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EXHIBIT 10.1
AMENDED AND RESTATED
ARENA PHARMACEUTICALS, INC.
1998 EQUITY COMPENSATION PLAN
The purpose of the Amended and Restated Arena Pharmaceuticals, Inc. 1998
Equity Compensation Plan (the "Plan") is to provide (i) designated employees of
Arena Pharmaceuticals, Inc. (the "Company") and its subsidiaries, (ii) certain
consultants and advisors who perform services for the Company or its
subsidiaries and (iii) non-employee members of the Board of Directors of the
Company (the "Board") with the opportunity to receive grants of incentive stock
options, nonqualified stock options and restricted stock. The Company believes
that the Plan will encourage the participants to contribute materially to the
growth of the Company, thereby benefiting the Company's shareholders, and will
align the economic interests of the participants with those of the shareholders.
I. Administration
A. Board. The Plan shall be administered and interpreted by the
Board or by a committee (the "Committee") appointed by the
Board. After an initial public offering of the Company's stock
as described in Section XIXB of the Plan (a "Public Offering"),
the Plan shall be administered by a Committee, which may consist
of "outside directors" as defined under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and
related Treasury regulations and "non-employee directors" as
defined under Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). However, the Board may
ratify or approve any grants as it deems appropriate. If a
Committee is appointed, references in the Plan to the "Board,"
as they relate to Plan administration, shall be deemed to refer
to the Committee.
B. Board Authority. The Board shall have the sole authority to (i)
determine the individuals to whom grants shall be made under the
Plan, (ii) determine the type, size and terms of the grants to
be made to each such individual, (iii) determine the time when
the grants will be made and the duration of any applicable
exercise or restriction period, including the criteria for
exercisability and the acceleration of exercisability and (iv)
deal with any other matters arising under the Plan.
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C. Board Determinations. The Board shall have full power and
authority to administer and interpret the Plan, to make factual
determinations and to adopt or amend such rules, regulations,
agreements and instruments for implementing the Plan and for the
conduct of its business as it deems necessary or advisable, in
its sole discretion. The Board's interpretations of the Plan and
all determinations made by the Board pursuant to the powers
vested in it hereunder shall be conclusive and binding on all
persons having any interest in the Plan or in any awards granted
hereunder. All powers of the Board shall be executed in its sole
discretion, in the best interest of the Company, and in keeping
with the objectives of the Plan and need not be uniform as to
similarly situated individuals.
II. Grants
Awards under the Plan may consist of grants of incentive stock options
as described in Section V of the Plan ("Incentive Stock Options"), nonqualified
stock options as described in Section V of the Plan ("Nonqualified Stock
Options") (Incentive Stock Options and Nonqualified Stock Options are
collectively referred to as "Options") and restricted stock as described in
Section VI of the Plan ("Restricted Stock") (hereinafter "Options" and
"Restricted Stock" are collectively referred to as "Grants"). All Grants shall
be subject to the terms and conditions set forth herein and to such other terms
and conditions consistent with this Plan as the Board deems appropriate and as
are specified in writing by the Board to the individual in a grant instrument or
an amendment to the grant instrument (the "Grant Instrument"). The Board shall
approve the form and provisions of each Grant Instrument. Grants under a
particular Section of the Plan need not be uniform as among the grantees.
III. Shares Subject to the Plan
A. Shares Authorized. Subject to the adjustment specified below,
the aggregate number of shares of common stock of the Company
("Company Stock") that may be issued or transferred under the
Plan is the sum of (i) 472,080 shares, plus (ii) as of each
December 31 after December 31, 1997, an additional positive
number equal to 15% of the shares of Company Stock (as defined
below) issued by the Company during the preceding one-year
period; provided, however, in no event may the number of shares
for which Incentive Stock Options may be granted during the term
of the Plan exceed 1,500,000 shares. As used in item (ii) above,
"Company Stock" shall mean any (i) common stock and (ii) common
stock issuable upon conversion or exercise of any Preferred
Stock, warranty or other security into common stock.
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B. Adjustments. If there is any change in the number or kind of
shares of Company Stock outstanding (i) by reason of a stock
dividend, spinoff, recapitalization, stock split, or combination
or exchange of shares, (ii) by reason of a merger,
reorganization or consolidation in which the Company is the
surviving corporation, (iii) by reason of a reclassification or
change in par value, or (iv) by reason of any other
extraordinary or unusual event affecting the outstanding Company
Stock as a class without the Company's receipt of consideration,
or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or the Company's
payment of an extraordinary dividend or distribution, the
maximum number of shares of Company Stock available for Grants,
the maximum number of shares of Company Stock that any
individual participating in the Plan may be granted in any year,
the number of shares covered by outstanding Grants, the kind of
shares issued under the Plan, and the price per share or the
applicable market value of such Grants shall be appropriately
adjusted by the Board to reflect any increase or decrease in the
number of, or change in the kind or value of, issued shares of
Company Stock to preclude, to the extent practicable, the
enlargement or dilution of rights and benefits under such
Grants; provided, however, that any fractional shares resulting
from such adjustment shall be eliminated. Any adjustments
determined by the Board shall be final, binding and conclusive.
IV. Eligibility for Participation
A. Eligible Persons. All employees of the Company and its
subsidiaries ("Employees"), including Employees who are officers
or members of the Board, and members of the Board who are not
Employees ("Non-Employee Directors") shall be eligible to
participate in the Plan. Consultants and advisors who perform
services to the Company or any of its subsidiaries ("Key
Advisors") shall be eligible to participate in the Plan if the
Key Advisors render bona fide services and such services are not
in connection with the offer or sale of securities in a
capital-raising transaction.
B. Selection of Grantees. The Board shall select the Employees,
Non-Employee Directors and Key Advisors to receive Grants and
shall determine the number of shares of Company Stock subject to
a particular Grant in such manner as the Board determines.
Employees, Key Advisors and Non-Employee Directors who receive
Grants under this Plan shall hereinafter be referred to as
"Grantees".
V. Granting of Options
A. Number of Shares. The Board shall determine the number of shares
of Company Stock that will be subject to each Grant of Options
to Employees, Non-Employee
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Directors and Key Advisors.
B. Type of Option and Price.
(i) The Board may grant Incentive Stock Options that are
intended to qualify as "incentive stock options" within the
meaning of Section 422 of the Code or Nonqualified Stock Options
that are not intended so to qualify or any combination of
Incentive Stock Options and Nonqualified Stock Options, all in
accordance with the terms and conditions set forth herein.
Incentive Stock Options may be granted only to Employees.
Nonqualified Stock Options may be granted to Employees,
Non-Employee Directors and Key Advisors.
(ii) The purchase price (the "Exercise Price") of Company
Stock subject to an Option shall be determined by the Board and
may be equal to, greater than, or less than the Fair Market
Value (as defined below) of a share of Company Stock on the date
the Option is granted; provided, however, that (a) the Exercise
Price of a Nonqualified Stock Option shall not be less than 85%
of the Fair Market Value of a share of Company Stock on the date
of grant (unless clause (d) below applies), (b) the Exercise
Price of an Incentive Stock Option shall be equal to, or greater
than, 100% of the Fair Market Value of a share of Company Stock
on the date the Incentive Stock Option is granted, (c) an
Incentive Stock Option not be granted to an Employee who, at the
time of grant, owns stock possessing more than 10 percent of the
total combined voting power of all classes of stock of the
Company or any parent or subsidiary of the Company, unless the
Exercise Price per share is not less than 110% of the Fair
Market Value of Company Stock on the date of grant, and (d) to
the extent required by applicable law, a Nonqualified Stock
Option may not be granted to a person who, at the time of grant,
owns stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company or any
parent or subsidiary of the Company, unless the Exercise Price
per share is not less than 110% of the Fair Market Value of
Company Stock on the date of grant.
(iii) If the Company Stock is publicly traded, then the Fair
Market Value per share shall be determined as follows: (a) if
the principal trading market for the Company Stock is a national
securities exchange or the NASDAQ National Market, the last
reported sale price thereof on the relevant date or (if there
were no trades on that date) the latest preceding date upon
which a sale was reported, or (b) if the Company Stock is not
principally traded on such exchange or market, the mean between
the last reported "bid" and "asked" prices of Company Stock on
the relevant date, as reported on NASDAQ or, if not so reported,
as reported by the National Daily Quotation Bureau, Inc. or as
reported in a customary financial reporting service, as
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applicable and as the Board determines. If the Company Stock is
not publicly traded or, if publicly traded, is not subject to
reported transactions or "bid" or "asked" quotations as set
forth above, the Fair Market Value per share shall be as
determined by the Board. If required by applicable law, the
Company will provide Grantees with financial statements of the
Company at least annually.
C. Option Term. The Board shall determine the term of each Option.
The term of any Option shall not exceed ten years from the date
of grant. However, an Incentive Stock Option that is granted to
an Employee who, at the time of grant, owns stock possessing
more than 10 percent of the total combined voting power of all
classes of stock of the Company, or any parent or subsidiary of
the Company, may not have a term that exceeds five years from
the date of grant.
D. Exercisability of Options. Options shall become exercisable in
accordance with such terms and conditions, consistent with the
Plan, as may be determined by the Board and specified in the
Grant Instrument. Options shall vest over a period of not more
than five years and at a rate of not less than 20% per year. The
Board may accelerate the exercisability of any or all
outstanding Options at any time for any reason.
E. Termination of Employment, Disability or Death.
(i) Except as provided below, an Option may only be
exercised while the Grantee is employed by, or providing service
to, the Company as an Employee, Key Advisor or member of the
Board. In the event that a Grantee ceases to be employed by, or
provide service to, the Company for any reason other than
"disability" or death, any Option which is otherwise exercisable
by the Grantee shall terminate unless exercised within 90 days
after the date on which the Grantee ceases to be employed by, or
provide service to, the Company (or within such other period of
time as may be specified by the Board), but in any event no
later than the date of expiration of the Option term. Any of the
Grantee's Options that are not otherwise exercisable as of the
date on which the Grantee ceases to be employed by, or provide
service to, the Company shall terminate as of such date.
(ii) In the event the Grantee ceases to be employed by, or
provide service to, the Company because the Grantee is
"disabled", any Option which is otherwise exercisable by the
Grantee shall terminate unless exercised within one year after
the date on which the Grantee ceases to be employed by, or
provide service to, the Company (or within such other period of
time as may be specified by the Board), but in any event no
later than the date of expiration of the Option term. Any of the
Grantee's Options which are not otherwise exercisable as of the
date on which the
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Grantee ceases to be employed by, or provide service to, the
Company shall terminate as of such date.
(iii) If the Grantee dies while employed by, or providing
service to, the Company or within 90 days after the date on
which the Grantee ceases to be employed or provide service on
account of a termination specified in Section V.E.(i) above (or
within such other period of time as may be specified by the
Board), any Option that is otherwise exercisable by the Grantee
shall terminate unless exercised within one year after the date
on which the Grantee ceases to be employed by, or provide
service to, the Company (or within such other period of time as
may be specified by the Board), but in any event no later than
the date of expiration of the Option term. Any of the Grantee's
Options that are not otherwise exercisable as of the date on
which the Grantee ceases to be employed by, or provide service
to, the Company shall terminate as of such date.
(iv) For purposes of this Section V.E. and Section VI.E. of
the Plan:
(a) The term "Company" shall mean the Company and
its parent and subsidiary corporations.
(b) "Employed by, or provide service to, the
Company" shall mean employment or service as an
Employee, Key Advisor or member of the Board (so that,
for purposes of exercising Options and satisfying
conditions with respect to Restricted Stock, a Grantee
shall not be considered to have terminated employment or
service until the Grantee ceases to be an Employee, Key
Advisor and member of the Board), unless the Board
determines otherwise.
(c) "Disability" shall mean a Grantee's becoming
disabled within the meaning of Section 22(e)(3) of the
Code.
F. Exercise of Options. A Grantee may exercise an Option that has
become exercisable, in whole or in part, by delivering a notice
of exercise to the Company with payment of the Exercise Price.
The Grantee shall pay the Exercise Price for an Option as
specified by the Board (i) in cash, (ii) with the approval of
the Board, by delivering shares of Company Stock owned by the
Grantee (including Company Stock acquired in connection with the
exercise of an Option, subject to such restrictions as the Board
deems appropriate) and having a Fair Market Value on the date of
exercise equal to the Exercise Price or (ii) by such other
method as the Board may approve, including after a Public
Offering payment through a broker in accordance with procedures
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permitted by Regulation T of the Federal Reserve Board. Shares
of Company Stock used to exercise an Option shall have been held
by the Grantee for the requisite period of time to avoid adverse
accounting consequences to the Company with respect to the
Option. The Grantee shall pay the Exercise Price and the amount
of any withholding tax due (pursuant to Section VII of the Plan)
at the time of exercise.
G. Limits on Incentive Stock Options. Each Incentive Stock Option
shall provide that, if the aggregate Fair Market Value of the
stock on the date of the grant with respect to which Incentive
Stock Options are exercisable for the first time by a Grantee
during any calendar year, under the Plan or any other stock
option plan of the Company or a parent or subsidiary, exceeds
$100,000, then the option, as to the excess, shall be treated as
a Nonqualified Stock Option. An Incentive Stock Option shall not
be granted to any person who is not an Employee of the Company
or a parent or subsidiary (within the meaning of Section 424(f)
of the Code).
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VI. Restricted Stock Grants
The Board may issue or transfer shares of Company Stock to an
Employee, Non-Employee Director or Key Advisor under a Grant of
Restricted Stock, upon such terms as the Board deems
appropriate. The following provisions are applicable to
Restricted Stock:
A. General Requirements. Shares of Company Stock issued or
transferred pursuant to Restricted Stock Grants may be issued or
transferred for such consideration as may be determined by the
Board. The Board may establish conditions under which
restrictions on shares of Restricted Stock shall lapse over a
period of time or according to such other criteria as the Board
deems appropriate. The period of time during which the
Restricted Stock will remain subject to restrictions will be
designated in the Grant Instrument as the "Restriction Period
B. Number of Shares. The Board shall determine the number of shares
of Company Stock to be issued or transferred pursuant to a
Restricted Stock Grant and the restrictions applicable to such
shares.
C. Requirement of Employment or Service. If the Grantee ceases to
be employed by, or provide service to, the Company (as defined
in Section V.E. of the Plan) during a period designated in the
Grant Instrument as the Restriction Period, or if other
specified conditions are not met, the Restricted Stock Grant
shall terminate as to all shares covered by the Grant as to
which the restrictions have not lapsed, and those shares of
Company Stock must be immediately returned to the Company. The
Board may, however, provide for complete or partial exceptions
to this requirement as it deems appropriate.
D. Restrictions on Transfer and Legend on Stock Certificate. During
the Restriction Period, a Grantee may not sell, assign,
transfer, pledge or otherwise dispose of the shares of
Restricted Stock except to a Successor Grantee under Section
VIII.A. of the Plan. Each certificate for a share of Restricted
Stock shall contain a legend giving appropriate notice of the
restrictions in the Grant. The Grantee shall be entitled to have
the legend removed from the stock certificate covering the
shares subject to restrictions when all restrictions on such
shares have lapsed. The Board may determine that the Company
will not issue certificates for shares of Restricted Stock until
all restrictions on such shares have lapsed, or that the Company
will retain possession of certificates for shares of Restricted
Stock until all restrictions on such shares have lapsed.
E. Right to Vote and to Receive Dividends. Unless the Board
determines otherwise,
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during the Restriction Period, the Grantee shall have the right
to vote shares of Restricted Stock and to receive any dividends
or other distributions paid on such shares, subject to any
restrictions deemed appropriate by the Board.
F. Lapse of Restrictions. All restrictions imposed on Restricted
Stock shall lapse upon the expiration of the applicable
Restriction Period and the satisfaction of all conditions
imposed by the Board. The Board may determine, as to any or all
Restricted Stock Grants, that the restrictions shall lapse
without regard to any Restriction Period.
VII. Withholding of Taxes
A. Required Withholding. All Grants under the Plan shall be subject
to applicable federal (including FICA), state and local tax
withholding requirements. The Company shall have the right to
deduct from all Grants paid in cash, or from other wages paid to
the Grantee, any federal, state or local taxes required by law
to be withheld with respect to such Grants. In the case of
Options and other Grants paid in Company Stock, the Company may
require the Grantee or other person receiving such shares to pay
to the Company the amount of any such taxes that the Company is
required to withhold with respect to such Grants, or the Company
may deduct from other wages paid by the Company the amount of
any withholding taxes due with respect to such Grants.
B. Election to Withhold Shares. If the Board so permits, a Grantee
may elect to satisfy the Company's income tax withholding
obligation with respect to an Option or Restricted Stock paid in
Company Stock by having shares withheld up to an amount that
does not exceed the Grantee's minimum applicable withholding tax
rate for federal (including FICA), state and local tax
liabilities. The election must be in a form and manner
prescribed by the Board and shall be subject to the prior
approval of the Board.
VIII. Transferability of Grants
A. Nontransferability of Grants. Except as provided below, only the
Grantee may exercise rights under a Grant during the Grantee's
lifetime, and a Grantee may not transfer those rights except by
will or by the laws of descent and distribution. When a Grantee
dies, the personal representative or other person entitled to
succeed to the rights of the Grantee ("Successor Grantee") may
exercise such rights. A Successor Grantee must furnish proof
satisfactory to the Company of his or her right to receive the
Grant under the Grantee's will or under the applicable laws of
descent and
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distribution.
B. Transfer of Nonqualified Stock Options. Notwithstanding the
foregoing, if permitted by applicable law, the Board may
provide, in a Grant Instrument, that a Grantee may transfer
Nonqualified Stock Options to family members, one or more trusts
for the benefit of family members, or one or more partnerships
of which family members are the only partners, according to such
terms as the Board may determine; provided that the Grantee
receives no consideration for the transfer of an Option and the
transferred Option shall continue to be subject to the same
terms and conditions as were applicable to the Option
immediately before the transfer.
IX. Right of First Refusal
A. Offer. Prior to a Public Offering, if at any time an individual
desires to sell, encumber, or otherwise dispose of shares of
Company Stock that were distributed to him under this Plan and
that are transferable, the individual shall first offer the
shares to the Company by giving the Company written notice
disclosing: (a) the name of the proposed transferee of the
Company Stock; (b) the certificate number and number of shares
of Company Stock proposed to be transferred or encumbered; (c)
the proposed price; (d) all other terms of the proposed
transfer; and (e) a written copy of the proposed offer. Within
60 days after receipt of such notice, the Company shall have the
option to purchase all or part of such Company Stock at the then
current Fair Market Value (as defined in Section V.B. of the
Plan and may pay such price in installments over a period not to
exceed four years, at the discretion of the Board.
B. Sale. In the event the Company (or a shareholder, as described
below) does not exercise the option to purchase Company Stock,
as provided above, the individual shall have the right to sell,
encumber, or otherwise dispose of his shares of Company Stock on
the terms of the transfer set forth in the written notice to the
Company, provided such transfer is effected within 15 days after
the expiration of the option period. If the transfer is not
effected within such period, the Company must again be given an
option to purchase, as provided above.
C. Pass Through of Rights. The Board, in its sole discretion, may
waive the Company's right of first refusal pursuant to this
Section IX and the Company's repurchase right pursuant to
Section X of the Plan. If the Company's right of first refusal
or repurchase right is so waived, the Board may, in its sole
discretion, pass through such right to the remaining
shareholders of the Company in the same proportion that each
shareholder's stock ownership bears to the stock ownership of
all the shareholders of
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the Company, as determined by the Board. To the extent that a
shareholder has been given such right and does not purchase his
or her allotment, the other shareholders shall have the right to
purchase such allotment on the same basis.
D. Public Offering. On and after a Public Offering, the Company
shall have no further right to purchase shares of Company Stock
under this Section IX and Section X of the Plan, and their
limitations shall be null and void.
E. Shareholder's Agreement. Notwithstanding the foregoing, the
Board may require that a Grantee execute a shareholder's
agreement, with such terms as the Board deems appropriate, with
respect to any Company Stock distributed pursuant to this Plan,
in which case the provisions of this Section IX and Section X of
the Plan shall not apply to such Company Stock.
X. Purchase by the Company
Prior to a Public Offering, if a Grantee ceases to be employed by, or
provide service to, the Company, the Company shall have the right to purchase
all or part of any Company Stock distributed to him or her under this Plan at
its then current Fair Market Value (as defined in Section V.B. of the Plan) or
at such other price as may be established in the Grant Instrument; provided,
however, that such repurchase shall be made in accordance with applicable
accounting rules to avoid adverse accounting treatment.
XI. Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have occurred
if:
A. Any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than the those persons who are
shareholders of the Company on the date the Plan is adopted,
becomes a "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company representing more than 50% of the voting power of the
then outstanding securities of the Company, provided that a
Change of Control shall not be deemed to occur as a result of a
change of ownership resulting from the death of a shareholder;
or
B. The shareholders of the Company approve (or, if shareholder
approval is not required, the Board approves) an agreement
providing for (i) the merger or consolidation of the Company
with another corporation where the shareholders of the Company,
immediately prior to the merger or consolidation, will not
beneficially own, immediately after the merger or consolidation,
shares entitling such
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shareholders to more than 50% of all votes to which all
shareholders of the surviving corporation would be entitled in
the election of directors, (ii) the sale or other disposition of
all or substantially all of the assets of the Company, or (iii)
a liquidation or dissolution of the Company;
XII. Consequences of a Change of Control
A. Notice and Acceleration. Upon a Change of Control, unless the
Board determines otherwise, (i) the Company shall provide each
Grantee with outstanding Grants written notice of such Change of
Control, (ii) all outstanding Options shall automatically
accelerate and become fully exercisable, and (iii) the
restrictions and conditions on all outstanding Restricted Stock
shall immediately lapse.
B. Assumption of Grants. Upon a Change of Control where the Company
is not the surviving corporation (or survives only as a
subsidiary of another corporation), unless the Board determines
otherwise, all outstanding Options that are not exercised shall
be assumed by, or replaced with comparable options or rights by,
the surviving corporation.
C. Other Alternatives. Notwithstanding the foregoing, subject to
subsection D below, in the event of a Change of Control, the
Board may take one or both of the following actions: the Board
may (i) require that Grantees surrender their outstanding
Options in exchange for a payment by the Company, in cash or
Company Stock as determined by the Board, in an amount equal to
the amount by which the then Fair Market Value of the shares of
Company Stock subject to the Grantee's unexercised Options
exceeds the Exercise Price of the Options, or (ii) after giving
Grantees an opportunity to exercise their outstanding Options,
terminate any or all unexercised Options at such time as the
Board deems appropriate. Such surrender or termination shall
take place as of the date of the Change of Control or such other
date as the Board may specify.
D. Limitations. Notwithstanding anything in the Plan to the
contrary, in the event of a Change of Control, the Board shall
not have the right to take any actions described in the Plan
(including without limitation actions described in subsection C
above) that would make the Change of Control ineligible for
pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in
the absence of such right, the Change of Control would qualify
for such treatment and the Company intends to use such treatment
with respect to the Change of Control.
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XIII. Requirements for Issuance or Transfer of Shares
A. Shareholder's Agreement. The Board may require that a Grantee
execute a shareholder's agreement, with such terms as the Board
deems appropriate, with respect to any Company Stock issued or
distributed pursuant to this Plan.
B. Limitations on Issuance or Transfer of Shares. No Company Stock
shall be issued or transferred in connection with any Grant
hereunder unless and until all legal requirements applicable to
the issuance or transfer of such Company Stock have been
complied with to the satisfaction of the Board. The Board shall
have the right to condition any Grant made to any Grantee
hereunder on such Grantee's undertaking in writing to comply
with such restrictions on his or her subsequent disposition of
such shares of Company Stock as the Board shall deem necessary
or advisable as a result of any applicable law, regulation or
official interpretation thereof, and certificates representing
such shares may be legended to reflect any such restrictions.
Certificates representing shares of Company Stock issued or
transferred under the Plan will be subject to such stop-transfer
orders and other restrictions as may be required by applicable
laws, regulations and interpretations, including any requirement
that a legend be placed thereon.
XIV. Amendment and Termination of the Plan
A. Amendment. The Board may amend or terminate the Plan at any
time; provided, however, that the Board shall not amend the Plan
without shareholder approval if such approval is required by
Section 422 of the Code or, after a Public Offering, Section
162(m) of the Code or any Securities law for Exchange Listings
requirements.
B. Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective
date, unless the Plan is terminated earlier by the Board or is
extended by the Board with the approval of the shareholders.
C. Termination and Amendment of Outstanding Grants. A termination
or amendment of the Plan that occurs after a Grant is made shall
not materially impair the rights of a Grantee unless the Grantee
consents or unless the Board acts under Section XX.B. of the
Plan The termination of the Plan shall not impair the power and
authority of the Board with respect to an outstanding Grant.
Whether or not the Plan has terminated, an outstanding Grant may
be terminated or amended under Section XX.B. of the Plan or may
be amended by agreement of the Company and the Grantee
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consistent with the Plan.
D. Governing Document. The Plan shall be the controlling document.
No other statements, representations, explanatory materials or
examples, oral or written, may amend the Plan in any manner. The
Plan shall be binding upon and enforceable against the Company
and its successors and assigns.
XV. Funding of the Plan
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation
of assets to assure the payment of any Grants under this Plan. In no
event shall interest be paid or accrued on any Grant, including unpaid
installments of Grants.
XVI. Rights of Participants
Nothing in this Plan shall entitle any Employee, Key Advisor,
Non-Employee Director or other person to any claim or right to be
granted a Grant under this Plan. Neither this Plan nor any action taken
hereunder shall be construed as giving any individual any rights to be
retained by or in the employ of the Company or any other employment
rights.
XVII. No Fractional Shares
No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any Grant. The Board shall determine whether
cash, other awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights
thereto shall be forfeited or otherwise eliminated.
XVIII. Headings
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section
shall control.
XIX. Effective Date of the Plan.
C. Effective Date. Subject to approval by the Company's
shareholders, the Plan shall be effective on June 10, 1998.
D. Public Offering. The provisions of the Plan that refer to a
Public Offering, or that refer to, or are applicable to persons
subject to, Section 16 of the Exchange Act or
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Section 162(m) of the Code, shall be effective, if at all, upon
the initial registration of the Company Stock under Section
12(g) of the Exchange Act, and shall remain effective thereafter
for so long as such stock is so registered.
XX. Miscellaneous
A. Grants in Connection with Corporate Transactions and Otherwise.
Nothing contained in this Plan shall be construed to (I) limit
the right of the Board to make Grants under this Plan in
connection with the acquisition, by purchase, lease, merger,
consolidation or otherwise, of the business or assets of any
corporation, firm or association, including Grants to employees
thereof who become Employees of the Company, or for other proper
corporate purposes, or (ii) limit the right of the Company to
grant stock options or make other awards outside of this Plan.
Without limiting the foregoing, the Board may make a Grant to an
employee of another corporation who becomes an Employee by
reason of a corporate merger, consolidation, acquisition of
stock or property, reorganization or liquidation involving the
Company or any of its subsidiaries in substitution for a stock
option or restricted stock grant made by such corporation. The
terms and conditions of the substitute grants may vary from the
terms and conditions required by the Plan and from those of the
substituted stock incentives. The Board shall prescribe the
provisions of the substitute grants.
B. Compliance with Law. The Plan, the exercise of Options and the
obligations of the Company to issue or transfer shares of
Company Stock under Grants shall be subject to all applicable
laws and to approvals by any governmental or regulatory agency
as may be required. With respect to persons subject to Section
16 of the Exchange Act, after a Public Offering, it is the
intent of the Company that the Plan and all transactions under
the Plan comply with all applicable provisions of Rule 16b-3 or
its successors under the Exchange Act. In addition, it is the
intent of the Company that the Plan and applicable Grants under
the Plan comply with the applicable provisions of Section 162(m)
(after a Public Offering) and Section 422 of the Code. To the
extent that any legal requirement of Section 16 of the Exchange
Act or Section 162(m) or 422 of the Code as set forth in the
Plan ceases to be required under Section 16 of the Exchange Act
or Section 162(m) or 422 of the Code, that Plan provision shall
cease to apply. The Board may revoke any Grant if it is contrary
to law or modify a Grant to bring it into compliance with any
valid and mandatory government regulation. The Board may also
adopt rules regarding the withholding of taxes on payments to
Grantees. The Board may, in its sole discretion, agree to limit
its authority under this Section of the Plan.
C. Governing Law. The validity, construction, interpretation and
effect of the Plan and
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Grant Instruments issued under the Plan shall exclusively be
governed by and determined in accordance with the law of the
State of California.
D. Code, Exchange Act Sections. Copies of any section(s) of the
Code and/or Exchange Act referenced in the Grant Instrument or
Plan are available from the Company General Counsel.
[END OF DOCUMENT]
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