EXHIBIT 10.01


 


FORMFACTOR, INC.


 


2002 EMPLOYEE STOCK PURCHASE PLAN


 


As Adopted April 18, 2002


As Amended December 14, 2006


 


1.             Establishment of Plan.
FormFactor, Inc. (the “Company”)
proposes to grant options for purchase of the Company’s Common Stock to eligible
employees of the Company and its Participating Subsidiaries (as hereinafter
defined) pursuant to this Employee Stock Purchase Plan (this “Plan”). For purposes of this Plan, “Parent Corporation” and “Subsidiary” shall have the same
meanings as “parent corporation” and “subsidiary corporation” in Sections
424(e) and 424(f), respectively, of the Internal Revenue Code of 1986, as
amended (the “Code”). “Participating
Subsidiaries” are Parent Corporations or Subsidiaries that the
Board of Directors of the Company (the “Board”)
designates from time to time as corporations that shall participate in this
Plan. The Company intends this Plan to qualify as an “employee stock purchase
plan” under Section 423 of the Code (including any amendments to or replacements
of such Section), and this Plan shall be so construed. Any term not expressly
defined in this Plan but defined for purposes of Section 423 of the Code shall
have the same definition herein. A total of 2,000,000 shares of the Company’s
Common Stock is reserved for issuance under this Plan. In addition, on each
January 1, the aggregate number of shares of the Company’s Common Stock
reserved for issuance under the Plan shall be increased automatically by a
number of shares equal to 1% of the total number of outstanding shares of the
Company Common Stock on the immediately preceding December 31; provided,
that the Board or the Committee may in its sole discretion reduce the amount of
the increase in any particular year; and, provided further, that the
aggregate number of shares issued over the term of this Plan shall not exceed
20,000,000 shares. Such number shall be subject to adjustments effected in
accordance with Section 14 of this Plan.


 


2.             Purpose. The
purpose of this Plan is to provide eligible employees of the Company and
Participating Subsidiaries with a convenient means of acquiring an equity
interest in the Company through payroll deductions, to enhance such employees’
sense of participation in the affairs of the Company and Participating
Subsidiaries, and to provide an incentive for continued employment.


 


3.             Administration. This
Plan shall be administered by the Compensation Committee of the Board (the “Committee”). Subject to the
provisions of this Plan and the limitations of Section 423 of the Code or any
successor provision in the Code, or limitations imposed by other taxing
jurisdictions, as applicable, all questions of interpretation or application of
this Plan shall be determined by the Committee and its decisions shall be final
and binding upon all participants. Members of the Committee shall receive no
compensation for their services in connection with the administration of this
Plan, other than standard fees as established from time to time by the Board
for services rendered by Board members serving on Board committees. All
expenses incurred in connection with the administration of this Plan shall be
paid by the Company.


 


4.             Eligibility. Any
employee of the Company or the Participating Subsidiaries is eligible to
participate in an Offering Period (as hereinafter defined) under this Plan
except the following:


 


(a) employees who are not employed by the Company or a
Participating Subsidiary prior to the beginning of such Offering Period or
prior to such other time period as specified by the Committee, except that
employees who are employed on the Effective Date of the Registration Statement
filed by the Company with the Securities and Exchange Commission (“SEC”) under the Securities Act of
1933, as amended (the “Securities Act”)
registering the initial public offering of the Company’s Common Stock shall be
eligible to participate in the first Offering Period under the Plan;


 


(b) employees who are customarily employed for twenty (20) hours
or less per week;


 

















 


(c) employees who are customarily employed for five (5) months or
less in a calendar year;


 


(d) employees who, together with any other person whose stock
would be attributed to such employee pursuant to Section 424(d) of the Code,
own stock or hold options to purchase stock possessing five percent (5%) or
more of the total combined voting power or value of all classes of stock of the
Company or any of its Participating Subsidiaries or who, as a result of being
granted an option under this Plan with respect to such Offering Period, would
own stock or hold options to purchase stock possessing five percent (5%) or
more of the total combined voting power or value of all classes of stock of the
Company or any of its Participating Subsidiaries; and


 


(e) individuals who provide services to the Company or any of its
Participating Subsidiaries as independent contractors who are reclassified as
common law employees for any reason except  for federal income and
employment tax purposes.


 


5.             Offering Periods. The
offering periods of this Plan (each, an “Offering Period”)
beginning on and after February 1, 2007 shall consist of the following:
(i) an Offering Period of twelve (12) months fixed duration commencing on
February 1 of each calendar year and ending on January 31 of the subsequent
calendar year and (ii) an Offering Period of six (6) months fixed duration
commencing on August 1 of each calendar year and ending on January 31
of the subsequent calendar year; provided,
however, that


 


(a) with respect to participants who entered into this Plan on
the Offering Date (as defined below) of August 1, 2006, the Offering Period
shall be of twenty-four (24) months fixed duration commencing on August 1, 2006
and ending on July 31, 2008 (the “August 2006 Offering
Period”), unless an Early Termination Event (as defined below)
shall have occurred;


 


(b) with respect to participants who entered into this Plan on
the Offering Date of February 1, 2006, the Offering Period shall be of
twenty-four (24)  months fixed duration
commencing on  February 1, 2006 and ending on January 31, 2008 (the “February 2006 Offering Period”),
unless an Early Termination Event shall have occurred;


 


(c) with respect to participants who entered into this Plan on
the Offering Date of August 1, 2005, the Offering Period shall be of
twenty-four (24) months fixed duration commencing on August 1, 2005 and ending
on July 31, 2007 (the “August 2005 Offering
Period”), unless an Early Termination Event shall have occurred;


 


(d) with respect to participants who entered into this Plan on
the Offering Date of February 1, 2005, the Offering Period shall be of
twenty-four (24) months fixed duration commencing on February 1, 2005 and
ending on January 31, 2007 (the “February 2005 Offering
Period”);


 


(e)  with respect to participants
who entered into this Plan prior to the Offering Date of February 1, 2005
(other than as set forth in subsection (f) below), the Offering Periods shall
be of twenty-four (24) months duration commencing on February 1 and August 1 of
each year and ending on January 31 and July 31 of each year; and


 


(f) the first such Offering Period shall commence on the date on
which the registration statement filed by the Company with the SEC under the
Securities Act registering the initial public offering of the Company’s Common
Stock is declared effective by the SEC (the “First
Offering Date”) and shall end on July 31, 2004 (the “First Offering Period”).


 


Each Offering Period of twelve (12) months fixed duration commencing on
and after February 1, 2007 shall consist of two (2) six month purchase
periods during which payroll deductions of the participants are accumulated
under this Plan (individually, a “Purchase Period”),
and each Offering Period of six (6) months fixed duration shall consist of one
(1) six month Purchase Period. Each Offering Period that commenced before
February 1, 2007 shall consist of four (4) six month Purchase Periods, unless
an Early Termination Event shall have occurred. The First Offering Period shall
consist of no more than five and no fewer than three Purchase Periods, any of
which may be greater or less than six months as determined by the Committee. The
first business day of each Offering Period is referred to as the “Offering Date”. The last business
day of each Purchase Period is referred to as the “Purchase
Date”. The Committee shall have the power to change the Offering
Dates, the Purchase Dates and the duration of Offering Periods or Purchase
Periods without stockholder approval if such change is announced prior to the
relevant Offering Period or prior to such other time period as specified by the
Committee.


 

















 


Each of the following events shall be deemed an “Early
Termination Event” for the purposes of this Plan:


 


(i)    in the event that the Fair Market Value on any
Offering Date through February 1, 2008 is lower than the Fair Market Value on
the first Offering Date for the August 2006 Offering Period, then immediately
prior to such Offering Date, the Company shall terminate the August 2006
Offering Period and automatically enroll any participants in the August 2006
Offering Period into the immediately subsequent Offering Period pursuant to
this Plan;


 


(ii)   in the event that the Fair Market Value on any
Offering Date through August 1, 2007 is lower than the Fair Market Value on the
first Offering Date for the February 2006 Offering Period, then immediately
prior to such Offering Date, the Company shall terminate the February 2006
Offering Period and automatically enroll any participants in the February 2006
Offering Period into the immediately subsequent Offering Period pursuant to
this Plan; and


 


(iii)  in the event that the Fair Market Value on any
Offering Date through February 1, 2007 is lower than the Fair Market Value on
the first Offering Date for the August 2005 Offering Period, then immediately
prior to such Offering Date, the Company shall terminate the August 2005
Offering Period and automatically enroll any participants in the August 2005
Offering Period into the immediately subsequent Offering Period pursuant to
this Plan.


 


In the event that an Early Termination Event has not occurred with
respect to any participant in the August 2006 Offering Period, the February
2006 Offering Period and/or the August 2005 Offering Period, then upon the
expiration of the respective Offering Period of such participant in accordance
with subsections (a), (b) and (c) above, as applicable, the Company shall
automatically enroll such participant into the immediately subsequent Offering
Period pursuant to this Plan.


 


6.             Participation in this
Plan. Eligible employees may become participants in an Offering Period
under this Plan on the Offering Date after satisfying the eligibility
requirements by delivering a subscription agreement to the Company prior to
such Offering Date, or such other time period as specified by the Committee, or
as provided by Section 5 above; provided, however, that all eligible employees employed
on or before the First Offering Date will be automatically enrolled in the
First Offering Period. An eligible employee can participate in only one
Offering Period at a time. Notwithstanding the foregoing, (i) an eligible
employee may elect to decrease the number of shares of Common Stock that such
employee would otherwise be permitted to purchase pursuant to Section 7 below
for the First Offering Period and/or purchase shares of Common Stock for the
First Offering Period through payroll deductions by delivering a subscription
agreement to the Company within thirty (30) days following the First Offering
Date after the filing of an effective registration statement pursuant to Form
S-8 and (ii) the Committee may set a later time for filing the subscription
agreement authorizing payroll deductions for all eligible employees with
respect to a given Offering Period. Except as provided above with respect to
the First Offering Period, an eligible employee who does not deliver a
subscription agreement to the Company after becoming eligible to participate in
an Offering Period shall not participate in such Offering Period or any
subsequent Offering Period unless such employee enrolls in this Plan by filing
a subscription agreement with the Company prior to such Offering Period, or
such other time period as specified by the Committee. Once an employee becomes
a participant in an Offering Period by filing a subscription agreement, such
employee will automatically participate in the Offering Period commencing
immediately following the last day of the prior Offering Period unless the
employee withdraws or is deemed to withdraw from this Plan or terminates
further participation in the Offering Period as set forth in Section 11 below. Such
participant is not required to file any additional subscription agreement in
order to continue participation in this Plan.


 

















 


7.             Grant of Option on
Enrollment. Enrollment by an eligible employee in this Plan with respect to
an Offering Period will constitute the grant (as of the Offering Date) by the
Company to such employee of an option to purchase on the Purchase Date up to
that number of shares of Common Stock of the Company determined by a fraction,
the numerator of which is the amount accumulated in such employee’s
payroll deduction account during such Purchase Period and the denominator of
which is the lower of (i) eighty-five percent (85%) of the fair
market value of a share of the Company’s Common Stock on the Offering Date (but
in no event less than the par value of a share of the Company’s Common Stock),
or (ii) eighty-five percent (85%) of the fair market value of a share of
the Company’s Common Stock on the Purchase Date (but in no event less than the
par value of a share of the Company’s Common Stock), provided, however, that for each Purchase Period within the First
Offering Period the numerator shall be fifteen percent (15%) of the eligible
employee’s compensation for such Purchase Period and provided, further,
that the number of shares of the Company’s Common Stock subject to any option
granted pursuant to this Plan shall not exceed the lesser of (x) the
maximum number of shares set by the Committee pursuant to Section 10(c) below
with respect to the applicable Purchase Date, or (y) the maximum number of
shares which may be purchased pursuant to Section 10(b) below with respect to
the applicable Purchase Date. The fair market value of a share of the Company’s
Common Stock shall be determined as provided in Section 8 below.


 


8.             Purchase Price. The
purchase price per share at which a share of Common Stock will be sold in any
Offering Period shall be eighty-five percent (85%) of the lesser of:


 


(a)  The fair market value on the
Offering Date; or


 


(b)  The fair market value on the
Purchase Date.


 


The term “fair market value” means, as
of any date, the value of a share of the Company’s Common Stock determined as
follows:


 


(a)  if such Common Stock is then
quoted on the Nasdaq Global Market, its closing price on the Nasdaq Global
Market on the date of determination as reported in The Wall Street Journal;


 


(b)  if such Common Stock is
publicly traded and is then listed on a national securities exchange, its
closing price on the date of determination on the principal national securities
exchange on which the Common Stock is listed or admitted to trading as reported
in The Wall Street Journal; or


 


(c)  if such Common Stock is
publicly traded but is not quoted on the Nasdaq Global Market nor listed or
admitted to trading on a national securities exchange, the average of the
closing bid and asked prices on the date of determination as reported in The
Wall Street Journal.


 


Notwithstanding the foregoing, for purposes of the First Offering Date,
fair market value shall be the price per share at which shares of the Company’s
Common Stock are initially offered for sale to the public by the Company’s
underwriters in the initial public offering of the Company’s Common Stock
pursuant to a registration statement filed with the SEC under the Securities
Act.


 


9.             Payment Of Purchase
Price; Changes In Payroll Deductions; Issuance Of Shares.


 


(a)  The purchase price of the
shares is accumulated by regular payroll deductions made during each Offering
Period, provided, however, that for the First Offering
Period the purchase price of the shares shall be paid by the eligible employee
in cash on each Purchase Date within the First Offering Period unless the
eligible employee elects to purchase such shares through payroll deductions
after the filing of an effective Form S-8 registration statement pursuant to
the second sentence of Section 6 above within thirty (30) days following the
First Offering Period. The deductions are made as a percentage of the
participant’s compensation in one percent (1%) increments not less than one
percent (1%), nor greater than fifteen percent (15%) or such lower limit set by
the Committee. Compensation shall mean all W-2 cash compensation, including,
but not limited to, base salary, wages, commissions, overtime, shift premiums,
plus draws against commissions, provided, however, that for
purposes of determining a participant’s compensation, any election by such
participant to reduce 


 

















 


his or her regular cash
remuneration under Sections 125 or 401(k) of the Code shall be treated as if
the participant did not make such election. Payroll deductions shall commence
on the first payday of the Offering Period and shall continue to the end of the
Offering Period unless sooner altered or terminated as provided in this Plan.


 


(b)  (i)  For any Offering Periods
that commenced before February 1, 2007 (including the August 2006 Offering
Period, the February 2006 Offering Period, the August 2005 Offering Period and
the February 2005 Offering Period), the following provision is operative:  A participant may increase or decrease the
rate of payroll deductions during an Offering Period by filing with the Company
a new authorization for payroll deductions, in which case the new rate shall
become effective for the next payroll period commencing after the Company’s
receipt of the authorization and shall continue unless changed as described
below. Such change in the rate of payroll deductions may be made at any time
during an Offering Period, but not more than one (1) change may be made
effective during any Purchase Period. A participant may increase or decrease
the rate of payroll deductions for any subsequent Offering Period by filing
with the Company a new authorization for payroll deductions prior to the
beginning of such Offering Period, or such other time period as specified by
the Committee.


 


(ii)  For any
Offering Periods commencing from and after February 1, 2007, the following
provision is operative:  A
participant may not increase the rate of payroll deductions at any time during
an Offering Period. A participant may decrease the rate of payroll deductions
during an Offering Period by filing with the Company a new authorization for
payroll deductions, in which case the new rate shall become effective as soon
as practicable commencing after the Company’s receipt of the authorization and
shall continue unless changed as described below. Such decrease in the rate of
payroll deductions may be made at any time during an Offering Period, but not
more than one (1) change may be made effective during any Purchase Period. A
participant may increase or decrease the rate of payroll deductions for any
subsequent Offering Period by filing with the Company a new authorization for
payroll deductions prior to the beginning of such Offering Period, or such other
time period as specified by the Committee.


 


(c)  A participant may reduce his
or her payroll deduction percentage to zero during an Offering Period by filing
with the Company a request for cessation of payroll deductions. A participant
may make only one change, if allowable, whether a suspension, decrease or
increase, during any Purchase Period. Such reduction shall be effective
beginning as soon as practicable after the Company’s receipt of the request and
no further payroll deductions will be made for the duration of the Offering
Period. Payroll deductions credited to the participant’s account prior to the
effective date of the request shall be used to purchase shares of Common Stock
of the Company in accordance with Section (e) below. A participant may not
resume making payroll deductions during the Offering Period in which he or she
reduced his or her payroll deductions to zero.


 


(d)  All payroll deductions made
for a participant are credited to his or her account under this Plan and are
deposited with the general funds of the Company. No interest accrues on the
payroll deductions. All payroll deductions received or held by the Company may
be used by the Company for any corporate purpose, and the Company shall not be
obligated to segregate such payroll deductions.


 


(e)  On each Purchase Date, so
long as this Plan remains in effect and provided that the participant has not
submitted a signed and completed withdrawal form before that date which
notifies the Company that the participant wishes to withdraw from that Offering
Period under this Plan and have all payroll deductions accumulated in the
account maintained on behalf of the participant as of that date returned to the
participant, the Company shall apply the funds then in the participant’s
account to the purchase of whole shares of Common Stock reserved under the
option granted to such participant with respect to the Offering Period to the
extent that such option is exercisable on the Purchase Date. The purchase price
per share shall be as specified in Section 8 of this Plan. Any cash remaining
in a participant’s account after such purchase of shares shall be refunded to
such participant in cash, without interest; provided, however that any amount
remaining in such participant’s account on a Purchase Date which is less than
the amount necessary to purchase a full share of Common Stock of the Company
shall be carried forward, without interest, into the next Purchase Period or
Offering Period, as the case may be. In the event that this Plan has been
oversubscribed, all funds not used to purchase shares on the Purchase Date
shall be returned to the participant, without interest. No Common Stock shall
be purchased on a Purchase Date on behalf of any employee whose participation
in this Plan has terminated prior to such Purchase Date.


 


(f)  As promptly as practicable
after the Purchase Date, the Company shall issue shares for the participant’s
benefit representing the shares purchased upon exercise of his or her option.


 

















 


(g)  During a participant’s
lifetime, his or her option to purchase shares hereunder is exercisable only by
him or her. The participant will have no interest or voting right in shares
covered by his or her option until such option has been exercised.


 


10.                               Limitations
on Shares to be Purchased.


 


(a)  No participant shall be
entitled to purchase stock under this Plan at a rate which, when aggregated
with his or her rights to purchase stock under all other employee stock
purchase plans of the Company or any Subsidiary, exceeds $25,000 in fair market
value, determined as of the Offering Date (or such other limit as may be
imposed by the Code) for each calendar year in which the employee participates
in this Plan. The Company shall automatically suspend the payroll deductions of
any participant as necessary to enforce such limit provided that when the
Company automatically resumes such payroll deductions, the Company must apply
the rate in effect immediately prior to such suspension.


 


(b)  No more than two hundred
percent (200%) of the number of shares determined by using eighty-five percent
(85%) of the fair market value of a share of the Company’s Common Stock on the
Offering Date as the denominator may be purchased by a participant on any
single Purchase Date.


 


(c)  No participant shall be
entitled to purchase more than the Maximum Share Amount (as defined below) on
any single Purchase Date. Prior to the commencement of any Offering Period or
prior to such time period as specified by the Committee, the Committee may, in
its sole discretion, set a maximum number of shares which may be purchased by
any employee at any single Purchase Date (hereinafter the “Maximum
Share Amount”). Until otherwise determined by the Committee,
there shall be no Maximum Share Amount. In no event shall the Maximum Share
Amount exceed the amounts permitted under Section 10(b) above. If a new Maximum
Share Amount is set, then all participants must be notified of such Maximum
Share Amount prior to the commencement of the next Offering Period. The Maximum
Share Amount shall continue to apply with respect to all succeeding Purchase
Dates and Offering Periods unless revised by the Committee as set forth above.


 


(d)  If the number of shares to
be purchased on a Purchase Date by all employees participating in this Plan
exceeds the number of shares then available for issuance under this Plan, then
the Company will make a pro rata allocation of the remaining shares in as
uniform a manner as shall be reasonably practicable and as the Committee shall
determine to be equitable. In such event, the Company shall give written notice
of such reduction of the number of shares to be purchased under a participant’s
option to each participant affected.


 


(e)  Any payroll deductions
accumulated in a participant’s account which are not used to purchase stock due
to the limitations in this Section 10 shall be returned to the participant as
soon as practicable after the end of the applicable Purchase Period, without
interest.


 


11.                             Withdrawal.


 


(a)  Each participant may
withdraw from an Offering Period under this Plan by signing and delivering to
the Company a written notice to that effect on a form provided for such purpose.
Such withdrawal may be elected at any time prior to the end of an Offering
Period, or such other time period as specified by the Committee.


 


(b)  Upon withdrawal from this
Plan, the accumulated payroll deductions shall be returned to the withdrawn
participant, without interest, and his or her interest in this Plan shall
terminate. In the event a participant voluntarily elects to withdraw from this
Plan, he or she may not resume his or her participation in this Plan during the
same Offering Period, but he or she may participate in any Offering Period
under this Plan which commences on a date subsequent to such withdrawal by
filing a new authorization for payroll deductions in the same manner as set
forth in Section 6 above for initial participation in this Plan.


 


(c)  If the Fair Market Value on
the first day of the current Offering Period in which a participant is enrolled
is higher than the Fair Market Value on the first day of any subsequent
Offering Period, the Company will 


 

















 


automatically enroll such
participant in the subsequent Offering Period. Any funds accumulated in a
participant’s account prior to the first day of such subsequent Offering Period
will be applied to the purchase of shares on the Purchase Date immediately
prior to the first day of such subsequent Offering Period, if any.


 


(d)  Section 11(c) of this Plan
shall not apply to any Offering Period from and after February 1, 2007.


 


12.                             Termination
of Employment. Termination of a participant’s employment for any reason,
including retirement, death or the failure of a participant to remain an
eligible employee of the Company or of a Participating Subsidiary, immediately
terminates his or her participation in this Plan. In such event, the payroll
deductions credited to the participant’s account will be returned to him or her
or, in the case of his or her death, to his or her legal representative,
without interest. For purposes of this Section 12, an employee will not be
deemed to have terminated employment or failed to remain in the continuous
employ of the Company or of a Participating Subsidiary in the case of sick
leave, military leave, or any other leave of absence approved by the Board; provided
that such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.


 


13.                             Return
of Payroll Deductions. In the event a participant’s interest in this Plan
is terminated by withdrawal, termination of employment or otherwise, or in the
event this Plan is terminated by the Board, the Company shall deliver to the
participant all payroll deductions credited to such participant’s account. No
interest shall accrue on the payroll deductions of a participant in this Plan.


 


14.                             Capital
Changes. Subject to any required action by the stockholders of the Company,
the number of shares of Common Stock covered by each option under this Plan
which has not yet been exercised and the number of shares of Common Stock which
have been authorized for issuance under this Plan but have not yet been placed
under option (collectively, the “Reserves”),
as well as the price per share of Common Stock covered by each option under this
Plan which has not yet been exercised, shall be proportionately adjusted for
any increase or decrease in the number of issued and outstanding shares of
Common Stock of the Company resulting from a stock split or the payment of a
stock dividend (but only on the Common Stock) or any other increase or decrease
in the number of issued and outstanding shares of Common Stock effected without
receipt of any consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall
not be deemed to have been “effected without receipt of consideration”. Such
adjustment shall be made by the Committee, whose
determination shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.


 


In the event of the proposed dissolution or liquidation of the Company,
the Offering Period will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Committee. The Committee
may, in the exercise of its sole discretion in such instances, declare that
this Plan shall terminate as of a date fixed by the Committee and give each
participant the right to purchase shares under this Plan prior to such
termination. In the event of (i) a merger or consolidation in which the
Company is not the surviving corporation (other than a merger or consolidation
with a wholly-owned subsidiary, a reincorporation of the Company in a different
jurisdiction, or other transaction in which there is no substantial change in
the stockholders of the Company or their relative stock holdings and the
options under this Plan are assumed, converted or replaced by the successor
corporation, which assumption will be binding on all participants), (ii) a
merger in which the Company is the surviving corporation but after which the
stockholders of the Company immediately prior to such merger (other than any
stockholder that merges, or which owns or controls another corporation that
merges, with the Company in such merger) cease to own their shares or other equity
interest in the Company, (iii) the sale of all or substantially all of the
assets of the Company or (iv) the acquisition, sale, or transfer of more than
50% of the outstanding shares of the Company by tender offer or similar
transaction, the Plan will continue with regard to Offering Periods that
commenced prior to the closing of the proposed transaction and shares will be
purchased based on the Fair Market Value of the surviving corporation’s stock
on each Purchase Date, unless otherwise provided by the Committee.


 


The Committee may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the
price per share of Common Stock covered by each outstanding option, in the
event that the Company effects one or more reorganizations, recapitalizations,
rights offerings or other increases or reductions of shares of its outstanding
Common Stock, or in the event of the Company being consolidated with or merged
into any other corporation.


 

















 


15.                             Nonassignability.
Neither payroll deductions credited to a participant’s account nor any rights
with regard to the exercise of an option or to receive shares under this Plan
may be assigned, transferred, pledged or otherwise disposed of in any way
(other than by will, the laws of descent and distribution or as provided in
Section 22 below) by the participant. Any such attempt at assignment, transfer,
pledge or other disposition shall be void and without effect.


 


16.                             Reports.
Individual accounts will be maintained for each participant in this Plan. Each
participant shall receive promptly after the end of each Purchase Period a
report of his or her account setting forth the total payroll deductions
accumulated, the number of shares purchased, the per share price thereof and
the remaining cash balance, if any, carried forward to the next Purchase Period
or Offering Period, as the case may be.


 


17.                             Notice
of Disposition. Each participant shall notify the Company in writing if the
participant disposes of any of the shares purchased in any Offering Period
pursuant to this Plan if such disposition occurs within two (2) years from the
Offering Date or within one (1) year from the Purchase Date on which such
shares were purchased (the “Notice Period”).
The Company may, at any time during the Notice Period, place a legend or
legends on any certificate representing shares acquired pursuant to this Plan
requesting the Company’s transfer agent to notify the Company of any transfer
of the shares. The obligation of the participant to provide such notice shall
continue notwithstanding the placement of any such legend on the certificates.


 


18.                             No
Rights to Continued Employment. Neither this Plan nor the grant of any
option hereunder shall confer any right on any employee to remain in the employ
of the Company or any Participating Subsidiary, or restrict the right of the
Company or any Participating Subsidiary to terminate such employee’s
employment.


 


19.                             Equal
Rights And Privileges. All eligible employees shall have equal rights and
privileges with respect to this Plan so that this Plan qualifies as an “employee
stock purchase plan” within the meaning of Section 423 or any successor
provision of the Code and the related regulations. Any provision of this Plan
which is inconsistent with Section 423 or any successor provision of the Code
shall, without further act or amendment by the Company, the Committee or the
Board, be reformed to comply with the requirements of Section 423. This
Section 19 shall take precedence over all other provisions in this Plan.


 


20.                             Notices.
All notices or other communications by a participant to the Company under or in
connection with this Plan shall be deemed to have been duly given when received
in the form specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.


 


21.                             Term;
Stockholder Approval. After this Plan is adopted by the Board, this Plan
will become effective on the First Offering Date (as defined above). This Plan
shall be approved by the stockholders of the Company, in any manner permitted
by applicable corporate law, within twelve (12) months before or after the date
this Plan is adopted by the Board. No purchase of shares pursuant to this Plan
shall occur prior to such stockholder approval. This Plan shall continue until
the earlier to occur of (a) termination of this Plan by the Board (which
termination may be effected by the Board at any time), (b) issuance of all of
the shares of Common Stock reserved for issuance under this Plan, or (c) ten
(10) years from the adoption of this Plan by the Board.


 


22.                             Designation
of Beneficiary.


 


(a)  A participant may file a
written designation of a beneficiary who is to receive any shares and cash, if
any, from the participant’s account under this Plan in the event of such
participant’s death subsequent to the end of a Purchase Period but prior to
delivery to him of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant’s account under this Plan in the event of such participant’s death
prior to a Purchase Date.


 


(b)  Such designation of
beneficiary may be changed by the participant at any time by written notice. In
the event of the death of a participant and in the absence of a beneficiary
validly designated under this Plan who is living at the time of such
participant’s death, the Company shall deliver such shares or cash to the
executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the 


 

















 


Company, in its discretion, may
deliver such shares or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known
to the Company, then to such other person as the Company may designate.


 


23.                             Conditions
Upon Issuance of Shares; Limitation on Sale of Shares. Shares shall not be
issued with respect to an option unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange or automated quotation system upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.


 


24.                             Applicable
Law. The Plan shall be governed by the substantive laws (excluding the
conflict of laws rules) of the State of California.


 


25.                             Amendment
or Termination of this Plan. The Board may at any time amend, terminate or
extend the term of this Plan, except that any such termination cannot affect
options previously granted under this Plan, nor may any amendment make any
change in an option previously granted which would adversely affect the right
of any participant, nor may any amendment be made without approval of the
stockholders of the Company obtained in accordance with Section 21 above within
twelve (12) months of the adoption of such amendment (or earlier if required by
Section 21) if such amendment would:


 


(a)  increase the number of
shares that may be issued under this Plan; or


 


(b)  change the designation of
the employees (or class of employees) eligible for participation in this Plan.


 


Notwithstanding the foregoing, the Board may make such amendments to
the Plan as the Board determines to be advisable, if the continuation of the
Plan or any Offering Period would result in financial accounting treatment for
the Plan that is different from the financial accounting treatment in effect on
the date this Plan is adopted by the Board.