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EXHIBIT 10.2
ARENA PHARMACEUTICALS, INC.
2000 EQUITY COMPENSATION PLAN
The purpose of the Arena Pharmaceuticals, Inc. 2000 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.
1. Administration
(a) Committee. The Plan shall be administered and
interpreted by a committee (the "Committee") appointed by the Board. The
Committee shall be comprised of two or more individuals who are both
"non-employee directors" within the meaning of Rule 16b-3(b)(3) of the
Securities Exchange Act of 1934, as amended, and "outside directors" within the
meaning of Treasury Regulation 1.62-27(e)(3) promulgated under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"). In addition, the
Board may ratify or approve any grants as it deems appropriate.
(b) Committee Authority. The Committee 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.
(c) Committee Determinations. The Committee 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 Committee
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 Committee shall be executed in its sole discretion, in the
best interest of the Company, not as a fiduciary, and in keeping with the
objectives of the Plan and need not be uniform as to similarly situated
individuals.
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2. Grants
Awards under the Plan may consist of grants of incentive stock options
as described in Section 5 ("Incentive Stock Options"), nonqualified stock
options as described in Section 5 ("Nonqualified Stock Options") (Incentive
Stock Options and Nonqualified Stock Options are collectively referred to as
"Options") and restricted stock as described in Section 6 (Restricted Stock")
(hereinafter 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 Committee deems appropriate and as
are specified in writing by the Committee to the individual in a grant
instrument or an amendment to the grant instrument (the "Grant Instrument"). The
Committee 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.
3. 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 Two Million
(2,000,000). The maximum aggregate number of shares of Company Stock that shall
be subject to Grants made under the Plan to any individual during any calendar
year shall be 200,000 shares. The shares may be authorized but unissued shares
of Company Stock or reacquired shares of Company Stock, including shares
purchased by the Company on the open market for purposes of the Plan. If and to
the extent Options granted under the Plan terminate, expire, or are canceled,
forfeited, exchanged or surrendered without having been exercised or if any
shares of Restricted Stock are forfeited, the shares subject to such Grants
shall again be available for purposes of the Plan.
(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 Committee 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 Committee shall be final, binding and conclusive.
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4. 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"), who are not members of the Committee, 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 Committee 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 Committee determines. Employees, Key Advisors and
Non-Employee Directors who receive Grants under this Plan shall hereinafter be
referred to as "Grantees".
5. Granting of Options
(a) Number of Shares. The Committee shall determine the
number of shares of Company Stock that will be subject to each Grant of Options
to Employees, Non-Employee Directors and Key Advisors.
(b) Type of Option and Price.
(i) The Committee 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 Committee 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 (w) 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 (z) below applies), (x) 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, (y) 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 (z) 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
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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) The Fair Market Value per share shall be
determined as follows: (x) 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 (y) 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 applicable and as the Committee determines. If the Company
Stock is publicly traded and 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.
(c) Option Term. The Committee 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 Committee 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 Committee 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", death, or termination for "cause", 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 on account of a termination for "cause"
by the Company, any Option held by the Grantee shall terminate as of the date
the Grantee ceases to be employed by, or provide service to, the Company. In
addition, notwithstanding any other provisions of this
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Section 5, if the Committee determines that the Grantee has engaged in conduct
that constitutes "cause" at any time while the Grantee is employed by, or
providing service to, the Company or after the Grantee's termination of
employment or service, any Options held by the Grantee shall immediately
terminate.
(iii) 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 Grantee ceases to be employed
by, or provide service to, the Company shall terminate as of such date.
(iv) 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 5(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.
(v) For purposes of this Section 5(e) and Section 6:
(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 Committee (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 Committee determines
otherwise.
(C) "Disability" shall mean a Grantee's becoming
disabled within the meaning of section 22(e)(3) of the Code.
(D) "Cause" shall mean, except to the extent
specified otherwise by the Board, a finding by the Committee that the Grantee
has breached his or her employment or service contract with the Company, or has
been engaged in disloyalty to the Company, including, without limitation, fraud,
embezzlement, theft, commission of a felony or proven dishonesty in the course
of his or her employment or service, or has disclosed trade secrets or
confidential
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information of the Company to persons not entitled to receive such information.
In the event a Grantee's employment or service is terminated for cause, in
addition to the immediate termination of all Grants, the Grantee shall
automatically forfeit all shares underlying any exercised portion of an Option
for which the Company has not yet delivered the share certificates, upon refund
by the Company of the Exercise Price paid by the Grantee for such shares.
(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 Committee (x) in cash,
(y) 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 Committee deems appropriate)
and having a Fair Market Value on the date of exercise equal to the Exercise
Price or (z) by such other method as the Committee may approve, including
payment through a broker in accordance with procedures 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 7) 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).
6. Restricted Stock Grants The Committee 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 Committee 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
consideration or for no consideration, as determined by the Board. The Committee
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
Committee 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 Committee 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.
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(c) Requirement of Employment or Service. If the Grantee
ceases to be employed by, or provide service to, the Company (as defined in
Section 5(e)) 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 Committee 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 8(a). 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 Committee 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
Committee determines otherwise, 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
Committee may determine, as to any or all Restricted Stock Grants, that the
restrictions shall lapse without regard to any Restriction Period.
7. 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 Committee so
permits, a Grantee may elect to satisfy the Company's income tax withholding
obligation with respect to an Option, SAR, Restricted Stock or Performance Units
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
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federal (including FICA), state and local tax liabilities. The election must be
in a form and manner prescribed by the Committee and shall be subject to the
prior approval of the Board.
8. Transferability of Grants
(a) No transferability of Grants. Except as provided below,
only the Grantee may exercise rights under a Grant during the Grantee's
lifetime. A Grantee may not transfer those rights except by will or by the laws
of descent and distribution or, with respect to Grants other than Incentive
Stock Options, if permitted in any specific case by the Board, pursuant to a
domestic relations order (as defined under the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the regulations
thereunder). 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 distribution.
(b) Transfer of Nonqualified Stock Options. Notwithstanding
the foregoing, if permitted by applicable law, the Committee 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 Committee 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.
9. 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 Committee 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 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;
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10. Consequences of a Change of Control
(a) Notice and Acceleration. Upon a Change of Control,
unless the Committee 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 Committee 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
Committee may take one or both of the following actions: the Committee 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 Committee deems appropriate. Such surrender or termination
shall take place as of the date of the Change of Control or such other date as
the Committee may specify.
(d) Limitations. Notwithstanding anything in the Plan to the
contrary, in the event of a Change of Control, the Committee 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.
11. Requirements for Issuance or Transfer of Shares
(a) Shareholder's Agreement. The Committee may require that
a Grantee execute a shareholder's agreement, with such terms as the Committee
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 Committee 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
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Committee 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.
12. Amendment and Termination of the Plan
(a) Amendment. The Committee may amend or terminate the Plan
at any time; provided, however, that the Committee shall not amend the Plan
without shareholder approval if such approval is required by section 422 of the
Code or, section 162(m) of the Code.
(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 Committee or is extended by the Committee 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 Committee acts under Section 18(b). The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Grant. Whether or not the Plan has terminated, an outstanding Grant may be
terminated or amended under Section 18(b) or may be amended by agreement of the
Company and the Grantee 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.
13. 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.
14. 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.
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15. No Fractional Shares
No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any Grant. The Committee 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.
16. 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.
17. Effective Date of the Plan.
Subject to approval by the Company's shareholders, the Plan shall be
effective on the date of completion of the Company's Initial Public offering.
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18. 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 Committee 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 Committee 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 Committee 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, 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) 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 Committee 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 Committee may also adopt
rules regarding the withholding of taxes on payments to Grantees. The Committee
may, in its sole discretion, agree to limit its authority under this Section.
(c) Governing Law. The validity, construction, interpretation and
effect of the Plan and Grant Instruments issued under the Plan shall exclusively
be governed by and determined in accordance with the law of the State of
California.
[END OF PLAN]
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