exv10w10



 




Exhibit
10.10



NOVELLUS SYSTEMS, INC.

2001 STOCK INCENTIVE PLAN




(Amended and Restated February 15, 2007)




     1. Purposes of the Plan. The purposes of this Stock Incentive Plan are to attract and
retain the best available personnel, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company’s business.



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



          (a) “Administrator” means the Board or any of the Committees appointed to administer
the Plan.




          (b) “Affiliate” and “Associate” shall have the respective meanings ascribed to
such terms in Rule 12b-2 promulgated under the Exchange Act.




          (c) “Applicable Laws” means the legal requirements relating to the administration of
stock incentive plans, if any, under applicable provisions of federal securities laws, state
corporate and securities laws, the Code, the rules of any applicable stock exchange or national
market system, and the rules of any foreign jurisdiction applicable to Awards granted to residents
therein.




          (d) “Award” means the grant of an Option, Restricted Stock or Restricted Stock Unit
under the Plan.




          (e) “Award Agreement” means the written agreement evidencing the grant of an Award
executed by the Company and the Grantee, including any amendments thereto.




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




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




          (h) “Committee” means any committee appointed by the Board to administer the Plan.




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




          (j) “Company” means Novellus Systems, Inc., a California corporation.




          (k) “Consultant” means any person (other than an Employee or a Director, solely with
respect to rendering services in such person’s capacity as a Director) who is engaged by the
Company or any Related Entity to render consulting or advisory services to the Company or such
Related Entity.




          (l) “Continuous Service” means that the provision of services to the Company or a
Related Entity in any capacity of Employee, Director or Consultant is not interrupted or
terminated. In jurisdictions requiring notice in advance of an effective termination as an
Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual
cessation of providing services to the Company or a Related Entity notwithstanding any required
notice period that must be fulfilled before a termination as an Employee, Director or Consultant
can be effective under Applicable Laws. A Grantee’s Continuous Service shall be deemed to have
terminated either upon an actual termination of Continuous Service or upon the entity for which the
Grantee provides services ceasing to be a Related Entity. Continuous Service shall not be
considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the
Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant,
or (iii) any change in status as long as the individual remains in the service of the Company or a
Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in
the Award Agreement). An approved leave of absence shall include sick leave, military leave, or
any other authorized personal leave. For purposes of each Incentive Stock Option granted under the
Plan, if such leave exceeds three (3) months, and reemployment



upon expiration of such leave is not guaranteed by statute or contract, then the Incentive Stock
Option shall be treated as a Nonstatutory Stock Option on the day three (3) months and one (1) day
following the expiration of such three (3) month period.




 









 








          (m) “Corporate Transaction” means any of the following transactions:




               (i) a merger or consolidation in which the Company is not the surviving entity, except for a
transaction the principal purpose of which is to change the state in which the Company is
incorporated;



               (ii) the sale, transfer or other disposition of all or substantially all of the assets of the
Company (including the capital stock of the Company’s subsidiary corporations);



               (iii) approval by the Company’s shareholders of any plan or proposal for the complete
liquidation or dissolution of the Company;



               (iv) any reverse merger or series of related transactions culminating in a reverse merger
(including, but not limited to, a tender offer followed by a reverse merger) in which the Company
is the surviving entity but (A) the shares of Common Stock outstanding immediately prior to such
merger are converted or exchanged by virtue of the merger into other property, whether in the form
of securities, cash or otherwise, or (B) in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company’s outstanding securities are transferred to
a person or persons different from those who held such securities immediately prior to such merger
or the initial transaction culminating in such merger; or



               (v) acquisition in a single or series of related transactions by any person or related group
of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than
fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but
excluding any such transaction or series of related transactions that the Administrator determines
shall not be a Corporate Transaction.



          (n) “Covered Employee” means an Employee who is a “covered employee” under Section
162(m)(3) of the Code.




          (o) “Director” means a member of the Board or the board of directors of any Related
Entity.




          (p) “Disability” means a Grantee would qualify for benefit payments under the
long-term disability policy of the Company or the Related Entity to which the Grantee provides
services regardless of whether the Grantee is covered by such policy. If the Company or the
Related Entity to which the Grantee provides service does not have a long-term disability plan in
place, “Disability” means that a Grantee is permanently unable to carry out the responsibilities
and functions of the position held by the Grantee by reason of any medically determinable physical
or mental impairment. A Grantee will not be considered to have incurred a Disability unless he or
she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.




          (q) “Employee” means any person, including an Officer or Director, who is an employee
of the Company or any Related Entity. The payment of a director’s fee by the Company or a Related
Entity shall not be sufficient to constitute “employment” by the Company.




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




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




               (i) If the Common Stock is listed on one or more established stock exchanges or national
market systems, including without limitation The NASDAQ Global Select Market, The NASDAQ Global
Market or The NASDAQ Capital Market of The NASDAQ Stock Market LLC, its Fair Market Value shall be
the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on
the principal exchange or system on which the Common Stock is listed (as determined by the
Administrator) on the date of


determination (or, if no closing sales price or closing bid was reported on that date, as
applicable, on the last trading date such closing sales price or closing bid was reported), as
reported in The Wall Street Journal or such other source as the Administrator deems reliable;




               (ii) If the Common Stock is regularly quoted on an automated quotation system (including the
OTC Bulletin Board) or by a recognized securities dealer, its Fair Market Value shall be the



 









 







closing sales price for such stock as quoted on such system or by such securities dealer on
the date of determination, but if selling prices are not reported, the Fair Market Value of a share
of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on
the date of determination (or, if no such prices were reported on that date, on the last date such
prices were reported), as reported in The Wall Street Journal or such other source as the
Administrator deems reliable; or



               (iii) In the absence of an established market for the Common Stock of the type described in
(i) and (ii), above, the Fair Market Value thereof shall be determined by the Administrator in good
faith.



          (t) “Grantee” means an Employee, Director or Consultant who receives an Award pursuant
to an Award Agreement under the Plan.




          (u) “Incentive Stock Option” means an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code.




          (v) “Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.




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




          (x) “Option” means an option to purchase Shares pursuant to an Award Agreement granted
under the Plan.




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




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




          (aa) “Performance — Based Compensation” means compensation qualifying as
“performance-based compensation” under Section 162(m) of the Code.




          (bb) “Plan” means this 2001 Stock Incentive Plan.




          (cc) “Related Entity” means any Parent, Subsidiary and any business, corporation,
partnership, limited liability company or other entity in which the Company, a Parent or a
Subsidiary holds a substantial ownership interest, directly or indirectly.




          (dd) “Related Entity Disposition” means the sale, distribution or other disposition by
the Company, a Parent or a Subsidiary of all or substantially all of the interests of the Company,
a Parent or a Subsidiary in any Related Entity effected by a sale, merger or consolidation or other
transaction involving that Related Entity or the sale of all or substantially all of the assets of
that Related Entity, other than any Related Entity Disposition to the Company, a Parent or a
Subsidiary.




          (ee) “Restricted Stock” means Shares issued under the Plan to the Grantee for such
consideration, if any, and subject to such restrictions on transfer, rights of first refusal,
repurchase provisions, forfeiture provisions, and other terms and conditions as established by the
Administrator.




          (ff) “Restricted Stock Units” means an Award which may be earned in whole or in part
upon the passage of time or the attainment of performance criteria established by the Administrator
and which may be settled for cash, Shares or other securities or a combination of cash, Shares or
other securities as established by the Administrator.




          (gg) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor
thereto.




          (hh) “Share” means a share of the Common Stock.




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




     3. Stock Subject to the Plan.



          (a) Subject to the provisions of Section 10, below, the maximum aggregate number of Shares
which may be issued pursuant to all Awards is 14,860,000 Shares, plus the number of Shares that
remain

 









 








available for grants of awards under the Company’s 2001 Non-Qualified Stock Option Plan (the
2001 NQ Plan) as of May 11, 2007, plus any Shares that would otherwise return to the 2001 NQ Plan
as a result of forfeiture, termination or expiration of awards previously granted under the 2001 NQ
Plan; provided, however, that the maximum aggregate number of Shares which may be issued pursuant
to all Awards of Restricted Stock and Restricted Stock Units is 4,636,000 and that the maximum
aggregate number of Shares which may be issued pursuant to all Awards of Incentive Stock Options is
14,000,000 Shares (with all such Share amounts and limits subject to the provisions of Section 10,
below). The Shares to be issued pursuant to Awards may be authorized, but unissued, or reacquired
Common Stock.




          (b) Any Shares covered by an Award (or portion of an Award) which is forfeited or canceled,
expires or is settled in cash, shall be deemed not to have been issued for purposes of determining
the maximum aggregate number of Shares which may be issued under the Plan. Shares that actually
have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall
not become available for future issuance under the Plan, except that if unvested Shares are
forfeited, or repurchased by the Company at the lower of their original purchase price or their
Fair Market Value at the time of repurchase, such Shares shall become available for future grant
under the Plan. Notwithstanding anything to the contrary contained herein: (i) Shares tendered or
withheld in payment of an Option exercise price shall not be returned to the Plan and shall not
become available for future issuance under the Plan; and (ii) Shares withheld by the Company to
satisfy any tax withholding obligation shall not be returned to the Plan and shall not become
available for future issuance under the Plan.




     4. Administration of the Plan.



          (a) Plan Administrator.




               (i) Administration with Respect to Directors and Officers. With respect to grants of
Awards to Directors or Employees who are also Officers or Directors of the Company, the Plan shall
be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the Applicable Laws and to permit such grants and
related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in
accordance with Rule 16b-3. Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board.



               (ii) Administration With Respect to Consultants and Other Employees. With respect to
grants of Awards to Employees or Consultants who are neither Directors nor Officers of the Company,
the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which
Committee shall be constituted in such a manner as to satisfy the Applicable Laws. Once appointed,
such Committee shall continue to serve in its designated capacity until otherwise directed by the
Board.



               (iii) Administration With Respect to Covered Employees. Notwithstanding the
foregoing, grants of Awards to any Covered Employee intended to qualify as Performance-Based
Compensation shall be made only by a Committee (or subcommittee of a Committee) which is comprised
solely of two or more Directors eligible to serve on a committee making Awards qualifying as
Performance-Based Compensation. In the case of such Awards granted to Covered Employees,
references to the “Administrator” or to a “Committee” shall be deemed to be references to such
Committee or subcommittee.



 









 





               (iv) Administration Errors. In the event an Award is granted in a manner inconsistent
with the provisions of this subsection (a), such Award shall be presumptively valid as of its grant
date to the extent permitted by the Applicable Laws.



          (b) Powers of the Administrator. Subject to Applicable Laws and the provisions of the
Plan (including any other powers given to the Administrator hereunder), and except as otherwise
provided by the Board, the Administrator shall have the authority, in its discretion:




               (i) to select the Employees, Directors and Consultants to whom Awards may be granted from time
to time hereunder;



               (ii) to determine whether and to what extent Awards are granted hereunder;



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



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



               (v) to determine the terms and conditions of any Award granted hereunder;



               (vi) to amend the terms of any outstanding Award granted under the Plan, provided that (A) any
amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be
made without the Grantee’s written consent, provided, however, that an amendment or modification
that may cause an Incentive Stock Option to become a Non-Qualified Stock Option shall not be
treated as adversely affecting the rights of the Grantee, (B) the reduction of the exercise price
of any Option awarded under the Plan shall be subject to shareholder approval and (C) canceling an
Option at a time when its exercise price exceeds the Fair Market Value of the underlying Shares, in
exchange for another Option, Restricted Stock or other Award shall be subject to shareholder
approval, unless the cancellation and exchange occurs in connection with a Corporate Transaction;



               (vii) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan,
including without limitation, any notice of Award or Award Agreement, granted pursuant to the Plan;



               (viii) to grant Awards to Employees, Directors and Consultants employed outside the United
States on such terms and conditions different from those specified in the Plan as may, in the
judgment of the Administrator, be necessary or desirable to further the purpose of the Plan; and



               (ix) to take such other action, not inconsistent with the terms of the Plan, as the
Administrator deems appropriate.



     The express grant in the Plan of any specific power to the Administrator shall not be
construed as limiting any power or authority of the Administrator; provided that the Administrator
may not exercise any right or power reserved to the Board. Any decision made, or action taken, by
the Administrator or in connection with the administration of this Plan shall be final, conclusive
and binding on all persons having an interest in the Plan.



     5. Eligibility. Awards other than Incentive Stock Options may be granted to
Employees, Directors and Consultants. Incentive Stock Options may be granted only to Employees of
the Company, a Parent or a Subsidiary. An Employee, Director or Consultant who has been granted an
Award may, if otherwise eligible, be granted additional Awards. Awards may be granted to such
Employees, Directors or Consultants who are residing in foreign jurisdictions as the Administrator
may determine from time to time.



     6. Terms and Conditions of Awards.



          (a) Type of Awards. The Administrator is authorized under the Plan to award Options,
Restricted Stock and Restricted Stock Units with a fixed or variable price related to the Fair
Market Value of the Shares and with an exercise or conversion privilege related to the passage of
time, the occurrence of one or more events, or the satisfaction of performance criteria or other
conditions.




 









 








          (b) Designation of Award. Each Award shall be designated in the Award Agreement. In
the case of an Option, the Option shall be designated as either an Incentive Stock Option or a
Nonstatutory Stock Option. However, notwithstanding such designation, an Option will qualify as an
Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation of Section
422(d) of the Code is not exceeded. The $100,000 limitation of Section 422(d) of the Code is
calculated based on the aggregate Fair Market Value of the Shares subject to Options designated as
Incentive Stock Options which become exercisable for the first time by a Grantee during any
calendar year (under all plans of the Company or any Parent or Subsidiary of the Company). For
purposes of this calculation, Incentive Stock Options shall be taken into account in the order in
which they were granted, and the Fair Market Value of the Shares shall be determined as of the
grant date of the relevant Option.




          (c) Conditions of Award. Subject to the terms of the Plan, the Administrator shall
determine the provisions, terms, and conditions of each Award including, but not limited to, the
Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form
of payment (cash, Shares, or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The performance criteria established
by the Administrator may be based on any one of, or combination of, the following: (i) increase in
share price, (ii) earnings per share, (iii) total shareholder return, (iv) operating margin, (v)
gross margin, (vi) return on equity, (vii) return on assets, (viii) return on investment, (ix)
operating income, (x) net operating income, (xi) pre-tax profit, (xii) cash flow, (xiii) revenue,
(xiv) expenses, (xv) earnings before interest, taxes and depreciation, (xvi) economic value added
and (xvii) market share. For Awards that are not intended to qualify as Performance-Based
Compensation, the performance criteria established by the Administrator may be based on personal
management objectives, or other measures of performance selected by the Administrator. The
performance criteria may be applicable to the Company, Related Entities and/or any individual
business units of the Company or any Related Entity. Partial achievement of the specified criteria
may result in a payment or vesting corresponding to the degree of achievement as specified in the
Award Agreement.




          (d) Acquisitions and Other Transactions. The Administrator may issue Awards under the
Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant
future awards in connection with the Company or a Related Entity acquiring another entity, an
interest in another entity or an additional interest in a Related Entity whether by merger, stock
purchase, asset purchase or other form of transaction.




          (e) Deferral of Award Payment. The Administrator may establish one or more programs
under the Plan to permit selected Grantees the opportunity to elect to defer receipt of
consideration upon exercise of an Award, satisfaction of performance criteria, or other event that
absent the election would entitle the Grantee to payment or receipt of Shares or other
consideration under an Award. The Administrator may establish the election procedures, the timing
of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if
any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules
and procedures that the Administrator deems advisable for the administration of any such deferral
program.




          (f) Separate Programs. The Administrator may establish one or more separate programs
under the Plan for the purpose of issuing particular forms of Awards to one or more classes of
Grantees on such terms and conditions as determined by the Administrator from time to time.




          (g) Individual Limitations on Awards.




               (i) Individual Limit for Options. The maximum number of Shares with respect to which
Options may be granted to any Grantee in any fiscal year of the Company shall be 600,000 Shares.
In connection with a Grantee’s commencement of Continuous Service, a Grantee may be granted Options
for up to an additional 1,200,000 Shares which shall not count against the limit set forth in the
previous sentence. The foregoing limitations shall be adjusted proportionately in connection with
any change in the Company’s capitalization pursuant to Section 10, below. To the extent required
by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitations
with respect to a Grantee, if any Option is



 









 







canceled, the canceled Option shall continue to count against the maximum number of Shares with
respect to which Options may be granted to the Grantee. For this purpose, the repricing of an
Option shall be treated as the cancellation of the existing Option and the grant of a new Option
(if approved by shareholders).



               (ii) Individual Limit for Restricted Stock and Restricted Stock Units. For awards of
Restricted Stock and Restricted Stock Units that are intended to be Performance-Based Compensation,
the maximum number of Shares with respect to which such Awards may be granted to any Grantee in any
fiscal year of the Company shall be 600,000 Shares. The foregoing limitation shall be adjusted
proportionately in connection with any change in the Company’s capitalization pursuant to Section
10, below.



               (iii) Deferral. If the vesting or receipt of Shares under an Award is deferred to a
later date, any amount (whether denominated in Shares or cash) paid in addition to the original
number of Shares subject to such Award will not be treated as an increase in the number of Shares
subject to the Award if the additional amount is based either on a reasonable rate of interest or
on one or more predetermined actual investments such that the amount payable by the Company at the
later date will be based on the actual rate of return of a specific investment (including any
decrease as well as any increase in the value of an investment).



          (h) Early Exercise. The Award Agreement may, but need not, include a provision
whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any
part or all of the Award prior to full vesting of the Award. Any unvested Shares received pursuant
to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity
or to any other restriction the Administrator determines to be appropriate.




          (i) Term of Award. The term of each Award shall be the term stated in the Award
Agreement provided, however, that the term shall be no more than ten (10) years from the date of
grant thereof. However, in the case of an Incentive Stock Option granted to a Grantee who, at the
time the Option is granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary of the Company, the term of the
Incentive Stock Option shall be five (5) years from the date of grant thereof or such shorter term
as may be provided in the Award Agreement. Notwithstanding the foregoing, the specified term of
any Award shall not include any period for which the Grantee has elected to defer the receipt of
the Shares or cash issuable pursuant to the Award.




          (j) Transferability of Awards. Incentive Stock Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws
of descent or distribution and may be exercised, during the lifetime of the Grantee, only by the
Grantee. Other Awards shall be transferable (i) by will and by the laws of descent and
distribution and (ii) during the lifetime of the Grantee, to the extent and in the manner
authorized by the Administrator, but only to the extent such transfers are made to family members,
to family trusts, to family controlled entities, to charitable organizations, and pursuant to
domestic relations orders or agreements, in all cases without payment for such transfers to the
Grantee. Notwithstanding the foregoing, the Grantee may designate one or more beneficiaries of the
Grantee’s Award in the event of the Grantee’s death on a beneficiary designation form provided by
the Administrator.




          (k) Time of Granting Awards. The date of grant of an Award shall for all purposes be
the date on which the Administrator makes the determination to grant such Award, or such other date
as is determined by the Administrator. Notice of the grant determination shall be given to each
Employee, Director or Consultant to whom an Award is so granted within a reasonable time after the
date of such grant.




     7. Award Exercise or Purchase Price, Consideration and Taxes.



          (a) Exercise or Purchase Price. The exercise or purchase price, if any, for an Award
shall be as follows:




               (i) In the case of an Incentive Stock Option granted to an Employee who, at the time of the
grant of such Incentive Stock Option owns stock representing more than ten percent (10%) of the
voting



 









 







power of all classes of stock of the Company or any Parent or Subsidiary, the per Share
exercise price shall be not less than one hundred ten percent (110%) of the Fair Market Value per
Share on the date of grant.



               (ii) In cases other than the case described in the preceding paragraph, the per Share exercise
price of an Option shall be not less than one hundred percent (100%) of the Fair Market Value per
Share on the date of grant.



               (iii) In the case of Awards intended to qualify as Performance-Based Compensation, the
exercise or purchase price, if any, shall be not less than one hundred percent (100%) of the Fair
Market Value per Share on the date of grant.



               (iv) In the case of a Restricted Stock or Restricted Stock Units grant, such price, if any,
shall be determined by the Administrator.



               (v) Notwithstanding the foregoing provisions of this Section 7(a), in the case of an Award
issued pursuant to Section 6(d), above, the exercise or purchase price for the Award shall be
determined in accordance with the provisions of the relevant instrument evidencing the agreement to
issue such Award.



          (b) Consideration. Subject to Applicable Laws, the consideration to be paid for the
Shares to be issued upon exercise or purchase of an Award including the method of payment, shall be
determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined
at the time of grant). In addition to any other types of consideration the Administrator may
determine, the Administrator is authorized to accept as consideration for Shares issued under the
Plan the following:




               (i) cash;



               (ii) check;



               (iii) surrender of Shares or delivery of a properly executed form of attestation of ownership
of Shares as the Administrator may require (including withholding of Shares otherwise deliverable
upon exercise of the Award) which have a Fair Market Value on the date of surrender or attestation
equal to the aggregate exercise price of the Shares as to which said Award shall be exercised (but
only to the extent that such exercise of the Award would not result in an accounting compensation
charge with respect to the Shares used to pay the exercise price unless otherwise determined by the
Administrator);



               (iv) with respect to Options, payment through a broker-dealer sale and remittance procedure
pursuant to which the Grantee (A) shall provide written instructions to a Company designated
brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the
Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and
(B) shall provide written directives to the Company to deliver the certificates for the purchased
Shares directly to such brokerage firm in order to complete the sale transaction;



               (v) with respect to Options, payment through a “net exercise” such that, without the payment
of any funds, the Grantee may exercise the Option and receive the net number of Shares equal to (i)
the number of Shares as to which the Option is being exercised, multiplied by (ii) a fraction, the
numerator of which is the Fair Market Value per Share (on such date as is determined by the
Administrator) less the Exercise Price per Share, and the denominator of which is such Fair Market
Value per Share (the number of net Shares to be received shall be rounded down to the nearest whole
number of Shares); or



               (vi) any combination of the foregoing methods of payment.



     The Administrator may at any time or from time to time, by adoption of or by amendment to the
standard forms of Award Agreement described in Section 4(b)(iv), or by other means, grant Awards
which do not permit all of the foregoing forms of consideration to be used in payment for the
Shares or which otherwise restrict one or more forms of consideration.



          (c) Taxes. No Shares shall be delivered under the Plan to any Grantee or other person
until such Grantee or other person has made arrangements acceptable to the Administrator for the
satisfaction of any foreign, federal, state, or local income and employment tax withholding
obligations, including, without

 









 






limitation, obligations incident to the receipt of Shares or the disqualifying disposition of
Shares received on exercise of an Incentive Stock Option. Upon exercise of an Award, the Company
shall withhold or collect from Grantee an amount sufficient to satisfy such tax obligations.




     8. Exercise of Award.



          (a) Procedure for Exercise; Rights as a Shareholder.





               (i) Any Award granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator under the terms of the Plan and specified in the Award
Agreement.




               (ii) An Award shall be deemed to be exercised when written notice of such exercise has been
given to the Company in accordance with the terms of the Award by the person entitled to exercise
the Award and full payment for the Shares with respect to which the Award is exercised, including,
to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase
price as provided in Section 7(b)(v).



          (b) Exercise of Award Following Termination of Continuous Service.




               (i) An Award may not be exercised after the termination date of such Award set forth in the
Award Agreement and may be exercised following the termination of a Grantee’s Continuous Service
only to the extent provided in the Award Agreement.



               (ii) Where the Award Agreement permits a Grantee to exercise an Award following the
termination of the Grantee’s Continuous Service for a specified period, the Award shall terminate
to the extent not exercised on the last day of the specified period or the last day of the original
term of the Award, whichever occurs first.



               (iii) Any Award designated as an Incentive Stock Option to the extent not exercised within the
time permitted by law for the exercise of Incentive Stock Options following the termination of a
Grantee’s Continuous Service shall convert automatically to a Nonstatutory Stock Option and
thereafter shall be exercisable as such to the extent exercisable by its terms for the period
specified in the Award Agreement.



     9. Conditions Upon Issuance of Shares.



          (a) If at any time the Administrator determines that the delivery of Shares pursuant to the
exercise, vesting or any other provision of an Award is or may be unlawful under Applicable Laws,
the vesting or right to exercise an Award or to otherwise receive Shares pursuant to the terms of
an Award shall be suspended until the Administrator determines that such delivery is lawful and
shall be further subject to the approval of counsel for the Company with respect to such
compliance. The Company shall have no obligation to effect any registration or qualification of
the Shares under federal or state laws.




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




     10. Adjustments Upon Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of Shares covered by each outstanding Award, and the number
of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet
been granted or which have been returned to the Plan, the exercise or purchase price of each such
outstanding Award, the maximum number of Shares with respect to which Awards may be granted to any
Grantee in any fiscal year of the Company, as well as any other terms that the Administrator
determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in
the number of issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Shares, or similar event affecting the Shares, (ii) any
other increase or decrease in the number of issued Shares effected without receipt of consideration
by the Company, or (iii) any other transaction with respect to Common Stock including a corporate
merger, consolidation, acquisition of property or stock, separation (including a spin-off or other
distribution of stock or property), reorganization, liquidation (whether partial or complete) or
any similar transaction; provided, however that conversion of any convertible securities of the
Company shall not be



 









 







deemed to have been “effected without receipt of consideration.” In connection with the
foregoing adjustments, the Administrator may, in its discretion, prohibit the exercise of Awards or
other issuance of Shares, cash or other consideration



pursuant to Awards during certain periods of time. Except as the Administrator determines, no
issuance by the Company of shares of any class, or securities convertible into shares of any class,
shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price
of Shares subject to an Award.



     11. Corporate Transactions and Related Entity Dispositions. Except as may be provided
in an Award Agreement:



          (a) The Administrator shall have the authority, exercisable either in advance of any actual or
anticipated Corporate Transaction or Related Entity Disposition or at the time of an actual
Corporate Transaction or Related Entity Disposition and exercisable at the time of the grant of an
Award under the Plan or any time while an Award remains outstanding, to provide for the full or
partial automatic vesting and exercisability of one or more outstanding unvested Awards under the
Plan and the full or partial release from restrictions on transfer and repurchase or forfeiture
rights of such Awards in connection with a Corporate Transaction or Related Entity Disposition, on
such terms and conditions as the Administrator may specify. The Administrator also shall have the
authority to condition any such Award vesting and exercisability or release from such limitations
upon the subsequent termination of the Continuous Service of the Grantee within a specified period
following the effective date of the Corporate Transaction or Related Entity Disposition. The
Administrator may provide that any Awards so vested or released from such limitations in connection
with a Related Entity Disposition, shall remain fully exercisable until the expiration or sooner
termination of the Award. Effective upon the consummation of a Corporate Transaction, all
outstanding Awards under the Plan shall terminate unless assumed by the successor company or its
parent.




          (b) The portion of any Incentive Stock Option accelerated under this Section 11 in connection
with a Corporate Transaction or Related Entity Disposition shall remain exercisable as an Incentive
Stock Option under the Code only to the extent the $100,000 dollar limitation of Section 422(d) of
the Code is not exceeded. To the extent such dollar limitation is exceeded, the accelerated excess
portion of such Option shall be exercisable as a Nonstatutory Stock Option.




     12. Effective Date and Term of Plan. The Plan became effective in 2001. It shall
continue in effect for a term of ten (10) years unless sooner terminated. Subject to Applicable
Laws, Awards may be granted under the Plan upon its becoming effective.



     13. Amendment, Suspension or Termination of the Plan.



          (a) The Board may at any time amend, suspend or terminate the Plan; provided, however, that no
such amendment shall be made without the approval of the Company’s shareholders to the extent such
approval is required by Applicable Laws, or if such amendment would:




               (i) lessen the shareholder approval requirements of Section 4(b)(vi) or this Section 13(a);



               (ii) increase the benefits accrued to participants under the Plan;



               (iii) increase the number of securities which may be issued under the Plan; or



               (iv) modify the requirements for participation in the Plan.



          (b) No Award may be granted during any suspension of the Plan or after termination of the
Plan.




          (c) No suspension or termination of the Plan (including termination of the Plan under Section
11 above) shall adversely affect any rights under Awards already granted to a Grantee.




     14. Reservation of Shares.



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




 









 








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




     15. No Effect on Terms of Employment/Consulting Relationship. The Plan shall not
confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it
interfere in any way with his or her right or the Company’s right to terminate the Grantee’s
Continuous Service at any time, with or without cause.



     16. No Effect on Retirement and Other Benefit Plans. Except as specifically provided
in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be
deemed compensation for purposes of computing benefits or contributions under any retirement plan
of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan
of any kind or any benefit plan subsequently instituted under which the availability or amount of
benefits is related to level of compensation. The Plan is not a “Retirement Plan” or “Welfare
Plan” under the Employee Retirement Income Security Act of 1974, as amended.



     17. Plan History. The Plan was initially approved by the Board and shareholders of
the Company in 2001. In February 2003, the Board approved an amendment to the Plan to increase the
automatic option grant to Outside Directors under Section 6(e) of the Plan from 10,000 shares to
18,000 shares, which amendment was not subject to shareholder approval. In March 2005, subject to
shareholder approval, the Board approved an amendment to the Plan in order to (i) increase the
number of shares available for issuance thereunder by 4,500,000 shares from 6,360,000 shares to
10,860,00 shares, (ii) provide that the maximum number of Shares which may be issued pursuant to
all Awards of Restricted Stock is 2,136,000 Shares, (iii) remove the automatic option grant program
for Outside Directors under Section 6(e) in order to permit greater flexibility in the granting of
awards to Outside Directors under the Plan and (iv) amend certain other administrative provisions
of the Plan. On July 20, 2006, the Board approved an amendment to the Plan to permit the grant of
Restricted Stock Units and to make such other changes to reflect current Applicable Laws. On
February 15, 2007, the Board approved an amendment and restatement of the Plan, subject to the
approval of the Company’s shareholders, (i) to increase the maximum number of Shares available
under the Plan; (ii) to impose a per person limit on the number of Shares subject to Awards of
Restricted Stock and Restricted Stock Units intended to qualify as Performance-Based Compensation
in any fiscal year of the Company; and (iii) to expand the definition of Corporate Transaction,
which shall take effect only for Awards granted on and after the date on which the Company’s
shareholders approve the amendment and restatement of the Plan.



     18. Unfunded Obligation. Grantees shall have the status of general unsecured
creditors of the Company. Any amounts payable to Grantees pursuant to the Plan shall be unfunded
and unsecured obligations for all purposes, including, without limitation, Title I of the Employee
Retirement Income Security Act of 1974, as amended. Neither the Company nor any Related Entity
shall be required to segregate any monies from its general funds, or to create any trusts, or
establish any special accounts with respect to such obligations. The Company shall retain at all
times beneficial ownership of any investments, including trust investments, which the Company may
make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance
of any trust or any Grantee account shall not create or constitute a trust or fiduciary
relationship between the Administrator, the Company or any Related Entity and a Grantee, or
otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any
assets of the Company or a Related Entity. The Grantees shall have no claim against the Company or
any Related Entity for any changes in the value of any assets that may be invested or reinvested by
the Company with respect to the Plan.



     19. Construction. Captions and titles contained herein are for convenience only and
shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise
indicated by the context, the singular shall include the plural and the plural shall include the
singular. Use of the term “or” is not intended to be exclusive, unless the context clearly
requires otherwise.