Document:

Exhibit 10.1

 

AMYLIN PHARMACEUTICALS, INC.

 

2003 NON-EMPLOYEE DIRECTORS’
STOCK OPTION PLAN

 

ADOPTED APRIL 2, 2003

APPROVED BY STOCKHOLDERS MAY 14,
2003

EFFECTIVE DATE: APRIL 2, 2003

LAST AMENDED: MARCH 16, 2009

 

1.                                      PURPOSES
AND RELATIONSHIP WITH THE COMPANY’S 2001 EQUITY INCENTIVE PLAN.

 

(a)                                  Eligible Option Recipients. 
The persons eligible for Initial Grants and Annual Grants are the
Non-Employee Directors of the Company.

 

(b)                                  Available Options. 
The purpose of the Plan is to provide a means by which Non-Employee
Directors may be given an opportunity to benefit from increases in the value of
the Common Stock through the granting of Nonstatutory Stock Options.

 

(c)                                  General Purpose. 
The Company, by means of the Plan, seeks to retain the services of its
Non-Employee Directors, to secure and retain the services of new Non-Employee
Directors and to provide incentives for such persons to exert maximum efforts
for the success of the Company and its Affiliates.

 

(d)                                  Relationship with the
Company’s 2001 Equity Incentive Plan.  All Options
granted pursuant to the Plan shall be deemed to have been issued under and
pursuant to the terms of the Incentive Plan and subject to all the terms and
conditions of the Incentive Plan except to the extent otherwise provided for in
the Plan.  In the event that any of the
terms or conditions of the Incentive Plan are inconsistent with or in conflict
with any of the terms or conditions of the Plan or the Options, the terms and
conditions of the Plan or the Options shall control.

 

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)                                  “Annual Grant” means an Option granted annually to all
Non-Employee Directors who meet the criteria specified in subsection 6(b) of
the Plan.

 

(c)                                  “Annual
Meeting”
means the annual meeting of the stockholders of the Company.

 

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

 

(e)                                  “Change
in Control”
means the occurrence of any of the following: (i) any “person,” as such
term is used in Sections 13(d) and 14(d) of the Exchange Act (other
than the Company, a subsidiary, an affiliate, or a Company employee benefit
plan, including any trustee

 

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of such plan acting as
trustee) is or becomes the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company’s then
outstanding securities other than by virtue of a merger, consolidation or
similar transaction; (ii) there is consummated a sale or other disposition
of all or substantially all of the assets of the Company (other than a sale to
an entity where at least 50% of the combined voting power of the voting
securities of such entity are owned by the stockholders of the Company in
substantially the same proportions as their ownership of the Company
immediately prior to such sale); (iii) there is consummated a merger,
consolidation or similar transaction involving (directly or indirectly) the
Company and, immediately after the consummation of such transaction, the
stockholders immediately prior to the consummation of such transaction do not
own, directly or indirectly, outstanding voting securities representing more
than 50% of the combined outstanding voting power of the surviving entity in
such transaction or more than 50% of the combined outstanding voting power of the
parent of the surviving entity in such transaction.

 

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

 

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

 

(h)                                 “Company” means Amylin Pharmaceuticals, Inc.,
a Delaware corporation.

 

(i)                                    “Consultant” means any person, including an advisor,
whether an individual or an entity, (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 and who is compensated for such services.  However, the term “Consultant” shall not
include Directors who are not compensated by the Company for their services as
Directors, and the payment of a director’s fee by the Company for services as a
Director shall not cause a Director to be considered a “Consultant” for
purposes of the Plan.

 

(j)                                    “Continuous Service” means that the Optionholder’s service
with the Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated. 
An Optionholder’s Continuous Service shall not be deemed to have
terminated by reason of a change in the capacity in which such Optionholder
renders service to the Company or an Affiliate as an Employee, Consultant or
Director or a change in the entity for which such Optionholder renders such
service, provided that there is otherwise no interruption or termination of
such Optionholder’s Continuous Service. 
For example, a change in status from a Non-Employee Director of the Company
to a Consultant of an Affiliate or an Employee of the Company 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.

 

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

 

(l)                                    “Employee” means any person employed by the Company
or an Affiliate.  A person shall not be
deemed an Employee by reason of such person’s service as a Director and/or
payments of director’s fees to such person.

 

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

 

(n)                                 “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 any established market, the Fair Market
Value of a share of Common Stock shall be the closing sales price for such
stock as quoted on such exchange or market (or the exchange or market with the
greatest volume of trading in the Common Stock) on the date of determination,
as reported in a source the Board deems reliable.

 

(ii)                                Unless otherwise provided by the Board,
if there is no closing sales price for the Common Stock on the date of
determination, then the Fair Market Value shall be the closing selling price on
the last preceding date for which such quotation exists.

 

(iii)                            In the absence of such markets for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Board and in a manner that complies with Section 409A and 422 of the Code.

 

(o)                                  “Incentive
Plan” means
the Company’s 2001 Equity Incentive Plan or any successor equity incentive plan
thereto.

 

(p)                                  “Initial Grant” means an Option granted to a
Non-Employee Director who meets the criteria specified in subsection 6(a) of
the Plan.

 

(q)                                  “Non-Employee Director” means a Director who is not an Employee.

 

(r)                                  “Nonstatutory Stock Option” means an Option not intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code
and the regulations promulgated thereunder.

 

(s)                                  “Option” means a Nonstatutory Stock Option
granted pursuant to the Plan.

 

(t)                                    “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.

 

(u)                                 “Plan” means this Amylin Pharmaceuticals, Inc.
2003 Non-Employee Directors’ Stock Option Plan.

 

(v)                                   “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.

 

3.                                      ADMINISTRATION.

 

(a)                                  Administration by Board. 
The Board shall administer the Plan.

 

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

 

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(i)                                    To determine the provisions of each
Option to the extent permitted in the Plan.

 

(ii)                                To construe and interpret the Plan and
Options 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, in a manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective.

 

(iii)                            To amend the Plan as provided in Section 10.

 

(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)                                  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.                                      OPTIONS
ISSUED UNDER INCENTIVE PLAN.

 

All Options granted pursuant to the Plan shall be
deemed to have been issued under the Incentive Plan, and the shares of Common
Stock issuable upon exercise of such Options shall be issuable out of the
shares reserved for issuance under the Incentive Plan pursuant to Section 4
of the Incentive Plan.

 

5.                                      ELIGIBILITY.

 

The Options as set forth in Section 6
automatically shall be granted under the Plan to all Non-Employee Directors in
accordance with the provisions of Section 6.

 

6.                                      NON-DISCRETIONARY
GRANTS.

 

(a)                                  Initial Grants. 
Each person who is elected or appointed by the Board or stockholders of
the Company for the first time to be a Non-Employee Director subsequent to April 2,
2003 and who has not served as a Director at any time during the two-year
period immediately preceding the date of such election or appointment,
automatically shall, upon the date of his or her initial election or
appointment to be a Non-Employee Director, be granted an Initial Grant to
purchase thirty thousand (30,000) shares of Common Stock on the terms and
conditions set forth herein, which Initial Grant shall be effective as of the
date of such election or appointment.

 

(b)                                  Annual Grants. 
Immediately following each Annual Meeting held after April 2, 2003,
each Non-Employee Director automatically shall be granted, effective as of the
date of such Annual Meeting (and in addition to any Initial Grant granted
pursuant to Section 6(a)) an Annual Grant to purchase twenty thousand
(20,000) shares of Common Stock on the terms and conditions set forth herein.

 

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7.                                      OPTION
PROVISIONS.

 

Each Option granted shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions, and may include other provisions
to the extent those provisions are permitted or required by the Incentive Plan
and are not inconsistent with or in conflict with the terms and conditions of
the Plan:

 

(a)                                  Term. 
No Option shall be exercisable after the expiration of seven (7) years
from the date it was granted.

 

(b)                                  Exercise Price. 
The exercise price of each Option shall be 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 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)                                  Vesting Schedule. 
The Option shall vest and become exercisable as follows:

 

(i)                                    Initial Grants:  (A) if the applicable Optionholder’s
Continuous Service continues through the date that is one (1) year from
the date of grant thereof (the “Anniversary Date”), such Option shall become
exercisable as of the Anniversary Date with respect to one-fourth (1/4th) of
the total number of shares of Common Stock subject to such Option; and (B) over
the thirty-six month period following the Anniversary Date, for so long as the
applicable Optionholder’s Continuous Service continues, such Option shall
become exercisable with respect to an additional one forty-eighth (1/48) of the
total number of shares of Common Stock subject to such Option on each monthly
anniversary of the Anniversary Date until such Option has become fully
exercisable.

 

(ii)                                Annual Grants:  such Option shall become exercisable in equal
monthly increments over a period of one (1) year from the date of grant of
such Option for so long as the applicable Optionholder’s Continuous Service continues.

 

8.                                      MISCELLANEOUS.

 

The Board shall have the
power to accelerate the time at which an Option may first be exercised or the
time during which an Option or any part thereof will vest in accordance with
the Plan, notwithstanding the provisions in the Option stating the time at
which it may first be exercised or the time during which it will vest.

 

9.                                      ADJUSTMENTS
UPON CHANGES IN STOCK.

 

(a)                                  Capitalization
Adjustments.  If any change is made in the Common Stock
subject to the Incentive Plan, or subject to any Option, 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)

 

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of securities subject to
Options granted under the Plan and the number of securities to be issued upon
the exercise of Options granted pursuant to subsection 6(a) and 6(b), and
the outstanding Options will be appropriately adjusted in the class(es) and
number of securities and price per share of Common Stock subject to such
outstanding Options.  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 Options 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 Options outstanding under the Plan or shall substitute similar
options (including options to acquire the same consideration paid to the
stockholders in the Corporate Transaction for those outstanding under the
Plan).  In the event any surviving
corporation or acquiring corporation refuses to assume such Options or to
substitute similar options for those outstanding under the Plan, then with
respect to Options held by Optionholders whose Continuous Service has not
terminated, the vesting of such Options (and, if applicable, the time during
which such Options may be exercised) shall be accelerated in full, and the
Options shall terminate if not exercised (if applicable) at or prior to the
Corporate Transaction.  With respect to
any other Options outstanding under the Plan, such Options shall terminate if
not exercised (if applicable) prior to the Corporate Transaction.

 

(d)                                  Change in Control. 
Notwithstanding any other provisions of the Plan to the contrary, if a
Change in Control occurs and the Optionholder’s Continuous Service has not
terminated prior to the effective date of such Change in Control, then the
vesting and exercisability of the shares of Common Stock subject to the
Optionholder’s Options shall be accelerated in full as of the effective date of
the Change in Control.  Following such
Change in Control (other than a Change in Control resulting from a plan of
complete dissolution or liquidation of the Company) and notwithstanding any
other provision of the Plan to the contrary and provided that the Optionholder’s
Continuous Service has not terminated prior to the effective date of the Change
in Control, then the Optionholder’s Options shall expire on the earliest of (i) 12
months following the effective date of such Change in Control or (ii) the
expiration of the term of the Option.

 

(e)                                  Parachute Payments. 
If any payment or benefit the Optionholder would receive pursuant to a
Change in Control from the Company or otherwise would (i) constitute a “parachute
payment” within the meaning of Section 280G of the Code, or any comparable
successor provisions, and (ii) but for this subsection, be subject to the
excise tax imposed by Section 4999 of the Code, or any comparable
successor provisions (the “Excise Tax”), then such payment or benefit shall be
either (x) provided to the Optionholder in full or (y) provided to
the

 

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Optionholder as to such
lesser extent which would result in no portion of the payment or benefit 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 (all computed at the
highest applicable marginal rate), results in the receipt by the Optionholder,
on an after-tax basis, of the greatest amount of payment or benefits,
notwithstanding that all or some portion of such payment or benefits may be
taxable under the Excise Tax.  Unless the
Company and the Optionholder otherwise agree in writing, any determination
required under this subsection shall be made in writing in good faith by the
accounting firm engaged by the Company for general audit purposes as of the day
prior to the effective date of the Change in Control.  If the accounting firm so engaged by the
Company is serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, the Company shall appoint a different
nationally recognized accounting firm to make the determinations required
hereunder (the accounting firm so engaged pursuant to the two immediately
preceding sentences, the “Accountants”).  If a reduction in payments or benefits
constituting “parachute payments” is necessary so that the payments or benefits
equal the amount determined pursuant to clauses (x) and (y) above,
reduction shall occur in the following order unless the Optionholder elects in
writing a different order (provided, however,
that such election shall be subject to Company approval if made on or after the
effective date of the event that triggers the payments or benefits): reduction
of cash payments; cancellation of accelerated vesting of Options; reduction of
employee benefits.  In the event that
acceleration of vesting of Options is to be reduced, such acceleration of
vesting shall be cancelled in the reverse order of the date of grant of the
Optionholder’s Options unless the Optionholder elects in writing a different
order for cancellation.  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 Optionholder 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 Internal Revenue Service (the “IRS”) determines
that the Optionholder is liable for the Excise Tax as a result of the receipt
of a payment or benefits as described above, then the Optionholder shall be
obligated to pay back to the Company, within thirty (30) days after a final IRS
determination or in the event that the Optionholder challenges the final IRS
determination, a final judicial determination, a portion of the payment or
benefits equal to the “Repayment Amount.”  The Repayment Amount with respect to the
payment or benefits shall be the smallest such amount, if any, as shall be
required to be paid to the Company so that the Optionholder’s net after-tax
proceeds with respect to any payment or benefits (after taking into account the
payment of the Excise Tax and all other applicable taxes imposed on such
payment or benefits) shall be maximized. 
The Repayment Amount with respect to the payment or benefits shall be
zero if a Repayment Amount of more than zero would not result in the Optionholder’s
net after-tax proceeds with respect to the payment or benefits being
maximized.  If the Excise Tax is not
eliminated pursuant to this paragraph, the Optionholder shall pay the Excise
Tax.

 

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

 

If the Optionholder
either (i) brings any action to enforce rights pursuant to this
subsection, or (ii) defends any legal challenge to its rights hereunder,
the Optionholder 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
Optionholder, the court finds the claim was brought in good faith.

 

10.                               AMENDMENT
OF THE PLAN AND OPTIONS.

 

(a)                                  Amendment of Plan. 
The Board at any time, and from time to time, may amend the Plan.  However, except as provided in Section 9
relating to adjustments upon changes in Common Stock, no amendment shall be
effective unless approved by the stockholders of the Company to the extent
stockholder approval is necessary to satisfy the requirements of Rule 16b-3
or any Nasdaq or securities exchange listing requirements.

 

(b)                                  Stockholder Approval. 
The Board may, in its sole discretion, submit any other amendment to the
Plan for stockholder approval.

 

(c)                                  No Impairment of Rights. 
Rights under any Option 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 Optionholder and (ii) the Optionholder consents in
writing.

 

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

 

11.                               TERMINATION
OR SUSPENSION OF THE PLAN.

 

(a)                                  Plan Term. 
The Board may suspend or terminate the Plan at any time.  Unless sooner terminated, the Plan shall
terminate on the day before the tenth (10th) anniversary of the date the Plan
is adopted by the Board or approved by the stockholders of the Company,
whichever is earlier.  No Options 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 Option granted while the Plan is in effect except with
the written consent of the Optionholder.

 

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12.                               EFFECTIVE
DATE OF PLAN.

 

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

 

13.                               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.

 

9Exhibit 10.2

 

AMYLIN
PHARMACEUTICALS, INC.

2003 NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN

STOCK OPTION
AGREEMENT

(NONSTATUTORY STOCK OPTION)

 

Pursuant to your Stock Option
Grant Notice (“Grant Notice”) and this Stock Option Agreement, Amylin
Pharmaceuticals, Inc. (the “Company”) has granted you an option pursuant
to the Company’s 2003 Non-Employee Directors’ Stock Option 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.  Options granted under the Plan are issued
under the Company’s 2001 Equity Incentive Plan or any successor equity
incentive plan thereto (the “Incentive Plan”), and any shares of the Company’s
Common Stock issued upon exercise of your option will be issued out of shares
reserved for issuance under the Incentive Plan. 
Defined terms not explicitly defined in this Stock Option Agreement but
defined in the Incentive Plan shall have the same definitions as in the
Incentive Plan except to the extent otherwise defined in the Plan.

 

The details of your option are
as follows:

 

1.             VESTING.  Subject to the limitations contained herein, your
option will vest as set forth in the Plan, 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.             METHOD OF PAYMENT.  Payment of the exercise price is due in full upon
exercise of all or any part of your option. 
You may elect to make payment of the exercise price in cash or by check
or in any other manner permitted by your Grant Notice, which may include one or
more of the following:

 

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

 

(b)           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”

 

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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 (i) on the
date designated by the Company in its sole and absolute discretion but not to
exceed four (4) years from date of exercise, or (ii) 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 market rate of interest necessary to avoid a charge to
earnings for financial accounting purposes.

 

(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.

 

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

 

5.             SECURITIES LAW COMPLIANCE.  Notwithstanding anything to the contrary contained
herein, you may not exercise your option unless the shares of Common Stock
issuable upon such exercise are then registered under the Securities Act or, if
such shares of Common Stock are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the
registration requirements of the Securities Act.  The exercise of your option 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.

 

6.             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)           three (3) months after the termination of your
Continuous Service for any reason other than your Disability or death, provided
that if during any part of such three (3)

 

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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 the Expiration Date or until it shall have been
exercisable for an aggregate period of three (3) months after the
termination of your Continuous Service;

 

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

 

(c)           twelve (12) months after your death if you die either
during your Continuous Service or within three (3) months after your
Continuous Service terminates;

 

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

 

(e)           the day before the seventh (7th) anniversary of the
Date of Grant.

 

7.             EXERCISE.

 

(a)           You may exercise the vested portion of your option
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.

 

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

 

9.             OPTION NOT A SERVICE CONTRACT.  Your option is not a 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 service of the Company as a Director, or of the
Company to continue your service as a Director. 
Nothing in your option shall obligate the Company or an Affiliate, their
respective stockholders, Boards of Directors, Officers or Employees to continue
your relationship with the Company as a Director.

 

10.          WITHHOLDING OBLIGATIONS.

 

(a)           At the time you exercise your option, in whole or in
part, or at any time thereafter as requested by the Company, you hereby
authorize withholding from payroll and any other amounts payable to you, and
otherwise agree to make adequate provision for (including by

 

3

 

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) 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.

 

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

 

12.          GOVERNING PLAN DOCUMENT.  Your option is subject to all the provisions of the
Incentive Plan except to the extent otherwise provided for in the Plan, the
respective 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
Incentive Plan except to the extent otherwise provided for in the Plan or any
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 Incentive Plan or the Plan, as applicable, the provisions of the
Incentive Plan or the Plan shall control, as the case may be.

 

4

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