**Exhibit 10.1**

 

**RIGELPHARMACEUTICALS, INC.**

 

**2000EQUITY INCENTIVE PLAN**

 

**ADOPTEDJANUARY 27, 2000**

**APPROVEDBY STOCKHOLDERS MARCH 15, 2000**

**AMENDEDDECEMBER 13, 2002**

**AMENDEDAND RESTATED APRIL 24, 2003**

**APPROVEDBY STOCKHOLDERS JUNE 20, 2003**

**AMENDEDAND RESTATED APRIL 22, 2005**

**APPROVEDBY STOCKHOLDERS JUNE 2, 2005**

**AMENDEDAND RESTATED MARCH 10, 2006 AND APRIL 18, 2006**

**APPROVEDBY STOCKHOLDERS MAY 30, 2006**

**AMENDEDJANUARY 31, 2007**

**APPROVEDBY STOCKHOLDERS 29, 2007**

**AMENDEDFEBRUARY 21, 2008**

**APPROVEDBY STOCKHOLDERS MAY 29, 2008**

**AMENDED MAY 19,2009**

**TERMINATIONDATE: APRIL 24, 2013**

 

**1.**                                      PURPOSES.

 

**(a)****                                 **The Plan is an amendment and restatementof, and is intended to supersede and replace, the Company’s 1997 Stock OptionPlan.

 

**(b)****                                 **The persons eligible to receive Stock Awardsare the Employees, Directors and Consultants of the Company and its Affiliates.

 

**(c)****                                 **The purpose of the Plan is to provide ameans by which eligible recipients of Stock Awards may be given an opportunityto benefit from increases in value of the Common Stock through the granting ofthe following Stock Awards:  (i) IncentiveStock Options, (ii) Nonstatutory Stock Options, (iii) stock bonusesand (iv) rights to acquire restricted stock.

 

**(d)****                                 **The Company, by means of the Plan, seeksto retain the services of the group of persons eligible to receive StockAwards, to secure and retain the services of new members of this group and toprovide incentives for such persons to exert maximum efforts for the success ofthe Company and its Affiliates.

 

**(e)****                                 **Any stock awards granted under the RigelPharmaceuticals, Inc. 2001 Non-Officer Equity Incentive Plan (the “Non-OfficerPlan”) prior to April 24, 2003 shall be governed by the terms of theNon-Officer Plan as in effect immediately prior to April 24, 2003, as setforth in Appendix A to this Plan.  TheCommon Stock that was reserved for issuance under the Non-Officer Plan,including the Common Stock that may be issued pursuant to outstanding stockawards granted under the Non-Officer Plan prior to April 24, 2003, shallbe included in the aggregate share reserve for this Plan, as set forth insubsection 4(a).

 

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**2.**                                      DEFINITIONS.

** **

**(a)****                                 *****“Affiliate”*** means, at the time of determination, any“parent” or “subsidiary” of the Company as such terms are defined in Rule 405of the Securities Act.  The Board shallhave the authority to determine the time or times at which “parent” or “subsidiary”status is determined within the foregoing definition.

 

**(b)****                                 *****“Board”*** means the Board of Directors of theCompany.

 

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

 

**(d)****                                 *****“Committee”*** means a committee of one or more membersof the Board appointed by the Board in accordance with subsection 3(c).

 

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

 

**(f)****                                   *****“Company”*** means Rigel Pharmaceuticals, Inc.,a Delaware corporation.

 

**(g)****                                *****“Consultant”*** means any person, including an advisor, (i) engagedby the Company or an Affiliate to render consulting or advisory services andwho is compensated for such services or (ii) who is a member of the Boardof Directors of an Affiliate.  However,the term “Consultant” shall not include either Directors who are notcompensated by the Company for their services as Directors or Directors who aremerely paid a director’s fee by the Company for their services as Directors.

 

**(h)****                                *****“Continuous Service”*** means that the Participant’s servicewith the Company or an Affiliate, whether as an Employee, Director orConsultant, is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to haveterminated merely because of a change in the capacity in which the Participantrenders service to the Company or an Affiliate as an Employee, Consultant orDirector or a change in the entity for which the Participant renders suchservice, provided that**there is nointerruption or termination of the Participant’s service.  For example, a change in status withoutinterruption from an Employee of the Company to a Consultant of an Affiliate ora Director will not constitute an interruption of Continuous Service.  The Board or the chief executive officer ofthe Company, in that party’s sole discretion, may determine whether ContinuousService shall be considered interrupted in the case of any leave of absenceapproved by that party, including sick leave, military leave or any otherpersonal leave.

 

**(i)****                                   *****“Covered Employee”*** means the chief executive officer andthe four (4) other highest compensated officers of the Company for whomtotal compensation is required to be reported to stockholders under theExchange Act, as determined for purposes of Section 162(m) of theCode.

 

**(j)****                                   *****“Director”*** means a member of the Board of Directorsof the Company.

 

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

 

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**(l)****                                   *****“Employee”*** means any person employed by the Companyor an Affiliate.  Mere service as aDirector or payment of a director’s fee by the Company or an Affiliate shallnot be sufficient to constitute “employment” by the Company or an Affiliate.

 

**(m)****                             *****“Exchange Act”*** means the Securities Exchange Act of1934, as amended.

 

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

 

**(i)****                                   **If the Common Stock is listed on anyestablished stock exchange or traded on the Nasdaq National Market or theNasdaq SmallCap Market, the Fair Market Value of a share of Common Stock shallbe the closing sales price for such stock (or the closing bid, if no sales werereported) as quoted on such exchange or market (or the exchange or market withthe greatest volume of trading in the Common Stock) on the last market tradingday prior to the day of determination, as reported in *The WallStreet Journal*****or such other sourceas the Board deems reliable.

 

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

 

**(o)****                                 *****“Incentive Stock Option”*** means an Option intended to qualify asan incentive stock option within the meaning of Section 422 of the Codeand the regulations promulgated thereunder.

 

**(p)****                                 *****“Non-Employee Director”*******means a Director who either (i) is not a currentEmployee or Officer of the Company or its parent or a subsidiary, does notreceive compensation (directly or indirectly) from the Company or its parent ora subsidiary for services rendered as a consultant or in any capacity otherthan as a Director (except for an amount as to which disclosure would not be requiredunder Item 404(a) of Regulation S-K promulgated pursuant to the SecuritiesAct (“Regulation S-K”)), does not possess an interest in any other transactionas to which disclosure would be required under Item 404(a) of RegulationS-K and is not engaged in a business relationship as to which disclosure wouldbe required under Item 404(b) of Regulation S-K; or (ii) isotherwise considered a “non-employee director” for purposes of Rule 16b-3.

 

**(q)****                                 *****“Nonstatutory Stock Option”*** means an Option not intended to qualifyas an Incentive Stock Option.

 

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

 

**(s)****                                 *****“Option”*** means an Incentive Stock Option or aNonstatutory Stock Option granted pursuant to the Plan.

 

**(t)****                                   *****“Option Agreement”*** means a written agreement between theCompany and an Optionholder evidencing the terms and conditions of anindividual Option grant.  Each OptionAgreement shall be subject to the terms and conditions of the Plan.

 

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**(u)****                                *****“Optionholder”*** means a person to whom an Option isgranted pursuant to the Plan or, if applicable, such other person who holds anoutstanding Option.

 

**(v)****                                  *****“Outside Director”*** means a Director who either (i) isnot a current employee of the Company or an “affiliated corporation” (withinthe meaning of Treasury Regulations promulgated under Section 162(m) ofthe Code), is not a former employee of the Company or an “affiliatedcorporation” receiving compensation for prior services (other than benefitsunder a tax qualified pension plan), was not an officer of the Company or an “affiliatedcorporation” at any time and is not currently receiving direct or indirect remunerationfrom the Company or an “affiliated corporation” for services in any capacityother than as a Director or (ii) is otherwise considered an “outsidedirector” for purposes of Section 162(m) of the Code.

 

**(w)****                               *****“Participant”*** means a person to whom a Stock Award isgranted pursuant to the Plan or, if applicable, such other person who holds anoutstanding Stock Award.

 

**(x)****                                 *****“PerformanceCriteria”***means the one or more criteria that the Board shall select for purposes ofestablishing the Performance Goals for a Performance Period.  The Performance Criteria that shall be usedto establish such Performance Goals may be based on any one of, or combinationof, the following: (i) earnings per share; (ii) earnings beforeinterest, taxes and depreciation; (iii) earnings before interest, taxes,depreciation and amortization (EBITDA); (iv) net earnings; (v) totalshareholder return; (vi) return on equity; (vii) return on assets,investment, or capital employed; (viii) operating margin; (ix) grossmargin; (x) operating income; (xi) net income (before or after taxes);(xii) net operating income; (xiii) net operating income after tax; (xiv) pre-and after-tax income; (xv) pre-tax profit; (xvi) operating cash flow; (xvii)sales or revenue targets; (xviii) increases in revenue or product revenue;(xix) expenses and cost reduction goals; (xx) improvement in or attainment ofexpense levels; (xxi) improvement in or attainment of working capital levels;(xxii) economic value added (or an equivalent metric); (xxiii) market share;(xxiv) cash flow; (xxv) cash flow per share; (xxvi) share price performance;(xxvii) debt reduction; (xxviii) implementation or completion of projects orprocesses; (xxix) customer satisfaction; (xxx) total stockholder return; (xxxi)stockholders’ equity; and (xxxii) other measures of performance selected by theBoard.  Partial achievement of thespecified criteria may result in the payment or vesting corresponding to thedegree of achievement as specified in the Stock Award Agreement.  The Board shall, in its sole discretion,define the manner of calculating the Performance Criteria it selects to use forsuch Performance Period.

 

**(y)****                                 *****“PerformanceGoals”*** means,for a Performance Period, the one or more goals established by the Board forthe Performance Period based upon the Performance Criteria. The Board isauthorized at any time in its sole discretion, to adjust or modify thecalculation of a Performance Goal for such Performance Period in order toprevent the dilution or enlargement of the rights of Participants, (a) inthe event of, or in anticipation of, any unusual or extraordinary corporateitem, transaction, event or development; (b) in recognition of, or inanticipation of, any other unusual or nonrecurring events affecting theCompany, or the financial statements of the Company, or in response to, or inanticipation of, changes in applicable laws, regulations, accountingprinciples, or business conditions; or (c) in view of the Board’sassessment of the business strategy of the Company, performance of comparableorganizations, economic and business conditions, and any other circumstancesdeemed relevant.  Specifically, the Boardis authorized to make adjustment in the method of calculating attainment ofPerformance Goals and 

 

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objectives for a Performance Period as follows: (i) toexclude the dilutive effects of acquisitions or joint ventures; (ii) toassume that any business divested by the Company achieved performanceobjectives at targeted levels during the balance of a Performance Periodfollowing such divestiture; and (iii) to exclude the effect of any changein the outstanding shares of common stock of the Company by reason of any stockdividend or split, stock repurchase, reorganization, recapitalization, merger,consolidation, spin-off, combination or exchange of shares or other similarcorporate change, or any distributions to common shareholders other thanregular cash dividends.  In addition, theBoard is authorized to make adjustment in the method of calculating attainmentof Performance Goals and objectives for a Performance Period as follows: (i) toexclude restructuring and/or other nonrecurring charges; (ii) to excludeexchange rate effects, as applicable, for non-U.S. dollar denominated net salesand operating earnings; (iii) to exclude the effects of changes togenerally accepted accounting standards required by the Financial AccountingStandards Board; (iv) to exclude the effects to any statutory adjustmentsto corporate tax rates; (v) to exclude the impact of any “extraordinaryitems” as determined under generally accepted accounting principles; and (vi) toexclude any other unusual, non-recurring gain or loss or other extraordinaryitem.

 

**(z)****                                 *****“PerformancePeriod”*** meansthe one or more periods of time, which may be of varying and overlappingdurations, as the Board may select, over which the attainment of one or morePerformance Goals will be measured for the purpose of determining a Participant’sright to and the payment of a Stock Award.

 

**(aa)****                           *****“Plan”*** means this Rigel Pharmaceuticals, Inc.2000 Equity Incentive Plan.

 

**(bb)****                           *****“Rule 16b-3”*** means Rule 16b-3 promulgated underthe Exchange Act or any successor to Rule 16b-3, as in effect from time totime.

 

**(cc)****                           *****“Securities Act”*** means the Securities Act of 1933, asamended.

 

**(dd)****                           *****“Stock Award”*** means any right granted under the Plan,including an Option, a stock bonus, a right to acquire restricted stock, astock unit award and a stock appreciation right.

 

**(ee)****                           *****“Stock Award Agreement”*** means a written agreement between theCompany and a holder of a Stock Award evidencing the terms and conditions of anindividual Stock Award grant.  Each StockAward Agreement shall be subject to the terms and conditions of the Plan.

 

**(ff)****                               *****“Ten Percent Stockholder”*** means a person who owns (or is deemed toown pursuant to Section 424(d) of the Code) stock possessing morethan ten percent (10%) of the total combined voting power of all classes ofstock of the Company or of any of its Affiliates.

 

**3.**                                      ADMINISTRATION.

** **

**(a)****                                 ****Administration by Board.** The Board shall administer the Plan unless and until the Board delegatesadministration to a Committee, as provided in subsection 3(c).

 

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

 

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**(i)****                                   **To determine from time to time which ofthe persons eligible under the Plan shall be granted Stock Awards; when and howeach Stock Award shall be granted; what type or combination of types of StockAward shall be granted; the provisions of each Stock Award granted (which neednot be identical), including the time or times when a person shall be permittedto receive Common Stock pursuant to a Stock Award; and the number of shares ofCommon Stock with respect to which a Stock Award shall be granted to each suchperson.

 

**(ii)****                               **To construe and interpret the Plan andStock Awards granted under it, and to establish, amend and revoke rules andregulations for its administration.  TheBoard, in the exercise of this power, may correct any defect, omission orinconsistency in the Plan or in any Stock Award Agreement, in a manner and tothe extent it shall deem necessary or expedient to make the Plan fullyeffective.

 

**(iii)****                           **To amend the Plan or a Stock Award asprovided in Section 12.

 

**(iv)****                              **To terminate or suspend the Plan asprovided in Section 13.

 

**(v)****                                  **Generally, to exercise such powers and toperform such acts as the Board deems necessary or expedient to promote the bestinterests of the Company which are not in conflict with the provisions of thePlan.

 

**(c)****                                 ****Delegation to Committee.**

 

**(i)****                                   ****General.** The Board may delegate administration of the Plan to a Committee orCommittees of one (1) or more members of the Board, and the term “Committee”shall apply to any person or persons to whom such authority has beendelegated.  If administration isdelegated to a Committee, the Committee shall have, in connection with theadministration of the Plan, the powers theretofore possessed by the Board,including the power to delegate to a subcommittee any of the administrativepowers the Committee is authorized to exercise (and references in this Plan tothe Board shall thereafter be to the Committee or subcommittee), subject,however, to such resolutions, not inconsistent with the provisions of the Plan,as may be adopted from time to time by the Board.  The Board may abolish the Committee at anytime and revest in the Board the administration of the Plan.

 

**(ii)****                               ****Committee Composition when CommonStock is Publicly Traded.**  At such time as the CommonStock is publicly traded, in the discretion of the Board, a Committee mayconsist solely of two or more Outside Directors, in accordance with Section 162(m) ofthe Code, and/or solely of two or more Non-Employee Directors, in accordancewith Rule 16b-3.  Within the scopeof such authority, the Board or the Committee may (1) delegate to acommittee of one or more members of the Board who are not Outside Directors theauthority to grant Stock Awards to eligible persons who are either (a) notthen Covered Employees and are not expected to be Covered Employees at the timeof recognition of income resulting from such Stock Award or (b) notpersons with respect to whom the Company wishes to comply with Section 162(m) ofthe Code and/or (2) delegate to a committee of one or more members of theBoard who are not Non-Employee Directors the authority to grant Stock Awards toeligible persons who are not then subject to Section 16 of the ExchangeAct.

 

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**(d)****                                 ****Effect ofBoard’s Decision.** All determinations, interpretations and constructionsmade by the Board in good faith shall not be subject to review by any personand shall be final, binding and conclusive on all persons.

 

**(e)****                                 ****Cancellation andRe-Grant of Stock Awards**.  Notwithstanding anything tothe contrary in the Plan, neither the Board nor any Committee shall have theauthority to: (i) reprice any outstanding Stock Awards under the Plan, (ii) canceland re-grant any outstanding Stock Awards under the Plan, or (iii) effectany other action that is treated as a repricing under generally acceptedaccounting principles unless, in each case, the stockholders of the Companyhave approved such an action within twelve (12) months prior to such an event.

 

**4.**                                      SHARESSUBJECT TO THE PLAN.

** **

**(a)****                                 ****Share Reserve.** Subject to the provisions of subsection 11(a) relating toadjustments upon changes in Common Stock, the shares of Common Stock that maybe issued pursuant to Stock Awards shall not exceed in the aggregate 8,410,403 shares of Common Stock, which numberconsists of (i) 1,058,333 shares of Common Stock initially reserved forissuance under the Plan plus (ii) 1,600,000 shares of Common Stockapproved by the Board in April 2003 and subsequently approved by theCompany’s stockholders plus (iii) 388,889 shares of Common Stock that wereoriginally reserved for issuance under the Non-Officer Plan (prior to thetermination of such plan) as approved by the Board in April 2003 and subsequentlyapproved by the Company’s stockholders plus (iv) 296,022 shares and392,159 shares of Common Stock made available for issuance on December 2,2003 and 2004, respectively, pursuant to the evergreen provision that wasapproved by the Board and the Company’s stockholders in April 2003 (andsubsequently terminated by the Board and stockholders in April 2005) plus (v) 2,275,000shares of Common Stock approved by the Board in April 2005 andsubsequently approved by the Company’s stockholders plus (vi) 500,000shares of Common Stock approved by the Board in April 2006 andsubsequently approved by the Company’s stockholders plus (vii) 1,900,000shares of Common stock approved by the Board in January 2007 andsubsequently approved by the Company’s stockholders plus (viii) 3,350,000shares of Common stock approved by the Board in February 2008 andsubsequently approved by the Company’s stockholders.

 

**(b)****                                 **Subject to subsection 4(c), the number ofshares available for issuance under the Plan shall be reduced by: (i) one (1) sharefor each share of stock issued pursuant to (A) an Option granted under Section 6,or (B) a Stock Appreciation Right granted under subsection 7(d) withrespect to which the strike price is at least one hundred percent (100%) of theFair Market Value of the underlying Common Stock on the date of grant; and (ii) one and five tenths (1.5) shares foreach share of Common Stock issued pursuant to a Stock Bonus Award, RestrictedStock Award, Stock Unit Award or Performance Stock Award.

 

**(c)****                                 ****Reversion of Shares to the ShareReserve**.

 

**(i)****                                   ****Shares Available For SubsequentIssuance.**  If any (i) Stock Award, including anystock awards granted under the Non-Officer Plan prior to April 24, 2003,shall for any reason expire or otherwise terminate, in whole or in part,without having been exercised in full, (ii) shares of Common Stock issuedto a Participant pursuant to a Stock Award, including 

 

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any shares of Common Stock issued pursuant to stockawards under the Non-Officer Plan prior to April 24, 2003, are forfeitedto or repurchased by the Company, including any repurchase or forfeiture causedby the failure to meet a contingency or condition required for the vesting ofsuch shares, or (iii) Stock Award is settled in cash, then the shares ofCommon Stock not issued under such Stock Award, or forfeited to or repurchasedby the Company, shall revert to and again become available for issuance underthe Plan.  To the extent there is issueda share of Common Stock pursuant to a Stock Award that counted as****oneand five tenths (1.5) shares against the number of shares available forissuance under the Plan pursuant to subsection 4(b) and such share ofCommon Stock again becomes available for issuance under the Plan pursuant tothis subsection 4(c)(i), then the number of shares of Common Stock availablefor issuance under the Plan shall increase by one and five tenths (1.5) shares.

 

**(ii)****                               ****Shares Not Available ForSubsequent Issuance.**  If any shares subject to a Stock Award arenot delivered to a Participant because the Stock Award is exercised through areduction of shares subject to the Stock Award (*i.e*.,“net exercised”), the number of shares that are not delivered to theParticipant shall not remain available for issuance under the Plan.  If any shares subject to a Stock Award arenot delivered to a Participant because such shares are withheld in satisfactionof the withholding of taxes incurred in connection with the exercise of anOption or stock appreciation right, or the issuance of shares under a stockbonus award, restricted stock award or stock unit award, the number of sharesthat are not delivered to the Participant shall not remain available forsubsequent issuance under the Plan.  Ifthe exercise price of any Stock Award is satisfied by tendering shares ofCommon Stock held by the Participant (either by actual delivery orattestation), then the number of shares so tendered shall not remain availablefor subsequent issuance under the Plan.

 

**(d)****                                 ****Source of Shares.** The shares of Common Stock subject to the Plan may be unissued shares orreacquired shares, bought on the market or otherwise.

 

**5.**                                      ELIGIBILITY.

** **

**(a)****                                 ****Eligibility for Specific StockAwards**.  Incentive Stock Options maybe granted only to employees of the Company or a “parent corporation” or “subsidiarycorporation” thereof (as such terms are defined in Sections 424(e) and (f) ofthe Code).  Stock Awards other thanIncentive Stock Options may be granted to Employees, Directors and Consultants;*provided, however*, NonstatutoryStock Options and stock appreciation rights may not be granted to Employees,Directors, and Consultants who are providing Continuous Services only to any “parent”of the Company, as such term is defined in Rule 405 promulgated under theSecurities Act, unless such Stock Awards comply with the distributionrequirements of Section 409A of the Code.

 

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

 

**(c)****                                 ****Section 162(m) Limitation.** Subject to the provisions of Section 11 relating to adjustmentsupon changes in the shares of Common Stock, no Employee shall be eligible to be

 

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granted Options covering more than one hundredsixty-six thousand six hundred sixty-six (166,666) shares of Common Stockduring any calendar year.

 

**(d)****                                 ****Consultants.**

 

**(i)****                                   **A Consultant shall not be eligible forthe grant of a Stock Award if, at the time of grant, a Form S-8Registration Statement under the Securities Act (“Form S-8”) is notavailable to register either the offer or the sale of the Company’s securitiesto such Consultant because of the nature of the services that the Consultant isproviding to the Company, or because the Consultant is not a natural person, oras otherwise provided by the rules governing the use of Form S-8,unless the Company determines both (i) that such grant (A) shall beregistered in another manner under the Securities Act (*e.g.,*on a Form S-3 Registration Statement) or (B) does not require registrationunder the Securities Act in order to comply with the requirements of theSecurities Act, if applicable, and (ii) that such grant complies with thesecurities laws of all other relevant jurisdictions.

 

**(ii)****                               **Form S-8 generally is available toconsultants and advisors only if (i) they are natural persons; (ii) theyprovide bona fide services to the issuer, its parents, its majority-ownedsubsidiaries or majority-owned subsidiaries of the issuer’s parent; and (iii) theservices are not in connection with the offer or sale of securities in acapital-raising transaction, and do not directly or indirectly promote ormaintain a market for the issuer’s securities.

 

**6.**                                      OPTIONPROVISIONS.

** **

Each Option shall be in such form and shall contain such terms and conditionsas the Board shall deem appropriate.  AllOptions shall be separately designated Incentive Stock Options or NonstatutoryStock Options at the time of grant, and, if certificates are issued, a separatecertificate or certificates will be issued for shares of Common Stock purchasedon exercise of each type of Option.  Theprovisions of separate Options need not be identical, but each Option shallinclude (through incorporation of provisions hereof by reference in the Optionor otherwise) the substance of each of the following provisions:

 

**(a)****                                 ****Term.** Subject to the provisions of subsection 5(b) regarding Ten PercentStockholders, no Option shall be exercisable after the expiration of ten (10) yearsfrom the date it was granted.

 

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

 

**(c)****                                 ****Exercise Price of a NonstatutoryStock Option.**  The exercise price of each Nonstatutory StockOption shall be not less than one hundred percent (100%) of the Fair MarketValue of the Common Stock subject to the Option on the date the Option isgranted.  

 

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Notwithstanding the foregoing, a Nonstatutory StockOption may be granted with an exercise price lower than that set forth in thepreceding sentence if such Option is granted pursuant to an assumption orsubstitution for another option in a manner satisfying the provisions of Section 424(a) ofthe Code.

 

**(d)****                                 ****Consideration.** The purchase price of Common Stock acquired pursuant to an Option shallbe paid, to the extent permitted by applicable statutes and regulations, either(i) in cash at the time the Option is exercised or (ii) at thediscretion of the Board (1) by delivery to the Company of other CommonStock; (2) according to a deferred payment or other similar arrangementwith the Optionholder; (3) by a “net exercise” arrangement pursuant towhich the Company will reduce the number of shares of Common Stock issued uponexercise by the largest whole number of shares with a Fair Market Value thatdoes not exceed the aggregate exercise price; *provided,however,* that the Company shall accept a cash or other payment fromthe Participant to the extent of any remaining balance of the aggregateexercise price not satisfied by such holding back of whole shares; *provided, further, however,* that shares ofCommon Stock will no longer be outstanding under an Option and will not beexercisable thereafter to the extent that (i) shares are used to pay theexercise price pursuant to the “net exercise,” (ii) shares are deliveredto the Participant as a result of such exercise, and (iii) shares arewithheld to satisfy tax withholding obligations; or (4) in any other formof legal consideration that may be acceptable to the Board.  At any time that the Company is incorporatedin Delaware, payment of the Common Stock’s “par value,” as defined in theDelaware General Corporation Law, shall not be made by deferred payment.

 

In the case of any deferred payment arrangement, interest shall becompounded at least annually and shall be charged at the minimum rate ofinterest necessary to avoid (1) the treatment as interest, under anyapplicable provisions of the Code, of any amounts other than amounts stated tobe interest under the deferred payment arrangement and (2) the treatmentof the Option as a variable award for financial accounting purposes.

 

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

 

**(i)****                                   ****Restrictions on Transfer.** An Option shall not be transferable except by will or by the laws ofdescent and distribution and shall be exercisable during the lifetime of theOptionholder only by the Optionholder; *provided, however*,that the Board may, in its sole discretion, permit transfer of the Option in amanner that is not prohibited by applicable tax and securities laws upon theOptionholder’s request.  Except asexplicitly provided herein, an Option may not be transferred for consideration.

 

**(ii)****                               ****Domestic Relations Orders.** Notwithstanding the foregoing, an Option may be transferred pursuant toa domestic relations order; *provided, however*,that if an Option is an Incentive Stock Option, such Option may be deemed to bea Nonstatutory Stock Option as a result of such transfer.

 

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**(iii)****                           ****Beneficiary Designation.** Notwithstanding the foregoing, the Optionholder may, by deliveringwritten notice to the Company, in a form provided by or otherwise satisfactoryto the Company and any broker designated by the Company to effect Option exercises,designate a third party who, in the event of the death of the Optionholder,shall thereafter be entitled to exercise the Option and receive the CommonStock or other consideration resulting from such exercise.  In the absence of such a designation, theexecutor or administrator of the Optionholder’s estate shall be entitled toexercise the Option and receive the Common Stock or other considerationresulting from such exercise.

 

**(f)****                                   ****Vesting Generally.** The total number of shares of Common Stock subject to an Option may, butneed not, vest and therefore become exercisable in periodic installments thatmay, but need not, be equal.  The Optionmay be subject to such other terms and conditions on the time or times when itmay be exercised (which may be based on performance or other criteria) as theBoard may deem appropriate.  The vestingprovisions of individual Options may vary. The provisions of this subsection 6(g) are subject to any Optionprovisions governing the minimum number of shares of Common Stock as to whichan Option may be exercised.

 

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

 

**(h)****                                ****Extension of Termination Date.** An Optionholder’s Option Agreement may also provide that if the exerciseof the Option following the termination of the Optionholder’s ContinuousService (other than upon the Optionholder’s death or Disability) would beprohibited at any time solely because the issuance of shares of Common Stockwould violate the registration requirements under the Securities Act, then theOption shall terminate on the earlier of (i) the expiration of the term ofthe Option set forth in the Option Agreement or (ii) the expiration of atotal period of three (3) months (that need not be consecutive) after thetermination of the Optionholder’s Continuous Service during which the exerciseof the Option would not be in violation of such registration requirements.

 

**(i)****                                   ****Disability of Optionholder.** In the event that an Optionholder’s Continuous Service terminates as aresult of the Optionholder’s Disability, the Optionholder may exercise his orher Option (to the extent that the Optionholder was entitled to exercise suchOption as of the date of termination), but only within such period of timeending on the earlier of (i) the date twelve (12) months following suchtermination (or such longer or shorter period specified in the OptionAgreement) or (ii) the expiration of the term of the Option as set forthin the Option Agreement.  If, aftertermination, the Optionholder does not exercise his or her Option within thetime specified herein, the Option shall terminate.

 

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**(j)****                                   ****Death of Optionholder.** In the event (i) an Optionholder’s Continuous Service terminates asa result of the Optionholder’s death or (ii) the Optionholder dies withinthe period (if any) specified in the Option Agreement after the termination ofthe Optionholder’s Continuous Service for a reason other than death, then theOption may be exercised (to the extent the Optionholder was entitled toexercise such Option as of the date of death) by the Optionholder’s estate, bya person who acquired the right to exercise the Option by bequest orinheritance or by a person designated to exercise the Option upon theOptionholder’s death pursuant to subsection 6(e) or 6(f), but only withinthe period ending on the earlier of (1) the date eighteen (18) monthsfollowing the date of death (or such longer or shorter period specified in theOption Agreement) or (2) the expiration of the term of such Option as setforth in the Option Agreement.  If, afterdeath, the Option is not exercised within the time specified herein, the Optionshall terminate.

 

**(k)****                               ****Early Exercise.** The Option may, but need not, include a provision whereby theOptionholder may elect at any time before the Optionholder’s Continuous Serviceterminates to exercise the Option as to any part or all of the shares of CommonStock subject to the Option prior to the full vesting of the Option.  Any unvested shares of Common Stock so purchasedmay be subject to a repurchase option in favor of the Company or to any otherrestriction the Board determines to be appropriate.  The Company will not exercise its repurchaseoption until at least six (6) months (or such longer or shorter period oftime required to avoid a charge to earnings for financial accounting purposes)have elapsed following exercise of the Option unless the Board otherwisespecifically provides in the Option.

 

**(l)****                                   ****Non-Exempt Employees**. No Option granted to an Employee who is a non-exempt employee forpurposes of the Fair Labor Standards Act of 1938, as amended, shall be firstexercisable for any shares of Common Stock until at least six months followingthe date of grant of the Option. Notwithstanding the foregoing, consistent withthe provisions of the Worker Economic Opportunity Act, (i) in the event of the Participant’s death orDisability, (ii) upon a Corporate Transaction (as defined in section11(c)) in which such Option is not assumed, continued, or substituted, or (iii) uponthe Participant’s retirement (as such term may be defined in the Participant’sOption Agreement or in another applicable agreement or in accordance with theCompany’s then current employment policies and guidelines), any such vestedOptions may be exercised earlier than six months following the date ofgrant.  The foregoing provision isintended to operate so that any income derived by a non-exempt employee inconnection with the exercise or vesting of an Option will be exempt from his orher regular rate of pay.

 

**7.**                                      PROVISIONSOF STOCK AWARDS OTHER THAN OPTIONS.

** **

**(a)****                                 ****Stock Bonus Awards.** Each stock bonus agreement shall be in such form and shall contain suchterms and conditions as the Board shall deem appropriate.  The terms and conditions of stock bonus agreementsmay change from time to time, and the terms and conditions of separate stockbonus agreements need not be identical, but each stock bonus agreement shallinclude (through incorporation of provisions hereof by reference in theagreement or otherwise) the substance of each of the following provisions:

 

**(i)****                                   ****Consideration.**  Astock bonus may be awarded in consideration for past services actually renderedto the Company or an Affiliate for its benefit.

 

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**(ii)****                               ****Vesting.** Shares of Common Stock awarded under the stock bonus agreement may, butneed not, be subject to a share repurchase option in favor of the Company inaccordance with a vesting schedule to be determined by the Board.

 

**(iii)****                           ****Termination of Participant’sContinuous Service.**  In the event a Participant’s ContinuousService terminates, the Company may reacquire any or all of the shares ofCommon Stock held by the Participant which have not vested as of the date oftermination under the terms of the stock bonus agreement.

 

**(iv)****                              ****Transferability.** Rights to acquire shares of Common Stock under the stock bonus agreementshall be transferable by the Participant only upon such terms and conditions asare set forth in the stock bonus agreement, as the Board shall determine in itsdiscretion, so long as Common Stock awarded under the stock bonus agreementremains subject to the terms of the stock bonus agreement.

 

**(b)****                                 ****Restricted Stock Awards.** Each restricted stock purchase agreement shall be in such form and shallcontain such terms and conditions as the Board shall deem appropriate.  The terms and conditions of the restrictedstock purchase agreements may change from time to time, and the terms andconditions of separate restricted stock purchase agreements need not beidentical, but each restricted stock purchase agreement shall include (throughincorporation of provisions hereof by reference in the agreement or otherwise)the substance of each of the following provisions:

 

**(i)****                                   ****Purchase Price.** The purchase price under each restricted stock purchase agreement shallbe such amount as the Board shall determine and designate in such restrictedstock purchase agreement.  The purchaseprice shall not be less than eighty-five percent (85%) of the Common Stock’sFair Market Value on the date such award is made or at the time the purchase isconsummated.

 

**(ii)****                               ****Consideration.** The purchase price of Common Stock acquired pursuant to the restrictedstock purchase agreement shall be paid either: (i) in cash at the time of purchase; (ii) at the discretion ofthe Board, according to a deferred payment or other similar arrangement withthe Participant; or (iii) in any other form of legal consideration thatmay be acceptable to the Board in its discretion; *provided,however,*that at any time that the Company is incorporated inDelaware, then payment of the Common Stock’s “par value,” as defined in theDelaware General Corporation Law, shall not be made by deferred payment.

 

**(iii)****                           ****Vesting.** Shares of Common Stock acquired under the restricted stock purchaseagreement may, but need not, be subject to a share repurchase option in favorof the Company in accordance with a vesting schedule to be determined by theBoard.

 

**(iv)****                              ****Termination of Participant’sContinuous Service.**  In the event a Participant’s ContinuousService terminates, the Company may repurchase or otherwise reacquire any orall of the shares of Common Stock held by the Participant that have not vestedas of the date of termination under the terms of the restricted stock purchaseagreement.

 

**(v)****                                  ****Transferability.** Rights to acquire shares of Common Stock under the restricted stockpurchase agreement shall be transferable by the Participant only upon suchterms 

 

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and conditions as are set forth in the restrictedstock purchase agreement, as the Board shall determine in its discretion, solong as Common Stock awarded under the restricted stock purchase agreementremains subject to the terms of the restricted stock purchase agreement.

 

**(c)****                                 ****Stock Unit Awards. **Each stock unit award agreement shall be in such formand shall contain such terms and conditions as the Board shall deemappropriate.  The terms and conditions ofstock unit award agreements may change from time to time, and the terms andconditions of separate stock unit award agreements need not be identical, *provided, however,*that each stock unitaward agreement shall include (through incorporation of the provisions hereofby reference in the agreement or otherwise) the substance of each of the followingprovisions:

 

**(i)****                                   ****Consideration.** At the time of grant of a stock unit award, the Board will determine theconsideration, if any, to be paid by the Participant upon delivery of eachshare of Common Stock subject to the stock unit award. The consideration to bepaid (if any) by the Participant for each share of Common Stock subject to astock unit award may be paid in any form of legal consideration that may beacceptable to the Board in its sole discretion and permissible under applicablelaw.

 

**(ii)****                               ****Vesting. **At the time of the grant of a stock unit award, theBoard may impose such restrictions or conditions to the vesting of the stockunit award as it, in its sole discretion, deems appropriate.

 

**(iii)****                           ****Payment**. A stock unit award may be settled by the delivery of shares of CommonStock, their cash equivalent, any combination thereof or in any other form ofconsideration, as determined by the Board and contained in the stock unit awardagreement.

 

**(iv)****                              ****AdditionalRestrictions. **At the time of the grant of a stock unitaward, the Board, as it deems appropriate, may impose such restrictions orconditions that delay the delivery of the shares of Common Stock (or their cashequivalent) subject to a stock unit award after the vesting of such stock unitaward.

 

**(v)****                                  ****DividendEquivalents. **Dividend equivalents may be credited inrespect of shares of Common Stock covered by a stock unit award, as determinedby the Board and contained in the stock unit award agreement.  At the sole discretion of the Board, such dividendequivalents may be converted into additional shares of Common Stock covered bythe stock unit award in such manner as determined by the Board.  Any additional shares covered by the stockunit award credited by reason of such dividend equivalents will be subject toall the terms and conditions of the underlying stock unit award agreement towhich they relate.

 

**(vi)****                              ****Termination ofParticipant’s Continuous Service. **Except as otherwise provided in theapplicable stock unit award agreement, such portion of the stock unit awardthat has not vested will be forfeited upon the Participant’s termination ofContinuous Service.

 

**(d)****                                 ****Stock AppreciationRights. **Each stock appreciation right agreement shall be insuch form and shall contain such terms and conditions as the Board shall deemappropriate.  The terms and conditions ofstock appreciation right agreements may change from time to time, and the termsand conditions of separate stock appreciation right agreements need not beidentical; *provided, however*, thateach stock appreciation right agreement shall include (through 

 

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incorporation of the provisions hereof by reference inthe agreement or otherwise) the substance of each of the following provisions:

 

**(i)****                                   ****Strike Price andCalculation of Appreciation.**  Each stockappreciation right will be denominated in shares of Common Stockequivalents.  The appreciationdistribution payable on the exercise of a stock appreciation right will be notgreater than an amount equal to the excess of (i) the aggregate FairMarket Value (on the date of the exercise of the stock appreciation right) of anumber of shares of Common Stock equal to the number of shares of Common Stockequivalents in which the Participant is vested under such stock appreciationright, and with respect to which the Participant is exercising the stockappreciation right on such date, over (ii) an amount (the strike price)that will be determined by the Board at the time of grant of the stockappreciation right.

 

**(ii)****                               ****Vesting. **At the time of the grant of a stock appreciationright, the Board may impose such restrictions or conditions to the vesting ofsuch stock appreciation right as it, in its sole discretion, deems appropriate.

 

**(iii)****                           ****Exercise.** To exercise any outstanding stock appreciation right, the Participantmust provide written notice of exercise to the Company in compliance with theprovisions of the stock appreciation right agreement evidencing such stockappreciation right.

 

**(iv)****                              ****Payment**. The appreciation distribution in respect to a stock appreciation rightmay be paid in Common Stock, in cash, in any combination of the two or in anyother form of consideration, as determined by the Board and contained in thestock appreciation right agreement evidencing such stock appreciation right.

 

**(v)****                                  ****Termination ofContinuous Service.**  In the event that a Participant’s ContinuousService terminates, the Participant may exercise his or her stock appreciationright (to the extent that the Participant was entitled to exercise such stockappreciation right as of the date of termination) but only within such periodof time ending on the earlier of (i) the date three (3) monthsfollowing the termination of the Participant’s Continuous Service (or suchlonger or shorter period specified in the stock appreciation right agreement),or (ii) the expiration of the term of the stock appreciation right as setforth in the stock appreciation right agreement.  If, after termination, the Participant doesnot exercise his or her stock appreciation right within the time specifiedherein or in the stock appreciation right agreement (as applicable), the stockappreciation right shall terminate.

 

**8.**                                      COVENANTSOF THE COMPANY.

** **

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

 

**(b)****                                 ****Securities Law Compliance.** The Company shall seek to obtain from each regulatory commission oragency having jurisdiction over the Plan such authority as may be required togrant Stock Awards and to issue and sell shares of Common Stock upon exerciseof the Stock Awards; *provided, however,*thatthis undertaking shall not require the Company to register under the SecuritiesAct the Plan, any Stock Award or any Common Stock issued or 

 

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issuable pursuant to any such Stock Award.  If, after reasonable efforts, the Company isunable to obtain from any such regulatory commission or agency the authoritywhich counsel for the Company deems necessary for the lawful issuance and saleof Common Stock under the Plan, the Company shall be relieved from anyliability for failure to issue and sell Common Stock upon exercise of suchStock Awards unless and until such authority is obtained.

 

**(c)****                                 ****No Obligation to Notify orMinimize Taxes. **The Company shall have no duty orobligation to any Participant to advise such holder as to the time or manner ofexercising such Stock Award.  Furthermore,the Company shall have no duty or obligation to warn or otherwise advise suchholder of a pending termination or expiration of a Stock Award or a possibleperiod in which the Stock Award may not be exercised.  The Company has no duty or obligation tominimize the tax consequences of a Stock Award to the holder of such StockAward.

 

**9.**                                      USE OFPROCEEDS FROM STOCK.

** **

Proceeds from the sale of Common Stock pursuant to Stock Awards shallconstitute general funds of the Company.

 

**10.**                               MISCELLANEOUS.

** **

**(a)****                                 ****Corporate ActionConstituting Grant of Stock Awards.**  Corporateaction constituting a grant by the Company of a Stock Award to any Participantshall be deemed completed as of the date of such corporate action, unlessotherwise determined by the Board, regardless of when the instrument,certificate, or letter evidencing the Stock Award is communicated to, oractually received or accepted by, the Participant.

 

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

 

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

 

**(d)****                                 ****No Employment or other ServiceRights.**  Nothing in the Plan or any instrumentexecuted or Stock Award granted pursuant thereto shall confer upon anyParticipant any right to continue to serve the Company or an Affiliate in thecapacity in effect at the time the Stock Award was granted or shall affect theright of the Company or an Affiliate to terminate (i) the employment of anEmployee with or without notice and with or without cause, (ii) theservice of a Consultant pursuant to the terms of such Consultant’s agreementwith the Company or an Affiliate or (iii) the service of a Directorpursuant to the Bylaws of the Company or an Affiliate, and any applicableprovisions of the corporate law of the state in which the Company or theAffiliate is incorporated, as the case may be.

 

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**(e)****                                 ****Incentive Stock Option $100,000Limitation.**  To the extent that the aggregate Fair MarketValue (determined at the time of grant) of Common Stock with respect to whichIncentive Stock Options are exercisable for the first time by any Optionholderduring any calendar year (under all plans of the Company and its Affiliates)exceeds one hundred thousand dollars ($100,000), the Options or portionsthereof which exceed such limit (according to the order in which they weregranted) shall be treated as Nonstatutory Stock Options.

 

**(f)****                                   ****Investment Assurances.** The Company may require a Participant, as a condition of exercising oracquiring Common Stock under any Stock Award, (i) to give writtenassurances satisfactory to the Company as to the Participant’s knowledge andexperience in financial and business matters and/or to employ a purchaserrepresentative reasonably satisfactory to the Company who is knowledgeable andexperienced in financial and business matters and that he or she is capable ofevaluating, alone or together with the purchaser representative, the merits andrisks of exercising the Stock Award; and (ii) to give written assurancessatisfactory to the Company stating that the Participant is acquiring CommonStock subject to the Stock Award for the Participant’s own account and not withany present intention of selling or otherwise distributing the CommonStock.  The foregoing requirements, andany assurances given pursuant to such requirements, shall be inoperative if (1) theissuance of the shares of Common Stock upon the exercise or acquisition ofCommon Stock under the Stock Award has been registered under a then currentlyeffective registration statement under the Securities Act or (2) as to anyparticular requirement, a determination is made by counsel for the Company thatsuch requirement need not be met in the circumstances under the then applicablesecurities laws.  The Company may, uponadvice of counsel to the Company, place legends on stock certificates issuedunder the Plan as such counsel deems necessary or appropriate in order tocomply with applicable securities laws, including, but not limited to, legendsrestricting the transfer of the Common Stock.

 

**(g)****                                ****Withholding Obligations.** To the extent provided by the terms of a Stock Award Agreement, theParticipant may satisfy any federal, state or local tax withholding obligationrelating to the exercise or acquisition of Common Stock under a Stock Award byany of the following means (in addition to the Company’s right to withhold fromany compensation paid to the Participant by the Company) or by a combination ofsuch means:  (i) tendering a cashpayment; (ii) authorizing the Company to withhold shares of Common Stockfrom the shares of Common Stock otherwise issuable to the Participant as aresult of the exercise or acquisition of Common Stock under the Stock Award, *provided, however,*that no shares of Common Stock arewithheld with a value exceeding the minimum amount of tax required to bewithheld by law (or such lesser amount as may be necessary to avoid variableaward accounting); or (iii) delivering to the Company (either by actualdelivery or attestation) owned and unencumbered shares of Common Stock of theCompany.

 

**(h)****                                ****Performance Stock Awards****.**  A Stock Awardmay be granted, may vest, or may be exercised based upon service conditions,upon the attainment during a Performance Period of certain Performance Goals,or both.  The length of any PerformancePeriod, the Performance Goals to be achieved during the Performance Period, andthe measure of whether and to what degree such Performance Goals have beenattained shall be conclusively determined by the Board in its solediscretion.  The maximum benefit to bereceived by any individual in any calendar year attributable to Stock Awardsdescribed in this subsection 10(g) shall not exceed the 

 

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value of one hundred sixty-six thousand six hundredsixty-six (166,666) shares of Common Stock.

 

**(i)****                                   ****Electronic Delivery**. Any reference herein to a “written” agreement or document shall includeany agreement or document delivered electronically or posted on the Company’sintranet.

 

**(j)****                                   ****Compliance with Section 409A. **To the extent that the Board determines that any StockAward granted hereunder is subject to Section 409A of the Code, the StockAward Agreement evidencing such Stock Award shall incorporate the terms andconditions necessary to avoid the consequences specified in Section 409A(a)(1) ofthe Code.  To the extent applicable, the Plan and StockAward Agreements shall be interpreted in accordance with Section 409A ofthe Code.  Notwithstanding anything tothe contrary in this Plan (and unless the Stock Award Agreement specificallyprovides otherwise), if the Shares are publicly traded and a Participantholding a Stock Award that constitutes “deferred compensation” under Section 409Aof the Code is a “specified employee” for purposes of Section 409A of theCode, no distribution or payment of any amount shall be made upon a “separation from service” before a datethat is six (6) months following the date of such Participant’s “separationfrom service” (as defined in Section 409A of the Code without regard toalternative definitions thereunder) or, if earlier, the date of the Participant’sdeath.

 

**11.**                               ADJUSTMENTSUPON CHANGES IN STOCK.

** **

**(a)****                                 ****Capitalization Adjustments**. If any change is made in the Common Stock subject to the Plan, orsubject to any Stock Award, without the receipt of consideration by the Company(through merger, consolidation, reorganization, recapitalization,reincorporation, stock dividend, dividend in property other than cash, stocksplit, liquidating dividend, combination of shares, exchange of shares, changein corporate structure or other transaction not involving the receipt ofconsideration by the Company), the Board shall appropriately andproportionately adjust: (i) the class(es) and maximum number of securitiessubject to the Plan pursuant to subsection 4(a) and the maximum number ofsecurities subject to award to any person pursuant to subsection 5(c) and10(g) and (ii) the class(es) and number of securities and price pershare of Common Stock subject to such outstanding Stock Awards.  The Board shall make such adjustments, andits determination shall be final, binding and conclusive.  (The conversion of any convertible securitiesof the Company shall not be treated as a transaction “without receipt ofconsideration” by the Company.)

 

**(b)****                                 ****Dissolution or Liquidation**. In the event of a dissolution or liquidation of the Company, then alloutstanding Stock Awards shall terminate immediately prior to such event, andshares of Common Stock subject to the Company’s repurchase option may berepurchased by the Company notwithstanding the fact that the holder of suchstock is still in Continuous Service. Notwithstanding the foregoing, Options granted under the 1997 StockOption Plan shall be subject to subsection 11(c) below in the event of adissolution or liquidation of the Company.

 

**(c)****                                 ****Corporate Transaction**. In the event of (i) a sale, lease or other disposition of all orsubstantially all of the securities or assets of the Company, (ii) amerger or consolidation in which the Company is not the surviving corporationor (iii) a reverse merger in which the 

 

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Company is the surviving corporation but the shares ofCommon Stock outstanding immediately preceding the merger are converted byvirtue of the merger into other property, whether in the form of securities,cash or otherwise, then any surviving corporation or acquiring corporation mayassume any Stock Awards outstanding under the Plan or may substitute similarstock awards (including an award to acquire the same consideration paid to thestockholders in the transaction described in this subsection 11(c)) for thoseoutstanding under the Plan.  In the eventany surviving corporation or acquiring corporation does not assume such StockAwards or substitute similar stock awards for those outstanding under the Plan,then with respect to Stock Awards held by Participants whose Continuous Servicehas not terminated, the vesting of such Stock Awards (and, if applicable, thetime during which such Stock Awards may be exercised) shall be accelerated infull, and the Stock Awards shall terminate if not exercised (if applicable) ator prior to such event.  With respect toany other Stock Awards outstanding under the Plan, such Stock Awards shallterminate if not exercised (if applicable) prior to such event.

 

**12.**                               AMENDMENTOF THE PLAN AND STOCK AWARDS.

** **

**(a)****                                 ****Amendment of Plan.** The Board at any time, and from time to time, may amend the Plan.  However, except as provided in Section 11relating to adjustments upon changes in Common Stock, no amendment shall beeffective unless approved by the stockholders of the Company to the extentstockholder approval is necessary to satisfy the requirements of Section 422of the Code, Rule 16b-3 or any Nasdaq or securities exchange listingrequirements.

 

**(b)****                                 ****Stockholder Approval.** The Board may, in its sole discretion, submit any other amendment to thePlan for stockholder approval, including, but not limited to, amendments to thePlan intended to satisfy the requirements of Section 162(m) of theCode and the regulations thereunder regarding the exclusion ofperformance-based compensation from the limit on corporate deductibility ofcompensation paid to certain executive officers.

 

**(c)****                                 ****Contemplated Amendments.** It is expressly contemplated that the Board may amend the Plan in anyrespect the Board deems necessary or advisable to provide eligible Employeeswith the maximum benefits provided or to be provided under the provisions ofthe Code and the regulations promulgated thereunder relating to Incentive StockOptions and/or to bring the Plan and/or Incentive Stock Options granted underit into compliance therewith.

 

**(d)****                                 ****No Impairment of Rights.** Rights under any Stock Award granted before amendment of the Plan shallnot be impaired by any amendment of the Plan unless (i) the Companyrequests the consent of the Participant and (ii) the Participant consentsin writing.

 

**(e)****                                 ****Amendment of Stock Awards.** The Board at any time, and from time to time, may amend the terms of anyone or more Stock Awards; *provided, however,*thatthe rights under any Stock Award shall not be impaired by any such amendmentunless (i) the Company requests the consent of the Participant and (ii) theParticipant consents in writing.

 

**13.**                               TERMINATIONOR SUSPENSION OF THE PLAN.

** **

**(a)****                                 ****Plan Term.** Unless sooner terminated by the Board pursuant to Section 3, thePlan shall automatically terminate on the day before the tenth (10th)anniversary of the date the Plan is adopted by the Board or approved by thestockholders of the Company, whichever is 

 

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earlier.  NoStock Awards may be granted under the Plan while the Plan is suspended or afterit is terminated.

 

**(b)****                                 ****No Impairment of Rights.** Suspension or termination of the Plan shall not impair rights andobligations under any Stock Award granted while the Plan is in effect exceptwith the written consent of the Participant.

 

**14.**                               EFFECTIVEDATE OF PLAN.

** **

The Plan shall becomeeffective upon its adoption by the Board, but no Stock Award shall be exercised(or, in the case of a stock bonus, shall be granted) unless and until the Planhas been approved by the stockholders of the Company, which approval shall bewithin twelve (12) months before or after the date the Plan is adopted by theBoard.

 

**15.**                               CHOICE OFLAW.

** **

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

 

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** **

**Appendix A**

** **

**RIGEL PHARMACEUTICALS, INC.**

 

**2001NON-OFFICER EQUITY INCENTIVE PLAN**

 

**ADOPTEDJULY 19, 2001**

**AMENDEDDECEMBER 13, 2002**

**STOCKHOLDERAPPROVAL NOT REQUIRED**

 

**1.**                                      PURPOSES.

** **

**(a)****                                 ****Eligible Stock Award Recipients.** The persons eligible to receive Stock Awards are the Employees (otherthan Officers) and Consultants of the Company and its Affiliates.

 

**(b)****                                 ****Available Stock Awards.** The purpose of the Plan is to provide a means by which eligiblerecipients of Stock Awards may be given an opportunity to benefit fromincreases in value of the Common Stock through the granting of the followingStock Awards: (i) Nonstatutory Stock Options, (ii) stock bonus awardsand (iii) rights to acquire restricted stock.

 

**(c)****                                 ****General Purpose.** The Company, by means of the Plan, seeks to retain the services of thegroup of persons eligible to receive Stock Awards, to secure and retain theservices of new members of this group and to provide incentives for suchpersons to exert maximum efforts for the success of the Company and itsAffiliates.

 

**2.**                                      DEFINITIONS.

** **

**(a)****                                 *****“Affiliate”*** means any parent corporation orsubsidiary corporation of the Company, whether now or hereafter existing, asthose terms are defined in Sections 424(e) and (f), respectively, of theCode.

 

**(b)****                                 *****“Board”*** means the Board of Directors of theCompany.

 

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

 

**(d)****                                 *****“Committee”*** means a committee of one or more membersof the Board appointed by the Board in accordance with Section 3(c).

 

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

 

**(f)****                                   *****“Company”*** means Rigel Pharmaceuticals, Inc.,a Delaware corporation.

 

**(g)****                                *****“Consultant”*** means any person, including an advisor,engaged by the Company or an Affiliate to render consulting or advisoryservices and who is compensated for such services.  However, the term “Consultant” shall notinclude either Directors who are not 

 

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compensated by the Company for their services asDirectors or Directors who are merely paid a director’s fee by the Company fortheir services as Directors.

 

**(h)****                                *****“Continuous Service”*** means that the Participant’s servicewith the Company or an Affiliate, whether as an Employee, Director orConsultant, is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to haveterminated merely because of a change in the capacity in which the Participantrenders service to the Company or an Affiliate as an Employee, Consultant orDirector or a change in the entity for which the Participant renders suchservice, provided that there is no interruption or termination of theParticipant’s Continuous Service.  Forexample, a change in status from an Employee of the Company to a Consultant ofan Affiliate or a Director will not constitute an interruption of ContinuousService.  The Board or the chiefexecutive officer of the Company, in that party’s sole discretion, maydetermine whether Continuous Service shall be considered interrupted in thecase of any leave of absence approved by that party, including sick leave,military leave or any other personal leave.

 

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

 

**(j)****                                   *****“Disability”*** means the inability of a person, in theopinion of a qualified physician acceptable to the Company, to perform themajor duties of such person’s position with the Company or with an Affiliatebecause of the sickness or injury of such person.

 

**(k)****                               *****“Employee”*** means any person employed by the Companyor an Affiliate.  Mere service as aDirector or payment of a director’s fee by the Company or an Affiliate shallnot be sufficient to constitute “employment” by the Company or an Affiliate.

 

**(l)****                                   *****“Exchange Act”*** means the Securities Exchange Act of1934, as amended.

 

**(m)****                             *****“Fair Market Value”***means, as of any date, the value of theCommon Stock determined as follows:

 

**(i)****                                   **If the Common Stock is listed on anyestablished stock exchange or traded on the Nasdaq National Market or theNasdaq SmallCap Market, the Fair Market Value of a share of Common Stock shallbe the closing sales price for such stock (or the closing bid if no sales werereported) as quoted on such exchange or market (or the exchange or market withthe greatest volume of trading in the Common Stock) on the day before the dateof grant (the “determination date”, or if the determination date is not amarket trading day, then the last market trading day prior to thedetermination, as reported in *The Wall Street Journal*****or such other source as the Board deemsreliable.

 

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

 

**(n)****                                *****“Non-Employee Director”*******means a Director who either (i) is not a currentEmployee or Officer of the Company or its parent or a subsidiary, does notreceive compensation (directly or indirectly) from the Company or its parent ora subsidiary for services rendered as a consultant or in any capacity otherthan as a Director (except for an amount as to which disclosure would not berequired under Item 404(a) of Regulation S-K promulgated under the federalsecurities laws (“Regulation S-K”)), does not possess an interest in any othertransaction 

 

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as to which disclosure would be required under Item404(a) of Regulation S-K and is not engaged in a business relationship asto which disclosure would be required under Item 404(b) of Regulation S-K;or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.

 

**(o)****                                 *****“Nonstatutory Stock Option”*** means an Option not intended to qualifyas an “incentive stock option” within the meaning of Section 422 of theCode and the regulations promulgated thereunder.

 

**(p)****                                 *****“Officer”*** means a person who possesses theauthority of an “officer” as that term is used in Rule 4460(i)(1)(A) ofthe Rules of the National Association of Securities Dealers, Inc.  For purposes of the Plan, a person employedby the Company in the position of “Vice President” or higher shall beclassified as an “Officer” unless the Board or Committee expressly finds thatsuch person does not possess the authority of an “officer” as that term is usedin Rule 4460(i)(1)(A) of the Rules of the National Associationof Securities Dealers, Inc.

 

**(q)****                                 *****“Option”*** means a Nonstatutory Stock Option grantedpursuant to the Plan.

 

**(r)****                                 *****“Option Agreement”*** means a written agreement between theCompany and an Optionholder evidencing the terms and conditions of anindividual Option grant.  Each OptionAgreement shall be subject to the terms and conditions of the Plan.

 

**(s)****                                 *****“Optionholder”*** means a person to whom an Option isgranted pursuant to the Plan or, if applicable, such other person who holds anoutstanding Option.

 

**(t)****                                   *****“Participant”*** means a person to whom a Stock Award isgranted pursuant to the Plan or, if applicable, such other person who holds anoutstanding Stock Award.

 

**(u)****                                *****“Plan”*** means this Rigel Pharmaceuticals, Inc.2001 Non-Officer Equity Incentive Plan.

 

**(v)****                                  *****“Rule 16b-3”*** means Rule 16b-3 promulgated underthe Exchange Act or any successor to Rule 16b-3, as in effect from time totime.

 

**(w)****                               *****“Securities Act”*** means the Securities Act of 1933, asamended.

 

**(x)****                                 *****“Stock Award”*** means any right granted under the Plan,including an Option, a restricted stock purchase award and a stock bonus award.

 

**(y)****                                 *****“Stock Award Agreement”*** means a written agreement between theCompany and a holder of a Stock Award evidencing the terms and conditions of anindividual Stock Award grant.  Each StockAward Agreement shall be subject to the terms and conditions of the Plan.

 

**3.**                                      ADMINISTRATION.

** **

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

 

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

 

**(i)****                                   **To determine from time to time which ofthe persons eligible under the Plan shall be granted Stock Awards; when and howeach Stock Award shall be granted; what type or combination of types of StockAward shall be granted; the provisions of each Stock Award granted, includingthe time or times when a person shall be permitted to receive Common Stockpursuant to a Stock Award; and the number of shares of Common Stock withrespect to which a Stock Award shall be granted to each such person.

 

**(ii)****                               **To construe and interpret the Plan andStock Awards granted under it, and to establish, amend and revoke rules andregulations for its administration.  TheBoard, in the exercise of this power, may correct any defect, omission orinconsistency in the Plan or in any Stock Award Agreement, in a manner and tothe extent it shall deem necessary or expedient to make the Plan fullyeffective.

 

**(iii)****                           **To effect, at any time and from time totime, with the consent of any adversely affected Optionholder, (1) thereduction of the exercise price of any outstanding Option under the Plan, (2) thecancellation of any outstanding Option under the Plan and the grant in substitutiontherefor of (A) a new Option under the Plan covering the same or adifferent number of shares of Common Stock, (B) a stock bonus, (C) theright to acquire restricted stock, and/or (D) cash, or (3) any otheraction that is treated as a repricing under generally accepted accountingprinciples.

 

**(iv)****                              **To amend the Plan or a Stock Award asprovided in Section 12.

 

**(v)****                                  **Generally, to exercise such powers and toperform such acts as the Board deems necessary or expedient to promote the bestinterests of the Company which are not in conflict with the provisions of thePlan.

 

**(c)****                                 ****Delegation to Committee.**

 

**(i)****                                   ****General.** The Board may delegate administration of the Plan to a Committee orCommittees of one (1) or more members of the Board, and the term “Committee”shall apply to any person or persons to whom such authority has beendelegated.  If administration isdelegated to a Committee, the Committee shall have, in connection with theadministration of the Plan, the powers theretofore possessed by the Board, includingthe power to delegate to a subcommittee any of the administrative powers theCommittee is authorized to exercise (and references in this Plan to the Boardshall thereafter be to the Committee or subcommittee), subject, however, tosuch resolutions, not inconsistent with the provisions of the Plan, as may beadopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Boardthe administration of the Plan.

 

**(ii)****                               ****Committee Composition when CommonStock is Publicly Traded.**  At such time as the CommonStock is publicly traded, in the discretion of the Board, a Committee mayconsist solely of two or more Non-Employee Directors, in accordance with Rule 16b-3.  Within the scope of such authority, the Boardor the Committee may delegate to a committee of 

 

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one or more members of the Board who are notNon-Employee Directors the authority to grant Stock Awards to eligible personswho are not then subject to Section 16 of the Exchange Act.

 

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

 

**4.**                                      SHARES SUBJECT TO THE PLAN.

** **

**(a)****                                 ****Share Reserve.** Subject to the provisions of Section 11 relating to adjustmentsupon changes in Common Stock, the Common Stock that may be issued pursuant toStock Awards shall not exceed in the aggregate three million five hundredthousand (3,500,000) shares of Common Stock.

 

**(b)****                                 ****Reversion of Shares to the ShareReserve.**  If any Nonstatutory Stock Option shall forany reason expire or otherwise terminate, in whole or in part, without havingbeen exercised in full, the shares of Common Stock not acquired under suchNonstatutory Stock Option shall revert to and again become available forissuance under the Plan.

 

**(c)****                                 ****Source of Shares.** The shares of Common Stock subject to the Plan may be unissued shares orreacquired shares, bought on the market or otherwise.

 

**5.**                                      ELIGIBILITY.

** **

**(a)****                                 ****Eligibility for Specific StockAwards.**  Stock Awards may be granted to Employees, whoare not Officers, and Consultants; *provided, however,*thatOfficers who are not previously employed by the Company may be granted StockAwards as an inducement essential to such individuals entering into employmentcontracts with the Company.

 

**(b)****                                 ****Consultants.**

 

**(i)****                                   **A Consultant shall not be eligible forthe grant of a Stock Award if, at the time of grant, a Form S-8 RegistrationStatement under the Securities Act (“Form S-8”) is not available toregister either the offer or the sale of the Company’s securities to suchConsultant because of the nature of the services that the Consultant isproviding to the Company, or because the Consultant is not a natural person, oras otherwise provided by the rules governing the use of Form S-8,unless the Company determines both (i) that such grant (A) shall beregistered in another manner under the Securities Act (*e.g.,*on a Form S-3 Registration Statement) or (B) does not requireregistration under the Securities Act in order to comply with the requirementsof the Securities Act, if applicable, and (ii) that such grant complieswith the securities laws of all other relevant jurisdictions.

 

**(ii)****                               **Form S-8 generally is available toconsultants and advisors only if (i) they are natural persons; (ii) theyprovide bona fide services to the issuer, its parents, its majority-ownedsubsidiaries or majority-owned subsidiaries of the issuer’s parent; and (iii) theservices are not in connection with the offer or sale of securities in acapital-raising transaction, and do not directly or indirectly promote ormaintain a market for the issuer’s securities.

 

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**6.**                                      OPTION PROVISIONS.

** **

Each Option shall be in such form and shall contain such terms andconditions as the Board shall deem appropriate. The provisions of separate Options shall include (through incorporationof provisions hereof by reference in the Option or otherwise) the substance ofeach of the following provisions:

 

**(a)****                                 ****Term.** The term of an Option shall not exceed 10 years, either at the time ofgrant of the Option or as the Option may be amended thereafter.

 

**(b)****                                 ****Exercise Price of a NonstatutoryStock Option.**  The exercise price of each Nonstatutory StockOption shall be not less than the Fair Market Value of the Common Stock subjectto the Option on the date the Option is granted.

 

**(c)****                                 ****Consideration.** The purchase price of Common Stock acquired pursuant to an Option shallbe paid, to the extent permitted by applicable statutes and regulations, either(i) in cash or by check at the time the Option is exercised or (ii) atthe discretion of the Board at the time of the grant of the Option or at anytime prior to the time of exercise in the case of a Nonstatutory Stock Option (1) bydelivery to the Company of other Common Stock, (2) according to a deferredpayment or other similar arrangement with the Optionholder or (3) in anyother form of legal consideration that may be acceptable to the Board.  Unless otherwise specifically provided in theOption, the purchase price of Common Stock acquired pursuant to an Option thatis paid by delivery to the Company of other Common Stock acquired, directly orindirectly from the Company, shall be paid only by shares of the Common Stockof the Company that have been held for more than six (6) months (or suchlonger or shorter period of time required to avoid a charge to earnings forfinancial accounting purposes).  At anytime that the Company is incorporated in Delaware, payment of the Common Stock’s“par value,” as defined in the Delaware General Corporation Law, shall not bemade by deferred payment.

 

In the case of any deferred payment arrangement, interest shall becompounded at least annually and shall be charged at the market rate ofinterest necessary to avoid a charge to earnings for financial accountingpurposes.

 

**(d)****                                 ****Transferability of a NonstatutoryStock Option.** ANonstatutory Stock Option shall not be transferable except by will or by thelaws of descent and distribution and shall be exercisable during the lifetimeof the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by deliveringwritten notice to the Company, in a form satisfactory to the Company, designatea third party who, in the event of the death of the Optionholder, shallthereafter be entitled to exercise the Option.

 

**(e)****                                 ****Vesting Generally.** Each Option shall be evidenced by an Option Agreement executed by theCompany and the Optionholder.  The totalnumber of shares of Common Stock subject to an Option may vest and thereforebecome exercisable as set-forth in the Option Agreement. The Option may besubject to such other terms and conditions on the time or times when it may beexercised (which may be based on performance or other criteria) as the Boardmay deem appropriate.   The provisions ofthis Section 6(e) are subject to any Option provisions 

 

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governing the minimum number of shares of Common Stockas to which an Option may be exercised.

 

**(f)****                                   ****Termination of ContinuousService.**  In the event an Optionholder’s ContinuousService terminates for any reason other than upon the Optionholder’s death orDisability, the Optionholder may exercise his or her Option (to the extent thatthe Optionholder was entitled to exercise such Option as of the date oftermination or as otherwise permitted by the Company) but only within suchperiod of time ending on the earlier of (i) the three (3) monthsfollowing such termination (or such longer or shorter period specified in theOption Agreement), or (ii) the expiration of the term of the Option as setforth in the Option Agreement.  If, aftertermination, the Optionholder does not exercise his or her Option within thetime specified in the Option Agreement, the Option shall terminate.

 

**(g)****                                ****Extension of Termination Date.** An Optionholder’s Option Agreement may also provide that if the exerciseof the Option following the termination of the Optionholder’s ContinuousService (other than upon the Optionholder’s death or Disability) would beprohibited at any time solely because the issuance of shares of Common Stockwould violate the registration requirements under the Securities Act or similarrequirements of applicable law of another jurisdiction to which the Option issubject, then the Option shall terminate on the earlier of (i) theexpiration of the term of the Option set forth in the Option Agreement, or (ii) theexpiration of a period of three (3) months after the termination of theOptionholder’s Continuous Service during which the exercise of the Option wouldnot be in violation of such registration requirements or similar requirements.

 

**(h)****                                ****Disability of Optionholder.** In the event that an Optionholder’s Continuous Service terminates as aresult of the Optionholder’s Disability, the Optionholder may exercise his orher Option (to the extent that the Optionholder was entitled to exercise suchOption as of the date of termination or as otherwise permitted by the Company),but only within such period of time ending on the earlier of (i) thetwelve (12) months following such termination (or such longer or shorter periodspecified in the Option Agreement) or (ii) the expiration of the term ofthe Option as set forth in the Option Agreement.  If, after termination, the Optionholder doesnot exercise his or her Option within the time specified herein, the Optionshall terminate.

 

**(i)****                                   ****Death of Optionholder.** In the event (i) an Optionholder’s Continuous Service terminates asa result of the Optionholder’s death or (ii) the Optionholder dies withinthe period (if any) specified in the Option Agreement after the termination ofthe Optionholder’s Continuous Service for a reason other than death, then theOption may be exercised (to the extent the Optionholder was entitled toexercise such Option as of the date of death or as otherwise permitted by theCompany) by the Optionholder’s estate, by a person who acquired the right to exercisethe Option by bequest or inheritance or by a person designated to exercise theOption upon the Optionholder’s death pursuant to Section 6(d), but onlywithin the period ending on the earlier of (1) the date eighteen (18)moths following the date of death (or such longer or shorter period specifiedin the Option Agreement) or (2) the expiration of the term of such Optionas set forth in the Option Agreement. If, after death, the Option is not exercised within the time specifiedherein, the Option shall terminate.

 

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**(j)****                                   ****Early Exercise.** The Option may include a provision whereby the Optionholder may elect atany time before the Optionholder’s Continuous Service terminates to exercisethe Option as to any part or all of the shares of Common Stock subject to theOption prior to the full vesting of the Option. Any unvested shares of Common Stock so purchased may be subject to arepurchase option in favor of the Company or to any other restriction the Boarddetermines to be appropriate.

 

**7.**                                      PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

** **

**(a)****                                 ****Stock Bonus Awards.** Each stock bonus agreement shall be in such form and shall contain suchterms and conditions as the Board shall deem appropriate.  The terms and conditions of stock bonusagreements may change from time to time, and the terms and conditions ofseparate stock bonus agreements shall include (through incorporation ofprovisions hereof by reference in the agreement or otherwise) the substance ofeach of the following provisions:

 

**(i)****                                   ****Consideration.**  Astock bonus award may be awarded in consideration for past services actuallyrendered to the Company or an Affiliate for its benefit.

 

**(ii)****                               ****Vesting.** Shares of Common Stock awarded under the stock bonus agreement may besubject to a share repurchase option in favor of the Company in accordance witha vesting schedule to be determined by the Board.

 

**(iii)****                           ****Termination of Participant’sContinuous Service.**  In the event a Participant’s ContinuousService terminates, the Company shall automatically reacquire any or all of theshares of Common Stock held by the Participant which have not vested as of thedate of termination under the terms of the stock bonus agreement.

 

**(iv)****                              ****Transferability.** Rights to acquire shares of Common Stock under the stock bonus agreementshall be transferable by the Participant only upon such terms and conditions asare set forth in the stock bonus agreement, as the Board shall determine in itsdiscretion, so long as Common Stock awarded under the stock bonus agreementremains subject to the terms of the stock bonus agreement.

 

**(b)****                                 ****Restricted Stock Purchase Awards.** Each restricted stock purchase agreement shall be in such form and shallcontain such terms and conditions as the Board shall deem appropriate.  The terms and conditions of the restrictedstock purchase agreements may change from time to time, and the terms andconditions of separate restricted stock purchase agreements need not beidentical, but each restricted stock purchase agreement shall include (throughincorporation of provisions hereof by reference in the agreement or otherwise)the substance of each of the following provisions:

 

**(i)****                                   ****Purchase Price.** The purchase price under each restricted stock purchase agreement shallbe such amount as the Board shall determine and designate in such restrictedstock purchase agreement.

 

**(ii)****                               ****Consideration.** The purchase price of Common Stock acquired pursuant to the restrictedstock purchase agreement shall be paid either: (i) in cash at the time of 

 

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purchase; (ii) at the discretion of the Board,according to a deferred payment or other similar arrangement with theParticipant; or (iii) in any other form of legal consideration that may beacceptable to the Board in its discretion; provided, however, that at any timethat the Company is incorporated in Delaware, then payment of the Common Stock’s“par value,” as defined in the Delaware General Corporation Law, shall not bemade by deferred payment.

 

**(iii)****                           ****Vesting.** Shares of Common Stock acquired under the restricted stock purchaseagreement may be subject to a share repurchase option in favor of the Companyin accordance with a vesting schedule to be determined by the Board.

 

**(iv)****                              ****Termination of Participant’sContinuous Service.**  In the event a Participant’s ContinuousService terminates, the Company may repurchase or otherwise reacquire any orall of the shares of Common Stock held by the Participant which have not vestedas of the date of termination under the terms of the restricted stock purchaseagreement.

 

**(v)****                                  ****Transferability.** Rights to acquire shares of Common Stock under the restricted stockpurchase agreement shall be transferable by the Participant only upon suchterms and conditions as are set forth in the restricted stock purchaseagreement, as the Board shall determine in its discretion, so long as CommonStock awarded under the restricted stock purchase agreement remains subject tothe terms of the restricted stock purchase agreement.

 

**8.**                                      COVENANTS OF THE COMPANY.

** **

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

 

**(b)****                                 ****Securities Law Compliance.** The Company shall seek to obtain from each regulatory commission oragency having jurisdiction over the Plan such authority as may be required togrant Stock Awards and to issue and sell shares of Common Stock upon exerciseof the Stock Awards; provided, however, that this undertaking shall not requirethe Company to register under the Securities Act the Plan, any Stock Award orany Common Stock issued or issuable pursuant to any such Stock Award.  If, after reasonable efforts, the Company isunable to obtain from any such regulatory commission or agency the authoritywhich counsel for the Company deems necessary for the lawful issuance and saleof Common Stock under the Plan, the Company shall be relieved from anyliability for failure to grant Stock Awards in compliance with applicable lawor to issue and sell Common Stock upon exercise of such Stock Awards unless anduntil such authority is obtained.

 

**9.**                                      USE OF PROCEEDS FROM STOCK.

** **

Proceeds from the sale of Common Stock pursuant to Stock Awards shallconstitute general funds of the Company.

 

**10.**                               MISCELLANEOUS.

** **

**(a)****                                 ****Stockholder Rights.** No Participant shall be deemed to be the holder of, or to have any ofthe rights of a holder with respect to, any shares of Common Stock subject tosuch 

 

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Stock Award unless and until such Participant hassatisfied all requirements for exercise of the Stock Award pursuant to itsterms.

 

**(b)****                                 ****No Employment or other ServiceRights.**  Nothing in the Plan or any instrument executedor Stock Award granted pursuant thereto shall confer upon any Participant anyright to continue to serve the Company or an Affiliate in the capacity ineffect at the time the Stock Award was granted or shall affect the right of theCompany or an Affiliate to terminate (i) the employment of an Employeewith or without notice and with or without cause, (ii) the service of aConsultant pursuant to the terms of such Consultant’s agreement with theCompany or an Affiliate or (iii) the service of a Director pursuant to theBylaws of the Company or an Affiliate, and any applicable provisions of thecorporate law of the state in which the Company or the Affiliate isincorporated, as the case may be.

 

**(c)****                                 ****Investment Assurances.** The Company may require a Participant, as a condition of exercising oracquiring Common Stock under any Stock Award, (i) to give writtenassurances satisfactory to the Company as to the Participant’s knowledge andexperience in financial and business matters and/or to employ a purchaser representativereasonably satisfactory to the Company who is knowledgeable and experienced infinancial and business matters and that he or she is capable of evaluating,alone or together with the purchaser representative, the merits and risks ofexercising the Stock Award; and (ii) to give written assurancessatisfactory to the Company stating that the Participant is acquiring CommonStock subject to the Stock Award for the Participant’s own account and not withany present intention of selling or otherwise distributing the CommonStock.  The foregoing requirements, andany assurances given pursuant to such requirements, shall be inoperative if (1) theissuance of the shares of Common Stock upon the exercise or acquisition ofCommon Stock under the Stock Award has been registered under a then currentlyeffective registration statement under the Securities Act or (2) as to anyparticular requirement, a determination is made by counsel for the Company thatsuch requirement need not be met in the circumstances under the then applicablesecurities laws.  The Company may, uponadvice of counsel to the Company, place legends on stock certificates issuedunder the Plan as such counsel deems necessary or appropriate in order tocomply with applicable securities laws, including, but not limited to, legendsrestricting the transfer of the Common Stock.

 

**(d)****                                 ****Withholding Obligations.** To the extent provided by the terms of a Stock Award Agreement, theParticipant may satisfy any federal, state or local tax withholding obligationrelating to the exercise or acquisition of Common Stock under a Stock Award byany of the following means (in addition to the Company’s right to withhold fromany compensation paid to the Participant by the Company) or by a combination ofsuch means:  (i) tendering a cashpayment; (ii) authorizing the Company to withhold shares of Common Stockfrom the shares of Common Stock otherwise issuable to the Participant as aresult of the exercise or acquisition of Common Stock under the Stock Award,provided, however, that no shares of Common Stock are withheld with a valueexceeding the minimum amount of tax required to be withheld by law; or (iii) deliveringto the Company owned and unencumbered shares of Common Stock.

 

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**11.**                               ADJUSTMENTS UPON CHANGES IN STOCK.

** **

**(a)****                                 ****Capitalization Adjustments**. If any change is made in the Common Stock subject to the Plan, orsubject to any Stock Award, without the receipt of consideration by the Company(through merger, consolidation, reorganization, recapitalization,reincorporation, stock dividend, dividend in property other than cash, stocksplit, liquidating dividend, combination of shares, exchange of shares, changein corporate structure or other transaction not involving the receipt ofconsideration by the Company), the Plan will be appropriately adjusted in thetype, class(es) and maximum number of securities subject to the Plan pursuantto Section 4(a), and the outstanding Stock Awards will be appropriatelyadjusted in the type, class(es) and number of securities and price per share ofsecurities subject to such outstanding Stock Awards.  The Board shall make such adjustments, andits determination shall be final, binding and conclusive.  (The conversion of any convertible securitiesof the Company shall not be treated as a transaction “without receipt ofconsideration” by the Company.)

 

**(b)****                                 ****Dissolution or Liquidation**. In the event of a dissolution or liquidation of the Company, then alloutstanding Stock Awards shall terminate immediately prior to such event.

 

**(c)****                                 ****Asset Sale, Merger, Consolidationor Reverse Merger**.  In the event of (i) a sale, exchange,lease or other disposition of all or substantially all of the assets of theCompany, (ii) a merger or consolidation in which the Company is not thesurviving corporation or (iii) a reverse merger in which the Company isthe surviving corporation but the shares of Common Stock outstandingimmediately preceding the merger are converted by virtue of the merger intoother property, whether in the form of securities, cash or otherwise(individually, a “Corporate Transaction”), then any surviving corporation oracquiring corporation shall assume or continue any Stock Awards outstandingunder the Plan or shall substitute similar stock awards (including an award toacquire the same consideration paid to the stockholders in the CorporateTransaction) for those outstanding under the Plan.  In the event any surviving corporation oracquiring corporation refuses to assume or continue such Stock Awards or tosubstitute similar stock awards for those outstanding under the Plan, then withrespect to Stock Awards held by Participants whose Continuous Service has notterminated, the vesting of such Stock Awards (and, if applicable, the timeduring which such Stock Awards may be exercised) shall be accelerated in full,and the Stock Awards shall terminate if not exercised (if applicable) at orprior to the Corporate Transaction.  Withrespect to any other Stock Awards outstanding under the Plan, such Stock Awardsshall terminate if not exercised (if applicable) prior to the CorporateTransaction.

 

**12.**                               AMENDMENT OF THE PLAN AND STOCK AWARDS.

** **

**(a)****                                 ****Amendment of Plan.** The Board at any time, and from time to time, may amend the Plan.However, except as provided in Section 11 relating to adjustments uponchanges in stock, no amendment shall be effective unless approved by thestockholders of the Company to the extent stockholder approval is necessary forthe Plan to satisfy any Nasdaq or securities exchange listingrequirements.  The Board may in its solediscretion submit such amendment to the Plan for stockholder approval.

 

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**(b)****                                 ****No Impairment of Rights.** Rights under any Stock Award granted before amendment of the Plan shallnot be materially impaired by any amendment of the Plan unless (i) theCompany requests the consent of the Participant and (ii) the Participantconsents in writing.

 

**(c)****                                 ****Amendment of Stock Awards.** The Board at any time, and from time to time, may amend the terms of anyone or more Stock Awards; provided, however, that the rights under any StockAward shall not be materially impaired by any such amendment unless (i) theCompany requests the consent of the Participant and (ii) the Participantconsents in writing.

 

**13.**                               TERMINATION OR SUSPENSION OF THE PLAN.

** **

**(a)****                                 ****Plan Term.** The Board may suspend or terminate the Plan at any time.  No Stock Awards may be granted under the Planwhile the Plan is suspended or after it is terminated.

 

**(b)****                                 ****No Impairment of Rights.** Suspension or termination of the Plan shall not impair rights andobligations under any Stock Award granted while the Plan is in effect exceptwith the written consent of the Participant.

 

**14.**                               EFFECTIVE DATE OF PLAN.

** **

The Plan shall becomeeffective immediately upon its adoption by the Board.

 

**15.**                               CHOICE OF LAW.

** **

The law of the State of California shall govern allquestions concerning the construction, validity and interpretation of thisPlan, without regard to such state’s conflict of laws rules.

 

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