TRIANGLE PHARMACEUTICALS INC, S-8, 1998-06-05

TRIANGLE PHARMACEUTICALS INC
S-8, 1998-06-05
PHARMACEUTICAL PREPARATIONS

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<PAGE>

As filed with the Securities and Exchange Commission on June 5, 1998
Registration No. 333-________

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

--------------------

FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

--------------------

TRIANGLE PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)

Delaware 56-1930728
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)

4 UNIVERSITY PLACE
4611 UNIVERSITY DRIVE
DURHAM, NC 27707
(919) 493-5980
(Address of principal executive offices) (Zip Code)

--------------------
TRIANGLE PHARMACEUTICALS, INC.
1996 STOCK INCENTIVE PLAN
(Full title of the Plans)

--------------------

DR. DAVID W. BARRY
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
TRIANGLE PHARMACEUTICALS, INC.
4 UNIVERSITY PLACE
4611 UNIVERSITY DRIVE
DURHAM, NC 27707
(919) 493-5980

(Name, address including zip code, and telephone number, including
area code, of agent for service)

CALCULATION OF REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share(2) Price(2) Fee
---------- ---------- --------- ----- ---
<S> <C> <C> <C> <C>
Common Stock 1,000,000 shares $16.0625 $16,062,500.00 $4,738.44
$0.001 par value
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------

</TABLE>

(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Triangle Pharmaceuticals, Inc.
1996 Stock Incentive Plan by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without Registrant's
receipt of consideration which results in an increase in the number of the
outstanding shares of Registrant's Common Stock.

(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the average of the high
and low selling prices per share of the Registrant's Common Stock on
June 1, 1998, as reported by the Nasdaq National Market.

<PAGE>

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. INCORPORATION OF DOCUMENTS BY REFERENCE

Triangle Pharmaceuticals, Inc. (the "Registrant") hereby incorporates
by reference into this Registration Statement the following documents previously
filed with the Securities and Exchange Commission (the "SEC"):

(a) The Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, filed with the SEC on March 10, 1998;

(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1998, filed with the SEC on May 8,
1998;

(d) The Registrant's Registration Statement No. 000-21589 on Form
8-A filed with the SEC on October 18, 1996 pursuant to Section
12 of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), in which there is described the terms, rights and
provisions applicable to the Registrant's outstanding Common
Stock.

All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of
this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any subsequently filed
document which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.

Item 4. DESCRIPTION OF SECURITIES

Not Applicable.

Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL

Not Applicable.

Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law permits
indemnification of officers and directors of the Company under certain
conditions and subject to certain limitations. Section 145 of the Delaware
General Corporation Law also provides that a corporation has the power to
purchase and maintain insurance on behalf of its officers and directors against
any liability asserted against such person and incurred by him or her in such
capacity, or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify him or her against such liability
under the provisions of Section 145 of the Delaware General Corporation Law.

Article VII, Section (i) of the Restated Bylaws of the Company
provides that the Company shall indemnify its directors and executive officers
to the fullest extent not prohibited by the Delaware General Corporation Law.
The rights to indemnity thereunder continue as to a person who has ceased to be
a director, officer, employee or agent and inure to the benefit of the heirs,
executors and administrators of the person. In addition, expenses incurred by a
director or officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding by reason of the fact that he or she is
or was a director or officer of the Company (or was serving at the Company's

<PAGE>

request as a director or officer of another corporation), shall be paid by the
Company in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the Company as authorized by the relevant section
of the Delaware General Corporation Law.

As permitted by Section 102(b) (7) of the Delaware General Corporation
Law, Article 5, Section (a) of the Company's Second Restated Certificate of
Incorporation provides that a director of the Company shall not be personally
liable for monetary damages for breach of fiduciary duty as a director, except
for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
acts or omissions that involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law or (iv) for
any transaction from which the director derived any improper personal benefit.

The Company has entered into indemnification agreements with each of
its officers and directors. Generally, the indemnification agreements attempt
to provide the maximum protection permitted by Delaware law as it may be amended
from time to time. Under such additional indemnification provisions, however,
an individual will not receive indemnification for judgments, settlements or
expenses if he or she is found liable to the Company (except to the extent the
court determines he or she is fairly and reasonably entitled to indemnity for
expenses), for settlements not approved by the Company or for settlement and
expenses if the settlement is not approved by the court. The indemnification
agreements provide for the Company to advance to the individual any and all
reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding. In order to
receive an advance of expenses, the individual must submit to the Company copies
of invoices presented to him or her for such expenses. Also, the individual
must repay such advances upon a final judicial decision that he or she is not
entitled to indemnification.

The Company has also purchased directors' and officers' liability
insurance.

Item 7. EXEMPTION FROM REGISTRATION CLAIMED

Not Applicable.

Item 8. EXHIBITS

NUMBER EXHIBIT

4 Instruments Defining Rights of Stockholders. Reference is made
to Registrant's Registration Statement No. 000-21589 on Form 8-
A, including the exhibits thereto, which is incorporated herein
by reference pursuant to Item 3(d).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Price Waterhouse LLP, Independent Accountants.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 1996 Stock Incentive Plan.
99.2 Form of Notice of Grant of Stock Option.
99.3 Form of Stock Option Agreement.
99.4 Form of Addendum to Stock Option Agreement (Involuntary
Termination Following Corporate Transaction).
99.5 Form of Addendum to Stock Option Agreement (Involuntary
Termination Following Change in Control).
99.6 Form of Stock Issuance Agreement.
99.7 Form of Notice of Grant of Stock Option Under Automatic Option
Grant Program.
99.8 Form of Automatic Stock Option Agreement.
99.9 Form of Salary Investment Option Grant Election.
99.10 Form of Notice of Grant of Stock Option Under Salary Investment
Option Grant Program.
99.11 Form of Salary Investment Stock Option Agreement.

II-2
<PAGE>

Item 9. UNDERTAKINGS

A. The undersigned Registrant hereby undertakes: (1) to
file, during any period in which offers or sales are being made, a post-
effective amendment to this Registration Statement (i) to include any prospectus
required by Section 10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus
any facts or events arising after the effective date of this Registration
Statement (or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement and (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in this Registration Statement or any material change to such
information in this Registration Statement; PROVIDED, however, that
clauses (1)(i) and (1)(ii) shall not apply if the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d)
of the 1934 Act that are incorporated by reference into this Registration
Statement; (2) that for the purpose of determining any liability under the 1933
Act each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and (3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the Registrant's 1996 Stock Incentive Plan.

B. The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the 1933 Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
1934 Act that is incorporated by reference into this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

C. Insofar as indemnification for liabilities arising under
the 1933 Act may be permitted to directors, officers, or controlling persons of
the Registrant pursuant to the indemnification foregoing provisions summarized
in Item 6 or otherwise, the Registrant has been advised that, in the opinion of
the SEC, such indemnification is against public policy as expressed in the 1933
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.

II-3

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8, and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Durham, State of North Carolina on
this 5th day of June 1998.

TRIANGLE PHARMACEUTICALS, INC.

By: /s/ David W. Barry
-----------------------------------
Dr. David W. Barry
Chairman and Chief Executive Officer and
Director

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

That the undersigned officers and directors of Triangle
Pharmaceuticals, Inc., a Delaware corporation, do hereby constitute and appoint
David W. Barry and James A Klein, Jr. and each one of them, the lawful
attorneys-in-fact and agents with full power and authority to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, and any one of them, determine may be necessary or advisable or required
to enable said corporation to comply with the Securities Act of 1933, as
amended, and any rules or regulations or requirements of the Securities and
Exchange Commission in connection with this Registration Statement. Without
limiting the generality of the foregoing power and authority, the powers granted
include the power and authority to sign the names of the undersigned officers
and directors in the capacities indicated below to this Registration Statement,
to any and all amendments, both pre-effective and post-effective, and
supplements to this Registration Statement, and to any and all instruments or
documents filed as part of or in conjunction with this Registration Statement or
amendments or supplements thereof, and each of the undersigned hereby ratifies
and confirms all that said attorneys and agents, or any one of them, shall do or
cause to be done by virtue hereof. This Power of Attorney may be signed in
several counterparts.

IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.

Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

SIGNATURE TITLE DATE

/s/ David W. Barry Chairman and Chief Executive
- ---------------------- Officer (Principal Executive June 5, 1998
Dr. David W. Barry Officer)

/s/ James A. Klein, Jr. Chief Financial Officer and
- ----------------------- Treasurer (Principal Financial June 5, 1998
James A. Klein, Jr. and Accounting Officer)

II-4

<PAGE>

SIGNATURE TITLE DATE

/s/ M. Nixon Ellis Director, President and
- ----------------------- Chief Operating Officer June 5, 1998
M. Nixon Ellis

- ----------------------- Director
Anthony B. Evnin

/s/ Standish M. Fleming
- ----------------------- Director June 5, 1998
Standish M. Fleming

/s/ Dennis B. Gillings
- ----------------------- Director June 5, 1998
Dennis B. Gillings

/s/ George McFadden
- ----------------------- Director June 5, 1998
George McFadden

- ----------------------- Director
Peter McPartland

/s/ Henry G. Grabowski
- ----------------------- Director June 5, 1998
Henry G. Grabowski

II-5

<PAGE>

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

EXHIBITS

FORM S-8

UNDER

SECURITIES ACT OF 1933

TRIANGLE , INC.

II-6

<PAGE>

EXHIBIT INDEX

NUMBER EXHIBIT

<PAGE>

EXHIBIT 5

Opinion and consent of Brobeck, Phleger & Harrison LLP

June 5, 1998

Triangle Pharmaceuticals, Inc.
4 University Place
4611 University Drive
Durham, NC 27707

Re: Registration Statement for Offering of
an 1,000,000 Shares of Common Stock

Ladies and Gentlemen:

We refer to your registration on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of an additional
1,000,000 shares of the Common Stock of Triangle Pharmaceuticals, Inc. (the
"Company") under the Company's 1996 Stock Incentive Plan. We advise you that,
in our opinion, when such shares have been issued and sold pursuant to the
applicable provisions of the 1996 Stock Incentive Plan and in accordance with
the Registration Statement, such shares will be duly authorized, validly issued,
fully paid and non-assessable shares of the Company's Common Stock.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.

Very truly yours,

/s/ Brobeck, Phleger & Harrison LLP

BROBECK, PHLEGER & HARRISON LLP

<PAGE>

EXHIBIT 23.1

Consent of Price Waterhouse LLP, Independent Accountants

We consent to the incorporation by reference in this Registration Statement
of Triangle Pharmaceuticals, Inc. on Form S-8 of our report dated March 3,
1998, which appears on page 48 of the Annual Report on Form 10-K of Triangle
Pharmaceuticals, Inc. for the year ended December 31, 1997.

/s/ Price Waterhouse LLP
- ------------------------------
PRICE WATERHOUSE LLP
Raleigh, North Carolina
June 5, 1998

<PAGE>

TRIANGLE PHARMACEUTICALS, INC.

1996 STOCK INCENTIVE PLAN
(AS AMENDED AND RESTATED THROUGH MARCH 27, 1998)

ARTICLE ONE

GENERAL PROVISIONS

I. PURPOSE OF THE PLAN

This 1996 Stock Incentive Plan is intended to promote the interests of
Triangle Pharmaceuticals, Inc., a Delaware corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for them
to remain in the service of the Corporation.

Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.

II. STRUCTURE OF THE PLAN

A. The Plan shall be divided into four separate equity programs:

- the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock,

- the Salary Investment Option Grant Program under which
eligible employees may elect to have a portion of their base salary invested
each year in special option grants,

- the Stock Issuance Program under which eligible persons may,
at the discretion of the Plan Administrator, be issued shares of Common Stock
directly, either through the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or Subsidiary), and

- the Automatic Option Grant Program under which eligible
non-employee Board members shall automatically receive option grants at periodic
intervals to purchase shares of Common Stock.

B. The provisions of Articles One and Six shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.

<PAGE>

III. ADMINISTRATION OF THE PLAN

A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders and shall have sole and exclusive authority to
administer the Salary Investment Option Grant Program with respect to all
eligible individuals.

B. Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to participate in
those programs may, at the Board's discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons. The members of the
Secondary Committee may be Board members who are Employees eligible to receive
discretionary option grants or direct stock issuances under the Plan or any
other stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary).

C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions
of any Secondary Committee and reassume all powers and authority previously
delegated to such committee.

D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant,
Salary Investment Option Grant and Stock Issuance Programs and to make such
determinations under, and issue such interpretations of, the provisions of such
programs and any outstanding options or stock issuances thereunder as it may
deem necessary or advisable. Decisions of the Plan Administrator within the
scope of its administrative functions under the Plan shall be final and binding
on all parties who have an interest in the Discretionary Option Grant, Salary
Investment Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.

E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.

F. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to any
option grants or stock issuances made under this program.

<PAGE>

IV. ELIGIBILITY

A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:

(i) Employees,

(ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and

(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).

B. Only Employees who are Section 16 Insiders and other highly
compensated Employees shall be eligible to participate in the Salary Investment
Option Grant Program.

C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
for such shares.

D. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.

E. The individuals eligible to participate in the Automatic Option
Grant Program shall be determined in accordance with the provisions of Article
Five.

V. STOCK SUBJECT TO THE PLAN

A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
reserved for issuance over the term of the Plan shall not exceed 3,200,000
shares. Such authorized share reserve is comprised of (i) the number of shares
which remained available for issuance, as of the Plan Effective Date, under the
Predecessor Plan as last approved by the Corporation's stockholders, including
the

3.
<PAGE>

shares subject to the outstanding options incorporated into the Plan and the
additional shares which were otherwise available for future grant, plus (ii) an
additional increase of 500,000 shares authorized by the Board and subsequently
approved by the stockholders prior to the Section 12 Registration Date, plus
(iii) an additional increase of 1,000,000 shares authorized by the Board on
December 4, 1997, subject to stockholder approval at the 1998 Annual Meeting.
In addition, the maximum number of shares of Common Stock reserved for issuance
under the Plan shall automatically increase on January 1st of each of the
calendar years 1999, 2000 and 2001 by an amount equal to four percent (4%) of
the total number of shares of Common Stock issued and outstanding on December
31st of the immediately preceding calendar year; provided, however, that in no
event shall any such annual increase exceed the difference between (x) 1,000,000
shares and (y) the number of shares of Common Stock available for future option
grants under the Plan on such December 31 (net of all outstanding options and
unvested stock issuances). This automatic annual increase feature was
authorized by the Board on December 4, 1997, subject to stockholder approval at
the 1998 Annual Meeting.

B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 500,000 shares of Common Stock in the aggregate per calendar year,
beginning with the 1996 calendar year.

C. Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plan) shall be
available for subsequent issuance under the Plan to the extent (i) those options
expire or terminate for any reason prior to exercise in full or (ii) those
options are cancelled in accordance with the cancellation/regrant provisions of
Article Two. Unvested shares issued under the Plan and subsequently cancelled
or repurchased by the Corporation, at the original issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan. However,
should the exercise price of an option under the Plan be paid with shares of
Common Stock or should shares of Common Stock otherwise issuable under the Plan
be withheld by the Corporation in satisfaction of the withholding taxes incurred
in connection with the exercise of an option or the vesting of a stock issuance
under the Plan, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised or which vest under the stock issuance, and not by the net
number of shares of Common Stock issued to the holder of such option or stock
issuance.

D. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the maximum number and/or class of securities for which the share
reserve under the Plan is to be increased each year pursuant to the automatic
annual increase provisions of Section V.A of this Article One, (iii) the number
and/or class of securities

4.
<PAGE>

for which any one person may be granted stock options, separately exercisable
stock appreciation rights and direct stock issuances under this Plan per
calendar year, (iv) the number and/or class of securities for which grants are
subsequently to be made under the Automatic Option Grant Program to new and
continuing non-employee Board members, (v) the number and/or class of securities
and the exercise price per share in effect under each outstanding option under
the Plan and (vi) the number and/or class of securities and price per share in
effect under each outstanding option incorporated into this Plan from the
Predecessor Plan. Such adjustments to the outstanding options are to be
effected in a manner which shall preclude the enlargement or dilution of rights
and benefits under such options. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.

5.
<PAGE>

ARTICLE TWO

DISCRETIONARY OPTION GRANT PROGRAM

I. OPTION TERMS

Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; PROVIDED, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.

A. EXERCISE PRICE.

1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the option grant date.

2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Six and the documents evidencing the option, be payable in one or more
of the forms specified below:

(i) cash or check made payable to the Corporation,

(ii) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or

(iii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable written
instructions to (a) a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price payable
for the purchased shares plus all applicable Federal, state and local
income and employment taxes required to be withheld by the Corporation
by reason of such exercise and (b) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale.

Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

6.
<PAGE>

B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option. However, no option shall have a term in excess of ten
(10) years measured from the option grant date.

C. EFFECT OF TERMINATION OF SERVICE.

1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:

(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain
exercisable for such period of time thereafter as shall be determined
by the Plan Administrator and set forth in the documents evidencing
the option, but no such option shall be exercisable after the
expiration of the option term.

(ii) Any outstanding option held by the Optionee at the
time of death and exercisable in whole or in part at that time may be
subsequently exercised by the personal representative of the
Optionee's estate or by the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution.

(iii) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.

(iv) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of
the applicable exercise period or (if earlier) upon the expiration of
the option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee's
cessation of Service, terminate and cease to be outstanding to the
extent the option is not otherwise at that time exercisable for vested
shares.

2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:

(i) extend the period of time for which the option is
to remain exercisable following the Optionee's cessation of Service
from the limited exercise period otherwise in effect for that option
to such greater period of time

7.
<PAGE>

as the Plan Administrator shall deem appropriate, but in no event beyond
the expiration of the option term, and/or

(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but
also with respect to one or more additional installments in which the
Optionee would have vested had the Optionee continued in Service.

D. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.

E. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares,
the Corporation shall have the right to repurchase, at the exercise price paid
per share, any or all of those unvested shares. The terms upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall be
established by the Plan Administrator and set forth in the document evidencing
such repurchase right.

F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory
Option may be assigned in whole or in part during the Optionee's lifetime. The
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem appropriate.

II. INCENTIVE OPTIONS

The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Six shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall NOT be subject to the terms of this Section II.

A. ELIGIBILITY. Incentive Options may only be granted to Employees.

8.
<PAGE>

B. EXERCISE PRICE. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.

C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent
the Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.

D. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable with respect to the total number of shares of Common Stock at
the time subject to such option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. However, an outstanding option
shall not so accelerate if and to the extent: (i) such option is, in connection
with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent
thereof), (ii) such option is to be replaced with a cash incentive program of
the successor corporation which preserves the spread existing on the unvested
option shares at the time of the Corporate Transaction and provides for
subsequent payout in accordance with the same vesting schedule applicable to
those option shares or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.
The determination of option comparability under clause (i) above shall be made
by the Plan Administrator, and its determination shall be final, binding and
conclusive.

B. All outstanding repurchase rights shall terminate automatically,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except to
the extent: (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.

9.
<PAGE>

C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
PROVIDED the aggregate exercise price payable for such securities shall remain
the same, (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan and (iii) the maximum number and/or
class of securities for which any one person may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances
under the Plan per calendar year.

E. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those options are assumed or replaced and do not
otherwise accelerate. Any options so accelerated shall remain exercisable for
fully-vested shares until the EARLIER of (i) the expiration of the option term
or (ii) the expiration of the one (1)-year period measured from the effective
date of the Involuntary Termination. In addition, the Plan Administrator may
provide that one or more of the Corporation's outstanding repurchase rights with
respect to shares held by the Optionee at the time of such Involuntary
Termination shall immediately terminate, and the shares subject to those
terminated repurchase rights shall accordingly vest in full.

F. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any Change
in Control. Each option so accelerated shall remain exercisable for
fully-vested shares until the EARLIER of (i) the expiration of the option term
or (ii) the expiration of the one (1)-year period measured from the effective
date of the Involuntary Termination. In addition, the Plan Administrator may
provide that one or more of the Corporation's outstanding repurchase rights with
respect to shares held by the Optionee at the time of such Involuntary
Termination shall immediately terminate, and the shares subject to those
terminated repurchase rights shall accordingly vest in full.

10.
<PAGE>

G. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.

H. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.

IV. CANCELLATION AND REGRANT OF OPTIONS

The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new grant date.

V. STOCK APPRECIATION RIGHTS

A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.

B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:

(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish,
to elect between the exercise of the underlying option for shares of
Common Stock and the surrender of that option in exchange for a
distribution from the Corporation in an amount equal to the excess of
(a) the Fair Market Value (on the option surrender date) of the number
of shares in which the Optionee is at the time vested under the
surrendered option (or surrendered portion thereof) over (b) the
aggregate exercise price payable for such shares.

(ii) No such option surrender shall be effective unless
it is approved by the Plan Administrator, either at the time of the
actual option surrender or at any earlier time. If the surrender is
so approved, then the distribution to which the Optionee shall be
entitled may be made in shares of Common Stock valued at Fair Market
Value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion
deem appropriate.

11.
<PAGE>

(iii) If the surrender of an option is not approved by
the Plan Administrator, then the Optionee shall retain whatever rights
the Optionee had under the surrendered option (or surrendered portion
thereof) on the option surrender date and may exercise such rights at
any time prior to the LATER of (a) five (5) business days after the
receipt of the rejection notice or (b) the last day on which the
option is otherwise exercisable in accordance with the terms of the
documents evidencing such option, but in no event may such rights be
exercised more than ten (10) years after the option grant date.

C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:

(i) One or more Section 16 Insiders may be granted
limited stock appreciation rights with respect to their outstanding
options.

(ii) Upon the occurrence of a Hostile Take-Over, each
individual holding one or more options with such a limited stock
appreciation right shall have the unconditional right (exercisable for
a thirty (30)-day period following such Hostile Take-Over) to
surrender each such option to the Corporation, to the extent the
option is at the time exercisable for vested shares of Common Stock.
In return for the surrendered option, the Optionee shall receive a
cash distribution from the Corporation in an amount equal to the
excess of (A) the Take-Over Price of the shares of Common Stock which
are at the time vested under each surrendered option (or surrendered
portion thereof) over (B) the aggregate exercise price payable for
such shares. Such cash distribution shall be paid within five (5)
days following the option surrender date.

(iii) The Plan Administrator shall pre-approve, at the
time the limited stock appreciation right is granted, the subsequent
exercise of that right in accordance with the terms of the grant and
the provisions of this Section V.C. No additional approval of the
Plan Administrator or the Board shall be required at the time of the
actual option surrender and cash distribution.

(iv) The balance of the option (if any) shall remaining
outstanding and exercisable in accordance with the documents
evidencing such option.

12.
<PAGE>

ARTICLE THREE

SALARY INVESTMENT OPTION GRANT PROGRAM

I. OPTION GRANTS

The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years (if any) for which the Salary Investment
Option Grant Program is to be in effect and to select the Section 16 Insiders
and other highly compensated Employees eligible to participate in the Salary
Investment Option Grant Program for such calendar year or years. Each selected
individual who elects to participate in the Salary Investment Option Grant
Program must, prior to the start of each calendar year of participation, file
with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by an amount not less than Ten Thousand Dollars ($10,000.00) nor more than
Fifty Thousand Dollars ($50,000.00). The Primary Committee shall have complete
discretion to determine whether to approve the filed authorization in whole or
in part. To the extent the Primary Committee approves the authorization, the
individual who filed that authorization shall be granted an option under the
Salary Investment Grant Program as soon as possible after the start of the
calendar year for which the salary reduction is to be in effect. All grants
under the Salary Investment Option Grant Program shall be at the sole discretion
of the Primary Committee.

II. OPTION TERMS

Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Plan Administrator; PROVIDED, however,
that each such document shall comply with the terms specified below.

A. EXERCISE PRICE.

1. The exercise price per share shall be equal to the excess of
(i) the Fair Market Value per share of Common Stock on the option grant date
over (ii) the amount of the approved Salary Reduction divided by the number of
shares subject to the Option.

2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

13.
<PAGE>

B. NUMBER OF OPTION SHARES. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):

X = A DIVIDED BY (B x C), where

X is the number of option shares,

A is the dollar amount of the approved reduction in the
Optionee's base salary for the calendar year,

B is the Fair Market Value per share of Common Stock on the
option grant date, and

C is a percentage not less than 33 1/3% nor more than 66 2/3%
fixed by the Plan Administrator, in its sole discretion, for
purposes of the option grants to be made under the Salary
Investment Option Grant Program for a particular calendar year
for which that program is to be in effect.

C. EXERCISE AND TERM OF OPTIONS. The option shall become
exercisable in a series of twelve (12) successive equal monthly installments
upon the Optionee's completion of each calendar month of Service in the calendar
year for which the salary reduction is in effect. Each option shall have a
maximum term of ten (10) years measured from the option grant date.

D. EFFECT OF TERMINATION OF SERVICE. Should the Optionee cease
Service for any reason while holding one or more options under this Article
Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the EARLIER of (i) the expiration of the ten (10)-year option
term or (ii) the expiration of the three (3)-year period measured from the date
of such cessation of Service. Should the Optionee die while holding one or more
options under this Article Three, then each such option may be exercised, for
any or all of the shares for which the option is exercisable at the time of the
Optionee's cessation of Service (less any shares subsequently purchased by
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant to
the Optionee's will or in accordance with the laws of descent and distribution.
Such right of exercise shall lapse, and the option shall terminate, upon the
EARLIER of (i) the expiration of the ten (10)-year option term or (ii) the three
(3)-year period measured from the date of the Optionee's cessation of Service.
However, the option shall, immediately upon the Optionee's cessation of Service
for any reason, terminate and cease to remain outstanding with respect to any
and all shares of Common Stock for which the option is not otherwise at that
time exercisable.

14.
<PAGE>

III. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. In the event of any Corporate Transaction while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable with respect to the total number of shares
of Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock. Each such
outstanding option shall be assumed by the successor corporation (or parent
thereof) in the Corporate Transaction and shall remain exercisable for the
fully-vested shares until the EARLIER of (i) the expiration of the ten (10)-year
option term or (ii) the expiration of the three (3)-year period measured from
the date of the Optionee's cessation of Service.

B. In the event of a Change in Control while the Optionee remains
in Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each
such option shall immediately become fully exercisable with respect to the
total number of shares of Common Stock at the time subject to such option and
may be exercised for any or all of those shares as fully-vested shares of
Common Stock. Any option not exercised prior to the Change in Control may be
repurchased by the Corporation at the time of the Change in Control at a
repurchase price equal to the amount by which the Optionee's salary was
reduced in connection with the grant of that option. Any option which is
neither exercised nor repurchased shall remain exercisable for fully-vested
shares until the EARLIER or (i) the expiration of the ten (10)-year option
term or (ii) the expiration of the three (3)-year period measured from the
date of the Optionee's cessation of Service.

C. The grant of options under the Salary Investment Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.

III. REMAINING TERMS

The remaining terms of each option granted under the Salary Investment
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.

15.
<PAGE>

ARTICLE FOUR

STOCK ISSUANCE PROGRAM

I. STOCK ISSUANCE TERMS

Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.

A. PURCHASE PRICE.

1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the issuance date.

2. Subject to the provisions of Section I of Article Six,
shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:

(i) cash or check made payable to the Corporation, or

(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).

B. VESTING PROVISIONS.

1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:

(i) the Service period to be completed by the
Participant or the performance objectives to be attained,

(ii) the number of installments in which the shares are
to vest,

(iii) the interval or intervals (if any) which are to
lapse between installments, and

16.
<PAGE>

(iv) the effect which death, Permanent Disability or
other event designated by the Plan Administrator is to have upon the
vesting schedule,

shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.

2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.

4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.

5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock which
would otherwise occur upon the cessation of the Participant's Service or the
non-attainment of the performance objectives applicable to those shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.

17.
<PAGE>

II. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. All of the Corporation's outstanding repurchase/cancellation
rights under the Stock Issuance Program shall terminate automatically, and all
the shares of Common Stock subject to those terminated rights shall immediately
vest in full, in the event of any Corporate Transaction, except to the extent
(i) those repurchase/cancellation rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed in the
Stock Issuance Agreement.

B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's Service
should subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those repurchase/cancellation rights
are assigned to the successor corporation (or parent thereof).

C. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's Service
should subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Change in Control.

III. SHARE ESCROW/LEGENDS

Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.

18.
<PAGE>

ARTICLE FIVE

AUTOMATIC OPTION GRANT PROGRAM

I. OPTION TERMS

A. GRANT DATES. Effective with the 1998 Annual Meeting, (i) on the
date that each non-employee Board member is first elected or appointed as a
non-employee Board member, option grants shall be made to such non-employee
Board member and (ii) on the date that each non-employee Board member is
re-elected as a non-employee Board member, option grants shall be made to such
non-employee Board member. Each automatic option grant shall be a Non-Statutory
Option. For each individual who is first elected or appointed as a non-employee
Board member, the number of shares of Common Stock subject to the option shall
be equal to 2,000 shares plus an additional 2,000 shares for any partial year
and for each full year of the term for which the non-employee Board member is
elected or appointed. Each non-employee Board member who is re-elected to serve
as a non-employee Board member at any time after his or her initial term will
receive an additional automatic grant of 2,000 shares for any partial year and
for each full year of the term for which the non-employee Board member is
re-elected to the Board. There shall be no limit on the number of such
automatic option grants any one Eligible Director may receive over his or her
period of Board service, and non-employee Board members who have previously been
in the employ of the Corporation (or any Parent or Subsidiary) or who have
otherwise received a stock option grant from the Corporation prior to the
Effective Date shall be eligible to receive one or more such annual option
grants over their period of continued Board service.

B. EXERCISE PRICE.

1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.

2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.

C. OPTION TERM. Each option shall have a term of ten (10) years
measured from the option grant date.

D. EXERCISE AND VESTING OF OPTIONS. Each option shall be
exercisable only with respect to option shares with respect to which the
automatic option grant has become vested. Provided the optionee continues to
serve as a Board member, the automatic option grant shall vest with respect to
2,000 shares on the day the non-employee Board member is first elected or
appointed to the Board and with respect to an additional 2,000 shares on the day
immediately

19.
<PAGE>

preceding the date of each subsequent Annual Meeting following the date of the
automatic option grant until the automatic option grant has become fully vested
and exercisable for all the option shares. No portion of the automatic option
grant shall vest after the optionee has ceased to be a member of the Board.

E. TERMINATION OF BOARD SERVICE. The following provisions shall
govern the exercise of any options held by the Optionee at the time the Optionee
ceases to serve as a Board member:

(i) The Optionee (or, in the event of Optionee's
death, the personal representative of the Optionee's estate or the
person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and
distribution) shall have a twelve (12)-month period following the date
of such cessation of Board service in which to exercise each such
option.

(ii) During the twelve (12)-month exercise period, the
option may not be exercised in the aggregate for more than the number
of vested shares of Common Stock for which the option is exercisable
at the time of the Optionee's cessation of Board service.

(iii) Should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all shares at
the time subject to the option shall immediately vest so that such
option may, during the twelve (12)-month exercise period following
such cessation of Board service, be exercised for all or any portion
of those shares as fully-vested shares of Common Stock.

(iv) In no event shall the option remain exercisable
after the expiration of the option term. Upon the expiration of the
twelve (12)-month exercise period or (if earlier) upon the expiration
of the option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee's
cessation of Board service for any reason other than death or
Permanent Disability, terminate and cease to be outstanding to the
extent the option is not otherwise at that time exercisable for vested
shares.

II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

A. In the event of any Corporate Transaction, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Corporate

20.
<PAGE>

Transaction, become fully exercisable for all of the shares of Common Stock at
the time subject to such option and may be exercised for all or any portion of
those shares as fully-vested shares of Common Stock. Immediately following the
consummation of the Corporate Transaction, each automatic option grant shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof).

B. In connection with any Change in Control, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Change in Control, become fully exercisable
for all of the shares of Common Stock at the time subject to such option and may
be exercised for all or any portion of those shares as fully-vested shares of
Common Stock. Each such option shall remain exercisable for such fully-vested
option shares until the expiration or sooner termination of the option term or
the surrender of the option in connection with a Hostile Take-Over.

C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each of
his or her outstanding automatic option grants. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over (ii) the aggregate exercise price payable
for such shares. Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Corporation. Stockholder approval
of this March 27, 1998 amendment of the Plan shall constitute pre-approval of
each option subsequently granted under this Article Five with such a surrender
provision and the subsequent surrender of that option in accordance with the
terms of this Section II.C. No additional approval of the Board or any Plan
Administrator shall be required at the time of the actual option surrender and
cash distribution.

E. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

21.
<PAGE>

III. REMAINING TERMS

The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.

22.
<PAGE>

ARTICLE SIX

MISCELLANEOUS

I. FINANCING

The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.

II. TAX WITHHOLDING

A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or the issuance or vesting of such shares under the
Plan shall be subject to the satisfaction of all applicable Federal, state and
local income and employment tax withholding requirements.

B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant Program) with the right to use shares of Common Stock in
satisfaction of all or part of the Taxes incurred by such holders in connection
with the exercise of their options or the vesting of their shares. Such right
may be provided to any such holder in either or both of the following formats:

STOCK WITHHOLDING: The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such Non-Statutory Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the percentage of the Taxes
(not to exceed one hundred percent (100%)) designated by the holder.

STOCK DELIVERY: The election to deliver to the Corporation, at
the time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.

23.
<PAGE>

III. EFFECTIVE DATE AND TERM OF THE PLAN

A. The Plan became effective immediately upon the Plan Effective
Date. However, the Salary Investment Option Grant Program shall not be
implemented until such time as the Primary Committee may deem appropriate.

B. The Plan shall serve as the successor to the Predecessor Plan,
and no further option grants or direct stock issuances shall be made under the
Predecessor Plan. All options outstanding under the Predecessor Plan on the
Section 12 Registration Date have been incorporated into the Plan and shall be
treated as outstanding options under the Plan. However, each outstanding option
so incorporated shall continue to be governed solely by the terms of the
documents evidencing such option, and no provision of the Plan shall be deemed
to affect or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of Common
Stock.

C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise contain such provisions.

D. On December 4, 1997, the Board adopted an amendment to the Plan
(the "1997 Amendment") to effect the following changes: (i) increase the
maximum number of shares of Common Stock available for issuance over the term of
the Plan by an additional 1,000,000 shares, and (ii) implement an automatic
share increase feature pursuant to which the number of shares of Common Stock
available for issuance under the Plan will automatically increase on January 1st
of each of the calendar years 1999, 2000 and 2001 by an amount equal to four
percent (4%) of the total number of shares of Common Stock issued and
outstanding on December 31st of the immediately preceding calendar year;
provided, however, that in no event shall any such annual increase exceed the
difference between (x) 1,000,000 shares and (y) the number of shares of Common
Stock available for future option grants under the Plan on such December 31 (net
of all outstanding options and unvested stock issuances). In addition, on March
27, 1998, the Board adopted an amendment to the Plan (the "1998 Amendment") to
effect the following change: under the Automatic Option Grant Program, effective
with the 1998 Annual Meeting (A) automatically grant to each individual who is
first appointed or elected as a non-employee Board member an option to purchase
shares of Common Stock in an amount equal to 2,000 shares of Common Stock plus
2,000 shares for any partial year and for each full year of the term for which
the non-employee Board member is first appointed or elected, and (B)
automatically grant to each individual who is re-elected to serve as a
non-employee Board member an option to purchase 2,000 shares of Common Stock for
each full year of the term for which the non-employee Board member is re-elected
to the Board. The 1997 Amendment and the 1998 Amendment are subject to
stockholder approval at the 1998 Annual Meeting, and no option grants made on
the basis of the 1,000,000-share increase shall become exercisable in whole or
in part unless and until the 1997 Amendment is approved by the stockholders.
Should such

24.
<PAGE>

stockholder approval not be obtained at the 1998 Annual Meeting, then each
option grant made pursuant to the 1,000,000-share increase shall terminate and
cease to remain outstanding, and no further option grants shall be made on the
basis of that share increase. In addition, the automatic share increase feature
pursuant to which the share reserve under the Plan will automatically increase
on January 1st of the calendar years 1999, 2000 and 2001, and the revisions to
the Automatic Option Grant Program shall not be implemented. However, the
provisions of the Plan as in effect immediately prior to the 1997 Amendment and
the 1998 Amendment shall continue in full force and effect, and option grants
may thereafter continue to be made pursuant to those provisions. All option
grants made prior to the 1997 Amendment and the 1998 Amendment shall remain
outstanding in accordance with the terms and conditions of the respective
instruments evidencing those options, and nothing in the 1997 Amendment or the
1998 Amendment shall be deemed to modify or in any way affect those outstanding
options or issuances.

E. The Plan shall terminate upon the EARLIEST of (i) August 30,
2006, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Upon such plan
termination, all outstanding option grants and unvested stock issuances shall
thereafter continue to have force and effect in accordance with the provisions
of the documents evidencing such grants or issuances.

IV. AMENDMENT OF THE PLAN

A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall adversely affect the rights and obligations with respect
to stock options or unvested stock issuances at the time outstanding under the
Plan unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
if so determined by the Board or pursuant to applicable laws or regulations.

B. Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant and Salary Investment Option Grant Programs
and shares of Common Stock may be issued under the Stock Issuance Program that
are in each instance in excess of the number of shares then available for
issuance under the Plan, provided any excess shares actually issued under those
programs shall be held in escrow until there is obtained any required approval
of an amendment sufficiently increasing the number of shares of Common Stock
available for issuance under the Plan. If such approval is not obtained within
twelve (12) months after the date the first such excess issuances are made, then
(i) any unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees and the Participants the exercise or purchase price paid
for any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically cancelled
and cease to be outstanding.

25.
<PAGE>

V. USE OF PROCEEDS

Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.

VI. REGULATORY APPROVALS

A. The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any granted option or (ii) under the Stock Issuance Program shall be
subject to the Corporation's procurement of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.

B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.

VII. NO EMPLOYMENT/SERVICE RIGHTS

Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.

26.
<PAGE>

APPENDIX

The following definitions shall be in effect under the Plan:

A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant
program in effect under the Plan.

B. BOARD shall mean the Corporation's Board of Directors.

C. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:

(i) the acquisition, directly or indirectly by any person
or related group of persons (other than the Corporation or a person
that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation), of beneficial ownership (within
the meaning of Rule 13d-3 of the 1934 Act) of securities possessing
more than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept, or

(ii) a change in the composition of the Board over a period
of thirty-six (36) consecutive months or less such that a majority of
the Board members ceases, by reason of one or more contested elections
for Board membership, to be comprised of individuals who either (A)
have been Board members continuously since the beginning of such
period or (B) have been elected or nominated for election as Board
members during such period by at least a majority of the Board members
described in clause (A) who were still in office at the time the Board
approved such election or nomination.

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

E. COMMON STOCK shall mean the Corporation's common stock.

F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:

(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or

A-1.
<PAGE>

(iii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.

G. CORPORATION shall mean Triangle Pharmaceuticals, Inc., a Delaware
corporation, and its successors.

H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option
grant program in effect under the Plan.

I. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

J. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.

K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:

(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be deemed equal to
the closing selling price per share of Common Stock on the date in
question, as such price is reported on the Nasdaq National Market. If
there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.

(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the
closing selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.

L. HOSTILE TAKE-OVER shall mean the acquisition, directly or indirectly,
by any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.

A-2.
<PAGE>

M. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.

N. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:

(i) such individual's involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct, or

(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially
reduces his or her level of responsibility, (B) a reduction in his or
her level of compensation (including base salary, fringe benefits and
participation in any corporate-performance based bonus or incentive
programs) by more than fifteen percent (15%) or (C) a relocation of
such individual's place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is effected
by the Corporation without the individual's consent.

O. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee, Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary).

P. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.

Q. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.

R. OPTIONEE shall mean any person to whom an option is granted under the
Discretionary Option Grant, Salary Investment Option Grant or the Automatic
Option Grant Program.

S. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) 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.

A-3.

<PAGE>

T. PARTICIPANT shall mean any person who is issued shares of Common Stock
under the Stock Issuance Program.

U. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability
of the Optionee or the Participant to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more. However, solely for purposes of the Automatic Option Grant Program,
Permanent Disability or Permanently Disabled shall mean the inability of the
non-employee Board member to perform his or her usual duties as a Board member
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.

V. PLAN shall mean the Corporation's 1996 Stock Incentive Plan, as set
forth in this document.

W. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.

X. PLAN EFFECTIVE DATE shall mean, August 30, 1996, the date on which the
Plan was adopted by the Board.

Y. PREDECESSOR PLAN shall mean the Corporation's pre-existing 1996 Stock
Option/Stock Issuance Plan in effect immediately prior to the Plan Effective
Date hereunder.

Z. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders and to administer the Salary Investment Option Grant Program with
respect to all eligible individuals.

AA. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary
investment option grant program in effect under the Plan.

AB. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.

AC. SECTION 12 REGISTRATION DATE shall mean the date on which the Common
Stock was first registered under Section 12 of the 1934 Act.

A-4.

<PAGE>

AD. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.

AE. SERVICE shall mean the performance of services for the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.

AF. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.

AG. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.

AH. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect
under the Plan.

AI. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, 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.

AJ. TAKE-OVER PRICE shall mean the GREATER of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.

AK. TAXES shall mean the Federal, state and local income and employment
tax liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of those options or the
vesting of those shares.

AL. 10% STOCKHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).

A-5

<PAGE>

TRIANGLE PHARMACEUTICALS, INC.
NOTICE OF GRANT OF STOCK OPTION

Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Triangle Pharmaceuticals, Inc. (the
"Corporation"):

OPTIONEE:
------------------------------------------------------------
GRANT DATE:
---------------------------------------------------------
VESTING COMMENCEMENT DATE:
------------------------------------------
EXERCISE PRICE: $ per share
-------------------------------------------
NUMBER OF OPTION SHARES: shares
---------------------------------------
EXPIRATION DATE:
-----------------------------------------------------
TYPE OF OPTION: Incentive Stock Option
------
Non-Statutory Stock Option
------
EXERCISE SCHEDULE:

Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the Triangle Pharmaceuticals, Inc. 1996
Stock Incentive Plan (the "Plan"). Optionee further agrees to be bound by the
terms of the Plan and the terms of the Option as set forth in the Stock Option
Agreement attached hereto as Exhibit A.

Optionee hereby acknowledges receipt of a copy of the official
prospectus for the Plan in the form attached hereto as Exhibit B. A copy of the
Plan is available upon request made to the Corporate Secretary at the
Corporation's principal offices.

NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Notice or in the
attached Stock Option Agreement or in the Plan shall confer upon Optionee any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining Optionee) or of

<PAGE>

Optionee, which rights are hereby expressly reserved by each, to terminate
Optionee's Service at any time for any reason, with or without cause.

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

DATED: ______________________, 199__

TRIANGLE PHARMACEUTICALS, INC.

By:
---------------------------------------
Title:
------------------------------------

-------------------------------------------
OPTIONEE

Address:
----------------------------------

ATTACHMENTS
EXHIBIT A - STOCK OPTION AGREEMENT
EXHIBIT B - PLAN SUMMARY AND PROSPECTUS

<PAGE>

EXHIBIT A

STOCK OPTION AGREEMENT

<PAGE>

EXHIBIT B

PLAN SUMMARY AND PROSPECTUS

<PAGE>

TRIANGLE PHARMACEUTICALS, INC.
STOCK OPTION AGREEMENT

RECITALS

A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or of the
board of directors of any Parent or Subsidiary and consultants and other
independent advisors who provide services to the Corporation (or any Parent or
Subsidiary).

B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.

C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.

NOW, THEREFORE, it is hereby agreed as follows:

1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.

2. OPTION TERM. This option shall have a term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.

3. LIMITED TRANSFERABILITY. If this option is designated an
Incentive Option in the Grant Notice, then this option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, if this option is designated a
Non-Statutory Option in the Grant Notice, then this option may also be assigned
in whole or in part during Optionee's lifetime. The assigned portion shall be
exercisable only by the person or persons who acquire a proprietary interest in
the option pursuant to such assignment. The terms applicable to the assigned
portion shall be the same as those in effect for this option immediately prior
to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.

4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate and the option shall remain

<PAGE>

exercisable for the accumulated installments until the Expiration Date or sooner
termination of the option term under Paragraph 5 or 6.

5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:

(i) Should Optionee cease to remain in Service for any
reason (other than death, Permanent Disability or Misconduct) while this
option is outstanding, then Optionee shall have a period of three (3)
months (commencing with the date of such cessation of Service) during which
to exercise this option, but in no event shall this option be exercisable
at any time after the Expiration Date.

(ii) Should Optionee die while this option is
outstanding, then the personal representative of Optionee's estate or the
person or persons to whom the option is transferred pursuant to Optionee's
will or in accordance with the laws of descent and distribution shall have
the right to exercise this option. Such right shall lapse, and this option
shall cease to be outstanding, upon the EARLIER of (A) the expiration of
the twelve (12)- month period measured from the date of Optionee's death or
(B) the Expiration Date.

(iii) Should Optionee cease Service by reason of
Permanent Disability while this option is outstanding, then Optionee shall
have a period of twelve (12) months (commencing with the date of such
cessation of Service) during which to exercise this option. In no event
shall this option be exercisable at any time after the Expiration Date.

(iv) During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for more
than the number of vested Option Shares for which the option is exercisable
at the time of Optionee's cessation of Service. Upon the expiration of
such limited exercise period or (if earlier) upon the Expiration Date, this
option shall terminate and cease to be outstanding for any vested Option
Shares for which the option has not been exercised. However, this option
shall, immediately upon Optionee's cessation of Service for any reason,
terminate and cease to be outstanding with respect to any Option Shares in
which Optionee is not otherwise at that time vested or for which this
option is not otherwise at that time exercisable.

(v) Should Optionee's Service be terminated for
Misconduct, then this option shall terminate immediately and cease to
remain outstanding.

<PAGE>

6. SPECIAL ACCELERATION OF OPTION.

(a) This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective date of
the Corporate Transaction, become exercisable for all of the Option Shares at
the time subject to this option and may be exercised for any or all of those
Option Shares as fully-vested shares of Common Stock. No such acceleration of
this option, however, shall occur if and to the extent: (i) this option is, in
connection with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent
thereof) or (ii) this option is to be replaced with a cash incentive program of
the successor corporation which preserves the spread existing on the unvested
Option Shares at the time of the Corporate Transaction (the excess of the Fair
Market Value of those Option Shares over the aggregate Exercise Price payable
for such shares) and provides for subsequent pay-out in accordance with the
option exercise/vesting schedule set forth in the Grant Notice. The
determination of option comparability under clause (i) shall be made by the Plan
Administrator, and such determination shall be final, binding and conclusive.

(b) Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by
the successor corporation (or parent thereof) in connection with the Corporate
Transaction.

(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, PROVIDED the aggregate Exercise Price shall remain the same.

(d) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.

7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.

8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.

<PAGE>

9. MANNER OF EXERCISING OPTION.

(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:

(i) Execute and deliver to the Corporation a
Notice of Exercise for the Option Shares for which the option is exercised.

(ii) Pay the aggregate Exercise Price for the
purchased shares in one or more of the following forms:

(A) cash or check made payable to the
Corporation;

(B) a promissory note payable to the Corporation,
but only to the extent authorized by the Plan Administrator in
accordance with Paragraph 13;

(C) shares of Common Stock held by Optionee (or
any other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date; or

(D) to the extent the option is exercised for
vested Option Shares, through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable written
instructions (I) to a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate Exercise Price payable
for the purchased shares plus all applicable Federal, state and local
income and employment taxes required to be withheld by the Corporation
by reason of such exercise and (II) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale transaction.

Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise delivered to the
Corporation in connection with the option exercise.

<PAGE>

(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if other
than Optionee) have the right to exercise this option.

(iv) Make appropriate arrangements with the
Corporation (or Parent or Subsidiary employing or retaining Optionee) for
the satisfaction of all Federal, state and local income and employment tax
withholding requirements applicable to the option exercise.

(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.

10. COMPLIANCE WITH LAWS AND REGULATIONS.

(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.

(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.

11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.

12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to
be given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on the Grant Notice.
All notices shall be deemed effective upon personal delivery or upon deposit in
the U.S. mail, postage prepaid and properly addressed to the party to be
notified.

<PAGE>

13. FINANCING. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse
promissory note payable to the Corporation. The terms of any such promissory
note (including the interest rate, the requirements for collateral and the terms
of repayment) shall be established by the Plan Administrator in its sole
discretion.

14. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.

15. GOVERNING LAW. The interpretation, performance and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.

16. EXCESS SHARES. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval be issued under the Plan, then this option shall be
void with respect to those excess shares, unless stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of the Plan.

17. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:

- This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is
exercised for one or more Option Shares: (A) more than three (3) months
after the date Optionee ceases to be an Employee for any reason other than
death or Permanent Disability or (B) more than twelve (12) months after the
date Optionee ceases to be an Employee by reason of Permanent Disability.

- No installment under this option shall qualify for favorable
tax treatment as an Incentive Option if (and to the extent) the aggregate
Fair Market Value (determined at the Grant Date) of the Common Stock for
which such installment first becomes exercisable hereunder would, when
added to the aggregate value (determined as of the respective date or dates
of grant) of the Common Stock or other securities for which this option or
any other Incentive Options granted to Optionee prior to the Grant Date
(whether under the Plan or any other option plan of the Corporation or any
Parent or Subsidiary) first become exercisable during the same calendar
year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate.
Should such One Hundred Thousand Dollar

<PAGE>

($100,000) limitation be exceeded in any calendar year, this option shall
nevertheless become exercisable for the excess shares in such calendar year
as a Non-Statutory Option.

- Should the exercisability of this option be accelerated upon
a Corporate Transaction, then this option shall qualify for favorable tax
treatment as an Incentive Option only to the extent the aggregate Fair
Market Value (determined at the Grant Date) of the Common Stock for which
this option first becomes exercisable in the calendar year in which the
Corporate Transaction occurs does not, when added to the aggregate value
(determined as of the respective date or dates of grant) of the Common
Stock or other securities for which this option or one or more other
Incentive Options granted to Optionee prior to the Grant Date (whether
under the Plan or any other option plan of the Corporation or any Parent or
Subsidiary) first become exercisable during the same calendar year, exceed
One Hundred Thousand Dollars ($100,000) in the aggregate. Should the
applicable One Hundred Thousand Dollar ($100,000) limitation be exceeded in
the calendar year of such Corporate Transaction, the option may
nevertheless be exercised for the excess shares in such calendar year as a
Non-Statutory Option.

- Should Optionee hold, in addition to this option, one or
more other options to purchase Common Stock which become exercisable for
the first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options
shall be applied on the basis of the order in which such options are
granted.

18. LEAVE OF ABSENCE. The following provisions shall apply upon the
Optionee's commencement of an authorized leave of absence:

(a) The exercise schedule in effect under the Grant Notice shall
be frozen as of the first day of the authorized leave, and this option
shall not become exercisable for any additional installments of the Option
Shares during the period Optionee remains on such leave.

(b) Should Optionee resume active Employee status within sixty
(60) days after the start date of the authorized leave, Optionee shall, for
purposes of the exercise schedule set forth in the Grant Notice, receive
Service credit for the entire period of such leave. If Optionee does not
resume active Employee status within such sixty (60)-day period, then no
Service credit shall be given for the period of such leave.

(c) If the option is designated as an Incentive Option in the
Grant Notice, then the following additional provision shall apply:

<PAGE>

- If the leave of absence continues for more than ninety
(90) days, then this option shall automatically convert to a
Non-Statutory Option under the Federal tax laws on the ninety-first
(91st) day of such leave, unless the Optionee's reemployment rights
are guaranteed by statute or by written agreement. Following any such
conversion of the option, all subsequent exercises of such option,
whether effected before or after Optionee's return to active Employee
status, shall result in an immediate taxable event, and the
Corporation shall be required to collect from Optionee the Federal,
state and local income and employment withholding taxes applicable to
such exercise.

(d) In no event shall this option become exercisable for any
additional Option Shares or otherwise remain outstanding if Optionee does
not resume Employee status prior to the Expiration Date of the option term.

<PAGE>

EXHIBIT I

NOTICE OF EXERCISE

I hereby notify Triangle Pharmaceuticals, Inc. (the "Corporation")
that I elect to purchase shares of the Corporation's Common Stock
(the "Purchased Shares") at the option exercise price of $ per share
(the "Exercise Price") pursuant to that certain option (the "Option") granted to
me under the Corporation's 1996 Stock Incentive Plan on ,
199 .

Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.

, 199
- ------------------ --
Date

-----------------------------------
Optionee

Address:
---------------------------

-----------------------------------

Print name in exact manner
it is to appear on the
stock certificate:
-----------------------------------
Address to which certificate
is to be sent, if different
from address above:
-----------------------------------

-----------------------------------
Social Security Number:
-----------------------------------
Employee Number:
-----------------------------------

<PAGE>

APPENDIX

The following definitions shall be in effect under the Agreement:

A. AGREEMENT shall mean this Stock Option Agreement.

B. BOARD shall mean the Corporation's Board of Directors.

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

D. COMMON STOCK shall mean the Corporation's common stock.

E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:

(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or

(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.

F. CORPORATION shall mean Triangle Pharmaceuticals, Inc., a Delaware
corporation.

G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

H. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of the Agreement.

I. EXERCISE PRICE shall mean the exercise price per share as specified in
the Grant Notice.

J. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.

K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:

A-1

<PAGE>

Association of Securities Dealers on the Nasdaq National Market or any
successor system. If there is no closing selling price for the Common
Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such quotation
exists.

(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.

L. GRANT DATE shall mean the date of grant of the option as specified in
the Grant Notice.

M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.

N. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.

O. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by Optionee, any unauthorized use or disclosure by Optionee of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by Optionee adversely affecting
the business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be inclusive
of all the acts or omissions which the Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of Optionee or any other
individual in the Service of the Corporation (or any Parent or Subsidiary).

P. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.

Q. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.

R. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option as specified in the Grant Notice.

A-2

<PAGE>

S. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.

T. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) 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.

U. PERMANENT DISABILITY shall mean the inability of Optionee to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.

V. PLAN shall mean the Corporation's 1996 Stock Incentive Plan.

W. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its administrative capacity under the Plan.

X. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.

Y. STOCK EXCHANGE shall mean the American Stock Exchange or the New York
Stock Exchange.

Z. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, 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.

A-3

<PAGE>

ADDENDUM
TO
STOCK OPTION AGREEMENT

The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Option Agreement dated 2~ (the "Option
Agreement") by and between Triangle Pharmaceuticals, Inc. (the "Corporation")
and 1~ ("Optionee") evidencing the stock option (the "Option") granted on such
date to Optionee under the terms of the Corporation's 1996 Stock Incentive Plan,
and such provisions shall be effective immediately. All capitalized terms in
this Addendum, to the extent not otherwise defined herein, shall have the
meanings assigned to them in the Option Agreement.

INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION

1. To the extent the Option is, in connection with a Corporate
Transaction, to be assumed or replaced with a comparable option in accordance
with Paragraph 6 of the Option Agreement, the Option shall not accelerate upon
the occurrence of that Corporate Transaction, and the Option shall accordingly
continue, over Optionee's period of Service after the Corporate Transaction, to
become exercisable for the Option Shares in one or more installments in
accordance with the provisions of the Option Agreement. However, immediately
upon an Involuntary Termination of Optionee's Service within twelve (12) months
following such Corporate Transaction, the Option (or any replacement grant), to
the extent outstanding at the time but not otherwise fully exercisable, shall
automatically accelerate so that the Option shall become immediately exercisable
for all the Option Shares at the time subject to the Option and may be exercised
for any or all of those Option Shares as fully vested shares. The Option shall
remain so exercisable until the EARLIER of (i) the Expiration Date or (ii) the
expiration of the one (1)-year period measured from the date of the Involuntary
Termination.

2. For purposes of this Addendum, an INVOLUNTARY TERMINATION shall
mean the termination of Optionee's Service by reason of:

(i) Optionee's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or

(ii) Optionee's voluntary resignation following (A) a change
in Optionee's position with the Corporation (or Parent or Subsidiary
employing Optionee) which materially reduces Optionee's level of
responsibility, (B) a reduction in Optionee's level of compensation
(including base salary, fringe benefits and participation in any
corporate-performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of Optionee's place of
employment by more than fifty (50) miles, provided and only if such

<PAGE>

change, reduction or relocation is effected by the Corporation without
Optionee's consent.

3. The provisions of Paragraph 1 of this Addendum shall govern the
period for which the Option is to remain exercisable following the Involuntary
Termination of Optionee's Service within twelve (12) months after the Corporate
Transaction and shall supersede any provisions to the contrary in Paragraph 5 of
the Option Agreement.

IN WITNESS WHEREOF, Triangle Pharmaceuticals, Inc. has caused this
Addendum to be executed by its duly-authorized officer, and Optionee has
executed this Addendum, all as of the Effective Date specified below.

TRIANGLE PHARMACEUTICALS, INC.

By:
-----------------------------------------
Title:
-------------------------------------

--------------------------------------------
1~, OPTIONEE

EFFECTIVE DATE: _______________________, 199__

<PAGE>

ADDENDUM
TO
STOCK OPTION AGREEMENT

INVOLUNTARY TERMINATION FOLLOWING
CHANGE IN CONTROL

1. The Option shall not accelerate upon the occurrence of a Change
in Control, and the Option shall, over Optionee's continued period of Service
after the Change in Control, continue to become exercisable for the Option
Shares in accordance with the provisions of the Option Agreement. However,
immediately upon an Involuntary Termination of Optionee's Service within twelve
(12) months following the Change in Control, the Option, to the extent
outstanding at the time but not otherwise fully exercisable, shall automatically
accelerate so that the Option shall become immediately exercisable for all the
Option Shares at the time subject to the Option and may be exercised for any or
all of those Option Shares as fully vested shares. The Option shall remain so
exercisable until the EARLIER of (i) the Expiration Date or (ii) the expiration
of the one (1)-year period measured from the date of the Involuntary
Termination.

2. For purposes of this Addendum, a CHANGE IN CONTROL shall be
deemed to occur in the event of a change in ownership or control of the
Corporation effected through either of the following transactions:

(i) the acquisition, directly or indirectly, by any person
or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3
of the Securities Exchange Act of 1934, as amended) of securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders which the Board does not recommend
such stockholders to accept, or

(ii) a change in the composition of the Board over a period
of thirty-six (36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been elected
or nominated for election as Board members during such period by at least a

<PAGE>

majority of the Board members described in clause (A) who were still in office
at the time such election or nomination was approved by the Board.

3. For purposes of this Addendum, an INVOLUNTARY TERMINATION shall
mean the termination of Optionee's Service by reason of:

(i) Optionee's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or

(ii) Optionee's voluntary resignation following (A) a change in
Optionee's position with the Corporation (or Parent or Subsidiary employing
Optionee) which materially reduces Optionee's level of responsibility, (B) a
reduction in Optionee's level of compensation (including base salary, fringe
benefits and participation in any corporate-performance based bonus or incentive
programs) by more than fifteen percent (15%) or (C) a relocation of Optionee's
place of employment by more than fifty (50) miles, provided and only if such
change, reduction or relocation is effected by the Corporation without
Optionee's consent.

4. The provisions of Paragraph 1 of this Addendum shall govern the
period for which the Option is to remain exercisable following the Involuntary
Termination of Optionee's Service within twelve (12) months after the Change in
Control and shall supersede any provisions to the contrary in Paragraph 5 of the
Option Agreement.

TRIANGLE PHARMACEUTICALS, INC.

By:
--------------------------------------------

Title:
----------------------------------------

-----------------------------------------------
1~, OPTIONEE

EFFECTIVE DATE: ___________________, 199__

<PAGE>

TRIANGLE PHARMACEUTICALS, INC.

STOCK ISSUANCE AGREEMENT

AGREEMENT made this _____ day of ____________________ 19___, by and
between Triangle Pharmaceuticals, Inc., a Delaware corporation, and
___________________________________________ , a Participant in the Corporation's
1996 Stock Incentive Plan.

All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix.

A. PURCHASE OF SHARES

1. PURCHASE. Participant hereby purchases _____________ shares of
Common Stock (the "Purchased Shares") pursuant to the provisions of the Stock
Issuance Program at the purchase price of $______ per share (the "Purchase
Price").

2. PAYMENT. Concurrently with the delivery of this Agreement to the
Corporation, Participant shall pay the Purchase Price for the Purchased Shares
in cash or check payable to the Corporation and shall deliver a duly-executed
blank Assignment Separate from Certificate (in the form attached hereto as
Exhibit I) with respect to the Purchased Shares.

3. STOCKHOLDER RIGHTS. Until such time as the Corporation exercises
the Repurchase Right, Participant (or any successor in interest) shall have all
the rights of a stockholder (including voting, dividend and liquidation rights)
with respect to the Purchased Shares, subject, however, to the transfer
restrictions of this Agreement.

4. COMPLIANCE WITH LAW. Under no circumstances shall shares of
Common Stock or other assets be issued or delivered to Participant pursuant to
the provisions of this Agreement unless, in the opinion of counsel for the
Corporation or its successors, there shall have been compliance with all
applicable requirements of Federal and state securities laws, all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is at the time listed for trading and all
other requirements of law or of any regulatory bodies having jurisdiction over
such issuance and delivery.

B. TRANSFER RESTRICTIONS

1. RESTRICTION ON TRANSFER. Except for any Permitted Transfer,
Participant shall not transfer, assign, encumber or otherwise dispose of any of
the Purchased Shares which are subject to the Repurchase Right.

2. RESTRICTIVE LEGEND. The stock certificate for the Purchased
Shares shall be endorsed with the following restrictive legend:

<PAGE>

"The shares represented by this certificate are unvested and
subject to certain repurchase rights granted to the Corporation and
accordingly may not be sold, assigned, transferred, encumbered, or in
any manner disposed of except in conformity with the terms of a written
agreement dated , 199 between the Corporation and the
registered holder of the shares (or the predecessor in interest to the
shares). A copy of such agreement is maintained at the Corporation's
principal corporate offices."

3. TRANSFEREE OBLIGATIONS. Each person (other than the Corporation)
to whom the Purchased Shares are transferred by means of a Permitted Transfer
must, as a condition precedent to the validity of such transfer, acknowledge in
writing to the Corporation that such person is bound by the provisions of this
Agreement and that the transferred shares are subject to the Repurchase Right to
the same extent such shares would be so subject if retained by Participant.

C. REPURCHASE RIGHT

1. GRANT. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the ninety (90)-day period
following the date Participant ceases for any reason to remain in Service, to
repurchase at the Purchase Price all or any portion of the Purchased Shares in
which Participant is not, at the time of his or her cessation of Service, vested
in accordance with the Vesting Schedule or the provisions of Paragraph C.5 of
this Agreement (such shares to be hereinafter referred to as the "Unvested
Shares").

2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be
exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the ninety (90)-day exercise period. The notice
shall indicate the number of Unvested Shares to be repurchased and the date on
which the repurchase is to be effected, such date to be not more than thirty
(30) days after the date of such notice. The certificates representing the
Unvested Shares to be repurchased shall be delivered to the Corporation on or
before the close of business on the date specified for the repurchase.
Concurrently with the receipt of such stock certificates, the Corporation shall
pay to Owner, in cash or cash equivalent (including the cancellation of any
purchase-money indebtedness), an amount equal to the Purchase Price previously
paid for the Unvested Shares to be repurchased from Owner.

3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall
terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph C.2. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all Purchased
Shares in which Participant vests in accordance with the following Vesting
Schedule:

(i) Upon Participant's completion of one (1) year of
Service measured from ______________, 199__, Participant shall acquire a
vested interest in, and the Repurchase Right shall lapse with respect to,
twenty-five percent (25%) of the Purchased Shares.

2
<PAGE>

(ii) Participant shall acquire a vested interest in, and the
Repurchase Right shall lapse with respect to, the remaining Purchased
Shares in a series of thirty six (36) successive equal monthly installments
upon Participant's completion of each additional month of Service over the
thirty-six (36)-month period measured from the initial vesting date under
subparagraph (i) above.

4. RECAPITALIZATION. Any new, substituted or additional securities
or other property (including cash paid other than as a regular cash dividend)
which is by reason of any Recapitalization distributed with respect to the
Purchased Shares shall be immediately subject to the Repurchase Right and any
escrow requirements hereunder, but only to the extent the Purchased Shares are
at the time covered by such right or escrow requirements. Appropriate
adjustments to reflect such distribution shall be made to the number and/or
class of securities subject to this Agreement and to the price per share to be
paid upon the exercise of the Repurchase Right in order to reflect the effect of
any such Recapitalization upon the Corporation's capital structure; PROVIDED,
however, that the aggregate purchase price shall remain the same.

5. CORPORATE TRANSACTION.

(a) Immediately prior to the consummation of any Corporate
Transaction, the Repurchase Right shall automatically lapse in its entirety and
the Purchased Shares shall vest in full, except to the extent the Repurchase
Right is assigned to the successor corporation (or parent thereof) or otherwise
continues in full force and effect pursuant to the terms of the Corporate
Transaction.

(b) To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to the new capital
stock or other property (including any cash payments) received in exchange for
the Purchased Shares in consummation of the Corporate Transaction, but only to
the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments shall be made to the price per share payable upon
exercise of the Repurchase Right to reflect the effect of the Corporate
Transaction upon the Corporation's capital structure; PROVIDED, however, that
the aggregate purchase price shall remain the same. The new securities or other
property (including cash payments) issued or distributed with respect to the
Purchased Shares in consummation of the Corporate Transaction shall immediately
be deposited in escrow with the Corporation (or the successor entity) and shall
not be released from escrow until Participant vests in such securities or other
property in accordance with the same Vesting Schedule in effect for the
Purchased Shares.

(c) The Repurchase Right may also be subject to termination in
whole or in part on an accelerated basis, and the Purchased Shares subject to
immediate vesting, in accordance with the terms of any special Addendum attached
to this Agreement.

3
<PAGE>

D. SPECIAL TAX ELECTION

1. SECTION 83(b) ELECTION . Under Code Section 83, the excess of
the fair market value of the Purchased Shares on the date any forfeiture
restrictions applicable to such shares lapse over the Purchase Price paid for
such shares will be reportable as ordinary income on the lapse date. For this
purpose, the term "forfeiture restrictions" includes the right of the
Corporation to repurchase the Purchased Shares pursuant to the Repurchase Right.
Participant may elect under Code Section 83(b) to be taxed at the time the
Purchased Shares are acquired, rather than when and as such Purchased Shares
cease to be subject to such forfeiture restrictions. Such election must be
filed with the Internal Revenue Service within thirty (30) days after the date
of this Agreement. Even if the fair market value of the Purchased Shares on the
date of this Agreement equals the Purchase Price paid (and thus no tax is
payable), the election must be made to avoid adverse tax consequences in the
future. THE FORM FOR MAKING THIS ELECTION IS ATTACHED AS EXHIBIT II HERETO.
PARTICIPANT UNDERSTANDS THAT FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE
THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME AS THE
FORFEITURE RESTRICTIONS LAPSE.

2. FILING RESPONSIBILITY. PARTICIPANT ACKNOWLEDGES THAT IT IS
PARTICIPANT'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY
ELECTION UNDER CODE SECTION 83(b), EVEN IF PARTICIPANT REQUESTS THE CORPORATION
OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.

E. GENERAL PROVISIONS

1. ASSIGNMENT. The Corporation may assign the Repurchase Right to
any person or entity selected by the Board, including (without limitation) one
or more stockholders of the Corporation.

2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or
in the Plan shall confer upon Participant any right to continue in Service for
any period of specific duration or interfere with or otherwise restrict in any
way the rights of the Corporation (or any Parent or Subsidiary employing or
retaining Participant) or of Participant, which rights are hereby expressly
reserved by each, to terminate Participant's Service at any time for any reason,
with or without cause.

3. NOTICES. Any notice required to be given under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.

4
<PAGE>

4. NO WAIVER. The failure of the Corporation in any instance to
exercise the Repurchase Right shall not constitute a waiver of any other
repurchase rights that may subsequently arise under the provisions of this
Agreement or any other agreement between the Corporation and Participant. No
waiver of any breach or condition of this Agreement shall be deemed to be a
waiver of any other or subsequent breach or condition, whether of like or
different nature.

5. CANCELLATION OF SHARES. If the Corporation shall make available,
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.

6. PARTICIPANT UNDERTAKING. Participant hereby agrees to take
whatever additional action and execute whatever additional documents the
Corporation may deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either Participant or the
Purchased Shares pursuant to the provisions of this Agreement.

7. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the terms of the Plan.

8. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of ____________________
without resort to that State's conflict-of-laws rules.

9. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and upon Participant, Participant's assigns and the legal
representatives, heirs and legatees of Participant's estate, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.

5
<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.

TRIANGLE PHARMACEUTICALS, INC.

By:
-----------------------------------------
Title:
--------------------------------------
Address:
------------------------------------

--------------------------------------------

--------------------------------------------
PARTICIPANT

Address:
------------------------------------

--------------------------------------------

6
<PAGE>

EXHIBIT I

ASSIGNMENT SEPARATE FROM CERTIFICATE

FOR VALUE RECEIVED ______________________ hereby sell(s), assign(s)
and transfer(s) unto Triangle Pharmaceuticals, Inc. (the "Corporation"),
____________(________) shares of the Common Stock of the Corporation standing in
his or her name on the books of the Corporation represented by Certificate
No._______________ herewith and do(es) hereby irrevocably constitute and appoint
_______________________ Attorney to transfer the said stock on the books of the
Corporation with full power of substitution in the premises.

Dated: __________________, 199__.

Signature
----------------------------------

INSTRUCTION: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Participant.

7
<PAGE>

EXHIBIT II

SECTION 83(b) TAX ELECTION

This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.

(1) The taxpayer who performed the services is:

Name:
Address:
Taxpayer Ident. No.:

(2) The property with respect to which the election is being made is
___________ shares of the common stock of Triangle Pharmaceuticals, Inc..

(3) The property was issued on ________________, 199__.

(4) The taxable year in which the election is being made is the calendar year
199__.

(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's employment with the issuer is terminated. The
issuer's repurchase right lapses in a series of installments over a four
(4)-year period ending on ____________________________________.

(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $__________ per share.

(7) The amount paid for such property is $___________ per share.

(8) A copy of this statement was furnished to Triangle Pharmaceuticals, Inc.
for whom taxpayer rendered the services underlying the transfer of
property.

(9) This statement is executed on ________________________, 199__.

- --------------------------- --------------------------------------------
Spouse (if any) Taxpayer

This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Issuance Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Participant must retain two (2) copies of the completed form for filing with his
or her Federal and state tax returns for the current tax year and an additional
copy for his or her records.

<PAGE>

APPENDIX

The following definitions shall be in effect under the Agreement:

A. AGREEMENT shall mean this Stock Issuance Agreement.

B. BOARD shall mean the Corporation's Board of Directors.

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

D. COMMON STOCK shall mean the Corporation's common stock.

E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:

(A) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or

(B) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.

F. CORPORATION shall mean Triangle Pharmaceuticals, Inc., a Delaware
corporation.

G. OWNER shall mean Participant and all subsequent holders of the
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Participant.

H. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) 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.

I. PARTICIPANT shall mean the person to whom the Purchased Shares are
issued under the Stock Issuance Program.

J. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the
Purchased Shares, PROVIDED AND ONLY IF Participant obtains the Corporation's
prior written consent to such transfer, (ii) a transfer of title to the
Purchased Shares effected pursuant to Participant's will or the laws of
intestate succession following Participant's death or (iii) a transfer to the
Corporation in pledge

A-1

<PAGE>

as security for any purchase-money indebtedness incurred by Participant in
connection with the acquisition of the Purchased Shares.

K. PLAN shall mean the Corporation's 1996 Stock Incentive Plan.

L. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its administrative capacity under the Plan.

M. PURCHASE PRICE shall have the meaning assigned to such term in
Paragraph A.1.

N. PURCHASED SHARES shall have the meaning assigned to such term in
Paragraph A.1.

O. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.

P. REPURCHASE RIGHT shall mean the right granted to the Corporation in
accordance with Article C.

Q. SERVICE shall mean the Participant's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control and direction of the employer entity as to both the work
to be performed and the manner and method of performance, a non-employee member
of the board of directors or a consultant.

R. STOCK ISSUANCE PROGRAM shall mean the Stock Issuance Program under the
Plan.

S. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, 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.

T. VESTING SCHEDULE shall mean the vesting schedule specified in
Paragraph C.3, subject to acceleration (if any) in connection with a Corporate
Transaction.

U. UNVESTED SHARES shall have the meaning assigned to such term in
Paragraph C.1.

A-2

<PAGE>

TRIANGLE PHARMACEUTICALS, INC.
NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
AUTOMATIC STOCK OPTION

Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Triangle Pharmaceuticals, Inc. (the
"Corporation"):

OPTIONEE:
-----------------------------------------------------------

GRANT DATE:
---------------------------------------------------------

EXERCISE PRICE: $ per share
-----------------------------------------

NUMBER OF OPTION SHARES: shares
------------------------

EXPIRATION DATE:
----------------------------------------------------

TYPE OF OPTION: Non-Statutory Stock Option

VESTING SCHEDULE: With respect to automatic stock option grants
made on the date the Optionee is first elected or appointed to the
Board of Directors (the "Board"), the Option Shares shall vest and
become exercisable with respect to two thousand (2,000) shares on
the day the Optionee is first elected or appointed to the Board and
with respect to an additional two thousand (2,000) shares on the day
immediately preceding the date of each subsequent annual
stockholders meeting following the grant date until all of the
Option Shares have become vested and exercisable. With respect to
automatic stock option grants made on the date the Optionee is
reelected to the Board, the Option Shares shall vest and become
exercisable with respect to two thousand (2,000) shares on the day
immediately preceding the date of each subsequent annual
stockholders meeting following the grant date until all of the
Option Shares have become vested and exercisable. In no event shall
any additional Option Shares vest after Optionee's cessation of
Board service.

Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the automatic option grant program under the
Triangle Pharmaceuticals, Inc. 1996 Stock Incentive Plan (the "Plan"). Optionee
further agrees to be bound by the terms of the Plan and the terms of the Option
as set forth in the Automatic Stock Option Agreement attached hereto as Exhibit
A. A copy of the Plan is available upon request made to the Corporate Secretary
at the Corporation's principal offices.

NO IMPAIRMENT OF RIGHTS. Nothing in this Notice or in the attached
Automatic Stock Option Agreement or the Plan shall interfere with or otherwise
restrict in any way the rights of the Corporation or the Corporation's
stockholders to remove Optionee from the Board at any time in accordance with
the provisions of applicable law.

<PAGE>

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

DATED: , 199
----------------------- ---

TRIANGLE PHARMACEUTICALS, INC.

By:
-----------------------------------

Title:
---------------------------------

-----------------------------------
OPTIONEE

Address:
------------------------------

------------------------------

ATTACHMENTS
EXHIBIT A - AUTOMATIC STOCK OPTION AGREEMENT

<PAGE>

EXHIBIT A

AUTOMATIC STOCK OPTION AGREEMENT

<PAGE>

TRIANGLE PHARMACEUTICALS, INC.
AUTOMATIC STOCK OPTION AGREEMENT

RECITALS

A. The Corporation has implemented an automatic option grant program
under the Corporation's 1996 Stock Incentive Plan pursuant to which eligible
non-employee members of the Corporation's Board will automatically receive
special option grants at designated intervals over their period of Board
service in order to provide such individuals with a meaningful incentive to
continue to serve as a member of the Board.

B. Optionee is an eligible non-employee Board member, and this Agreement
is executed pursuant to, and is intended to carry out the purposes of, the Plan
in connection with the automatic grant of a stock option to purchase shares of
the Corporation's Common Stock under the Plan.

C. The granted option is intended to be a non-statutory option which does
NOT meet the requirements of Section 422 of the Internal Revenue Code.

D. All capitalized terms in this Agreement, to the extent not otherwise
defined in the Agreement, shall have the meaning assigned to them in the
attached Appendix.

NOW, THEREFORE, it is hereby agreed as follows:

1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, a Non-Statutory Option to purchase up to the number of Option
Shares specified in the Grant Notice. The Option Shares shall be purchasable
from time to time during the option term specified in Paragraph 2 at the
Exercise Price.

2. OPTION TERM. This option shall have a maximum term of ten (10)
years measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5, 6 or 7.

3. LIMITED TRANSFERABILITY. This option may be assigned in whole or
in part during Optionee's lifetime. The assigned portion of the option shall be
exercisable only by the person or persons who acquire a proprietary interest in
the option pursuant to such assignment. The terms applicable to the assigned
portion shall be the same as those in effect for this option immediately prior
to such assignment and shall be set forth in such documents issued to the
assignee as the Corporation may deem appropriate. Should the Optionee die
while holding this option, then this option shall be transferred in accordance
with Optionee's will or the laws of descent and distribution.

<PAGE>

4. EXERCISABILITY/VESTING.

(a) This option shall be exercisable for any or all of the
Option Shares which have become vested in accordance with the Vesting Schedule
set forth in the Grant Notice, and shall remain so exercisable until the
Expiration Date or the sooner termination of the option term under Paragraph 5,
6 or 7.

(b) Optionee shall, in accordance with the Vesting Schedule set
forth in the Grant Notice, vest in the Option Shares in a series of installments
over his or her period of Board service. Vesting in the Option Shares may be
accelerated pursuant to the provisions of Paragraph 5, 6 or 7. In no event,
however, shall any additional Option Shares vest following Optionee's cessation
of service as a Board member.

5. CESSATION OF BOARD SERVICE. Should Optionee's service as a Board
member cease while this option remains outstanding, then the option term
specified in Paragraph 2 shall terminate (and this option shall cease to be
outstanding) prior to the Expiration Date in accordance with the following
provisions:

(i) Should Optionee cease to serve as a Board member for
any reason (other than death or Permanent Disability) while holding this
option, then the period for exercising this option shall be reduced to a
twelve (12)-month period commencing with the date of such cessation of
Board service, but in no event shall this option be exercisable at any time
after the Expiration Date. During such limited period of exercisability,
this option may not be exercised in the aggregate for more than the number
of Option Shares (if any) in which Optionee is vested on the date of his or
her cessation of Board service. Upon the EARLIER of (i) the expiration of
such twelve (12)-month period or (ii) the specified Expiration Date, the
option shall terminate and cease to be exercisable with respect to any
vested Option Shares for which the option has not been exercised.

(ii) Should Optionee die during the twelve (12)-month period
following his or her cessation of Board service, then the personal
representative of Optionee's estate or the person or persons to whom the
option is transferred pursuant to Optionee's will or in accordance with the
laws of descent and distribution shall have the right to exercise this
option for any or all of the Option Shares in which Optionee is vested at
the time of Optionee's cessation of Board service (less any Option Shares
purchased by Optionee after such cessation of Board service but prior to
death). Such right of exercise shall terminate, and this option shall
accordingly cease to be exercisable for such vested Option Shares, upon the
EARLIER of (i) the expiration of the twelve (12)-month period measured from
the date of Optionee's cessation of Board service or (ii) the specified
Expiration Date of the option term.

2.
<PAGE>

(iii) Should Optionee cease service as a Board member by
reason of death or Permanent Disability, then all Option Shares at the time
subject to this option but not otherwise vested shall immediately vest in
full so that Optionee (or the personal representative of Optionee's estate
or the person or persons to whom the option is transferred upon Optionee's
death) shall have the right to exercise this option for any or all of the
Option Shares as fully-vested shares of Common Stock at any time prior to
the EARLIER of (i) the expiration of the twelve (12)-month period measured
from the date of Optionee's cessation of Board service or (ii) the
specified Expiration Date.

(iv) Upon Optionee's cessation of Board service for any
reason other than death or Permanent Disability, this option shall
immediately terminate and cease to be outstanding with respect to any and
all Option Shares in which Optionee is not otherwise at that time vested in
accordance with the normal Vesting Schedule set forth in the Grant Notice
or the special vesting acceleration provisions of Paragraph 6 or 7 below.

6. CORPORATE TRANSACTION.

(a) In the event of a Corporate Transaction, all Option Shares
at the time subject to this option but not otherwise vested shall automatically
vest so that this option shall, immediately prior to the specified effective
date for the Corporate Transaction, become fully exercisable for all of the
Option Shares at the time subject to this option and may be exercised for all or
any portion of such shares as fully-vested shares of Common Stock. Immediately
following the consummation of the Corporate Transaction, this option shall
terminate and cease to be outstanding except to the extent assumed by the
successor corporation or its parent company.

(b) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, PROVIDED the aggregate Exercise Price shall remain the same.

7. CHANGE IN CONTROL/HOSTILE TAKE-OVER.

(a) All Option Shares subject to this option at the time of a
Change in Control but not otherwise vested shall automatically vest so that this
option shall, immediately prior to the effective date of such Change in Control,
become fully exercisable for all of the Option Shares at the time subject to
this option and may be exercised for all or any portion of such shares as
fully-vested shares of Common Stock. This option shall remain exercisable for
such fully-vested Option Shares until the EARLIEST to occur of (i) the specified
Expiration Date, (ii) the sooner termination of this option in accordance with
Paragraph 5 or 6 or (iii) the surrender of this option under Paragraph 7(b).

3.
<PAGE>

(b) Optionee shall have an unconditional right (exercisable
during the thirty (30)-day period immediately following the consummation of a
Hostile Take-Over) to surrender this option to the Corporation in exchange for a
cash distribution from the Corporation in an amount equal to the excess of (i)
the Take-Over Price of the Option Shares at the time subject to the surrendered
option (whether or not those Option Shares are otherwise at the time vested)
over (ii) the aggregate Exercise Price payable for such shares. This Paragraph
7(b) limited stock appreciation right shall in all events terminate upon the
expiration or sooner termination of the option term and may not be assigned or
transferred by Optionee.

(c) To exercise the Paragraph 7(b) limited stock appreciation
right, Optionee must, during the applicable thirty (30)-day exercise period,
provide the Corporation with written notice of the option surrender in which
there is specified the number of Option Shares as to which the option is being
surrendered. Such notice must be accompanied by the return of Optionee's copy
of this Agreement, together with any written amendments to such Agreement. The
cash distribution shall be paid to Optionee within five (5) days following such
delivery date, and neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such option surrender
and cash distribution. Upon receipt of such cash distribution, this option
shall be cancelled with respect to the shares subject to the surrendered option
(or the surrendered portion), and Optionee shall cease to have any further right
to acquire those Option Shares under this Agreement. The option shall, however,
remain outstanding for the balance of the Option Shares (if any) in accordance
with the terms and provisions of this Agreement, and the Corporation shall
accordingly issue a new stock option agreement (substantially in the same form
as this Agreement) for those remaining Option Shares.

8. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder; provided, however, that the aggregate Exercise Price shall
remain the same.

9. STOCKHOLDER RIGHTS. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.

10. MANNER OF EXERCISING OPTION.

(a) In order to exercise this option for all or any part of the
Option Shares for which the option is at the time exercisable, Optionee or, in
the case of exercise after Optionee's death, Optionee's executor, administrator,
heir or legatee, as the case may be, must take the following actions:

4.
<PAGE>

(i) To the extent the option is exercised for vested
Option Shares, the Secretary of the Corporation shall be provided with
written notice of the option exercise (the "Exercise Notice") in
substantially the form of Exhibit I attached hereto, in which there is
specified the number of vested Option Shares to be purchased under the
exercised option. To the extent that the option is exercised for one or
more unvested Option Shares, Optionee (or other person exercising the
option) shall deliver to the Secretary of the Corporation a Purchase
Agreement for those unvested Option Shares.

(ii) The Exercise Price for the purchased shares shall
be paid in one or more of the following alternative forms:

- cash or check made payable to the Corporation's
order; or

- shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date; or

- to the extent the option is exercised for vested
Option Shares, through a special sale and remittance procedure
pursuant to which Optionee shall provide irrevocable written
instructions (A) to a Corporation-designated brokerage firm to effect
the immediate sale of the vested shares purchased under the option and
remit to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate Exercise
Price payable for those shares plus the applicable Federal, state and
local income taxes required to be withheld by the Corporation by
reason of such exercise and (B) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale.

(iii) Appropriate documentation evidencing the right to
exercise this option shall be furnished the Corporation if the person or
persons exercising the option is other than Optionee.

(iv) Appropriate arrangement must be made with the
Corporation for the satisfaction of all Federal, state and local income tax
withholding requirements applicable to the option exercise.

(b) Except to the extent the sale and remittance procedure
specified above is utilized in connection with the exercise of the option for
vested Option Shares, payment

5.
<PAGE>

of the Exercise Price for the purchased shares must accompany the Exercise
Notice or Purchase Agreement delivered to the Corporation in connection with the
option exercise.

(c) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate or certificates representing the
purchased Option Shares. To the extent any such Option Shares are unvested, the
certificates for those Option Shares shall be endorsed with any appropriate
legends.

(d) In no event may this option be exercised for fractional
shares.

11. NO IMPAIRMENT OF RIGHTS. This Agreement shall not in any way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets. Nor shall this Agreement in any way be construed or
interpreted so as to affect adversely or otherwise impair the right of the
Corporation or the stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.

12. COMPLIANCE WITH LAWS AND REGULATIONS.

(b) The inability of the Corporation to obtain approval from
any regulatory body having authority deemed by the Corporation to be
necessary to the lawful issuance and sale of any Common Stock pursuant to
this option shall relieve the Corporation of any liability with respect to
the non-issuance or sale of the Common Stock as to which such approval shall
not have been obtained. However, the Corporation shall use its best efforts
to obtain all such applicable approvals.

13. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns and the legal representatives, heirs and legatees
of Optionee's estate.

14. CONSTRUCTION/GOVERNING LAW. This Agreement and the option
evidenced hereby are made and granted pursuant to the automatic option grant
program in effect under the Plan and are in all respects limited by and subject
to the express terms and provisions of that program. The interpretation,
performance, and enforcement of this Agreement shall be governed by the laws of
the State of California without resort to that State's conflict-of-laws rules.

6.
<PAGE>

15. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to
be given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on the Grant Notice.
All notices shall be deemed effective upon personal delivery or upon deposit in
the U.S. mail, postage prepaid and properly addressed to the party to be
notified.

7.
<PAGE>

EXHIBIT I

NOTICE OF EXERCISE

I hereby notify Triangle Pharmaceuticals, Inc. (the "Corporation")
that I elect to purchase _______ shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $_______ per share (the
"Exercise Price") pursuant to that certain option (the "Option") granted to me
pursuant to the automatic option grant program under the Corporation's 1996
Stock Incentive Plan on ______________, 199___.

Concurrently with the delivery of this Exercise Notice to the
Secretary of the Corporation, I shall hereby pay to the Corporation the Exercise
Price for the Purchased Shares in accordance with the provisions of my agreement
with the Corporation evidencing the Option and shall deliver whatever additional
documents may be required by such agreement as a condition for exercise.
Alternatively, I may utilize the special broker/dealer sale and remittance
procedure specified in my agreement to effect payment of the Exercise Price for
any Purchased Shares in which I am vested at the time of exercise.

, 199
- -------------------- ---
Date

----------------------------------------
Optionee

Address:
-------------------------------

----------------------------------------

Print name in exact manner
it is to appear on the
stock certificate: ----------------------------------------

Address to which certificate
is to be sent, if different
from address above: ----------------------------------------

----------------------------------------

Social Security Number: ----------------------------------------

<PAGE>

APPENDIX

The following definitions shall be in effect under the Agreement:

A. AGREEMENT shall mean this Automatic Stock Option Agreement.

B. BOARD shall mean the Corporation's Board of Directors.

C. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:

(i) the acquisition, directly or indirectly, by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to
accept, or

(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who
were still in office at the time the Board approved such election or
nomination.

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

E. COMMON STOCK shall mean the Corporation's common stock.

F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:

(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or

(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.

A-1.
<PAGE>

G. CORPORATION shall mean Triangle Pharmaceuticals, Inc., a California
corporation.

H. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 10 of the Agreement.

I. EXERCISE PRICE shall mean the exercise price payable per share as
specified in the Grant Notice.

J. EXPIRATION DATE shall mean the date on which the option term expires
as specified in the Grant Notice.

K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:

(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question, as the price is reported by
the National Association of Securities Dealers on the Nasdaq National
Market or any successor system. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.

(ii) If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on the Stock Exchange determined by
the Plan Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions on
such exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.

L. GRANT DATE shall mean the date of grant of the option as specified in
the Grant Notice.

M. GRANT NOTICE shall mean the Notice of Grant of Automatic Stock Option
accompanying this Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.

N. HOSTILE TAKE-OVER shall mean the acquisition, directly or indirectly,
by any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities

A-2.
<PAGE>

pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to accept.

O. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.

P. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.

Q. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option.

R. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.

S. PERMANENT DISABILITY shall mean the inability of Optionee to perform
his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment which is expected to result in death
or has lasted or can be expected to last for a continuous period of twelve (12)
months or more.

T. PLAN shall mean the Corporation's 1996 Stock Incentive Plan.

U. PURCHASE AGREEMENT shall mean the stock purchase agreement (in form
and substance satisfactory to the Corporation) which must be executed at the
time the option is exercised for unvested Option Shares and which will
accordingly (i) grant the Corporation the right to repurchase, at the Exercise
Price, any and all of those Option Shares in which Optionee is not otherwise
vested at the time of his or her cessation of service as a Board member and (ii)
preclude the sale, transfer or other disposition of any of the Option Shares
purchased under such agreement while those Option Shares remain subject to the
repurchase right.

V. STOCK EXCHANGE shall mean the American Stock Exchange or the New York
Stock Exchange.

W. TAKE-OVER PRICE shall mean the GREATER of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting the
Hostile Take-Over.

X. VESTING SCHEDULE shall mean the vesting schedule specified in the
Grant Notice, pursuant to which Optionee will vest in the Option Shares in one
or more installments over his or her period of Board service, subject to
acceleration in accordance with the provisions of the Agreement.

A-3.

<PAGE>

TRIANGLE PHARMACEUTICALS, INC.
SALARY INVESTMENT OPTION GRANT ELECTION

I hereby elect to apply the following portion of the salary otherwise
payable to me in cash for the ____ calendar year to the acquisition of a special
option grant under the Salary Investment Option Grant Program in effect under
the Company's 1996 Stock Incentive Plan (the "Plan").

$_____________(not less than $10,000 nor more than $50,000).

I hereby acknowledge and agree that this election shall be irrevocable
and that the option to be granted pursuant to such election shall be subject to
the following terms:

1. The option will be granted on or before January 31 of the
subject calendar year.

2. The exercise price per share will be equal to sixty-six and
two-thirds percent (66-2/3%) of the fair market value per share of the Company's
common stock (the closing selling price per share on the Nasdaq National Market)
on the option grant date.

3. The number of shares of common stock subject to the option will
be determined by dividing (i) the portion of my salary for the ____ calendar
year which I have elected to apply to the acquisition of the option by (ii)
thirty-three and one-third percent (33-1/3%) of the fair market value per share
of common stock on the option grant date.

4. The option will become exercisable in twelve (12) successive
equal monthly installments over my period of continued service with the Company
during the subject calendar year, with the first such installment to become
exercisable upon my continuation in the Company's service through January 31
of the subject calendar year.

5. The remaining terms of the option will be as set forth in the
Salary Investment Option Grant Program in effect under the Plan.

Signature:
--------------------------

Dated:
-----------------------------

<PAGE>

TRIANGLE PHARMACEUTICALS, INC.
NOTICE OF GRANT OF STOCK OPTION
UNDER SALARY INVESTMENT OPTION GRANT PROGRAM

Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Triangle Pharmaceuticals, Inc. (the
"Corporation"):

OPTIONEE:

CALENDAR YEAR:
---------------------------------

GRANT DATE: January
--------

EXERCISE PRICE: $ per share
-----------------------

NUMBER OF OPTION SHARES: shares
------------------------

EXPIRATION DATE: January
--------

TYPE OF OPTION: Non-Statutory Stock Option

EXERCISE SCHEDULE: The Option shall become exercisable in a series
of twelve (12) successive equal monthly installments over
Optionee's period of continued Service during the subject calendar
year, with the first such installment to become exercisable upon
Optionee's continuation in Service through January 31 of the
subject calendar year. In no event shall the Option become
exercisable for any additional Option Shares after Optionee's
cessation of Service.

Optionee agrees that the Option is granted subject to and in
accordance with the terms of the Salary Investment Option Grant Program under
the Triangle Pharmaceuticals, Inc. 1996 Stock Incentive Plan (the "Plan").
Optionee further agrees to be bound by the terms of the Plan and the terms of
the Option as set forth in the Salary Investment Stock Option Agreement attached
hereto as Exhibit A.

NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Notice or in the
Plan or in the attached Salary Investment Stock Option Agreement shall confer
upon Optionee any right to continue in Service for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the
Corporation (or any Parent or Subsidiary employing or retaining Optionee) or the
Optionee, which rights are hereby expressly reserved by each, to terminate
Optionee's Service at any time for any reason, with or without cause.

<PAGE>

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

TRIANGLE PHARMACEUTICALS, INC.

By:
-----------------------------------------

Title:
--------------------------------------

--------------------------------------------
OPTIONEE

Address:
------------------------------------

--------------------------------------------

ATTACHMENTS
Exhibit A - Salary Investment Stock Option Agreement
Exhibit B - Plan Summary and Prospectus

<PAGE>

TRIANGLE PHARMACEUTICALS, INC.
SALARY INVESTMENT STOCK OPTION AGREEMENT

RECITALS

A. The Corporation has implemented a special salary investment stock
option program under the Plan pursuant to which selected employees may, by
prior irrevocable election, apply a portion of their base salary each year to
the acquisition of a special stock option grant.

B. Optionee has made the requisite election to apply a portion of his or
her base salary to the acquisition of the special option, and this Agreement is
executed pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the Corporation's grant of such special option to Optionee.

C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.

NOW, THEREFORE, it is hereby agreed as follows:

1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, a Non-Qualified Option to purchase up to the number of Option
Shares specified in the Grant Notice. The Option Shares shall be purchasable
from time to time during the option term specified in Paragraph 2 at the
Exercise Price.

3. LIMITED TRANSFERABILITY. This option may, in connection with the
Optionee's estate plan, be assigned in whole or in part during Optionee's
lifetime to one or more members of the Optionee's immediate family or to a trust
established for the exclusive benefit of one or more such family members. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary interest in the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Corporation may deem appropriate. Should
the Optionee die while holding this option, then this option shall be
transferred in accordance with Optionee's will or the laws of descent and
distribution.

<PAGE>

4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in a series of successive monthly installments as specified in the
Grant Notice. As the option becomes exercisable for one or more of those
installments, the installments shall accumulate and the option shall remain
exercisable for the accumulated installments until the Expiration Date or sooner
termination of the option term under Paragraph 5 or 6.

(i) Should Optionee cease to remain in Service for any
reason while this option is outstanding, then the exercise period for this
option shall be reduced to a period of three (3) years measured from the
date of such cessation of Service, but in no event shall this option be
exercisable at any time after the Expiration Date.

(ii) Should Optionee die while this option is outstanding,
then the personal representative of Optionee's estate or the person or
persons to whom the option is transferred pursuant to Optionee's will or in
accordance with the laws of descent and distribution shall have the right
to exercise this option. Such right shall lapse and this option shall
cease to be outstanding upon the EARLIER of (i) the expiration of the three
(3)-year period measured from the date of Optionee's cessation of Service
or (ii) the Expiration Date.

(iii) During the applicable post-Service exercise period,
this option may not be exercised in the aggregate for more than the number
of Option Shares for which the option is exercisable at the time of
Optionee's cessation of Service. Upon the expiration of such limited
exercise period or (if earlier) upon the Expiration Date, this option shall
terminate and cease to be outstanding for any exercisable Option Shares for
which the option has not been exercised. However, this option shall
immediately, upon Optionee's cessation of Service for any reason, terminate
and cease to be outstanding with respect to any and all Option Shares for
which the option is not otherwise at that time exercisable.

(iv) In the event of a Corporate Transaction or Change in
Control, the provisions of Paragraph 6 or Paragraph 7 shall govern the
period for which this option is to remain exercisable following Optionee's
cessation of Service and shall supersede any provisions to the contrary in
this Paragraph 5.

6. CORPORATE TRANSACTION.

<PAGE>

(a) This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable for all the Option
Shares, shall automatically accelerate so that this option shall, immediately
prior to the effective date of such Corporate Transaction, become exercisable
for all the Option Shares at the time subject to this option and may be
exercised for any or all of those Option Shares as fully-vested shares of Common
Stock.

(b) This option shall be assumed by the successor corporation
(or parent thereof) in connection with such Corporate Transaction and shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
to the number and class of securities which would have been issuable to Optionee
in consummation of such Corporate Transaction had the option been exercised
immediately prior to such Corporate Transaction, and appropriate adjustments
shall also be made to the Exercise Price, PROVIDED the aggregate Exercise Price
shall remain the same.

(c) This option, as so accelerated and assumed, shall remain
exercisable until the EARLIER of (i) the expiration of the three (3)-year period
measured from the date of Optionee's cessation of Service or (ii) the specified
Expiration Date.

7. CHANGE IN CONTROL. All Option Shares subject to this option at
the time of a Change in Control but not otherwise vested shall automatically
vest so that this option shall, immediately prior to the effective date of such
Change in Control, become fully exercisable for all of the Option Shares at the
time subject to this option and may be exercised for all or any portion of such
shares as fully-vested shares of Common Stock. This option shall remain
exercisable for such fully-vested Option Shares until the EARLIEST to occur of
(i) the specified Expiration Date, (ii) the expiration of the three (3)-year
period measured from the date of Optionee's cessation of Service.

9. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the number and/or
class of securities subject to this option and (ii) the Exercise Price in order
to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.

<PAGE>

10. MANNER OF EXERCISING OPTION.

(i) Execute and deliver to the Corporation a Notice of
Exercise for the number of Option Shares for which the option is exercised.

(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:

(A) cash or check made payable to the Corporation;

(B) shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date; or

(C) through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable written
instructions (I) to a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate Exercise Price payable
for the purchased shares plus all applicable Federal, state and local
income and employment taxes required to be withheld by the Corporation
by reason of such exercise and (II) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale.

Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise.

(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if other
than Optionee) have the right to exercise this option.

(iv) Make appropriate arrangements with the Corporation
(or Parent or Subsidiary employing or retaining Optionee) for the

<PAGE>

satisfaction of all Federal, state and local income and employment tax
withholding requirements applicable to the option exercise.

11. COMPLIANCE WITH LAWS AND REGULATIONS.

12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraph 3, the provisions of this Agreement shall inure to the benefit of,
and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns and the legal representatives, heirs and legatees
of Optionee's estate.

13. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to
be given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on the Grant Notice.
All notices shall be deemed effective upon personal delivery or upon deposit in
the U.S. mail, postage prepaid and properly addressed to the party to be
notified.

<PAGE>

15. GOVERNING LAW. The interpretation, performance and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.

16. EXCESS SHARES. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval be issued under the Plan, then this option shall be
void with respect to such excess shares, unless stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of the Plan.

17. LEAVE OF ABSENCE. The following provisions shall apply upon the
Optionee's commencement of an authorized leave of absence:

(i) The exercise schedule in effect under the Grant
Notice shall be frozen as of the first day of the authorized leave, and the
option shall not become exercisable for any additional installments of the
Option Shares during the period Optionee remains on such leave.

(ii) Should Optionee resume active Employee status
within sixty (60) days after the start date of the authorized leave,
Optionee shall, for purposes of the exercise schedule set forth in the
Grant Notice, receive Service credit for the entire period of such leave.
If Optionee does not resume active Employee status within such sixty
(60)-day period, then Service credit shall be given for the period of the
leave.

(iii) If the option is designated as an Incentive Stock
Option in the Grant Notice, then the following additional provision shall
apply:

If the leave of absence continues for more than
ninety (90) days, then the option shall automatically convert to a
non-qualified option under the federal tax laws on the ninety-first
(91st) day of such leave, unless the Optionee's reemployment rights
are guaranteed by statute or by written agreement. Following any such
conversion of the option, all subsequent exercises of such option,
whether effected before or after Optionee's return to active Employee
status, shall result in an immediate taxable event, and the
Corporation shall be required to collect from Optionee the federal,
state and local income and employment withholding taxes applicable to
such exercise.

(iv) In no event shall this option become exercisable
for any additional Option Shares or otherwise remain outstanding if

<PAGE>

Optionee does not resume Employee status prior to the Expiration Date of the
option term.

7.
<PAGE>

APPENDIX

The following definitions shall be in effect under the Agreement:

A. AGREEMENT shall mean this Salary Investment Stock Option Agreement.