EXHIBIT 10.06

 

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2002 EQUITY INCENTIVE PLAN

 

As Adopted April 18, 2002
As Amended February 9, 2006, May 18, 2006, December 13, 2007, May 21, 2008,
August 19, 2009 and December 10, 2009

 

1.                                      PURPOSE.  The purpose of this Plan is to
provide incentives to attract, retain and motivate eligible persons whose
present and potential contributions are important to the success of the Company,
its Parent and Subsidiaries, by offering them an opportunity to participate in
the Company’s future performance through awards of Options, Restricted Stock and
Restricted Stock Units.  Capitalized terms not defined in the text are defined
in Section 24.

 

2.                                      SHARES SUBJECT TO THE PLAN.

 

2.1                                 Number of Shares Available.  Subject to
Sections 2.2 and 18, the total number of Shares reserved and available for grant
and issuance pursuant to this Plan will be 500,000 Shares plus Shares that are
subject to: (a) issuance upon exercise of an Option but cease to be subject to
such Option for any reason other than exercise of such Option; (b) an Award
granted hereunder but are forfeited or are repurchased by the Company at the
original issue price; and (c) an Award that otherwise terminates without Shares
being issued.  In addition, any authorized shares not issued or subject to
outstanding grants under the Company’s 1996 Stock Option Plan, Incentive Option
Plan and Management Incentive Option Plan on the Effective Date (as defined
below) and any shares issued under the Company’s 1995 Stock Plan, 1996 Stock
Option Plan, Incentive Option Plan and Management Incentive Option Plan (the
“Prior Plans”) that are forfeited or repurchased by the Company or that are
issuable upon exercise of options granted pursuant to the Prior Plans that
expire or become unexercisable for any reason without having been exercised in
full, will no longer be available for grant and issuance under the Prior Plans,
but will be available for grant and issuance under this Plan.  In addition, on
each January 1, the aggregate number of Shares reserved and available for grant
and issuance pursuant to this Plan will be increased automatically by a number
of Shares equal to 5% of the total outstanding shares of the Company as of the
immediately preceding December 31; provided, that the Board may in its sole
discretion reduce the amount of the increase in any particular year; and,
provided further, provided that no more than 40,000,000 shares shall be issued
as ISOs (as defined in Section 5 below).  At all times the Company shall reserve
and keep available a sufficient number of Shares as shall be required to satisfy
the requirements of all outstanding Options granted under this Plan and all
other outstanding but unvested Awards granted under this Plan.

 

2.2                                 Adjustment of Shares.  In the event that the
number of outstanding shares is changed by a stock dividend, recapitalization,
stock split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan, (b) the
number of Shares that may be granted pursuant to Sections 3 and 9 below, (c) the
Exercise Prices

 

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of and number of Shares subject to outstanding Options, and (d) the number of
Shares subject to other outstanding Awards shall, upon approval of the Board in
its discretion, be proportionately adjusted in compliance with applicable
securities laws; provided, however, that fractions of a Share will not be issued
but will either be replaced by a cash payment equal to the Fair Market Value of
such fraction of a Share or will be rounded up to the nearest whole Share, as
determined by the Committee.

 

3.                                      ELIGIBILITY.  ISOs (as defined in
Section 5 below) may be granted only to employees (including officers and
directors who are also employees) of the Company or of a Parent or Subsidiary of
the Company.  All other Awards may be granted to employees, officers, directors,
consultants, independent contractors and advisors of the Company or any Parent
or Subsidiary of the Company; provided such consultants, contractors and
advisors render bona fide services not in connection with the offer and sale of
securities in a capital-raising transaction.  No person will be eligible to
receive more than 1,000,000 Shares in any calendar year under this Plan pursuant
to the grant of Awards hereunder, other than new employees of the Company or of
a Parent or Subsidiary of the Company (including new employees who are also
officers and directors of the Company or any Parent or Subsidiary of the
Company), who are eligible to receive up to a maximum of 3,000,000 Shares in the
calendar year in which they commence their employment.  A person may be granted
more than one Award under this Plan.

 

4.                                      ADMINISTRATION.

 

4.1                                 Committee Authority.  This Plan will be
administered by the Committee or by the Board acting as the Committee.  Except
for automatic grants to Outside Directors pursuant to Section 9 hereof, and
subject to the general purposes, terms and conditions of this Plan, and to the
direction of the Board, the Committee will have full power to implement and
carry out this Plan.  Except for automatic grants to Outside Directors pursuant
to Section 9 hereof, the Committee will have the authority to:

 

(a)                                  construe and interpret this Plan, any Award
Agreement and any other agreement or document executed pursuant to this Plan;

 

(b)                                 prescribe, amend and rescind rules and
regulations relating to this Plan or any Award;

 

(c)                                  select persons to receive Awards;

 

(d)                                 determine the form and terms of Awards;

 

(e)                                  determine the number of Shares or other
consideration subject to Awards;

 

(f)                                    determine whether Awards will be granted
singly, in combination with, in tandem with, in replacement of, or as
alternatives to, other Awards under this Plan or any other incentive or
compensation plan of the Company or any Parent or Subsidiary of the Company;

 

(g)                                 grant waivers of Plan or Award conditions;

 

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(h)                                 determine the vesting, exercisability and
payment of Awards;

 

(i)                                     correct any defect, supply any omission
or reconcile any inconsistency in this Plan, any Award or any Award Agreement;

 

(j)                                     determine whether an Award has been
earned; and

 

(k)                                  make all other determinations necessary or
advisable for the administration of this Plan.

 

4.2                                 Committee Discretion.  Except for automatic
grants to Outside Directors pursuant to Section 9 hereof, any determination made
by the Committee with respect to any Award will be made in its sole discretion
at the time of grant of the Award or, unless in contravention of any express
term of this Plan or Award, at any later time, and such determination will be
final and binding on the Company and on all persons having an interest in any
Award under this Plan.  The Committee may delegate to one or more officers of
the Company the authority to grant an Award under this Plan to Participants who
are not Insiders of the Company.

 

5.                                      OPTIONS.  The Committee may grant
Options to eligible persons and will determine whether such Options will be
Incentive Stock Options within the meaning of the Code (“ISO”) or Nonqualified
Stock Options (“NQSOs”), the number of Shares subject to the Option, the
Exercise Price of the Option, the period during which the Option may be
exercised, and all other terms and conditions of the Option, subject to the
following:

 

5.1                                 Form of Option Grant.  Each Option granted
under this Plan will be evidenced by an Award Agreement which will expressly
identify the Option as an ISO or an NQSO (“Stock Option Agreement”), and, except
as otherwise required by the terms of Section 9 hereof, will be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.

 

5.2                                 Date of Grant.  The date of grant of an
Option will be the date on which the Committee makes the determination to grant
such Option, unless otherwise specified by the Committee.  The Stock Option
Agreement will be delivered, and a copy of this Plan will be made available, to
the Participant within a reasonable time after the granting of the Option.

 

5.3                                 Exercise Period.  Options may be exercisable
within the times or upon the events determined by the Committee as set forth in
the Stock Option Agreement governing such Option; provided, however, that no
Option granted on or before February 9, 2006 will be exercisable after the
expiration of ten (10) years from the date the Option is granted and no Option
granted after February 9, 2006 will be exercisable after the expiration of seven
(7) years from the date the Option is granted; and provided further that no ISO
granted to a person who directly or by attribution owns more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any Parent or Subsidiary of the Company (“Ten Percent Stockholder”) will
be exercisable after the expiration of five (5) years from the date the ISO is
granted.  The Committee also may provide for Options to become exercisable at

 

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one time or from time to time, periodically or otherwise, in such number of
Shares or percentage of Shares as the Committee determines.

 

5.4                                 Exercise Price.  The Exercise Price of an
Option will be determined by the Committee when the Option is granted; provided
that: (i) the Exercise Price of an ISO will be not less than 100% of the Fair
Market Value of the Shares on the date of grant; and (ii) the Exercise Price of
any ISO granted to a Ten Percent Stockholder will not be less than 110% of the
Fair Market Value of the Shares on the date of grant.  Payment for the Shares
purchased may be made in accordance with Section 6 of this Plan.

 

5.5                                 Termination.  Notwithstanding the exercise
periods set forth in the Stock Option Agreement, exercise of an Option will
always be subject to the following:

 

(a)                                  If the Participant is Terminated for any
reason except death or Disability, then the Participant may exercise such
Participant’s Options only to the extent that such Options would have been
exercisable upon the Termination Date no later than three (3) months after the
Termination Date (or such shorter or longer time period not exceeding five
(5) years as may be determined by the Committee, with any exercise beyond three
(3) months after the Termination Date deemed to be an NQSO), but in any event,
no later than the expiration date of the Options.

 

(b)                                 If the Participant is Terminated because of
Participant’s death or Disability (or the Participant dies within three
(3) months after a Termination other than for Cause or because of Participant’s
Disability), then Participant’s Options may be exercised only to the extent that
such Options would have been exercisable by Participant on the Termination Date
and must be exercised by Participant (or Participant’s legal representative or
authorized assignee) no later than twelve (12) months after the Termination Date
(or such shorter or longer time period not exceeding five (5) years as may be
determined by the Committee, with any such exercise beyond (i) three (3) months
after the Termination Date when the Termination is for any reason other than the
Participant’s death or disability, within the meaning of Section 22(e)(3) of the
Code, or (ii) twelve (12) months after the Termination Date when the Termination
is for Participant’s disability, within the meaning of Section 22(e)(3) of the
Code, deemed to be an NQSO), but in any event no later than the expiration date
of the Options.

 

(c)                                  If the Participant is terminated for Cause,
then the Participant may exercise such Participant’s Options only to the extent
that such Options would have been exercisable upon the Termination Date no later
than one month after the Termination Date (or such shorter or longer time period
not exceeding five (5) years as may be determined by the Committee, with any
exercise beyond three (3) months after the Termination Date deemed to be an
NQSO), but in any event, no later than the expiration date of the Options.

 

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5.6                                 Limitations on Exercise.  The Committee may
specify a reasonable minimum number of Shares that may be purchased on any
exercise of an Option, provided that such minimum number will not prevent
Participant from exercising the Option for the full number of Shares for which
it is then exercisable.

 

5.7                                 Limitations on ISO.  The aggregate Fair
Market Value (determined as of the date of grant) of Shares with respect to
which ISO are exercisable for the first time by a Participant during any
calendar year (under this Plan or under any other incentive stock option plan of
the Company, Parent or Subsidiary of the Company) will not exceed $100,000.  If
the Fair Market Value of Shares on the date of grant with respect to which ISO
are exercisable for the first time by a Participant during any calendar year
exceeds $100,000, then the Options for the first $100,000 worth of Shares to
become exercisable in such calendar year will be ISO and the Options for the
amount in excess of $100,000 that become exercisable in that calendar year will
be NQSOs.  In the event that the Code or the regulations promulgated thereunder
are amended after the Effective Date of this Plan to provide for a different
limit on the Fair Market Value of Shares permitted to be subject to ISO, such
different limit will be automatically incorporated herein and will apply to any
Options granted after the effective date of such amendment.

 

5.8                                 Modification, Extension or Renewal.  The
Committee may modify, extend or renew outstanding Options and authorize the
grant of new Options in substitution therefor, provided that any such action may
not, without the written consent of a Participant, impair any of such
Participant’s rights under any Option previously granted.  Any outstanding ISO
that is modified, extended, renewed or otherwise altered will be treated in
accordance with Section 424(h) of the Code.  The Committee may reduce the
Exercise Price of outstanding Options without the consent of Participants
affected by a written notice to them; provided, however, that the Exercise Price
may not be reduced below the minimum Exercise Price that would be permitted
under Section 5.4 of this Plan for Options granted on the date the action is
taken to reduce the Exercise Price.

 

5.9                                 No Disqualification.  Notwithstanding any
other provision in this Plan, no term of this Plan relating to ISO will be
interpreted, amended or altered, nor will any discretion or authority granted
under this Plan be exercised, so as to disqualify this Plan under Section 422 of
the Code or, without the consent of the Participant affected, to disqualify any
ISO under Section 422 of the Code.

 

6.                                      PAYMENT FOR OPTION SHARES.  The entire
Exercise Price of Shares issued upon exercise of Options and automatic grants to
Outside Directors pursuant to Section 9 shall be payable in cash at the time
when such Shares are purchased, except as follows and if so provided for in an
applicable Stock Option Agreement:

 

6.1                                 Surrender of Stock.  Payment for all or any
part of the Exercise Price or Options may be made with shares of the Company’s
common stock which have already been owned by the Participant; provided that the
Committee may, in its sole discretion, require that shares tendered for payment
be previously held by the Participant for a minimum duration. Such shares shall
be valued at their Fair Market Value.

 

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6.2                                 Cashless Exercise.  Payment for all or any
part of the Exercise Price may be made through Cashless Exercise at the
Committee’s sole discretion.

 

6.3                                 Other Forms of Payment.  Payment for all or
any part of the Exercise Price may be made in any other form that is consistent
with applicable laws, regulations and rules and approved by the Committee.

 

In the case of an ISO granted under the Plan, payment shall be made only
pursuant to the express provisions of the applicable Stock Option Agreement. 
The Stock Option Agreement may specify that payment may be made in any
form(s) described in this Section 6.  In the case of an NQSO granted under the
Plan, the Committee may, in its discretion at any time, accept payment in any
form(s) described in this Section 6.

 

7.                                      RESTRICTED STOCK AWARD.

 

7.1                                 Amount and Form of Restricted Stock Award. 
Awards under this Section 7 may be granted in the form of a Restricted Stock
Award.  Restricted Stock Awards made pursuant to this Plan will be evidenced by
an Award Agreement (“Restricted Stock Agreement”) that shall specify the number
of Shares to which the Restricted Stock Award pertains and shall be subject to
adjustment of such number in accordance with Section 2.2.

 

7.2                                 Restricted Stock Agreement.  Each Restricted
Stock Award awarded under the Plan shall be evidenced and governed exclusively
by a Restricted Stock Agreement between the Participant and the Company. Each
Restricted Stock Award shall be subject to all applicable terms and conditions
of the Plan and may be subject to any other terms and conditions that are not
inconsistent with the Plan and that the Committee deems appropriate for
inclusion in the applicable Restricted Stock Agreement (including without
limitation any performance conditions). The provisions of the various Restricted
Stock Agreements entered into under the Plan need not be identical.

 

7.3                                 Payment of Restricted Stock Awards. 
Restricted Stock Awards may be issued with or without cash consideration or any
other form of legally permissible consideration approved by the Committee.

 

7.4                                 Vesting Conditions.  Each Restricted Stock
Award may or may not be subject to vesting. Any such vesting provision may
provide that Shares shall vest based on service with the Company over time or
shall vest, in full or in installments, upon satisfaction of performance goals
specified in the Restricted Stock Agreement.  A Restricted Stock Agreement may
provide for accelerated vesting in the event of the Participant’s death,
Disability, or other events.

 

7.5                                 Assignment or Transfer of Restricted Stock
Awards.  Except as provided in the applicable Restricted Stock Agreement, and
then only to the extent permitted by applicable law, Restricted Stock Awards
shall not be anticipated, assigned, attached, garnished, optioned, transferred
or made subject to any creditor’s process, whether voluntarily, involuntarily or
by operation of law. Any act in violation of this Section 7.5 shall be void.

 

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7.6                                 Voting and Dividend Rights.  The holder of a
Restricted Stock Award under the Plan shall have the same voting, dividend and
other rights as the Company’s other shareholders. A Restricted Stock Agreement,
however, may require that the holder of such Restricted Stock Award invest any
cash dividends received in additional Shares subject to the Restricted Stock
Award.  Such additional Shares subject to the Restricted Stock Award shall be
subject to the same conditions and restrictions as the Restricted Stock Award
with respect to which the dividends were paid.  Such additional Shares subject
to the Restricted Stock Award shall not reduce the number of Shares available
for issuance under Section 2.1.

 

7.7                                 Modification or Assumption of Restricted
Stock Awards.  Within the limitations of the Plan, the Committee may modify or
assume outstanding restricted stock awards or may accept the cancellation of
outstanding restricted stock awards (including stock awards granted by another
issuer) in return for the Award of new Restricted Stock Awards for the same or a
different number of Shares and with the same or different vesting provisions.
Notwithstanding the preceding sentence or anything to the contrary herein, no
modification of a Restricted Stock Award shall, without the consent of the
Participant, impair his or her rights or obligations under such Restricted Stock
Award.

 

8.                                      RESTRICTED STOCK UNITS.

 

8.1                                 Restricted Stock Unit Agreement.  Each Award
of Restricted Stock Units under the Plan shall be evidenced and governed
exclusively by an Award Agreement (“Restricted Stock Unit Agreement”) between
the Participant and the Company. Such Restricted Stock Units shall be subject to
all applicable terms and conditions of the Plan and may be subject to any other
terms and conditions that are not inconsistent with the Plan and that the
Committee deems appropriate for inclusion in the applicable Restricted Stock
Unit Agreement (including without limitation any vesting and performance
conditions). The provisions of the various Restricted Stock Unit Agreements
entered into under the Plan need not be identical. Restricted Stock Units may be
awarded in consideration of a reduction in the Participant’s other compensation.

 

8.2                                 Number of Shares.  Each Restricted Stock
Unit Agreement shall specify the number of Shares to which the Restricted Stock
Unit Award pertains and shall be subject to adjustment of such number in
accordance with Section 2.2.

 

8.3                                 Payment for Restricted Stock Units. 
Restricted Stock Units shall be issued without consideration.

 

8.4                                 Vesting Conditions.  Each Restricted Stock
Unit may or may not be subject to vesting.  Any such vesting provision may
provide that Shares shall vest based on service with the Company over time or
shall vest, in full or in installments, upon satisfaction of performance goals
specified in the Restricted Stock Unit Agreement.  A Restricted Stock Unit
Agreement may provide for accelerated vesting in the event of the Participant’s
death, Disability, or other events.

 

8.5                                 Voting and Dividend Rights.  The holders of
Restricted Stock Units shall have no voting rights. Prior to settlement or
forfeiture, any Restricted Stock Unit awarded under

 

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the Plan may, at the Committee’s discretion, carry with it a right to dividend
equivalents. Such right entitles the holder to be credited with an amount equal
to all cash dividends paid on one Share while the Restricted Stock Unit is
outstanding. Dividend equivalents may be converted into additional Restricted
Stock Units. Settlement of dividend equivalents may be made in the form of cash,
in the form of Shares, or in a combination of both. Prior to distribution, any
dividend equivalents which are not paid shall be subject to the same conditions
and restrictions as the Restricted Stock Units to which they attach.

 

8.6                                 Form and Time of Settlement of Restricted
Stock Units.  Settlement of vested Restricted Stock Units may be made in the
form of (a) cash, (b) Shares or (c) any combination of both, as determined by
the Committee at the time of the grant of the Restricted Stock Units, in its
sole discretion. Methods of converting Restricted Stock Units into cash may
include (without limitation) a method based on the average Fair Market Value of
Shares over a series of trading days. Vested Restricted Stock Units may be
settled in a lump sum or in installments. The distribution may occur or commence
when the vesting conditions applicable to the Restricted Stock Units have been
satisfied or have lapsed, or it may be deferred, in accordance with applicable
law, to any later date. The amount of a deferred distribution may be increased
by an interest factor or by dividend equivalents. Until an Award of Restricted
Stock Units is settled, the number of such Restricted Stock Units shall be
subject to adjustment pursuant to Section 2.2.  Notwithstanding anything to the
contrary in any Award Agreement or the Plan, any Restricted Stock Units that, by
their terms, are settled on the applicable vesting date(s) shall be settled no
later than the fifteenth (15th) day of the third (3rd) month following the end
of the calendar year containing the applicable vesting date (or, if later, the
fifteenth (15th) day of the third (3rd) month following the end of the Company’s
taxable year).  In addition, notwithstanding anything to the contrary in any
Award Agreement or the Plan, references to “termination of the Participant’s
Service,” “Termination Date” and similar references for Restricted Stock Units
that are subject to Code Section 409A shall mean the date of the Participant’s
“separation from service” within the meaning of Code Section 409A and such
Restricted Stock Units shall be settled no later than the time permitted by
Treasury Regulation Section 1.409A-3(d).

 

8.7                                 Creditor’s Rights.  A holder of Restricted
Stock Units shall have no rights other than those of a general creditor of the
Company. Restricted Stock Units represent an unfunded and unsecured obligation
of the Company, subject to the terms and conditions of the applicable Restricted
Stock Unit Agreement.

 

8.8                                 Modification or Assumption of Restricted
Stock Units.  Within the limitations of the Plan, the Committee may modify or
assume outstanding restricted stock units or may accept the cancellation of
outstanding restricted stock units (including stock units granted by another
issuer) in return for the Award of new Restricted Stock Units for the same or a
different number of Shares and with the same or different vesting provisions.
Notwithstanding the preceding sentence or anything to the contrary herein, no
modification of a Restricted Stock Unit shall, without the consent of the
Participant, impair his or her rights or obligations under such Restricted Stock
Unit.

 

8.9                                 Assignment or Transfer of Restricted Stock
Units.  Except as provided in the applicable Restricted Stock Unit Agreement,
and then only to the extent permitted by

 

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applicable law, Restricted Stock Units shall not be anticipated, assigned,
attached, garnished, optioned, transferred or made subject to any creditor’s
process, whether voluntarily, involuntarily or by operation of law. Any act in
violation of this Section 8.9 shall be void.

 

9.                                      AUTOMATIC GRANTS TO OUTSIDE DIRECTORS.

 

9.1                                 Types of Options and Shares.  Awards granted
under this Plan and subject to this Section 9 may be NQSOs, Restricted Stock
Awards or Restricted Stock Units.

 

9.2                                 Eligibility.  Awards subject to this
Section 9 shall be granted only to Outside Directors.

 

9.3                                 Initial Grant.  Each Outside Director who
first becomes a member of the Board after the Effective Date will automatically
be granted an Award for that number of Shares determined by the Board (an
“Initial Grant”) on the date such Outside Director first becomes a member of the
Board.  Each Outside Director who became a member of the Board on or prior to
the Effective Date and who did not receive a prior option grant (under this Plan
or otherwise and from the Company or any of its corporate predecessors) will
receive an Initial Grant on the Effective Date.

 

9.4                                 Succeeding Grants.  Immediately following
each Annual Meeting of stockholders, each Outside Director will automatically be
granted an Award for that number of Shares determined by the Board (a
“Succeeding Grant”), provided, that the Outside Director is a member of the
Board on such date.

 

9.5                                 Vesting and Exercisability.  Each Award may
or may not be subject to vesting.  Each Award Agreement shall specify the
vesting and exercise conditions for such Award as determined by the Board.

 

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Unless deferred in accordance with the rules established by the Committee,
Restricted Stock Units will be settled in Shares upon the earlier of: (i) the
date on which such Restricted Stock Units are fully vested, or (ii) the Outside
Director’s Termination Date (or the first market trading day during an open
trading window thereafter if either the date on which such Restricted Stock
Units are fully vested or the Outside Director’s Termination Date is not on a
market trading day during an open trading window).

 

Notwithstanding any provision to the contrary, in the event of a Corporate
Transaction described in Section 18.1, the vesting of all Awards granted to
Outside Directors pursuant to this Section 9 will accelerate in full prior to
the consummation of such event at such times and on such conditions as the
Committee determines which comply with Section 409A of the Code, and options
must be exercised, if at all, within three (3) months of the consummation of
said event.  Any options not exercised within such three-month period shall
expire.

 

9.6                                 Exercise Price.  The exercise price of an
option pursuant to an Initial Grant and Succeeding Grant shall be the Fair
Market Value of the Shares, at the time that the option is granted.

 

9.7                                 Director Fees.  Each Outside Director may
elect to receive a Restricted Stock Award or Restricted Stock Unit under the
Plan in lieu of payment of a portion of his or her regular annual retainer based
on the Fair Market Value of the Shares on the date any regular annual retainer
would otherwise be paid.  For purposes of the Plan, an Outside Director’s
regular annual retainer shall include any additional retainer paid in connection
with service on any committee of the Board or paid for any other reason.  Such
an election may be for any dollar or percentage amount equal to at least 25% of
the Outside Director’s regular annual retainer (up to a limit of 100% of the
Outside Director’s regular annual retainer).  The election must be made prior to
the beginning of the annual board of directors cycle which shall be any twelve
month continuous period designated by the Board.  Any amount of the regular
annual retainer not elected to be received as a Restricted Stock Award or
Restricted Stock Unit shall be payable in cash in accordance with the Company’s
standard payment procedures.

 

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10.                               WITHHOLDING TAXES.

 

10.1                           Withholding Generally.  Whenever Shares are to be
issued in satisfaction of Awards granted under this Plan, the Company may
require the Participant to remit to the Company an amount sufficient to satisfy
federal, state and local withholding tax requirements prior to the delivery of
any certificate or certificates for such Shares.  Whenever, under this Plan,
payments in satisfaction of Awards are to be made in cash, such payment will be
net of an amount sufficient to satisfy federal, state, and local withholding tax
requirements.

 

10.2                           Stock Withholding.  When, under applicable tax
laws, a Participant incurs tax liability in connection with the exercise or
vesting of any Award that is subject to tax withholding and the Participant is
obligated to pay the Company the amount required to be withheld, the Committee
may in its sole discretion allow the Participant to satisfy the minimum
withholding tax obligation by electing to have the Company withhold from the
Shares to be issued that number of Shares having a Fair Market Value equal to
the minimum amount required to be withheld, determined on the date that the
amount of tax to be withheld is to be determined.  All elections by a
Participant to have Shares withheld for this purpose will be made in accordance
with the requirements established by the Committee and be in writing in a form
acceptable to the Committee.

 

11.                               TRANSFERABILITY.

 

11.1                           Except as otherwise provided in this Section 11,
Awards granted under this Plan, and any interest therein, will not be
transferable or assignable by Participant, and may not be made subject to
execution, attachment or similar process, otherwise than by will or by the laws
of descent and distribution or as determined by the Committee and set forth in
the Award Agreement with respect to Awards that are not ISOs.

 

11.2                           All Awards other than NQSO’s.  All Awards other
than NQSO’s shall be exercisable:  (i) during the Participant’s lifetime, only
by (A) the Participant, or (B) the Participant’s guardian or legal
representative; and (ii) after Participant’s death, by the legal representative
of the Participant’s heirs or legatees.

 

11.3                           NQSOs.  Unless otherwise restricted by the
Committee, an NQSO shall be exercisable:  (i) during the Participant’s lifetime
only by (A) the Participant, (B) the Participant’s guardian or legal
representative, (C) a Family Member of the Participant who has acquired the NQSO
by “permitted transfer;” and (ii) after Participant’s death, by the legal
representative of the Participant’s heirs or legatees.  “Permitted transfer”
means, as authorized by this Plan and the Committee in an NQSO, any transfer
effected by the Participant during the Participant’s lifetime of an interest in
such NQSO but only such transfers which are by gift or domestic relations
order.  A permitted transfer does not include any transfer for value and neither
of the following are transfers for value:  (a) a transfer of under a domestic
relations order in settlement of marital property rights or (b) a transfer to an
entity in which more than fifty percent of the voting interests are owned by
Family Members or the Participant in exchange for an interest in that entity.

 

11

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12.                               PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON
SHARES.

 

12.1                           Voting and Dividends.  Unless otherwise provided
under Section 7, no Participant will have any of the rights of a stockholder
with respect to any Shares until the Shares are issued to the Participant. 
After Shares are issued to the Participant, the Participant will be a
stockholder and have all the rights of a stockholder with respect to such
Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that the
Participant will have no right to retain such stock dividends or stock
distributions with respect to Shares that are repurchased at the Participant’s
Purchase Price or Exercise Price pursuant to Section 12.

 

12.2                           Restrictions on Shares.  At the discretion of the
Committee, the Company may reserve to itself and/or its assignee(s) in the Award
Agreement a right to repurchase a portion of or all Unvested Shares held by a
Participant following such Participant’s Termination at any time within ninety
(90) days after the later of Participant’s Termination Date and the date
Participant purchases Shares under this Plan, for cash and/or cancellation of
purchase money indebtedness, at the Participant’s Exercise Price or Purchase
Price, as the case may be.

 

13.                               CERTIFICATES.  All certificates for Shares or
other securities delivered under this Plan will be subject to such stock
transfer orders, legends and other restrictions as the Committee may deem
necessary or advisable, including restrictions under any applicable federal,
state or foreign securities law, or any rules, regulations and other
requirements of the SEC or any stock exchange or automated quotation system upon
which the Shares may be listed or quoted.

 

14.                               ESCROW; PLEDGE OF SHARES.  To enforce any
restrictions on a Participant’s Shares, the Committee may require the
Participant to deposit all certificates representing Shares, together with stock
powers or other instruments of transfer approved by the Committee, appropriately
endorsed in blank, with the Company or an agent designated by the Company to
hold in escrow until such restrictions have lapsed or terminated, and the
Committee may cause a legend or legends referencing such restrictions to be
placed on the certificates.  Any Participant who is permitted to execute a
promissory note as partial or full consideration for the purchase of Shares
under this Plan will be required to pledge and deposit with the Company all or
part of the Shares so purchased as collateral to secure the payment of
Participant’s obligation to the Company under the promissory note; provided,
however, that the Committee may require or accept other or additional forms of
collateral to secure the payment of such obligation and, in any event, the
Company will have full recourse against the Participant under the promissory
note notwithstanding any pledge of the Participant’s Shares or other
collateral.  In connection with any pledge of the Shares, Participant will be
required to execute and deliver a written pledge agreement in such form as the
Committee will from time to time approve.  The Shares purchased with the
promissory note may be released from the pledge on a pro rata basis as the
promissory note is paid.

 

15.                               EXCHANGE AND BUYOUT OF AWARDS.  The Committee
may, at any time or from time to time, authorize the Company, with the consent
of the respective Participants, to issue new Awards in exchange for the
surrender and cancellation of any or all outstanding Awards.  The Committee may
at any time buy from a Participant an Award previously granted

 

12

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with payment in cash, Shares (including Restricted Stock) or other
consideration, based on such terms and conditions as the Committee and the
Participant may agree.

 

16.                              
SECURITIES LAW AND OTHER REGULATORY COMPLIANCE.  An Award will not be effective
unless such Award is in compliance with all applicable federal and state
securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. 
Notwithstanding any other provision in this Plan, the Company will have no
obligation to issue or deliver certificates for Shares under this Plan prior
to:  (a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable; and/or (b) completion of any registration
or other qualification of such Shares under any state or federal law or ruling
of any governmental body that the Company determines to be necessary or
advisable.  The Company will be under no obligation to register the Shares with
the SEC or to effect compliance with the registration, qualification or listing
requirements of any state securities laws, stock exchange or automated quotation
system, and the Company will have no liability for any inability or failure to
do so.

 

17.                               NO OBLIGATION TO EMPLOY.  Nothing in this Plan
or any Award granted under this Plan will confer or be deemed to confer on any
Participant any right to continue in the employ of, or to continue any other
relationship with, the Company or any Parent or Subsidiary of the Company or
limit in any way the right of the Company or any Parent or Subsidiary of the
Company to terminate Participant’s employment or other relationship at any time,
with or without cause.

 

18.                               CORPORATE TRANSACTIONS.

 

18.1                          
Assumption or Replacement of Awards by Successor.  Except for automatic grants
to Outside Directors pursuant to Section 9 hereof, in the event of (a) a
dissolution or liquidation of the Company, (b) a merger or consolidation in
which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is no
substantial change in the stockholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company immediately prior to such merger
(other than any stockholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (d) the sale of substantially
all of the assets of the Company, or (e) the acquisition, sale, or transfer of
more than 50% of the outstanding shares of the Company by tender offer or
similar transaction (each, a “Corporate Transaction”), any or all outstanding
Awards may be assumed, converted or replaced by the successor corporation (if
any), which assumption, conversion or replacement will be binding on all
Participants.  In the alternative, the successor corporation may substitute
equivalent Awards or provide substantially similar consideration to Participants
as was provided to stockholders (after taking into account the existing
provisions of the Awards).  The successor corporation may also issue, in place
of outstanding Shares of the Company held by the Participants, substantially

 

13

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similar shares or other property subject to repurchase restrictions no less
favorable to the Participant.  In the event such successor corporation (if any)
refuses to assume or substitute Awards, as provided above, pursuant to a
transaction described in this SubSection 18.1, such Awards will expire on such
transaction at such time and on such conditions as the Committee will
determine.  Notwithstanding anything in this Plan to the contrary, the Committee
may, in its sole discretion, provide that the vesting of any or all Awards
granted pursuant to this Plan will accelerate upon a transaction described in
this Section 18.  If the Committee exercises such discretion with respect to
Options, such Options will become exercisable in full prior to the consummation
of such event at such time and on such conditions as the Committee determines,
and if such Options are not exercised prior to the consummation of the corporate
transaction, they shall terminate at such time as determined by the Committee.

 

18.2                           Other Treatment of Awards.  Subject to any
greater rights granted to Participants under the foregoing provisions of this
Section 18, in the event of the occurrence of any Corporate Transaction
described in Section 18.1, any outstanding Awards will be treated as provided in
the applicable agreement or plan of merger, consolidation, dissolution,
liquidation, or sale of assets.

 

18.3                           Assumption of Awards by the Company.  The
Company, from time to time, also may substitute or assume outstanding awards
granted by another company, whether in connection with an acquisition of such
other company or otherwise, by either; (a) granting an Award under this Plan in
substitution of such other company’s award; or (b) assuming such award as if it
had been granted under this Plan if the terms of such assumed award could be
applied to an Award granted under this Plan.  Such substitution or assumption
will be permissible if the holder of the substituted or assumed award would have
been eligible to be granted an Award under this Plan if the other company had
applied the rules of this Plan to such grant.  In the event the Company assumes
an award granted by another company, the terms and conditions of such award will
remain unchanged (except that the exercise price and the number and nature of
Shares issuable upon exercise of any such option will be adjusted appropriately
pursuant to Section 424(a) of the Code).  In the event the Company elects to
grant a new Option rather than assuming an existing option, such new Option may
be granted with a similarly adjusted Exercise Price.

 

19.                               ADOPTION AND STOCKHOLDER APPROVAL.  This Plan
will become effective on the date on which the registration statement filed by
the Company with the SEC under the Securities Act registering the initial public
offering of the Company’s Common Stock is declared effective by the SEC (the
“Effective Date”).  This Plan shall be approved by the stockholders of the
Company (excluding Shares issued pursuant to this Plan), consistent with
applicable laws, within twelve (12) months before or after the date this Plan is
adopted by the Board.  Upon the Effective Date, the Committee may grant Awards
pursuant to this Plan; provided, however, that:  (a) no Option may be exercised
prior to initial stockholder approval of this Plan; (b) no Option granted
pursuant to an increase in the number of Shares subject to this Plan approved by
the Board will be exercised prior to the time such increase has been approved by
the stockholders of the Company; (c) in the event that initial stockholder
approval is not obtained within the time period provided herein, all Awards
granted hereunder shall be cancelled, any Shares issued pursuant to any Awards
shall be cancelled and any purchase of Shares issued hereunder shall be
rescinded; and (d) in the event that stockholder approval of such

 

14

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increase is not obtained within the time period provided herein, all Awards
granted pursuant to such increase will be cancelled, any Shares issued pursuant
to any Award granted pursuant to such increase will be cancelled, and any
purchase of Shares pursuant to such increase will be rescinded.

 

20.                               TERM OF PLAN/GOVERNING LAW.  Unless earlier
terminated as provided herein, this Plan will terminate ten (10) years from the
date this Plan is adopted by the Board or, if earlier, the date of stockholder
approval.  This Plan and all agreements thereunder shall be governed by and
construed in accordance with the laws of the State of California.

 

21.                               AMENDMENT OR TERMINATION OF PLAN.  The Board
may at any time terminate or amend this Plan in any respect, including without
limitation amendment of any form of Award Agreement or instrument to be executed
pursuant to this Plan; provided, however, that the Board will not, without the
approval of the stockholders of the Company, amend this Plan in any manner that
requires such stockholder approval.

 

22.                               NONEXCLUSIVITY OF THE PLAN.  Neither the
adoption of this Plan by the Board, the submission of this Plan to the
stockholders of the Company for approval, nor any provision of this Plan will be
construed as creating any limitations on the power of the Board to adopt such
additional compensation arrangements as it may deem desirable, including,
without limitation, the granting of stock options and bonuses otherwise than
under this Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.

 

23.                               INSIDER TRADING POLICY.  Each Participant and
Outsider Director who receives an Award shall comply with any policy, adopted by
the Company from time to time covering transactions in the Company’s securities
by employees, officers and/or directors of the Company.

 

24.                               DEFINITIONS.  As used in this Plan, the
following terms will have the following meanings:

 

“Award” means any award under this Plan, including any Option, Restricted Stock
or Restricted Stock Unit.

 

“Award Agreement” means, with respect to each Award, the signed written
agreement between the Company and the Participant setting forth the terms and
conditions of the Award.

 

“Board” means the Board of Directors of the Company.

 

“Cashless Exercise”  means, to the extent that a Stock Option Agreement so
provides and as permitted by applicable law, a program approved by the Committee
in which payment may be made all or in part by delivery (on a form prescribed by
the Committee) of an irrevocable direction to a securities broker to sell Shares
and to deliver all or part of the sale proceeds to the Company in payment of the
aggregate Exercise Price and, if applicable, the amount necessary to satisfy the
Company’s withholding obligations at the minimum statutory withholding rates,
including, but not limited to, U.S. federal and state income taxes, payroll
taxes, and foreign taxes, if applicable.

 

15

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“Cause” means (a) the commission of an act of theft, embezzlement, fraud,
dishonesty, (b) a breach of fiduciary duty to the Company or a Parent or
Subsidiary of the Company or (c) a failure to materially perform the customary
duties of employee’s employment.

 

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

 

“Committee” means the Compensation Committee of the Board.

 

“Company” means FormFactor, Inc. or any successor corporation.

 

“Disability” means a disability, whether temporary or permanent, partial or
total, as determined by the Committee.

 

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

 

“Exercise Price” means the price at which a holder of an Option may purchase the
Shares issuable upon exercise of the Option.

 

“Fair Market Value” means, as of any date, the value of a share of the Company’s
Common Stock determined as follows:

 

(a)                                  if such Common Stock is then quoted on the
Nasdaq Global Market, its closing price on the Nasdaq Global Market on the date
of determination as reported in The Wall Street Journal;

 

(b)                                 if such Common Stock is publicly traded and
is then listed on a national securities exchange, its closing price on the date
of determination on the principal national securities exchange on which the
Common Stock is listed or admitted to trading as reported in The Wall Street
Journal;

 

(c)                                  if such Common Stock is publicly traded but
is not quoted on the Nasdaq Global Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and asked prices on
the date of determination as reported in The Wall Street Journal;

 

(d)                                 in the case of an Award made on the
Effective Date, the price per share at which shares of the Company’s Common
Stock are initially offered for sale to the public by the Company’s underwriters
in the initial public offering of the Company’s Common Stock pursuant to a
registration statement filed with the SEC under the Securities Act;  or

 

(e)                                  if none of the foregoing is applicable, by
the Committee in good faith.

 

“Family Member” includes any of the following:

 

(a)                                  child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law of the Participant,

 

16

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including any such person with such relationship to the Participant by adoption;

 

(b)                                 any person (other than a tenant or employee)
sharing the Participant’s household;

 

(c)                                  a trust in which the persons in (a) and
(b) have more than fifty percent of the beneficial interest;

 

(d)                                 a foundation in which the persons in (a) and
(b) or the Participant control the management of assets; or

 

(e)                                  any other entity in which the persons in
(a) and (b) or the Participant own more than fifty percent of the voting
interest.

 

“Insider” means an officer or director of the Company or any other person whose
transactions in the Company’s Common Stock are subject to Section 16 of the
Exchange Act.

 

“Option” means an award of an option to purchase Shares pursuant to Section 5.

 

“Outside Director” means a member of the Board who is not an employee of the
Company or any Parent or Subsidiary.

 

“Parent” means any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company if each of such corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.

 

“Participant” means a person who receives an Award under this Plan.

 

“Performance Factors” means the factors selected by the Committee from among the
following measures to determine whether the performance goals established by the
Committee and applicable to Awards have been satisfied:

 

(a)                                  Net revenue and/or net revenue growth;

 

(b)                                 Earnings before income taxes and
amortization and/or earnings before income taxes and amortization growth;

 

(c)                                  Operating income and/or operating income
growth;

 

(d)                                 Net income and/or net income growth;

 

(e)                                  Earnings per share and/or earnings per
share growth;

 

(f)                                    Total stockholder return and/or total
stockholder return growth;

 

(g)                                 Return on equity;

 

17

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(h)                                 Operating cash flow return on income;

 

(i)                                     Adjusted operating cash flow return on
income;

 

(j)                                     Economic value added; and

 

(k)                                  Individual confidential business
objectives.

 

“Performance Period” means the period of service determined by the Committee,
not to exceed five years, during which years of service or performance is to be
measured for Restricted Stock Awards Restricted Stock Units.

 

“Plan” means this FormFactor, Inc. 2002 Equity Incentive Plan, as amended from
time to time.

 

“Restricted Stock Award” means an award of Shares pursuant to Section 7.

 

“Restricted Stock Unit” means a bookkeeping entry representing the equivalent of
one Share, as awarded under the Plan pursuant to Section 8.

 

 “SEC” means the Securities and Exchange Commission.

 

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

 

“Shares” means shares of the Company’s Common Stock reserved for issuance under
this Plan, as adjusted pursuant to Sections 2 and 18, and any successor
security.

 

“Subsidiary” means any corporation (other than the Company) in an unbroken chain
of corporations beginning with the Company if each of the corporations other
than the last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

 

“Termination” or “Terminated” means, for purposes of this Plan with respect to a
Participant, that the Participant has for any reason ceased to provide services
as an employee, officer, director, consultant, independent contractor, or
advisor to the Company or a Parent or Subsidiary of the Company.  An employee
will not be deemed to have ceased to provide services in the case of (i) sick
leave, (ii) military leave, or (iii) any other leave of absence approved by the
Committee, provided, that such leave is for a period of not more than 90 days,
unless reemployment upon the expiration of such leave is guaranteed by contract
or statute or unless provided otherwise pursuant to formal policy adopted from
time to time by the Company and issued and promulgated to employees in writing. 
In the case of any employee on an approved leave of absence, the Committee may
make such provisions respecting suspension of vesting of the Award while on
leave from the employ of the Company or a Subsidiary as it may deem appropriate,
except that in no event may an Option be exercised after the expiration of the
term set forth in the Option agreement.  The Committee will have sole discretion
to determine whether a Participant has ceased to provide services and the
effective date on which the Participant ceased to provide services (the
“Termination Date”).

 

18

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“Unvested Shares” means “Unvested Shares” as defined in the Award Agreement.

 

“Vested Shares” means “Vested Shares” as defined in the Award Agreement.

 

19

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[g357372kg05i001.jpg]

 

2002 EQUITY INCENTIVE PLAN

OUTSIDE DIRECTOR STOCK OPTION AGREEMENT

 

FormFactor, Inc., a Delaware corporation (the “Company”), hereby grants an
option (this “Option”) to the Optionee named below (“Optionee”) as of the Date
of Grant set forth below (the “Date of Grant”) pursuant to the Company’s 2002
Equity Incentive Plan, as amended (the “Plan”) and this Stock Option Agreement
(this “Agreement”), which includes the Terms and Conditions (the “Terms and
Conditions”) set forth on Exhibit A hereto. Capitalized terms not defined in
this Agreement have the meaning ascribed to them in the Plan.

 

Name of Optionee:

 

 

 

 

 

Optionee’s Social Security #:

XXX-XX-           

 

 

 

 

Optionee’s Address:

 

 

 

 

 

 

 

 

 

 

 

Grant Number:

 

 

 

 

 

 

 

Date of Grant:

 

 

 

 

 

 

 

Number of Options Granted:

 

 

 

 

 

Option Exercise Price:

$

 

 

Vesting Schedule:

Provided the Optionee renders continuous service to the Company as a Director or
a Consultant (“Service”), the Options will vest and become exercisable in
thirty-six (36) equal monthly installments beginning
                              , such that the Options will vest in full upon
completion of three (3) years of Board service.

 

 

Expiration Date:

 

 

 

 

Type of Option Granted:

Non-Qualified Stock Option

 

The Company has signed this Agreement effective as of the Date of Grant and has
caused it to be executed in duplicate by its duly authorized representative.

 

FORMFACTOR, INC.

 

MARIO RUSCEV
PRESIDENT & CEO

 

1

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Exhibit A

 

STOCK OPTION AGREEMENT

2002 EQUITY INCENTIVE PLAN

TERMS AND CONDITIONS

 

This Option is subject to the following Terms and Conditions and the terms and
conditions of the Plan, which are incorporated herein by reference. This
Agreement and the Plan constitute the entire agreement and understanding of the
Company and the Optionee with respect to this Option and supersede all prior
understandings and agreements with respect to such subject matter. If there is
any discrepancy, conflict or omission between this Agreement and the provisions
of the Plan as interpreted by the Committee, the provisions of the Plan shall
apply.

 

1.   Grant of Option

 

The Company hereby grants to Optionee this Option to purchase up to the total
number of shares of Common Stock of the Company (the “Shares”) at the Exercise
Price Per Share (the “Exercise Price”), each as set forth on the first page of
this Agreement, subject to the terms and conditions of this Agreement and the
Plan.

 

2.   Exercise Period

 

2.1  Vesting of Shares.  This Option is exercisable as it vests.  Subject to the
terms and conditions of the Plan and this Agreement, this Option shall vest and
become exercisable as set forth on the first page of this Agreement if Optionee
has continuously served as a director and/or consultant of the Company.

 

2.2  Acceleration of Vesting Upon a Corporate Transaction.  In the event of a
Corporate Transaction (as defined in the Plan) the Shares shall vest and become
exercisable upon the terms and conditions of Section 9.5 of the Plan.

 

2.3  Acceleration of Vesting on Death or Disability.  In the event Optionee
ceases to be either a member of the Board of Directors of the Company or a
consultant to the Company (“Board Member”) as a result of his or her death or
“permanent and total disability,” as such term is defined in Section 22(e)(3) of
the Code, then the Option and Shares subject to the Option shall become vested
and exercisable as to an additional number of Shares equal to the number of
Shares that would have vested and become exercisable during the twelve (12)
months following the date on which Optionee ceases to be a Board Member; 
provided, however, such vested Option may be exercised no later than twelve (12)
months after the date Optionee ceases to be a Board Member, but in any event no
later than the Expiration Date.  The date on which Optionee ceases to be a Board
Member shall be referred to as the “Termination Date”

 

2.4  Expiration.  This Option expires on the Expiration Date set forth on the
first page of this Agreement and must be exercised, if at all, on or before the
earlier of the Expiration Date or the date on which this Option is terminated in
accordance with the provisions of this Section 2, Section 3 of this Agreement or
Section 9 of the Plan.

 

3.   Termination

 

3.1  Termination for Any Reason Except Death or Disability.  If Optionee ceases
to be a Board Member for any reason except Optionee’s death or Disability (as
such terms are defined in the Plan), then this Option, to the extent (and only
to the extent) that it is vested on the Termination Date in accordance with the
schedule set forth on the first page of this Agreement, may be exercised by
Optionee during the

 

2

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three (3) months following the Termination Date, but in any event must be
exercised no later than the Expiration Date.

 

3.2  Termination Because of Death or Disability.  If Optionee ceases to be a
Board Member due to Optionee’s death or Disability (or Optionee dies within
three (3) months after Optionee ceases to be a Board Member for any reason
except Optionee’s Disability), then this Option, to the extent (and only to the
extent) that it is vested on the Termination Date in accordance with
Section 2.3, may be exercised by Optionee (or Optionee’s legal representative or
authorized assignee) during the twelve (12) months following the Termination
Date, but in any event must be exercised no later than the Expiration Date.

 

3.3  No Obligation or Right to Continue as Board Member.  Nothing in the Plan or
this Agreement confers on Optionee any right or obligation to continue as a
Board Member or in any other relationship with the Company or any Parent or
Subsidiary of the Company (or any successor-in-interest to the Company), or
limits in any way the right of the Company or any Parent or Subsidiary of the
Company to terminate Optionee’s service or other relationship at any time, with
or without Cause.

 

4.   Manner of Exercise

 

4.1   Method of Payment.  In order to exercise this Option with respect to all
or any part of the Shares for which this Option is at the time exercisable,
Optionee (or any other person or persons exercising the Option) must take the
following actions:

 

a.     Pay the aggregate Exercise Price and taxes, as applicable, for the
purchased Shares in one or more of the following forms:

 

i.   cash or check which, in the Company’s sole discretion, shall be made
payable to a Company-designated brokerage firm or the Company; or

 

ii.  as permitted by applicable law, through a special sale and remittance
procedure pursuant to which Optionee (or any other person or persons exercising
the Option) shall concurrently provide irrevocable instructions (i) to a
Company-designated brokerage firm (or in the case of an executive officer or
Board member of the Company, an Optionee-designated brokerage firm) to effect
the immediate sale of all or any part of the purchased Shares and remit to the
Company, out of the sale proceeds available on the settlement date, sufficient
funds to cover the aggregate Exercise Price payable for the purchased Shares,
plus, if applicable, the amount necessary to satisfy the Company’s tax
withholding obligations at the minimum statutory tax withholding rates and
(ii) to the Company to deliver the purchased Shares directly to such brokerage
firm in order to complete the sale transaction; or

 

iii. shares of the Company’s common stock held by Optionee (or any other person
or persons exercising the Option) valued at Fair Market Value.

 

b.     Furnish to the Company appropriate documentation that the person or
persons exercising the Option (if other than Optionee) have the right to
exercise this Option.

 

c.     Make appropriate arrangements with the Company (or Parent or Subsidiary
employing or retaining Optionee) for the satisfaction of all tax withholding
requirements applicable to the Option exercise.

 

4.2   Limitations on Exercise.  This Option may not be exercised (a) unless such
exercise is in compliance with all applicable federal and state securities laws
and with all applicable requirements of

 

3

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any stock exchange on which the Company’s Common Stock may be listed at the time
of such issuance and (b) as to fewer than 100 Shares unless it is exercised as
to all Shares as to which this Option is then exercisable.  The Company is under
no obligation to register or qualify the Shares with the SEC, any state
securities commission or any stock exchange to effect such compliance.  In no
event may this Option be exercised for any fractional Shares.

 

4.3   Issuance of Shares.  As soon as practical after the exercise date, the
Company shall issue to or on behalf of Optionee (or any other person or persons
exercising this Option) the purchased Option Shares (as evidenced by an
appropriate entry on the books of the Company or a duly authorized transfer
agent of the Company), subject to the appropriate legends and/or stop transfer
instructions.

 

5.   Nontransferability of Option and Shares

 

This Option may not be transferred in any manner other than under the terms and
conditions of the Plan or by will or by the laws of descent and distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
this Option shall be binding upon the legal representatives and authorized
executors and assignees of Optionee.

 

6.   Tax Consequences

 

Optionee should refer to the prospectus for the Plan for a description of the
federal tax consequences of exercising this Option and disposing of the Shares.
A copy of the Prospectus is available at the Human Resources/Benefits page of
the Company’s internal website, or upon request from the Company’s Stock
Administrator.

 

7.   Privileges of Stock Ownership

 

Optionee shall not have any of the rights of a stockholder with respect to any
Shares until the Shares are issued to Optionee.

 

8.   Notices

 

Any notice required to be given or delivered to the Company under the terms of
this Agreement shall be in writing and addressed to the Corporate Secretary of
the Company at its principal corporate offices. Any notice required to be given
or delivered to Optionee shall be in writing and addressed to Optionee at the
address indicated on the first page of this Agreement or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: personal delivery;
three (3) days after deposit in the United States mail by certified or
registered mail (return receipt requested); one (1) business day after deposit
with any return receipt express courier (prepaid); or one (1) business day after
transmission by facsimile or email.

 

9.   Successors and Assigns

 

The Company may assign any of its rights under this Agreement. This Agreement
shall be binding upon and inure to the benefit of the successors and assigns of
the Company. Subject to the restrictions on transfer set forth herein, this
Agreement shall be binding upon Optionee and Optionee’s legal representatives
and authorized assignees.

 

10.   Further Instruments

 

The parties agree to execute such further instruments and to take such further
action as may be reasonably necessary to carry out the purposes and intent of
this Agreement.

 

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11.   Governing Law

 

This Agreement shall be governed by and construed in accordance with the
internal laws of the State of California, without regard to that body of law
pertaining to choice of law or conflicts of law.

 

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[GENERAL]

STOCK OPTION AGREEMENT

2002 EQUITY INCENTIVE PLAN

TERMS AND CONDITIONS

 

This Option is subject to the following Terms and Conditions and the terms and
conditions of the Plan, which are incorporated herein by reference. This
Agreement and the Plan constitute the entire agreement and understanding of the
Company and the Optionee with respect to this Option and supersede all prior
understandings and agreements with respect to such subject matter.  If there is
any discrepancy, conflict or omission between this Agreement and the provisions
of the Plan as interpreted by the Committee, the provisions of the Plan shall
apply.

 

1.                                       Grant of Option

 

The Company hereby grants to Optionee this Option to purchase up to the total
number of shares of Common Stock of the Company (the “Shares”) at the Exercise
Price Per Share (the “Exercise Price”), each as set forth on the first page of
this Agreement, subject to the terms and conditions of this Agreement and the
Plan.  If designated as an Incentive Stock Option, this Option is intended to
qualify to the extent permitted as an “incentive stock option” (“ISO”) within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
“Code”).

 

2.                                       Exercise Period

 

2.1       Vesting of Shares.  This Option is exercisable as it vests.  Subject
to the terms and conditions of the Plan and this Agreement, this Option shall
vest and become exercisable as set forth on the first page of this Agreement if
Optionee has continuously provided services to the Company, or any Parent or
Subsidiary of the Company.

 

2.2       Acceleration of Vesting in Certain Circumstances Following a Corporate
Transaction.  In addition to the vesting provided herein, the Option and Shares
subject to this Option shall become vested and exercisable immediately prior to
the occurrence of a Non-Justifiable Termination (as defined below) occurring
during the period beginning on the date of consummation of a Corporate
Transaction (as defined in the Plan) and ending twelve (12) months thereafter,
as to an additional number of Shares equal to the number of Shares that would
have vested and become exercisable during the twelve (12) months following the
date of such Non-Justifiable Termination (which accelerated vesting and
exercisability is referred to herein as the “Corporate Transaction Vesting”). 
“Non-Justifiable Termination” means any Termination by the Company, or any
Parent or Subsidiary of the Company or the successor-in-interest to the Company
following a Corporate Transaction, other than for Cause (as defined below). 
“Cause” (for purposes of this paragraph only) means (i) any willful
participation by Optionee in acts of either material fraud or material
dishonesty against the Company or any Subsidiary or Parent of the Company or the
successor-in-interest to the Company following a Corporate Transaction; (ii) any
indictment or conviction of Optionee of any felony (excluding drunk driving);
(iii) any willful act of gross misconduct by Optionee which is materially and
demonstrably injurious to the Company or any Subsidiary or Parent of the Company
or the successor-in-interest to the Company following a Corporate Transaction;
or (iv) the death or Disability of Optionee.  Notwithstanding anything to the
contrary set forth in this Agreement, if a Corporate Transaction Vesting occurs
by reason of a Non-Justifiable Termination, then this Option may be exercised by
Optionee up to, but no later than, three (3) months after the date of such
Non-Justifiable Termination, but in any event no later than the Expiration Date.

 

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2.3       Acceleration of Vesting on Death or Disability.  In the event of
Termination of Optionee as a result of his or her death or “permanent and total
disability,” as such term is defined in Section 22(e)(3) of the Code, then, in
addition to the vesting provided herein, the Option and Shares subject to the
Option shall become vested and exercisable as to an additional number of Shares
equal to the number of Shares that would have vested and become exercisable
during the twelve (12) months following the Termination Date of Optionee;
provided, however, such vested Option may be exercised no later than twelve (12)
months after the Termination Date, but in any event no later than the Expiration
Date.

 

2.4       Expiration.  This Option expires on the Expiration Date set forth on
the first page of this Agreement and must be exercised, if at all, on or before
the earlier of the Expiration Date or the date on which this Option is
terminated in accordance with the provisions of this Section 2, Section 3 of
this Agreement or Section 18 of the Plan.

 

2.5       Additional Terms Applicable to Incentive Stock Options.  In the event
this Option is designated an ISO on the first page of this Agreement, the
following terms and conditions shall also apply to the Option:

 

a.               This Option shall cease to qualify for favorable tax treatment
as an ISO if (and to the extent) this Option is exercised for one or more Option
Shares: (i) more than three (3) months after the date Optionee ceases to be
employed by the Company for any reason other than death or Disability or
(ii) more than twelve (12) months after the date Optionee ceases to be employed
by the Company by reason of Disability.

 

b.              If Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (i) the date two
(2) years after the Date of Grant, and (ii) the date one (1) year after transfer
of such Shares to Optionee upon exercise of this Option, then Optionee shall
immediately notify the Company in writing of such disposition.

 

3.                                       Termination

 

3.1       Termination for Any Reason Except Death, Disability or Cause.  If
Optionee is Terminated for any reason except Optionee’s death, Disability or
Cause (as such terms are defined in the Plan), then this Option, to the extent
(and only to the extent) that it is vested on the Termination Date in accordance
with the schedule set forth on the first page of this Agreement, may be
exercised by Optionee during the three (3) months following the Termination
Date, but in any event must be exercised no later than the Expiration Date.

 

3.2       Termination Because of Death or Disability. If Optionee is Terminated
because of Optionee’s death or Disability (or Optionee dies within three
(3) months after Termination for any reason except Cause or Disability), then
this Option, to the extent (and only to the extent) that it is vested on the
Termination Date in accordance with the schedule set forth on the first page of
this Agreement, may be exercised by Optionee (or Optionee’s legal representative
or authorized assignee) during the twelve (12) months following the Termination
Date, but in any event must be exercised no later than the Expiration Date.  Any
exercise occurring more than three months following the Termination Date (when
the Termination is for any reason other than Optionee’s death or disability (as
defined in the Code)), shall be deemed to be the exercise of a nonqualified
stock option.

 

3.3       Termination for Cause.  If Optionee is Terminated for Cause, then this
Option, to the extent (and only to the extent) that it is vested on the
Termination Date in accordance with the schedule set forth on the first page of
this Agreement, may be exercised by Optionee no later than one (1) month after
the Termination Date, but in any event must be exercised no later than the
Expiration Date.

 

2

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3.4       No Obligation to Employ.  Nothing in the Plan or this Agreement
confers on Optionee any right to continue in the employ of, or other
relationship with, the Company or any Parent or Subsidiary of the Company (or
any successor-in-interest to the Company), or limits in any way the right of the
Company or any Parent or Subsidiary of the Company to terminate Optionee’s
employment or other relationship at any time, with or without Cause.

 

4.                                       Manner of Exercise

 

4.1       Method of Payment.  In order to exercise this Option with respect to
all or any part of the Shares for which this Option is at the time exercisable,
Optionee (or any other person or persons exercising the Option) must take the
following actions:

 

a.               Pay the aggregate Exercise Price  for the purchased Shares in
one or more of the following forms:

 

i.      cash or check which, in the Company’s sole discretion, shall be made
payable to a Company-designated brokerage firm or the Company;

 

ii.   as permitted by applicable law, through a special sale and remittance
procedure pursuant to which Optionee (or any other person or persons exercising
the Option) shall concurrently provide irrevocable written instructions (i) to a
Company-designated brokerage firm (or in the case of an executive officer or
Board member of the Company, an Optionee-designated brokerage firm) to effect
the immediate sale of the purchased Shares and remit to the Company, out of the
sale proceeds available on the settlement date, sufficient funds to cover the
aggregate Exercise Price payable for the purchased Shares, plus, if applicable,
the amount necessary to satisfy the Company’s tax withholding obligations at the
minimum statutory tax withholding rates and (ii) to the Company to deliver the
certificates for the purchased Shares directly to such brokerage firm in order
to complete the sale transaction; or

 

iii. shares of the Company’s common stock held by Optionee (or any other person
or persons exercising the Option) valued at Fair Market Value.

 

b.              Furnish to the Company appropriate documentation that the person
or persons exercising the Option (if other than Optionee) have the right to
exercise this Option.

 

c.               Make appropriate arrangement with the Company (or Parent or
Subsidiary employing or retaining Optionee) for the satisfaction of all tax
withholding requirements applicable to the Option exercise.

 

4.2       Limitations on Exercise.  This Option may not be exercised (a) unless
such exercise is in compliance with all applicable federal and state securities
laws and with all applicable requirements of any stock exchange on which the
Company’s Common Stock may be listed at the time of such issuance and (b) as to
fewer than 100 Shares unless it is exercised as to all Shares as to which this
Option is then exercisable.  The Company is under no obligation to register or
qualify the Shares with the SEC, any state securities commission or any stock
exchange to effect such compliance.  In no event may this Option be exercised
for any fractional Shares.

 

4.3       Issuance of Shares.  As soon as practical after the exercise date, the
Company shall issue to or on behalf of Optionee (or any other person or persons
exercising this Option) the purchased Option Shares (as evidenced by an
appropriate entry on the books of the Company or a duly authorized transfer
agent of the Company), subject to the appropriate legends and/or stop transfer
instructions.

 

3

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4.4           Optionee Indebtedness.  Notwithstanding any other provisions of
the Plan, this Agreement or any other agreement to the contrary, if at the time
this Option is exercised, Optionee is indebted to the Company (or any Parent or
Subsidiary) for any reason, the following actions shall be taken, as deemed
appropriate by the Committee:

 

a.               any Shares to be issued upon such exercise shall automatically
be pledged against Optionee’s outstanding indebtedness; and

 

b.              if this Option is exercised in accordance with subparagraph
4.1(a)(ii) above, the after tax proceeds of the sale of Optionee’s Shares shall
automatically be applied to the outstanding balance of Optionee’s indebtedness.

 

5.                                       Nontransferability of Option and Shares

 

This Option may not be transferred in any manner other than under the terms and
conditions of the Plan or by will or by the laws of descent and distribution and
may be exercised during the lifetime of Optionee only by Optionee.  The terms of
this Option shall be binding upon the legal representatives and authorized
executors and assignees of Optionee.

 

6.                                       Tax Consequences

 

Optionee should refer to the prospectus for the Plan for a description of the
federal tax consequences of exercising this Option and disposing of the Shares. 
A copy of the Prospectus is available at the Finance/Stock Administration
page of the Company’s internal website, or upon request from the Company’s Stock
Administrator.

 

7.                                       Privileges of Stock Ownership

 

Optionee shall not have any of the rights of a stockholder with respect to any
Shares until the Shares are issued to Optionee.

 

8.                                       Notices

 

Any notice required to be given or delivered to the Company under the terms of
this Agreement shall be in writing and addressed to the Corporate Secretary of
the Company at its principal corporate offices.  Any notice required to be given
or delivered to Optionee shall be in writing and addressed to Optionee at the
address indicated on the first page of this Agreement or to such other address
as such party may designate in writing from time to time to the Company.  All
notices shall be deemed to have been given or delivered upon:  personal
delivery; three (3) days after deposit in the United States mail by certified or
registered mail (return receipt requested); one (1) business day after deposit
with any return receipt express courier (prepaid); or one (1) business day after
transmission by facsimile or email.

 

9.                                       Successors and Assigns

 

The Company may assign any of its rights under this Agreement.  This Agreement
shall be binding upon and inure to the benefit of the successors and assigns of
the Company.  Subject to the restrictions on transfer set forth herein, this
Agreement shall be binding upon Optionee and Optionee’s legal representatives
and authorized assignees.

 

4

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10.                                 Further Instruments

 

The parties agree to execute such further instruments and to take such further
action as may be reasonably necessary to carry out the purposes and intent of
this Agreement.

 

11.                                 Governing Law

 

This Agreement shall be governed by and construed in accordance with the
internal laws of the State of California, without regard to that body of law
pertaining to choice of law or conflicts of law.

 

5

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[GENERAL]

 

[g357372kg13i001.gif]

 

 

FORMFACTOR, INC.

2002 EQUITY INCENTIVE PLAN

RESTRICTED STOCK UNIT AGREEMENT

TERMS AND CONDITIONS

 

This Award is subject to the following Terms and Conditions and the terms and
conditions of the Plan, which are incorporated herein by reference. The
Participant and the Company agree to execute such further instruments and to
take such further action as may reasonably be necessary to carry out the intent
of this Restricted Stock Unit Agreement (the “Agreement”).

 

This Agreement and the Plan constitute the entire agreement and understanding of
the Company and the Participant with respect to this Award and supersede all
prior understandings and agreements with respect to such subject matter. If
there is any discrepancy, conflict or omission between this Agreement and the
provisions of the Plan as interpreted by the Committee, the provisions of the
Plan shall apply. Capitalized terms not defined in this Agreement have the
meaning ascribed to them in the Plan.

 

1.                                       EFFECT OF TERMINATION OF EMPLOYMENT. If
the Participant’s employment is terminated by the Participant or by the Company
before an applicable vesting date for any reason, all of the Restricted Stock
Units (“RSUs”) which have not yet vested shall be forfeited without
consideration.

 

2.                                       SETTLEMENT. In accordance with the
Plan, to the extent an RSU becomes vested, and subject to the Participant’s
satisfaction of any tax withholding obligations as discussed below, each vested
RSU will be settled in Shares on the applicable vesting date(s) (or the first
market trading day during an open trading window thereafter if the vesting date
is not on a market trading day during an open trading window) in exchange for
such RSU. Issuance of Shares shall be in complete satisfaction of such vested
RSUs. Such settled RSUs shall be immediately cancelled and no longer outstanding
and you shall have no further rights or entitlements related to those settled
RSUs.

 

3.                                       RESTRICTIONS ON ISSUANCE. The Company
will not issue any Shares if the issuance of such Shares at that time would
violate any law or regulation.

 

4.                                       TAX WITHHOLDING OBLIGATIONS. The
Participant shall satisfy his or her withholding tax obligations, but no more
than the minimum statutory withholding amounts, in such a manner determined by
the Committee in its sole discretion which may include the withholding or
selling all or a portion of any Shares that otherwise would be issued to the
Participant.

 

5.                                       TAX ADVICE. The Participant represents,
warrants and acknowledges that the Company has made no warranties or
representations to the Participant with respect to the income tax consequences
of the transactions contemplated by this Agreement, and the Participant is in no
manner relying on the Company or the Company’s representatives for an assessment
of such tax consequences. THE PARTICIPANT UNDERSTANDS THAT THE TAX LAWS AND
REGULATIONS ARE SUBJECT TO CHANGE. THE PARTICIPANT SHOULD CONSULT HIS OR HER OWN
TAX ADVISOR REGARDING ANY RESTRICTED STOCK UNITS. NOTHING STATED HEREIN IS

 

1

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INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING
TAXPAYER PENALTIES.

 

6.                                       NON-TRANSFERABILITY. The RSUs may not
be anticipated, assigned, attached, garnished, optioned, transferred or made
subject to any creditor’s process, whether voluntarily or involuntarily or by
operation of law other than under the terms and conditions of the Plan. The
terms of the RSUs shall be binding upon the legal representatives and authorized
executors and assignees of Participant.

 

7.                                       RESTRICTION OF TRANSFER. Regardless of
whether the transfer or issuance of the Shares to be issued pursuant to the
vesting of RSUs has been registered under the Securities Act or has been
registered or qualified under the securities laws of any state, the Company may
impose additional restrictions upon the sale, pledge, or other transfer of the
Shares (including the placement of appropriate legends on stock certificates and
the issuance of stop-transfer instructions to the Company’s transfer agent) if,
in the judgment of the Company and the Company’s counsel, such restrictions are
necessary in order to achieve compliance with the provisions of the Securities
Act, the securities laws of any state, or any other law.

 

8.                                       RIGHTS AS SHAREHOLDER. The Participant
holding RSUs shall have no rights other than those of a general creditor of the
Company. Subject to the terms of this Agreement, the Participant holding
outstanding RSUs has none of the rights and privileges of a shareholder of the
Company, including no right to vote or to receive dividends (if any). Subject to
the terms and conditions of this Agreement, RSUs create no fiduciary duty of the
Company to the Participant and only represent an unfunded and unsecured
contractual obligation of the Company. The RSUs shall not be treated as property
or as a trust fund of any kind.

 

9.                                       ADMINISTRATION. The Committee shall
have the power to interpret the Plan and this Agreement and to adopt such
rules for the administration, interpretation, and application of the Plan as are
consistent therewith and to interpret or revoke any such rules. All actions
taken and all interpretations and determinations made by the Committee shall be
final and binding upon the Participant, the Company, and all other interested
persons. No member of the Committee shall be personally liable for any action,
determination, or interpretation made in good faith with respect to the Plan or
this Agreement.

 

10.                                 EFFECT ON OTHER EMPLOYEE BENEFIT PLANS. The
value of the RSUs awarded pursuant to this Agreement shall not be included as
compensation, earnings, salaries, or other similar terms used when calculating
the Participant’s benefits under any employee benefit plan sponsored by the
Company except as such plan otherwise expressly provides. The Company expressly
reserves its rights to amend, modify, or terminate any of the Company’s employee
benefit plans.

 

2

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11.                                 NO EMPLOYMENT RIGHTS. The award of the RSUs
pursuant to this Agreement shall not give the Participant any right to remain
employed by the Company or a Subsidiary. The Participant agrees that the
Participants rights hereunder shall be subject to set-off by the Company for any
valid debts the Participant owes the Company.

 

12.                                 NOTICES. Any notice to be given under the
terms of this Agreement to the Company shall be addressed to the Company in care
of its Secretary. Any notice to be given to the Participant shall be addressed
to the Participant at the address listed in the employer’s records. By a notice
given pursuant to this Section, either party may designate a different address
for notices. Any notice shall have been deemed given when actually delivered.

 

13.                                 SEVERABILITY. If all or any part of this
Agreement or the Plan is declared by any court or governmental authority to be
unlawful or invalid, such unlawfulness or invalidity shall not invalidate any
portion of this Agreement or the Plan not declared to be unlawful or invalid.
Any Section of this Agreement (or part of such a Section) so declared to be
unlawful or invalid shall, if possible, be construed in a manner which will give
effect to the terms of such Section or part of a Section to the fullest extent
possible while remaining lawful and valid.

 

14.                                 CONSTRUCTION. The RSUs are being issued
pursuant to the Plan and are subject to the terms of the Plan. A copy of the
Plan has been made available to the Participant, and additional copies of the
Plan are available upon request during normal business hours at the principal
executive offices of the Company. To the extent that any provision of this
Agreement violates or is inconsistent with an express provision of the Plan, the
Plan provision shall govern and any inconsistent provision in this Agreement
shall be of no force or effect.

 

15.                                 ADJUSTMENTS. In the event of a stock split,
a stock dividend or a similar change in the Company stock, the number of
outstanding RSUs covered under this Agreement may be adjusted pursuant to the
Plan.

 

16.                                 LIABILITY. The Company (or members of the
Board or Committee) shall not be liable to the Participant or other persons as
to: (i) the non-issuance or sale of Shares as to which the Company has been
unable to obtain from any regulatory body having jurisdiction the authority
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder; and (ii) any unexpected or adverse tax consequence
realized by the Participant or other person due to the award, receipt, or
settlement of RSUs or Shares under this Agreement.

 

17.                                 MISCELLANEOUS.

 

17.1                           This Agreement shall be subject to all applicable
laws, rules, and regulations, and to such approvals by any governmental agencies
or national securities exchanges as may be required.

 

17.2                           The Company may assign any of its rights under
this Agreement. This Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the Company. Subject to the restrictions on
transfer set forth herein, this Agreement shall be binding upon the Participant
and Participant’s legal representatives and authorized assignees.

 

17.3                           To the extent not preempted by federal law, this
Agreement shall be governed by, and construed in accordance with, the laws of
the State of California.

 

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[g357372kg13i002.jpg]

 

2002 EQUITY INCENTIVE PLAN

OUTSIDE DIRECTOR RESTRICED STOCK UNIT AGREEMENT

(OUTSIDE DIRECTOR *[INITIAL] OR [ANNUAL] EQUITY AWARD)

 

FormFactor, Inc., a Delaware corporation (the “Company”), hereby awards
Restricted Stock Units (“RSUs”) to the Participant named below as of the Date of
Award set forth below pursuant to the Company’s 2002 Equity Incentive Plan, as
amended (the “Plan”). The terms and conditions of the Award are set forth in
this cover sheet, in the attached Restricted Stock Unit Agreement (the
“Agreement”) and in the Plan. Capitalized terms not defined in this Agreement
have the meaning ascribed to them in the Plan.

 

Name of Participant:

 

 

 

 

 

 

 

Participant’s Social Security:

 

XXX-XX-       

 

 

 

 

 

Participant’s Address:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Award Number:

 

 

 

 

 

 

 

 

 

Date of Award:

 

 

 

 

 

 

 

 

Number of Restricted Stock Units Awarded:

 

 

 

 

 

 

 

 

Amount Paid by Participant for the RSUs Awarded:

 

$0.001

 

 

 

 

 

Vesting Schedule:

 

Provided the Participant renders continuous service to the Company as a Director
or a Consultant (“Service”), the RSUs will vest in [thirty-six (36)] OR [twelve
(12)]* equal monthly installments beginning                             , such
that the RSUs will vest in full upon completion of [three (3) years] OR [one (1)
year]* of Board Service.

 

The Company has signed this Agreement effective as of the Date of Award and has
caused it to be executed in duplicate by its duly authorized representative.

 

FORMFACTOR, INC.

 

MARIO RUSCEV

PRESIDENT & CEO

 

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* Select one depending whether initial or annual equity award.

 

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[g357372kg13i002.jpg]

 

FORMFACTOR, INC.

2002 EQUITY INCENTIVE PLAN

OUTSIDE DIRECTOR RESTRICTED STOCK UNIT AGREEMENT

TERMS AND CONDITIONS

 

This Award is subject to the following Terms and Conditions and the terms and
conditions of the Plan, which are incorporated herein by reference. The
Participant and the Company agree to execute such further instruments and to
take such further action as may reasonably be necessary to carry out the intent
of this Agreement.

 

This Agreement, the Plan and the preceding cover sheet constitute the entire
agreement and understanding of the Company and the Participant with respect to
this Award and supersede all prior understandings and agreements with respect to
such subject matter. If there is any discrepancy, conflict or omission between
this Agreement and the provisions of the Plan as interpreted by the Committee,
the provisions of the Plan shall apply.

 

1.                                       EFFECT OF TERMINATION OF SERVICE. If
the Participant’s Service is terminated by the Participant or by the Company
before an applicable vesting date for any reason, all of the RSUs which have not
yet vested shall be forfeited without consideration.

 

2.                                       SETTLEMENT. To the extent an RSU
becomes vested and the Participant has not elected to defer settlement of the
RSU, each vested RSU will be settled in Shares in exchange for such RSU on the
earlier of: (i) the date on which the RSUs subject to this Agreement are fully
vested, or (ii) the Participant’s separation from service within the meaning of
Code Section 409A (“Separation from Service”) (or the first market trading day
during an open trading window thereafter if either the date on which the RSUs
subject to this Agreement are fully vested or the Participant’s Separation from
Service is not on a market trading day during an open trading window).  To the
extent an RSU becomes vested and the Participant has elected to defer settlement
of the RSU, each vested RSU will be settled in Shares upon the Participant’s
Separation from Service (or the first market trading day during an open trading
window thereafter if the Participant’s Separation from Service is not on a
market trading day during an open trading window) in exchange for such RSU. 
Issuance of Shares shall be in complete satisfaction of such vested RSUs. Such
settled RSUs shall be immediately cancelled and no longer outstanding and you
shall have no further rights or entitlements related to those settled RSUs.
Notwithstanding the foregoing, to extent the RSUs are settled upon the
Participant’s Separation from Service, such settlement shall be delayed to the
extent required under Code Section 409A, until the Company’s first business day
following the six-month anniversary of his or her Separation from Service.

 

3.                                       RESTRICTIONS ON ISSUANCE. The Company
will not issue any Shares if the issuance of such Shares at that time would
violate any law or regulation.

 

4.                                       TAX ADVICE. The Participant represents,
warrants and acknowledges that the Company has made no warranties or
representations to the Participant with respect to the income tax consequences
of the transactions contemplated by this Agreement, and the Participant is in no
manner relying on the Company or the Company’s representatives for an assessment
of such tax consequences. THE PARTICIPANT UNDERSTANDS THAT THE TAX LAWS AND
REGULATIONS ARE SUBJECT TO CHANGE. THE PARTICIPANT SHOULD CONSULT HIS OR HER OWN
TAX ADVISOR REGARDING ANY RESTRICTED STOCK UNITS. NOTHING STATED HEREIN IS
INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING
TAXPAYER PENALTIES.

 

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5.                                       NON-TRANSFERABILITY. The RSUs may not
be anticipated, assigned, attached, garnished, optioned, transferred or made
subject to any creditor’s process, whether voluntarily or involuntarily or by
operation of law other than under the terms and conditions of the Plan. The
terms of the RSUs shall be binding upon the legal representatives and authorized
executors and assignees of Participant.

 

6.                                       RESTRICTION OF TRANSFER. Regardless of
whether the transfer or issuance of the Shares to be issued pursuant to the
vesting of RSUs has been registered under the Securities Act or has been
registered or qualified under the securities laws of any state, the Company may
impose additional restrictions upon the sale, pledge, or other transfer of the
Shares (including the placement of appropriate legends on stock certificates and
the issuance of stop-transfer instructions to the Company’s transfer agent) if,
in the judgment of the Company and the Company’s counsel, such restrictions are
necessary in order to achieve compliance with the provisions of the Securities
Act, the securities laws of any state, or any other law.

 

7.                                       RIGHTS AS SHAREHOLDER. The Participant
holding RSUs shall have no rights other than those of a general creditor of the
Company. Subject to the terms of this Agreement, the Participant holding
outstanding RSUs has none of the rights and privileges of a shareholder of the
Company, including no right to vote or to receive dividends (if any). Subject to
the terms and conditions of this Agreement, RSUs create no fiduciary duty of the
Company to the Participant and only represent an unfunded and unsecured
contractual obligation of the Company. The RSUs shall not be treated as property
or as a trust fund of any kind.

 

8.                                       ADMINISTRATION. The Committee shall
have the power to interpret the Plan and this Agreement and to adopt such
rules for the administration, interpretation, and application of the Plan as are
consistent therewith and to interpret or revoke any such rules. All actions
taken and all interpretations and determinations made by the Committee shall be
final and binding upon the Participant, the Company, and all other interested
persons. No member of the Committee shall be personally liable for any action,
determination, or interpretation made in good faith with respect to the Plan or
this Agreement.

 

9.                                       NOTICES. Any notice to be given under
the terms of this Agreement to the Company shall be addressed to the Company in
care of its Secretary. Any notice to be given to the Participant shall be
addressed to the Participant at the address listed in the Company’s records. By
a notice given pursuant to this Section, either party may designate a different
address for notices. Any notice shall have been deemed given when actually
delivered.

 

10.                                 SEVERABILITY. If all or any part of this
Agreement or the Plan is declared by any court or governmental authority to be
unlawful or invalid, such unlawfulness or invalidity shall not invalidate any
portion of this Agreement or the Plan not declared to be unlawful or invalid.
Any Section of this Agreement (or part of such a Section) so declared to be
unlawful or invalid shall, if possible, be construed in a manner which will give
effect to the terms of such Section or part of a Section to the fullest extent
possible while remaining lawful and valid.

 

11.                                 CONSTRUCTION. The RSUs are being issued
pursuant to the Plan and are subject to the terms of the Plan. A copy of the
Plan has been made available to the Participant, and additional copies of the
Plan are available upon request during normal business hours at the principal
executive offices of the Company. To the extent that any provision of this
Agreement violates or is inconsistent with an express provision of the Plan, the
Plan provision shall govern and any inconsistent provision in this Agreement
shall be of no force or effect.

 

12.                                 ADJUSTMENTS. In the event of a stock split,
a stock dividend or a similar change in the Company stock, the number of
outstanding RSUs covered under this Agreement may be adjusted pursuant to the
Plan.

 

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13.                                 LIABILITY. The Company (or members of the
Board or Committee) shall not be liable to the Participant or other persons as
to: (i) the non-issuance or sale of Shares as to which the Company has been
unable to obtain from any regulatory body having jurisdiction the authority
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder; and (ii) any unexpected or adverse tax consequence
realized by the Participant or other person due to the award, receipt, or
settlement of RSUs or Shares under this Agreement.

 

14.                                 MISCELLANEOUS.

 

14.1                           This Agreement shall be subject to all applicable
laws, rules, and regulations, and to such approvals by any governmental agencies
or national securities exchanges as may be required.

 

14.2                           The Company may assign any of its rights under
this Agreement. This Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the Company. Subject to the restrictions on
transfer set forth herein, this Agreement shall be binding upon the Participant
and Participant’s legal representatives and authorized assignees.

 

14.3                           To the extent not preempted by federal law, this
Agreement shall be governed by, and construed in accordance with, the laws of
the State of California.

 

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OUTSIDE DIRECTOR ELECTION UNDER THE
FORMFACTOR, INC. 2002 EQUITY INCENTIVE PLAN
INITIAL EQUITY AWARD

 

I,                                                                 , being a
prospective new non-employee member of the Board of Directors of
FormFactor, Inc. (the “Company”) hereby irrevocably elect to defer the
settlement of the restricted stock unit portion of my initial equity award to be
granted under the 2002 Equity Incentive Plan on [                ], subject to
and following my appointment to the Board of Directors of the Company.

 

I understand that this election will be effective only if received by Hank Feir
([insert e-mail address] (e-mail) or [insert fax number] (fax)) before
[                       ].

 

I understand that if I elect to defer the settlement of my initial restricted
stock unit grant, any vested portion of my stock unit grant will be settled in
shares of the Company’s common stock on, or as soon as practicable after, my
“separation from service” within the meaning of Section 409A of the Internal
Revenue Code (which generally will be the date my service as a member of the
Board of Directors of the Company terminates).  I further understand that my
receipt of shares of the Company’s common stock pursuant to any stock unit grant
will be taxed as ordinary income to me based on the value of the shares on the
date the stock unit grant is settled and I receive shares of the Company’s
common stock.

 

I further understand that the election to defer settlement of the restricted
stock unit portion of my initial equity award is subject to approval of the
Company’s Board of Directors.  If such approval is not obtained, I understand
that this election shall be null and void.

 

 

 

 

 

Signature of Non-Employee Director

 

Date

 

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OUTSIDE DIRECTOR ELECTION UNDER THE
FORMFACTOR, INC. 2002 EQUITY INCENTIVE PLAN
ANNUAL EQUITY AWARD

 

I,                                                                 , being a
non-employee member of the Board of Directors of FormFactor, Inc. (the
“Company”) hereby irrevocably elect to defer the settlement of my total annual
restricted stock unit award to be granted under the 2002 Equity Incentive Plan
(the “Plan”) on [        ] immediately following the Company’s [       ] Annual
Meeting of Stockholders.

 

I understand that this election will be effective only if received by Hank Feir
([insert e-mail address] (e-mail) or [insert fax number] (fax)) before
[                     ].

 

I understand that if I elect to defer the settlement of my annual restricted
stock unit grant, any vested portion of my stock unit grant will be settled in
shares of the Company’s common stock on, or as soon as practicable after, my
“separation from service” within the meaning of Section 409A of the Internal
Revenue Code (which generally will be the date my service as a member of the
Board of Directors of the Company terminates).  I further understand that my
receipt of shares of the Company’s common stock pursuant to any stock unit grant
will be taxed as ordinary income to me based on the value of the shares on the
date the stock unit grant is settled and I receive shares of the Company’s
common stock.

 

I further understand that the election to defer settlement of my total annual
restricted stock unit award is subject to approval of the amended and restated
terms of the Plan by the Company’s Board of Directors providing for the grant of
restricted stock unit awards.  If such approval is not obtained, I understand
that this election shall be null and void.

 

 

 

 

 

Signature of Non-Employee Director

 

Date

 

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NON-EMPLOYEE DIRECTOR ELECTION UNDER
THE FORMFACTOR, INC. 
2002 EQUITY INCENTIVE PLAN
ANNUAL RETAINER

 

I,                                                                 , being a
non-employee member of the Board of Directors (“Board”) of FormFactor, Inc. (the
“Company”) hereby elect to receive (complete either (a) or (b) below:

 

(a)           % (insert percentage between 25% and 100%) of my total regular
annual retainer, including any additional retainer paid in connection with
service on any committee of the Board (the “Retainer”) for the next year of
Board service commencing at the Company’s next Annual Meeting of Stockholders;

 

(b)           $                 (insert dollar amount between 25% and 100% of
Retainer) of my Retainer for the next year of Board service commencing at the
Company’s next Annual Meeting of Stockholders;

 

in the form of (check (i) or (ii) below, as applicable):

 

(i)            a fully vested deferred stock unit grant which will be granted
under the Company’s 2002 Equity Incentive Plan (the “Plan”) on the date the
Retainer is paid based on the closing value of the Company’s common stock
(“Common Stock”) on that date.

 

(ii)           a fully vested stock grant which will be granted under the Plan
on the date the Retainer is paid based on the closing value of the Common Stock
on that date.

 

I understand that I may not elect to receive less than 25% of my Retainer in a
fully vested deferred stock unit grant or a fully vested stock grant.  I further
understand that I will receive my Retainer in the form of cash to the extent
that I do not elect to receive it in the form of a fully vested deferred stock
unit or fully vested stock grant under the Plan.

 

I understand that my Retainer payment and deferral elections above will be
effective only if received by Hank Feir ([insert e-mail address] (e-mail) or
[insert fax number] (fax)) before [                       ].

 

I understand that any fully vested deferred stock unit grant I elect to receive
will be settled in Common Stock on, or as soon as practicable after, my
“separation from service” within the meaning of Section 409A of the Internal
Revenue Code (which generally will be the date my service as a member of the
Board of the Company terminates).  I further understand that my receipt of
Common Stock pursuant to any fully vested deferred stock unit grant will be
taxed as ordinary income to me based on the value on the date of such settlement
and receipt.

 

I understand that, if I elect to receive a fully vested stock grant, I will
receive the Common Stock representing any such fully vested stock grant on, or
as soon as practicable after, the date of the Company’s Annual Meeting of
Stockholders and that my stock grant receipt will be taxed as ordinary income to
me based on the value of such Common Stock on the date of grant.

 

 

 

 

 

Signature of Non-Employee Director

 

Date

 

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