Exhibit 10.1
THE EIGHTH AMENDED AND RESTATED
1998 EQUITY PARTICIPATION PLAN
OF
TEGAL CORPORATION*
 
* This Plan addresses the effect of the Company’s 1-to-12 reverse stock split
effected on July 25, 2006.
 
Tegal Corporation, a Delaware corporation (the “Company”), hereby amends and
restates the Seventh Amended and Restated 1998 Equity Participation Plan of
Tegal Corporation (as so amended, the “Plan”), incorporating certain amendments
adopted by the Board of Directors on May 24, 2006. The Plan shall become
effective on the date it is approved by the Company’s stockholders. The Plan was
initially adopted by the Board of Directors on July 16, 1998 and the
stockholders of the Company on September 15, 1998, with an initial effective
date of July 16, 1998. The Plan was amended and restated by the Board of
Directors on July 21, 1999 and such amendment was approved by the stockholders
on September 21, 1999. The Plan was again amended and restated on July 8, 2000
by the Board of Directors and such amendment was approved by the stockholders on
September 19, 2000. The Plan was amended and restated a third time on September
25, 2001 by the Board of Directors and such amendment did not require
shareholder approval. The Plan was amended and restated a fourth time on
September 9, 2002 and was approved by our stockholders on October 22, 2002. The
Plan was amended and restated a fifth time on June 30, 2003 and was approved by
our stockholders on September 8, 2003. The Plan was amended and restated a sixth
time on July 23, 2004 and was approved by our stockholders on September 21,
2004. The Plan was amended and restated a seventh time on July 5, 2005 and was
approved by our stockholders on August 8, 2005. The plan was amended and
restated an eighth time on May 24, 2006 and was approved by our stockholders on
July 21, 2006. The purposes of the Plan are as follows:
 
(1)          To provide an additional incentive for key Employees and
Consultants (as such terms are defined below) to further the growth, development
and financial success of the Company by personally benefiting through the
ownership of Company stock and/or rights which recognize such growth,
development and financial success.
 
(2)          To enable the Company to obtain and retain the services of key
Employees and Consultants considered essential to the long range success of the
Company by offering them an opportunity to own stock in the Company and/or
rights which will reflect the growth, development and financial success of the
Company.
 
1.
DEFINITIONS
 
1.1  General. Wherever the following terms are used in the Plan, they shall have
the meanings specified below, unless the context clearly indicates otherwise.
 
1.2  Administrator. “Administrator” shall mean the entity that conducts the
general administration of the Plan as provided herein. With reference to the
administration of the Plan with respect to any Award granted under the Plan, the
term “Administrator” shall refer to the Committee unless the Board has assumed
the authority for administration of the Plan generally as provided in Section
11.1.
 
1.3  Award. “Award” shall mean an Option, a Restricted Stock award, a Restricted
Stock Unit award, a Dividend Equivalent award or a Stock Appreciation Right
which may be awarded or granted under the Plan (collectively, “Awards”).
 
1.4  Award Agreement. “Award Agreement” shall mean a written agreement executed
by an authorized officer of the Company and the Holder which shall contain such
terms and conditions with respect to an Award as the Administrator shall
determine, consistent with the Plan.
 
1.5  Award Limit. “Award Limit” shall mean 333,334 shares of Common Stock, as
adjusted pursuant to Section 12.3 of the Plan.
 
1.6  Board. “Board” shall mean the Board of Directors of the Company.
 
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1.7      Change in Control. “Change in Control” shall mean a change in ownership
or control of the Company effected through any of the following transactions:
 
(a)     any person or related group of persons (other than the Company or a
person that, prior to such transaction, directly or indirectly controls, is
controlled by, or is under common control with, the Company) directly or
indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under
the Exchange Act) of securities of the Company (or a successor of the Company)
possessing more than twenty-five percent (25%) of the total combined voting
power of the then outstanding securities of the Company or such successor; or
(b)     at any time that the Company has registered shares under the Exchange
Act, at least 40% of the directors of the Company constitute persons who were
not at the time of their first election to the Board, candidates proposed by a
majority of the Board in office prior to the time of such first election; or
(c)     the dissolution of the Company or liquidation of more than 75% in value
of the Company or a sale of assets involving 75% or more in value of the assets
of the Company, (x) any merger or reorganization of the Company whether or not
another entity is the survivor, (y) a transaction pursuant to which the holders,
as a group, of all of the shares of the Company outstanding prior to the
transaction hold, as a group, less than 50% of the combined voting power of the
Company or any successor company outstanding after the transaction, or (z) any
other event which the Board determines, in its discretion, would materially
alter the structure of the Company or its ownership.
1.8      Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.
 
1.9  Committee. “Committee” shall mean the Compensation Committee of the Board,
or another committee or subcommittee of the Board, appointed as provided in
Section 11.1.
 
1.10     Common Stock. “Common Stock” shall mean the common stock of the
Company, par value $.01 per share, and any equity security of the Company issued
or authorized to be issued in the future, but excluding any preferred stock and
any warrants, options or other rights to purchase Common Stock.
 
1.11     Company. “Company” shall mean Tegal Corporation, a Delaware
corporation.
 
1.12     Consultant. “Consultant” shall mean any consultant or adviser if:
 
             the consultant or adviser renders bona fide services to the
Company;
 
             the services rendered by the consultant or adviser are not in
connection with the offer or sale of securities in a capital-raising transaction
and do not directly or indirectly promote or maintain a market for the Company’s
securities; and
 
                             the consultant or adviser is a natural person who
has contracted directly with the Company to render such services.
 
1.13     Director. “Director” shall mean a member of the Board.
 
1.14     Dividend Equivalent. “Dividend Equivalent” shall mean a right granted
to a Holder pursuant to Section 11.1 to receive the equivalent value (in cash or
shares of Common Stock) of dividends paid on Common Stock.
 
1.15     DRO. “DRO” shall mean a domestic relations order as defined by the Code
or Title I of the Employee Retirement Income Security Act of 1974, as amended,
or the rules thereunder.
 
1.16     Employee. “Employee” shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.
 
1.17     Exchange Act. “Exchange Act” shall mean the Securities Exchange Act of
1934, as amended.
 
1.18     Fair Market Value. “Fair Market Value” of a share of Common Stock as of
a given date shall be (a) the closing price of a share of Common Stock on the
principal exchange on which shares of Common Stock are then trading, if any (or
as reported on any composite index which includes such principal exchange), on
the trading day previous to such date, or if shares were not traded on the
trading day previous to such date, then on the next preceding date on which a
trade occurred, or (b) if Common Stock is not traded on an exchange but is
quoted on NASDAQ or a successor quotation system, the mean between the closing
representative bid and asked prices for the Common Stock on the trading day
previous to such date as reported by NASDAQ or such successor quotation system;
or (c) if Common Stock is not publicly traded on an exchange and not quoted on
NASDAQ or a successor quotation system, the Fair Market Value of a share of
Common Stock as established by the Administrator acting in good faith.
 
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1.19  Holder. “Holder” shall mean a person who has been granted or awarded an
Award.
 
1.20  Incentive Stock Option. “Incentive Stock Option” shall mean an option
which conforms to the applicable provisions of Section 422 of the Code and which
is designated as an Incentive Stock Option by the Administrator.
 
1.21  Independent Director. “Independent Director” shall mean a member of the
Board who is not an Employee of the Company.
 
1.22  Non-Qualified Stock Option. “Non-Qualified Stock Option” shall mean an
Option which is not designated as an Incentive Stock Option by the
Administrator.
 
1.23  Option. “Option” shall mean a stock option granted under Article IV of the
Plan. An Option granted under the Plan shall, as determined by the
Administrator, be either a Non-Qualified Stock Option or an Incentive Stock
Option; provided, however, that Options granted to Consultants shall be
Non-Qualified Stock Options.
 
1.24  Performance Criteria. “Performance Criteria” shall mean the following
business criteria with respect to the Company, any Subsidiary or any division or
operating unit: (a) net income, (b) pre-tax income, (c) operating income, (d)
cash flow, (e) earnings per share, (f) return on equity, (g) return on invested
capital or assets, (h) cost reductions or savings, (i) funds from operations,
(j) appreciation in the fair market value of Common Stock and (k) earnings
before any one or more of the following items: interest, taxes, depreciation or
amortization.
 
1.25  Plan. “Plan” shall mean The Eighth Amended and Restated 1998 Equity
Participation Plan of Tegal Corporation.
 
1.26  Restricted Stock. “Restricted Stock” shall mean Common Stock awarded under
Article VII of the Plan.
 
1.27  Restricted Stock Unit. “Restricted Stock Unit” shall mean a right to
receive a share of Common Stock during specified time periods granted pursuant
to Section 11.2
 
1.28  Rule 16b-3. “Rule 16b-3” shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended from time to time.
 
1.29  Section 162(m) Participant. “Section 162(m) Participant” shall mean any
key Employee designated by the Administrator as a key Employee whose
compensation for the fiscal year in which the key Employee is so designated or a
future fiscal year may be subject to the limit on deductible compensation
imposed by Section 162(m) of the Code.
 
1.30  Securities Act. “Securities Act” shall mean the Securities Act of 1933, as
amended.
 
1.31  Stock Appreciation Right. “Stock Appreciation Right” shall mean a stock
appreciation right granted under Article VIII of the Plan.
 
1.32  Subsidiary. “Subsidiary” shall mean any corporation in an unbroken chain
of corporations beginning with the Company if each of the corporations other
than the last corporation in the unbroken chain then owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
 
1.33  Substitute Award. “Substitute Award” shall mean an Option granted under
this Plan upon the assumption of, or in substitution for, outstanding equity
awards previously granted by a company or other entity in connection with a
corporate transaction, such as a merger, combination, consolidation or
acquisition of property or stock.
 
1.34  Termination of Consultancy. “Termination of Consultancy” shall mean the
time when the engagement of a Holder as a Consultant to the Company or a
Subsidiary is terminated for any reason, with or without cause, including, but
not by way of limitation, by resignation, discharge, death, disability or
retirement; but excluding terminations where there is a simultaneous
commencement of employment with the Company or any Subsidiary. The
Administrator, in its absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Consultancy, including, but not
by way of limitation, the question of whether a Termination of Consultancy
resulted from a discharge for good cause, and all questions of whether a
particular leave of absence constitutes a Termination of Consultancy.
Notwithstanding any other provision of the Plan, the Company or any Subsidiary
has an absolute and unrestricted right to terminate a Consultant’s service at
any time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.
 
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1.35  Termination of Employment. “Termination of Employment” shall mean the time
when the employee-employer relationship between a Holder and the Company or any
Subsidiary is terminated for any reason, with or without cause, including, but
not by way of limitation, a termination by resignation, discharge, death,
disability or retirement; but excluding (a) terminations where there is a
simultaneous reemployment or continuing employment of a Holder by the Company or
any Subsidiary, (b) at the discretion of the Administrator, terminations which
result in a temporary severance of the employee-employer relationship, and (c)
at the discretion of the Administrator, terminations which are followed by the
simultaneous establishment of a consulting relationship by the Company or a
Subsidiary with the former employee. The Administrator, in its absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Employment, including, but not by way of limitation, the question
of whether a Termination of Employment resulted from a discharge for good cause,
and all questions of whether a particular leave of absence constitutes a
Termination of Employment; provided, however, that, with respect to Incentive
Stock Options, unless otherwise determined by the Administrator in its
discretion, a leave of absence, change in status from an employee to an
independent contractor or other change in the employee-employer relationship
shall constitute a Termination of Employment if, and to the extent that, such
leave of absence, change in status or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section. Notwithstanding any other provision of
the Plan, the Company or any Subsidiary has an absolute and unrestricted right
to terminate an Employee’s service at any time for any reason whatsoever, with
or without cause, except to the extent expressly provided otherwise in writing.
 
2.
SHARES SUBJECT TO PLAN
 
2.1  Shares Subject to Plan.
 
                            The shares of stock subject to Awards shall be
Common Stock, initially shares of the Company’s Common Stock, par value $.01 per
share. The aggregate number of such shares which may be issued upon exercise of
such Options or rights or upon any such awards under the Plan shall not exceed
1,666,667. The shares of Common Stock issuable upon exercise of such Options or
rights or upon any such awards may be either previously authorized but unissued
shares or treasury shares.
 
                             The maximum number of shares which may be subject
to Awards, granted under the Plan to any individual in any fiscal year shall not
exceed the Award Limit. To the extent required by Section 162(m) of the Code,
shares subject to Options which are canceled continue to be counted against the
Award Limit.
 
2.2  Add-back of Options and Other Rights. If any Option, or other right to
acquire shares of Common Stock under any other Award under the Plan, expires or
is canceled without having been fully exercised, or is exercised in whole or in
part for cash as permitted by the Plan, the number of shares subject to such
Option or other right but as to which such Option or other right was not
exercised prior to its expiration, cancellation or exercise may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. Furthermore, any shares subject to Awards which are adjusted pursuant to
Section 12.3 and become exercisable with respect to shares of stock of another
corporation shall be considered cancelled and may again be optioned, granted or
awarded hereunder, subject to the limitations of Section 2.1. Shares of Common
Stock which are delivered by the Holder or withheld by the Company upon the
exercise of any Award under the Plan, in payment of the exercise price thereof
or tax withholding thereon, may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1. If any shares of Restricted Stock are
surrendered by the Holder or repurchased by the Company pursuant to Section 7.4
or 7.5 hereof, such shares may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1. Notwithstanding the provisions of
this Section 2.2, no shares of Common Stock may again be optioned, granted or
awarded if such action would cause an Incentive Stock Option to fail to qualify
as an incentive stock option under Section 422 of the Code.
 
3.
GRANTING OF AWARDS
 
3.1  Award Agreement. Each Award shall be evidenced by an Award Agreement. Award
Agreements evidencing Awards intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code. Award Agreements evidencing Incentive Stock Options
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.
 
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3.2  Provisions Applicable to Section 162(m) Participants.
 
The Committee, in its discretion, may determine whether an Award is to qualify
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code.
 
Notwithstanding anything in the Plan to the contrary, the Committee may grant
any Award to a Section 162(m) Participant, including Restricted Stock the
restrictions with respect to which lapse upon the attainment of performance
goals which are related to one or more of the Performance Criteria.
 
To the extent necessary to comply with the performance-based compensation
requirements of Section 162(m)(4)(C) of the Code, with respect to any Award
granted under Article VII which may be granted to one or more Section 162(m)
Participants, no later than ninety (90) days following the commencement of any
fiscal year in question or any other designated fiscal period or period of
service (or such other time as may be required or permitted by Section 162(m) of
the Code), the Committee shall, in writing, (i) designate one or more Section
162(m) Participants, (ii) select the Performance Criteria applicable to the
fiscal year or other designated fiscal period or period of service, (iii)
establish the various performance targets, in terms of an objective formula or
standard, and amounts of such Awards, as applicable, which may be earned for
such fiscal year or other designated fiscal period or period of service and (iv)
specify the relationship between Performance Criteria and the performance
targets and the amounts of such Awards, as applicable, to be earned by each
Section 162(m) Participant for such fiscal year or other designated fiscal
period or period of service. Following the completion of each fiscal year or
other designated fiscal period or period of service, the Committee shall certify
in writing whether the applicable performance targets have been achieved for
such fiscal year or other designated fiscal period or period of service. In
determining the amount earned by a Section 162(m) Participant, the Committee
shall have the right to reduce (but not to increase) the amount payable at a
given level of performance to take into account additional factors that the
Committee may deem relevant to the assessment of individual or corporate
performance for the fiscal year or other designated fiscal period or period of
service.
 
Furthermore, notwithstanding any other provision of the Plan, any Award which is
granted to a Section 162(m) Participant and is intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall be subject to any additional limitations set forth in Section 162(m) of
the Code (including any amendment to Section 162(m) of the Code) or any
regulations or rulings issued thereunder that are requirements for qualification
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and the Plan shall be deemed amended to the extent necessary to conform to
such requirements.
 
3.3  Limitations Applicable to Section 16 Persons. Notwithstanding any other
provision of the Plan, the Plan, and any Award granted or awarded to any
individual who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of
the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan and Awards granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.
 
3.4  At-Will Employment. Nothing in the Plan or in any Award Agreement hereunder
shall confer upon any Holder any right to continue in the employ of, or as a
Consultant for, the Company or any Subsidiary, or shall interfere with or
restrict in any way the rights of the Company and any Subsidiary, which are
hereby expressly reserved, to discharge any Holder at any time for any reason
whatsoever, with or without cause, except to the extent expressly provided
otherwise in a written employment agreement between the Holder and the Company
and any Subsidiary.
 
4.
GRANTING OF OPTIONS TO EMPLOYEES AND CONSULTANTS
 
4.1  Eligibility. Any Employee or Consultant selected by the Committee pursuant
to Section 4.4(a)(i) shall be eligible to be granted an Option.
 
4.2  Disqualification for Stock Ownership. No person may be granted an Incentive
Stock Option under the Plan if such person, at the time the Incentive Stock
Option is granted, owns stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or any then
existing Subsidiary or parent corporation (within the meaning of Section 422 of
the Code) unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code.
 
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4.3  Qualification of Incentive Stock Options. No Incentive Stock Option shall
be granted to any person who is not an Employee.
 
4.4  Granting of Options to Employees and Consultants.
 
The Committee shall from time to time, in its absolute discretion, and subject
to applicable limitations of the Plan:
 
Determine which Employees are key Employees and select from among the key
Employees or Consultants (including Employees or Consultants who have previously
received Awards under the Plan) such of them as in its opinion should be granted
Options;
 
Subject to the Award Limit, determine the number of shares to be subject to such
Options granted to the selected key Employees or consultants;
 
Subject to Section 4.3, determine whether such Options are to be Incentive Stock
Options or Non-Qualified Stock Options and whether such Options are to qualify
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code; and
 
Determine the terms and conditions of such Options, consistent with the Plan;
provided, however, that the terms and conditions of Options intended to qualify
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code shall include, but not be limited to, such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the Code.
 
Upon the selection of a key Employee or Consultant to be granted an Option, the
Committee shall instruct the Secretary of the Company to issue the Option and
may impose such conditions on the grant of the Option as it deems appropriate.
 
Any Incentive Stock Option granted under the Plan may be modified by the
Committee, with the consent of the Holder, to disqualify such Option from
treatment as an “incentive stock option” under Section 422 of the Code.
 
5.
TERMS OF OPTIONS
 
5.1     Option Price. The price per share of the shares subject to each Option
granted to Employees and Consultants shall be set by the Committee; provided,
however, that such price shall be no less than 85% of the Fair Market Value of a
share of Common Stock on the date the Option is granted and:
 
in the case of Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code, such price shall not be less than
100% of the Fair Market Value of a share of Common Stock on the date the Option
is granted;
 
in the case of Incentive Stock Options such price shall not be less than 100% of
the Fair Market Value of a share of Common Stock on the date the Option is
granted (or the date the Option is modified, extended or renewed for purposes of
Section 424(h) of the Code);
 
in the case of Incentive Stock Options granted to an individual then owning
(within the meaning of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company or any Subsidiary
or parent corporation thereof (within the meaning of Section 422 of the Code),
such price shall not be less than 110% of the Fair Market Value of a share of
Common Stock on the date the Option is granted (or the date the Option is
modified, extended or renewed for purposes of Section 424(h) of the Code); and
 
with the consent of a Holder whose rights are impaired or altered under an
outstanding Option, the exercise price per share of shares subject to a
previously granted, outstanding Option may be reduced (i) to the then-current
Fair Market Value if the Fair Market Value of the Common Stock has declined
since the date the Option was granted, (ii) pursuant to an option exchange
program, including a program pursuant to which an outstanding Option is
cancelled and any of the following is granted in substitution therefor (A) a new
option under the Plan or another equity plan of the Company covering the same or
a different number of shares of Common Stock, (B) another Award, (C) cash, or
(D) other valuable consideration (as determined by the Committee, in its sole
discretion); (iii) pursuant to any other action that is treated as a repricing
under generally accepted accounting principles.
 
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5.2  Option Term. The term of an Option granted to an Employee or consultant
shall be set by the Committee in its discretion; provided, however, that, in the
case of Incentive Stock Options, the term shall not be more than ten (10) years
from the date the Incentive Stock Option is granted, or five (5) years from the
date the Incentive Stock Option is granted if the Incentive Stock Option is
granted to an individual then owning (within the meaning of Section 424(d) of
the Code) more than 10% of the total combined voting power of all classes of
stock of the Company or any Subsidiary or parent corporation thereof (within the
meaning of Section 422 of the Code). Except as limited by requirements of
Section 422 of the Code and regulations and rulings thereunder applicable to
Incentive Stock Options, the Committee may extend the term of any outstanding
Option in connection with any Termination of Employment or Termination of
Consultancy of the Holder, or amend any other term or condition of such Option
relating to such a termination.
 
5.3   Option Vesting
 
The period during which the right to exercise, in whole or in part, an Option
granted to an Employee or a Consultant vests in the Holder shall be set by the
Committee and the Committee may determine that an Option may not be exercised in
whole or in part for a specified period after it is granted; provided, however,
that, unless the Committee otherwise provides in the terms of the Award
Agreement or otherwise, no Option shall be exercisable by any Holder who is then
subject to Section 16 of the Exchange Act within the period ending six months
and one day after the date the Option is granted. At any time after grant of an
Option, the Committee may, in its sole and absolute discretion and subject to
whatever terms and conditions it selects, accelerate the period during which an
Option granted to an Employee or Consultant vests.
 
No portion of an Option granted to an Employee or Consultant which is
unexercisable at Termination of Employment or Termination of Consultancy, as
applicable, shall thereafter become exercisable, except as may be otherwise
provided by the Committee either in the Award Agreement or by action of the
Committee following the grant of the Option.
 
To the extent that the aggregate Fair Market Value of stock with respect to
which “incentive stock options” (within the meaning of Section 422 of the Code,
but without regard to Section 422(d) of the Code) are exercisable for the first
time by a Holder during any calendar year (under the Plan and all other
incentive stock option plans of the Company and any parent or subsidiary
corporation, within the meaning of Section 422 of the Code) of the Company,
exceeds $100,000, such Options shall be treated as Non-Qualified Options to the
extent required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking Options into account in the order in which
they were granted. For purposes of this Section 5.3(c), the Fair Market Value of
stock shall be determined as of the time the Option with respect to such stock
is granted.
 
5.4  Substitute Awards. Notwithstanding the foregoing provisions of this Article
V to the contrary, in the case of an Option that is a Substitute Award, the
price per share of the shares subject to such Option may be less than the Fair
Market Value per share on the date of grant, provided, that the excess of:
 
the aggregate Fair Market Value (as of the date such Substitute Award is
granted) of the shares subject to the Substitute Award; over
 
the aggregate exercise price thereof; does not exceed the excess of;
 
the aggregate fair market value (as of the time immediately preceding the
transaction giving rise to the Substitute Award, such fair market value to be
determined by the Committee) of the shares of the predecessor entity that were
subject to the grant assumed or substituted for by the Company; over
 
the aggregate exercise price of such shares.
 
5.5      Termination. In the event of a Holder’s Termination of Employment or
Termination of Consultancy, such Holder may exercise his or her Option within
such period of time as is specified in the Option Agreement to the extent that
the Option is vested on the date of termination. If, on the date of termination,
the Holder is not vested as to his or her entire Option, the shares covered by
the unvested portion of the Option shall immediately cease to be issuable under
the Option and shall again become available for issuance under the Plan. If,
after termination, the Holder does not exercise his or her Option within the
time period specified herein, the Option shall terminate, and the shares covered
by such Option shall again become available for issuance under the Plan.
 
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6.
EXERCISE OF OPTIONS
 
6.1      Partial Exercise. An exercisable Option may be exercised in whole or in
part. However, an Option shall not be exercisable with respect to fractional
shares and the Administrator may require that, by the terms of the Option, a
partial exercise be with respect to a minimum number of shares.
 
6.2      Manner of Exercise. All or a portion of an exercisable Option shall be
deemed exercised upon delivery of all of the following to the Secretary of the
Company or his office:
 
A written notice complying with the applicable rules established by the
Administrator stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Holder or other person then entitled to exercise
the Option or such portion of the Option;
 
Such representations and documents as the Administrator, in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Administrator may, in its absolute
discretion, also take whatever additional actions it deems appropriate to effect
such compliance including, without limitation, placing legends on share
certificates and issuing stop-transfer notices to agents and registrars;
 
In the event that the Option shall be exercised pursuant to Section 10.1 by any
person or persons other than the Holder, appropriate proof of the right of such
person or persons to exercise the Option; and
 
Full cash payment to the Secretary of the Company for the shares with respect to
which the Option, or portion thereof, is exercised. However, the Administrator,
may in its discretion
 
allow a delay in payment up to thirty (30) days from the date the Option, or
portion thereof, is exercised;
 
allow payment, in whole or in part, through the delivery of shares of Common
Stock which have been owned by the Holder for at least six months, duly endorsed
for transfer to the Company with a Fair Market Value on the date of delivery
equal to the aggregate exercise price of the Option or exercised portion
thereof;
 
allow payment, in whole or in part, through the surrender of shares of Common
Stock then issuable upon exercise of the Option having a Fair Market Value on
the date of Option exercise equal to the aggregate exercise price of the Option
or exercised portion thereof;
 
allow payment, in whole or in part, through the delivery of property of any kind
which constitutes good and valuable consideration; (v) allow payment, in whole
or in part, through the delivery of a full recourse promissory note bearing
interest (at no less than such rate as shall then preclude the imputation of
interest under the Code) and payable upon such terms as may be prescribed by the
Administrator; (vi) allow payment, in whole or in part, through the delivery of
a notice that the Holder has placed a market sell order with a broker with
respect to shares of Common Stock then issuable upon exercise of the Option, and
that the broker has been directed to pay a sufficient portion of the net
proceeds of the sale to the Company in satisfaction of the Option exercise
price, provided that payment of such proceeds is then made to the Company upon
settlement of such sale; or (vii) allow payment through any combination of the
consideration provided in the foregoing subparagraphs (ii), (iii), (iv), (v) and
(vi). In the case of a promissory note, the Administrator may also prescribe the
form of such note and the security to be given for such note. The Option may not
be exercised, however, by delivery of a promissory note or by a loan from the
Company when or where such loan or other extension of credit is prohibited by
law.
 
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6.3   Conditions to Issuance of Stock Certificates. The Company shall not be
required to issue or deliver any certificate or certificates for shares of stock
purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
 
The admission of such shares to listing on all stock exchanges on which such
class of stock is then listed;
 
The completion of any registration or other qualification of such shares under
any state or federal law, or under the rulings or regulations of the Securities
and Exchange Commission or any other governmental regulatory body which the
Administrator shall, in its absolute discretion, deem necessary or advisable;
 
The obtaining of any approval or other clearance from any state or federal
governmental agency which the Administrator shall, in its absolute discretion,
determine to be necessary or advisable;
 
The lapse of such reasonable period of time following the exercise of the Option
as the Administrator may establish from time to time for reasons of
administrative convenience; and
 
The receipt by the Company of full payment for such shares, including payment of
any applicable withholding tax, which in the discretion of the Administrator may
be in the form of consideration used by the Holder to pay for such shares under
Section 6.2(d).
 
6.4   Rights as Stockholders. Holders shall not be, nor have any of the rights
or privileges of, stockholders of the Company in respect of any shares
purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by the Company to such
Holders.
 
6.5   Ownership and Transfer Restrictions. The Administrator, in its absolute
discretion, may impose such restrictions on the ownership and transferability of
the shares purchasable upon the exercise of an Option as it deems appropriate.
Any such restriction shall be set forth in the respective Award Agreement and
may be referred to on the certificates evidencing such shares. The Holder shall
give the Company prompt notice of any disposition of shares of Common Stock
acquired by exercise of an Incentive Stock Option within (a) two years from the
date of granting (including the date the Option is modified, extended or renewed
for purposes of Section 424(h) of the Code) such Option to such Holder or (b)
one year after the transfer of such shares to such Holder.
 
6.6   Additional Limitations on Exercise of Options. Holders may be required to
comply with any timing or other restrictions with respect to the settlement or
exercise of an Option, including a window-period limitation, as may be imposed
in the discretion of the Administrator.
 
7.
AWARD OF RESTRICTED STOCK
 
7.1   Eligibility. Subject to the Award Limit. Restricted Stock may be awarded
to any Employee who the Committee determines is a key Employee or any Consultant
who the Committee determines should receive such an Award.
 
7.2   Award of Restricted Stock.
 
The Committee may from time to time, in its absolute discretion:
 
Determine which Employees are key Employees and select from among the key
Employees or Consultants (including Employees or Consultants who have previously
received other awards under the Plan) such of them as in its opinion should be
awarded Restricted Stock; and
 
Determine the purchase price, if any, and other terms and conditions applicable
to such Restricted Stock, consistent with the Plan.
 
The Committee shall establish the purchase price, if any, and form of payment
for Restricted Stock; provided, however, that such purchase price shall be no
less than the par value of the Common Stock to be purchased, unless otherwise
permitted by applicable state law. In all cases, legal consideration shall be
required for each issuance of Restricted Stock.
 
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Upon the selection of a key Employee or Consultant to be awarded Restricted
Stock, the Committee shall instruct the Secretary of the Company to issue such
Restricted Stock and may impose such conditions on the issuance of such
Restricted Stock as it deems appropriate.
 
7.3  Rights as Stockholders. Subject to Section 7.4, upon delivery of the shares
of Restricted Stock to the escrow holder pursuant to Section 7.6, the Holder
shall have, unless otherwise provided by the Committee, all the rights of a
stockholder with respect to said shares, subject to the restrictions in his
Award Agreement, including the right to receive all dividends and other
distributions paid or made with respect to the shares; provided, however, that
in the discretion of the Committee, any extraordinary distributions with respect
to the Common Stock shall be subject to the restrictions set forth in Section
7.4.
 
7.4   Restriction. All shares of Restricted Stock issued under the Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Award Agreement, be
subject to such restrictions as the Committee shall provide, which restrictions
may include, without limitation, restrictions concerning voting rights and
transferability and restrictions based on duration of employment with the
Company, Company performance and individual performance; provided, however,
that, unless the Committee otherwise provides in the terms of the Award
Agreement or otherwise, no share of Restricted Stock granted to a person subject
to Section 16 of the Exchange Act shall be sold, assigned or otherwise
transferred until at least six months and one day have elapsed from the date on
which the Restricted Stock was issued, and provided, further, that, except with
respect to shares of Restricted Stock granted to Section 162(m) Participants, by
action taken after the Restricted Stock is issued, the Committee may, on such
terms and conditions as it may determine to be appropriate, remove any or all of
the restrictions imposed by the terms of the Award Agreement. Restricted Stock
may not be sold or encumbered until all restrictions are terminated or expire.
If no consideration was paid by the Holder upon issuance, a Holder’s rights in
unvested Restricted Stock shall lapse, and such Restricted Stock shall be
surrendered to the Company without consideration, upon Termination of Employment
or, if applicable, upon Termination of Consultancy with the Company; provided,
however, that the Committee in its sole and absolute discretion may provide that
such rights shall not lapse in the event of a Termination of Employment
following a “change of ownership or control” (within the meaning of Treasury
Regulation Section 1.162-27(e)(2)(v) or any successor regulation thereto) of the
Company or because of the Holder’s death or disability; provided, further,
except with respect to shares of Restricted Stock granted to Section 162(m)
Participants, the Committee in its sole and absolute discretion may provide that
no such lapse or surrender shall occur in the event of a Termination of
Employment, or a Termination of Consultancy, without cause or following any
Change in Control of the Company or because of the Holder’s retirement, or
otherwise.
 
7.5  Repurchase of Restricted Stock. The Committee shall provide in the terms of
each individual Award Agreement that the Company shall have the right to
repurchase from the Holder the Restricted Stock then subject to restrictions
under the Award Agreement immediately upon a Termination of Employment or, if
applicable, upon a Termination of Consultancy between the Holder and the
Company, at a cash price per share equal to the price paid by the Holder for
such Restricted Stock; provided, however, that the Committee in its sole and
absolute discretion may provide that no such right of repurchase shall exist in
the event of a Termination of Employment following a “change of ownership or
control” (within the meaning of Treasury Regulation Section 1.162-27(e)(2)(v) or
any successor regulation thereto) of the Company or because of the Holder’s
death or disability; provided, further, that, except with respect to shares of
Restricted Stock granted to Section 162(m) Participants, the Committee in its
sole and absolute discretion may provide that no such right of repurchase shall
exist in the event of a Termination of Employment or a Termination of
Consultancy without cause or following any Change in Control of the Company or
because of the Holder’s retirement, or otherwise.
 
7.6   Escrow. The Secretary of the Company or such other escrow holder as the
Committee may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions imposed under the
Award Agreement with respect to the shares evidenced by such certificate expire
or shall have been removed.
 
7.7   Legend. In order to enforce the restrictions imposed upon shares of
Restricted Stock hereunder, the Committee shall cause a legend or legends to be
placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions under Award Agreements, which legend or legends
shall make appropriate reference to the conditions imposed thereby.
 
7.8  Section 83(b) Election. If a Holder makes an election under Section 83(b)
of the Code, or any successor section thereto, to be taxed with respect to the
Restricted Stock as of the date of transfer of the Restricted Stock rather than
as of the date or dates upon which the Holder would otherwise be taxable under
Section 83(a) of the Code, the Holder shall deliver a copy of such election to
the Company immediately after filing such election with the Internal Revenue
Service.
 
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8.
STOCK APPRECIATION RIGHTS
 
8.1  Grant of Stock Appreciation Rights. A Stock Appreciation Right may be
granted to any key Employee or Consultant selected by the Committee. A Stock
Appreciation Right may be granted (a) in connection and simultaneously with the
grant of an Option, (b) with respect to a previously granted Option, or (c)
independent of an Option. A Stock Appreciation Right shall be subject to such
terms and conditions not inconsistent with the Plan as the Committee shall
impose and shall be evidenced by an Award Agreement.
 
8.2  Coupled Stock Appreciation Rights.
 
A Coupled Stock Appreciation Right (“CSAR”) shall be related to a particular
Option and shall be exercisable only when and to the extent the related Option
is exercisable.
 
A CSAR may be granted to the Holder for no more than the number of shares
subject to the simultaneously or previously granted Option to which it is
coupled.
 
A CSAR shall entitle the Holder (or other person entitled to exercise the Option
pursuant to the Plan) to surrender to the Company unexercised a portion of the
Option to which the CSAR relates (to the extent then exercisable pursuant to its
terms) and to receive from the Company in exchange therefore an amount
determined by multiplying the difference obtained by subtracting the Option
exercise price from the Fair Market Value of a share of Common Stock on the date
of exercise of the CSAR by the number of shares of Common Stock with respect to
which the CSAR shall have been exercised, subject to any limitations the
Committee may impose.
 
8.3  Independent Stock Appreciation Rights.
 
An Independent Stock Appreciation Right (“ISAR”) shall be unrelated to any
Option and shall have a term set by the Committee. An ISAR shall be exercisable
in such installments as the Committee may determine. An ISAR shall cover such
number of shares of Common Stock as the Committee may determine; provided,
however, that unless the Committee otherwise provides in the terms of the ISAR
or otherwise, no ISAR granted to a person subject to Section 16 of the Exchange
Act shall be exercisable until at least six months have elapsed from (but
excluding) the date on which the Option was granted. The exercise price per
share of Common Stock subject to each ISAR shall be set by the Committee. With
the consent of a Holder whose rights are impaired or altered under an
outstanding ISAR, the exercise price per share of shares subject to a previously
granted, outstanding ISAR may be reduced (i) to the then-current Fair Market
Value if the Fair Market Value of the Common Stock has declined since the date
the ISAR was granted, (ii) pursuant to a Stock Appreciation Right exchange
program, including a program pursuant to which an outstanding ISAR is cancelled
and any of the following is granted in substitution therefor (A) a new ISAR
under the Plan or another equity plan of the Company covering the same or a
different number of shares of Common Stock, (B) another Award, (C) cash, or (D)
other valuable consideration (as determined by the Committee, in its sole
discretion); (iii) pursuant to any other action that is treated as a repricing
under generally accepted accounting principles. An ISAR is exercisable only
while the Holder is an Employee or Consultant; provided that the Committee may
determine that the ISAR may be exercised subsequent to Termination of Employment
or Termination of Consultancy without cause, or following a Change in Control,
or because of the Holder’s retirement, death or disability, or otherwise.
 
An ISAR shall entitle the Holder (or other person entitled to exercise the ISAR
pursuant to the Plan) to exercise all or a specified portion of the ISAR (to the
extent then exercisable pursuant to its terms) and to receive from the Company
an amount determined by multiplying the difference obtained by subtracting the
exercise price per share of the ISAR from the Fair Market Value of a share of
Common Stock on the date of exercise of the ISAR by the number of shares of
Common Stock with respect to which the ISAR shall have been exercised, subject
to any limitations the Committee may impose.
 
8.4  Payment and Limitations on Exercise.
 
Payment of the amounts determined under Section 8.2(c) and 8.3(b) above shall be
in cash, in Common Stock (based on its Fair Market Value as of the date the
Stock Appreciation Right is exercised) or a combination of both, as determined
by the Committee. To the extent such payment is effected in Common Stock, it
shall be made subject to satisfaction of all provisions of Section 6.3 above
pertaining to Options.
 
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Holders of Stock Appreciation Rights may be required to comply with any timing
or other restrictions with respect to the settlement or exercise of a Stock
Appreciation Right, including a window-period limitation, as may be imposed in
the discretion of the Committee.
 
9.
OTHER TYPES OF AWARDS

9.1  Dividend Equivalents.
 
 
(a)     Any Employee or Consultant selected by the Administrator may be granted
Dividend Equivalents based on the dividends on the shares of Common Stock that
are subject to any Award, to be credited as of dividend payment dates, during
the period between the date the Award is granted and the date the Award is
exercised, vests or expires, as determined by the Administrator. Such Dividend
Equivalents shall be converted to cash or additional shares of Common Stock by
such formula and at such time and subject to such limitations as may be
determined by the Administrator.
 
(b)     Dividend Equivalents granted with respect to Options or Stock
Appreciation Rights that are intended to qualify as performance-based
compensation as described in Section 162(m)(C)(4) of the Code shall be payable,
with respect to pre-exercise periods, regardless of whether such Option or Stock
Appreciation Right is subsequently exercised.
9.2  Restricted Stock Units. The Administrator is authorized to make Awards of
Restricted Stock Units to any Employee or Consultant selected by the
Administrator in such amounts and subject to such terms and conditions as
determined by the Administrator. At the time of grant, the Administrator shall
specify the date or dates on which the Restricted Stock Units shall become fully
vested and nonforfeitable, and may specify such conditions to vesting as it
deems appropriate. Alternatively, Restricted Stock Units may become fully vested
and nonforfeitable pursuant to the satisfaction of one or more Performance
Criteria or other specific performance criteria as the Administrator determines
to be appropriate at the time of the grant of the Restricted Stock Units or
thereafter, in each case on a specified date or dates or over any period or
periods determined by the Administrator. At the time of grant, the Administrator
shall specify the maturity date applicable to each grant of Restricted Stock
Units which shall be no earlier than the vesting date or dates of the Award and
may be determined at the election of the Employee or Consultant to whom the
Award is granted. On the maturity date, the Company shall transfer to the Holder
one unrestricted, fully transferable share of Stock for each Restricted Stock
Unit that is vested and scheduled to be distributed on such date and not
previously forfeited. The Administrator shall specify the purchase price, if
any, to be paid by the Holder to the Company for such shares of Common Stock;
provided, however, that such price shall not be less than the par value of a
share of Stock on the date of grant, unless otherwise permitted by applicable
state law.
 
9.3  Term. Except as otherwise provided herein, the term of any Award of
Dividend Equivalents or Restricted Stock Units shall be set by the Administrator
in its discretion.
 
9.4  Form of Payment. Payments with respect to any Awards granted under Sections
9.1 and 9.2 shall be made in cash, in Common Stock or a combination of both, as
determined by the Administrator.
 
9.5  Award Agreement. All Awards under this Article 9 shall be subject to such
additional terms and conditions as determined by the Administrator and shall be
evidenced by a written Award Agreement.
 
10.
COMPLIANCE WITH SECTION 409A OF THE CODE
 
10.1     Awards subject to Code Section 409A. Any Award that constitutes, or
provides for, a deferral of compensation subject to Section 409A of the Code (a
“Section 409A Award”) shall satisfy the requirements of Section 409A of the Code
and this Article 10, to the extent applicable. The Award Agreement with respect
to a Section 409A Award shall incorporate the terms and conditions required by
Section 409A of the Code and this Article 10.
 
10.2     Distributions under a Section 409A Award.
 
(a)  Subject to subsection (b), any shares of Common Stock or other property or
amounts to be paid or distributed upon the grant, issuance, vesting, exercise or
payment of a Section 409A Award shall be distributed in accordance with the
requirements of Section 409A(a)(2) of the Code, and shall not be distributed
earlier than:
 
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(i)  the Holder’s separation from service, as determined by the Secretary of the
Treasury;
 
(ii)  the date the Holder becomes disabled;
 
(iii)  the Participant’s death;
 
(iv)  a specified time (or pursuant to a fixed schedule) specified under the
Award Agreement at the date of the deferral compensation;
 
(v)  to the extent provided by the Secretary of the Treasury, a change in the
ownership or effective control of the Company or a Subsidiary, or in the
ownership of a substantial portion of the assets of the Company or a Subsidiary;
or
 
(vi)  the occurrence of an unforeseeable emergency with respect to the Holder.
 
(b)  In the case of a Holder who is a “specified employee,” the requirement of
paragraph (a)(i) shall be met only if the distributions with respect to the
Section 409A Award may not be made before the date which is six months after the
Holder’s separation from service (or, if earlier, the date of the Holder’s
death). For purposes of this subsection (b), a Holder shall be a “specified
employee” if such Holder is a key employee (as defined in Section 416(i) of the
Code without regard to paragraph (5) thereof) of a corporation any stock of
which is publicly traded on an established securities market or otherwise, as
determined under Section 409A(a)(2)(B)(i) of the Code and the Treasury
Regulations thereunder.
 
(c)  The requirement of paragraph (a)(vi) shall be met only if, as determined
under Treasury Regulations under Section 409A(a)(2)(B)(ii) of the Code, the
amounts distributed with respect to the unforeseeable emergency do not exceed
the amounts necessary to satisfy such unforeseeable emergency plus amounts
necessary to pay taxes reasonably anticipated as a result of the distribution,
after taking into account the extent to which such unforeseeable emergency is or
may be relieved through reimbursement or compensation by insurance or otherwise
or by liquidation of the Holder’s assets (to the extent the liquidation of such
assets would not itself cause severe financial hardship).
 
(d)  For purposes of this Section, the terms specified therein shall have the
respective meanings ascribed thereto under Section 409A of the Code and the
Treasury Regulations thereunder.
 
10.3     Prohibition on Acceleration of Benefits. The time or schedule of any
distribution or payment of any shares of Stock or other property or amounts
under a Section 409A Award shall not be accelerated, except as otherwise
permitted under Section 409A(a)(3) of the Code and the Treasury Regulations
thereunder.
 
10.4     Elections under Section 409A Awards.
 
(a)      Any deferral election provided under or with respect to an Award to any
Employee or Consultant, or to the Holder holding a Section 409A Award, shall
satisfy the requirements of Section 409A(a)(4)(B) of the Code, to the extent
applicable, and, except as otherwise permitted under paragraph (i) or (ii)
below, any such deferral election with respect to compensation for services
performed during a taxable year shall be made not later than the close of the
preceding taxable year, or at such other time as provided in Treasury
Regulations.
 
(i) In the case of the first year in which an Eligible Individual or a
Participant holding a Section 409A Award, becomes eligible to participate in the
Plan, any such deferral election may be made with respect to services to be
performed subsequent to the election with thirty days after the date the
Eligible Individual, or the Participant holding a Section 409A Award, becomes
eligible to participate in the Plan, as provided under Section 409A(a)(4)(B)(ii)
of the Code.
(ii) In the case of any performance-based compensation based on services
performed by an Eligible Individual, or the Participant holding a Section 409A
Award, over a period of at least twelve months, any such deferral election may
be made no later than six months before the end of the period, as provided under
Section 409A(a)(4)(B)(iii) of the Code.
(b)      In the event that a Section 409A Award permits, under a subsequent
election by the Holder holding such Section 409A Award, a delay in a
distribution or payment of any shares of Common Stock or other property or
amounts under such Section 409A Award, or a change in the form of distribution
or payment, such subsequent election shall satisfy the requirements of Section
409A(a)(4)(C) of the Code, and:
 
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(i)  such subsequent election may not take effect until at least twelve months
after the date on which the election is made,
 
(ii)  in the case such subsequent election relates to a distribution or payment
not described in Section 10.2(a)(ii), (iii) or (vi), the first payment with
respect to such election may be deferred for a period of not less than five
years from the date such distribution or payment otherwise would have been made,
and
 
(iii)  in the case such subsequent election relates to a distribution or payment
described in Section 10.2(a)(iv), such election may not be made less than twelve
months prior to the date of the first scheduled distribution or payment under
Section 12.2(a)(iv).
 
10.5  Compliance in Form and Operation. A Section 409A Award, and any election
under or with respect to such Section 409A Award, shall comply in form and
operation with the requirements of Section 409A of the Code and the Treasury
Regulations thereunder.
 
11.
ADMINISTRATION
 
11.1  Compensation Committee. The Compensation Committee (or another committee
or a subcommittee of the Board assuming the functions of the Committee under the
Plan) shall consist solely of two or more Independent Directors appointed by and
holding office at the pleasure of the Board, each of whom is both a
“non-employee director” as defined by Rule 16b-3 and an “outside director” for
purposes of Section 162(m) of the Code. Appointment of Committee members shall
be effective upon acceptance of appointment. Committee members may resign at any
time by delivering written notice to the Board. Vacancies in the Committee may
be filled by the Board.
 
11.2  Duties and Powers of Committee. It shall be the duty of the Committee to
conduct the general administration of the Plan in accordance with its
provisions. The Committee shall have the power to interpret the Plan and the
Award Agreements, and to adopt such rules for the administration,
interpretation, and application of the Plan as are consistent therewith, to
interpret, amend or revoke any such rules and to amend any Award Agreement
provided that the rights or obligations of the Holder of the Award that is the
subject of any such Award Agreement are not affected adversely. Any such grant
or award under the Plan need not be the same with respect to each Holder. Any
such interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under the Plan except with respect to matters
which under Rule 16b-3 or Section 162(m) of the Code, or any regulations or
rules issued thereunder, are required to be determined in the sole discretion of
the Committee.
 
11.3  Majority Rule; Unanimous Written Consent. The Committee shall act by a
majority of its members in attendance at a meeting at which a quorum is present
or by a memorandum or other written instrument signed by all members of the
Committee.
 
11.4   Compensation; Professional Assistance; Good Faith Actions. Members of the
Committee shall receive such compensation, if any, for their services as members
as may be determined by the Board. All expenses and liabilities which members of
the Committee incur in connection with the administration of the Plan shall be
borne by the Company. The Committee may, with the approval of the Board, employ
attorneys, consultants, accountants, appraisers, brokers, or other persons. The
Committee, the Company and the Company’s officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee or the Board in good faith shall be final and binding upon all
Holders, the Company and all other interested persons. No members of the
Committee or Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or Awards, and all
members of the Committee and the Board shall be fully protected by the Company
with respect to any such action, determination or interpretation.
 
11.5  Delegation of Authority to Grant Awards. The Committee may, but need not,
delegate from time to time some or all of its authority to grant Awards under
the Plan to a committee consisting of one or more members of the Committee or of
one or more officers of the Company; provided, however, that the Committee may
not delegate its authority to grant Awards to individuals (i) who are subject on
the date of the grant to the reporting rules under Section 16(a) of the Exchange
Act, (ii) who are Section 162(m) Participants or (iii) who are officers of the
Company who are delegated authority by the Committee hereunder. Any delegation
hereunder shall be subject to the restrictions and limits that the Committee
specifies at the time of such delegation of authority and may be rescinded at
any time by the Committee. At all times, any committee appointed under this
Section 11.5 shall serve in such capacity at the pleasure of the Committee.
 
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12.
MISCELLANEOUS PROVISIONS
12.1  Not Transferable. No Award under the Plan may be sold, pledged, assigned
or transferred in any manner other than by will or the laws of descent and
distribution or, subject to the consent of the Administrator, pursuant to a DRO,
unless and until such Award has been exercised, or the shares underlying such
Award have been issued, and all restrictions applicable to such shares have
lapsed; provided, however, that the restrictions set forth in the foregoing
clause shall not apply to transfers of Non-Qualified Stock Options, Restricted
Stock or Stock Appreciation Rights, subject to the consent of the Administrator,
by gift of an Option by an Employee to a Permitted Transferee (as defined below)
subject to the following terms and conditions: (i) an Option transferred to a
Permitted Transferee shall not be assignable or transferable by the Permitted
Transferee other than by DRO or by will or the laws of descent and distribution;
(ii) any Option which is transferred to a Permitted Transferee shall continue to
be subject to all the terms and considerations of the Option as applicable to
the original holder (other than the ability to further transfer the Option);
(iii) the Employee and the Permitted Transferee shall execute any and all
documents reasonably requested by the Administrator, including, without
limitation, documents to (a) confirm the status of the transferee as a Permitted
Transferee, (b) satisfy any requirements for an exemption for the transfer under
applicable federal and state securities laws and (c) provide evidence of the
transfer; (iv) the shares of Common Stock acquired by a Permitted Transferee
through exercise of an Option have not been registered under the Securities Act,
or any state securities act and may not be transferred, nor will any assignee or
transferee thereof be recognized as an owner of such shares of Common Stock for
any purpose, unless a registration statement under the Securities Act and any
applicable state securities act with respect to such shares shall then be in
effect or unless the availability of an exemption from registration with respect
to any proposed transfer or disposition of such shares shall be established to
the satisfaction of counsel for the Company. As used in this Section 12.1,
“Permitted Transferee” shall mean (i) one or more of the following family
members of an Employee: spouse, former spouse, child (whether natural or
adopted), stepchild, any other lineal descendant of the Employee, (ii) a trust,
partnership or other entity established and existing for the sole benefit of, or
under the sole control of, one or more of the above family members of the
Employee, or (iii) any other transferee specifically approved by the
Administrator after taking into account any state or federal tax or securities
laws applicable to transferable Options.
 
No Award or interest or right therein shall be liable for the debts, contracts
or engagements of the Holder or his successors in interest or shall be subject
to disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law, by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.
 
Unless an Option has been transferred in accordance with this Section 12.1, (i)
during the lifetime of the Holder, only he may exercise an Option or other Award
(or any portion thereof) granted to him under the Plan unless it has been
disposed of pursuant to a DRO, and (ii) after the death of the Holder, any
exercisable portion of an Option or other Award may, prior to the time when such
portion becomes unexercisable under the Plan or the applicable Award Agreement,
be exercised by his personal representative or by any person empowered to do so
under the deceased Holder’s will or under the then applicable laws of descent
and distribution.
 
12.2   Amendment, Suspension or Termination of the Plan. Except as otherwise
provided in this Section 12.2, the Plan may be wholly or partially amended or
otherwise modified, suspended or terminated at any time or from time to time by
the Administrator. However, without approval of the Company’s stockholders given
within twelve months before or after the action by the Administrator, no action
of the Administrator may, except as provided in Section 12.3, increase the
limits imposed in Section 2.1 on the maximum number of shares which may be
issued under the Plan. No amendment, suspension or termination of the Plan
shall, without the consent of the Holder, alter or impair any rights or
obligations under any Award theretofore granted or awarded, unless the Award
itself otherwise expressly so provides. No Awards may be granted or awarded
during any period of suspension or after termination of the Plan, and in no
event may any Award be granted under the Plan after the first to occur of the
following events:
 
The expiration of ten years from the date the Plan is adopted by the Board; or
 
The expiration of ten years from the date the Plan is approved by the Company’s
stockholders under Section 12.4.
 
The Plan will terminate on July 14, 2015, unless it is terminated sooner by the
Administrator pursuant to this Section 12.2.
 
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12.3   Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.
 
Subject to Section 12.3 (d), in the event that the Administrator determines that
any dividend or other distribution (whether in the form of cash, Common Stock,
other securities, or other property), recapitalization, reclassification, stock
split, reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer,
exchange or other disposition of all or substantially all of the assets of the
Company, or exchange of Common Stock or other securities of the Company,
issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or event, in
the Administrator’s sole discretion, affects the Common Stock such that an
adjustment is determined by the Administrator to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan or with respect to an Award, then the
Administrator shall, in such manner as it may deem equitable, adjust any or all
of
 
the number and kind of shares of Common Stock (or other securities or property)
with respect to which Awards may be granted or awarded (including, but not
limited to, adjustments of the limitations in Section 2.1 on the maximum number
and kind of shares which may be issued and adjustments of the Award Limit),
 
the number and kind of shares of Common Stock (or other securities or property)
subject to outstanding Awards, and
 
the grant or exercise price with respect to any Award.
 
Subject to Sections 12.3(b)(vii) and 12.3(d), in the event of any transaction or
event described in Section 12.3(a) or of changes in applicable laws,
regulations, or accounting principles, the Administrator, in its sole and
absolute discretion, and on such terms and conditions as it deems appropriate,
either by the terms of the Award or by action taken prior to the occurrence of
such transaction or event and either automatically or upon the Holder’s request,
is hereby authorized to take any one or more of the following actions whenever
the Administrator determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any Award under the Plan, to
facilitate such transactions or events or to give effect to such changes in
laws, regulations or principles:
 
To provide for either the purchase of any such Award for an amount of cash equal
to the amount that could have been attained upon the exercise of such Award or
realization of the Holder’s rights had such Award been currently exercisable or
payable or fully vested or the replacement of such Award with other rights or
property selected by the Administrator in its sole discretion;
 
To provide that the Award cannot vest, be exercised or become payable after such
event;
 
To provide that such Award shall be exercisable as to all shares covered
thereby, notwithstanding anything to the contrary in Section 5.3 or the
provisions of such Award;
 
To provide that such Award be assumed by the successor or survivor corporation,
or a parent or subsidiary thereof, or shall be substituted for by similar
options, rights or awards covering the stock of the successor or survivor
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices;
 
To make adjustments in the number and type of shares of Common Stock (or other
securities or property) subject to outstanding Awards, and in the number and
kind of outstanding Restricted Stock and/or in the terms and conditions of, and
the criteria included in, outstanding options, rights and awards and options,
rights and awards which may be granted in the future;
 
To provide that, for a specified period of time prior to such event, the
restrictions imposed under an Award Agreement upon some or all shares of
Restricted Stock may be terminated, and some or all shares of such Restricted
Stock may cease to be subject to repurchase under Section 7.5 or forfeiture
under Section 7.4 after such event; and
 
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Notwithstanding any other provision of the Plan, in the event of a Change in
Control, each outstanding Award shall, immediately prior to the effective date
of the Change in Control, automatically become fully exercisable for all of the
shares of Common Stock at the time subject to such rights and may be exercised
for any or all of those shares as fully-vested shares of Common Stock.
 
Subject to Sections 12.3(d), 3.2 and 3.3, the Administrator may, in its
discretion, include such further provisions and limitations in any Award,
agreement or certificate, as it may deem equitable and in the best interests of
the Company.
 
With respect to Awards which are granted to Section 162(m) Participants and are
intended to qualify as performance-based compensation under Section
162(m)(4)(C), no adjustment or action described in this Section 12.3 or in any
other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause such Award to fail to so qualify under Section
162(m)(4)(C), or any successor provisions thereto. No adjustment or action
described in this Section 12.3 or in any other provision of the Plan shall be
authorized to the extent that such adjustment or action would cause the Plan to
violate Section 422(b)(1) of the Code. Furthermore, no such adjustment or action
shall be authorized to the extent such adjustment or action would result in
short-swing profits liability under Section 16 or violate the exemptive
conditions of Rule 16b-3 unless the Administrator determines that the Award is
not to comply with such exemptive conditions. The number of shares of Common
Stock subject to any Award shall always be rounded to the next whole number.
 
Notwithstanding the foregoing, in the event that the Company becomes a party to
a transaction that is intended to qualify for “pooling of interests” accounting
treatment and, but for one or more of the provisions of this Plan or any Award
Agreement would so qualify, then this Plan and any Award Agreement shall be
interpreted so as to preserve such accounting treatment, and to the extent that
any provision of the Plan or any Award Agreement would disqualify the
transaction from pooling of interests accounting treatment (including, if
applicable, an entire Award Agreement), then such provision shall be null and
void. All determinations to be made in connection with the preceding sentence
shall be made by the independent accounting firm whose opinion with respect to
“pooling of interests” treatment is required as a condition to the Company’s
consummation of such transaction.
 
The existence of the Plan, the Award Agreement and the Awards granted hereunder
shall not affect or restrict in any way the right or power of the Company or the
shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company’s capital
structure or its business, any merger or consolidation of the Company, any issue
of stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Common Stock or the rights thereof or which are convertible into or
exchangeable for Common Stock, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.
 
12.4   Approval of Plan by Stockholders. The Plan will be submitted for the
approval of the Company’s stockholders within twelve months after the date of
the Board’s initial adoption of the Plan. Awards may be granted or awarded prior
to such stockholder approval, provided that such Awards shall not be exercisable
nor shall such Awards vest prior to the time when the Plan is approved by the
stockholders, and provided further that if such approval has not been obtained
at the end of said twelve-month period, all Awards previously granted or awarded
under the Plan shall thereupon be canceled and become null and void. In
addition, if the Board determines that Awards other than Options or Stock
Appreciation Rights which may be granted to Section 162(m) Participants should
continue to be eligible to qualify as performance-based compensation under
Section 162(m)(4)(C) of the Code, the Performance Criteria must be disclosed to
and approved by the Company’s stockholders no later than the first stockholder
meeting that occurs in the fifth year following the year in which the Company’s
stockholders previously approved the Performance Criteria.
 
12.5   Tax Withholding. The Company shall be entitled to require payment in cash
or deduction from other compensation payable to each Holder of any sums required
by federal, state or local tax law to be withheld with respect to the issuance,
vesting, exercise or payment of any Award. The Administrator may in its
discretion and in satisfaction of the foregoing requirement allow such Holder to
elect to have the Company withhold shares of Common Stock otherwise issuable
under such Award (or allow the return of shares of Common Stock) having a Fair
Market Value equal to the sums required to be withheld.
 
12.6  Loans. The Committee may, in its discretion, extend one or more loans to
key Employees in connection with the exercise or receipt of an Award granted or
awarded under the Plan, or the issuance of Restricted Stock awarded under the
Plan. The terms and conditions of any such loan shall be set by the Committee.
 
12.7  Forfeiture Provisions. Pursuant to its general authority to determine the
terms and conditions applicable to Awards under the Plan, the Administrator
shall have the right to provide, in the terms of Awards made under the Plan, or
to require a Holder to agree by separate written instrument, that (a)(i) any
proceeds, gains or other economic benefit actually or constructively received by
the Holder upon any receipt or exercise of the Award, or upon the receipt or
resale of any Common Stock underlying the Award, must be paid to the Company,
and (ii) the Award shall terminate and any unexercised portion of the Award
(whether or not vested) shall be forfeited, if (b)(i) a Termination of
Employment or Termination of Consultancy occurs prior to a specified date, or
within a specified time period following receipt or exercise of the Award, or
(ii) the Holder at any time, or during a specified time period, engages in any
activity in competition with the Company, or which is inimical, contrary or
harmful to the interests of the Company, as further defined by the Administrator
or (iii) the Holder incurs a Termination of Employment or Termination of
Consultancy for cause.
 
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12.8  Effect of Plan Upon Options and Compensation Plans. The adoption of the
Plan shall not affect any other compensation or incentive plans in effect for
the Company or any Subsidiary. Nothing in the Plan shall be construed to limit
the right of the Company (a) to establish any other forms of incentives or
compensation for Employees or Consultants of the Company or any Subsidiary or
(b) to grant or assume options or other rights or awards otherwise than under
the Plan in connection with any proper corporate purpose including but not by
way of limitation, the grant or assumption of options in connection with the
acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, limited liability
company, firm or association.
 
12.9  Compliance with Laws. The Plan, the granting and vesting of Awards under
the Plan and the issuance and delivery of shares of Common Stock and the payment
of money under the Plan or under Awards granted or awarded hereunder are subject
to compliance with all applicable federal and state laws, rules and regulations
(including but not limited to state and federal securities law and federal
margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
the Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to
assure compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan and Awards granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such laws, rules
and regulations.
 
12.10  Titles. Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of the Plan.
 
12.11  Governing Law. The Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.
 
________________________
 
I hereby certify that the foregoing Plan was duly adopted by the Board of
Directors of Tegal Corporation as of May 24, 2006.
 

              /s/ CHRISTINE HERGENROTHER  

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Christine Hergenrother   Secretary

 

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