EXHIBIT 10.2

ELECTRO SCIENTIFIC INDUSTRIES, INC.

2004 STOCK INCENTIVE PLAN

(As amended January 25, 2005, April 20, 2005 and October 25, 2007)

1. Purpose. The purpose of this 2004 Stock Incentive Plan (the “Plan”) is to
enable Electro Scientific Industries, Inc. (the “Company”) to attract and retain
the services of (i) selected employees, officers and directors of the Company or
any parent or subsidiary of the Company and (ii) selected non-employee agents,
consultants, advisors and independent contractors of the Company or any parent,
subsidiary of the Company. For purposes of this Plan, a person is considered to
be employed by or in the service of the Company if the person is employed by or
in the service of any entity (the “Employer”) that is either the Company or a
parent or subsidiary of the Company.

2. Shares Subject to the Plan. Subject to adjustment as provided below and in
Section 12, the shares to be offered under the Plan shall consist of Common
Stock of the Company (“Common Stock”), and the total number of shares of Common
Stock that may be issued under the Plan shall be 3,000,000 shares plus any
shares that at the time the Plan is approved by shareholders are available for
grant under the Company’s 1989 Stock Option Plan, 1996 Stock Incentive Plan and
2000 Stock Option Incentive Plan, which plans were previously approved by
shareholders of the Company, and the Company’s 2000 Stock Option Plan, which
plan was not previously approved by the Company’s shareholders (collectively,
the “Prior Plans”), or that may subsequently become available for grant under
any of the Prior Plans through the expiration, termination, forfeiture or
cancellation of grants. If an option, stock appreciation right or
Performance-Based Award granted under the Plan expires, terminates or is
canceled, the unissued shares subject to that option, stock appreciation right
or Performance-Based Award shall again be available under the Plan. If shares
awarded as a bonus pursuant to Section 9 or sold pursuant to Section 10 under
the Plan are forfeited to or repurchased by the Company, the number of shares
forfeited or repurchased shall again be available under the Plan.

 

  3. Effective Date and Duration of Plan.

3.1 Effective Date. The Plan shall become effective as of July 15, 2004. No
awards shall be made under the Plan until the Plan is approved by shareholders
of the Company in accordance with rules of The Nasdaq Stock Market.

3.2 Duration. The Plan shall continue in effect until all shares available for
issuance under the Plan have been issued and all restrictions on the shares have
lapsed. The Board of Directors may suspend or terminate the Plan at any time
except with respect to Awards then outstanding under the Plan. Termination shall
not affect any Awards or any right of the Company to repurchase shares or the
forfeitability of shares issued under the Plan.

4. Administration.

4.1 Board of Directors. The Plan shall be administered by the Board of Directors
of the Company, which shall determine and designate the individuals to whom
awards shall be made, the amount of the awards and the other terms and
conditions of the awards. Subject to the provisions of the Plan, the Board of
Directors may adopt and amend rules and regulations relating to administration
of the Plan, advance the lapse of any waiting period, accelerate any exercise
date, waive or modify any

--------------------------------------------------------------------------------

restriction applicable to shares (except those restrictions imposed by law) and
make all other determinations in the judgment of the Board of Directors
necessary or desirable for the administration of the Plan. The interpretation
and construction of the provisions of the Plan and related agreements by the
Board of Directors shall be final and conclusive. The Board of Directors may
correct any defect or supply any omission or reconcile any inconsistency in the
Plan or in any related agreement in the manner and to the extent it deems
expedient to carry the Plan into effect, and the Board of Directors shall be the
sole and final judge of such expediency.

4.2 Committee. The Board of Directors may delegate to any committee of the Board
of Directors (the “Committee”) any or all authority for administration of the
Plan. If authority is delegated to the Committee, all references to the Board of
Directors in the Plan shall mean and relate to the Committee, except (i) as
otherwise provided by the Board of Directors and (ii) that only the Board of
Directors may amend or terminate the Plan as provided in Sections 3 and 13.

 

  5. Types of Awards; Eligibility; Limitations.

5.1 Types of Awards, Eligibility. The Board of Directors may, from time to time,
take the following actions, separately or in combination, under the Plan
(“Awards”): (i) grant Incentive Stock Options, as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the “Code”), as provided in
Sections 6.1, 6.2 and 8; (ii) grant options other than Incentive Stock Options
(“Non-Statutory Stock Options”) as provided in Sections 6.1, 6.3 and 8;
(iii) grant stock appreciation rights as provided in Sections 7 and 8;
(iv) award stock bonuses (including bonuses in the form of restricted stock
units) as provided in Section 9; (v) sell shares subject to restrictions as
provided in Sections 10; (vi) award Performance-Based Awards as provided in
Section 11. Awards may be made to employees, including employees who are
officers or directors, and to non-employee directors; provided, however, that
only employees of the Company or any parent or subsidiary of the Company (as
defined in subsections 424(e) and 424(f) of the Code) are eligible to receive
Incentive Stock Options under the Plan. The Board of Directors shall select the
individuals to whom awards shall be made and shall specify the action taken with
respect to each individual to whom an award is made.

5.2 Per Employee Share Limitations. No employee may be granted options and/or
stock appreciation rights for more than an aggregate of 500,000 shares of Common
Stock in any calendar year or restricted stock or restricted stock units for
more than an aggregate of 170,000 shares of Common Stock in any calendar year;
provided, however, that to the extent the annual limitation is not fully used in
any year for an employee, any shares not used may be added to the number of
shares for which options and/or stock appreciation rights or restricted stock
and/or restricted stock units, as applicable, may be granted to that employee in
any future year.

5.3 Prohibition on Option Repricing. Except as provided in Section 12, without
the prior approval of the Company’s shareholders, an option issued under the
Plan may not be repriced by lowering the option exercise price or by
cancellation of an outstanding option with a subsequent replacement or regrant
of an option with a lower exercise price.

5.4 Maximum Number of Shares Issuable Upon Exercise of ISOs. The maximum
aggregate number of shares of Common Stock that may be issued under the Plan
upon exercise of Incentive Stock Options shall be equal to the sum of
3,000,000 shares plus any shares that at July 15, 2004 are available for grant
under the Prior Plans or that may subsequently become available for grant under
any of the Prior Plans through the expiration, termination, forfeiture or
cancellation of grants, which number will not exceed 9,568,684 shares.

--------------------------------------------------------------------------------

5.5 Reservation of Additional Shares. Except as provided in Section 12,
additional shares of Common Stock may not be reserved for issuance under the
Plan without the approval of the Company’s shareholders.

 

  6. Stock Options.

6.1 General Rules Relating to Options.

6.1-1 Terms of Grant. The Board of Directors may grant options under the Plan.
With respect to each option grant, the Board of Directors shall determine the
number of shares subject to the option, the exercise price, the period of the
option, the time or times at which the option may be exercised and whether the
option is an Incentive Stock Option or a Non-Statutory Stock Option. At the time
of the grant of an option or at any time thereafter, the Board of Directors may
provide that an optionee who exercised an option with Common Stock of the
Company shall automatically receive a new option to purchase additional shares
equal to the number of shares surrendered and may specify the terms and
conditions of such new options.

6.1-2 Nontransferability. Each Incentive Stock Option and, unless otherwise
determined by the Board of Directors, each other option granted under the Plan
by its terms (i) shall be nonassignable and nontransferable by the optionee,
either voluntarily or by operation of law, except by will or by the laws of
descent and distribution of the state or country of the optionee’s domicile at
the time of death, and (ii) during the optionee’s lifetime, shall be exercisable
only by the optionee.

6.1-3 Purchase of Shares. Unless the Board of Directors determines otherwise, on
or before the date specified for completion of the purchase of shares pursuant
to an option exercise, the optionee must pay the Company the full purchase price
of those shares in cash or by check or, with the consent of the Board of
Directors, in whole or in part, in Common Stock of the Company valued at fair
market value, restricted stock or other contingent awards denominated in either
stock or cash, promissory notes and other forms of consideration. Unless
otherwise determined by the Board of Directors, any Common Stock provided in
payment of the purchase price must have been previously acquired and held by the
optionee for at least six months. The fair market value of Common Stock provided
in payment of the purchase price shall be the closing price of the Common Stock
last reported before the time payment in Common Stock is made or, if earlier,
committed to be made, if the Common Stock is publicly traded, or another value
of the Common Stock as specified by the Board of Directors. No shares shall be
issued until full payment for the shares has been made, including all amounts
owed for tax withholding. With the consent of the Board of Directors, an
optionee may request the Company to apply automatically the shares to be
received upon the exercise of a portion of a stock option (even though stock
certificates have not yet been issued) to satisfy the purchase price for
additional portions of the option.

6.1-4 Limitations on Grants to Non-Exempt Employees. Unless otherwise determined
by the Board of Directors, if an employee of the Company or any parent or
subsidiary of the Company is a non-exempt employee subject to the overtime
compensation provisions of Section 7 of the Fair Labor Standards Act (the
“FLSA”), any option granted to that employee shall be subject to the following
restrictions: (i) the option price shall be at least 85 percent of the fair
market value, as

--------------------------------------------------------------------------------

described in Section 6.2-4, of the Common Stock subject to the option on the
date it is granted; and (ii) the option shall not be exercisable until at least
six months after the date it is granted; provided, however, that this six-month
restriction on exercisability will cease to apply if the employee dies, becomes
disabled or retires, there is a change in ownership of the Company, or in other
circumstances permitted by regulation, all as prescribed in Section 7(e)(8)(B)
of the FLSA.

6.2 Incentive Stock Options. Incentive Stock Options shall be subject to the
following additional terms and conditions:

6.2-1 Limitation on Amount of Grants. If the aggregate fair market value of
stock (determined as of the date the option is granted) for which Incentive
Stock Options granted under this Plan (and any other stock incentive plan of the
Company or its parent or subsidiary corporations, as defined in
subsections 424(e) and 424(f) of the Code) are exercisable for the first time by
an employee during any calendar year exceeds $100,000, the portion of the option
or options not exceeding $100,000, to the extent of whole shares, will be
treated as an Incentive Stock Option and the remaining portion of the option or
options will be treated as a Non-Statutory Stock Option. The preceding sentence
will be applied by taking options into account in the order in which they were
granted. If, under the $100,000 limitation, a portion of an option is treated as
an Incentive Stock Option and the remaining portion of the option is treated as
a Non-Statutory Stock Option, unless the optionee designates otherwise at the
time of exercise, the optionee’s exercise of all or a portion of the option will
be treated as the exercise of the Incentive Stock Option portion of the option
to the full extent permitted under the $100,000 limitation. If an optionee
exercises an option that is treated as in part an Incentive Stock Option and in
part a Non-Statutory Stock Option, the Company will designate the portion of the
stock acquired pursuant to the exercise of the Incentive Stock Option portion as
Incentive Stock Option stock by issuing a separate certificate for that portion
of the stock and identifying the certificate as Incentive Stock Option stock in
its stock records.

6.2-2 Limitations on Grants to 10 percent Shareholders. An Incentive Stock
Option may be granted under the Plan to an employee possessing more than
10 percent of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary (as defined in subsections 424(e) and 424(f)
of the Code) only if the option price is at least 110 percent of the fair market
value, as described in Section 6.2-4, of the Common Stock subject to the option
on the date it is granted and the option by its terms is not exercisable after
the expiration of five years from the date it is granted.

6.2-3 Duration of Options. Subject to Sections 6.2-2, 8.1 and 8.2, Incentive
Stock Options granted under the Plan shall continue in effect for the period
fixed by the Board of Directors, except that by its terms no Incentive Stock
Option shall be exercisable after the expiration of 10 years from the date it is
granted.

6.2-4 Option Price. The option price per share shall be determined by the Board
of Directors at the time of grant. Except as provided in Section 6.2-2, the
option price shall not be less than 100 percent of the fair market value of the
Common Stock covered by the Incentive Stock Option at the date the option is
granted. The fair market value shall be the closing price of the Common Stock
last reported on the date the option is granted, if the stock is publicly
traded, or another value of the Common Stock as specified by the Board of
Directors.

--------------------------------------------------------------------------------

6.2-5 Limitation on Time of Grant. No Incentive Stock Option shall be granted on
or after the tenth anniversary of the last action by the Board of Directors
adopting the Plan or approving an increase in the number of shares available for
issuance under the Plan, which action was subsequently approved within 12 months
by the shareholders.

6.2-6 Early Dispositions. If within two years after an Incentive Stock Option is
granted or within 12 months after an Incentive Stock Option is exercised, the
optionee sells or otherwise disposes of Common Stock acquired on exercise of the
Option, the optionee shall within 30 days of the sale or disposition notify the
Company in writing of (i) the date of the sale or disposition, (ii) the amount
realized on the sale or disposition and (iii) the nature of the disposition
(e.g., sale, gift, etc.).

6.3 Non-Statutory Stock Options. Non-Statutory Stock Options shall be subject to
the following terms and conditions, in addition to those set forth in
Sections 6.1 and 8.

6.3-1 Option Price. The option price for Non-Statutory Stock Options shall be
determined by the Board of Directors at the time of grant. The option price
shall not be less than 100 percent of the fair market value of the Common Stock
covered by the Non-Statutory Stock Option at the date the option is granted. The
fair market value shall be the closing price of the Common Stock last reported
on the date the option is granted, if the stock is publicly traded, or another
value of the Common Stock as specified by the Board of Directors.

6.3-2 Duration of Options. Non-Statutory Stock Options granted under the Plan
shall continue in effect for the period fixed by the Board of Directors, except
that no Non-Statutory Option shall be exercisable after the expiration of 10
years from the date it is granted.

7. Stock Appreciation Rights.

7.1 Grant. Stock appreciation rights may be granted under the Plan by the Board
of Directors, subject to such rules, terms, and conditions as the Board of
Directors prescribes. The Board of Directors may provide that stock appreciation
rights may be granted in substitution for stock options granted under the Plan.
With respect to each grant, the Board shall determine the number of shares
subject to the stock appreciation right, the exercise price of the stock
appreciation right, the period of the stock appreciation right, and the time or
times at which the stock appreciation right may be exercised. Stock appreciation
rights shall continue in effect for the period fixed by the Board of Directors.

7.2 Stock Appreciation Rights Granted in Connection with Options. If a stock
appreciation right is granted in connection with an option, the stock
appreciation right shall be exercisable only to the extent and on the same
conditions that the related option could be exercised. Upon exercise of a stock
appreciation right, any option or portion thereof to which the stock
appreciation right relates terminates. If a stock appreciation right is granted
in connection with an option, upon exercise of the option, the stock
appreciation right or portion thereof to which the grant relates terminates.

7.3 Exercise. Each stock appreciation right shall entitle the holder, upon
exercise, to receive from the Company in exchange therefor an amount equal in
value to the excess of the fair market value on the date of exercise of one
share of Common Stock of the Company over the exercise price as determined by
the Board of Directors (or, in the case of a stock appreciation right granted in
connection with an option, the option price per share under the option to which
the stock appreciation right relates),

--------------------------------------------------------------------------------

multiplied by the number of shares covered by the stock appreciation right, or
portion thereof, that is surrendered. Payment by the Company upon exercise of a
stock appreciation right may be made in Common Stock valued at fair market
value, in cash, or partly in Common Stock and partly in cash, all as determined
by the Board of Directors. For this purpose, the fair market value of the Common
Stock shall be the closing price of the Common Stock last reported before the
time of exercise, or such other value of the Common Stock as specified by the
Board of Directors.

7.4 Fractional Shares. No fractional shares shall be issued upon exercise of a
stock appreciation right. In lieu thereof, cash may be paid in an amount equal
to the value of the fraction or, if the Board of Directors shall determine, the
number of shares may be rounded downward to the next whole share.

7.5 Nontransferability. Each stock appreciation right granted in connection with
an Incentive Stock Option and, unless otherwise determined by the Board of
Directors, each other stock appreciation right granted under the Plan, by its
terms shall be nonassignable and nontransferable by the holder, either
voluntarily or by operation of law, except by will or by the laws of descent and
distribution of the state or country of the holder’s domicile at the time of
death, and each stock appreciation right by its terms shall be exercisable
during the holder’s lifetime only by the holder.

 

  8. Exercise of Options and Stock Appreciation Rights.

8.1 Exercise. Except as provided in Section 8.2 or as determined by the Board of
Directors, no option or stock appreciation right granted under the Plan may be
exercised unless at the time of exercise the holder is employed by or in the
service of the Company and shall have been so employed or provided such service
continuously since the date the option or stock appreciation right was granted.
Except as provided in Sections 8.2, 12 and 17, options and stock appreciation
rights granted under the Plan may be exercised from time to time over the period
stated in each option or stock appreciation right in amounts and at times
prescribed by the Board of Directors, provided that options and stock
appreciation rights may not be exercised for fractional shares. Unless otherwise
determined by the Board of Directors, if a holder does not exercise an option or
stock appreciation right in any one year for the full number of shares to which
the holder is entitled in that year, the holder’s rights shall be cumulative and
the holder may acquire those shares in any subsequent year during the term of
the option or stock appreciation right.

8.2 Termination of Employment or Service.

8.2-1 General Rule. Unless otherwise determined by the Board of Directors, if a
holder’s employment or service with the Company terminates for any reason other
than because of total disability or death as provided in Sections 8.2-2 and
8.2-3, his or her option or stock appreciation right may be exercised at any
time before the expiration date of the option or stock appreciation right or the
expiration of 3 months after the date of termination, whichever is the shorter
period, but only if and to the extent the holder was entitled to exercise the
option or stock appreciation right at the date of termination. Notwithstanding
the foregoing, unless otherwise determined by the Board of Directors, if a
holder’s employment or service with the Company terminates for any reason other
than because of total disability or death as provided in Sections 8.2-2 and
8.2-3, and such holder dies before the expiration date of the option or stock
appreciation right and the expiration of 3 months after the date of termination,
his or her option or stock appreciation right may be exercised at any time
before the expiration date of the option or stock appreciation right or before
the date 12 months after the date of termination,

--------------------------------------------------------------------------------

whichever is the shorter period, but only if and to the extent the holder was
entitled to exercise the option or stock appreciation right at the date of
termination and only by the person or persons to whom the holder’s rights under
the option or stock appreciation right shall pass by the holder’s will or by the
laws of descent and distribution of the state or country of domicile at the time
of death.

8.2-2 Termination Because of Total Disability. Unless otherwise determined by
the Board of Directors, if a holder’s employment or service with the Company
terminates because of total disability, his or her option or stock appreciation
right may be exercised at any time before the expiration date of the option or
stock appreciation right or before the date 12 months after the date of
termination, whichever is the shorter period, but only if and to the extent the
holder was entitled to exercise the option or stock appreciation right at the
date of termination. The term “total disability” means a medically determinable
mental or physical impairment that is expected to result in death or has lasted
or is expected to last for a continuous period of 12 months or more and that, in
the opinion of the Company and two independent physicians, causes the holder to
be unable to perform his or her duties as an employee, director or officer of
the Employer and unable to be engaged in any substantial gainful activity. Total
disability shall be deemed to have occurred on the first day after the two
independent physicians have furnished their written opinion of total disability
to the Company and the Company has reached an opinion of total disability.

8.2-3 Termination Because of Death. Unless otherwise determined by the Board of
Directors, if a holder dies while employed by or providing service to the
Company, his or her option or stock appreciation right may be exercised at any
time before the expiration date of the option or stock appreciation right or
before the date 12 months after the date of death, whichever is the shorter
period, but only if and to the extent the holder was entitled to exercise the
option or stock appreciation right at the date of death and only by the person
or persons to whom the holder’s rights under the option or stock appreciation
right shall pass by the holder’s will or by the laws of descent and distribution
of the state or country of domicile at the time of death.

8.2-4 Amendment of Exercise Period Applicable to Termination. The Board of
Directors may at any time extend the 3-month and 12-month exercise periods any
length of time not longer than the original expiration date of the option or
stock appreciation right. The Board of Directors may at any time increase the
portion of an option or stock appreciation right that is exercisable, subject to
terms and conditions determined by the Board of Directors.

8.2-5 Failure to Exercise Option or Stock Appreciation Right. To the extent that
the option or stock appreciation right of any deceased holder or any holder
whose employment or service terminates is not exercised within the applicable
period, all further rights to purchase shares pursuant to the option or stock
appreciation right shall cease and terminate.

8.2-6 Leave of Absence. Absence on leave approved by the Employer or on account
of illness or disability shall not be deemed a termination or interruption of
employment or service. Unless otherwise determined by the Board of Directors,
vesting of options and stock appreciation rights shall continue during a
medical, family or military leave of absence or other leave approved by the
Employer, whether paid or unpaid, and vesting of options and stock appreciation
rights shall be suspended during any other unpaid leave of absence.

--------------------------------------------------------------------------------

8.3 Notice of Exercise or Surrender. Unless the Board of Directors determines
otherwise, shares may be acquired pursuant to an option or stock appreciation
right granted under the Plan only upon the Company’s receipt of written notice
from the holder of the holder’s binding commitment to purchase shares,
specifying the number of shares the holder desires to acquire under the option
or stock appreciation right and the date on which the holder agrees to complete
the transaction, and, if required to comply with the Securities Act of 1933,
containing a representation that it is the holder’s intention to acquire the
shares for investment and not with a view to distribution. Unless the Board of
Directors determines otherwise, cash may be paid upon surrender of a stock
appreciation right granted under the Plan only upon the Company’s receipt of
written notice from the holder of the holder’s binding commitment to surrender
the stock appreciation right, specifying the number of shares subject to the
stock appreciation right being surrendered and the date on which the holder
agrees to complete the surrender.

8.4 Tax Withholding. Each holder who has exercised an option or stock
appreciation right shall, immediately upon notification of the amount due, if
any, pay to the Company in cash or by check amounts necessary to satisfy any
applicable federal, state and local tax withholding requirements. If additional
withholding is or becomes required (as a result of exercise of an option or
stock appreciation right or as a result of disposition of shares acquired
pursuant to exercise of an option or stock appreciation right) beyond any amount
deposited before delivery of the certificates, the holder shall pay such amount,
in cash or by check, to the Company on demand. If the holder fails to pay the
amount demanded, the Company or the Employer may withhold that amount from other
amounts payable to the holder, including salary, subject to applicable law.
With the consent of the Board of Directors, a holder may satisfy this
obligation, in whole or in part, by instructing the Company to withhold from the
shares to be issued upon exercise or by delivering to the Company other shares
of Common Stock; provided, however, that the number of shares so withheld or
delivered in connection with an option exercise shall not exceed the minimum
amount necessary to satisfy the required withholding obligation.

8.5 Reduction of Reserved Shares. Upon the exercise of an option or stock
appreciation right, the number of shares reserved for issuance under the Plan
shall be reduced by the number of shares issued upon exercise of the option or
stock appreciation right. Cash payments of stock appreciation rights shall not
reduce the number of shares of Common Stock reserved for issuance under the
Plan.

9. Stock Bonuses. The Board of Directors may award shares under the Plan as
stock bonuses, including restricted stock units that provide for delivery of
Common Stock at a later date. Shares awarded as a bonus shall be subject to the
terms, conditions and restrictions determined by the Board of Directors. The
restrictions may include restrictions concerning transferability and forfeiture
of the shares awarded, together with any other restrictions determined by the
Board of Directors. The Board of Directors may require the recipient to sign an
agreement as a condition of the award, but may not require the recipient to pay
any monetary consideration other than amounts necessary to satisfy tax
withholding requirements. The agreement may contain any terms, conditions,
restrictions, representations and warranties required by the Board of Directors.
The certificates representing the shares awarded shall bear any legends required
by the Board of Directors. The Company may require any recipient of a stock
bonus to pay to the Company in cash or by check upon demand amounts necessary to
satisfy any applicable federal, state or local tax withholding requirements. If
the recipient fails to pay the amount demanded, the Company or the Employer may
withhold that amount from other amounts payable to the recipient, including
salary, subject to applicable law. With the consent of the Board of Directors, a
recipient may satisfy this obligation, in whole or in part, by instructing the
Company to withhold from any shares to be issued or by delivering to the Company
other shares of Common Stock; provided,

--------------------------------------------------------------------------------

however, that the number of shares so withheld or delivered shall not exceed the
minimum amount necessary to satisfy the required withholding obligation. Upon
the issuance of a stock bonus, the number of shares reserved for issuance under
the Plan shall be reduced by the number of shares issued.

 

  10. Restricted Stock.

10.1 Restricted Stock. The Board of Directors may issue shares under the Plan
for any consideration (including promissory notes and services) determined by
the Board of Directors. Shares issued under the Plan shall be subject to the
terms, conditions and restrictions determined by the Board of Directors;
provided, however, that any award made under this Section 10 the vesting for
which is time-based will provide for a restriction period of at least three
years, with the restriction to lapse no more quickly than with respect to
one-third of the shares annually over the three-year restriction period. Subject
to the provisions of the Plan, the restrictions may include restrictions
concerning transferability, repurchase by the Company and forfeiture of the
shares issued, together with any other restrictions determined by the Board of
Directors. All Common Stock issued pursuant to this Section 10.1 shall be
subject to a Restricted Stock Agreement, which shall be executed by the Company
and the prospective recipient of the shares before the delivery of certificates
representing the shares. The Agreement may contain any terms, conditions,
restrictions, representations and warranties required by the Board of Directors.

10.2 Other Provisions. The certificates representing shares of restricted stock
shall bear any legends required by the Board of Directors. The Company may
require any participant receiving restricted stock to pay to the Company in cash
or by check upon demand amounts necessary to satisfy any applicable federal,
state or local tax withholding requirements. If the participant fails to pay the
amount demanded, the Company or the Employer may withhold that amount from other
amounts payable to the participant, including salary, subject to applicable law.
With the consent of the Board of Directors, a participant may satisfy this
obligation, in whole or in part, by instructing the Company to withhold from any
shares to be issued or by delivering to the Company other shares of Common
Stock; provided, however, that the number of shares so withheld or delivered
shall not exceed the minimum amount necessary to satisfy the required
withholding obligation. Upon the issuance of restricted stock, the number of
shares reserved for issuance under the Plan shall be reduced by the number of
shares issued.

11. Performance-Based Awards. The Board of Directors may grant awards intended
to qualify as qualified performance-based compensation under Section 162(m) of
the Code and the regulations thereunder (“Performance-Based Awards”).
Performance-Based Awards shall be denominated at the time of grant either in
Common Stock (“Stock Performance Awards”) or in dollar amounts (“Dollar
Performance Awards”). Payment under a Stock Performance Award or a Dollar
Performance Award shall be made, at the discretion of the Board of Directors, in
Common Stock (“Performance Shares”), or in cash or in any combination thereof.
Performance-Based Awards shall be subject to the following terms and conditions:

11.1 Award Period. The Board of Directors shall determine the period of time for
which a Performance-Based Award is made (the “Award Period”).

11.2 Performance Goals and Payment. The Board of Directors shall establish in
writing objectives (“Performance Goals”) that must be met by the Company or any
subsidiary, division or other unit of the Company (“Business Unit”) during the
Award Period as a condition to payment

--------------------------------------------------------------------------------

being made under the Performance-Based Award. The Performance Goals for each
award shall be one or more targeted levels of performance with respect to one or
more of the following objective measures with respect to the Company or any
Business Unit: earnings, earnings per share, stock price increase, total
shareholder return (stock price increase plus dividends), return on equity,
return on assets, return on capital, economic value added, sales, revenues,
operating income, inventories, inventory turns, cash flows, or any of the
foregoing before the effect of acquisitions, divestitures, accounting changes,
restructuring and special charges, extraordinary items and all items of gain,
loss or expense determined to be extraordinary or unusual in nature or
infrequent in occurrence (determined according to criteria established by the
Board of Directors). The Board of Directors shall also establish the number of
Performance Shares or the amount of cash payment to be made under a
Performance-Based Award if the Performance Goals are met or exceeded, including
the fixing of a maximum payment (subject to Section 11.4). The Board of
Directors may establish other restrictions to payment under a Performance-Based
Award, such as a continued employment requirement, in addition to satisfaction
of the Performance Goals. Some or all of the Performance Shares may be issued at
the time of the award as restricted shares subject to forfeiture in whole or in
part if Performance Goals or, if applicable, other restrictions are not
satisfied.

11.3 Computation of Payment. During or after an Award Period, the performance of
the Company or Business Unit, as applicable, during the period shall be measured
against the Performance Goals. If the Performance Goals are not met, no payment
shall be made under a Performance-Based Award. If the Performance Goals are met
or exceeded, the Board of Directors shall certify that fact in writing and
certify the number of Performance Shares earned or the amount of cash payment to
be made under the terms of the Performance-Based Award.

11.4 Maximum Awards. No participant may receive in any fiscal year Stock
Performance Awards under which the aggregate amount payable under the Awards
exceeds the equivalent of 200,000 shares of Common Stock or Dollar Performance
Awards under which the aggregate amount payable under the Awards exceeds
$4,000,000.

11.5 Tax Withholding. Each participant who has received Performance Shares
shall, upon notification of the amount due, pay to the Company in cash or by
check amounts necessary to satisfy any applicable federal, state and local tax
withholding requirements. If the participant fails to pay the amount demanded,
the Company or the Employer may withhold that amount from other amounts payable
to the participant, including salary, subject to applicable law. With the
consent of the Board of Directors, a participant may satisfy this obligation, in
whole or in part, by instructing the Company to withhold from any shares to be
issued or by delivering to the Company other shares of Common Stock; provided,
however, that the number of shares so delivered or withheld shall not exceed the
minimum amount necessary to satisfy the required withholding obligation.

11.6 Effect on Shares Available. The payment of a Performance-Based Award in
cash shall not reduce the number of shares of Common Stock reserved for issuance
under the Plan. The number of shares of Common Stock reserved for issuance under
the Plan shall be reduced by the number of shares issued upon payment of an
award. Cash payments of Performance-Based Awards shall not reduce the number of
shares of Common Stock reserved for issuance under the Plan.

--------------------------------------------------------------------------------

12. Changes in Capital Structure.

12.1 Stock Splits, Stock Dividends. If the outstanding Common Stock of the
Company is hereafter increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company by reason
of any stock split, combination of shares, dividend payable in shares,
recapitalization or reclassification, appropriate adjustment shall be made by
the Board of Directors in the number and kind of shares available for grants
under the Plan and in all other share amounts set forth in the Plan. In
addition, the Board of Directors shall make appropriate adjustment in the number
and kind of shares subject to any Awards theretofor granted, and the exercise
and settlement prices of those Awards, if any, so that the holder’s
proportionate interest before and after the occurrence of the event is
maintained without changing the aggregate exercise or settlement price, if any.
Notwithstanding the foregoing, the Board of Directors shall have no obligation
to effect any adjustment that would or might result in the issuance of
fractional shares, and any fractional shares resulting from any adjustment may
be disregarded or provided for in any manner determined by the Board of
Directors. Any such adjustments made by the Board of Directors shall be
conclusive.

12.2 Mergers, Reorganizations, Etc. In the event of a merger, consolidation,
plan of exchange, acquisition of property or stock, split-up, split-off,
spin-off, reorganization or liquidation to which the Company is a party or any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the Company
(each, a “Transaction”), the Board of Directors shall, in its sole discretion
and to the extent possible under the structure of the Transaction, select one or
more of the following alternatives for treating outstanding Awards under the
Plan, with the Board of Directors having the discretion to apply different
alternatives to various outstanding Awards:

12.2-1 Outstanding Awards shall remain in effect in accordance with their terms.

12.2-2 Outstanding Awards shall be converted into Awards with respect to stock
in one or more of the corporations, including the Company, that are the
surviving or acquiring corporations in the Transaction, with such conversion to
occur by assumption of the Plan, assumption of Awards, or substitution of
Awards. The amount, type of securities subject thereto and exercise or
settlement price of the converted Awards shall be determined by the Board of
Directors of the Company, taking into account the relative values of the
companies involved in the Transaction and the exchange rate, if any, used in
determining shares of the surviving corporation(s) to be held by holders of
shares of the Company following the Transaction. Unless otherwise determined by
the Board of Directors, the converted Awards shall be vested or released from
restrictions on transfer and repurchase and forfeiture rights only to the extent
that the vesting requirements or restrictions relating to Awards granted
hereunder have been satisfied.

12.2-3 The Board of Directors shall provide a period of 30 days or less before
the completion of the Transaction during which outstanding Awards may be
exercised to the extent then exercisable, and upon the expiration of that
period, all outstanding Awards (including Awards that are not options or stock
appreciation rights) shall immediately terminate.

12.2-4 Outstanding Awards shall be cancelled immediately prior to the completion
of the Transaction in exchange for a payment with respect to each vested or
exercisable share subject to such cancelled Award in (i) cash, (ii) stock in one
or more corporations that are the surviving or acquiring corporations in the
Transaction, or (iii) other property which, in any such case, shall have a

--------------------------------------------------------------------------------

fair market value equal to the fair market value of the consideration to be paid
per share of Common Stock in the Transaction over the exercise or settlement
price per share under the Award, if any (the “Spread”). In the event such
determination is made by the Board of Directors, the Spread (reduced by
applicable withholding taxes, if any) shall be paid to the holders in respect of
their cancelled Awards as soon as practicable following the closing of the
Transaction. This provision shall not apply to Incentive Stock Options awarded
prior to October 25, 2007.

The Board of Directors may, in its sole discretion, accelerate in full or in
part the vesting or exercisability of Awards under the Plan and the full or
partial release from restrictions on transfer and repurchase or forfeiture
rights of Award under the Plan, on such terms and conditions as the Board of
Directors may specify prior to the completion of the Transaction.

12.3 Dissolution of the Company. In the event of the dissolution of the Company,
options and stock appreciation rights shall be treated in accordance with
Section 12.2-3.

12.4 Rights Issued by Another Corporation. The Board of Directors may also grant
options, stock appreciation rights, stock bonuses and Performance-Based Awards
and issue restricted stock under the Plan with terms, conditions and provisions
that vary from those specified in the Plan, provided that any such awards are
granted in substitution for, or in connection with the assumption of, existing
options, stock appreciation rights, stock bonuses, Performance-Based Awards or
restricted stock granted, awarded or issued by another corporation and assumed
or otherwise agreed to be provided for by the Company pursuant to or by reason
of an acquisition of another entity, business or an interest in another entity
whether by merger, stock purchase, asset purchase or other form of transaction.

13. Amendment of the Plan. The Board of Directors may at any time modify or
amend the Plan in any respect. Except as provided in Section 12, however, no
change in an award already granted shall be made without the written consent of
the holder of the award if the change would adversely affect the holder.

14. Approvals. The Company’s obligations under the Plan are subject to the
approval of state and federal authorities or agencies with jurisdiction in the
matter. The Company will use its best efforts to take steps required by state or
federal law or applicable regulations, including rules and regulations of the
Securities and Exchange Commission and any stock exchange on which the Company’s
shares may then be listed, in connection with the grants under the Plan. The
foregoing notwithstanding, the Company shall not be obligated to issue or
deliver Common Stock under the Plan if such issuance or delivery would violate
state or federal securities laws.

15. Employment and Service Rights. Nothing in the Plan or any award pursuant to
the Plan shall (i) confer upon any employee any right to be continued in the
employment of an Employer or interfere in any way with the Employer’s right to
terminate the employee’s employment at will at any time, for any reason, with or
without cause, or to decrease the employee’s compensation or benefits, or
(ii) confer upon any person engaged by an Employer any right to be retained or
employed by the Employer or to the continuation, extension, renewal or
modification of any compensation, contract or arrangement with or by the
Employer.

16. Rights as a Shareholder. The recipient of any award under the Plan shall
have no rights as a shareholder with respect to any shares of Common Stock until
the date the recipient becomes the holder of record of those shares. Except as
otherwise expressly provided in the Plan, no adjustment shall be made for
dividends or other rights for which the record date occurs before the date the
recipient becomes the holder of record.

--------------------------------------------------------------------------------

17. Suspension or Termination of Awards; Claw-Back. Notwithstanding any
provision of the Plan to the contrary, if at any time (including after a notice
of exercise has been delivered with respect to an Award that is an option or
stock appreciation right), the Board of Directors, including any Committee
authorized pursuant to Section 4.2 (the Board of Directors or such Committee,
the “Committee” for purposes of this Section), reasonably believes that a
participant, other than a non-employee director, has committed an act of
misconduct as described in this section, the Committee may suspend the
participant’s right to exercise any stock option or stock appreciation right or
the vesting of restricted stock or restricted stock unit awards pending a
determination of whether an act of misconduct has been committed. If the
Committee determines a participant, other than a non-employee director, has
committed an act of embezzlement, fraud, dishonesty, nonpayment of any
obligation owed to the Company or its subsidiaries, breach of fiduciary duty or
deliberate disregard of Company rules resulting in loss, damage or injury to the
Company, or if a participant makes an unauthorized disclosure of any Company
trade secret or confidential information, engages in any conduct constituting
unfair competition, induces any customer to breach a contract with the Company
or induces any principal for whom the Company or its subsidiaries acts as agent
to terminate such agency relationship, neither the participant nor his or her
estate shall be entitled to exercise any stock option or stock appreciation
right whatsoever and the participant’s restricted stock or restricted stock unit
agreement shall be terminated and cancelled. In addition, for any participant
who is designated an “executive officer” by the Board of Directors, if the
Committee determines that the participant engaged in an act of embezzlement,
fraud or breach of fiduciary duty during the participant’s employment that
contributed to an obligation to restate the Company’s financial statements
(“Contributing Misconduct”), the participant shall be required to repay to the
Company, in cash and upon demand, the Option Proceeds and/or Restricted Stock
Proceeds, as applicable, resulting from the sale or other disposition (including
to the Company) of shares issued or issuable upon exercise of a stock option or
stock appreciation right or upon vesting of restricted stock or a restricted
stock unit, as applicable, if the sale or disposition was effected during the
12-month period following the first public issuance or filing with the
Securities and Exchange Commission of the financial statements required to be
restated. The term “Option Proceeds” means, with respect to any sale or other
disposition (including to the Company) of shares issued or issuable upon
exercise of an option or stock appreciation right, an amount determined
appropriate by the Committee to reflect the effect of the restatement on the
Company’s stock price, up to the amount equal to the number of shares sold or
disposed of multiplied by the difference between the market value per share at
the time of such sale or disposition and the exercise price. The term
“Restricted Stock Proceeds” means, with respect to any sale or other disposition
(including to the Company) of restricted stock or a restricted stock unit, an
amount determined appropriate by the Committee to reflect the effect of the
restatement on the Company’s stock price, up to the amount equal to the market
value per share at the time of such sale or other disposition multiplied by the
number of shares or units sold or disposed of. The return of Option Proceeds
and/or Restricted Stock Proceeds is in addition to and separate from any other
relief available to the Company due to the executive officer’s Contributing
Misconduct. Any determination by the Committee with respect to the foregoing
shall be final, conclusive and binding on all parties. For any participant who
is an “executive officer,” the determination of the Committee shall be subject
to the approval of the Board of Directors.