service at any time for any reason,
with or without cause. 

        Definitions.    All capitalized terms in this Notice shall have the meaning assigned to them in this
Notice or in the attached Stock Option Agreement. 

        Additional Terms/Acknowledgements.    The undersigned Optionee acknowledges receipt of, and understands
and agrees to, this Grant Notice, the Stock Option Agreement and the Plan. Optionee 

17

 

further
acknowledges that as of the grant Date, this Grant Notice, the Stock Option Agreement and the Plan set forth the entire understanding between Optionee and the Company regarding the acquisition
of stock in the Company and supersede any prior oral and written agreements on that subject with the exception of options previously granted and delivered to the Optionee under the Plan or a
predecessor plan. 

	

 	

 	
 	

 	
PROMETHEUS LABORATORIES INC.
	

 	

 	
 	

 	

By:
	

 	

 	
 	

 	

Title:    President and Chief Executive Officer
	

 	

 	
 	

 	
Optionee:
	

 	

 	
 	

 	

    

	

 	

 	
 	

Address:	

 
	 	 	 	 	

	

 	

 	
 	

 	

    

	

Dated:	

 	
 	

 	

 
	 	
	 	 	 

ATTACHMENTS

Stock Option Agreement 

2000 Equity Incentive Plan

Notice of Exercise 

18

 
PROMETHEUS LABORATORIES INC.

2000 EQUITY INCENTIVE PLAN  

STOCK OPTION AGREEMENT

(INCENTIVE STOCK OPTION OR NONSTATUTORY STOCK OPTION)

        Pursuant
to your Stock Option Grant Notice ("Grant Notice") and this Stock Option Agreement, Prometheus Laboratories Inc. (the "Company") has granted you an option under its 2000
Equity Incentive Plan (the "Plan") to purchase the number of shares of the Company's Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice. Defined terms not
explicitly defined in this Stock Option Agreement but defined in the Plan shall have the same definitions as in the Plan. 

        The
details of your option are as follows: 

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

        2.    NUMBER OF SHARES AND EXERCISE PRICE.    The number of shares of
Common Stock subject to your option and your exercise price per share referenced in your Grant Notice may be adjusted from time to time for Capitalization Adjustments, as provided in the Plan. 

        3.    EXERCISE PRIOR TO VESTING ("EARLY EXERCISE").    If permitted in
your Grant Notice (i.e., the "Exercise Schedule" indicates that "Early Exercise" of your option is permitted) and subject to the provisions of your option, you may elect at any time that is both
(i) during the period of your Continuous Service and (ii) during the term of your option, to exercise all or part of your option, including the nonvested portion of your option;
provided, however, that: 

        (a)   a partial exercise of your option shall be deemed to cover first vested shares of Common Stock and then the earliest
vesting installment of unvested shares of Common Stock; 

        (b)   any shares of Common Stock so purchased from installments that have not vested as of the date of exercise shall be
subject to the purchase option in favor of the Company as described in the Company's form of Early Exercise Stock Purchase Agreement; 

        (c)   you shall enter into the Company's form of Early Exercise Stock Purchase Agreement with a vesting schedule that will
result in the same vesting as if no early exercise had occurred; and 

        (d)   if your option is an incentive stock option, then, as provided in the Plan, to the extent that the aggregate Fair Market
Value (determined at the time of grant) of the shares of Common Stock with respect to which your option plus all other incentive stock options you hold are exercisable for the first time by you during
any calendar year (under all plans of the Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), your option(s) or portions thereof that exceed such limit (according to the order
in which they were granted) shall be treated as nonstatutory stock options. 

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

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

19

 

        (b)   Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in  The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period required to avoid a charge to the
Company's reported earnings (generally six months) or that you did not acquire, directly or indirectly from the Company, that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise. "Delivery" for these purposes, in the sole discretion of the Company at the time you exercise your option, shall include
delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by the Company. Notwithstanding the foregoing, you may not exercise your option by tender to
the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company's stock. 

        (c)   Pursuant to the following deferred payment alternative: 

        (i)    Not less than one hundred percent (100%) of the aggregate exercise price, plus accrued interest, shall be due four
(4) years from date of exercise or, at the Company's election, upon termination of your Continuous Service. 

        (ii)   Interest shall be compounded at least annually and shall be charged at the minimum rate of interest necessary to avoid
the treatment as interest, under any applicable provisions of the Code, of any portion of any amounts other than amounts stated to be interest under the deferred payment arrangement. 

        (iii) At any time that the Company is incorporated in Delaware, payment of the Common Stock's "par value," as defined in the
Delaware General Corporation Law, shall be made in cash and not by deferred payment. 

        (iv)  In order to elect the deferred payment alternative, you must, as a part of your written notice of exercise, give notice
of the election of this payment alternative and, in order to secure the payment of the deferred exercise price to the Company hereunder, if the Company so requests, you must tender to the Company a
promissory note and a security agreement covering the purchased shares of Common Stock, both in form and substance satisfactory to the Company, or such other or additional documentation as the Company
may request. 

        5.    WHOLE SHARES.    You may exercise your option only for whole
shares of Common Stock. 

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

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

        (a)   immediately upon the termination of your Continuous Service for Cause; 

        (b)   three (3) months after the termination of your Continuous Service for any reason other than Cause, your Disability
or death, provided that if during any part of such three- (3-) month period your option is not exercisable solely because of the condition set forth in the preceding paragraph relating to
"Securities Law Compliance," your option shall not expire until the earlier of 

20

 

the
Expiration Date or until it shall have been exercisable for an aggregate period of thirty (30) days after the termination of your Continuous Service; 

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

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

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

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

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

        8.    EXERCISE.    

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

        (b)   By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to
enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your option, (2) the
lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (3) the disposition of shares of Common Stock acquired upon such
exercise. 

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

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

21

 

        9.    TRANSFERABILITY.    Your option is not transferable, except by
will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to
the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your option. 

        10.    RIGHT OF FIRST REFUSAL.    

        (a)   Prior to the Listing Date, you may not validly transfer (as hereinafter defined) of any shares of stock purchased on
exercise of the option, or any interest in such shares, unless such transfer is solely for cash consideration and is made in compliance with the following provisions: 

        (i)    Before there can be a valid transfer of any shares or any interest therein, the record holder of the shares to be
transferred (the "Offered Shares") shall give written notice (by registered or certified mail) to the Company. Such notice shall specify the identity of the proposed transferee, the cash price offered
for the Offered Shares by the proposed transferee and the other terms and conditions of the proposed transfer. The date such notice is mailed shall be hereinafter referred to as the "notice date" and
the record holder of the Offered Shares shall be hereinafter referred to as the "Offeror." If, from time to time, there is any stock dividend, stock split or other change in the character or amount of
any of the outstanding stock of the corporation the stock of which is subject to the provisions of this option, then in such event any and all new, substituted or additional securities to which you
are entitled by reason of your ownership of the shares acquired upon exercise of this option shall be immediately subject to the Company's Right of First Refusal with the same force and effect as the
shares subject to the Right of First Refusal immediately before such event. 

        (ii)   For a period of thirty (30) calendar days after the notice date, the Company shall have the option to purchase
all (but not less than all) of the Offered Shares at the purchase price and on the terms set forth in subsection 10(a)(iii) ("Right of First Refusal"). The Company may exercise its Right of
First Refusal by mailing (by registered or certified mail) written notice of exercise of its Right of First Refusal to the Offeror prior to the end of said thirty (30) days. 

        (iii) The price at which the Company may purchase the Offered Shares pursuant to the exercise of its Right of First Refusal
shall be the cash price offered for the Offered Shares by the proposed transferee (as set forth in the notice required under subsection 10(a)(i). The Company's notice of exercise of its Right of First
Refusal shall be accompanied by full payment for the Offered Shares and, upon such payment by the Company, the Company shall acquire full right, title and interest to all of the Offered Shares. 

        (iv)  If, and only if, the option given pursuant to subsection 10(a)(ii) is not exercised, the transfer proposed in the
notice given pursuant to subsection 10(a)(i) may take place; provided, however, that such transfer must, in all respects, be exactly as proposed in said notice except that such transfer may not
take place either before the tenth (10th) calendar day after the expiration of said 30-day option exercise period or after the ninetieth (90th) calendar day after the expiration of said
30-day option exercise period, and if such transfer has not taken place prior to said ninetieth (90th) day, such transfer may not take place without once again complying with subsection
10(a). 

        (b)   As used in this Section 10, the term "transfer" means any sale, encumbrance, pledge, gift or other form of
disposition or transfer of shares of the Company's stock or any legal or equitable interest therein; provided, however, that the term "transfer" does not include a transfer of such shares or interests
by will or by the applicable laws of descent and distribution or a gift of such shares if the donee agrees to be bound by the provisions of this Section 10. 

22

 

        (c)   None of the shares of the Company's stock purchased on exercise of this option shall be transferred on the Company's
books nor shall the Company recognize any such transfer of any such shares or any interest therein unless and until all applicable provisions of this Section 10 have been complied with in all
respects. The certificates of stock evidencing shares of stock purchased on exercise of this option shall bear an appropriate legend referring to the transfer restrictions imposed by this
Section 10. 

        (d)   To ensure that shares subject to the Company's Right of First Refusal will be available for repurchase by the Company,
the Company may require you to deposit the certificate(s) evidencing the shares that you purchase upon exercise of this option with an escrow agent designated by the Company under the terms and
conditions of an escrow agreement approved by the Company. If the Company does not require such deposit as a condition of exercise of your option, the Company reserves the right at any time to require
you to so deposit the certificate(s) in escrow. As soon as practicable after the expiration of the Company's Right of First Refusal, the agent shall deliver to you the shares and any other property no
longer subject to such restriction. In the event the shares and any other property held in escrow are subject to the Company's exercise of its Right of First Refusal, the notices required to be given
to you shall be given to the escrow agent, and any payment required to be given to you shall be given to the escrow agent. Within thirty (30) days after payment by the Company for the Offered
Shares, the escrow agent shall deliver the Offered Shares that the Company has repurchased to the Company and shall deliver the payment received from the Company to you. Shares of Common Stock that
you acquire upon exercise of your option are subject to any right of first refusal that may be described in the Company's bylaws in effect at such time the Company elects to exercise its right. The
Company's right of first refusal shall expire on the Listing Date. 

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

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

        13.    WITHHOLDING OBLIGATIONS.    

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

        (b)   Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable
conditions or restrictions of law, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock
having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law. If the date of determination of any tax
withholding obligation is deferred to a date later than the date of exercise of your option, share withholding pursuant to the preceding sentence shall not be permitted unless you make a proper and
timely election under Section 83(b) 

23

 

of
the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such
tax withholding obligation to the date of exercise of your option. Notwithstanding the filing of such election, shares of Common Stock shall be withheld solely from fully vested shares of Common Stock
determined as of the date of exercise of your option that are otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such share withholding procedure
shall be your sole responsibility. 

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

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

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

24

QuickLinks

PROMETHEUS LABORATORIES INC. 2000 EQUITY INCENTIVE PLAN Adopted February 17, 2000 Approved By Shareholders April 13, 2000 Termination Date: February 16, 2010

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