Document:

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                                                                    EXHIBIT 10.6

                                     AS AMENDED AND APPROVED ON NOVEMBER 2, 2006

                                 ALKERMES, INC.

                             1999 STOCK OPTION PLAN

                                    ARTICLE I

                                     PURPOSE

The purpose of the 1999 Stock Option Plan (the "Plan") is to enable Alkermes,
Inc. (the "Company") to offer to certain officers, employees, directors and
consultants of the Company or any of its Subsidiaries options to acquire equity
interests in the Company, thereby helping to attract, retain and reward such
persons, and strengthen the mutuality of interests between such persons and the
Company's shareholders.

                                   ARTICLE II

                                   DEFINITIONS

For purposes of the Plan, the following terms shall have the following meanings:

      2.1 "ADMINISTRATOR" shall mean the Board or, if the Board has delegated
its responsibility to administer the Plan pursuant to Section 3.1, the committee
and/or subcommittee of the Board to which such responsibility has been
delegated.

      2.2 "BOARD" shall mean the Board of Directors of the Company.

      2.3 "CHANGE OF CONTROL" shall mean

            (a) The acquisition, directly or indirectly, other than from the
Company, by any person, entity or "group" (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), excluding, for this purpose, the Company, it subsidiaries, and
any employee benefit plan of the Company or its subsidiaries which acquires
beneficial ownership of voting securities of the Company) (a "Third Party") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than 50% of the combined voting power of the Company's
then outstanding voting securities entitled to vote generally in the election of
directors; or

            (b) Individuals who, as of December 14, 2000, constitute the Board
(the "Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to such date whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the Incumbent
Directors who are directors at the time of such vote shall be, for purposes of
this Agreement, an Incumbent Director; or

            (c) Consummation of (i) a reorganization, merger or consolidation,
or (ii) a liquidation or dissolution of the Company or the sale of all or
substantially all of the assets of the Company (whether such assets are held
directly or indirectly) to a Third Party;

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            (d) except that any event or transaction which would be a "Change of
Control" under (a) or (c)(i) of this definition shall not be a "Change of
Control" if persons who were the shareholders of the Company immediately prior
to such event or transaction (other than the acquiror in the case of a
reorganization, merger or consolidation), immediately thereafter, beneficially
own more than 50% of the combined voting power of the Company's or the
reorganized, merged or consolidated company's then outstanding voting securities
entitled to vote generally in the election of directors.

      2.4 "CODE" shall mean the Internal Revenue Code of 1986, as amended.

      2.5 "COMMON STOCK" shall mean the Common Stock, par value $.01 per share,
of the Company.

      2.6 "DISABILITY" shall mean a disability that results in a Participant's
Termination of Employment, as determined pursuant to standard Company
procedures.

      2.7 "EFFECTIVE DATE" shall mean the date on which the Plan is adopted by
the Board.

      2.8 "FAIR MARKET VALUE" for purposes of the Plan, unless otherwise
required by any applicable provision of the Code or any regulations issued
thereunder, shall mean, as of any date, the average of the high and low sales
prices of a share of Common Stock as reported on the principal national
securities exchange on which the Common Stock is listed or admitted to trading,
or, if not listed or traded on any such exchange, on the Nasdaq Stock Market
("Nasdaq"), or, if such sales prices are not available, the average of the bid
and asked prices per share reported on Nasdaq, or, if such quotations are not
available, the fair market value as determined by the Board, which determination
shall be conclusive.

      2.9 "INCENTIVE STOCK OPTION" shall mean any Stock Option that is intended
to be and is designated as an "incentive stock option" within the meaning of
Section 422 of the Code.

      2.10 "NON-QUALIFIED STOCK OPTION" shall mean any Stock Option that is not
an Incentive Stock Option.

      2.11 "PARTICIPANT" shall mean an officer, employee, director or consultant
of the Company or a Subsidiary to whom an Option has been granted under the
Plan.

      2.12 "STOCK OPTION" or "OPTION" shall mean any option to purchase shares
of Common Stock granted pursuant to Article VI of the Plan.

      2.13 "SUBSIDIARY" shall mean any corporation, limited partnership, limited
liability company or any other entity of which the Company owns more than 50% of
the voting stock or equity or a controlling interest.

      2.14 "TERMINATION OF EMPLOYMENT" shall mean, as appropriate, (a) the
termination of a Participant's employment with the Company and its subsidiaries
for reasons other than a military or personal leave of absence granted by the
Company, (b) termination of a Participant's consulting relationship with the
Company or (c) termination of a Participant's service as a member of the Board.

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                                   ARTICLE III

                                 ADMINISTRATION

      3.1 THE ADMINISTRATOR. The Plan shall be administered and interpreted by
the Board; provided, however, that the Board may delegate this responsibility to
a committee, which may in turn delegate this responsibility to a subcommittee
thereof, each such committee and subcommittee to be comprised of two or more
members of the Board; and provided further, however, that notwithstanding the
foregoing, the Board may also delegate to a committee, which may in turn
delegate to a subcommittee thereof, each such committee and subcommittee to be
comprised of one or more members of the Board, the authority to grant from time
to time individual Options to purchase not more than 5,000 shares of Common
Stock to any person eligible under Article V (who is not subject to the
reporting requirements of Section 16(a) of the Securities Exchange Act of 1934,
as amended).

      3.2 AWARDS. The Administrator shall have full authority to grant, pursuant
to the terms of the Plan, Stock Options to persons eligible under Article V. In
particular, the Administrator shall have the authority:

            (a) to select the officers, employees, directors and consultants to
whom Stock Options may from time to time be granted;

            (b) to determine whether and to what extent Stock Options are to be
granted to one or more officers, employees, directors and consultants eligible
to receive Options under Article V;

            (c) to determine the number of shares of Common Stock to be covered
by each Option granted pursuant to Article VI; and

            (d) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Option granted under Article VI (including, but not
limited to, the option price, the option term, installment exercise or waiting
period provisions and provisions relating to the waiver or acceleration
thereof).

      3.3 GUIDELINES. Subject to Article VII hereof, the Administrator shall
have the authority to adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it shall, from time to time, deem
advisable; to interpret the terms and provisions of the Plan and any Option
granted under the Plan (and any agreements relating thereto); and to otherwise
supervise the administration of the Plan. The Administrator may correct any
defect, supply any omission or reconcile any inconsistency in the Plan or in any
Option in the manner and to the extent it shall deem necessary to carry out the
purposes of the Plan. Notwithstanding the foregoing, no action of the
Administrator under this Section 3.3 shall impair the rights of any Participant
without the Participant's consent, unless otherwise required by law.

      3.4 DECISIONS FINAL. Any decision, interpretation or other action made or
taken in good faith by the Administrator arising out of or in connection with
the Plan shall be final, binding and conclusive on the Company, all
Participants, officers, employees, directors and consultants, and their
respective heirs, executors, administrators, successors and assigns.

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                                   ARTICLE IV

                                SHARE LIMITATION

      4.1 SHARES. The maximum aggregate number of shares of Common Stock that
may be issued under the Plan is Twenty Million, Nine Hundred Thousand
(20,900,000) (subject to increase or decrease pursuant to Section 4.2), which
may be either authorized and unissued shares of Common Stock or authorized and
issued shares of Common Stock reacquired by the Company. If any Option granted
under the Plan shall expire, terminate or be cancelled for any reason without
having been exercised in full, the number of shares of Common Stock not
purchased under such Option shall again be available for the purposes of the
Plan.

      4.2 CHANGES. In the event of a stock dividend, cash dividend declared and
paid other than in the ordinary course, stock split, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination, exchange
of shares or other transaction affecting the Common Stock, the Administrator
shall make equitable or proportionate adjustments in (i) the maximum aggregate
shares of Common Stock that may be issued under the Plan, (ii) the maximum
number of shares with respect to which Options may be granted to any individual
during any year, (iii) the number of shares of Common Stock subject to
outstanding Awards, and (iv) the exercise price of any outstanding Options;
provided, however, that no such adjustment shall be required if the
Administrator determines that such action could cause an Award to fail to
satisfy the conditions of any applicable exception from the requirements of
Section 409A of the Code or disqualify any Award intended to be an Incentive
Stock Option. All adjustments made by the Administrator shall be final, binding
and conclusive. No fractional share of Common Stock shall be issued from the
Plan resulting from any such adjustment, but the Administrator in its discretion
may make a cash payment in lieu of fractional shares.

      4.3 PER-PARTICIPANT LIMIT. Subject to adjustment under Section 4.2, no
Participant may be granted Options during any one fiscal year to purchase more
than 4,000,000 shares of Common Stock.

                                    ARTICLE V

                                   ELIGIBILITY

      5.1 EMPLOYEES. Officers and other employees of the Company or any of its
Subsidiaries are eligible to be granted both Incentive Stock Options and
Non-Qualified Stock Options under the Plan.

      5.2 DIRECTORS AND CONSULTANTS. Directors and consultants of the Company or
any of its Subsidiaries are eligible to be granted Non-Qualified Stock Options,
but may not receive Incentive Stock Options unless they are employees of the
Company or a Subsidiary corporation within the meaning of Section 424 of the
Code.

                                   ARTICLE VI

                             GRANT OF STOCK OPTIONS

      6.1 GRANTS. The Administrator shall have the authority to grant to any
person, to the extent eligible under Article V, one or more Incentive Stock
Options, Non-Qualified Stock Options, or both types of Stock Options. To the
extent that any Stock Option does not qualify as an Incentive Stock Option
(whether because of its provisions or the time or manner of its exercise or
otherwise), such Stock Option or the portion thereof which does not qualify as
an Incentive Stock Option shall constitute a separate Non-Qualified Stock
Option.

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      6.2 INCENTIVE STOCK OPTIONS. Anything in the Plan to the contrary
notwithstanding, no term of this Plan relating to Incentive Stock Options shall
be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify the Plan under Section
422 of the Code, or, without the consent of the Participants affected, to
disqualify any Incentive Stock Option under such Section 422 of the Code.

      6.3 TERMS OF OPTIONS. Options granted under the Plan shall be subject to
the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Administrator
shall deem desirable:

            (a) STOCK OPTION CERTIFICATE. Each Stock Option shall be evidenced
by, and subject to the terms of, a Stock Option Certificate executed by the
Company. The Stock Option Certificate shall specify whether the Option is an
Incentive Stock Option or a Non-Qualified Stock Option, the number of shares of
Common Stock subject to the Stock Option, the option price, the option term, and
the other terms and conditions applicable to the Stock Option.

            (b) OPTION PRICE. The option price per share of Common Stock to be
delivered upon exercise of a Stock Option shall be determined by the
Administrator at the time of grant, but shall not be less than 100% of the Fair
Market Value of a share of Common Stock on the date the Option is granted.

            (c) OPTION TERM. The term of each Stock Option shall be fixed by the
Administrator at the time of grant, but no Stock Option shall be exercisable
more than ten years after the date it is granted.

            (d) EXERCISABILITY. Stock Options shall be exercisable at such time
or times and subject to such terms and conditions as shall be determined by the
Administrator at the time of grant; provided, however, that the Administrator
may waive any installment exercise or waiting period provisions, in whole or in
part, at any time after the date of grant, based on such factors as the
Administrator shall deem appropriate in its sole discretion.

            (e) METHOD OF EXERCISE. Subject to such installment exercise and
waiting period provisions as may be imposed by the Administrator, Stock Options
may be exercised in whole or in part at any time during the option term by
delivering to the Company written notice of exercise specifying the number of
shares of Common Stock to be purchased and the aggregate option price therefor.
The notice of exercise shall be accompanied by payment in full of the option
price and, if requested by the Company, by the representation described in
Section 9.2. Payment of the option price may be made (i) in cash or by check
payable to the Company, (ii) unless otherwise determined by the Administrator on
or after the date of grant, in shares of Common Stock duly owned by the
Participant (and for which the Participant has good title, free and clear of any
liens and encumbrances) or (iii) in the case of an Option that is not an
Incentive Stock Option unless otherwise determined by the Administrator on or
after the date of grant, by reduction in the number of shares of Common Stock
issuable upon such exercise, based, in each case, on the Fair Market Value of
the Common Stock on the date of exercise. Upon satisfaction of the conditions
provided herein, a stock certificate representing the number of shares of Common
Stock to which the Participant is entitled shall be issued and delivered to the
Participant. Stock Options may also be exercised by the optionee delivering to
the Company a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company cash or a check
payable and acceptable to the Company for the purchase price; provided that in
the event the optionee chooses to pay the purchase price as so provided, the
optionee and the broker shall

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comply with such procedures and enter into such agreements of indemnity and
other agreements as the Administrator shall prescribe as a condition of such
payment procedure.

In the event that the Company establishes, for itself or using the services of a
third party, an automated system for the exercise of Stock Options, such as a
system using an internet website or interactive voice response, then the
paperless exercise of Stock Options may be permitted through the use of such an
automated system.

            (f) DEATH. Unless otherwise determined by the Administrator on or
after the date of grant, in the event of a Participant's Termination of
Employment by reason of death, any Stock Option held by such Participant which
was exercisable on the date of death may thereafter be exercised by the legal
representative of the Participant's estate until the earlier of one year after
the date of death or the expiration of the stated term of such Stock Option, and
any Stock Option not exercisable on the date of death shall be forfeited.

            (g) DISABILITY. Unless otherwise determined by the Administrator on
or after the date of grant, in the event of a Participant's Termination of
Employment by reason of Disability, any Stock Option held by such Participant
that was exercisable on the date of such Termination of Employment may
thereafter be exercised by the Participant until the earlier of one year after
such date or the expiration of the stated term of such Stock Option, and any
Stock Option not exercisable on the date of such Termination of Employment shall
be forfeited. If the Participant dies during such one-year period, any
unexercised Stock Options held by the Participant at the time of death may
thereafter be exercised by the legal representative of the Participant's estate
until the earlier of one year after the date of the Participant's death or the
expiration of the stated term of such Stock Option. If an Incentive Stock Option
is exercised after the expiration of the exercise period that applies for
purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.

            (h) TERMINATION OF EMPLOYMENT. Unless otherwise determined by the
Administrator on or after the date of grant, in the event of a Participant's
Termination of Employment by reason of retirement or for any reason other than
death or Disability, any Stock Option held by such Participant which was
exercisable on the date of such Termination of Employment may thereafter be
exercised by the Participant until the earlier of three months after such date
or the expiration of the stated term of such Stock Option, and any Stock Option
not exercisable on the date of Termination of Employment shall be forfeited.

            (i) CHANGE OF CONTROL. Notwithstanding the provisions of Section
4.2, in the event of a Change of Control, all outstanding Stock Options shall
immediately become fully exercisable, and upon payment by the Participant of the
option price (and, if requested, delivery of the representation described in
Section 9.2), a stock certificate representing the Common Stock covered thereby
shall be issued and delivered to the Participant. This Section 6.3(i) shall
apply to any outstanding Stock Options which are Incentive Stock Options to the
extent permitted by Code Section 422(d), and any outstanding Incentive Stock
Options in excess thereof shall, immediately upon the occurrence of such a
Change of Control be treated for all purposes of the Plan as Non-Qualified Stock
Options and shall be immediately exercisable as set forth in this Section
6.3(i).

            (j) MERGER AND OTHER FUNDAMENTAL TRANSACTIONS. In the event the
Company is succeeded by another company in a reorganization, merger,
consolidation, acquisition of property or stock, separation or liquidation or
any other transaction occurs that affects the Common Stock such that an
adjustment is required in order to preserve the benefits intended to be provided
by the Plan, the successor company shall assume all of the outstanding

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Options granted under this Plan or shall substitute new options for them, which
shall provide that each Participant, at the same cost, shall be entitled upon
the exercise of each such option to receive such securities as the Board of
Directors (or equivalent governing body) of the succeeding, resulting or other
company shall determine to be equivalent, as nearly as practicable, to the
nearest whole number and class of shares of stock or other securities to which
the Participant would have been entitled under the terms of the agreement
governing the reorganization, merger, consolidation, acquisition of property or
stock, separation or liquidation as if, immediately prior to such event, the
Participant had been the holder of record of the number of shares of Common
Stock which were then subject to the outstanding Option granted under this Plan.

            (k) NON-TRANSFERABILITY OF OPTIONS. Unless otherwise determined by
the Administrator on or after the date of grant, Stock Options shall not be
transferrable by the Participant otherwise than by will or by the laws of
descent and distribution, and all Stock Options shall be exercisable, during the
Participant's lifetime, only by the Participant.

            (l) INCENTIVE STOCK OPTION LIMITATIONS. To the extent that the
aggregate Fair Market Value (determined as of the date of grant) of the Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by the Participant during any calendar year under the Plan and/or any
other stock option plan of the Company or any Subsidiary or parent corporation
(each within the meaning of Section 424 of the Code) exceeds $100,000, such
Options shall be treated as Options which are not Incentive Stock Options.

            (m) TEN-PERCENT SHAREHOLDER RULE. Notwithstanding any other
provision of the Plan to the contrary, no Incentive Stock Option shall be
granted to any person who, immediately prior to the grant, owns stock possessing
more than ten percent of the total combined voting power of all classes of stock
of the Company or any Subsidiary or parent corporation (each within the meaning
of Section 424 of the Code), unless the option price is at least 110% of the
Fair Market Value of the Common Stock on the date of grant and the Option, by
its terms, expires no later than five years after the date of grant.

      Should any of the foregoing provisions not be necessary in order for the
Stock Options to qualify as Incentive Stock Options, or should any additional
provisions be required, the Board may amend the Plan accordingly, without the
necessity of obtaining the approval of the shareholders of the Company.

      6.4 RIGHTS AS SHAREHOLDER. A Participant shall not be deemed to be the
holder of Common Stock, or to have any of the rights of a holder of Common
Stock, with respect to shares subject to an Option, unless and until the Option
is exercised and a stock certificate representing such shares of Common Stock is
issued to the Participant.

                                   ARTICLE VII

                            TERMINATION OR AMENDMENT

      7.1 TERMINATION OR AMENDMENT OF PLAN. The Board may at any time amend,
discontinue or terminate the Plan or any part thereof (including any amendment
deemed necessary to ensure that the Company may comply with any regulatory
requirement referred to in Article IX) or amend any Option previously granted,
prospectively or retroactively (subject to Article IV); provided, however, that
(a) in either case, unless otherwise required by law, the rights of a
Participant with respect to Options granted prior to such amendment,
discontinuance or

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termination may not be impaired without the consent of such Participant and (b)
the Company will seek the approval of the Company's shareholders for any
amendment to the Plan if (i) such amendment materially increases the benefits to
Participants under the Plan or (ii) approval is necessary to comply with the
Code, Federal or state securities laws, the rules or regulations of any stock
exchange or stock market on which the Common Stock is listed or traded or any
other applicable rules or regulations.

      7.2 OPTION REPRICING. Notwithstanding any provision in the Plan to the
contrary, neither the Administrator nor the Company will reprice any Option
previously granted to a Participant (except for a change in exercise price which
is effected under Section 4.2).

                                  ARTICLE VIII

                                  UNFUNDED PLAN

      8.1 UNFUNDED STATUS. The Plan is intended to constitute an "unfunded" plan
for incentive compensation. With respect to any payment not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor of the
Company.

                                   ARTICLE IX

                               GENERAL PROVISIONS

      9.1 NONASSIGNMENT. Except as otherwise provided in the Plan, any Option
granted hereunder and the rights and privileges conferred thereby shall not be
sold, transferred, assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise), and shall not be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of an Option, right or privilege contrary to
the provisions hereof, or upon the levy of any attachment or similar process
thereon, such Option and the rights and privileges conferred thereby shall
immediately terminate and the Option shall immediately be forfeited to the
Company.

      9.2 LEGEND. The Company may require each person acquiring shares upon
exercise of an Option to represent to the Company in writing that the
Participant is acquiring the shares for the Participant's own account and
without a view to the distribution thereof. The stock certificates representing
such shares may include any legend which the Company deems appropriate to
reflect any restrictions on transfer.

      All certificates representing shares of Common Stock delivered under the
Plan shall be subject to such stop transfer orders and other restrictions as the
Company may deem advisable under the rules, regulations and other requirements
of the Securities and Exchange Commission, any stock exchange or stock market
upon which the Common Stock is then listed or traded, any applicable Federal or
state securities law, and any applicable corporate law, and the Company may
cause a legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.

      9.3 OTHER PLANS. Nothing contained in the Plan shall prevent the Company
from adopting other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in specific
cases.

<PAGE>

      9.4 NO RIGHT TO EMPLOYMENT. Neither the Plan nor the grant of any Option
shall give any Participant or other officer, employee, consultant or director
any right with respect to continuance of office, employment, consulting
relationship or directorship, as the case may be, with the Company or any
Subsidiary, nor shall the Plan impose any limitation on the right of the Company
or any Subsidiary by which a Participant is employed to terminate a
Participant's office, employment or consulting relationship at any time. Neither
the Plan nor the grant of any Option shall give any director the right to
continue as a member of the Board or obligate the Company to nominate any
director for reelection by the Company's shareholders.

      9.5 WITHHOLDING OF TAXES. The Company shall have the right to reduce the
number of shares of Common Stock otherwise deliverable upon exercise of an
Option by an amount that would have a Fair Market Value equal to the amount of
all Federal, state and local taxes required to be withheld, or to deduct the
amount of such taxes from any cash payment otherwise to be made to the
Participant, pursuant to the Plan or otherwise. In connection with such
withholding, the Company may make such arrangements as are consistent with the
Plan as it may deem appropriate.

      9.6 LISTING AND OTHER CONDITIONS.

            (a) If the Common Stock is listed on a national securities exchange
or Nasdaq, the issuance of any shares of Common Stock upon exercise of an Option
shall be conditioned upon such shares being listed on such exchange or Nasdaq.
The Company shall have no obligation to issue any shares of Common Stock unless
and until such shares are so listed, and the right to exercise any Option shall
be suspended until such listing has been effected.

            (b) If at any time counsel to the Company shall be of the opinion
that any sale or delivery of shares of Common Stock upon exercise of an Option
is or may in the circumstances be unlawful or result in the imposition of excise
taxes under the statutes, rules or regulations of any applicable jurisdiction,
the Company shall have no obligation to make such sale or delivery, or to make
any application or to effect or to maintain any qualification or registration
under the Securities Act of 1933, as amended, or otherwise with respect to
shares of Common Stock or Options, and the right to exercise any Option shall be
suspended until, in the opinion of such counsel, such sale or delivery shall be
lawful or shall not result in the imposition of excise taxes.

            (c) Upon termination of any period of suspension under this Section
9.6, any Option affected by such suspension which shall not then have expired or
terminated shall be reinstated as to all shares available before such suspension
and as to shares which would otherwise have become available during the period
of such suspension, but no such suspension shall extend the term of any Option.

      9.7 GOVERNING LAW. The Plan and actions taken in connection herewith shall
be governed and construed in accordance with the laws of the Commonwealth of
Pennsylvania without regard to the conflict of law principles thereof.

      9.8 CONSTRUCTION. Wherever any words are used in the Plan in the masculine
gender they shall be construed as though they were also used in the feminine
gender in all cases where they would so apply, and wherever any words are used
herein in the singular form they shall be construed as though they were also
used in the plural form in all cases where they would so apply.

<PAGE>

      9.9 LIABILITY OF THE BOARD. No member of the Board nor any employee of the
Company or any of its Subsidiaries shall be liable for any act or action
hereunder, whether of omission or commission, by any other member of the Board
or officer or employee or by any agent to whom duties in connection with the
administration of the Plan have been delegated or, except in circumstances
involving bad faith, gross negligence or fraud, for anything done or omitted to
be done by himself or herself.

      9.10 COSTS. The Company shall bear all expenses incurred in administering
the Plan, including expenses related to the issuance of Common Stock upon
exercise of Options.

      9.11 SEVERABILITY. If any part of the Plan shall be determined to be
invalid or void in any respect, such determination shall not affect, impair,
invalidate or nullify the remaining provisions of the Plan which shall continue
in full force and effect.

      9.12 SUCCESSORS. The Plan shall be binding upon and inure to the benefit
of any successor or successors of the Company.

      9.13 HEADINGS. Article and section headings contained in the Plan are
included for convenience only and are not to be used in construing or
interpreting the Plan.

                                    ARTICLE X

                                  TERM OF PLAN

      10.1 EFFECTIVE DATE. The Plan shall be effective as of the Effective Date,
but the grant of any Option hereunder is subject to the express condition that
the Plan be approved by the shareholders of the Company within 12 months after
the Effective Date.

      10.2 TERMINATION DATE. Unless sooner terminated, the Plan shall terminate
ten years after the Effective Date and no Options may be granted thereafter.
Termination of the Plan shall not affect Options granted before such date.<PAGE>

                                                                    EXHIBIT 10.7

                                     AS AMENDED AND APPROVED ON NOVEMBER 2, 2006

                                 ALKERMES, INC.

                           1998 EQUITY INCENTIVE PLAN

1. Purpose

      The purpose of the Alkermes, Inc. 1998 Equity Incentive Plan (the "Plan")
is to attract and retain key employees and consultants of the Company and its
Affiliates, to provide an incentive for them to achieve long-range performance
goals, and to enable them to participate in the long-term growth of the Company
by granting Awards with respect to the Company's Common Stock. Certain
capitalized terms used herein are defined in Section 8 below.

2.  Administration

      The Plan shall be administered by the Committee. The Committee shall
select the Participants to receive Awards and shall determine the terms and
conditions of the Awards. The Committee shall have authority to adopt, alter and
repeal such administrative rules, guidelines and practices governing the
operation of the Plan as it shall from time to time consider advisable, and to
interpret the provisions of the Plan. The Committee's decisions shall be final
and binding.

3.  Eligibility

      All employees and consultants of the Company or any Affiliate capable of
contributing significantly to the successful performance of the Company, other
than a person who has irrevocably elected not to be eligible, are eligible to be
Participants in the Plan. Incentive Stock Options were granted only to persons
eligible to receive such Options under the Code.

4.  Stock Available for Awards

      (a) Amount. Subject to adjustment under subsection (b), Awards may be made
under the Plan for up to 591,487 shares of Common Stock, of which shares Options
to purchase 119,474 shares of Common Stock and 53,327 shares of Restricted Stock
were awarded prior to the assumption of the Plan, leaving 418,686 shares of
Common Stock available for Awards. If any Award expires or is terminated
unexercised or is forfeited or settled in a manner that results in fewer shares
outstanding than were awarded, the shares subject to such Award, to the extent
of such expiration, termination, forfeiture or decrease, shall again be
available for award under the Plan. Common Stock issued through the assumption
or substitution of outstanding grants from an acquired company shall not reduce
the shares available for Awards under the Plan. Shares issued under the Plan may
consist in whole or in part of authorized but unissued shares or treasury
shares.

      (b) Adjustment. In the event of a stock dividend, cash dividend declared
and paid other than in the ordinary course, stock split, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination, exchange
of shares or other transaction affecting the

<PAGE>

Common Stock, the Committee shall make equitable or proportionate adjustments in
(i) the maximum aggregate shares of Common Stock that may be issued under the
Plan, (ii) the maximum number of shares with respect to which Options may be
granted to any individual during any year, (iii) the number of shares of Common
Stock subject to outstanding Awards, and (iv) the exercise price of any
outstanding Options; provided, however, that no such adjustment shall be
required if the Committee determines that such action could cause an Award to
fail to satisfy the conditions of any applicable exception from the requirements
of Section 409A of the Code or disqualify any Award intended to be an Incentive
Stock Option. All adjustments made by the Committee shall be final, binding and
conclusive. No fractional share of Common Stock shall be issued from the Plan
resulting from any such adjustment, but the Committee in its discretion may make
a cash payment in lieu of fractional shares.

5.  Stock Options

      (a) Grant of Options. Subject to the provisions of the Plan, after the
assumption of the Plan by the Company the Committee may grant options
("Options") to purchase shares of Common Stock not intended to comply with the
requirements of Section 422 of the Code or any successor provision and any
regulations thereunder ("Nonstatutory Stock Options"). The Committee shall
determine the number of shares subject to each Option and the exercise price
therefor. Prior to the date of the assumption of the Plan by the Company,
Options to purchase shares of Common Stock complying with the requirements of
Section 422 of the Code or any successor provision and any regulations
thereunder ("Incentive Stock Options") were granted as authorized under the Plan
and such granted Incentive Stock Options remain in full force and effect.
Incentive Stock Options had or shall have an exercise price of at least 100% of
the Fair Market Value of the Common Stock on the date of grant. No Incentive
Stock Option may be granted hereunder after the effective date of the assumption
of the Plan by the Company.

      (b) Terms and Conditions. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Committee may specify in the
applicable grant or thereafter. The Committee may impose such conditions with
respect to the exercise of Options, including conditions relating to applicable
federal or state securities laws, as it considers necessary or advisable.

      (c) Payment. No shares shall be delivered pursuant to any exercise of an
Option until payment in full of the exercise price therefor is received by the
Company. Such payment for shares to be delivered pursuant to any exercise of an
Option may be made in whole or in part in cash or, to the extent permitted by
the Committee at or after the grant of the Option, by delivery of a note or
other commitment satisfactory to the Committee or shares of Common Stock owned
by the optionee, including Restricted Stock, or by retaining shares otherwise
issuable pursuant to the Option, in each case valued at their Fair Market Value
on the date of delivery or retention, or such other lawful consideration,
including a payment commitment of a financial or brokerage institution, as the
Committee may determine. Options may also be exercised by the optionee
delivering to the Company a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company cash or
a check payable and acceptable to the Company for the purchase price; provided
that in the event the optionee chooses to pay the purchase price as so provided,
the optionee and the broker shall comply with such procedures and enter into
such

<PAGE>

agreements of indemnity and other agreements as the Administrator shall
prescribe as a condition of such payment procedure.In the event that the Company
establishes, for itself or using the services of a third party, an automated
system for the exercise of Options, such as a system using an internet website
or interactive voice response, then the paperless exercise of Options may be
permitted through the use of such an automated system.

6.    Restricted Stock

      (a) Grant of Restricted Stock. Subject to the provisions of the Plan, the
Committee may grant shares of Common Stock subject to forfeiture ("Restricted
Stock") and determine the duration of the period (the "Restricted Period")
during which, and the conditions under which, the shares may be forfeited to the
Company and the other terms and conditions of such Awards. Shares of Restricted
Stock may be issued for no cash consideration, such minimum consideration as may
be required by applicable law or such other consideration as the Committee may
determine.

      (b) Restrictions. Shares of Restricted Stock (may not be sold, assigned,
transferred, pledged or otherwise encumbered, except as permitted by the
Committee, during the Restricted Period. Shares of Restricted Stock shall be
evidenced in such manner as the Committee may determine. Any certificates issued
in respect of shares of Restricted Stock shall be registered in the name of the
Participant and unless otherwise determined by the Committee, deposited by the
Participant, together with a stock power endorsed in blank, with the Company. At
the expiration of the Restricted Period, the Company shall deliver such
certificates to the Participant or if the Participant has died, to the
Participant's Designated Beneficiary.

7.    General Provisions Applicable to Awards

      (a) Documentation. Each Award under the Plan shall be evidenced by a
writing, delivered to the Participant specifying the terms and conditions
thereof and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Committee considers necessary or advisable to
achieve the purposes of the Plan or to comply with applicable tax and regulatory
laws and accounting principles.

      (b) Committee Discretion. Each type of Award may be made alone, in
addition to or in relation to any other Award. The terms of each type of Award
need not be identical, and the Committee need not treat Participants uniformly.
Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Committee at the time
of grant or at any time thereafter.

      (c) Dividends and Cash Awards. In the discretion of the Committee, any
Award under the Plan may provide the Participant with (i) dividends or dividend
equivalents payable (in cash or in the form of Awards under the Plan) currently
or deferred with or without interest and (ii) cash payments in lieu of or in
addition to an Award.

      (d) Termination of Employment. The Committee shall determine the effect on
an Award of the disability, death, retirement or other termination of employment
of a Participant and

<PAGE>

the extent to which, and the period during which, the Participant's legal
representative, guardian or Designated Beneficiary may receive payment of an
Award or exercise rights thereunder.

      (e) Change in Control. In order to preserve a Participant's rights under
an Award in the event of a "change in control" (as defined by the Committee) of
the Company, the Committee in its discretion may, at the time an Award is made
or at any time thereafter, take one or more of the following actions: (i)
provide for the acceleration of any time period relating to the exercise or
payment of the Award, (ii) provide for payment to the Participant of cash or
other property with a Fair Market Value equal to the amount that would have been
received upon the exercise or payment of the Award had the Award been exercised
or paid upon the change in control, (iii) adjust the terms of the Award in a
manner determined by the Committee to reflect the change in control, (iv) cause
the Award to be assumed, or new rights substituted therefor, by another entity,
or (v) make such other provision as the Committee may consider equitable to
Participants and in the best interests of the Company.

      (f) Loans. The Connate may authorize the making of loans or cash payments
to Participants in connection with the grant or exercise of any Award under the
Plan, which loans may be secured by any security, including Common Stock,
underlying or related to such Award (provided that the loan shall not exceed the
Fair Market Value of the security subject to such Award), and which may be
forgiven upon such terms and conditions as the Committee may establish at the
time of such loan or at any time thereafter.

      (g) Transferability. In the discretion of the Committee, any Award may be
made transferable upon such terms and conditions and to such extent as the
Committee determines, provided that Incentive Stock Options may be transferable
only to the extent permitted by the Code. The Committee may in its discretion
waive any restriction on transferability.

      (h) Withholding Taxes. The Participant shall pay to the Company, or make
provision satisfactory to the Committee for payment of, any taxes required by
law to be withheld in respect of Awards under the Plan no later than the date of
the event creating the tax liability. The Company and its Affiliates may, to the
extent permitted by law, deduct any such tax obligations from any payment of any
kind otherwise due to the Participant. In the Committee's discretion, such tax
obligations may be paid in whole or in part in shares of Common Stock, including
shares retained from the Award creating the tax obligation, valued at their Fair
Market Value on the date of delivery. The Company and its Affiliates may, to the
extent permitted by law, deduct any such tax obligations from any payment of any
kind otherwise due to the Participant.

      (i) Foreign Nationals. Awards may be made to Participants who are foreign
nationals or employed outside the United States on such terms and conditions
different from those specified in the Plan as the Committee considers necessary
or advisable to achieve the purposes of the Plan or to comply with applicable
laws.

      (j) Amendment of Award. The Committee may amend, modify or terminate any
outstanding Award, including substituting therefor another Award of the same or
a different type, changing the date of exercise or realization and converting an
Incentive Stock Option to a Nonstatutory Stock Option, provided that the
Participant's consent to such action shall be required

<PAGE>

unless the Committee determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.

8.    Certain Definitions

      "Affiliate" means any business entity in which the Company owns directly
or indirectly 50% or more of the total voting power or has a significant
financial interest as determined by the Committee.

      "Award" means any Option or Restricted Stock granted under the Plan,
provided, that after the date of the assumption of the Plan by the Company,
"Award" shall not mean granting of Incentive Stock Options.

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

      "Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor law.

      "Committee" means the Board or one or more committees and/or
subcommittees, each such committee or subcommittee to be comprised of two or
more members of the Board appointed by the Board to administer the Plan or a
specified portion thereof; provided, however, that notwithstanding the
foregoing, the term "Committee" also means a committee and/or a subcommittee
comprised of one or more members of the Board appointed by the Board or such
committee, to which the Board or such committee has delegated the authority to
grant from time to time individual Options to purchase not more than 5,000
shares of Common Stock to any person eligible under Section 3 (who is not
subject to the reporting requirements of Section 16(a) of the Securities
Exchange Act of 1934, as amended).

      "Common Stock" or "STOCK" means the Common Stock, par value $0.01, of the
Company.

      "Company" means Alkermes, Inc., a Pennsylvania corporation.

      "Covered Employee" means a "covered employee" within the meaning of
Section 162(m) of the Code.

      "Designated Beneficiary" means the beneficiary designated by a
Participant, in a manner determined by the Committee, to receive amounts due or
exercise rights of the Participant in the event of the Participant's death. In
the absence of an effective designation by a Participant, "DESIGNATED
BENEFICIARY" means the Participant's estate.

      "Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the Committee
in good faith or in the manner established by the Committee from time to time.

      "Participant" means a person selected by the Committee to receive an Award
under the Plan.

<PAGE>

9.    Miscellaneous

      (a) No Right To Employment. No person shall have any claim or right to be
granted an Award. Neither the Plan nor any Award hereunder shall be deemed to
give any employee the right to continued employment or to limit the right of the
Company to discharge any employee at any time.

      (b) No Rights As Shareholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
shareholder with respect to any shares of Common Stock to be distributed under
the Plan until he or she becomes the holder thereof. A Participant to whom
Common Stock is awarded shall be considered the holder of the Stock at the time
of the Award except as otherwise provided in the applicable Award.

      (c) Effective Date. The Plan shall be effective as of April 1, 1998.

      (d) Assumption Date. The outstanding Awards granted under the Plan were
assumed by the Company in connection with the merger transaction among the
Company, Advanced Inhalation Research, Inc. and Alkermes Acquisition Sub, Inc.
effective February 1, 1999, and the Plan was assumed by the Company on April 7,
1999.

      (e) Amendment of Plan. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, subject to such shareholder approval as the
Board determines to be necessary or advisable to comply with any tax or
regulatory requirement.

      (f) Governing Law. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of Pennsylvania.

<PAGE>

                                                                     Exhibit L-1

No.  ISO-____                                                        ____ Shares

                                 ALKERMES, INC.

                           1998 EQUITY INCENTIVE PLAN

                       INCENTIVE STOCK OPTION CERTIFICATE*

      Alkermes, Inc. (the "Company"), a Pennsylvania corporation, hereby grants
to the person named below an option to purchase shares of Common Stock, par
value $0.01, of the Company (the "Option") under and subject to the Company's
1998 Equity Incentive Plan (the "Plan") exercisable on the following terms and
conditions and those set forth on the reverse side of this certificate:

Name of Optionholder:                                  _________________________
Address:                                               _________________________

Social Security No.                                    _________________________

Number of Shares:                                           ____________________
Option Price:                                               ____________________
Date of Grant:                                              ____________________

Exercisability Schedule:                        [to be set at the time of Grant]

Expiration Date:                [not more than ten years from the Date of Grant
                                                                as stated above]

      This Option is intended to be treated as an Incentive Stock Option under
section 422 of the Internal Revenue Code of 1986, as amended (the "Code").

      By acceptance of this Option, the Optionholder agrees to, the terms and
conditions hereof.

                                 ALKERMES, INC.

                                 By:_________________________

*To be used after the assumption of the Plan by the Company only to reflect the
exchange of Incentive Stock Options of the Company for Incentive Stock Options
previously granted by Advanced Inhalation Research, Inc. pursuant to the Plan.

<PAGE>

                    ALKERMES, INC. 1998 EQUITY INCENTIVE PLAN

                   INCENTIVE STOCK OPTION TERMS AND CONDITIONS

      1. Plan Incorporated by Reference . This option is issued pursuant to the
terms of the Plan and may be amended as provided in the Plan. Capitalized terms
used and not otherwise defined in this certificate have the meanings given to
them in the Plan. This certificate does not set forth all of the terms and
conditions of the Plan, which are incorporated herein by reference. The
Committee administers the Plan and its determinations regarding the operation of
the Plan are final and binding. Copies of the Plan may be obtained upon written
request without charge from the Company.

      2. Option Price. The price to be paid for each share of Common Stock
issued upon exercise of the whole or any part of this Option is the Option Price
set forth on the face of this certificate.

      3. Exercisability Schedule. This Option may be exercised at any time and
from time to time for the number of shares and in accordance with the
exercisability schedule set forth on the face of this certificate, but only for
the purchase of whole shares. This Option may not be exercised as to any shares
after the Expiration Date.

      4. Method of Exercise. To exercise this Option. the Optionholder shall
deliver written notice of exercise to the Company specifying the number of
shares with respect to which the Option is being exercised accompanied by
payment of the Option Price for such shares in cash, by certified check or in
such other form, including shares of Common Stock of the Company valued at their
Fair Market Value on the date of delivery or a payment commitment of a financial
or brokerage institution. Options may also be exercised by the optionee
delivering to the Company a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company cash or
a check payable and acceptable to the Company for the purchase price; provided
that in the event the optionee chooses to pay the purchase price as so provided,
the optionee and the broker shall comply with such procedures and enter into
such agreements of indemnity and other agreements as the Administrator shall
prescribe as a condition of such payment procedure.

In the event that the Company establishes, for itself or using the services of a
third party, an automated system for the exercise of Options, such as a system
using an internet website or interactive voice response, then the paperless
exercise of Options may be permitted through the use of such an automated
system. Promptly following such notice, the Company will deliver to the
Optionholder a certificate representing the number of shares with respect to
which the Option is being exercised.

      5. Rights as a Shareholder or Employee. The Optionholder shall not have
any rights in respect of shares as to which the Option shall not have been
exercised and payment made as provided above. The Optionholder is an
employee-at-will unless, and only to the extent, provided in a separate written
agreement executed by the chief executive officer of the Company or his duly
authorized designee, and neither the Plan nor the grant of this Option shall be
deemed to give the Optionholder the right to continued employment or to limit
the right of the Company to discharge the Optionholder at any time.

      6. Recapitalization, Mergers, Etc. As provided in the Plan, in the event
of corporate transactions affecting the Company's outstanding Common Stock, the
Committee shall equitably adjust the number and kind of shares subject to this
Option and the exercise price hereunder or make provision for a cash payment. If
such transaction involves a consolidation or merger of the Company with another
entity, the sale, lease or exchange of all or substantially all of the assets of
the Company or a reorganization or liquidation of the Company, then in lieu of
the foregoing, the Committee may upon written notice to the Optionholder provide
that this Option may terminate on a date not less than 20 days after the date of
such notice unless theretofore exercised. In connection with such notice the
Committee may accelerate or waive any deferred exercise period.

      7. Option Not Transferable. This Option is not transferable by the
Optionholder otherwise than by will or the laws of descent and distribution, and
is exercisable, during the Optionholder's lifetime, only by the Optionholder.
The naming of a Designated Beneficiary does not constitute a transfer.

      8. Exercise of 0ption After Termination of Employment. If the
Optionholder's employment with (a) the Company, (b) an Affiliate, or (c) a
corporation (or parent or subsidiary corporation of such corporation) issuing or
assuming a stock option in a transaction to which section 424(a) of the Code
applies, is terminated for any reason other than by disability (within the
meaning of section 22(e)(3) of the Code) or death, the Optionholder may exercise
the rights which were available to the Optionholder at the time of such
termination only within three months from the date of termination. If the
Optionholder's employment is terminated as a result of disability, such rights
may be exercised within twelve months from the date of termination. Upon the
death of the Optionholder, his or her Designated Beneficiary shall have the
right, at any time within twelve months after the date of death, to exercise in
whole or in part any rights that were available to the Optionholder at the time
of death. Notwithstanding the foregoing, no rights under this Option may be
exercised after the Expiration Date.

      9. Compliance with Securities Laws. lt shall be a condition to the
Optionholder's right to purchase shares of Common Stock hereunder that the
Company may, in its discretion, require (a) that the shares of Common Stock
reserved for issue upon the exercise of this Option shall have been duly listed,
upon official notice of issuance, upon any national securities exchange or
automated quotation system on which the Company's Common Stock may then be
listed or quoted, (b) that either (i) a registration statement under the
Securities Act of 1933 with respect to the shares shall be in effect, or (ii) in
the opinion of counsel for the Company, the proposed purchase shall be exempt
from registration under that Act and the Optionholder shall have made such
undertakings and agreements with the Company as the Company may reasonably
require, and (c) that such other steps, if any, as counsel for the Company shall
consider necessary to comply with any laws applicable to the issue of such
shares by the Company shall have been taken by the Company or the Optionholder,
or both. The certificates representing the shares purchased under this Option
may contain such legends as counsel for the Company shall consider necessary to
comply with any applicable law.

      10. Payment of Taxes. The Optionholder shall pay to the Company, or make
provision satisfactory to the Company for payment of, any taxes required by law
to be withheld with respect to the exercise of this Option. The Committee may,
in its discretion, require any other Federal or state taxes imposed on the sale
of the shares to be paid by the Optionholder. In the Committee's discretion,
such tax

<PAGE>

obligations may be paid in whole or in part in shares of Common Stock, including
shares retained from the exercise of this Option, valued of their Fair Market
Value on the date of delivery. The Company and its Affiliates may, to the extent
permitted by law, deduct any such tax obligations from any payment of any kind
otherwise due to the Optionholder.

      11. Notice of Sale of Shares Required. The Optionholder agrees to notify
the Company in writing within 30 days of the disposition of any shares purchased
upon exercise of this Option if such disposition occurs within two years of the
date of the grant of this Option or within one year after such purchase.

<PAGE>

No. NSO-____                                                        _____ Shares

                                 ALKERMES, INC.

                           1998 EQUITY INCENTIVE PLAN

                      NONSTATUTORY STOCK OPTION CERTIFICATE

Alkermes, Inc. (the "Company"), a Pennsylvania corporation, hereby grants to the
person named below an option to purchase shares of Common Stock, par value
$0.01, of the Company (the "Option") under and subject to the Company's 1998
Equity Incentive Plan (the "Plan") exercisable on the following terms and
conditions and those set forth on the reverse side of this certificate:

Name of Optionholder:                                  _________________________
Address:                                               _________________________

[Social Security No.                                  _________________________]

Number of Shares:                                           ____________________
Option Price:                                               ____________________
Date of Grant:                                              ____________________

Exercisability Schedule:                        [to be set at the time of Grant]

Expiration Date:                      [not more than ten years from the Date of
                                                          Grant as stated above]

      This Option shall not be treated as an Incentive Stock Option under
section 422 of the Internal Revenue Code of 1986, as amended (the "Code").

      By acceptance of this Option, the Optionholder agrees to the terms and
conditions hereof.

                                 ALKERMES, INC.

                                 By:______________________________

<PAGE>

                    ALKERMES, INC. 1998 EQUITY INCENTIVE PLAN

                 NONSTATUTORY STOCK OPTION TERMS AND CONDITIONS

      1. Plan Incorporated by Reference. This Option is issued pursuant to the
terms of the Plan and may be amended as provided in the Plan. Capitalized terms
used and not otherwise defined in this certificate have the meanings given to
them in the Plan. This certificate does not set forth all of the terms and
conditions of the Plan, which are incorporated herein by reference. The
Committee administers the Plan and its determinations regarding the operation of
the Plan are final and binding. Copies of the Plan may be obtained upon written
request without charge from the Company.

      2. Option Price. The price to be paid for each share of Common Stock
issued upon exercise of the whole or any part of this Option is the Option Price
set forth on the face of this certificate.

      3. Exercisability Schedule. This Option may be exercised at any time and
from time to time for the number of shares and in accordance with the
exercisability schedule set forth on the face of this certificate, but only for
the purchase of whole shares. This Option may not be exercised as to any shares
after the Expiration Date.

      4. Method of Exercise. To exercise this Option, the Optionholder shall
deliver written notice of exercise to the Company specifying the number of
shares with respect to which the Option is being exercised accompanied by
payment of the Option Price for such shares in cash, by certified check or in
such other form. including shares of Common Stock of the Company valued at their
Fair Market Value on the date of delivery or a payment commitment of a financial
or brokerage institution. Options may also be exercised by the optionee
delivering to the Company a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company cash or
a check payable and acceptable to the Company for the purchase price; provided
that in the event the optionee chooses to pay the purchase price as so provided,
the optionee and the broker shall comply with such procedures and enter into
such agreements of indemnity and other agreements as the Administrator shall
prescribe as a condition of such payment procedure.

In the event that the Company establishes, for itself or using the services of a
third party, an automated system for the exercise of Options, such as a system
using an internet website or interactive voice response, then the paperless
exercise of Options may be permitted through the use of such an automated
system. Promptly following such notice, the Company will deliver to the
Optionholder a certificate representing the number of shares with respect to
which the Option is being exercised.

      5. Rights as a Shareholder or Employee. The Optionholder shall not have
any rights in respect of shares as to which the Option shall not have been
exercised and payment made as provided above. The Optionholder is an
employee-at-will unless, and only to the extent, provided in a separate written
agreement executed by the chief executive officer of the Company or his duly
authorized designee, and neither the Plan nor the grant of this Option shall be
deemed to give the Optionholder the right to continued employment or to limit
the right of the Company to discharge the Optionholder at any time.

      6. Recapitalization, Mergers, Etc. As provided in the Plan, in the event
of corporate transactions affecting the Company's outstanding Common Stock, the
number and kind of shares subject to this Option and the exercise price
hereunder shall be equitably adjusted. If such transaction involves a
consolidation or merger of the Company with another entity, the sale, lease or
exchange of all or substantially all of the assets of the Company or a
reorganization or liquidation of the Company, then in lieu of the foregoing, the
Committee may upon written notice to the Optionholder provide that this Option
may terminate on a date not less than 20 days after the date of such notice
unless theretofore exercised. In connection with such notice, the Committee may
accelerate or waive any deferred exercise period.

      7. Option Not Transferable. This Option is not transferable by the
Optionholder otherwise than to the extent permitted by the Plan, and is
exercisable, during the Optionholder's lifetime, only by the Optionholder or the
Optionholder's immediate transferee as permitted by the Plan. The naming of a
Designated Beneficiary does not constitute a transfer.

      8. Exercise of Option After Termination of Employment. If the
Optionholder's status as an employee or consultant of (a) the Company, (b) an
Affiliate, or (c) a corporation (or parent or subsidiary corporation of such
corporation) issuing or assuming a stock option in a transaction to which
section 424(a) of the Code applies, is terminated for any reason other than by
disability (within the meaning of section 22(e) (3) of the Code) or death, the
Optionholder may exercise the rights which were available to the Optionholder at
the time of such termination only within three months from the date of
termination. If such status is terminated as a result of disability, such rights
may be exercised within twelve months from the date of termination. Upon the
death of the Optionholder, his or her Designated Beneficiary shall have the
right, at any time within twelve months after the date of death, to exercise in
whole or in part any rights that were available to the Optionholder at the time
of death. Notwithstanding the foregoing, no rights under this Option may be
exercised after the Expiration Date.

      9. Compliance with Securities Laws. It shall be a condition to the
Optionholder's right to purchase shares of Common Stock hereunder that the
Company may, in its discretion. require (a) that the shares of Common Stock
reserved for issue upon the exercise of this Option shall have been duty listed,
upon official notice of issuance, upon any national securities exchange or
automated quotation system on which the Company's Common Stock may then be
listed or quoted, (b) that either (i) a registration statement under the
Securities Act of 1933 with respect to the shares shall be in effect, or (ii) in
the opinion of counsel for the Company, the proposed purchase shall be exempt
from registration under that Act and the Optionholder shall have made such
undertakings and agreements with the Company as the Company may reasonably
require, and (c) that such other steps, if any, as counsel for the Company shall
consider necessary to comply with any law applicable to the issue of such shares
by the Company shall have been taken by the Company or the Optionholder, or
both. The certificates representing the shares purchased under this Option may
contain such legends as counsel for the Company shall consider necessary to
comply with any applicable law.

      10. Payment of Taxes. The Optionholder shall pay to the Company, or make
provision satisfactory to the Company for payment of, any taxes required by law
to be withheld with respect to the

<PAGE>

exercise of this Option. The Committee may, in its discretion, require any other
Federal or state taxes imposed on the sale of the shares to be paid by the
Optionholder. In the Committee's discretion, such tax obligations may be paid in
whole or in part in shares of Common Stock, including shares retained from the
exercise of this Option, valued at their Fair Market Value on the date of
delivery. The Company and its Affiliates may, to the extent permitted by law,
deduct any such tax obligations from any payment of any kind otherwise due to
the Optionholder.

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