Document:

Exhibit 10.3

VERIGY LTD.

2006 EMPLOYEE
SHARES PURCHASE PLAN

(As Amended,
August 29, 2006)

 

TABLE OF
CONTENTS

	
  

  	
  Page

  
	
   

  	
   

  
	
  SECTION 1. PURPOSE OF THE PLAN

  	
  1

  
	
  SECTION 2. ADMINISTRATION OF THE PLAN

  	
  1

  
	
   

  	
  (a) Committee Composition

  	
  1

  
	
   

  	
  (b) Committee Responsibilities

  	
  1

  
	
  SECTION 3. STOCK OFFERED UNDER THE PLAN

  	
  1

  
	
   

  	
  (a) Authorized Shares

  	
  1

  
	
   

  	
  (b) Anti-Dilution Adjustments

  	
  1

  
	
   

  	
  (c) Reorganizations

  	
  1

  
	
  SECTION 4. ENROLLMENT AND PARTICIPATION

  	
  1

  
	
   

  	
  (a) Offering Periods

  	
  1

  
	
   

  	
  (c) Enrollment at IPO

  	
  2

  
	
   

  	
  (c) Enrollment After IPO

  	
  2

  
	
   

  	
  (d) Duration of Participation

  	
  2

  
	
  SECTION 5. EMPLOYEE CONTRIBUTIONS

  	
  2

  
	
   

  	
  (a) Commencement of Payroll Deductions

  	
  2

  
	
   

  	
  (b) Amount of Payroll Deductions

  	
  2

  
	
   

  	
  (c) Changing Withholding Rate

  	
  2

  
	
   

  	
  (d) Discontinuing Payroll Deductions

  	
  3

  
	
   

  	
  (e) Limit on Number of Elections

  	
  3

  
	
  SECTION 6. WITHDRAWAL FROM THE PLAN

  	
  3

  
	
   

  	
  (a) Withdrawal

  	
  3

  
	
   

  	
  (b) Re-Enrollment After Withdrawal

  	
  3

  
	
  SECTION 7. CHANGE IN EMPLOYMENT STATUS

  	
  3

  
	
   

  	
  (a) Termination of Employment

  	
  3

  
	
   

  	
  (b) Leave of Absence

  	
  3

  
	
   

  	
  (c) Death

  	
  3

  
	
  SECTION 8. PLAN ACCOUNTS AND PURCHASE OF SHARES

  	
  4

  
	
   

  	
  (a) Plan Accounts

  	
  4

  
	
   

  	
  (b) Purchase Price

  	
  4

  
	
   

  	
  (c) Number of Shares Purchased

  	
  4

  
	
   

  	
  (d) Available Shares Insufficient

  	
  4

  
	
   

  	
  (e) Issuance of Stock

  	
  4

  
	
   

  	
  (f) Tax Withholding

  	
  4

  
	
   

  	
  (g) Unused Cash Balances

  	
  4

  
	
   

  	
  (h) Stockholder Approval

  	
  5

  
	
  SECTION 9. LIMITATIONS ON STOCK OWNERSHIP

  	
  5

  
	
   

  	
  (a) Five Percent Limit

  	
  5

  
	
   

  	
  (b) Dollar Limit

  	
  5

  
	
  SECTION 10. RIGHTS NOT TRANSFERABLE

  	
  5

  
	
  SECTION 11. NO RIGHTS AS AN EMPLOYEE

  	
  6

  
	
  SECTION 12. NO RIGHTS AS A STOCKHOLDER

  	
  6

  
	
  SECTION 13. AMENDMENT OR DISCONTINUANCE

  	
  6

  
	
  SECTION 14. COMMITTEE RULES FOR NON-U.S.
  JURISDICTIONS

  	
  6

  
	
   

  	
  (a) Rules and Procedures

  	
  6

  
	
   

  	
  (b) Sub-Plans

  	
  6

  
	
  SECTION 15. COMPLIANCE with LAW

  	
  6

  
	
   

  	
  (a) Securities Laws and Regulations

  	
  6

  
	
   

  	
  (b) Governmental Approvals

  	
  7

  
	
   

  	
  (c) Choice of Law

  	
  7

  
	
  SECTION 16. DEFINITIONS

  	
  7

  
	
   

  	
  (a) Board

  	
  7

  

 

 

 

	
  

  	
  (b) Code

  	
  7

  
	
   

  	
  (c) Committee

  	
  7

  
	
   

  	
  (d) Company

  	
  7

  
	
   

  	
  (e) Compensation

  	
  7

  
	
   

  	
  (f) Corporate Reorganization

  	
  7

  
	
   

  	
  (g) Eligible Employee

  	
  7

  
	
   

  	
  (h) Exchange Act

  	
  8

  
	
   

  	
  (i) Fair Market Value

  	
  8

  
	
   

  	
  (j) IPO

  	
  8

  
	
   

  	
  (k) Offering Period

  	
  8

  
	
   

  	
  (l) Participant

  	
  8

  
	
   

  	
  (m) Participating Company

  	
  8

  
	
   

  	
  (n) Plan

  	
  8

  
	
   

  	
  (o) Plan Account

  	
  8

  
	
   

  	
  (p) Purchase Price

  	
  8

  
	
   

  	
  (q) Stock

  	
  8

  
	
   

  	
  (r) Subsidiary

  	
  8

  

 

 

VERIGY LTD.2006

EMPLOYEE SHARES
PURCHASE PLAN

SECTION 1. 
PURPOSE OF THE PLAN.

The Board adopted the Plan effective as of the date of
the IPO. The purpose of the Plan is to provide Eligible Employees with an
opportunity to increase their proprietary interest in the success of the
Company by purchasing Shares from the Company on favorable terms and to pay for
such purchases through payroll deductions. The Plan is intended to qualify for
favorable tax treatment under section 423 of the Code although the Company
undertakes no obligation to maintain such qualification. In addition, this Plan
document authorizes the grant of options to Eligible Employees resident outside
of the United States of America pursuant to terms, rules, procedures or
sub-plans adopted by the Committee (or its designate) designed to achieve tax,
securities law or other Company objectives but which may not qualify under
section 423 of the Code, provided that such terms, rules, procedures or
sub-plans shall apply on a uniform basis to all Eligible Employees employed by
a Participating Company if the grants to the Eligible Employees employed by
such Participating Company are intended to qualify under section 423 of
the Code.

SECTION 2. 
ADMINISTRATION OF THE PLAN.

(a)            Committee Composition.  The
Committee shall administer the Plan. The Committee shall consist exclusively of
one or more directors of the Company, who shall be appointed by the Board.

(b)           Committee Responsibilities.  The Committee shall have the authority and
discretion to interpret the Plan and make all other policy decisions relating
to the operation of the Plan. The Committee may adopt such rules, guidelines
and forms as it deems appropriate to implement the Plan. The Committee’s
determinations under the Plan shall be final and binding on all persons.

SECTION 3. 
SHARES OFFERED UNDER THE PLAN.

(a)            Authorized Shares.  The
number of Shares available for purchase under the Plan shall be 1,700,000
(subject to adjustment pursuant to Subsection (b) below).

(b)           Anti-Dilution Adjustments.
 The aggregate number of Shares offered
under the Plan, the 2,500-share limitation described in Section 8(c) and
the price of shares that any Participant has elected to purchase shall be
adjusted proportionately for any increase or decrease in the number of
outstanding Shares resulting from a subdivision or consolidation of Shares or
the payment of a share dividend, any other increase or decrease in the
outstanding Shares effected without receipt or payment of consideration by the
Company, the distribution of the shares of a Subsidiary to the Company’s
stockholders, or a similar event. The determination of the basis for, and the
calculation of, any such adjustment shall be made in the discretion of the
Committee.

(c)            Reorganizations.  Any other provision of the Plan
notwithstanding, immediately prior to the effective time of a Corporate
Reorganization, the Offering Period then in progress shall terminate and shares
shall be purchased pursuant to Section 8, unless the Plan is continued or
assumed by the surviving corporation or its parent corporation. The Plan shall
in no event be construed to restrict in any way the Company’s right to
undertake a dissolution, liquidation, merger, consolidation or other
reorganization.

SECTION 4. 
ENROLLMENT AND PARTICIPATION.

(a)            Offering Periods.  While the Plan is in effect and
unless otherwise determined by the Committee, two Offering Periods shall
commence in each calendar year. The Offering Periods shall consist of the
six-month periods commencing on each June 1 and December 1, except
that:

(i)               The first Offering Period under the Plan shall
commence on the date of the IPO and shall end on November 30, 2006;

 

(ii)            Prior to the commencement of any Offering Period,
the Committee may in its discretion alter the length of such Offering Period,
provided that an Offering Period shall in no event be longer than
27 months; and

(iii)         The Committee may determine that the first Offering Period applicable to
the Eligible Employees of a new Participating Company shall commence on any
date specified by the Committee, provided that an Offering Period shall in no
event be longer than 27 months.

(b)           Enrollment at IPO.  Each individual who, on the day of the IPO,
qualifies as an Eligible Employee shall automatically become a Participant on
such day, and shall initially be deemed to have elected a payroll deduction
rate of zero. Each Participant who was automatically enrolled on the day of the
IPO shall confirm their enrollment and participation level in the manner and
within the time prescribed by the Company.

(c)            Enrollment After IPO.  In the
case of any individual who qualifies as an Eligible Employee on the first day
of any Offering Period other than the first Offering Period, he or she may
elect to become a Participant on such day by submitting the prescribed
enrollment form to the Company in the manner prescribed by the Company not
later than such day. The Company may prescribe electronic enrollment
procedures.

(d)           Duration of Participation.  Once enrolled in the Plan, a Participant
shall continue to participate in the Plan until he or she:

(i)               Reaches the end of the Offering Period in which
his or her employee contributions were discontinued under Section 5(d) or
9(b);

(ii)            Is deemed to withdraw from the Plan under
Subsection (b) above;

(iii)         Withdraws from the Plan under Section 6(a); or

(iv)        Ceases to be an Eligible Employee.

A Participant whose employee contributions were discontinued
automatically under Section 9(b) shall automatically resume participation
at the beginning of the earliest Offering Period ending in the next calendar
year, if he or she then is an Eligible Employee. In all other cases, a former
Participant may again become a Participant, if he or she then is an Eligible
Employee, by following the procedure described in Subsection (c) above.

SECTION 5. 
EMPLOYEE CONTRIBUTIONS.

(a)            Commencement of Payroll Deductions.  A
Participant may purchase Shares under the Plan solely by means of payroll
deductions. Payroll deductions shall commence as soon as reasonably practicable
after the Company has received the Participant’s enrollment instructions in the
prescribed manner.

(b)           Amount of Payroll Deductions.  An Eligible Employee shall designate in the
enrollment instructions the portion of his or her Compensation that he or she
elects to have withheld for the purchase of Shares. Such portion shall be a
whole percentage of the Eligible Employee’s Compensation, but not more than
10%.

(c)            Changing Withholding Rate.  If a
Participant wishes to change the rate of payroll withholding, he or she may do
so by submitting new instructions with the Company in the prescribed manner at
any time. The new withholding rate shall be effective as soon as reasonably
practicable after the Company has received such instructions. The new
withholding rate shall be a whole percentage of the Eligible Employee’s
Compensation, but not less than 1% nor more than 10%.

 2
 

 

(d)           Discontinuing Payroll Deductions.  If a Participant wishes to
discontinue employee contributions entirely, he or she may do so by submitting
new enrollment instructions with the Company in the prescribed manner at any
time. Payroll withholding shall cease as soon as reasonably practicable after
the Company has received such instructions. (In addition, employee
contributions may be discontinued automatically pursuant to Section 9(b).)
A Participant who has discontinued employee contributions may resume such
contributions by submitting new enrollment instructions with the Company in the
prescribed manner. Payroll withholding shall resume as soon as reasonably
practicable after the Company has received such instructions.

(e)            Limit on Number of Elections.  No
Participant shall make more than three elections under Subsection (c) or
(d) above during any Offering Period.

SECTION 6. 
WITHDRAWAL FROM THE PLAN.

(a)            Withdrawal.  A Participant may elect to
withdraw from the Plan by submitting his or her withdrawal instructions with
the Company in the prescribed manner at any time before the last day of an
Offering Period. As soon as reasonably practicable thereafter, payroll
deductions shall cease and the entire amount credited to the Participant’s Plan
Account shall be refunded to him or her in cash, without interest. No partial
withdrawals shall be permitted.

(b)           Deemed Withdrawal.  A Participant shall be deemed to have
withdrawn from the Plan where, during an offering period the Participant has
elected to reduce his or her withholding rate to zero (including, with respect
to the first Offering Period, a Participant who does not reset his or her
withholding level to a number above zero) and such election remains in effect
at the end of an Offering Period. A withdrawal pursuant to this
Section 6(b) will be deemed effective with respect to the Offering Period
first succeeding the Offering Period which ended with a withholding election at
the zero level, but will not be deemed a withdrawal from the Offering Period in
which the withholding level was reduced to zero. A former Participant who is
deemed to have withdrawn from the Plan shall not be a Participant until he or she
re-enrolls in the Plan under Subsection (c) below. Re-enrollment may be
effective only at the commencement of an Offering Period.

(c)            Re-Enrollment After Withdrawal.  A former
Participant who has withdrawn from the Plan pursuant to Sections 6(a) or 6(b)
shall not be a Participant until he or she re-enrolls in the Plan under
Section 4(c). Re-enrollment may be effective only at the commencement of
an Offering Period.

SECTION 7. 
CHANGE IN EMPLOYMENT STATUS.

(a)            Termination of Employment. 
Termination of status as an Eligible Employee for any reason, including
death, shall be treated as an automatic withdrawal from the Plan under
Section 6(a). (A transfer from one Participating Company to another shall
not be treated as a termination of employment.) Determination of Eligible
Employee status shall be made by the Committee in its sole discretion.

(b)           Leave of Absence.  For purposes of the Plan, employment shall
not be deemed to terminate when the Participant goes on a military leave, a
sick leave or another bona fide
leave of absence, if the leave was approved by the Company in writing.
Employment, however, shall be deemed to terminate 90 days after the
Participant goes on a leave, unless a contract or statute guarantees his or her
right to return to work. Employment shall be deemed to terminate in any event
when the approved leave ends, unless the Participant immediately returns to
work.

(c)            Death.  In the event of the Participant’s death, the
amount credited to his or her Plan Account shall be paid to a beneficiary
designated by him or her for this purpose in the prescribed manner or, if none,
to the Participant’s estate. Such designation shall be valid only if it was
submitted

 3
 

 

to the Company in the prescribed manner before the
Participant’s death and is otherwise valid under applicable law.

SECTION 8.  PLAN
ACCOUNTS AND PURCHASE OF SHARES.

(a)            Plan Accounts.  The Company shall maintain a
Plan Account on its books in the name of each Participant. Whenever an amount
is deducted from a Participant’s Compensation under the Plan, such amount shall
be credited to the Participant’s Plan Account. Amounts credited to Plan
Accounts shall not be trust funds and may be commingled with the Company’s
general assets and applied to general corporate purposes unless otherwise determined
by the Committee in order to comply with local law. No interest shall be
credited to Plan Accounts.

(b)           Purchase Price.  The Purchase Price for each Share purchased
at the close of an Offering Period shall be the lower of:

(i)               85% of the Fair Market Value of one Share on the
last trading day before the commencement of such Offering Period or, in the
case of the first Offering Period under the Plan, 85% of the IPO Price; or

(ii)            85% of the Fair Market Value of one Share on the
last trading day in such Offering Period.

(c)            Number of Shares Purchased.  As of the
last day of each Offering Period, each Participant shall be deemed to have
elected to purchase the number of Shares calculated in accordance with this
Subsection (c), unless the Participant has previously elected to withdraw from
the Plan in accordance with Section 6(a). The amount then in the
Participant’s Plan Account shall be divided by the Purchase Price, and the
number of shares that results shall be purchased from the Company with the funds
in the Participant’s Plan Account. The foregoing notwithstanding, no
Participant shall purchase more than 2,500 Shares with respect to any Offering
Period nor more than the amounts of Shares set forth in Sections 3(a) and 9(b).

(d)           Available Shares Insufficient.  In the event that the aggregate
number of shares that all Participants elect to purchase during an Offering
Period exceeds the maximum number of shares remaining available for issuance
under Section 3, then the number of shares to which each Participant is
entitled shall be determined by multiplying the number of shares available for
issuance by a fraction. The numerator of such fraction is the number of shares
that such Participant has elected to purchase, and the denominator of such
fraction is the number of shares that all Participants have elected to
purchase.

(e)            Issuance of Shares.  Shares
purchased by a Participant under the Plan shall be credited to an account with
the transfer agent in the name of the Participant as soon as reasonably practicable
after the close of the applicable Offering Period. The Committee may provide
that such shares shall initially be held for each Participant’s benefit by a
broker designated by the Committee.

(f)              Tax Withholding.  To the extent required by
applicable federal, state, local or foreign law, as determined by the
Committee, a Participant shall make arrangements satisfactory to the Company
for the satisfaction of any withholding tax obligations that arise in
connection with the Plan. The Company shall not be required to issue any Shares
under the Plan until such obligations are satisfied.

(g)           Unused Cash Balances.  An amount remaining in the Participant’s Plan
Account that represents the Purchase Price for any fractional share shall be
carried over in the Participant’s Plan Account to the next Offering Period. Any
amount remaining in the Participant’s Plan Account that represents the Purchase
Price for whole shares that could not be purchased by reason of Subsection
(c) above, Section 3 or Section 9(b) shall be refunded to the
Participant in cash, without interest.

 4
 

 

(h)           Shareholder Approval.  Any other provision of the Plan
notwithstanding, no Shares shall be purchased under the Plan unless and until
the Company’s stockholders have approved the adoption of, and the issuance of
Shares under, the Plan.

SECTION 9. 
LIMITATIONS ON STOCK OWNERSHIP.

(a)            Five Percent Limit.  Any other
provision of the Plan notwithstanding, no Participant shall be granted a right
to purchase Shares under the Plan if such Participant, immediately after his or
her election to purchase such Shares, would own stock possessing more than 5%
of the total combined voting power or value of all classes of stock of the
Company or any parent or Subsidiary of the Company. For purposes of this Subsection
(a), the following rules shall apply:

(i)               Ownership of stock shall be determined after
applying the attribution rules of section 424(d) of the Code;

(ii)            Each Participant shall be deemed to own any stock
that he or she has a right or option to purchase under this or any other plan;
and

(iii)         Each Participant shall be deemed to have the right to purchase 2,500
Shares under this Plan with respect to each Offering Period.

(b)           Dollar Limit.  Any other provision of the Plan
notwithstanding, no Participant shall purchase Shares with a Fair Market Value
in excess of the following limit:

(i)               In the case of Shares purchased during an Offering
Period that commenced in the current calendar year, the limit shall be equal to
(A) $25,000 minus (B) the Fair Market Value of the Shares that the
Participant previously purchased in the current calendar year (under this Plan
and all other employee stock purchase plans of the Company or any parent or
Subsidiary of the Company);

(ii)            In the case of Shares purchased during an Offering
Period that commenced in the immediately preceding calendar year, the limit
shall be equal to (A) $50,000 minus (B) the Fair Market Value of the
Shares that the Participant previously purchased (under this Plan and all other
employee stock purchase plans of the Company or any parent or Subsidiary of the
Company) in the current calendar year and in the immediately preceding calendar
year; or

(iii)         In the case of Stock purchased during an Offering Period that commenced
in the second preceding calendar year, the limit shall be equal to
(A) $75,000 minus (B) the Fair Market Value of the Stock that the
Participant previously purchased (under this Plan and all other employee stock
purchase plans of the Company or any parent or Subsidiary of the Company) in
the current calendar year and in the two preceding calendar years.

For purposes of this Subsection (b), the Fair Market Value of Shares
shall be determined in each case as of the beginning of the Offering Period in
which such Shares is purchased. Shares purchased under stock purchase plans not
intended to qualify under section 423 of the Code shall be disregarded. If
a Participant is precluded by this Subsection (b) from purchasing
additional Shares under the Plan, then his or her employee contributions shall
automatically be discontinued and shall automatically resume at the beginning
of the earliest Offering Period ending in the next calendar year (if he or she
then is an Eligible Employee).

SECTION 10. 
RIGHTS NOT TRANSFERABLE.

The rights of any Participant under the Plan, or any
Participant’s interest in any Shares or monies to which he or she may be
entitled under the Plan, shall not be transferable by voluntary or involuntary
assignment or by operation of law, or in any other manner other than by beneficiary
designation or the laws of descent and distribution. If a Participant in any
manner attempts to transfer, assign or otherwise

 5
 

 

encumber his or her rights or interest under the Plan,
other than by beneficiary designation or the laws of descent and distribution,
then such act shall be treated as an election by the Participant to withdraw
from the Plan under Section 6(a).

SECTION 11.  NO
RIGHTS AS AN EMPLOYEE.

Nothing in the Plan or in any right granted under the
Plan shall confer upon the Participant any right to continue in the employ of a
Participating Company for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Participating Companies or of
the Participant, which rights are hereby expressly reserved by each, to
terminate his or her employment at any time and for any reason, with or without
cause.

SECTION 12.  NO
RIGHTS AS A SHAREHOLDER.

A Participant shall have no rights as a stockholder with
respect to any Shares that he or she may have a right to purchase under the
Plan until such shares have been purchased on the last day of the applicable
Offering Period and issued to the Participant.

SECTION 13. 
AMENDMENT OR DISCONTINUANCE.

The Board shall have the right to amend, suspend or
terminate the Plan at any time and without notice. Except as provided in
Section 3, any increase in the aggregate number of Shares that may be
issued under the Plan shall be subject to the approval of the Company’s
stockholders. In addition, any other amendment of the Plan shall be subject to
the approval of the Company’s stockholders to the extent required by any
applicable laws and regulations, and the regulations of any stock exchange or
other securities market on which the Company’s securities may then be traded.
The Plan shall terminate automatically 20 years after its adoption by the
Board, unless (a) the Plan is extended by the Board and (b) the
extension is approved within 12 months by a vote of the stockholders of
the Company.

SECTION 14. 
COMMITTEE RULES FOR NON-U.S. JURISDICTIONS.

(a)            Rules and Procedures.  The
Committee may adopt rules or procedures relating to the operation and
administration of the Plan to accommodate the specific requirements of local
laws and procedures. Without limiting the generality of the foregoing, the
Committee is specifically authorized to adopt rules and procedures regarding
handling of payroll deductions, enrollment/withdrawal procedures, conversion of
local currency, payroll tax, withholding procedures and handling of evidence of
stock ownership which vary with local requirements. In addition, the Committee
may adopt rules regarding the payment of interest on amounts held in Plan
Accounts, provided that such rules shall apply on a uniform basis to all
Eligible Employees employed by a Participating Company if the grants to the
Eligible Employees employed by such Participating Company are intended to
qualify under section 423 of the Code.

(b)           Sub-Plans.  The Committee may also adopt sub-plans
applicable to particular Subsidiaries, which sub-plans may be designed to be
outside the scope of Code section 423. The rules of such sub-plans may
take precedence over other provisions of this Plan, with the exception of
Section 3(a), but unless otherwise superseded by the terms of such sub-plan,
the provisions of this Plan shall govern the operation of such sub-plan.

SECTION 15. 
COMPLIANCE WITH LAW.

(a)            Securities Laws and Regulations.  Shares
shall not be issued under the Plan unless the issuance and delivery of such
shares comply with (or are exempt from) all applicable requirements of law,
including (without limitation) the U.S. Securities Act of 1933, as amended, the
rules and

 6
 

 

regulations promulgated thereunder, state and non-U.S.
securities laws and regulations, and the regulations of any stock exchange or
other securities market on which the Company’s securities may then be traded.

(b)           Governmental Approvals.  This Plan and the Company’s obligation to
sell and deliver shares of its stock under the Plan shall be subject to the
approval of any governmental authority required in connection with the Plan or
the authorization, issuance, sale, or delivery of stock hereunder.

(c)            Choice of Law.  This Plan shall be governed by
the laws of the Republic of Singapore, without regard to choice of law rules.

SECTION 16. 
DEFINITIONS.

(a)            “Board”
means the Board of Directors of the Company, as constituted from time to time.

(b)           “Code”
means the U.S. Internal Revenue Code of 1986, as amended.

(c)            “Committee”
means a committee of the Board, as described in Section 2.

(d)           “Company”
means Verigy Ltd., a Singapore corporation.

(e)            “Compensation” means: (i) the following to the extent paid in
cash to a Participant by a Participating Company: salaries; base wages;
commissions and other sales achievement-based compensation; shift premiums;
salaries and wages paid during flexible time off, paid holidays, jury duty,
bereavement periods and other approved time off; plus (ii) any pre-tax
contributions made by the Participant under section 401(k) or 125 of the Code.  The Committee shall determine whether a
particular item is included in Compensation.”

(f)              “Corporate
Reorganization” means:

(i)                The consummation of a merger or consolidation of
the Company with or into another entity or any other corporate reorganization;
or

(ii)             The sale, transfer or other disposition of all or
substantially all of the Company’s assets or the complete liquidation or
dissolution of the Company.

(g)           “Eligible
Employee” means any employee of a Participating Company who meets
both of the following requirements:

(i)                His or her customary employment is for more than
five months per calendar year and for more than 20 hours per week; and

(ii)             He or she has been an employee of a Participating
Company for not less than three consecutive months, or such other period as the
Committee may determine before the beginning of the applicable Offering Period.

The foregoing notwithstanding, (A) for the first Offering Period,
the requirements of subparagraph (ii) above shall not be applicable;
(B) an individual shall be considered an Eligible Employee regardless of
whether the individual satisfies the requirements of Paragraphs (i) and
(ii) above where so provided by the law of any country that has
jurisdiction over him or her or if he or she is subject to a collective bargaining
agreement that so provides; and (C) an individual shall not be considered
an Eligible Employee if his or her participation in the Plan is prohibited by
the law of any country that has jurisdiction over him or her or if he or she is
subject to a collective bargaining agreement that does not provide for
participation in the Plan, provided that the eligibility requirements of the
Plan shall apply

 7
 

 

on a uniform basis to all employees of a Participating
Company if the grants to the Eligible Employees employed by such Participating
Company are intended to qualify under section 423 of the Code.

(h)           “Exchange Act”
means the U.S. Securities Exchange Act of 1934, as amended.

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

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

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

(j)               “IPO”
means the effective date of the registration statement filed by the Company
with the U.S. Securities and Exchange Commission for its initial offering of
Shares to the public.

(k)            “IPO Price”
means the price at which the shares will be first offered to the public (as
reflected on the cover page of the final prospectus prepared in connection with
the IPO).

(l)               “Offering Period”
means a period with respect to which the right to purchase Shares may be
granted under the Plan, as determined pursuant to Section 4(a).

(m)         “Participant”
means an Eligible Employee who participates in the Plan, as provided in
Section 4.

(n)           “Participating
Company” means (i) the Company and (ii) each present or
future Subsidiary designated by the Committee as a Participating Company.

(o)           “Plan”
means this Verigy Ltd. 2006 Employee Shares Purchase Plan, as it may be
amended from time to time.

(p)           “Plan Account”
means the account established for each Participant pursuant to
Section 8(a).

(q)           “Purchase Price”
means the price at which Participants may purchase Shares under the Plan, as
determined pursuant to Section 8(b).

(r)              “Shares”
means the Ordinary Shares of the Company.

(s)            “Subsidiary”
means any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than
the last corporation in the unbroken chain owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.ADOPTION & AMENDMENT HISTORY

Approved by the Board of Directors                         ,         , 2006

Approved by the sole shareholder                         ,         , 2006

 8Exhibit 4.2.5

FIFTH AMENDMENT TO THE REVOLVING CREDIT AGREEMENT

THIS FIFTH AMENDMENT to the REVOLVING CREDIT
AGREEMENT, dated as of this 28th day of August, 2006 (the “Fifth Amendment”),
is entered into in connection with and as an amendment to that certain
Revolving Credit Agreement, dated as of March 10th, 2003 (the “Credit Agreement”), as
amended by that First Amendment, dated as of August 31st, 2003, as further amended by that Second
Amendment, dated as of February 27th,
2004, as further amended by that Third Amendment, dated as of August 30th, 2004, as further amended by
that Fourth Amendment, dated as of August 24th, 2005, and as further amended, restated
or modified from time to time, by and between First National Bank of Omaha (the
“Bank”) and Ballantyne of Omaha, Inc. (the “Borrower”). All capitalized terms
used but not otherwise defined herein shall have their respective meanings as
prescribed in the Credit Agreement.

WHEREAS, the maturity date for the Base Revolving
Credit Facility pursuant to the Credit Agreement is currently August 28th, 2006; and

WHEREAS, the Borrower and the Bank desire to extend
the maturity date of the Base Revolving Credit Facility to August 27th, 2007 and to make such other
amendments as discussed below.

NOW, THEREFORE,
the parties hereby agree that as of the date hereof:

1.                 The
following definition in Article I of the Credit Agreement is hereby amended to
read as follows:

Termination Date:
August 27, 2007, or such later date as is approved in writing by FNBO.

2.                 Section
2.1 of the Credit Agreement is hereby amended by replacing the phrase “Until
August 28, 2006” with “Until August 27, 2007”.

3.                 This
Fifth Amendment shall not affect any and all amounts and obligations that may
be outstanding from the Borrower to the Bank under the Credit Agreement, and
all such obligations remain secured by the Collateral.

4.                 This
Fifth Amendment may be executed in several counterparts, and such counterparts
together shall constitute one and the same instrument.

5.                 Except
as expressly agreed herein, all terms of the Credit Agreement shall remain in
full force and effect.

[Signature page
follows]

 

IN WITNESS WHEREOF, the Borrower and the Bank have
caused this Fifth Amendment to be executed as of the day and year first above
written.

	
  

  	
  BANK:

  
	
   

  	
   

  
	
   

  	
  FIRST NATIONAL BANK OF OMAHA

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marc T. Wisdom

  
	
   

  	
   

  	
  Marc T. Wisdom, Second Vice President

  
	
   

  	
   

  
	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  BALLANTYNE OF OMAHA, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John P Wilmers

  
	
   

  	
  Its:

  	
  President/CEO

  

 

NOTICE: A credit agreement must be in writing to be
enforceable under Nebraska law. To protect you and us from any
misunderstandings or disappointments, any contract, promise, undertaking, or
offer to forebear repayment of money or to make any other financial
accommodation in connection with this loan of money or grant or extension of
credit, or any amendment of, cancellation of, waiver of, or substitution for
any or all of the terms or provisions of any instrument or document executed in
connection with this loan of money or grant or extension of credit, must be in
writing to be effective.

	
  INITIALED:

  	
   

  	
  JPW

  	
   

  
	
   

  	
   

  	
  Borrower

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