Document:

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                                TABLE OF CONTENTS

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SECTION 1.        GENERAL................................................1

         1.1      Definitions............................................1

SECTION 2.        REGISTRATION; RESTRICTIONS ON TRANSFER.................3

         2.1      Restrictions on Transfer...............................3

         2.2      Demand Registration....................................4

         2.3      Piggyback Registrations................................5

         2.4      Form S-3 Registration..................................6

         2.5      Expenses of Registration...............................8

         2.6      Obligations of the Company.............................8

         2.7      Termination of Registration Rights.....................9

         2.8      Delay of Registration; Furnishing Information..........9

         2.9      Indemnification.......................................10

         2.10     Assignment of Registration Rights.....................12

         2.11     Amendment of Registration Rights......................12

         2.12     Limitation on Subsequent Registration Rights..........12

         2.13     "Market Stand-Off" Agreement..........................12

         2.14     Rule 144 Reporting....................................13

SECTION 3.        COVENANTS OF THE COMPANY..............................13

         3.1      Basic Financial Information and Reporting.............13

         3.2      Inspection Rights.....................................14

         3.3      Confidentiality of Records............................15

         3.4      Reservation of Common Stock...........................15

         3.5      Stock Vesting.........................................15

         3.6      Executive Officer Compensation........................15

         3.7      Proprietary Information and Inventions Agreement......15

         3.8      Directors' Liability and Indemnification..............15

         3.9      Real Property Holding Corporation.....................15

         3.10     Termination of Covenants..............................16

SECTION 4.        RIGHTS OF FIRST REFUSAL...............................16

                                       i.

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                                TABLE OF CONTENTS
                                   (CONTINUED)
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         4.1      Subsequent Offerings..................................16

         4.2      Exercise of Rights....................................16

         4.3      Issuance of Equity Securities to Other Persons........17

         4.4      Termination of Rights of First Refusal................17

         4.5      Transfer of Rights of First Refusal...................17

         4.6      Excluded Securities...................................17

SECTION 5.        MISCELLANEOUS.........................................18

         5.1      Governing Law.........................................18

         5.2      Survival..............................................18

         5.3      Successors and Assigns................................18

         5.4      Entire Agreement......................................18

         5.5      Severability..........................................18

         5.6      Amendment and Waiver..................................19

         5.7      Delays or Omissions...................................19

         5.8      Notices...............................................19

         5.9      Attorneys' Fees.......................................19

         5.10     Titles and Subtitles..................................19

         5.11     Counterparts..........................................20
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                                       ii.

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                           RIGEL PHARMACEUTICALS, INC.

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

         THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the "Agreement")
is entered into as of February 3, 2000, by and among RIGEL PHARMACEUTICALS,
INC., a Delaware corporation (the "Company"), the holders of the Company's
Series B Preferred Stock ("Series B Stock"), Series C Preferred Stock ("Series C
Stock") and Series D Preferred Stock ("Series D Stock"), set forth on the
Schedule of Investors attached hereto as Schedule A, and the purchasers of the
Company's Series E Preferred Stock ("Series E Stock") set forth on Schedule A of
that certain Series E Preferred Stock Purchase Agreement of even date herewith
(the "Purchase Agreement") and Schedule A hereto together, the "Investors" and
each individually, an "Investor."

                                    RECITALS

         WHEREAS, certain of the Investors hold shares of the Company's Series B
Stock, Series C Stock, Series D Stock and/or shares of Common Stock issued upon
conversion thereof and possess registration rights, information rights, and
other rights pursuant to that certain Amended and Restated Investor Rights
Agreement dated as of December 18, 1998 (as amended May 26, 1999), between the
Company and such Investors (the "Prior Agreement"); and

         WHEREAS, the Investors who hold Series B Stock, Series C Stock and
Series D Stock desire to terminate the Prior Agreement and to accept the rights
created pursuant hereto in lieu of the rights granted to them under the Prior
Agreement; and

         WHEREAS, the Company proposes to sell and issue up to Two Million Seven
Hundred Fifty Thousand (2,750,000) shares of its Series E Stock pursuant to the
Purchase Agreement; and

         WHEREAS, as a condition of entering into the Purchase Agreement,
certain of the Investors who are parties to such Purchase Agreement have
requested that the Company extend to them registration rights, information
rights and other rights as set forth below.

         NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth herein, the
Investors who are parties to the Prior Agreement hereby agree that the Prior
Agreement shall be superseded and replaced in its entirety by this Agreement and
the parties hereto mutually agree as follows:

SECTION 1. GENERAL

         1.1 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:

               "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

                                       1.

<PAGE>

               "HOLDER" means any person owning of record Registrable Securities
that have not been sold to the public or any assignee of record of such
Registrable Securities in accordance with Section 2.10 hereof.

               "INITIAL OFFERING" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.

               "REGISTER," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.

               "REGISTRABLE SECURITIES" means (i) Common Stock of the Company
issued or issuable upon conversion of the Shares; and (ii) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
above-described securities. Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a person to the public
either pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferor's rights under Section 2 of this Agreement
are not assigned.

               "REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (1) are then issued and
outstanding or (2) are issuable pursuant to then exercisable or convertible
securities.

               "REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed Fifteen Thousand Dollars ($15,000) of a single special counsel for the
Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).

               "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.

               "SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale.

               "SHARES" shall mean the Company's Series B Stock issued pursuant
to the Series B Preferred Stock Purchase Agreement dated January 22, 1997 and
the Investors listed on Schedule A thereto and their permitted assigns, Series C
Stock issued pursuant to the Series C Preferred Stock Purchase Agreement dated
November 3, 1997 and the Investors listed on Schedule A thereto and their
permitted assigns, Series D Stock issued pursuant to the Series D Preferred
Stock Purchase Agreement dated December 18, 1998 (as amended May 26, 1999) and
the Investors listed on Schedule A thereto and their permitted assigns and
Series E Stock issued

                                       2.

<PAGE>

pursuant to the Purchase Agreement and held by the Investors listed on Schedule
A thereto and their permitted assigns.

               "FORM S-3" means such form under the Securities Act as in effect
on the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.

               "SEC" OR "COMMISSION" means the Securities and Exchange
Commission.

SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER

         2.1 RESTRICTIONS ON TRANSFER.

               (a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:

                    (i) There is then in effect a registration statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or

                    (ii) (A) The transferee has agreed in writing to be bound by
the terms of this Agreement, (B) such Holder shall have notified the Company of
the proposed disposition and shall have furnished the Company with a statement
of the circumstances surrounding the proposed disposition, and (C) if reasonably
requested by the Company, such Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Securities
Act. It is agreed that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144 except in unusual circumstances.

                    (iii) Notwithstanding the provisions of paragraphs (i) and
(ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder which is (A) a partnership to its partners
or former partners in accordance with partnership interests, (B) a corporation
to its stockholders in accordance with their interest in the corporation, (C) a
limited liability company to its members or former members in accordance with
their interest in the limited liability company, or (D) to the Holder's family
member or trust for the benefit of an individual Holder or his or her family
member; provided that in each case the transferee will be subject to the terms
of this Agreement to the same extent as if he or she were an original Holder
hereunder.

               (b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the Purchase
Agreement) be stamped or otherwise imprinted with a legend substantially similar
to the following (in addition to any legend required under applicable state
securities laws or as provided elsewhere in this Agreement):

                                       3.

<PAGE>

                    The following legend under the Securities Act:

                    THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
               THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
               TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
               REGISTERED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN
               OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY
               AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

               (c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.

               (d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.

         2.2 DEMAND REGISTRATION.

               (a) Subject to the conditions of this Section 2.2, if the Company
shall receive a written request from the Holders of more than fifty percent
(50%) of the Registrable Securities then outstanding (the "Initiating Holders")
that the Company file a registration statement under the Securities Act covering
the registration of Registrable Securities having an aggregate offering price to
the public in excess of $5,000,000 (a "Qualified Public Offering"), then the
Company shall, within thirty (30) days of the receipt thereof, give written
notice of such request to all Holders, and subject to the limitations of this
Section 2.2, use its best efforts to effect, as soon as practicable, the
registration under the Securities Act of all Registrable Securities that the
Holders request to be registered.

               (b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2.2 or any request pursuant to Section 2.4 and the Company shall
include such information in the written notice referred to in Section 2.2(a) or
Section 2.4(a), as applicable. In such event, the right of any Holder to include
its Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall enter into an underwriting agreement in customary form
with the

                                       4.

<PAGE>

underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders (which underwriter or underwriters shall be
reasonably acceptable to the Company). Notwithstanding any other provision of
this Section 2.2 or Section 2.4, if the underwriter advises the Company that
marketing factors require a limitation of the number of securities to be
underwritten (including Registrable Securities) then the Company shall so advise
all Holders of Registrable Securities which would otherwise be underwritten
pursuant hereto, and the number of shares that may be included in the
underwriting shall be allocated, first, to the Initiating Holders and, second,
to all other Holders of such Registrable Securities on a pro rata basis based on
the total number of Registrable Securities held by all such Holders. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from the registration.

               (c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:

                    (i) prior to the fourth anniversary of the date of this
Agreement;

                    (ii) after the Company has effected two (2) registrations
pursuant to this Section 2.2, and such registrations have been declared or
ordered effective;

                    (iii) during the period starting with the date of filing of,
and ending on the date one hundred eighty (180) days following the effective
date of the registration statement pertaining to the Initial Offering; provided
that the Company makes reasonable good faith efforts to cause such registration
statement to become effective;

                    (iv) if within thirty (30) days of receipt of a written
request from Initiating Holders pursuant to Section 2.2(a), the Company gives
notice to the Holders of the Company's intention to make its Initial Offering
within ninety (90) days; or

                    (v) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the Board stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its stockholders for such registration statement to be effected at such time, in
which event the Company shall have the right to defer such filing for a period
of not more than ninety (90) days after receipt of the request of the Initiating
Holders; provided that such right to delay a request shall be exercised by the
Company not more than once in any twelve (12) month period.

         2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including a registration statement filed
pursuant to Section 2.2 of this Agreement and including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of

                                       5.

<PAGE>

such Registrable Securities held by such Holder. Each Holder desiring to include
in any such registration statement all or any part of the Registrable Securities
held by it shall, within fifteen (15) days after the above-described notice from
the Company, so notify the Company in writing. Such notice shall state the
intended method of disposition of the Registrable Securities by such Holder. If
a Holder decides not to include all of its Registrable Securities in any
registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.

               (a) UNDERWRITING. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company (or in the case of a registration
pursuant to Section 2.2, the Initiating Holders); second, to the Holders on a
pro rata basis based on the total number of Registrable Securities held by the
Holders; and third, to any stockholder of the Company (other than a Holder) on a
pro rata basis. No such reduction shall (i) reduce the securities being offered
by the Company for its own account to be included in the registration and
underwriting, or (ii) reduce the amount of securities of the selling Holders
included in the registration below twenty-five percent (25%) of the total amount
of securities included in such registration, unless such offering is the Initial
Offering and such registration does not include shares of any other selling
stockholders, in which event any or all of the Registrable Securities of the
Holders may be excluded in accordance with the immediately preceding sentence.
In no event will shares of any other selling stockholder be included in such
registration which would reduce the number of shares which may be included by
Holders without the written consent of Holders of not less than two-thirds (66
2/3%) of the Registrable Securities proposed to be sold in the offering.

               (b) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.5 hereof.

         2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration

                                       6.

<PAGE>

statement and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:

               (a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders of Registrable
Securities; and

               (b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:

                    (i) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or

                    (ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than $500,000, or

                    (iii) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 2.4: provided, that such
right to delay a request shall be exercised by the Company not more than once in
any twelve (12) month period, or

                    (iv) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected two (2) registrations on
Form S-3 for the Holders pursuant to this Section 2.4, or

                    (v) if the Company has already effected three (3)
registrations on Form S-3 for the Holders pursuant to this Section 2.4, or

                    (vi) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.

               (c) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders.

                                       7.

<PAGE>

         2.5 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2, Section 2.3 or Section 2.4
herein shall be borne by the Company. All Selling Expenses incurred in
connection with any registrations hereunder, shall be borne by the holders of
the securities so registered pro rata on the basis of the number of shares so
registered. The Company shall not, however, be required to pay for expenses of
any registration proceeding begun pursuant to Section 2.2 or 2.4, the request of
which has been subsequently withdrawn by the Initiating Holders unless (a) the
withdrawal is based upon material adverse information concerning the Company of
which the Initiating Holders were not aware at the time of such request or (b)
the Holders of a majority of Registrable Securities agree to forfeit their right
to one requested registration pursuant to Section 2.2 or Section 2.4, as
applicable, in which event such right shall be forfeited by all Holders. If the
Holders are required to pay the Registration Expenses, such expenses shall be
borne by the holders of securities (including Registrable Securities) requesting
such registration in proportion to the number of shares for which registration
was requested. If the Company is required to pay the Registration Expenses of a
withdrawn offering pursuant to clause (a) above, then the Holders shall not
forfeit their rights pursuant to Section 2.2 or Section 2.4 to a demand or S-3
registration.

         2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:

               (a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to ninety (90) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto.

               (b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.

               (c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.

               (d) Use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.

               (e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing

                                       8.

<PAGE>

underwriter(s) of such offering. Each Holder participating in such underwriting
shall also enter into and perform its obligations under such an agreement.

               (f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.

               (g) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) a letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and if permitted by
applicable accounting standards, to the Holders requesting registration of
Registrable Securities.

         2.7 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect three
(3) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire if (i) the Company has completed its
Initial Offering and is subject to the provisions of the Exchange Act, (ii) such
Holder (together with its affiliates, partners and former partners) holds less
than 1% of the Company's outstanding Common Stock (treating all shares of
convertible Preferred Stock on an as-converted basis) and (iii) all Registrable
Securities held by and issuable to such Holder (and its affiliates, partners and
former partners) may be sold under Rule 144 during any ninety (90) day period.

         2.8 DELAY OF REGISTRATION; FURNISHING INFORMATION.

               (a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.

               (b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be

                                       9.

<PAGE>

included in the registration does not equal or exceed the number of shares or
the anticipated aggregate offering price required to originally trigger the
Company's obligation to initiate such registration as specified in Section 2.2
or Section 2.4, whichever is applicable.

         2.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:

               (a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, officers, directors and legal
counsel of each Holder, any underwriter (as defined in the Securities Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation") by the Company: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law in
connection with the offering covered by such registration statement; and the
Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided however, that the indemnity
agreement contained in this Section 2.9(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, which consent shall
not be unreasonably withheld, nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.

               (b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration, qualification or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers,
and legal counsel and each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such Holder, against
any losses, claims, damages or liabilities (joint or several) to which the
Company or any such director, officer, controlling person, underwriter or other
such Holder, or partner, director, officer or controlling person of such other
Holder may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon

                                      10.

<PAGE>

any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder under an instrument duly executed by such Holder and
stated to be specifically for use in connection with such registration; and each
such Holder will reimburse any legal or other expenses reasonably incurred by
the Company or any such director, officer, controlling person, underwriter or
other Holder, or partner, officer, director or controlling person of such other
Holder in connection with investigating or defending any such loss, claim,
damage, liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 2.9(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall any indemnity under this Section 2.9
exceed the proceeds from the offering received by such Holder.

               (c) Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.9.

               (d) If the indemnification provided for in this Section 2.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or

                                      11.

<PAGE>

omission; provided, that in no event shall any contribution by a Holder
hereunder exceed the proceeds from the offering received by such Holder.

               (e) The obligations of the Company and Holders under this Section
2.9 shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this Agreement. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.

         2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned by
a Holder to a transferee or assignee of Registrable Securities which (i) is a
general partner, limited partner or retired partner of a Holder, (ii) is a
Holder's family member or trust for the benefit of an individual Holder or
family member, or (iii) acquires at least three hundred thousand (300,000)
shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, (A) the transferor shall, within ten (10) days
after such transfer, furnish to the Company written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration rights are being assigned and (B) such transferee shall agree
to be subject to all restrictions set forth in this Agreement.

         2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least sixty-six and
two-thirds percent (66 2/3%) of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this Section 2.11 shall be
binding upon each Holder and the Company.

         2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of
this Agreement, the Company shall not, without the prior written consent of the
Holders of sixty-six and two-thirds percent (66 2/3%) of the Registrable
Securities then outstanding, enter into any agreement with any holder or
prospective holder of any securities of the Company that would grant such holder
registration rights senior to or on parity with those granted to the Holders
hereunder.

         2.13 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that such
Holder shall not sell or otherwise transfer or dispose of any Common Stock (or
other securities) of the Company held by such Holder (other than those included
in the registration) for a period specified by the representative of the
underwriters of Common Stock (or other securities) of the Company not to exceed
one hundred eighty (180) days following the effective date of a registration
statement of the Company filed under the Securities Act, provided that:

               (i) such agreement shall apply only to the Company's Initial
Offering; and

                                      12.

<PAGE>

               (ii) all officers and directors of the Company and holders of at
least three percent (3%) of the Company's voting securities enter into similar
agreements.

         Each Holder agrees to execute and deliver such other agreements as may
be reasonably requested by the Company or the underwriter which are consistent
with the foregoing or which are necessary to give further effect thereto. The
obligations described in this Section 2.13 shall not apply to a registration
relating solely to employee benefit plans on Form S-1 or Form S-8 or similar
forms that may be promulgated in the future, or a registration relating solely
to a Commission Rule 145 transaction on Form S-4 or similar forms that may be
promulgated in the future. The Company may impose stop-transfer instructions
with respect to the shares of Common Stock (or other securities) subject to the
foregoing restriction until the end of said one hundred eighty (180) day period.

         2.14 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:

               (a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;

               (b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act;

               (c) So long as a Holder owns any Registrable Securities, furnish
to such Holder forthwith upon request: a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 of the
Securities Act, and of the Exchange Act (at any time after it has become subject
to such reporting requirements); a copy of the most recent annual or quarterly
report of the Company; and such other reports and documents as a Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing it to sell any such securities without registration.

SECTION 3. COVENANTS OF THE COMPANY

         3.1 BASIC FINANCIAL INFORMATION AND REPORTING.

               (a) The Company will maintain true books and records of account
in which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.

               (b) As soon as practicable after the end of each fiscal year of
the Company, and in any event within ninety (90) days thereafter, the Company
will furnish each Investor a consolidated balance sheet of the Company, as at
the end of such fiscal year, and a consolidated

                                      13.

<PAGE>

statement of income and a consolidated statement of cash flows of the Company,
for such year, all prepared in accordance with generally accepted accounting
principles consistently applied and setting forth in each case in comparative
form the figures for the previous fiscal year, all in reasonable detail. Such
financial statements shall be accompanied by a report and opinion thereon by
independent public accountants of national standing selected by the Company's
Board of Directors.

               (c) The Company will furnish each Investor, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within forty-five
(45) days thereafter, a consolidated balance sheet of the Company as of the end
of each such quarterly period, and a consolidated statement of income and a
consolidated statement of cash flows of the Company for such period and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made.

               (d) So long as an Investor (with its affiliates) shall own not
less than three-hundred thousand (300,000) shares of Registrable Securities (as
adjusted for stock splits and combinations) (a "Major Investor"), the Company
will furnish each such Major Investor (i) at least thirty (30) days prior to the
beginning of each fiscal year an annual budget and operating plans for such
fiscal year (and as soon as available, any subsequent revisions thereto); and
(ii) as soon as practicable after the end of each month, and in any event within
twenty (20) days thereafter, a consolidated balance sheet of the Company as of
the end of each such month, and a consolidated statement of income and a
consolidated statement of cash flows of the Company for such month and for the
current fiscal year to date, including a comparison to plan figures for such
period, prepared in accordance with generally accepted accounting principles
consistently applied, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made.

         3.2 INSPECTION RIGHTS. Each Investor shall have the right to visit and
inspect any of the properties of the Company or any of its subsidiaries, and to
discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under this
Section 3.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.

         3.3 CONFIDENTIALITY OF RECORDS. Each Investor agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential information
to keep confidential any information furnished to it which the Company
identifies as being confidential or proprietary (so long as such information is
not in the public domain), except that such Investor may disclose such
proprietary or confidential information to any partner, subsidiary or parent of
such Investor for the purpose of

                                      14.
<PAGE>

evaluating its investment in the Company as long as such partner, subsidiary or
parent is advised of the confidentiality provisions of this Section 3.3.

         3.4 RESERVATION OF COMMON STOCK. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.

         3.5 STOCK VESTING. Unless otherwise approved by the Board of Directors,
all stock options and other stock equivalents issued after the date of this
Agreement to employees, directors, consultants and other service providers shall
be subject to vesting as follows: (i) twenty percent (20%) of such stock shall
vest at the end of the first year following the earlier of the date of issuance
or such person's services commencement date with the company, and (ii) eighty
percent (80%) of such stock shall vest over the remaining four (4) years. With
respect to any shares of stock purchased by any such person, the Company's
repurchase option shall provide that upon such person's termination of
employment or service with the Company, with or without cause, the Company or
its assignee (to the extent permissible under applicable securities laws and
other laws) shall have the option to purchase at cost any unvested shares of
stock held by such person.

         3.6 EXECUTIVE OFFICER COMPENSATION. The Board of Directors of the
Company shall have the discretion to evaluate and modify the compensation of the
Company's executive officers from time to time (including at the first meeting
of the Board of Directors which occurs after the date hereof).

         3.7 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company shall
require all officers and employees to execute and deliver a Proprietary
Information and Inventions Agreement in the form attached to the Purchase
Agreement. The Company shall require all consultants to execute and deliver a
consulting agreement containing confidentiality and assignment of inventions
provisions similar to those included in the Proprietary Information and
Inventions Agreement.

         3.8 DIRECTORS' LIABILITY AND INDEMNIFICATION. The Company's Certificate
of Incorporation and Bylaws shall provide (i) for elimination of the liability
of directors to the maximum extent permitted by law and (ii) for indemnification
of directors for acts on behalf of the Company to the maximum extent permitted
by law.

         3.9 REAL PROPERTY HOLDING CORPORATION. The Company covenants that it
will operate in a manner such that it will not become a "United States real
property holding corporation" ("USRPHC") as that term is defined in Section
897(c)(2) of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder ("FIRPTA"). The Company agrees to make determinations
as to its status as a USRPHC, and will file statements concerning those
determinations with the Internal Revenue Service, in the manner and at the
times required under Reg. Section 1.897-2(h), or any supplementary or
successor provision thereto. Within 30 days of a request from an Investor or
any of its partners, the Company will inform the requesting party, in the
manner set forth in Reg. Section 1.897-2(h)(1)(iv) or any supplementary or
successor provision thereto, whether that party's interest in the Company
constitutes a United States real property

                                      15.

<PAGE>

interest (within the meaning of Internal Revenue Code Section 897(c)(1) and the
regulations thereunder) and whether the Company has provided to the Internal
Revenue Service all required notices as to its USRPHC status.

         3.10 TERMINATION OF COVENANTS. All covenants of the Company contained
in Section 3 of this Agreement shall expire and terminate as to each Investor on
the effective date of the registration statement pertaining to a firmly
underwritten public offering of shares of Common Stock of the Company at a price
per share not less than $3.50 and for a total offering of not less than $15.0
million (before deduction of underwriters commissions and expenses) (a
"Qualified IPO").

SECTION 4. RIGHTS OF FIRST REFUSAL

         4.1 SUBSEQUENT OFFERINGS. Each Major Investor shall have a right of
first refusal to purchase its pro rata share of all Equity Securities, as
defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, other than the Equity Securities
excluded by Section 4.6 hereof. Each Investor's pro rata share is equal to the
ratio of (A) the number of shares of the Company's Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares) of
which such Investor is deemed to be a holder immediately prior to the issuance
of such Equity Securities to (B) the total number of shares of the Company's
outstanding Common Stock (including all shares of Common Stock issued or
issuable upon conversion of the Shares) immediately prior to the issuance of the
Equity Securities. The term "Equity Securities" shall mean (i) any Common Stock,
Preferred Stock or other security of the Company, (ii) any security convertible,
with or without consideration, into any Common Stock, Preferred Stock or other
security (including any option to purchase such a convertible security), (iii)
any security carrying any warrant or right to subscribe to or purchase any
Common Stock, Preferred Stock or other security, or (iv) any such warrant or
right.

         4.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Major Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Major Investor shall have
fifteen (15) days from the giving of such notice to agree to purchase its pro
rata share of the Equity Securities for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Investor who would cause the Company to be in
violation of applicable federal securities laws by virtue of such offer or sale.

         4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If not all of the
Major Investors elect to purchase their pro rata share of the Equity Securities,
then the Company shall promptly notify in writing the Major Investors who do so
elect and shall offer such Major Investors the right to acquire such
unsubscribed shares. The Major Investors shall have five (5) days after receipt
of such notice to notify the Company of its election to purchase all or a
portion thereof of the unsubscribed shares. If the Investors fail to exercise in
full the rights of first

                                      16.

<PAGE>

refusal, the Company shall have ninety (90) days thereafter to sell the Equity
Securities in respect of which the Major Investors' rights were not exercised,
at a price and upon general terms and conditions materially no more favorable to
the purchasers thereof than specified in the Company's notice to the Major
Investors pursuant to Section 4.2 hereof. If the Company has not sold such
Equity Securities within ninety (90) days of the notice provided pursuant to
Section 4.2, the Company shall not thereafter issue or sell any Equity
Securities without first offering such securities to the Major Investors in the
manner provided above.

         4.4 TERMINATION OF RIGHTS OF FIRST REFUSAL. The rights of first refusal
established by this Section 4 shall not apply to, and shall terminate upon the
effective date of the registration statement pertaining to a Qualified IPO.

         4.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal of
each Major Investor under this Section 4 may be transferred to the same parties,
subject to the same restrictions as any transfer of registration rights pursuant
to Section 2.10.

         4.6 EXCLUDED SECURITIES. The rights of first refusal established by
this Section 4 shall have no application to any of the following Equity
Securities:

               (a) up to an aggregate amount of 9,525,000 shares of Common Stock
(and/or options, warrants or other Common Stock purchase rights issued pursuant
to such options, warrants or other rights) issued or to be issued to employees,
officers or directors of, or consultants or advisors to, the Company or any
subsidiary, pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Board of Directors;

               (b) stock issued pursuant to any rights or agreements outstanding
as of the date of this Agreement, options and warrants outstanding as of the
date of this Agreement; and stock issued pursuant to any such rights or
agreements granted after the date of this Agreement, provided that the rights of
first refusal established by this Section 4 applied with respect to the initial
sale or grant by the Company of such rights or agreements;

               (c) any Equity Securities issued for consideration other than
cash pursuant to a merger, consolidation, acquisition or similar business
combination;

               (d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;

               (e) shares of Common Stock issued upon conversion of the Shares;

               (f) any Equity Securities issued pursuant to any equipment
leasing arrangement, or debt financing from a bank or similar financial
institution;

               (g) any Equity Securities that are issued by the Company pursuant
to a registration statement filed under the Securities Act; and

                                      17.

<PAGE>

               (h) shares of the Company's Common Stock or Preferred Stock
issued in connection with strategic transactions involving the Company and other
entities, including (A) joint ventures, manufacturing, marketing or distribution
arrangements or (B) technology transfer or development arrangements; provided
that such strategic transactions and the issuance of shares therein, has been
approved by the Company's Board of Directors.

SECTION 5. MISCELLANEOUS

         5.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.

         5.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.

         5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.

         5.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, the Purchase Agreement and the other documents delivered pursuant
thereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and no party shall be liable or bound
to any other in any manner by any representations, warranties, covenants and
agreements except as specifically set forth herein and therein.

         5.5 SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.

         5.6 AMENDMENT AND WAIVER.

               (a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least two-thirds (66 2/3%) of the Registrable Securities.

                                      18.

<PAGE>

               (b) Except as otherwise expressly provided, the obligations of
the Company and the rights of the Holders under this Agreement may be waived
only with the written consent of the holders of at least two-thirds (66 2/3%) of
the Registrable Securities.

               (c) Notwithstanding the foregoing, this Agreement may be amended
with only the written consent of the Company to include additional purchasers of
Shares as "Investors," "Holders" and parties hereto.

         5.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under this Agreement
or any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.

         5.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
party to be notified at the address as set forth on the signature pages hereof
or Schedule A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.

         5.9 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.

         5.10 TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

         5.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

                                      19.

<PAGE>

         Agreed and executed by:

RIGEL PHARMACEUTICALS

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

Name:
     ----------------------------------

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

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                                        FRAZIER HEALTHCARE II, L.P.

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

                                        Name:
                                             ---------------------------------

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

                                        FRAZIER & COMPANY, INC.

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

                                        Name:
                                             ---------------------------------

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

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                                        LOMBARD, ODIER & CIE

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

                                        Name:
                                             ---------------------------------

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

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                                  ALTA CALIFORNIA PARTNERS, L.P.
                                  By: Alta California Management Partners, L.P.

                                  By:
                                     ------------------------------------------
                                          General Partner

                                  ALTA EMBARCADERO PARTNERS, LLC

                                  By:
                                     -------------------------------------------
                                          Member

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                                        FORTUNE MAKER CORPORATION

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

                                        Name:
                                             ---------------------------------

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

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                                      JOHNSON & JOHNSON DEVELOPMENT CORPORATION

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

                                      Name:
                                           ---------------------------------

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

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                                        NOVARTIS PHARMA AG

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

                                        Name:
                                             ---------------------------------

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

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                                        PFIZER, INC.

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

                                        Name:
                                             ---------------------------------

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

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

CMEA LIFE SCIENCES FUND, L.P.

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

Name:
     ---------------------------------

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

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

AURORA BIOSCIENCES CORPORATION

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

Name:
     ---------------------------------

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

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

CB CAPITAL INVESTORS, L.P.

By:  Chase Capital Partners

Its:  Manager

Name:
     ---------------------------------

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

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

SUMMIT BANK & TRUST CO.

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

Name:
     ---------------------------------

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

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

R.A. INVESTMENT GROUP

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

Name:
     ---------------------------------

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

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

QUANTUM PARTNERS LDC

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

Name:
     ---------------------------------

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

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                                        GC & H INVESTMENTS

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

                                        Name:
                                             ---------------------------------

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

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                           RIGEL PHARMACEUTICALS, INC.

                              AMENDED AND RESTATED

                            INVESTOR RIGHTS AGREEMENT

<PAGE>

                           RIGEL PHARMACEUTICALS, INC.
                       SERIES E PREFERRED STOCK FINANCING
                             SCHEDULE OF PURCHASERS
                                FEBRUARY 3, 2000

<TABLE>
<CAPTION>
NAME AND ADDRESS                         INVESTMENT AMOUNT    NUMBER OF SHARES
----------------                         -----------------    ----------------

<S>                                        <C>                  <C>
Alta California Partners, L.P.              $  977,664             162,944
One Embarcadero Center, Suite 4050
San Francisco, CA 94111

                                            $   22,338               3,723
Alta Embarcadero Partners, LLC
One Embarcadero Center, Suite 4050
San Francisco, CA 94111

Fortune Maker Corporation                      300,000              50,000
11/F King Fook Building
30-32 Des Voeux Road Central
HONG KONG

Frazier Healthcare II, L.P.                    750,000             125,000
Two Union Square
601 Union Street, Suite 3300
Seattle, WA 98101

CMEA Life Sciences Fund                      1,000,000             166,666
235 Montgomery Street, Suite 920
San Francisco, CA 94104

CB Capital Investors                         5,000,000             833,333
c/o Chase Capital Partners
Partners 380
Madison Avenue
12th Floor
New York, NY 10017

Pritzker Entities
  Cynthia J. Cohn                               99,996              16,666
  Hannah S. & Samuel A. Cohn                    99,996              16,666
    Memorial Foundation
  R.A. Investments Group                       800,000             133,333
c/o Diversified Financial Management
  Group
200 West Madison Street
Suite 3800
Chicago, IL 50606

Quantum Partners LDC                         2,000,000             333,333
888 Seventh Avenue
New York, NY 10106

Johnson & Johnson Development                1,000,000             166,666
  Corporation
One Johnson & Johnson Plaza
New Brunswick, NJ 08933

                                  Schedule A-1

<PAGE>

Lombard, Odier & Cie                         3,000,000             500,000
Toedistrasse 36 - Ch 8027
Zurich
Switzerland

Aurora Biosciences Corporation          Transfer of Technology      50,000
11010 Torreyana Road
San Diego, CA 92121

TOTAL                                      $15,049,994           2,558,330
</TABLE>

                                  Schedule A-2EXHIBIT 4.1

                                ANDOVER.NET, INC.
                             1999 STOCK OPTION PLAN

         1.       Purpose of the Plan.
                  -------------------
         This stock option plan (the "Plan") is intended to encourage  ownership
of the stock of  Andover.Net,  Inc., a Delaware  corporation  (the "Company") by
employees,  consultants  and  advisors of the Company and its  subsidiaries,  to
induce  qualified  personnel to enter and remain in the employ of the Company or
its subsidiaries and otherwise to provide additional  incentive for optionees to
promote the success of its business.

         2.       Stock Subject to the Plan.
                  -------------------------
         (a) The  total  number  of shares of the  authorized  but  unissued  or
Treasury  shares of the common stock,  par value $.01 per share,  of the Company
("Common  Stock")  for which  options  may be  granted  under the Plan shall not
exceed eighty six thousand four hundred (86,400)  shares,  subject to adjustment
as provided in Section 12 hereof.

         (b) If an option  granted  hereunder  shall expire or terminate for any
reason  without  having  vested  fully or having  been  exercised  in full,  the
unvested and/or  unpurchased shares subject thereto shall again be available for
subsequent option grants under the Plan.

         (c) Stock  issuable upon  exercise of an option  granted under the Plan
may be subject to such  restrictions  on  transfer,  repurchase  rights or other
restrictions as shall be determined by the Committee.

         3.       Administration of the Plan.
                  --------------------------
         At the discretion of the Company's  Board of Directors,  the Plan shall
be administered either (i) by the full Board of Directors of the Company or (ii)
by a  committee  (the  "Committee")  consisting  of two or more  members  of the
Company's  Board of  Directors.  In the event the full Board of Directors is the
administrator of the Plan, references herein to the Committee shall be deemed to
include the full Board of  Directors.  The Board of  Directors  may from time to
time  appoint a member or members of the  Committee  in  substitution  for or in
addition to the member or members  then in office and may fill  vacancies on the
Committee  however  caused.  The  Committee  shall  choose one of its members as
Chairman  and shall  hold  meetings  at such  times and  places as it shall deem
advisable.  A majority of the members of the Committee shall constitute a quorum
and any  action may be taken by a majority  of those  present  and voting at any
meeting.

         Any action may also be taken  without the  necessity  of a meeting by a
written  instrument  signed by a majority of the Committee.  The decision of the
Committee as to all  questions of  interpretation  and  application  of the Plan
shall be final,  binding and conclusive on all persons. The Committee shall have
the authority to adopt,  amend and rescind such rules and regulations as, in its
opinion,  may be advisable in the  administration of the Plan. The Committee may
correct any defect or supply any omission or reconcile any  inconsistency in the
Plan or in any  option  agreement  granted  hereunder  in the  manner and to the
extent it shall deem  expedient  to carry the Plan into  effect and shall be the
sole and final judge of such expediency. No Committee member shall be liable for
any action or determination made in good faith.
<PAGE>
         4.       Type of Options.
                  ---------------
         Options  granted  pursuant to the Plan shall be authorized by action of
the Committee and may be designated as either  incentive  stock options  meeting
the requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the  "Code"),  or  non-qualified  options  which are not  intended  to meet the
requirements  of such Section 422 of the Code, the designation to be in the sole
discretion of the Committee.  The Plan shall be administered by the Committee in
such manner as to permit options to qualify as incentive stock options under the
Code.

         5.       Eligibility.
                  -----------
         Options  designated as incentive stock options shall be granted only to
employees  (including  officers and  directors  who are also  employees)  of the
Company or any of its  subsidiaries,  including  subsidiaries  which become such
after adoption of the Plan. Options  designated as non-qualified  options may be
granted to  officers,  employees,  consultants,  advisors  and  directors of the
Company or of any of its subsidiaries,  including subsidiaries which become such
after adoption of the Plan.  "Subsidiary" or "subsidiaries"  shall be as defined
in Section 424 of the Code and the Treasury Regulations  promulgated  thereunder
(the "Regulations").

         The Committee shall, from time to time, at its sole discretion,  select
from such eligible  individuals those to whom options shall be granted and shall
determine the number of shares to be subject to each option.  In determining the
eligibility of an individual to be granted an option,  as well as in determining
the number of shares to be granted to any individual,  the Committee in its sole
discretion  shall take into  account the position  and  responsibilities  of the
individual  being  considered,  the  nature  and  value  to the  Company  or its
subsidiaries of his or her service and  accomplishments,  his or her present and
potential  contribution to the success of the Company or its  subsidiaries,  and
such other factors as the Committee may deem relevant.

         No option  designated as an incentive  stock option shall be granted to
any employee of the Company or any subsidiary if such employee owns, immediately
prior to the grant of an  option,  stock  possessing  more than 10% of the total
combined voting power of all classes of stock of the Company or of a parent or a
subsidiary,  unless the purchase  price for the stock under such option shall be
at least 110% of its fair  market  value at the time such  option is granted and
the option, by its terms, shall not be exercisable more than five years from the
date it is granted. In determining the stock ownership under this paragraph, the
provisions of Section  424(d) of the Code shall be  controlling.  In determining
the fair market value under this  paragraph,  the provisions of Section 7 hereof
shall apply.

         The maximum number of shares of the Company's Common Stock with respect
to which an option or options  may be granted to any  employee  in any  calendar
year shall not exceed eighty six thousand four hundred (86,400)  shares,  taking
into account  shares  subject to options  granted and  terminated,  or repriced,
during such calendar year.
<PAGE>
         6.       Option Agreement.
                  ----------------
         Each option shall be evidenced by an option agreement (the "Agreement")
duly  executed on behalf of the Company and by the  optionee to whom such option
is granted,  which  Agreement  shall comply with and be subject to the terms and
conditions of the Plan.  The Agreement may contain such other terms,  provisions
and conditions which are not inconsistent  with the Plan as may be determined by
the Committee, provided that options designated as incentive stock options shall
meet all of the conditions for incentive stock options as defined in Section 422
of the  Code.  The date of  grant of an  option  shall be as  determined  by the
Committee. More than one option may be granted to an individual.

         7.       Option Price.
                  ------------
         The option price or prices of shares of the Company's  Common Stock for
options designated as non-qualified  stock options shall be as determined by the
Committee.  The option price or prices of shares of the  Company's  Common Stock
for incentive stock options shall be not less than the fair market value of such
Common Stock at the time the option is granted as determined by the Committee in
accordance  with the Regulations  promulgated  under Section 422 of the Code. If
such shares are then listed on any national securities exchange, the fair market
value shall be the mean  between the high and low sales  prices,  if any, on the
largest such exchange on the date of the grant of the option or, if none,  shall
be determined by taking a weighted  average of the means between the highest and
lowest  sales  prices on the nearest  date before and the nearest date after the
date of grant in accordance with Treasury Regulations Section 25.2512-2.  If the
shares are not then listed on any such  exchange,  the fair market value of such
shares  shall be the mean  between  the high and low sales  prices,  if any,  as
reported in the National  Association of Securities Dealers Automated  Quotation
National Market  ("NASDAQ/NM")  for the date of the grant of the option,  or, if
none,  shall be determined by taking a weighted average of the means between the
highest and lowest  sales on the nearest  date before and the nearest date after
the date of grant in accordance with Treasury Regulations Section 25.2512-2.  If
the  shares  are not then  either  listed  on any such  exchange  or  quoted  in
NASDAQ/NM,  the fair market  value shall be the mean  between the average of the
"Bid" and the average of the "Ask"  prices,  if any, as reported in the National
Daily  Quotation  Service for the date of the grant of the option,  or, if none,
shall be  determined  by taking a  weighted  average  of the means  between  the
highest and lowest  sales prices on the nearest date before and the nearest date
after  the  date of  grant  in  accordance  with  Treasury  Regulations  Section
25.2512-2.  If the fair market value cannot be  determined  under the  preceding
three sentences, it shall be determined in good faith by the Committee.

         8.       Manner of Payment; Manner of Exercise.
                  -------------------------------------
         (a) Options  granted  under the Plan may provide for the payment of the
exercise price,  as determined by the Committee,  and as set forth in the Option
Agreement,  by  delivery  of (i)  cash or a check  payable  to the  order of the
Company in an amount equal to the exercise price of such options, (ii) shares of
Common  Stock of the Company  owned by the  optionee  having a fair market value
equal in amount to the exercise price of the options being exercised,  (iii) any
combination  of (i) and (ii),  provided,  however,  that payment of the exercise
price by  delivery  of  shares  of  Common  Stock of the  Company  owned by such
optionee  may be made  only if such  payment  does not  result  in a  charge  to
earnings for  financial  accounting  purposes as  determined by the Committee or
(iv) by delivery of a properly executed exercise notice to the Company, together
with a copy of irrevocable  instruments  to a broker to deliver  promptly to the
Company the amount of sale or loan proceeds to pay the exercise price.  The fair
market value of any shares of the Company's  Common Stock which may be delivered
upon  exercise of an option shall be  determined  by the Committee in accordance
with Section 7 hereof.  To facilitate  clause (iv) above,  the Company may enter
into agreements for coordinated procedures with one or more brokerage firms. The
date of  exercise  shall be the date of  delivery  of such  exercise  notice  or
payment.

<PAGE>

         (b) To the extent that the right to purchase shares under an option has
accrued  and is in effect,  options may be  exercised  in full at one time or in
part  from time to time,  by  giving  written  notice,  signed by the  person or
persons exercising the option, to the Company, stating the number of shares with
respect to which the option is being  exercised,  accompanied by payment in full
for such shares as  provided  in  subparagraph  (a) above.  Upon such  exercise,
delivery of a certificate for paid-up non-assessable shares shall be made at the
principal  office of the Company to the person or persons  exercising the option
at such time,  during ordinary  business hours, not more than ten (10) days from
the date of receipt of the notice by the Company, as shall be designated in such
notice,  or at such time,  place and manner as may be agreed upon by the Company
and the person or persons exercising the option. Upon exercise of the option and
payment as provided  above,  the  optionee  shall  become a  shareholder  of the
Company as to the Shares acquired upon such exercise.

         9.       Exercise of Options.
                  -------------------
         Each option granted under the Plan shall,  subject to Section 10(b) and
Section 12 hereof,  be  exercisable at such time or times and during such period
as  determined  by the  Committee  which  shall be set  forth in the  Agreement;
provided,  however,  that no option  granted under the Plan shall have a term in
excess of ten (10) years from the date of grant.

         To the extent that an option to purchase  shares is not exercised by an
optionee when it becomes initially exercisable, it shall not expire but shall be
carried  forward and shall be  exercisable,  on a  cumulative  basis,  until the
expiration of the exercise period. No partial exercise may be made for less than
fifty (50) full shares of Common Stock.

         Notwithstanding  the  foregoing,  the Committee  may in its  discretion
accelerate the exercisability of any option subject to such terms and conditions
as  the  Committee   deems  necessary  and  appropriate.
<PAGE>
10.  Term  of  Options; Exercisability.

         (a)      Term.
                  ----
                  (1) Each option shall expire not more than ten (10) years from
the date of the granting thereof, but shall be subject to earlier termination as
herein provided.

                  (2) Except as otherwise provided in this Section 10, an option
granted to any employee  optionee who ceases to be an employee of the Company or
one of its  subsidiaries  shall  terminate 60 days after the date such  optionee
ceases to be an employee of the  Company or one of its  subsidiaries,  or on the
date on which the option expires by its terms, whichever occurs first.

                  (3) If such  termination of employment is because of dismissal
for cause or because the employee is in breach of any employment agreement, such
option will  terminate on the date the optionee  ceases to be an employee of the
Company or one of its subsidiaries.

                  (4) If such  termination of employment is because the optionee
has become  permanently  disabled (within the meaning of Section 22(e)(3) of the
Code), such option shall terminate on the last day of the twelfth month from the
date such optionee ceases to be an employee,  or on the date on which the option
expires by its terms, whichever occurs first.

                  (5) In the  event of the  death of any  optionee,  any  option
granted to such  optionee  shall  terminate on the last day of the twelfth month
from the date of death, or on the date on which the option expires by its terms,
whichever occurs first.

                  (6) Notwithstanding subparagraphs (2), (3), (4) and (5) above,
the  Committee  shall have the  authority to extend the  expiration  date of any
outstanding  option  in  circumstances  in  which  it deems  such  action  to be
appropriate,  provided that no such extension shall extend the term of an option
beyond the date on which the option would have expired if no  termination of the
optionee's employment had occurred.
<PAGE>
         (b)      Exercisability.
                  --------------
                  (1) Except as provided below, an option granted to an employee
optionee who ceases to be an employee of the Company or one of its  subsidiaries
shall be exercisable  only to the extent that the right to purchase shares under
such option has accrued and is in effect on the date such optionee  ceases to be
an employee of the Company or one of its subsidiaries.

                  (2) An option granted to an employee optionee who ceases to be
an  employee  of the  Company or one of its  subsidiaries  because he or she has
become permanently  disabled,  as defined in Section 22(e)(3) of the Code, shall
be  exercisable  by such person or his or her legal  representative  only to the
extent that the right to purchase shares under such option has accrued and is in
effect on the date such optionee  ceases to be an employee of the Company or one
of its subsidiaries.

                  (3) In the  event of the  death of any  optionee,  the  option
granted to such  optionee may be exercised  only to the extent that the right to
purchase shares under such option is accrued and is in effect on the date of the
death of such  optionee  by the  estate of such  optionee,  or by any  person or
persons who acquired the right to exercise such option by bequest or inheritance
or by reason of the death of such optionee.

         11.      Options Not Transferable.
                  ------------------------
         The right of any optionee to exercise any option  granted to him or her
shall not be assignable or transferable by such optionee  otherwise than by will
or the laws of descent and  distribution,  except that an optionee  may transfer
options  that  are  not  incentive  stock  options  granted  under  Plan  to the
optionee's  spouse or children or to a trust or family  limited  partnership  or
similar  organization  established  for the sole  benefit  of one or more of the
optionee, the optionee's spouse or the optionee's children; provided, that prior
to any  registration by the Company under the Securities Act of 1933, as amended
(the  "Securities  Act"), no optionee shall assign or transfer any option if the
result of such assignment or transfer shall be to increase, upon exercise of the
option,  the total number of holders of Common Stock  without the prior  written
consent of the  Committee,  which consent may be withheld by the Committee if it
reasonably  believes that  withholding  such consent will reduce the  likelihood
that the  Company  would be  required  to  register  its Common  Stock under the
Securities Act. Incentive stock options shall be exercisable during the lifetime
of such  optionee  only by him/her.  Any option  granted under the Plan shall be
null and void and without effect upon the bankruptcy of the optionee to whom the
option is granted,  or upon any  attempted  assignment  or  transfer,  except as
herein provided, including without limitation any purported assignment,  whether
voluntary or by operation of law, pledge,  hypothecation  or other  disposition,
attachment,  divorce,  trustee  process or  similar  process,  whether  legal or
equitable, upon such option.
<PAGE>
         12.      Recapitalizations, Reorganizations and the Like.
                  -----------------------------------------------
         (a) In the event that the outstanding shares of the Common Stock of the
Company are changed into or exchanged  for a different  number or kind of shares
or other  securities of the Company or of another  corporation  by reason of any
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up,  combination  of  shares,  or  dividends  payable  in  capital  stock,
appropriate  adjustment  shall be made in the  number  and kind of  shares as to
which options may be granted under the Plan and as to which outstanding  options
or portions thereof then unexercised  shall be exercisable,  to the end that the
proportionate  interest  of the  optionee  shall be  maintained  as  before  the
occurrence of such event;  such adjustment in outstanding  options shall be made
without change in the total price applicable to the unexercised  portion of such
options and with a corresponding adjustment in the option price per share.

         (b) In addition,  unless  otherwise  determined by the Committee in its
sole discretion,  in the case of any (i) sale or conveyance to another entity of
all or substantially  all of the property and assets of the Company,  including,
without limitation, by way of merger or consolidation, or (ii) Change in Control
(as  hereinafter  defined) of the Company,  the  purchaser(s)  of the  Company's
assets or stock may, in his, her or its discretion,  deliver to the optionee the
same kind of consideration  that is delivered to the shareholders of the Company
as a result of such sale,  conveyance  or Change in Control,  the  Committee may
cancel all outstanding  options in exchange for consideration in cash or in kind
which  consideration  shall be equal in value to the  value of those  shares  of
stock or other  securities  the optionee would have received had the option been
exercised  (to the extent then  exercisable)  and no  disposition  of the shares
acquired upon such  exercise been made prior to such sale,  conveyance or Change
in Control,  less the option price therefor.  Upon receipt of such consideration
by the  optionee,  his or her option shall  immediately  terminate  and be of no
further  force  and  effect.  The  value of the  stock or other  securities  the
optionee  would  have  received  if the  option  had  been  exercised  shall  be
determined  in good  faith by the  Committee,  and in the case of  shares of the
Common Stock of the Company,  in  accordance  with the  provisions  of Section 7
hereof.  The  Committee  shall also have the power and right to  accelerate  the
exercisability of any options,  notwithstanding  any limitations in this Plan or
in the Agreement  upon such a sale,  conveyance or Change in Control.  Upon such
acceleration,  any options or portion thereof originally designated as incentive
stock  options that no longer  qualify as incentive  stock options under Section
422 of the Code as a  result  of such  acceleration  shall  be  redesignated  as
non-qualified  stock  options.  A "Change  in  Control"  shall be deemed to have
occurred if any person,  together with all affiliates of such person or persons,
who  prior  to such  time  owned  less  than  thirty  percent  (30%) of the then
outstanding  Common Stock of the Company,  shall  acquire,  whether by purchase,
exchange,  tender offer,  merger,  consolidation  or otherwise,  such additional
shares of the Company's Common Stock in one or more  transactions,  or series of
transactions,  such that following such transaction or transactions, such person
and  affiliates  beneficially  own fifty  percent (50%) or more of the Company's
Common Stock outstanding;  provided,  that in no event shall the consummation of
an initial public offering by the Company constitute a Change of Control.
<PAGE>
         (c) Upon dissolution or liquidation of the Company, all options granted
under  this Plan  shall  terminate,  but each  optionee  (if at such time in the
employ of or otherwise  associated with the Company or any of its  subsidiaries)
shall have the right,  immediately prior to such dissolution or liquidation,  to
exercise his or her option to the extent then exercisable.

         (d) No fraction of a share shall be purchasable or deliverable upon the
exercise of any option, but in the event any adjustment  hereunder of the number
of shares covered by the option shall cause such number to include a fraction of
a share,  such fraction shall be adjusted to the nearest smaller whole number of
shares.

         13.      No Special Employment Rights.
                  ----------------------------
         Nothing  contained in the Plan or in any option  granted under the Plan
shall confer upon any option  holder any right with respect to the  continuation
of his or her employment by the Company (or any  subsidiary) or interfere in any
way with the right of the Company (or any  subsidiary),  subject to the terms of
any separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the option holder from
the  rate in  existence  at the  time of the  grant  of an  option.  Whether  an
authorized leave of absence, or absence in military or government service, shall
constitute termination of employment shall be determined by the Committee at the
time.

         14.      Withholding.
                  -----------
         The  Company's  obligation  to deliver  shares upon the exercise of any
option  granted  under the Plan and any payments or transfers  under  Section 12
hereof shall be subject to the option  holder's  satisfaction  of all applicable
Federal,  state  and  local  income,  excise,   employment  and  any  other  tax
withholding requirements.
<PAGE>
         15.      Restrictions on Issue of Shares.
                  -------------------------------
         (a)  Notwithstanding the provisions of Section 8, the Company may delay
the issuance of shares  covered by the exercise of an option and the delivery of
a  certificate  for such shares until one of the following  conditions  shall be
satisfied:

     (i) The shares with respect to which such option has been  exercised are at
the time of the issue of such shares  effectively  registered or qualified under
applicable  Federal  and  state  securities  acts now in  force or as  hereafter
amended;  or

     (ii)  Counsel for the Company  shall have given an opinion,  which  opinion
shall not be unreasonably  conditioned or withheld,  that such shares are exempt
from  registration  and  qualification   under  applicable   Federal  and  state
securities acts now in force or as hereafter amended.

         (b) It is intended  that all  exercises of options  shall be effective,
and the Company  shall use its best efforts to bring about  compliance  with the
above  conditions  within a reasonable  time,  except that the Company  shall be
under no obligation to qualify shares or to cause a registration  statement or a
post-effective  amendment to any  registration  statement to be prepared for the
purpose  of  covering  the issue of shares in respect of which any option may be
exercised, except as otherwise agreed to by the Company in writing.

  16.      Purchase for Investment; Rights of Holder on Subsequent Registration.
           --------------------------------------------------------------------
         Unless the shares to be issued upon exercise of an option granted under
the Plan have been  effectively  registered under the Securities Act of 1933, as
now in force or hereafter  amended,  the Company shall be under no obligation to
issue any  shares  covered by any option  unless the person who  exercises  such
option, in whole or in part, shall give a written representation and undertaking
to the  Company  which is  satisfactory  in form and  scope to  counsel  for the
Company  and upon  which,  in the  opinion  of such  counsel,  the  Company  may
reasonably  rely, that he or she is acquiring the shares issued pursuant to such
exercise of the option for his or her own account as an investment  and not with
a view to, or for sale in connection  with, the distribution of any such shares,
and that he or she will make no transfer of the same except in  compliance  with
any  rules  and  regulations  in force at the time of such  transfer  under  the
Securities  Act of 1933,  or any other  applicable  law,  and that if shares are
issued without such  registration,  a legend to this effect may be endorsed upon
the  securities so issued.  In the event that the Company  shall,  nevertheless,
deem it necessary or desirable to register  under the  Securities Act of 1933 or
other applicable  statutes any shares with respect to which an option shall have
been exercised,  or to qualify any such shares for exemption from the Securities
Act of 1933 or other applicable statutes,  then the Company may take such action
and may require from each  optionee such  information  in writing for use in any
registration  statement,   supplementary  registration  statement,   prospectus,
preliminary  prospectus or offering circular as is reasonably necessary for such
purpose and may require reasonable indemnity to the Company and its officers and
directors and controlling  persons from such holder against all losses,  claims,
damages and  liabilities  arising from such use of the  information so furnished
and caused by any untrue statement of any material fact therein or caused by the
omission to state a material fact required to be stated  therein or necessary to
make the  statements  therein not  misleading in the light of the  circumstances
under which they were made.
<PAGE>
         17.      Loans.
                  -----
         The  Company  may make loans to  optionees  to permit  them to exercise
options. If loans are made, the requirements of all applicable Federal and state
laws and regulations regarding such loans must be met.

         18.      Modification of Outstanding Options.
                  -----------------------------------
         The Committee may  authorize  the amendment of any  outstanding  option
with the  consent of the  optionee  when and subject to such  conditions  as are
deemed to be in the best  interests  of the Company and in  accordance  with the
purposes of this Plan.

         19.      Approval of Stockholders.
                  ------------------------
         The Plan  shall be  subject  to  approval  by the vote of  stockholders
holding  at least a majority  of the voting  stock of the  Company  present,  or
represented,  and entitled to vote at a duly held stockholders'  meeting,  or by
written consent of the  stockholders as provided for under applicable state law,
within  twelve  (12)  months  after  the  adoption  of the Plan by the  Board of
Directors  and  shall  take  effect as of the date of  adoption  by the Board of
Directors  upon such  approval.  The  Committee may grant options under the Plan
prior to such  approval,  but any such option shall  become  effective as of the
date of grant only upon such  approval and,  accordingly,  no such option may be
exercisable prior to such approval.

         20.      Termination and Amendment.
                  -------------------------
         Unless sooner  terminated as herein provided,  the Plan shall terminate
ten (10) years  from the date upon which the Plan was duly  adopted by the Board
of Directors of the Company.  The Board of Directors  may at any time  terminate
the Plan or make such  modification or amendment  thereof as it deems advisable;
provided,  however,  that except as  provided  in this  Section 20, the Board of
Directors  may not,  without  the  approval of the  stockholders  of the Company
obtained in the manner  stated in Section  19,  increase  the maximum  number of
shares for which options may be granted or change the  designation  of the class
of persons  eligible to receive options under the Plan, or make any other change
in  the  Plan  which  requires  stockholder  approval  under  applicable  law or
regulations.
<PAGE>
         21.      Reservation of Stock.
                  --------------------
         The Company  shall at all times during the term of the Plan reserve and
keep  available  such number of shares of stock as will be sufficient to satisfy
the  requirements  of the Plan and shall pay all fees and  expenses  necessarily
incurred by the Company in connection therewith.

         22.      Limitation of Rights in the Option Shares.
                  -----------------------------------------
         An optionee  shall not be deemed for any purpose to be a stockholder of
the Company  with  respect to any of the  options  except to the extent that the
option  shall have been  exercised  with respect  thereto  and, in  addition,  a
certificate shall have been issued theretofore and delivered to the optionee.

         23.      Notices.
                  -------
Any  communication  or notice  required or  permitted to be given under the Plan
shall be in writing,  and mailed by registered or certified mail or delivered by
hand,  if to the  Company,  to  its  principal  place  of  business,  attention:
President, and, if to an optionee, to the address as appearing on the records of
the Company.

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