EXHIBIT 10.3

IKANOS COMMUNICATIONS, INC.

AMENDED AND RESTATED

2004 EQUITY INCENTIVE PLAN

(as amended and restated through August 21, 2009)

1. Purposes of the Plan. The purposes of this Plan are:

 

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to attract and retain the best available personnel for positions of substantial
responsibility,

 

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to provide additional incentive to Employees, Directors and Consultants, and

 

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to promote the success of the Company’s business.

The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock
Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights,
Performance Units, Performance Shares, and Deferred Stock Units.

2. Definitions. As used herein, the following definitions will apply:

(a) “Administrator” means the Board or any of its Committees as will be
administering the Plan, in accordance with Section 4 of the Plan.

(b) “Applicable Laws” means the requirements relating to the administration of
equity-based awards or equity compensation programs under U.S. state corporate
laws, U.S. federal and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Awards are, or will
be, granted under the Plan.

(c) “Award” means, individually or collectively, a grant under the Plan of
Options, SARs, Restricted Stock, Restricted Stock Units, Performance Units,
Performance Shares, or Deferred Stock Units.

(d) “Award Agreement” means the written or electronic agreement setting forth
the terms and provisions applicable to each Award granted under the Plan. The
Award Agreement is subject to the terms and conditions of the Plan.

(e) “Board” means the Board of Directors of the Company.

(f) “Change in Control” means the occurrence of any of the following events:

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the total voting power represented by the
Company’s then outstanding voting securities;

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(ii) The consummation of the sale or disposition by the Company of all or
substantially all of the Company’s assets;

(iii) A change in the composition of the Board occurring within a two-year
period, as a result of which fewer than a majority of the directors are
Incumbent Directors. “Incumbent Directors” means directors who either (A) are
Directors as of the effective date of the Plan, or (B) are elected, or nominated
for election, to the Board with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination (but will not
include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company); or

(iv) The consummation of a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or its parent) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity or its parent outstanding immediately after
such merger or consolidation.

(g) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to
a section of the Code herein will be a reference to any successor or amended
section of the Code.

(h) “Committee” means a committee of Directors or other individuals satisfying
Applicable Laws appointed by the Board in accordance with Section 4 of the Plan.

(i) “Common Stock” means the common stock of the Company.

(j) “Company” means Ikanos Communications, Inc., a Delaware corporation, or any
successor thereto.

(k) “Consultant” means any person, including an advisor, engaged by the Company
or a Parent or Subsidiary to render services to such entity.

(l) “Deferred Stock Unit” means an Award that the Administrator permits to be
paid in installments or on a deferred basis pursuant to Sections 4 and 11 of the
Plan.

(m) “Determination Date” means the latest possible date that will not jeopardize
the qualification of an Award granted under the Plan as “performance-based
compensation” under Section 162(m) of the Code.

(n) “Director” means a member of the Board.

(o) “Disability” means total and permanent disability as defined in
Section 22(e)(3) of the Code, provided that in the case of Awards other than
Incentive Stock Options, the Administrator in its discretion may determine
whether a permanent and total disability exists in accordance with uniform and
non-discriminatory standards adopted by the Administrator from time to time.

 

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(p) “Employee” means any person, including Officers and Directors, employed by
the Company or any Parent or Subsidiary of the Company. Neither service as a
Director nor payment of a director’s fee by the Company will be sufficient to
constitute “employment” by the Company.

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

(r) “Exchange Program” means a program under which (i) outstanding Awards are
surrendered or cancelled in exchange for Awards of the same type (which may have
lower exercise prices and different terms), Awards of a different type, or cash,
or (ii) the exercise price of an outstanding Award is reduced. The
Administrator, in its sole discretion, will determine the terms and conditions
of any Exchange Program, except that approval of the holders of a majority of
the Company’s outstanding common stock shall be required for any Exchange
Program in which (x) outstanding awards are surrendered or cancelled for awards
of cash, or (y) the exercise price of outstanding awards is reduced.

(s) “Fair Market Value” means, as of any date, the value of Common Stock
determined as follows:

(i) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq Global Market,
the Nasdaq Global Select Market or the Nasdaq Capital Market, its Fair Market
Value will be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system on the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized securities dealer
but selling prices are not reported, the Fair Market Value of a Share of Common
Stock will be the mean between the high bid and low asked prices for the Common
Stock on the day of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;

(iii) For purposes of any Awards granted on the Registration Date, the Fair
Market Value will be the initial price to the public as set forth in the final
prospectus included within the registration statement in Form S-1 filed with the
Securities and Exchange Commission for the initial public offering of the
Company’s Common Stock; or

(iv) In the absence of an established market for the Common Stock, the Fair
Market Value will be determined in good faith by the Administrator.

(t) “Fiscal Year” means the fiscal year of the Company.

(u) “Incentive Stock Option” means an Option that by its terms qualifies and is
otherwise intended to qualify as an incentive stock option within the meaning of
Section 422 of the Code and the regulations promulgated thereunder.

(v) “Inside Director” means a Director who is an Employee.

 

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(w) “Nonstatutory Stock Option” means an Option that by its terms does not
qualify or is not intended to qualify as an Incentive Stock Option.

(x) “Officer” means a person who is an officer of the Company within the meaning
of Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.

(y) “Option” means a stock option granted pursuant to the Plan.

(z) “Outside Director” means a Director who is not an Employee.

(aa) “Parent” means a “parent corporation,” whether now or hereafter existing,
as defined in Section 424(e) of the Code.

(bb) “Participant” means the holder of an outstanding Award.

(cc) “Performance Goals” will have the meaning set forth in Section 13 of the
Plan.

(dd) “Performance Period” means any Fiscal Year or such other period as
determined by the Administrator in its sole discretion.

(ee) “Performance Share” means an Award denominated in Shares which may be
earned in whole or in part upon attainment of Performance Goals or other vesting
criteria as the Administrator may determine pursuant to Section 10.

(ff) “Performance Unit” means an Award which may be earned in whole or in part
upon attainment of Performance Goals or other vesting criteria as the
Administrator may determine and which may be settled for cash, Shares or other
securities or a combination of the foregoing pursuant to Section 10.

(gg) “Period of Restriction” means the period during which the transfer of
Shares of Restricted Stock are subject to restrictions and therefore the Shares
are subject to a substantial risk of forfeiture. Such restrictions may be based
on the passage of time, the achievement of target levels of performance, or the
occurrence of other events as determined by the Administrator.

(hh) “Plan” means this 2004 Equity Incentive Plan.

(ii) “Registration Date” means the effective date of the first registration
statement that is filed by the Company and declared effective pursuant to
Section 12(g) of the Exchange Act, with respect to any class of the Company’s
securities.

(jj) “Restricted Stock” means shares of Common Stock issued pursuant to a
Restricted Stock award under Section 7 of the Plan or issued pursuant to the
early exercise of an Option.

(kk) “Restricted Stock Unit” means a bookkeeping entry representing an amount
equal to the Fair Market Value of one Share, granted pursuant to Section 8. Each
Restricted Stock Unit represents an unfunded and unsecured obligation of the
Company.

 

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(ll) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule
16b-3, as in effect when discretion is being exercised with respect to the Plan.

(mm) “Section 16(b)” means Section 16(b) of the Exchange Act.

(nn) “Service Provider” means an Employee, Director or Consultant.

(oo) “Share” means a share of the Common Stock, as adjusted in accordance with
Section 16 of the Plan.

(pp) “Stock Appreciation Right” or “SAR” means an Award, granted alone or in
connection with an Option, that pursuant to Section 9 is designated as a SAR.

(qq) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter
existing, as defined in Section 424(f) of the Code.

3. Stock Subject to the Plan.

(a) Stock Subject to the Plan. Subject to the provisions of Section 16 of the
Plan, the maximum aggregate number of Shares that may be optioned and sold under
the Plan is (i) the number of Shares which have been reserved but not issued
under the Company’s 1999 Stock Plan (the “1999 Plan”) as of the Registration
Date, (ii) any Shares returned to the 1999 Plan as a result of termination of
options or repurchase of Shares issued under such plan on or following the
Registration Date, (iii) an annual increase to be added on the first day of the
Company’s fiscal year beginning in 2006, equal to the least of (A) 4.4% of the
outstanding Shares on such date, (B) 3,000,000 Shares, or (C) an amount
determined by the Board, and (iv) 5,500,000 Shares added to the Plan as part of
our Special Meeting of Stockholder held on August 21, 2009. Notwithstanding the
foregoing, or any other provision of the Plan, the 5,500,000 approved at the
April 21, 2009 Special Meeting of Stockholders may only be used for awards of
stock options and stock appreciation rights and are not permitted to be used for
awards of restricted stock, restricted stock units, or performance shares/units.
The Shares may be authorized, but unissued, or reacquired Common Stock.

(b) Lapsed Awards. If an Award expires or becomes unexercisable without having
been exercised in full, is surrendered pursuant to an Exchange Program, or, with
respect to Restricted Stock, Restricted Stock Units, Performance Shares or
Performance Units, is forfeited to or repurchased by the Company, the
unpurchased Shares (or for Awards other than Options and SARs, the forfeited or
repurchased Shares) which were subject thereto will become available for future
grant or sale under the Plan (unless the Plan has terminated). With respect to
SARs, only Shares actually issued pursuant to an SAR will cease to be available
under the Plan; all remaining Shares under SARs will remain available for future
grant or sale under the Plan (unless the Plan has terminated). However, Shares
that have actually been issued under the Plan under any Award will not be
returned to the Plan and will not become available for future distribution under
the Plan; provided, however, that if Shares of Restricted Stock, Performance
Shares or Performance Units are repurchased by the Company or are forfeited to
the Company, such Shares will become available for future grant under the Plan.
Shares used to pay the tax and/or exercise price of an Award will become
available for future grant or sale under the Plan. To the extent an Award under
the Plan is paid out in cash rather than Shares, such cash payment will not
result in reducing the number of

 

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Shares available for issuance under the Plan. Notwithstanding the foregoing and,
subject to adjustment provided in Section 16, the maximum number of Shares that
may be issued upon the exercise of Incentive Stock Options shall equal the
aggregate Share number stated in Section 3(a), plus, to the extent allowable
under Section 422 of the Code, any Shares that become available for issuance
under the Plan under this Section 3(b).

(c) Share Reserve. The Company, during the term of this Plan, will at all times
reserve and keep available such number of Shares as will be sufficient to
satisfy the requirements of the Plan.

4. Administration of the Plan.

(a) Procedure.

(i) Multiple Administrative Bodies. Different Committees with respect to
different groups of Service Providers may administer the Plan.

(ii) Section 162(m). To the extent that the Administrator determines it to be
necessary or desirable to qualify Awards granted hereunder as “performance-based
compensation” within the meaning of Section 162(m) of the Code, the Plan will be
administered by a Committee of two or more “outside directors” within the
meaning of Section 162(m) of the Code.

(iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as
exempt under Rule 16b-3, the transactions contemplated hereunder will be
structured to satisfy the requirements for exemption under Rule 16b-3.

(iv) Other Administration. Other than as provided above, the Plan will be
administered by (A) the Board or (B) a Committee, which committee will be
constituted to satisfy Applicable Laws.

(v) Delegation of Authority for Day-to-Day Administration. Except to the extent
prohibited by Applicable Law, the Administrator may delegate to one or more
individuals the day-to-day administration of the Plan and any of the functions
assigned to it under the Plan. Such delegation may be revoked at any time. The
Administrator may not delegate authority with respect to Awards intended to
qualify as “performance-based compensation” within the meaning of Section 162(m)
of the Code.

(b) Powers of the Administrator. Subject to the provisions of the Plan, and in
the case of a Committee, subject to the specific duties delegated by the Board
to such Committee, the Administrator will have the authority, in its discretion:

(i) to determine the Fair Market Value;

(ii) to select the Service Providers to whom Awards may be granted hereunder;

(iii) to determine the number of Shares to be covered by each Award granted
hereunder;

 

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(iv) to approve forms of agreement for use under the Plan;

(v) to determine the terms and conditions, not inconsistent with the terms of
the Plan, of any Award granted hereunder. Such terms and conditions include, but
are not limited to, the exercise price, the time or times when Awards may be
exercised (which may be based on performance criteria), any vesting acceleration
or waiver of forfeiture or repurchase restrictions, and any restriction or
limitation regarding any Award or the Shares relating thereto, based in each
case on such factors as the Administrator, in its sole discretion, will
determine;

(vi) to reduce the exercise price of any Award to the then current Fair Market
Value if the Fair Market Value of Common Stock covered by such Award shall have
declined since the date the Award was granted (however, the reduction of the
exercise price of a grant made under the terms of this Plan is subject to
stockholder approval);

(vii) to institute an Exchange Program;

(viii) to construe and interpret the terms of the Plan and Awards granted
pursuant to the Plan;

(ix) to prescribe, amend and rescind rules and regulations relating to the Plan,
including rules and regulations relating to sub-plans established for the
purpose of satisfying applicable foreign laws (including qualifying for
preferred tax treatment under applicable foreign tax laws);

(x) to modify or amend each Award (subject to Section 21(c) of the Plan),
including the discretionary authority to extend the post-termination
exercisability period of Awards longer than is otherwise provided for in the
Plan;

(xi) to allow Participants to satisfy withholding tax obligations in such manner
as prescribed in Section 17;

(xii) to authorize any person to execute on behalf of the Company any instrument
required to effect the grant of an Award previously granted by the
Administrator;

(xiii) to allow a Participant to defer the receipt of the payment of cash or the
delivery of Shares that would otherwise be due to such Participant under an
Award;

(xiv) to determine whether Awards will be settled in Shares, cash, or in any
combination thereof; and

(xv) to make all other determinations deemed necessary or advisable for
administering the Plan.

(c) Effect of Administrator’s Decision. The Administrator’s decisions,
determinations and interpretations will be final and binding on all Participants
and any other holders of Awards.

 

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5. Eligibility. Nonstatutory Stock Options, Restricted Stock, Restricted Stock
Units, Stock Appreciation Rights, Deferred Stock Units, Performance Units and
Performance Shares may be granted to Service Providers. Incentive Stock Options
may be granted only to Employees. Any Employees who are officers of Ikanos
within the meaning of Section 16 of the Securities Exchange Act of 1934, as
amended, are only eligible to receive awards of stock options and stock
appreciation rights under the Plan and are not eligible to receive awards of
restricted stock, restricted stock units, or performance shares/units.

6. Stock Options.

(a) Limitations.

(i) Designation as Incentive Stock Option; $100,000 Limitation. Each Option will
be designated in the Award Agreement as either an Incentive Stock Option or a
Nonstatutory Stock Option. However, notwithstanding such designation, to the
extent that the aggregate Fair Market Value of the Shares with respect to which
Incentive Stock Options are exercisable for the first time by the Participant
during any calendar year (under all plans of the Company and any Parent or
Subsidiary) exceeds $100,000, such Options will be treated as Nonstatutory Stock
Options. For purposes of this Section 6(a)(i), Incentive Stock Options will be
taken into account in the order in which they were granted. The Fair Market
Value of the Shares will be determined as of the time the Option with respect to
such Shares is granted.

(ii) Number of Shares. The Administrator will have complete discretion to
determine the number of Shares that may be granted pursuant to Options granted
to any Service Provider; provided, however, no Service Provider will be granted,
in any Fiscal Year, Options covering more than 500,000 Shares. Notwithstanding
the limitation in the previous sentence, in connection with his or her initial
service a Service Provider may be granted Options covering up to an additional
1,000,000 Shares. The foregoing limitations will be adjusted proportionately in
connection with any change in the Company’s capitalization as described in
Section 16. In addition, if an Option is cancelled in the same Fiscal Year in
which it was granted (other than in connection with a transaction described in
Section 16), the cancelled Option will be counted against the numerical share
limits set forth above.

(b) Term of Option. The term of each Option will be stated in the Award
Agreement. In the case of an Incentive Stock Option, the term will be ten
(10) years from the date of grant or such shorter term as may be provided in the
Award Agreement. Moreover, in the case of an Incentive Stock Option granted to a
Participant who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option will be five (5) years from the date of grant or such
shorter term as may be provided in the Award Agreement.

(c) Option Exercise Price and Consideration.

(i) Exercise Price. The per Share exercise price for the Shares to be issued
pursuant to exercise of an Option will be determined by the Administrator,
subject to the following:

(1) In the case of an Incentive Stock Option

 

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a) granted to an Employee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price will be no less than 110% of the Fair Market Value per
Share on the date of grant.

b) granted to any Employee other than an Employee described in paragraph
(A) immediately above, the per Share exercise price will be no less than 100% of
the Fair Market Value per Share on the date of grant.

c) Notwithstanding the foregoing, Incentive Stock Options may be granted with a
per Share exercise price of less than 100% of the Fair Market Value per Share on
the date of grant pursuant to a transaction described in, and in a manner
consistent with, Section 424(a) of the Code.

(2) In the case of a Nonstatutory Stock Option, the per Share exercise price
will be determined by the Administrator. In the case of a Nonstatutory Stock
Option, whether or not intended to qualify as “performance-based compensation”
within the meaning of Section 162(m) of the Code, the per Share exercise price
will be no less than 100% of the Fair Market Value per Share on the date of
grant.

(ii) Waiting Period and Exercise Dates. At the time an Option is granted, the
Administrator will fix the period within which the Option may be exercised and
will determine any conditions that must be satisfied before the Option may be
exercised.

(iii) Form of Consideration. The Administrator will determine the acceptable
form of consideration for exercising an Option, including the method of payment.
In the case of an Incentive Stock Option, the Administrator will determine the
acceptable form of consideration at the time of grant. Such consideration, to
the extent permitted by Applicable Law, may consist entirely of: (1) cash;
(2) check; (3) other Shares that meet conditions established by the
Administrator to avoid averse accounting consequences (as determined by the
Administrator); (4) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan; (5) a
reduction in the amount of any Company liability to the Participant, including
any liability attributable to the Participant’s participation in any
Company-sponsored deferred compensation program or arrangement; (6) any
combination of the foregoing methods of payment; or (7) such other consideration
and method of payment for the issuance of Shares to the extent permitted by
Applicable Laws. For the avoidance of doubt, promissory notes and loans are not
permissible forms of consideration for exercising Options granted under the
Amended Plan

(d) Exercise of Option.

(i) Procedure for Exercise; Rights as a Stockholder. Any Option granted
hereunder will be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set forth
in the Award Agreement. An Option may not be exercised for a fraction of a
Share.

 

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An Option will be deemed exercised when the Company receives: (x) notice of
exercise (in such form as the Administrator specify from time to time) from the
person entitled to exercise the Option, and (y) full payment for the Shares with
respect to which the Option is exercised (together with any applicable
withholding taxes). Full payment may consist of any consideration and method of
payment authorized by the Administrator and permitted by the Award Agreement and
the Plan. Shares issued upon exercise of an Option will be issued in the name of
the Participant or, if requested by the Participant, in the name of the
Participant and his or her spouse. Until the Shares are issued (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a stockholder will exist with respect to the Awarded Stock,
notwithstanding the exercise of the Option. The Company will issue (or cause to
be issued) such Shares promptly after the Option is exercised. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Shares are issued, except as provided in Section 16 of the Plan or
the applicable Award Agreement.

Exercising an Option in any manner will decrease the number of Shares thereafter
available under the Option by the number of Shares as to which the Option is
exercised.

(ii) Termination of Relationship as a Service Provider. If a Participant ceases
to be a Service Provider, other than upon the Participant’s death or Disability,
the Participant may exercise his or her Option within such period of time as is
specified in the Award Agreement to the extent that the Option is vested on the
date of termination (but in no event later than the expiration of the term of
such Option as set forth in the Award Agreement). In the absence of a specified
time in the Award Agreement, the Option will remain exercisable for three
(3) months following the Participant’s termination. Unless otherwise provided by
the Administrator, if on the date of termination the Participant is not vested
as to his or her entire Option, the Shares covered by the unvested portion of
the Option will revert to the Plan. If after termination the Participant does
not exercise his or her Option within the time specified by the Administrator,
the Option will terminate, and the Shares covered by such Option will revert to
the Plan.

(iii) Disability of Participant. If a Participant ceases to be a Service
Provider as a result of the Participant’s Disability, the Participant may
exercise his or her Option within such period of time as is specified in the
Award Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Award Agreement). In the absence of a specified time in the Award
Agreement, the Option will remain exercisable for twelve (12) months following
the Participant’s termination. Unless otherwise provided by the Administrator,
if on the date of termination the Participant is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option will
revert to the Plan. If after termination the Participant does not exercise his
or her Option within the time specified herein, the Option will terminate, and
the Shares covered by such Option will revert to the Plan.

(iv) Death of Participant. If a Participant dies while a Service Provider, the
Option may be exercised following the Participant’s death within such period of
time as is specified in the Award Agreement to the extent that the Option is
vested on the date of death (but in no event may the option be exercised later
than the expiration of the term of such Option as set forth in the Award
Agreement), by the Participant’s designated beneficiary, provided such
beneficiary has been

 

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designated prior to the Participant’s death in a form acceptable to the
Administrator. If no such beneficiary has been designated by the Participant,
then such Option may be exercised by the personal representative of the
Participant’s estate or by the person(s) to whom the Option is transferred
pursuant to the Participant’s will or in accordance with the laws of descent and
distribution. In the absence of a specified time in the Award Agreement, the
Option will remain exercisable for twelve (12) months following the
Participant’s death. Unless otherwise provided by the Administrator, if at the
time of death the Participant is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option will immediately revert to
the Plan. If the Option is not so exercised within the time specified herein,
the Option will terminate, and the Shares covered by such Option will revert to
the Plan.

7. Restricted Stock.

(a) Grant of Restricted Stock. Subject to the terms and provisions of the Plan,
the Administrator, at any time and from time to time, may grant Shares of
Restricted Stock to Service Providers in such amounts as the Administrator, in
its sole discretion, will determine.

(b) Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced
by an Award Agreement that will specify the Period of Restriction, the number of
Shares granted, and such other terms and conditions as the Administrator, in its
sole discretion, will determine. Notwithstanding the foregoing sentence, for
Restricted Stock intended to qualify as “performance-based compensation” within
the meaning of Section 162(m) of the Code, during any Fiscal Year no Participant
will receive more than an aggregate of 200,000 Shares of Restricted Stock.
Notwithstanding the foregoing limitation, in connection with his or her initial
service as an Employee, for Restricted Stock intended to qualify as
“performance-based compensation” within the meaning of Section 162(m) of the
Code, an Employee may be granted an aggregate of up to an additional 300,000
Shares of Restricted Stock. Unless the Administrator determines otherwise,
Shares of Restricted Stock will be held by the Company as escrow agent until the
restrictions on such Shares have lapsed.

(c) Transferability. Except as provided in this Section 7, Shares of Restricted
Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated until the end of the applicable Period of Restriction.

(d) Other Restrictions. The Administrator, in its sole discretion, may impose
such other restrictions on Shares of Restricted Stock as it may deem advisable
or appropriate.

(e) Removal of Restrictions. Except as otherwise provided in this Section 7,
Shares of Restricted Stock covered by each Restricted Stock grant made under the
Plan will be released from escrow as soon as practicable after the last day of
the Period of Restriction. The Administrator, in its discretion, may accelerate
the time at which any restrictions will lapse or be removed.

(f) Voting Rights. During the Period of Restriction, Service Providers holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares, unless the Administrator determines otherwise.

 

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(g) Dividends and Other Distributions. During the Period of Restriction, Service
Providers holding Shares of Restricted Stock will be entitled to receive all
dividends and other distributions paid with respect to such Shares unless
otherwise provided in the Award Agreement. If any such dividends or
distributions are paid in Shares, the Shares will be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid.

(h) Return of Restricted Stock to Company. On the date set forth in the Award
Agreement, the Restricted Stock for which restrictions have not lapsed will
revert to the Company and again will become available for grant under the Plan.

(i) Section 162(m) Performance Restrictions. For purposes of qualifying grants
of Restricted Stock as “performance-based compensation” under Section 162(m) of
the Code, the Administrator, in its discretion, may set restrictions based upon
the achievement of Performance Goals. The Performance Goals will be set by the
Administrator on or before the Determination Date. In granting Restricted Stock
which is intended to qualify under Section 162(m) of the Code, the Administrator
will follow any procedures determined by it from time to time to be necessary or
appropriate to ensure qualification of the Award under Section 162(m) of the
Code (e.g., in determining the Performance Goals).

8. Restricted Stock Units.

(a) Grant. Restricted Stock Units may be granted at any time and from time to
time as determined by the Administrator. After the Administrator determines that
it will grant Restricted Stock Units under the Plan, it shall advise the
Participant in an Award Agreement of the terms, conditions, and restrictions
related to the grant, including the number of Restricted Stock Units and the
form of payout, which, subject to Section 8(d), may be left to the discretion of
the Administrator. Notwithstanding anything to the contrary in this subsection
(a), for Restricted Stock Units intended to qualify as “performance-based
compensation” within the meaning of Section 162(m) of the Code, during any
Fiscal Year of the Company, no Participant will receive more than an aggregate
of 200,000 Restricted Stock Units. Notwithstanding the limitation in the
previous sentence, for Restricted Stock Units intended to qualify as
“performance-based compensation” within the meaning of Section 162(m) of the
Code, in connection with his or her initial service as an Employee, an Employee
may be granted an aggregate of up to an additional 300,000 Restricted Stock
Units.

(b) Vesting Criteria and Other Terms. The Administrator shall set vesting
criteria in its discretion, which, depending on the extent to which the criteria
are met, will determine the number of Restricted Stock Units that will be paid
out to the Participant. The Administrator may set vesting criteria based upon
the achievement of Company-wide, business unit, or individual goals (including,
but not limited to, continued employment), or any other basis determined by the
Administrator in its discretion.

(c) Earning Restricted Stock Units. Upon meeting the applicable vesting
criteria, the Participant shall be entitled to receive a payout as specified in
the Restricted Stock Unit Award Agreement. Notwithstanding the foregoing, at any
time after the grant of Restricted Stock Units, the Administrator, in its sole
discretion, may reduce or waive any vesting criteria that must be met to receive
a payout.

 

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(d) Form and Timing of Payment. Payment of earned Restricted Stock Units shall
be made as soon as practicable after the date(s) set forth in the Restricted
Stock Unit Award Agreement. The Administrator, in its sole discretion, may pay
earned Restricted Stock Units in cash, Shares, or a combination thereof. Shares
represented by Restricted Stock Units that are fully paid in cash again shall be
available for grant under the Plan.

(e) Cancellation. On the date set forth in the Restricted Stock Unit Award
Agreement, all unearned Restricted Stock Units shall be forfeited to the
Company.

(f) Section 162(m) Performance Restrictions. For purposes of qualifying grants
of Restricted Stock Units as “performance-based compensation” under
Section 162(m) of the Code, the Administrator, in its discretion, may set
restrictions based upon the achievement of Performance Goals. The Performance
Goals will be set by the Administrator on or before the Determination Date. In
granting Restricted Stock Units which are intended to qualify under
Section 162(m) of the Code, the Administrator will follow any procedures
determined by it from time to time to be necessary or appropriate to ensure
qualification of the Award under Section 162(m) of the Code (e.g., in
determining the Performance Goals).

9. Stock Appreciation Rights.

(a) Grant of SARs. Subject to the terms and conditions of the Plan, a SAR may be
granted to Service Providers at any time and from time to time as will be
determined by the Administrator, in its sole discretion.

(b) Number of Shares. The Administrator will have complete discretion to
determine the number of SARs granted to any Service Provider; provided, however,
no Service Provider will be granted, in any Fiscal Year, SARs covering more than
500,000 Shares. Notwithstanding the limitation in the previous sentence, in
connection with his or her initial service a Service Provider may be granted
SARs covering up to an additional 1,000,000 Shares. The foregoing limitations
will be adjusted proportionately in connection with any change in the Company’s
capitalization as described in Section 16. In addition, if a SAR is cancelled in
the same Fiscal Year in which it was granted (other than in connection with a
transaction described in Section 16), the cancelled SAR will be counted against
the numerical share limits set forth above.

(c) Exercise Price and Other Terms. SARs granted under the Plan will have an
exercise price that is no less than one hundred percent (100%) of the fair
market value per share of Ikanos common stock on the date of grant. In all other
respects, the Administrator, subject to the provisions of the Plan, will have
complete discretion to determine the terms and conditions of SARs granted under
the Plan.

(d) Exercise of SARs. SARs will be exercisable on such terms and conditions as
the Administrator, in its sole discretion, will determine.

 

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(e) SAR Agreement. Each SAR grant will be evidenced by an Award Agreement that
will specify the exercise price, the term of the SAR, the conditions of
exercise, and such other terms and conditions as the Administrator, in its sole
discretion, will determine.

(f) Expiration of SARs. An SAR granted under the Plan will expire upon the date
determined by the Administrator, in its sole discretion, and set forth in the
Award Agreement. Notwithstanding the foregoing, the rules of Section 6(d) also
will apply to SARs.

(g) Payment of SAR Amount. Upon exercise of an SAR, a Participant will be
entitled to receive payment from the Company in an amount determined by
multiplying:

(i) The difference between the Fair Market Value of a Share on the date of
exercise over the exercise price; times

(ii) The number of Shares with respect to which the SAR is exercised.

At the discretion of the Administrator, the payment upon SAR exercise may be in
cash, in Shares of equivalent value, or in some combination thereof.

10. Performance Units and Performance Shares.

(a) Grant of Performance Units/Shares. Subject to the terms and conditions of
the Plan, Performance Units and Performance Shares may be granted to Service
Providers at any time and from time to time, as will be determined by the
Administrator, in its sole discretion. The Administrator will have complete
discretion in determining the number of Performance Units and Performance Shares
granted to each Participant provided that during any Fiscal Year, for
Performance Units or Performance Shares intended to qualify as
“performance-based compensation” within the meaning of Section 162(m) of the
Code, (i) no Participant will receive Performance Units having an initial value
greater than $1,000,000, and (ii) no Participant will receive more than 200,000
Performance Shares. Notwithstanding the foregoing limitation, for Performance
Shares intended to qualify as “performance-based compensation” within the
meaning of Section 162(m) of the Code, in connection with his or her initial
service, a Service Provider may be granted up to an additional 300,000
Performance Shares and Performance Units having an initial value up to an
additional $1,000,000.

(b) Value of Performance Units/Shares. Each Performance Unit will have an
initial value that is established by the Administrator on or before the date of
grant. Each Performance Share will have an initial value equal to the Fair
Market Value of a Share on the date of grant.

(c) Performance Objectives and Other Terms. The Administrator will set
performance objectives or other vesting provisions (including, without
limitation, continued status as a Service Provider) in its discretion which,
depending on the extent to which they are met, will determine the number or
value of Performance Units/Shares that will be paid out to the Service
Providers. Each Award of Performance Units/Shares will be evidenced by an Award
Agreement that will specify the Performance Period, and such other terms and
conditions as the Administrator, in its sole discretion, will determine. The
Administrator may set performance objectives based upon the achievement of
Company-wide, divisional, or individual goals (including solely continued
service), applicable federal or state securities laws, or any other basis
determined by the Administrator in its discretion.

 

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(d) Earning of Performance Units/Shares. After the applicable Performance Period
has ended, the holder of Performance Units/Shares will be entitled to receive a
payout of the number of Performance Units/Shares earned by the Participant over
the Performance Period, to be determined as a function of the extent to which
the corresponding performance objectives or other vesting provisions have been
achieved. After the grant of a Performance Unit/Share, the Administrator, in its
sole discretion, may reduce or waive any performance objectives or other vesting
provisions for such Performance Unit/Share.

(e) Form and Timing of Payment of Performance Units/Shares. Payment of earned
Performance Units/Shares will be made after the expiration of the applicable
Performance Period at the time determined by the Administrator. The
Administrator, in its sole discretion, may pay earned Performance Units/Shares
in the form of cash, in Shares (which have an aggregate Fair Market Value equal
to the value of the earned Performance Units/Shares at the close of the
applicable Performance Period) or in a combination thereof.

(f) Cancellation of Performance Units/Shares. On the date set forth in the Award
Agreement, all unearned or unvested Performance Units/Shares will be forfeited
to the Company, and again will be available for grant under the Plan.

(g) Section 162(m) Performance Restrictions. For purposes of qualifying grants
of Performance Units/Shares as “performance-based compensation” under
Section 162(m) of the Code, the Administrator, in its discretion, may set
restrictions based upon the achievement of Performance Goals. The Performance
Goals will be set by the Administrator on or before the Determination Date. In
granting Performance Units/Shares which are intended to qualify under
Section 162(m) of the Code, the Administrator will follow any procedures
determined by it from time to time to be necessary or appropriate to ensure
qualification of the Award under Section 162(m) of the Code (e.g., in
determining the Performance Goals).

11. Deferred Stock Units. Deferred Stock Units shall consist of a Restricted
Stock, Restricted Stock Units, Performance Share or Performance Unit Award that
the Administrator, in its sole discretion permits to be paid out in installments
or on a deferred basis, in accordance with rules and procedures established by
the Administrator. Deferred Stock Units may be settled, at the discretion of the
Administrator, in cash, Shares, or any combination thereof.

12. Formula Option Grants to Outside Directors. All grants of Options to Outside
Directors pursuant to this Section will be automatic and nondiscretionary,
except as otherwise provided herein, and will be made in accordance with the
following provisions:

(a) Type of Option. All Options granted pursuant to this Section will be
Nonstatutory Stock Options and, except as otherwise provided herein, will be
subject to the other terms and conditions of the Plan.

(b) No Discretion. No person will have any discretion to select which Outside
Directors will be granted Options under this Section or to determine the number
of Shares to be covered by such Options (except as provided in Sections 12(g)
and 16).

 

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(c) First Option. Each person who first becomes an Outside Director following
the Registration Date will be automatically granted an Option to purchase 30,000
Shares (the “First Option”) on or about the date on which such person first
becomes an Outside Director, whether through election by the stockholders of the
Company or appointment by the Board to fill a vacancy; provided, however, that
an Inside Director who ceases to be an Inside Director, but who remains a
Director, will not receive a First Option.

(d) Subsequent Option. Each Outside Director will be automatically granted an
Option to purchase 12,000 Shares (a “Subsequent Option”) on each date of the
annual meeting of the stockholders of the Company beginning in 2006, if as of
such date, he or she will have served on the Board for at least the preceding
six (6) months.

(e) Terms. The terms of each Option granted pursuant to this Section will be as
follows:

(i) The term of the Option will be ten (10) years.

(ii) The exercise price per Share will be 100% of the Fair Market Value per
Share on the date of grant of the Option.

(iii) Subject to Section 16, the First Option will vest and become exercisable
as to 25% of the Shares on the first anniversary of the date of grant and as to
1/48th of the Shares each month thereafter, provided that the Participant
continues to serve as a Director through each such date.

(iv) Subject to Section 16, the Subsequent Option will vest and become
exercisable as to 1/12th of the shares each month following the date of grant,
provided that the Participant continues to serve as a Director through such
date.

(f) Exercise of Options. The rules of Sections 6(d) also will apply to Options
granted pursuant to this Section 12. To the extent that the Participant was not
entitled to exercise an Option on the date of termination, or if he or she does
not exercise an Option (to the extent otherwise so entitled) granted pursuant to
this Section 12 within the time specified in the applicable Award Agreement, the
Option shall terminate. Outside Directors may not use promissory notes or loans
as consideration for exercising options to purchase Ikanos common stock granted
pursuant to the terms of Section 12 of the Plan.

(g) Adjustments. The Administrator in its discretion may change and otherwise
revise the terms of Options granted under this Section 12, including, without
limitation, the number of Shares subject thereto, or change the type of Award to
be granted under this Section 12, for Options or Awards granted on or after the
date the Administrator determines to make any such change or revision.

13. Performance-Based Compensation Under Code Section 162(m).

(a) General. If the Administrator, in its discretion, decides to grant an Award
intended to qualify as “performance-based compensation” under Section 162(m) of
the Code, the provisions of this Section 13 will control over any contrary
provision in the Plan; provided, however,

 

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that the Administrator may in its discretion grant Awards that are not intended
to qualify as “performance-based compensation” under Section 162(m) of the Code
to such Participants that are based on Performance Goals or other specific
criteria or goals but that do not satisfy the requirements of this Section 13.

(b) Performance Goals. The granting and/or vesting of Awards of Restricted
Stock, Restricted Stock Units, Performance Shares, Performance Units, and
Deferred Stock Units and other incentives under the Plan may be made subject to
the attainment of performance goals relating to one or more business criteria
within the meaning of Section 162(m) of the Code and may provide for a targeted
level or levels of achievement (“Performance Goals”) including: (i) cash
position, (ii) earnings per Share, (iii) net income, (iv) operating cash flow,
(v) operating expenses, (vi) operating income, (vii) product revenues,
(viii) profit after-tax, (ix) profit before-tax, (x) return on assets,
(xi) return on equity, (xii) return on sales, (xiii) revenue, (xiv) revenue
growth, and (xv) total stockholder return. Prior to the Determination Date, the
Administrator will determine whether any significant element(s) will be included
in or excluded from the calculation of any Performance Goal with respect to any
Participant. Any Performance Goals may be used to measure the performance of the
Company as a whole or a business unit of the Company and may be measured
relative to a peer group or index. With respect to any Award, Performance Goals
may be used alone or in combination. The Performance Goals may differ from
Participant to Participant and from Award to Award. Prior to the Determination
Date, the Administrator will determine whether any significant element(s) will
be included in or excluded from the calculation of any Performance Goal with
respect to any Participant.

(c) Procedures. To the extent necessary to comply with the performance-based
compensation provisions of Section 162(m) of the Code, with respect to any Award
granted subject to Performance Goals, within the first twenty-five percent
(25%) of the Performance Period, but in no event more than ninety (90) days
following the commencement of any Performance Period (or such other time as may
be required or permitted by Code Section 162(m)), the Administrator will, in
writing, (i) designate one or more Participants to whom an Award will be made,
(ii) select the Performance Goals applicable to the Performance Period,
(iii) establish the Performance Goals, and amounts of such Awards, as
applicable, which may be earned for such Performance Period, and (iv) specify
the relationship between Performance Goals and the amounts of such Awards, as
applicable, to be earned by each Participant for such Performance Period.
Following the completion of each Performance Period, the Administrator will
certify in writing whether the applicable Performance Goals have been achieved
for such Performance Period. In determining the amounts earned by a Participant,
the Administrator will have the right to reduce or eliminate (but not to
increase) the amount payable at a given level of performance to take into
account additional factors that the Administrator may deem relevant to the
assessment of individual or corporate performance for the Performance Period. A
Participant will be eligible to receive payment pursuant to an Award for a
Performance Period only if the Performance Goals for such period are achieved.

(d) Additional Limitations. Notwithstanding any other provision of the Plan, any
Award which is granted to a Participant and is intended to constitute qualified
performance based compensation under Code Section 162(m) will be subject to any
additional limitations set forth in the Code (including any amendment to
Section 162(m)) or any regulations and ruling issued thereunder that are
requirements for qualification as qualified performance-based compensation as

 

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described in Section 162(m) of the Code, and the Plan will be deemed amended to
the extent necessary to conform to such requirements.

14. Leaves of Absence. Unless the Administrator provides otherwise, vesting of
Awards granted hereunder will be suspended during any unpaid leave of absence. A
Service Provider will not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, or any Subsidiary. For purposes of
Incentive Stock Options, no such leave may exceed three (3) months, unless
reemployment upon expiration of such leave is guaranteed by statute or contract.
If reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, then six (6) months and one (1) day following the
commencement of such leave any Incentive Stock Option held by the Participant
will cease to be treated as an Incentive Stock Option and will be treated for
tax purposes as a Nonstatutory Stock Option.

15. Transferability of Awards. Unless determined otherwise by the Administrator,
an Award may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Participant, only
by the Participant. If the Administrator makes an Award transferable, such Award
will contain such additional terms and conditions as the Administrator deems
appropriate.

16. Adjustments; Dissolution or Liquidation; Merger or Change in Control.

(a) Adjustments. In the event that any dividend or other distribution (whether
in the form of cash, Shares, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Shares or other securities of the Company, or other change in the corporate
structure of the Company affecting the Shares occurs such that the Administrator
(in its sole discretion) determines an adjustment is appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Administrator shall, in such
manner as it may deem equitable, adjust the number and class of Shares that may
be delivered under the Plan, the number, class, and price of Shares covered by
each outstanding Award, the numerical Share limits in Sections 3, 6, 7, 8, 9,
and 10, and the number of Shares issuable pursuant to the formula option grants
to Outside Directors under Section 11.

(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator will notify each Participant as
soon as practicable prior to the effective date of such proposed transaction.
The Administrator in its discretion may provide for a Participant to have the
right to exercise his or her Award, to the extent applicable, until ten
(10) days prior to such transaction as to all of the Awarded Stock covered
thereby, including Shares as to which the Award would not otherwise be
exercisable. In addition, the Administrator may provide that any Company
repurchase option or forfeiture rights applicable to any Award shall lapse 100%,
and that any Award vesting shall accelerate 100%, provided the proposed
dissolution or liquidation takes place at the time and in the manner
contemplated. To the extent an Award has not been previously exercised or
settled, the Award will terminate immediately prior to the consummation of such
proposed action.

 

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(c) Change in Control.

(i) Stock Options and SARS. In the event of a merger or Change in Control, each
outstanding Option and SAR shall be assumed or an equivalent option or SAR
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. Unless determined otherwise by the Administrator, in the
event that the successor corporation refuses to assume or substitute for the
Option or SAR, the Participant shall fully vest in and have the right to
exercise the Option or SAR as to all of the Awarded Stock, including Shares as
to which the Award would not otherwise be vested or exercisable. If an Option or
SAR is not assumed or substituted in the event of a merger or Change in Control,
the Administrator shall notify the Participant in writing or electronically that
the Option or SAR shall be exercisable, to the extent vested, for a period from
the date of such notice as the Administrator may determine, and the Option or
SAR shall terminate upon the expiration of such period. For the purposes of this
paragraph, the Option or SAR shall be considered assumed if, following the
merger or Change in Control, the option or stock appreciation right confers the
right to purchase or receive, for each Share of Awarded Stock subject to the
Option or SAR immediately prior to the merger or Change in Control, the
consideration (whether stock, cash, or other securities or property) received in
the merger or Change in Control by holders of Common Stock for each Share held
on the effective date of the transaction (and if holders were offered a choice
of consideration, the type of consideration chosen by the holders of a majority
of the outstanding Shares); provided, however, that if such consideration
received in the merger or Change in Control is not solely common stock of the
successor corporation or its Parent, the Administrator may, with the consent of
the successor corporation, provide for the consideration to be received upon the
exercise of the Option or SAR, for each Share of Awarded Stock subject to the
Option or SAR, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or Change in Control. Notwithstanding
anything herein to the contrary, an Award that vests, is earned or paid-out upon
the satisfaction of one or more performance goals will not be considered assumed
if the Company or its successor modifies any of such performance goals without
the Participant’s consent; provided, however, a modification to such performance
goals only to reflect the successor corporation’s post-merger or post-Change in
Control corporate structure will not be deemed to invalidate an otherwise valid
Award assumption.

(ii) Restricted Stock, Restricted Stock Units, Performance Shares, Performance
Units, and Deferred Stock Units. In the event of a merger or Change in Control,
each outstanding Award of Restricted Stock, Restricted Stock Units, Performance
Shares, Performance Units, and Deferred Stock Units shall be assumed or an
equivalent Restricted Stock, Restricted Stock Unit, Performance Share,
Performance Unit, or Deferred Stock Unit award substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. Unless
determined otherwise by the Administrator, in the event that the successor
corporation refuses to assume or substitute for the Award, all restrictions on
Restricted Stock will lapse, and, with respect to Restricted Stock Units,
Performance Shares, Performance Units, Deferred Stock Units, all Performance
Goals or other vesting criteria will be deemed achieved at target levels and all
other terms and conditions met. For the purposes of this paragraph, a Restricted
Stock, Restricted Stock Unit, Performance Share, Performance Unit, and Deferred
Stock Unit award shall be considered assumed if, following the merger or Change
in Control, the Award confers the right to purchase or receive, for each Share
subject to the Award immediately prior to the merger or Change in Control, the
consideration (whether stock, cash, or other securities or property) or, in the
case of a Stock Appreciation Right upon the exercise of which the Administrator
determines to pay cash or a Restricted Stock Unit, Performance Share or
Performance Unit which the Administrator can

 

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determine to pay in cash, the fair market value of received in the merger or
Change in Control by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or Change in Control is not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received, for each
Share and each unit/right to acquire a Share subject to the Award (or in the
case of Restricted Stock Units and Performance Units, the number of implied
Shares determined by dividing the value of the Restricted Stock Units and
Performance Units, as applicable, by the per Share consideration received by
holders of Common Stock in the Change in Control), to be solely common stock of
the successor corporation or its Parent equal in fair market value to the per
share consideration received by holders of Common Stock in the merger or Change
in Control. Notwithstanding anything herein to the contrary, an Award that
vests, is earned or paid-out upon the satisfaction of one or more performance
goals will not be considered assumed if the Company or its successor modifies
any of such performance goals without the Participant’s consent; provided,
however, a modification to such performance goals only to reflect the successor
corporation’s post-merger or post-Change in Control corporate structure will not
be deemed to invalidate an otherwise valid Award assumption.

(iii) Outside Director Awards. Notwithstanding any provision of Section 16(c)(i)
or 16(c)(ii) to the contrary, with respect to Awards granted to an Outside
Director that are assumed or substituted for, if on or following the date of
such assumption or substitution the Participant’s status as a Director or a
director of the successor corporation, as applicable, is terminated other than
upon a voluntary resignation by the Participant (unless such resignation is at
the request of the acquiror), then the Participant will fully vest in and have
the right to exercise his or her Options and Stock Appreciation Rights as to all
of the Awarded Stock, including Shares as to which such Awards would not
otherwise be vested or exercisable, all restrictions on Restricted Stock,
Restricted Stock Units and Deferred Stock Units, as applicable, will lapse, and,
with respect to Performance Shares and Performance Units (and related Deferred
Stock Units), all performance goals or other vesting criteria will be deemed
achieved at target levels and all other terms and conditions met.

17. Tax Withholding.

(a) Withholding Requirements. Prior to the delivery of any Shares or cash
pursuant to an Award (or exercise thereof), the Company will have the power and
the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, state, local, foreign or other
taxes (including the Participant’s FICA obligation) required to be withheld with
respect to such Award (or exercise thereof).

(b) Withholding Arrangements. The Administrator, in its sole discretion and
pursuant to such procedures as it may specify from time to time, may permit a
Participant to satisfy such tax withholding obligation, in whole or in part by
(without limitation) (a) paying cash, (b) electing to have the Company withhold
otherwise deliverable cash or Shares having a Fair Market Value equal to the
minimum amount required to be withheld, or (c) delivering to the Company
already-owned Shares having a Fair Market Value equal to the minimum amount
required to be withheld. The amount of the withholding requirement will be
deemed to include any amount

 

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which the Administrator agrees may be withheld at the time the election is made,
not to exceed the amount determined by using the maximum federal, state or local
marginal income tax rates applicable to the Participant with respect to the
Award on the date that the amount of tax to be withheld is to be determined. The
Fair Market Value of the Shares to be withheld or delivered will be determined
as of the date that the taxes are required to be withheld.

18. No Effect on Employment or Service. Neither the Plan nor any Award will
confer upon a Participant any right with respect to continuing the Participant’s
relationship as a Service Provider with the Company, nor will they interfere in
any way with the Participant’s right or the Company’s right to terminate such
relationship at any time, with or without cause, to the extent permitted by
Applicable Laws.

19. Date of Grant. The date of grant of an Award will be, for all purposes, the
date on which the Administrator makes the determination granting such Award, or
such other later date as is determined by the Administrator. Notice of the
determination will be provided to each Participant within a reasonable time
after the date of such grant.

20. Term of Plan. Subject to Section 24 of the Plan, the Plan will become
effective upon its adoption by the Board. It will continue in effect for a term
of ten (10) years from the date adopted by the Board, unless terminated earlier
under Section 21 of the Plan.

21. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may at any time amend, alter, suspend
or terminate the Plan.

(b) Stockholder Approval. The Company will obtain stockholder approval of any
Plan amendment to the extent necessary and desirable to comply with Applicable
Laws.

(c) Effect of Amendment or Termination. No amendment, alteration, suspension or
termination of the Plan will impair the rights of any Participant, unless
mutually agreed otherwise between the Participant and the Administrator, which
agreement must be in writing and signed by the Participant and the Company.
Termination of the Plan will not affect the Administrator’s ability to exercise
the powers granted to it hereunder with respect to Awards granted under the Plan
prior to the date of such termination.

22. Conditions Upon Issuance of Shares.

(a) Legal Compliance. Shares will not be issued pursuant to the exercise of an
Award unless the exercise of such Award and the issuance and delivery of such
Shares will comply with Applicable Laws and will be further subject to the
approval of counsel for the Company with respect to such compliance.

(b) Investment Representations. As a condition to the exercise, receipt, or
settlement of an Award, the Company may require the person exercising or
receiving such Award or settlement to represent and warrant at the time of any
such exercise or receipt that the Shares are being purchased only for investment
and without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.

 

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23. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, will relieve the Company of any liability in respect of
the failure to issue or sell such Shares as to which such requisite authority
will not have been obtained.

24. Stockholder Approval. The Plan will be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval will be obtained in the manner and to the
degree required under Applicable Laws.

 

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