Document:

exv10w2

Exhibit 10.2

QLOGIC CORPORATION

2005 PERFORMANCE INCENTIVE PLAN

NON-EMPLOYEE DIRECTOR EQUITY AWARD PROGRAM

1. Establishment; Purpose

     This Non-Employee Director Equity Award Program (this “Program”) is adopted under, and any
shares of Common Stock issued with respect to awards granted under this Program after the date of
its adoption shall be charged against the applicable share limits of, the QLogic Corporation 2005
Performance Incentive Plan (the “Plan”). The purpose of this Program is to promote the success of
the Corporation and the interests of its stockholders by providing members of the Board who are not
officers or employees of the Corporation or one of its Subsidiaries (“Non-Employee Directors”) an
opportunity to acquire an ownership interest in the Corporation and more closely aligning the
interests of Non-Employee Directors and stockholders. This Program shall be effective as of the
date of its adoption by the Board, subject, however, to the approval by the Corporation’s
stockholders of certain amendments to the Plan at the Corporation’s 2008 annual meeting (the “2008
Annual Meeting”) (including, without limitation, the deletion of the automatic director grant
provisions of the Plan set forth in Appendix A thereof). Except as otherwise expressly provided
herein, the provisions of the Plan shall govern all awards made pursuant to this Program.
Capitalized terms are defined in the Plan if not defined herein.

2. Participation

     Equity award grants under this Program (each such award, a “Director Award”) shall be made
only to Non-Employee Directors who have not, within three (3) years immediately preceding the
applicable date of such grant, received any stock option, stock bonus, stock appreciation right or
other similar stock award from the Corporation or any of its Subsidiaries, except as provided by
this Program or pursuant to Appendix A of the Plan prior to the 2008 Annual Meeting (an “Eligible
Director”).

3. Equity Award Grants

     3.1 Initial Award Grant. If any person who is not then an officer or employee of the
Corporation shall first become a Non-Employee Director on or after the date of the 2008 Annual
Meeting, there shall be granted automatically to such person on such date a Director Award on the
terms set forth below (the “Initial Grant”); provided that no such Initial Grant shall be made to
any Non-Employee Director who does not then qualify as an Eligible Director.

     3.2 Subsequent Annual Award Grants. Subject to Section 3.3, there shall be granted
automatically at the close of business on the date of the first annual meeting of stockholders of
the Corporation each year at which the members of the Board are elected or reelected (each such
date, an “Annual Meeting Date”), a Director Award on
the terms set forth below to each Eligible
Director who is re-elected as a director of the Corporation at such meeting (each, an “Annual
Grant”).

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     3.3 Proration of Annual Grants. If a period of less than twelve (12) months has elapsed
between (i) the date that a Non-Employee Director first received a Director Award pursuant to
Section 3.1 above or, prior to the date of the 2008 Annual Meeting, pursuant to Section A.2(a) of
Appendix A of the Plan (the date of grant of any such award, an “Initial Award Date”) and (ii) the
Annual Meeting Date, then the number of shares of Common Stock subject to any Annual Grant granted to an Eligible Director pursuant to
Section 3.2 shall be prorated by multiplying (x) the number of such shares or units, as applicable,
subject to such Annual Grant (as determined under Section 4 below), by (y) a fraction, the
numerator of which shall be the number of days from and including the Initial Award Date through
and including the Annual Meeting Date, and the denominator of which shall be the number of days
since the last annual meeting of stockholders at which the members of the Board were elected or
reelected preceding the Annual Meeting Date through and including the Annual Meeting Date (but in
no event shall such fraction be greater than one (1)).

     3.4 Maximum Number of Shares. Notwithstanding any other provision herein or in the Plan,
Director Awards hereunder that would otherwise exceed any applicable share limit of Section 4.2 of
the Plan shall be prorated within such limitation.

4. Determination of Grant Levels

     4.1 Board or Administrator Approval. In each calendar year during the term of the Plan,
commencing in 2008, the Board or the Administrator (which, if appointed for purposes of this
Program, must be a committee of the Board) will determine, on or prior to the Annual Meeting Date
for such calendar year, the grant levels for the Director Awards to be made to Non-Employee
Directors under this Program for the period commencing on such Annual Meeting Date and ending on
the day before the next succeeding Annual Meeting Date (the “Director Grant Period”). The action
of the Board or the Administrator, as applicable, shall set forth its approval of such Annual
Grants and any Initial Grants that may be made during the Director Grant Period commencing on such
Annual Meeting Date and shall set forth each determination required to be made pursuant to Section
4.2.

     4.2 Types of Awards and Grant Levels. Each Initial Grant made pursuant to this Program shall
consist of a nonqualified stock option. Each Annual Grant made pursuant to this Program shall
consist of a nonqualified stock option and an award of restricted stock units. If a Non-Employee
Director who is serving as Chairman of the Board is entitled to an Annual Grant under Section 3.2,
the grant levels for such grant will be determined independently from the Annual Grant levels
determined for the other Non-Employee Directors as provided below in this Section 4.2. The number
of shares of Common Stock subject to each Initial Grant and Annual Grant shall be determined as
follows:

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	 	 	 	The value of equity awards granted to non-employee directors
of each of a peer group of companies for the Corporation selected by the Board or the
Administrator for the applicable year (the “Peer Group”) will be determined by the
Board or Administrator (with options and similar awards granted by such companies
being valued as of the date of grant of the respective award using a Black –
Scholes or similar valuation model and with restricted stock units and similar
awards granted by such companies being valued as of the date of grant of the
respective award based on the closing market price on that date of grant of the
shares subject to the award), with separate determinations being made each year
for the value of equity awards granted to non-employee directors
generally, the value of equity awards granted to non-employee directors serving as
Chairman of the Board (or equivalent title), and the value of equity awards granted
to newly elected or appointed non-employee directors. The Board or the
Administrator will determine each year (i) a target amount (expressed in dollars)
for the Corporation’s Non-Employee Directors not serving as Chairman of the Board
(or equivalent title) at the 75th percentile of non-employee directors
for the Peer Group; (ii) if a Non-Employee Director is then serving as Chairman of
the Board (or equivalent title), a target amount (expressed in dollars) for the
Corporation’s Chairman of the Board at the 75th percentile of
non-employee directors serving as Chairman of the Board (or equivalent title) for
the Peer Group; and (iii) a target amount (expressed in dollars) for any newly
elected or appointed Non-Employee Director at the 75th percentile of
newly elected or appointed non-employee directors for the Peer Group (each, a
“Target Amount”). The Target Amount determined for new Non-Employee Directors
under clause (iii) above shall apply to any Non-Employee Director newly elected or
appointed to the Board during the applicable Director Grant Period identified in
Section 4.1. The Board or the Administrator, as applicable, will have discretion
to make appropriate adjustments in the data for the Peer Group and/or the Target
Amounts as necessary to carry out the intent of these provisions (which may
include, without limitation, adjustments to mitigate the effects of extraordinary
one-time grants made by Peer Group members, extraordinary changes in the time
commitments of directors, differences in the timing or frequency of grants, unusual
grant terms or types of awards not contemplated, or similar circumstances).

	 	•	 	In the case of an Initial Grant, 100% of the Target Amount for any
newly elected or appointed Non – Employee Director will be delivered in the form
of a nonqualified stock option. In the case of an Annual Grant, the Target Amount
so determined will be allocated so that 35% of the applicable Target Amount will
be delivered in the form of an award of restricted stock units and 65% of the
applicable Target Amount will be delivered in the form of a nonqualified stock
option. The number of shares of Common Stock that will be subject to any such
restricted stock unit award will equal (i) the dollar value of the portion of the
applicable

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	 	 	 	Target Amount to be granted in the form of such restricted stock unit
award, divided by (ii) the fair market value of a share of Common Stock on the
applicable Annual Meeting Date. The number of shares of Common Stock that will be
subject to any such nonqualified stock option will equal (x) the dollar value of
the portion of the applicable Target Amount to be granted in the form of such
nonqualified stock option, divided by (y) the per-share fair value of the option
on the applicable Annual Meeting Date (based on the Black – Scholes or similar
valuation method and assumptions then generally used by the Corporation in valuing
its options for financial statement purposes).

5. Terms of Options

     The purchase price per share of the Common Stock covered by each stock option granted pursuant
to this Program shall be 100% of the fair market value (as that term is defined in Section 5.6 of
the Plan) of the Common Stock on the date of grant of the option. The exercise price of any stock
option granted under this Program shall be paid in full at the time of each purchase in any of the
following methods (or combination thereof): (i) cash, check payable to the order of the
Corporation, or electronic funds transfer, (ii) subject to compliance with all applicable laws, rules and regulations,
and subject to such procedures as the Administrator may adopt, the delivery of previously owned
shares of Common Stock or pursuant to a “cashless exercise” with a third party who provides
financing for the purposes of (or who otherwise facilitates) the purchase or exercise of awards.
Shares of Common Stock used to satisfy the exercise price of an option shall be valued at their
fair market value on the date of exercise. Each stock option granted under this Program and all
rights or obligations thereunder shall commence on the date of grant of the award and expire no
later than ten years thereafter, subject to earlier termination as provided in Section 8 below.

6. Payment of Restricted Stock Units

     Restricted stock units granted pursuant to this Program shall be payable in an equivalent
number of shares of Common Stock as soon as practicable after (and in all events within two and
one-half months after) such units vest in accordance with Section 7.

7. Vesting of Equity Awards

     Subject to earlier termination as provided in Section 8 below, each nonqualified stock option
and each award of restricted stock units granted under this Program shall become vested as to
one-third (1/3) of the total number of shares of Common Stock subject to the option or restricted
stock unit award, as applicable, on each of the following dates:

	 	•	 	the earlier of (i) the day prior to the annual meeting of the Corporation’s
stockholders that occurs in the calendar year following the calendar
year in which the award is granted or (ii) the first
anniversary of the date of grant;

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	 	•	 	the earlier of (i) the day prior to the annual meeting of the Corporation’s
stockholders that occurs in the second calendar year following the calendar year
in which the award is granted or (ii) the second anniversary of the date of grant;
and
	 
	 	•	 	the earlier of (i) the day prior to the annual meeting of the Corporation’s
stockholders that occurs in the third calendar year following the calendar year in
which the award is granted or (ii) the third anniversary of the date of grant.”

8. Termination of Directorship

     If an Eligible Director’s services as a member of the Board terminate for any reason, (a) any
portion of a stock option granted pursuant to this Program which is not then vested and exercisable
shall immediately terminate, and any portion of such option which is then vested and exercisable
may be exercised within a period of one (1) year after the date of such termination, or until the
expiration of the option or termination of the option pursuant to Section 7.4 of the Plan,
whichever first occurs, and (b) any portion of a restricted stock unit award granted pursuant to
this Program which is not then vested shall terminate as of the date of such Eligible Director’s
termination of service.

9. Plan Provisions; Award Agreement; Amendments; Administration

     Each equity award granted under this Program shall otherwise be subject to the terms of the
Plan (including, without limitation, the provisions of Section 7.1 of the Plan respecting
adjustments to awards that are outstanding as of the date of an event contemplated therein and
Section 7.4 of the Plan respecting early termination of outstanding awards). Each award granted
hereunder shall be evidenced by a written award agreement in the form approved by the Board or the
Compensation Committee of the Board for use in evidencing equity award grants made pursuant to this
Program. The Board may from time to time amend this Program without stockholder approval; provided
that no such amendment shall materially and adversely affect the rights of a Non-Employee Director as to an option granted under this
Program before the adoption of such amendment. This Program does not limit the Board’s authority
to make other, discretionary award grants to Non-Employee Directors pursuant to the Plan. The Plan
Administrator’s power and authority to construe and interpret the Plan and awards thereunder
pursuant to Section 3.2 of the Plan shall extend to this Program and awards granted hereunder. As
provided in Section 3.3 of the Plan, any action taken by, or inaction of, the Administrator
relating or pursuant to this Program and within its authority or under applicable law shall be
within the absolute discretion of that entity or body and shall be conclusive and binding upon all
persons.

5exv10w3

Exhibit 10.3

QLOGIC CORPORATION

1998 EMPLOYEE STOCK PURCHASE PLAN

(Amended and Restated Effective May 22, 2008)

     This 1998 EMPLOYEE STOCK PURCHASE PLAN (the “Plan”) was established by QLOGIC CORPORATION, a
Delaware corporation, on the 9th day of April, 1998 and became effective on the
“Effective Date.” The Plan is hereby amended and restated in its entirety as set forth herein,
effective as of May 22, 2008.

ARTICLE 1

PURPOSE OF THE PLAN

     1.1 Purpose. The Company has determined that it is in its best interest to
provide incentives to attract and retain employees and to increase employee morale by providing a
program through which employees of the Company, and of such of the Company’s Subsidiaries as the
Company’s Board of Directors may from time to time designate (each a “Designated Subsidiary,” and
collectively, “Designated Subsidiaries”) may acquire a proprietary interest in the Company through
the purchase of shares of the common stock of the Company (“Company Stock”). The Plan is hereby
established by the Company to permit employees to subscribe for and purchase directly from the
Company shares of the Company Stock at a discount from the market price, and to pay the purchase
price in installments by payroll deductions. The Plan is intended to qualify as an “employee stock
purchase plan” under Section 423 of the Internal Revenue Code of 1986, as amended from time to time
(the “Code”). The provisions of the Plan are to be construed in a manner consistent with the
requirements of Section 423 of the Code. The Plan is not intended to be an employee benefit plan
under the Employee Retirement Income Security Act of 1974, and therefore is not required to comply
with that Act.

ARTICLE 2

DEFINITIONS

     2.1 Administrator. “Administrator” shall refer to the committee of the Board
of Directors of the Company appointed to administer the Plan, and if no such committee has been
appointed, the term Administrator shall mean the Board of Directors.

     2.2 Company. “Company” means QLogic Corporation, a Delaware corporation.

     2.3 Compensation. “Compensation” includes salary, annual bonus/incentive paid
in cash, annual profit sharing, overtime, lead premium, commissions and shift differential, but
expressly excludes other forms of compensation such as relocation, housing, car allowances, phone
allowances, sign-on bonuses, referral bonuses and non-cash incentives.

     2.4 Effective Date. “Effective Date” means November 2, 1998.

     2.5 Employee. “Employee” means each person currently employed by the Company
or any of its Designated Subsidiaries.

 

 

     2.6 Grant Date. “Grant Date” means the first day of each Offering Period
(February 1, May 1, August 1 and November 1) under the Plan.

     2.7 Offering Period. “Offering Period” means the three-month periods from
February 1 through April 30, May 1 through July 31, August 1 through October 31, and November 1
through January 31 of each calendar year.

     2.8 5% Owner. “5% Owner” means an Employee who, immediately after the grant
of any rights under the Plan, would own stock (within the meaning of Section 423(b)(3) of the Code)
possessing 5% or more of the total combined voting power or value of all classes of stock of the
Company, or of any Parent, or of any Subsidiary. For purposes of this Section, the ownership
attribution rules of Section 424(d) of the Code shall apply, and stock which the Employee may
purchase under outstanding options shall be treated as stock owned by the Employee.

     2.9 Parent. “Parent” means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company in which each corporation (other than the Company)
owns shares possessing 50% or more of the total combined voting power of all classes of shares in
one or more of the other corporations in the chain.

     2.10 Participant. “Participant” means an Employee who has satisfied the
eligibility requirements of Section 3.1 and has become a participant in the Plan in accordance with
Section 3.2.

     2.11 Purchase Date. “Purchase Date” means the last day of each Offering
Period (April 30, July 31, October 31, or January 31).

     2.12 Subsidiary. “Subsidiary” means any corporation (other than the Company) in an
unbroken chain of corporations (beginning with the Company) in which each corporation (other than
the last corporation) owns shares possessing 50% or more of the total combined voting power of all
classes of shares in one or more of the other corporations in the chain.

ARTICLE 3

ELIGIBILITY AND PARTICIPATION

     3.1 Eligibility. Each Employee of the Company, or any Designated Subsidiary,
whose customary employment is for more than 20 hours per week and more than five months in a
calendar year may become a Participant in the Plan on the Grant Date coincident with or next
following the Employee’s satisfaction of the requirements of Section 3.2.

     3.2 Participation. An Employee who has satisfied the eligibility requirements
of Section 3.1 may become a Participant in the Plan upon his completion and delivery to the
Administrator of the Company of a stock purchase agreement provided by the Company (the “Stock
Purchase Agreement”) authorizing payroll deductions. Payroll deductions for a Participant shall
commence on the Grant Date coincident with or next following the filing of the Participant’s Stock
Purchase Agreement and shall remain in effect until revoked by the Participant by the filing of a
notice of withdrawal from the Plan under Article 8 or by the filing of a new Stock Purchase
Agreement providing for a change in the Participant’s payroll deduction rate under Section 5.2.

 

 

     3.3 Special Rules. Under no circumstances shall:

          a. an option to purchase Company Stock under the Plan be granted to a Participant if
the exercise of such option would cause the Participant to be a 5% Owner;

          b. an option to purchase Company Stock under the Plan be granted to a Participant if
such option would cause the Participant to have rights to purchase Company Stock under the Plan
(and under any other employee stock purchase plan of the Company, any Parent or any Subsidiary
which is qualified under Section 423 of the Code) which accrue at a rate which exceeds $25,000 of
the fair market value of the Company Stock (determined at the time the right to purchase such
Company Stock is granted, before giving effect to any discounted purchase price under any such
plan) for each calendar year in which such right is outstanding at any time, as this rule is
applied under Section 423 of the Code and the rules and regulations promulgated thereunder; or

          c. the number of shares of Company Stock purchasable by a Participant in any calendar
year exceed 10,000 shares, subject to periodic adjustments under Section 10.4.

For purposes of the foregoing, a right to purchase Company Stock accrues when it first becomes
exercisable during the calendar year. If any amount which exceeds the limits set forth in this
Section 3.3 remains in the Participant’s Account after the exercise of the Participant’s option on
the Purchase Date, such amount shall be refunded to the Participant as soon as administratively
practicable after such date.

ARTICLE 4

OFFERING PERIODS

     4.1 Offering Periods. The Plan shall provide for Offering Periods commencing
on each Grant Date and terminating on the next following Purchase Date.

ARTICLE 5

PAYROLL DEDUCTIONS

     5.1 Participant Election. Upon completion of the Stock Purchase Agreement,
each Participant shall designate the amount of payroll deductions to be made from his or her
paycheck to purchase Company Stock under the Plan. The amount of payroll deductions shall be
designated in whole percentages of Compensation, not to exceed a maximum of 10%, which maximum
percentage may be increased or decreased from time to time in the discretion of the Administrator
effective with the Offering Period next commencing after the date of such increase or decrease, but
in no event shall the maximum amount be increased to an amount in excess of 15% of Compensation.
The amount so designated upon the Stock Purchase Agreement shall be effective as of the next Grant
Date and shall continue in effect for the Offering Period commencing on such Grant Date and, unless
otherwise expressly provided by the Administrator, all subsequent Offering Periods until the
Participant is no longer eligible to participate in the Plan or terminates or alters such Stock
Purchase Agreement in accordance with Section 5.2 below.

 

 

     5.2 Changes in Election. Any Participant may change any election (increase or
decrease the rate of payroll deductions) under this Section one time during any Offering Period by
completing and delivering to the Administrator a new Stock Purchase Agreement setting forth the
desired change at least 15 days prior to the end of the Offering Period. A Participant may
terminate participation in the Plan at any time prior to the close of an Offering Period as
provided in Article 8. A Participant may also terminate payroll deductions and have accumulated
deductions for the then current Offering Period applied to the purchase of Company Stock as of the
Purchase Date for that Offering Period by completing and delivering to the Administrator a new
Stock Purchase Agreement setting forth the desired change. Any change under this Section shall
become effective on the next payroll period (to the extent practical under the Company’s payroll
practices) following the delivery of the new Stock Purchase Agreement.

     5.3 Participant Accounts. The Company shall establish and maintain a separate
account (“Account”) for each Participant. The amount of each Participant’s payroll deductions
shall be credited to his Account. No interest will be paid or allowed on amounts credited to a
Participant’s Account. All payroll deductions received by the Company under the Plan are general
corporate assets of the Company and may be used by the Company for any corporate purpose. The
Company is not obligated to segregate such payroll deductions.

ARTICLE 6

GRANT OF OPTION

     6.1 Option to Purchase Shares. On each Grant Date, each Participant shall be
granted an option to purchase at the price determined under Section 6.2 that number of whole shares
of Company Stock that can be purchased or issued by the Company based upon that price with the
amounts held in his Account, subject to the limits set forth in Section 3.3. In the event that
there are amounts held in a Participant’s Account that are not used to purchase Company Stock
(except for amounts required to be returned under Section 3.3), such amounts shall remain in the
Participant’s Account and shall be eligible to purchase Company Stock in the next subsequent
Offering Period.

     6.2
Purchase Price. The purchase price for any Offering Period shall be the lesser of:

          a. 85% of the Fair Market Value of Company Stock on the Grant Date; or

          b. 85% of the Fair Market Value of Company Stock on the Purchase Date.

     6.3 Fair Market Value. “Fair Market Value” shall mean the value of one share
of Company Stock, determined as follows:

          a. If the Company Stock is then listed or admitted to trading on a national securities
exchange, the Fair Market Value shall be the closing sale price of the Company Stock on the date of
valuation on the principal national securities exchange on which the Company Stock is then listed
or admitted to trading, or, if there is no trading of the Company Stock on such date, the Fair
Market Value shall be the closing sale price of the Company Stock on such principal national
securities exchange on the next preceding day on which there was trading in the Company stock.

          b. If the Company Stock is not listed or admitted to trading on a national securities
exchange on the valuation date, the Fair Market Value shall be
determined by the Administrator in good faith using any reasonable method of valuation, which determination
shall be conclusive and binding on all interested parties.

 

 

ARTICLE 7

PURCHASE OF STOCK

     7.1 Exercise of Option.

          a. On each Purchase Date, the Participant will be deemed to exercise the option
expiring on that Purchase Date. Notwithstanding the above, a Participant may direct the Company
not to purchase Company Stock on the Purchase Date in accordance with Section 8.1, in which case
any amount in the Participant’s Account shall be refunded to the Participant as soon as
administratively practicable after such Purchase Date.

          b. Upon exercise of an option, the Plan shall purchase on behalf of each Participant
the maximum number of whole shares of Company Stock subject to such option at the option price
determined under Section 6.2 above as can be purchased with the amounts held in each Participant’s
Account. Any amounts remaining in a Participant’s Account as a result of the requirement that no
fractional shares may be purchased shall be held in the Participant’s Account and carried forward
for the rest of the Offering Period or to the next Offering Period.

     7.2 Delivery of Company Stock. The time of issuance and delivery of the
shares may be postponed for such period as may be necessary to comply with the registration
requirements under the Securities Act of 1933, as amended, the listing requirements of any
securities exchange on which the Company Stock may then be listed, or the requirements under other
laws or regulations applicable to the issuance or sale of such shares.

ARTICLE 8

WITHDRAWAL

     8.1 In Service Withdrawals. At any time prior to the Purchase Date of an
Offering Period (subject to any deadline the Administrator may establish for the relevant Offering
Period prior to the Grant Date for such Offering Period), any Participant may withdraw the amounts
held in his Account by executing and delivering to the Administrator a written notice of withdrawal
on the form provided by the Company. In such a case, the entire balance of the Participant’s
Account shall be paid to the Participant, without interest, as soon as is practicable. Upon such
notification, the Participant shall cease to participate in the Plan for the remainder of the
Offering Period in which the notice is given. A reduction in contributions to zero during any
Offering Period with an instruction to hold the funds in a Participant’s Account to purchase shares
on the Purchase Date of the Offering Period shall not be deemed a withdrawal. Any Employee who has
withdrawn under this Section shall be excluded from participation in the Plan for the remainder of
the Offering Period in which the withdrawal occurred and the next succeeding Offering Period, but
may then be reinstated as a Participant thereafter by executing and delivering a new Stock Purchase
Agreement to the Administrator.

 

 

     8.2 Termination of Employment.

          a. In the event that a Participant’s employment with the Company terminates for any
reason, the Participant shall cease to participate in the Plan on the date of termination. As soon
as is practical following the date of termination, the entire balance of the Participant’s Account
shall be paid to the Participant or his beneficiary in cash, without interest. For purposes of the
Plan, if a Designated Subsidiary ceases to be a Subsidiary of the Company, each person employed by
that Designated Subsidiary will be deemed to have terminated employment for purposes of the Plan,
unless the person continues as an employee of the Company or another Designated Subsidiary.

          b. A Participant may file a written designation of a beneficiary who is to receive any
shares of Company Stock purchased under the Plan or any cash from the Participant’s Account in the
event of his or her death subsequent to a Purchase Date, but prior to delivery of such shares or
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 the Plan in the event of his death prior to a
Purchase Date under paragraph (a) above. If a Participant is married and the designated
beneficiary is not solely his or her spouse, spousal consent shall be required for such designation
to be effective unless it is established (to the satisfaction of the Administrator or its delegate)
that there is no spouse or that the spouse cannot be located.

          c. Any beneficiary designation under paragraph (b) above may be changed by the
Participant at any time by written notice. In the event of the death of a Participant, the
Administrator may rely upon the most recent beneficiary designation it has on file as being the
appropriate beneficiary. In the event of the death of a Participant where no valid beneficiary
designation exists or the beneficiary has predeceased the Participant, the Administrator shall
deliver any cash or shares of Company Stock 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
Administrator, the Administrator, in its sole discretion, may deliver such shares of Company Stock
or cash to the spouse or any one or more dependents or relatives of the Participant, or if no
spouse, dependent or relative is known to the Administrator, then to such other person as the
Administrator may designate.

ARTICLE 9

PLAN ADMINISTRATION

     9.1 Plan Administration.

          a. Authority to control and manage the operation and administration of the Plan shall
be vested in the Board of Directors (the “Board”) for the Company, or a committee (“Committee”)
thereof. Members of the Committee may be appointed from time to time by, and shall serve at the
pleasure of, the Board. As used herein, the term “Administrator” shall mean the Board or, with
respect to any matter as to which responsibility has been delegated to the Committee, the term
Administrator shall mean the Committee. The initial Administrator of the Plan shall be the
Compensation Committee of the Board of Directors. The Administrator shall have all powers
necessary to supervise the administration of the Plan and control its operations.

 

 

          b. In addition to any powers and authority conferred on the Administrator elsewhere in
the Plan or by law, the Administrator shall have the following powers and authority:

               (i) To designate agents to carry out responsibilities relating to the Plan;

               (ii) To administer, interpret, construe and apply this Plan and to answer all
questions which may arise or which may be raised under this Plan by a Participant, his or her
beneficiary or any other person whatsoever;

               (iii) To establish rules and procedures from time to time for the conduct of its
business and for the administration and effectuation of its responsibilities under the Plan; and

               (iv) To perform or cause to be performed such further acts as it may deem to be
necessary, appropriate, or convenient for the operation of the Plan.

          c. Any action taken in good faith by the Administrator in the exercise of authority
conferred upon it by this Plan shall be conclusive and binding upon a Participant and his
beneficiaries. All discretionary powers conferred upon the Administrator shall be absolute.

     9.2 Limitation on Liability. No Employee of the Company nor member of the
Board or Committee shall be subject to any liability with respect to his or her duties under the
Plan unless the person acts fraudulently or in bad faith. To the extent permitted by law, the
Company shall indemnify each member of the Board or Committee, and any other Employee of the
Company with duties under the Plan who was or is a party, or is threatened to be made a party, to
any threatened, pending or completed proceeding, whether civil, criminal, administrative, or
investigative, by reason of the person’s conduct in the performance of his duties under the Plan.

     9.3 Sub-Plans. The Administrator has discretion to adopt any rules regarding
administration of the Plan to conform to local laws. Without limiting the generality of the
foregoing, the Administrator is specifically authorized to adopt rules and procedures regarding
handling of payroll deductions, payment of interest and handling of share certificates which vary
according to local requirements. The Administrator has the authority to suspend or limit
participation in the Plan by employees of any particular Subsidiary of the Company for any reason,
including administrative or economic reasons. The Administrator may also adopt rules, procedures
or sub-plans applicable to particular Subsidiaries or locations, which sub-plans may be designed to
be outside the scope of Section 423 of the Code.

     9.4 Reliance on Experts Delegation. In making any determination or in taking or not
taking any action under the Plan, the Committee or the Board, as the case may be, may obtain and
may rely upon the advice of experts, including professional advisors to the Company. No director,
officer or agent of the Company or any Designated Subsidiary shall be liable for any such action or
determination taken or made or omitted in good faith. The Administrator may delegate ministerial,
non-discretionary functions to individuals who are officers or employees of the Company or a
Designated Subsidiary.

ARTICLE 10

COMPANY STOCK

     10.1 Limitations on Purchase of Shares. The maximum number of shares of
Company Stock that shall be made available for sale under the Plan shall be 6,000,000 shares,
subject to adjustment under Section 10.4 below. The shares of Company Stock to be sold to
Participants under

 

 

the Plan will be issued by the Company. If the total number of shares of Company Stock that
would otherwise be issuable pursuant to rights granted pursuant to Section 6.1 of the Plan at the
Purchase Date exceeds the number of shares then available under the Plan, the Administrator shall
make a pro rata allocation of the shares remaining available in as uniform and equitable manner as
is practicable. In such event, the Administrator shall give written notice of such reduction of
the number of shares to each Participant affected thereby and any unused payroll deductions shall
be returned to such Participant if necessary.

     10.2 Voting Company Stock. The Participant will have no interest or voting
right in shares to be purchased under Section 6.1 of the Plan until such shares have been actually
delivered to and held of record by the Participant.

     10.3 Registration of Company Stock. Shares to be delivered to a Participant
under the Plan will be registered in the name of the Participant unless designated otherwise by the
Participant.

     10.4 Changes in Capitalization of the Company. Subject to any required action
by the stockholders of the Company, the number of shares of Company Stock covered by each right
under the Plan which has not yet been exercised and the number of shares of Company Stock which
have been authorized for issuance under the Plan but have not yet been placed under rights or which
have been returned to the Plan upon the cancellation of a right, as well as the purchase price per
share of Company Stock covered by each right under the Plan which has not yet been exercised, shall
be proportionately adjusted for any increase or decrease in the number of issued shares of Company
Stock resulting from a stock split, stock dividend, spin-off, reorganization, recapitalization,
merger, consolidation, exchange of shares or the like. Such adjustment shall be made by the
Administrator, whose determination in that respect 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 Company Stock subject to
any option granted hereunder.

     10.5 Merger of Company. In the event that the Company at any time proposes to
merge into, consolidate with or enter into any other reorganization pursuant to which the Company
is not the surviving entity (including the sale of substantially all of its assets or a “reverse”
merger in which the Company is the surviving entity), the Plan and each then outstanding option
hereunder shall terminate, unless provision is made in writing in connection with such transaction
for the continuance of the Plan and for the assumption of outstanding options theretofore granted,
or the substitution for such outstanding options of new options covering the shares of a successor
corporation, with appropriate adjustments as to number and kind of shares and prices, in which
event the Plan and the outstanding options theretofore granted or the new options substituted
therefor, shall continue in the manner and under the terms so provided. If such provision is not
made in such transaction for the continuance of the Plan and the assumption of the outstanding
options theretofore granted or the substitution for such outstanding options of new options
covering the shares of a successor corporation, then the Administrator shall cause written notice
of the proposed transaction to be given to the persons holding then-outstanding options not less
than 10 days prior to the anticipated effective date of the proposed transaction, and, concurrent
with the effective date of the proposed transaction, such outstanding options shall be exercised
automatically in accordance with Section 7.1 as if such effective date were the Purchase Date of
the applicable Offering Period unless a Participant withdraws from the Plan as provided in
Section 8.1. The Administrator may provide in each case that the transactions contemplated by this
Section 10.5 are contingent upon the consummation of the proposed merger, consolidation or other
reorganization event and provide for the reinstatement of the Plan and outstanding options and the continuation of the Offering Period then in effect in the
event that such consummation does not occur.

 

 

ARTICLE 11

MISCELLANEOUS MATTERS

     11.1 Amendment and Termination. The Plan shall terminate on December 31,
2018. Since future conditions affecting the Company cannot be anticipated or foreseen, the Company
reserves the right to amend, modify, or terminate the Plan at any time. Upon termination of the
Plan, all benefits shall become payable immediately. Notwithstanding the foregoing, no such
amendment or termination shall affect rights previously granted, nor may an amendment make any
change in any right previously granted which adversely affects the rights of any Participant
without the Participant’s consent. In addition, no amendment may be made without prior approval of
the stockholders of the Company if such amendment would:

          a. Increase the number of shares of Company Stock that may be issued under the Plan;

          b. Materially modify the requirements as to eligibility for participation in the Plan;
or

          c. Materially increase the benefits which accrue to Participants under the Plan.

     11.2 Benefits Not Alienable. Benefits under the Plan may not be assigned or
alienated, whether voluntarily or involuntarily. Any attempt at assignment, transfer, pledge or
other disposition shall be without effect, except that the Company may treat such act as an
election to withdraw funds in accordance with Article 8.

     11.3 No Enlargement of Employee Rights. This Plan is strictly a voluntary
undertaking on the part of the Company and shall not be deemed to constitute a contract between the
Company and any Employee or to be consideration for, or an inducement to, or a condition of, the
employment of any Employee. Nothing contained in the Plan shall be deemed to give the right to any
Employee to be retained in the employ of the Company or to interfere with the right of the Company
to discharge any Employee at any time.

     11.4 Governing Law. To the extent not preempted by Federal law, all legal
questions pertaining to the Plan shall be determined in accordance with the laws of the State of
California.

     11.5 Non-business Days. When any act under the Plan is required to be
performed on a day that falls on a Saturday, Sunday or legal holiday, that act shall be performed
on the next succeeding day which is not a Saturday, Sunday or legal holiday. Notwithstanding the
above, Fair Market Value shall be determined in accordance with Section 6.3.

     11.6 Compliance With Securities Laws. Notwithstanding any provision of the
Plan, the Administrator shall administer the Plan in such a way to ensure that the Plan at all
times complies with any requirements of Federal Securities Laws.

     11.7 Other Company Benefit and Compensation Programs. Payments and other
benefits received by an Employee pursuant to the Plan shall not be deemed a part of the
Employee’s compensation for purposes of the determination of benefits under any other employee welfare or
benefit plans or arrangements, if any, provided by the Company or any Subsidiary, except where the
Administrator expressly otherwise provides or authorizes in writing.

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