Document:

exv4w2

 

Exhibit
4.2

2007 Stock Incentive Plan

of

Lam Research Corporation

As Amended by the Board of Directors 

on

November 2, 2006

1. Purpose of this Plan

     The purpose of this 2007 Stock Incentive Plan is to enhance the long-term stockholder value of
Lam Research Corporation by offering opportunities to eligible individuals to participate in the
growth in value of the equity of Lam Research Corporation.

2. Definitions and Rules of Interpretation

     2.1 Definitions.

     This Plan uses the following defined terms:

               (a) “Administrator” means the Board or the Committee, or any officer or employee of
the Company to whom the Board or the Committee delegates authority to administer this Plan.

               (b) “Affiliate” means a “parent” or “subsidiary” (as each is defined in Section 424
of the Code) of the Company, and any other entity that the Board or Committee designates as an
“Affiliate” for purposes of this Plan.

               (c) “Applicable Law” means any and all laws of whatever jurisdiction, within or
without the United States, and the rules of any stock exchange or quotation system on which Shares
are listed or quoted, applicable to the taking or refraining from taking of any action under this
Plan, including the administration of this Plan and the issuance or transfer of Awards or Award
Shares.

               (d) “Award” means a Stock Award, SAR, or Option granted in accordance with the terms
of this Plan.

               (e) “Award Agreement” means the document evidencing the grant of an Award.

               (f) “Award Shares” means Shares covered by an outstanding Award or purchased under
an Award.

               (g) “Awardee” means: (i) a person to whom an Award has been granted, including a
holder of a Substitute Award, or (ii) a person to whom an Award has been transferred in accordance
with all applicable requirements of Sections 6.5, 7(h), and 17.

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

 

 

               (i) “Cause” means employment related dishonesty, fraud, misconduct or disclosure or
misuse of confidential information, or other employment related misconduct that is likely to cause
significant injury to the Company, an Affiliate, or any of their respective employees, officers or
directors (including, without limitation, commission of a felony or similar offense), in each case
as determined by the Administrator. “Cause” shall not require that a civil judgment or criminal
conviction have been entered against or guilty plea shall have been made by the Awardee regarding
any of the matters referred to in the previous sentence. Accordingly, the Administrator shall be
entitled to determine “Cause” based on the Administrator’s good faith belief. If the Awardee is
criminally charged with a felony or similar offense that shall be a sufficient, but not a
necessary, basis for such belief.

               (j) “Change in Control” means any transaction or event that the Board specifies as a
Change in Control under Section 10.3.

               (k) “Code” means the Internal Revenue Code of 1986.

               (l) “Committee” means a committee composed of Company Directors appointed in
accordance with the Company’s charter documents and Section 4.

               (m) “Company” means Lam Research Corporation, a Delaware corporation.

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

               (o) “Consultant” means an individual who (including as an employee or agent of an
entity that) provides bona fide services to the Company or an Affiliate not in connection with the
offer or sale of securities in a capital-raising transaction, but who is not an Employee.

               (p) “Director” means a member of the Board of Directors of the Company or an
Affiliate.

               (q) “Domestic Relations Order” means a “domestic relations order” as defined in, and
otherwise meeting the requirements of, Section 414(p) of the Code, except that reference to a
“plan” in that definition shall be to this Plan.

               (r) “Effective Date” means the date the shareholders of the Company approve the
Plan. In the event the shareholders do not approve the Plan, the Plan shall be null and void and
no terms of the Plan shall take effect.

               (s) “Employee” means a regular employee of the Company or an Affiliate, including an
officer or Director, who is treated as an employee in the personnel records of the Company or an
Affiliate, but not individuals who are classified by the Company or an Affiliate as: (i) leased
from or otherwise employed by a third party, (ii) independent contractors, or (iii) intermittent or
temporary workers. The Company’s or an Affiliate’s classification of an individual as an
“Employee” (or as not an “Employee”) for purposes of this Plan shall not be altered retroactively
even if that classification is changed retroactively for another purpose as a result of an audit,
litigation or otherwise. An Awardee shall not cease to be an Employee due to transfers between
locations of the Company, or between the Company and an Affiliate, or to any

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successor to the Company or an Affiliate that assumes the Awardee’s Options under Section 10.
Neither service as a Director nor receipt of a director’s fee shall be sufficient to make a
Director an “Employee.”

               (t) “Exchange Act” means the Securities Exchange Act of 1934.

               (u) “Executive” means, if the Company has any class of any equity security
registered under Section 12 of the Exchange Act, an individual who is subject to Section 16 of the
Exchange Act or who is a “covered employee” under Section 162(m) of the Code, in either case
because of the individual’s relationship with the Company or an Affiliate. If the Company does not
have any class of any equity security registered under Section 12 of the Exchange Act, “Executive”
means any (i) officer elected or appointed by the Board, or (ii) beneficial owner of more than 10%
of any class of the Company’s equity securities.

               (v) “Expiration Date” means, with respect to an Award, the date stated in the Award
Agreement as the expiration date of the Award or, if no such date is stated in the Award Agreement,
then the last day of the maximum exercise period for the Award, disregarding the effect of an
Awardee’s Termination or any other event that would shorten that period.

               (w) “Fair Market Value” means the value of Shares as determined under Section 18.2.

               (x) “Good Reason” means (i) a material diminution in responsibility or compensation
in connection with his or her employment relationship with the Company or an Affiliate, as
applicable, or (ii) requiring Awardee to work for the Company or an Affiliate in a location (other
than normal business travel) which is more than 50 miles from Awardee’s principal place of
employment before the Change in Control as the case may be.

               (y) “Grant Date” means the date the Administrator approves the grant of an Award.
However, if the Administrator specifies that an Award’s Grant Date is a future date or the date on
which a condition is satisfied, the Grant Date for such Award is that future date or the date that
the condition is satisfied.

               (z) “Incentive Stock Option” means an Option intended to qualify as an incentive
stock option under Section 422 of the Code and designated as an Incentive Stock Option in the Award
Agreement for that Option.

               (aa) “Involuntary Termination” means termination by the Company without Cause or
termination by the Awardee for Good Reason.

               (bb) “Nonstatutory Option” means any Option other than an Incentive Stock Option.

               (cc) “Objectively Determinable Performance Condition” shall mean any one or more of
the following performance criteria, either individually, alternatively or in any combination,
applied to either the Company as a whole or to a business unit, Affiliate or business segment,
either individually, alternatively or in any combination, and measured either annually

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or cumulatively over a period of years, on an absolute basis or relative to a pre-established
target, to previous years’ results or to a designated comparison group, in each case as specified
by the Committee in the Award and may include actual, growth, or performance-to-target for: (i)
cash flow, including free cash flow; (ii) earnings (including revenue, gross margin, operating
profit, earnings before interest and taxes, earnings before taxes, and net earnings) or earnings
per share; (iii) stock price; (iv) return on equity or average shareholders’ equity; (v) total
stockholder return, either actual or relative to share price or market capitalization; (vi) return
on capital; (vii) return on assets or net assets; (viii) return on investment or invested capital;
(ix) return on operating revenue; (x) income, net income, operating income, net operating income,
operating profit, net operating profit, or operating margin (with or without regard to
amortization/impairment of goodwill); (xi) market share or applications won; (xii) operational
performance, including orders, backlog, deferred revenues, revenue per employee, overhead, days
sales outstanding, inventory turns, or other expense levels; (xiii) stockholder value or return
relative to the moving average of the S&P 500 Index or a peer group index; (xiv) asset turns; and
(xv) strategic plan development and implementation (including individually designed goals and
objectives that are consistent with the Participant’s specific duties and responsibilities and that
are designed to improve the financial performance of the Company, an Affiliate, or a specific
business unit thereof and that are consistent with and derived from the strategic operating plan of
the Company, an Affiliate or any of their business units for the applicable performance period).
The Committee may appropriately adjust any evaluation of performance under an Objectively
Determinable Performance Criteria to exclude any of the following events that occurs during a
performance period: (A) asset write-downs; (B) litigation or claim judgments or settlements; (C)
the effect of changes in tax law, accounting principles or other such laws or provisions affecting
reported results; (D) accruals for reorganization and restructuring programs; and (E) any
extraordinary non-recurring items as described in Accounting Principles Board Opinion No. 30 and/or
in management’s discussion and analysis of financial condition and results of operations appearing
in the Company’s annual report to shareholders for the applicable year.

               (dd) “Officer” means an officer of the Company as defined in Rule 16a-1 adopted
under the Exchange Act.

               (ee) “Option” means a right to purchase Shares of the Company granted under this
Plan.

               (ff) “Option Price” means the price payable under an Option for Shares, not
including any amount payable in respect of withholding or other taxes.

               (gg) “Option Shares” means Shares covered by an outstanding Option or purchased
under an Option.

               (hh) “Plan” means this 2007 Stock Incentive Plan of Lam Research Corporation.

               (ii) “Prior Plans” mean the Company’s 1999 Stock Option Plan and 1997 Stock
Incentive Plan.

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               (jj) “Purchase Price” means the price payable under a Stock Award for Shares, not
including any amount payable in respect of withholding or other taxes.

               (kk) “Rule 16b-3” means Rule 16b-3 adopted under Section 16(b) of the Exchange Act.

               (ll) “SAR” or “Stock Appreciation Right” means a right to receive cash and/or Shares
based on a change in the Fair Market Value of a specific number of Shares pursuant to an Award
Agreement, as described in Section 8.1.

               (mm) “Securities Act” means the Securities Act of 1933.

               (nn) “Share” means a share of the common stock of the Company or other securities
substituted for the common stock under Section 10.

               (oo) “Stock Award” means an offer by the Company to sell or issue shares, including
shares subject to certain restrictions pursuant to the Award Agreement as described in Section 8.2
or, as determined by the Committee, a notional account representing the right to be paid an amount
based on Shares. Types of Awards which may be granted as Stock Awards include such awards as are
commonly known as restricted stock, deferred stock, restricted stock units, performance shares,
phantom stock or similar types of awards as determined by the Administrator.

               (pp) “Substitute Award” means a Substitute Option, Substitute SAR or Substitute
Stock Award granted in accordance with Sections 6.6, 8.1(d) and 8.2(e) of this Plan.

               (qq) “Substitute Option” means an Option granted in substitution for, or upon the
conversion of, an option granted by another entity to purchase equity securities in the granting
entity.

               (rr) “Substitute SAR” means a SAR granted in substitution for, or upon the
conversion of, a stock appreciation right granted by another entity with respect to equity
securities in the granting entity.

               (ss) “Substitute Stock Award” means a Stock Award granted in substitution for, or
upon the conversion of, a stock award granted by another entity to purchase equity securities in
the granting entity.

               (tt) “Termination” means that the Awardee has ceased to be, with or without any
cause or reason, an Employee, Director or Consultant. However, unless so determined by the
Administrator, or otherwise provided in this Plan, “Termination” shall not include a change in
status from an Employee, Consultant or Director to another such status. An event that causes an
Affiliate to cease being an Affiliate shall be treated as the “Termination” of that Affiliate’s
Employees, Directors, and Consultants.

     2.2 Rules of Interpretation. Any reference to a “Section,” without more, is to a Section of this Plan. Captions and titles
are used for convenience in this Plan and shall not, by

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themselves, determine the meaning of this
Plan. Except when otherwise indicated by the context, the singular includes the plural and vice
versa. Any reference to a statute is also a reference to the applicable rules and regulations
adopted under that statute. Any reference to a statute, rule or regulation, or to a section of a
statute, rule or regulation, is a reference to that statute, rule, regulation, or section as
amended from time to time, both before and after the Effective Date and including any successor
provisions.

3. Shares Subject to this Plan; Term of this Plan

     3.1 Number of Award Shares. The Shares issuable under this Plan shall be authorized
but unissued or reacquired Shares, including Shares repurchased by the Company on the open market.
Subject to adjustment under Section 10, the number of Shares initially reserved for issuance or
sale over the term of this Plan shall be 15,000,000. Except as required by Applicable Law, Shares
shall not reduce the number of Shares reserved for issuance under this Plan until the actual date
of delivery of the Shares to the Awardee. Shares subject to Awards granted under this Plan that
are cancelled, expire or are forfeited or repurchased (including without limitation any such Shares
that have been issued under the Award to the Participant) shall be available for re-grant or
re-issuance under the Plan following such cancellation, expiration, forfeiture or repurchase. If
an Awardee pays the exercise or purchase price of an Award granted under the Plan through the
withholding of Award Shares or the tender of Shares, or if Shares are withheld from the Award or
otherwise tendered to satisfy any applicable withholding obligations, the number of Shares so
tendered or withheld shall become available for re-grant or re-issuance thereafter under the Plan
following such tender or withholding.

     3.2 Term of this Plan.

               (a) This Plan shall be effective on, and Awards may be granted under this Plan on
and after, the earliest the date on which the Plan has been both adopted by the Board and approved
by the Company’s stockholders.

               (b) Subject to the provisions of Section 13, Awards may be granted under this Plan
for a period of ten years from the latest date the Company’s stockholders approve this Plan,
including any subsequent amendment or restatement of this Plan.

4. Administration

     4.1 General.

               (a) The Board shall have ultimate responsibility for administering this Plan. The
Board may delegate certain of its responsibilities to a Committee, which shall consist of at least
two members of the Board. The Board or the Committee may further delegate its responsibilities to
any Employee of the Company or any Affiliate. Where this Plan specifies that an action is to be
taken or a determination made by the Board, only the Board may take that action or make that
determination. Where this Plan specifies that an action is to be taken or a determination
made by the Committee, only the Committee may take that action or make that determination; provided
that, if for some reason the Committee cannot act or make a determination, then the Board shall
also be entitled to take such action or make such determination. Where this Plan references the

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“Administrator,” the action may be taken or determination made by the Board, the Committee, or
other Administrator. However, only the Board or the Committee may approve grants of Awards to
Executives, and an Administrator other than the Board or the Committee may grant Awards only within
the guidelines established by the Board or Committee. Moreover, all actions and determinations by
any Administrator are subject to the provisions of this Plan.

               (b) So long as the Company has registered and outstanding a class of equity
securities under Section 12 of the Exchange Act, the Committee shall consist of Company Directors
who are “Non-Employee Directors” as defined in Rule 16b-3 and, after the expiration of any
transition period permitted by Treasury Regulations Section 1.162-27(h)(3), who are “outside
directors” as defined in Section 162(m) of the Code. So long as the Shares are listed with Nasdaq,
the Committee shall comply with applicable Nasdaq rules and listing standards.

     4.2 Authority of the Board or the Committee. Subject to the other provisions of
this Plan, the Board or the Committee shall have the authority to:

               (a) grant Awards, including Substitute Awards;

               (b) determine the Fair Market Value of Shares;

               (c) determine the Option Price and the Purchase Price of Awards;

               (d) select the Awardees;

               (e) determine the times Awards are granted;

               (f) determine the number of Shares subject to each Award;

               (g) determine the methods of payment that may be used to purchase Award Shares;

               (h) determine the methods of payment that may be used to satisfy withholding tax
obligations;

               (i) determine the other terms of each Award, including but not limited to the time
or times at and the conditions upon which Awards may be exercised or become vested, whether and
under what conditions an Award is assignable, whether an Option is a Nonstatutory Option or an
Incentive Stock Option, automatic cancellation of the Award if certain objective requirements
determined by the Administration are not met, and whether the Award or Award Shares are subject to
any forfeiture or other conditions;

               (j) modify or amend any Award;

               (k) authorize any person to sign any Award Agreement or other document related to
this Plan on behalf of the Company;

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               (l) determine the form of any Award Agreement or other document related to this
Plan, and whether that document, including signatures, may be in electronic form;

               (m) interpret this Plan and any Award Agreement or document related to this Plan;

               (n) correct any defect, remedy any omission, or reconcile any inconsistency in this
Plan, any Award Agreement or any other document related to this Plan;

               (o) adopt, amend, and revoke rules and regulations under this Plan, including rules
and regulations relating to sub-plans and Plan addenda;

               (p) adopt, amend, and revoke special rules and procedures which may be inconsistent
with the terms of this Plan, set forth (if the Administrator so chooses) in sub-plans regarding
(for example) the operation and administration of this Plan and the terms of Awards, if and to the
extent necessary or useful to accommodate non-U.S. Applicable Laws and practices as they apply to
Awards and Award Shares held by, or granted or issued to, persons working or resident outside of
the United States or employed by Affiliates incorporated outside the United States;

               (q) determine whether a transaction or event should be treated as a Change in
Control, as well as the effect of a Change of Control; and

               (r) make all other determinations the Administrator deems necessary or advisable for
the administration of this Plan.

     4.3 Scope of Discretion. Subject to the provisions of this Section 4.3, on all
matters for which this Plan confers the authority, right or power on the Board, the Committee, or
other Administrator to make decisions, that body may make those decisions in its sole and absolute
discretion. Those decisions will be final, binding and conclusive. In making its decisions, the
Board, Committee or other Administrator need not treat all persons eligible to receive Awards, all
Awardees, all Awards or all Award Shares the same way. Notwithstanding anything herein to the
contrary, and except as provided in Section 13.3, the discretion of the Board, Committee or other
Administrator is subject to the specific provisions and specific limitations of this Plan, as well
as all rights conferred on specific Awardees by Award Agreements and other agreements.

5. Persons Eligible to Receive Awards

     5.1 Eligible Individuals. Awards (including Substitute Awards) may be granted to, and only to, Employees, Directors and
Consultants. However, Incentive Stock Options may only be granted to Employees, as provided in
Section 7(g).

     5.2 Section 162(m) Limitation.

               (a) Options and SARs. Subject to the provisions of this Section 5.2, for so long as
the Company is a “publicly held corporation” within the meaning of Section 162(m) of the Code, no
Employee may be granted one or more Options or SARs within any fiscal year of the

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Company under
this Plan giving him or her the right to purchase or be issued more than 1,000,000 Shares under
such Options or SARs, or to receive compensation calculated with reference to more than that number
of Shares under Options and SARs, subject to adjustment pursuant to Section 10. If an Option or
SAR is cancelled without being exercised or if the Option Price of an Option is reduced, that
cancelled or repriced Option or SAR shall continue to be counted against the annual limit on
Options and SARs that may be granted to any individual under this Section 5.2. Notwithstanding
anything herein to the contrary, a new Employee of the Company or an Affiliate shall be eligible to
be granted in the fiscal year in which he or she commences employment Options and SARs giving him
or her the right to purchase or be issued up to a maximum of 2,000,000 Shares, or to receive
compensation calculated with reference to that number of Shares under such Options and SARs,
subject to adjustment pursuant to Section 10.

               (b) Stock Awards. Any Stock Award intended as “qualified performance-based
compensation” within the meaning of Section 162(m) of the Code, whether granted solely under this
Plan or pursuant to the terms of any other stockholder-approved compensation plan awards granted
under which are intended to comply with Code Section 162(m) (including without limitation the
Company’s 2004 Executive Incentive Plan (the “2004 EIP”)), must be granted, vest or become
exercisable contingent on the achievement of one or more Objectively Determinable Performance
Conditions. The Committee shall have the discretion to determine the time and manner of compliance
with Section 162(m) of the Code. Notwithstanding anything to the contrary contained herein or in
the 2004 EIP, no Employee may be granted one or more Stock Awards within any fiscal year of the
Company under this Plan (whether the Company’s obligation to issue such Shares arises solely under
this Plan or also under any other stockholder-approved compensation plan, including the 2004 EIP)
giving him or her the right to purchase or be issued more than 300,000 Shares under such Stock
Awards, or to receive compensation calculated with reference to more than that number of Shares
under Stock Awards, subject to adjustment pursuant to Section 10.

6. Terms and Conditions of Options

     The following rules apply to all Options:

     6.1 Price. No Option may have a per-Share Option Price less than the Fair Market
Value of a Share on the Grant Date.

     6.2 Term. No Option shall be exercisable after its Expiration Date. No Option may
have an Expiration Date that is more than ten years after its Grant Date. Additional provisions
regarding the term of Incentive Stock Options are provided in Sections 7(a) and 7(e).

     6.3 Vesting. Options shall vest and become exercisable: (a) on the Grant Date, or
(b) in accordance with a schedule related to the Grant Date, the date the Optionee’s directorship,
employment or consultancy begins, or a different date specified in the Option Agreement.
Additional provisions regarding the vesting of Incentive Stock Options are provided in Section
7(c).

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     6.4 Form and Method of Payment.

               (a) The Board or Committee shall determine the acceptable form and method of payment
for exercising an Option. So long as there is no material adverse accounting consequence during
the term of the Award or at the time of exercise, the Board or Committee may require the delivery
in Shares for the value of the net appreciation of the Shares at the time of exercise over the
exercise price. The difference between full number of Shares covered by the exercised portion of
the Award and the number of Shares actually delivered shall be restored to the amount of Shares
reserved for issuance under Section 3.1.

               (b) Acceptable forms of payment for all Option Shares are cash, check or wire
transfer, denominated in U.S. dollars except as specified by the Administrator for non-U.S.
Employees or non-U.S. sub-plans.

               (c) In addition, the Administrator may permit payment to be made by any of the
following methods:

                    (i) Shares, or the designation of Shares, in either case whether Shares subject to
the Option or not, that have a Fair Market Value on the date of surrender equal to the Option Price
of the Shares as to which the Option is being exercised;

                    (ii) provided that a public market exists for the Shares, consideration received by
the Company under a procedure under which a licensed broker-dealer advances funds on behalf of an
Optionee or sells Option Shares on behalf of an Optionee (a “Cashless Exercise Procedure”),
provided that if the Company extends or arranges for the extension of credit to an Optionee under
any Cashless Exercise Procedure, no Officer or Director may participate in that Cashless Exercise
Procedure;

                    (iii) cancellation of any debt owed by the Company or any Affiliate to the Optionee
by the Company including without limitation waiver of compensation due or accrued for services
previously rendered to the Company; and

                    (iv) any combination of the methods of payment permitted by any paragraph of this
Section 6.4.

               (d) The Administrator may also permit any other form or method of payment for Option
Shares permitted by Applicable Law.

     6.5 Nonassignability of Options. Except as determined by the Administrator, no
Option shall be assignable or otherwise transferable by the Optionee except by will or by the laws
of descent and distribution. However, Options may be transferred and exercised in accordance with
a Domestic Relations Order, or in any manner allowed under the Form S-8 rules if so permitted by
the Administrator and may be exercised by a guardian or conservator appointed to act for the
Optionee. Incentive Stock Options may only be assigned in compliance with Section 7(h).

     6.6 Substitute Options. The Board may cause the Company to grant Substitute Options
in connection with the acquisition by the Company or an Affiliate of equity securities of any

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entity (including by merger, tender offer, or other similar transaction) or of all or a portion of
the assets of any entity. Any such substitution shall be effective on the effective date of the
acquisition. Substitute Options may be Nonstatutory Options or Incentive Stock Options. Unless
and to the extent specified otherwise by the Board, Substitute Options shall have the same terms
and conditions as the options they replace, except that (subject to the provisions of Section 10)
Substitute Options shall be Options to purchase Shares rather than equity securities of the
granting entity and shall have an Option Price determined by the Board.

7. Incentive Stock Options

     The following rules apply only to Incentive Stock Options and only to the extent these rules
are more restrictive than the rules that would otherwise apply under this Plan. With the consent
of the Optionee, or where this Plan provides that an action may be taken notwithstanding any other
provision of this Plan, the Administrator may deviate from the requirements of this Section,
notwithstanding that any Incentive Stock Option modified by the Administrator will thereafter be
treated as a Nonstatutory Option.

               (a) Except as provided in Section 7(e), the Expiration Date of an Incentive Stock
Option shall not be later than ten years from its Grant Date, with the result that no Incentive
Stock Option may be exercised after the expiration of ten years from its Grant Date.

               (b) No Incentive Stock Option may be granted more than ten years from the date this
Plan was approved by the Board.

               (c) Options intended to be incentive stock options under Section 422 of the Code
that are granted to any single Optionee under all incentive stock option plans of the Company and
its Affiliates, including incentive stock options granted under this Plan, may not vest at a rate
of more than $100,000 in Fair Market Value of Shares (measured on the grant dates of the options)
during any calendar year. For this purpose, an option vests with respect to a given share of stock
the first time its holder may purchase that share, notwithstanding any right of the Company to
repurchase that share. Unless the administrator of that option plan specifies
otherwise in the related agreement governing the option, this vesting limitation shall be
applied by, to the extent necessary to satisfy this $100,000 rule, treating certain stock options
that were intended to be Incentive Stock Options under Section 422 of the Code as Nonstatutory
Options. The stock options or portions of stock options to be reclassified as Nonstatutory Options
are those with the highest option prices, whether granted under this Plan or any other equity
compensation plan of the Company or any Affiliate that permits that treatment. This Section 7(c)
shall not cause an Incentive Stock Option to vest before its original vesting date or cause an
Incentive Stock Option that has already or would otherwise be vested to cease to vest or be vested.

               (d) In order for an Incentive Stock Option to be exercised for any form of payment
other than those described in Section 6.4(b), that right must be stated at the time of grant in the
Option Agreement relating to that Incentive Stock Option.

               (e) Any Incentive Stock Option granted to a Ten Percent Stockholder, must have an
Expiration Date that is not later than five years from its Grant Date, with the result that no

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such
Option may be exercised after the expiration of five years from the Grant Date. A “Ten Percent
Stockholder” is any person who, directly or by attribution under Section 424(d) of the Code, owns
stock possessing more than ten percent of the total combined voting power of all classes of stock
of the Company or of any Affiliate on the Grant Date.

               (f) The Option Price of an Incentive Stock Option shall never be less than the Fair
Market Value of the Shares at the Grant Date. The Option Price for the Shares covered by an
Incentive Stock Option granted to a Ten Percent Stockholder shall never be less than 110% of the
Fair Market Value of the Shares at the Grant Date.

               (g) Incentive Stock Options may be granted only to Employees. If an Optionee changes
status from an Employee to a Consultant, that Optionee’s Incentive Stock Options become
Nonstatutory Options if not exercised within the time period described in Section 7(i) (determined
by treating that change in status as a Termination solely for purposes of this Section 7(g)).

               (h) No rights under an Incentive Stock Option may be transferred by the Optionee,
other than by will or the laws of descent and distribution. During the life of the Optionee, an
Incentive Stock Option may be exercised only by the Optionee. The Company’s compliance with a
Domestic Relations Order, or the exercise of an Incentive Stock Option by a guardian or conservator
appointed to act for the Optionee, shall not violate this Section 7(h).

               (i) An Incentive Stock Option shall be treated as a Nonstatutory Option if it
remains exercisable after, and is not exercised within, the three-month period beginning with the
Optionee’s Termination for any reason other than the Optionee’s death or disability (as defined in
Section 22(e) of the Code). In the case of Termination due to death, an Incentive Stock Option
shall continue to be treated as an Incentive Stock Option if it remains exercisable after, and is
not exercised within, the three month period after the Optionee’s Termination provided it is
exercised before the Expiration Date. In the case of Termination due to disability, an Incentive
Stock Option shall be treated as a Nonstatutory Option if it remains exercisable after, and is
not exercised within, one year after the Optionee’s Termination.

8. Stock Appreciation Rights and Stock Awards

     8.1 Stock Appreciation Rights. The following rules apply to SARs:

               (a) General. SARs may be granted either alone, in addition to, or in tandem with
other Awards granted under this Plan. The Administrator may grant SARs to eligible participants
subject to terms and conditions not inconsistent with this Plan and determined by the
Administrator. The specific terms and conditions applicable to the Awardee shall be provided for in
the Award Agreement. SARs shall be exercisable, in whole or in part, at such times as the
Administrator shall specify in the Award Agreement. The grant or vesting of a SAR may be made
contingent on the achievement of Objectively Determinable Performance Conditions.

               (b) Exercise of SARs. Upon the exercise of an SAR, in whole or in part, an Awardee
shall be entitled to a payment in an amount equal to the excess of the Fair Market Value of a fixed
number of Shares covered by the exercised portion of the SAR on the date of

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exercise, over the Fair
Market Value of the Shares covered by the exercised portion of the SAR on the Grant Date. The
amount due to the Awardee upon the exercise of a SAR shall be paid in cash, Shares or a combination
thereof, as specified in the Award Agreement, over the period or periods specified in the Award
Agreement. An Award Agreement may place limits on the amount that may be paid over any specified
period or periods upon the exercise of a SAR, on an aggregate basis or as to any Awardee. A SAR
shall be considered exercised when the Company receives written notice of exercise in accordance
with the terms of the Award Agreement from the person entitled to exercise the SAR. If a SAR has
been granted in tandem with an Option, upon the exercise of the SAR, the number of shares that may
be purchased pursuant to the Option shall be reduced by the number of shares with respect to which
the SAR is exercised.

               (c) Nonassignability of SARs. Except as determined by the Administrator, no SAR
shall be assignable or otherwise transferable by the Awardee except by will or by the laws of
descent and distribution. Notwithstanding anything herein to the contrary, SARs may be transferred
and exercised in accordance with a Domestic Relations Order or in any manner allowed under the Form
S-8 rules if so permitted by the Administrator.

               (d) Substitute SARs. The Board may cause the Company to grant Substitute SARs in
connection with the acquisition by the Company or an Affiliate of equity securities of any entity
(including by merger) or all or a portion of the assets of any entity. Any such substitution shall
be effective on the effective date of the acquisition. Unless and to the extent specified
otherwise by the Board, Substitute SARs shall have the same terms and conditions as the awards they
replace, except that (subject to the provisions of Section 9) Substitute SARs shall be exercisable
with respect to the Fair Market Value of Shares rather than with regard to the value of equity
securities of the granting entity and shall be on terms that, as determined by the Board in its
sole and absolute discretion, properly reflects the substitution.

     8.2 Stock Awards. The following rules apply to all Stock Awards:

               (a) General. The specific terms and conditions of a Stock Award applicable to the
Awardee shall be provided for in the Award Agreement. The Award Agreement shall state the number of
Shares that the Awardee shall be entitled to receive or purchase, the terms and conditions on which
the Shares shall vest, the price to be paid (if any), whether Shares are to be delivered at the
time of grant or at some deferred date specified in the Award Agreement, whether the Award is
payable solely in Shares, cash or either and, if applicable, the time within which the Awardee must
accept such offer. The offer shall be accepted by execution of the Award Agreement. The
Administrator may require that all Shares subject to a right of repurchase or risk of forfeiture be
held in escrow until such repurchase right or risk of forfeiture lapses. The grant or vesting of a
Stock Award may be made contingent on the achievement of Objectively Determinable Performance
Conditions.

               (b) Right of Repurchase. If so provided in the Award Agreement, Award Shares
acquired pursuant to a Stock Award may be subject to repurchase by the Company or an Affiliate if
not vested in accordance with the Award Agreement.

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               (c) Form of Payment. If the Awardee is required to pay any amount to purchase
Shares subject to the Stock Award, then the Administrator shall determine the acceptable form and
method of payment for exercising a Stock Award. Acceptable forms of payment for all Award Shares
are cash, check or wire transfer, denominated in U.S. dollars except as specified by the
Administrator for non-U.S. sub-plans. In addition, the Administrator may permit payment to be made
by any of the methods permitted with respect to the exercise of Options pursuant to Section 6.4.

               (d) Nonassignability of Stock Awards. Except as determined by the Administrator, no
Stock Award shall be assignable or otherwise transferable by the Awardee except by will or by the
laws of descent and distribution. Notwithstanding anything to the contrary herein, Stock Awards
may be transferred and exercised in accordance with a Domestic Relations Order and in any manner
allowed under the Form S-8 rules if so permitted by the Administrator.

               (e) Substitute Stock Award. The Board may cause the Company to grant Substitute
Stock Awards in connection with the acquisition by the Company or an Affiliate of equity securities
of any entity (including by merger) or all or a portion of the assets of any entity. Unless and to
the extent specified otherwise by the Board, Substitute Stock Awards shall have the same terms and
conditions as the stock awards they replace, except that (subject to the provisions of Section 10)
Substitute Stock Awards shall be Stock Awards to purchase Shares rather than equity securities of
the granting entity and shall have a Purchase Price that, as determined by the Board in its sole
and absolute discretion, properly reflects the substitution. Any such Substituted Stock Award
shall be effective on the effective date of the acquisition.

9. Exercise of Awards

     9.1 In General. An Award shall be exercisable in accordance with this Plan and the
Award Agreement under which it is granted.

     9.2 Time of Exercise. Options and Stock Awards shall be considered exercised when
the Company (or its authorized agent) receives: (a) written (including electronic) notice of
exercise from the person entitled to exercise the Option or Stock Award, (b) full payment, or
provision for payment, in a form and method approved by the Administrator, for the Shares for which
the Option or Stock Award is being exercised, and (c) if applicable, payment, or provision for
payment, in a form approved by the Administrator, of all applicable withholding taxes due upon
exercise. An Award may not be exercised for a fraction of a Share. SARs shall be considered
exercised when the Company receives written notice of the exercise from the person entitled to
exercise the SAR.

     9.3 Issuance of Award Shares. The Company shall issue Award Shares in the name of
the person properly exercising the Award. If the Awardee is that person and so requests, the Award
Shares shall be issued in the name of the Awardee and the Awardee’s spouse. The Company shall
endeavor to issue Award Shares promptly after an Award is exercised or after the Grant Date of a
Stock Award, as applicable. Until Award Shares are actually issued, as evidenced by the
appropriate entry on the stock register of the Company or its transfer agent, the

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Awardee will not
have the rights of a stockholder with respect to those Award Shares, even though the Awardee has
completed all the steps necessary to exercise the Award. No adjustment shall be made for any
dividend, distribution, or other right for which the record date precedes the date the Award Shares
are issued, except as provided in Section 10 or with regard to Stock Awards, except as set forth in
the Award Agreement.

     9.4 Termination.

               (a) In General. Except as provided in an Award Agreement or in writing by the
Administrator, including in an Award Agreement, and as otherwise provided in Sections 9.4(b), (c),
and (d) after an Awardee’s Termination for other than Cause, the Awardee’s Awards shall be
exercisable to the extent (but only to the extent) they are vested on the date of that Termination
and only during the ninety (90) days after the Termination, but in no event after the Expiration
Date. Except as provided in an Award Agreement, or otherwise in writing by the Administrator
(including, pursuant to Section 9.4(d)(ii)), an Award shall terminate as to all Shares that are
unvested as of the Awardee’s date of termination for any reason. Unless otherwise provided in the
Award Agreement, in the event of termination for Cause the Award may not be exercised after the
date of Termination (even as to vested Shares). To the extent the Awardee does not exercise an
Award within the time specified for exercise, the Award shall automatically terminate.

               (b) Leaves of Absence. Unless otherwise provided in the Award Agreement, no Award
may be exercised more than three months after the beginning of a leave of absence, other than a
personal or medical leave approved by an authorized representative of the Company with employment
guaranteed upon return. Awards shall not continue to vest during a leave of absence, unless
otherwise determined by the Administrator with respect to an approved personal or medical leave
with employment guaranteed upon return.

               (c) Death or Disability. Unless otherwise provided by the Administrator, if an
Awardee’s Termination is due to death or disability (as determined by the Administrator with
respect to all Awards other than Incentive Stock Options and as defined by Section 22(e) of the
Code with respect to Incentive Stock Options), all Awards of that Awardee to the extent exercisable
at the date of that Termination may be exercised for one year after that Termination, but in no
event after the Expiration Date. In the case of Termination due to death, an Award may be
exercised as provided in Section 16. In the case of Termination due to disability, if a guardian
or conservator has been appointed to act for the Awardee and been granted this authority as part of
that appointment, that guardian or conservator may exercise the Award on behalf of the Awardee.
Death or disability occurring after an Awardee’s Termination shall not cause the Termination to be
treated as having occurred due to death or disability. To the extent an Award is not so exercised
within the time specified for its exercise, the Award shall automatically terminate.

               (d) Administrator Discretion. Notwithstanding the provisions of Section 9.4
(a)-(c), the Plan Administrator shall have complete discretion, exercisable either at the time an
Award is granted or at any time while the Award remains outstanding, to:

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                    (i) After considering any tax and accounting consequences of such change, extend the
period of time for which the Award is to remain exercisable, following the Awardee’s Termination,
from the limited exercise period otherwise in effect for that Award to such greater period of time
as the Administrator shall deem appropriate, but in no event beyond the Expiration Date; and/or

                    (ii) Permit the Award to be exercised, during the applicable post-Termination
exercise period, not only with respect to the number of vested Shares for which such Award may be
exercisable at the time of the Awardee’s Termination but also with respect to one or more
additional installments in which the Awardee would have vested had the Awardee not been subject to
Termination.

               (e) Consulting or Employment Relationship. Nothing in this Plan or in any Award
Agreement, and no Award or the fact that an Award remains unvested or that Award Shares remain
subject to repurchase rights or other forfeiture conditions, shall: (A) interfere with or limit
the right of the Company or any Affiliate to terminate the employment or consultancy of any Awardee
at any time, whether with or without cause or reason, and with or without the payment of severance
or any other compensation or payment, or (B) interfere with the application of any provision in any
of the Company’s or any Affiliate’s charter documents or Applicable Law relating to the election,
appointment, term of office, or removal of a Director.

10. Certain Transactions and Events

     10.1 In General. Except as provided in this Section 10, the existence of
outstanding Awards shall not affect in any way the right or power of the Company or its
shareholders to make or authorize any or all adjustments, recapitalizations, reorganizations,
exchanges, or other changes in the Company’s capital structure or its business, or any merger or
consolidation of the Company or any issuance of Shares or other securities or subscription rights
thereto, or any issuance of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Shares or other securities of the Company or the rights thereof, or the dissolution
or liquidation of the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar character or otherwise.
Further, except as expressly provided in this Section 10 or otherwise expressly provided for in a
writing approved by the Board or Committee, (i) the issuance by the Company of shares of stock or
any class of securities convertible into shares of stock of any class, for cash, property, labor or
services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares or other
securities, (ii) the payment of a dividend in property other than Shares, or (iii) the occurrence
of any similar transaction, and in any case whether or not for fair value, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number of Shares subject to Options
or other Awards theretofore granted or the purchase or repurchase price per Share.

     10.2 Changes in Capital Structure. In the event of any stock split, reverse stock
split, recapitalization, combination or reclassification of stock, stock dividend, spin-off,
extraordinary cash dividend or similar change to the capital structure of the Company (not
including a Change of Control), the Board or Committee shall make appropriate adjustments to

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preserve the proportionate value of such Awards or the Plan to: (a) the number and type of Shares
that may be granted subject to Awards granted under this Plan, (b) the number and type of Awards
that may be granted to any individual under this Plan, (c) the terms of any SAR, (d) the Purchase
Price or repurchase price of any Stock Award, (e) the Option Price and number and class of
securities issuable under each outstanding Option, and (f) the repurchase price of any securities
substituted for Award Shares that are subject to repurchase rights. The specific adjustments to be
made to effectuate the intent of the preceding sentence shall be determined by the Board or the
Committee, whose determination in this regard shall be final and binding on all parties. Unless
the Board or Committee specifies otherwise, any securities issuable as a result of any such
adjustment shall be rounded down to the next lower whole security. The Board or Committee need not
adopt the same rules for each Award or each Awardee.

     10.3 Change of Control Transactions. In the event of (a) any merger or
consolidation in which the Company shall not be the surviving entity or survives only as a
subsidiary of another entity whose shareholders did not own all or substantially all of the Common
Stock in substantially the same proportions as immediately prior to such transaction (which
transaction shall not include a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company in a different
jurisdiction, or other transaction in which there is no substantial change in the stockholders of
the Company or their relative stock holdings and the Awards granted under this Plan are assumed,
converted or replaced by the successor corporation, which assumption shall be binding on all
Participants), (b) the sale, transfer or other disposition of all or substantially all of the
assets of the Company, including a liquidation or dissolution of the Company, or (c) the
acquisition, sale, or transfer of more than 50% of the outstanding shares of the Company by tender
offer or similar transaction (each, a “Change of Control”), any or all outstanding Awards shall be
subject to the definitive agreement governing the Change of Control transaction. Such transaction
agreement may provide, without limitation and in a manner that is binding on all parties, for (1)
the assumption, substitution or replacement with equivalent awards of outstanding Awards (but in
each case adjusted to reflect the transaction terms) by the surviving corporation or its parent,
(2) continuation of outstanding Awards (but again adjusted to reflect the transaction terms) by the
Company if the Company is a surviving corporation, (3) accelerated vesting, or lapse of repurchase
rights or forfeiture conditions applicable to, and accelerated expiration or termination of, the
outstanding Awards, or (4) settlement of outstanding Awards (including termination thereof) in
cash. Except for adjustments to reflect the transaction terms as referenced above or, to the
extent any Award or Award Shares are subject to accelerated vesting or lapse of restrictions
approved by the Board or Committee upon specific events or conditions (and then only to the extent
such acceleration benefits are reflected in the transaction agreement, the applicable Award
Agreement or another written agreement between the participant and the Company), any outstanding
Awards that are assumed, substituted, replaced with equivalent awards or continued shall continue
following the transaction to be subject to the same vesting or other restrictions that applied to
the original Award. The Administrator need not adopt the same rules or apply the same treatment
for each Award or Awardee.

     10.4 Dissolution. Notwithstanding anything herein to the contrary, in the event of
a dissolution or liquidation of the Company, to the extent an Award has not been exercised or the
Shares subject thereto have not been issued in full prior to the earlier of the completion of the

17

 

transaction or the applicable Award Expiration Date, then outstanding Awards shall terminate
immediately prior to the transaction.

11. Award Grants to Non-Employee Directors

     11.1 General.

     Consistent with the terms of this Plan and as reflected in individual Award Agreements, the
Administrator or, if required by Applicable Law, the Board, may grant Awards to Directors who are
not Employees (“Non-Employee Directors”) on such terms and conditions as it determines, including
to provide for satisfaction of Director fee or retainer payments through issuance of Awards under
the Plan. Such Awards may be done by establishing an annual or other periodic grant program, or
may done through action taken to approve individual Awards from time to time. To the extent that
the Administrator or the Board from time to time establish an annual or other periodic grant
program for Non-Employee Directors, it may at any time amend, suspend or terminate such program
with respect to Awards that have not yet been
granted, without the need for approval from any Non-Employee Director who might otherwise have
benefited from such Awards or from the stockholders.

     11.2 Non-Employee Director Award Guidelines

     Awards granted by the Board pursuant to Section 11.1 may be granted only with the approval of
the Committee or a majority of the Company Directors then serving on the Board who meet the
director independence standards of Nasdaq (or such other primary exchange or system on which Shares
are traded or quoted). Such grants shall be made with the objective that Non-Employee Director
compensation taken as a whole shall not exceed the 75th percentile of comparable
companies.

12. Tax Matters

     12.1 Tax Withholding.

               (a) General. Whenever Awards are granted, Award Shares vest, are issued or become
free of restrictions, or Awards or Award Shares are transferred, the Company may require the
Awardee to remit to the Company an amount sufficient to satisfy any applicable tax withholding
requirement, whether the related tax is imposed on the Awardee or the Company. The Company shall
have no obligation to deliver Award Shares or release Award Shares from an escrow or permit a
transfer of Award Shares until the Awardee has satisfied those tax withholding obligations. The
Awardee accepts this requirement as a condition of her or her receipt of the Award. To the extent
any payment in satisfaction of Awards is made in cash, the payment will be reduced by an amount
sufficient to satisfy all tax withholding requirements.

               (b) Method of Payment. The Awardee shall pay any required withholding using the
forms of consideration described in Section 6.4(b), except that, in the discretion of the
Administrator, the Company may also permit the Awardee to use any of the forms of payment described
in Section 6.4(c). If the Administrator permits Award Shares to be withheld from the Award to
satisfy applicable withholding obligations, the Fair Market Value of the Award Shares

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withheld, as
determined as of the date of withholding, shall not exceed the amount determined by the applicable
minimum statutory withholding rates to the extent the Administrator determines such limit is
necessary or advisable in light of generally accepted accounting principles.

     12.2 Reporting of Dispositions. Any holder of Option Shares acquired under an
Incentive Stock Option shall promptly notify the Administrator, following such procedures as the
Administrator may require, of the sale or other disposition of any of those Option Shares if the
disposition occurs during: (a) the longer of two years after the Grant Date of the Incentive Stock
Option and one year after the date the Incentive Stock Option was exercised, or (b) such other
period as the Administrator has established.

     12.3 Liability for Applicable Taxes. Regardless of any action the Company or the Awardee’s employer (the “Employer”) takes with
respect to any or all income tax, social security, payroll tax, payment on account, other
tax-related withholding or information reporting (“Tax-Related Items”), the Awardee acknowledges
and agrees that the ultimate liability for all Tax-Related Items legally due by him is and remains
the Awardee ‘s responsibility and that the Company and or the Employer (i) make no representations
nor undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of
an Award; and (ii) do not commit to structure the terms or any aspect of an Award granted hereunder
to reduce or eliminate the Awardee ‘s liability for Tax-Related Items. The Awardee shall pay the
Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be
required to withhold as a result of the Awardee’s participation in the Plan that cannot be
satisfied by the means previously described. The Company may refuse to deliver any benefit under
the Plan if the Awardee fails to comply with his or her obligations in connection with the
Tax-Related Items.

13. Compliance with Law

     13.1 General. The grant of Awards and the issuance and subsequent transfer of Award
Shares shall be subject to compliance with all Applicable Law, including all applicable securities
laws. Awards may not be exercised, and Award Shares may not be transferred, in violation of
Applicable Law. Thus, for example, Awards may not be exercised or issued unless: (a) a
registration statement under the Securities Act is then in effect with respect to the related Award
Shares, or (b) in the opinion of legal counsel to the Company, those Award Shares may be issued in
accordance with an applicable exemption from the registration requirements of the Securities Act
and any other applicable securities laws. The failure or inability of the Company to obtain from
any regulatory body the authority considered by the Company’s legal counsel to be necessary or
useful for the lawful issuance of any Award Shares or their subsequent transfer shall relieve the
Company of any liability for failing to issue those Award Shares or permitting their transfer. As
a condition to the exercise of any Award or the transfer of any Award Shares, the Company may
require the Awardee to satisfy any requirements or qualifications that may be necessary or
appropriate to comply with or evidence compliance with any Applicable Law. The Company shall have
no liability to any Awardee or any party who might claim through the Awardee to the extent that the
Awardee (or his or her permitted transferee) is required to forfeit

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an Award, or the benefits
received or to be received under an Award, pursuant to any Applicable Law.

     13.2 Tax Matters. Notwithstanding anything to the contrary contained herein, to the
extent that the Administrator determines that any Award granted under the Plan is subject to Code
Section 409A and unless otherwise specified in the applicable Award Agreement, the Award Agreement
evidencing such Award shall incorporate the terms and conditions necessary for such Award to avoid
the consequences described in Code Section 409A(a)(1), and to the maximum extent permitted under
Applicable Law (and unless otherwise stated in the applicable Award Agreement), the Plan and the
Award Agreements shall be interpreted in a manner that results in their conforming to the
requirements of Code Section 409A(a)(2), (3) and (4) and any
Department of Treasury or Internal Revenue Service regulations or other interpretive guidance
issued under Section 409A (whenever issued, the “Guidance”). Notwithstanding anything to the
contrary in this Plan (and unless the Award Agreement provides otherwise, with specific reference
to this sentence), to the extent that a Participant holding an Award that constitutes “deferred
compensation” under Section 409A and the Guidance is a “specified employee” (also as defined
thereunder), no distribution or payment of any amount shall be made before a date that is six
months following the date of such Participant’s “separation from service” (as defined in Section
409A and the Guidance) or, if earlier, the date of the Participant’s death.

14. Amendment or Termination of this Plan or Outstanding Awards

     14.1 Amendment and Termination. The Board may at any time amend, suspend, or
terminate this Plan.

     14.2 Stockholder Approval. The Company shall obtain the approval of the Company’s
stockholders for any amendment to this Plan if stockholder approval is necessary or desirable to
comply with any Applicable Law or with the requirements applicable to the grant of Awards intended
to be Incentive Stock Options; provided however that the Company shall obtain stockholder approval
of any of the following: (a) other than an increase under Section 10.2, an increase to the Shares
reserved for issuance hereunder; (b) an expansion of the class of persons eligible to receive
Awards hereunder; or (c) any amendment of outstanding Options or SARs that effects a repricing of
such Awards or other lowering of the original Option Price or grant date Fair Market Value that
applies to a SAR. For Stock Awards to continue to be eligible to qualify as “performance-based
compensation” under Code Section 162(m), the Company’s stockholders must re-approve the material
terms of the performance goals included in the Plan by the date of the first stockholder meeting
that occurs in the fifth year following the year in which the stockholders first approved the Plan.
The Board may also, but need not, require that the Company’s stockholders approve any other
amendments to this Plan.

     14.3 Effect. No amendment, suspension, or termination of this Plan, and no
modification of any Award even in the absence of an amendment, suspension, or termination of this
Plan, shall impair any existing contractual rights of any Awardee unless the affected Awardee
consents to the amendment, suspension, termination, or modification. Notwithstanding anything
herein to the contrary, no such consent shall be required if the Board determines, in its sole and
absolute discretion, that the amendment, suspension, termination, or modification: (a) is

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required
or advisable in order for the Company, this Plan or the Award to satisfy Applicable Law, to meet
the requirements of any accounting standard or to avoid any adverse accounting treatment, or (b) in
connection with any transaction or event described in Section 10, is in the best interests of the
Company or its stockholders. The Board may, but need not, take the tax or accounting consequences
to affected Awardees into consideration in acting under the preceding sentence. Those decisions
shall be final, binding and conclusive. Termination of this Plan shall not affect the
Administrator’s ability to exercise the powers granted to it under this Plan with respect to
Awards granted before the termination of Award Shares issued under such Awards even if those
Award Shares are issued after the termination.

15. Reserved Rights

     15.1 Nonexclusivity of this Plan. This Plan shall not limit the power of the
Company or any Affiliate to adopt other incentive arrangements including, for example, the grant or
issuance of stock options, stock, or other equity-based rights under other plans.

     15.2 Unfunded Plan. This Plan shall be unfunded. Although bookkeeping accounts may
be established with respect to Awardees, any such accounts will be used merely as a convenience.
The Company shall not be required to segregate any assets on account of this Plan, the grant of
Awards, or the issuance of Award Shares. The Company and the Administrator shall not be deemed to
be a trustee of stock or cash to be awarded under this Plan. Any obligations of the Company to any
Awardee shall be based solely upon contracts entered into under this Plan, such as Award
Agreements. No such obligations shall be deemed to be secured by any pledge or other encumbrance
on any assets of the Company. Neither the Company nor the Administrator shall be required to give
any security or bond for the performance of any such obligations.

16. Special Arrangements Regarding Award Shares

     16.1 Escrow of Stock Certificates. To enforce any restrictions on Award Shares, the
Administrator may require their holder to deposit the certificates representing Award Shares, with
stock powers or other transfer instruments approved by the Administrator endorsed in blank, with
the Company or an agent of the Company to hold in escrow until the restrictions have lapsed or
terminated. The Administrator may also cause a legend or legends referencing the restrictions to
be placed on the certificates.

16.2 Repurchase Rights.

               (a) General. If a Stock Award is subject to vesting or other forfeiture conditions,
the Company shall have the right, during such period after the Awardee’s Termination as is
specified by the Administrator to repurchase any or all of the Award Shares that were unvested or
otherwise subject to forfeiture as of the date of that Termination. The repurchase price shall be
such price as is determined by the Administrator and set forth in the Award Agreement, subject to
adjustment under Section 10. The repurchase price shall be paid in cash. The Company may assign
this right of repurchase.

               (b) Procedure. The Company or its assignee may choose to give the Awardee a written
notice of exercise of its repurchase rights under this Section 16.2. However, the

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Company’s
failure to give such a notice shall not affect its rights to repurchase Award Shares.
The Company must, however, tender the repurchase price during the period specified in this
Section 16.2 for exercising its repurchase rights in order to exercise such rights.

     16.3 Deferral of Award Benefits. The Administrator may in its discretion and upon
such terms and conditions as it determines appropriate permit one or more Participants whom it
selects to (a) defer compensation payable pursuant to the terms of an Award, or (b) defer
compensation arising outside the terms of this Plan pursuant to a program that provides for
deferred payment in satisfaction of such other compensation amounts through the issuance of one or
more Awards. Any such deferral arrangement shall be evidenced by an Award Agreement in such form
as the Administrator shall from time to time establish, and no such deferral arrangement shall be a
valid and binding obligation unless evidenced by a fully executed Award Agreement, the form of
which the Administrator has approved, including through the Administrator’s establishing a written
program (the “Program”) under this Plan to govern the form of Award Agreements participating in
such Program. Any such Award Agreement or Program shall specify the treatment of dividends or
dividend equivalent rights (if any) that apply to Awards governed thereby, and shall further
provide that any elections governing payment of amounts pursuant to such Program shall be in
writing, shall be delivered to the Company or its agent in a form and manner that complies with
Code Section 409A and the Guidance, and shall specify the amount to be distributed in settlement of
the deferral arrangement, as well as the time and form of such distribution in a manner required by
the Administrator, and shall specify the amount to be distributed in settlement of the deferral
arrangement, as well as the time and form of such distribution.

     16.4 Limit to Waivers of Vesting or Forfeiture Conditions. Time or performance-based vesting
or forfeiture restrictions shall not be waived on greater than five percent (5%) of the total
number of Award Shares set forth in Section 3.1 (as such section may be amended from time to time),
subject to adjustment as set forth in Section 10 (the “Waiver Limit”), other than due to a change
of control or a change in status due to a Participant’s death, disability, retirement or other
exigent circumstances as determined by the Board, the Committee or the Administrator. Final
determination as to whether a particular waiver will be made and is subject to the Waiver Limit
shall be at the discretion of the Board, the Committee or the Administrator.

17. Beneficiaries

     An Awardee may file a written designation of one or more beneficiaries who are to receive the
Awardee’s rights under the Awardee’s Awards after the Awardee’s death. An Awardee may change such
a designation at any time by written notice. If an Awardee designates a beneficiary, the
beneficiary may exercise the Awardee’s Awards after the Awardee’s death. If an Awardee dies when
the Awardee has no living beneficiary designated under this Plan, the Company shall allow the
executor or administrator of the Awardee’s estate to exercise the Award or, if there is none, the
person entitled to exercise the Option under the Awardee’s will or the laws of descent and
distribution; provided the Company may require of any such person, evidence of authority to act in
such capacity as it deems appropriate. In any case, no Award may be exercised after its Expiration
Date.

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18. Miscellaneous

     18.1 Governing Law. This Plan, the Award Agreements and all other agreements
entered into under this Plan, and all actions taken under this Plan or in connection with Awards or
Award Shares, shall be governed by the laws of the State of Delaware.

     18.2 Determination of Value. Fair Market Value shall be determined as follows:

               (a) Listed Stock. If the Shares are traded on any established stock exchange or
quoted on a national market system, Fair Market Value shall be the closing sales price for the
Shares as quoted on that stock exchange or system for the date the value is to be determined (the
“Value Date”) as reported in The Wall Street Journal or a similar publication. If no sales are
reported as having occurred on the Value Date, Fair Market Value shall be that closing sales price
for the last preceding trading day on which sales of Shares are reported as having occurred. If no
sales are reported as having occurred during the five trading days before the Value Date, Fair
Market Value shall be the closing bid for Shares on the Value Date (or on the last preceding date
on which a closing bid for the Shares was made). If Shares are listed on multiple exchanges or
systems, Fair Market Value shall be based on sales or bid prices on the primary exchange or system
on which Shares are traded or quoted.

               (b) Stock Quoted by Securities Dealer. If Shares are regularly quoted by a
recognized securities dealer but selling prices are not reported on any established stock exchange
or quoted on a national market system, Fair Market Value shall be the mean between the high bid and
low asked prices on the Value Date. If no prices are quoted for the Value Date, Fair Market Value
shall be the mean between the high bid and low asked prices on the last preceding trading day on
which any bid and asked prices were quoted.

               (c) No Established Market. If Shares are not traded on any established stock
exchange or quoted on a national market system and are not quoted by a recognized securities
dealer, and unless otherwise required by Applicable Law, the Administrator (following guidelines
established by the Board or Committee) will determine Fair Market Value in good faith using any
reasonable valuation method. The Administrator will consider the following factors, and any others
it considers significant, in determining Fair Market Value: (i) the price at which other securities
of the Company have been issued to purchasers other than Employees, Directors, or Consultants, (ii)
the Company’s stockholder’s equity, prospective earning power, dividend-paying capacity, present
value of future cash flows, and value of tangible and intangible assets, if any, and (iii) any
other relevant factors, including the economic outlook for the Company and the Company’s industry,
the Company’s position in that industry, the Company’s goodwill and other intellectual property,
and the values of securities of other businesses in the same industry.

     18.3 Reservation of Shares. During the term of this Plan, the Company shall at all times reserve and keep available such
number of Shares as are still issuable under this Plan.

     18.4 Electronic Communications. Any Award Agreement, notice of exercise of an
Award, or other document required or permitted by this Plan may be delivered in writing or, to

23

 

the
extent determined by the Administrator, electronically. Signatures may also be electronic if
permitted by the Administrator.

     18.5 Notices. Unless the Administrator specifies otherwise, any notice to the
Company under any Option Agreement or with respect to any Awards or Award Shares shall be in
writing (or, if so authorized by Section 18.4, communicated electronically), shall be addressed to
the Secretary of the Company, and shall only be effective when received by the Secretary of the
Company.

Plan History

Initial
Adoption — Adopted by the Board on August 15, 2006 and approved by the
stockholders at 2006 annual meeting (November 2, 2006).

Amendment No. 1 — During the pendency of the 2006 proxy solicitation, two institutional
stockholders suggested changes to the plan. Stockholder approval of the Plan was obtained without
regard to how the votes of such stockholders were cast. Nevertheless because the Board is willing
to consider stockholder inputs when they are reasonable and consistent with the Company’s business
objectives, following the 2006 annual meeting, on November 2, 2006, the Board amended the Plan to
add sections 11.2 (“Non-Employee Director Award Guidelines”) and 16.4 (“Limit to Waivers of Vesting
or Forfeiture Conditions”). (November 2, 2006).

24exv10w1

 

Exhibit 10.1

VOUGHT AIRCRAFT INDUSTRIES, INC.

2006 INCENTIVE AWARD PLAN

ARTICLE 1.

PURPOSE

     The purpose of this Vought Aircraft Industries, Inc. 2006 Incentive Award Plan (the
“Plan”) is to promote the success and enhance the value of Vought Aircraft Industries, Inc.
(the “Company”) by linking the personal interests of the members of the Board, Employees,
and Consultants to those of Company stockholders and by providing such individuals with an
incentive for outstanding performance to generate superior returns to Company stockholders. The
Plan is further intended to provide flexibility to the Company in its ability to motivate, attract,
and retain the services of members of the Board, Employees, and Consultants upon whose judgment,
interest, and special effort the successful conduct of the Company’s operation is largely
dependent.

ARTICLE 2.

DEFINITIONS AND CONSTRUCTION

Wherever the following terms are used in the Plan they shall have the meanings specified

below, unless the context clearly indicates otherwise. The singular pronoun shall include the

plural where the context so indicates.

     2.1 “Award” means an Option, a Restricted Stock award, a Stock Appreciation Right
award, a Performance Share award, a Performance Stock Unit award, a Dividend Equivalents award, a
Stock Payment award, a Deferred Stock award, a Restricted Stock Unit award, a Performance Bonus
Award, or a Performance-Based Award granted to a Participant pursuant to the Plan.

     2.2 “Award Agreement” means any written agreement, contract, or other instrument or
document evidencing an Award, including through electronic medium.

     2.3 “Board” means the Board of Directors of the Company.

     2.4 “Change in Control” means either (a) the consummation of the sale, transfer,
conveyance or other disposition in one or a series of related transactions, of the equity
securities of the Company or its successor held, directly or indirectly, by TC Group, LLC
(“Carlyle”) in exchange for cash, or in the case of any transaction resulting in the
exchange for consideration other than cash (“non-cash consideration”) the receipt of cash
upon the disposition of such non-cash consideration, such that immediately following such
transaction or disposition (or series of related transactions or dispositions), the total number of
all equity securities held, directly or indirectly, by Carlyle and any Affiliate of Carlyle is, in
the aggregate, less than 50% of the total number of equity securities (as such securities may be
adjusted for the occurrence of a corporate

 

 

event) held, directly or indirectly, by Carlyle and any Affiliate of Carlyle immediately prior
to the transaction; or (b) the consummation of the sale, lease, transfer, conveyance or other
disposition (other than any transaction otherwise covered under the preceding sub-clause(a)), in
one or a series of related transactions, of all or substantially all of the assets of the Company,
or the Company and its Subsidiaries taken as a whole, to any “person ” (as such term is defined in
Section 13(d)(3) of the Exchange Act) other than to Carlyle or an Affiliate of Carlyle.

     2.5 “Code” means the Internal Revenue Code of 1986, as amended.

     2.6 “Committee” means the committee of the Board described in Article 12 hereof.

     2.7 “Consultant” means any consultant or adviser if: (a) the consultant or adviser
renders bona fide services to the Company or any Subsidiary; (b) the services rendered by the
consultant or adviser are not in connection with the offer or sale of securities in a
capital-raising transaction and do not directly or indirectly promote or maintain a market for the
Company’s securities; and (c) the consultant or adviser is a natural person who has contracted
directly with the Company or any Subsidiary to render such services.

     2.8 “Covered Employee” means an Employee who is, or could be, a “covered employee”
within the meaning of Section 162(m) of the Code.

     2.9 “Deferred Stock” means a right to receive a specified number of shares of Stock
during specified time periods pursuant to Section 8.5 hereof.

     2.10 “Disability” means that the Participant qualifies to receive long-term disability
payments under the Company’s long-term disability insurance program, as it may be amended from time
to time.

     2.11 “Dividend Equivalents” means a right granted to a Participant pursuant to Section
8.3 hereof to receive the equivalent value (in cash or Stock) of dividends paid on Stock.

     2.12 “Effective Date” shall have the meaning set forth in Section 13.1 hereof.

     2.13 “Eligible Individual” means any person who is an Employee, a Consultant or an
Independent Director, as determined by the Committee.

     2.14 “Employee” means any officer or other employee (as defined in accordance with
Section 3401(c) of the Code) of the Company or any Subsidiary.

     2.15 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     2.16 “Fair Market Value” means, as of any given date, (a) if Stock is traded on an
exchange (including NASDAQ), the closing price of a share of Stock as reported in the Wall Street
Journal (or such other source as the Company may deem reliable for such purposes) for such date, or
if no sale occurred on such date, the first trading date immediately prior to such date during
which a sale occurred; or (b) if Stock is not traded on an exchange but is quoted on a quotation
system, the mean between the closing representative bid and asked prices for the Stock on such
date, or if no sale occurred on such date, the first date immediately prior to such date on

2

 

which sales prices or bid and asked prices, as applicable, are reported by such quotation
system; or (c) if Stock is not publicly traded, the fair market value established by the Committee
acting in good faith.

     2.17 “Incentive Stock Option” means an Option that is intended to meet the
requirements of Section 422 of the Code or any successor provision thereto.

     2.18 “Independent Director” means a member of the Board who is not an Employee of the
Company.

     2.19 “Non-Employee Director” means a member of the Board who qualifies as a
“Non-Employee Director” as defined in Rule 16b-3(b)(3) under the Exchange Act, or any successor
rule.

     2.20 “Non-Qualified Stock Option” means an Option that is not intended to be an
Incentive Stock Option.

     2.21 “Option” means a right granted to a Participant pursuant to Article 5 hereof to
purchase a specified number of shares of Stock at a specified price during specified time periods.
An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option.

     2.22 “Participant” means any Eligible Individual who, as a member of the Board,
Consultant or Employee, has been granted an Award pursuant to the Plan.

     2.23 “Performance-Based Award” means an Award granted to selected Covered Employees
pursuant to Section 8.7 hereof, but which is subject to the terms and conditions set forth in
Article 9 hereof. All Performance-Based Awards are intended to qualify as Qualified
Performance-Based Compensation.

     2.24 “Performance Bonus Award” has the meaning set forth in Section 8.7 hereof.

     2.25 “Performance Criteria” means the criteria that the Committee selects for purposes
of establishing the Performance Goal or Performance Goals for a Participant for a Performance
Period. The Performance Criteria that will be used to establish Performance Goals are limited to
the following: net earnings (either before or after interest, taxes, depreciation and
amortization), economic value-added, sales or revenue, net income (either before or after taxes),
operating earnings, cash flow (including, but not limited to, operating cash flow and free cash
flow), cash flow return on capital, return on net assets, return on stockholders’ equity, return on
assets, return on capital, stockholder returns, return on sales, gross or net profit margin,
productivity, expense, margins, operating efficiency, customer satisfaction, working capital,
earnings per share, price per share of Stock, and market share, any of which may be measured either
in absolute terms or as compared to any incremental increase or as compared to results of a peer
group. The Committee shall define in an objective fashion the manner of calculating the
Performance Criteria it selects to use for such Performance Period for such Participant.

     2.26 “Performance Goals” means, for a Performance Period, the goals established in
writing by the Committee for the Performance Period based upon the Performance Criteria. Depending
on the Performance Criteria used to establish such Performance Goals, the

3

 

Performance Goals may be expressed in terms of overall Company performance or the performance
of a division, business unit, or an individual. The Committee, in its discretion, may, within the
time prescribed by Section 162(m) of the Code, adjust or modify the calculation of Performance
Goals for such Performance Period in order to prevent the dilution or enlargement of the rights of
Participants (a) in the event of, or in anticipation of, any unusual or extraordinary corporate
item, transaction, event, or development, or (b) in recognition of, or in anticipation of, any
other unusual or nonrecurring events affecting the Company, or the financial statements of the
Company, or in response to, or in anticipation of, changes in applicable laws, regulations,
accounting principles, or business conditions.

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

     2.28 “Performance Share” means a right granted to a Participant pursuant to Section
8.1 hereof, to receive Stock, the payment of which is contingent upon achieving certain Performance
Goals or other performance-based targets established by the Committee.

     2.29 “Performance Stock Unit” means a right granted to a Participant pursuant to
Section 8.2 hereof, to receive Stock, the payment of which is contingent upon achieving certain
Performance Goals or other performance-based targets established by the Committee.

     2.30 “Plan” means this Vought Aircraft Industries, Inc. 2006 Incentive Award Plan, as
it may be amended from time to time.

     2.31 “Public Trading Date” means the first date upon which Stock is listed (or
approved for listing) upon notice of issuance on any securities exchange or designated (or approved
for designation) upon notice of issuance as a national market security on an interdealer quotation
system.

     2.32 “Qualified Performance-Based Compensation” means any compensation that is
intended to qualify as “qualified performance-based compensation” as described in Section
162(m)(4)(C) of the Code.

     2.33 “Restricted Stock” means Stock awarded to a Participant pursuant to Article 6
hereof that is subject to certain restrictions and may be subject to risk of forfeiture.

     2.34 “Restricted Stock Unit” means an Award granted pursuant to Section 8.6 hereof.

     2.35 “Securities Act” shall mean the Securities Act of 1933, as amended.

     2.36 “Stock” means the common stock of the Company, par value $.01 per share, and such
other securities of the Company that may be substituted for Stock pursuant to Article 11 hereof.

     2.37 “Stock Appreciation Right” or “SAR” means a right granted pursuant to
Article 7 hereof to receive a payment equal to the excess of the Fair Market Value of a specified
number

4

 

of shares of Stock on the date the SAR is exercised over the exercise price of the SAR
indicated in the applicable Award Agreement, which per share exercise price shall not be less than
the Fair Market Value of a share of Stock on the date the SAR is granted.

     2.38 “Stock Payment” means (a) a payment in the form of shares of Stock, or (b) an
option or other right to purchase shares of Stock, as part of any bonus, deferred compensation or
other arrangement, made in lieu of all or any portion of the compensation, granted pursuant to
Section 8.4 hereof.

     2.39 “Subsidiary” means any “subsidiary corporation” as defined in Section 424(f) of
the Code and any applicable regulations promulgated thereunder or any other entity of which a
majority of the outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Company.

ARTICLE 3.

SHARES SUBJECT TO THE PLAN

     3.1 Number of Shares.

          (a) Subject to Article 11 hereof and Section 3.1(b) hereof, the aggregate number of shares of
Stock which may be issued or transferred pursuant to Awards under the Plan is 1,500,000.

          (b) To the extent that an Award terminates, expires, or lapses for any reason, any shares of
Stock subject to the Award shall again be available for the grant of an Award pursuant to the Plan.
To the extent permitted by applicable law or any exchange rule, shares of Stock issued in
assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of
combination by the Company or any Subsidiary shall not be counted against shares of Stock available
for grant pursuant to this Plan. The payment of Dividend Equivalents in cash in conjunction with
any outstanding Awards shall not be counted against the shares available for issuance under the
Plan. Notwithstanding the provisions of this Section 3.1(b), no shares of Stock may again be
optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to
qualify as an incentive stock option under Section 422 of the Code.

     3.2 Stock Distributed. Any Stock distributed pursuant to an Award may consist, in
whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open
market.

     3.3 Limitation on Number of Shares Subject to Awards. Notwithstanding any provision
in the Plan to the contrary, and subject to Article 11 hereof, the maximum number of shares of
Stock with respect to one or more Awards that may be granted to any one Participant during any
calendar year shall be 750,000 and the maximum amount that may be paid in cash during any calendar
year with respect to any Performance-Based Award (including, without limitation, any Performance
Bonus Award) shall be $1,000,000; provided, however, that the foregoing limitations shall not apply
prior to the Public Trading Date and, following the Public Trading Date, the foregoing limitations
shall not apply until the earliest of: (a) the first material

5

 

modification of the Plan (including any increase in the number of shares reserved for issuance
under the Plan in accordance with Section 3.1 hereof); (b) the issuance of all of the shares of
Stock reserved for issuance under the Plan; (c) the expiration of the Plan; (d) the first meeting
of stockholders at which members of the Board are to be elected that occurs after the close of the
third calendar year following the calendar year in which occurred the first registration of an
equity security of the Company under Section 12 of the Exchange Act; or (e) such other date
required by Section 162(m) of the Code and the rules and regulations promulgated thereunder.

ARTICLE 4.

ELIGIBILITY AND PARTICIPATION

     4.1 Eligibility. Each Eligible Individual shall be eligible to be granted one or more
Awards pursuant to the Plan.

     4.2 Participation. Subject to the provisions of the Plan, the Committee may, from
time to time, select from among all Eligible Individuals, those to whom Awards shall be granted and
shall determine the nature and amount of each Award. No Eligible Individual shall have any right
to be granted an Award pursuant to this Plan.

     4.3 Foreign Participants. Notwithstanding any provision of the Plan to the contrary,
in order to comply with the laws in other countries in which the Company and its Subsidiaries
operate or have Eligible Individuals, the Committee, in its sole discretion, shall have the power
and authority to: (i) determine which Subsidiaries shall be covered by the Plan; (ii) determine
which Eligible Individuals outside the United States are eligible to participate in the Plan; (iii)
modify the terms and conditions of any Award granted to Eligible Individuals outside the United
States to comply with applicable foreign laws; (iv) establish subplans and modify exercise
procedures and other terms and procedures, to the extent such actions may be necessary or advisable
(any such subplans and/or modifications shall be attached to this Plan as appendices); provided,
however, that no such subplans and/or modifications shall increase the share limitations contained
in Sections 3.1 and 3.3 hereof; and (v) take any action, before or after an Award is made, that it
deems advisable to obtain approval or comply with any necessary local governmental regulatory
exemptions or approvals. Notwithstanding the foregoing, the Committee may not take any actions
hereunder, and no Awards shall be granted, that would violate the Exchange Act, the Code, any
securities law or governing statute or any other applicable law.

ARTICLE 5.

STOCK OPTIONS

     5.1 General. The Committee is authorized to grant Options to Participants on the
following terms and conditions:

          (a) Exercise Price. The exercise price per share of Stock subject to an Option shall
be determined by the Committee and set forth in the Award Agreement; provided, that,

6

 

subject to Section 5.2(b) hereof, the per share exercise price for any Option shall not be
less than 100% of the Fair Market Value of a share of Stock on the date of grant.

          (b) Time and Conditions of Exercise. The Committee shall determine the time or times
at which an Option may be exercised in whole or in part; provided that the term of any Option
granted under the Plan shall not exceed ten years. The Committee shall also determine the
performance or other conditions, if any, that must be satisfied before all or part of an Option may
be exercised.

          (c) Payment. The Committee shall determine the methods by which the exercise price of
an Option may be paid, the form of payment, including, without limitation: (i) cash, (ii) shares of
Stock held for such period of time as may be required by the Committee in order to avoid adverse
accounting consequences and having a fair market value on the date of delivery equal to the
aggregate exercise price of the Option or exercised portion thereof, or (iii) other property
acceptable to the Committee (including through the delivery of a notice that the Participant has
placed a market sell order with a broker with respect to shares of Stock then issuable upon
exercise of the Option, and that the broker has been directed to pay a sufficient portion of the
net proceeds of the sale to the Company in satisfaction of the Option exercise price; provided that
payment of such proceeds is then made to the Company upon settlement of such sale), and the methods
by which shares of Stock shall be delivered or deemed to be delivered to Participants.
Notwithstanding any other provision of the Plan to the contrary, after the Public Trading Date, no
Participant who is a member of the Board or an “executive officer” of the Company within the
meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise price of an
Option, or continue any extension of credit with respect to the exercise price of an Option with a
loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the
Exchange Act.

          (d) Evidence of Grant. All Options shall be evidenced by an Award Agreement between
the Company and the Participant. The Award Agreement shall include such additional provisions as
may be specified by the Committee.

     5.2 Incentive Stock Options. Incentive Stock Options shall be granted only to
Employees and the terms of any Incentive Stock Options granted pursuant to the Plan, in addition to
the requirements of Section 5.1 hereof, must comply with the provisions of this Section 5.2.

          (a) Dollar Limitation. The aggregate Fair Market Value (determined as of the time the
Option is granted) of all shares of Stock with respect to which Incentive Stock Options are first
exercisable by a Participant in any calendar year may not exceed $100,000 or such other limitation
as imposed by Section 422(d) of the Code, or any successor provision. To the extent that Incentive
Stock Options are first exercisable by a Participant in excess of such limitation, the excess shall
be considered Non-Qualified Stock Options.

          (b) Ten Percent Owners. No Incentive Stock Option may be granted to any individual
who, at the date of grant, owns stock possessing more than ten percent of the total combined voting
power of all classes of Stock of the Company unless such Option is granted at a

7

 

price that is not
less than 110% of Fair Market Value on the date of grant and the Option is exercisable for no more
than five years from the date of grant.

         (c) Notice of Disposition. The Participant shall give the Company prompt notice of
any disposition of shares of Stock acquired by exercise of an Incentive Stock Option within (i) two
years from the date of grant of such Incentive Stock Option or (ii) one year after the transfer of
such shares of Stock to the Participant.

         (d) Right to Exercise. During a Participant’s lifetime, an Incentive Stock Option may
be exercised only by the Participant.

         (e) Failure to Meet Requirements. Any Option (or portion thereof) purported to be an
Incentive Stock Option, which, for any reason, fails to meet the requirements of Section 422 of the
Code shall be considered a Non-Qualified Stock Option.

ARTICLE 6.

RESTRICTED STOCK AWARDS

     6.1 Grant of Restricted Stock. The Committee is authorized to make Awards of
Restricted Stock to any Participant selected by the Committee in such amounts and subject to such
terms and conditions as determined by the Committee. All Awards of Restricted Stock shall be
evidenced by an Award Agreement.

     6.2 Issuance and Restrictions. Restricted Stock shall be subject to such restrictions
on transferability and other restrictions as the Committee may impose (including, without
limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on
the Restricted Stock). These restrictions may lapse separately or in combination at such times,
pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at
the time of the grant of the Award or thereafter.

     6.3 Forfeiture. Except as otherwise determined by the Committee at the time of the
grant of the Award or thereafter, upon termination of employment or service during the applicable
restriction period, Restricted Stock that is at that time subject to restrictions shall be
forfeited; provided, however, that, the Committee may (a) provide in any Restricted Stock Award
Agreement that restrictions or forfeiture conditions relating to Restricted Stock will lapse in
whole or in part in the event of terminations resulting from specified causes, and (b) provide in
other cases for the lapse in whole or in part of restrictions or forfeiture conditions relating to
Restricted Stock.

     6.4 Certificates for Restricted Stock. Restricted Stock granted pursuant to the Plan
may be evidenced in such manner as the Committee shall determine. If certificates representing
shares of Restricted Stock are registered in the name of the Participant, certificates must bear an
appropriate legend referring to the terms, conditions, and restrictions applicable to such
Restricted Stock, and the Company may, at its discretion, retain physical possession of the
certificate until such time as all applicable restrictions lapse.

8

 

ARTICLE 7.

STOCK APPRECIATION RIGHTS

     7.1 Grant of Stock Appreciation Rights.

          (a) A Stock Appreciation Right may be granted to any Participant selected by the Committee. A
Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the
Plan as the Committee shall impose and shall be evidenced by an Award Agreement.

          (b) A Stock Appreciation Right shall entitle the Participant (or other person entitled to
exercise the Stock Appreciation Right pursuant to the Plan) to exercise all or a specified portion
of the Stock Appreciation Right (to the extent then exercisable pursuant to its terms) and to
receive from the Company an amount equal to the product of (i) the excess of (A) the Fair Market
Value of a share of Stock on the date the Stock Appreciation Right is exercised over (B) the per
share exercise price of the SAR, which exercise price shall not be less than the Fair Market Value
of a share of Stock on the date the Stock Appreciation Right is granted and (ii) the number of
shares of Stock with respect to which the Stock Appreciation Right is exercised, subject to any
limitations the Committee may impose.

     7.2 Payment and Limitations on Exercise.

          (a) Subject to Section 7.2(b) below, payment of the amounts determined under Sections 7.1(b)
above shall be in cash, in Stock (based on its Fair Market Value as of the date the Stock
Appreciation Right is exercised) or a combination of both, as determined by the Committee in the
Award Agreement.

          (b) To the extent any payment under Section 7.1(b) hereof is effected in Stock, it shall be
made subject to satisfaction of all provisions of Article 5 above pertaining to Options.

ARTICLE 8.

OTHER TYPES OF AWARDS

     8.1 Performance Share Awards. Any Participant selected by the Committee may be
granted one or more Performance Share awards which shall be denominated in a number of shares of
Stock and which may be linked to any one or more of the Performance Criteria or other specific
performance criteria determined appropriate by the Committee, in each case on a specified date or
dates or over any period or periods determined by the Committee. In making such determinations,
the Committee shall consider (among such other factors as it deems relevant in light of the
specific type of award) the contributions, responsibilities and other compensation of the
particular Participant.

     8.2 Performance Stock Units. Any Participant selected by the Committee may be granted
one or more Performance Stock Unit awards which shall be denominated in unit equivalent of shares
of Stock and/or units of value including dollar value of shares of Stock and

9

 

which may be linked to
any one or more of the Performance Criteria or other specific performance criteria determined
appropriate by the Committee, in each case on a specified date or dates or over any period or
periods determined by the Committee. In making such determinations, the Committee shall consider
(among such other factors as it deems relevant in light of the specific type of award) the
contributions, responsibilities and other compensation of the particular Participant.

     8.3 Dividend Equivalents.

          (a) Any Participant selected by the Committee may be granted Dividend Equivalents based on the
dividends declared on the shares of Stock that are subject to any Award, to be credited as of
dividend payment dates, during the period between the date the Award is granted and the date the
Award is exercised, vests or expires, as determined by the Committee. Such Dividend Equivalents
shall be converted to cash or additional shares of Stock by such formula and at such time and
subject to such limitations as may be determined by the Committee.

          (b) Dividend Equivalents granted with respect to Options or SARs that are intended to be
Qualified Performance-Based Compensation shall be payable, with respect to pre-exercise periods,
regardless of whether such Option or SAR is subsequently exercised.

     8.4 Stock Payments. Any Participant selected by the Committee may receive Stock
Payments in the manner determined from time to time by the Committee; provided, that unless
otherwise determined by the Committee such Stock Payments shall be made in lieu of base salary,
bonus, or other cash compensation otherwise payable to such Participant. The number of shares
shall be determined by the Committee and may be based upon the Performance Criteria or other
specific performance criteria determined appropriate by the Committee, determined on the date such
Stock Payment is made or on any date thereafter.

     8.5 Deferred Stock. Any Participant selected by the Committee may be granted an award
of Deferred Stock in the manner determined from time to time by the Committee. The number of
shares of Deferred Stock shall be determined by the Committee and may be linked to the Performance
Criteria or other specific performance criteria determined to be appropriate by the Committee, in
each case on a specified date or dates or over any period or periods determined by the Committee.
Stock underlying a Deferred Stock award will not be issued until the Deferred Stock award has
vested, pursuant to a vesting schedule or performance criteria set by the Committee. Unless
otherwise provided by the Committee, a Participant awarded Deferred Stock shall have no rights as a
Company stockholder with respect to such Deferred Stock until such time as the Deferred Stock Award
has vested and the Stock underlying the Deferred Stock Award has been issued.

     8.6 Restricted Stock Units. The Committee is authorized to make Awards of Restricted
Stock Units to any Participant selected by the Committee in such amounts and subject to such terms
and conditions as determined by the Committee. At the time of grant, the
Committee shall specify the date or dates on which the Restricted Stock Units shall become
fully vested and nonforfeitable, and may specify such conditions to vesting as it deems
appropriate. At the time of grant, the Committee shall specify the maturity date applicable to
each grant of

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Restricted Stock Units which shall be no earlier than the vesting date or dates of
the Award and may be determined at the election of the grantee. On the maturity date, the Company
shall, subject to Section 10.7(b) hereof, transfer to the Participant one unrestricted, fully
transferable share of Stock for each Restricted Stock Unit scheduled to be paid out on such date
and not previously forfeited.

     8.7 Performance Bonus Awards. Any Participant selected by the Committee may be
granted a cash bonus (a “Performance Bonus Award”) payable upon the attainment of
Performance Goals that are established by the Committee and relate to one or more of the
Performance Criteria or other specific performance criteria determined to be appropriate by the
Committee, in each case on a specified date or dates or over any period or periods determined by
the Committee. Any such Performance Bonus Award paid to a Covered Employee may be a
Performance-Based Award and shall be based upon objectively determinable bonus formulas established
in accordance with Article 9 hereof.

     8.8 Term. Except as otherwise provided herein, the term of any Award of Performance
Shares, Performance Stock Units, Dividend Equivalents, Stock Payments, Deferred Stock or Restricted
Stock Units shall be set by the Committee in its discretion.

     8.9 Exercise or Purchase Price. The Committee may establish the exercise or purchase
price, if any, of any Award of Performance Shares, Performance Stock Units, Deferred Stock, Stock
Payments or Restricted Stock Units; provided, however, that such price shall not be less than the
par value of a share of Stock on the date of grant, unless otherwise permitted by applicable state
law.

     8.10 Exercise upon Termination of Employment or Service. An Award of Performance
Shares, Performance Stock Units, Dividend Equivalents, Deferred Stock, Stock Payments and
Restricted Stock Units shall only be exercisable or payable while the Participant is an Employee,
Consultant or a member of the Board, as applicable; provided, however, that the Committee in its
sole and absolute discretion may provide that an Award of Performance Shares, Performance Stock
Units, Dividend Equivalents, Stock Payments, Deferred Stock or Restricted Stock Units may be
exercised or paid subsequent to a termination of employment or service, as applicable, or following
a Change in Control of the Company, or because of the Participant’s retirement, death or
Disability, or otherwise; provided, however, that any such provision with respect to Performance
Shares or Performance Stock Units shall be subject to the requirements of Section 162(m) of the
Code that apply to Qualified Performance-Based Compensation.

     8.11 Form of Payment. Payments with respect to any Awards granted under this Article
8 shall be made in cash, in Stock or a combination of both, as determined by the Committee.

     8.12 Award Agreement. All Awards under this Article 8 shall be subject to such
additional terms and conditions as determined by the Committee and shall be evidenced by an Award
Agreement.

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ARTICLE 9.

PERFORMANCE-BASED AWARDS

     9.1 Purpose. The purpose of this Article 9 is to provide the Committee the ability to
qualify Awards other than Options and SARs and that are granted pursuant to Articles 6 and 8 hereof
as Qualified Performance-Based Compensation. If the Committee, in its discretion, decides to grant
a Performance-Based Award to a Covered Employee, the provisions of this Article 9 shall control
over any contrary provision contained in Articles 6 or 8 hereof; provided, however, that the
Committee may in its discretion grant Awards to Covered Employees that are based on Performance
Criteria or Performance Goals but that do not satisfy the requirements of this Article 9.

     9.2 Applicability. This Article 9 shall apply only to those Covered Employees
selected by the Committee to receive Performance-Based Awards. The designation of a Covered
Employee as a Participant for a Performance Period shall not in any manner entitle the Participant
to receive an Award for the period. Moreover, designation of a Covered Employee as a Participant
for a particular Performance Period shall not require designation of such Covered Employee as a
Participant in any subsequent Performance Period and designation of one Covered Employee as a
Participant shall not require designation of any other Covered Employees as a Participant in such
period or in any other period.

     9.3 Procedures with Respect to Performance-Based Awards. To the extent necessary to
comply with the Qualified Performance-Based Compensation requirements of Section 162(m)(4)(C) of
the Code, with respect to any Award granted under Articles 6 or 8 hereof which may be granted to
one or more Covered Employees, no later than ninety (90) days following the commencement of any
fiscal year in question or any other designated fiscal period or period of service (or such other
time as may be required or permitted by Section 162(m) of the Code), the Committee shall, in
writing, (a) designate one or more Covered Employees, (b) select the Performance Criteria
applicable to the Performance Period, (c) establish the Performance Goals, and amounts of such
Awards, as applicable, which may be earned for such Performance Period, and (d) specify the
relationship between Performance Criteria and the Performance Goals and the amounts of such Awards,
as applicable, to be earned by each Covered Employee for such Performance Period. Following the
completion of each Performance Period, the Committee shall certify in writing whether the
applicable Performance Goals have been achieved for such Performance Period. In determining the
amount earned by a Covered Employee, the Committee shall have the right to reduce or eliminate (but
not to increase) the amount payable at a given level of performance to take into account additional
factors that the Committee may deem relevant to the assessment of individual or corporate
performance for the Performance Period.

     9.4 Payment of Performance-Based Awards. Unless otherwise provided in the applicable
Award Agreement, a Participant must be employed by the Company or a Subsidiary on the day a
Performance-Based Award for such Performance Period is paid to the Participant. Furthermore, a
Participant shall be eligible to receive payment pursuant to a Performance-Based Award for a
Performance Period only if the Performance Goals for such period are achieved. In determining the
amount earned under a Performance-Based Award, the Committee may reduce

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or eliminate the amount of the Performance-Based Award earned for the Performance Period, if
in its sole and absolute discretion, such reduction or elimination is appropriate.

     9.5 Additional Limitations. Notwithstanding any other provision of the Plan, any
Award which is granted to a Covered Employee and is intended to constitute Qualified
Performance-Based Compensation shall be subject to any additional limitations set forth in Section
162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or
rulings issued thereunder that are requirements for qualification as qualified performance-based
compensation as described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed amended
to the extent necessary to conform to such requirements.

ARTICLE 10.

PROVISIONS APPLICABLE TO AWARDS

     10.1 Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the
discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other
Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards
may be granted either at the same time as or at a different time from the grant of such other
Awards.

     10.2 Award Agreement. Awards under the Plan shall be evidenced by Award Agreements
that set forth the terms, conditions and limitations for each Award which may include the term of
an Award, the provisions applicable in the event the Participant’s employment or service
terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend,
cancel or rescind an Award.

     10.3 Limits on Transfer. No right or interest of a Participant in any Award may be
pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a
Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any
other party other than the Company or a Subsidiary. Except as otherwise provided by the Committee,
no Award shall be assigned, transferred, or otherwise disposed of by a Participant other than by
will or the laws of descent and distribution. The Committee by express provision in the Award or
an amendment thereto may permit an Award (other than an Incentive Stock Option) to be transferred
to, exercised by and paid to certain persons or entities related to the Participant, including but
not limited to members of the Participant’s family, charitable institutions, or trusts or other
entities whose beneficiaries or beneficial owners are members of the Participant’s family and/or
charitable institutions, or to such other persons or entities as may be expressly approved by the
Committee, pursuant to such conditions and procedures as the Committee may establish. Any
permitted transfer shall be subject to the condition that the Committee receive evidence
satisfactory to it that the transfer is being made for estate and/or tax planning purposes (or to a
“blind trust” in connection with the Participant’s termination of employment or service with the
Company or a Subsidiary to assume a position with a governmental, charitable, educational or
similar non-profit institution) and on a basis consistent with the Company’s lawful issue of
securities.

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     10.4 Restrictions on Shares. Shares purchased upon the exercise of an Option or
otherwise issued pursuant to Awards under the Plan shall be subject to such terms and conditions as
the Committee shall determine in its sole discretion, including, without limitation,
transferability restrictions, repurchase rights, requirements that shares be transferred in the
event of certain transactions, rights of first refusal with respect to permitted transfers of
shares, voting agreements, tag-along rights and bring-along rights. Such terms and conditions may,
in the Committee’s sole discretion, be contained in an Award Agreement, a stockholders’ agreement
or such other agreement as the Committee shall determine, in each case in a form determined by the
Committee. The issuance of such shares shall be conditioned on the Participant’s consent to such
terms and conditions and/or the Participant’s entering into such agreement or agreements. Without
limiting the generality of the foregoing, the Committee in its sole discretion may provide that the
Company may repurchase shares acquired upon exercise of an Option or otherwise issued pursuant to
an Award upon the occurrence of certain specified events, including, without limitation, a
Participant’s termination of employment or service, divorce, bankruptcy or insolvency.

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

     10.6 Beneficiaries. Notwithstanding Section 10.3 hereof, a Participant may, in the
manner determined by the Committee, designate a beneficiary to exercise the rights of the
Participant and to receive any distribution with respect to any Award upon the Participant’s death.
A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant
to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable
to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any
additional restrictions deemed necessary or appropriate by the Committee. If the Participant is
married and resides in a community property state, a designation of a person other than the
Participant’s spouse as his or her beneficiary with respect to more than 50% of the Participant’s
interest in the Award shall not be effective without the prior written consent of the

14

 

Participant’s spouse. If no beneficiary has been designated or survives the Participant,
payment shall be made to the person entitled thereto pursuant to the Participant’s will or the laws
of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or
revoked by a Participant at any time provided the change or revocation is filed with the Committee.

     10.7 Stock Certificates; Book Entry Procedures.

          (a) Notwithstanding anything herein to the contrary, the Company shall not be required to
issue or deliver any certificates evidencing shares of Stock pursuant to the exercise of any Award,
unless and until the Board has determined, with advice of counsel, that the issuance and delivery
of such certificates is in compliance with all applicable laws, regulations of governmental
authorities and, if applicable, the requirements of any exchange on which the shares of Stock are
listed or traded. All Stock certificates delivered pursuant to the Plan are subject to any
stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply
with federal, state, or foreign jurisdiction, securities or other laws, rules and regulations and
the rules of any national securities exchange or automated quotation system on which the Stock is
listed, quoted, or traded. The Committee may place legends on any Stock certificate to reference
restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the
Board may require that a Participant make such reasonable covenants, agreements, and
representations as the Board, in its discretion, deems advisable in order to comply with any such
laws, regulations, or requirements. The Committee shall have the right to require any Participant
to comply with any timing or other restrictions with respect to the settlement or exercise of any
Award, including a window-period limitation, as may be imposed in the discretion of the Committee.

          (b) Notwithstanding any other provision of the Plan, unless otherwise determined by the
Committee or required by any applicable law, rule or regulation, the Company shall not deliver to
any Participant certificates evidencing shares of Stock issued in connection with any Award and
instead such shares of Stock shall be recorded in the books of the Company (or, as applicable, its
transfer agent or stock plan administrator).

     10.8 Paperless Exercise. In the event that the Company establishes, for itself or
using the services of a third party, an automated system for the exercise of Awards, such as a
system using an internet website or interactive voice response, then the paperless exercise of
Awards by a Participant may be permitted through the use of such an automated system.

ARTICLE 11.

CHANGES IN CAPITAL STRUCTURE

     11.1 Adjustments.

          (a) In the event of any stock dividend, stock split, combination or exchange of shares,
merger, consolidation, spin-off, recapitalization or other distribution (other than normal cash
dividends) of Company assets to stockholders, or any other change affecting the shares of Stock or
the share price of the Stock, the Committee shall make proportionate adjustments to

15

 

reflect such change with respect to (a) the aggregate number and kind of shares that may be
issued under the Plan (including, but not limited to, adjustments of the limitations in Sections
3.1 and 3.3 hereof); (b) the terms and conditions of any outstanding Awards (including, without
limitation, any applicable performance targets or criteria with respect thereto); and (c) the grant
or exercise price per share for any outstanding Awards under the Plan. Any adjustment affecting an
Award intended as Qualified Performance-Based Compensation shall be made consistent with the
requirements of Section 162(m) of the Code.

          (b) In the event of any transaction or event described in Section 11.1(a) hereof or any
unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company,
or the financial statements of the Company or any affiliate, or of changes in applicable laws,
regulations or accounting principles, the Committee, on such terms and conditions as it deems
appropriate, either by the terms of the Award or by action taken prior to the occurrence of such
transaction or event and either automatically or upon the Participant’s request, shall take any one
or more of the following actions whenever the Committee determines that such action is appropriate
in order to prevent dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any Award under the Plan, to facilitate such
transactions or events or to give effect to such changes in laws, regulations or principles:

     (i) To provide for either (A) termination of any such Award in exchange for an amount of cash,
if any, equal to the amount that would have been attained upon the exercise of such Award or
realization of the Participant’s rights (and, for the avoidance of doubt, if as of the date of the
occurrence of the transaction or event described in this Section 11.1 the Committee determines in
good faith that no amount would have been attained upon the exercise of such Award or realization
of the Participant’s rights, then such Award may be terminated by the Company without payment) or
(B) the replacement of such Award with other rights or property;

     (ii) To provide that such Award be assumed by the successor or survivor corporation, or a
parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards
covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kind of shares and prices;

     (iii) To make adjustments in the number and type of shares of Stock (or other securities or
property) subject to outstanding Awards, and in the number and kind of outstanding Restricted Stock
or Deferred Stock and/or in the terms and conditions of (including the grant or exercise price),
and the criteria included in, outstanding options, rights and awards and options, rights and awards
which may be granted in the future;

     (iv) To provide that such Award shall be exercisable or payable or fully vested with respect
to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the
applicable Award Agreement; and

     (v) To provide that the Award cannot vest, be exercised or become payable after such event.

16

 

     11.2 Acceleration Upon a Change in Control. Notwithstanding Section 11.1 hereof, and
except as may otherwise be provided in any applicable Award Agreement or other written agreement
entered into between the Company and a Participant, if a Change in Control occurs and a
Participant’s Awards are not converted, assumed, or replaced by a successor entity, then
immediately prior to the Change in Control such Awards shall become fully exercisable and all
forfeiture restrictions on such Awards shall lapse. Upon, or in anticipation of, a Change in
Control, the Committee may cause any and all Awards outstanding hereunder to terminate at a
specific time in the future, including but not limited to the date of such Change in Control, and
shall give each Participant the right to exercise such Awards during a period of time as the
Committee, in its sole and absolute discretion, shall determine.

     11.3 No Other Rights. Except as expressly provided in the Plan, no Participant shall
have any rights by reason of any subdivision or consolidation of shares of stock of any class, the
payment of any dividend, any increase or decrease in the number of shares of stock of any class or
any dissolution, liquidation, merger, or consolidation of the Company or any other corporation.
Except as expressly provided in the Plan or pursuant to action of the Committee under the Plan, no
issuance 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 of shares of Stock subject to an Award or the grant or exercise price of any Award.

ARTICLE 12.

ADMINISTRATION

     12.1 Committee. Unless and until the Board delegates administration of the Plan to a
Committee as set forth below, the Plan shall be administered by the full Board, and for such
purposes the term “Committee” as used in this Plan shall be deemed to refer to the Board. The
Board, at its discretion or as otherwise necessary to comply with the requirements of Section
162(m) of the Code, Rule 16b-3 promulgated under the Exchange Act or to the extent required by any
other applicable rule or regulation, shall delegate administration of the Plan to a Committee.
From and after the Public Trading Date, the Committee shall consist solely of two or more members
of the Board each of whom is an “outside director,” within the meaning of Section 162(m) of the
Code, a Non-Employee Director and an “independent director” under the rules of the New York Stock
Exchange (or other principal securities market on which shares of Stock are traded).
Notwithstanding the foregoing: (a) the full Board, acting by a majority of its members in office,
shall conduct the general administration of the Plan with respect to all Awards granted to
Independent Directors and for purposes of such Awards the term “Committee” as used in this Plan
shall be deemed to refer to the Board and (b) the Committee may delegate its authority hereunder to
the extent permitted by Section 12.5 hereof. In its sole discretion, the Board may at any time and
from time to time exercise any and all rights and duties of the Committee under the Plan except
with respect to matters which under Rule 16b-3 under the Exchange Act or Section 162(m) of the
Code, or any regulations or rules issued thereunder, are required to be determined in the sole
discretion of the Committee. Committee members may resign at any time by delivering written notice
to the Board.

17

 

     12.2 Governance of the Committee. The governance of the Committee shall be subject to
the charter of the Committee as approved by the Board. Notwithstanding the foregoing, any action
taken by the Committee shall be valid and effective, whether or not members of the Committee at the
time of such action are later determined not to have satisfied the requirements for membership set
forth in Section 12.1 or otherwise provided in the charter of the Committee. Each member of the
Committee is entitled to, in good faith, rely or act upon any report or other information furnished
to that member by any officer or other employee of the Company or any Subsidiary, the Company’s
independent certified public accountants, or any executive compensation consultant or other
professional retained by the Company to assist in the administration of the Plan.

     12.3 Authority of Committee. Subject to any specific designation in the Plan, the
Committee has the exclusive power, authority and discretion to:

          (a) Designate Participants to receive Awards;

          (b) Determine the type or types of Awards to be granted to each Participant;

          (c) Determine the number of Awards to be granted and the number of shares of Stock to which an
Award will relate;

          (d) Determine the terms and conditions of any Award granted pursuant to the Plan, including,
but not limited to, the exercise price, grant price, or purchase price, any reload provision, any
restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or
restrictions on the exercisability of an Award, and accelerations or waivers thereof, any
provisions related to non-competition and recapture of gain on an Award, based in each case on such
considerations as the Committee in its sole discretion determines; provided, however, that the
Committee shall not have the authority to accelerate the vesting or waive the forfeiture of any
Performance-Based Awards;

          (e) Determine whether, to what extent, and pursuant to what circumstances an Award may be
settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other
property, or an Award may be canceled, forfeited, or surrendered;

          (f) Prescribe the form of each Award Agreement, which need not be identical for each
Participant;

          (g) Decide all other matters that must be determined in connection with an Award;

          (h) Establish, adopt, or revise any rules and regulations as it may deem necessary or
advisable to administer the Plan;

          (i) Interpret the terms of, and any matter arising pursuant to, the Plan or any Award
Agreement; and

          (j) Make all other decisions and determinations that may be required pursuant to the Plan or
as the Committee deems necessary or advisable to administer the Plan.

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     12.4 Decisions Binding. The Committee’s interpretation of the Plan, any Awards
granted pursuant to the Plan, any Award Agreement and all decisions and determinations by the
Committee with respect to the Plan are final, binding, and conclusive on all parties.

     12.5 Delegation of Authority. To the extent permitted by applicable law, the
Committee may from time to time delegate to a committee of one or more members of the Board or one
or more officers of the Company the authority to grant or amend Awards to Participants other than
(a) senior executives of the Company who are subject to Section 16 of the Exchange Act, (b) Covered
Employees, or (c) officers of the Company (or members of the Board) to whom authority to grant or
amend Awards has been delegated hereunder. Any delegation hereunder shall be subject to the
restrictions and limits that the Committee specifies at the time of such delegation, and the
Committee may at any time rescind the authority so delegated or appoint a new delegate. At all
times, the delegate appointed under this Section 12.5 shall serve in such capacity at the pleasure
of the Committee.

ARTICLE 13.

EFFECTIVE AND EXPIRATION DATE

     13.1 Effective Date. The Plan is effective as of the date the Plan is approved by the
Company’s stockholders (the “Effective Date”). The Plan will be deemed to be approved by
the stockholders if it receives the affirmative vote of the holders of a majority of the shares of
stock of the Company present or represented and entitled to vote at a meeting duly held in
accordance with the applicable provisions of the Company’s bylaws.

     13.2 Expiration Date. The Plan will expire on, and no Award may be granted pursuant
to the Plan after, the tenth anniversary of the Effective Date, except that no Incentive Stock
Options may be granted under the Plan after the earlier of the tenth anniversary of (i) the date
the Plan is approved by the Board or (ii) the Effective Date. Any Awards that are outstanding on
the tenth anniversary of the Effective Date shall remain in force according to the terms of the
Plan and the applicable Award Agreement.

ARTICLE 14.

AMENDMENT, MODIFICATION, AND TERMINATION

     14.1 Amendment, Modification, and Termination. Subject to Section 16.14 hereof, with
the approval of the Board, at any time and from time to time, the Committee may terminate, amend or
modify the Plan; provided, however, that (a) to the extent necessary and desirable to comply with
any applicable law, regulation, or stock exchange rule, the Company shall obtain stockholder
approval of any Plan amendment in such a manner and to such a degree as required, and (b)
stockholder approval shall be required for any amendment to the Plan that (i) increases the number
of shares available under the Plan (other than any adjustment as provided by Article 11 hereof),
(ii) permits the Committee to grant Options with an exercise price that is below Fair Market Value
on the date of grant, or (iii) permits the Committee to extend the exercise period for an Option
beyond ten years from the date of grant. Notwithstanding any provision in this Plan to the
contrary, absent approval of the stockholders of the Company, no Option may be

19

 

amended to reduce the per share exercise price of the shares subject to such Option below the
per share exercise price as of the date the Option is granted and, except as permitted by Article
11 hereof, no Option may be granted in exchange for, or in connection with, the cancellation or
surrender of an Option having a higher per share exercise price.

     14.2 Awards Previously Granted. Except with respect to amendments made pursuant to
Section 16.14 hereof, no termination, amendment, or modification of the Plan shall adversely affect
in any material way any Award previously granted pursuant to the Plan without the prior written
consent of the Participant.

ARTICLE 15.

     15.1 Restrictions on Shares. Shares of Stock issued to a Participant in respect of
any Award shall be subject to such terms and conditions as the Committee shall determine in its
sole discretion, including, without limitation, restrictions on the transferability of such shares,
the right of the Company to repurchase such shares, the right of the Company to require that such
shares be transferred in the event of certain transactions, a right of first refusal in favor of
the Company with respect to permitted transfers of such shares, tag-along rights, bring-along
rights, redemption and co-sale rights and voting requirements. Such terms and conditions may, in
the Committee’s sole discretion, be contained in an applicable Award Agreement, exercise notice,
stockholders agreement, voting agreement or in such other agreement as the Committee shall
determine, in each case in a form prescribed by the Committee in its sole discretion. The issuance
of such shares shall be conditioned on the Participant’s agreement to such terms and conditions
and, at the Company’s request, the Participant’s entering into such agreement or agreements.

ARTICLE 16.

GENERAL PROVISIONS

     16.1 No Rights to Awards. No Eligible Individual or other person shall have any claim
to be granted any Award pursuant to the Plan, and neither the Company nor the Committee is
obligated to treat Eligible Individuals, Participants or any other persons uniformly.

     16.2 No Stockholders Rights. Except as otherwise provided herein, a Participant shall
have none of the rights of a stockholder with respect to shares of Stock covered by any Award until
the Participant becomes the record owner of such shares of Stock.

     16.3 Withholding. The Company or any Subsidiary shall have the authority and the
right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient
to satisfy federal, state, local and foreign taxes (including the Participant’s employment tax
obligations) required by law to be withheld with respect to any taxable event concerning a
Participant arising as a result of this Plan. Unless otherwise determined by the Committee, the
Company shall, in satisfaction of the foregoing requirement, withhold shares of Stock otherwise
issuable under an Award having a Fair Market Value equal to the sums required to be withheld, and
the Participant’s acceptance of an Award hereunder shall be deemed to constitute the Participant’s
agreement to such withholding of shares. Notwithstanding the foregoing, the

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Committee, in its sole discretion may allow the Participant to satisfy such withholding
requirement through any other means permitted by applicable law, including, without limitation,
payment in cash, payroll deduction, or the return of other shares of Stock owned by the
Participant. Notwithstanding any other provision of the Plan, the number of shares of Stock which
may be withheld with respect to the issuance, vesting, exercise or payment of any Award (or which
may be repurchased from the Participant of such Award within six months (or such other period as
may be determined by the Committee) after such shares of Stock were acquired by the Participant
from the Company) in order to satisfy the Participant’s federal, state, local and foreign income
and payroll tax liabilities with respect to the issuance, vesting, exercise or payment of the Award
shall be limited to the number of shares which have a Fair Market Value on the date of withholding
or repurchase equal to the aggregate amount of such liabilities based on the minimum legally
required withholding rates for federal, state, local and foreign income tax and payroll tax
purposes that are applicable to such supplemental taxable income.

     16.4 No Right to Employment or Services. Nothing in the Plan or any Award Agreement
shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate
any Participant’s employment or services at any time, nor confer upon any Participant any right to
continue in the employ or service of the Company or any Subsidiary.

     16.5 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for
incentive compensation. With respect to any payments not yet made to a Participant pursuant to an
Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights
that are greater than those of a general creditor of the Company or any Subsidiary.

     16.6 Indemnification. To the extent allowable pursuant to applicable law, each member
of the Committee or of the Board shall be indemnified and held harmless by the Company from any
loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in
connection with or resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action or failure to act pursuant to
the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in
such action, suit, or proceeding against him or her; provided he or she gives the Company an
opportunity, at its own expense, to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be entitled pursuant to
the Company’s Certificate of Incorporation or bylaws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them harmless.

     16.7 Relationship to Other Benefits. No payment pursuant to the Plan shall be taken
into account in determining any benefits pursuant to any pension, retirement, savings, profit
sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except to
the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.

     16.8 Expenses. The expenses of administering the Plan shall be borne by the Company
and its Subsidiaries.

21

 

     16.9 Titles and Headings. The titles and headings of the Sections in the Plan are for
convenience of reference only and, in the event of any conflict, the text of the Plan, rather than
such titles or headings, shall control.

     16.10 Fractional Shares. No fractional shares of Stock shall be issued and the
Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional
shares or whether such fractional shares shall be eliminated by rounding up or down as appropriate.

     16.11 Limitations Applicable to Section 16 Persons. Notwithstanding any other
provision of the Plan, the Plan, and any Award granted or awarded to any Participant who is then
subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth
in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to
Rule 16b-3 under the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

     16.12 Government and Other Regulations. The obligation of the Company to make payment
of awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations,
and to such approvals by government agencies as may be required. The Company shall be under no
obligation to register pursuant to the Securities Act, as amended, any of the shares of Stock paid
pursuant to the Plan. If the shares paid pursuant to the Plan may in certain circumstances be
exempt from registration pursuant to the Securities Act, as amended, the Company may restrict the
transfer of such shares in such manner as it deems advisable to ensure the availability of any such
exemption.

     16.13 Governing Law. The Plan and all Award Agreements shall be construed in
accordance with and governed by the laws of the State of Delaware.

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

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* * * * *

     I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of Vought
Aircraft Industries, Inc. on November 2, 2006.

* * * * *

     I hereby certify that the foregoing Plan was approved by the stockholders of Vought Aircraft
Industries, Inc. on November 2, 2006.

     Executed on this 3rd day of November, 2006.

	 	 	 
	 	 	/s/ Kevin P. McGlinchey
	 	 	/s/ Kevin P. McGlinchey
	 

	 	Kevin P. McGlinchey
	 

	 	Corporate Secretary

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