Exhibit 10.1

VERIGY LTD.

2006 EQUITY INCENTIVE PLAN

(AS AMENDED JANUARY 19, 2010)

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TABLE OF CONTENTS

 

          Page ARTICLE 1.    INTRODUCTION    1 ARTICLE 2.    ADMINISTRATION    1
    2.1    Committee Composition    1     2.2    Committee Responsibilities    1
    2.3    Administration with Respect to Substitute Awards    2     2.4   
Minimum Vesting Requirement    2     2.5    Limited Exceptions to Vesting and
Acceleration Limitations    2 ARTICLE 3.    SHARES AVAILABLE FOR GRANTS    3
    3.1    Basic Limitation    3     3.2    Shares Returned to Reserve    3
    3.3    Substitute Awards    3     3.4    Dividend Equivalents    4 ARTICLE
4.    ELIGIBILITY    4     4.1    Incentive Stock Options    4     4.2    Other
Grants    4 ARTICLE 5.    OPTIONS    4     5.1    Option Agreement    4     5.2
   Number of Shares    4     5.3    Exercise Price    4     5.4   
Exercisability and Term    5     5.5    Effect of Change in Control    6     5.6
   Buyout Provisions    6     5.7    Payment for Option Shares    6 ARTICLE 6.
   SHARE APPRECIATION RIGHTS    6     6.1    SAR Agreement    6     6.2   
Number of Shares    6     6.3    Exercise Price    7     6.4    Exercisability
and Term    7     6.5    Effect of Change in Control    8     6.6    Exercise of
SARs    8 ARTICLE 7.    RESTRICTED SHARES    8     7.1    Restricted Share
Agreement    8     7.2    Number of Shares    8     7.3    Payment for Awards   
8     7.4    Restrictions & Conditions    9     7.5    Effect of Change in
Control    9     7.6    Voting and Dividend Rights    9 ARTICLE 8.    SHARE
UNITS    9     8.1    Share Unit Agreement    9     8.2    Number of Shares    9

 

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    8.3    Payment for Awards    9     8.4    Vesting Conditions    9     8.5   
Effect of Change in Control    10     8.6    Voting and Dividend Rights    10
    8.7    Form and Time of Settlement of Share Units    10     8.8   
Creditors’ Rights    11 ARTICLE 9.    AUTOMATIC GRANTS TO OUTSIDE DIRECTORS   
11     9.1    Initial Grants    11     9.2    Annual Grants    11     9.3   
Cessation of Eligibility to Vest    12     9.4    Accelerated Exercisability   
12     9.5    Exercise Price    12     9.6    Term    12     9.7    Affiliates
of Outside Directors    12 ARTICLE 10.    PROTECTION AGAINST DILUTION    12
    10.1    Adjustments    12     10.2    Dissolution or Liquidation    13
    10.3    Reorganizations    13 ARTICLE 11.    PAYMENT OF DIRECTOR’S FEES IN
SECURITIES    14     11.1    Effective Date    14     11.2    Elections to
Receive NSOs, Restricted Shares or Share Units    14     11.3    Number and
Terms of NSOs, Restricted Shares or Share Units    14 ARTICLE 12.    LIMITATION
ON RIGHTS    15     12.1    Retention Rights    15     12.2    Shareholders’
Rights    15     12.3    Regulatory Requirements    15 ARTICLE 13.   
WITHHOLDING TAXES    15     13.1    General    15     13.2    Share Withholding
   15 ARTICLE 14.    LIMITATION ON PAYMENTS    15     14.1    Scope of
Limitation    15     14.2    Basic Rule    16     14.3    Reduction of Payments
   16     14.4    Overpayments and Underpayments    16     14.5    Related
Corporations    17 ARTICLE 15.    FUTURE OF THE PLAN    17     15.1    Term of
the Plan    17     15.2    Amendment or Termination    17     15.3   
Shareholder Approval    17 ARTICLE 16.    DEFINITIONS    17

 

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VERIGY LTD.

2006 EQUITY INCENTIVE PLAN

ARTICLE 1. INTRODUCTION.

The purpose of the Plan is to promote the long-term success of the Company and
the creation of shareholder value by (a) encouraging Employees, Outside
Directors and Consultants to focus on critical long-range objectives,
(b) encouraging the attraction and retention of Employees, Outside Directors and
Consultants with exceptional qualifications and (c) linking Employees, Outside
Directors and Consultants directly to shareholder interests through increased
share ownership. The Plan seeks to achieve this purpose by providing for Awards
in the form of Options (which may constitute ISOs or NSOs), SARs, Restricted
Shares or Share Units.

The Plan shall be governed by, and construed in accordance with, the laws of the
Republic of Singapore (except its choice-of-law provisions).

ARTICLE 2. ADMINISTRATION.

2.1 Committee Composition. The Committee shall administer the Plan. The
Committee shall consist exclusively of two or more directors of the Company, who
shall be appointed by the Board. In addition, each member of the Committee shall
meet the following requirements:

(a) Any listing standards prescribed by the principal securities market on which
the Company’s equity securities are traded;

(b) Such requirements as the Internal Revenue Service may establish for outside
directors acting under plans intended to qualify for exemption under
section 162(m)(4)(C) of the Code;

(c) Such requirements as the Securities and Exchange Commission may establish
for administrators acting under plans intended to qualify for exemption under
Rule 16b-3 (or its successor) under the Exchange Act; and

(d) Any other requirements imposed by applicable law, regulations or rules.

2.2 Committee Responsibilities. The Committee shall (a) select the Employees,
Outside Directors and Consultants who are to receive Awards under the Plan,
(b) determine the type, number, vesting requirements and other features and
conditions of such Awards, (c) interpret the Plan, (d) make all other decisions
relating to the operation of the Plan and (e) carry out any other duties
delegated to it by the Board. The Committee may adopt such rules or guidelines
as it deems appropriate to implement the Plan, including rules and procedures
relating to the operation and administration of the Plan in order to accommodate
the specific requirements of local laws and procedures. Without limiting the
generality of the foregoing, the

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Committee is specifically authorized to adopt (a) rules and procedures regarding
the conversion of local currency, withholding procedures and handling of stock
certificates that vary with local requirements and (b) such sub-plans and Plan
addenda as the Committee deems desirable to accommodate foreign tax laws,
regulations and practice. The Committee’s determinations under the Plan shall be
final and binding on all persons.

2.3 Administration with Respect to Substitute Awards. Notwithstanding any other
provision of this Plan, in connection with issuing Substitute Awards, the
Committee may provide that the Substitute Awards shall be subject to the terms
and conditions of the plan and/or agreements under which the awards being
assumed or substituted were originally issued, even where such terms are in
conflict or inconsistent with the terms of this Plan.

2.4 Minimum Vesting Requirement. All Awards that vest based solely on the
continuation of Service shall vest over a period of not less than three years
and all Awards that vest on the basis of one or more performance criteria set
forth in Appendix A shall vest over a period of not less than one year. This
Section 2.4 shall not apply to the following:

(a) An Award granted prior to December 2, 2009;

(b) An automatic Award to an Outside Director under Article 9; and

(c) Awards falling within the limits on exceptions established by Section 2.5.

2.5 Limited Exceptions to Vesting and Acceleration Limitations. A reserve (the
“Exceptions Share Reserve”) is hereby established equal to the sum of (i) 10% of
the Shares available for issuance under Article 3 as of December 2, 2009, plus
(ii) 10% of any Shares added after December 2, 2009. Up to the Exceptions Share
Reserve, the Committee may:

(a) Issue Awards with vesting periods shorter than the minimum vesting
requirements of Section 2.4;

(b) Accelerate the vesting of Awards in connection with a voluntary severance
incentive program or workforce management plan approved by the Board or a
Committee as provided in Sections 5.4(d), 6.4(d) and 8.4(d); and

(c) Accelerate the Vesting of Restricted Shares in connection with a voluntary
severance incentive program or workforce management plan approved by the Board
or a Committee.

(d) The following additional provisions shall apply:

(i) If Shares subject to an Award that was granted in reliance on
Subsection (a)(i) of this Section 2.5 are returned to the reserve pursuant to
Section 3.2, then the number of Shares subject to such Award shall be added back
to the Exceptions Share Reserve;

(ii) Any acceleration of vesting in connection with a voluntary severance
incentive program or workforce management plan approved by the Board or a
Committee on or before December 2, 2009 shall not be subject to, and any Awards
so accelerated shall not be deducted from, the Exceptions Share Reserve;

 

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(iii) Any acceleration of vesting in connection with a voluntary severance
incentive program or workforce management plan approved by the Board or a
Committee on or after December 2, 2009 where the Awards, at the time of
issuance, provided for partial or full acceleration of vesting in such
circumstances, shall not be subject to, and any Awards so accelerated shall not
be deducted from, the Exceptions Share Reserve; and

(iv) Any acceleration of vesting pursuant to any agreement between the Company
and any Participant that was entered into before December 2, 2009 shall not be
subject to, and any Awards so accelerated shall not be deducted from, the
Exceptions Share Reserve.

ARTICLE 3. SHARES AVAILABLE FOR GRANTS.

3.1 Basic Limitation. Shares issued pursuant to the Plan may be unissued shares
or treasury shares. The aggregate number of Shares issued under the Plan shall
not exceed (a) 13,300,000 plus (b) the additional Shares described in
Section 3.3. The number of Shares that are subject to Awards outstanding at any
time under the Plan shall not exceed the number of Shares that then remain
available for issuance under the Plan. Notwithstanding any other provision of
this Plan, the maximum number of Shares that may be issued upon the exercise of
ISOs under this Plan is 13,300,000. The limitations of this Section 3.1 shall be
subject to adjustment pursuant to Article 10.

3.2 Shares Returned to Reserve. If Options, SARs or Share Units (including
Replacement Awards) are forfeited or terminated for any other reason before
being exercised or settled, then the Shares subject to such Options, SARs or
Share Units shall again become available for issuance under the Plan. If SARs
are exercised, then only the number of Shares (if any) actually issued in
settlement of such SARs shall reduce the number available under Section 3.1 and
the balance shall again become available for issuance under the Plan. If Share
Units are settled, then only the number of Shares (if any) actually issued in
settlement of such Share Units shall reduce the number available under
Section 3.1 and the balance shall again become available for issuance under the
Plan.

3.3 Substitute Awards. Except with respect to Substitute Awards issued with
respect to awards previously issued by Agilent Technologies, Inc., Substitute
Awards shall not reduce the Shares authorized for issuance under the Plan or
authorized for grant to a Participant in any calendar year. Additionally, in the
event that a company acquired by the Company or any Subsidiary, or with which
the Company or any Subsidiary combines, has shares available under a
pre-existing plan approved by shareholders and not adopted in contemplation of
such acquisition or combination, the shares available for grant pursuant to the
terms of such pre-existing plan (as adjusted, to the extent appropriate, using
the exchange ratio or other adjustment or valuation ratio or formula used in
such acquisition or combination to determine the consideration payable to the
holders of ordinary shares or common shares of the entities party to such
acquisition or combination) may be used for Awards under the Plan and shall not
reduce the Shares authorized for issuance under the Plan; provided that Awards
using such available Shares shall not be made

 

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after the date awards or grants could have been made under the terms of the
pre-existing plan, absent the acquisition or combination, and shall only be made
to individuals who were employees, directors or consultants of such acquired or
combined company before such acquisition or combination.

3.4 Dividend Equivalents. Any dividend equivalents paid or credited under the
Plan shall be applied against the number of Shares that may be issued under the
Plan if such dividend equivalents are converted into Share Units.

ARTICLE 4. ELIGIBILITY.

4.1 Incentive Stock Options. Only Employees who are common-law employees of the
Company, a Parent or a Subsidiary shall be eligible for the grant of ISOs. In
addition, an Employee who owns more than 10% of the total combined voting power
of all classes of outstanding shares of the Company or any of its Parents or
Subsidiaries shall not be eligible for the grant of an ISO unless the
requirements set forth in section 422(c)(5) of the Code are satisfied.

4.2 Other Grants. Only Employees, Outside Directors and Consultants shall be
eligible for the grant of Restricted Shares, Share Units, NSOs or SARs.

ARTICLE 5. OPTIONS.

5.1 Option Agreement. Each grant of an Option under the Plan shall be evidenced
by an Option Agreement between the Optionee and the Company. Such Option shall
be subject to all applicable terms of the Plan and may be subject to any other
terms that are not inconsistent with the Plan. The Option Agreement shall
specify whether the Option is an ISO or an NSO. The provisions of the various
Option Agreements entered into under the Plan need not be identical.

5.2 Number of Shares. Each Option Agreement shall specify the number of Shares
subject to the Option and shall provide for the adjustment of such number in
accordance with Article 10. Options granted to any Optionee in a single fiscal
year of the Company shall not cover more than 750,000 Shares, except that
Options granted to a new Employee in the fiscal year of the Company in which his
or her Service as an Employee first commences shall not cover more than
1,500,000 Shares. The limitations set forth in the preceding sentence shall be
subject to adjustment in accordance with Article 10.

5.3 Exercise Price. Each Option Agreement shall specify the Exercise Price;
provided that the Exercise Price shall in no event be less than 100% of the Fair
Market Value of a Share on the Date of Grant. Other than in connection with an
event or transaction described in Article 10, Options may not be repriced,
replaced, regranted through cancellation or modified without shareholder
approval if the effect of such repricing, replacement, regrant or modification
would be to reduce the exercise price of such Options.

 

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5.4 Exercisability and Term.

(a) General. Each Option Agreement shall specify the date or event when all or
any installment of the Option is to become exercisable, subject to Section 2.4.
The Option Agreement shall also specify the term of the Option; provided that
the term of an ISO shall in no event exceed 10 years from the Date of Grant.
Options may be awarded in combination with SARs, and such an Award may provide
that the Options will not be exercisable unless the related SARs are forfeited.

(b) Cessation of Eligibility to Vest. Unless otherwise provided by the Option
Agreement, if an Optionee ceases to be an Awardee Eligible to Vest, other than
as a result of circumstances described in Subsection (c) or (d) below, such
Optionee’s Option shall terminate immediately as to the unvested Shares and such
unvested Shares shall revert to the Plan, and such Optionee’s Option shall be
exercisable as to the vested Shares for three months after the date such
individual ceases to be an Awardee Eligible to Vest or, if earlier, the
expiration of the term of such Option. If, for any reason, the Optionee does not
exercise his or her vested Option within the appropriate exercise period set
forth above, the Option shall automatically terminate, and the Shares covered by
such Option shall revert to the Plan.

(c) Death, Disability or Retirement of Optionee. Unless otherwise provided by
the Option Agreement, if an Optionee ceases to be an Awardee Eligible to Vest as
a result of the Optionee’s death, Disability, or Separation from Service after
age 55 with at least 15 years of full-time equivalent service with the Company
or an affiliate (including service with the Company’s predecessor companies),
then (i) the vested portion of such Optionee’s Option shall be determined by
adding 12 months to the length of his or her actual Service, (ii) such
Optionee’s Option shall terminate immediately as to the unvested Shares and such
unvested Shares shall revert to the Plan, and (iii) such Optionee’s Option shall
be exercisable as to the vested Shares for one year after the date such
individual ceases to be an Awardee Eligible to Vest or, if earlier, the
expiration of the term of such Option. Where an individual ceases to be an
Awardee Eligible to Vest as a result of death, the Option may be exercised by
the beneficiary designated by the Optionee, the executor or administrator of the
Optionee’s estate or, if none, by the person(s) entitled to exercise the Option
under the Optionee’s will or the laws of descent or distribution. If, for any
reason, the Option is not so exercised within the time specified herein, the
Option shall automatically terminate, and the Shares covered by such Option
shall revert to the Plan.

(d) Voluntary Severance Incentive Program. If an Optionee ceases to be an
Awardee Eligible to Vest as a result of participation in a voluntary severance
incentive program or workforce management plan approved by the Board or a
Committee, unvested Options shall vest and Options shall remain exercisable, to
the extent permitted under applicable laws and provided by the Board or a
Committee in such voluntary severance incentive program or workforce management
plan. The total number of Options that may be accelerated pursuant to this
Section 5.4(d) shall be subject to the limitations of Section 2.5. Absent a
specific provision for acceleration or extended exercise period, the provisions
of Subsection (b) above shall apply.

 

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5.5 Effect of Change in Control. The Committee may determine, at the time of
granting an Option or thereafter, that such Option shall become exercisable as
to all or part of the Shares subject to such Option if a Change in Control
occurs with respect to the Company or if the Optionee’s Service is terminated
without Cause after a Change in Control. In addition, acceleration of
exercisability may be required under Section 10.3.

5.6 Buyout Provisions. The Committee may at any time (a) offer to buy out for a
payment in cash or cash equivalents an Option previously granted or
(b) authorize an Optionee to elect to cash out an Option previously granted, in
either case at such time and based upon such terms and conditions as the
Committee shall establish. Prior to exercising its authority under this
Section 5.6, the Company shall first obtain the approval of the shareholders for
the intended buy-out of Options or offer to Optionees of an election to cash out
Options; provided, however, that shareholder approval will not be required with
respect to offers, buy-outs or cash elections where the amount of purchase price
or cash-out to be paid by the Company does not exceed the intrinsic value of the
Option being bought- or cashed-out, measured on or about the date of the buy-out
or cash-out. For clarity, the “intrinsic value” means the Fair Market Value of
the Shares subject to the Option, minus the exercise price, multiplied by the
number of Shares being bought- or cashed-out.

5.7 Payment for Option Shares.

(a) General Rule. The entire Exercise Price of Shares issued upon exercise of
Options shall be payable in cash or cash equivalents at the time when such
Shares are purchased, except that the Committee at its sole discretion may
accept payment of the Exercise Price in any other form(s) described in this
Section 5.7. However, if the Optionee is an Outside Director or executive
officer of the Company, he or she may pay the Exercise Price in a form other
than cash or cash equivalents only to the extent permitted by section 13(k) of
the Exchange Act.

(b) Exercise/Sale. With the Committee’s consent, all or any part of the Exercise
Price and any withholding taxes may be paid by delivering (in a manner
prescribed by the Company) an irrevocable direction to a securities broker
approved by the Company to sell all or part of the Shares being purchased under
the Plan and to deliver all or part of the sales proceeds to the Company.

(c) Other Forms of Payment. With the Committee’s consent, all or any part of the
Exercise Price and any withholding taxes may be paid in any other form that is
consistent with applicable laws, regulations and rules.

ARTICLE 6. SHARE APPRECIATION RIGHTS.

6.1 SAR Agreement. Each grant of a SAR under the Plan shall be evidenced by a
SAR Agreement between the Optionee and the Company. Such SAR shall be subject to
all applicable terms of the Plan and may be subject to any other terms that are
not inconsistent with the Plan. The provisions of the various SAR Agreements
entered into under the Plan need not be identical.

6.2 Number of Shares. Each SAR Agreement shall specify the number of Shares to
which the SAR pertains and shall provide for the adjustment of such number in
accordance with Article 10. SARs granted to any Optionee in a single fiscal year
shall in no event pertain to more

 

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than 750,000 Shares, except that SARs granted to a new Employee in the fiscal
year of the Company in which his or her Service as an Employee first commences
shall not pertain to more than 1,500,000 Shares. The limitations set forth in
the preceding sentence shall be subject to adjustment in accordance with
Article 10.

6.3 Exercise Price. Each SAR Agreement shall specify the Exercise Price;
provided that the Exercise Price shall in no event be less than 100% of the Fair
Market Value of a Share on the Date of Grant. Other than in connection with an
event or transaction described in Article 10, SARs may not be repriced,
replaced, regranted through cancellation or modified without shareholder
approval if the effect of such repricing, replacement, regrant or modification
would be to reduce the exercise price of such SARs.

6.4 Exercisability and Term.

(a) General. Each SAR Agreement shall specify the date when all or any
installment of the SAR is to become exercisable, subject to Section 2.4. The SAR
Agreement shall also specify the term of the SAR. SARs may be awarded in
combination with Options, and such an Award may provide that the SARs will not
be exercisable unless the related Options are forfeited. An SAR may be included
in an ISO only at the time of grant but may be included in an NSO at the time of
grant or thereafter. An SAR granted under the Plan may provide that it will be
exercisable only in the event of a Change in Control.

(b) Cessation of Eligibility to Vest. Unless otherwise provided by the SAR
Agreement, if an Optionee ceases to be an Awardee Eligible to Vest, other than
as a result of circumstances described in Subsection (c) or (d) below, such
Optionee’s SAR shall terminate immediately as to the unvested Shares and such
unvested Shares shall revert to the Plan, and the SAR shall be exercisable as to
the vested Shares for three months after the date such individual ceases to be
an Awardee Eligible to Vest or, if earlier, the expiration of the term of such
SAR. If, for any reason, the Optionee does not exercise his or her vested SARs
within the appropriate exercise period set forth above, the SAR shall
automatically terminate, and the Shares covered by such SAR shall revert to the
Plan.

(c) Death, Disability or Retirement of Optionee. Unless otherwise provided by
the SAR Agreement, if an Optionee ceases to be an Awardee Eligible to Vest as a
result of the Optionee’s death, Disability, or Separation from Service after age
55 with at least 15 years of full-time equivalent service with the Company or an
affiliate (including service with the Company’s predecessor companies), then
(i) the vested portion of such Optionee’s SAR shall be determined by adding 12
months to the length of his or her actual Service, (ii) such Optionee’s SAR
shall terminate immediately as to the unvested Shares and such unvested Shares
shall revert to the Plan, and (iii) such Optionee’s SAR shall be exercisable as
to the vested Shares for one year after the date such individual ceases to be an
Awardee Eligible to Vest or, if earlier, the expiration of the term of such SAR.
Where an individual ceases to be an Awardee Eligible to Vest as a result of
death, the SAR may be exercised by the beneficiary designated by the Optionee,
the executor or administrator of the Optionee’s estate or, if none, by the
person(s) entitled to exercise the SAR under the Optionee’s will or the laws of
descent or distribution. If, for any reason, the SAR is not so exercised within
the time specified herein, the SAR shall automatically terminate, and the Shares
covered by such SAR shall revert to the Plan.

 

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(d) Voluntary Severance Incentive Program. If an Optionee ceases to be an
Awardee Eligible to Vest as a result of participation in a voluntary severance
incentive program or workforce management plan approved by the Board or a
Committee, unvested SARs shall vest and SARs shall remain exercisable, to the
extent permitted under applicable laws and provided by the Board or a Committee
in such voluntary severance incentive program or workforce management plan. The
total number of SARs that may be accelerated pursuant to this Section 6.4(d)
shall be subject to the limitations of Section 2.5. Absent a specific provision
for acceleration or extended exercise period, the provisions of Subsection (b)
above shall apply.

6.5 Effect of Change in Control. The Committee may determine, at the time of
granting a SAR or thereafter, that such SAR shall become exercisable as to all
or part of the Shares subject to such SAR if a Change in Control occurs with
respect to the Company or if the Optionee’s Service is terminated without Cause
after a Change in Control. In addition, acceleration of exercisability may be
required under Section 10.3.

6.6 Exercise of SARs. Upon exercise of a SAR, the Optionee (or any person having
the right to exercise the SAR after his or her death) shall receive from the
Company consideration in the form of (a) Shares, (b) cash or (c) a combination
of Shares and cash, as the Committee shall determine. Each SAR Agreement shall
specify the amount and/or Fair Market Value of the consideration that the
Optionee will receive upon exercising the SAR; provided that the aggregate
consideration shall not exceed the amount by which the Fair Market Value (on the
date of exercise) of the Shares subject to the SAR exceeds the Exercise Price of
the SAR. If, on the date when a SAR expires, the Exercise Price of the SAR is
less than the Fair Market Value of the Shares subject to the SAR on such date
but any portion of the SAR has not been exercised, then the SAR shall
automatically be deemed to be exercised as of such date with respect to such
portion. An SAR Agreement may also provide for an automatic exercise of the SAR
on an earlier date.

ARTICLE 7. RESTRICTED SHARES.

7.1 Restricted Share Agreement. Each grant of Restricted Shares under the Plan
shall be evidenced by a Restricted Share Agreement between the recipient and the
Company. Such Restricted Shares shall be subject to all applicable terms of the
Plan and may be subject to any other terms that are not inconsistent with the
Plan. The provisions of the various Restricted Share Agreements entered into
under the Plan need not be identical.

7.2 Number of Shares. Each Restricted Share Agreement shall specify the number
of Shares to which the Agreement pertains.

7.3 Payment for Awards. Restricted Shares may be sold or awarded under the Plan
for such consideration as the Committee may determine, including (without
limitation) cash, cash equivalents, property, past services and future services.
Within the limitations of the Plan, the Committee may accept the cancellation of
outstanding options in return for the grant of Restricted Shares.

 

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7.4 Restrictions & Conditions. The Committee may, at the time of granting
Restricted Shares, impose such conditions and restrictions on the Restricted
Shares as it deems appropriate; provided, however, that: (a) Section 2.4 shall
apply; (b) any acceleration of vesting, other than in the case of acceleration
of vesting in connection with death, Disability, retirement or Change in Control
shall be subject to the limitations of Section 2.5, and (c) such conditions and
restrictions may not result in the Company reacquiring from a Participant
Restricted Shares that have been issued.

7.5 Effect of Change in Control. The Committee may determine, at the time of
granting Restricted Shares or thereafter, that all or some of any restrictions
imposed on such Restricted Shares shall be removed if a Change in Control occurs
with respect to the Company or if the Participant’s Service is terminated
without Cause after a Change in Control.

7.6 Voting and Dividend Rights. The holders of Restricted Shares awarded under
the Plan shall have the same voting, dividend and other rights as the Company’s
other shareholders. A Restricted Share Agreement, however, may require that the
holders of Restricted Shares invest any cash dividends received in additional
Restricted Shares. Such additional Restricted Shares shall be subject to the
same conditions and restrictions as the Award with respect to which the
dividends were paid.

ARTICLE 8. SHARE UNITS.

8.1 Share Unit Agreement. Each grant of Share Units under the Plan shall be
evidenced by a Share Unit Agreement between the recipient and the Company. Such
Share Units shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan. The
provisions of the various Share Unit Agreements entered into under the Plan need
not be identical.

8.2 Number of Shares. Each Share Unit Agreement shall specify the number of
Shares to which the Share Unit pertains and shall provide for the adjustment of
such number in accordance with Article 10. Such number shall be subject to the
limitation of Section 8.4(a), if applicable.

8.3 Payment for Awards. To the extent that an Award is granted in the form of
Share Units, no cash consideration shall be required of the Award recipients.

8.4 Vesting Conditions.

(a) General. Each Award of Share Units may or may not be subject to vesting,
subject to Section 2.4. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Share Unit Award. The Committee
may include among such conditions continued performance of Service and/or the
requirement that the performance of the Company (or a Subsidiary, Affiliate or
business unit of the Company) for a specified period of not less than one fiscal
year equal or exceed performance targets determined by the Committee. Such
targets shall be based on one or more of the criteria set forth in Appendix A,
and shall be determined not later than the 90 days following commencement of the
specified performance period. As to Awards with respect to which the Company
desires to secure an exemption from section 162(m) of the Code, no Participant
shall receive more than 400,000 Share Units subject to performance-based vesting
conditions in a single fiscal year, except that a new Employee may receive up to
800,000 Share Units subject to performance-based vesting conditions in the
fiscal year of the Company in which his or her Service as an Employee first
commences. The limitations set forth in the preceding sentence shall be subject
to adjustment in accordance with Article 10.

 

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(b) Cessation of Eligibility to Vest. Unless otherwise provided by the Share
Unit Award, if a Participant ceases to be an Awardee Eligible to Vest, other
than as a result of circumstances described in Subsection (c) or (d) below, then
all unvested Share Units subject to a Share Unit Agreement shall immediately be
forfeited and shall revert to the Plan.

(c) Death, Disability or Retirement of Participant. Unless otherwise provided by
the Share Unit Award, if a Participant ceases to be an Awardee Eligible to Vest
as a result of the Participant’s death, Disability, or Separation from Service
after age 55 with at least 15 years of full-time equivalent service with the
Company or an affiliate (including service with the Company’s predecessor
companies), the provisions of Subsection (b) above will apply except that the
vested portion of such Participant’s Share Unit Award shall be determined by
adding 12 months to the length of his or her actual Service.

(d) Voluntary Severance Incentive Program. If a Participant ceases to be an
Awardee Eligible to Vest as a result of participation in a voluntary severance
incentive program or workforce management plan approved by the Board or a
Committee, unvested Share Units shall vest to the extent permitted under
applicable laws and provided by the Board or a Committee in such voluntary
severance incentive program or workforce management plan. The total number of
Share Units that may be accelerated pursuant to this Section 8.4(d) shall be
subject to the limitations of Section 2.5. Absent a specific provision for
acceleration, the provisions of Subsection (b) above shall apply.

8.5 Effect of Change in Control. The Committee may determine, at the time of
granting Share Units or thereafter, that all or part of such Share Units shall
become vested if a Change in Control occurs with respect to the Company or if
the Participant’s Service is terminated without Cause after a Change in Control.
In addition, acceleration of vesting may be required under Section 10.3.

8.6 Voting and Dividend Rights. The holders of Share Units shall have no voting
rights. Prior to settlement or forfeiture, any Share Unit awarded under 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 Share Unit is outstanding.
Dividend equivalents may be converted into additional Share 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 that
are not paid shall be subject to the same conditions and restrictions as the
Share Units to which they attach.

8.7 Form and Time of Settlement of Share Units. Settlement of vested Share Units
may be made in the form of (a) cash, (b) Shares or (c) any combination of both,
as determined by the Committee. The actual number of Share Units eligible for
settlement may be larger or smaller than the number included in the original
Award, based on predetermined performance factors. Methods of converting Share
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 Share

 

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Units may be settled in a lump sum or in installments. The distribution may
occur or commence when all vesting conditions applicable to the Share Units have
been satisfied or have lapsed, or it may be deferred 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 Share Units is settled, the number of
such Share Units shall be subject to adjustment pursuant to Article 10.

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

ARTICLE 9. AUTOMATIC GRANTS TO OUTSIDE DIRECTORS.

9.1 Initial Grants. In connection with joining the Board, each Outside Director
shall receive:

(a) A one-time grant of an NSO covering Shares with an Accounting Value of
$120,000. Such NSO shall be granted on the date when such Outside Director first
joins the Board, and shall vest and become exercisable on the first anniversary
of the Date of Grant; and

(b) A one-time grant of Share Units with an Accounting Value of $120,000. Such
Share Units shall be granted on the date when such Outside Director first joins
the Board and shall vest on the first anniversary of the Date of Grant.
Settlement of vested Share Units shall be made in a lump sum on the third
anniversary of the Date of Grant unless deferred to a later date. Such lump sum
shall consist of a number of Shares equal to the number of vested Share Units.

An Outside Director who was previously an Employee shall not receive grants
under this Section 9.1.

9.2 Annual Grants. Upon the conclusion of each regular annual meeting of the
Company’s shareholders, each Outside Director who will continue serving as a
member of the Board thereafter shall receive:

(a) A grant of an NSO covering Shares with an Accounting Value of $60,000. Such
NSO shall vest and become exercisable quarterly over a period of four quarters
from the Date of Grant; and

(b) A grant of Share Units with an Accounting Value of $60,000. Such Share Units
shall vest in four equal quarterly installments over a period of four quarters
from the Date of Grant. Settlement of vested Share Units shall be made in a lump
sum on the third anniversary of the Date of Grant, unless deferred to a later
date. Such lump sum shall consist of a number of Shares equal to the number of
vested Share Units.

Notwithstanding the foregoing, no grants shall be made pursuant to this
Section 9.2 in the calendar year in which the same Outside Director received
grants described in Section 9.1. An Outside Director who previously was an
Employee shall be eligible to receive grants under this Section 9.2.

 

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9.3 Cessation of Eligibility to Vest. Unless otherwise provided by the Award
Agreement, if an Outside Director’s Service terminates prior to the vesting date
specified in such agreement other than as a result of circumstances described in
Section 9.4 below, then such Director’s unvested Award shall immediately be
forfeited and such unvested Shares shall revert to the Plan.

9.4 Accelerated Exercisability. All Awards granted to an Outside Director under
this Article 9 shall also become exercisable in full, and Restricted Shares and
Share Units shall be distributed, in the event that:

(a) Such Outside Director’s Service terminates because of death, Disability, or
retirement at or after age 65;

(b) The Company is subject to a Change in Control before such Outside Director’s
Service terminates; or

(c) As otherwise required by Section 10.3.

9.5 Exercise Price. The Exercise Price under all NSOs granted to an Outside
Director under this Article 9 shall be equal to 100% of the Fair Market Value of
a Share on the Date of Grant, payable in one of the forms described in
Section 5.7(a), (b) or (c).

9.6 Term. The Option Agreement shall specify the term of the option, which shall
not exceed 5 years from the Date of Grant. Each NSO granted to an Outside
Director under this Article 9 shall terminate on the earlier of (a) the
expiration of the term of such option or (b) the date 36 months after the
termination of such Outside Director’s Service for any reason.

9.7 Affiliates of Outside Directors. The Committee may provide that the NSOs
that otherwise would be granted to an Outside Director under this Article 9
shall instead be granted to an affiliate of such Outside Director. Such
affiliate shall then be deemed to be an Outside Director for purposes of the
Plan, provided that the Service-related vesting and termination provisions
pertaining to the NSOs shall be applied with regard to the Service of the
Outside Director.

ARTICLE 10. PROTECTION AGAINST DILUTION.

10.1 Adjustments. In the event of a subdivision of the outstanding Shares, a
declaration of a dividend payable in Shares or a combination or consolidation of
the outstanding Shares (by reclassification or otherwise) into a lesser number
of Shares, corresponding adjustments shall automatically be made in each of the
following:

(a) The number of Options, SARs, Restricted Shares and Share Units available for
future Awards under Article 3;

(b) The limitations set forth in Sections 2.5, 5.2, 6.2, 7.2 and 8.4(a);

(c) The number of Shares covered by each outstanding Option and SAR;

 

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(d) The Exercise Price under each outstanding Option and SAR; or

(e) The number of Share Units included in any prior Award that has not yet been
settled.

In the event of a declaration of a dividend payable in a form other than Shares
in an amount that has a material effect on the price of Shares, a
recapitalization, a spin-off or a similar occurrence, the Committee shall make
such adjustments as it, in its sole discretion, deems appropriate in one or more
of the foregoing. Except as provided in this Article 10, a Participant shall
have no rights by reason of any issuance by the Company of shares of any class
or securities convertible into shares of any class, any subdivision or
consolidation of shares of any class, the payment of any share dividend or any
other increase or decrease in the number of shares of any class.

10.2 Dissolution or Liquidation. To the extent not previously exercised or
settled, Options, SARs and Share Units shall terminate immediately prior to the
dissolution or liquidation of the Company.

10.3 Reorganizations. In the event that the Company is a party to a merger,
consolidation or amalgamation, all outstanding Awards shall be subject to the
agreement of merger, consolidation or amalgamation. Such agreement shall provide
for one or more of the following:

(a) The continuation of such outstanding Awards by the Company (if the Company
is the surviving corporation).

(b) The assumption of such outstanding Awards by the surviving corporation or
its parent, provided that the assumption of Options or SARs shall comply with
sections 409A and 424(a) of the Code (whether or not the Options are ISOs).

(c) The substitution by the surviving corporation or its parent of new awards
for such outstanding Awards, provided that the substitution of Options or SARs
shall comply with sections 409A and 424(a) of the Code (whether or not the
Options are ISOs).

(d) Full exercisability of outstanding Options and SARs and full vesting of the
Shares subject to such Options and SARs, followed by the cancellation of such
Options and SARs. The full exercisability of such Options and SARs and full
vesting of such Shares may be contingent on the closing of such merger,
consolidation or amalgamation. The Optionees shall be able to exercise such
Options and SARs during a period of not less than five full business days
preceding the closing date of such merger, consolidation or amalgamation, unless
(i) a shorter period is required to permit a timely closing of such merger,
consolidation or amalgamation and (ii) such shorter period still offers the
Optionees a reasonable opportunity to exercise such Options and SARs. Any
exercise of such Options and SARs during such period may be contingent on the
closing of such merger, consolidation or amalgamation.

(e) The cancellation of outstanding Options and SARs and a payment to the
Optionees equal to the excess of (i) the Fair Market Value of the Shares subject
to such Options and SARs (whether or not such Options and SARs are then
exercisable or such Shares are then vested) as of the closing date of such
merger, consolidation or amalgamation over (ii) their

 

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Exercise Price. Such payment shall be made in the form of cash, cash
equivalents, or securities of the surviving corporation or its parent with a
Fair Market Value equal to the required amount. Such payment may be made in
installments and may be deferred until the date or dates when such Options and
SARs would have become exercisable or such Shares would have vested. Such
payment may be subject to vesting based on the Optionee’s continuing Service,
provided that the vesting schedule shall not be less favorable to the Optionee
than the schedule under which such Options and SARs would have become
exercisable or such Shares would have vested. If the Exercise Price of the
Shares subject to such Options and SARs exceeds the Fair Market Value of such
Shares, then such Options and SARs may be cancelled without making a payment to
the Optionees. For purposes of this Subsection (e), the Fair Market Value of any
security shall be determined without regard to any vesting conditions that may
apply to such security.

(f) The cancellation of outstanding Share Units and a payment to the
Participants equal to the Fair Market Value of the Shares subject to such Share
Units (whether or not such Share Units are then vested) as of the closing date
of such merger, consolidation or amalgamation. Such payment shall be made in the
form of cash, cash equivalents, or securities of the surviving corporation or
its parent with a Fair Market Value equal to the required amount. Such payment
may be made in installments and may be deferred until the date or dates when
such Share Units would have vested. Such payment may be subject to vesting based
on the Participant’s continuing Service, provided that the vesting schedule
shall not be less favorable to the Participant than the schedule under which
such Share Units would have vested. For purposes of this Subsection (f), the
Fair Market Value of any security shall be determined without regard to any
vesting conditions that may apply to such security.

ARTICLE 11. PAYMENT OF DIRECTOR’S FEES IN SECURITIES.

11.1 Effective Date. No provision of this Article 11 shall be effective unless
and until the Board has determined to implement such provision.

11.2 Elections to Receive NSOs, Restricted Shares or Share Units. An Outside
Director may elect to receive his or her annual retainer payments and/or meeting
fees from the Company in the form of cash, NSOs, Restricted Shares or Share
Units, or a combination thereof, as determined by the Board. Such NSOs,
Restricted Shares and Share Units shall be issued under the Plan. An election
under this Article 11 shall be filed with the Company on the prescribed form.

11.3 Number and Terms of NSOs, Restricted Shares or Share Units. The number of
NSOs, Restricted Shares or Share Units to be granted to Outside Directors in
lieu of annual retainers and meeting fees that would otherwise be paid in cash
shall be calculated in a manner determined by the Board. The Board shall also
determine the terms of such NSOs, Restricted Shares or Share Units.

 

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ARTICLE 12. LIMITATION ON RIGHTS.

12.1 Retention Rights. Neither the Plan nor any Award granted under the Plan
shall be deemed to give any individual a right to remain an Employee, Outside
Director or Consultant. The Company and its Parents, Subsidiaries and Affiliates
reserve the right to terminate the Service of any Employee, Outside Director or
Consultant at any time, with or without cause, subject to applicable laws, the
Company’s Articles of Association and a written employment agreement (if any).

12.2 Shareholders’ Rights. A Participant shall have no dividend rights, voting
rights or other rights as a shareholder with respect to any Shares covered by
his or her Award prior to the time when such Shares are issued. No adjustment
shall be made for cash dividends or other rights for which the record date is
prior to such time, except as expressly provided in the Plan.

12.3 Regulatory Requirements. Any other provision of the Plan notwithstanding,
the obligation of the Company to issue Shares under the Plan shall be subject to
all applicable laws, rules and regulations and such approval by any regulatory
body as may be required. The Company reserves the right to restrict, in whole or
in part, the delivery of Shares pursuant to any Award prior to the satisfaction
of all legal requirements relating to the issuance of such Shares, to their
registration, qualification or listing or to an exemption from registration,
qualification or listing.

ARTICLE 13. WITHHOLDING TAXES.

13.1 General. To the extent required by applicable federal, state, local or
foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Shares or make any cash payment under the Plan until such
obligations are satisfied.

13.2 Share Withholding. To the extent that applicable law subjects a Participant
to tax withholding obligations, the Committee may permit such Participant to
satisfy all or part of such obligations by having the Company withhold all or a
portion of any Shares that otherwise would be issued to him or her Such Shares
shall be valued at their Fair Market Value on the date when they are withheld.

ARTICLE 14. LIMITATION ON PAYMENTS.

14.1 Scope of Limitation. This Article 14 shall apply to an Award only if:

(a) The independent auditors selected for this purpose by the Committee (the
“Auditors”) determine that the after-tax value of such Award to the Participant,
taking into account the effect of all federal, state and local income taxes,
employment taxes and excise taxes applicable to the Participant (including the
excise tax under section 4999 of the Code), will be greater after the
application of this Article 14 than it was before the application of this
Article 14; or

(b) The Committee, at the time of making an Award under the Plan or at any time
thereafter, specifies in writing that such Award shall be subject to this
Article 14 (regardless of the after-tax value of such Award to the Participant).

 

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If this Article 14 applies to an Award, it shall supersede any contrary
provision of the Plan or of any Award granted under the Plan.

14.2 Basic Rule. In the event that the Auditors determine that any payment or
transfer by the Company under the Plan to or for the benefit of a Participant (a
“Payment”) would be nondeductible by the Company for federal income tax purposes
because of the provisions concerning “excess parachute payments” in section 280G
of the Code, then the aggregate present value of all Payments shall be reduced
(but not below zero) to the Reduced Amount. For purposes of this Article 14, the
“Reduced Amount” shall be the amount, expressed as a present value, which
maximizes the aggregate present value of the Payments without causing any
Payment to be nondeductible by the Company because of section 280G of the Code.

14.3 Reduction of Payments. If the Auditors determine that any Payment would be
nondeductible by the Company because of section 280G of the Code, then the
Company shall promptly give the Participant notice to that effect and a copy of
the detailed calculation thereof and of the Reduced Amount, and the Participant
may then elect, in his or her sole discretion, which and how much of the
Payments shall be eliminated or reduced (as long as after such election the
aggregate present value of the Payments equals the Reduced Amount) and shall
advise the Company in writing of his or her election within 10 days of receipt
of notice. If no such election is made by the Participant within such 10-day
period, then the Company may elect which and how much of the Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Payments equals the Reduced Amount) and shall notify the
Participant promptly of such election. For purposes of this Article 14, present
value shall be determined in accordance with section 280G(d)(4) of the Code. All
determinations made by the Auditors under this Article 14 shall be binding upon
the Company and the Participant and shall be made within 60 days of the date
when a Payment becomes payable or transferable. As promptly as practicable
following such determination and the elections hereunder, the Company shall pay
or transfer to or for the benefit of the Participant such amounts as are then
due to him or her under the Plan and shall promptly pay or transfer to or for
the benefit of the Participant in the future such amounts as become due to him
or her under the Plan.

14.4 Overpayments and Underpayments. As a result of uncertainty in the
application of section 280G of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that Payments will have been made by
the Company which should not have been made (an “Overpayment”) or that
additional Payments which will not have been made by the Company could have been
made (an “Underpayment”), consistent in each case with the calculation of the
Reduced Amount hereunder. In the event that the Auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against the Company or
the Participant that the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Participant that he or she shall repay to the
Company, together with interest at the applicable federal rate provided in
section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Participant to the Company if and to the extent that such payment
would not reduce the amount that is subject to taxation under section 4999 of
the Code. In the event that the Auditors determine that an Underpayment has
occurred, such Underpayment shall promptly be paid or transferred by the Company
to or for the benefit of the Participant, together with interest at the
applicable federal rate provided in section 7872(f)(2) of the Code.

 

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14.5 Related Corporations. For purposes of this Article 14, the term “Company”
shall include affiliated corporations to the extent determined by the Auditors
in accordance with section 280G(d)(5) of the Code.

ARTICLE 15. FUTURE OF THE PLAN.

15.1 Term of the Plan. The Plan shall remain in effect until the earlier of
(a) the date when the Plan is terminated under Section 15.2 or (b) June 6, 2016.

15.2 Amendment or Termination. The Board may, at any time and for any reason,
amend or terminate the Plan. No Awards shall be granted under the Plan after the
termination thereof. The termination of the Plan, or any amendment thereof,
shall not affect any Award previously granted under the Plan.

15.3 Shareholder Approval. An amendment of the Plan shall be subject to the
approval of the Company’s shareholders only to the extent required by applicable
laws, regulations or rules. The Company may, but is not required to, seek the
approval (or re-approval) of the Company’s shareholders of the performance
criteria set forth in Appendix A to the extent, and at such frequencies, as may
be necessary to provide the full tax deductibility of performance-based Awards
in accordance with Section 162(m) of the Code.

ARTICLE 16. DEFINITIONS.

16.1 “Awardee Eligible to Vest” means a Participant who is in active service
with the Company or a Subsidiary or Affiliate (or who is on an approved leave of
absence or taking vacation or otherwise approved flexible time off (“FTO”) in
accordance with the Company’s FTO policy) on the vesting date fixed in the Award
Agreement, subject to the exceptions provided in Articles 5, 7, 8 and 9. With
the exception of an individual who is on an approved leave of absence or taking
FTO, in no event shall an individual be considered an Awardee Eligible to Vest
if and at the time the individual ceases or has ceased to perform job duties for
which he or she is compensated directly by the Company or a Subsidiary or
Affiliate. The foregoing shall be true in the event that the individual, prior
to ceasing to perform job duties for which he or she is compensated directly by
the Company or a Subsidiary or Affiliate, received or provided notice of
termination (irrespective of any notice period or similar period prescribed
under the laws of a jurisdiction outside the United States) whether such notice
of termination or transfer is lawful or unlawful under applicable employment law
or is in breach of an employment contract. Continued affiliation or relationship
with the Company or a Subsidiary or Affiliate pursuant to a statutory or
contractual notice period shall not constitute continuation of an individual’s
status as an Awardee Eligible to Vest. In accordance with the definition above,
status as an Awardee Eligible to Vest will always cease upon termination of
employment with the Company or a Subsidiary or Affiliate except as provided in
Articles 5, 7, 8 and 9.

16.2 “Accounting Value” means, with respect to an Award, a value calculated
using the same methodology as was applied by the Company for purposes of
determining the accounting charge associated with similar Awards for the fiscal
period immediately preceding the date on which the subject Award is granted.

 

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16.3 “Affiliate” means any entity other than a Subsidiary, if the Company and/or
one or more Subsidiaries own not less than 50% of such entity.

16.4 “Award” means any award of an Option, a SAR, a Restricted Share or a Share
Unit under the Plan.

16.5 “Board” means the Company’s Board of Directors, as constituted from time to
time.

16.6 “Cause” means:

(a) An unauthorized use or disclosure by the Participant of the Company’s
confidential information or trade secrets, which use or disclosure causes
material harm to the Company;

(b) A material breach by the Participant of any agreement between the
Participant and the Company;

(c) A material failure by the Participant to comply with the Company’s written
policies or rules;

(d) The Participant’s conviction of, or plea of “guilty” or “no contest” to, a
felony under the laws of the United States or any State thereof or the
equivalent under the applicable laws outside of the United States;

(e) The Participant’s gross negligence or willful misconduct;

(f) A continuing failure by the Participant to perform assigned duties after
receiving written notification of such failure; or

(g) A failure by the Participant to cooperate in good faith with a governmental
or internal investigation of the Company or its directors, officers or
employees, if the Company has requested the Participant’s cooperation.

16.7 “Change in Control” means:

(a) The consummation of a merger, consolidation or amalgamation of the Company
with or into another entity or any other corporate reorganization, if persons
who were not shareholders of the Company immediately prior to such merger,
consolidation, amalgamation or other reorganization own immediately after such
merger, consolidation, amalgamation or other reorganization 50% or more of the
voting power of the outstanding securities of each of (i) the continuing or
surviving entity and (ii) any direct or indirect parent corporation of such
continuing or surviving entity;

(b) The sale, transfer or other disposition of all or substantially all of the
Company’s assets;

 

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(c) A change in the composition of the Board, as a result of which fewer than
50% of the incumbent directors are directors who either:

(i) Had been directors of the Company on the date 24 months prior to the date of
such change in the composition of the Board (the “Original Directors”); or

(ii) Were appointed to the Board, or nominated for election to the Board, with
the affirmative votes of at least a majority of the aggregate of (A) the
Original Directors who were in office at the time of their appointment or
nomination and (B) the directors whose appointment or nomination was previously
approved in a manner consistent with this Paragraph (ii); or

(d) Any transaction as a result of which any person is the “beneficial owner”
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing at least 30% of the total voting power
represented by the Company’s then outstanding voting securities. For purposes of
this Subsection (d), the term “person” shall have the same meaning as when used
in sections 13(d) and 14(d) of the Exchange Act but shall exclude (i) a trustee
or other fiduciary holding securities under an employee benefit plan of the
Company or of a Parent or Subsidiary and (ii) a corporation owned directly or
indirectly by the shareholders of the Company in substantially the same
proportions as their ownership of Shares.

A transaction shall not constitute a Change in Control if its sole purpose is to
change the jurisdiction of the Company’s incorporation or to create a holding
company that will be owned in substantially the same proportions by the persons
who held the Company’s securities immediately before such transaction.

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

16.9 “Committee” means a committee of the Board, as described in Article 2.

16.10 “Company” means Verigy Ltd., a Singapore corporation.

16.11 “Consultant” means a consultant or adviser who provides bona fide services
to the Company, a Parent, a Subsidiary or an Affiliate as an independent
contractor.

16.12 “Date of Grant” means the latest of: (a) the date on which the Committee
determines that the Option or SAR shall be granted; (b) the date on which the
Optionee’s Service commences; or (c) the date on which all material terms of the
Option or SAR, including (without limitation) the Exercise Price, are
ascertainable; provided, however, that with respect to automatic awards to
Outside Directors, “Date of Grant” means the date of such automatic award as
provided in the applicable provision of this Plan.

16.13 “Disability” means that the Participant is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months.

 

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16.14 “Employee” means a full time or part time employee of the Company or any
Subsidiary or Affiliate, including officers and Directors, who is treated as an
employee in the personnel records of the Company or a Subsidiary or Affiliate
for the relevant period, but shall exclude individuals who are classified by the
Company or a Subsidiary or Affiliate as (a) leased from or otherwise employed by
a third party, (b) independent contractors or (c) intermittent or temporary,
even if any such classification is changed retroactively as a result of an
audit, litigation or otherwise. A Participant shall not cease to be an Employee
in the case of (i) any vacation or sick time or otherwise approved FTO in
accordance with the Company’s (or a Subsidiary’s or Affiliate’s) FTO policy or
(ii) transfers between locations of the Company or between the Company and/or
any Subsidiary or Affiliate. Neither service as a Director nor payment of a
director’s fee by the Company shall be sufficient to constitute “employment” by
the Company.

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

16.16 “Exercise Price,” in the case of an Option, means the amount for which one
Share may be purchased upon exercise of such Option, as specified in the
applicable Option Agreement. “Exercise Price,” in the case of a SAR, means an
amount, as specified in the applicable SAR Agreement, which is subtracted from
the Fair Market Value of one Share in determining the amount payable upon
exercise of such SAR.

16.17 “Fair Market Value” means the market price of Shares, determined by the
Committee as follows:

(a) If the Shares are traded on Nasdaq or on a stock exchange, then the Fair
Market Value shall be equal to the last sale price of the Shares on such market
or exchange as of the date in question or, if the market or exchange was closed
on the date in question, then the Fair Market Value will be equal to the last
sale price on the last trading day immediately preceding the day in question. If
the Shares are traded on more than one market or exchange, then the Fair Market
Value shall be determined by reference to the primary market or exchange where
the Shares trade.

(b) If foregoing provisions are not applicable, then the Committee shall
determine the Fair Market Value in good faith on such basis as it deems
appropriate. Such determination shall be conclusive and binding on all persons.

16.18 “ISO” means an incentive stock option described in section 422(b) of the
Code.

16.19 “NSO” means a share option not described in sections 422 or 423 of the
Code.

16.20 “Option” means an ISO or NSO granted under the Plan and entitling the
holder to purchase Shares.

16.21 “Option Agreement” means the agreement between the Company and an Optionee
that contains the terms, conditions and restrictions pertaining to his or her
Option.

16.22 “Optionee” means an individual or estate that holds an Option or SAR.

 

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16.23 “Outside Director” means a member of the Board who is not an Employee.

16.24 “Parent” means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company, if each of the corporations other
than the Company owns shares possessing 50% or more of the total combined voting
power of all classes of shares in one of the other corporations in such chain. A
corporation that attains the status of a Parent on a date after the adoption of
the Plan shall be considered a Parent commencing as of such date.

16.25 “Participant” means an individual or estate that holds an Award.

16.26 “Plan” means this Verigy Ltd. 2006 Equity Incentive Plan, as amended from
time to time.

16.27 “Replacement Awards” means Awards granted or Shares issued by the Company
in the conversion, assumption, substitution, or exchange of awards previously
granted under the Agilent Technologies, Inc. 1999 Stock Plan or the Agilent
Technologies, Inc. 1999 Non-employee Director Stock Plan.

16.28 “Restricted Share” means a Share awarded under the Plan.

16.29 “Restricted Share Agreement” means the agreement between the Company and
the recipient of a Restricted Share that contains the terms, conditions and
restrictions pertaining to such Restricted Share.

16.30 “SAR” means a share appreciation right granted under the Plan.

16.31 “SAR Agreement” means the agreement between the Company and an Optionee
that contains the terms, conditions and restrictions pertaining to his or her
SAR.

16.32 “Separation from Service” shall have the meaning set forth in the
regulations under Section 409A of the Code.

16.33 “Service” means service as an Employee, Outside Director or Consultant.

16.34 “Shares” means the Ordinary Shares of the Company.

16.35 “Share Unit” means a bookkeeping entry representing the equivalent of one
Share, as awarded under the Plan.

16.36 “Share Unit Agreement” means the agreement between the Company and the
recipient of a Share Unit that contains the terms, conditions and restrictions
pertaining to such Share Unit.

16.37 “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 shares possessing
more than 50% of the total combined voting power of all classes of shares in one
of the other corporations in such chain. A corporation that attains the status
of a Subsidiary on a date after the adoption of the Plan shall be considered a
Subsidiary commencing as of such date.

 

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16.38 “Substitute Awards” means:

(a) Awards granted or Shares issued by the Company in assumption of, or in
substitution or exchange for, awards previously granted by: (i) a company
acquired by the Company; (ii) a company acquired by any Subsidiary; or (iii) a
company with which the Company or any Subsidiary combines; and

(b) Awards granted or Shares issued by the Company in assumption of, or in
substitution or exchange for, awards previously granted by Agilent Technologies,
Inc.

 

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Adoption and Amendment History:

 

Action

   Date Adopted by the Board of Directors:    June 7, 2006 Approved by the sole
shareholder:    June 7, 2006 Amended by the Board of Directors to revise
definition of “Fair Market Value” (Section 16.16)    August 29, 2006 Amended by
the Board of Directors to add definition of Date of Grant (Section 16.12)   
December 13, 2006 Amended by the Board of Directors to modify Outside Director
Awards (Article 9) and miscellaneous technical amendments    April 14, 2008
Outside Director Award amendments approved by Shareholders    April 15, 2008
Amended by the Board of Directors to increase the number of reserved shares,
eliminate the secondary committee and require minimum vesting    December 2,
2009 Amended by the Board of Directors to establish the Exceptions Share Reserve
(Section 2.5) and related changes and to limit option buy backs (Section 5.6)   
January 19, 2009 Increase in share reserve approved by the shareholders    April
6, 2010

 

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APPENDIX A

PERFORMANCE CRITERIA FOR AWARDS

The Committee may apply any one or more of the following performance criteria,
individually, alternatively or in any combination, either to the Company as a
whole or to a business unit, Subsidiary or Affiliate, measured annually,
quarterly or cumulatively over a period of years, either on an absolute basis or
relative to a pre-established target, with respect to previous years’ results or
a designated comparison group, in each case as specified by the Committee:
(i) cash flow (before or after dividends), (ii) earnings per share (including
earnings before interest, taxes, depreciation and amortization), (iii) share
price, (iv) return on equity, (v) total shareholder return, (vi) return on
capital (including return on total capital or return on invested capital),
(vii) return on assets or net assets, (viii) market capitalization,
(ix) economic value added, (x) debt leverage (debt to capital), (xi) revenue or
net revenue, (xii) income or net income, (xiii) operating income,
(xiv) operating profit or net operating profit, (xv) operating margin or profit
margin, (xvi) return on operating revenue, (xvii) cash from operations,
(xviii) operating ratio, (xix) operating revenue, (xx) customer satisfaction
measures, (xxi) net order dollars, (xxii) guaranteed efficiency measures;
(xxiii) service agreement renewal rates; (xxiv) service revenues as a percentage
of product revenues, either with respect to one or more particular transactions
or with respect to revenues as a whole; or (xxv) individual performance. To the
extent consistent with section 162(m) of the Code, the Committee may
appropriately adjust any evaluation of performance under a performance criterion
to exclude any of the following events that occurs during a performance period:
(i) asset write-downs, (ii) litigation, claims, judgments or settlements,
(iii) the effect of changes in tax law, accounting principles or other such laws
or provisions affecting reported results, (iv) accruals for reorganization and
restructuring programs and (v) any extraordinary, unusual or non-recurring
items.

 

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