Exhibit
10.2


Verigy
Ltd.



2006 Equity Incentive Plan



(As Amended December 13, 2006)















 


TABLE OF CONTENTS


	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
  ARTICLE 1.

  	
   

  	
  INTRODUCTION

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 2.

  	
   

  	
  ADMINISTRATION

  	
   

  	
  1

  
	
  2.1

  	
   

  	
  Committee Composition

  	
   

  	
  1

  
	
  2.2

  	
   

  	
  Committee Responsibilities

  	
   

  	
  1

  
	
  2.3

  	
   

  	
  Committee for Non-Officer Grants

  	
   

  	
  2

  
	
  2.4

  	
   

  	
  Administration with Respect to Substitute Awards

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 3.

  	
   

  	
  SHARES AVAILABLE FOR GRANTS

  	
   

  	
  2

  
	
  3.1

  	
   

  	
  Basic Limitation

  	
   

  	
  2

  
	
  3.2

  	
   

  	
  Shares Returned to Reserve

  	
   

  	
  2

  
	
  3.3

  	
   

  	
  Substitute Awards

  	
   

  	
  2

  
	
  3.4

  	
   

  	
  Dividend Equivalents

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 4.

  	
   

  	
  ELIGIBILITY

  	
   

  	
  3

  
	
  4.1

  	
   

  	
  Incentive Stock Options

  	
   

  	
  3

  
	
  4.2

  	
   

  	
  Other Grants

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 5.

  	
   

  	
  OPTIONS

  	
   

  	
  3

  
	
  5.1

  	
   

  	
  Option Agreement

  	
   

  	
  3

  
	
  5.2

  	
   

  	
  Number of Shares

  	
   

  	
  3

  
	
  5.3

  	
   

  	
  Exercise Price

  	
   

  	
  4

  
	
  5.4

  	
   

  	
  Exercisability and Term

  	
   

  	
  4

  
	
  5.5

  	
   

  	
  Effect of Change in Control

  	
   

  	
  5

  
	
  5.6

  	
   

  	
  Buyout Provisions

  	
   

  	
  5

  
	
  5.7

  	
   

  	
  Payment for Option Shares

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 6.

  	
   

  	
  SHARE APPRECIATION RIGHTS

  	
   

  	
  5

  
	
  6.1

  	
   

  	
  SAR Agreement

  	
   

  	
  5

  
	
  6.2

  	
   

  	
  Number of Shares

  	
   

  	
  6

  
	
  6.3

  	
   

  	
  Exercise Price

  	
   

  	
  6

  
	
  6.4

  	
   

  	
  Exercisability and Term

  	
   

  	
  6

  
	
  6.5

  	
   

  	
  Effect of Change in Control

  	
   

  	
  7

  
	
  6.6

  	
   

  	
  Exercise of SARs

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 7.

  	
   

  	
  RESTRICTED SHARES

  	
   

  	
  7

  
	
  7.1

  	
   

  	
  Restricted Share Agreement

  	
   

  	
  7

  
	
  7.2

  	
   

  	
  Number of Shares

  	
   

  	
  7

  
	
  7.3

  	
   

  	
  Payment for Awards

  	
   

  	
  8

  
	
  7.4

  	
   

  	
  Vesting Conditions

  	
   

  	
  8

  
	
  7.5

  	
   

  	
  Effect of Change in Control

  	
   

  	
  9

  
	
  7.6

  	
   

  	
  Voting and Dividend Rights

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 8.

  	
   

  	
  SHARE UNITS

  	
   

  	
  9

  
	
  8.1

  	
   

  	
  Share Unit Agreement

  	
   

  	
  9

  
	
  8.2

  	
   

  	
  Number of Shares

  	
   

  	
  9

  



 



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  8.3

  	
   

  	
  Payment for Awards

  	
   

  	
  9

  
	
  8.4

  	
   

  	
  Vesting Conditions

  	
   

  	
  9

  
	
  8.5

  	
   

  	
  Effect of Change in Control

  	
   

  	
  10

  
	
  8.6

  	
   

  	
  Voting and Dividend Rights

  	
   

  	
  10

  
	
  8.7

  	
   

  	
  Form and Time of Settlement of Share Units

  	
   

  	
  10

  
	
  8.8

  	
   

  	
  Creditors’ Rights

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 9.

  	
   

  	
  AUTOMATIC OPTION GRANTS TO OUTSIDE DIRECTORS

  	
   

  	
  11

  
	
  9.1

  	
   

  	
  Initial Grants

  	
   

  	
  11

  
	
  9.2

  	
   

  	
  Annual Grants

  	
   

  	
  11

  
	
  9.3

  	
   

  	
  Cessation of Eligibility to Vest

  	
   

  	
  12

  
	
  9.4

  	
   

  	
  Accelerated Exercisability

  	
   

  	
  12

  
	
  9.5

  	
   

  	
  Exercise Price

  	
   

  	
  12

  
	
  9.6

  	
   

  	
  Term

  	
   

  	
  12

  
	
  9.7

  	
   

  	
  Affiliates of Outside Directors

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 10.

  	
   

  	
  PROTECTION AGAINST DILUTION

  	
   

  	
  12

  
	
  10.1

  	
   

  	
  Adjustments

  	
   

  	
  12

  
	
  10.2

  	
   

  	
  Dissolution or Liquidation

  	
   

  	
  13

  
	
  10.3

  	
   

  	
  Reorganizations

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 11.

  	
   

  	
  PAYMENT OF DIRECTOR’S FEES IN SECURITIES

  	
   

  	
  14

  
	
  11.1

  	
   

  	
  Effective Date

  	
   

  	
  14

  
	
  11.2

  	
   

  	
  Elections to Receive NSOs, Restricted Shares or
  Share Units

  	
   

  	
  14

  
	
  11.3

  	
   

  	
  Number and Terms of NSOs, Restricted Shares or Share
  Units

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 12.

  	
   

  	
  LIMITATION ON RIGHTS

  	
   

  	
  15

  
	
  12.1

  	
   

  	
  Retention Rights

  	
   

  	
  15

  
	
  12.2

  	
   

  	
  Shareholders’ Rights

  	
   

  	
  15

  
	
  12.3

  	
   

  	
  Regulatory Requirements

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 13.

  	
   

  	
  WITHHOLDING TAXES

  	
   

  	
  15

  
	
  13.1

  	
   

  	
  General

  	
   

  	
  15

  
	
  13.2

  	
   

  	
  Share Withholding

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 14.

  	
   

  	
  LIMITATION ON PAYMENTS

  	
   

  	
  15

  
	
  14.1

  	
   

  	
  Scope of Limitation

  	
   

  	
  15

  
	
  14.2

  	
   

  	
  Basic Rule

  	
   

  	
  16

  
	
  14.3

  	
   

  	
  Reduction of Payments

  	
   

  	
  16

  
	
  14.4

  	
   

  	
  Overpayments and Underpayments

  	
   

  	
  16

  
	
  14.5

  	
   

  	
  Related Corporations

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 15.

  	
   

  	
  FUTURE OF THE PLAN

  	
   

  	
  17

  
	
  15.1

  	
   

  	
  Term of the Plan

  	
   

  	
  17

  
	
  15.2

  	
   

  	
  Amendment or Termination

  	
   

  	
  17

  
	
  15.3

  	
   

  	
  Shareholder Approval

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 16.

  	
   

  	
  DEFINITIONS

  	
   

  	
  17

  



 



 ii














 


Verigy
Ltd.


2006
Equity Incentive Plan


ARTICLE 1.            INTRODUCTION.


The purpose of the Plan is to promote the long-term
success of the Company and the creation of shareholder value by
(a) encouraging Employees, Outside Directors and Consultants to focus on
critical long-range objectives, (b) encouraging the attraction and
retention of Employees, Outside Directors and Consultants with exceptional
qualifications and (c) linking Employees, Outside Directors and
Consultants directly to shareholder interests through increased share
ownership.  The Plan seeks to achieve
this purpose by providing for Awards in the form of Options (which may
constitute ISOs or NSOs), SARs, Restricted Shares or Share Units.


The Plan shall be governed by, and construed in
accordance with, the laws of the Republic of Singapore (except its
choice-of-law provisions).


ARTICLE 2.            ADMINISTRATION.


2.1          Committee Composition.  The Committee shall administer the Plan.  The Committee shall consist exclusively of
two or more directors of the Company, who shall be appointed by the Board.  In addition, each member of the Committee
shall meet the following requirements:


(a)           Any
listing standards prescribed by the principal securities market on which the
Company’s equity securities are traded;


(b)           Such
requirements as the Internal Revenue Service may establish for outside
directors acting under plans intended to qualify for exemption under
section 162(m)(4)(C) of the Code;


(c)           Such
requirements as the Securities and Exchange Commission may establish for administrators
acting under plans intended to qualify for exemption under Rule 16b-3
(or its successor) under the Exchange Act; and


(d)           Any
other requirements imposed by applicable law, regulations or rules.


2.2          Committee
Responsibilities.  The Committee shall
(a) select the Employees, Outside Directors and Consultants who are to
receive Awards under the Plan, (b) determine the type, number, vesting
requirements and other features and conditions of such Awards,
(c) interpret the Plan, (d) make all other decisions relating to the
operation of the Plan and (e) carry out any other duties delegated to it
by the Board.  The Committee may adopt
such rules or guidelines as it deems
appropriate to implement the Plan, including rules and procedures relating to
the operation and administration of the Plan in order to accommodate the
specific









 



requirements of local laws
and procedures.  Without limiting the
generality of the foregoing, the Committee is specifically authorized to adopt
(a) rules and procedures regarding the conversion of local currency,
withholding procedures and handling of stock certificates that vary with local
requirements and (b) such sub-plans and Plan addenda as the Committee
deems desirable to accommodate foreign tax laws, regulations and practice.  The Committee’s determinations under the Plan
shall be final and binding on all persons.


2.3          Committee for
Non-Officer Grants.  The Board may
also appoint a secondary committee of the Board, which shall be composed of one
or more directors of the Company who need not satisfy the requirements of
Section 2.1.  Such secondary
committee may administer the Plan with respect to Employees and Consultants who
are not Outside Directors and are not considered executive officers of the
Company under section 16 of the Exchange Act, may grant Awards under the
Plan to such Employees and Consultants and may determine all features and
conditions of such Awards.  Within the
limitations of this Section 2.3, any reference in the Plan to the
Committee shall include such secondary committee.


2.4          Administration with
Respect to Substitute Awards.  
Notwithstanding any other provision of this Plan, in connection with
issuing Substitute Awards, the Committee may provide that the Substitute Awards
shall be subject to the terms and conditions of the plan and/or agreements
under which the awards being assumed or substituted were originally issued,
even where such terms are in conflict or inconsistent with the terms of this
Plan.


ARTICLE 3.            SHARES
AVAILABLE FOR GRANTS.


3.1          Basic Limitation.  Shares issued pursuant to the Plan may be
authorized but unissued shares or treasury shares.  The aggregate number of Shares issued under
the Plan shall not exceed (a) 10,300,000 plus (b) the additional
Shares described in Section 3.3. 
The number of Shares that are subject to Awards outstanding at any time
under the Plan shall not exceed the number of Shares that then remain available
for issuance under the Plan. 
Notwithstanding any other provision of this Plan, the maximum number of
Shares that may be issued upon the exercise of ISOs under this Plan is
10,300,000.  The limitations of this
Section 3.1 shall be subject to adjustment pursuant to Article 10.


3.2          Shares Returned to
Reserve.  If Options, SARs or Share
Units (including Replacement Awards) are forfeited or terminate for any other
reason before being exercised or settled, then the Shares subject to such
Options, SARs or Share Units shall again become available for issuance under
the Plan.  If SARs are exercised, then
only the number of Shares (if any) actually issued in settlement of such SARs
shall reduce the number available under Section 3.1 and the balance shall
again become available for issuance under the Plan.  If Share Units are settled, then only the
number of Shares (if any) actually issued in settlement of such Share Units
shall reduce the number available under Section 3.1 and the balance shall
again become available for issuance under the Plan.  If Restricted Shares or Shares issued upon the
exercise of Options are reacquired by the Company pursuant to a forfeiture
provision or for any other reason, then such Shares shall again become
available for issuance under the Plan.


3.3          Substitute Awards.  Except with respect to Substitute Awards
issued with respect to awards previously issued by Agilent Technologies, Inc.,
Substitute Awards shall not



 2
 






 



reduce the
Shares authorized for issuance under the Plan or authorized for grant to a
Participant in any calendar year. 
Additionally, in the event that a company acquired by the Company or any
Subsidiary, or with which the Company or any Subsidiary combines, has shares
available under a pre-existing plan approved by shareholders and not adopted in
contemplation of such acquisition or combination, the shares available for
grant pursuant to the terms of such pre-existing plan (as adjusted, to the
extent appropriate, using the exchange ratio or other adjustment or valuation
ratio or formula used in such acquisition or combination to determine the
consideration payable to the holders of ordinary shares or common shares of the
entities party to such acquisition or combination) may be used for Awards under
the Plan and shall not reduce the Shares authorized for issuance under the
Plan; provided that Awards using such available Shares shall not be made after
the date awards or grants could have been made under the terms of the
pre-existing plan, absent the acquisition or combination, and shall only be
made to individuals who were employees, directors or consultants of such
acquired or combined company before such acquisition or combination.


3.4          Dividend
Equivalents.  Any dividend
equivalents paid or credited under the Plan shall be applied against the number
of Shares that may be issued under the Plan if such dividend equivalents are
converted into Share Units.


ARTICLE 4.            ELIGIBILITY.


4.1          Incentive
Stock Options.  Only Employees
who are common-law employees of the Company, a Parent or a Subsidiary
shall be eligible for the grant of ISOs. 
In addition, an Employee who owns more than 10% of the total combined voting
power of all classes of outstanding shares of the Company or any of its Parents
or Subsidiaries shall not be eligible for the grant of an ISO unless the
requirements set forth in section 422(c)(5) of the Code are
satisfied.


4.2          Other
Grants.  Only Employees,
Outside Directors and Consultants shall be eligible for the grant of Restricted
Shares, Share Units, NSOs or SARs.


ARTICLE 5.            OPTIONS.


5.1          Option
Agreement.  Each grant of an
Option under the Plan shall be evidenced by an Option Agreement between the
Optionee and the Company.  Such Option
shall be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan.  The Option Agreement shall specify whether
the Option is an ISO or an NSO.  The provisions
of the various Option Agreements entered into under the Plan need not be
identical.  An Option Agreement may
provide that a new Option will be granted automatically to the Optionee when he
or she exercises a prior Option and pays the Exercise Price in the form
described in Section 5.7(b).


5.2          Number of
Shares.  Each Option Agreement
shall specify the number of Shares subject to the Option and shall provide for
the adjustment of such number in accordance with Article 10.  Options granted to any Optionee in a single
fiscal year of the Company shall not cover more than 750,000 Shares, except
that Options granted to a new Employee in the fiscal year of the Company in
which his or her Service as an Employee first commences shall not cover



 3
 






 



more than 1,500,000
Shares.  The limitations set forth in the
preceding sentence shall be subject to adjustment in accordance with
Article 10.


5.3          Exercise
Price.  Each Option Agreement
shall specify the Exercise Price; provided that the Exercise Price shall in no
event be less than 100% of the Fair Market Value of a Share on the Date of
Grant.  Other than in connection with an
event or transaction described in Article 10, Options may not be repriced,
replaced, regranted through cancellation or modified without shareholder
approval if the effect of such repricing, replacement, regrant or modification
would be to reduce the exercise price of such Options.


5.4          Exercisability
and Term.


(a)           General. 
Each Option Agreement shall specify the date or event when all or any
installment of the Option is to become exercisable.  The Option Agreement shall also specify the
term of the Option; provided that the term of an ISO shall in no event exceed
10 years from the Date of Grant.  Options
may be awarded in combination with SARs, and such an Award may provide that the
Options will not be exercisable unless the related SARs are forfeited.


(b)           Cessation of Eligibility to Vest.  Unless otherwise provided by the Option
Agreement, if an Optionee ceases to be an Awardee Eligible to Vest, other than
as a result of circumstances described in Subsection (c) or (d) below,
such Optionee’s Option shall terminate immediately as to the unvested Shares
and such unvested Shares shall revert to the Plan, and such Optionee’s Option
shall be exercisable as to the vested Shares for three months after the date
such individual ceases to be an Awardee Eligible to Vest or, if earlier, the
expiration of the term of such Option. 
If, for any reason, the Optionee does not exercise his or her vested
Option within the appropriate exercise period set forth above, the Option shall
automatically terminate, and the Shares covered by such Option shall revert to
the Plan.


(c)           Death, Disability or Retirement of Optionee.  Unless otherwise provided by the Option
Agreement, if an Optionee ceases to be an Awardee Eligible to Vest as a result
of the Optionee’s death, total and permanent disability or retirement due to
age, in accordance with the Company’s or a Subsidiary’s or Affiliate’s
retirement policy, then (i) the vested portion of such Optionee’s Option
shall be determined by adding 12 months to the length of his or her actual
Service, (ii) such Optionee’s Option shall terminate immediately as to the
unvested Shares and such unvested Shares shall revert to the Plan, and (iii) such
Optionee’s Option shall be exercisable as to the vested Shares for one year
after the date such individual ceases to be an Awardee Eligible to Vest or, if
earlier, the expiration of the term of such Option.  Where an individual ceases to be an Awardee
Eligible to Vest as a result of death, the Option may be exercised by the
beneficiary designated by the Optionee, the executor or administrator of the
Optionee’s estate or, if none, by the person(s) entitled to exercise the Option
under the Optionee’s will or the laws of descent or distribution.  If, for any reason, the Option is not so
exercised within the time specified herein, the Option shall automatically
terminate, and the Shares covered by such Option shall revert to the Plan.


(d)           Voluntary Severance Incentive Program.  If an Optionee ceases to be an Awardee
Eligible to Vest as a result of participation in a voluntary severance
incentive



 4
 






 



program or
workforce management plan approved by the Board or a Committee, unvested
Options shall vest and Options shall remain exercisable, to the extent provided
by the Board or a Committee in such voluntary severance incentive program or
workforce management plan.  Absent a
specific provision for acceleration or extended exercise period, the provisions
of Subsection (b) above shall apply.


5.5          Effect of
Change in Control.  The
Committee may determine, at the time of granting an Option or thereafter, that
such Option shall become exercisable as to all or part of the Shares subject to
such Option if a Change in Control occurs with respect to the Company or if the
Optionee’s Service is terminated without Cause after a Change in Control.  In addition, acceleration of exercisability
may be required under Section 10.3.


5.6          Buyout
Provisions.  The Committee may
at any time (a) offer to buy out for a payment in cash or cash equivalents
an Option previously granted or (b) authorize an Optionee to elect to cash
out an Option previously granted, in either case at such time and based upon
such terms and conditions as the Committee shall establish.


5.7          Payment for
Option Shares.


(a)           General Rule.  The entire Exercise Price of Shares issued
upon exercise of Options shall be payable in cash or cash equivalents at the
time when such Shares are purchased, except that the Committee at its sole
discretion may accept payment of the Exercise Price in any other form(s)
described in this Section 5.7. 
However, if the Optionee is an Outside Director or executive officer of
the Company, he or she may pay the Exercise Price in a form other than cash or
cash equivalents only to the extent permitted by section 13(k) of the
Exchange Act.


(b)           Surrender of Shares.  With the Committee’s consent, all or any part
of the Exercise Price may be paid by surrendering, or attesting to the
ownership of, Shares that are already owned by the Optionee.  Such Shares shall be valued at their Fair
Market Value on the date when the new Shares are purchased under the Plan.


(c)           Exercise/Sale.  With the Committee’s consent, all or any part
of the Exercise Price and any withholding taxes may be paid by delivering (in a
manner prescribed by the Company) an irrevocable direction to a securities
broker approved by the Company to sell all or part of the Shares being
purchased under the Plan and to deliver all or part of the sales proceeds to
the Company.


(d)           Other Forms of Payment.  With the Committee’s consent, all or any part
of the Exercise Price and any withholding taxes may be paid in any other form
that is consistent with applicable laws, regulations and rules.


ARTICLE 6.            SHARE APPRECIATION RIGHTS.


6.1          SAR
Agreement.  Each grant of a
SAR under the Plan shall be evidenced by a SAR Agreement between the Optionee
and the Company.  Such SAR shall be
subject to all applicable terms of the Plan and may be subject to any other
terms that are not inconsistent with



 5
 






 



the Plan.  The provisions of the various SAR Agreements
entered into under the Plan need not be identical.


6.2          Number of
Shares.  Each SAR Agreement
shall specify the number of Shares to which the SAR pertains and shall provide
for the adjustment of such number in accordance with Article 10.  SARs granted to any Optionee in a single
fiscal year shall in no event pertain to more than 750,000 Shares, except that
SARs granted to a new Employee in the fiscal year of the Company in which his
or her Service as an Employee first commences shall not pertain to more than
1,500,000 Shares.  The limitations set
forth in the preceding sentence shall be subject to adjustment in accordance
with Article 10.


6.3          Exercise
Price.  Each SAR Agreement
shall specify the Exercise Price; provided that the Exercise Price shall in no
event be less than 100% of the Fair Market Value of a Share on the Date of
Grant.  Other than in connection with an
event or transaction described in Article 10, SARs may not be repriced,
replaced, regranted through cancellation or modified without shareholder
approval if the effect of such repricing, replacement, regrant or modification
would be to reduce the exercise price of such SARs.


6.4          Exercisability
and Term.


(a)           General. 
Each SAR Agreement shall specify the date when all or any installment of
the SAR is to become exercisable.  The
SAR Agreement shall also specify the term of the SAR.  SARs may be awarded in combination with
Options, and such an Award may provide that the SARs will not be exercisable
unless the related Options are forfeited. 
An SAR may be included in an ISO only at the time of grant but may be
included in an NSO at the time of grant or thereafter.  An SAR granted under the Plan may provide that
it will be exercisable only in the event of a Change in Control.


(b)           Cessation of Eligibility to Vest.  Unless otherwise provided by the SAR
Agreement, if an Optionee ceases to be an Awardee Eligible to Vest, other than
as a result of circumstances described in Subsection (c) or (d) below,
such Optionee’s SAR shall terminate immediately as to the unvested Shares and
such unvested Shares shall revert to the Plan, and the SAR shall be exercisable
as to the vested Shares for three months after the date such individual ceases
to be an Awardee Eligible to Vest or, if earlier, the expiration of the term of
such SAR.  If, for any reason, the
Optionee does not exercise his or her vested SARs within the appropriate
exercise period set forth above, the SAR shall automatically terminate, and the
Shares covered by such SAR shall revert to the Plan.


(c)           Death, Disability or Retirement of Optionee.  Unless otherwise provided by the SAR
Agreement, if an Optionee ceases to be an Awardee Eligible to Vest as a result
of the Optionee’s total and permanent disability or retirement due to age, in
accordance with the Company’s or a Subsidiary’s or Affiliate’s retirement
policy, then (i) the vested portion of such Optionee’s SAR shall be
determined by adding 12 months to the length of his or her actual Service,
(ii) such Optionee’s SAR shall terminate immediately as to the unvested
Shares and such unvested Shares shall revert to the Plan, and (iii) such
Optionee’s SAR shall be exercisable as to the vested Shares for one year after
the date such individual ceases to be an Awardee Eligible to Vest or, if
earlier, the expiration of the term of such SAR.  Where an



 6
 






 



individual
ceases to be an Awardee Eligible to Vest as a result of death, the SAR may be
exercised by the beneficiary designated by the Optionee, the executor or
administrator of the Optionee’s estate or, if none, by the person(s) entitled
to exercise the SAR under the Optionee’s will or the laws of descent or
distribution.  If, for any reason, the
SAR is not so exercised within the time specified herein, the SAR shall
automatically terminate, and the Shares covered by such SAR shall revert to the
Plan.


(d)           Voluntary Severance Incentive Program.  If an Optionee ceases to be an Awardee
Eligible to Vest as a result of participation in a voluntary severance
incentive program or workforce management plan approved by the Board or a
Committee, unvested SARs shall vest and SARs shall remain exercisable, to the
extent provided by the Board or a Committee in such voluntary severance incentive
program or workforce management plan. 
Absent a specific provision for acceleration or extended exercise
period, the provisions of Subsection (b) above shall apply.


6.5          Effect of
Change in Control.  The
Committee may determine, at the time of granting a SAR or thereafter, that such
SAR shall become exercisable as to all or part of the Shares subject to such
SAR if a Change in Control occurs with respect to the Company or if the
Optionee’s Service is terminated without Cause after a Change in Control.  In addition, acceleration of exercisability
may be required under Section 10.3.


6.6          Exercise of
SARs.  Upon exercise of a SAR,
the Optionee (or any person having the right to exercise the SAR after his or
her death) shall receive from the Company consideration in the form of
(a) Shares, (b) cash or (c) a combination of Shares and cash, as
the Committee shall determine.  Each SAR
Agreement shall specify the amount and/or Fair Market Value of the consideration
that the Optionee will receive upon exercising the SAR; provided that the
aggregate consideration shall not exceed the amount by which the Fair Market
Value (on the date of exercise) of the Shares subject to the SAR exceeds the
Exercise Price of the SAR.  If, on the
date when a SAR expires, the Exercise Price of the SAR is less than the Fair
Market Value of the Shares subject to the SAR on such date but any portion of
the SAR has not been exercised, then the SAR shall automatically be deemed to
be exercised as of such date with respect to such portion.  An SAR Agreement may also provide for an
automatic exercise of the SAR on an earlier date.


ARTICLE 7.            RESTRICTED SHARES.


7.1          Restricted
Share Agreement.  Each grant
of Restricted Shares under the Plan shall be evidenced by a Restricted Share
Agreement between the recipient and the Company.  Such Restricted Shares shall be subject to
all applicable terms of the Plan and may be subject to any other terms that are
not inconsistent with the Plan.  The
provisions of the various Restricted Share Agreements entered into under the
Plan need not be identical.


7.2          Number of
Shares.  Each Restricted Share
Agreement shall specify the number of Shares to which the Agreement
pertains.  Such number shall be subject
to the limitation of Section 7.4(a), if applicable.



 7
 






 



7.3          Payment for
Awards.  Restricted Shares may
be sold or awarded under the Plan for such consideration as the Committee may
determine, including (without limitation) cash, cash equivalents, property,
past services and future services. 
Within the limitations of the Plan, the Committee may accept the
cancellation of outstanding options in return for the grant of Restricted
Shares.


7.4          Vesting Conditions.


(a)           General. 
Each Award of Restricted Shares may or may not be subject to
vesting.  Vesting shall occur, in full or
in installments, upon satisfaction of the conditions specified in the
Restricted Share Agreement.  The
Committee may include among such conditions continued performance of Service
and/or the requirement that the performance of the Company (or a Subsidiary,
Affiliate or business unit of the Company) for a specified period of not less
than one fiscal year equal or exceed a target determined by the Committee.  Such target shall be based on one or more of
the criteria set forth in Appendix A, and shall be determined not later
than the 90 days following commencement of the specified performance
period.  As to Awards with respect to
which the Company desires to secure an exemption from section 162(m) of
the Code, no Participant shall receive more than 400,000 Restricted Shares
subject to performance-based vesting conditions in a single fiscal year, except
that a new Employee may receive up to 800,000 Restricted Shares subject to
performance-based vesting conditions in the fiscal year of the Company in which
his or her Service as an Employee first commences.  The limitations set forth in the preceding
sentence shall be subject to adjustment in accordance with Article 10.


(b)           Cessation of Eligibility to Vest.  Unless otherwise provided by the Restricted
Share Agreement, if a Participant ceases to be an Awardee Eligible to Vest,
other than as a result of circumstances described in Subsection (c)
or (d) below, then:


(i)            To the extent that the
Participant did not purchase the Restricted Shares, all unvested Shares subject
to a Restricted Share Agreement shall immediately be forfeited and shall revert
to the Plan; and


(ii)           To the extent that the
Participant purchased the Restricted Shares, the Company shall have a right to
repurchase the unvested Restricted Shares at the original price paid by the
Participant upon the Participant’s ceasing to be an Awardee Eligible to Vest.


(c)           Death, Disability or Retirement of Participant.  Unless otherwise provided by the Restricted
Share Agreement, if a Participant ceases to be an Awardee Eligible to Vest as a
result of the Participant’s death, total and permanent disability or retirement
due to age, in accordance with the Company’s or a Subsidiary’s or Affiliate’s
retirement policy, the provisions of Subsection (b) above will apply except
that the vested portion of such Participant’s Restricted Shares shall be
determined by adding 12 months to the length of his or her actual Service.


(d)           Voluntary Severance Incentive Program.  If a Participant ceases to be an Awardee
Eligible to Vest as a result of participation in a voluntary severance
incentive



 8
 






 



program or
workforce management plan approved by the Board or a Committee, unvested
Restricted Shares shall vest to the extent provided by the Board or a Committee
in such voluntary severance incentive program or workforce management
plan.  Absent a specific provision for
acceleration, the provisions of Subsection (b) above shall apply.


7.5          Effect of
Change in Control.  The
Committee may determine, at the time of granting Restricted Shares or
thereafter, that all or part of such Restricted Shares shall become vested if a
Change in Control occurs with respect to the Company or if the Participant’s
Service is terminated without Cause after a Change in Control.


7.6          Voting and
Dividend Rights.  The holders
of Restricted Shares awarded under the Plan shall have the same voting,
dividend and other rights as the Company’s other shareholders.  A Restricted Share Agreement, however, may
require that the holders of Restricted Shares invest any cash dividends
received in additional Restricted Shares. 
Such additional Restricted Shares shall be subject to the same
conditions and restrictions as the Award with respect to which the dividends
were paid.


ARTICLE 8.            SHARE UNITS.


8.1          Share Unit
Agreement.  Each grant of
Share Units under the Plan shall be evidenced by a Share Unit Agreement between
the recipient and the Company.  Such
Share Units shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan.  The provisions of the various Share Unit
Agreements entered into under the Plan need not be identical.


8.2          Number of
Shares.  Each Share Unit
Agreement shall specify the number of Shares to which the Share Unit pertains
and shall provide for the adjustment of such number in accordance with
Article 10.  Such number shall be
subject to the limitation of Section 8.4(a), if applicable.


8.3          Payment for
Awards.  To the extent that an
Award is granted in the form of Share Units, no cash consideration shall be
required of the Award recipients.


8.4          Vesting
Conditions.


(a)           General. 
Each Award of Share Units may or may not be subject to vesting.  Vesting shall occur, in full or in
installments, upon satisfaction of the conditions specified in the Share Unit
Award.  The Committee may include among
such conditions continued performance of Service and/or the requirement that
the performance of the Company (or a Subsidiary, Affiliate or business unit of
the Company) for a specified period of not less than one fiscal year equal or
exceed performance targets determined by the Committee.  Such targets shall be based on one or more of
the criteria set forth in Appendix A, and shall be determined not later
than the 90 days following commencement of the specified performance
period.  As to Awards with respect to
which the Company desires to secure an exemption from section 162(m) of
the Code, no Participant shall receive more than 400,000 Share Units subject to
performance-based vesting conditions in a single fiscal year, except that a new
Employee may receive up to 800,000 Share Units subject to performance-based
vesting conditions in the fiscal year of the



 9
 






 



Company in
which his or her Service as an Employee first commences.  The limitations set forth in the preceding
sentence shall be subject to adjustment in accordance with Article 10.


(b)           Cessation of Eligibility to Vest.  Unless otherwise provided by the Share Unit
Award, if a Participant ceases to be an Awardee Eligible to Vest, other than as
a result of circumstances described in Subsection (c) or (d) below, then
all unvested Share Units subject to a Share Unit Agreement shall immediately be
forfeited and shall revert to the Plan.


(c)           Death, Disability or Retirement of Participant.  Unless otherwise provided by the Share Unit
Award, if a Participant ceases to be an Awardee Eligible to Vest as a result of
the Participant’s death, total and permanent disability or retirement due to
age, in accordance with the Company’s or a Subsidiary’s or Affiliate’s
retirement policy, the provisions of Subsection (b) above will apply except
that the vested portion of such Participant’s Share Unit Award shall be
determined by adding 12 months to the length of his or her actual Service.


(d)           Voluntary Severance Incentive Program.  If a Participant ceases to be an Awardee
Eligible to Vest as a result of participation in a voluntary severance
incentive program or workforce management plan approved by the Board or a
Committee, unvested Share Units shall vest to the extent provided by the Board
or a Committee in such voluntary severance incentive program or workforce
management plan.  Absent a specific
provision for acceleration, the provisions of Subsection (b) above shall
apply.


8.5          Effect of Change in Control.  The Committee may determine, at the time of
granting Share Units or thereafter, that all or part of such Share Units shall
become vested if a Change in Control occurs with respect to the Company or if
the Participant’s Service is terminated without Cause after a Change in Control.  In addition, acceleration of vesting may be
required under Section 10.3.


8.6          Voting and
Dividend Rights.  The holders
of Share Units shall have no voting rights. 
Prior to settlement or forfeiture, any Share Unit awarded under the Plan
may, at the Committee’s discretion, carry with it a right to dividend
equivalents.  Such right entitles the
holder to be credited with an amount equal to all cash dividends paid on one
Share while the Share Unit is outstanding. 
Dividend equivalents may be converted into additional Share Units.  Settlement of dividend equivalents may be
made in the form of cash, in the form of Shares, or in a combination of
both.  Prior to distribution, any dividend
equivalents that are not paid shall be subject to the same conditions and
restrictions as the Share Units to which they attach.


8.7          Form and
Time of Settlement of Share Units. 
Settlement of vested Share Units may be made in the form of
(a) cash, (b) Shares or (c) any combination of both, as
determined by the Committee.  The actual
number of Share Units eligible for settlement may be larger or smaller than the
number included in the original Award, based on predetermined performance
factors.  Methods of converting Share
Units into cash may include (without limitation) a method based on the average
Fair Market Value of Shares over a series of trading days.  Vested Share Units may be settled in a lump
sum or in installments.  The distribution
may occur or commence when all vesting conditions applicable to the Share Units
have been satisfied or have lapsed, or it may be deferred to any later
date.  The amount of a deferred
distribution



 10
 






 



may be
increased by an interest factor or by dividend equivalents.  Until an Award of Share Units is settled, the
number of such Share Units shall be subject to adjustment pursuant to
Article 10.


8.8          Creditors’
Rights.  A holder of Share
Units shall have no rights other than those of a general creditor of the
Company.  Share Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Share Unit Agreement.


ARTICLE 9.            AUTOMATIC OPTION GRANTS TO OUTSIDE
DIRECTORS.


9.1          Initial
Grants.  In connection with
joining the Board, each Outside Director shall receive:


(a)           
A one-time grant of an NSO covering Shares with an Accounting Value of
$110,000.  Such NSO shall be granted on
the date when such Outside Director first joins the Board, and shall vest and
become exercisable on the first anniversary of the Date of Grant; and


(b)           A
one-time grant of Share Units with an Accounting Value of $110,000.  Such Share Units shall be granted on the date
when such Outside Director first joins the Board and shall vest on the first
anniversary of the Date of Grant. 
Settlement of vested Share Units shall be made in a lump sum on the
third anniversary of the Date of Grant. 
Such lump sum shall consist of a number of Shares equal to the number of
vested Share Units.


(c)           With
respect to an Outside Director who first becomes a member of the Board prior to
completion of the Company’s initial public offering, the initial grants
referred to in subparagraphs (a) and (b) above shall be granted on the date of
the Company’s initial public offering and the prices shall be calculated by
reference to the initial public offering price reflected in the final
prospectus related to the offering.


An Outside Director who
was previously an Employee shall not receive grants under this
Section 9.1.


9.2          Annual
Grants.  Upon the conclusion
of each regular annual meeting of the Company’s shareholders held in the year
2007 or thereafter, each Outside Director who will continue serving as a member
of the Board thereafter shall receive:


(a)           A
grant of an NSO covering Shares with an Accounting Value of $55,000.  Such NSO shall vest and become exercisable on
the first anniversary of the Date of Grant; and


(b)           A
grant of Share Units with an Accounting Value of $55,000.  Such Share Units shall vest on the first
anniversary of the Date of Grant. 
Settlement of vested Share Units shall be made in a lump sum on the
third anniversary of the Date of Grant, unless deferred to a later date.  Such lump sum shall consist of a number of
Shares equal to the number of vested Share Units.



 11
 






 



Notwithstanding the
foregoing, no grants shall be made pursuant to this Section 9.2 in the calendar
year in which the same Outside Director received grants described in
Section 9.1.  An Outside Director
who previously was an Employee shall be eligible to receive grants under this
Section 9.2.


9.3          Cessation
of Eligibility to Vest.  Unless
otherwise provided by the Award Agreement, if an Outside Director’s Service
terminates prior to the vesting date specified in such agreement other than as
a result of circumstances described in Section 9.4 below, then such Director’s
unvested Award shall immediately be forfeited and such unvested Shares shall
revert to the Plan.


9.4          Accelerated
Exercisability.  All Awards
granted to an Outside Director under this Article 9 shall also become
exercisable in full, and Restricted Shares and Share Units shall be
distributed, in the event that:


(a)           Such
Outside Director’s Service terminates because of death, total and permanent
disability, or retirement at or after age 65;


(b)           The
Company is subject to a Change in Control before such Outside Director’s Service
terminates; or


(c)           As
otherwise required by Section 10.3.


9.5          Exercise
Price.  The Exercise Price
under all NSOs granted to an Outside Director under this Article 9 shall
be equal to 100% of the Fair Market Value of a Share on the Date of Grant,
payable in one of the forms described in Section 5.7(a), (b) or (c).


9.6          Term.  The Option Agreement shall specify the term
of the option, which shall not exceed 10 years form the Date of Grant.  Each NSO granted to an Outside Director under
this Article 9 shall terminate on the earlier of (a) the expiration
of the term of such option or (b) the date 12 months after the termination
of such Outside Director’s Service for any reason.


9.7          Affiliates
of Outside Directors.  The
Committee may provide that the NSOs that otherwise would be granted to an
Outside Director under this Article 9 shall instead be granted to an
affiliate of such Outside Director.  Such
affiliate shall then be deemed to be an Outside Director for purposes of the
Plan, provided that the Service-related vesting and termination provisions
pertaining to the NSOs shall be applied with regard to the Service of the
Outside Director.


ARTICLE 10.          PROTECTION AGAINST DILUTION.


10.1        Adjustments.  In the event of a subdivision of the
outstanding Shares, a declaration of a dividend payable in Shares or a
combination or consolidation of the outstanding Shares (by reclassification or
otherwise) into a lesser number of Shares, corresponding adjustments shall
automatically be made in each of the following:


(a)           The
number of Options, SARs, Restricted Shares and Share Units available for future
Awards under Article 3;



 12
 






 



(b)           The
limitations set forth in Sections 5.2, 7.2, 8.4(a) and 9.4(a);


(c)           The
number of Shares covered by each outstanding Option and SAR;


(d)           The
Exercise Price under each outstanding Option and SAR; or


(e)           The
number of Share Units included in any prior Award that has not yet been
settled.


In
the event of a declaration of an extraordinary dividend payable in a form other
than Shares in an amount that has a material effect on the price of Shares, a
recapitalization, a spin-off or a similar occurrence, the Committee shall make
such adjustments as it, in its sole discretion, deems appropriate in one or
more of the foregoing.  Except as
provided in this Article 10, a Participant shall have no rights by reason
of any issuance by the Company of shares of any class or securities convertible
into shares of any class, any subdivision or consolidation of shares of any
class, the payment of any share dividend or any other increase or decrease in
the number of shares of any class.


10.2        Dissolution
or Liquidation.  To the extent
not previously exercised or settled, Options, SARs and Share Units shall
terminate immediately prior to the dissolution or liquidation of the Company.


10.3        Reorganizations.  In the event that the Company is a party to a
merger or consolidation, all outstanding Awards shall be subject to the
agreement of merger or consolidation. 
Such agreement shall provide for one or more of the following:


(a)           The
continuation of such outstanding Awards by the Company (if the Company is the
surviving corporation).


(b)           The
assumption of such outstanding Awards by the surviving corporation or its
parent, provided that the assumption of Options or SARs shall comply with
sections 409A and 424(a) of the Code (whether or not the Options are
ISOs).


(c)           The
substitution by the surviving corporation or its parent of new awards for such
outstanding Awards, provided that the substitution of Options or SARs shall
comply with sections 409A and 424(a) of the Code (whether or not the
Options are ISOs).


(d)           Full
exercisability of outstanding Options and SARs and full vesting of the Shares
subject to such Options and SARs, followed by the cancellation of such Options
and SARs.  The full exercisability of
such Options and SARs and full vesting of such Shares may be contingent on the
closing of such merger or consolidation. 
The Optionees shall be able to exercise such Options and SARs during a
period of not less than five full business days preceding the closing date of
such merger or consolidation, unless (i) a shorter period is required to
permit a timely closing of such merger or consolidation and (ii) such
shorter period still offers the Optionees a reasonable opportunity to exercise
such Options and SARs.  Any exercise of
such Options and SARs during such period may be contingent on the closing of
such merger or consolidation.



 13
 






 



(e)           The
cancellation of outstanding Options and SARs and a payment to the Optionees
equal to the excess of (i) the Fair Market Value of the Shares subject to
such Options and SARs (whether or not such Options and SARs are then
exercisable or such Shares are then vested) as of the closing date of such
merger or consolidation over (ii) their Exercise Price.  Such payment shall be made in the form of
cash, cash equivalents, or securities of the surviving corporation or its
parent with a Fair Market Value equal to the required amount.  Such payment may be made in installments and
may be deferred until the date or dates when such Options and SARs would have
become exercisable or such Shares would have vested.  Such payment may be subject to vesting based
on the Optionee’s continuing Service, provided that the vesting schedule shall
not be less favorable to the Optionee than the schedule under which such
Options and SARs would have become exercisable or such Shares would have
vested.  If the Exercise Price of the
Shares subject to such Options and SARs exceeds the Fair Market Value of such
Shares, then such Options and SARs may be cancelled without making a payment to
the Optionees.  For purposes of this
Subsection (e), the Fair Market Value of any security shall be determined
without regard to any vesting conditions that may apply to such security.


(f)            The
cancellation of outstanding Share Units and a payment to the Participants equal
to the Fair Market Value of the Shares subject to such Share Units (whether or
not such Share Units are then vested) as of the closing date of such merger or
consolidation.  Such payment shall be
made in the form of cash, cash equivalents, or securities of the surviving
corporation or its parent with a Fair Market Value equal to the required
amount.  Such payment may be made in
installments and may be deferred until the date or dates when such Share Units
would have vested.  Such payment may be
subject to vesting based on the Participant’s continuing Service, provided that
the vesting schedule shall not be less favorable to the Participant than the
schedule under which such Share Units would have vested.  For purposes of this Subsection (f), the
Fair Market Value of any security shall be determined without regard to any
vesting conditions that may apply to such security.


ARTICLE 11.          PAYMENT OF DIRECTOR’S FEES IN SECURITIES.


11.1        Effective Date.  No provision of this Article 11 shall be
effective unless and until the Board has determined to implement such
provision.


11.2        Elections to
Receive NSOs, Restricted Shares or Share Units.  An Outside Director may elect to receive his
or her annual retainer payments and/or meeting fees from the Company in the
form of cash, NSOs, Restricted Shares or Share Units, or a combination thereof,
as determined by the Board.  Such NSOs,
Restricted Shares and Share Units shall be issued under the Plan.  An election under this Article 11 shall
be filed with the Company on the prescribed form.


11.3        Number and
Terms of NSOs, Restricted Shares or Share Units.  The number of NSOs, Restricted Shares or
Share Units to be granted to Outside Directors in lieu of annual retainers and
meeting fees that would otherwise be paid in cash shall be calculated in a
manner determined by the Board.  The
Board shall also determine the terms of such NSOs, Restricted Shares or Share
Units.



 14
 






 



ARTICLE 12.          LIMITATION ON RIGHTS.


12.1        Retention
Rights.  Neither the Plan nor
any Award granted under the Plan shall be deemed to give any individual a right
to remain an Employee, Outside Director or Consultant.  The Company and its Parents, Subsidiaries and
Affiliates reserve the right to terminate the Service of any Employee, Outside
Director or Consultant at any time, with or without cause, subject to
applicable laws, the Company’s Articles of Association and a written employment
agreement (if any).


12.2        Shareholders’
Rights.  A Participant shall have
no dividend rights, voting rights or other rights as a shareholder with respect
to any Shares covered by his or her Award prior to the time when such Shares
are issued or, if applicable, the time when he or she becomes entitled to
receive such Shares by filing any required notice of exercise and paying any
required Exercise Price.  No adjustment
shall be made for cash dividends or other rights for which the record date is
prior to such time, except as expressly provided in the Plan.


12.3        Regulatory
Requirements.  Any other
provision of the Plan notwithstanding, the obligation of the Company to issue
Shares under the Plan shall be subject to all applicable laws, rules and
regulations and such approval by any regulatory body as may be required.  The Company reserves the right to restrict,
in whole or in part, the delivery of Shares pursuant to any Award prior to the
satisfaction of all legal requirements relating to the issuance of such Shares,
to their registration, qualification or listing or to an exemption from
registration, qualification or listing.


ARTICLE 13.          WITHHOLDING TAXES.


13.1        General.  To the extent required by applicable federal,
state, local or foreign law, a Participant or his or her successor shall make
arrangements satisfactory to the Company for the satisfaction of any
withholding tax obligations that arise in connection with the Plan.  The Company shall not be required to issue
any Shares or make any cash payment under the Plan until such obligations are
satisfied.


13.2        Share
Withholding.  To the extent
that applicable law subjects a Participant to tax withholding obligations, the
Committee may permit such Participant to satisfy all or part of such
obligations by having the Company withhold all or a portion of any Shares that
otherwise would be issued to him or her or by surrendering all or a portion of
any Shares that he or she previously acquired. 
Such Shares shall be valued at their Fair Market Value on the date when
they are withheld or surrendered.


ARTICLE 14.          LIMITATION ON PAYMENTS.


14.1        Scope of
Limitation.  This
Article 14 shall apply to an Award only if:


(a)           The
independent auditors selected for this purpose by the Committee (the “Auditors”)
determine that the after-tax value of such Award to the Participant, taking
into account the effect of all federal, state and local income taxes,
employment taxes and excise taxes applicable to the Participant (including the
excise tax under section 4999 of the



 15
 






 



Code), will be
greater after the application of this Article 14 than it was before the
application of this Article 14; or


(b)           The
Committee, at the time of making an Award under the Plan or at any time
thereafter, specifies in writing that such Award shall be subject to this
Article 14 (regardless of the after-tax value of such Award to the
Participant).


If
this Article 14 applies to an Award, it shall supersede any contrary
provision of the Plan or of any Award granted under the Plan.


14.2        Basic Rule.  In the event that the Auditors determine that
any payment or transfer by the Company under the Plan to or for the benefit of
a Participant (a “Payment”) would be nondeductible by the Company for federal
income tax purposes because of the provisions concerning “excess parachute
payments” in section 280G of the Code, then the aggregate present value of
all Payments shall be reduced (but not below zero) to the Reduced Amount.  For purposes of this Article 14, the “Reduced
Amount” shall be the amount, expressed as a present value, which maximizes the
aggregate present value of the Payments without causing any Payment to be
nondeductible by the Company because of section 280G of the Code.


14.3        Reduction of
Payments.  If the Auditors
determine that any Payment would be nondeductible by the Company because of
section 280G of the Code, then the Company shall promptly give the
Participant notice to that effect and a copy of the detailed calculation
thereof and of the Reduced Amount, and the Participant may then elect, in his
or her sole discretion, which and how much of the Payments shall be eliminated
or reduced (as long as after such election the aggregate present value of the
Payments equals the Reduced Amount) and shall advise the Company in writing of
his or her election within 10 days of receipt of notice.  If no such election is made by the Participant
within such 10-day period, then the Company may elect which and how much
of the Payments shall be eliminated or reduced (as long as after such election
the aggregate present value of the Payments equals the Reduced Amount) and
shall notify the Participant promptly of such election.  For purposes of this Article 14, present
value shall be determined in accordance with section 280G(d)(4) of the
Code.  All determinations made by the
Auditors under this Article 14 shall be binding upon the Company and the
Participant and shall be made within 60 days of the date when a Payment
becomes payable or transferable.  As
promptly as practicable following such determination and the elections
hereunder, the Company shall pay or transfer to or for the benefit of the Participant
such amounts as are then due to him or her under the Plan and shall promptly
pay or transfer to or for the benefit of the Participant in the future such
amounts as become due to him or her under the Plan.


14.4        Overpayments
and Underpayments.  As a
result of uncertainty in the application of section 280G of the Code at
the time of an initial determination by the Auditors hereunder, it is possible
that Payments will have been made by the Company which should not have been
made (an “Overpayment”) or that additional Payments which will not have been
made by the Company could have been made (an “Underpayment”), consistent in
each case with the calculation of the Reduced Amount hereunder.  In the event that the Auditors, based upon
the assertion of a deficiency by the Internal Revenue Service against the
Company or the Participant that the Auditors believe has a high probability of
success, determine that an Overpayment has been made, such Overpayment shall be
treated for all purposes as a loan to the Participant that he



 16
 






 



or she shall
repay to the Company, together with interest at the applicable federal rate
provided in section 7872(f)(2) of the Code; provided, however, that no
amount shall be payable by the Participant to the Company if and to the extent
that such payment would not reduce the amount that is subject to taxation under
section 4999 of the Code.  In the
event that the Auditors determine that an Underpayment has occurred, such
Underpayment shall promptly be paid or transferred by the Company to or for the
benefit of the Participant, together with interest at the applicable federal
rate provided in section 7872(f)(2) of the Code.


14.5        Related
Corporations.  For purposes of
this Article 14, the term “Company” shall include affiliated corporations
to the extent determined by the Auditors in accordance with
section 280G(d)(5) of the Code.


ARTICLE 15.          FUTURE OF THE PLAN.


15.1        Term of the
Plan.  The Plan, as set forth
herein, shall become effective on the date of the Company’s initial public
offering.  The Plan shall remain in
effect until the earlier of (a) the date when the Plan is terminated under
Section 15.2 or (b) the 10th anniversary
of the date when the Board adopted the Plan.


15.2        Amendment or
Termination.  The Board may,
at any time and for any reason, amend or terminate the Plan.  No Awards shall be granted under the Plan
after the termination thereof.  The
termination of the Plan, or any amendment thereof, shall not affect any Award
previously granted under the Plan.


15.3        Shareholder
Approval.  An amendment of the
Plan shall be subject to the approval of the Company’s shareholders only to the
extent required by applicable laws, regulations or rules.  However, section 162(m) of the Code may
require that the Company’s shareholders approve:


(a)           The
Plan not later than the first regular meeting of shareholders that occurs in
the fourth calendar year following the calendar year in which the Company’s
initial public offering occurred; and


(b)           The
performance criteria set forth in Appendix A not later than the first
meeting of shareholders that occurs in the fifth year following the year in
which the Company’s shareholders previously approved such criteria.


ARTICLE 16.          DEFINITIONS.


16.1         “Awardee
Eligible to Vest” means a Participant who is in active
service with the Company or a Subsidiary or Affiliate (or who is on an approved
leave of absence or taking vacation or otherwise approved flexible time off (“FTO”)
in accordance with the Company’s FTO policy) on the vesting date fixed in the
Award Agreement, subject to the exceptions provided in Articles 5, 7, 8
and 9.  With the exception of an
individual who is on an approved leave of absence or taking FTO, in no event
shall an individual be considered an Awardee Eligible to Vest if and at the
time the individual ceases or has ceased to perform job duties for which he or
she is compensated directly by the Company or a Subsidiary or Affiliate. The
foregoing shall be true in the event that the individual, prior to ceasing to
perform job duties



 17
 






 



for which he or
she is compensated directly by the Company or a Subsidiary or Affiliate,
received or provided notice of termination (irrespective of any notice period
or similar period prescribed under the laws of a jurisdiction outside the
United States) whether such notice of termination or transfer is lawful or
unlawful under applicable employment law or is in breach of an employment
contract.  Continued affiliation or
relationship with the Company or a Subsidiary or Affiliate pursuant to a
statutory or contractual notice period shall not constitute continuation of an
individual’s status as an Awardee Eligible to Vest.  In accordance with the definition above,
status as an Awardee Eligible to Vest will always cease upon termination of
employment with the Company or a Subsidiary or Affiliate except as provided in
Articles 5, 7, 8 and 9.


16.2         “Accounting Value” means, with respect to an
Award, a value calculated using the same methodology as was applied by the
Company for purposes of determining the accounting charge associated with
similar Awards for the fiscal period immediately preceding the date on which
the subject Award is granted.


16.3         “Affiliate” means any entity other than a
Subsidiary, if the Company and/or one or more Subsidiaries own not less than
50% of such entity.


16.4         “Award” means any award of an Option, a SAR,
a Restricted Share or a Share Unit under the Plan.


16.5         “Board” means the Company’s Board of
Directors, as constituted from time to time.


16.6         “Cause” means:


(a)           An
unauthorized use or disclosure by the Participant of the Company’s confidential
information or trade secrets, which use or disclosure causes material harm to
the Company;


(b)           A
material breach by the Participant of any agreement between the Participant and
the Company;


(c)           A
material failure by the Participant to comply with the Company’s written
policies or rules;


(d)           The
Participant’s conviction of, or plea of “guilty” or “no contest” to, a felony
under the laws of the United States or any State thereof or the equivalent
under the applicable laws outside of the United States;


(e)           The
Participant’s gross negligence or willful misconduct;


(f)            A
continuing failure by the Participant to perform assigned duties after
receiving written notification of such failure; or


(g)           A
failure by the Participant to cooperate in good faith with a governmental or
internal investigation of the Company or its directors, officers or employees,
if the Company has requested the Participant’s cooperation.



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16.7         “Change in Control” means:


(a)           The
consummation of a merger or consolidation of the Company with or into another
entity or any other corporate reorganization, if persons who were not
shareholders of the Company immediately prior to such merger, consolidation or
other reorganization own immediately after such merger, consolidation or other
reorganization 50% or more of the voting power of the outstanding securities of
each of (i) the continuing or surviving entity and (ii) any direct or
indirect parent corporation of such continuing or surviving entity;


(b)           The
sale, transfer or other disposition of all or substantially all of the Company’s
assets;


(c)           A
change in the composition of the Board, as a result of which fewer than 50% of
the incumbent directors are directors who either:


(i)            Had been directors of
the Company on the date 24 months prior to the date of such change in the
composition of the Board (the “Original Directors”); or


(ii)           Were appointed to the
Board, or nominated for election to the Board, with the affirmative votes of at
least a majority of the aggregate of (A) the Original Directors who were
in office at the time of their appointment or nomination and (B) the
directors whose appointment or nomination was previously approved in a manner
consistent with this Paragraph (ii); or


(d)           Any
transaction as a result of which any person is the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing at least 30% of the total voting power
represented by the Company’s then outstanding voting securities.  For purposes of this Subsection (d), the
term “person” shall have the same meaning as when used in sections 13(d)
and 14(d) of the Exchange Act but shall exclude (i) a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company or of a Parent or Subsidiary and (ii) a corporation owned directly
or indirectly by the shareholders of the Company in substantially the same
proportions as their ownership of Shares.


A transaction shall not constitute a Change in Control
if its sole purpose is to change the jurisdiction of the Company’s
incorporation or to create a holding company that will be owned in
substantially the same proportions by the persons who held the Company’s
securities immediately before such transaction.


16.8         “Code” means the U.S. Internal Revenue Code
of 1986, as amended.


16.9         “Committee” means a committee of the Board,
as described in Article 2.


16.10       “Company” means Verigy Ltd., a Singapore corporation.


16.11       “Consultant” means a consultant or adviser who provides bona
fide services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor.



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16.12       “Date of Grant” means the
latest of: (a) the date on which the Committee determines that the Option or
SAR shall be granted; (b) the date on which the Optionee’s Service commences;
or (c) the date on which all material terms of the Option or SAR, including
(without limitation) the Exercise Price, are ascertainable; provided, however,
that with respect to automatic awards to Outside Directors, “Date of Grant”
means the date of such automatic award as provided in the applicable provision
of this Plan.


16.13       “Employee” means a full time or part time employee of the
Company or any Subsidiary or Affiliate, including Officers and Directors, who
is treated as an employee in the personnel records of the Company or a
Subsidiary or Affiliate for the relevant period, but shall exclude individuals
who are classified by the Company or a Subsidiary or Affiliate as
(a) leased from or otherwise employed by a third party,
(b) independent contractors or (c) intermittent or temporary, even if
any such classification is changed retroactively as a result of an audit,
litigation or otherwise.  A Participant
shall not cease to be an Employee in the case of (i) any vacation or sick
time or otherwise approved FTO in accordance with the Company’s (or a
Subsidiary’s or Affiliate’s) FTO policy or (ii) transfers between
locations of the Company or between the Company and/or any Subsidiary or
Affiliate.  Neither service as a Director
nor payment of a director’s fee by the Company shall be sufficient to
constitute “employment” by the Company.


16.14       “Exchange Act” means the U.S. Securities Exchange Act of 1934,
as amended.


16.15       “Exercise Price,” in the case of an Option, means the amount
for which one Share may be purchased upon exercise of such Option, as specified
in the applicable Option Agreement.  “Exercise Price,” in the case of a SAR,
means an amount, as specified in the applicable SAR Agreement, which is subtracted
from the Fair Market Value of one Share in determining the amount payable upon
exercise of such SAR.


16.16       “Fair Market Value” means the market price of Shares,
determined by the Committee as follows:


(a)           If the Shares are
traded on Nasdaq or on a stock exchange, then the Fair Market Value shall be
equal to the last sale price of the Shares on such market or exchange as of the
date in question or, if the market or exchange was closed on the date in
question, then the Fair Market Value will be equal to the last sale price on
the last trading day immediately preceding the day in question.  If the Shares are traded on more than one
market or exchange, then the Fair Market Value shall be determined by reference
to the primary market or exchange where the Shares trade.


(b)           If foregoing provisions
are not applicable, then the Committee shall determine the Fair Market Value in
good faith on such basis as it deems appropriate.  Such determination shall be conclusive and
binding on all persons.


16.17       “ISO” means an incentive stock option described in
section 422(b) of the Code.



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16.18       “NSO” means a share option not described in sections 422
or 423 of the Code.


16.19       “Option” means an ISO or NSO granted under the Plan and
entitling the holder to purchase Shares.


16.20       “Option Agreement” means the agreement between the Company and
an Optionee that contains the terms, conditions and restrictions pertaining to
his or her Option.


16.21       “Optionee” means an individual or estate that holds an Option
or SAR.


16.22       “Outside Director” means a member of the Board who is not an
Employee.


16.23       “Parent” means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns shares possessing 50% or more of the
total combined voting power of all classes of shares in one of the other
corporations in such chain.  A
corporation that attains the status of a Parent on a date after the adoption of
the Plan shall be considered a Parent commencing as of such date.


16.24       “Participant” means an individual or estate that holds an
Award.


16.25       “Plan” means this Verigy Ltd. 2006 Equity Incentive Plan, as
amended from time to time.


16.26       “Replacement Awards” means Awards granted or Shares issued by the
Company in the conversion, assumption, substitution, or exchange of awards
previously granted under the Agilent Technologies, Inc. 1999 Stock Plan or the
Agilent Technologies, Inc. 1999 Non-employee Director Stock Plan.


16.27       “Restricted Share” means a Share awarded under the Plan.


16.28       “Restricted Share Agreement” means the agreement between the
Company and the recipient of a Restricted Share that contains the terms,
conditions and restrictions pertaining to such Restricted Share.


16.29       “SAR” means a share appreciation right granted under the Plan.


16.30       “SAR Agreement” means the agreement between the Company and an
Optionee that contains the terms, conditions and restrictions pertaining to his
or her SAR.


16.31       “Service” means service as an Employee, Outside Director or
Consultant.


16.32       “Shares” means the Ordinary Shares of the Company.


16.33       “Share Unit” means a bookkeeping entry representing the
equivalent of one Share, as awarded under the Plan.



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16.34       “Share Unit Agreement” means the agreement between the Company
and the recipient of a Share Unit that contains the terms, conditions and
restrictions pertaining to such Share Unit.


16.35       “Subsidiary” means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns shares
possessing 50% or more of the total combined voting power of all classes of
shares in one of the other corporations in such chain.  A corporation that attains the status of a
Subsidiary on a date after the adoption of the Plan shall be considered a
Subsidiary commencing as of such date.


16.36       “Substitute Awards” means:


(a)           Awards granted or
Shares issued by the Company in assumption of, or in substitution or exchange
for, awards previously granted by: (i) a company acquired by the Company; (ii)
a company acquired by any Subsidiary; or (iii) a company with which the Company
or any Subsidiary combines; and


(b)           Awards granted or
Shares issued by the Company in assumption of, or in substitution or exchange
for, awards previously granted by Agilent Technologies, Inc.


Adoption and Amendment History:


	
  Action

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Adopted by the
  Board of Directors:

  	
   

  	
  June 7, 2006

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Approved by the
  sole shareholder:

  	
   

  	
  June 7, 2006

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Amended by the Board of Directors to revise
  definition of “Fair Market Value” (Section 16.16)

  	
   

  	
  August 29, 2006

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Amended by the Board
  of Directors to add definition of Date of Grant (Section 16.12)

  	
   

  	
  December 13, 2006

  	
   

  




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ADDENDUM TO THE VERIGY LTD. 2006 EQUITY INCENTIVE PLAN


Pursuant
to Section 2.2 of the Verigy Ltd. 2006 Equity Incentive Plan the
following modifications to the Plan will apply in the countries as set forth
below:


CHINA


All stock options granted in China will only be
exercisable using the full cashless exercise method (i.e.,
cashless exercise for cash).  Only full
cashless exercise (proceeds remitted in cash) will be permitted.  Cash exercises are prohibited.


FRANCE


All
options and restricted stock units (“RSUs”) granted in France shall be subject
to the additional terms and conditions of the Verigy Ltd. 2006
Equity Incentive Plan Option Sub-Plan for French Employees and the Verigy Ltd. 2006
Equity Incentive Plan RSU Sub-Plan for French Employees, as
applicable.


ITALY


All stock options granted in Italy will only be
exercisable using the full cashless exercise method (i.e.,
cashless exercise for cash).  Only full
cashless exercise (proceeds remitted in cash) will be permitted.  Cash exercises are prohibited.



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Appendix A


Performance
Criteria for Restricted Shares and Share Units


The Committee may apply any one or more of
the following performance criteria, individually, alternatively or in any
combination, either to the Company as a whole or to a business unit, Subsidiary
or Affiliate, measured annually, quarterly or cumulatively over a period of
years, either on an absolute basis or relative to a pre-established target,
with respect to previous years’ results or a designated comparison group, in
each case as specified by the Committee: (i) cash flow (before or after
dividends), (ii) earnings per share (including earnings before interest,
taxes, depreciation and amortization), (iii) share price, (iv) return
on equity, (v) total shareholder return, (vi) return on capital
(including return on total capital or return on invested capital),
(vii) return on assets or net assets, (viii) market capitalization,
(ix) economic value added, (x) debt leverage (debt to capital),
(xi) revenue or net revenue, (xii) income or net income,
(xiii) operating income, (xiv) operating profit or net operating
profit, (xv) operating margin or profit margin, (xvi) return on
operating revenue, (xvii) cash from operations, (xviii) operating
ratio, (xix) operating revenue, (xx) customer satisfaction measures,
(xxi) net order dollars, (xxii) guaranteed efficiency measures; (xxiii)
service agreement renewal rates; (xxiv) service revenues as a percentage of
product revenues, either with respect to one or more particular transactions or
with respect to revenues as a whole; or (xxv) individual performance.  To the extent consistent with
section 162(m) of the Code, the Committee may appropriately adjust any
evaluation of performance under a performance criterion to exclude any of the
following events that occurs during a performance period: (i) asset
write-downs, (ii) litigation, claims, judgments or settlements,
(iii) the effect of changes in tax law, accounting principles or other
such laws or provisions affecting reported results, (iv) accruals for
reorganization and restructuring programs and (v) any extraordinary,
unusual or non-recurring items.



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