Exhibit 10.1


 


RIGEL
PHARMACEUTICALS, INC.


 


2000
EQUITY INCENTIVE PLAN


 


ADOPTED
JANUARY 27, 2000


APPROVED
BY STOCKHOLDERS MARCH 15, 2000


AMENDED
DECEMBER 13, 2002


AMENDED
AND RESTATED APRIL 24, 2003


APPROVED
BY STOCKHOLDERS JUNE 20, 2003


AMENDED
AND RESTATED APRIL 22, 2005


APPROVED
BY STOCKHOLDERS JUNE 2, 2005


AMENDED
AND RESTATED MARCH 10, 2006 AND APRIL 18, 2006


APPROVED
BY STOCKHOLDERS MAY 30, 2006


AMENDED
JANUARY 31, 2007


APPROVED
BY STOCKHOLDERS 29, 2007


AMENDED
FEBRUARY 21, 2008


APPROVED
BY STOCKHOLDERS MAY 29, 2008


AMENDED MAY 19,
2009


TERMINATION
DATE: APRIL 24, 2013


 


1.                                      PURPOSES.


 


(a)                                  The Plan is an amendment and restatement
of, and is intended to supersede and replace, the Company’s 1997 Stock Option
Plan.


 


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


 


(c)                                  The purpose of the Plan is to provide a
means by which eligible recipients of Stock Awards may be given an opportunity
to benefit from increases in value of the Common Stock through the granting of
the following Stock Awards:  (i) Incentive
Stock Options, (ii) Nonstatutory Stock Options, (iii) stock bonuses
and (iv) rights to acquire restricted stock.


 


(d)                                  The Company, by means of the Plan, seeks
to retain the services of the group of persons eligible to receive Stock
Awards, to secure and retain the services of new members of this group and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and its Affiliates.


 


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


 


1

















 


2.                                      DEFINITIONS.


 


(a)                                  “Affiliate” means, at the time of determination, any
“parent” or “subsidiary” of the Company as such terms are defined in Rule 405
of the Securities Act.  The Board shall
have 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 the
Company.


 


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


 


(d)                                  “Committee” means a committee of one or more members
of 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) engaged
by the Company or an Affiliate to render consulting or advisory services and
who is compensated for such services or (ii) who is a member of the Board
of Directors of an Affiliate.  However,
the term “Consultant” shall not include either Directors who are not
compensated by the Company for their services as Directors or Directors who are
merely paid a director’s fee by the Company for their services as Directors.


 


(h)                                 “Continuous Service” means that the Participant’s service
with the Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated. 
The Participant’s Continuous Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Participant
renders service to the Company or an Affiliate as an Employee, Consultant or
Director or a change in the entity for which the Participant renders such
service, provided that  there is no
interruption or termination of the Participant’s service.  For example, a change in status without
interruption from an Employee of the Company to a Consultant of an Affiliate or
a Director will not constitute an interruption of Continuous Service.  The Board or the chief executive officer of
the Company, in that party’s sole discretion, may determine whether Continuous
Service shall be considered interrupted in the case of any leave of absence
approved by that party, including sick leave, military leave or any other
personal leave.


 


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


 


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


 


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


 


2

















 


(l)                                    “Employee” means any person employed by the Company
or an Affiliate.  Mere service as a
Director or payment of a director’s fee by the Company or an Affiliate shall
not be sufficient to constitute “employment” by the Company or an Affiliate.


 


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


 


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


 


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


 


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


 


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


 


(p)                                  “Non-Employee Director”  means a Director who either (i) is not a current
Employee or Officer of the Company or its parent or a subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities
Act (“Regulation S-K”)), does not possess an interest in any other transaction
as to which disclosure would be required under Item 404(a) of Regulation
S-K and is not engaged in a business relationship as to 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.


 


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


 


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


 


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


 


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


 


3

















 


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


 


(v)                                   “Outside Director” means a Director who either (i) is
not a current employee of the Company or an “affiliated corporation” (within
the meaning of Treasury Regulations promulgated under Section 162(m) of
the Code), is not a former employee of the Company or an “affiliated
corporation” receiving compensation for prior services (other than benefits
under a tax qualified pension plan), was not an officer of the Company or an “affiliated
corporation” at any time and is not currently receiving direct or indirect remuneration
from the Company or an “affiliated corporation” for services in any capacity
other than as a Director or (ii) is otherwise considered an “outside
director” for purposes of Section 162(m) of the Code.


 


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


 


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


 


(y)                                  “Performance
Goals” means,
for a Performance Period, the one or more goals established by the Board for
the Performance Period based upon the Performance Criteria. The Board is
authorized at any time in its sole discretion, to adjust or modify the
calculation of a Performance Goal for such Performance Period in order to
prevent the dilution or enlargement of the rights of Participants, (a) in
the event of, or in anticipation of, any unusual or extraordinary corporate
item, transaction, event or development; (b) in recognition of, or in
anticipation of, any other unusual or nonrecurring events affecting the
Company, or the financial statements of the Company, or in response to, or in
anticipation of, changes in applicable laws, regulations, accounting
principles, or business conditions; or (c) in view of the Board’s
assessment of the business strategy of the Company, performance of comparable
organizations, economic and business conditions, and any other circumstances
deemed relevant.  Specifically, the Board
is authorized to make adjustment in the method of calculating attainment of
Performance Goals and 


 


4

















 


objectives for a Performance Period as follows: (i) to
exclude the dilutive effects of acquisitions or joint ventures; (ii) to
assume that any business divested by the Company achieved performance
objectives at targeted levels during the balance of a Performance Period
following such divestiture; and (iii) to exclude the effect of any change
in the outstanding shares of common stock of the Company by reason of any stock
dividend or split, stock repurchase, reorganization, recapitalization, merger,
consolidation, spin-off, combination or exchange of shares or other similar
corporate change, or any distributions to common shareholders other than
regular cash dividends.  In addition, the
Board is authorized to make adjustment in the method of calculating attainment
of Performance Goals and objectives for a Performance Period as follows: (i) to
exclude restructuring and/or other nonrecurring charges; (ii) to exclude
exchange rate effects, as applicable, for non-U.S. dollar denominated net sales
and operating earnings; (iii) to exclude the effects of changes to
generally accepted accounting standards required by the Financial Accounting
Standards Board; (iv) to exclude the effects to any statutory adjustments
to corporate tax rates; (v) to exclude the impact of any “extraordinary
items” as determined under generally accepted accounting principles; and (vi) to
exclude any other unusual, non-recurring gain or loss or other extraordinary
item.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


3.                                      ADMINISTRATION.


 


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


 


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


 


5

















 


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


 


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


 


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


 


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


 


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


 


(c)                                  Delegation to Committee.


 


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


 


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


 


6

















 


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


 


(e)                                  Cancellation and
Re-Grant of Stock Awards.  Notwithstanding anything to
the contrary in the Plan, neither the Board nor any Committee shall have the
authority to: (i) reprice any outstanding Stock Awards under the Plan, (ii) cancel
and re-grant any outstanding Stock Awards under the Plan, or (iii) effect
any other action that is treated as a repricing under generally accepted
accounting principles unless, in each case, the stockholders of the Company
have approved such an action within twelve (12) months prior to such an event.


 


4.                                      SHARES
SUBJECT TO THE PLAN.


 


(a)                                  Share Reserve. 
Subject to the provisions of subsection 11(a) relating to
adjustments upon changes in Common Stock, the shares of Common Stock that may
be issued pursuant to Stock Awards shall not exceed in the aggregate 8,410,403 shares of Common Stock, which number
consists of (i) 1,058,333 shares of Common Stock initially reserved for
issuance under the Plan plus (ii) 1,600,000 shares of Common Stock
approved by the Board in April 2003 and subsequently approved by the
Company’s stockholders plus (iii) 388,889 shares of Common Stock that were
originally reserved for issuance under the Non-Officer Plan (prior to the
termination of such plan) as approved by the Board in April 2003 and subsequently
approved by the Company’s stockholders plus (iv) 296,022 shares and
392,159 shares of Common Stock made available for issuance on December 2,
2003 and 2004, respectively, pursuant to the evergreen provision that was
approved by the Board and the Company’s stockholders in April 2003 (and
subsequently terminated by the Board and stockholders in April 2005) plus (v) 2,275,000
shares of Common Stock approved by the Board in April 2005 and
subsequently approved by the Company’s stockholders plus (vi) 500,000
shares of Common Stock approved by the Board in April 2006 and
subsequently approved by the Company’s stockholders plus (vii) 1,900,000
shares of Common stock approved by the Board in January 2007 and
subsequently approved by the Company’s stockholders plus (viii) 3,350,000
shares of Common stock approved by the Board in February 2008 and
subsequently approved by the Company’s stockholders.


 


(b)                                  Subject to subsection 4(c), the number of
shares available for issuance under the Plan shall be reduced by: (i) one (1) share
for 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) with
respect to which the strike price is at least one hundred percent (100%) of the
Fair Market Value of the underlying Common Stock on the date of grant; and (ii) one and five tenths (1.5) shares for
each share of Common Stock issued pursuant to a Stock Bonus Award, Restricted
Stock Award, Stock Unit Award or Performance Stock Award.


 


(c)                                  Reversion of Shares to the Share
Reserve.


 


(i)                                    Shares Available For Subsequent
Issuance.  If any (i) Stock Award, including any
stock 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 issued
to a Participant pursuant to a Stock Award, including 


 


7

















 


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


 


(ii)                                Shares Not Available For
Subsequent Issuance.  If any shares subject to a Stock Award are
not delivered to a Participant because the Stock Award is exercised through a
reduction of shares subject to the Stock Award (i.e.,
“net exercised”), the number of shares that are not delivered to the
Participant shall not remain available for issuance under the Plan.  If any shares subject to a Stock Award are
not delivered to a Participant because such shares are withheld in satisfaction
of the withholding of taxes incurred in connection with the exercise of an
Option or stock appreciation right, or the issuance of shares under a stock
bonus award, restricted stock award or stock unit award, the number of shares
that are not delivered to the Participant shall not remain available for
subsequent issuance under the Plan.  If
the exercise price of any Stock Award is satisfied by tendering shares of
Common Stock held by the Participant (either by actual delivery or
attestation), then the number of shares so tendered shall not remain available
for subsequent issuance under the Plan.


 


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


 


5.                                      ELIGIBILITY.


 


(a)                                  Eligibility for Specific Stock
Awards.  Incentive Stock Options may
be granted only to employees of the Company or a “parent corporation” or “subsidiary
corporation” thereof (as such terms are defined in Sections 424(e) and (f) of
the Code).  Stock Awards other than
Incentive Stock Options may be granted to Employees, Directors and Consultants;
provided, however, Nonstatutory
Stock 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 the
Securities Act, unless such Stock Awards comply with the distribution
requirements of Section 409A of the Code.


 


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


 


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



 


8

















 


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


 


(d)                                  Consultants.


 


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


 


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


 


6.                                      OPTION
PROVISIONS.


 


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


 


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


 


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


 


(c)                                  Exercise Price of a Nonstatutory
Stock Option.  The exercise price of each Nonstatutory Stock
Option shall be not less than one hundred percent (100%) of the Fair Market
Value of the Common Stock subject to the Option on the date the Option is
granted.  


 


9

















 


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


 


(d)                                  Consideration. 
The purchase price of Common Stock acquired pursuant to an Option shall
be paid, to the extent permitted by applicable statutes and regulations, either
(i) in cash at the time the Option is exercised or (ii) at the
discretion of the Board (1) by delivery to the Company of other Common
Stock; (2) according to a deferred payment or other similar arrangement
with the Optionholder; (3) by a “net exercise” arrangement pursuant to
which the Company will reduce the number of shares of Common Stock issued upon
exercise by the largest whole number of shares with a Fair Market Value that
does not exceed the aggregate exercise price; provided,
however, that the Company shall accept a cash or other payment from
the Participant to the extent of any remaining balance of the aggregate
exercise price not satisfied by such holding back of whole shares; provided, further, however, that shares of
Common Stock will no longer be outstanding under an Option and will not be
exercisable thereafter to the extent that (i) shares are used to pay the
exercise price pursuant to the “net exercise,” (ii) shares are delivered
to the Participant as a result of such exercise, and (iii) shares are
withheld to satisfy tax withholding obligations; or (4) in any other form
of legal consideration that may be acceptable to the Board.  At any time 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 be made by deferred payment.


 


In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid (1) the treatment as interest, under any
applicable provisions of the Code, of any amounts other than amounts stated to
be interest under the deferred payment arrangement and (2) the treatment
of 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 the
transferability of Options as the Board shall determine.  In the absence of such a determination by the
Board to the contrary, the following restrictions on the transferability of
Options shall apply:


 


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


 


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


 


10
















 


(iii)                            Beneficiary Designation. 
Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form provided by or otherwise satisfactory
to 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 Common
Stock or other consideration resulting from such exercise.  In the absence of such a designation, the
executor or administrator of the Optionholder’s estate shall be entitled to
exercise the Option and receive the Common Stock or other consideration
resulting from such exercise.


 


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


 


(g)                                 Termination of Continuous
Service.  In the event an Optionholder’s Continuous
Service terminates (other than upon the Optionholder’s death or Disability),
the Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i) the
date three (3) months following the termination of the Optionholder’s
Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth
in the Option Agreement.  If, after
termination, the Optionholder does not exercise his or her Option within the
time 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 exercise
of the Option following the termination of the Optionholder’s Continuous
Service (other than upon the Optionholder’s death or Disability) would be
prohibited at any time solely because the issuance of shares of Common Stock
would violate the registration requirements under the Securities Act, then the
Option shall terminate on the earlier of (i) the expiration of the term of
the Option set forth in the Option Agreement or (ii) the expiration of a
total period of three (3) months (that need not be consecutive) after the
termination of the Optionholder’s Continuous Service during which the exercise
of the Option would not be in violation of such registration requirements.


 


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


 


11

















 


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


 


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


 


(l)                                    Non-Exempt Employees. 
No Option granted to an Employee who is a non-exempt employee for
purposes of the Fair Labor Standards Act of 1938, as amended, shall be first
exercisable for any shares of Common Stock until at least six months following
the date of grant of the Option. Notwithstanding the foregoing, consistent with
the provisions of the Worker Economic Opportunity Act, (i) in the event of the Participant’s death or
Disability, (ii) upon a Corporate Transaction (as defined in section
11(c)) in which such Option is not assumed, continued, or substituted, or (iii) upon
the Participant’s retirement (as such term may be defined in the Participant’s
Option Agreement or in another applicable agreement or in accordance with the
Company’s then current employment policies and guidelines), any such vested
Options may be exercised earlier than six months following the date of
grant.  The foregoing provision is
intended to operate so that any income derived by a non-exempt employee in
connection with the exercise or vesting of an Option will be exempt from his or
her regular rate of pay.


 


7.                                      PROVISIONS
OF STOCK AWARDS OTHER THAN OPTIONS.


 


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


 


(i)                                    Consideration.  A
stock bonus may be awarded in consideration for past services actually rendered
to the Company or an Affiliate for its benefit.


 


12

















 


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


 


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


 


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


 


(b)                                  Restricted Stock Awards. 
Each restricted stock purchase agreement shall be in such form and shall
contain such terms and conditions as the Board shall deem appropriate.  The terms and conditions of the restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate restricted stock purchase agreements need not be
identical, but each restricted stock purchase agreement shall include (through
incorporation 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 shall
be such amount as the Board shall determine and designate in such restricted
stock purchase agreement.  The purchase
price shall not be less than eighty-five percent (85%) of the Common Stock’s
Fair Market Value on the date such award is made or at the time the purchase is
consummated.


 


(ii)                                Consideration. 
The purchase price of Common Stock acquired pursuant to the restricted
stock purchase agreement shall be paid either: 
(i) in cash at the time of purchase; (ii) at the discretion of
the Board, according to a deferred payment or other similar arrangement with
the Participant; or (iii) in any other form of legal consideration that
may be acceptable to the Board in its discretion; provided,
however, that at any time that 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 be made by deferred payment.


 


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


 


(iv)                               Termination of Participant’s
Continuous Service.  In the event a Participant’s Continuous
Service terminates, the Company may repurchase or otherwise reacquire any or
all of the shares of Common Stock held by the Participant that have not vested
as of the date of termination under the terms of the restricted stock purchase
agreement.


 


(v)                                   Transferability. 
Rights to acquire shares of Common Stock under the restricted stock
purchase agreement shall be transferable by the Participant only upon such
terms 


 


13

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(d)                                  Stock Appreciation
Rights.  Each stock appreciation right agreement shall be in
such form and shall contain such terms and conditions as the Board shall deem
appropriate.  The terms and conditions of
stock appreciation right agreements may change from time to time, and the terms
and conditions of separate stock appreciation right agreements need not be
identical; provided, however, that
each stock appreciation right agreement shall include (through 


 


14

















 


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


 


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


 


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


 


(iii)                            Exercise. 
To exercise any outstanding stock appreciation right, the Participant
must provide written notice of exercise to the Company in compliance with the
provisions of the stock appreciation right agreement evidencing such stock
appreciation right.


 


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


 


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


 


8.                                      COVENANTS
OF THE COMPANY.


 


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


 


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


 


15

















 


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


 


(c)                                  No Obligation to Notify or
Minimize Taxes.  The Company shall have no duty or
obligation to any Participant to advise such holder as to the time or manner of
exercising such Stock Award.  Furthermore,
the Company shall have no duty or obligation to warn or otherwise advise such
holder of a pending termination or expiration of a Stock Award or a possible
period in which the Stock Award may not be exercised.  The Company has no duty or obligation to
minimize the tax consequences of a Stock Award to the holder of such Stock
Award.


 


9.                                      USE OF
PROCEEDS FROM STOCK.


 


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


 


10.                               MISCELLANEOUS.


 


(a)                                  Corporate Action
Constituting Grant of Stock Awards.  Corporate
action constituting a grant by the Company of a Stock Award to any Participant
shall be deemed completed as of the date of such corporate action, unless
otherwise determined by the Board, regardless of when the instrument,
certificate, or letter evidencing the Stock Award is communicated to, or
actually received or accepted by, the Participant.


 


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


 


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


 


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


 


16

















 


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


 


(f)                                    Investment Assurances. 
The Company may require a Participant, as a condition of exercising or
acquiring Common Stock under any Stock Award, (i) to give written
assurances satisfactory to the Company as to the Participant’s knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring Common
Stock subject to the Stock Award for the Participant’s own account and not with
any present intention of selling or otherwise distributing the Common
Stock.  The foregoing requirements, and
any assurances given pursuant to such requirements, shall be inoperative if (1) the
issuance of the shares of Common Stock upon the exercise or acquisition of
Common Stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (2) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws.  The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to
comply with applicable securities laws, including, but not limited to, legends
restricting the transfer of the Common Stock.


 


(g)                                 Withholding Obligations. 
To the extent provided by the terms of a Stock Award Agreement, the
Participant may satisfy any federal, state or local tax withholding obligation
relating to the exercise or acquisition of Common Stock under a Stock Award by
any of the following means (in addition to the Company’s right to withhold from
any compensation paid to the Participant by the Company) or by a combination of
such means:  (i) tendering a cash
payment; (ii) authorizing the Company to withhold shares of Common Stock
from the shares of Common Stock otherwise issuable to the Participant as a
result of the exercise or acquisition of Common Stock under the Stock Award, provided, however, that no shares of Common Stock are
withheld with a value exceeding the minimum amount of tax required to be
withheld by law (or such lesser amount as may be necessary to avoid variable
award accounting); or (iii) delivering to the Company (either by actual
delivery or attestation) owned and unencumbered shares of Common Stock of the
Company.


 


(h)                                 Performance Stock Awards.  A Stock Award
may be granted, may vest, or may be exercised based upon service conditions,
upon the attainment during a Performance Period of certain Performance Goals,
or both.  The length of any Performance
Period, the Performance Goals to be achieved during the Performance Period, and
the measure of whether and to what degree such Performance Goals have been
attained shall be conclusively determined by the Board in its sole
discretion.  The maximum benefit to be
received by any individual in any calendar year attributable to Stock Awards
described in this subsection 10(g) shall not exceed the 


 


17

















 


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


 


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


 


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


 


11.                               ADJUSTMENTS
UPON CHANGES IN STOCK.


 


(a)                                  Capitalization Adjustments. 
If any change is made in the Common Stock subject to the Plan, or
subject 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, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Board shall appropriately and
proportionately adjust: (i) the class(es) and maximum number of securities
subject to the Plan pursuant to subsection 4(a) and the maximum number of
securities subject to award to any person pursuant to subsection 5(c) and
10(g) and (ii) the class(es) and number of securities and price per
share of Common Stock subject to such outstanding Stock Awards.  The Board shall make such adjustments, and
its determination shall be final, binding and conclusive.  (The conversion of any convertible securities
of the Company shall not be treated as a transaction “without receipt of
consideration” by the Company.)


 


(b)                                  Dissolution or Liquidation. 
In the event of a dissolution or liquidation of the Company, then all
outstanding Stock Awards shall terminate immediately prior to such event, and
shares of Common Stock subject to the Company’s repurchase option may be
repurchased by the Company notwithstanding the fact that the holder of such
stock is still in Continuous Service. 
Notwithstanding the foregoing, Options granted under the 1997 Stock
Option Plan shall be subject to subsection 11(c) below in the event of a
dissolution or liquidation of the Company.


 


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


 


18

















 


Company is the surviving corporation but the shares of
Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then any surviving corporation or acquiring corporation may
assume any Stock Awards outstanding under the Plan or may substitute similar
stock awards (including an award to acquire the same consideration paid to the
stockholders in the transaction described in this subsection 11(c)) for those
outstanding under the Plan.  In the event
any surviving corporation or acquiring corporation does not assume such Stock
Awards or substitute similar stock awards for those outstanding under the Plan,
then with respect to Stock Awards held by Participants whose Continuous Service
has not terminated, the vesting of such Stock Awards (and, if applicable, the
time during which such Stock Awards may be exercised) shall be accelerated in
full, and the Stock Awards shall terminate if not exercised (if applicable) at
or prior to such event.  With respect to
any other Stock Awards outstanding under the Plan, such Stock Awards shall
terminate if not exercised (if applicable) prior to such event.


 


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 upon changes in Common Stock, no amendment shall be
effective unless approved by the stockholders of the Company to the extent
stockholder approval is necessary to satisfy the requirements of Section 422
of the Code, Rule 16b-3 or any Nasdaq or securities exchange listing
requirements.


 


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


 


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


 


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


 


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


 


13.                               TERMINATION
OR SUSPENSION OF THE PLAN.


 


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


 


19

















 


earlier.  No
Stock Awards may be granted under the Plan while the Plan is suspended or after
it is terminated.


 


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


 


14.                               EFFECTIVE
DATE OF PLAN.


 


The Plan shall become
effective 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 Plan
has been approved by the stockholders of the Company, which approval shall be
within twelve (12) months before or after the date the Plan is adopted by the
Board.


 


15.                               CHOICE OF
LAW.


 


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


 


20
















 


Appendix A


 


RIGEL PHARMACEUTICALS, INC.


 


2001
NON-OFFICER EQUITY INCENTIVE PLAN


 


ADOPTED
JULY 19, 2001


AMENDED
DECEMBER 13, 2002


STOCKHOLDER
APPROVAL NOT REQUIRED


 


1.                                      PURPOSES.


 


(a)                                  Eligible Stock Award Recipients. 
The persons eligible to receive Stock Awards are the Employees (other
than 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 eligible
recipients of Stock Awards may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of the following
Stock Awards: (i) Nonstatutory Stock Options, (ii) stock bonus awards
and (iii) rights to acquire restricted stock.


 


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


 


2.                                      DEFINITIONS.


 


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


 


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


 


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


 


(d)                                  “Committee” means a committee of one or more members
of 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 advisory
services and who is compensated for such services.  However, the term “Consultant” shall not
include either Directors who are not 


 


1

















 


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


 


(h)                                 “Continuous Service” means that the Participant’s service
with the Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated. 
The Participant’s Continuous Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Participant
renders service to the Company or an Affiliate as an Employee, Consultant or
Director or a change in the entity for which the Participant renders such
service, provided that there is no interruption or termination of the
Participant’s Continuous Service.  For
example, a change in status from an Employee of the Company to a Consultant of
an Affiliate or a Director will not constitute an interruption of Continuous
Service.  The Board or the chief
executive officer of the Company, in that party’s sole discretion, may
determine whether Continuous Service shall be considered interrupted in the
case of any leave of absence approved by that party, including sick leave,
military leave or any other personal leave.


 


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


 


(j)                                    “Disability” means the inability of a person, in the
opinion of a qualified physician acceptable to the Company, to perform the
major duties of such person’s position with the Company or with an Affiliate
because of the sickness or injury of such person.


 


(k)                                “Employee” means any person employed by the Company
or an Affiliate.  Mere service as a
Director or payment of a director’s fee by the Company or an Affiliate shall
not be sufficient to constitute “employment” by the Company or an Affiliate.


 


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


 


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


 


(i)                                    If the Common Stock is listed on any
established stock exchange or traded on the Nasdaq National Market or the
Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock shall
be the closing sales price for such stock (or the closing bid if no sales were
reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in the Common Stock) on the day before the date
of grant (the “determination date”, or if the determination date is not a
market trading day, then the last market trading day prior to the
determination, as reported in The Wall Street Journal  or such other source as the Board deems
reliable.


 


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


 


(n)                                 “Non-Employee Director”  means a Director who either (i) is not a current
Employee or Officer of the Company or its parent or a subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated under the federal
securities laws (“Regulation S-K”)), does not possess an interest in any other
transaction 


 


2

















 


as to which disclosure would be required under Item
404(a) of Regulation S-K and is not engaged in a business relationship as
to 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 qualify
as an “incentive stock option” within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.


 


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


 


(q)                                  “Option” means a Nonstatutory Stock Option granted
pursuant to the Plan.


 


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


 


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


 


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


 


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


 


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


 


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


 


(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 the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant.  Each Stock
Award 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 delegates
administration to a Committee, as provided in Section 3(c).


 


3

















 


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


 


(i)                                    To determine from time to time which of
the persons eligible under the Plan shall be granted Stock Awards; when and how
each Stock Award shall be granted; what type or combination of types of Stock
Award shall be granted; the provisions of each Stock Award granted, including
the time or times when a person shall be permitted to receive Common Stock
pursuant to a Stock Award; and the number of shares of Common Stock with
respect to which a Stock Award shall be granted to each such person.


 


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


 


(iii)                            To effect, at any time and from time to
time, with the consent of any adversely affected Optionholder, (1) the
reduction of the exercise price of any outstanding Option under the Plan, (2) the
cancellation of any outstanding Option under the Plan and the grant in substitution
therefor of (A) a new Option under the Plan covering the same or a
different number of shares of Common Stock, (B) a stock bonus, (C) the
right to acquire restricted stock, and/or (D) cash, or (3) any other
action that is treated as a repricing under generally accepted accounting
principles.


 


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


 


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


 


(c)                                  Delegation to Committee.


 


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


 


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


 


4

















 


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


 


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


 


4.                                      SHARES SUBJECT TO THE PLAN.


 


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


 


(b)                                  Reversion of Shares to the Share
Reserve.  If any Nonstatutory Stock Option shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the shares of Common Stock not acquired under such
Nonstatutory Stock Option shall revert to and again become available for
issuance under the Plan.


 


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


 


5.                                      ELIGIBILITY.


 


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


 


(b)                                  Consultants.


 


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


 


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


 


5

















 


6.                                      OPTION PROVISIONS.


 


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


 


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


 


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


 


(c)                                  Consideration. 
The purchase price of Common Stock acquired pursuant to an Option shall
be 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) at
the discretion of the Board at the time of the grant of the Option or at any
time prior to the time of exercise in the case of a Nonstatutory Stock Option (1) by
delivery to the Company of other Common Stock, (2) according to a deferred
payment or other similar arrangement with the Optionholder or (3) in any
other form of legal consideration that may be acceptable to the Board.  Unless otherwise specifically provided in the
Option, the purchase price of Common Stock acquired pursuant to an Option that
is paid by delivery to the Company of other Common Stock acquired, directly or
indirectly from the Company, shall be paid only by shares of the Common Stock
of the Company that have been held for more than six (6) months (or such
longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes).  At any
time 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 be
made by deferred payment.


 


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


 


(d)                                  Transferability of a Nonstatutory
Stock Option. A
Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime
of the Optionholder only by the Optionholder. 
Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the Company, designate
a third party who, in the event of the death of the Optionholder, shall
thereafter be entitled to exercise the Option.


 


(e)                                  Vesting Generally. 
Each Option shall be evidenced by an Option Agreement executed by the
Company and the Optionholder.  The total
number of shares of Common Stock subject to an Option may vest and therefore
become exercisable as set-forth in the Option Agreement. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board
may deem appropriate.   The provisions of
this Section 6(e) are subject to any Option provisions 


 


6

















 


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


 


(f)                                    Termination of Continuous
Service.  In the event an Optionholder’s Continuous
Service terminates for any reason other than upon the Optionholder’s death or
Disability, the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination or as otherwise permitted by the Company) but only within such
period of time ending on the earlier of (i) the three (3) months
following such termination (or such longer or shorter period specified in the
Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement.  If, after
termination, the Optionholder does not exercise his or her Option within the
time 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 exercise
of the Option following the termination of the Optionholder’s Continuous
Service (other than upon the Optionholder’s death or Disability) would be
prohibited at any time solely because the issuance of shares of Common Stock
would violate the registration requirements under the Securities Act or similar
requirements of applicable law of another jurisdiction to which the Option is
subject, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in the Option Agreement, or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder’s Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements or similar requirements.


 


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


 


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


 


7

















 


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


 


7.                                      PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.


 


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


 


(i)                                    Consideration.  A
stock bonus award may be awarded in consideration for past services actually
rendered to the Company or an Affiliate for its benefit.


 


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


 


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


 


(iv)                               Transferability. 
Rights to acquire shares of Common Stock under the stock bonus agreement
shall be transferable by the Participant only upon such terms and conditions as
are set forth in the stock bonus agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the stock bonus agreement
remains 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 shall
contain such terms and conditions as the Board shall deem appropriate.  The terms and conditions of the restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate restricted stock purchase agreements need not be
identical, but each restricted stock purchase agreement shall include (through
incorporation 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 shall
be such amount as the Board shall determine and designate in such restricted
stock purchase agreement.


 


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


 


8

















 


purchase; (ii) at the discretion of the Board,
according to a deferred payment or other similar arrangement with the
Participant; or (iii) in any other form of legal consideration that may be
acceptable to the Board in its discretion; provided, however, that at any time
that 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 be
made by deferred payment.


 


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


 


(iv)                               Termination of Participant’s
Continuous Service.  In the event a Participant’s Continuous
Service terminates, the Company may repurchase or otherwise reacquire any or
all of the shares of Common Stock held by the Participant which have not vested
as of the date of termination under the terms of the restricted stock purchase
agreement.


 


(v)                                   Transferability. 
Rights to acquire shares of Common Stock under the restricted stock
purchase agreement shall be transferable by the Participant only upon such
terms and conditions as are set forth in the restricted stock purchase
agreement, as the Board shall determine in its discretion, so long as Common
Stock awarded under the restricted stock purchase agreement remains subject to
the 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 available
at all times the number of shares of Common Stock required to satisfy such
Stock Awards.


 


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


 


9.                                      USE OF PROCEEDS FROM STOCK.


 


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


 


10.                               MISCELLANEOUS.


 


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


 


9

















 


Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.


 


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


 


(c)                                  Investment Assurances. 
The Company may require a Participant, as a condition of exercising or
acquiring Common Stock under any Stock Award, (i) to give written
assurances satisfactory to the Company as to the Participant’s knowledge and
experience in financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring Common
Stock subject to the Stock Award for the Participant’s own account and not with
any present intention of selling or otherwise distributing the Common
Stock.  The foregoing requirements, and
any assurances given pursuant to such requirements, shall be inoperative if (1) the
issuance of the shares of Common Stock upon the exercise or acquisition of
Common Stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (2) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws.  The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to
comply with applicable securities laws, including, but not limited to, legends
restricting the transfer of the Common Stock.


 


(d)                                  Withholding Obligations. 
To the extent provided by the terms of a Stock Award Agreement, the
Participant may satisfy any federal, state or local tax withholding obligation
relating to the exercise or acquisition of Common Stock under a Stock Award by
any of the following means (in addition to the Company’s right to withhold from
any compensation paid to the Participant by the Company) or by a combination of
such means:  (i) tendering a cash
payment; (ii) authorizing the Company to withhold shares of Common Stock
from the shares of Common Stock otherwise issuable to the Participant as a
result of the exercise or acquisition of Common Stock under the Stock Award,
provided, however, that no shares of Common Stock are withheld with a value
exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering
to the Company owned and unencumbered shares of Common Stock.


 


10

















 


11.                               ADJUSTMENTS UPON CHANGES IN STOCK.


 


(a)                                  Capitalization Adjustments. 
If any change is made in the Common Stock subject to the Plan, or
subject 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, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
type, class(es) and maximum number of securities subject to the Plan pursuant
to Section 4(a), and the outstanding Stock Awards will be appropriately
adjusted in the type, class(es) and number of securities and price per share of
securities subject to such outstanding Stock Awards.  The Board shall make such adjustments, and
its determination shall be final, binding and conclusive.  (The conversion of any convertible securities
of the Company shall not be treated as a transaction “without receipt of
consideration” by the Company.)


 


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


 


(c)                                  Asset Sale, Merger, Consolidation
or Reverse Merger.  In the event of (i) a sale, exchange,
lease or other disposition of all or substantially all of the assets of the
Company, (ii) a merger or consolidation in which the Company is not the
surviving corporation or (iii) a reverse merger in which the Company is
the surviving corporation but the shares of Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise
(individually, a “Corporate Transaction”), then any surviving corporation or
acquiring corporation shall assume or continue any Stock Awards outstanding
under the Plan or shall substitute similar stock awards (including an award to
acquire the same consideration paid to the stockholders in the Corporate
Transaction) for those outstanding under the Plan.  In the event any surviving corporation or
acquiring corporation refuses to assume or continue such Stock Awards or to
substitute similar stock awards for those outstanding under the Plan, then with
respect to Stock Awards held by Participants whose Continuous Service has not
terminated, the vesting of such Stock Awards (and, if applicable, the time
during which such Stock Awards may be exercised) shall be accelerated in full,
and the Stock Awards shall terminate if not exercised (if applicable) at or
prior to the Corporate Transaction.  With
respect to any other Stock Awards outstanding under the Plan, such Stock Awards
shall terminate if not exercised (if applicable) prior to the Corporate
Transaction.


 


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 upon
changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary for
the Plan to satisfy any Nasdaq or securities exchange listing
requirements.  The Board may in its sole
discretion submit such amendment to the Plan for stockholder approval.


 


11

















 


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


 


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


 


13.                               TERMINATION OR SUSPENSION OF THE PLAN.


 


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


 


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


 


14.                               EFFECTIVE DATE OF PLAN.


 


The Plan shall become
effective immediately upon its adoption by the Board.


 


15.                               CHOICE OF LAW.


 


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


 


12