**Exhibit 10.26**

 

**RIGEL PHARMACEUTICALS, INC.**

 

**2000 NON-EMPLOYEE DIRECTORS’ STOCK OPTIONPLAN**

 

**ADOPTED AUGUST 18, 2000**

**APPROVED BY STOCKHOLDERS SEPTEMBER 11,2000**

**EFFECTIVE DATE: DECEMBER 4, 2000**

**AMENDED AND RESTATED APRIL 24, 2003**

**AMENDED AND RESTATED JUNE 20, 2003**

**APPROVED BY STOCKHOLDERS JUNE 20, 2003**

**AMENDED AND RESTATED APRIL 22, 2005**

**APPROVED BY STOCKHOLDERS JUNE 2, 2005**

**AMENDED AND RESTATED JANUARY 31, 2007**

**APPROVED BY STOCKHOLDERS MAY 31, 2007**

**AMENDED AND RESTATED SEPTEMBER 18, 2007**

**AMENDED AND RESTATED FEBRUARY 21, 2008**

**APPROVED BY STOCKHOLDERS MAY 29, 2008**

 

**1.****                                   PURPOSES.**

 

**(a)****                                  EligibleOption Recipients**.  The personseligible to receive Options are the Non-Employee Directors of the Company.

 

**(b)****                                  AvailableOptions**.  The purpose of the Plan isto provide a means by which Non-Employee Directors may be given an opportunityto benefit from increases in value of the Common Stock through the granting ofNonstatutory Stock Options.

 

**(c)****                                  GeneralPurpose**.  The Company, by means ofthe Plan, seeks to retain the services of its Non-Employee Directors, to secureand retain the services of new Non-Employee Directors and to provide incentivesfor such persons to exert maximum efforts for the success of the Company andits Affiliates.

 

**2.****                                   DEFINITIONS.**

 

**(a)****                                  “*Affiliate***” means any parentcorporation or subsidiary corporation of the Company, whether now or hereafterexisting, as those terms are defined in Sections 424(e) and (f),respectively, of the Code.

 

**(b)*****                                  “AnnualGrant”*** means an Option granted annually to all Non-Employee Directorswho meet the criteria specified in subsection 6(b) of the Plan.

 

**(c)*****                                  “AnnualMeeting”*** means the annual meeting of the stockholders of the Company.

 

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

 

**(e)****                                  A*“Change in Control,”*** withrespect to Options granted on or after the effective date of the Plan, will bedeemed to have occurred upon the first to occur of an event set forth in anyone of the following paragraphs:

 

**(i)**                                    the acquisition(other than from the Company, by any person (as such term is defined in Section 13(c) or14(d) of the Exchange Act of beneficial ownership (within the meaning of Rule 13d-3promulgated under the Exchange Act) of fifty percent (50%) or more of thecombined voting power of the Company’s then outstanding voting securities;

 

**(ii)**                                the individuals who, asof the effective date of the Plan, are members of the Board (the ***“Incumbent Board”***),cease for any reason to constitute at least a majority of the Board, unless the

 

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election, or nomination forelection by the Company’s stockholders, of any new director was approved by avote of at least a majority of the Incumbent Board, and such new directorshall, for purposes of this Plan, be considered as a member of the IncumbentBoard; or

 

**(iii)**                            the closing of:

 

**(1)**                                 a merger orconsolidation involving the Company if the stockholders of the Company,immediately before such merger or consolidation, do not, as a result of suchmerger or consolidation, own, directly or indirectly, more than fifty percent(50%) of the combined voting power of the then outstanding voting securities ofthe corporation resulting from such merger or consolidation in substantiallythe same proportion as their ownership of the combined voting power of thevoting securities of the Company outstanding immediately before such merger orconsolidation; or

 

**(2)**                                 a complete liquidationor dissolution of the Company or an agreement for the sale or other dispositionof all or substantially all of the assets of the Company.

 

Notwithstanding the foregoing,a Change in Control shall not be deemed to occur solely because fifty percent(50%) or more of the combined voting power of the Company’s then outstandingsecurities is acquired by (i) a trustee or other fiduciary holdingsecurities under one or more employee benefit plans maintained by the Companyor any of its subsidiaries or (ii) any corporation which, immediatelyprior to such acquisition, is owned directly or indirectly by the stockholdersof the Company in the same proportion as their ownership of stock in theCompany immediately prior to such acquisition.

 

For theavoidance of doubt, the term Change in Control shall not include a sale ofassets, merger or other transaction effected exclusively for the purpose ofchanging the domicile of the Company.

 

Notwithstandingthe foregoing or any other provision of this Plan, the definition of Change inControl (or any analogous term) in an individual written agreement between theCompany or any Affiliate and the Optionholder shall supersede the foregoingdefinition with respect to Options subject to such agreement; *provided, however,* that if no definitionof Change in Control or any analogous term is set forth in such an individualwritten agreement, the foregoing definition shall apply.

 

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

 

**(g)****                                 “*Common Stock***” means the common stockof the Company.

 

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

 

**(i)****                                    “*Consultant***” means any person, includingan advisor, (i) engaged by the Company or an Affiliate to renderconsulting or advisory services and who is compensated for such services or (ii) whois a member of the Board of Directors of an Affiliate. However, the term “Consultant”shall not include either Directors of the Company who are not compensated bythe Company for their services as Directors or Directors of the Company who aremerely paid a director’s fee by the Company for their services as Directors.

 

**(j)****                                    “*Continuous Service***” means that theOptionholder’s service with the Company or an Affiliate, whether as anEmployee, Director or Consultant, is not interrupted or terminated. TheOptionholder’s Continuous Service shall not be deemed to have terminated merelybecause of a change in the capacity in which the Optionholder renders serviceto the Company or an Affiliate as an Employee, Consultant or Director or achange in the entity for which the Optionholder renders such service, providedthat there is no interruption or termination of the Optionholder’s service. Forexample, a change in status without interruption from a Non-Employee Directorof the Company to a Consultant of an Affiliate or an Employee of the Companywill not constitute an interruption of Continuous Service. The Board or thechief executive officer of the Company, in that party’s sole discretion, maydetermine whether 

 

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Continuous Service shall beconsidered interrupted in the case of any leave of absence approved by thatparty, including sick leave, military leave or any other personal leave.

 

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

 

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

 

**(m)****                              “*Employee***” means any person employed bythe Company or an Affiliate. Mere service as a Director or payment of adirector’s fee by the Company or an Affiliate shall not be sufficient toconstitute “employment” by the Company or an Affiliate.

 

**(n)****                                 “*Exchange Act***” means the SecuritiesExchange Act of 1934, as amended.

 

**(o)****                                  “*Fair Market Value***” means, as of anydate, the value of the Common Stock determined as follows:

 

**(i)**                                    If the Common Stockis listed on any established stock exchange or traded on the Nasdaq NationalMarket or the Nasdaq SmallCap Market, the Fair Market Value of a share ofCommon Stock shall be the closing sales price for such stock (or the closingbid, if no sales were reported) as quoted on such exchange or market (or the exchangeor market with the greatest volume of trading in the Common Stock) on the lastmarket trading day prior to the day of determination, as reported in *The Wall Street Journal*or such othersource as the Board deems reliable.

 

**(ii)**                                In the absence of suchmarkets for the Common Stock, the Fair Market Value shall be determined in goodfaith by the Board.

 

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

 

**(q)*****                                  “IPODate”*** means the effective date of the initial public offering of theCommon Stock.

 

**(r)****                                  “*Non-Employee Director***” means aDirector who is not an Employee.

 

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

 

**(t)****                                    “*Officer***” means a person who is anofficer of the Company within the meaning of Section 16 of the ExchangeAct and the rules and regulations promulgated thereunder.

 

**(u)****                                 “*Option***” means a Nonstatutory StockOption granted pursuant to the Plan.

 

**(v)****                                   “*Option Agreement***” means a writtenagreement between the Company and an Optionholder evidencing the terms andconditions of an individual Option grant. Each Option Agreement shall besubject to the terms and conditions of the Plan.

 

**(w)****                                “*Optionholder***” means a person to whoman Option is granted pursuant to the Plan or, if applicable, such other personwho holds an outstanding Option.

 

**(x)****                                  “*Plan***” means this Rigel Pharmaceuticals, Inc.2000 Non-Employee Directors’ Stock Option Plan.

 

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

 

**(z)****                                  “*Securities Act***” means the SecuritiesAct of 1933, as amended.

 

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**3.****                                      ADMINISTRATION.**

 

**(a)****                                  Administrationby Board**.  The Board shall administerthe Plan. The Board may not delegate administration of the Plan to a committee.

 

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

 

**(i)**                                    To determine theprovisions of each Option to the extent not specified in the Plan.

 

**(ii)**                                To construe andinterpret the Plan and Options granted under it, and to establish, amend andrevoke rules and regulations for its administration. The Board, in theexercise of this power, may correct any defect, omission or inconsistency inthe Plan or in any Option Agreement, in a manner and to the extent it shalldeem necessary or expedient to make the Plan fully effective.

 

**(iii)**                            To amend the Plan or anOption as provided in Section 12.

 

**(iv)**                               To terminate or suspendthe Plan as provided in Section 13.

 

**(v)**                                   Generally, toexercise such powers and to perform such acts as the Board deems necessary orexpedient to promote the best interests of the Company that are not in conflictwith the provisions of the Plan.

 

**(c)****                                  Effectof Board’s Decision.**  Alldeterminations, interpretations and constructions made by the Board in goodfaith shall not be subject to review by any person and shall be final, bindingand conclusive on all persons.

 

**(d)****                                  Cancellationand Re-Grant of Options**. Notwithstanding anything to the contrary in the Plan, neither the Boardnor any Committee shall have the authority to: (i) reprice any outstandingOption under the Plan, (ii) cancel and re-grant any outstanding Optionunder the Plan, or (iii) effect any other action that is treated as arepricing under generally accepted accounting principles unless, in each case, thestockholders of the Company have approved such an action within twelve(12) months prior to such an event.

 

**4.****                                      SHARESSUBJECT TO THE PLAN.**

 

**(a)****                                  ShareReserve**.  Subject to the provisionsof Section 11 relating to adjustments upon changes in the Common Stock,the Common Stock that may be issued pursuant to Options shall not exceed in theaggregate 535,000 shares of Common Stock, which number consists of (i) 33,333shares of Common stock initially reserved for issuance under the Plan plus (ii) 66,667shares of Common stock approved by the Board in April 2003 andsubsequently approved by the Company’s stockholders plus (iii) 225,000shares of Common Stock approved by the Board in April 2005 andsubsequently approved by the Company’s stockholders plus (iv) 110,000shares of Common Stock approved by the Board in January 2007 andsubsequently approved by the Company’s stockholders plus (v) 100,000shares of Common Stock approved by the Board in February 2008 and subsequently approved by the Company’sstockholders.

 

**(b)****                                  Reversionof Shares to the Share Reserve**.  Ifany Option shall for any reason expire or otherwise terminate, in whole or inpart, without having been exercised in full, the shares of Common Stock notacquired under such Option shall revert to and again become available forissuance under the Plan. If any shares subject to an Option are not deliveredto an Optionholder because the Option is exercised through a reduction ofshares subject to the Option (*i.e*.,“net exercised”), the number of shares that are not delivered to theOptionholder shall not remain available for issuance under the Plan. If anyshares subject to an Option are not delivered to an Optionholder because suchshares are withheld in satisfaction of the withholding of taxes incurred inconnection with the exercise of an Option, the number of shares that are notdelivered to the Optionholder shall not remain available for 

 

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subsequent issuance under thePlan. If the exercise price of any Option is satisfied by tendering shares ofCommon Stock held by the Optionholder (either by actual delivery orattestation), then the number of shares so tendered shall not remain availablefor subsequent issuance under the Plan.

 

**(c)****                                  Sourceof Shares**.  The shares of CommonStock subject to the Plan may be unissued shares or reacquired shares, boughton the market or otherwise.

 

**5.****                                      ELIGIBILITY.**

 

The Options asset forth in section 6 automatically shall be granted under the Plan toall Non-Employee Directors.

 

**6.****                                      NON-DISCRETIONARYGRANTS.**

 

**(a)****                                  InitialGrants.**  Without any further actionof the Board, each person who is elected or appointed for the first time to bea Non-Employee Director after the IPO Date automatically shall, upon the dateof his or her initial election or appointment to be a Non-Employee Director bythe Board or stockholders of the Company, be granted an Initial Grant topurchase twenty thousand (20,000) shares of Common Stock on the terms andconditions set forth herein.

 

**(b)****                                  AnnualGrants.**  Without any further actionof the Board, a Non-Employee Director shall be granted an Annual Grant asfollows: On the day following each Annual Meeting commencing with the AnnualMeeting in 2001, each person who is then a Non-Employee Director automaticallyshall be granted an Annual Grant to purchase ten thousand (10,000) shares ofCommon Stock on the terms and conditions set forth herein; *provided, however*, that if the person hasnot been serving as a Non-Employee Director for the entire period since thepreceding Annual Meeting, then the number of shares subject to the Annual Grantshall be reduced pro rata for each full quarter prior to the date of grantduring which such person did not serve as a Non-Employee Director.

 

**7.****                                      OPTIONPROVISIONS.**

 

Each Optionshall be in such form and shall contain such terms and conditions as requiredby the Plan. Each Option shall contain such additional terms and conditions,not inconsistent with the Plan, as the Board shall deem appropriate. EachOption shall include (through incorporation of provisions hereof by referencein the Option or otherwise) the substance of each of the following provisions:

 

**(a)****                                  Term**.  No Option shall be exercisable after theexpiration of ten (10) years from the date it was granted.

 

**(b)****                                  ExercisePrice**.  The exercise price of eachOption shall be one hundred percent (100%) of the Fair Market Value of thestock subject to the Option on the date the Option is granted. Notwithstandingthe foregoing, an Option may be granted with an exercise price lower than thatset forth in the preceding sentence if such Option is granted pursuant to anassumption or substitution for another option in a manner satisfying theprovisions of Section 424(a) of the Code.

 

**(c)****                                  Consideration**.  The purchase price of stock acquired pursuantto an Option may be paid, to the extent permitted by applicable statutes andregulations, in any combination of the following methods:

 

**(i)**                                    By cash or check.

 

**(ii)**                                Provided that at thetime of exercise the Common Stock is publicly traded and quoted regularly in *The Wall Street Journal*, by delivery ofalready-owned shares of Common Stock either that the Optionholder has held formore than six (6) months (or such longer or shorter period of timerequired to avoid a charge to earnings for financial accounting purposes) orthat the Optionholder did not acquire, directly or indirectly from the Company,that are owned free and 

 

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clear of anyliens, claims, encumbrances or security interests, and that are valued at FairMarket Value on the date of exercise. “Delivery” for these purposes shallinclude delivery to the Company of the Optionholder’s attestation of ownershipof such shares of Common Stock in a form approved by the Company. Notwithstandingthe foregoing, the Optionholder may not exercise the Option by tender to theCompany of Common Stock to the extent such tender would violate the provisionsof any law, regulation or agreement restricting the redemption of the Company’sstock.

 

**(iii)**                            Provided that at the timeof exercise the Common Stock is publicly traded and quoted regularly in *The Wall Street Journal*, pursuant to aprogram developed under Regulation T as promulgated by the Federal ReserveBoard that, prior to the issuance of Common Stock, results in either thereceipt of cash (or check) by the Company or the receipt of irrevocableinstructions to pay the aggregate exercise price to the Company from the salesproceeds.

 

**(iv)**                               By a “net exercise”arrangement pursuant to which the Company will reduce the number of shares ofCommon Stock issued upon exercise by the largest whole number of shares with aFair Market Value that does not exceed the aggregate exercise price; *provided, however,* that the Company shallaccept a cash or other payment from the Optionholder to the extent of anyremaining balance of the aggregate exercise price not satisfied by such holdingback of whole shares; *provided, further,however,* that shares of Common Stock will no longer be outstandingunder an Option and will not be exercisable thereafter to the extent that (i) sharesare used to pay the exercise price pursuant to the “net exercise,” (ii) sharesare delivered to the Optionholder as a result of such exercise, and (iii) sharesare withheld to satisfy tax withholding obligations.

 

**(d)****                                  Transferability**.  An Option is transferable by will or by thelaws of descent and distribution. An Option also is transferable (i) byinstrument to an inter vivos or testamentary trust, in a form accepted by theCompany, in which the Option is to be passed to beneficiaries upon the death ofthe trustor (settlor) and (ii) by gift, in a form accepted by the Company,to a member of the “immediate family” of the Optionholder as that term isdefined in 17 C.F.R. 240.16a-1(e). An Option shall be exercisable during thelifetime of the Optionholder only by the Optionholder and a permittedtransferee as provided herein. However, 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)****                                  ExerciseSchedule**.  The Option shall beexercisable as the shares of Common Stock subject to the Option vest.

 

**(f)****                                    VestingSchedule.**

 

**(i)**                                    Each Option grantedas an initial grant shall vest in accordance with the schedule set forth belowthat results in a shorter period of full vesting:

 

**(1)**                                 1/36th ofthe shares of Common Stock subject to the Option shall vest each month afterthe date of grant over a period of three (3) years; or

 

**(2)**                                 the Option shall vestin equal monthly installments after the date of grant over a period commencingon the date that the Optionholder is appointed for the first time to be a Non-EmployeeDirector by the Board and ending on the date of the Annual Meeting at which theOptionholder is first scheduled to be considered for election to be a Non-EmployeeDirector by the stockholders of the Company.

 

**(ii)**                                Each Option granted asan annual grant before the Annual Meeting in 2008 shall vest such that 1/36th ofthe shares of Common Stock subject to such Option shall vest each month afterthe date of grant over a period of three (3) years; and each Optiongranted as an annual grant on or after the Annual Meeting in 2008 shall vestsuch that 1/12th of the shares of Common Stock subject to suchOption shall vest each month after the date of grant over a period of one (1) year.

 

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**(g)****                                 Terminationof Continuous Service**.  In the eventan Optionholder’s Continuous Service terminates (other than upon theOptionholder’s death or Disability), the Optionholder may exercise his or herOption (to the extent that the Optionholder was entitled to exercise it as ofthe date of termination) but only within such period of time ending on theearlier of (i) the date three (3) months following the termination ofthe Optionholder’s Continuous Service, or (ii) the expiration of the termof the Option as set forth in the Option Agreement. If, after termination, theOptionholder does not exercise his or her Option within the time specified inthe Option Agreement, the Option shall terminate.

 

**(h)****                                 Extensionof Termination Date**.  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 would violate theregistration requirements under the Securities Act, then the Option shallterminate on the earlier of (i) the expiration of the term of the Optionset forth in subsection 7(a) or (ii) the expiration of a periodof three (3) months after the termination of the Optionholder’s ContinuousService during which the exercise of the Option would not be in violation ofsuch registration requirements.

 

**(i)****                                    Disabilityof Optionholder**.  In the event anOptionholder’s Continuous Service terminates as a result of the Optionholder’sDisability, the Optionholder may exercise his or her Option (to the extent thatthe Optionholder was entitled to exercise it as of the date of termination),but only within such period of time ending on the earlier of (i) the datetwelve (12) months following such termination or (ii) the expirationof the term of the Option as set forth in the Option Agreement. If, aftertermination, the Optionholder does not exercise his or her Option within thetime specified herein, the Option shall terminate.

 

**(j)****                                    Deathof Optionholder**.  In the event (i) anOptionholder’s Continuous Service terminates as a result of the Optionholder’sdeath or (ii) the Optionholder dies within the three-month period afterthe termination of the Optionholder’s Continuous Service for a reason otherthan death, then the Option may be exercised (to the extent the Optionholderwas entitled to exercise the Option as of the date of death) by theOptionholder’s estate, by a person who acquired the right to exercise theOption by bequest or inheritance or by a person designated to exercise theOption upon the Optionholder’s death, but only within the period ending on theearlier of (1) the date eighteen (18) months following the date ofdeath or (2) the expiration of the term of such Option as set forth in theOption Agreement. If, after death, the Option is not exercised within the timespecified herein, the Option shall terminate.

 

**8.****                                      COVENANTSOF THE COMPANY.**

 

**(a)****                                  Availabilityof Shares**.  During the terms of theOptions, the Company shall keep available at all times the number of shares ofCommon Stock required to satisfy such Options.

 

**(b)****                                  SecuritiesLaw Compliance**.  The Company shallseek to obtain from each regulatory commission or agency having jurisdictionover the Plan such authority as may be required to grant Options and to issueand sell shares of Common Stock upon exercise of the Options; provided,however, that this undertaking shall not require the Company to register underthe Securities Act the Plan, any Option or any stock issued or issuablepursuant to any such Option. 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 stock under the Plan, the Company shall be relieved from any liability forfailure to issue and sell stock upon exercise of such Options unless and untilsuch authority is obtained.

 

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**9.****                                      USEOF PROCEEDS FROM STOCK.**

 

Proceeds fromthe sale of stock pursuant to Options shall constitute general funds of theCompany.

 

**10.****                               MISCELLANEOUS.**

 

**(a)****                                  StockholderRights**.  No Optionholder shall bedeemed to be the holder of, or to have any of the rights of a holder withrespect to, any shares subject to such Option unless and until suchOptionholder has satisfied all requirements for exercise of the Option pursuantto its terms.

 

**(b)****                                  NoService Rights**.  Nothing in the Planor any instrument executed or Option granted pursuant thereto shall confer uponany Optionholder any right to continue to serve the Company as a Non-EmployeeDirector or shall affect the right of the Company or an Affiliate to terminate (i) theemployment of an Employee 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.

 

**(c)****                                  InvestmentAssurances**.  The Company may requirean Optionholder, as a condition of exercising or acquiring stock under anyOption, (i) to give written assurances satisfactory to the Company as tothe Optionholder’s knowledge and experience in financial and business mattersand/or to employ a purchaser representative reasonably satisfactory to theCompany who is knowledgeable and experienced in financial and business mattersand that he or she is capable of evaluating, alone or together with thepurchaser representative, the merits and risks of exercising the Option; and (ii) togive written assurances satisfactory to the Company stating that theOptionholder is acquiring the stock subject to the Option for the Optionholder’sown account and not with any present intention of selling or otherwisedistributing the stock. The foregoing requirements, and any assurances givenpursuant to such requirements, shall be inoperative if (iii) the issuanceof the shares upon the exercise or acquisition of stock under the Option hasbeen registered under a then currently effective registration statement underthe Securities Act or (iv) as to any particular requirement, adetermination is made by counsel for the Company that such requirement need notbe met in the circumstances under the then applicable securities laws. TheCompany may, upon advice of counsel to the Company, place legends on stockcertificates issued under the Plan as such counsel deems necessary orappropriate in order to comply with applicable securities laws, including, butnot limited to, legends restricting the transfer of the stock.

 

**(d)****                                  WithholdingObligations**.  The Optionholder maysatisfy any federal, state or local tax withholding obligation relating to theexercise or acquisition of stock under an Option by any of the following means(in addition to the Company’s right to withhold from any compensation paid tothe Optionholder by the Company) or by a combination of such means: (i) tenderinga cash payment; (ii) authorizing the Company to withhold shares from theshares of the Common Stock otherwise issuable to the Optionholder as a resultof the exercise or acquisition of stock under the Option, provided, however,that no shares of Common Stock are withheld with a value exceeding the minimumamount of tax required to be withheld by law; or (iii) delivering to theCompany owned and unencumbered shares of the Common Stock.

 

**11.****                               ADJUSTMENTSUPON CHANGES IN STOCK.**

 

**(a)****                                  CapitalizationAdjustments**.  If any change is madein the stock subject to the Plan, or subject to any Option, without the receiptof consideration by the Company (through merger, consolidation, reorganization,recapitalization, reincorporation, stock dividend, dividend in property otherthan cash, stock split, liquidating dividend, combination of shares, exchangeof shares, change in 

 

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corporate structure or othertransaction not involving the receipt of consideration by the Company), thePlan will be appropriately adjusted in the class(es) and maximum number ofsecurities subject both to the Plan pursuant to subsection 4(a) andto the nondiscretionary Options specified in Section 5, and theoutstanding Options will be appropriately adjusted in the class(es) and numberof securities and price per share of stock subject to such outstanding Options.The Board shall make such adjustments, and its determination shall be final,binding and conclusive. (The conversion of any convertible securities of theCompany shall not be treated as a transaction “without receipt of consideration”by the Company.)

 

**(b)****                                  CorporateTransaction**.  In the event of (i) asale, lease or other disposition of all or substantially all of the securitiesor assets of the Company, (ii) a merger or consolidation in which theCompany is not the surviving corporation or (iii) a reverse merger inwhich the Company is the surviving corporation but the shares of Common Stockoutstanding immediately preceding the merger are converted by virtue of themerger into other property, whether in the form of securities, cash orotherwise, then any surviving corporation or acquiring corporation may assumeany Options outstanding under the Plan or may substitute similar Options(including an option to acquire the same consideration paid to the stockholdersin the transaction described in this subsection 11(b)) for thoseoutstanding under the Plan. In the event no surviving corporation or acquiringcorporation assumes such Options or substitutes similar Options for those outstandingunder the Plan, then with respect to Options held by Optionholders who are inContinuous Service immediately prior to such an event, the vesting of suchOptions (and the time during which such Options may be exercised) shall beaccelerated in full, and the Options shall terminate if not exercised at orprior to such event. With respect to any other Options outstanding under thePlan, such Options shall terminate if not exercised prior to such event.

 

**(c)****                                  Changein Control.**  Upon a Change inControl, all Options held by each Optionholder whose Continuous Service has notterminated immediately prior to the Change in Control shall become fully vestedand exercisable immediately prior to the effectiveness of such Change inControl.

 

**12.****                               AMENDMENTOF THE PLAN AND OPTIONS.**

 

**(a)****                                  Amendmentof Plan**.  The Board at any time, andfrom time to time, may amend the Plan. However, except as provided in Section 11relating to adjustments upon changes in stock, no amendment shall be effectiveunless approved by the stockholders of the Company to the extent stockholderapproval is necessary to satisfy the requirements of Rule 16b-3 or anyNasdaq or securities exchange listing requirements.

 

**(b)****                                  StockholderApproval**.  The Board may, in its solediscretion, submit any other amendment to the Plan for stockholder approval.

 

**(c)****                                  NoImpairment of Rights**.  Rights underany Option granted before amendment of the Plan shall not be impaired by anyamendment of the Plan unless (i) the Company requests the consent of theOptionholder and (ii) the Optionholder consents in writing.

 

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

 

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

 

**(a)****                                  PlanTerm**.  The Board may suspend orterminate the Plan at any time. No Options may be granted under the Plan whilethe Plan is suspended or after it is terminated.

 

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**(b)****                                  NoImpairment of Rights**.  Suspension ortermination of the Plan shall not impair rights and obligations under anyOption granted while the Plan is in effect except with the written consent ofthe Optionholder.

 

**14.****                               EFFECTIVEDATE OF PLAN.**

 

The Plan shallbecome effective on the IPO Date, but no Option shall be exercised unless anduntil the Plan has been approved by the stockholders of the Company, whichapproval shall be within twelve (12) months before or after the date thePlan is adopted by the Board.

 

**15.****                               CHOICEOF LAW.**

 

All questionsconcerning the construction, validity and interpretation of this Plan shall begoverned by the law of the State of Delaware, without regard to such state’sconflict of laws rules.

 

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