Document:

Exhibit 10.5

 

EXHIBIT
10.5

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

     THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT, effective as of the last date signed by the
parties hereto (the “Effective Date”), supersedes and replaces the Employment Agreement dated
September 18, 2006 by and between Neurocrine Biosciences, Inc., 12790 El Camino Real, San
Diego, California 92130 (hereinafter the “Company”), and Timothy P. Coughlin (hereinafter
“Executive”) (the “Original Employment Agreement”). Once this Agreement is effective, the Original
Employment Agreement shall have no further force or effect.

R E C I T A L S

     WHEREAS, the Company and Executive wish to set forth in this Agreement the terms and
conditions under which Executive is to be employed by the Company on and after the Effective Date
hereof;

     NOW, THEREFORE, the Company and Executive, in consideration of the mutual promises set forth
herein, agree as follows:

ARTICLE 1

NATURE OF EMPLOYMENT

     1.1 Commencement Date. Executive’s full-time employment with the Company under this
Agreement shall be deemed to have commenced as of August 1, 2007 (“Commencement Date”) and this
Agreement shall continue from the Effective Date until it is terminated by either the Company or
Executive pursuant to the terms set forth in Article 6.

     1.2 At-Will Employment. Executive shall be employed at-will by the Company and
therefore either Executive or the Company may terminate the employment relationship and this
Agreement at any time, with or without Cause (as defined herein) and with or without advance
notice, subject to the provisions of Article 6.

ARTICLE 2

EMPLOYMENT DUTIES

     2.1 Title/Responsibilities. Executive hereby accepts employment with the Company
pursuant to the terms and conditions hereof. Executive agrees to serve the Company in the position
of Vice President and Chief Financial Officer. Executive shall have the powers and duties
commensurate with such position, including but not limited to hiring personnel necessary to carry
out the responsibilities for such position as set forth in the annual business plan approved by the
Board of Directors.

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     2.2 Full Time Attention. Executive shall devote his best efforts and his full
business time and attention to the performance of the services customarily incident to such office
and to such other services as the President and Chief Executive Officer or Board may reasonably
request.

     2.3 Other Activities. Except upon the prior written consent of the President & Chief
Executive Officer, Executive shall not during the period of employment engage, directly or
indirectly, in any other business activity (whether or not pursued for pecuniary advantage) that is
or may be competitive with, or that might place him in a competing position to that of the Company
or any other corporation or entity that directly or indirectly controls, is controlled by, or is
under common control with the Company (an “Affiliated Company”), provided that Executive may own
less than two percent (2%) of the outstanding securities of any such publicly traded competing
corporation.

ARTICLE 3

COMPENSATION

     3.1 Base Salary. Executive shall receive a Base Salary at an annual rate of two
hundred seventy-five thousand dollars ($275,000.00), payable semi-monthly in equal installments in
accordance with the Company’s normal payroll practices. The Chief Executive Officer shall provide
Executive with annual performance reviews, and, thereafter, Executive shall be entitled to such
increase in Base Salary as the Chief Executive Officer and Board of Directors may from time to time
establish in their sole discretion.

     3.2 Incentive Bonus. In addition to any other bonus Executive shall be awarded by the
Company’s Board of Directors, Executive shall be eligible to receive an annual incentive bonus as
determined by the Company’s Board of Directors and Chief Executive Officer based upon both the
achievement of Executive in meeting annual personal goals established by the Chief Executive
Officer / Board of Directors and the achievement by the Company of annual corporate goals
established by the Board of Directors. Executive’s target annual incentive bonus will be as set
forth in the Company’s annual bonus plan (the “Target Annual Bonus”). Executive’s annual personal
goals and the Company’s annual corporate goals will be set forth in writing by the Chief Executive
Officer and the Board of Directors within ninety (90) days after the start of the Company’s fiscal
year. The Board of Directors and the Chief Executive Officer shall, in their sole discretion,
determine whether Executive’s annual personal goals have been attained. The Board of Directors
shall, in its sole discretion, determine whether the annual corporate goals have been attained.
Any annual incentive bonus shall be considered earned only if Executive is employed by the Company
both on the date that the determination is made as to whether annual personal goals have been met,
and on the date that the determination is made as to whether annual corporate goals have been met.
These determinations generally will be made within the first quarter following the end of the
Company’s fiscal year. Except as provided in Article 6 herein, no pro-rata bonus will be
considered earned if Executive leaves the Company for any reason prior to the foregoing
determination dates. Any annual incentive bonus that is earned shall be paid no later than the
fifteenth day of the third month following the end of the Company’s fiscal year for which such
bonus was earned.

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     3.3 Equity. Except as provided in Article 6 in the case of certain terminations of
employment, this Agreement shall not affect any Stock Awards (as such term is defined below)
previously granted by the Company to Executive. Subject to approval by the Company’s Board of
Directors, Executive shall be eligible to receive additional Stock Awards on terms to be set forth
by the Company at the time of any such grant. For purposes of this Agreement, “Stock Awards” shall
mean any rights granted by the Company to Executive with respect to the common stock of the
Company, including, without limitation, stock options, stock appreciation rights, restricted stock,
stock bonuses and restricted stock units.

     3.4 Withholdings. All compensation and benefits payable to Executive under this
Agreement shall be subject to all federal, state, local taxes and other withholdings and similar
taxes and payments required by applicable law.

ARTICLE 4

EXPENSE ALLOWANCES AND FRINGE BENEFITS

     4.1 Vacation. Executive shall be entitled to participate in the Company’s vacation
plan pursuant to the terms of that plan.

     4.2 Benefits. During Executive’s employment hereunder, the Company shall also provide
Executive with the health insurance benefits it generally provides to its other senior management
employees. As Executive becomes eligible in accordance with criteria to be adopted by the Company,
the Company shall provide Executive with the right to participate in and to receive benefit from
life, accident, disability, medical, and savings plans and similar benefits made available
generally to employees of the Company as such plans and benefits may be adopted by the Company.
With respect to long-term disability insurance coverage, the Executive will pay all premiums for
such coverage with after-tax dollars, and the Company will reimburse the Executive for the premium
costs so paid by the Executive and make an additional tax gross-up payment to Executive in an
amount that shall fully fund the payment by Executive of any income and employment taxes on such
reimbursement payment and tax gross-up payment. The amount and extent of benefits to which
Executive is entitled shall be governed by the specific benefit plan as it may be amended from time
to time.

     4.3 Business Expense Reimbursement. During the term of this Agreement, Executive
shall be entitled to receive proper reimbursement for all reasonable out-of-pocket expenses
incurred by him (in accordance with the policies and procedures established by the Company for its
senior executive officers) in performing services hereunder. Executive agrees to furnish to the
Company adequate records and other documentary evidence of such expense for which Executive seeks
reimbursement. Such expenses shall be reimbursed and accounted for under the policies and
procedures established by the Company, and such reimbursement shall be made promptly, but in no
event later than December 31 of the calendar year following the year in which such expenses were
incurred by Executive.

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ARTICLE 5

CONFIDENTIALITY

     5.1 Proprietary Information. Executive represents and warrants that he has previously
executed and delivered to the Company the Company’s standard Proprietary Information and Inventions
Agreement.

     5.2 Return of Property. All documents, records, apparatus, equipment and other
physical property which is furnished to or obtained by Executive in the course of his employment
with the Company shall be and remain the sole property of the Company. Executive agrees that, upon
the termination of his employment, he shall return all such property (whether or not it pertains to
Proprietary Information as defined in the Proprietary Information and Inventions Agreement), and
agrees not to make or retain copies, reproductions or summaries of any such property.

     5.3 No Use of Prior Confidential Information. Executive will not intentionally
disclose to the Company or use on its behalf any confidential information belonging to any of his
former employers or any other third party.

ARTICLE 6

TERMINATION

     6.1 General. As set forth in Section 1.2 herein, Executive shall be employed on an
at-will basis by the Company. Notwithstanding the foregoing, Executive’s employment and this
Agreement may be terminated in one of six ways as set forth in this Article 6: (a) Executive’s
Death (Section 6.2); (b) Executive’s Disability (Section 6.3); (c) Termination by the Company for
Cause (Section 6.4); (d) Termination by the Company without Cause (Section 6.5); (e) Termination by
Executive due to a Constructive Termination (Section 6.6); or (f) Voluntary Resignation (Section
6.7).

     6.2 By Death. Executive’s employment and this Agreement shall terminate automatically
upon the death of Executive. In such event:

          (a) Stock Awards. The vesting of all outstanding Stock Awards held by Executive shall
be accelerated so that the amount of shares vested under such Stock Awards shall equal that number
of shares that would have been vested if Executive had continued to render services to the Company
for 15 continuous months after the date of Executive’s termination of employment. All Stock Awards
held by Executive that are vested at the time of termination (including any accelerated Stock
Awards) will be exercisable in accordance with their terms for a period of one year after the
termination date.

          (b) Bonus. The Company shall pay to Executive’s beneficiaries or his estate, as the
case may be, a lump sum amount equal to Executive’s Target Annual Bonus (as defined in
Section 3.2) for the Company’s fiscal year in which Executive’s death occurs multiplied by a
fraction, the numerator of which is the number of full months of employment by Executive in

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such fiscal year and the denominator of which is 12. Such amount shall be paid as soon as
administratively practicable, but in no event later than March 15 following the year in which
Executive’s death occurred.

          (c) Accrued Compensation. The Company shall pay to Executive’s beneficiaries or his
estate, as the case may be, any accrued Base Salary, any vested deferred compensation (other than
pension plan or profit-sharing plan benefits that will be paid in accordance with the applicable
plan), any benefits under any plans of the Company (other than pension and profit-sharing plans) in
which Executive is a participant to the full extent of Executive’s rights under such plans, any
accrued vacation pay and any appropriate business expenses incurred by Executive in connection with
his duties hereunder, all to the date of termination (collectively “Accrued Compensation”).

          (d) No Severance Compensation. The compensation and benefits set forth in Sections
6.2(a) through (c) herein shall be the only compensation and benefits provided by the Company in
the event of Executive’s death and no other severance compensation or benefits shall be provided.

     6.3 By Disability. If Executive is prevented from performing his duties hereunder by
reason of any physical or mental incapacity that results in Executive’s satisfaction of all
requirements necessary to receive benefits under the Company’s long-term disability plan due to a
total disability, then, to the extent permitted by law, the Company may terminate the employment of
Executive and this Agreement at or after such time. In such event, and if Executive signs the
General Release set forth as Exhibit A or such other form of release as the Company may require
(the “Release”) on or within the time period set forth therein, but in no event later than
forty-five (45) days after the termination date and allows such Release to become effective, then:

          (a) Accrued Compensation. The Company shall pay to Executive all Accrued Compensation
(as defined in Section 6.2(c) herein).

          (b) Base Salary Continuation. The Company shall continue to pay Executive’s Base
Salary, less required withholdings, for a period of 15 months (the “Disability Base Salary
Payments”); provided that the Disability Base Salary Payments shall be reduced by any insurance or
other payments to Executive under policies and plans sponsored by the Company, even if premiums are
paid by Executive. Subject to the provisions of Section 6.11, the Disability Base Salary Payments
shall be paid in accordance with the Company’s standard payroll practices commencing with the first
payroll period following the effectiveness of the Release.

          (c) Bonus. The Company shall pay a lump sum amount equal to Executive’s Target Annual
Bonus (as defined in Section 3.2) for the Company’s then-current fiscal year multiplied by a
fraction, the numerator of which is the number of full months of employment by Executive in the
current fiscal year and the denominator of which is 12. Such payment shall be made within ten (10)
days following the Effective Date of the Release.

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          (d) Stock Awards. The vesting of all outstanding Stock Awards held by Executive shall
be accelerated so that the amount of shares vested under such Stock Awards shall equal that number
of shares which would have been vested if Executive had continued to render services to the Company
for 15 continuous months after the date of Executive’s termination of employment.

          (e) Health Insurance Benefits. To the extent provided by the federal COBRA law or, if
applicable, state insurance laws, and by the Company’s current group health insurance policies,
Executive will be eligible to continue Executive’s group health insurance benefits at Executive’s
own expense. If Executive timely elects continued coverage under COBRA, the Company shall pay
Executive’s COBRA premiums, and any applicable Company COBRA premiums, necessary to continue
Executive’s then-current coverage for a period of 15 months after the date of Executive’s
termination of employment; provided, however, that any such payments will cease if Executive
voluntarily enrolls in a health insurance plan offered by another employer or entity during the
period in which the Company is paying such premiums. Executive agrees to immediately notify the
Company in writing of any such enrollment.

          (f) Disability Plans. Nothing in this Section 6.3 shall affect Executive’s rights
under any disability plan in which Executive is a participant.

     6.4 Termination by the Company for Cause.

          (a) No Liability. The Company may terminate Executive’s employment and this Agreement
for Cause (as defined below) without liability at any time. In such event, the Company shall pay
Executive all Accrued Compensation (as defined in Section 6.2(c) herein), but no other compensation
or reimbursement of any kind, including without limitation, any severance compensation or benefits
shall be paid, and thereafter the Company’s obligations hereunder shall terminate.

          (b) Definition of “Cause.” For purposes of this Agreement, “Cause” shall mean one or
more of the following:

               (i) Executive’s intentional commission of an act, or intentional failure to act, that
materially injures the business of the Company; provided, however, that in no event shall any
business judgment made in good faith by Executive and within Executive’s defined scope of authority
constitute a basis for termination for Cause under this Agreement;

               (ii) Executive’s intentional refusal or intentional failure to act in accordance with any
lawful and proper direction or order of the Board of Directors, the Chief Executive Officer, or the
individual to whom Executive reports.

               (iii) Executive’s material breach of Executive’s fiduciary, statutory, contractual, or common
law duties to the Company (including any material breach of this Agreement, the Proprietary
Information and Inventions Agreement, or the Company’s written policies);

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               (iv) Executive’s indictment for or conviction of any felony or any crime involving dishonesty;
or

               (v) Executive’s participation in any fraud or other act of willful misconduct against the
Company;

provided, however, that in the event that any of the foregoing events is reasonably capable of
being cured, the Company shall provide written notice to Executive describing the nature of such
event and Executive shall thereafter have ten (10) business days to cure such event.

     6.5 Termination by the Company without Cause.

          (a) The Company’s Right. The Company may terminate Executive’s employment and this
Agreement without Cause (as defined in Section 6.4(b) herein) at any time by giving thirty (30)
days advance written notice to Executive.

          (b) Severance Benefits. If the Company terminates Executive’s employment without
Cause, and if Executive signs the Release on or within the time period set forth therein (but in no
event later than forty-five (45) days after the termination date) and allows such Release to become
effective, then:

               (i) Accrued Compensation. The Company shall pay to Executive all Accrued Compensation
(as defined in Section 6.2(c) herein).

               (ii) Cash Compensation Amount Payments. The Company shall pay Executive an amount
calculated as follows: [Executive’s annual Base Salary + Executive’s Target Annual Bonus (as
defined in Section 3.2 herein)] multiplied by 1.25 (the “Cash Compensation Amount”). Subject to
the provisions of Section 6.11, the Cash Compensation Amount will be paid in equal installments on
the Company’s standard payroll dates over a period of 15 months commencing with the first payroll
period following the effectiveness of the Release.

               (iii) Stock Awards. The vesting of all outstanding Stock Awards held by Executive
shall be accelerated so that the amount of shares vested under such Stock Awards shall equal that
number of shares which would have been vested if Executive had continued to render services to the
Company for 15 continuous months after the date of Executive’s termination of employment.

               (iv) Health Insurance Benefits. To the extent provided by the federal COBRA law or,
if applicable, state insurance laws, and by the Company’s current group health insurance policies,
Executive will be eligible to continue Executive’s group health insurance benefits at Executive’s
own expense. If Executive timely elects continued coverage under COBRA, the Company shall pay
Executive’s COBRA premiums, and any applicable Company COBRA premiums, necessary to continue
Executive’s then-current coverage for a period of 15 months after the date of Executive’s
termination of employment; provided, however, that any

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such payments will cease if Executive voluntarily enrolls in a health insurance plan offered by
another employer or entity during the period in which the Company is paying such premiums.
Executive agrees to immediately notify the Company in writing of any such enrollment.

      6.6 Termination by Executive due to a Constructive Termination.

          (a) Executive’s Right. Executive may resign his employment and terminate this
Agreement at any time as a result of a Constructive Termination (as defined in Section 6.6(c)
herein).

          (b) Severance Benefits. If Executive resigns his employment and terminates this
Agreement as a result of a Constructive Termination, and if Executive signs the Release on or
within the time period set forth therein (but in no event later than forty-five (45) days after the
termination date) and allows such Release to become effective, then Executive shall receive all of
the severance benefits set forth in Section 6.5(b) herein.

          (c) Definition of “Constructive Termination.” For purposes of this Agreement,
“Constructive Termination” shall mean a resignation of employment and termination of this Agreement
by Executive for one or more of the following reasons:

               (i) Assignment to, or withdrawal from, Executive of any duties or responsibilities that
results in a material diminution in such Executive’s authority, duties or responsibilities as in
effect immediately prior to such change;

               (ii) A material diminution in the authority, duties or responsibilities of the supervisor to
whom Executive is required to report,

               (iii) A material reduction by the Company of Executive’s annual Base Salary;

               (iv) A relocation of Executive or the Company’s principal executive offices if Executive’s
principal office is at such offices, to a location more than forty (40) miles from the location at
which Executive is then performing his duties, except for an opportunity to relocate which is
accepted by Executive in writing; or

               (v) A material breach by the Company of any provision of this Agreement or any other
enforceable written agreement between Executive and the Company; provided; however, that Executive
must first provide the Company with written notice specifying the condition giving rise to a
Constructive Termination within ninety (90) days following the initial existence of such condition;
and Executive’s notice must specify that Executive intends to terminate his employment no earlier
than thirty (30) days after providing such notice, and the Company must be given an opportunity to
cure such condition within thirty (30) days following its receipt of such notice and avoid paying
benefits.

     6.7 Voluntary Resignation. Executive may resign his or her employment and terminate
this Agreement at any time for any reason other than due to a Constructive Termination
(as defined in Section 6.6(c) herein). In such event, the Company shall pay Executive all
Accrued Compensation (as defined in Section 6.2(c) herein), but no other

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compensation or reimbursement of any kind, including without limitation, any severance compensation
or benefits shall be paid, and thereafter the Company’s obligations hereunder shall terminate.

     6.8 Change In Control.

          (a) Severance Benefits. If (i) within six months after the consummation of a Change
in Control (as defined in Section 6.8(b) herein), (1) the Company terminates Executive’s employment
and this Agreement without Cause pursuant to Section 6.5 herein or (2) Executive resigns his
employment and terminates this Agreement as a result of a Constructive Termination pursuant to
Section 6.6 herein, and (ii) in either event (1) or (2), Executive signs the Release on or within
the time period set forth therein, but in no event later than forty-five (45) days after the
termination date and allows such Release to become effective, then Executive shall receive the
following severance benefits in lieu of any severance benefits set forth in Section 6.5(b) or
Section 6.6(b) herein:

               (i) Accrued Compensation. The Company shall pay to Executive all Accrued Compensation
(as defined in Section 6.2(c) herein).

               (ii) CIC Cash Compensation Amount Payment. The Company shall pay Executive an amount
calculated as follows: [Executive’s annual Base Salary + Executive’s Target Annual Bonus (as
defined in Section 3.2 herein)] multiplied by 2.0 (collectively, the “CIC Cash Compensation
Amount”). The CIC Cash Compensation Amount will be paid in one lump sum within ten (10) days
following the Effective Date of the Release.

               (iii) Cash Payment for Stock Awards. Within ten (10) days following the Effective
Date of the Release, the Company shall pay Executive a cash amount equal to the value, as of the
date of the consummation of the Change in Control, of (1) all Stock Awards that are unvested at the
time of termination of employment, and (2) all Stock Awards that are vested at the time of
termination of employment and for which the shares subject to such Stock Awards have not yet been
issued, including, without limitation, any unexercised stock options, unexercised stock
appreciation rights, and unissued shares subject to a restricted stock unit award, provided, in
either case, that such Stock Awards were held by Executive as of the date of consummation of the
Change in Control, and all rights of Executive in such Stock Awards and any unvested shares of
stock that previously may have been issued thereunder shall be extinguished as a result of such
payment, with the result that such Stock Awards shall automatically terminate unexercised and
unvested shares of stock previously issued shall automatically be reacquired by the Company or its
successor. For purposes of the foregoing cash payment, (1) stock options and stock appreciation
rights shall be valued on the basis of the difference between the value of the subject stock for
purposes of the transaction constituting the Change of Control and the exercise or base price of
the award, and (2) restricted stock, restricted stock units or other full value awards and shares
of stock acquired under Stock Awards shall be valued on the basis of the value of the subject stock
for purposes of the transaction constituting the Change in Control.

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               (iv) Health Insurance Benefits. To the extent provided by the federal COBRA law or,
if applicable, state insurance laws, and by the Company’s current group health insurance policies,
Executive will be eligible to continue Executive’s group health insurance benefits at Executive’s
own expense. If Executive timely elects continued coverage under COBRA, the Company shall pay
Executive’s COBRA premiums, and any applicable Company COBRA premiums, necessary to continue
Executive’s then-current coverage for a period of 24 months after the date of Executive’s
termination of employment; provided, however, that any such payments will cease if Executive
voluntarily enrolls in a health insurance plan offered by another employer or entity during the
period in which the Company is paying such premiums. Executive agrees to immediately notify the
Company in writing of any such enrollment.

          (b) Definition of “Change in Control.” For purposes of this Agreement, a “Change in
Control” shall have occurred if at any time during Executive’s employment hereunder, any of the
following events shall occur:

               (i) The Company is merged, or consolidated. or reorganized into or with another corporation or
other legal person, and as a result of such merger, consolidation or reorganization less than 50%
of the combined voting power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of voting securities of
the Company immediately prior to such transaction;

               (ii) The Company sells all or substantially all of its assets or any other corporation or
other legal person and thereafter, less than 50% of the combined voting power of the
then-outstanding voting securities of the acquiring or consolidated entity are held in the
aggregate by the holders of voting securities of the Company immediately prior to such sale;

               (iii) There is a report filed after the date of this Agreement on Schedule 13 D or schedule 14
D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities
Exchange Act of l934 (the “Exchange Act”) disclosing that any person (as the term “person” is used
in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as
the term beneficial owner is defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) representing 50% or more of the combined voting power of the
then-outstanding voting securities of the Company;

               (iv) The Company shall file a report or proxy statement with the Securities and Exchange
Commission pursuant to the Exchange Act disclosing in response to item 1 of Form 8-X thereunder or
Item 5(f) of Schedule 14 A thereunder (or any successor schedule, form or report or item therein)
that the change in control of the Company has or may have occurred or will or may occur in the
future pursuant to any then-existing contract or transaction; or

               (v) During any period of two (2) consecutive years, individuals who at the beginning of any
such period constitute the directors of the Company cease for any reason to

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constitute at least a majority thereof unless the election to the nomination for election by the
Company’s shareholders of each director of the Company first elected during such period was
approved by a vote of at least two-thirds of the directors of the Company then still in office who
were directors of the Company at the beginning of such period.

          (c) Parachute Payments.

               (i) If any payment or benefit (including payments or benefits pursuant to this Agreement) that
Executive would receive in connection with a Change in Control or otherwise (a “Payment”) (1) would
constitute a “parachute payment” within the meaning of Section 280G of the Code, and (2) but for
this sentence, would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise
Tax”), then the Company shall cause to be determined, before any amount of the Payment is paid to
Executive, whether the total payments exceed 2.99 times Executive’s “base amount” within the
meaning of Section 280G of the Code (the “Base Amount”) by 15% or less, in which case such Payment
shall be reduced to an amount that results in no portion of the Payment being subject to the Excise
Tax (the “Reduced Payment”).

               (ii) If a Reduced Payment is made, (x) the Payment shall be paid only to the extent permitted
under the Reduced Payment alternative, and Executive shall have no rights to any additional
payments and/or benefits constituting the Payment, and (y) reduction in payments and/or benefits
shall occur in the following order unless Executive elects in writing a different order (provided,
however, that such election shall be subject to Company approval if made on or after the date on
which the event that triggers the Payment occurs): (1) reduction of cash payments; (2) cancellation
of accelerated vesting of equity awards other than stock options; (3) cancellation of accelerated
vesting of stock options; and (4) reduction of other benefits paid to Executive. In the event that
acceleration of compensation from Executive’s equity awards is to be reduced, such acceleration of
vesting shall be canceled in the reverse order of the date of grant unless Executive elects in
writing a different order for cancellation.

               (iii) If it is determined that the Payment exceeds 2.99 times Executive’s Base Amount by more
than 15%, the Company shall pay the full amount of the Payment and Executive shall be entitled to
receive an additional payment (a “Gross-Up Payment”) from the Company in an amount that after the
payment of all taxes (including, without limitation, (1) any income or employment taxes, (2) any
interest or penalties imposed with respect to such taxes, and (3) any additional Excise Tax on the
Gross-Up Payment, Executive shall retain an amount equal to the full Excise Tax. The Gross-Up
Payment shall be paid as soon as practicable following the date the Payment is made, but in no
event later than the end of the Executive’s taxable year following the taxable year in which
Executive has remitted (by withholding or otherwise) the Excise Tax.

               (iv) For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed
to have: (x) paid federal income taxes at the highest marginal rate of federal income and
employment taxation for the calendar year in which the Gross-Up Payment is to be made, and (y) paid
applicable state and local income taxes at the highest rate of taxation for
the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and local taxes.

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               (v) Except as otherwise provided herein, Executive shall not be entitled to any additional
payments or other indemnity arrangements in connection with the Payment or the Gross-Up Payment.

     6.9 Mitigation. Except as otherwise specifically provided herein, Executive shall not
be required to mitigate the amount of any payment provided under this Agreement by seeking other
employment or self-employment, nor shall the amount of any payment provided for under this
Agreement be reduced by any compensation earned by Executive as a result of employment by another
employer or through self-employment or by retirement benefits after the date of Executive’s
termination of employment from the Company, except as provided herein.

     6.10 Coordination. If upon termination of employment, Executive becomes entitled to
rights under other plans, contracts or arrangements entered into by the Company, this Agreement
shall be coordinated with such other arrangements so that Executive’s rights under this Agreement
are not reduced, and that any payments under this Agreement offset the same types of payments
otherwise provided under such other arrangements, but do not otherwise reduce any payments or
benefits under such other arrangements to which Executive becomes entitled.

     6.11 Application of Section 409A. If Executive is a “specified employee” within the
meaning of 409A(a)(2)(B)(i) of the Code, any installment payments of Disability Base Salary
Payments pursuant to Section 6.3(b) or Cash Compensation Amounts pursuant to Section 6.5(b) or
6.6(b) that are triggered by a separation from service shall be accelerated to the minimum extent
necessary so that (a) the lesser of (y) the total cash severance payment amount, or (z) six (6)
months of such installment payments are paid no later than March 15 of the calendar year following
such termination, and (b) all amounts paid pursuant to the foregoing clause (a) will constitute
separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations and thus will
be payable pursuant to the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the
Treasury Regulations. It is intended that if Executive is a “specified employee” within the
meaning of Section 409A(a)(2)(B)(i) of the Code at the time of such separation from service the
foregoing provision shall result in compliance with the requirements of Section 409A(a)(2)(B)(i) of
the Code since payments to Executive will either be payable pursuant to the “short-term deferral”
rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations or will not be paid until at
least 6 months after separation from service.

ARTICLE 7

GENERAL PROVISIONS

     7.1 Governing Law. The validity, interpretation, construction and performance of this
Agreement and the rights of the parties thereunder shall be interpreted and enforced under
California law without reference to principles of conflicts of laws. The parties expressly agree
that inasmuch as the Company’s headquarters and principal place of business are located in
California, it is appropriate that California law govern this Agreement.

Page 12 of 18 

 

     7.2 Assignment; Successors Binding Agreement.

          (a) No Assignment. Executive may not assign, pledge or encumber his interest in this
Agreement or any part thereof.

          (b) Assumption by Successor. The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by operation of law or by agreement in form and substance
reasonably satisfactory to Executive, to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it if no such
succession had taken place.

          (c) This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or
legal representatives, executors, administrators, successors, heirs, distributee, devisees and
legatees. If Executive should die while any amount is at such time payable to Executive hereunder,
all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Executive’s devisee, legates or other designee or, if there be no such designee,
to his estate.

     7.3 Notice. For the purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth below or to such other address as either party may
have furnished to the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.

To the Company:

Neurocrine Biosciences, Inc.

12790 El Camino Real

San Diego, CA 92130

Attn.: President & Chief Executive Officer

To Executive:

Timothy P. Coughlin

     7.4 Modification; Waiver; Entire Agreement. This Agreement constitutes the complete,
final and exclusive embodiment of the entire agreement between Executive and the Company with
regard to this subject matter. It is entered into without reliance on any promise or
representation, written or oral, other than those expressly contained herein, and it supersedes any
other such promises, warranties or representations, including, without limitation, the Original
Employment Agreement which shall have no further force or effect. No provisions of this Agreement
may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in
writing signed by Executive and such officer as may be specifically designated by the Board of the
Company. No waiver by either party hereto at any time of any

Page 13 of 18 

 

breach by the other party of, or compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or any prior or subsequent time.

     7.5 Validity. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this Agreement, which
shall remain in full force and effect.

     7.6 Controlling Document. Except to the extent described in Section 6.l0, in case of
conflict between any of the terms and condition of this Agreement and the document herein referred
to, the terms and conditions of this Agreement shall control.

     7.7 Executive Acknowledgment. Executive acknowledges (a) that he has consulted with or
has had the opportunity to consult with independent counsel of his own choice concerning this
Agreement, and has been advised to do so by the Company, and (b) that he has read and understands
the Agreement, is fully aware of its legal effect, and has entered into it freely based on his own
judgment.

     7.8 Dispute Resolution. To ensure the rapid and economical resolution of disputes
that may arise in connection with Executive’s employment, Executive and the Company agree that any
and all disputes, claims, or causes of action, in law or equity, arising from or relating to the
enforcement, breach, performance, execution, or interpretation of this Agreement, Executive’s
employment, or the termination of that employment, shall be resolved, to the fullest extent
permitted by law, by final, binding and confidential arbitration in San Diego, California conducted
before a single arbitrator by Judicial Arbitration and Mediation Services, Inc. (“JAMS”) or its
successor, under the then applicable JAMS rules. By agreeing to this arbitration procedure, both
Executive and the Company waive the right to resolve any such dispute through a trial by jury or
judge or by administrative proceeding. The arbitrator shall: (a) have the authority to compel
adequate discovery for the resolution of the dispute and to award such relief as would otherwise be
permitted by law; and (b) issue a written arbitration decision including the arbitrator’s essential
findings and conclusions and a statement of the award. The Company shall pay all of JAMS’
arbitration fees. Nothing in this letter agreement shall prevent either Executive or the Company
from obtaining injunctive relief in court if necessary to prevent irreparable harm pending the
conclusion of any arbitration. The parties agree that the arbitrator shall award reasonable
attorneys fees, costs, and all other related expenses to the prevailing party in any action brought
hereunder, and the arbitrator shall have discretion to determine the prevailing party in an
arbitration where multiple claims may be at issue.

     7.9 Remedies.

          (a) Injunctive Relief. The parties agree that the services to be rendered by Executive
hereunder are of a unique nature and that in the event of any breach or threatened breach of any of
the covenants contained herein, the damage or imminent damage to the value and the goodwill of the
Company’s business will be irreparable and extremely difficult to estimate, making any remedy at
law or in damages inadequate. Accordingly, the parties agree that the Company shall be entitled to
injunctive relief against Executive in the event of any

Page 14 of 18 

 

breach or threatened breach of any such provisions by Executive, in addition to any other
relief (including damage) available to the Company under this Agreement or under law.

          (b) Exclusive. Both parties agree that the remedy specified in Section 7.9(a) above is
not exclusive of any other remedy for the breach by Executive of the terms hereof.

     7.10 Counterparts. This Agreement may be executed in one or more counterparts, all of
which taken together shall constitute one and the same Agreement.

Executed by the parties as follows:

	 	 	 	 	 	 	 	 	 	 	 
	EXECUTIVE	 	 	 	NEUROCRINE BIOSCIENCES, INC	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Timothy P. Coughlin	 	 	 	By:	 	/s/ Gary A. Lyons	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date:

	 	August 1, 2007	 	 	 	Date:	 	August 1, 2007	 	 
	 

	 	 
	 	 	 	 	 	 	 	 

Page 15 of 18 

 

EXHIBIT A

GENERAL RELEASE

Pursuant to the terms of the Employment Agreement between Neurocrine Biosciences, Inc. (the
“Company”) and Timothy P. Coughlin (“Executive”) dated August 1, 2007 (the “Agreement”), the
parties hereby enter into the following General Release (the “Release”):

     1. Accrued Salary and Vacation. Executive understands that, on the last date of
Executive’s employment with the Company, the Company will pay Executive any accrued salary and
accrued and unused vacation to which Executive is entitled by law, regardless of whether Executive
signs this Release.

     2. General Release. Executive hereby generally and completely releases the Company
and its directors, officers, employees, shareholders, partners, agents, attorneys, predecessors,
successors, parent and subsidiary entities, insurers, affiliates, and assigns (collectively the
“Released Parties”) of and from any and all claims, liabilities and obligations, both known and
unknown, arising out of or in any way related to events, acts, conduct, or omissions occurring at
any time prior to or at the time that Executive signs this Release.\

     3. Scope of Release. This general release includes, but is not limited to: (1) all
claims arising out of or in any way related to Executive’s employment with the Company or the
termination of that employment; (2) all claims related to Executive’s compensation or benefits from
the Company, including salary, bonuses, commissions, vacation pay, expense reimbursements,
severance pay, fringe benefits, stock, stock options, or any other ownership or equity interests in
the Company; (3) all claims for breach of contract, wrongful termination, and breach of the implied
covenant of good faith and fair dealing (including claims based on or arising under the Agreement);
(4) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in
violation of public policy; and (5) all federal, state, and local statutory claims, including
claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under
the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of
1990, the federal Age Discrimination in Employment Act (as amended) (“ADEA”), the federal Family
and Medical Leave Act, the California Labor Code (as amended), the California Family Rights Act,
and the California Fair Employment and Housing Act (as amended).

     4. ADEA Waiver. Executive acknowledges that Executive is knowingly and voluntarily
waiving and releasing any rights Executive may have under the ADEA, and that the consideration
given for the waiver and release in the preceding paragraph is in addition to anything of value to
which Executive is already entitled. Executive further acknowledges that Executive has been
advised by this writing that: (1) Executive’s waiver and release do not apply to any rights or
claims that may arise after the date Executive signs this Release; (2) Executive should consult
with an attorney prior to signing this Release (although Executive may choose voluntarily not to do
so); (3) Executive has twenty-one (21) days to consider this Release (although Executive may choose
voluntarily to sign it earlier); (4) Executive has seven (7) days following the date Executive
signs this Release to revoke it by providing written notice of

Page 16 of 18 

 

revocation to the Company’s Chief Executive Officer; and (5) this Release will not be
effective until the date upon which the revocation period has expired, which will be the eighth
calendar day after the date Executive signs it provided that Executive does not revoke it (the
“Effective Date”).

     5. Section 1542 Waiver. EXECUTIVE UNDERSTANDS THAT THIS AGREEMENT INCLUDES A RELEASE
OF ALL KNOWN AND UNKNOWN CLAIMS. Executive acknowledges that Executive has read and understands
Section 1542 of the California Civil Code which reads as follows: “A general release does not
extend to claims which the creditor does not know or suspect to exist in his or her favor at the
time of executing the release, which if known by him or her must have materially affected his or
her settlement with the debtor.” Executive hereby expressly waives and relinquishes all rights and
benefits under that section and any law or legal principle of similar effect in any jurisdiction
with respect to Executive’s respective release of claims herein, including but not limited to
Executive’s release of unknown and unsuspected claims.

     6. Excluded Claims. Executive understands that notwithstanding the foregoing, the
following are not included in the Released Claims (the “Excluded Claims”): (i) any rights or claims
for indemnification Executive may have pursuant to any written indemnification agreement to which
he is a party, the charter, bylaws, or operating agreements of any of the Released Parties, or
under applicable law; or (ii) any rights which are not waivable as a matter of law. In addition,
Executive understands that nothing in this release prevents Executive from filing, cooperating
with, or participating in any proceeding before the Equal Employment Opportunity Commission, the
Department of Labor, or the California Department of Fair Employment and Housing, except that
Executive acknowledges and agrees that Executive shall not recover any monetary benefits in
connection with any such claim, charge or proceeding with regard to any claim released herein.
Executive hereby represents and warrants that, other than the Excluded Claims, Executive is not
aware of any claims he has or might have against any of the Released Parties that are not included
in the Released Claims.

     7. Executive Representations. Executive hereby represents that Executive has been
paid all compensation owed and for all hours worked; Executive has received all the leave and leave
benefits and protections for which Executive is eligible, pursuant to the Family and Medical Leave
Act, the California Family Rights Act, or otherwise; and Executive has not suffered any on-the-job
injury for which Executive has not already filed a workers’ compensation claim.

     8. Nondisparagement. Executive agrees not to disparage the Company, its parent, or
its or their officers, directors, employees, shareholders, affiliates and agents, in any manner
likely to be harmful to its or their business, business reputation, or personal reputation
(although Executive may respond accurately and fully to any question, inquiry or request for
information as required by legal process).

     9. Cooperation. Executive agrees not to voluntarily (except in response to legal
compulsion) assist any third party in bringing or pursuing any proposed or pending litigation,
arbitration, administrative claim or other formal proceeding against the other party, or against
the

Page 17 of 18 

 

Company’s parent or subsidiary entities, affiliates, officers, directors, employees or agents.
Executive further agrees to reasonably cooperate with the other party, by voluntarily (without
legal compulsion) providing accurate and complete information, in connection with such other
party’s actual or contemplated defense, prosecution, or investigation of any claims or demands by
or against third parties, or other matters, arising from events, acts, or failures to act that
occurred during the period of Executive’s employment by the Company.

     10. No Admission of Liability. The parties agree that this Release, and performance
of the acts required by it, does not constitute an admission of liability, culpability, negligence
or wrongdoing on the part of anyone, and will not be construed for any purpose as an admission of
liability, culpability, negligence or wrongdoing by any party and/or by any party’s current, former
or future parents, subsidiaries, related entities, predecessors, successors, officers, directors,
shareholders, agents, employees and assigns. The parties specifically acknowledge and agree that
this Release is a compromise of disputed claims and that the Company denies any liability for any
matter released herein.

	 	 	 	 	 	 	 	 	 	 	 
	Neurocrine Biosciences, Inc.:	 	 	 	Executive:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date:

	 	 	 	 	 	Date:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 

Page 18 of 18Exhibit 10.6

 

EXHIBIT 10.6

NEUROCRINE BIOSCIENCES, INC.

2003 INCENTIVE STOCK PLAN

as amended May 25, 2005, November 7, 2005, January 12, 2006,

March 2, 2006, May 31, 2007 and August 1, 2007

1. Purpose of the Plan. The purposes of this Incentive Stock Plan are to attract and
retain the best available personnel, to provide additional incentive to the employees of Neurocrine
Biosciences, Inc. (the “Company”) and to promote the success of the Company’s business.
Options granted hereunder may be either Incentive Stock Options or Nonstatutory Stock Options, at
the discretion of the Board and as reflected in the terms of the written option agreement. The
Board also has the discretion to grant Restricted Stock awards, Restricted Stock Unit awards and
Stock Bonus awards.

2. Definitions.

          (a) “Award” shall mean any right granted under the Plan, including an Option, a
Restricted Stock award, Restricted Stock Unit award, and a Stock Bonus award.

          (b) “Award Agreement” shall mean any written or electronic agreement, contract, or
other instrument or document evidencing an Award.

          (c) “Board” shall mean the Committee, if one has been appointed, or the Board of
Directors of the Company, if no Committee is appointed.

          (d) “Change in Control” has the meaning set forth in Section 15(c) of the Plan.

          (e) “Code” shall mean the Internal Revenue Code of 1986, as amended.

          (f) “Committee” shall mean the Committee appointed by the Board in accordance with
Section 4(a) of the Plan, if one is appointed.

          (g) “Common Stock” shall mean the common stock of the Company, par value $.001 per
share.

          (h) “Company” shall mean Neurocrine Biosciences, Inc.

          (i) “Consultant” shall mean any natural person who is engaged by the Company or any
Parent or Subsidiary to render bona fide consulting services and is compensated for such consulting
services, and any Director whether compensated for such services or not.

          (j) “Continuous Status as an Employee or Consultant” shall mean the absence of any
interruption or termination of service as an Employee or Consultant, as applicable. Continuous
Status as an Employee or Consultant shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Board; provided, that

1.

 

such leave is for a period of not more than ninety (90) days or reemployment upon the
expiration of such leave is guaranteed by contract or statute.

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

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

          (m) “Employee” shall mean any persons, including officers and directors, employed by
the Company or any Parent or Subsidiary of the Company. The payment of a director’s fee by the
Company shall not be sufficient to constitute “employment” by the Company.

          (n) “Holder” shall mean a person who has been granted or awarded an Award pursuant to
the Plan.

          (o) “Incentive Stock Option” shall mean an Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code.

          (p) “Nonstatutory Stock Option” shall mean an Option not intended to qualify as an
Incentive Stock Option.

          (q) “Option” shall mean a stock option granted pursuant to the Plan. An Option may be
either an Incentive Stock Option or a Nonstatutory Stock Option.

          (r) “Option Agreement” shall mean any written or electronic agreement, contract, or
other instrument or document evidencing an Option.

          (s) “Optioned Stock” shall mean the Common Stock subject to an Option.

          (t) “Optionee” shall mean an Employee or Consultant who receives an Option.

          (u) “Outside Director” means a Director who is not an Employee.

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

          (w) “Performance Award” shall mean an Award that vests based upon the acheivement of
performance goals related to one or more Performance Criteria.

          (x) “Performance Criteria” shall mean the following business criteria with respect to
the Company, any Subsidiary or any division or operating unit: (a) net income, (b) pre-tax income,
(c) operating income, (d) cash flow, (e) earnings per share, (f) return on equity, (g) return on
invested capital or assets, (h) cost reductions or savings, (i) funds from operations, (j)
appreciation in the fair market value of Common Stock, and (k) earnings before any one or more of
the following items: interest, taxes, depreciation or amortization; each as determined in
accordance with generally accepted accounting principles or subject to such adjustments as may be
specified by the Board.

2.

 

          (y) “Plan” shall mean this 2003 Incentive Stock Plan, as amended.

          (z) “Restricted Stock” shall mean a right to purchase Common Stock pursuant to Section
11 of the Plan.

          (aa) “Restricted Stock Unit” shall mean a right to receive a specified number of
shares of Common Stock during specified time periods pursuant to Section 12 of the Plan.

          (bb) “Retirement” has the meaning set forth in Section 9(d) of the Plan.

          (cc) “Section 162(m) Participant” shall mean any key Employee designated by the Board
as a key Employee whose compensation for the fiscal year in which the key Employee is so designated
or a future fiscal year may be subject to the limit on deductible compensation imposed by Section
162(m) of the Code.

          (dd) “Share” shall mean a share of the Common Stock, as adjusted in accordance with
Section 15 of the Plan.

          (ee) “Stock Bonus” shall mean the right to receive a bonus of Common Stock for past
services pursuant to Section 13 of the Plan.

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

3. Stock Subject to the Plan.

     (a) Subject to the provisions of Section 15 of the Plan, the maximum aggregate number of
shares available for issuance under the Plan is four million eight hundred thousand (4,800,000)
shares of Common Stock. The Shares may be authorized but unissued, or reacquired Common Stock. If
an Award should expire or become unexercisable for any reason without having been exercised in
full, then the unpurchased Shares which were subject thereto shall, unless the Plan shall have been
terminated, become available for future grant or sale under the Plan. Notwithstanding any other
provision of the Plan, shares issued under the Plan and later repurchased by the Company shall not
become available for future grant or sale under the Plan.

     (b) The following limitations shall apply to grants of Awards to Employees:

     (i) No Employee shall be granted, in any fiscal year of the Company, Awards
pursuant to which more than an aggregate of two hundred and fifty thousand (250,000)
Shares are issuable to such Employee.

     (ii) In connection with his or her initial employment, an Employee may be
granted Awards to purchase and/or receive up to an additional two hundred and fifty
thousand (250,000) Shares which shall not count against the limit set forth in
subsection (i) above.

     (iii) The foregoing limitations shall be adjusted proportionately in connection
with any change in the Company’s capitalization as described in Section 15.

3.

 

     (iv) If an Option is canceled in the same fiscal year of the Company in which
it was granted (other than in connection with a transaction described in Section
15), the canceled Option shall be counted against the limit set forth in subsection
(i) above.

     (c)  Shares Available. Subject to adjustment as provided in Section 15, the
aggregate number of shares of Common Stock with respect to which awards of Restricted Stock,
Restricted Stock Units, Stock Bonuses or a combination thereof shall be made under this Plan shall
not exceed fifty percent (50%) of the aggregate number of shares of Common Stock available under
this Plan, as set forth in Section 3(a).

     (d)  Limited Exception to Minimum Vesting Restrictions. Up to five percent (5%) of
the total number of shares of Common Stock available for issuance under the Plan pursuant to
Section 3(a) may in the aggregate be issued as awards of Restricted Stock, Restricted Stock Units,
Stock Bonuses or a combination thereof that are not subject to the minimum vesting requirements set
forth in Sections 11(d), 12(b) and 13(d) of the Plan.

4. Administration of the Plan.

     (a) Procedure.

     (i) Multiple Administrative Bodies. The Plan may be administered by
different Committees with respect to different groups of Employees and Consultants.

     (ii) Section 162(m). To the extent that the Board determines it to be
desirable to qualify Awards granted hereunder as “performance-based compensation”
within the meaning of Section 162(m) of the Code, the Plan shall be administered by
a Committee of two or more “outside directors” within the meaning of Section 162(m)
of the Code.

     (iii) Discretionary Awards to Directors. Except for Options granted
automatically at the time and manner set forth in Section 10, any Award granted to a
Director shall be administered by a committee consisting solely of Outside Directors
and such Outside Directors may administer and grant discretionary Awards to
themselves.

     (iv) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall
be structured to satisfy the requirements for exemption under Rule 16b-3.

     (v) Other Administration. Other than as provided above, the Plan shall
be administered by (A) the Board or (B) a Committee, which committee shall be
constituted to satisfy applicable laws.

     (b) Powers of the Board. Subject to the provisions of the Plan, the Board shall have
the authority, in its discretion: (i) to grant Incentive Stock Options, Nonstatutory Stock Options,
Restricted Stock awards, Restricted Stock Unit awards, or Stock Bonus awards; (ii) to determine,
upon review of relevant information and in accordance with Section 7 of the Plan, the fair market

4.

 

value of the Common Stock; (iii) to determine the exercise price per share of each Award to be
granted, if any, which exercise price shall be determined in accordance with Section 7 of the Plan;
(iv) to determine the Employees or Consultants to whom, and the time or times at which, Awards
shall be granted and, subject to the limitations of Section 3 above, the number of shares to be
represented by each Award; (v) to interpret the Plan; (vi) to prescribe, amend and rescind rules
and regulations relating to the Plan; (vii) to determine the terms and provisions of each Award
granted (which need not be identical) and, with the consent of the holder thereof, modify or amend
any provisions (including provisions relating to exercise price) of any Award; (viii) to accelerate
or defer (with the consent of the Optionee) the exercise date of any Option, consistent with the
provisions of Section 6 of the Plan; (ix) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Award previously granted by the
Board; (x) to allow Optionees to satisfy withholding tax obligations by electing to have the
Company withhold from the Shares to be issued upon exercise of an Award that number of Shares
having a fair market value equal to the statutory minimum amount required to be withheld (the fair
market value of the Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined; and, all elections by an Award holder to have Shares withheld for
this purpose shall be made in such form and under such conditions as the Board may deem necessary
or advisable); and (xi) to make all other determinations deemed necessary or advisable for the
administration of the Plan. Except to the extent prohibited by Sections 11(d), 12(b) and 13(d) of
the Plan, the Board shall have the power to accelerate the time at which an Award may first be
exercised or the time during which an Award or any part thereof will vest in accordance with the
Plan, notwithstanding the provisions in the Award stating the time at which it may first be
exercised or the time during which it will vest.

     (c) Effect of Board’s Decision. All decisions, determinations and interpretations of
the Board shall be final and binding on all Holders of any Awards granted under the Plan.

     (d) Provisions Applicable to Section 162(m) Participants.

     (i) The Board, in its discretion, may determine whether an Award is to qualify
as performance-based compensation as described in Section 162(m)(4)(C) of the Code.

     (ii) Notwithstanding anything in the Plan to the contrary, the Board may grant
any Award to a Section 162(m) Participant, including a Restricted Stock award,
Restricted Stock Unit award, or Stock Bonus award the restrictions with respect to
which lapse upon the attainment of performance goals which are related to one or
more of the Performance Criteria.

     (iii) To the extent necessary to comply with the performance-based compensation
requirements of Section 162(m)(4)(C) of the Code, with respect to any Restricted
Stock award, Restricted Stock Unit award, or Stock Bonus award granted under the
Plan to one or more Section 162(m) Participants, no later than ninety (90) days
following the commencement of any fiscal year in question or any other designated
fiscal period or period of service (or such other time as may be required or
permitted by Section 162(m) of the Code), the Board shall, in writing, (i) designate
one or more Section 162(m) Participants, (ii) select the Performance Criteria
applicable to the fiscal year or other designated fiscal period

5.

 

or period of service, (iii) establish the various performance targets, in terms
of an objective formula or standard, and amounts of such Restricted Stock awards,
Restricted Stock Unit awards, and Stock Bonus awards, as applicable, which may be
earned for such fiscal year or other designated fiscal period or period of service,
and (iv) specify the relationship between Performance Criteria and the performance
targets and the amounts of such Restricted Stock awards, Restricted Stock Unit
awards, and Stock Bonus awards, as applicable, to be earned by each Section 162(m)
Participant for such fiscal year or other designated fiscal period or period of
service. Following the completion of each fiscal year or other designated fiscal
period or period of service, the Board shall certify in writing whether the
applicable performance targets have been achieved for such fiscal year or other
designated fiscal period or period of service. In determining the amount earned by
a Section 162(m) Participant, the Board shall have the right to reduce (but not to
increase) the amount payable at a given level of performance to take into account
additional factors that the Board may deem relevant to the assessment of individual
or corporate performance for the fiscal year or other designated fiscal period or
period of service.

     (iv) Furthermore, notwithstanding any other provision of the Plan, any Award
which is granted to a Section 162(m) Participant and is intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall be subject to any additional limitations set forth in Section 162(m) of the
Code (including any amendment to Section 162(m) of the Code) or any regulations or
rulings issued thereunder that are requirements for qualification as
performance-based compensation as described in Section 162(m)(4)(C) of the Code, and
the Plan shall be deemed amended to the extent necessary to conform to such
requirements.

5. Eligibility.

     (a) Awards may be granted to Employees and Consultants; provided, that Incentive Stock Options
may only be granted to Employees. An Employee or Consultant who has been granted an Award may, if
such Employee or Consultant is otherwise eligible, be granted additional Awards. Each Outside
Director shall be eligible to be automatically granted Options at the times and in the manner set
forth in Section 10.

     (b) Each Option shall be designated in the written Option Agreement as either an Incentive
Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the
extent that the aggregate fair market value of the Shares with respect to which Options designated
as Incentive Stock Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company) exceeds one hundred thousand dollars ($100,000), such Options
shall be treated as Nonstatutory Stock Options.

     (c) For purposes of Section 5(b), Options shall be taken into account in the order in which
they were granted, and the fair market value of the Shares shall be determined as of the time the
Option with respect to such Shares is granted.

     (d) The Plan shall not confer upon any Holder any right with respect to continuation of
employment by or the rendition of consulting services to the Company, nor shall it interfere in

6.

 

any way with his or her right or the Company’s right to terminate his or her employment or
services at any time, with or without cause.

6. Term of Plan. The Plan shall become effective upon the earlier to occur of its adoption
by the Board or its approval by vote of holders of a majority of the outstanding shares of the
Company entitled to vote on the adoption of the Plan. It shall continue in effect until terminated
under Section 17 of the Plan. Notwithstanding the foregoing, no Incentive Stock Option may be
granted under this Plan after the first to occur of (a) the expiration of ten (10) years from the
date the Plan is adopted by the Board or (b) the expiration of ten (10) years from the date the
Plan is approved by the Company’s stockholders under Section 21.

7. Exercise Price and Consideration.

     (a) The per Share exercise price for the Shares to be issued pursuant to exercise of an Option
shall be no less than one hundred percent (100%) of the fair market value per Share on the date of
grant; provided, however, that in the case of an Incentive Stock Option granted to an Employee who,
at the time of grant of such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than one hundred and ten percent (110%) of the fair
market value per Share on the date of grant. Notwithstanding the foregoing, Options may be granted
with a per Share exercise price of less than one hundred percent (100%) of the fair market value
per Share on the date of grant pursuant to a merger or other corporate transaction.

     (b) The fair market value shall be determined by the Board in its discretion; provided,
however, that where there is a public market for the Common Stock, the fair market value per Share
shall be the closing price per share (or the closing bid, if no sales were reported) of the Common
Stock for the date of grant, as reported in the Wall Street Journal (or, if not so reported, as
otherwise reported by the NASDAQ Stock Market) or, in the event the Common Stock is listed on
another stock exchange, the fair market value per Share shall be the closing price per share (or
the closing bid, if no sales were reported) on such exchange on the date of grant, as reported in
the Wall Street Journal (or if not so reported, as otherwise reported
by such exchange). If there is no closing price per share for the
Common Stock on the date of the grant, then the fair market value
shall be the closing price per share on the last preceding date for
which such quotation exists.

     (c) The consideration to be paid for the Shares to be issued upon exercise of an Award,
including the method of payment, shall be determined by the Board (and in the case of an Incentive
Stock Option, shall be determined at the time of grant) and to the extent permitted under
applicable laws may consist entirely of cash, check, other Shares of Common Stock which (i) either
have been owned by the Optionee for more than six (6) months on the date of surrender or were not
acquired directly or indirectly, from the Company, and (ii) have a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said Award shall be
exercised, or any combination of such methods of payment, or such other consideration and method of
payment for the issuance of Shares to the extent permitted under applicable law.

8. Term of Option. The term of each Option shall be the term stated in the Option
Agreement; provided, however, that the term shall be no more than seven (7) years from the date of
grant thereof. In the case of an Incentive Stock Option granted to an Optionee who, at the time
the Option is granted, owns stock representing more than ten percent (10%) of the voting

7.

 

power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option
shall be five (5) years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement.

9. Exercise of Option.

     (a)  Procedure for Exercise; Rights as a Stockholder.

          (i) Any Option granted hereunder shall be exercisable at such times and under
such conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible under the
terms of the Plan.

          (ii) An Option may not be exercised for a fraction of a Share.

          (iii) An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the Option by
the person entitled to exercise the Option and full payment for the Shares with
respect to which the Option is exercised has been received by the Company. Full
payment may, as authorized by the Board, consist of any consideration and method of
payment allowable under Section 7 of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right to
vote or receive dividends or any other rights as a stockholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. Upon an
Optionee’s request, the Company shall issue (or cause to be issued) such stock
certificate promptly upon exercise of the Option. To the extent an Option
designated as an Incentive Stock Option at grant that is treated as the exercise of
a Nonstatutory Stock Option pursuant to Section 5(b), the Company shall issue a
separate stock certificate evidencing the Shares treated as acquired upon exercise
of an Incentive Stock Option and a separate stock certificate evidencing the Shares
treated as acquired upon exercise of a Nonstatutory Stock Option and shall identify
each such certificate accordingly in its stock transfer records. No adjustment will
be made for a dividend or other right for which the record date is prior to the date
the stock certificate is issued, except as provided in Section 15 of the Plan.

          (iv) Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to which the Option is
exercised.

     (b) Termination of Status as an Employee or Consultant. In the event of termination
of an Optionee’s Continuous Status as an Employee or Consultant (as the case may be), such Optionee
may, but only within such period of time as is determined by the Board, with such determination in
the case of an Incentive Stock Option not exceeding three (3) months and in the case of
Nonstatutory Stock Option not exceeding six (6) months after the date of termination (provided,
that such period shall be three (3) months in the case of an Option granted to an Outside Director
pursuant to Section 10), with such determination in the case of an Incentive

8.

 

Stock Option being made at the time of grant of the Option, exercise the Option to the extent
that such Employee or Consultant was entitled to exercise it at the date of such termination (but
in no event later than the date of expiration of the term of such Option as set forth in the Option
Agreement). To the extent that such Employee or Consultant was not entitled to exercise the Option
at the date of such termination, or if such Employee or Consultant does not exercise such Option
(which such Employee or Consultant was entitled to exercise) within the time specified herein, the
Option shall terminate.

     (c) Disability of Optionee. Notwithstanding the provisions of Section 9(b) above, in
the event of termination of an Optionee’s Continuous Status as an Employee or Consultant as a
result of such Employee’s or Consultant’s Disability, such Employee or Consultant may, but only
within six (6) months (twelve (12) months in the case of an Option granted to an Outside Director
pursuant to Section 10) (or such other period of time not exceeding twelve (12) months as is
determined by the Board, with such determination in the case of an Incentive Stock Option being
made at the time of grant of the Option) from the date of such termination (but in no event later
than the date of expiration of the term of such Option as set forth in the Option Agreement),
exercise the Option to the extent the right to exercise would have accrued had the Optionee
continued Continuous Status as an Employee or Consultant for a period of six (6) months following
termination of Continuous Status as an Employee or Consultant by reason of Disability. To the
extent that such Employee or Consultant was not entitled to exercise an Option in this period, or
if such Employee or Consultant does not exercise such Option (which such Employee or Consultant was
entitled to exercise) within the time specified herein, the Option shall terminate.

     (d) Retirement of Employee. Notwithstanding the provisions of Section 9(b) above, in
the event of termination of an Employee’s Continuous Status as an Employee as a result of such
Employee’s retirement from the Company at age fifty-five (55) or greater after having Continuous
Status as an Employee for (5) years or more (“Retirement”), all Awards held by such Employee shall
vest and such Employee may, but only within three (3) years from the date of such termination (but
in no event later than the date of expiration of the term of such Award), exercise the Award to the
extent such Employee was entitled to exercise it at the date of such termination.

     (e) Death of Optionee. In the event of the death of an Optionee:

     (i) during the term of the Option who is at the time of his or her death an
Employee or Consultant of the Company and who shall have been in Continuous Status
as an Employee or Consultant since the date of grant of the Option, the Option may
be exercised, at any time within six (6) months (twelve (12) months in the case of
an Option granted to an Outside Director pursuant to Section 10) (or at such later
time as may be determined by the Board but in no event later than the date of
expiration of the term of such Option as set forth in the Option Agreement), by the
Optionee’s estate or by a person who acquired the right to exercise the Option by
bequest or inheritance, but only to the extent that the right to exercise would have
accrued had the Optionee continued living and remained in Continuous Status as an
Employee or Consultant six (6) months (or such other period of time as is determined
by the Board) after the date of death; or

9.

 

     (ii) within thirty (30) days (or such other period of time not exceeding three
(3) months as is determined by the Board, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option) after the
termination of Continuous Status as an Employee or Consultant, the Option may be
exercised, at any time within six (6) months (twelve (12) months in the case of an
Option granted to an Outside Director pursuant to Section 10) (or such other period
of time as is determined by the Board at the time of grant of the Option) following
the date of death (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), by the Optionee’s estate or by a
person who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the right to exercise that had accrued at the date of
termination.

10. Automatic Granting of Options to Outside Directors.

     (a) First Option Grants. Unless otherwise determined by the Board, each new Outside
Director shall be automatically granted an Option to purchase thirty thousand (30,000) Shares (a
“First Option”) on the date on which such person first becomes a Director, whether through
election by the stockholders of the Company or appointment by the Board to fill a vacancy.

     (b) Subsequent Option Grants. Unless otherwise determined by the Board, each Outside
Director and the Chairman of the Board of Directors of the Company shall be automatically granted
an annual Option (a “Subsequent Option”) to purchase, in the case of an Outside Director,
fifteen thousand (15,000) Shares, and in the case of the Chairman of the Board of Directors of the
Company, twenty thousand (20,000) Shares, each on the date of each annual meeting of the
stockholders of the Company, if on such date, he or she shall have served on the Board for at least
six (6) months.

     (c) Terms of Options Granted to Outside Directors. Options granted to Outside
Directors pursuant to this Section 10 shall have a per Share exercise price of no less than one
hundred percent (100%) of the fair market value per Share on the date of grant. Subject to Section
9, the term of each Option granted to an Outside Director pursuant to this Section 10 shall be
seven (7) years from the date of grant thereof. First Options and Subsequent Options shall become
exercisable in cumulative monthly installments of 1/12 of the Shares subject to such Option on each
of the monthly anniversaries of the date of grant of the Option, commencing with the first such
monthly anniversary, such that each such Option shall be one hundred percent (100%) vested on the
first anniversary of its date of grant.

11. Restricted Stock Awards.

     (a) Rights to Purchase. After the Board determines that it will offer an Employee or
Consultant a Restricted Stock award, it shall deliver to the offeree a stock purchase agreement
setting forth the terms, conditions and restrictions relating to the offer. Such agreement shall
further specify the number of Shares which such person shall be entitled to purchase, and the time
within which such person must accept such offer, which shall in no event exceed six (6) months from
the date upon which the Board made the determination to grant the Restricted Stock

10.

 

award. The offer shall be accepted by execution of a stock purchase agreement in the form
determined by the Board.

     (b) Purchase Price. The Board shall establish the purchase price, if any, and form of
payment for each Restricted Stock award; provided, however, that such purchase price shall be no
less than one hundred percent (100%) of the fair market value per Share on the date of grant;
provided, further, however, that the purchase price per Share may be reduced on a dollar-for-dollar
basis to the extent the Restricted Stock award is granted to the Holder in lieu of cash
compensation otherwise payable to the Holder. In all cases, legal consideration shall be required
for each issuance of a Restricted Stock award.

     (c) Issuance of Shares. Forthwith after payment therefor, the Shares purchased shall
be duly issued; provided, however, that the Board may require that the Holder make adequate
provision for any Federal and State withholding obligations of the Company as a condition to the
Holder purchasing such Shares.

     (d) Vesting. Subject to the following minimum vesting requirements and the
requirements of Section 4(d) of the Plan with respect to Restricted Stock awards granted to Section
162(m) Participants, at the time of the grant of a Restricted Stock award, the Board may impose
such restrictions or conditions to the vesting of such Restricted Stock award as it, in its sole
discretion, deems appropriate. No Restricted Stock award that is not a Performance Award shall
vest at a rate more favorable to the Holder than in pro-rata installments over a three (3) year
period measured from the date of grant. The vesting of all Restricted Stock Performance Awards
shall be subject to the completion of at least one (1) year of Continuous Status as an Employee or
Consultant measured from the date of the grant of the Award. Notwithanding the foregoing minimum
vesting requirements, vesting of Restricted Stock awards may occur earlier in the event of (A)
death, (B) Disability, (C) Retirement, or (D) a Change in Control. Additionally, Restricted Stock
awards granted pursuant to the exception set forth in Section 3(d) of the Plan are not subject to
the foregoing minimum vesting requirements.

     (e) Unvested Share Repurchase Option. The stock purchase agreement shall grant the
Company an unvested share repurchase option exercisable upon the voluntary or involuntary
termination of the Holder’s employment with the Company for any reason (including death or
Disability). Subject to applicable laws, if the Board so determines, the purchase price for shares
repurchased may be paid by cancellation of any indebtedness of the Holder to the Company.

     (f) Other Provisions. The stock purchase agreement shall contain such other terms,
provisions and conditions not inconsistent with the Plan as may be determined by the Board.

12. Restricted Stock Unit Awards.

     (a) Grant of Restricted Stock Units. Any Employee or Consultant selected by the Board
may be granted an Award of Restricted Stock Units in the manner determined from time to time by the
Board.

     (b) Vesting of Restricted Stock Units. Subject to the following minimum vesting
requirements and the requirements of Section 4(d) with respect to Restricted Stock Unit awards
granted to Section 162(m) Participants, at the time of the grant of a Restricted Stock Unit award,
the Board may impose such restrictions or conditions to the vesting of such Restricted Stock Unit

11.

 

award as it, in its sole discretion, deems appropriate. No Restricted Stock Unit award that
is not a Performance Award shall vest at a rate more favorable to the Holder than in pro-rata
installments over a three (3) year period measured from the date of grant. The vesting of all
Restricted Stock Unit Performance Awards shall be subject to the completion of at least one (1)
year of Continuous Status as an Employee or Consultant measured from the date of the grant of the
Award. Notwithanding the foregoing minimum vesting requirements, vesting of Restricted Stock Unit
awards may occur earlier in the event of (A) death, (B) Disability, (C) Retirement, or (D) a Change
in Control. Additionally, Restricted Stock Unit awards granted pursuant to the exception set forth
in Section 3(d) of the Plan are not subject to the foregoing minimum vesting requirements. Common
Stock underlying a Restricted Stock Unit award will not be issued until the Restricted Stock Unit
award has vested, pursuant to a vesting schedule or Performance Criteria set by the Board.

     (c) No Rights as a Stockholder. Unless otherwise provided by the Board, a Holder
awarded Restricted Stock Units shall have no rights as a Company stockholder with respect to such
Restricted Stock Units until such time as the Restricted Stock Units have vested and the Common
Stock underlying the Restricted Stock Units has been issued.

     (d) Purchase Price. The Board shall establish the purchase price, if any, and form of
payment for each Restricted Stock Unit award; provided, however, that such purchase price shall be
no less than one hundred percent (100%) of the fair market value per Share on the date of grant;
provided, further, however, that the purchase price per Share may be reduced on a dollar-for-dollar
basis to the extent the Restricted Stock Unit award is granted to the Holder in lieu of cash
compensation otherwise payable to the Holder. In all cases, legal consideration shall be required
for each issuance of a Restricted Stock Unit award.

     (e) Other Provisions. The restricted stock unit award agreements shall contain such
other terms, provisions and conditions not inconsistent with the Plan as may be determined by the
Board.

13. Stock Bonus Awards.

     (a) Terms of Award. After the Board determines that it will offer an Employee or
Consultant a Stock Bonus award, it shall deliver to the offeree a stock bonus agreement setting
forth the terms, conditions and restrictions relating to the offer and the number of shares to be
awarded. The offer shall be accepted by execution of a stock bonus agreement in the form
determined by the Board.

     (b) Purchase Price. The Board shall establish the purchase price, if any, and form of
payment for each Stock Bonus award; provided, however, that such purchase price shall be no less
than one hundred percent (100%) of the fair market value per Share on the date of grant; provided,
further, however, that the purchase price per Share may be reduced on a dollar-for-dollar basis to
the extent the Stock Bonus award is granted to the Holder in lieu of cash compensation otherwise
payable to the Holder.

     (c) Issuance of Shares. Forthwith after payment therefor, the Shares purchased shall
be duly issued; provided, however, that the Board may require that the Holder make adequate
provision for any Federal and State withholding obligations of the Company as a condition to the
Holder purchasing such Shares.

12.

 

     (d) Vesting. Subject to the following minimum vesting requirements and the
requirements of Section 4(d) with respect to Stock Bonus awards granted to Section 162(m)
Participants, at the time of the grant of a Stock Bonus award, the Board may impose such
restrictions or conditions to the vesting of such Stock Bonus award as it, in its sole discretion,
deems appropriate. No Stock Bonus award that is not a Performance Award shall vest at a rate more
favorable to the Holder than in pro-rata installments over a three (3) year period measured from
the date of grant. The vesting of all Stock Bonus Performance Awards shall be subject to the
completion of at least one (1) year of Continuous Status as an Employee or Consultant measured from
the date of the grant of the Award. Notwithanding the foregoing minimum vesting requirements,
vesting of Stock Bonus awards may occur earlier in the event of (A) death, (B) Disability, (C)
Retirement, or (D) a Change in Control. Additionally, Stock Bonus awards granted pursuant to the
exception set forth in Section 3(d) of the Plan are not subject to the foregoing minimum vesting
requirements.

     (e) Unvested Share Repurchase/Reacquisition Option. The Stock Bonus award agreement
shall grant the Company an unvested share repurchase/reacquisition option exercisable upon the
voluntary or involuntary termination of the Holder’s employment with the Company for any reason
(including death or Disability). Subject to applicable laws, if the Board so determines, the
purchase price (if any) for shares repurchased may be paid by cancellation of any indebtedness of
the Holder to the Company. If no purchase price was paid for the shares, the unvested shares may
be reacquired by the Company for no consideration.

     (e) Other Provisions. The stock bonus agreement shall contain such other terms,
provisions and conditions not inconsistent with the Plan as may be determined by the Board.

14. Non-Transferability of Awards. Unless determined otherwise by the Board, an Award may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than
by will or by the laws of descent or distribution and may be exercised, during the lifetime of the
Holder, only by the Holder. If the Board makes an Award transferable, such Award shall contain
such additional terms and conditions as the Board deems appropriate.

15. Adjustments upon Changes in Capitalization or Merger.

     (a) Changes in Capitalization. Subject to any action by the Company required by
applicable law or regulations or the requirements of the NASDAQ Stock Market or another established
stock exchange on which the Company’s securities are traded, and subject to Section 15(d), the
number and kind of shares of Common Stock (or other securities or property) covered by each
outstanding Award, and the number and kind of shares of Common Stock (or other securities or
property) which have been authorized for issuance under the Plan but as to which no Awards have yet
been granted or which have been returned to the Plan upon cancellation or expiration of an Award,
as well as the price per share of Common Stock (or other securities or property) covered by each
such outstanding Award, shall be adjusted proportionately to the extent the Board determines that
any increase, decrease or adjustment in the number or kind of issued shares of Common Stock (or
other securities or property), dividend, distribution, stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, reorganization, merger,
consolidation, split-up, repurchase, liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of the Company, exchange of Common Stock or
other securities of the Company, or other similar corporate

13.

 

transaction or event, in the Board’s sole discretion, affects the Common Stock such that an
adjustment is determined by the Board to be appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under the Plan or with respect
to an Award. Such adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the number or price of
shares of Common Stock subject to an Award.

     (b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Board shall notify the Holder at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously exercised, the Award shall
terminate immediately prior to the consummation of such proposed action.

     (c) Merger or Asset Sale. Unless otherwise provided in the Award Agreement, in the
event of a merger, sale of all or substantially all of the assets of the Company, tender offer or
other transaction or series of related transactions resulting in a change of ownership of more than
fifty percent (50%) of the voting securities of the Company (“Change in Control”) approved
by the majority of the members of the Board on the Board prior to the commencement of such Change
in Control, each outstanding Award shall be assumed or an equivalent award substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation; provided, however, in
the event that within one year of the date of the completion of the Change in Control, the
successor corporation or a Parent or Subsidiary of the successor corporation terminates the
employment of a Holder that is an Employee without Cause (as defined below), such Holder shall
fully vest in and, if applicable, have the right to exercise the award assumed or substituted for
the Award as to all of the Shares subject to the Award, including Shares as to which it would not
otherwise be exercisable. In the event that the successor corporation refuses to assume or
substitute the Award, the Holder shall fully vest in and, if applicable, have the right to exercise
the Award as to all of the Shares subject to the Award, including Shares as to which it would not
otherwise be exercisable. If an Award becomes fully vested and exercisable in lieu of assumption
or substitution in the event of a Change in Control, the Board shall notify the Holder in writing
or electronically that the Award shall be fully vested and exercisable for a period of fifteen (15)
days from the date of such notice, and the Award shall terminate upon the expiration of such
period, if applicable.

     For the purposes of this paragraph, the Award shall be considered assumed if, following the
Change in Control, the Award confers the same acquisition rights for each Share subject to the
Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other
securities or property) received in the Change in Control by holders of Common Stock for each Share
held on the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the Change in Control is not
solely common stock of the successor corporation or its Parent, the Board may, with the consent of
the successor corporation, provide for the consideration to be received pursuant to the Award, for
each Share subject to the Award, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by holders of Common
Stock in the Change in Control.

14.

 

     For purposes of this paragraph, termination shall be for “Cause” in the event of the
occurrence of any of the following: (a) any intentional action or intentional failure to act by
Employee which was performed in bad faith and to the material detriment of the successor
corporation or its Parent or Subsidiary; (b) Employee willfully and habitually neglects the duties
of employment; or (c) Employee is convicted of a felony crime involving moral turpitude; provided,
that in the event that any of the foregoing events is capable of being cured, the successor
corporation or its Parent or Subsidiary shall provide written notice to the Employee describing the
nature of such event and the Employee shall thereafter have five (5) business days to cure such
event.

     In the event of a Change in Control which is not approved by the majority of the members of
the Board on the Board prior to the commencement of a Change in Control, each Holder shall fully
vest in and, if applicable, have the right to exercise all outstanding Awards as to all of the
Shares subject to such Award, including Shares as to which it would not otherwise be exercisable.

     (d) With respect to Awards which are granted to Section 162(m) Participants and are intended
to qualify as performance-based compensation under Section 162(m)(4)(C), no adjustment or action
described in this Section 15 or in any other provision of the Plan shall be authorized to the
extent that such adjustment or action would cause such Award to fail to so qualify under Section
162(m)(4)(C), or any successor provisions thereto.

16. Date of Granting Awards. The date of grant of an Award shall, for all purposes, be the
date on which the Board makes the determination granting such Award. Notice of the determination
shall be given to each Employee or Consultant to whom an Award is so granted within a reasonable
time after the date of such grant.

17. Amendment and Termination of the Plan.

     (a) Amendment and Termination. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or discontinuation shall
be made which would impair the rights of any Holder under any grant theretofore made, without his
or her consent. In addition, to the extent necessary and desirable to comply with Section 422 of
the Code (or any other applicable laws or regulation, the requirements of the NASDAQ Stock Market
or another established stock exchange), the Company shall obtain stockholder approval of any Plan
amendment in such a manner and to such a degree as required.

     (b) Effect of Amendment or Termination. Any such amendment or termination of the Plan
shall not affect Awards already granted, and such Awards shall remain in full force and effect as
if this Plan had not been amended or terminated, unless mutually agreed otherwise between the
Holder, as applicable, and the Board, which agreement must be in writing and signed by the Holder,
as applicable, and the Company.

18. Conditions upon Issuance of Shares. Shares shall not be issued pursuant to the
exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including, without limitation,
the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules
and regulations promulgated thereunder, and the requirements of the NASDAQ Stock Market or any
other stock exchange upon which the Shares may then be listed, and shall be

15.

 

further subject to the approval of counsel for the Company with respect to such compliance. As a
condition to the exercise of an Award, the Company may require the person exercising such Award to
represent and warrant at the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares if, in the opinion
of counsel for the Company, such a representation is required by any of the aforementioned relevant
provisions of law.

19. Reservation of Shares. The Company, during the term of this Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements
of the Plan. The inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of
the failure to issue or sell such Shares as to which such requisite authority shall not have been
obtained.

20. Award Agreements. Options shall be evidenced by written Option Agreements in such form
as the Board shall approve. Restricted Stock awards, Restricted Stock Unit awards, or Stock Bonus
awards shall be evidenced by written restricted stock award agreements, a restricted stock unit
award agreements, or stock bonus agreements, respectively, in such form as the Board shall approve.

21. Stockholder Approval. Continuance of the Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months before or after the date the Plan is adopted.
Such stockholder approval shall be obtained in the degree and manner required under applicable
laws and the rules of the NASDAQ Stock Market or any other stock exchange upon which the Common
Stock is listed.

22. Section 409A of the Code. In the event any provision of the Plan, or the application
thereof, is or becomes inconsistent with Section 409A of the Code and any regulations promulgated
thereunder, such provision shall be void or unenforceable or in the sole discretion of the Board
shall be deemed amended to comply with Section 409A and any regulations promulgated thereunder.
The other provisions of the Plan shall remain in full force and effect.

16.

 

STOCK OPTION AGREEMENT

Unless
otherwise defined herein, the terms defined in the 2003 Stock Option
Plan as amended, (the “Plan”)
shall have the same defined meanings in this Option Agreement.

I. NOTICE OF STOCK OPTION GRANT

NAME

ADDRESS

CITY, STATE ZIP

As
part of [your Employment Agreement or the Company’s
Performance Options Policy] you have been granted an option to
purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option

Agreement, as follows:

Date of Grant:

Vesting Commencement Date

Exercise Price per Share:

Total Number of Shares Granted:

Total Exercise Price:

Type of Option:

NQ    Nonstatutory Stock Option

Term/Expiration Date:

Vesting Schedule:

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

[25%
of the Shares subject to the Option shall vest twelve months after the
Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall vest
each month thereafter, subject to the Optionee continuing to be an Employee or Consultant on such
dates.

or

One
third (1/3) of the Shares subject to the Option shall vest annually
beginning one year after the Vesting Commencement Date, subject to
the Optionee continuing to be an Employee or Consultant on such
dates.]

Termination Period:

This Option may be exercised for ninety (90) days (or such other period of time not exceeding
six (6) months, as is determined by the Board) after Optionee’s Continuous Status as an Employee or
Consultant terminates. Upon the death or Disability of the Optionee, this Option may be
exercised for six (6) months after Optionee’s Continuous Status as an Employee or Consultant. In no
event shall this Option be exercised later than the Term/Expiration Date as provided above.

 

 

     II. AGREEMENT

     1. Grant of Option. The Plan Administrator of the Company hereby grants to the Optionee named
in the Notice of Grant attached as Part I of this Agreement (the “Optionee”) an option (the
“Option”) to purchase the number of Shares, as set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the “Exercise Price”), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to Section 13(b) of the
Plan, in the event of a conflict between the terms and conditions of the Plan and the terms and
conditions of this Option Agreement, the terms and conditions of the Plan shall prevail.

          If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is
intended to qualify as an Incentive Stock Option under Section 422 of the Code. However, if this
Option is intended to be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule
of Code Section 422(d) it shall be treated as a Nonstatutory Stock Option (“NSO”).

          2. Exercise of Option.

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

               (b) Method of Exercise. This Option is exercisable by delivery of an exercise notice, in the
form attached as Exhibit A (the “Exercise Notice”), which shall state the election to exercise the
Option, the number of Shares in respect of which the Option is being exercised (the “Exercised
Shares”), and such other representations and agreements as may be required by the Company pursuant
to the provisions of the Plan. The Exercise Notice shall be completed by the Optionee and
delivered to the President, the Chief Financial Officer or Secretary of the Company. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares.
This Option shall be deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.

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

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

               (a) cash; or

               (b) check; or

               (c) consideration received by the Company under a cashless exercise program implemented by
the Company in connection with the Plan; or

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

          4. Non-Transferability of Option. This Option may not be transferred in any manner otherwise
than by will or by the laws of descent or distribution and may be exercised during the lifetime of
Optionee only by the

 

 

Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

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

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

               (a) Exercising the Option.

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

                    (ii) Incentive Stock Option. If this Option qualifies as an ISO, the Optionee will have no
regular federal income tax liability upon its exercise, although the excess, if any, of the Fair
Market Value of the Exercised Shares on the date of exercise over their aggregate Exercise Price
will be treated as an adjustment to alternative minimum taxable income for federal tax purposes and
may subject the Optionee to alternative minimum tax in the year of exercise. In the event that the
Optionee ceases to be an Employee but continues to provide services to the Company, any Incentive
Stock Option of the Optionee that remains unexercised shall cease to qualify as an Incentive Stock
Option and will be treated for tax purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.

               (b) Disposition of Shares.

                    (i) NSO. If the Optionee holds NSO Shares for at least one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal income tax purposes
(holding the Shares for more than eighteen (18) months may lower the long-term capital gains rate).

                    (ii) ISO. If the Optionee holds ISO Shares for at least one year after exercise and two years
after the grant date, any gain realized on disposition of the Shares will be treated as long-term
capital gain for federal income tax purposes. If the Optionee disposes of ISO Shares within one
year after exercise or two years after the grant date, any gain realized on such disposition will
be treated as compensation income (taxable at ordinary income rates) to the extent of the excess,
if any, of the lesser of (A) the difference between the Fair Market Value of the Shares acquired on
the date of exercise and the aggregate Exercise Price, or (B) the difference between the sale price
of such Shares and the aggregate Exercise Price. Any additional gain will be taxed as capital
gain, short-term or long-term depending on the period that the ISO Shares were held.

               (c) Notice of Disqualifying Disposition of ISO Shares. If the Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to an ISO on or before the later of (i) two years
after the grant date, or (ii) one year after the exercise date, the Optionee shall immediately
notify the Company in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation

 

 

income recognized from such early disposition of ISO Shares by payment in cash or out of the
current earnings paid to the Optionee.

          7. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan
and this Option Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not be modified adversely
to the Optionee’s interest except by means of a writing signed by the Company and Optionee. This
agreement is governed by the internal substantive laws, but not the choice of law rules, of
California.

          8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF
SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN
OPTION OR PURCHASING SHARES HEREUNDER).

OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE
OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S
RELATIONSHIP AS AN EMPLOYEE OR CONSULTANT AT ANY TIME, WITH OR WITHOUT CAUSE.

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

	 	 	 
	OPTIONEE:

	 	NEUROCRINE BIOSCIENCES, INC.
	 
	 	 
	 

	 	 
	Signature

	 	Signature
	 
	 	 
	Date

	 	Date

 

 

Name:

NAME

ADDRESS

CITY, STATE ZIP

CONSENT OF SPOUSE

          The undersigned spouse of Optionee has read and hereby approves the terms and conditions of
the Plan and this Option Agreement. In consideration of the Company’s granting his or her spouse
the right to purchase Shares as set forth in the Plan and this Option Agreement, the undersigned
hereby agrees to be irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be similarly bound. The
undersigned hereby appoints the undersigned’s spouse as attorney-in-fact for the undersigned with
respect to any amendment or exercise of rights under the Plan or this Option Agreement.

	 	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Spouse of Optionee
	 	 

 

 

EXHIBIT A

NEUROCRINE BIOSCIENCES, INC.

2003
Stock Option Plan as amended

EXERCISE NOTICE

Neurocrine Biosciences, Inc.

12790 El Camino Real

San Diego, CA 92130

Attention: Secretary

          1. Exercise of Option. Effective as of today,                     , 20___, the undersigned
(“Purchaser”) hereby elects to purchase                     shares (the “Shares”) of the Common Stock of
Neurocrine Biosciences, Inc. (the “Company”) under and
pursuant to the 2003 Stock Option
Plan as amended (the “Plan”) and the Stock Option Agreement dated                      , 20___(the “Option Agreement”).
The purchase price for the Shares shall be $                     , as required by the Option
Agreement.

          2. Delivery of Payment. Purchaser herewith delivers to the Company the full purchase price
for the Shares.

          3. Representations of Purchaser. Purchaser acknowledges that Purchaser has received, read and
understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and
conditions.

          4. Rights as Shareholder. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) of the Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Shares so acquired shall be issued
to the Optionee as soon as practicable after exercise of the Option. No adjustment will be made
for a dividend or other right for which the record date is prior to the date of issuance, except as
provided in Section 11 of the Plan.

          5. Tax Consultation. Purchaser understands that Purchaser may suffer adverse tax consequences
as a result of Purchaser’s purchase or disposition of the Shares. Purchaser represents that
Purchaser has consulted with any tax consultants Purchaser deems advisable in connection with the
purchase or disposition of the Shares and that Purchaser is not relying on the Company for any tax
advice.

6. Entire Agreement; Governing Law. The Plan and Option Agreement are incorporated herein by
reference. This Agreement, the Plan and the Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Company and Purchaser with respect to the subject matter hereof,
and may not be modified adversely to the Purchaser’s interest except by means of a writing signed
by the Company and Purchaser. This agreement is governed by the internal substantive laws, but not
the choice of law rules, of California.

 

 

			
	 	 	 
	Submitted by:
	 	Accepted by:
	PURCHASER:	 	 
	 
	 	NEUROCRINE BIOSCIENCES, INC.

	 	 	 	 
	 

	 	 	 
	Signature
	 	 	 
	 
	 	 	 
	 

	 	 	 
	Print Name

	 	 	Its

Neurocrine Biosciences, Inc.

12790 El Camino Real

San Diego, CA 92130

Date Received

 

 

NEUROCRINE BIOSCIENCES, INC.

2003 INCENTIVE STOCK PLAN

Restricted Stock Unit Agreement

Grant Notice

     Neurocrine Biosciences, Inc. (the “Company”) hereby grants you, [                    ] (the
“Employee”), an award of Restricted Stock Units (“RSUs”) under the Company’s 2003 Incentive Stock
Plan, as amended (the “Plan”), the terms of which are hereby incorporated by reference. The date
of this Restricted Stock Unit Agreement, which includes Appendix A attached hereto and incorporated
herein (the “Agreement”), is September 26, 2006 (the “Effective Date”). Subject to the remaining
terms of this Agreement and of the Plan, the principal features of this award are as follows:

Number of RSUs:                     

Vesting of RSUs: The RSUs will vest according to the following schedule:

So long as you remain in Continuous Status as an Employee or Consultant through each such date,
1/3rd of the RSUs shall vest on each of the thirteen (13), twenty-four (24) and
thirty-six (36) month anniversaries of the Effective Date, so that the RSUs will become fully
vested on the thirty-six (36) month anniversary of the Effective Date (the “Vesting Schedule”).
The RSUs are also subject to the vesting conditions set forth in paragraph 4 of the attached
Appendix A.

Unless otherwise defined herein or in Appendix A, capitalized terms herein or in
Appendix A shall have the defined meanings ascribed to them in the Plan.

Your signature below indicates your agreement and understanding that this award is subject to all
of the terms and conditions contained in this Agreement (including Appendix A) and the
Plan. For example, important additional information on vesting and forfeiture of the RSUs is
contained in Paragraphs 4 through 6 of Appendix A. PLEASE BE SURE TO READ ALL OF APPENDIX
A, WHICH CONTAINS THE SPECIFIC TERMS AND CONDITIONS OF THIS AGREEMENT.

	 	 	 	 	 	 	 	 	 
	NEUROCRINE BIOSCIENCES, INC.	 	EMPLOYEE	 	 
	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	Tim Coughlin	 	[NAME]	 	 
	 	 	Address:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	VP and CFO
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	Date:
               9/26/06                        

	 	Date:	 	 	 	 	 	 
	 	 	 	 	 	 	 

 

 

APPENDIX A

TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS

     1. Grant. The Company hereby grants to the Employee under the Plan an award of that
number of RSUs set forth on the first page of this Agreement, subject to all of the terms and
conditions in this Agreement and the Plan.

     2. Plan Governs. The RSUs are issued pursuant to, and the terms of this Agreement are
subject to, all terms and provisions of the Plan, including without limitation Section 15 of the
Plan. Except as provided in paragraph 4(b) below, in the event of a conflict between one or more
provisions of this Agreement and one or more provisions of the Plan, the provisions of the Plan
will govern.

     3. Company’s Obligation to Pay. Each RSU has a value equal to the fair market value
of a share of Common Stock on the date the shares subject thereto are distributed. Unless and
until the RSUs will have vested in the manner set forth in paragraphs 4 and 5, the Employee will
have no right to payment of any such RSUs. Prior to actual payment of any vested RSUs, such RSUs
will represent an unsecured obligation of the Company, payable (if at all) only from the general
assets of the Company. Nothing contained in this Agreement, and no action taken pursuant to its
provisions, shall create or be construed to create a trust of any kind or fiduciary relationship
between Employee and the Company or any other person.

     4. Vesting.

     (a) Subject to paragraph 5, the RSUs awarded by this Agreement will vest in the Employee
according to the Vesting Schedule set forth on the first page of this Agreement, subject to the
Employee’s remaining in Continuous Status as an Employee or Consultant through such vesting periods
or dates.

     (b) Notwithstanding anything to the contrary set forth in the Plan, the vesting of the RSUs
awarded by this Agreement shall not accelerate in accordance with Section 9(d) of the Plan in
connection with a termination of Employee’s Continuous Status as an Employee as a result of
Employee’s retirement from the Company.

     (c) In the event of a Change in Control of the Company approved by the majority of the members
of the Board on the Board prior to the commencement of such Change in Control, the RSUs shall be
assumed or an equivalent award or right substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation; provided, however, in the event that within one year of
the date of the completion of the Change in Control, the successor corporation or a Parent or
Subsidiary of the successor corporation terminates the Employee without Cause, the RSUs shall
become immediately fully vested. In the event that the successor corporation refuses to assume or
substitute the RSUs, the RSUs shall become immediately fully vested and the shares subject to the
RSUs shall be issued to Employee immediately prior to the Change in Control, provided that such
transaction also qualifies as a change in the ownership or effective control of the Company, or in
the ownership of a substantial portion of the assets of the Company, in each case for purposes of
Section 409A(a)(2)(A)(v) of the Internal Revenue Code and the regulations and other guidance
thereunder (“Section 409A Change of Control”).

     (d) In the event of a Change in Control which is not approved by the majority of the members
of the Board on the Board prior to the commencement of a Change in Control, the RSUs shall
immediately fully vest. In the event that the successor corporation refuses to assume or
substitute the RSUs, the shares subject to the RSUs shall be issued to Employee immediately prior
to the Change in Control , provided that such transaction also qualifies as a Section 409A Change
of Control.

     (e) The RSUs shall be considered assumed if, following the Change in Control, the RSUs confer
the right to receive, for each Share of Common Stock subject to the RSUs immediately prior to the
Change in Control, the consideration (whether stock, cash, or other securities or property)
received in the Change in Control by holders of Common Stock for each Share held on the effective
date of the transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares); provided, however,
that if such consideration received in the Change in Control is not solely common stock of the
successor corporation or its Parent, the Board may, with the consent of the successor corporation,
provide for the consideration to be issued pursuant to the RSUs, for each Share of Common Stock
subject to the RSUs, to be solely common stock of the successor corporation or its Parent equal in
fair market value to the per share consideration received by holders of Common Stock in the Change
in Control.

     5. Forfeiture upon Termination as Service Provider. Notwithstanding any contrary
provision of this Agreement, if the Employee terminates Continuous Status as an Employee or
Consultant for any or no reason, the then-unvested RSUs awarded by this Agreement will thereupon be
forfeited at no cost to the Company and the Employee shall have no further rights thereunder. To
the extent not already paid, RSUs that vest in accordance with the Vesting Schedule shall be paid
following the Employee’s termination of Continuous Status as an Employee or Consultant in
accordance with paragraph 6 or 8 below, as applicable.

 

 

     6. Issuance after Vesting. If Employee does not elect to defer his or her
distribution of the shares subject to the RSUs in accordance with paragraph 8 below, shares of
Common Stock subject to any RSUs that vest in accordance with the Vesting Schedule will be issued
to the Employee (or in the event of the Employee’s death, to his or her estate) in whole shares of
Common Stock on each of the thirteen (13), twenty-four (24) and thirty-six (36) month anniversaries
of the Effective Date (each a “Vesting Distribution Date”), in each case not later than ten (10)
days following each Vesting Distribution Date, with respect to shares of Common Stock subject to
those RSUs that have vested on each such date.

     7. Tax Withholding. On or before the time Employee receives a distribution of shares
of Common Stock pursuant to the RSUs, or at any time thereafter as requested by the Company, the
Employee must make adequate provision, as determined by the Company, for any sums required to
satisfy the federal, state, local and foreign tax withholding obligations of the Company or a
Subsidiary, if any, which arise in connection with the vesting and/or issuance of the shares
subject to the RSUs. Unless the tax withholding obligations of the Company and/or any Subsidiary
are satisfied, the Company shall have no obligation to issue the shares of Common Stock subject to
the RSU. If the Employee does not satisfy the tax withholding obligations of the Company and/or
any Subsidiary within thirty (30) days following receipt of notice from the Company, then the RSU
will automatically terminate and the Employee will not be issued any shares pursuant to the RSU.

     8. Deferral Election.

     (a) Election Whether to Defer Distribution of RSU Shares. Each Employee must elect
whether to defer his or her distribution of the RSU shares to a date following the Vesting
Distribution Date in accordance with paragraph 8(b) or 8(c) below, as applicable. Employees who
are not eligible to participate in the Amended and Restated Neurocrine Biosciences, Inc.
Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”), as amended, must make
an election pursuant to paragraph 8(b) below. Employees who are eligible to participate in the
Deferred Compensation Plan (“Selected Employees”) must make an election pursuant to paragraph 8(c)
below. If an Employee does not make a valid, timely election pursuant to paragraph 8(b) or 8(c)
below, as applicable, the Employee will be deemed to have affirmatively elected not to defer his or
her distribution of the RSU shares, and the shares will be delivered to Employee in accordance with
paragraph 6.

     (b) Standard Deferral Election. Employees who are not Selected Employees must make an
election whether to defer receipt of the RSU shares pursuant to the terms and conditions of the
Standard Deferral Election Agreement attached hereto as Exhibit A. Subject to a valid
deferral election made within thirty (30) days following the Effective Date, the Employee may elect
to defer the timing of the receipt of shares under this Agreement and have such shares issued at a
later date pursuant to the terms and conditions of the Standard Deferral Election Agreement. Such
deferral elections must also comply with the requirements of Section 409A of the Internal Revenue
Code of 1986, as amended (the “Code”), and the related Treasury Regulations or other guidance
issued thereunder.

     (c) Deferral Election Under Deferred Compensation Plan by Selected Employees.
Selected Employees must make an election whether to defer receipt of the RSU shares pursuant to the
terms and conditions of the Deferred Compensation Plan Deferral Election Agreement attached hereto
as Exhibit B. Subject to a valid deferral election made within thirty (30) days following
the Effective Date, Selected Employees may elect to defer the timing of the receipt of the shares
under this Agreement and have such shares issued at a later date pursuant to the terms and
conditions of the Deferred Compensation Plan and the Deferred Compensation Plan Deferral Election
Agreement. Such deferral elections must also comply with the requirements of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”), and the related Treasury Regulations or
other guidance issued thereunder. To make a valid deferral election pursuant to this paragraph
8(c), Employee must also complete a Deferred Compensation Plan Beneficiary Designation form, in
substantially the form attached hereto as Exhibit C.

     (d) Deferred Distribution Date. The date upon which the shares of Common Stock are
scheduled to be delivered pursuant to any deferral election made under this paragraph 8 is the
“Deferred Distribution Date.” Shares of Common Stock subject to any RSUs that are subject to any
deferral election made under this paragraph 8 will be issued to the Employee (or in the event of
the Employee’s death, to his or her estate) in whole shares of Common Stock in each case not later
than ten (10) days following the Deferred Distribution Date

     9. Delay in Issuance of Shares. Notwithstanding anything to the contrary set forth
herein, if the Company determines that the Employee’s sale of shares of Common Stock on the date
the shares subject to the RSUs are scheduled to be delivered, whether on the Vesting Distribution
Date or a Deferred Distribution Date selected pursuant to paragraph 8 above (in either case, the
“Original Distribution Date”) would violate its policy regarding insider trading of the Company’s
stock, as determined by the Company in accordance with such policy, then such shares shall not be
delivered on such Original Distribution Date and shall instead be delivered as soon as practicable
on or after the earliest date on which the Employee could sell such shares pursuant to such policy;
provided, however, that in no event shall the delivery of the shares be delayed pursuant to this
provision beyond the later of: (1) December 31st of the same calendar year of the Original
Distribution Date, or (2) the 15th day of the third calendar month following the Original
Distribution Date.

 

 

     10. Rights as Stockholder. Neither the Employee nor any person claiming under or
through the Employee will have any of the rights or privileges of a stockholder of the Company in
respect of any shares of Common Stock deliverable hereunder unless and until certificates
representing such shares of Common Stock will have been issued, recorded on the records of the
Company or its transfer agents or registrars, and delivered to the Employee.

     11. No Effect on Employment. This Agreement is not an employment contract, and
nothing herein shall be deemed to create in any way whatsoever any obligation on the Employee’s
part to continue in the employ of the Company, or of the Company to continue the Employee’s
employment with the Company. The Employee’s employment with the Company is on an at will basis
only. The Company will have the right, which is hereby expressly reserved, to terminate or change
the terms of the employment of the Employee at any time for any reason whatsoever, with or without
good cause.

     12. Address for Notices. Any notice to be given to the Company under the terms of
this Agreement will be addressed to the Company at its principal place of business (attention:
General Counsel), or at such other address as the Company may hereafter designate in writing. Any
notices provided for in this Agreement or the Plan shall be given in writing and shall be deemed
effectively given upon receipt or, in the case of notices delivered by the Company to the Employee,
five (5) days after deposit in the United States mail, postage prepaid, addressed to the Employee
at the address specified on the first page of this Agreement or at such other address as the
Employee may hereafter designate by written notice to the Company.

     13. Transferability. Unless determined otherwise by the Board, this grant and the
rights and privileges conferred hereby, including without limitation the shares of Common Stock
issuable following the vesting of the RSUs, will not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner (whether by operation of law or otherwise) and will not
be subject to sale under execution, attachment or similar process until, with respect to whole
shares of Common Stock issuable following the vesting of the RSUs, such shares are issued pursuant
to paragraph 6 or 8 above. Upon any attempt to sell, pledge, assign, hypothecate, transfer, or
dispose of this grant, or any right or privilege conferred hereby, or upon any attempted sale under
any execution, attachment or similar process, this grant and the rights and privileges conferred
hereby immediately will become null and void.

     14. Binding Agreement. Subject to the limitations on the transferability of this
grant contained herein, this Agreement will be binding upon and inure to the benefit of the heirs,
legatees, legal representatives, successors and assigns of the parties hereto.

     15. Additional Conditions to Issuance of Stock. If at any time the Company will
determine, in its discretion, that the listing, registration or qualification of the shares of
Common Stock upon any securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory authority, is necessary or desirable as a condition to the
issuance of shares of Common Stock to the Employee (or his or her estate), such issuance will not
occur unless and until such listing, registration, qualification, consent or approval will have
been effected or obtained free of any conditions not acceptable to the Company. The Company will
make all reasonable efforts to meet the requirements of any such state or federal law or securities
exchange and to obtain any such consent or approval of any such governmental authority.

     16. Committee Authority. The Committee will have the power to interpret the Plan and
this Agreement and to adopt such rules for the administration, interpretation and application of
the Plan and this Agreement as are consistent therewith and to interpret or revoke any such rules.
All actions taken and all interpretations and determinations made by the Committee in good faith
will be final and binding upon Employee, the Company and all other interested persons. No member
of the Committee will be personally liable for any action, determination or interpretation made in
good faith with respect to the Plan or this Agreement.

     17. Captions. Captions provided herein are for convenience only and are not to serve
as a basis for interpretation or construction of this Agreement.

     18. Agreement Severable. In the event that any provision in this Agreement will be
held invalid or unenforceable, such provision will be severable from, and such invalidity or
unenforceability will not be construed to have any effect on, the remaining provisions of this
Agreement.

     19. Amendment. The Committee may amend, terminate or revoke this Agreement in any
respect to the extent determined necessary or desirable by the Committee in its discretion to
comply with the requirements of Section 409A of the Code and the Treasury Regulations or other
guidance issued thereunder. Employee expressly understands and agrees that no additional consent
of Employee shall be required in connection with such amendment, termination or revocation.

 

 

EXHIBIT A

Standard Deferral Election Agreement

Please complete this Standard Deferral Election Agreement (“Election Agreement”) and return a
signed copy to Steve Zug no later than the thirtieth (30th) day following the Effective
Date as indicated on your Restricted Stock Unit Agreement.

	I.	 	Deferral Election (check one)
	 
	 	 	Election to Defer:

	 	___ 	 	Employee hereby irrevocably elects to defer receipt of the shares of Common
Stock associated with the RSUs provided for in the Grant Notice and Appendix A thereto,
to which this Exhibit A is attached, until the fifth anniversary of the Effective
Date.

	 	 	Decline:

	 	___ 	 	Employee hereby irrevocably elects not to defer receipt of the shares of Common
Stock associated with the RSUs provided for in the Grant Notice and Appendix A thereto,
to which this Exhibit A is attached (shares will be issued to Employee as the RSU award
vests in accordance with the Restricted Stock Unit Agreement).

	II.	 	Terms and Conditions of Deferral Election

If Employee elects to defer receipt of the shares subject to the RSU pursuant to this Election
Agreement, by signing this Election Agreement, Employee hereby acknowledges his or her
understanding and acceptance of each of the following:

	1.	 	Acceleration of Issuance of Shares Upon Termination of Continuous Status as an Employee
or Consultant. In the event of Employee’s termination of Continuous Status as an Employee
or Consultant prior to the fifth anniversary of the Effective Date that qualifies as a
“separation from service” within the meaning of Code Section 409A(a)(2)(A)(i) and the
regulations and other guidance promulgated thereunder, then any vested shares of Common Stock
subject to the RSUs shall instead be delivered to Employee on the date of his or her
termination of Continuous Status as an Employee or Consultant.
	 
	2.	 	Acceleration of Issuance of Shares Upon Change in Control.  Notwithstanding
Employee’s deferral election pursuant to this Election Agreement, in the event that a
successor corporation refuses to assume or substitute the RSUs in connection with a Change in
Control, the shares subject to the RSUs shall instead be issued to Employee immediately prior
to the Change in Control to the extent provided in paragraph 4 of the Appendix.
	 
	3.	 	Delay in Distribution for Specified Employees. Notwithstanding anything to the
contrary set forth herein, if at the time the shares of Common Stock would otherwise be issued
to Employee as a result of termination of Continuous Status as an Employee or Consultant,
Employee is subject to the distribution limitations contained in Section 409A of the Code
applicable to “specified employees,” share issuances resulting from a termination of
Continuous Status as an Employee or Consultant shall not be made before the date which is six
(6) months following the date of termination of Continuous Status as an Employee or
Consultant, or, if earlier, the date of Employee’s death that occurs within such six (6) month
period.
	 
	4.	 	Delay in Distribution for Insiders. Notwithstanding the foregoing election, as
described in paragraph 9 of the Appendix to the RSU Agreement, the distribution of shares may
be delayed if the Company determines that Employee’s sale of the shares on such date would
violate the Company’s policy regarding insider trading of the Company’s stock, as determined
by the Company in accordance with such policy.
	 
	5.	 	Effective Election. In order for the foregoing deferral election to become
effective, this Election Agreement must be submitted by Employee to Steve Zug on or before
thirty (30) days following the Effective Date of the RSUs.
	 
	6.	 	Withholding. The Company shall require that Employee make adequate provision for any
federal, state, or local tax required by law to be withheld prior to the issuance of the
shares of Common Stock.
	 
	7.	 	Nonassignable. Employee’s rights and interests under this Election Agreement may not
be assigned, pledged, or transferred.
	 
	8.	 	Termination of this Election Agreement. The Company reserves the right to terminate
this Election Agreement at any time. In such case, any vested shares of Common Stock granted
to Employee pursuant to the Restricted Stock Unit Agreement may be issued to Employee
immediately, to the extent permitted by Section 409A of the Code and the regulations and other
guidance promulgated thereunder.

 

 

	9.	 	Bookkeeping Account. The Company will establish a bookkeeping account to reflect the
number of shares of Common Stock that Employee may acquire pursuant to the RSUs and the fair
market value of such shares of Common Stock that are subject to this Election Agreement.
	 
	10.	 	Governing Law. This Election Agreement shall be construed and administered according
to the internal laws of the State of California, without regard to its conflicts of laws
principles.
	 
	III.	 	Authorization and Signature

By completing and executing this Election Agreement, Employee authorizes the Company to defer or
not defer, as applicable, the issuance of the shares subject to the RSU award. Employee
acknowledges that the Company has not made any representations concerning future performance of the
Company’s Common Stock. Further, Employee has not relied upon advice from the Company in making
Employee’s election. By executing this Election Agreement, the Employee hereby acknowledges his or
her understanding of and agreement with all the terms and provisions set forth herein.

	 	 	 	 	 	 	 	 	 
	Employee	 	Neurocrine Biosciences, Inc.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Date:

	 	 	 	Date:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 

 

 

EXHIBIT B

Deferred Compensation Plan Deferral Election Agreement (RSU Awards)

Please complete this Deferred Compensation Plan Deferral Election Agreement (“Election Agreement”)
and return a signed copy to Steve Zug no later than the thirtieth (30th) day following
the Effective Date as indicated on your Restricted Stock Unit Agreement (“RSU Agreement”).

Defined terms not explicitly defined in this Election Agreement but defined in the Company’s 2003
Incentive Stock Plan (“Plan”), the Company’s Amended and Restated Nonqualified Deferred
Compensation Plan (“Deferred Compensation Plan”), or your RSU Agreement shall have the same
definitions as in such documents.

	I.	 	Deferral Election (check one)
	 
	 	 	Election to Defer:

	 	___ 	 	Employee hereby irrevocably elects to defer receipt of the shares of Common
Stock associated with the RSUs provided for in the Grant Notice and Appendix A thereto,
to which this Exhibit B is attached, in accordance with the terms of the Deferred
Compensation Plan.

	 	 	Decline:

	 	___ 	 	Employee hereby irrevocably elects not to defer receipt of the shares of Common
Stock associated with the RSUs provided for in the Grant Notice and Appendix A thereto,
to which this Exhibit B is attached (shares will be issued to Employee as the RSU award
vests in accordance with the RSU Agreement).

If Employee elects above to defer receipt of the shares subject to the RSUs, Employee must complete
Deferral Alternative #1 (Termination of Service). Selecting Deferral Alternative #2 is optional.
If Employee selects Deferral Alternative #2, Employee must also complete the applicable portion
that follows such selection.

All Employees Who Elect To Defer Receipt Of Their RSUs Must Complete This Section

Deferral Alternative #1 (Termination of Service): 

	o	 	Employee elects to receive the vested shares of Common Stock associated with the
RSUs upon his or her termination of service.

PLEASE NOTE: The above election will apply in the event of Employee’s termination of
service for any reason, including due to Employee’s Death, Disability or Retirement. The
shares subject to the RSUs will be issued in a single lump sum upon termination of
service. However, for termination of service distributions Employee may (but is not
required to) instead elect annual installment distribution of the shares, as follows:

	 	o	 	Employee elects to receive the vested shares of Common Stock
associated with the RSUs upon his or her termination of service in
substantially equal annual installments as follows:

	 	o	 	          annual installments (elect 2-15)
	 
	 	PLEASE NOTE: The above election to receive a distribution of
shares in annual installments instead of a lump sum will only
apply if the number of shares subject to each annual installment
is at least 2,500 shares. If the number of shares to be
distributed pursuant to any annual installment would be less
than 2,500 shares, the shares subject to the RSUs will be issued
in a single lump sum upon termination of service.

 

 

Completion Of This Section Is Optional

Deferral Alternative #2: (Specified Date(S) — Check boxes that apply) 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	o	 	Employee elects to receive the vested shares of Common Stock associated
with the RSUs on the following specified dates (must be year 2013 or later) for
the following number of shares:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	A.
	 	o	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Number of shares
	 	Month
	 	Day
	 	Year   

	 	 
	 

	 	B.
	 	o	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Number of shares
	 	Month
	 	Day
	 	Year   
	 	 
	 

	 	C.
	 	o	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Number of shares
	 	Month
	 	Day
	 	Year   
	 	 
	 

	 	D.
	 	o	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Number of shares
	 	Month
	 	Day
	 	Year   
	 	 

PLEASE NOTE: If Employee’s Retirement, Death, Disability, or
Termination of Employment occurs before the elected specified date(s), the
shares will not be issued to Employee on the specified date(s) elected above,
but will instead be issued to Employee in accordance with Employee’s deferral
election under Alternative #1 (Termination of Service). Employee may elect up
to four separate specified dates, and may not elect that fewer than 5,000 shares
be issued to Employee on any specified date.

II. Election Conditions

The following conditions apply to the foregoing deferral election:

	 	1.	 	Employee may elect a Deferred Distribution Date that occurs after the date of vesting
of the RSUs. The “Deferred Distribution Date” is the date as of which Employee will
receive the shares of vested Common Stock associated with the RSUs that Employee elects to
defer. Unless Employee timely elects otherwise on this Election Agreement, such shares
will be issued to Employee on or about the date or dates upon which they vest as indicated
in the RSU Agreement. Notwithstanding the foregoing, as described in paragraph 9 of the
Appendix to the RSU Agreement, the distribution of such shares may be delayed if the
Company determines that Employee’s sale of the shares on such date would violate the
Company’s policy regarding insider trading of the Company’s stock, as determined by the
Company in accordance with such policy.
	 
	 	2.	 	Employee may elect as the Deferred Distribution Date a termination of Employee’s
service that qualifies as a “separation from service” for purposes of Section 409A of the
Code.
	 
	 	3.	 	As an alternative to 2 above, Employee may elect up to four different specified dates
as Deferred Distribution Dates. However, if prior to such Deferred Distribution Date,
there is a termination of Employee’s service with the Company that is a “separation from
service” for purposes of Section 409A of the Code, Employee will receive all shares of
vested Common Stock associated with the RSUs in accordance with Employee’s election under
Deferral Alternative #1, notwithstanding any deferral election Employee makes on this
Election Agreement under Alternative #2 to receive shares on a specified date.
	 
	 	4.	 	If no Deferred Distribution Date is elected, then the issuance of vested Common Stock
will occur upon or about the vesting date(s) as indicated in the RSU Agreement.
	 
	 	5.	 	Notwithstanding anything to the contrary set forth herein, if at the time the shares of
Common Stock would otherwise be issued to Employee as a result of termination of service,
Employee is subject to the distribution limitations contained in Section 409A of the Code
applicable to “specified employees,” share issuances resulting from a termination of
service shall not be made before the date which is six (6) months following the date of
termination of Employee’s service, or, if earlier, the date of Employee’s death that occurs
within such six (6) month period.

 

 

	 	6.	 	Notwithstanding anything to the contrary that may be set forth in Section 4.6 of the
Deferred Compensation Plan, and notwithstanding Employee’s deferral election pursuant to
this Election Agreement, in the event that a successor corporation refuses to assume or
substitute the RSUs in connection with a Change in Control (as defined in the 2003
Incentive Stock Plan), the shares subject to the RSUs shall instead be issued to Employee
immediately prior to the Change in Control to the extent provided in paragraph 4 of the
Appendix.

III. Acknowledgement

Employee further acknowledges and agrees as follows:

	 	1.	 	In order for the foregoing deferral election to become effective, this Election
Agreement must be submitted by Employee to Steve Zug on or before thirty (30) days
following the Effective Date of the RSUs.
	 
	 	2.	 	The Company shall require that Employee make adequate provision for any federal, state,
or local tax required by law to be withheld prior to the issuance of the shares of Common
Stock.
	 
	 	3.	 	Employee’s rights and interests under this Election Agreement may not be assigned,
pledged, or transferred.
	 
	 	4.	 	The Company reserves the right to terminate this Election Agreement at any time. In
such case, any vested shares of Common Stock granted to Employee pursuant to the RSU
Agreement may be issued to Employee immediately, to the extent permitted by Section 409A of
the Code and the regulations and other guidance promulgated thereunder.
	 
	 	5.	 	The Company will establish a bookkeeping account to reflect the number of shares of
Common Stock that Employee may acquire pursuant to the RSUs and the fair market value of
such shares of Common Stock that are subject to this Election Agreement.
	 
	 	6.	 	This Election Agreement shall be construed and administered according to the internal
laws of the State of California, without regard to its conflicts of laws principles.

IV. Authorization and Signature

By completing and executing this Election Agreement, Employee authorizes the Company to defer or
not defer, as applicable, the issuance of the shares subject to the RSU award. Employee
acknowledges that the Company has not made any representations concerning future performance of the
Company’s Common Stock. Further, Employee has not relied upon advice from the Company in making
Employee’s election. Additionally, Employee acknowledges that the terms of the Deferred
Compensation Plan document, as reasonably interpreted by the Company, governs all aspects of this
election. By executing this Election Agreement, the Employee hereby acknowledges his or her
understanding of and agreement with all the terms and provisions set forth herein.

	 	 	 	 	 
	 

•
	 	 

	 	 
	 

Signature of Employee

	 	 

Date
	 	 

 

 

Exhibit C

Beneficiary Designation

Personal Information

	 	 	 	 	 	 	 
	 
	 
	   Last

	 	First
	 	Middle Initial 
	 	Social Security Number
	 
	 	 	 	 	 	 
	I hereby designate the following Beneficiary(ies) to receive any benefit payable under the Plan
by reason of my death, as provided in the Plan document.
	 
	 	 	 	 	 	 
	Primary Beneficiary(ies)
	 
	 	 	 	 	 	 
	 
	 
	   Beneficiary

	 	 	 	Percentage	 	 
	 
	 	 	 	 	 	 
	 
	 
	   Relationship to Participant

	 	 	 	Social Security Number	 	 
	 
	 	 	 	 	 	 
	 
	 
	   Beneficiary

	 	 	 	Percentage	 	 
	 
	 	 	 	 	 	 
	 
	 
	   Relationship to Participant

	 	 	 	Social Security Number	 	 
	 
	 	 	 	 	 	 
	 
	 
	   Beneficiary

	 	 	 	Percentage	 	 
	 
	 	 	 	 	 	 
	 
	 
	   Relationship to Participant

	 	 	 	Social Security Number	 	 
	 
	 	 	 	 	 	 
	 
	 
	   Beneficiary

	 	 	 	Percentage	 	 
	 
	 	 	 	 	 	 
	 
	 
	   Relationship to Participant

	 	 	 	Social Security Number	 	 
	 
	 	 	 	 	 	 
	Contingent Beneficiary(ies)
	 
	 	 	 	 	 	 
	 
	 
	   Beneficiary

	 	 	 	Percentage	 	 
	 
	 	 	 	 	 	 
	 
	 
	   Relationship to Participant

	 	 	 	Social Security Number	 	 
	 
	 	 	 	 	 	 
	 
	 
	   Beneficiary

	 	 	 	Percentage	 	 
	 
	 	 	 	 	 	 
	 
	 
	   Relationship to Participant

	 	 	 	Social Security Number	 	 
	 
	 	 	 	 	 	 
	Please Sign Below

If no percentage is indicated, all beneficiaries will be deemed to have an equal interest in
the benefits payable under the Plan.

	 	 	 	 	 
	 

•
	 	 

	 	 
	 

Signature of Employee

	 	 

Date

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