Document:

Exhibit 10.4

 

INTARCIA THERAPEUTICS, INC.

 

2005 EQUITY INCENTIVE PLAN

 

ADOPTED:  MARCH 23,
2005

APPROVED BY STOCKHOLDERS: 
                  ,
2005

TERMINATION DATE: 
MARCH 22, 2015

 

1.                                      GENERAL.

 

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

 

(b)                                  Available Stock Awards.  The Plan provides for the grant of the
following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory
Stock Options, (iii) Stock Purchase Awards, (iv) Stock Bonus Awards, (v) Stock
Appreciation Rights, (vi) Stock Unit Awards, and (vii) Other Stock
Awards.

 

(c)                                  General Purpose.  The Company, by means of the Plan, seeks to
secure and retain the services of the group of persons eligible to receive
Stock Awards as set forth in Section 1(a), to provide incentives for such
persons to exert maximum efforts for the success of the Company and any
Affiliate and to provide a means by which such eligible recipients may be given
an opportunity to benefit from increases in value of the Common Stock through
the granting of Stock Awards.

 

2.                                      DEFINITIONS.

 

As used in the Plan, the
following definitions shall apply to the capitalized terms indicated below:

 

(a)                                  “Affiliate” means (i) any corporation (other than
the Company) in an unbroken chain of corporations ending with the Company,
provided each corporation in the unbroken chain (other than the Company) owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain, and (ii) any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company,
provided each corporation (other than the last corporation) in the unbroken
chain owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain. 
The Board shall have the authority to determine (i) the time or
times at which the ownership tests are applied, and (ii) whether “Affiliate”
includes entities other than corporations within the foregoing definition.

 

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

 

(c)                                  “Capitalization Adjustment” has the meaning ascribed to
that term in Section 11(a).

 

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(d)                                  “Cause”
means, with respect to a Participant, the occurrence of any of the following: (i) such
Participant’s commission of any felony or any crime involving fraud, dishonesty
or moral turpitude under the laws of the United States or any state thereof; (ii) such
Participant’s attempted commission of, or participation in, a fraud or act of
dishonesty against the Company; (iii) such Participant’s intentional,
material violation of any material contract or agreement between the
Participant and the Company or any statutory duty owed to the Company; (iv) such
Participant’s unauthorized use or disclosure of the Company’s confidential
information or trade secrets; or (v) such Participant’s gross
misconduct.  The determination that a
termination is for Cause shall be made by the Company in its sole
discretion.  Any determination by the
Company that the Continuous Service of a Participant was terminated by reason
of dismissal without Cause for the purposes of outstanding Stock Awards held by
such Participant shall have no effect upon any determination of the rights or
obligations of the Company or such Participant for any other purpose.

 

(e)                                  “Change in Control” means the occurrence, in a single
transaction or in a series of related transactions, of any one or more of the
following events:

 

(i)                                    any
Exchange Act Person becomes the Owner, directly or indirectly, of securities of
the Company representing more than fifty
percent (50%) of the combined voting power of the Company’s then
outstanding securities other than by virtue of a merger, consolidation or
similar transaction.  Notwithstanding the foregoing, a Change in
Control shall not be deemed to occur (A) on account of the acquisition of
securities of the Company by an investor, any affiliate thereof or any other
Exchange Act Person from the Company in a transaction or series of related
transactions the primary purpose of which is to obtain financing for the Company
through the issuance of equity securities or (B) solely because the level
of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting
securities as a result of a repurchase or other acquisition of voting
securities by the Company reducing the number of shares outstanding, provided
that if a Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of voting securities by the Company,
and after such share acquisition, the Subject Person becomes the Owner of any
additional voting securities that, assuming the repurchase or other acquisition
had not occurred, increases the percentage of the then outstanding voting
securities Owned by the Subject Person over the designated percentage
threshold, then a Change in Control shall be deemed to occur;

 

(ii)                                there
is consummated a merger, consolidation or similar transaction involving
(directly or indirectly) the Company and, immediately after the consummation of
such merger, consolidation or similar transaction, the stockholders of the
Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding
voting securities representing more than fifty percent (50%) of the combined outstanding voting power of
the surviving Entity in such merger, consolidation or similar transaction or (B) more
than fifty percent (50%) of the
combined outstanding voting power of the parent of the surviving Entity in such
merger, consolidation or similar transaction, in each case in substantially the
same proportions as their Ownership of the outstanding voting securities of the
Company immediately prior to such transaction;

 

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(iii)                            the
stockholders of the Company approve or the Board approves a plan of complete
dissolution or liquidation of the Company, or a complete dissolution or
liquidation of the Company shall otherwise occur;

 

(iv)                               there
is consummated a sale, lease, exclusive license or other disposition of all or
substantially all of the consolidated assets of the Company and its
Subsidiaries, other than a sale, lease, license or other disposition of all or
substantially all of the consolidated assets of the Company and its
Subsidiaries to an Entity, more than fifty
percent (50%) of the combined voting power of the voting securities of
which are Owned by stockholders of the Company in substantially the same
proportions as their Ownership of the outstanding voting securities of the
Company immediately prior to such sale, lease, license or other disposition; or

 

(v)                                   individuals
who, on the date this Plan is adopted by the Board, are members of the Board
(the “Incumbent Board”)
cease for any reason to constitute at least a majority of the members of the
Board; provided, however, that if the
appointment or election (or nomination for election) of any new Board member
was approved or recommended by a majority vote of the members of the Incumbent
Board then still in office, such new member shall, for purposes of this Plan,
be considered as a member of the Incumbent Board.

 

The term Change in
Control shall not include a sale of assets, merger or other transaction
effected exclusively for the purpose of changing the domicile of the Company.

 

Notwithstanding the
foregoing or any other provision of this Plan, the definition of Change in
Control (or any analogous term) in an individual written agreement between the
Company or any Affiliate and the Participant shall supersede the foregoing
definition with respect to Stock Awards subject to such agreement; provided, however, that if no definition
of Change in Control or any analogous term is set forth in such an individual
written agreement, the foregoing definition shall apply.

 

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

 

(g)                                 “Committee” means a committee of one (1) or more
members of the Board to whom authority has been delegated by the Board in
accordance with Section 3(c).

 

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

 

(i)                                    “Company” means Intarcia Therapeutics, Inc., a
Delaware corporation.

 

(j)                                    “Consultant”
means any person, including an advisor, who is (i) engaged by the Company
or an Affiliate to render consulting or advisory services and is compensated
for such services, or (ii) serving as a member of the Board of Directors
of an Affiliate and is compensated for such services.  However, service solely as a Director, or
payment of a fee for such service, shall not cause a Director to be considered
a “Consultant” for purposes of the Plan.

 

(k)                                “Continuous Service” means that the Participant’s
service with the Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated. 
A change in the capacity in which the Participant renders service to the
Company or an Affiliate as an Employee, Consultant or Director or a change in
the entity for which the Participant renders

 

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such
service, provided that there is no interruption or termination of the
Participant’s service with the Company or an Affiliate, shall not terminate a
Participant’s Continuous Service.  For
example, a change in status from an employee of the Company to a consultant to
an Affiliate or to a Director shall not constitute an interruption of
Continuous Service.  To the extent
permitted by law, the Board or the chief executive officer of the Company, in
that party’s sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave.  Notwithstanding the foregoing, a leave of
absence shall be treated as Continuous Service for purposes of vesting in a
Stock Award only to such extent as may be provided in the Company’s leave of
absence policy or in the written terms of the Participant’s leave of absence.

 

(l)                                    “Corporate Transaction” means the occurrence, in a
single transaction or in a series of related transactions, of any one or more of
the following events:

 

(i)                                    a
sale or other disposition of all or
substantially all, as determined by the Board in its sole discretion, of the
consolidated assets of the Company and its Subsidiaries;

 

(ii)                                a
sale or other disposition of at least ninety
percent (90%) of the
outstanding securities of the Company;

 

(iii)                            the
consummation of a merger, consolidation or similar transaction following which
the Company is not the surviving corporation; or

 

(iv)                               the
consummation of a merger, consolidation or similar transaction following which
the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger, consolidation or similar
transaction are converted or exchanged by virtue of the merger, consolidation
or similar transaction into other property, whether in the form of securities,
cash or otherwise.

 

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

 

(n)                                 “Director” means a member of the Board.

 

(o)                                  “Disability” means the permanent and total disability of
a person within the meaning of Section 22(e)(3) of the Code.

 

(p)                                  “Employee”
means any person employed by the Company or an Affiliate.  However, service solely as a Director, or
payment of a fee for such services, shall not cause a Director to be considered
an “Employee” for purposes of the Plan.

 

(q)                                  “Entity” means a corporation, partnership or other
entity.

 

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

 

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(s)                                  “Exchange Act Person” means any natural person, Entity
or “group” (within the meaning of Section 13(d) or 14(d) of the
Exchange Act), except that “Exchange Act Person” shall not include (i) the
Company or any Subsidiary of the Company, (ii) any employee benefit plan
of the Company or any Subsidiary of the Company or any trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any Subsidiary of the Company, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, (iv) an Entity
Owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their Ownership of stock of the Company;
or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or
14(d) of the Exchange Act) that, as of the effective date of the Plan as
set forth in Section 14, is the Owner, directly or indirectly, of
securities of the Company representing more than fifty percent (50%) of the
combined voting power of the Company’s then outstanding securities.

 

(t)                                    “Fair Market Value” means, as of any date, the value of
the Common Stock determined as follows:

 

(i)                                    If
the Common Stock is listed on any established stock exchange or traded on the
Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of
a share of Common Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or market
(or the exchange or market with the greatest volume of trading in the Common
Stock) on the date in question, as reported in The Wall
Street Journal or such other source
as the Board deems reliable.  Unless
otherwise provided by the Board, if there is no closing sales price (or closing
bid if no sales were reported) for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price (or closing bid
if no sales were reported) on the last preceding date for which such quotation
exists.

 

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

 

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

 

(v)                                   “IPO Date” means
the date of the underwriting agreement between the Company and the
underwriter(s) managing the initial public offering of the Common Stock,
pursuant to which the Common Stock is priced for the initial public offering.

 

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

 

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(x)                                  “Nonstatutory Stock Option” means an Option not intended
to qualify as an Incentive Stock Option.

 

(y)                                  “Officer” means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

 

(z)                                  “Option” means an Incentive Stock Option or a
Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant
to the Plan.

 

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

 

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

 

(cc)                            “Other Stock Award”
means an award based in whole or in part by reference to the Common Stock which
is granted pursuant to the terms and conditions of Section 7(e).

 

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

 

(ee)                            “Outside Director” means a Director who either (i) is
not a current employee of the Company or an “affiliated corporation” (within
the meaning of Treasury Regulations promulgated under Section 162(m) of
the Code), is not a former employee of the Company or an “affiliated
corporation” who receives compensation for prior services (other than benefits
under a tax-qualified retirement plan) during the taxable year, has not been an
officer of the Company or an “affiliated corporation,” and does not receive
remuneration from the Company or an “affiliated corporation,” either directly
or indirectly, in any capacity other than as a Director, or (ii) is
otherwise considered an “outside director” for purposes of Section 162(m)
of the Code.

 

(ff)                                “Own,” “Owned,” “Owner,” “Ownership”  A person or Entity shall be deemed to “Own,”
to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of
securities if such person or Entity, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares voting
power, which includes the power to vote or to direct the voting, with respect
to such securities.

 

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

 

(hh)                          “Performance Criteria”
means the one or more criteria that the Board shall select for purposes of
establishing the Performance Goals for a Performance Period.  The Performance Criteria that shall be used
to establish such Performance Goals may be based on any one of, or combination
of, the following: (i) earnings per share; (ii) earnings before
interest, taxes and depreciation; (iii) earnings before interest, taxes,
depreciation and amortization (EBITDA); (iv) net earnings; (v) total
shareholder return; (vi) return on equity; (vii) return on assets,
investment,

 

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or
capital employed; (viii) operating margin; (ix) gross margin; (x)
operating income; (xi) net income (before or after taxes); (xii) net operating
income; (xiii) net operating income after tax; (xiv) pre- and after-tax income;
(xv) pre-tax profit; (xvi) operating cash flow; (xvii) sales or revenue
targets; (xviii) increases in revenue or product revenue; (xix) expenses and
cost reduction goals; (xx) improvement in or attainment of expense levels;
(xxi) improvement in or attainment of working capital levels; (xxii) economic
value added (or an equivalent metric); (xxiii) market share; (xxiv) cash flow;
(xxv) cash flow per share; (xxvi) share price performance; (xxvii) debt
reduction; (xxviii) implementation or completion of projects or processes;
(xxix) customer satisfaction; (xxx) total stockholder return; (xxxi)
stockholders’ equity; and (xxxii) other measures of performance selected by the
Board.  Partial achievement of the
specified criteria may result in the payment or vesting corresponding to the
degree of achievement as specified in the Stock Award Agreement.  The Board shall, in its sole discretion,
define the manner of calculating the Performance Criteria it selects to use for
such Performance Period.

 

(ii)                                “Performance Goals”
means the one or more goals established by the Board for the Performance Period
based upon the Performance Criteria. 
Performance Goals may be based on a Company-wide basis, with respect to
one or more business units, divisions, Affiliates, or business segments, and in
either absolute terms or relative to the performance of one or more comparable
companies or a relevant index.  The Board
is authorized to make adjustments in the method of calculating the attainment
of Performance Goals for a Performance Period as follows: (i) to exclude
restructuring and/or other nonrecurring charges; (ii) to exclude exchange
rate effects, as applicable, for non-U.S. dollar denominated net sales and
operating earnings; (iii) to exclude the effects of changes to generally
accepted accounting standards required by the Financial Accounting Standards
Board; (iv) to exclude the effects of any statutory adjustments to
corporate tax rates; and (v) to exclude the effects of any “extraordinary
items” as determined under generally accepted accounting principles.  The Board also retains the discretion to
reduce or eliminate the compensation or economic benefit due upon attainment of
Performance Goals.

 

(jj)                                “Performance Period”
means the one or more periods of time, which may be of varying and overlapping
durations, as the Board may select, over which the attainment of one or more
Performance Goals will be measured for the purpose of determining a Participant’s
right to and the payment of a Stock Award.

 

(kk)                        “Plan” means this Intarcia Therapeutics, Inc. 2005
Equity Incentive Plan.

 

(ll)                                “Prior Plans” means the Company’s 2002 Equity Incentive
Plan and 1998 Stock Option Plan in effect immediately prior to the effective
date of the Plan as set forth in Section 14.

 

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

 

(nn)                          “Securities Act” means the Securities Act of 1933, as
amended.

 

(oo)                            “Stock Appreciation Right”
means a right to receive the appreciation on Common Stock that is granted
pursuant to the terms and conditions of Section 7(d).

 

(pp)                            “Stock Appreciation Right
Agreement” means a written agreement between the Company and a
holder of a Stock Appreciation Right evidencing the terms and conditions of a

 

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Stock
Appreciation Right grant.  Each Stock
Appreciation Right Agreement shall be subject to the terms and conditions of
the Plan.

 

(qq)                            “Stock Award”
means any right granted under the Plan, including an Option, a Stock Purchase
Award, Stock Bonus Award, a Stock Appreciation Right, a Stock Unit Award, or
any Other Stock Award.

 

(rr)                            “Stock Award Agreement”
means a written agreement between the Company and a Participant evidencing the
terms and conditions of a Stock Award grant. 
Each Stock Award Agreement shall be subject to the terms and conditions
of the Plan.

 

(ss)                            “Stock Bonus Award”
means an award of shares of Common Stock which is granted pursuant to the terms
and conditions of Section 7(b).

 

(tt)                                “Stock Bonus Award
Agreement” means a written agreement between the Company and a
holder of a Stock Bonus Award evidencing the terms and conditions of a Stock
Bonus Award grant.  Each Stock Bonus
Award Agreement shall be subject to the terms and conditions of the Plan.

 

(uu)                          “Stock Purchase Award”
means an award of shares of Common Stock which is granted pursuant to the terms
and conditions of Section 7(a).

 

(vv)                              “Stock Purchase Award
Agreement” means a written agreement between the Company and a
holder of a Stock Purchase Award evidencing the terms and conditions of a Stock
Purchase Award grant.  Each Stock
Purchase Award Agreement shall be subject to the terms and conditions of the
Plan.

 

(ww)                        “Stock Unit Award” means
a right to receive shares of Common Stock which is granted pursuant to the
terms and conditions of Section 7(c).

 

(xx)                            “Stock Unit Award Agreement”
means a written agreement between the Company and a holder of a
Stock Unit Award evidencing the terms and conditions of a Stock Unit Award
grant.  Each Stock Unit Award Agreement
shall be subject to the terms and conditions of the Plan.

 

(yy)                            “Subsidiary” means, with respect to the Company, (i) any
corporation of which more than fifty percent (50%) of the outstanding capital
stock having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether, at the time, stock of
any other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly
or indirectly, Owned by the Company, and (ii) any partnership in which the
Company has a direct or indirect interest (whether in the form of voting or
participation in profits or capital contribution) of more than fifty percent
(50%).

 

(zz)                            “Ten Percent Stockholder” means a person who Owns (or is
deemed to Own pursuant to Section 424(d) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Affiliate.

 

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3.                                      ADMINISTRATION.

 

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

 

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

 

(i)                                    To
determine from time to time (1) which of the persons eligible under the
Plan shall be granted Stock Awards; (2) when and how each Stock Award
shall be granted; (3) what type or combination of types of Stock Award
shall be granted; (4) the provisions of each Stock Award granted (which
need not be identical), including the time or times when a person shall be
permitted to receive Common Stock pursuant to a Stock Award; and (5) the
number of shares of Common Stock with respect to which a Stock Award shall be
granted to each such person.

 

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

 

(iii)                            To
effect, at any time and from time to time, with the consent of any adversely
affected Optionholder, (1) the reduction of the exercise price of any
outstanding Option under the Plan; (2) the cancellation of any outstanding
Option under the Plan and the grant in substitution therefor of (a) a new
Option under the Plan or another equity plan of the Company covering the same
or a different number of shares of Common Stock, (b) a Stock Purchase
Award, (c) a Stock Bonus Award, (d) a Stock Appreciation Right, (e) a
Stock Unit Award, (f) an Other Stock Award, (g) cash, and/or (h) other
valuable consideration (as determined by the Board, in its sole discretion); or
(3) any other action that is treated as a repricing under generally
accepted accounting principles.

 

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

 

(v)                                   To
terminate or suspend the Plan as provided in Section 13.

 

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

 

(vii)                           To
adopt such procedures and sub-plans as are necessary or appropriate to permit
participation in the Plan by Employees who are foreign nationals or employed
outside the United States.

 

(c)                                  Delegation
to Committee.

 

(i)                                    General.  The Board may delegate some or all of the
administration of the Plan to a Committee or Committees.  If administration is delegated to a
Committee, the

 

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Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board that have been delegated to the Committee,
including the power to delegate to a subcommittee any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board.  The Board may retain the authority to
concurrently administer the Plan with the Committee and may, at any time,
revest in the Board some or all of the powers previously delegated.

 

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

 

(d)                                  Delegation to an Officer.  The Board may delegate to one or more
Officers of the Company the authority to do one or both of the following (i) designate
Officers and Employees of the Company or any of its Subsidiaries to be
recipients of Stock Awards and the terms thereof, and (ii) determine the
number of shares of Common Stock to be subject to such Stock Awards granted to
such Officers and Employees of the Company; provided,
however, that the Board resolutions regarding such delegation shall
specify the total number of shares of Common Stock that may be subject to the
Stock Awards granted by such Officer and that such Officer may not grant a
Stock Award to himself or herself. 
Notwithstanding anything to the contrary in this Section 3(d), the
Board may not delegate to an Officer authority to determine the Fair Market
Value of the Common Stock pursuant to Section 2(t)(ii) above.

 

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

 

4.                                      SHARES
SUBJECT TO THE PLAN.

 

(a)                                  Share
Reserve.  Subject to the provisions
of Section 11(a) relating to Capitalization Adjustments, the number
of shares of Common Stock that may be issued pursuant to Stock Awards shall not
exceed, in the aggregate, one million six hundred thousand (1,600,000) shares
of Common Stock; provided, however,
that such share reserve shall be increased from time to time by the number of
shares of Common Stock that (i) are issuable pursuant to stock awards
outstanding under the Company’s Prior Plans as of the IPO Date, and (ii) but
for the termination of the Prior Plans as of the IPO Date, would otherwise have
reverted to the share reserve of the Prior Plans.  In
addition, the number of shares of Common Stock available for issuance under the
Plan shall be increased effective as of January 1st of each year

 

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commencing in 2006 and ending on (and including) January 1,
2015, by such number of shares of Common Stock as may be approved for that year
by the Board, provided that such number of shares shall not exceed for any year
the lesser of (i) two and one half percent (2.5%) of the total number of
shares of Common Stock outstanding on December 31st of the preceding
calendar year, or (ii) seven hundred twenty-five thousand (725,000) shares
of Common Stock.

 

(b)                                  Reversion
of Shares to the Share Reserve.  If
any Stock Award shall for any reason expire or otherwise terminate, in whole or
in part, without having been exercised in full, if any shares of Common Stock
issued to a Participant pursuant to a Stock Award are forfeited to or
repurchased by the Company, including, but not limited to, any repurchase or
forfeiture caused by the failure to meet a contingency or condition required
for the vesting of such shares, or if any shares of Common Stock are cancelled
in accordance with the cancellation and regrant provisions of Section 3(b)(iii),
then the shares of Common Stock not issued under such Stock Award, or forfeited
to or repurchased by the Company, shall revert to and again become available
for issuance under the Plan.  If any
shares subject to a Stock Award are not delivered to a Participant because such
shares are withheld for the payment of taxes or the Stock Award is exercised
through a reduction of shares subject to the Stock Award (i.e., “net exercised”), the number of
shares that are not delivered to the Participant shall remain available for
issuance under the Plan.  If the exercise
price of any Stock Award is satisfied by tendering shares of Common Stock held
by the Participant (either by actual delivery or attestation), then the number
of shares so tendered shall remain available for issuance under the Plan.  Notwithstanding anything to the contrary in
this Section 4(b), subject to the provisions of Section 11(a) relating
to Capitalization Adjustments the aggregate maximum number of shares of Common
Stock that may be issued pursuant to the exercise of Incentive Stock Options
shall be one million six hundred thousand (1,600,000) shares of Common Stock
plus the amount of any increase in the number of shares that may be available
for issuance pursuant to Stock Awards pursuant to Section 4(a).

 

(c)                                  Source
of Shares.  The stock issuable under
the Plan shall be shares of authorized but unissued or reacquired Common Stock,
including shares repurchased by the Company on the open market.

 

5.                                      ELIGIBILITY.

 

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

 

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

 

(c)                                  Section 162(m) Limitation on Annual
Grants.  Subject to the
provisions of Section 11(a) relating to Capitalization Adjustments,
at such time as the Company may be subject to the applicable provisions of Section 162(m)
of the Code, no Employee shall be eligible to be granted Stock Awards whose
value is determined by reference to an increase over an

 

11

 

exercise
or strike price of at least one hundred percent (100%) of the Fair Market Value
of the Common Stock on the date the Stock Award is granted covering more than
eight hundred thousand (800,000) shares of Common Stock during any calendar
year.

 

(d)                                  Consultants.  A Consultant shall not be eligible for the
grant of a Stock Award if, at the time of grant, a Form S-8
Registration Statement under the Securities Act (“Form S-8”) is not available
to register either the offer or the sale of the Company’s securities to such
Consultant because of the nature of the services that the Consultant is
providing to the Company, because the Consultant is not a natural person, or
because of any other rule governing the use of Form S-8.

 

6.                                      OPTION
PROVISIONS.

 

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

 

(a)                                  Term.  The Board shall determine the term of an
Option; provided, however, that
subject to the provisions of Section 5(b) regarding Ten Percent
Stockholders, no Incentive Stock Option shall be exercisable after the
expiration of ten (10) years from the date of grant.

 

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

 

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

 

(d)                                  Consideration.  The purchase price of Common Stock acquired
pursuant to the exercise of an Option shall be paid, to the extent permitted by
applicable law and as determined by the Board in its sole discretion, by any
combination of the methods of payment set forth below.  The Board shall have the authority to grant
Options that do not permit all of the

 

12

 

following
methods of payment (or otherwise restrict the ability to use certain methods)
and to grant Options that require the consent of the Company to utilize a
particular method of payment.  The
methods of payment permitted by this Section 6(d) are:

 

(i)                                    by
cash or check;

 

(ii)                                pursuant
to a program developed under Regulation T as promulgated by the Federal Reserve
Board that, prior to the issuance of Common Stock, results in either the
receipt of cash (or check) by the Company or the receipt of irrevocable
instructions to pay the aggregate exercise price to the Company from the sales
proceeds;

 

(iii)                            by
delivery to the Company (either by actual delivery or attestation) of shares of
Common Stock;

 

(iv)                               by
a “net exercise” arrangement pursuant to which the Company will reduce the
number of shares of Common Stock issued upon exercise by the largest whole
number of shares with a Fair Market Value that does not exceed the aggregate
exercise price; provided, however,
the Company shall accept a cash or other payment from the Participant to the
extent of any remaining balance of the aggregate exercise price not satisfied
by such holding back of whole shares; provided,
however, shares of Common Stock will no longer be outstanding under
an Option and will not be exercisable thereafter to the extent that (i) shares
are used to pay the exercise price pursuant to the “net exercise,” (ii) shares
are delivered to the Participant as a result of such exercise, and (iii) shares
are withheld to satisfy tax withholding obligations;

 

(v)                                   according
to a deferred payment or similar arrangement with the Optionholder; provided, however, that interest shall
compound at least annually and shall be charged at the minimum rate of interest
necessary to avoid (i) the imputation of interest income to the Company
and compensation income to the Optionholder under any applicable provisions of
the Code, and (ii) the treatment of the Option as a variable award for
financial accounting purposes; or

 

(vi)                               in
any other form of legal consideration that may be acceptable to the Board.

 

(e)                                  Transferability
of Options.  The Board may, in its
sole discretion, impose such limitations on the transferability of Options as
the Board shall determine.  In the
absence of such a determination by the Board to the contrary, the following
restrictions on the transferability of Options shall apply:

 

(i)                                    Restrictions
on Transfer.  An Option shall not be
transferable except by will or by the laws of descent and distribution and
shall be exercisable during the lifetime of the Optionholder only by the
Optionholder.

 

(ii)                                Domestic
Relations Orders.  Notwithstanding
the foregoing, an Option may be transferred pursuant to a domestic relations
order.

 

(iii)                            Beneficiary
Designation.  Notwithstanding the
foregoing, the Optionholder may, by delivering written notice to the Company,
in a form provided by or

 

13

 

otherwise
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.

 

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

 

(g)                                 Termination of Continuous Service.  In the event that an Optionholder’s Continuous
Service terminates (other than upon the Optionholder’s death or Disability),
the Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise such Option as of the date of termination
of Continuous Service) but only within such period of time ending on the
earlier of (i) the date three (3) months following the termination of
the Optionholder’s Continuous Service (or such longer or shorter period
specified in the Option Agreement), or (ii) the expiration of the term of
the Option as set forth in the Option Agreement.  If, after termination of Continuous Service,
the Optionholder does not exercise his or her Option within the time specified
herein or in the Option Agreement (as applicable), the Option shall terminate.

 

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

 

(i)                                    Disability of Optionholder.  In the event that an Optionholder’s
Continuous Service terminates as a result of the Optionholder’s Disability, the
Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise such Option as of the date of termination
of Continuous Service), but only within such period of time ending on the
earlier of (i) the date twelve (12) months following such termination of
Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth
in the Option Agreement.  If, after
termination of Continuous Service, the Optionholder does not exercise his or
her Option within the time specified herein or in the Option Agreement (as
applicable), the Option shall terminate.

 

(j)                                    Death of Optionholder.  In the event that (i) an Optionholder’s
Continuous Service terminates as a result of the Optionholder’s death, or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder’s Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the

 

14

 

Optionholder’s
estate, by a person who acquired the right to exercise the Option by bequest or
inheritance or by a person designated to exercise the option upon the
Optionholder’s death, but only within the period ending on the earlier of (i) the
date eighteen (18) months following the date of death (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration
of the term of such Option as set forth in the Option Agreement.  If, after the Optionholder’s death, the
Option is not exercised within the time specified herein or in the Option
Agreement (as applicable), the Option shall terminate.

 

(k)                                Early Exercise.  The Option may include a provision whereby
the Optionholder may elect at any time before the Optionholder’s Continuous
Service terminates to exercise the Option as to any part or all of the shares
of Common Stock subject to the Option prior to the full vesting of the
Option.  Any unvested shares of Common
Stock so purchased may be subject to a repurchase option in favor of the
Company or to any other restriction the Board determines to be
appropriate.  The Company shall not be
required to exercise its repurchase option until at least six (6) months
(or such longer or shorter period of time necessary to avoid a charge to
earnings for financial accounting purposes) have elapsed following exercise of
the Option unless the Board otherwise specifically provides in the Option.

 

7.                                      PROVISIONS
OF STOCK AWARDS OTHER THAN OPTIONS.

 

(a)                                  Stock Purchase Awards.  Each Stock Purchase Award Agreement shall be
in such form and shall contain such terms and conditions as the Board shall
deem appropriate.  At the Board’s
election, shares of Common Stock may be (i) held in book entry form
subject to the Company’s instructions until any restrictions relating to the
Stock Purchase Award lapse; or (ii) evidenced by a certificate, which
certificate shall be held in such form and manner as determined by the
Board.  The terms and conditions of Stock
Purchase Award Agreements may change from time to time, and the terms and
conditions of separate Stock Purchase Award Agreements need not be identical, provided, however, that each Stock
Purchase Award Agreement shall include (through incorporation of the provisions
hereof by reference in the agreement or otherwise) the substance of each of the
following provisions:

 

(i)                                    Purchase Price.  At the time of the grant of a Stock Purchase
Award, the Board will determine the price to be paid by the Participant for
each share subject to the Stock Purchase Award. 
To the extent required by applicable law, the price to be paid by the
Participant for each share of the Stock Purchase Award will not be less than
the par value of a share of Common Stock.

 

(ii)                                Consideration.  At the time of the grant of a Stock Purchase
Award, the Board will determine the consideration permissible for the payment
of the purchase price of the Stock Purchase Award.  The purchase price of Common Stock acquired
pursuant to the Stock Purchase Award shall be paid either: (i) in cash or
by check at the time of purchase, (ii) at the discretion of the Board,
according to a deferred payment or other similar arrangement with the
Participant, (iii) by past or future services rendered to the Company or
an Affiliate, or (iv) in any other form of legal consideration that may be
acceptable to the Board in its sole discretion and permissible under applicable
law.

 

15

 

(iii)                            Vesting. Shares of Common Stock
acquired under a Stock Purchase Award may be subject to a share repurchase
right or option in favor of the Company in accordance with a vesting schedule to
be determined by the Board.

 

(iv)                               Termination of Participant’s Continuous Service.
In the event that a Participant’s Continuous Service terminates, the Company
shall have the right, but not the obligation, to repurchase or otherwise
reacquire, any or all of the shares of Common Stock held by the Participant
that have not vested as of the date of termination under the terms of the Stock
Purchase Award Agreement.  At the Board’s
election, the price paid for all shares of Common Stock so repurchased or
reacquired by the Company may be at the lesser of: (i) the Fair Market
Value on the relevant date, or (ii) the Participant’s original cost for
such shares.  The Company shall not be
required to exercise its repurchase or reacquisition option until at least six (6) months
(or such longer or shorter period of time necessary to avoid a charge to
earnings for financial accounting purposes) have elapsed following the
Participant’s purchase of the shares of stock acquired pursuant to the Stock
Purchase Award unless otherwise determined by the Board or provided in the
Stock Purchase Award Agreement.

 

(v)                                   Transferability. Rights to
purchase or receive shares of Common Stock granted under a Stock Purchase Award
shall be transferable by the Participant only upon such terms and conditions as
are set forth in the Stock Purchase Award Agreement, as the Board shall
determine in its sole discretion, and so long as Common Stock awarded under the
Stock Purchase Award remains subject to the terms of the Stock Purchase Award
Agreement.

 

(b)                                  Stock
Bonus Awards.  Each Stock Bonus Award
Agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate.  At the
Board’s election, shares of Common Stock may be (i) held in book entry
form subject to the Company’s instructions until any restrictions relating to
the Stock Bonus Award lapse; or (ii) evidenced by a certificate, which
certificate shall be held in such form and manner as determined by the
Board.  The terms and conditions of Stock
Bonus Award Agreements may change from time to time, and the terms and
conditions of separate Stock Bonus Award Agreements need not be identical, provided, however, that each Stock Bonus
Award Agreement shall include (through incorporation of provisions hereof by
reference in the agreement or otherwise) the substance of each of the following
provisions:

 

(i)                                    Consideration.  A Stock Bonus Award may be awarded in
consideration for (i) past or future services rendered to the Company or
an Affiliate, or (ii) any other form of legal consideration that may be
acceptable to the Board in its sole discretion and permissible under applicable
law.

 

(ii)                                Vesting.  Shares of Common Stock awarded under the
Stock Bonus Award Agreement may be subject to forfeiture to the Company in
accordance with a vesting schedule to be determined by the Board.

 

(iii)                            Termination
of Participant’s Continuous Service. 
In the event a Participant’s Continuous Service terminates, the Company
may receive via a forfeiture condition, any or all of the shares of Common
Stock held by the Participant which have not

 

16

 

vested
as of the date of termination of Continuous Service under the terms of the
Stock Bonus Award Agreement.

 

(iv)                               Transferability.  Rights to acquire shares of Common Stock
under the Stock Bonus Award Agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the Stock Bonus Award
Agreement, as the Board shall determine in its sole discretion, so long as
Common Stock awarded under the Stock Bonus Award Agreement remains subject to
the terms of the Stock Bonus Award Agreement.

 

(c)                                  Stock
Unit Awards.  Each Stock Unit Award
Agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate.  The
terms and conditions of Stock Unit Award Agreements may change from time to
time, and the terms and conditions of separate Stock Unit Award Agreements need
not be identical, provided, however, that
each Stock Unit Award Agreement shall include (through incorporation of the
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:

 

(i)                                    Consideration.  At the time of grant of a Stock Unit Award,
the Board will determine the consideration, if any, to be paid by the
Participant upon delivery of each share of Common Stock subject to the Stock
Unit Award. The consideration to be paid (if any) by the Participant for each
share of Common Stock subject to a Stock Unit Award may be paid in any form of
legal consideration that may be acceptable to the Board in its sole discretion
and permissible under applicable law.

 

(ii)                                Vesting. 
At the time of the grant of a Stock Unit Award, the Board may
impose such restrictions or conditions to the vesting of the Stock Unit Award
as it, in its sole discretion, deems appropriate.

 

(iii)                            Payment.  A Stock Unit Award may be settled by the
delivery of shares of Common Stock, their cash equivalent, any combination
thereof or in any other form of consideration, as determined by the Board and
contained in the Stock Unit Award Agreement.

 

(iv)                               Additional Restrictions.  At the time of the grant of a
Stock Unit Award, the Board, as it deems appropriate, may impose such
restrictions or conditions that delay the delivery of the shares of Common
Stock (or their cash equivalent) subject to a Stock Unit Award after the
vesting of such Stock Unit Award.

 

(v)                                   Dividend Equivalents.  Dividend equivalents may be
credited in respect of shares of Common Stock covered by a Stock Unit Award, as
determined by the Board and contained in the Stock Unit Award Agreement.  At the sole discretion of the Board, such
dividend equivalents may be converted into additional shares of Common Stock
covered by the Stock Unit Award in such manner as determined by the Board.  Any additional shares covered by the Stock
Unit Award credited by reason of such dividend equivalents will be subject to
all the terms and conditions of the underlying Stock Unit Award Agreement to
which they relate.

 

(vi)                               Termination of Participant’s Continuous
Service.  Except as otherwise
provided in the applicable Stock Unit Award Agreement, such portion of the
Stock Unit Award that has not vested will be forfeited upon the Participant’s
termination of Continuous Service.

 

17

 

(d)                                  Stock
Appreciation Rights.  Each Stock
Appreciation Right Agreement shall be in such form and shall contain such terms
and conditions as the Board shall deem appropriate.  The terms and conditions of Stock
Appreciation Right Agreements may change from time to time, and the terms and
conditions of separate Stock Appreciation Right Agreements need not be
identical; provided, however,
that each Stock Appreciation Right Agreement shall include (through
incorporation of the provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions:

 

(i)                                    Strike Price and Calculation of Appreciation.  Each Stock Appreciation Right will be
denominated in shares of Common Stock equivalents.  The appreciation distribution payable on the
exercise of a Stock Appreciation Right will be not greater than an amount equal
to the excess of (i) the aggregate Fair Market Value (on the date of the
exercise of the Stock Appreciation Right) of a number of shares of Common Stock
equal to the number of share of Common Stock equivalents in which the
Participant is vested under such Stock Appreciation Right, and with respect to
which the Participant is exercising the Stock Appreciation Right on such date,
over (ii) an amount (the strike price) that will be determined by the
Board at the time of grant of the Stock Appreciation Right.

 

(ii)                                Vesting. 
At the time of the grant of a Stock Appreciation Right, the
Board may impose such restrictions or conditions to the vesting of such Stock
Appreciation Right as it, in its sole discretion, deems appropriate.

 

(iii)                            Exercise.  To exercise any outstanding Stock
Appreciation Right, the Participant must provide written notice of exercise to
the Company in compliance with the provisions of the Stock Appreciation Right
Agreement evidencing such Stock Appreciation Right.

 

(iv)                               Payment.  The appreciation distribution in respect to a
Stock Appreciation Right may be paid in Common Stock, in cash, in any
combination of the two or in any other form of consideration, as determined by
the Board and contained in the Stock Appreciation Right Agreement evidencing
such Stock Appreciation Right.

 

(v)                                   Termination of Continuous Service.  In the event that a Participant’s Continuous
Service terminates, the Participant may exercise his or her Stock Appreciation
Right (to the extent that the Participant was entitled to exercise such Stock
Appreciation Right as of the date of termination) but only within such period
of time ending on the earlier of (i) the date three (3) months
following the termination of the Participant’s Continuous Service (or such
longer or shorter period specified in the Stock Appreciation Right Agreement),
or (ii) the expiration of the term of the Stock Appreciation Right as set
forth in the Stock Appreciation Right Agreement.  If, after termination, the Participant does
not exercise his or her Stock Appreciation Right within the time specified
herein or in the Stock Appreciation Right Agreement (as applicable), the Stock
Appreciation Right shall terminate.

 

(e)                                  Other Stock Awards.  Other forms of Stock Awards valued in whole
or in part by reference to, or otherwise based on, Common Stock may be granted
either alone or in addition to Stock Awards provided for under Section 6
and the preceding provisions of this Section 7.  Subject to the provisions of the Plan, the
Board shall have sole and complete authority to

 

18

 

determine
the persons to whom and the time or times at which such Other Stock Awards will
be granted, the number of shares of Common Stock (or the cash equivalent
thereof) to be granted pursuant to such Other Stock Awards and all other terms
and conditions of such Other Stock Awards.

 

8.                                      COVENANTS
OF THE COMPANY.

 

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

 

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

 

9.                                      USE
OF PROCEEDS FROM SALES OF COMMON STOCK.

 

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

 

10.                               MISCELLANEOUS.

 

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

 

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

 

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

 

19

 

corporate
law of the state in which the Company or the Affiliate is incorporated, as the
case may be.

 

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

 

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

 

(f)                                    Withholding
Obligations.  To the extent provided
by the terms of a Stock Award Agreement, the Company may, in its sole
discretion, satisfy any federal, state or local tax withholding obligation
relating to a Stock Award by any of the following means (in addition to the
Company’s right to withhold from any compensation paid to the Participant by
the Company) or by a combination of such means: (i) causing the
Participant to tender a cash payment; (ii) withholding shares of Common
Stock from the shares of Common Stock issued or otherwise issuable to the
Participant in connection with the Stock Award; or (iii) by such other
method as may be set forth in the Stock Award Agreement.

 

(g)                                 Electronic
Delivery.  Any reference herein to a “written”
agreement or document shall include any agreement or document delivered
electronically or posted on the Company’s intranet.

 

(h)                                 Performance Stock Awards.    A Stock Award may be granted, may vest, or
may be exercised based upon service conditions, upon the attainment during a
Performance Period of certain Performance Goals, or both.  The length of any Performance Period, the
Performance Goals to be achieved during the Performance Period, and the measure
of whether

 

20

 

and to
what degree such Performance Goals have been attained shall be conclusively
determined by the Board in its sole discretion. 
The maximum benefit to be received by any individual in any calendar
year attributable to Stock Awards described in this Section 10(h) shall
not exceed the value of eight hundred thousand (800,000) shares of Common
Stock.

 

11.                               ADJUSTMENTS
UPON CHANGES IN COMMON STOCK; CORPORATE TRANSACTIONS.

 

(a)                                  Capitalization
Adjustments.  If any change is made
in, or other events occur with respect to, the Common Stock subject to the Plan
or subject to any Stock Award after the effective date of the Plan set forth in
Section 14 without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by
the Company (each a “Capitalization
Adjustment”)), the Board shall appropriately adjust: (i) the
class(es) and maximum number of securities subject to the Plan pursuant to Section 4(a),
(ii) the class(es) and maximum number of securities by which the share
reserve is to increase automatically each year pursuant to Section 4(a), (iii) the
class(es) and number of securities subject to each outstanding stock award
under the Prior Plans that are added from time to time to the share reserve
under the Plan pursuant to Section 4(a), (iv) the class(es) and
maximum number of securities that may be issued pursuant to the exercise of
Incentive Stock Options pursuant to Section 4(b), (v) the class(es)
and maximum number of securities that may be awarded to any person pursuant to
Sections 5(c) and 10(h), and (vi) the class(es) and number of
securities and price per share of stock subject to outstanding Stock
Awards.  The Board shall make such
adjustments, and its determination shall be final, binding and conclusive.  (Notwithstanding the foregoing, the conversion
of any convertible securities of the Company shall not be treated as a
transaction “without receipt of consideration” by the Company.)

 

(b)                                  Dissolution
or Liquidation.  In the event of a
dissolution or liquidation of the Company, all outstanding Stock Awards (other
than Stock Awards consisting of vested and outstanding shares of Common Stock
not subject to the Company’s right of repurchase) shall terminate immediately
prior to the completion of such dissolution or liquidation, and the shares of
Common Stock subject to the Company’s repurchase option may be repurchased by
the Company notwithstanding the fact that the holder of such Stock Award is
providing Continuous Service, provided,
however, that the Board may, in its sole discretion, cause some or
all Stock Awards to become fully vested, exercisable and/or no longer subject
to repurchase or forfeiture (to the extent such Stock Awards have not
previously expired or terminated) before the dissolution or liquidation is
completed but contingent on its completion.

 

(c)                                  Corporate
Transaction.  The following
provisions shall apply to Stock Awards in the event of a Corporate Transaction
unless otherwise provided in a written agreement between the Company or any
Affiliate and the holder of the Stock Award:

 

(i)                                    Stock Awards May Be Assumed.  In the event of a Corporate Transaction, any
surviving corporation or acquiring corporation (or the surviving or acquiring
corporation’s parent company) may assume or continue any or all Stock Awards
outstanding under the Plan or may substitute similar stock awards for Stock
Awards outstanding under the Plan (including but not limited to, awards to
acquire the same consideration paid to the

 

21

 

stockholders
of the Company pursuant to the Corporate Transaction), and any reacquisition or
repurchase rights held by the Company in respect of Common Stock issued
pursuant to Stock Awards may be assigned by the Company to the successor of the
Company (or the successor’s parent company, if any), in connection with such
Corporate Transaction.  A surviving
corporation or acquiring corporation may choose to assume or continue only a
portion of a Stock Award or substitute a similar stock award for only a portion
of a Stock Award.  The terms of any
assumption, continuation or substitution shall be set by the Board in
accordance with the provisions of Section 3.

 

(ii)                                Stock Awards Held by Participants and Recent
Participants.  In the event of
a Corporate Transaction in which the surviving corporation or acquiring
corporation (or its parent company) does not assume or continue such
outstanding Stock Awards or substitute similar stock awards for such
outstanding Stock Awards, then with respect to Stock Awards that have not been
assumed, continued or substituted and that are held by Participants whose
Continuous Service has not terminated more than three (3) months prior to
the effective time of the Corporate Transaction (referred to as the “Participants and Recent Participants”),
the vesting of such Stock Awards (and, if applicable, the time at which such
Stock Awards may be exercised) shall (contingent upon the effectiveness of the
Corporate Transaction) be accelerated in full to a date prior to the effective
time of such Corporate Transaction as the Board shall determine (or, if the
Board shall not determine such a date, to the date that is five (5) days
prior to the effective time of the Corporate Transaction), and such Stock
Awards shall terminate if not exercised (if applicable) at or prior to the effective
time of the Corporate Transaction, and any reacquisition or repurchase rights
held by the Company with respect to such Stock Awards shall lapse (contingent
upon the effectiveness of the Corporate Transaction).

 

(iii)                            Stock Awards Held by Other Former
Participants.  In the event of
a Corporate Transaction in which the surviving corporation or acquiring
corporation (or its parent company) does not assume or continue such
outstanding Stock Awards or substitute similar stock awards for such
outstanding Stock Awards, then with respect to Stock Awards that have not been
assumed, continued or substituted and that are held by persons other than
Participants and Recent Participants, the vesting of such Stock Awards (and, if
applicable, the time at which such Stock Award may be exercised) shall not be
accelerated and such Stock Awards (other than a Stock Award consisting of
vested and outstanding shares of Common Stock not subject to the Company’s
right of repurchase) shall terminate if not exercised (if applicable) prior to
the effective time of the Corporate Transaction; provided, however, that any reacquisition or repurchase
rights held by the Company with respect to such Stock Awards shall not
terminate and may continue to be exercised notwithstanding the Corporate
Transaction.

 

(iv)                               Payment for Stock Awards in Lieu of Exercise.  Notwithstanding the foregoing, in the event a
Stock Award will terminate if not exercised prior to the effective time of a
Corporate Transaction, the Board may provide, in its sole discretion, that the
holder of such Stock Award may not exercise such Stock Award but will receive a
payment, in such form as may be determined by the Board, equal in value to the
excess, if any, of (i) the value of the property the holder of the Stock
Award would have received upon the exercise of the Stock Award, over (ii) any
exercise price payable by such holder in connection with such exercise.

 

22

 

(d)                                  Change
in Control.  A Stock Award may be
subject to additional acceleration of vesting and exercisability upon or after
a Change in Control as may be provided in the Stock Award Agreement for such
Stock Award or as may be provided in any other written agreement between the
Company or any Affiliate and the Participant, but in the absence of such
provision, no such acceleration shall occur.

 

12.                               AMENDMENT
OF THE PLAN AND STOCK AWARDS.

 

(a)                                  Amendment
of Plan.  Subject to the limitations,
if any, of applicable law, the Board at any time, and from time to time, may
amend the Plan.  However, except as
provided in Section 11(a) relating to Capitalization Adjustments, no
amendment shall be effective unless approved by the stockholders of the Company
to the extent stockholder approval is necessary to satisfy applicable law.

 

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

 

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

 

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

 

(e)                                  Amendment
of Stock Awards.  The Board, at any
time and from time to time, may amend the terms of any one or more Stock
Awards, including, but not limited to, amendments to provide terms more
favorable than previously provided in the Stock Award Agreement, subject to any
specified limits in the Plan that are not subject to Board discretion; provided, however, that the rights under any Stock Award
shall not be impaired by any such amendment unless (i) the Company
requests the consent of the affected Participant, and (ii) such
Participant consents in writing.

 

13.                               TERMINATION
OR SUSPENSION OF THE PLAN.

 

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

 

23

 

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

 

14.                               EFFECTIVE
DATE OF PLAN.

 

No Stock Award shall be
exercised (or, in the case of a Stock Purchase Award, Stock Bonus Award, Stock
Unit Award, or Other Stock Award shall be granted) unless and until (i) the
Plan has been approved by the stockholders of the Company, which approval shall
be within twelve (12) months before or after the date the Plan is adopted by
the Board, and (ii) the IPO Date has occurred.

 

15.                               CHOICE
OF LAW.

 

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

 

24

 

INTARCIA THERAPEUTICS, INC.

2005 EQUITY INCENTIVE PLAN

 

OPTION GRANT NOTICE

 

Intarcia Therapeutics, Inc. (the “Company”), pursuant
to its 2005 Equity Incentive Plan (the “Plan”), hereby grants to Optionholder an
option to purchase the number of shares of the Company’s Common Stock set forth
below.  This option is subject to all of
the terms and conditions as set forth herein and in the Option Agreement, the
Plan and the Notice of Exercise, all of which are attached hereto and incorporated
herein in their entirety.

 

	
  Optionholder:

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
   

  
	
  Vesting Commencement Date:

  	
   

  	
   

  
	
  Number of Shares Subject to Option:

  	
   

  	
   

  
	
  Exercise Price (Per Share):

  	
   

  	
   

  
	
  Total Exercise Price:

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
   

  

 

	
  Type of Grant:

  	
   

  	
  o
  Incentive Stock Option(1)

  	
   

  	
  o
  Nonstatutory Stock Option

  

 

Exercise
Schedule:                                   [Initial
Grant:  1/4th of the shares
vest and become exercisable one year after the Vesting Commencement Date; the
balance of the shares vest and become exercisable in a series of thirty-six
(36) successive equal monthly installments measured from the first anniversary
of the Vesting Commencement Date.]

 

[Refresher Grant:  The shares vest and become exercisable in a
series of forty-eight (48) successive equal monthly installments over the four
(4)-year period measured from the Vesting Commencement Date.]

 

Payment:                                                                                       By
one or a combination of the following items (described in the Option
Agreement):

 

ý                                          By
cash or check

ý                                          Pursuant
to a Regulation T Program if the Shares are publicly traded

ý                                          By
delivery of already-owned shares if the Shares are publicly traded

 

Additional Terms/Acknowledgements:
The undersigned Optionholder acknowledges receipt of, and understands and
agrees to, this Option Grant Notice, the Option Agreement and the Plan.  Optionholder further acknowledges that as of
the Date of Grant, this Option Grant Notice, the Option Agreement and the Plan
set forth the entire understanding between Optionholder and the Company
regarding the acquisition of stock in the Company and supersede all prior oral and
written agreements on that subject with the exception of (i) options
previously granted and delivered to Optionholder under the Plan, and (ii) the
following agreements only:

 

	
   

  	
  OTHER AGREEMENTS:

  	
   

  
	
   

  	
   

  

 

	
  INTARCIA THERAPEUTICS, INC.

  	
   

  	
  OPTIONHOLDER:

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Signature

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
						

 

ATTACHMENTS:  Option Agreement, 2005 Equity Incentive Plan
and Notice of Exercise

 

(1)                                  If
this is an Incentive Stock Option, it (plus other outstanding Incentive Stock
Options) cannot be first exercisable for more than $100,000 in value (measured
by exercise price) in any calendar year. 
Any excess over $100,000 is a Nonstatutory Stock Option.

 

 

INTARCIA THERAPEUTICS, INC.

2005 EQUITY INCENTIVE PLAN

 

OPTION AGREEMENT

(INCENTIVE STOCK OPTION OR NONSTATUTORY STOCK OPTION)

 

Pursuant
to your Option Grant Notice (“Grant Notice”) and this Option Agreement, Intarcia Therapeutics, Inc. (the “Company”) has granted you an option under its
2005 Equity Incentive Plan (the “Plan”) to purchase the number of shares of
the Company’s Common Stock indicated in your Grant Notice at the exercise price
indicated in your Grant Notice.  Defined
terms not explicitly defined in this Option Agreement but defined in the Plan
shall have the same definitions as in the Plan.

 

The
details of your option are as follows:

 

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

 

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

 

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

 

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

 

b.                                       In
the Company’s sole discretion at the time your option is exercised and provided
that at the time of exercise the Common Stock is publicly traded and quoted
regularly in The Wall Street Journal, by
delivery to the Company (either by actual delivery or attestation) of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company’s reported earnings (generally six (6) months)
or that you did not acquire, directly or indirectly from the Company, that are
owned free and clear of any liens, claims, encumbrances or security interests,
and that are valued at Fair Market Value on the date of exercise.  “Delivery” for these purposes, in the sole
discretion of the Company at the time you exercise your option, shall include
delivery to the Company of your attestation of ownership of such shares of
Common Stock in a form approved by the Company. 
Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender would

 

25

 

violate the provisions of any law, regulation or
agreement restricting the redemption of the Company’s stock.

 

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

 

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

 

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

 

a.                                       three
(3) months after the termination of your Continuous Service for any reason
other than your Disability or death, provided that if during any part of such
three (3) month period your option is not exercisable solely because of
the condition set forth in Section 5, your option shall not expire until
the earlier of the Expiration Date or until it shall have been exercisable for
an aggregate period of three (3) months after the termination of your
Continuous Service;

 

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

 

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

 

d.                                       the
Expiration Date indicated in your Grant Notice; or

 

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

 

If
your option is an Incentive Stock Option, note that to obtain the federal
income tax advantages associated with an Incentive Stock Option, the Code
requires that at all times beginning on the date of grant of your option and
ending on the day three (3) months before the date of your option’s
exercise, you must be an employee of the Company or an Affiliate, except in the
event of your death or your permanent and total disability, as defined in Section 22(e) of
the Code.  (The definition of disability
in Section 22(e) of the Code is different from the definition of the
Disability under the Plan).  The Company
has provided for extended exercisability of your option under certain
circumstances for your benefit but cannot guarantee that your option will necessarily
be treated as an Incentive Stock Option if you continue to provide services to
the Company or an Affiliate as a Consultant or Director after your employment
terminates or if you otherwise exercise your option more than three (3) months
after the date your employment with the Company or an Affiliate terminates.

 

 

7.                                      EXERCISE.

 

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

 

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

 

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

 

8.                                      TRANSFERABILITY.  Your option is not transferable, except by
will or by the laws of descent and distribution, and is exercisable during your
life only by you.  Notwithstanding the
foregoing, by delivering written notice to the Company, in a form satisfactory
to the Company, you may designate a third party who, in the event of your
death, shall thereafter be entitled to exercise your option.  In addition, you may transfer your option to
a trust if you are considered to be the sole beneficial owner (determined under
Section 671 of the Code and applicable state law) while the option is held
in the trust, provided that you and the trustee enter into transfer and other
agreements required by the Company.

 

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

 

10.                               WITHHOLDING
OBLIGATIONS.

 

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

 

b.                                       Upon
your request and subject to approval by the Company, in its sole discretion,
and compliance with any applicable legal conditions or restrictions, the
Company may

 

 

withhold from fully vested shares of Common Stock
otherwise issuable to you upon the exercise of your option a number of whole
shares of Common Stock having a Fair Market Value, determined by the Company as
of the date of exercise, not in excess of the minimum amount of tax required to
be withheld by law (or such lower amount as may be necessary to avoid variable
award accounting).  If the date of
determination of any tax withholding obligation is deferred to a date later
than the date of exercise of your option, share withholding pursuant to the
preceding sentence shall not be permitted unless you make a proper and timely
election under Section 83(b) of the Code, covering the aggregate
number of shares of Common Stock acquired upon such exercise with respect to
which such determination is otherwise deferred, to accelerate the determination
of such tax withholding obligation to the date of exercise of your option.  Notwithstanding the filing of such election,
shares of Common Stock shall be withheld solely from fully vested shares of
Common Stock determined as of the date of exercise of your option that are
otherwise issuable to you upon such exercise. 
Any adverse consequences to you arising in connection with such share
withholding procedure shall be your sole responsibility.

 

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

 

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

 

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

 

 

NOTICE OF EXERCISE

 

	
  Intarcia Therapeutics, Inc.

  	
   

  	
   

  
	
  2000 Powell St., Ste. 1640

  	
   

  	
   

  
	
  Emeryville, CA 94608

  	
   

  	
  Date of Exercise:

  	
   

  

 

Ladies and Gentlemen:

 

This constitutes notice under my stock option that I
elect to purchase the number of shares for the price set forth below.

 

	
  Type of option (check one):

  	
   

  	
   ̈
  Incentive

  	
   

  	
   ̈
  Nonstatutory

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Stock option dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Number of shares as to which option is exercised:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Certificates to be issued in name of:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total exercise price:

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash payment delivered herewith:

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Value of
                    
  shares of Intarcia Therapeutics, Inc. Common Stock delivered herewith(2):

  	
   

  	
  $

  	
   

  	
   

  	
   

  
							

 

By this exercise, I agree
(i) to provide such additional documents as you may require pursuant to
the terms of the Intarcia Therapeutics, Inc.
2005 Equity Incentive Plan, (ii) to
provide for the payment by me to you (in the manner designated by you) of your
withholding obligation, if any, relating to the exercise of this option, and (iii) if
this exercise relates to an incentive stock option, to notify you in writing
within fifteen (15) days after the date of any disposition of any of the shares
of Common Stock issued upon exercise of this option that occurs within two (2) years
after the date of grant of this option or within one (1) year after such
shares of Common Stock are issued upon exercise of this option.

 

Very truly yours,

 

(2)                                  Shares
must meet the public trading requirements set forth in the option.  Shares must be valued in accordance with the
terms of the option being exercised, must have been owned for the minimum
period required in the option, and must be owned free and clear of any liens,
claims, encumbrances or security interests. 
Certificates must be endorsed or accompanied by an executed assignment
separate from certificate.Exhibit 10.5

 

INTARCIA THERAPEUTICS, INC.

 

2005 EMPLOYEE STOCK PURCHASE PLAN

 

ADOPTED:  MARCH 23,
2005

APPROVED BY STOCKHOLDERS: 
            ,
2005

 

1.                                      GENERAL.

 

(a)                                  The
purpose of the Plan is to provide a means by which Employees of the Company and
certain designated Related Corporations may be given an opportunity to purchase
shares of the Common Stock of the Company.

 

(b)                                  The
Company, by means of the Plan, seeks to retain the services of such Employees,
to secure and retain the services of new Employees and to provide incentives
for such persons to exert maximum efforts for the success of the Company and
its Related Corporations.

 

(c)                                  The
Company intends that the Purchase Rights be considered options issued under an
Employee Stock Purchase Plan.

 

2.                                      DEFINITIONS.

 

As used in the Plan, the
following definitions shall apply to the capitalized terms indicated below:

 

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

 

(b)                                  “Capitalization Adjustment” has
the meaning ascribed to that term in Section 14(a).

 

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

 

(d)                                  “Committee” means a
committee of one (1) or more members of the Board to whom authority has
been delegated by the Board in accordance with Section 3(c).

 

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

 

(f)                                    “Company” means Intarcia Therapeutics, Inc., a
Delaware corporation.

 

(g)                                 “Contributions” means the payroll deductions and other
additional payments specifically provided for in the Offering, that a
Participant contributes to fund the exercise of a Purchase Right. A Participant
may make additional payments into his or her account, if specifically provided
for in the Offering, and then only if the Participant has not already had the
maximum permitted amount withheld during the Offering through payroll
deductions.

 

1

 

(h)                                 “Corporate Transaction” means the occurrence, in a
single transaction or in a series of related transactions, of any one or more
of the following events:

 

(i)                                    a
sale or other disposition of all or
substantially all, as determined by the Board in its sole discretion, of the
consolidated assets of the Company and its Subsidiaries;

 

(ii)                                a
sale or other disposition of at least ninety
percent (90%) of the
outstanding securities of the Company;

 

(iii)                            the
consummation of a merger, consolidation or similar transaction following which
the Company is not the surviving corporation; or

 

(iv)                               the
consummation of a merger, consolidation or similar transaction following which
the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger, consolidation or similar
transaction are converted or exchanged by virtue of the merger, consolidation
or similar transaction into other property, whether in the form of securities,
cash or otherwise.

 

(i)                                    “Director” means a member
of the Board.

 

(j)                                    “Eligible Employee” means an
Employee who meets the requirements set forth in the Offering for eligibility
to participate in the Offering, provided that such Employee also meets the
requirements for eligibility to participate set forth in the Plan.

 

(k)                                “Employee” means any
person, including Officers and Directors, who is employed for purposes of Section 423(b)(4) of
the Code by the Company or a Related Corporation.  However, service solely as a Director, or
payment of a fee for such services, shall not cause a Director to be considered
an “Employee” for purposes of the Plan.

 

(l)                                    “Employee Stock Purchase Plan” means
a plan that grants Purchase Rights intended to be options issued under an “employee
stock purchase plan,” as that term is defined in Section 423(b) of
the Code.

 

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

 

(n)                                 “Fair Market Value” means, as of any date, the value of
the Common Stock determined as follows:

 

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

 

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

 

2

 

(o)                                  “IPO Date” means the date
of the underwriting agreement between the Company and the underwriter(s)
managing the initial public offering of the Common Stock, pursuant to which the
Common Stock is priced for the initial public offering.

 

(p)                                  “Offering” means the
grant of Purchase Rights to purchase shares of Common Stock under the Plan to
Eligible Employees.

 

(q)                                  “Offering Date” means a date selected by the Board for
an Offering to commence.

 

(r)                                  “Officer” means a person who
is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.

 

(s)                                  “Participant” means an
Eligible Employee who holds an outstanding Purchase Right granted pursuant to
the Plan.

 

(t)                                    “Plan” means this
Intarcia Therapeutics, Inc. 2005 Employee Stock Purchase Plan.

 

(u)                                 “Purchase Date” means one or
more dates during an Offering established by the Board on which Purchase Rights
shall be exercised and as of which purchases of shares of Common Stock shall be
carried out in accordance with such Offering.

 

(v)                                   “Purchase Period” means a period of time specified
within an Offering beginning on the Offering Date or on the next day following
a Purchase Date within an Offering and ending on a Purchase Date.  An Offering may consist of one or more
Purchase Periods.

 

(w)                                “Purchase Right” means an
option to purchase shares of Common Stock granted pursuant to the Plan.

 

(x)                                  “Related Corporation” means any “parent
corporation” or “subsidiary corporation” of the Company whether now or
subsequently established, as those terms are defined in Sections 424(e) and
(f), respectively, of the Code.

 

(y)                                  “Securities Act” means the
Securities Act of 1933, as amended.

 

(z)                                  “Trading Day” means any day on which the exchange(s) or
market(s) on which shares of Common Stock are listed, whether it be an
established stock exchange, the Nasdaq National Market, the Nasdaq SmallCap
Market or otherwise, is open for trading.

 

3.                                      ADMINISTRATION.

 

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

 

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

 

3

 

(i)                                    To
determine when and how Purchase Rights to purchase shares of Common Stock shall
be granted and the provisions of each Offering of such Purchase Rights (which
need not be identical).

 

(ii)                                To
designate from time to time which Related Corporations of the Company shall be
eligible to participate in the Plan.

 

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

 

(iv)                               To
adopt such procedures and sub-plans as are necessary or appropriate to permit
participation in the Plan by Employees who are foreign nationals or employed
outside the United States.

 

(v)                                   To
amend the Plan as provided in Section 15.

 

(vi)                               Generally,
to exercise such powers and to perform such acts as it deems necessary or
expedient to promote the best interests of the Company and its Related
Corporations and to carry out the intent that the Plan be treated as an
Employee Stock Purchase Plan.

 

(c)                                  The
Board may delegate some or all of the administration of the Plan to a Committee
or Committees.  If administration is delegated
to a Committee, the Committee shall have, in connection with the administration
of the Plan, the powers theretofore possessed by the Board that have been
delegated to the Committee, including the power to delegate to a subcommittee
any of the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board.  The Board may retain the authority to
concurrently administer the Plan with the Committee and may, at any time,
revest in the Board some or all of the powers previously delegated.

 

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

 

4.                                      SHARES
OF COMMON STOCK SUBJECT TO THE PLAN.

 

(a)                                  Subject
to the provisions of Section 14(a) relating to Capitalization
Adjustments, the shares of Common Stock that may be sold pursuant to Purchase
Rights shall not exceed in the aggregate two hundred fifty thousand (250,000)
shares of Common Stock. In addition,
the number of shares of Common Stock available for issuance under the Plan
shall be increased effective as of January 1st of each year commencing in
2006 and ending on (and including) January 1, 2015, by such number of
shares of Common Stock as may be approved for that year by the Board, provided
that such number of shares shall not exceed for any year the lesser of (i) three
quarters of one percent (0.75%) of the total number of shares of Common Stock

 

4

 

outstanding
on December 31st of the preceding calendar year, or (ii) two hundred
fifty thousand (250,000) shares of Common Stock.

 

(b)                                  If
any Purchase Right granted under the Plan shall for any reason terminate
without having been exercised, the shares of Common Stock not purchased under
such Purchase Right shall again become available for issuance under the Plan.

 

(c)                                  The
stock purchasable under the Plan shall be shares of authorized but unissued or
reacquired Common Stock, including shares repurchased by the Company on the
open market.

 

5.                                      GRANT
OF PURCHASE RIGHTS; OFFERING.

 

(a)                                  The
Board may from time to time grant or provide for the grant of Purchase Rights
to purchase shares of Common Stock under the Plan to Eligible Employees in an
Offering (consisting of one or more Purchase Periods) on an Offering Date or
Offering Dates selected by the Board. 
Each Offering shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate, which shall comply with the
requirement of Section 423(b)(5) of the Code that all Employees
granted Purchase Rights shall have the same rights and privileges.  The terms and conditions of an Offering shall
be incorporated by reference into the Plan and treated as part of the Plan.  The provisions of separate Offerings need not
be identical, but each Offering shall include (through incorporation of the
provisions of this Plan by reference in the document comprising the Offering or
otherwise) the period during which the Offering shall be effective, which
period shall not exceed twenty-seven (27) months beginning with the Offering
Date, and the substance of the provisions contained in Sections 6 through 9,
inclusive.

 

(b)                                  If
a Participant has more than one Purchase Right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (i) each agreement or notice delivered by that Participant
shall be deemed to apply to all of his or her Purchase Rights under the Plan,
and (ii) a Purchase Right with a lower exercise price (or an
earlier-granted Purchase Right, if different Purchase Rights have identical
exercise prices) shall be exercised to the fullest possible extent before a
Purchase Right with a higher exercise price (or a later-granted Purchase Right
if different Purchase Rights have identical exercise prices) shall be
exercised.

 

(c)                                  The
Board shall have the discretion to structure an Offering so that if the Fair
Market Value of the shares of Common Stock on the first day of a new Purchase
Period within that Offering is less than or equal to the Fair Market Value of
the shares of Common Stock on the Offering Date, then (i) that Offering
shall terminate immediately, and (ii) the Participants in such terminated
Offering shall be automatically enrolled in a new Offering beginning on the
first day of such new Purchase Period.

 

6.                                      ELIGIBILITY.

 

(a)                                  Purchase
Rights may be granted only to Employees of the Company or, as the Board may
designate as provided in Section 3(b), to Employees of a Related
Corporation.  Except as provided in Section 6(b),
an Employee shall not be eligible to be granted Purchase Rights under the Plan
unless, on the Offering Date, such Employee has been in the employ of the
Company or the Related Corporation, as the case may be, for such continuous
period preceding

 

5

 

such
Offering Date as the Board may require, but in no event shall the required
period of continuous employment be greater than two (2) years.  In addition, the Board may provide that no
Employee shall be eligible to be granted Purchase Rights under the Plan unless,
on the Offering Date, such Employee’s customary employment with the Company or
the Related Corporation is more than twenty (20) hours per week and more than
five (5) months per calendar year or such other criteria as the Board may
determine consistent with Section 423 of the Code.

 

(b)                                  The
Board may provide that each person who, during the course of an Offering, first
becomes an Eligible Employee shall, on a date or dates specified in the
Offering which coincides with the day on which such person becomes an Eligible
Employee or which occurs thereafter, receive a Purchase Right under that
Offering, which Purchase Right shall thereafter be deemed to be a part of that
Offering.  Such Purchase Right shall have
the same characteristics as any Purchase Rights originally granted under that
Offering, as described herein, except that:

 

(i)                                    the
date on which such Purchase Right is granted shall be the “Offering Date” of
such Purchase Right for all purposes, including determination of the exercise
price of such Purchase Right;

 

(ii)                                the
period of the Offering with respect to such Purchase Right shall begin on its
Offering Date and end coincident with the end of such Offering; and

 

(iii)                            the
Board may provide that if such person first becomes an Eligible Employee within
a specified period of time before the end of the Offering, he or she shall not
receive any Purchase Right under that Offering.

 

(c)                                  No
Employee shall be eligible for the grant of any Purchase Rights under the Plan
if, immediately after any such Purchase Rights are granted, such Employee owns
stock possessing five percent (5%) or more of the total combined voting power
or value of all classes of stock of the Company or of any Related Corporation.  For purposes of this Section 6(c), the rules of
Section 424(d) of the Code shall apply in determining the stock
ownership of any Employee, and stock which such Employee may purchase under all
outstanding Purchase Rights and options shall be treated as stock owned by such
Employee.

 

(d)                                  As
specified by Section 423(b)(8) of the Code, an Eligible Employee may
be granted Purchase Rights under the Plan only if such Purchase Rights,
together with any other rights granted under all Employee Stock Purchase Plans
of the Company and any Related Corporations, do not permit such Eligible
Employee’s rights to purchase stock of the Company or any Related Corporation
to accrue at a rate which exceeds twenty five thousand dollars ($25,000) of
Fair Market Value of such stock (determined at the time such rights are
granted, and which, with respect to the Plan, shall be determined as of their
respective Offering Dates) for each calendar year in which such rights are
outstanding at any time.

 

(e)                                  Officers
of the Company and any designated Related Corporation, if they are otherwise
Eligible Employees, shall be eligible to participate in Offerings under the
Plan.  Notwithstanding the foregoing, the
Board may provide in an Offering that Employees who are highly compensated
Employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.

 

6

 

7.                                      PURCHASE
RIGHTS; PURCHASE PRICE.

 

(a)                                  On
each Offering Date, each Eligible Employee, pursuant to an Offering made under
the Plan, shall be granted a Purchase Right to purchase up to that number of
shares of Common Stock purchasable either with a percentage or with a maximum
dollar amount, as designated by the Board, but in either case not exceeding
fifteen percent (15%) of such
Employee’s earnings (as defined by the Board in each Offering) during the
period that begins on the Offering Date (or such later date as the Board
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no later than the end of the Offering.

 

(b)                                  The
Board shall establish one (1) or more Purchase Dates during an Offering as
of which Purchase Rights granted pursuant to that Offering shall be exercised
and purchases of shares of Common Stock shall be carried out in accordance with
such Offering.

 

(c)                                  In
connection with each Offering made under the Plan, the Board may specify a
maximum number of shares of Common Stock that may be purchased by any
Participant on any Purchase Date during such Offering.  In connection with each Offering made under
the Plan, the Board may specify a maximum aggregate number of shares of Common
Stock that may be purchased by all Participants pursuant to such Offering.  In addition, in connection with each Offering
that contains more than one Purchase Date, the Board may specify a maximum
aggregate number of shares of Common Stock that may be purchased by all
Participants on any Purchase Date under the Offering.  If the aggregate purchase of shares of Common
Stock issuable upon exercise of Purchase Rights granted under the Offering
would exceed any such maximum aggregate number, then, in the absence of any
Board action otherwise, a pro rata allocation of the shares of Common Stock
available shall be made in as nearly a uniform manner as shall be practicable
and equitable.

 

(d)                                  The
purchase price of shares of Common Stock acquired pursuant to Purchase Rights
shall be not less than the lesser of:

 

(i)                                    an
amount equal to eighty-five percent (85%) of the Fair Market Value of the
shares of Common Stock on the Offering Date; or

 

(ii)                                an
amount equal to eighty-five percent (85%) of the Fair Market Value of the
shares of Common Stock on the applicable Purchase Date.

 

8.                                      PARTICIPATION;
WITHDRAWAL; TERMINATION.

 

(a)                                  A
Participant may elect to authorize payroll deductions pursuant to an Offering
under the Plan by completing and delivering to the Company, within the time
specified in the Offering, an enrollment form (in such form as the Company may
provide). Each such enrollment form shall authorize an amount of Contributions
expressed as a percentage of the submitting Participant’s earnings (as defined
in each Offering) during the Offering (not to exceed the maximum percentage
specified by the Board). Each Participant’s Contributions shall be credited to
a bookkeeping account for such Participant under the Plan and shall be
deposited with the general funds of the Company except where applicable law
requires that Contributions be deposited with a third party. To the extent
provided in the Offering, a

 

7

 

Participant
may begin such Contributions after the beginning of the Offering.  To the extent provided in the Offering, a
Participant may thereafter reduce (including to zero) or increase his or her
Contributions.  To the extent
specifically provided in the Offering, in addition to making Contributions by
payroll deductions, a Participant may make Contributions through the payment by
cash or check prior to each Purchase Date of the Offering.

 

(b)                                  During
an Offering, a Participant may cease making Contributions and withdraw from the
Offering by delivering to the Company a notice of withdrawal in such form as
the Company may provide.  Such withdrawal
may be elected at any time prior to the end of the Offering, except as provided
otherwise in the Offering.  Upon such
withdrawal from the Offering by a Participant, the Company shall distribute to
such Participant all of his or her accumulated Contributions (reduced to the
extent, if any, such Contributions have been used to acquire shares of Common
Stock for the Participant) under the Offering, and such Participant’s Purchase
Right in that Offering shall thereupon terminate.  A Participant’s withdrawal from an Offering
shall have no effect upon such Participant’s eligibility to participate in any
other Offerings under the Plan, but such Participant shall be required to
deliver a new enrollment form in order to participate in subsequent Offerings.

 

(c)                                  Purchase
Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon a Participant ceasing to be an Employee for any reason or for
no reason (subject to any post-employment participation period required by law)
or other lack of eligibility. The Company shall distribute to such terminated
or otherwise ineligible Employee all of his or her accumulated Contributions
(reduced to the extent, if any, such Contributions have been used to acquire
shares of Common Stock for the terminated or otherwise ineligible Employee)
under the Offering.

 

(d)                                  Purchase
Rights shall not be transferable by a Participant except by will, the laws of
descent and distribution, or by a beneficiary designation as provided in Section 13.  During a Participant’s lifetime, Purchase
Rights shall be exercisable only by such Participant.

 

(e)                                  Unless
otherwise specified in an Offering, the Company shall have no obligation to pay
interest on Contributions.

 

9.                                      EXERCISE.

 

(a)                                  On
each Purchase Date during an Offering, each Participant’s accumulated
Contributions shall be applied to the purchase of shares of Common Stock up to
the maximum number of shares of Common Stock permitted pursuant to the terms of
the Plan and the applicable Offering, at the purchase price specified in the
Offering.  No fractional shares shall be
issued upon the exercise of Purchase Rights unless specifically provided for in
the Offering.

 

(b)                                  If
any amount of accumulated Contributions remains in a Participant’s account
after the purchase of shares of Common Stock and such remaining amount is less
than the amount required to purchase one share of Common Stock on the final
Purchase Date of an Offering, then such remaining amount shall be held in such
Participant’s account for the purchase of shares of Common Stock under the next
Offering under the Plan, unless such Participant withdraws from such next
Offering, as provided in Section 8(b), or is not eligible to participate
in such Offering, as provided in Section 6, in which case such amount
shall be

 

8

 

distributed
to such Participant after the final Purchase Date, without interest.  If the amount of Contributions remaining in a
Participant’s account after the purchase of shares of Common Stock is at least
equal to the amount required to purchase one (1) whole share of Common
Stock on the final Purchase Date of the Offering, then such remaining amount
shall be distributed in full to such Participant at the end of the Offering
without interest.

 

(c)                                  No
Purchase Rights may be exercised to any extent unless the shares of Common
Stock to be issued upon such exercise under the Plan are covered by an
effective registration statement pursuant to the Securities Act and the Plan is
in material compliance with all applicable federal, state, foreign and other
securities and other laws applicable to the Plan.  If on a Purchase Date during any Offering
hereunder the shares of Common Stock are not so registered or the Plan is not
in such compliance, no Purchase Rights or any Offering shall be exercised on
such Purchase Date, and the Purchase Date shall be delayed until the shares of
Common Stock are subject to such an effective registration statement and the
Plan is in such compliance, except that the Purchase Date shall not be delayed
more than twelve (12) months and the Purchase Date shall in no event be more
than twenty-seven (27) months from the Offering Date.  If, on the Purchase Date under any Offering
hereunder, as delayed to the maximum extent permissible, the shares of Common
Stock are not registered and the Plan is not in such compliance, no Purchase
Rights or any Offering shall be exercised and all Contributions accumulated
during the Offering (reduced to the extent, if any, such Contributions have
been used to acquire shares of Common Stock) shall be distributed to the
Participants without interest.

 

10.                               COVENANTS
OF THE COMPANY.

 

The Company shall seek to
obtain from each federal, state, foreign or other regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of Common Stock upon exercise of the Purchase
Rights.  If, after commercially
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority that counsel for the Company deems necessary
for the lawful issuance and sale of Common Stock under the Plan, the Company
shall be relieved from any liability for failure to issue and sell Common Stock
upon exercise of such Purchase Rights unless and until such authority is
obtained.

 

11.                               USE
OF PROCEEDS FROM SALES OF COMMON STOCK.

 

Proceeds from the sale of shares of Common Stock
pursuant to Purchase Rights shall constitute general funds of the Company.

 

12.                               RIGHTS
AS A STOCKHOLDER.

 

A Participant shall not be deemed to be the holder of,
or to have any of the rights of a holder with respect to, shares of Common
Stock subject to Purchase Rights unless and until the Participant’s shares of
Common Stock acquired upon exercise of Purchase Rights are recorded in the
books of the Company (or its transfer agent).

 

9

 

13.                               DESIGNATION
OF BENEFICIARY.

 

(a)                                  A
Participant may file a written designation of a beneficiary who is to receive
any shares of Common Stock and/or cash, if any, from the Participant’s account
under the Plan in the event of such Participant’s death subsequent to the end
of an Offering but prior to delivery to the Participant of such shares of
Common Stock or cash.  In addition, a
Participant may file a written designation of a beneficiary who is to receive
any cash from the Participant’s account under the Plan in the event of such
Participant’s death during an Offering. 
Any such designation shall be on a form provided by or otherwise
acceptable to the Company.

 

(b)                                  The
Participant may change such designation of beneficiary at any time by written
notice to the Company.  In the event of
the death of a Participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such Participant’s
death, the Company shall deliver such shares of Common Stock and/or cash to the
executor or administrator of the estate of the Participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its sole discretion, may deliver such shares of Common Stock
and/or cash to the spouse or to any one or more dependents or relatives of the
Participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.

 

14.                               ADJUSTMENTS
UPON CHANGES IN COMMON STOCK; CORPORATE TRANSACTIONS.

 

(a)                                  If
any change is made in, or other events occur with respect to, the Common Stock
subject to the Plan or subject to any Purchase Right after the effective date
of the Plan set forth in Section 17 without the receipt of consideration
by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company (each a “Capitalization Adjustment”)), the Board
shall appropriately adjust: (i) the class(es) and maximum number of
securities subject to the Plan pursuant to Section 4(a), (ii) the
class(es) and maximum number of securities by which the share reserve is to
increase automatically each year pursuant to Section 4(a), (iii) the
class(es) and number of securities subject to outstanding Purchase Rights, and (iv) the
class(es) and number of securities imposed by purchase limits under each
ongoing Offering.  The Board shall make
such adjustments, and its determination shall be final, binding and conclusive.  (Notwithstanding the foregoing, the
conversion of any convertible securities of the Company shall not be treated as
a transaction “without receipt of consideration” by the Company.)

 

(b)                                  In
the event of a Corporate Transaction, then: (i) any surviving corporation
or acquiring corporation (or the surviving or acquiring corporation’s parent
company) may assume or continue Purchase Rights outstanding under the Plan or
may substitute similar rights (including a right to acquire the same
consideration paid to the stockholders in the Corporate Transaction) for those
outstanding under the Plan, or (ii) if any surviving or acquiring
corporation (or its parent company) does not assume or continue such Purchase
Rights or does not substitute similar rights for Purchase Rights outstanding
under the Plan, then the Participants’ accumulated Contributions shall be used
to purchase shares of Common Stock within ten (10) business days prior to
the Corporate Transaction under any ongoing Offerings, and the

 

10

 

Participants’
Purchase Rights under the ongoing Offerings shall terminate immediately after
such purchase.

 

15.                               AMENDMENT
OF THE PLAN.

 

(a)                                  The
Board at any time, and from time to time, may amend the Plan.  However, except as provided in Section 14(a) relating
to Capitalization Adjustments and except as to amendments solely to benefit the
administration of the Plan, to take account of a change in legislation or to
obtain or maintain favorable tax, exchange control or regulatory treatment for
Participants or the Company or any Related Corporation, no amendment shall be
effective unless approved by the stockholders of the Company to the extent
stockholder approval is necessary for the Plan to satisfy the requirements of Section 423
of the Code or other applicable laws or regulations.

 

(b)                                  It
is expressly contemplated that the Board may amend the Plan in any respect the
Board deems necessary or advisable to provide Employees with the maximum
benefits provided or to be provided under the provisions of the Code and the
regulations promulgated thereunder relating to Employee Stock Purchase Plans
and/or to bring the Plan and/or Purchase Rights into compliance therewith.

 

(c)                                  The
rights and obligations under any Purchase Rights granted before amendment of
the Plan shall not be impaired by any amendment of the Plan except: (i) with
the consent of the person to whom such Purchase Rights were granted, or (ii) as
necessary to comply with any laws or governmental regulations (including,
without limitation, the provisions of the Code and the regulations promulgated
thereunder relating to Employee Stock Purchase Plans).

 

16.                               TERMINATION
OR SUSPENSION OF THE PLAN.

 

(a)                                  The
Board may suspend or terminate the Plan at any time.  Unless sooner terminated, the Plan shall
terminate at the time that all of the shares of Common Stock reserved for
issuance under the Plan, as increased and/or adjusted from time to time, have
been issued under the terms of the Plan. 
No Purchase Rights may be granted under the Plan while the Plan is
suspended or after it is terminated.

 

(b)                                  Any
benefits, privileges, entitlements and obligations under any Purchase Rights
while the Plan is in effect shall not be impaired by suspension or termination
of the Plan except (i) as expressly provided in the Plan or with the
consent of the person to whom such Purchase Rights were granted, (ii) as
necessary to comply with any laws, regulations or listing requirements, or (iii) as
necessary to ensure that the Plan and/or Purchase Rights comply with the
requirements of Section 423 of the Code. 
Notwithstanding the foregoing, if the Company’s accountants advise the
Company that the accounting treatment of purchases under the Plan will change
or has changed in a manner that the Company determines is detrimental to its
best interests, then the Company may, in its discretion, take any or all of the
following actions: (i) terminate each Offering hereunder that is then
ongoing as of the next Purchase Date (after the purchase of Common Stock on
such Purchase Date) under such Offering; (ii) set a new Purchase Date for
each ongoing Offering and terminate such Offerings after the purchase of Common
Stock on such Purchase Date; (iii) amend the Plan and the ongoing Offering
so that such

 

11

 

Offering
will no longer have an accounting treatment that is detrimental to the Company’s
best interests and (iv) terminate each ongoing Offering and refund any
Contributions (reduced to the extent, if any, such Contributions have been used
to acquire shares of Common Stock) without interest to the participants.

 

17.                               EFFECTIVE
DATE OF PLAN.

 

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

 

18.                               MISCELLANEOUS
PROVISIONS.

 

(a)                                  The
Plan and Offering do not constitute an employment contract.  Nothing in the Plan or in the Offering shall
in any way alter the at will nature of a Participant’s employment or be deemed
to create in any way whatsoever any obligation on the part of any Participant
to continue in the employ of the Company or a Related Corporation, or on the
part of the Company or a Related Corporation to continue the employment of a
Participant.

 

(b)                                  The
provisions of the Plan shall be governed by the laws of the State of Delaware without resort to that state’s
conflicts of laws rules.

 

12

 

INTARCIA THERAPEUTICS, INC.

 

2005 EMPLOYEE STOCK PURCHASE PLAN

OFFERING DOCUMENT

 

ADOPTED BY THE BOARD OF DIRECTORS:
                  ,
2005

 

In this document, capitalized terms not otherwise
defined shall have the same definitions of such terms as in the Intarcia Therapeutics, Inc. 2005
Employee Stock Purchase Plan.

 

19.                               GRANT;
OFFERING DATE.

 

(a)                                  The
Board hereby authorizes a series of Offerings pursuant to the terms of this
Offering document.

 

(b)                                  The
first Offering hereunder (the “Initial Offering”) shall begin on the date the Common
Stock is first offered to the public under a registration statement declared
effective under the Securities Act and shall end on
[                   ],
unless terminated earlier as provided below. 
The Initial Offering shall consist of
[             ]
([      ]) Purchase Periods, with the first
Purchase Period ending on
[                      ],
the second Purchase Period ending on
[                     ],
the third Purchase Period ending on [                           ],
and the fourth Purchase Period ending on
[                                           ].

 

(c)                                  After
the Initial Offering commences, a [concurrent] Offering shall begin on
[                  ]
and
[                    ]
and [                           ]
each year after
[               ]
over the term of the Plan and shall be approximately
[          ]
([     ]) years in duration.  Each Offering shall consist of
[         ]
([     ]) Purchase Periods each of which shall be
approximately
[             ]
([     ]) months in length ending on or about
[                     ]
and
[                     ]
each year.  Except as provided below, a
Purchase Date is the last day of a Purchase Period or of an Offering, as the
case may be.

 

(d)                                  Notwithstanding
the foregoing: (i) if any Offering Date falls on a day that is not a
Trading Day, then such Offering Date shall instead fall on the next subsequent
Trading Day, and (ii) if any Purchase Date falls on a day that is not a
Trading Day, then such Purchase Date shall instead fall on the immediately
preceding Trading Day.

 

(e)                                  Prior
to the commencement of any Offering, the Board may change any or all terms of
such Offering and any subsequent Offerings. 
The granting of Purchase Rights pursuant to each Offering hereunder
shall occur on each respective Offering Date unless prior to such date (i) the
Board determines that such Offering shall not occur, or (ii) no shares of
Common Stock remain available for issuance under the Plan in connection with
the Offering.

 

(f)                                    If
the Company’s accountants advise the Company that the accounting treatment of
purchases under the Plan is such that the Company determines is detrimental to
its best interests, then the Board may, in its sole discretion, terminate each
Offering hereunder that is

 

13

 

then
ongoing as of the next Purchase Date (after the purchase of stock on such
Purchase Date) under such Offering.

 

(g)                                 [Notwithstanding
anything in this Section 1 to the contrary, if on the first day of a new
Purchase Period during the Offering the Fair Market Value of a share of Common
Stock is less than or equal to the Fair Market Value of a share of Common Stock
on the Offering Date for that Offering, then that Offering shall immediately
terminate. Participants in the terminated Offering shall automatically be
enrolled in the new Offering that starts on or about such day.]

 

20.                               ELIGIBLE
EMPLOYEES.

 

(a)                                  Each
Eligible Employee, who has been an Employee for a continuous period of at least
[ten] ([10]) [days] ending on the Offering Date of an Offering hereunder and is
either (i) an employee of the Company; (ii) an employee of a Related
Corporation incorporated in the United States; or (iii) an employee of a
Related Corporation that is not incorporated in the United States, provided
that the Board has designated the employees of such Related Corporation as
eligible to participate in the Offering, shall be granted a Purchase Right on
the Offering Date of such Offering.

 

(b)                                  Each
person who first becomes an Eligible Employee during an Offering shall not be
able to participate in such Offering.

 

(c)                                  Notwithstanding
the foregoing, the following Employees shall not be Eligible Employees
or be granted Purchase Rights under an Offering:

 

(i)                                    Employees
whose customary employment is twenty (20) hours per week or less or five (5) months
per calendar year or less;

 

(ii)                                five
percent (5%) stockholders (including ownership through unexercised and/or
unvested stock options) as described in Section 6(c) of the Plan; or

 

(iii)                            Employees
in jurisdictions outside of the United States if, as of the Offering Date of
the Offering, the grant of such Purchase Rights would not be in compliance with
the applicable laws of any jurisdiction in which the Employee resides or is
employed.

 

21.                               PURCHASE
RIGHTS.

 

(a)                                  Subject
to the limitations herein and in the Plan, a Participant’s Purchase Right shall
permit the purchase of the number of shares of Common Stock purchasable with up
to [               ]
percent ([      ]%) of such Participant’s
Earnings paid during the period of such Offering beginning immediately after
such Participant first commences participation; provided,
however, that no Participant may have more than [            ]
percent ([   ]%) of such Participant’s Earnings applied
to purchase shares of Common Stock under all ongoing Offerings under the Plan
and all other plans of the Company and Related Corporations that are intended
to qualify as Employee Stock Purchase Plans.

 

(b)                                  For
Offerings hereunder, “Earnings”
means the base compensation paid to a Participant, including all salary, wages
(including amounts elected to be deferred by such

 

14

 

Participant,
that would have been paid, under any cash or deferred arrangement or other
deferred compensation program established by the Company or a Related
Corporation), but excluding all overtime pay, commissions, bonuses, and other
remuneration paid directly to such Participant, profit sharing, the cost of
employee benefits paid for by the Company or a Related Corporation, education
or tuition reimbursements, imputed income arising under any Company or Related
Corporation group insurance or benefit program, traveling expenses, business
and moving expense reimbursements, income received in connection with stock
options, contributions made by the Company or a Related Corporation under any
employee benefit plan, and similar items of compensation.

 

(c)                                  Notwithstanding
the foregoing, the maximum number of shares of Common Stock that a Participant
may purchase on any Purchase Date in an Offering shall be such number of shares
as has a Fair Market Value (determined as of the Offering Date for such
Offering) equal to (x) $25,000 multiplied by the number of calendar years in
which the Purchase Right under such Offering has been outstanding at any time,
minus (y) the Fair Market Value of any other shares of Common Stock (determined
as of the relevant Offering Date with respect to such shares) that, for
purposes of the limitation of Section 423(b)(8) of the Code, are attributed
to any of such calendar years in which the Purchase Right is outstanding. The
amount in clause (y) of the previous sentence shall be determined in accordance
with regulations applicable under Section 423(b)(8) of the Code based
on (i) the number of shares previously purchased with respect to such
calendar years pursuant to such Offering or any other Offering under the Plan,
or pursuant to any other Company or Related Corporation plans intended to
qualify as Employee Stock Purchase Plans, and (ii) the number of shares
subject to other Purchase Rights outstanding on the Offering Date for such
Offering pursuant to the Plan or any other such Company or Related Corporation
Employee Stock Purchase Plan.

 

(d)                                  The
maximum aggregate number of shares of Common Stock available to be purchased by
all Participants under an Offering shall be the number of shares of Common
Stock remaining available under the Plan on the Offering Date.  If the aggregate purchase of shares of Common
Stock upon exercise of Purchase Rights granted under all concurrent Offerings
would exceed the maximum aggregate number of shares available, the Board shall
make a uniform and equitable allocation of the shares available.

 

(e)                                  Notwithstanding
the foregoing, the maximum number of shares of Common Stock that an Eligible
Employee may purchase on any Purchase Date during any Offering shall not exceed
[                        ]
([            ])
shares.

 

22.                               PURCHASE
PRICE.

 

The purchase price of
shares of Common Stock under the Offering shall be the lesser of: (i) eighty-five
percent (85%) of the Fair Market Value of such shares of Common Stock on the
Offering Date, or (ii) eighty-five percent (85%) of the Fair Market Value
of such shares of Common Stock on the applicable Purchase Date.  For the Initial Offering, the Fair Market
Value of the shares of Common Stock at the time when the Offering commences
shall be the price per share at which shares are first sold to the public in
the Company’s initial public offering as specified in the final prospectus for
that initial public offering.

 

15

 

23.                               PARTICIPATION.

 

(a)                                  An
Eligible Employee may elect to participate in an Offering on the Offering Date.
An Eligible Employee may enroll in only one Offering at a time.  An Eligible Employee shall elect his or her
payroll deduction percentage on such enrollment form as the Company provides.
The completed enrollment form must be delivered to the Company prior to the
date participation is to be effective, unless a later time for filing the
enrollment form is set by the Company for all Eligible Employees with respect
to a given Offering. Payroll deduction percentages must be expressed in whole
percentages of Earnings, with a minimum percentage of one percent (1%) and a
maximum percentage of [                         ]
percent ([   ]%).  Except as provided in Section 5(e), a
Participant may participate only by way of payroll deductions.

 

(b)                                  A
Participant may not increase his or her participation level during a Purchase
Period but may increase his or her
participation level for a subsequent Purchase Period.  In addition, a Participant may
decrease (including a decrease to zero percent (0%)) his or her participation
level no more than twice during a
Purchase Period (and the second decrease in participation level must be
to zero percent (0%)). Any such change in participation level shall be made by
delivering a notice to the Company or a designated Related Corporation in such
form as the Company provides prior to the ten (10) day period (or such
shorter period of time as determined by the Company and communicated to
Participants) immediately preceding the payroll date for which it is to be
effective.

 

(c)                                  A
Participant may withdraw from an Offering and receive a refund of his or her
Contributions (reduced to the extent, if any, such Contributions have been used
to acquire shares of Common Stock for the Participant on any prior Purchase
Date) without interest, at any time prior to the end of the Offering, excluding
only each ten (10) day period immediately preceding a Purchase Date (or
such shorter period of time determined by the Company and communicated to
Participants), by delivering a withdrawal notice to the Company or a designated
Related Corporation in such form as the Company provides.  A Participant who has withdrawn from an
Offering shall not again participate in such Offering, but may participate in
subsequent Offerings under the Plan in accordance with the terms of the Plan and
the terms of such subsequent Offerings.

 

(d)                                  Notwithstanding
the foregoing or any other provision of this Offering document or of the Plan
to the contrary, neither the enrollment of any Eligible Employee in the Plan
nor any forms relating to participation in the Plan shall be given effect until
such time as a registration statement covering the registration of the shares
under the Plan that are subject to the Offering has been filed by the Company
and has become effective.

 

(e)                                  If
the provisions of Section 23(d) are applicable, the Company shall
establish such procedures as will enable the purposes of the Plan to be
satisfied while complying with applicable securities laws.  Such procedures may include, for example,
allowing Participants to participate other than by means of payroll deduction
and/or allowing Participants to increase their level of participation during a
Purchase Period.  Except as otherwise
provided by the Company pursuant to the preceding sentence, for the initial
Purchase Period ending [January 31, 2006], no payroll deductions shall be
required from the Eligible Employee until such time as the Eligible Employee
affirmatively elects to commence such payroll deductions following the

 

16

 

Eligible
Employee’s receipt of the Securities Act prospectus for the Plan.  To the extent that the Eligible Employee’s
payroll deductions for such initial Purchase Period are less than
[                         ]
percent ([   ]%) of Earnings paid to the Eligible Employee
during such initial Purchase Period, the Eligible Employee may make an
additional cash payment at any time on or prior to [                           ]
in order to fund the purchase of shares of Common Stock purchased on behalf of
the Eligible Employee on such initial Purchase Date.

 

24.                               PURCHASES.

 

Subject to the
limitations contained herein, on each Purchase Date, each Participant’s
Contributions (without any increase for interest) shall be applied to the
purchase of whole shares, up to the maximum number of shares permitted under
the Plan and the Offering.

 

25.                               NOTICES
AND AGREEMENTS.

 

Any notices or agreements
provided for in an Offering or the Plan shall be given in writing, in a form
provided by the Company, and unless specifically provided for in the Plan or
this Offering, shall be deemed effectively given upon receipt or, in the case
of notices and agreements delivered by the Company, five (5) days
after deposit in the United States mail, postage prepaid.

 

I.                                         EXERCISE
CONTINGENT ON STOCKHOLDER APPROVAL.

 

(a)                                  The
Purchase Rights granted under an Offering are subject to the approval of the
Plan by the stockholders of the Company as required for the Plan to obtain
treatment as an Employee Stock Purchase Plan.

 

26.                               OFFERING
SUBJECT TO PLAN.

 

(a)                                  Each
Offering is subject to all the provisions of the Plan, and the provisions of
the Plan are hereby made a part of the Offering.  The Offering is further subject to all
interpretations, amendments, rules and regulations which may from time to
time be promulgated and adopted pursuant to the Plan.  In the event of any conflict between the
provisions of an Offering and those of the Plan (including interpretations,
amendments, rules and regulations which may from time to time be
promulgated and adopted pursuant to the Plan), the provisions of the Plan shall
control.

 

*  *  *  *

 

17

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