exv10w16



 








Exhibit 10.16




Veraz Networks, Inc. 

2006 Equity Incentive Plan




Approved by the Board: June 29, 2006

Approved by the
Stockholders: ___, 2007

Termination Date: June 28, 2016




1. General.




     (a) Successor and Continuation of Prior Plan. The Plan is intended as the successor to and
continuation of the Veraz Networks, Inc. 2001 Equity Incentive Plan (the “Prior Plan”). Following
the Effective Date, no additional stock awards shall be granted under the Prior Plan. Any shares
remaining available for issuance pursuant to the exercise of options or settlement of stock awards
under the Prior Plan shall become available for issuance pursuant to Stock Awards granted
hereunder. Any shares subject to outstanding stock awards granted under the Prior Plan that expire
or terminate for any reason prior to exercise or settlement shall become available for issuance
pursuant to Stock Awards granted hereunder. On the Effective Date, all outstanding stock awards
granted under the Prior Plan shall be deemed to be stock awards granted pursuant to the Plan, but
shall remain subject to the terms of the Prior Plan with respect to which they were originally
granted. All Stock Awards granted subsequent to the effective date of this Plan shall be subject
to the terms of this Plan.



     (b) Eligible Stock Award Recipients. The persons eligible to receive Stock Awards are
Employees, Directors and Consultants.



     (c) Available Stock Awards. The Plan provides for the grant of the following Stock Awards:
(i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Restricted Stock Awards, (iv)
Restricted Stock Unit Awards, (v) Stock Appreciation Rights, (vi) Performance Stock Awards, and
(vii) Other Stock Awards.



     (d) Purpose. The Company, by means of the Plan, seeks to secure and retain the services of
the group of persons eligible to receive Stock Awards as set forth in Section 1(b), to provide
incentives for such persons to exert maximum efforts for the success of the Company and any
Affiliate, and to provide a means by which such eligible recipients may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of Stock Awards.



2. Administration.




     (a) Administration by Board. The Board shall administer the Plan unless and until the Board
delegates administration of the Plan to a Committee or Committees, as provided in Section 2(d).
However, the Board may not delegate administration of the Non-Discretionary Grant Program.



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     (b) Powers of Board. Except with respect to the Non-Discretionary Grant Program, the Board
shall have the power, subject to, and within the limitations of, the express provisions of the
Plan:



          (i) To determine from time to time (A) which of the persons eligible under the Plan shall be
granted Stock Awards; (B) when and how each Stock Award shall be granted; (C) what type or
combination of types of Stock Award shall be granted; (D) the provisions of each Stock Award
granted (which need not be identical), including the time or times when a person shall be permitted
to receive cash or Common Stock pursuant to a Stock Award; and (E) the number of shares of Common
Stock with respect to which a Stock Award shall be granted to each such person.




          (ii) To construe and interpret the Plan and Stock Awards granted under it, and to establish,
amend and revoke rules and regulations for its administration. The Board, in the exercise of this
power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan or
Stock Award fully effective.




          (iii) To settle all controversies regarding the Plan and Stock Awards granted under it.




          (iv) To accelerate the time at which a Stock Award may first be exercised or the time during
which a Stock Award or any part thereof will vest in accordance with the Plan, notwithstanding the
provisions in the Stock Award stating the time at which it may first be exercised or the time
during which it will vest.




          (v) To effect, at any time and from time to time, with the consent of any adversely affected
Participant, (1) the reduction of the exercise price of any outstanding Option or the strike price
of any outstanding Stock Appreciation Right; (2) the cancellation of any outstanding Option or
Stock Appreciation Right and the grant in substitution therefor of (a) a new Option or Stock
Appreciation Right under the Plan or another equity plan of the Company covering the same or
different number of shares of Common Stock, (b) a Restricted Stock Award, (c) a Restricted Stock
Unit Award, (d) an Other Stock Award, (e) cash, and/or (f) other valuable consideration as
determined by the Board in its sole discretion; or (3) any other action that is treated as a
repricing under generally accepted accounting principles.




          (vi) To suspend or terminate the Plan at any time. Suspension or termination of the Plan
shall not impair rights and obligations under any Stock Award granted while the Plan is in effect
except with the written consent of the affected Participant.




          (vii) To amend the Plan in any respect the Board deems necessary or advisable, including,
without limitation, relating to Incentive Stock Options and certain nonqualified deferred
compensation under Section 409A of the Code and/or to bring the Plan or Stock Awards granted under
the Plan into compliance therewith, subject to the limitations, if any, of applicable law. However,
except as provided in Section 10(a) relating to Capitalization Adjustments, stockholder approval
shall be required for any amendment of the Plan that either (i) materially increases the number of
shares of Common Stock available for issuance under the Plan, (ii)




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materially expands the class of individuals eligible to receive Stock Awards under the Plan,
(iii) materially increases the benefits accruing to Participants under the Plan or materially
reduces the price at which shares of Common Stock may be issued or purchased under the Plan, (iv)
materially extends the term of the Plan, or (v) expands the types of Stock Awards available for
issuance under the Plan, but in each of (i) through (v) only to the extent required by applicable
law or listing requirements. Except as provided above, rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company
requests the consent of the affected Participant, and (ii) such Participant consents in writing.




          (viii) To submit any amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of (i) Section 162(m) of
the Code and the regulations thereunder regarding the exclusion of performance-based compensation
from the limit on corporate deductibility of compensation paid to Covered Employees, (ii) Section
422 of the Code regarding Incentive Stock Options, or (iii) Rule 16b-3.




          (ix) To approve forms of Stock Award Agreements for use under the Plan and to amend the terms
of any one or more Stock Awards, including, but not limited to, amendments to provide terms more
favorable than previously provided in the Stock Award Agreement, subject to any specified limits in
the Plan that are not subject to Board discretion; provided however, that, the rights under any
Stock Award shall not be impaired by any such amendment unless (i) the Company requests the consent
of the affected Participant, and (ii) such Participant consents in writing. Notwithstanding the
foregoing, subject to the limitations of applicable law, if any, the Board may amend the terms of
any one or more Stock Awards without the affected Participant’s consent if necessary to maintain
the qualified status of the Stock Award as an Incentive Stock Option or to bring the Stock Award
into compliance with Section 409A of the Code and the related guidance thereunder.




          (x) Generally, to exercise such powers and to perform such acts as the Board deems necessary
or expedient to promote the best interests of the Company and that are not in conflict with the
provisions of the Plan or Stock Awards.




          (xi) To adopt such procedures and sub-plans as are necessary or appropriate to permit
participation in the Plan by Employees, Directors or Consultants who are foreign nationals or
employed outside the United States.




     (c) Administration of Non-Discretionary Grant Program. The Board shall have the power,
subject to and within the limitation of, the express provisions of the Non-Discretionary Grant
Program:



          (i) To determine the provisions of each Option to the extent not specified in the
Non-Discretionary Grant Program.




          (ii) To construe and interpret the Non-Discretionary Grant Program and the Options granted
under it, and to establish, amend and revoke rules and regulations for its administration. The
Board, in the exercise of this power, may correct any defect, omission or inconsistency in the
Non-Discretionary Grant Program or in any Option Agreement, in a manner




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and to the extent it shall deem necessary or expedient to make the Non-Discretionary Grant
Program or Option fully effective.




          (iii) Generally, to exercise such powers and to perform such acts as the Board deems necessary
or expedient to promote the best interests of the Company and that are not in conflict with the
provisions of the Non-Discretionary Grant Program.




     (d) Delegation to Committee.



          (i) General. The Board may delegate some or all of the administration of the Plan (except the
Non-Discretionary Grant Program) to a Committee or Committees. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board that have been delegated to the Committee, including the power
to delegate to a subcommittee of the Committee any of the administrative powers the Committee is
authorized to exercise (and references in the Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The Board may retain the
authority to concurrently administer the Plan with the Committee and may, at any time, revest in
the Board some or all of the powers previously delegated.




          (ii) Section 162(m) and Rule 16b-3 Compliance. In the sole discretion of the Board, the
Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of
the Code, or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3. In
addition, the Board or the Committee, in its sole discretion, may (A) delegate to a Committee who
need not be Outside Directors the authority to grant Stock Awards to eligible persons who are
either (I) not then Covered Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Stock Award, or (II) not persons with respect to whom the
Company wishes to comply with Section 162(m) of the Code, or (B) delegate to a Committee who need
not be Non-Employee Directors the authority to grant Stock Awards to eligible persons who are not
then subject to Section 16 of the Exchange Act.




     (e) Delegation to Officers. The Board may delegate to one or more Officers the authority to
do one or both of the following (i) designate Officers and Employees of the Company or any of its
Subsidiaries to be recipients of Options (and, to the extent permitted by Delaware law, other Stock
Awards) and the terms thereof, and (ii) determine the number of shares of Common Stock to be
subject to such Stock Awards granted to such Officers and Employees; provided, however, that the
Board resolutions regarding such delegation shall specify the total number of shares of Common
Stock that may be subject to the Stock Awards granted by such Officers and that such Officer may
not grant a Stock Award to himself or herself. Notwithstanding anything to the contrary in this
Section 2(e), the Board may not delegate to an Officer authority to determine the Fair Market Value
of the Common Stock pursuant to Section 14(x)(iii) below.



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     (f) Effect of Board’s Decision. All determinations, interpretations and constructions made by
the Board in good faith shall not be subject to review by any person and shall be final, binding
and conclusive on all persons.



3. Shares Subject to the Plan.




     (a) Share Reserve. Subject to the provisions of Section 10(a) relating to Capitalization
Adjustments, the aggregate number of shares of common stock of the Company that may be issued
pursuant to Stock Awards under the Plan and the Israeli Sub-Plan shall be 224,346 shares (on a post 2:1 reverse stock split basis); provided, however, that such share reserve shall be increased from
time to time by the number of shares of Common Stock that (i) are issuable pursuant to stock awards
outstanding under the Company’s Prior Plan as of the IPO Date, and (ii) but for the termination of
the Prior Plan as of the IPO Date, would otherwise have reverted to the share reserve of the Prior
Plan. In addition, the number of shares of Common Stock available for issuance under the Plan
shall automatically increase on January 1st of each year commencing in 2008 and ending on (and
including) January 1, 2016, in an amount equal to the lesser of (i) three percent (3%) of the total
number of shares of Common Stock outstanding on December 31st of the preceding calendar year, or
(ii) the number of shares of stock (not to exceed 6,000,000 (pre-split) shares) determined by the
Board of Directors. Notwithstanding the foregoing, the Board may act prior to the first day of any
calendar year, to provide that there shall be no increase in the share reserve for such calendar
year or that the increase in the share reserve for such calendar year shall be a lesser number of
shares of Common Stock than would otherwise occur pursuant to the preceding sentence. Shares may
be issued in connection with a merger or acquisition as permitted by NASD Rule 4350(i)(1)(A)(iii)
or, if applicable, NYSE Listed Company Manual Section 303A.08, or AMEX Company Guide Section 711
and such issuance shall not reduce the number of shares available for issuance under the Plan.



     (b) Reversion of Shares to the Share Reserve. If any (i) Stock Award shall for any reason
expire or otherwise terminate, in whole or in part, without having been exercised in full, (ii)
shares of Common Stock issued to a Participant pursuant to a Stock Award are forfeited back to or
repurchased by the Company because of the failure to meet a contingency or condition required for
the vesting of such shares, (iii) a Stock Award is settled in cash, (iv) if any shares of Common
Stock are cancelled in accordance with the cancellation and regrant provisions of Section 3(b)(v),
then the shares of Common Stock not issued under such Stock Award, or forfeited to or repurchased
by the Company, shall revert to and again become available for issuance under the Plan. If any
shares subject to a Stock Award are not delivered to a Participant because such shares are withheld
for the payment of taxes or the Stock Award is exercised through a reduction of shares subject to
the Stock Award (i.e., “net exercised”) or an appreciation distribution in respect of a Stock
Appreciation right is paid in shares of Common Stock, the number of shares subject to the Stock
Award that are not delivered to the Participant shall remain available for subsequent issuance
under the Plan. If the exercise price of any Stock Award is satisfied by tendering shares of
Common Stock held by the Participant (either by actual delivery or attestation), then the number of
shares so tendered shall remain available for issuance under the Plan.



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     (c) Incentive Stock Option Limit. Notwithstanding anything to the contrary in this Section
3(c), subject to the provisions of Section 10(a) relating to Capitalization Adjustments the
aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of
Incentive Stock Options shall be 224,346 shares of Common Stock 224,346 (on a post 2:1 reverse stock split basis) plus the amount of any increase in the
number of shares that may be available for issuance pursuant to Stock Awards pursuant to Section
3(a).



     (d) Source of Shares. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the Company on the open
market.



4. Eligibility.




     (a) Eligibility for Specific Stock Awards. Incentive Stock Options may be granted only to
employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such
terms are defined in Sections 424(e) and 424(f) of the Code). Stock Awards other than Incentive
Stock Options may be granted to Employees, Directors and Consultants. Non-discretionary Options
granted under the Non-Discretionary Grant Program in Section 7 may be granted only to Eligible
Directors.



     (b) Ten Percent Stockholders. A Ten Percent Stockholder shall not be granted an Incentive
Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of
the Fair Market Value of the Common Stock on the date of grant and the Option is not exercisable
after the expiration of five (5) years from the date of grant.



     (c) Section 162(m) Limitation. Subject to the provisions of Section 10(a) relating to
Capitalization Adjustments, at such time as the Company may be subject to the applicable provisions
of Section 162(m) of the Code, no Employee shall be eligible to be granted during any calendar year
Stock Awards whose value is determined by reference to an increase over an exercise or strike price
of at least one hundred percent (100%) of the Fair Market Value of the Common Stock on the date the
Stock Award is granted covering more than three million (3,000,000) (pre-split) shares of Common
Stock.



     (d) Consultants. A Consultant shall be eligible for the grant of a Stock Award only if, at
the time of grant, a Form S-8 Registration Statement under the Securities Act (“Form S-8”) is
available to register either the offer or the sale of the Company’s securities to such Consultant.



5. Option Provisions.




     Each Option shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. All Options shall be separately designated Incentive Stock Options or
Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate
certificate or certificates shall be issued for shares of Common Stock purchased on exercise of
each type of Option. If an Option is not specifically designated as an Incentive Stock Option,
then the Option shall be a Nonstatutory Stock Option. The provisions of separate Options need not
be identical; provided, however, that each Option Agreement shall conform to



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(through incorporation of provisions hereof by reference in the Option Agreement or otherwise)
the substance of each of the following provisions:




     (a) Term. Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, no
Option shall be exercisable after the expiration of ten (10) years from the date of its grant or
such shorter period specified in the Option Agreement.



     (b) Exercise Price. Subject to the provisions of Section 4(b) regarding Ten Percent
Stockholders, the exercise price of each Option shall be not less than one hundred percent (100%)
of the Fair Market Value of the Common Stock subject to the Option on the date the Option is
granted. Notwithstanding the foregoing, an Option may be granted with an exercise price lower than
one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option if
such Option is granted pursuant to an assumption or substitution for another option in a manner
consistent with the provisions of Section 424(a) of the Code (whether or not such options are
Incentive Stock Options).



     (c) Consideration. The purchase price of Common Stock acquired pursuant to the exercise of an
Option shall be paid, to the extent permitted by applicable law and as determined by the Board in
its sole discretion, by any combination of the methods of payment set forth below. The Board shall
have the authority to grant Options that do not permit all of the following methods of payment (or
otherwise restrict the ability to use certain methods) and to grant Options that require the
consent of the Company to utilize a particular method of payment. The methods of payment permitted
by this Section 5(c) are:



          (i) by cash, check, bank draft or money order payable to the Company;




          (ii) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve
Board that, prior to the issuance of the stock subject to the Option, results in either the receipt
of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds;




          (iii) by delivery to the Company (either by actual delivery or attestation) of shares of
Common Stock;




          (iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of
shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair
Market Value that does not exceed the aggregate exercise price; provided, however, the Company
shall accept a cash or other payment from the Participant to the extent of any remaining balance of
the aggregate exercise price not satisfied by such reduction in the number of whole shares to be
issued; provided, further, that shares of Common Stock will no longer be subject to an Option and
will not be exercisable thereafter to the extent that (A) shares issuable upon exercise are reduced
to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the
Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding
obligations; or




          (v) in any other form of legal consideration that may be acceptable to the Board in its sole
discretion and permissible under applicable law.




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     (d) Transferability of Options. The Board may, in its sole discretion, impose such
limitations on the transferability of Options as the Board shall determine. In the absence of such
a determination by the Board to the contrary, the following restrictions on the transferability of
Options shall apply:



          (i) Restrictions on Transfer. An Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder; provided, however, that the Board may, in its sole discretion, permit
transfer of the Option in a manner that is not prohibited by applicable tax and securities laws
upon the Optionholder’s request.




          (ii) Domestic Relations Orders. Notwithstanding the foregoing, an Option may be transferred
pursuant to a domestic relations order, provided, however, that if an Option is an Incentive Stock
Option, such Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.




          (iii) Beneficiary Designation. Notwithstanding the foregoing, the Optionholder may, by
delivering written notice to the Company, in a form provided by or otherwise satisfactory to the
Company and any broker designated by the Company to effect Option exercises, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise
the Option. In the absence of such a designation, the executor or administrator of the
Optionholder’s estate shall be entitled to exercise the Option.




     (e) Vesting of Options Generally. The total number of shares of Common Stock subject to an
Option may vest and therefore become exercisable in periodic installments that may or may not be
equal. The Option may be subject to such other terms and conditions on the time or times when it
may or may not be exercised (which may be based on the satisfaction of Performance Goals or other
criteria) as the Board may deem appropriate. The vesting provisions of individual Options may
vary. The provisions of this Section 5(e) are subject to any Option provisions governing the
minimum number of shares of Common Stock as to which an Option may be exercised.



     (f) Termination of Continuous Service. In the event that an Optionholder’s Continuous Service
terminates (other than for Cause or upon the Optionholder’s death or Disability), the Optionholder
may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such
Option as of the date of termination of Continuous Service) but only within such period of time
ending on the earlier of (i) the date three (3) months following the termination of the
Optionholder’s Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement.
If, after termination of Continuous Service, the Optionholder does not exercise his or her Option
within the time specified herein or in the Option Agreement (as applicable), the Option shall
terminate.



     (g) Extension of Termination Date. An Optionholder’s Option Agreement may provide that if the
exercise of the Option following the termination of the Optionholder’s Continuous Service (other
than for Cause or upon the Optionholder’s death or Disability) would be prohibited at any time
solely because the issuance of shares of Common Stock would violate



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the registration requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of a period of three (3) months after the termination of the
Optionholder’s Continuous Service during which the exercise of the Option would not be in violation
of such registration requirements, or (ii) the expiration of the term of the Option as set forth in
the Option Agreement.



     (h) Disability of Optionholder. In the event that an Optionholder’s Continuous Service
terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her
Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of
termination of Continuous Service), but only within such period of time ending on the earlier of
(i) the date twelve (12) months following such termination of Continuous Service (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option
as set forth in the Option Agreement. If, after termination of Continuous Service, the
Optionholder does not exercise his or her Option within the time specified herein or in the Option
Agreement (as applicable), the Option shall terminate.



     (i) Death of Optionholder. In the event that (i) an Optionholder’s Continuous Service
terminates as a result of the Optionholder’s death, or (ii) the Optionholder dies within the period
(if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous
Service for a reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s
estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionholder’s death, but only within the period
ending on the earlier of (i) the date eighteen (18) months following the date of death (or such
longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of
such Option as set forth in the Option Agreement. If, after the Optionholder’s death, the Option
is not exercised within the time specified herein or in the Option Agreement (as applicable), the
Option shall terminate.



     (j) Termination for Cause. In the event that an Optionholder’s Continuous Service is
terminated for Cause, the Option shall terminate immediately and cease to remain outstanding.



     (k) Non-Exempt Employees. No Option granted to an Employee that is a non-exempt employee for
purposes of the Fair Labor Standards Act shall be first exercisable for any shares of Common Stock
until at least six months following the date of grant of the Option. The foregoing provision is
intended to operate so that any income derived by a non-exempt employee in connection with the
exercise or vesting of an Option will be exempt from his or her regular rate of pay.



6. Provisions of Stock Awards other than Options.




     (a) Restricted Stock Awards. Each Restricted Stock Award Agreement shall be in such form and
shall contain such terms and conditions as the Board shall deem appropriate. To the extent
consistent with the Company’s Bylaws, at the Board’s election, shares of Common Stock may be (x)
held in book entry form subject to the Company’s instructions until any restrictions relating to
the Restricted Stock Award lapse; or (y) evidenced by a certificate, which certificate shall be
held in such form and manner as determined by the Board. The terms and



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conditions of Restricted Stock Award Agreements may change from time to time, and the terms
and conditions of separate Restricted Stock Award Agreements need not be identical, provided,
however, that each Restricted Stock Award Agreement shall conform to (through incorporation of the
provisions hereof by reference in the agreement or otherwise) the substance of each of the
following provisions:



          (i) Consideration. A Restricted Stock Award may be awarded in consideration for (A) cash,
check, bank draft or money order payable to the Company; (B) past or future services actually or to
be rendered to the Company or an Affiliate; or (C) any other form of legal consideration that may
be acceptable to the Board in its sole discretion and permissible under applicable law.




          (ii) Vesting. Shares of Common Stock awarded under a Restricted Stock Award Agreement may be
subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the
Board.




          (iii) Termination of Participant’s Continuous Service. In the event a Participant’s
Continuous Service terminates, the Company may receive via a forfeiture condition or a repurchase
right, any or all of the shares of Common Stock held by the Participant which have not vested as of
the date of termination of Continuous Service under the terms of the Restricted Stock Award
Agreement.




          (iv) Transferability. Rights to acquire shares of Common Stock under the Restricted Stock
Award Agreement shall be transferable by the Participant only upon such terms and conditions as are
set forth in the Restricted Stock Award Agreement, as the Board shall determine in its sole
discretion, so long as Common Stock awarded under the Restricted Stock Award Agreement remains
subject to the terms of the Restricted Stock Award Agreement.




     (b) Restricted Stock Unit Awards. Each Restricted Stock Unit Award Agreement shall be in such
form and shall contain such terms and conditions as the Board shall deem appropriate. The terms
and conditions of Restricted Stock Unit Award Agreements may change from time to time, and the
terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical,
provided, however, that each Restricted Stock Unit Award Agreement shall conform to (through
incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:



          (i) Consideration. At the time of grant of a Restricted Stock Unit Award, the Board will
determine the consideration, if any, to be paid by the Participant upon delivery of each share of
Common Stock subject to the Restricted Stock Unit Award. The consideration to be paid (if any) by
the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid
in any form of legal consideration that may be acceptable to the Board in its sole discretion and
permissible under applicable law.




          (ii) Vesting. At the time of the grant of a Restricted Stock Unit Award, the Board may impose
such restrictions or conditions to the vesting of the Restricted Stock Unit Award as it, in its
sole discretion, deems appropriate.




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          (iii) Payment. A Restricted Stock Unit Award may be settled by the delivery of shares of
Common Stock, their cash equivalent, any combination thereof or in any other form of consideration,
as determined by the Board and contained in the Restricted Stock Unit Award Agreement.




          (iv) Additional Restrictions. At the time of the grant of a Restricted Stock Unit Award, the
Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery
of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award
to a time after the vesting of such Restricted Stock Unit Award.




          (v) Dividend Equivalents. Dividend equivalents may be credited in respect of shares of Common
Stock covered by a Restricted Stock Unit Award, as determined by the Board and contained in the
Restricted Stock Unit Award Agreement. At the sole discretion of the Board, such dividend
equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock
Unit Award in such manner as determined by the Board. Any additional shares covered by the
Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all
the terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they
relate.




          (vi) Termination of Participant’s Continuous Service. Except as otherwise provided in the
applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award
that has not vested will be forfeited upon the Participant’s termination of Continuous Service.




          (vii) Compliance with Section 409A of the Code. Notwithstanding anything to the contrary set
forth herein, any Restricted Stock Unit Award granted under the Plan that is not exempt from the
requirements of Section 409A of the Code shall incorporate terms and conditions necessary to avoid
the consequences of Section 409A(a)(1) of the Code. Such restrictions, if any, shall be determined
by the Board and contained in the Restricted Stock Unit Award Agreement evidencing such Restricted
Stock Unit Award.




     (c) Stock Appreciation Rights. Each Stock Appreciation Right Agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate. Stock
Appreciation Rights may be granted as stand-alone Stock Awards or in tandem with other Stock
Awards. The terms and conditions of Stock Appreciation Right Agreements may change from time to
time, and the terms and conditions of separate Stock Appreciation Right Agreements need not be
identical; provided, however, that each Stock Appreciation Right Agreement shall conform to
(through incorporation of the provisions hereof by reference in the agreement or otherwise) the
substance of each of the following provisions:



          (i) Term. No Stock Appreciation Right shall be exercisable after the expiration of ten (10)
years from the date of its grant or such shorter period specified in the Stock Appreciation Right
Agreement.




          (ii) Strike Price. Each Stock Appreciation Right will be denominated in shares of Common Stock
equivalents. The strike price of each Stock Appreciation Right shall




11.









 







not be less than one hundred percent (100%) of the Fair Market Value of the Common Stock
equivalents subject to the Stock Appreciation Right on the date of grant.




          (iii) Calculation of Appreciation. The appreciation distribution payable on the exercise of a
Stock Appreciation Right will be not greater than an amount equal to the excess of (A) the
aggregate Fair Market Value (on the date of the exercise of the Stock Appreciation Right) of a
number of shares of Common Stock equal to the number of share of Common Stock equivalents in which
the Participant is vested under such Stock Appreciation Right, and with respect to which the
Participant is exercising the Stock Appreciation Right on such date, over (B) the strike price.




          (iv) Vesting. At the time of the grant of a Stock Appreciation Right, the Board may impose
such restrictions or conditions to the vesting of such Stock Appreciation Right as it, in its sole
discretion, deems appropriate.




          (v) Exercise. To exercise any outstanding Stock Appreciation Right, the Participant must
provide written notice of exercise to the Company in compliance with the provisions of the Stock
Appreciation Right Agreement evidencing such Stock Appreciation Right.




          (vi) Payment. The appreciation distribution in respect of a Stock Appreciation Right may be
paid in Common Stock, in cash, in any combination of the two or in any other form of consideration,
as determined by the Board and set forth in the Stock Appreciation Right Agreement evidencing such
Stock Appreciation Right.




          (vii) Termination of Continuous Service. In the event that a Participant’s Continuous Service
terminates (other than for Cause), the Participant may exercise his or her Stock Appreciation Right
(to the extent that the Participant was entitled to exercise such Stock Appreciation Right as of
the date of termination of Continuous Service) but only within such period of time ending on the
earlier of (A) the date three (3) months following the termination of the Participant’s Continuous
Service (or such longer or shorter period specified in the Stock Appreciation Right Agreement), or
(B) the expiration of the term of the Stock Appreciation Right as set forth in the Stock
Appreciation Right Agreement. If, after termination of Continuous Service, the Participant does
not exercise his or her Stock Appreciation Right within the time specified herein or in the Stock
Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate.




          (viii) Termination for Cause. Except as explicitly provided otherwise in an Participant’s
Stock Appreciation Right Agreement, in the event that a Participant’s Continuous Service is
terminated for Cause, the Stock Appreciation Right shall terminate upon the termination date of
such Participant’s Continuous Service, and the Participant shall be prohibited from exercising his
or her Stock Appreciation Right from and after the time of such termination of Continuous Service.




          (ix) Compliance with Section 409A of the Code. Notwithstanding anything to the contrary set
forth herein, any Stock Appreciation Rights granted under the Plan that are not exempt from the
requirements of Section 409A of the Code shall incorporate terms and




12.









 







conditions necessary to avoid the consequences described in Section 409A(a)(1) of the Code.
Such restrictions, if any, shall be determined by the Board and contained in the Stock Appreciation
Right Agreement evidencing such Stock Appreciation Right.




     (d) Performance Stock Awards. A Performance Stock Award is either a Restricted Stock Award or
Restricted Stock Unit Award that may be granted or may vest based upon the attainment during a
Performance Period of certain Performance Goals. A Performance Stock Award may, but need not,
require the completion of a specified period of Continuous Service. The length of any Performance
Period, the Performance Goals to be achieved during the Performance Period, and the measure of
whether and to what degree such Performance Goals have been attained shall be conclusively
determined by the Committee in its sole discretion. The maximum benefit to be received by any
Participant in a calendar year attributable to Performance Stock Awards described in this Section
6(d) shall not exceed the value of three million (3,000,000) (pre-split) shares of Common Stock.
In addition, to the extent permitted by applicable law and the applicable Award Agreement, the
Board may determine that cash may be used in payment of Performance Stock Awards.



     (e) Other Stock Awards. Other forms of Stock Awards valued in whole or in part by reference
to, or otherwise based on, Common Stock may be granted either alone or in addition to Stock Awards
provided for under Section 5 and the preceding provisions of this Section 6. Subject to the
provisions of the Plan, the Board shall have sole and complete authority to determine the persons
to whom and the time or times at which such Other Stock Awards will be granted, the number of
shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock
Awards and all other terms and conditions of such Other Stock Awards.



7. Non-Discretionary Grants to Eligible Directors




     (a) General. The Non-Discretionary Grant Program in this Section 7 allows Eligible Directors
to receive Nonstatutory Stock Options automatically at designated intervals over their period of
Continuous Service on the Board.



     (b) Eligibility. The Stock Awards shall automatically be granted to all Eligible Directors
who meet the specified criteria.



     (c) Non-Discretionary Grants.



          (i) IPO Awards. Without any further action of the Board, each person who is serving as a
Non-Employee Director on the IPO Date shall automatically be granted a Nonstatutory Stock Option
(the “IPO Grant”) to purchase thirty thousand (30,000) (pre-split) shares of Common Stock on the
terms and conditions set forth in Section 7(d).




          (ii) Initial Awards. Without any further action of the Board, each person who after the IPO
Date is elected or appointed for the first time to be a Non-Employee Director automatically shall,
upon the date of his or her initial election or appointment to be a Non-Employee Director, be
granted a Nonstatutory Stock Option (the “Initial Grant”) to purchase thirty thousand (30,000)
(pre-split) shares of Common Stock on the terms and conditions set forth in Section 7(d).




13.









 








          (iii) Annual Awards. Without any further action of the Board, on the date of each Annual
Meeting, commencing with the Annual Meeting in 2007, each person who is then a Non-Employee
Director shall be granted a Nonstatutory Stock Option (the “Annual Grant”) to purchase ten thousand
(10,000) (pre-split) shares of Common Stock on the terms and conditions set forth in Section 7(d).




     (d) Non-Discretionary Option Grant Provisions.



          (i) Term. No Option granted hereunder shall be exercisable after the expiration of ten (10)
years from the date it was granted.




          (ii) Exercise Price. The exercise price of each Option shall be one hundred percent (100%) of
the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted.




          (iii) Consideration. The purchase price of Common Stock acquired pursuant to the exercise of
an Option may be paid by any combination of the methods of payment set forth below.




               (1) by cash, check, bank draft or money order payable to the Company;



               (2) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve
Board that, prior to the issuance of the stock subject to the Option, results in either the receipt
of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds;



               (3) by delivery to the Company (either by actual delivery or attestation) of shares of Common
Stock; or



               (4) by a “net exercise” arrangement pursuant to which the Company will reduce the number of
shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair
Market Value that does not exceed the aggregate exercise price; provided, however, the Company
shall accept a cash or other payment from the Participant to the extent of any remaining balance of
the aggregate exercise price not satisfied by such reduction in the number of whole shares to be
issued; provided, further, that shares of Common Stock will no longer be subject to an Option and
will not be exercisable thereafter to the extent that (A) shares issuable upon exercise are reduced
to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the
Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding
obligations (if any).



          (iv) Termination of Continuous Service. In the event that an Eligible Director’s Continuous
Service terminates (other than upon the Eligible Director’s death or Disability or upon a Change in
Control), the Eligible Director may exercise his or her Option (to the extent that the Eligible
Director was entitled to exercise such Option as of the date of termination of Continuous Service)
but only within such period of time ending on the earlier of (i) the date three (3) months
following the termination of the Eligible Director’s Continuous




14.









 







Service (or such longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If, after termination
of Continuous Service, the Eligible Director does not exercise his or her Option within the time
specified herein or in the Option Agreement (as applicable), the Option shall terminate.




          (v) Extension of Termination Date. If the exercise of the Option following the termination of
the Eligible Director’s Continuous Service (other than upon the Eligible Director’s death or
Disability or upon a Change in Control) would be prohibited at any time solely because the issuance
of shares of Common Stock would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of a period of three (3)
months after the termination of the Eligible Director’s Continuous Service during which the
exercise of the Option would not be in violation of such registration requirements, or (ii) the
expiration of the term of the Option as set forth in the Option Agreement.




          (vi) Disability of Eligible Director. In the event that an Eligible Director’s Continuous
Service terminates as a result of the Eligible Director’s Disability, the Option shall become fully
vested and exercisable and the Eligible Director may exercise his or her Option, but only within
such period of time ending on the earlier of (i) the date twelve (12) months following such
termination of Continuous Service, or (ii) the expiration of the term of the Option as set forth in
the Option Agreement. If, after termination, the Eligible Director does not exercise his or her
Option within the time specified herein or in the Option Agreement, the Option shall terminate.




          (vii) Death of Eligible Director. In the event that (i) an Eligible Director’s Continuous
Service terminates as a result of the Eligible Director’s death, or (ii) the Eligible Director dies
within the three-month period after the termination of the Eligible Director’s Continuous Service
for a reason other than death, then the Option shall become fully vested and exercisable and may be
exercised by the Eligible Director’s estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the Option upon the Eligible
Director’s death, but only within the period ending on the earlier of (i) the date eighteen (18)
months following the date of death, or (ii) the expiration of the term of such Option as set forth
in the Option Agreement. If, after the Eligible Director’s death, the Option is not exercised
within the time specified herein, the Option shall terminate.




          (viii) Termination Upon Change in Control. In the event that an Eligible Director’s
Continuous Service terminates as of, or within twelve (12) months following a Change in Control,
the Eligible Director may exercise his or her Option (to the extent that the Eligible Director was
entitled to exercise such Option as of the date of termination of Continuous Service) within such
period of time ending on the earlier of (i) the date twelve (12) months following the effective
date of the Change in Control (or such longer or shorter period specified in the Option Agreement),
or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after
termination of Continuous Service, the Eligible Director does not exercise his or her Option within
the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.




15.









 








          (ix) Vesting. Options granted under the Non-Discretionary Grant Program shall vest as
follows:




               (1) IPO Grant. The Initial Grant shall vest in a series of forty-eight (48) successive equal
monthly installments during the Eligible Director’s Continuous Service over the four (4)-year
period measured from the date of grant.



               (2) Initial Grant. The Initial Grant shall vest with respect to (i) twenty-five percent (25%)
of the option shares upon the Eligible Director’s completion of one year of Continuous Service
measured from the date of grant, and (ii) the balance of the option shares in a series of
thirty-six (36) successive equal monthly installments during the Eligible Director’s completion of
each additional month of Continuous Service over the three (3)-year period measured from the first
anniversary of the date of grant.



               (3) Annual Grant. The Annual Grant shall vest in a series of forty-eight (48) successive
equal monthly installments during the Eligible Director’s Continuous Service over the four (4)-year
period measured from the date of grant.



          (x) Early Exercise. Each Option granted under the Non-Discretionary Grant Program shall
include a provision whereby the Eligible Director may elect at any time before the Eligible
Director’s Continuous Service terminates to exercise the Option as to any part or all of the shares
of Common Stock subject to the Option prior to the full vesting of the Option. Any unvested shares
of Common Stock so purchased may be subject to a repurchase option in favor of the Company or to
any other restriction the Board determines to be appropriate. The Company shall not be required to
exercise its repurchase option until at least six (6) months (or such longer or shorter period of
time necessary to avoid classification of the Option as a liability for financial accounting
purposes) have elapsed following exercise of the Option unless the Board otherwise specifically
provides in the Option.




          (xi) Corporate Transaction. In the event of a Corporate Transaction in which the surviving
corporation or acquiring corporation (or its parent company) does not assume or continue
outstanding Options granted under the Non-Discretionary Grant Program or substitute similar stock
awards for such outstanding Options, then with respect to Options that have not been assumed,
continued or substituted prior to the effective time of the Corporate Transaction, the vesting and
exercisability of such Options shall (contingent upon the effectiveness of the Corporate
Transaction) be accelerated in full to a date prior to the effective time of such Corporate
Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the
date that is five (5) days prior to the effective time of the Corporate Transaction), and such
Options shall terminate if not exercised at or prior to the effective time of the Corporate
Transaction, and any reacquisition or repurchase rights held by the Company with respect to such
Options shall lapse (contingent upon the effectiveness of the Corporate Transaction).




          (xii) Change in Control. In the event that an Eligible Director (i) is required to resign his
or her position as a Non-Employee Director as a condition of a Change in Control, or (ii) is
removed from his or her position as a Non-Employee Director in connection with a Change in Control,
the outstanding Options held by such Eligible Director shall become fully




16.









 







vested and exercisable immediately prior to the effectiveness of such resignation or removal
(and contingent upon the effectiveness of such Change in Control).




          (xiii) Remaining Terms. The remaining terms and conditions of each Option shall be as set
forth in an Option Agreement in the form adopted from time to time by the Board; provided, however,
that the terms of such Option Agreement shall be consistent with the terms of the Plan.




8. Covenants of the Company.




     (a) Availability of Shares. During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of Common Stock required to satisfy such Stock Awards.



     (b) Securities Law Compliance. The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be required to grant
Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards;
provided, however, that this undertaking shall not require the Company to register under the
Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority that counsel for the Company deems necessary for the
lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and
until such authority is obtained.



     (c) No Obligation to Notify. The Company shall have no duty or obligation to any holder of a
Stock Award to advise such holder as to the time or manner of exercising such Stock Award.
Furthermore, the Company shall have no duty or obligation to warn or otherwise advise such holder
of a pending termination or expiration of a Stock Award or a possible period in which the Stock
Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences
of a Stock Award to the holder of such Stock Award.



9. Miscellaneous.




     (a) Use of Proceeds. Proceeds from the sale of shares of Common Stock pursuant to Stock
Awards shall constitute general funds of the Company.



     (b) Corporate Action Constituting Grant of Stock Awards. Corporate action constituting a
grant by the Company of a Stock Award to any Participant shall be deemed completed as of the date
of such corporate action, unless otherwise determined by the Board, regardless of when the
instrument, certificate, or letter evidencing the Stock Award is communicated to, or actually
received or accepted by, the Participant.



     (c) Stockholder Rights. No Participant shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares of Common Stock subject to such Stock Award
unless and until (i) such Participant has satisfied all requirements for exercise of the Stock
Award pursuant to its terms, and (ii) the issuance of the Common Stock pursuant to such exercise
has been entered into the books and records of the Company.



17.









 





     (d) No Employment or Other Service Rights. Nothing in the Plan, any Stock Award Agreement or
other instrument executed thereunder or in connection with any Stock Award granted pursuant to the
Plan shall confer upon any Participant any right to continue to serve the Company or an Affiliate
in the capacity in effect at the time the Stock Award was granted or shall affect the right of the
Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and
with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s
agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the
Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the
state in which the Company or the Affiliate is incorporated, as the case may be.



     (e) Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market
Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by any Optionholder during any calendar year (under all
plans of the Company and any Affiliates) exceeds one hundred thousand dollars ($100,000), the
Options or portions thereof that exceed such limit (according to the order in which they were
granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of
the applicable Option Agreement(s).



     (f) Investment Assurances. The Company may require a Participant, as a condition of
exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances
satisfactory to the Company as to the Participant’s knowledge and experience in financial and
business matters and/or to employ a purchaser representative reasonably satisfactory to the Company
who is knowledgeable and experienced in financial and business matters and that he or she is
capable of evaluating, alone or together with the purchaser representative, the merits and risks of
exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating
that the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own
account and not with any present intention of selling or otherwise distributing the Common Stock.
The foregoing requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (x) the issuance of the shares upon the exercise or acquisition of Common Stock
under the Stock Award has been registered under a then currently effective registration statement
under the Securities Act, or (y) as to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in the circumstances under the then
applicable securities laws. The Company may, upon advice of counsel to the Company, place legends
on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order
to comply with applicable securities laws, including, but not limited to, legends restricting the
transfer of the Common Stock.



     (g) Withholding Obligations. Unless prohibited by the terms of a Stock Award Agreement, the
Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation
relating to a Stock Award by any of the following means (in addition to the Company’s right to
withhold from any compensation paid to the Participant by the Company) or by a combination of such
means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common
Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection
with the Stock Award; provided, however, that no shares of Common Stock are withheld with a value
exceeding the minimum amount of tax required to be withheld by law (or such lower amount as may be
necessary to avoid classification of the



18.









 







Stock Award as a liability for financial accounting purposes); (iii) withholding cash from a
Stock Award settled in cash; (iv) withholding payment from any amounts otherwise payable to the
Participant; or (v) by such other method as may be set forth in the Stock Award Agreement.



     (h) Electronic Delivery. Any reference herein to a “written” agreement or document shall
include any agreement or document delivered electronically or posted on the Company’s intranet.



     (i) Deferrals. To the extent permitted by applicable law, the Board, in its sole discretion,
may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting
or settlement of all or a portion of any Stock Award may be deferred and may establish programs and
procedures for deferral elections to be made by Participants. Deferrals by Participants will be
made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the
Board may provide for distributions while a Participant is still an employee. The Board is
authorized to make deferrals of Stock Awards and determine when, and in what annual percentages,
Participants may receive payments, including lump sum payments, following the Participant’s
termination of employment or retirement, and implement such other terms and conditions consistent
with the provisions of the Plan and in accordance with applicable law.



     (j) Compliance with Section 409A. To the extent that the Board determines that any Stock
Award granted under the Plan is subject to Section 409A of the Code, the Stock Award Agreement
evidencing such Stock Award shall incorporate the terms and conditions necessary to avoid the
consequences described in Section 409A(a)(1) of the Code. To the extent applicable, the Plan and
Stock Award Agreements shall be interpreted in accordance with Section 409A of the Code and
Department of Treasury regulations and other interpretive guidance issued thereunder, including
without limitation any such regulations or other guidance that may be issued or amended after the
Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event that
following the Effective Date the Board determines that any Stock Award may be subject to Section
409A of the Code and related Department of Treasury guidance (including such Department of Treasury
guidance as may be issued after the Effective Date), the Board may adopt such amendments to the
Plan and the applicable Stock Award Agreement or adopt other policies and procedures (including
amendments, policies and procedures with retroactive effect), or take any other actions, that the
Board determines are necessary or appropriate to (1) exempt the Stock Award from Section 409A of
the Code and/or preserve the intended tax treatment of the benefits provided with respect to the
Stock Award, or (2) comply with the requirements of Section 409A of the Code and related Department
of Treasury guidance.



10. Adjustments upon Changes in Common Stock; Other Corporate Events.




     (a) Capitalization Adjustments. In the event of a Capitalization Adjustment, the Board shall
appropriately and proportionately adjust: (i) the class(es) and maximum number of securities
subject to the Plan pursuant to Section 3(a); (ii) the class(es) and maximum number of securities
that may be issued pursuant to the exercise of Incentive Stock Options pursuant to Section 3(c);
(iii) the class(es) and maximum number of securities that may be awarded to any person pursuant to
Section 4(c) and 6(d); (iv) the class(es) and number of securities subject to



19.









 







each Option granted under the Non-Discretionary Grant Program under Section 7; and (v) the
class(es) and number of securities and price per share of stock subject to outstanding Stock
Awards. The Board shall make such adjustments, and its determination shall be final, binding and
conclusive.



     (b) Dissolution or Liquidation. Except as otherwise provided in a Stock Award Agreement, in
the event of a dissolution or liquidation of the Company, all outstanding Stock Awards (other than
Stock Awards consisting of vested and outstanding shares of Common Stock not subject to a
forfeiture condition or the Company’s right of repurchase) shall terminate immediately prior to the
completion of such dissolution or liquidation, and the shares of Common Stock subject to the
Company’s repurchase rights may be repurchased by the Company notwithstanding the fact that the
holder of such Stock Award is providing Continuous Service, provided, however, that the Board may,
in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or
no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not previously
expired or terminated) before the dissolution or liquidation is completed but contingent on its
completion.



     (c) Corporate Transaction. The following provisions shall apply to Stock Awards (except
those granted under the Non-Discretionary Grant Program) in the event of a Corporate Transaction
unless otherwise provided in the instrument evidencing the Stock Award or any other written
agreement between the Company or any Affiliate and the holder of the Stock Award or unless
otherwise expressly provided by the Board at the time of grant of a Stock Award. Except as
otherwise stated in the Stock Award Agreement, in the event of a Corporate Transaction, then,
notwithstanding any other provision of the Plan, the Board shall take one or more of the following
actions with respect to Stock Awards, contingent upon the closing or completion of the Corporate
Transaction:



          (i) arrange for the surviving corporation or acquiring corporation (or the surviving or
acquiring corporation’s parent company) to assume or continue the Stock Award or to substitute a
similar stock award for the Stock Award (including, but not limited to, an award to acquire the
same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction);




          (ii) arrange for the assignment of any reacquisition or repurchase rights held by the Company
in respect of Common Stock issued pursuant to the Stock Award to the surviving corporation or
acquiring corporation (or the surviving or acquiring corporation’s parent company);




          (iii) accelerate the vesting of the Stock Award (and, if applicable, the time at which the
Stock Award may be exercised) to a date prior to the effective time of such Corporate Transaction
as the Board shall determine (or, if the Board shall not determine such a date, to the date that is
five (5) days prior to the effective date of the Corporate Transaction), with such Stock Award
terminating if not exercised (if applicable) at or prior to the effective time of the Corporate
Transaction;




          (iv) arrange for the lapse of any reacquisition or repurchase rights held by the Company with
respect to the Stock Award;




20.









 








          (v) cancel or arrange for the cancellation of the Stock Award, to the extent not vested or not
exercised prior to the effective time of the Corporate Transaction, in exchange for such cash
consideration as the Board, in its sole discretion, may consider appropriate; and




          (vi) the payment, in such form as may be determined by the Board equal to the excess, if any,
of (A) the value of the property the holder of the Stock Award would have received upon the
exercise of the Stock Award, over (B) any exercise price payable by such holder in connection with
such exercise.




     The Board need not take the same action with respect to all Stock Awards or with respect to
all Participants.



     (d) Change in Control. A Stock Award may be subject to additional acceleration of vesting and
exercisability upon or after a Change in Control as may be provided in the Stock Award Agreement
for such Stock Award or as may be provided in any other written agreement between the Company or
any Affiliate and the Participant. A Stock Award may vest as to all or any portion of the shares
subject to the Stock Award (i) immediately upon the occurrence of a Change in Control, whether or
not such Stock Award is assumed, continued, or substituted by a surviving or acquiring entity in
the Change in Control, or (ii) in the event a Participant’s Continuous Service is terminated,
actually or constructively, within a designated period following the occurrence of a Change in
Control. In the absence of such provisions, no such acceleration shall occur.



11. Termination or Suspension of the Plan.




     (a) Plan Term. The Board may suspend or terminate the Plan at any time. Unless terminated
sooner, the Plan shall terminate on the day before the tenth (10th) anniversary of the earlier of
(i) the date the Plan is adopted by the Board, or (ii) the date the Plan is approved by the
stockholders of the Company. No Stock Awards may be granted under the Plan while the Plan is
suspended or after it is terminated.



     (b) No Impairment of Rights. Suspension or termination of the Plan shall not impair rights
and obligations under any Stock Award granted while the Plan is in effect except with the written
consent of the affected Participant.



12. Effective Date of Plan.




     The Plan shall become effective on the IPO Date, but no Stock Award shall be exercised (or, in
the case of a Restricted Stock Award, Restricted Stock Unit Award, or Other Stock Award shall be
granted) unless and until the Plan has been approved by the Stockholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan is adopted by the
Board.



13. Choice of Law.




     The law of the State of Delaware shall govern all questions concerning the construction,
validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.



21.









 





14. Definitions. 




     As used in the Plan, the following definitions shall apply to the capitalized terms indicated
below:



     (a) “Affiliate” means, at the time of determination, any “parent” or “subsidiary” of the
Company as such terms are defined in Rule 405 of the Securities Act. The Board shall have the
authority to determine the time or times at which “parent” or “subsidiary” status is determined
within the foregoing definition.



     (b) “Annual Award” means an Option granted to an Eligible Director who meets the specified
criteria pursuant to Section 7(c)(iii).



     (c) “Annual Meeting” means the annual meeting of the stockholders of the Company.



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



     (e) “Capitalization Adjustment” means any change that is made in, or other events that occur
with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the
Effective Date without the receipt of consideration by the Company (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than
cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in
corporate structure or other transaction not involving the receipt of consideration by the
Company). Notwithstanding the foregoing, the conversion of any convertible securities of the
Company shall not be treated as a transaction “without receipt of consideration” by the Company.



     (f) “Cause” means with respect to a Participant, the occurrence of any of the following
events: (i) such Participant’s commission of any felony or any crime involving fraud, dishonesty
or moral turpitude under the laws of the United States or any state thereof; (ii) such
Participant’s attempted commission of, or participation in, a fraud or act of dishonesty against
the Company; (iii) such Participant’s intentional, material violation of any contract or agreement
between the Participant and the Company or of any statutory duty owed to the Company; (iv) such
Participant’s unauthorized use or disclosure of the Company’s confidential information or trade
secrets; or (v) such Participant’s gross misconduct. The determination that a termination of the
Participant’s Continuous Service is either for Cause or without Cause shall be made by the Company
in its sole discretion. Any determination by the Company that the Continuous Service of a
Participant was terminated with or without Cause for the purposes of outstanding Stock Awards held
by such Participant shall have no effect upon any determination of the rights or obligations of the
Company or such Participant for any other purpose.



     (g) “Change in Control” means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events:



          (i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the combined voting power of the Company’s
then outstanding securities other than by virtue of a merger,




22.









 







consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur (A) on account of the acquisition of securities of the Company by an
investor, any affiliate thereof or any other Exchange Act Person from the Company in a transaction
or series of related transactions the primary purpose of which is to obtain financing for the
Company through the issuance of equity securities or (B) solely because the level of Ownership held
by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of
the outstanding voting securities as a result of a repurchase or other acquisition of voting
securities by the Company reducing the number of shares outstanding, provided that if a Change in
Control would occur (but for the operation of this sentence) as a result of the acquisition of
voting securities by the Company, and after such share acquisition, the Subject Person becomes the
Owner of any additional voting securities that, assuming the repurchase or other acquisition had
not occurred, increases the percentage of the then outstanding voting securities Owned by the
Subject Person over the designated percentage threshold, then a Change in Control shall be deemed
to occur;




          (ii) there is consummated a merger, consolidation or similar transaction involving (directly
or indirectly) the Company and, immediately after the consummation of such merger, consolidation or
similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly
or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%)
of the combined outstanding voting power of the surviving Entity in such merger, consolidation or
similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power
of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each
case in substantially the same proportions as their Ownership of the outstanding voting securities
of the Company immediately prior to such transaction;




          (iii) the stockholders of the Company approve or the Board approves a plan of complete
dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company
shall otherwise occur, except for a liquidation into a parent corporation;




          (iv) there is consummated a sale, lease, exclusive license or other disposition of all or
substantially all of the consolidated assets of the Company and its Subsidiaries, other than a
sale, lease, license or other disposition of all or substantially all of the consolidated assets of
the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting
power of the voting securities of which are Owned by stockholders of the Company in substantially
the same proportions as their Ownership of the outstanding voting securities of the Company
immediately prior to such sale, lease, license or other disposition; or




          (v) individuals who, on the date the Plan is adopted by the Board, are members of the Board
(the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of
the Board; provided, however, that if the appointment or election (or nomination for election) of
any new Board member was approved or recommended by a majority vote of the members of the Incumbent
Board then still in office, such new member shall, for purposes of the Plan, be considered as a
member of the Incumbent Board.




23.









 








     For avoidance of doubt, the term Change in Control shall not include a sale of assets, merger
or other transaction effected exclusively for the purpose of changing the domicile of the Company.



     Notwithstanding the foregoing or any other provision of the Plan, the definition of Change in
Control (or any analogous term) in an individual written agreement between the Company or any
Affiliate and the Participant shall supersede the foregoing definition with respect to Stock Awards
subject to such agreement; provided, however, that if no definition of Change in Control or any
analogous term is set forth in such an individual written agreement, the foregoing definition shall
apply.



     The Board may, in its sole discretion and without a Participant’s consent, amend the
definition of “Change in Control” to conform to the definition of “Change in Control” under Section
409A of the Code, and the regulations thereunder.



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



     (i) “Committee” means a committee of one (1) or more Directors to whom authority has been
delegated by the Board in accordance with Section 2(d).



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



     (k) “Company” means Veraz Networks, Inc., a Delaware corporation.



     (l) “Consultant” means any person, including an advisor, who is (i) engaged by the Company or
an Affiliate to render consulting or advisory services and is compensated for such services, or
(ii) serving as a member of the board of directors of an Affiliate and is compensated for such
services. However, service solely as a Director, or payment of a fee for such service, shall not
cause a Director to be considered a “Consultant” for purposes of the Plan.



     (m) “Continuous Service” means that the Participant’s service with the Company or an
Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A
change in the capacity in which the Participant renders service to the Company or an Affiliate as
an Employee, Consultant or Director or a change in the entity for which the Participant renders
such service, provided that there is no interruption or termination of the Participant’s service
with the Company or an Affiliate, shall not terminate a Participant’s Continuous Service; provided,
however, if the Entity for which a Participant is rendering services ceases to qualify as an
“Affiliate,” as determined by the Board in its sole discretion, such Participant’s Continuous
Service shall be considered to have terminated on the date such Entity ceases to qualify as an
Affiliate. To the extent permitted by law, the Board or the chief executive officer of the
Company, in that party’s sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of: (i) any leave of absence approved by the Board of the chief
executive officer of the Company, including sick leave, military leave or any other personal leave;
or (ii) transfers between the Company, an Affiliate, or their successors. Notwithstanding the
foregoing, a leave of absence shall be treated as Continuous Service for purposes of vesting in a
Stock Award only to such extent as may be provided in the Company’s leave of absence policy, in the
written terms of any leave of absence agreement or policy applicable to the Participant, or as
otherwise required by law.



24.









 





     (n) “Corporate Transaction” means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events:



          (i) a sale or other disposition of all or substantially all, as determined by the Board in its
sole discretion, of the consolidated assets of the Company and its Subsidiaries;




          (ii) a sale or other disposition of at least ninety percent (90%) of the outstanding
securities of the Company;




          (iii) the consummation of a merger, consolidation or similar transaction following which the
Company is not the surviving corporation; or




          (iv) the consummation of a merger, consolidation or similar transaction following which the
Company is the surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of
the merger, consolidation or similar transaction into other property, whether in the form of
securities, cash or otherwise.




     (o) “Covered Employee” means the chief executive officer and the four (4) other highest
compensated officers of the Company for whom total compensation is required to be reported to
stockholders under the Exchange Act, as determined for purposes of Section 162(m) of the Code.



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



     (q) “Disability” means, with respect to a Participant, the inability of such Participant to
engage in any substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months, as provided in Section 22(e)(3) and 409A(a)(2)(c)(i)
of the Code.



     (r) “Effective Date” means the effective date of the Plan as set forth in Section 12.



     (s) “Eligible Director” means a Director who is not an Employee and is eligible to participate
in the Non-Discretionary Grant Program.



     (t) “Employee” means any person employed by the Company or an Affiliate. However, service
solely as a Director, or payment of a fee for such services, shall not cause a Director to be
considered an “Employee” for purposes of the Plan.



     (u) “Entity” means a corporation, partnership, limited liability company or other entity.



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



     (w) “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include
(i) the Company or any Subsidiary of the Company, (ii) any employee benefit



25.









 







plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an
underwriter temporarily holding securities pursuant to an offering of such securities, (iv) an
Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same
proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or
“group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the
Effective Date, is the Owner, directly or indirectly, of securities of the Company representing
more than fifty percent (50%) of the combined voting power of the Company’s then outstanding
securities.



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



          (i) If the Common Stock is listed on any established stock exchange or traded on the Nasdaq
Global Select Market or the Nasdaq Global Market (formerly the Nasdaq National Market), the Fair
Market Value of a share of Common Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange (or the exchange or market with
the greatest volume of trading in the Common Stock) on the date of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable.




          (ii) If the Common Stock is listed or traded on the Nasdaq Capital Market (formerly the Nasdaq
Small Cap Market), the Fair Market Value of a share of Common Stock shall be the mean between the
bid and asked prices for the Common Stock on the date of determination, as reported in The Wall
Street Journal or such other source as the Board deems reliable. Unless otherwise provided by the
Board, if there is no closing sales price (or closing bid if no sales were reported) for the Common
Stock on the date of determination, then the Fair Market Value shall be the mean between the bid
and asked prices for the Common Stock on the last preceding date for which such quotation exists.




          (iii) In the absence of such markets for the Common Stock, the Fair Market Value shall be
determined by the Board in good faith and in a manner that complies with Section 409A of the Code.




     (y) “Incentive Stock Option” means an Option which qualifies as an “incentive stock option”
within the meaning of Section 422 of the Code and the regulations promulgated thereunder.



     (z) “Initial Award” means an Option granted to an Eligible Director who meets the specified
criteria pursuant to Section 7(c)(ii).



     (aa) “IPO Award” means an Option granted to an Eligible Director who meets the specified
criteria pursuant to Section 7(c)(i).



     (bb) “IPO Date” means the date of the underwriting agreement between the Company and the
underwriter(s) managing the initial public offering of the Common Stock, pursuant to which the
Common Stock is priced for the initial public offering.



26.









 





     (cc) “Israeli Sub-Plan” means the Company’s 2003 Israeli Share Option Plan.



     (dd) “Non-Discretionary Grant Program” means the non-discretionary grant program in effect
under Section 7 of the Plan.



     (ee) “Non-Employee Director” means a Director who either (i) is not a current employee or
officer of the Company or an Affiliate, does not receive compensation, either directly or
indirectly, from the Company or an Affiliate for services rendered as a consultant or in any
capacity other than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
(“Regulation S-K”)), does not possess an interest in any other transaction for which disclosure
would be required under Item 404(a) of Regulation S-K, and is not engaged in a business
relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or
(ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.



     (ff) “Nonstatutory Stock Option” means an Option that does not qualify as an Incentive Stock
Option.



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



     (hh) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase
shares of Common Stock granted pursuant to the Plan.



     (ii) “Option Agreement” means a written agreement between the Company and an Optionholder
evidencing the terms and conditions of an Option grant. Each Option Agreement shall be subject to
the terms and conditions of the Plan.



     (jj) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Option.



     (kk) “Other Stock Award” means an award based in whole or in part by reference to the Common
Stock which is granted pursuant to the terms and conditions of Section 6(d).



     (ll) “Other Stock Award Agreement” means a written agreement between the Company and a holder
of an Other Stock Award evidencing the terms and conditions of an Other Stock Award grant. Each
Other Stock Award Agreement shall be subject to the terms and conditions of the Plan.



     (mm) “Outside Director” means a Director who either (i) is not a current employee of the
Company or an “affiliated corporation” (within the meaning of Treasury Regulations promulgated
under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated
corporation” who receives compensation for prior services (other than benefits under a
tax-qualified retirement plan) during the taxable year, has not been an officer of the Company or
an “affiliated corporation,” and does not receive remuneration from the Company or an “affiliated
corporation,” either directly or indirectly, in any capacity other than as a Director, or (ii) is
otherwise considered an “outside director” for purposes of Section 162(m) of the Code.



27.









 





     (nn) “Own,” “Owned,” “Owner,” “Ownership” A person or Entity shall be deemed to “Own,” to
have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or
Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power, which includes the power to vote or to direct the voting,
with respect to such securities.



     (oo) “Participant” means a person to whom a Stock Award is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Stock Award.



     (pp) “Performance Criteria” means the one or more criteria that the Board shall select for
purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria
that shall be used to establish such Performance Goals may be based on any one of, or combination
of, the following: (i) earnings per share; (ii) earnings before interest, taxes and depreciation;
(iii) earnings before interest, taxes, depreciation and amortization (EBITDA); (iv) total
stockholder return; (v) return on equity; (vi) return on assets, investment, or capital employed;
(vii) operating margin; (viii) gross margin; (ix) operating income; (x) net income (before or after
taxes); (xi) net operating income; (xii) net operating income after tax; (xiii) pre- and after-tax
income; (xiv) pre-tax profit; (xv) operating cash flow; (xvi) sales or revenue targets; (xvii)
orders and revenue; (xviii) increases in revenue or product revenue; (xix) expenses and cost
reduction goals; (xx) improvement in or attainment of expense levels; (xxi) improvement in or
attainment of working capital levels; (xxii) economic value added (or an equivalent metric);
(xxiii) market share; (xxiv) cash flow; (xxv) cash flow per share; (xxvi) share price performance;
(xxvii) debt reduction; (xxviii) implementation or completion of projects or processes; (xxix)
customer satisfaction; (xxx) stockholders’ equity; (xxxi) quality measures; and (xxxii) to the
extent that a Stock Award is not intended to comply with Section 162(m) of the Code, other measures
of performance selected by the Board. Partial achievement of the specified criteria may result in
the payment or vesting corresponding to the degree of achievement as specified in the Stock Award
Agreement. The Board shall, in its sole discretion, define the manner of calculating the
Performance Criteria it selects to use for such Performance Period.



     (qq) “Performance Goals” means, for a Performance Period, the one or more goals established by
the Board for the Performance Period based upon the satisfaction of the Performance Criteria.
Performance Goals may be based on a Company-wide basis, with respect to one or more business units,
divisions, Affiliates, or business segments, and in either absolute terms or relative to the
performance of one or more comparable companies or the performance of one or more relevant indices.
At the time of the grant of any Stock Award, the Board is authorized to determine whether, when
calculating the attainment of Performance Goals for a Performance Period: (i) to exclude
restructuring and/or other nonrecurring charges; (ii) to exclude exchange rate effects, as
applicable, for non-U.S. dollar denominated net sales and operating earnings; (iii) to exclude the
effects of changes to generally accepted accounting standards required by the Financial Accounting
Standards Board; (iv) to exclude the effects of any statutory adjustments to corporate tax rates;
and (v) to exclude the effects of any “extraordinary items” as determined under generally accepted
accounting principles. In addition, the Board retains the discretion to reduce or eliminate the
compensation or economic benefit due upon attainment of Performance Goals.



28.









 





     (rr) “Performance Period” means one or more periods of time, which may be of varying and
overlapping duration, as the Committee may select, over which the attainment of one or more
Performance Goals will be measured for the purpose of determining a Participant’s right to and the
payment of a Performance Stock Award.



     (ss) “Performance Stock Award” means an award of shares of Common Stock which is granted
pursuant to the terms and conditions of Section 6(d).



     (tt) “Plan” means this Veraz Networks, Inc. 2006 Equity Incentive Plan.



     (uu) “Prior Plan” means the Company’s 2001 Equity Incentive Plan as in effect immediately
prior to the Effective Date.



     (vv) “Restricted Stock Award” means an award of shares of Common Stock which is granted
pursuant to the terms and conditions of Section 6(a).



     (ww) “Restricted Stock Award Agreement” means a written agreement between the Company and a
holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award
grant. Each Restricted Stock Award Agreement shall be subject to the terms and conditions of the
Plan.



     (xx) “Restricted Stock Unit Award” means a right to receive shares of Common Stock which is
granted pursuant to the terms and conditions of Section 6(b).



     (yy) “Restricted Stock Unit Award Agreement” means a written agreement between the Company and
a holder of a Restricted Stock Unit Award evidencing the terms and conditions of a Restricted Stock
Unit Award grant. Each Restricted Stock Unit Award Agreement shall be subject to the terms and
conditions of the Plan.



     (zz) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule
16b-3, as in effect from time to time.



     (aaa) “Securities Act” means the Securities Act of 1933, as amended.



     (bbb) “Stock Appreciation Right” means a right to receive the appreciation on Common Stock
that is granted pursuant to the terms and conditions of Section 6(c).



     (ccc) “Stock Appreciation Right Agreement” means a written agreement between the Company and a
holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation
Right grant. Each Stock Appreciation Right Agreement shall be subject to the terms and conditions
of the Plan.



     (ddd) “Stock Award” means any right to receive Common Stock granted under the Plan, including
an Option, a Restricted Stock Award, a Restricted Stock Unit Award, a Stock Appreciation Right, a
Performance Stock Award, or any Other Stock Award.



29.









 





     (eee) “Stock Award Agreement” means a written agreement between the Company and a Participant
evidencing the terms and conditions of a Stock Award grant. Each Stock Award Agreement shall be
subject to the terms and conditions of the Plan.



     (fff) “Subsidiary” means, with respect to the Company, (i) any corporation of which more than
fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether, at the time, stock
of any other class or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company,
and (ii) any partnership, limited liability company or other entity in which the Company has a
direct or indirect interest (whether in the form of voting or participation in profits or capital
contribution) of more than fifty percent (50%) .



     (ggg) “Ten Percent Stockholder” means a person who Owns (or is deemed to Own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Affiliate.



30.









 





Non-Discretionary Grant Program




Veraz Networks, Inc.

2006 Equity Incentive Plan 




Option Agreement

(Nonstatutory Stock Option)




     Pursuant to your Option Grant Notice (“Grant Notice”) and this Option Agreement, Veraz
Networks, Inc. (the “Company”) has granted you an option pursuant to the Non-Discretionary Grant
Program under its 2006 Equity Incentive Plan (the “Plan”) to purchase the number of shares of the
Company’s Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant
Notice. Defined terms not explicitly defined in this Option Agreement but defined in the Plan
shall have the same definitions as in the Plan.



     The details of your option are as follows:



     1. Vesting. Subject to the limitations contained herein, your option will vest as
provided in your Grant Notice, provided that vesting will cease upon the termination of your
Continuous Service.



     2. Number of Shares and Exercise Price. The number of shares of Common Stock subject
to your option and your exercise price per share referenced in your Grant Notice may be adjusted
from time to time for Capitalization Adjustments.



     3. Method of Payment. Payment of the exercise price is due in full upon exercise of
all or any part of your option. You may elect to make payment of the exercise price in cash or by
check or in any other manner permitted by your Grant Notice, which may include one or more of the
following:



          (a) Provided that at the time of exercise the Common Stock is publicly traded and quoted
regularly in The Wall Street Journal, pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in
either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to
pay the aggregate exercise price to the Company from the sales proceeds.



          (b) Provided that at the time of exercise the Common Stock is publicly traded and quoted
regularly in The Wall Street Journal, by delivery to the Company (either by actual delivery or
attestation) of already-owned shares of Common Stock either that you have held for the period
required to avoid classification of the option as a liability for financial accounting purposes
(generally six (6) months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security interests, and that
are valued at Fair Market Value on the date of exercise. “Delivery” for these purposes, in the
sole discretion of the Company at the time you exercise your option, shall include delivery to the
Company of your attestation of ownership of such shares of Common Stock in a form approved by the
Company. Notwithstanding the foregoing, you may not exercise your option by tender to the Company
of Common Stock to the extent such tender would violate the provisions of any law, regulation or
agreement restricting the redemption of the Company’s stock.



1.









 





          (c) By a “net exercise” arrangement pursuant to which the Company will reduce the number of
shares of Common Stock issued upon exercise of your option by the largest whole number of shares
with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, the
Company shall accept a cash or other payment from you to the extent of any remaining balance of the
aggregate exercise price not satisfied by such reduction in the number of whole shares to be
issued; provided, however, shares of Common Stock will no longer be outstanding under your option
and will not be exercisable thereafter to the extent that (i) shares are used to pay the exercise
price pursuant to the “net exercise,” (ii) shares are delivered to you as a result of such
exercise, and (iii) shares are withheld to satisfy tax withholding obligations.



     4. Whole Shares. You may exercise your option only for whole shares of Common Stock.



     5. Securities Law Compliance. Notwithstanding anything to the contrary contained
herein, you may not exercise your option unless the shares of Common Stock issuable upon such
exercise are then registered under the Securities Act or, if such shares of Common Stock are not
then so registered, the Company has determined that such exercise and issuance would be exempt from
the registration requirements of the Securities Act. The exercise of your option also must comply
with other applicable laws and regulations governing your option, and you may not exercise your
option if the Company determines that such exercise would not be in material compliance with such
laws and regulations.



     6. Term. You may not exercise your option before the commencement or after the
expiration of its term. The term of your option commences on the Date of Grant and expires upon
the earliest of the following:



          (a) three (3) months after the termination of your Continuous Service for any reason other
than your Disability or death or upon a Change in Control, provided that if during any part of such
three (3) month period your option is not exercisable solely because of the condition set forth in
Section 5, your option shall not expire until the earlier of the Expiration Date or until it shall
have been exercisable for an aggregate period of three (3) months after the termination of your
Continuous Service;



          (b) twelve (12) months after the termination of your Continuous Service due to your
Disability;



          (c) eighteen (18) months after your death if you die either during your Continuous Service or
within three (3) months after your Continuous Service terminates;



          (d) twelve (12) months after the effective date of a Change in Control if termination occurs
as of, or within twelve (12) months following the effective date of such a Change in Control;



          (e) the Expiration Date indicated in your Grant Notice; or



          (f) the day before the tenth (10th) anniversary of the Date of Grant.



2.









 





     7. Exercise.



          (a) You may exercise the vested portion of your option (and the unvested portion of your
option if your Grant Notice so permits) during its term by delivering a Notice of Exercise (in a
form designated by the Company) together with the exercise price to the Secretary of the Company,
or to such other person as the Company may designate, during regular business hours, together with
such additional documents as the Company may then require.



          (b) By exercising your option you agree that, as a condition to any exercise of your option,
the Company may require you to enter into an arrangement providing for the payment by you to the
Company of any tax withholding obligation of the Company arising by reason of (i) the exercise of
your option, (ii) the lapse of any substantial risk of forfeiture to which the shares of Common
Stock are subject at the time of exercise, or (iii) the disposition of shares of Common Stock
acquired upon such exercise.



     8. Transferability. Your option is transferable only by will or by the laws of
descent and distribution and is exercisable only by you during your lifetime. However, you may
transfer your option for no consideration upon written consent of the Board (i) if, at the time of
transfer, a Form S-8 registration statement under the Securities Act is available for the issuance
of shares by the Company upon the exercise of such transferred option, or (ii) the transfer is to
your employer at the time of transfer or an affiliate of your employer at the time of transfer.
Any such transfer is subject to such limits as the Board may establish, and subject to the
transferee agreeing to remain subject to all the terms and conditions applicable to your option
prior to such transfer. The forgoing right to transfer your option shall apply to the right to
consent to amendments to the Option Agreement for such option. In addition, until you transfers
the option, you may, by delivering written notice to the Company, in a form provided by or
otherwise satisfactory to the Company, designate a third party who, in the event of your death,
shall thereafter be entitled to exercise your option.



     9. Change in Control. 



          (a) In the event that you are required to resign your position as a Non-Employee Director as a
condition of a Change in Control or you are removed from your position as a Non-Employee Director
in connection with a Change in Control, your option shall become fully vested and exercisable
immediately prior to the effectiveness of such resignation or removal (and contingent upon the
effectiveness of such Change in Control).



          (b) If any payment or benefit you would receive pursuant to a Change in Control from the
Company or otherwise (“Payment”) would (i) constitute a “parachute payment” within the meaning of
Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by
Section 4999 of the Code (the “Excise Tax”), then the Company shall cause to be determined, before
any amounts of the Payment are paid to you, which of the following two alternative forms of payment
would maximize your after-tax proceeds: (i) payment in full of the entire amount of the Payment (a
“Full Payment”), or (ii) payment of only a part of the Payment so that you receive the largest
payment possible without the imposition of the Excise Tax (a “Reduced Payment”), whichever amount
results in your receipt, on an after-tax basis, of the greater amount of the Payment
notwithstanding that all or some portion of the



3.









 







Payment may be subject to the Excise Tax. For purposes of determining whether to make a Full
Payment or a Reduced Payment, the Company shall cause to be taken into account all applicable
federal, state and local income and employment taxes and the Excise Tax (all computed at the
highest applicable marginal rate, net of the maximum reduction in federal income taxes which could
be obtained from a deduction of such state and local taxes). If a Reduced Payment is made, (i) the
Payment shall be paid only to the extent permitted under the Reduced Payment alternative, and you
shall have no rights to any additional payments and/or benefits constituting the Payment, and (ii)
reduction in payments and/or benefits shall occur in the following order unless you elect in
writing a different order (provided, however, that such election shall be subject to Company
approval if made on or after the date on which the event that triggers the Payment occurs): (1)
reduction of cash payments; (2) cancellation of accelerated vesting of equity awards other than
stock options; (3) cancellation of accelerated vesting of stock options; and (4) reduction of other
benefits paid to you. In the event that acceleration of compensation from your equity awards is to
be reduced, such acceleration of vesting shall be canceled in the reverse order of the date of
grant unless you elect in writing a different order for cancellation.



          (c) The accounting firm engaged by the Company for general tax purposes as of the day prior to
the effective date of the Change in Control shall perform the foregoing calculations. If the
accounting firm so engaged by the Company is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, the Company shall appoint a nationally recognized
accounting firm to make the determinations required hereunder. The Company shall bear all expenses
with respect to the determinations by such accounting firm required to be made hereunder.



          (d) The accounting firm engaged to make the determinations hereunder shall provide its
calculations, together with detailed supporting documentation, to you and the Company within
fifteen (15) calendar days after the date on which your right to a Payment is triggered (if
requested at that time by you or the Company) or such other time as requested by you or the
Company. If the accounting firm determines that no Excise Tax is payable with respect to a
Payment, either before or after the application of the Reduced Amount, it shall furnish you and the
Company with an opinion reasonably acceptable to you that no Excise Tax will be imposed with
respect to such Payment. Any good faith determinations of the accounting firm made hereunder shall
be final, binding and conclusive upon you and the Company.



     10. Option not a Service Contract. Your option is not an employment or service
contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation
on your part to continue in the employ of the Company or an Affiliate, or of the Company or an
Affiliate to continue your employment. In addition, nothing in your option shall obligate the
Company or an Affiliate, their respective stockholders, Boards of Directors, Officers or Employees
to continue any relationship that you might have as a Director or Consultant for the Company or an
Affiliate.



     11. Withholding Obligations.



          (a) At the time you exercise your option, in whole or in part, or at any time thereafter as
requested by the Company, you hereby authorize withholding from payroll and any other amounts
payable to you, and otherwise agree to make adequate provision for (including by



4.









 







means of a “cashless exercise” pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required
to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an
Affiliate, if any, which arise in connection with the exercise of your option.



          (b) Upon your request and subject to approval by the Company, in its sole discretion, and
compliance with any applicable legal conditions or restrictions, the Company may withhold from
fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a
number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of
the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or
such lower amount as may be necessary to avoid classification of your option as a liability for
financial accounting purposes). If the date of determination of any tax withholding obligation is
deferred to a date later than the date of exercise of your option, share withholding pursuant to
the preceding sentence shall not be permitted unless you make a proper and timely election under
Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon
such exercise with respect to which such determination is otherwise deferred, to accelerate the
determination of such tax withholding obligation to the date of exercise of your option.
Notwithstanding the filing of such election, shares of Common Stock shall be withheld solely from
fully vested shares of Common Stock determined as of the date of exercise of your option that are
otherwise issuable to you upon such exercise. Any adverse consequences to you arising in
connection with such share withholding procedure shall be your sole responsibility.



          (c) You may not exercise your option unless the tax withholding obligations of the Company
and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when
desired even though your option is vested, and the Company shall have no obligation to issue a
certificate for such shares of Common Stock or release such shares of Common Stock from any escrow
provided for herein unless such obligations are satisfied.



     12. Notices. Any notices provided for in your option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by
mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid,
addressed to you at the last address you provided to the Company.



     13. Governing Plan Document. Your option is subject to all the provisions of the
Plan, the provisions of which are hereby made a part of your option, and is further subject to all
interpretations, amendments, rules and regulations, which may from time to time be promulgated and
adopted pursuant to the Plan. In the event of any conflict between the provisions of your option
and those of the Plan, the provisions of the Plan shall control.



5.









 





Non-Discretionary Grant Program




Veraz Networks, Inc.

2006 Equity Incentive Plan 




Option Grant Notice

([IPO] [Initial] [Annual] Grant)



Veraz Networks, Inc. (the “Company”), pursuant to its 2006 Equity Incentive Plan (the “Plan”),
hereby grants to Optionholder an option to purchase the number of shares of the Company’s Common
Stock set forth below. This option is subject to all of the terms and conditions as set forth
herein and in the Option Agreement, the Plan, and the Notice of Exercise, all of which are attached
hereto and incorporated herein in their entirety.




	 	 	 
	Optionholder:
	 	 
	 

	 	 
	Date of Grant:
	 	 
	 

	 	 
	Number of Shares Subject to Option:
	 	 
	 

	 	 
	Exercise Price (Per Share):
	 	 
	 

	 	 
	Total Exercise Price:
	 	 
	 

	 	 
	Expiration Date:
	 	 
	 

	 	 





	 	 	 
	Type of Grant:

	 	Nonstatutory Stock Option
	 
	 	 
	Exercise Schedule:

	 	þ     Early Exercise Permitted
	 
	 	 
	Vesting Schedule:

	 	[IPO Grant: The shares vest in a series of forty-eight
(48) successive equal monthly installments over the
four (4)-year period measured from the Date of Grant.]
	 
	 	 
	 

	 	[Initial Grant: Twenty five percent (25%) of the shares shall vest on the first
year anniversary of the date Optionholder was elected or appointed to the Board
and the balance shall vest in a series of thirty-six (36) successive equal
monthly installments over the three (3)-year period measured from the first
anniversary of the date Optionholder was elected or appointed to the Board.]
	 
	 	 
	 

	 	[Annual Grant: The shares vest in a series of forty-eight (48) successive equal
monthly installments over the four (4)-year period measured from the Date of
Grant.]
	 
	 	 
	Payment:

	 	By one or a combination of the following items (described in the Option Agreement):
	 
	 	 
	 

	 	þ     By cash or check
	 

	 	þ     Pursuant to a Regulation T Program if the Shares are publicly traded
	 

	 	þ     By delivery of already-owned shares if the Shares are publicly traded
	 

	 	o     By net exercise





Additional Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and
understands and agrees to, this Option Grant Notice, the Option Agreement, and the Plan.
Optionholder further acknowledges that as of the Date of Grant, this Option Grant Notice, the
Option Agreement, and the Plan set forth the entire understanding between Optionholder and the
Company regarding the acquisition of stock in the Company and supersede all prior oral and written
agreements on that subject with the exception of (i) options previously granted and delivered to
Optionholder under the Plan, and (ii) the following agreements only:




	 	 	 
	Other Agreements:
	 	 
	 

	 	 
	 
	 	 
	 

	 	 





 









 






Non-Discretionary Grant Program




	 	 	 	 	 	 	 	 	 
	Veraz Networks, Inc.	 	 	 	Optionholder:
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	Signature	 	 	 	Signature

	 
	 	 	 	 	 	 	 	 
	Title:

	 	 	 	 	 	Date:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 





Attachments: Option Agreement, 2006 Equity Incentive Plan, and Notice of Exercise




 









 








Non-Discretionary Grant Program




Attachment I



Option Agreement




 









 








Non-Discretionary Grant Program




Attachment II



2006 Equity Incentive Plan




 









 








Non-Discretionary Grant Program




Attachment III



NOTICE OF EXERCISE




 









 








Veraz Networks, Inc.

2006 Equity Incentive Plan




Option Agreement

(Incentive Stock Option or Nonstatutory Stock Option)




     Pursuant to your Option Grant Notice (“Grant Notice”) and this Option Agreement, Veraz
Networks, Inc. (the “Company”) has granted you an option under its 2006 Equity Incentive Plan (the
“Plan”) to purchase the number of shares of the Company’s Common Stock indicated in your Grant
Notice at the exercise price indicated in your Grant Notice. Defined terms not explicitly defined
in this Option Agreement but defined in the Plan shall have the same definitions as in the Plan.



     The details of your option are as follows:



     1. Vesting. Subject to the limitations contained herein, your option will vest as
provided in your Grant Notice, provided that vesting will cease upon the termination of your
Continuous Service.



     2. Number of Shares and Exercise Price. The number of shares of Common Stock subject
to your option and your exercise price per share referenced in your Grant Notice may be adjusted
from time to time for Capitalization Adjustments.



     3. Exercise Restriction for Non-Exempt Employees. In the event that you are an
Employee eligible for overtime compensation under the Fair Labor Standards Act of 1938, as amended
(i.e., a “Non-Exempt Employee”), you may not exercise your option until you have completed at least
six (6) months of Continuous Service measured from the Date of Grant specified in your Grant
Notice, notwithstanding any other provision of your option.



     4. Method of Payment. Payment of the exercise price is due in full upon exercise of
all or any part of your option. You may elect to make payment of the exercise price in cash or by
check or in any other manner permitted by your Grant Notice, which may include one or more of the
following:



          (a) Provided that at the time of exercise the Common Stock is publicly traded and quoted
regularly in The Wall Street Journal, pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in
either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to
pay the aggregate exercise price to the Company from the sales proceeds.



          (b) Provided that at the time of exercise the Common Stock is publicly traded and quoted
regularly in The Wall Street Journal, by delivery to the Company (either by actual delivery or
attestation) of already-owned shares of Common Stock either that you have held for the period
required to avoid classification of your option as a liability for financial accounting purposes
(generally six (6) months) or that you did not acquire, directly or indirectly from the



1.









 







Company, that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise. “Delivery” for these
purposes, in the sole discretion of the Company at the time you exercise your option, shall include
delivery to the Company of your attestation of ownership of such shares of Common Stock in a form
approved by the Company. Notwithstanding the foregoing, you may not exercise your option by tender
to the Company of Common Stock to the extent such tender would violate the provisions of any law,
regulation or agreement restricting the redemption of the Company’s stock.



     5. Whole Shares. You may exercise your option only for whole shares of Common Stock.



     6. Securities Law Compliance. Notwithstanding anything to the contrary contained
herein, you may not exercise your option unless the shares of Common Stock issuable upon such
exercise are then registered under the Securities Act or, if such shares of Common Stock are not
then so registered, the Company has determined that such exercise and issuance would be exempt from
the registration requirements of the Securities Act. The exercise of your option also must comply
with other applicable laws and regulations governing your option, and you may not exercise your
option if the Company determines that such exercise would not be in material compliance with such
laws and regulations.



     7. Term. You may not exercise your option before the commencement or after the
expiration of its term. The term of your option commences on the Date of Grant and expires upon
the earliest of the following:



          (a) three (3) months after the termination of your Continuous Service for any reason other
than your Disability or death; provided, however, that (i) if during any part of such three (3)
month period your option is not exercisable solely because of the condition set forth in Section 6,
your option shall not expire until the earlier of the Expiration Date or until it shall have been
exercisable for an aggregate period of three (3) months after the termination of your Continuous
Service and (ii) if (x) you are a Non-Exempt Employee, (y) you terminate your Continuous Service
within six (6) months after the Date of Grant specified in your Grant Notice, and (z) you have
vested in a portion of your option at the time of your termination of Continuous Service, your
option shall not expire until the earlier of (A) the later of the date that is seven (7) months
after the Date of Grant specified in your Grant Notice or the date that is three (3) months after
the termination of your Continuous Service, or (B) the Expiration Date;



          (b) twelve (12) months after the termination of your Continuous Service due to your
Disability;



          (c) eighteen (18) months after your death if you die either during your Continuous Service or
within three (3) months after your Continuous Service terminates;



          (d) the Expiration Date indicated in your Grant Notice; or



          (e) the day before the tenth (10th) anniversary of the Date of Grant.



     If your option is an Incentive Stock Option, note that to obtain the federal income tax
advantages associated with an Incentive Stock Option, the Code requires that at all times



2.









 







beginning on the date of grant of your option and ending on the day three (3) months before
the date of your option’s exercise, you must be an employee of the Company or an Affiliate, except
in the event of your death or Disability. The Company has provided for extended exercisability of
your option under certain circumstances for your benefit but cannot guarantee that your option will
necessarily be treated as an Incentive Stock Option if you continue to provide services to the
Company or an Affiliate as a Consultant or Director after your employment terminates or if you
otherwise exercise your option more than three (3) months after the date your employment with the
Company or an Affiliate terminates.



     8. Exercise.



          (a) You may exercise the vested portion of your option during its term by delivering a Notice
of Exercise (in a form designated by the Company) together with the exercise price to the Secretary
of the Company, or to such other person as the Company may designate, during regular business
hours, together with such additional documents as the Company may then require.



          (b) By exercising your option you agree that, as a condition to any exercise of your option,
the Company may require you to enter into an arrangement providing for the payment by you to the
Company of any tax withholding obligation of the Company arising by reason of (i) the exercise of
your option, or (ii) the disposition of shares of Common Stock acquired upon such exercise.



          (c) If your option is an Incentive Stock Option, by exercising your option you agree that you
will notify the Company in writing within fifteen (15) days after the date of any disposition of
any of the shares of the Common Stock issued upon exercise of your option that occurs within two
(2) years after the date of your option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of your option.



     9. Transferability. Your option is not transferable, except by will or by the laws
of descent and distribution, and is exercisable during your life only by you. Notwithstanding the
foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you
may designate a third party who, in the event of your death, shall thereafter be entitled to
exercise your option. In addition, you may transfer your option to a trust if you are considered
to be the sole beneficial owner (determined under Section 671 of the Code and applicable state law)
while the option is held in the trust, provided that you and the trustee enter into transfer and
other agreements required by the Company.



     10. Option not a Service Contract. Your option is not an employment or service
contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation
on your part to continue in the employ of the Company or an Affiliate, or of the Company or an
Affiliate to continue your employment. In addition, nothing in your option shall obligate the
Company or an Affiliate, their respective stockholders, Boards of Directors, Officers or Employees
to continue any relationship that you might have as a Director or Consultant for the Company or an
Affiliate.



3.









 





     11. Withholding Obligations.



          (a) At the time you exercise your option, in whole or in part, or at any time thereafter as
requested by the Company, you hereby authorize withholding from payroll and any other amounts
payable to you, and otherwise agree to make adequate provision for (including by means of a
“cashless exercise” pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the
federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if
any, which arise in connection with the exercise of your option.



          (b) Upon your request and subject to approval by the Company, in its sole discretion, and
compliance with any applicable legal conditions or restrictions, the Company may withhold from
fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a
number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of
the date of exercise, not in excess of the minimum amount required to be withheld by law (or such
lower amount as may be necessary to avoid classification of your option as a liability for
financial accounting purposes). Any adverse consequences to you arising in connection with such
share withholding procedure shall be your sole responsibility.



          (c) You may not exercise your option unless the tax withholding obligations of the Company
and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when
desired even though your option is vested, and the Company shall have no obligation to issue a
certificate for such shares of Common Stock or release such shares of Common Stock from any escrow
provided for herein unless such obligations are satisfied.



     12. Notices. Any notices provided for in your option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by
mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid,
addressed to you at the last address you provided to the Company.



     13. Governing Plan Document. Your option is subject to all the provisions of the
Plan, the provisions of which are hereby made a part of your option, and is further subject to all
interpretations, amendments, rules and regulations, which may from time to time be promulgated and
adopted pursuant to the Plan. In the event of any conflict between the provisions of your option
and those of the Plan, the provisions of the Plan shall control.



4.









 





Veraz Networks, Inc.

2006 Equity Incentive Plan 




Option Grant Notice



Veraz Networks, Inc. (the “Company”), pursuant to its 2006 Equity Incentive Plan (the “Plan”),
hereby grants to Optionholder an option to purchase the number of shares of the Company’s Common
Stock set forth below. This option is subject to all of the terms and conditions as set forth
herein and in the Option Agreement, the Plan, and the Notice of Exercise, all of which are attached
hereto and incorporated herein in their entirety.




	 	 	 
	Optionholder:
	 	 
	 

	 	 
	Date of Grant:
	 	 
	 

	 	 
	Vesting Commencement Date:
	 	 
	 

	 	 
	Number of Shares Subject to Option:
	 	 
	 

	 	 
	Exercise Price (Per Share):
	 	 
	 

	 	 
	Total Exercise Price:
	 	 
	 

	 	 
	Expiration Date:
	 	 
	 

	 	 





	 	 	 
	Type of Grant:

	 	o     Incentive Stock Option1                    o     Nonstatutory Stock Option
	 
	 	 
	Exercise Schedule:

	 	[Initial Grant: 1/4th of the shares vest and become exercisable one year after the Vesting Commencement
Date; the balance of the shares vest and become exercisable in a series of thirty-six (36) successive equal monthly
installments measured from the first anniversary of the Vesting Commencement Date.]
	 
	 	 
	 

	 	[Refresher Grant: The shares vest and become exercisable in a series of
forty-eight (48) successive equal monthly installments over the four (4)-year
period measured from the Vesting Commencement Date.]
	 
	 	 
	Payment:

	 	By one or a combination of the following items (described in the Option Agreement):
	 
	 	 
	 

	 	þ     By cash or check
	 

	 	þ     Pursuant to a Regulation T Program if the Shares are publicly traded
	 

	 	þ     By delivery of already-owned shares if the Shares are publicly traded
	 

	 	o     By net exercise2





Additional Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and
understands and agrees to, this Option Grant Notice, the Option Agreement, and the Plan.
Optionholder further acknowledges that as of the Date of Grant, this Option Grant Notice, the
Option Agreement, and the Plan set forth the entire understanding between Optionholder and the
Company regarding the acquisition of stock in the Company and supersede all prior oral and written
agreements on that subject with the exception of (i) options previously granted and delivered to
Optionholder under the Plan, and (ii) the following agreements only:




	 	 	 
	Other Agreements:
	 	 
	 

	 	 
	 
	 	 
	 

	 	 







 




			
	1	 	If this is an Incentive Stock Option, it (plus
other outstanding Incentive Stock Options) cannot be first exercisable for more
than $100,000 in value (measured by exercise price) in any calendar year. Any
excess over $100,000 is a Nonstatutory Stock Option.
	 
	2	 	An Incentive Stock Option may not be
exercised by a net exercise arrangement.





 









 





	 	 	 	 	 	 	 	 	 
	Veraz Networks, Inc.	 	 	 	Optionholder:
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	Signature	 	 	 	Signature

	 
	 	 	 	 	 	 	 	 
	Title:

	 	 	 	 	 	Date:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 





Attachments: Option Agreement, 2006 Equity Incentive Plan, and Notice of Exercise




 









 








Attachment I



Option Agreement




 









 








Attachment II



2006 Equity Incentive Plan




 









 








Attachment III



Notice of Exercise