Document:

Exhibit 4.4

 

STOCK OPTION AGREEMENT

(Employment Inducement Grant)

 

This
NON-STATUTORY STOCK OPTION AGREEMENT, dated as of June 8, 2010 (this “Agreement”),
is between NETLIST, INC., a Delaware corporation (the “Company”),
and Nickie Duong (the “Optionee”).

 

R E C I T A L S

 

A.            Optionee has not previously been an
officer, director or employee of the Company, and this Option (as defined
below) is granted to Optionee to attract and retain Optionee to serve the
Company in the capacity of Vice President and General Counsel.

 

B.            This Agreement, and the grant of an
Option to the Optionee pursuant to the terms and conditions hereof, have been
approved by the Board of Directors of the Company (the “Board”).

 

C.            This Option is designated as a
non-qualified stock option, and does not
qualify as an incentive stock option within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the “Code”).

 

A G R E E M E N T

 

In
consideration of the foregoing recitals and of the mutual covenants contained
herein, the parties, intending to be legally bound, agree as follows:

 

1.             Grant  of  Option.  The Company hereby grants to the Optionee, as
an inducement to accept employment with the Company, an option (the “Option”)
to purchase from the Company all or any number of an aggregate of 75,000 shares
(the “Option  Shares”), of the Company’s common stock, $.001 par
value per share, at a price of $1.92 per share, on the terms and subject to the
conditions of this Agreement.  This grant
is not made pursuant to the
Company’s 2006 Equity Incentive Plan (the “Plan”), attached as Exhibit A.  However, except as otherwise expressly
provided herein, this grant is subject to the rules, terms and conditions of
the Plan as if it were a grant made pursuant to and under the Plan, and all
such rules, terms and conditions are hereby incorporated herein by reference as
if set forth herein in their entirety. 
Capitalized terms used but not defined in this Agreement shall have the
meanings given to them in the Plan.  The
Option is granted as of June 8, 2010 (the “Grant  Date”).

 

2.             Character  of  Option.  The Option is not intended to be treated as an “incentive stock option”
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the “Code”).

 

3.             Duration  of  Option.
 Unless subject to earlier expiration or
termination pursuant to the terms of the Plan, the Option shall expire on the
ten year anniversary of the Grant Date.

 

4.             Exercisability  of  Option.  The
Option may be exercised, at any time and from time to time until its expiration
or termination, for any or all of those Option Shares in respect of which the
Option shall have become exercisable, in accordance with the provisions set
forth below in this Section 4, on or at any time prior to the date of any
such exercise.  Subject to the provisions
of the Plan (including, without limitation, the provisions of Section 7.1(e) of
the Plan), the Option shall become exercisable in equal 

 

 

quarterly
installments starting with the first quarterly vesting on July 29, 2010 of
1/16th  Shares and shall continue vesting each
quarter on October 29, January 29 and April 29 of the
appropriate year, such that on April 29, 2014, the Option shall be vested
as to all of the Shares and fully exercisable, provided, however, that in the event
that Optionee’s services with the Company is terminated by the Company as a
result of Optionee’s death or disability, an additional 25% of the total number
of Shares (or such fewer number as then remain unvested) shall Accelerate and
vest on the date of such termination. 
These installments shall be cumulative, such that Optionee may exercise
the Option as to any or all of the Shares covered by any installment at any
time or times after such installment vests and prior to termination of the
Option.  The foregoing notwithstanding,
except to the extent the Option vests upon the termination of Optionee’s
services with the Company as provided above, the Option shall cease vesting
upon the termination of Optionee’s services with the Company for any
reason.  Notwithstanding anything
expressed or implied to the contrary in the foregoing provisions of this Section 4,
the exercisability of the Option may, as provided in Section 7.1(d) of
the Plan, at any time be Accelerated in the discretion of the Committee.

 

5.             Transfer  of  Option.  Other than as expressly permitted by the
provisions of Section 6.4 of the Plan, the Option may not be transferred
except by will or the laws of descent and distribution and, during the lifetime
of the Optionee, may be exercised only by the Optionee.

 

6.             Incorporation  of  Plan
Terms.  The Option is granted
subject to all of the applicable terms and provisions of the Plan, which terms
and provisions are incorporated herein by reference pursuant to Section 1
of this Agreement, including, but not limited to, the limitations on the
Company’s obligation to deliver Option Shares upon exercise set forth in Section 9.2
(Violation of Law), Section 9.3 (Corporate Restrictions on Rights in
Stock), Section 9.4 (Investment Representations) and Section 9.7 (Tax
Withholding).

 

7.             Miscellaneous.  This Agreement shall be construed and
enforced in accordance with the internal, substantive laws of the State of
Delaware and shall be binding upon and inure to the benefit of any successor or
assign of the Company and any executor, administrator, trustee, guardian, or
other legal representative of the Optionee.

 

 

IN
WITNESS WHEREOF, the parties have executed this Stock Option Agreement as a
sealed instrument as of the date first above written.

 

	
  NETLIST, INC.

  	
  OPTIONEE

  
	
  By:

  	
  /s/
  Chuck Hong

  	
   

  	
  /s/
  Nickie Duong

  
	
   

  	
  Chuck
  Hong

  	
   

  	
  Nickie
  Duong

  
	
   

  	
  CEO

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Optionee’s
  Address:

  
	
   

  	
   

  	
   

  	
  807
  Alcosta De 

  
	
   

  	
   

  	
   

  	
  Milpitas
  CA 95035

  

 

 

Exhibit A

 

NETLIST, INC., 2006 EQUITY
INCENTIVE PLAN

 

As Proposed to be Amended by the
Stockholders on June 2, 2010

 

1.                                      Purpose

 

This
Plan is intended to encourage ownership of Stock by employees, consultants,
advisors and directors of the Company and its Affiliates and to provide
additional incentive for them to promote the success of the Company’s business through
the grant of Awards of, or pertaining to, shares of the Company’s Stock. This
Plan is intended to be an incentive stock option plan within the meaning of
Section 422 of the Code, but not all Awards are required to be Incentive
Options. This Plan shall not become effective until the Effective Date.

 

2.                                      Definitions

 

As
used in this Plan, the following terms shall have the following meanings:

 

2.1           Accelerate,
Accelerated, and Acceleration, means: (a) when used
with respect to an Option or Stock Appreciation Right, that as of the time of
reference the Option or Stock Appreciation Right will become exercisable with
respect to some or all of the shares of Stock for which it was not then
otherwise exercisable by its terms; (b) when used with respect to Restricted
Stock or Restricted Stock Units, that the Risk of Forfeiture otherwise
applicable to the Stock or Units shall expire with respect to some or all of
the shares of Restricted Stock or Units then still otherwise subject to the
Risk of Forfeiture; and (c) when used with respect to Performance Units,
that the applicable Performance Goals shall be deemed to have been met as to
some or all of the Units.

 

2.2           Acquisition
means (i) a merger or consolidation of the Company with or into another
person, (ii) the sale, transfer, or other disposition of all or
substantially all of the Company’s assets to one or more other persons in a
single transaction or series of related transactions, or (iii) the
acquisition of beneficial ownership (determined pursuant to Securities and
Exchange Commission Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended and in effect from time to time) by any person of more
than 50% of the Company’s outstanding common stock pursuant to a tender or
exchange offer made directly to the Company’s stockholders, other than an
underwriter temporarily holding common stock pursuant to an offering of such
common stock. Notwithstanding the foregoing, a transaction shall not constitute
an “Acquisition” if its sole purpose is to change the state of the Company’s
incorporation or to create a holding company that will be owned in
substantially the same proportions by the persons who held the Company’s
securities immediately prior to such transaction.

 

2.3           Affiliate
means any corporation, partnership, limited liability company, business trust,
or other entity controlling, controlled by or under common control with the
Company.

 

2.4           Award
means any grant or sale pursuant to the Plan of Options, Stock Appreciation
Rights, Performance Units, Restricted Stock, Restricted Stock Units or Stock
Grants.

 

2.5           Award
Agreement means an agreement between the Company and the recipient
of an Award, setting forth the terms and conditions of the Award.

 

2.6           Board
means the Company’s Board of Directors.

 

2.7           Code
means the Internal Revenue Code of 1986, as amended from time to time, or any
successor statute thereto, and any regulations issued from time to time
thereunder.

 

2.8           Committee
means the Compensation Committee of the Board, which in general is responsible
for the administration of the Plan, as provided in Section 5 of the Plan.
For any period during which no such committee is in existence “Committee” shall
mean the Board and all authority and responsibility assigned to the Committee
under the Plan shall be exercised, if at all, by the Board.

 

2.9           Company
means Netlist, Inc., a corporation organized under the laws of the State
of Delaware.

 

2.10         Covered
Employee means an employee who is a “covered employee” within the
meaning of Section 162(m) of the Code.

 

A-1

 

2.11         Effective
Date means the date on which the Company’s registration statement on
Form S-1, initially filed with the Securities and Exchange Commission on
August 18, 2006 in connection with the initial public offering of its
common stock in a firm commitment underwriting, as amended, is declared
effective by the Securities and Exchange Commission.

 

2.12         Grant
Date means the date as of which an Option is granted, as determined
under Section 7.1(a).

 

2.13         Incentive
Option means an Option which by its terms is to be treated as an “incentive
stock option” within the meaning of Section 422 of the Code.

 

2.14         Market
Value means the value of a share of Stock on a particular date
determined by such methods or procedures as may be established by the
Committee. Unless otherwise determined by the Committee, the Market Value of
Stock as of any date is the closing price for the Stock as quoted on the NGM
(or on any other national securities exchange on which the Stock is then
listed) for that date or, if no closing price is reported for that date, the
closing price on the next preceding date for which a closing price was
reported. For purposes of Awards effective as of the effective date of the
Company’s initial public offering, Market Value of Stock shall be the price at
which the Company’s Stock is offered to the public in its initial public
offering.

 

2.15         NGM
means the NASDAQ Global Market.

 

2.16         Nonstatutory
Option means any Option that is not an Incentive Option.

 

2.17         Option
means an option to purchase shares of Stock.

 

2.18         Optionee
means a Participant to whom an Option shall have been granted under the Plan.

 

2.19         Participant
means any holder of an outstanding Award under the Plan.

 

2.20         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 used to establish Performance
Goals are limited to: (i) cash flow (before or after dividends),
(ii) earnings per share (including, without limitation, earnings before
interest, taxes, depreciation and amortization), (iii) stock price,
(iv) return on equity, (v) stockholder return or total stockholder
return, (vi) return on capital (including, without limitation, return on
total capital or return on invested capital), (vii) return on investment,
(viii) return on assets or net assets, (ix) market capitalization,
(x) economic value added, (xi) debt leverage (debt to capital),
(xii) revenue, (xiii) sales or net sales, (xiv) backlog,
(xv) income, pre-tax income or net income, (xvi) operating income or
pre-tax profit, (xvii) operating profit, net operating profit or economic
profit, (xviii) gross margin, operating margin or profit margin,
(xix) return on operating revenue or return on operating assets,
(xx) cash from operations, (xxi) operating ratio,
(xxii) operating revenue, (xxiii) market share improvement,
(xxiv) general and administrative expenses or (xxv) customer service.

 

2.21         Performance
Goals means, for a Performance Period, the written goal or goals
established by the Committee for the Performance Period based upon the
Performance Criteria. The Performance Goals may be expressed in terms of
overall Company performance or the performance of a division, business unit,
subsidiary, or an individual. either individually, alternatively or in any
combination, applied to either the Company as a whole or to a business unit or
Affiliate, either individually, alternatively or in any combination, and
measured either quarterly, annually 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. The Committee will, in the manner and within the time prescribed by
Section 162(m) of the Code in the case of Qualified Performance-Based
Awards, objectively define the manner of calculating the Performance Goal or
Goals it selects to use for such Performance Period for such Participant. To
the extent consistent with Section 162(m) of the Code, the Committee
may appropriately adjust any evaluation of performance against a Performance
Goal to exclude any of the following events that occurs during a performance
period: (i) asset write-downs, (ii) litigation, claims, judgments or
settlements, (iii) the effect of changes in tax law, accounting principles
or other such laws or provisions affecting reported results, (iv) accruals
for reorganization and restructuring programs and (v) any extraordinary,
unusual, non-recurring or non-comparable items (A) as described in
Accounting Principles Board Opinion No. 30, (B) as described in
management’s discussion and analysis of financial condition and results of
operations appearing in the Company’s Annual Report to stockholders for the
applicable year, or (C) publicly announced by the Company in a press
release or conference call relating to the Company’s results of operations or
financial condition for a completed quarterly or annual fiscal period.

 

A-2

 

2.22         Performance
Period means the one or more periods of time, which may be of
varying and overlapping durations, selected by the Committee, over which the
attainment of one or more Performance Goals will be measured for purposes of
determining a Participant’s right to, and the payment of, a Performance Unit.

 

2.23         Performance
Unit means a right granted to a Participant under Section 7.5,
to receive cash, Stock or other Awards, the payment of which is contingent on
achieving Performance Goals established by the Committee.

 

2.24         Plan
means this 2006 Equity Incentive Plan of the Company, as amended from time to
time, and including any attachments or addenda hereto.

 

2.25         Qualified
Performance-Based Awards means Awards intended to qualify as “performance-based
compensation” under Section 162(m) of the Code.

 

2.26         Restricted
Stock means a grant or sale of shares of Stock to a Participant
subject to a Risk of Forfeiture.

 

2.27         Restriction
Period means the period of time, established by the Committee in
connection with an Award of Restricted Stock or Restricted Stock Units, during
which the shares of Restricted Stock or Restricted Stock Units are subject to a
Risk of Forfeiture described in the applicable Award Agreement.

 

2.28         Risk
of Forfeiture means a limitation on the right of the Participant to
retain Restricted Stock or Restricted Stock Units, including a right in the
Company to reacquire shares of Restricted Stock at less than their then Market
Value, arising because of the occurrence or non-occurrence of specified events
or conditions.

 

2.29         Restricted
Stock Units means rights to receive shares of Stock at the close of
a Restriction Period, subject to a Risk of Forfeiture.

 

2.30         Stock
means common stock, par value $0.001 per share, of the Company, and such other
securities as may be substituted for Stock pursuant to Section 8.

 

2.31         Stock
Appreciation Right means a right to receive any excess in the Market
Value of shares of Stock (except as otherwise provided in Section 7.2(c))
over a specified exercise price.

 

2.32         Stock
Grant means the grant of shares of Stock not subject to restrictions
or other forfeiture conditions.

 

2.33         Ten
Percent Owner means a person who owns, or is deemed within the
meaning of Section 422(b)(6) of the Code to own, stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company (or any parent or subsidiary corporations of the Company, as defined in
Sections 424(e) and (f), respectively, of the Code). Whether a person
is a Ten Percent Owner shall be determined with respect to an Option based on
the facts existing immediately prior to the Grant Date of the Option.

 

3.                                      Term of the Plan

 

Unless
the Plan shall have been earlier terminated by the Board, Awards may be granted
under this Plan at any time in the period commencing on the date of approval of
the Plan by the Board and ending immediately prior to the tenth anniversary of
the earlier of the adoption of the Plan by the Board or approval of the Plan by
the Company’s stockholders. Awards granted pursuant to the Plan within that
period shall not expire solely by reason of the termination of the Plan. Awards
of Incentive Options granted prior to stockholder approval of the Plan are
expressly conditioned upon such approval, but in the event of the failure of
the stockholders to approve the Plan shall thereafter and for all purposes be
deemed to constitute Nonstatutory Options.

 

4.                                      Stock Subject to the Plan

 

At
no time shall the number of shares of Stock issued pursuant to or subject to
outstanding Awards granted under the Plan (including, without limitation,
pursuant to Incentive Options), nor the number of shares of Common Stock issued
pursuant to Incentive Options, exceed the sum of (a) 500,000 shares of
Stock plus (b) an annual increase to be added on the first day of each
calendar year beginning on or after January 1, 2007 equal to the lesser of
(i) 500,000 shares of Stock, and (ii) such lesser number as the Board
may approve for the fiscal year, provided, however, that beginning on
January 1, 2010, the annual increase to the number of shares of Stock that
may be issued pursuant to the Plan shall be equal to the lesser of 

 

A-3

 

(x) 5.0% of the number
of shares of Stock that are issued and outstanding as of the first day of the
calendar year, and (y) 1,200,000 shares of Stock; subject, however, to the provisions of
Section 8 of the Plan. For purposes of applying the foregoing limitation,
(a) if any Option or Stock Appreciation Right expires, terminates, or is
cancelled for any reason without having been exercised in full, or if any other
Award is forfeited by the recipient or repurchased at less than its Market Value,
the shares not purchased by the Optionee or which are forfeited by the
recipient or repurchased shall again be available for Awards to be granted
under the Plan and (b) if any Option is exercised by delivering
previously-owned shares in payment of the exercise price therefor, only the net
number of shares, that is, the number of shares issued minus the number
received by the Company in payment of the exercise price, shall be considered
to have been issued pursuant to an Award granted under the Plan. In addition,
settlement of any Award shall not count against the foregoing limitations
except to the extent settled in the form of Stock. Shares of Stock issued
pursuant to the Plan may be either authorized but unissued shares or shares
held by the Company in its treasury.

 

5.                                      Administration

 

The
Plan shall be administered by the Committee; provided,
however, that at any time and on any one or more occasions the Board
may itself exercise any of the powers and responsibilities assigned the
Committee under the Plan and when so acting shall have the benefit of all of
the provisions of the Plan pertaining to the Committee’s exercise of its
authorities hereunder; and provided further,
however, that the Committee may delegate to an executive officer or
officers the authority to grant Awards hereunder to employees who are not
officers, and to consultants and advisors, in accordance with such guidelines
as the Committee shall set forth at any time or from time to time. Subject to
the provisions of the Plan, the Committee shall have complete authority, in its
discretion, to make or to select the manner of making all determinations with
respect to each Award to be granted by the Company under the Plan including the
employee, consultant, advisor or director to receive the Award and the form of
Award. In making such determinations, the Committee may take into account the
nature of the services rendered by the respective employees, consultants,
advisors and directors, their present and potential contributions to the success
of the Company and its Affiliates, and such other factors as the Committee in
its discretion shall deem relevant. Subject to the provisions of the Plan, the
Committee shall also have complete authority to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to it, to
determine the terms and provisions of the respective Award Agreements (which
need not be identical), and to make all other determinations necessary or
advisable for the administration of the Plan, including, but not limited to,
the cancellation, amendment, repricing, reclassification or exchange of
outstanding Options and other Awards, subject to the provisions of
Section 14. The Committee’s determinations made in good faith on matters
referred to in the Plan shall be final, binding and conclusive on all persons
having or claiming any interest under the Plan or an Award made pursuant
hereto.

 

6.                                      Authorization of Grants

 

6.1  Eligibility.  The Committee may grant from time to time and
at any time prior to the termination of the Plan one or more Awards, either
alone or in combination with any other Awards, to any employee of, or
consultant or advisor to, one or more of the Company and its Affiliates or to
any non-employee member of the Board or of any board of directors (or similar
governing authority) of any Affiliate. However, only employees of the Company,
and of any parent or subsidiary corporations of the Company, as defined in
Sections 424(e) and (f), respectively, of the Code, shall be eligible
for the grant of an Incentive Option. Further, in no event shall the number of
shares of Stock covered by Options or other Awards granted to any one person in
any one calendar year exceed 25% of the aggregate number of shares of Stock
subject to the Plan.

 

6.2  General Terms
of Awards.  Each grant of an
Award shall be subject to all applicable terms and conditions of the Plan
(including but not limited to any specific terms and conditions applicable to
that type of Award set out in the following Section), and such other terms and
conditions, not inconsistent with the terms of the Plan, as the Committee may
prescribe. No prospective Participant shall have any rights with respect to an
Award, unless and until such Participant shall have complied with the
applicable terms and conditions of such Award (including, if applicable,
delivering a fully-executed copy of any agreement evidencing an Award to the
Company).

 

6.3  Effect of
Termination of Employment, Etc. 
Unless the Committee shall provide otherwise with respect to any Award,
if the Participant’s employment or other association with the Company and its
Affiliates ends for any reason, including because of the Participant’s employer
ceasing to be an Affiliate, (a) any outstanding Option or Stock
Appreciation Right of the Participant shall cease to be exercisable in any
respect not later than 90 days following that event and, for the period it
remains exercisable following that event, shall be exercisable only to the
extent exercisable at the date of that event, and (b) any other outstanding
Award of the Participant shall be forfeited or otherwise subject to return to,
or repurchase by, the Company on the terms specified in the applicable Award
Agreement. Military or sick leave or other bona fide leave shall not be deemed
a termination of employment or other association, provided that it does not exceed the longer of 90 days
or the period during which the absent Participant’s reemployment rights, if
any, are guaranteed by statute or by contract.

 

A-4

 

6.4 
Transferability of Awards. 
Except as otherwise provided in this Section 6.4, Awards shall not
be transferable, and no Award or interest therein may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or
by the laws of descent and distribution. The foregoing sentence shall not limit
the transferability of Stock Grants or of Restricted Stock that is no longer
subject to a Risk of Forfeiture. All of a Participant’s rights in any Award may
be exercised during the life of the Participant only by the Participant or the
Participant’s legal representative. However, the Committee may, at or after the
grant of an Award of a Nonstatutory Option, or shares of Restricted Stock,
provide that such Award may be transferred by the recipient to a family member;
provided, however, that any such
transfer is without payment of any consideration whatsoever and that no
transfer shall be valid unless first approved by the Committee, acting in its
sole discretion. For this purpose, “family member” means any child, stepchild,
grandchild, parent, stepparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
employee’s household (other than a tenant or employee), a trust in which the
foregoing persons have more than 50% of the beneficial interests, a foundation
in which the foregoing persons (or the Participant) control the management of
assets, and any other entity in which these persons (or the Participant) own
more than 50% of the voting interests.

 

7.                                      Specific Terms of Awards

 

7.1           Options.

 

(a)  Date of Grant.  The granting of an Option shall take place at
the time specified in the Award Agreement. Only if expressly so provided in the
applicable Award Agreement shall the Grant Date be the date on which the Award
Agreement shall have been duly executed and delivered by the Company and the
Optionee.

 

(b)  Exercise Price.  The price at which shares of Stock may be
acquired under each Incentive Option shall be not less than 100% of the Market
Value of Stock on the Grant Date, or not less than 110% of the Market Value of
Stock on the Grant Date if the Optionee is a Ten Percent Owner. The price at
which shares may be acquired under each Nonstatutory Option shall not be so
limited solely by reason of this Section.

 

(c)  Option Period.  No Incentive Option may be exercised on or
after the tenth anniversary of the Grant Date, or on or after the fifth
anniversary of the Grant Date if the Optionee is a Ten Percent Owner. The
Option period under each Nonstatutory Option shall not be so limited solely by
reason of this Section.

 

(d)  Exercisability.  An Option may be immediately exercisable or
become exercisable in such installments, cumulative or non-cumulative, as the
Committee may determine. In the case of an Option not otherwise immediately
exercisable in full, the Committee may Accelerate such Option in whole or in
part at any time; provided, however,
that in the case of an Incentive Option, any such Acceleration of the Option
would not cause the Option to fail to comply with the provisions of
Section 422 of the Code or the Optionee consents to the Acceleration.

 

(e)  Method of Exercise.  An Option may be exercised by the Optionee
giving written notice, in the manner provided in Section 16, specifying
the number of shares with respect to which the Option is then being exercised.
The notice shall be accompanied by payment in the form of cash or check payable
to the order of the Company in an amount equal to the exercise price of the
shares to be purchased or, subject in each instance to the Committee’s
approval, acting in its sole discretion, and to such conditions, if any, as the
Committee may deem necessary to avoid adverse accounting effects to the
Company) by delivery to the Company of

 

(i)                                     shares of Stock
having a Market Value equal to the exercise price of the shares to be
purchased, or

 

(ii)                                 unless
prohibited by applicable law, the Optionee’s executed promissory note in the
principal amount equal to the exercise price of the shares to be purchased and
otherwise in such form as the Committee shall have approved.

 

If the Stock is traded on an
established market, payment of any exercise price may also be made through and
under the terms and conditions of any formal cashless exercise program
authorized by the Company entailing the sale of the Stock subject to an Option
in a brokered transaction (other than to the Company). Receipt by the Company
of such notice and payment in any authorized, or combination of authorized,
means shall constitute the exercise of the Option. Within thirty (30) days
thereafter but subject to the remaining provisions of the Plan, the Company
shall deliver, or cause to be delivered, to the Optionee or his agent a
certificate or certificates for the number of shares then being purchased. Such
shares shall be fully paid and nonassessable.

 

A-5

 

(f)  Limit on Incentive Option Characterization.  An Incentive Option shall be considered to be
an Incentive Option only to the extent that the number of shares of Stock for
which the Option first becomes exercisable in a calendar year do not have an
aggregate Market Value (as of the date of the grant of the Option) in excess of
the “current limit”. The current limit for any Optionee for any calendar year
shall be $100,000 minus the
aggregate Market Value at the date of grant of the number of shares of Stock
available for purchase for the first time in the same year under each other
Incentive Option previously granted to the Optionee under the Plan, and under
each other incentive stock option previously granted to the Optionee under any
other incentive stock option plan of the Company and its Affiliates, after
December 31, 1986. Any shares of Stock which would cause the foregoing
limit to be violated shall be deemed to have been granted under a separate
Nonstatutory Option, otherwise identical in its terms to those of the Incentive
Option.

 

(g)  Notification of Disposition.  Each person exercising any Incentive Option
granted under the Plan shall be deemed to have covenanted with the Company to
report to the Company any disposition of such shares prior to the expiration of
the holding periods specified by Section 422(a)(1) of the Code
(currently the later of two years from the Grant Date and one year from the
date of exercise of the Incentive Option) and, if and to the extent that the
realization of income in such a disposition imposes upon the Company federal,
state, local or other withholding tax requirements, or any such withholding is
required to secure for the Company an otherwise available tax deduction, to
remit to the Company an amount in cash sufficient to satisfy those
requirements.

 

7.2           Stock
Appreciation Rights.

 

(a)  Tandem or Stand-Alone.  Stock Appreciation Rights may be granted in
tandem with an Option (at or, in the case of a Nonstatutory Option, after the
award of the Option), or alone and unrelated to an Option. Stock Appreciation Rights
in tandem with an Option shall terminate to the extent that the related Option
is exercised, and the related Option shall terminate to the extent that the
tandem Stock Appreciation Rights are exercised.

 

(b)  Exercise Price.  Stock Appreciation Rights shall have such
exercise price as the Committee may determine, except that in the case of Stock
Appreciation Rights in tandem with Options, the exercise price of the Stock
Appreciation Rights shall equal the exercise price of the related Option.

 

(c)  Other Terms.  Except as the Committee may deem
inappropriate or inapplicable in the circumstances, Stock Appreciation Rights
shall be subject to terms and conditions substantially similar to those
applicable to a Nonstatutory Option. In addition, a Stock Appreciation Right
related to an Option which can only be exercised during limited periods
following a Change in Control may entitle the Participant to receive an amount
based upon the highest price paid or offered for Stock in any transaction
relating to the Change in Control or paid during the thirty (30) day
period immediately preceding the occurrence of the Change in Control in any
transaction reported in the stock market in which the Stock is normally traded.

 

7.3           Restricted
Stock.

 

(a)  Purchase Price.  Shares of Restricted Stock shall be issued
under the Plan for such consideration, in cash, other property or services, or
any combination thereof, as is determined by the Committee.

 

(b)  Issuance of Certificates.  Each Participant receiving a Restricted Stock
Award, subject to subsection (c) below, shall be issued a stock
certificate in respect of such shares of Restricted Stock. Such certificate
shall be registered in the name of such Participant, and, if applicable, shall
bear an appropriate legend referring to the terms, conditions, and restrictions
applicable to such Award substantially in the following form:

 

The
transferability of this certificate and the shares represented by this
certificate are subject to the terms and conditions of the Netlist, Inc.
2006 Equity Incentive Plan and an Award Agreement entered into by the
registered owner and Netlist, Inc. Copies of such Plan and Agreement are
on file in the offices of Netlist, Inc.

 

(c)  Escrow of Shares.  The Committee may require that the stock certificates
evidencing shares of Restricted Stock be held in custody by a designated escrow
agent (which may but need not be the Company) until the restrictions thereon
shall have lapsed, and that the Participant deliver a stock power, endorsed in
blank, relating to the Stock covered by such Award.

 

(d)  Restrictions and Restriction Period.  During the Restriction Period applicable to
shares of Restricted Stock, such shares shall be subject to limitations on
transferability and a Risk of Forfeiture arising on the basis of such
conditions related to the performance of services, Company or Affiliate
performance or otherwise as the Committee may determine and provide for in the
applicable Award Agreement. Any such Risk of Forfeiture may be waived or
terminated, or the Restriction Period shortened, at any time by the Committee
on such basis as it deems appropriate.

 

A-6

 

(e)  Rights Pending Lapse of Risk of Forfeiture or
Forfeiture of Award.  Except
as otherwise provided in the Plan or the applicable Award Agreement, at all
times prior to lapse of any Risk of Forfeiture applicable to, or forfeiture of,
an Award of Restricted Stock, the Participant shall have all of the rights of a
stockholder of the Company, including the right to vote, and the right to
receive any dividends with respect to, the shares of Restricted Stock. The
Committee, as determined at the time of Award, may permit or require the
payment of cash dividends to be deferred and, if the Committee so determines,
reinvested in additional Restricted Stock to the extent shares are available
under Section 4.

 

(f)  Lapse of Restrictions.  If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock, the certificates for such
shares shall be delivered to the Participant promptly if not previously
delivered.

 

7.4           Restricted
Stock Units.

 

(a)  Character.  Each Restricted Stock Unit shall entitle the
recipient to a share of Stock at a close of such Restriction Period as the
Committee may establish and be subject to a Risk of Forfeiture arising on the
basis of such conditions relating to the performance of services, Company or
Affiliate performance or otherwise as the Committee may determine and provide
for in the applicable Award Agreement. Any such Risk of Forfeiture may be
waived or terminated, or the Restriction Period shortened, at any time by the
Committee on such basis as it deems appropriate.

 

(b)  Form and Timing of Payment.  Payment of earned Restricted Stock Units
shall be made in a single lump sum following the close of the applicable
Restriction Period. At the discretion of the Committee, Participants may be
entitled to receive payments equivalent to any dividends declared with respect
to Stock referenced in grants of Restricted Stock Units but only following the
close of the applicable Restriction Period and then only if the underlying
Stock shall have been earned. Unless the Committee shall provide otherwise, any
such dividend equivalents shall be paid, if at all, without interest or other
earnings.

 

7.5           Performance
Units.

 

(a)  Character.  Each Performance Unit shall entitle the
recipient to the value of a specified number of shares of Stock, over the
initial value for such number of shares, if any, established by the Committee
at the time of grant, at the close of a specified Performance Period to the
extent specified Performance Goals shall have been achieved.

 

(b)  Earning of Performance Units.  The Committee shall set Performance Goals in
its discretion which, depending on the extent to which they are met within the
applicable Performance Period, will determine the number and value of
Performance Units that will be paid out to the Participant. After the
applicable Performance Period has ended, the holder of Performance Units shall
be entitled to receive payout on the number and value of Performance Units
earned by the Participant over the Performance Period, to be determined as a
function of the extent to which the corresponding Performance Goals have been
achieved.

 

(c)  Form and Timing of Payment.  Payment of earned Performance Units shall be
made in a single lump sum following the close of the applicable Performance
Period. At the discretion of the Committee, Participants may be entitled to
receive any dividends declared with respect to Stock which have been earned in
connection with grants of Performance Units which have been earned, but not yet
distributed to Participants. The Committee may permit or, if it so provides at
grant, require a Participant to defer such Participant’s receipt of the payment
of cash or the delivery of Stock that would otherwise be due to such
Participant by virtue of the satisfaction of any requirements or goals with
respect to Performance Units. If any such deferral election is permitted or
required, the Committee shall establish rules and procedures for such
payment deferrals.

 

7.6  Stock Grants.  Stock Grants shall be awarded solely in
recognition of significant contributions to the success of the Company or its
Affiliates, in lieu of compensation otherwise already due and in such other
limited circumstances as the Committee deems appropriate. Stock Grants shall be
made without forfeiture conditions of any kind.

 

7.7           Qualified
Performance-Based Awards.

 

(a)  Purpose. 
The purpose of this Section 7.7 is to provide the Committee the
ability to qualify Awards as “performance-based compensation” under
Section 162(m) of the Code. If the Committee, in its discretion,
decides to grant an Award as a Qualified Performance-Based Award, the
provisions of this Section 7.7 will control over any contrary provision
contained in the Plan. In the course of granting any Award, the Committee may
specifically designate the Award as intended to qualify as a Qualified
Performance-Based Award. However, no Award shall be considered to have failed
to qualify as a Qualified Performance-Based Award solely because the Award is
not expressly designated as a Qualified Performance-Based Award if the Award
otherwise satisfies the provisions of this Section 7.7 and the requirements
of Section 162(m) of the Code and the regulations thereunder
applicable to “performance-based compensation.”

 

A-7

 

(b)  Authority.  All grants of Awards intended to qualify as
Qualified Performance-Based Awards and determination of terms applicable
thereto shall be made by the Committee or, if not all of the members thereof
qualify as “outside directors” within the meaning of applicable IRS regulations
under Section 162 of the Code, a subcommittee of the Committee consisting
of such of the members of the Committee as do so qualify. Any action by such a
subcommittee shall be considered the action of the Committee for purposes of
the Plan.

 

(c)  Applicability.  This Section 7.7 will apply only to
those Covered Employees, or to those persons who the Committee determines are
reasonably likely to become Covered Employees in the period covered by an
Award, selected by the Committee to receive Qualified Performance-Based Awards.
The Committee may, in its discretion, grant Awards to Covered Employees that do
not satisfy the requirements of this Section 7.7.

 

(d)  Discretion of Committee with Respect to Qualified
Performance-Based Awards. 
Options may be granted as Qualified Performance-Based Awards in
accordance with Section 7.1, except that the exercise price of any Option
intended to qualify as a Qualified Performance-Based Award shall in no event be
less that the Market Value of the Stock on the date of grant. With regard to
other Awards intended to qualify as Qualified Performance-Based Awards, such as
Restricted Stock, Restricted Stock Units, or Performance Units, the Committee
will have full discretion to select the length of any applicable Restriction
Period or Performance Period, the kind and/or level of the applicable
Performance Goal, and whether the Performance Goal is to apply to the Company,
a Subsidiary or any division or business unit or to the individual. Any
Performance Goal or Goals applicable to Qualified Performance-Based Awards
shall be objective, shall be established not later than ninety (90) days
after the beginning of any applicable Performance Period (or at such other date
as may be required or permitted for “performance-based compensation” under
Section 162(m) of the Code) and shall otherwise meet the requirements
of Section 162(m) of the Code, including the requirement that the
outcome of the Performance Goal or Goals be substantially uncertain (as defined
in the regulations under Section 162(m) of the Code) at the time
established.

 

(e)  Payment of Qualified Performance-Based Awards.  A Participant will be eligible to receive
payment under a Qualified Performance-Based Award which is subject to
achievement of a Performance Goal or Goals only if the applicable Performance
Goal or Goals period are achieved within the applicable Performance Period, as
determined by the Committee. In determining the actual size of an individual
Qualified Performance-Based Award, the Committee may reduce or eliminate the
amount of the Qualified Performance-Based Award earned for the Performance
Period, if in its sole and absolute discretion, such reduction or elimination
is appropriate.

 

(f)  Maximum Award Payable.  The maximum Qualified Performance-Based Award
payment to any one Participant under the Plan for a Performance Period is 25%
of the number of shares of Stock set forth in Section 4 above, or if the
Qualified Performance-Based Award is paid in cash, that number of shares
multiplied by the Market Value of the Stock as of the date the Qualified
Performance-Based Award is granted.

 

(g)  Limitation on Adjustments for Certain Events.  No adjustment of any Qualified
Performance-Based Award pursuant to Section 8 shall be made except on such
basis, if any, as will not cause such Award to provide other than “performance-based
compensation” within the meaning of Section 162(m) of the Code.

 

7.8  Awards to
Participants Outside the United States.  The Committee may modify the terms of any
Award under the Plan granted to a Participant who is, at the time of grant or
during the term of the Award, resident or primarily employed outside of the
United States in any manner deemed by the Committee to be necessary or
appropriate to conform that Award to laws, regulations, and customs of the
country in which the Participant is then resident or primarily employed, or so
that the value and other benefits of the Award to the Participant, as affected
by foreign tax laws and other restrictions applicable as a result of the
Participant’s residence or employment abroad, shall be comparable to the value
of such an Award to a Participant who is resident or primarily employed in the
United States. The Committee may establish supplements to, or amendments,
restatements, or alternative versions of, the Plan for the purpose of granting
and administrating any such modified Award. No such modification, supplement,
amendment, restatement or alternative version may increase the share limit of
Section 4.

 

8.                                      Adjustment Provisions

 

8.1  Adjustment
for Corporate Actions.  All of
the share numbers set forth in the Plan reflect the capital structure of the
Company as of the Effective Date. Subject to Section 8.2, if subsequent to
that date the outstanding shares of Stock (or any other securities covered by
the Plan by reason of the prior application of this Section) are increased,
decreased, or exchanged for a different number or kind of shares or other
securities, or if additional shares or new or different shares or other
securities are distributed with respect to shares of Stock, through a merger,
consolidation, sale of all or substantially all the property of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split, or other similar distribution with respect to such
shares of Stock, an appropriate and proportionate adjustment will be made in 

 

A-8

 

(i) the maximum numbers
and kinds of shares provided in Section 4, (ii) the numbers and kinds
of shares or other securities subject to the then outstanding Awards,
(iii) the exercise price for each share or other unit of any other
securities subject to then outstanding Options and Stock Appreciation Rights
(without change in the aggregate purchase price as to which such Options or
Rights remain exercisable), and (iv) the repurchase price of each share of
Restricted Stock then subject to a Risk of Forfeiture in the form of a Company
repurchase right.

 

8.2           Treatment
in Certain Acquisitions.

 

(a)           Subject to any provisions of then
outstanding Awards granting greater rights to the holders thereof, in the event
of an Acquisition, the Committee may, either in advance of the Acquisition or
at the time thereof and upon such terms as it may deem appropriate, provide for
the Acceleration of any then outstanding Awards in full if, and only if, such
Awards are not assumed or replaced by comparable Awards referencing shares of
the capital stock of the successor or acquiring entity or parent thereof, and
after a reasonable period following such Acceleration, as determined by the Committee,
such Accelerated Awards and all other then outstanding Awards not assumed or
replaced by comparable Awards shall terminate. As to any one or more
outstanding Awards which are not otherwise Accelerated in full by reason of
such Acquisition, the Committee may also, either in advance of an Acquisition
or at the time thereof and upon such terms as it may deem appropriate, provide
for the Acceleration of such outstanding Awards in the event that the
employment of the Participants should subsequently terminate following the
Acquisition. Each outstanding Award that is assumed in connection with an
Acquisition, or is otherwise to continue in effect subsequent to the
Acquisition, will be appropriately adjusted, immediately after the Acquisition,
as to the number and class of securities and other relevant terms in accordance
with Section 8.1.

 

(b)           For the purposes of this
Section 8.2, an Award shall be considered assumed or replaced by a
comparable Award if, following the Acquisition, the Award confers the right to
purchase, for each share of Stock subject to the Award immediately prior to the
Acquisition, the consideration (whether stock, cash or other securities or
property) received in the Acquisition by holders of Stock on the effective date
of the Acquisition (and if holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
shares of Stock); provided, however,
that if such consideration received in the Acquisition was not solely common stock
of the successor corporation or its parent or subsidiary, the Committee may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Award for each share of Stock subject to
the Award to be solely common stock of the successor corporation or its parent
or subsidiary equal in fair market value to the per share consideration
received by holders of Stock in the Acquisition, or any combination of cash and
common stock, (including the payment of cash equal to the net of Market Value
over the exercise price of the shares of Stock subject to the Award) so
approved by the Committee with the consent of the successor corporation; and
provided further that such Award may continue to be subject to the same vesting
requirements or Risks of Forfeiture after the Acquisition.

 

8.3  Dissolution
or Liquidation.  Upon the
dissolution or liquidation of the Company, other than as part of an Acquisition
or similar transaction, each outstanding Option and Stock Appreciation Right
shall terminate, but the Optionee or Stock Appreciation Right holder shall have
the right, immediately prior to the dissolution or liquidation, to exercise the
Option or Stock Appreciation Right to the extent exercisable on the date of the
dissolution or liquidation.

 

8.4  Adjustment of
Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events.  In the event of any corporate action not
specifically covered by the preceding Sections, including but not limited to an
extraordinary cash distribution on Stock, a corporate separation or other
reorganization or liquidation, the Committee may make such adjustment of
outstanding Awards and their terms, if any, as it, in its sole discretion, may
deem equitable and appropriate in the circumstances. The Committee may make
adjustments in the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events (including, without
limitation, the events described in this Section) affecting the Company or the
financial statements of the Company or of changes in applicable laws,
regulations, or accounting principles, whenever the Committee determines that
such adjustments are appropriate in order to prevent the dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan.

 

8.5  Related
Matters.  Any adjustment in
Awards made pursuant to this Section 8 shall be determined and made, if at
all, by the Committee and shall include any correlative modification of terms,
including of Option exercise prices, rates of vesting or exercisability, Risks
of Forfeiture, applicable repurchase prices for Restricted Stock, and
Performance Goals and other financial objectives which the Committee may deem
necessary or appropriate so as to ensure the rights of the Participants in
their respective Awards are not substantially diminished nor enlarged as a
result of the adjustment and corporate action other than as expressly
contemplated in this Section 8. No fraction of a share shall be purchasable
or deliverable upon exercise, but in the event any adjustment hereunder of the
number of shares covered by an Award shall cause such number to include a
fraction of a share, such number of shares shall be adjusted to the nearest
smaller whole number of shares. No adjustment of an Option exercise price per
share pursuant to this Section 8 shall result in an exercise price which
is less than the par value of the Stock.

 

A-9

 

9.                                      Settlement of Awards

 

9.1  In General.  Options and Restricted Stock shall be settled
in accordance with their terms. All other Awards may be settled in cash, Stock,
or other Awards, or a combination thereof, as determined by the Committee at or
after grant and subject to any contrary Award Agreement. The Committee may not
require settlement of any Award in Stock pursuant to the immediately preceding
sentence to the extent issuance of such Stock would be prohibited or
unreasonably delayed by reason of any other provision of the Plan.

 

9.2  Violation of
Law.  Notwithstanding any
other provision of the Plan or the relevant Award Agreement, if, at any time,
in the reasonable opinion of the Company, the issuance of shares of Stock
covered by an Award may constitute a violation of law, then the Company may
delay such issuance and the delivery of a certificate for such shares until
(i) approval shall have been obtained from such governmental agencies,
other than the Securities and Exchange Commission, as may be required under any
applicable law, rule, or regulation and (ii) in the case where such
issuance would constitute a violation of a law administered by, or a regulation
of, the Securities and Exchange Commission, one of the following conditions
shall have been satisfied:

 

(a)           the shares are at the time of the
issue of such shares effectively registered under the Securities Act of 1933,
as amended; or

 

(b)           the Company shall have determined, on
such basis as it deems appropriate (including an opinion of counsel in form and
substance satisfactory to the Company) that the sale, transfer, assignment,
pledge, encumbrance or other disposition of such shares or such beneficial
interest, as the case may be, does not require registration under the
Securities Act of 1933, as amended, or any applicable State securities laws.

 

The
Company shall make all reasonable efforts to bring about the occurrence of said
events.

 

9.3  Corporate
Restrictions on Rights in Stock. 
Any Stock to be issued pursuant to Awards granted under the Plan shall
be subject to all restrictions upon the transfer thereof which may be now or
hereafter imposed by the certificate of incorporation and by-laws (or similar
charter documents) of the Company.

 

9.4  Investment
Representations.  The Company
shall be under no obligation to issue any shares covered by any Award unless
the shares to be issued pursuant to Awards granted under the Plan have been
effectively registered under the Securities Act of 1933, as amended, or the
Participant shall have made such written representations to the Company (upon
which the Company believes it may reasonably rely) as the Company may deem
necessary or appropriate for purposes of confirming that the issuance of such
shares will be exempt from the registration requirements of that Act and any
applicable state securities laws and otherwise in compliance with all
applicable laws, rules and regulations, including but not limited to that
the Participant is acquiring the shares for his or her own account for the
purpose of investment and not with a view to, or for sale in connection with,
the distribution of any such shares.

 

9.5  Registration.  If the Company shall deem it necessary or
desirable to register under the Securities Act of 1933, as amended or other
applicable statutes any shares of Stock issued or to be issued pursuant to
Awards granted under the Plan, or to qualify any such shares of Stock for
exemption from the Securities Act of 1933, as amended, or other applicable
statutes, then the Company shall take such action at its own expense. The Company
may require from each recipient of an Award, or each holder of shares of Stock
acquired pursuant to the Plan, such information in writing for use in any
registration statement, prospectus, preliminary prospectus or offering circular
as is reasonably necessary for that purpose and may require reasonable
indemnity to the Company and its officers and directors from that holder
against all losses, claims, damage and liabilities arising from use of the
information so furnished and caused by any untrue statement of any material
fact therein or caused by the omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made. In addition, the
Company may require of any such person that he or she agree that, without the
prior written consent of the Company or the managing underwriter in any public
offering of shares of Stock, he or she will not sell, make any short sale of,
loan, grant any option for the purchase of, pledge or otherwise encumber, or
otherwise dispose of, any shares of Stock during the 180 day period
commencing on the effective date of the registration statement relating to the
underwritten public offering of securities. Without limiting the generality of
the foregoing provisions of this Section 9.5, if in connection with any
underwritten public offering of securities of the Company the managing
underwriter of such offering requires that the Company’s directors and officers
enter into a lock-up agreement containing provisions that are more restrictive
than the provisions set forth in the preceding sentence, then (a) each
holder of shares of Stock acquired pursuant to the Plan (regardless of whether
such person has complied or complies with the provisions of clause (b) below)
shall be bound by, and shall be deemed to have agreed to, the same lock-up
terms as those to which the Company’s directors and officers are required to
adhere; and (b) at the request of the Company or such managing underwriter,
each such person shall execute and deliver a lock-up agreement in form and
substance equivalent to that which is required to be executed by the Company’s
directors and officers.

 

A-10

 

9.6  Placement of
Legends; Stop Orders; etc. 
Each share of Stock to be issued pursuant to Awards granted under the
Plan may bear a reference to the investment representation made in accordance
with Section 9.4 in addition to any other applicable restriction under the
Plan, the terms of the Award and if applicable under the Stockholders’
Agreement and to the fact that no registration statement has been filed with
the Securities and Exchange Commission in respect to such shares of Stock. All
certificates for shares of Stock or other securities delivered under the Plan
shall be subject to such stock transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
requirements of any stock exchange upon which the Stock is then listed, and any
applicable federal or state securities law, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.

 

9.7  Tax
Withholding.  Whenever shares
of Stock are issued or to be issued pursuant to Awards granted under the Plan,
the Company shall have the right to require the recipient to remit to the
Company an amount sufficient to satisfy federal, state, local or other
withholding tax requirements if, when, and to the extent required by law
(whether so required to secure for the Company an otherwise available tax
deduction or otherwise) prior to the delivery of any certificate or
certificates for such shares. The obligations of the Company under the Plan
shall be conditional on satisfaction of all such withholding obligations and
the Company shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the recipient of an
Award. However, in such cases Participants may elect, subject to the approval
of the Committee, to satisfy an applicable withholding requirement, in whole or
in part, by having the Company withhold shares to satisfy their tax
obligations. Participants may only elect to have Shares withheld having a
Market Value on the date the tax is to be determined equal to the minimum
statutory total tax which could be imposed on the transaction. All elections
shall be irrevocable, made in writing, signed by the Participant, and shall be
subject to any restrictions or limitations that the Committee deems
appropriate.

 

10.                               Reservation of Stock

 

The
Company shall at all times during the term of the Plan and any outstanding
Awards granted hereunder reserve or otherwise keep available such number of
shares of Stock as will be sufficient to satisfy the requirements of the Plan
(if then in effect) and the Awards and shall pay all fees and expenses
necessarily incurred by the Company in connection therewith.

 

11.                               Limitation of Rights in Stock; No Special Service Rights

 

A
Participant shall not be deemed for any purpose to be a stockholder of the
Company with respect to any of the shares of Stock subject to an Award, unless
and until a certificate shall have been issued therefor and delivered to the
Participant or his agent. Nothing contained in the Plan or in any Award
Agreement shall confer upon any recipient of an Award any right with respect to
the continuation of his or her employment or other association with the Company
(or any Affiliate), or interfere in any way with the right of the Company (or
any Affiliate), subject to the terms of any separate employment or consulting
agreement or provision of law or corporate articles, by-laws or similar charter
documents to the contrary, at any time to terminate such employment or
consulting agreement or to increase or decrease, or otherwise adjust, the other
terms and conditions of the recipient’s employment or other association with
the Company and its Affiliates.

 

12.                               Unfunded Status of Plan

 

The
Plan is intended to constitute an “unfunded” plan for incentive compensation,
and the Plan is not intended to constitute a plan subject to the provisions of
the Employee Retirement Income Security Act of 1974, as amended. With respect
to any payments not yet made to a Participant by the Company, nothing contained
herein shall give any such Participant any rights that are greater than those
of a general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments with respect to Options,
Stock Appreciation Rights and other Awards hereunder, provided, however, that the existence of
such trusts or other arrangements is consistent with the unfunded status of the
Plan.

 

13.                               Nonexclusivity of the Plan

 

Neither
the adoption of the Plan by the Board nor the submission of the Plan to the
stockholders of the Company shall be construed as creating any limitations on
the power of the Board to adopt such other incentive arrangements as it may
deem desirable, including without limitation, the granting of stock options and
restricted stock other than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.

 

A-11

 

14.                               Termination and Amendment of the Plan

 

The
Board may at any time terminate the Plan or make such modifications of the Plan
as it shall deem advisable. Unless the Board otherwise expressly provides, no
amendment of the Plan shall affect the terms of any Award outstanding on the
date of such amendment.

 

The
Committee may amend the terms of any Award theretofore granted, prospectively
or retroactively, provided that the Award as amended is consistent with the
terms of the Plan. Also within the limitations of the Plan, the Committee may
modify, extend or assume outstanding Awards or may accept the cancellation of
outstanding Awards or of outstanding stock options or other equity-based
compensation awards granted by another issuer in return for the grant of new
Awards for the same or a different number of shares and on the same or
different terms and conditions (including but not limited to the exercise price
of any Option). Furthermore, the Committee may at any time (a) offer to
buy out for a payment in cash or cash equivalents an Award previously granted
or (b) authorize the recipient of an Award to elect to cash out an Award
previously granted, in either case at such time and based upon such terms and
conditions as the Committee shall establish.

 

No
amendment or modification of the Plan by the Board, or of an outstanding Award
by the Committee, shall impair the rights of the recipient of any Award
outstanding on the date of such amendment or modification or such Award, as the
case may be, without the Participant’s consent; provided, however, that no such consent shall be required if
(i) the Board or Committee, as the case may be, determines in its sole
discretion and prior to the date of any Acquisition that such amendment or
alteration either is required or advisable in order for the Company, the Plan
or the Award to satisfy any law or regulation, including without limitation the
provisions of Section 409A of the Code or to meet the requirements of or
avoid adverse financial accounting consequences under any accounting standard,
or (ii) the Board or Committee, as the case may be, determines in its sole
discretion that such amendment or alteration is not reasonably likely to
significantly diminish the benefits provided under the Award, or that any such
diminution has been adequately compensated.

 

15.                               Notices and Other Communications

 

Any
notice, demand, request or other communication hereunder to any party shall be
deemed to be sufficient if contained in a written instrument delivered in
person or duly sent by first class registered, certified or overnight mail,
postage prepaid, or telecopied with a confirmation copy by regular, certified
or overnight mail, addressed or telecopied, as the case may be, (i) if to
the recipient of an Award, at his or her residence address last filed with the
Company and (ii) if to the Company, at its principal place of business,
addressed to the attention of its Treasurer, or to such other address or
telecopier number, as the case may be, as the addressee may have designated by
notice to the addressor. All such notices, requests, demands and other
communications shall be deemed to have been received: (i) in the case of
personal delivery, on the date of such delivery; (ii) in the case of
mailing, when received by the addressee; and (iii) in the case of
facsimile transmission, when confirmed by facsimile machine report.

 

16.                               Governing Law

 

The
Plan and all Award Agreements and actions taken thereunder shall be governed,
interpreted and enforced in accordance with the laws of the State of Delaware,
without regard to the conflict of laws principles thereof.

 

A-12Exhibit 4.5

 

STOCK OPTION AGREEMENT

(Employment Inducement Grant)

 

This
NON-STATUTORY STOCK OPTION AGREEMENT, dated as of June 8, 2010 (this “Agreement”),
is between NETLIST, INC., a Delaware corporation (the “Company”),
and Lisa Roger (the “Optionee”).

 

R E C I T A L S

 

A.            Optionee has not previously been an
officer, director or employee of the Company, and this Option (as defined
below) is granted to Optionee to attract and retain Optionee to serve the
Company in the capacity of Controller and Director of Financial Reporting.

 

B.            This Agreement, and the grant of an
Option to the Optionee pursuant to the terms and conditions hereof, have been
approved by the Board of Directors of the Company (the “Board”).

 

C.            This Option is designated as a
non-qualified stock option, and does not
qualify as an incentive stock option within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the “Code”).

 

A G R E E M E N T

 

In
consideration of the foregoing recitals and of the mutual covenants contained
herein, the parties, intending to be legally bound, agree as follows:

 

1.             Grant  of  Option.  The Company hereby grants to the Optionee, as
an inducement to accept employment with the Company, an option (the “Option”)
to purchase from the Company all or any number of an aggregate of 30,000 shares
(the “Option  Shares”), of the Company’s common stock, $.001 par
value per share, at a price of $1.92 per share, on the terms and subject to the
conditions of this Agreement.  This grant
is not made pursuant to the
Company’s 2006 Equity Incentive Plan (the “Plan”), attached as Exhibit A.  However, except as otherwise expressly
provided herein, this grant is subject to the rules, terms and conditions of
the Plan as if it were a grant made pursuant to and under the Plan, and all
such rules, terms and conditions are hereby incorporated herein by reference as
if set forth herein in their entirety. 
Capitalized terms used but not defined in this Agreement shall have the
meanings given to them in the Plan.  The
Option is granted as of June 8, 2010 (the “Grant  Date”).

 

2.             Character  of  Option.  The Option is not intended to be treated as an “incentive stock option”
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the “Code”).

 

3.             Duration  of  Option.  Unless subject to earlier expiration or
termination pursuant to the terms of the Plan, the Option shall expire on the
ten year anniversary of the Grant Date.

 

4.             Exercisability  of  Option.  The
Option may be exercised, at any time and from time to time until its expiration
or termination, for any or all of those Option Shares in respect of which the
Option shall have become exercisable, in accordance with the provisions set
forth below in this Section 4, on or at any time prior to the date of any such
exercise.  Subject to the provisions of
the Plan (including, without limitation, the 

 

 

provisions
of Section 7.1(e) of the Plan), one-fourth of the Option shall become
exercisable on the first anniversary of the employment start date of April 26,
2010, with the remainder vesting thereafter in twelve equal quarterly
installments, such that from and after the fourth anniversary of the employment
start date the Option shall be vested as to all of the Shares and fully
exercisable, provided, however, that in the event that Optionee’s services  with the Company is terminated by the Company
as a result of Optionee’s death or disability, an additional 25% of the total
number of Shares (or such fewer number as then remain unvested) shall
Accelerate and vest on the date of such termination.  These installments shall be cumulative, such
that Optionee may exercise the Option as to any or all of the Shares covered by
any installment at any time or times after such installment vests and prior to
termination of the Option.  The foregoing
notwithstanding, except to the extent the Option vests upon the termination of
Optionee’s services with the Company as provided above, the Option shall cease
vesting upon the termination of Optionee’s services with the Company for any
reason.  Notwithstanding anything
expressed or implied to the contrary in the foregoing provisions of this Section 4,
the exercisability of the Option may, as provided in Section 7.1(d) of
the Plan, at any time be Accelerated in the discretion of the Committee.

 

5.             Transfer  of  Option.  Other than as expressly permitted by the
provisions of Section 6.4 of the Plan, the Option may not be transferred
except by will or the laws of descent and distribution and, during the lifetime
of the Optionee, may be exercised only by the Optionee.

 

6.             Incorporation  of  Plan
Terms.  The Option is granted
subject to all of the applicable terms and provisions of the Plan, which terms
and provisions are incorporated herein by reference pursuant to Section 1
of this Agreement, including, but not limited to, the limitations on the
Company’s obligation to deliver Option Shares upon exercise set forth in Section 9.2
(Violation of Law), Section 9.3 (Corporate Restrictions on Rights in
Stock), Section 9.4 (Investment Representations) and Section 9.7 (Tax
Withholding).

 

7.             Miscellaneous.  This Agreement shall be construed and
enforced in accordance with the internal, substantive laws of the State of
Delaware and shall be binding upon and inure to the benefit of any successor or
assign of the Company and any executor, administrator, trustee, guardian, or
other legal representative of the Optionee.

 

 

IN
WITNESS WHEREOF, the parties have executed this Stock Option Agreement as a
sealed instrument as of the date first above written.

 

	
  NETLIST, INC.

  	
  OPTIONEE

  
	
  By:

  	
  /s/
  Nickie Duong

  	
   

  	
  /s/
  Lisa Roger

  
	
   

  	
  Nickie
  Duong

  	
   

  	
  Lisa
  Roger

  
	
   

  	
  Assistant
  Secretary

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Optionee’s
  Address:

  
	
   

  	
   

  	
   

  	
  11772
  Las Palmas Dr. 

  
	
   

  	
   

  	
   

  	
  Santa
  Ana, CA 92705

  

 

 

Exhibit A

 

NETLIST, INC., 2006 EQUITY
INCENTIVE PLAN

 

As Proposed to be Amended by the
Stockholders on June 2, 2010

 

1.                                      Purpose

 

This
Plan is intended to encourage ownership of Stock by employees, consultants,
advisors and directors of the Company and its Affiliates and to provide
additional incentive for them to promote the success of the Company’s business
through the grant of Awards of, or pertaining to, shares of the Company’s
Stock. This Plan is intended to be an incentive stock option plan within the
meaning of Section 422 of the Code, but not all Awards are required to be
Incentive Options. This Plan shall not become effective until the Effective
Date.

 

2.                                      Definitions

 

As
used in this Plan, the following terms shall have the following meanings:

 

2.1           Accelerate,
Accelerated, and Acceleration, means: (a) when used
with respect to an Option or Stock Appreciation Right, that as of the time of
reference the Option or Stock Appreciation Right will become exercisable with
respect to some or all of the shares of Stock for which it was not then
otherwise exercisable by its terms; (b) when used with respect to
Restricted Stock or Restricted Stock Units, that the Risk of Forfeiture
otherwise applicable to the Stock or Units shall expire with respect to some or
all of the shares of Restricted Stock or Units then still otherwise subject to
the Risk of Forfeiture; and (c) when used with respect to Performance
Units, that the applicable Performance Goals shall be deemed to have been met
as to some or all of the Units.

 

2.2           Acquisition
means (i) a merger or consolidation of the Company with or into another
person, (ii) the sale, transfer, or other disposition of all or
substantially all of the Company’s assets to one or more other persons in a
single transaction or series of related transactions, or (iii) the
acquisition of beneficial ownership (determined pursuant to Securities and
Exchange Commission Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended and in effect from time to time) by any person of more
than 50% of the Company’s outstanding common stock pursuant to a tender or
exchange offer made directly to the Company’s stockholders, other than an
underwriter temporarily holding common stock pursuant to an offering of such
common stock. Notwithstanding the foregoing, a transaction shall not constitute
an “Acquisition” if its sole purpose is to change the state of the Company’s
incorporation or to create a holding company that will be owned in
substantially the same proportions by the persons who held the Company’s
securities immediately prior to such transaction.

 

2.3           Affiliate
means any corporation, partnership, limited liability company, business trust,
or other entity controlling, controlled by or under common control with the
Company.

 

2.4           Award
means any grant or sale pursuant to the Plan of Options, Stock Appreciation
Rights, Performance Units, Restricted Stock, Restricted Stock Units or Stock
Grants.

 

2.5           Award
Agreement means an agreement between the Company and the recipient
of an Award, setting forth the terms and conditions of the Award.

 

2.6           Board
means the Company’s Board of Directors.

 

2.7           Code
means the Internal Revenue Code of 1986, as amended from time to time, or any
successor statute thereto, and any regulations issued from time to time
thereunder.

 

2.8           Committee
means the Compensation Committee of the Board, which in general is responsible
for the administration of the Plan, as provided in Section 5 of the Plan.
For any period during which no such committee is in existence “Committee” shall
mean the Board and all authority and responsibility assigned to the Committee
under the Plan shall be exercised, if at all, by the Board.

 

2.9           Company
means Netlist, Inc., a corporation organized under the laws of the State
of Delaware.

 

2.10         Covered
Employee means an employee who is a “covered employee” within the
meaning of Section 162(m) of the Code.

 

A-1

 

2.11         Effective
Date means the date on which the Company’s registration statement on
Form S-1, initially filed with the Securities and Exchange Commission on
August 18, 2006 in connection with the initial public offering of its
common stock in a firm commitment underwriting, as amended, is declared
effective by the Securities and Exchange Commission.

 

2.12         Grant
Date means the date as of which an Option is granted, as determined
under Section 7.1(a).

 

2.13         Incentive
Option means an Option which by its terms is to be treated as an “incentive
stock option” within the meaning of Section 422 of the Code.

 

2.14         Market
Value means the value of a share of Stock on a particular date
determined by such methods or procedures as may be established by the
Committee. Unless otherwise determined by the Committee, the Market Value of
Stock as of any date is the closing price for the Stock as quoted on the NGM
(or on any other national securities exchange on which the Stock is then
listed) for that date or, if no closing price is reported for that date, the
closing price on the next preceding date for which a closing price was
reported. For purposes of Awards effective as of the effective date of the
Company’s initial public offering, Market Value of Stock shall be the price at
which the Company’s Stock is offered to the public in its initial public
offering.

 

2.15         NGM
means the NASDAQ Global Market.

 

2.16         Nonstatutory
Option means any Option that is not an Incentive Option.

 

2.17         Option
means an option to purchase shares of Stock.

 

2.18         Optionee
means a Participant to whom an Option shall have been granted under the Plan.

 

2.19         Participant
means any holder of an outstanding Award under the Plan.

 

2.20         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 used to establish Performance
Goals are limited to: (i) cash flow (before or after dividends),
(ii) earnings per share (including, without limitation, earnings before
interest, taxes, depreciation and amortization), (iii) stock price,
(iv) return on equity, (v) stockholder return or total stockholder
return, (vi) return on capital (including, without limitation, return on
total capital or return on invested capital), (vii) return on investment,
(viii) return on assets or net assets, (ix) market capitalization,
(x) economic value added, (xi) debt leverage (debt to capital),
(xii) revenue, (xiii) sales or net sales, (xiv) backlog,
(xv) income, pre-tax income or net income, (xvi) operating income or
pre-tax profit, (xvii) operating profit, net operating profit or economic
profit, (xviii) gross margin, operating margin or profit margin,
(xix) return on operating revenue or return on operating assets,
(xx) cash from operations, (xxi) operating ratio,
(xxii) operating revenue, (xxiii) market share improvement,
(xxiv) general and administrative expenses or (xxv) customer service.

 

2.21         Performance
Goals means, for a Performance Period, the written goal or goals
established by the Committee for the Performance Period based upon the
Performance Criteria. The Performance Goals may be expressed in terms of
overall Company performance or the performance of a division, business unit,
subsidiary, or an individual. either individually, alternatively or in any
combination, applied to either the Company as a whole or to a business unit or
Affiliate, either individually, alternatively or in any combination, and
measured either quarterly, annually 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. The Committee will, in the manner and within the time prescribed by
Section 162(m) of the Code in the case of Qualified Performance-Based
Awards, objectively define the manner of calculating the Performance Goal or
Goals it selects to use for such Performance Period for such Participant. To
the extent consistent with Section 162(m) of the Code, the Committee
may appropriately adjust any evaluation of performance against a Performance
Goal to exclude any of the following events that occurs during a performance
period: (i) asset write-downs, (ii) litigation, claims, judgments or
settlements, (iii) the effect of changes in tax law, accounting principles
or other such laws or provisions affecting reported results, (iv) accruals
for reorganization and restructuring programs and (v) any extraordinary,
unusual, non-recurring or non-comparable items (A) as described in
Accounting Principles Board Opinion No. 30, (B) as described in
management’s discussion and analysis of financial condition and results of
operations appearing in the Company’s Annual Report to stockholders for the
applicable year, or (C) publicly announced by the Company in a press
release or conference call relating to the Company’s results of operations or
financial condition for a completed quarterly or annual fiscal period.

 

A-2

 

2.22         Performance
Period means the one or more periods of time, which may be of
varying and overlapping durations, selected by the Committee, over which the
attainment of one or more Performance Goals will be measured for purposes of
determining a Participant’s right to, and the payment of, a Performance Unit.

 

2.23         Performance
Unit means a right granted to a Participant under Section 7.5,
to receive cash, Stock or other Awards, the payment of which is contingent on
achieving Performance Goals established by the Committee.

 

2.24         Plan
means this 2006 Equity Incentive Plan of the Company, as amended from time to
time, and including any attachments or addenda hereto.

 

2.25         Qualified
Performance-Based Awards means Awards intended to qualify as “performance-based
compensation” under Section 162(m) of the Code.

 

2.26         Restricted
Stock means a grant or sale of shares of Stock to a Participant
subject to a Risk of Forfeiture.

 

2.27         Restriction
Period means the period of time, established by the Committee in
connection with an Award of Restricted Stock or Restricted Stock Units, during
which the shares of Restricted Stock or Restricted Stock Units are subject to a
Risk of Forfeiture described in the applicable Award Agreement.

 

2.28         Risk
of Forfeiture means a limitation on the right of the Participant to
retain Restricted Stock or Restricted Stock Units, including a right in the
Company to reacquire shares of Restricted Stock at less than their then Market
Value, arising because of the occurrence or non-occurrence of specified events
or conditions.

 

2.29         Restricted
Stock Units means rights to receive shares of Stock at the close of
a Restriction Period, subject to a Risk of Forfeiture.

 

2.30         Stock
means common stock, par value $0.001 per share, of the Company, and such other
securities as may be substituted for Stock pursuant to Section 8.

 

2.31         Stock
Appreciation Right means a right to receive any excess in the Market
Value of shares of Stock (except as otherwise provided in Section 7.2(c))
over a specified exercise price.

 

2.32         Stock
Grant means the grant of shares of Stock not subject to restrictions
or other forfeiture conditions.

 

2.33         Ten
Percent Owner means a person who owns, or is deemed within the
meaning of Section 422(b)(6) of the Code to own, stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company (or any parent or subsidiary corporations of the Company, as defined in
Sections 424(e) and (f), respectively, of the Code). Whether a person
is a Ten Percent Owner shall be determined with respect to an Option based on
the facts existing immediately prior to the Grant Date of the Option.

 

3.                                      Term of the Plan

 

Unless
the Plan shall have been earlier terminated by the Board, Awards may be granted
under this Plan at any time in the period commencing on the date of approval of
the Plan by the Board and ending immediately prior to the tenth anniversary of
the earlier of the adoption of the Plan by the Board or approval of the Plan by
the Company’s stockholders. Awards granted pursuant to the Plan within that
period shall not expire solely by reason of the termination of the Plan. Awards
of Incentive Options granted prior to stockholder approval of the Plan are
expressly conditioned upon such approval, but in the event of the failure of
the stockholders to approve the Plan shall thereafter and for all purposes be
deemed to constitute Nonstatutory Options.

 

4.                                      Stock Subject to the Plan

 

At
no time shall the number of shares of Stock issued pursuant to or subject to
outstanding Awards granted under the Plan (including, without limitation,
pursuant to Incentive Options), nor the number of shares of Common Stock issued
pursuant to Incentive Options, exceed the sum of (a) 500,000 shares of
Stock plus (b) an annual increase to be added on the first day of each
calendar year beginning on or after January 1, 2007 equal to the lesser of
(i) 500,000 shares of Stock, and (ii) such lesser number as the Board
may approve for the fiscal year, provided, however, that beginning on
January 1, 2010, the annual increase to the number of shares of Stock that
may be issued pursuant to the Plan shall be equal to the lesser of 

 

A-3

 

(x) 5.0% of the number
of shares of Stock that are issued and outstanding as of the first day of the
calendar year, and (y) 1,200,000 shares of Stock; subject, however, to the provisions of
Section 8 of the Plan. For purposes of applying the foregoing limitation,
(a) if any Option or Stock Appreciation Right expires, terminates, or is
cancelled for any reason without having been exercised in full, or if any other
Award is forfeited by the recipient or repurchased at less than its Market
Value, the shares not purchased by the Optionee or which are forfeited by the
recipient or repurchased shall again be available for Awards to be granted
under the Plan and (b) if any Option is exercised by delivering previously-owned
shares in payment of the exercise price therefor, only the net number of
shares, that is, the number of shares issued minus the number received by the
Company in payment of the exercise price, shall be considered to have been
issued pursuant to an Award granted under the Plan. In addition, settlement of
any Award shall not count against the foregoing limitations except to the
extent settled in the form of Stock. Shares of Stock issued pursuant to the
Plan may be either authorized but unissued shares or shares held by the Company
in its treasury.

 

5.                                      Administration

 

The
Plan shall be administered by the Committee; provided,
however, that at any time and on any one or more occasions the Board
may itself exercise any of the powers and responsibilities assigned the
Committee under the Plan and when so acting shall have the benefit of all of
the provisions of the Plan pertaining to the Committee’s exercise of its
authorities hereunder; and provided further,
however, that the Committee may delegate to an executive officer or
officers the authority to grant Awards hereunder to employees who are not
officers, and to consultants and advisors, in accordance with such guidelines
as the Committee shall set forth at any time or from time to time. Subject to the
provisions of the Plan, the Committee shall have complete authority, in its
discretion, to make or to select the manner of making all determinations with
respect to each Award to be granted by the Company under the Plan including the
employee, consultant, advisor or director to receive the Award and the form of
Award. In making such determinations, the Committee may take into account the
nature of the services rendered by the respective employees, consultants,
advisors and directors, their present and potential contributions to the
success of the Company and its Affiliates, and such other factors as the
Committee in its discretion shall deem relevant. Subject to the provisions of
the Plan, the Committee shall also have complete authority to interpret the Plan,
to prescribe, amend and rescind rules and regulations relating to it, to
determine the terms and provisions of the respective Award Agreements (which
need not be identical), and to make all other determinations necessary or
advisable for the administration of the Plan, including, but not limited to,
the cancellation, amendment, repricing, reclassification or exchange of
outstanding Options and other Awards, subject to the provisions of
Section 14. The Committee’s determinations made in good faith on matters
referred to in the Plan shall be final, binding and conclusive on all persons
having or claiming any interest under the Plan or an Award made pursuant
hereto.

 

6.                                      Authorization of Grants

 

6.1  Eligibility.  The Committee may grant from time to time and
at any time prior to the termination of the Plan one or more Awards, either
alone or in combination with any other Awards, to any employee of, or
consultant or advisor to, one or more of the Company and its Affiliates or to
any non-employee member of the Board or of any board of directors (or similar
governing authority) of any Affiliate. However, only employees of the Company,
and of any parent or subsidiary corporations of the Company, as defined in
Sections 424(e) and (f), respectively, of the Code, shall be eligible
for the grant of an Incentive Option. Further, in no event shall the number of
shares of Stock covered by Options or other Awards granted to any one person in
any one calendar year exceed 25% of the aggregate number of shares of Stock subject
to the Plan.

 

6.2  General Terms
of Awards.  Each grant of an
Award shall be subject to all applicable terms and conditions of the Plan
(including but not limited to any specific terms and conditions applicable to
that type of Award set out in the following Section), and such other terms and
conditions, not inconsistent with the terms of the Plan, as the Committee may
prescribe. No prospective Participant shall have any rights with respect to an
Award, unless and until such Participant shall have complied with the
applicable terms and conditions of such Award (including, if applicable,
delivering a fully-executed copy of any agreement evidencing an Award to the
Company).

 

6.3  Effect of
Termination of Employment, Etc. 
Unless the Committee shall provide otherwise with respect to any Award,
if the Participant’s employment or other association with the Company and its
Affiliates ends for any reason, including because of the Participant’s employer
ceasing to be an Affiliate, (a) any outstanding Option or Stock
Appreciation Right of the Participant shall cease to be exercisable in any
respect not later than 90 days following that event and, for the period it
remains exercisable following that event, shall be exercisable only to the
extent exercisable at the date of that event, and (b) any other
outstanding Award of the Participant shall be forfeited or otherwise subject to
return to, or repurchase by, the Company on the terms specified in the
applicable Award Agreement. Military or sick leave or other bona fide leave
shall not be deemed a termination of employment or other association, provided that it does not exceed the
longer of 90 days or the period during which the absent Participant’s
reemployment rights, if any, are guaranteed by statute or by contract.

 

A-4

 

6.4 
Transferability of Awards. 
Except as otherwise provided in this Section 6.4, Awards shall not
be transferable, and no Award or interest therein may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or
by the laws of descent and distribution. The foregoing sentence shall not limit
the transferability of Stock Grants or of Restricted Stock that is no longer
subject to a Risk of Forfeiture. All of a Participant’s rights in any Award may
be exercised during the life of the Participant only by the Participant or the
Participant’s legal representative. However, the Committee may, at or after the
grant of an Award of a Nonstatutory Option, or shares of Restricted Stock,
provide that such Award may be transferred by the recipient to a family member;
provided, however, that any such
transfer is without payment of any consideration whatsoever and that no
transfer shall be valid unless first approved by the Committee, acting in its
sole discretion. For this purpose, “family member” means any child, stepchild,
grandchild, parent, stepparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
employee’s household (other than a tenant or employee), a trust in which the
foregoing persons have more than 50% of the beneficial interests, a foundation
in which the foregoing persons (or the Participant) control the management of
assets, and any other entity in which these persons (or the Participant) own
more than 50% of the voting interests.

 

7.                                      Specific Terms of Awards

 

7.1           Options.

 

(a)  Date of Grant.  The granting of an Option shall take place at
the time specified in the Award Agreement. Only if expressly so provided in the
applicable Award Agreement shall the Grant Date be the date on which the Award
Agreement shall have been duly executed and delivered by the Company and the
Optionee.

 

(b)  Exercise Price.  The price at which shares of Stock may be
acquired under each Incentive Option shall be not less than 100% of the Market
Value of Stock on the Grant Date, or not less than 110% of the Market Value of
Stock on the Grant Date if the Optionee is a Ten Percent Owner. The price at
which shares may be acquired under each Nonstatutory Option shall not be so
limited solely by reason of this Section.

 

(c)  Option Period.  No Incentive Option may be exercised on or
after the tenth anniversary of the Grant Date, or on or after the fifth
anniversary of the Grant Date if the Optionee is a Ten Percent Owner. The
Option period under each Nonstatutory Option shall not be so limited solely by
reason of this Section.

 

(d)  Exercisability.  An Option may be immediately exercisable or
become exercisable in such installments, cumulative or non-cumulative, as the
Committee may determine. In the case of an Option not otherwise immediately
exercisable in full, the Committee may Accelerate such Option in whole or in
part at any time; provided, however,
that in the case of an Incentive Option, any such Acceleration of the Option
would not cause the Option to fail to comply with the provisions of
Section 422 of the Code or the Optionee consents to the Acceleration.

 

(e)  Method of Exercise.  An Option may be exercised by the Optionee
giving written notice, in the manner provided in Section 16, specifying
the number of shares with respect to which the Option is then being exercised.
The notice shall be accompanied by payment in the form of cash or check payable
to the order of the Company in an amount equal to the exercise price of the
shares to be purchased or, subject in each instance to the Committee’s
approval, acting in its sole discretion, and to such conditions, if any, as the
Committee may deem necessary to avoid adverse accounting effects to the
Company) by delivery to the Company of

 

(i)                                     shares of Stock
having a Market Value equal to the exercise price of the shares to be
purchased, or

 

(ii)                                  unless
prohibited by applicable law, the Optionee’s executed promissory note in the
principal amount equal to the exercise price of the shares to be purchased and
otherwise in such form as the Committee shall have approved.

 

If the Stock is traded on an
established market, payment of any exercise price may also be made through and
under the terms and conditions of any formal cashless exercise program
authorized by the Company entailing the sale of the Stock subject to an Option
in a brokered transaction (other than to the Company). Receipt by the Company
of such notice and payment in any authorized, or combination of authorized,
means shall constitute the exercise of the Option. Within thirty (30) days
thereafter but subject to the remaining provisions of the Plan, the Company
shall deliver, or cause to be delivered, to the Optionee or his agent a
certificate or certificates for the number of shares then being purchased. Such
shares shall be fully paid and nonassessable.

 

A-5

 

(f)  Limit on Incentive Option Characterization.  An Incentive Option shall be considered to be
an Incentive Option only to the extent that the number of shares of Stock for
which the Option first becomes exercisable in a calendar year do not have an
aggregate Market Value (as of the date of the grant of the Option) in excess of
the “current limit”. The current limit for any Optionee for any calendar year
shall be $100,000 minus the
aggregate Market Value at the date of grant of the number of shares of Stock
available for purchase for the first time in the same year under each other
Incentive Option previously granted to the Optionee under the Plan, and under
each other incentive stock option previously granted to the Optionee under any
other incentive stock option plan of the Company and its Affiliates, after
December 31, 1986. Any shares of Stock which would cause the foregoing
limit to be violated shall be deemed to have been granted under a separate
Nonstatutory Option, otherwise identical in its terms to those of the Incentive
Option.

 

(g)  Notification of Disposition.  Each person exercising any Incentive Option
granted under the Plan shall be deemed to have covenanted with the Company to
report to the Company any disposition of such shares prior to the expiration of
the holding periods specified by Section 422(a)(1) of the Code
(currently the later of two years from the Grant Date and one year from the
date of exercise of the Incentive Option) and, if and to the extent that the
realization of income in such a disposition imposes upon the Company federal,
state, local or other withholding tax requirements, or any such withholding is
required to secure for the Company an otherwise available tax deduction, to
remit to the Company an amount in cash sufficient to satisfy those
requirements.

 

7.2           Stock
Appreciation Rights.

 

(a)  Tandem or Stand-Alone.  Stock Appreciation Rights may be granted in
tandem with an Option (at or, in the case of a Nonstatutory Option, after the
award of the Option), or alone and unrelated to an Option. Stock Appreciation Rights
in tandem with an Option shall terminate to the extent that the related Option
is exercised, and the related Option shall terminate to the extent that the
tandem Stock Appreciation Rights are exercised.

 

(b)  Exercise Price.  Stock Appreciation Rights shall have such
exercise price as the Committee may determine, except that in the case of Stock
Appreciation Rights in tandem with Options, the exercise price of the Stock
Appreciation Rights shall equal the exercise price of the related Option.

 

(c)  Other Terms.  Except as the Committee may deem
inappropriate or inapplicable in the circumstances, Stock Appreciation Rights
shall be subject to terms and conditions substantially similar to those
applicable to a Nonstatutory Option. In addition, a Stock Appreciation Right
related to an Option which can only be exercised during limited periods
following a Change in Control may entitle the Participant to receive an amount
based upon the highest price paid or offered for Stock in any transaction
relating to the Change in Control or paid during the thirty (30) day
period immediately preceding the occurrence of the Change in Control in any
transaction reported in the stock market in which the Stock is normally traded.

 

7.3           Restricted
Stock.

 

(a)  Purchase Price.  Shares of Restricted Stock shall be issued
under the Plan for such consideration, in cash, other property or services, or
any combination thereof, as is determined by the Committee.

 

(b)  Issuance of Certificates.  Each Participant receiving a Restricted Stock
Award, subject to subsection (c) below, shall be issued a stock
certificate in respect of such shares of Restricted Stock. Such certificate
shall be registered in the name of such Participant, and, if applicable, shall
bear an appropriate legend referring to the terms, conditions, and restrictions
applicable to such Award substantially in the following form:

 

The
transferability of this certificate and the shares represented by this
certificate are subject to the terms and conditions of the Netlist, Inc.
2006 Equity Incentive Plan and an Award Agreement entered into by the
registered owner and Netlist, Inc. Copies of such Plan and Agreement are
on file in the offices of Netlist, Inc.

 

(c)  Escrow of Shares.  The Committee may require that the stock certificates
evidencing shares of Restricted Stock be held in custody by a designated escrow
agent (which may but need not be the Company) until the restrictions thereon
shall have lapsed, and that the Participant deliver a stock power, endorsed in
blank, relating to the Stock covered by such Award.

 

(d)  Restrictions and Restriction Period.  During the Restriction Period applicable to
shares of Restricted Stock, such shares shall be subject to limitations on
transferability and a Risk of Forfeiture arising on the basis of such
conditions related to the performance of services, Company or Affiliate
performance or otherwise as the Committee may determine and provide for in the
applicable Award Agreement. Any such Risk of Forfeiture may be waived or
terminated, or the Restriction Period shortened, at any time by the Committee
on such basis as it deems appropriate.

 

A-6

 

(e)  Rights Pending Lapse of Risk of Forfeiture or
Forfeiture of Award.  Except
as otherwise provided in the Plan or the applicable Award Agreement, at all
times prior to lapse of any Risk of Forfeiture applicable to, or forfeiture of,
an Award of Restricted Stock, the Participant shall have all of the rights of a
stockholder of the Company, including the right to vote, and the right to
receive any dividends with respect to, the shares of Restricted Stock. The
Committee, as determined at the time of Award, may permit or require the
payment of cash dividends to be deferred and, if the Committee so determines,
reinvested in additional Restricted Stock to the extent shares are available
under Section 4.

 

(f)  Lapse of Restrictions.  If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock, the certificates for such
shares shall be delivered to the Participant promptly if not previously
delivered.

 

7.4           Restricted
Stock Units.

 

(a)  Character.  Each Restricted Stock Unit shall entitle the
recipient to a share of Stock at a close of such Restriction Period as the
Committee may establish and be subject to a Risk of Forfeiture arising on the
basis of such conditions relating to the performance of services, Company or
Affiliate performance or otherwise as the Committee may determine and provide
for in the applicable Award Agreement. Any such Risk of Forfeiture may be
waived or terminated, or the Restriction Period shortened, at any time by the
Committee on such basis as it deems appropriate.

 

(b)  Form and Timing of Payment.  Payment of earned Restricted Stock Units
shall be made in a single lump sum following the close of the applicable
Restriction Period. At the discretion of the Committee, Participants may be
entitled to receive payments equivalent to any dividends declared with respect
to Stock referenced in grants of Restricted Stock Units but only following the
close of the applicable Restriction Period and then only if the underlying
Stock shall have been earned. Unless the Committee shall provide otherwise, any
such dividend equivalents shall be paid, if at all, without interest or other
earnings.

 

7.5           Performance
Units.

 

(a)  Character.  Each Performance Unit shall entitle the
recipient to the value of a specified number of shares of Stock, over the
initial value for such number of shares, if any, established by the Committee
at the time of grant, at the close of a specified Performance Period to the
extent specified Performance Goals shall have been achieved.

 

(b)  Earning of Performance Units.  The Committee shall set Performance Goals in
its discretion which, depending on the extent to which they are met within the
applicable Performance Period, will determine the number and value of
Performance Units that will be paid out to the Participant. After the
applicable Performance Period has ended, the holder of Performance Units shall
be entitled to receive payout on the number and value of Performance Units
earned by the Participant over the Performance Period, to be determined as a
function of the extent to which the corresponding Performance Goals have been
achieved.

 

(c)  Form and Timing of Payment.  Payment of earned Performance Units shall be
made in a single lump sum following the close of the applicable Performance
Period. At the discretion of the Committee, Participants may be entitled to
receive any dividends declared with respect to Stock which have been earned in
connection with grants of Performance Units which have been earned, but not yet
distributed to Participants. The Committee may permit or, if it so provides at
grant, require a Participant to defer such Participant’s receipt of the payment
of cash or the delivery of Stock that would otherwise be due to such
Participant by virtue of the satisfaction of any requirements or goals with
respect to Performance Units. If any such deferral election is permitted or
required, the Committee shall establish rules and procedures for such
payment deferrals.

 

7.6  Stock Grants.  Stock Grants shall be awarded solely in
recognition of significant contributions to the success of the Company or its
Affiliates, in lieu of compensation otherwise already due and in such other
limited circumstances as the Committee deems appropriate. Stock Grants shall be
made without forfeiture conditions of any kind.

 

7.7           Qualified
Performance-Based Awards.

 

(a)  Purpose. 
The purpose of this Section 7.7 is to provide the Committee the
ability to qualify Awards as “performance-based compensation” under
Section 162(m) of the Code. If the Committee, in its discretion,
decides to grant an Award as a Qualified Performance-Based Award, the
provisions of this Section 7.7 will control over any contrary provision
contained in the Plan. In the course of granting any Award, the Committee may
specifically designate the Award as intended to qualify as a Qualified
Performance-Based Award. However, no Award shall be considered to have failed
to qualify as a Qualified Performance-Based Award solely because the Award is
not expressly designated as a Qualified Performance-Based Award if the Award
otherwise satisfies the provisions of this Section 7.7 and the requirements
of Section 162(m) of the Code and the regulations thereunder
applicable to “performance-based compensation.”

 

A-7

 

(b)  Authority.  All grants of Awards intended to qualify as
Qualified Performance-Based Awards and determination of terms applicable
thereto shall be made by the Committee or, if not all of the members thereof
qualify as “outside directors” within the meaning of applicable IRS regulations
under Section 162 of the Code, a subcommittee of the Committee consisting
of such of the members of the Committee as do so qualify. Any action by such a
subcommittee shall be considered the action of the Committee for purposes of
the Plan.

 

(c)  Applicability.  This Section 7.7 will apply only to
those Covered Employees, or to those persons who the Committee determines are
reasonably likely to become Covered Employees in the period covered by an
Award, selected by the Committee to receive Qualified Performance-Based Awards.
The Committee may, in its discretion, grant Awards to Covered Employees that do
not satisfy the requirements of this Section 7.7.

 

(d)  Discretion of Committee with Respect to Qualified
Performance-Based Awards. 
Options may be granted as Qualified Performance-Based Awards in
accordance with Section 7.1, except that the exercise price of any Option
intended to qualify as a Qualified Performance-Based Award shall in no event be
less that the Market Value of the Stock on the date of grant. With regard to
other Awards intended to qualify as Qualified Performance-Based Awards, such as
Restricted Stock, Restricted Stock Units, or Performance Units, the Committee
will have full discretion to select the length of any applicable Restriction
Period or Performance Period, the kind and/or level of the applicable
Performance Goal, and whether the Performance Goal is to apply to the Company,
a Subsidiary or any division or business unit or to the individual. Any
Performance Goal or Goals applicable to Qualified Performance-Based Awards
shall be objective, shall be established not later than ninety (90) days
after the beginning of any applicable Performance Period (or at such other date
as may be required or permitted for “performance-based compensation” under
Section 162(m) of the Code) and shall otherwise meet the requirements
of Section 162(m) of the Code, including the requirement that the
outcome of the Performance Goal or Goals be substantially uncertain (as defined
in the regulations under Section 162(m) of the Code) at the time
established.

 

(e)  Payment of Qualified Performance-Based Awards.  A Participant will be eligible to receive
payment under a Qualified Performance-Based Award which is subject to
achievement of a Performance Goal or Goals only if the applicable Performance
Goal or Goals period are achieved within the applicable Performance Period, as
determined by the Committee. In determining the actual size of an individual
Qualified Performance-Based Award, the Committee may reduce or eliminate the
amount of the Qualified Performance-Based Award earned for the Performance
Period, if in its sole and absolute discretion, such reduction or elimination
is appropriate.

 

(f)  Maximum Award Payable.  The maximum Qualified Performance-Based Award
payment to any one Participant under the Plan for a Performance Period is 25%
of the number of shares of Stock set forth in Section 4 above, or if the
Qualified Performance-Based Award is paid in cash, that number of shares
multiplied by the Market Value of the Stock as of the date the Qualified
Performance-Based Award is granted.

 

(g)  Limitation on Adjustments for Certain Events.  No adjustment of any Qualified
Performance-Based Award pursuant to Section 8 shall be made except on such
basis, if any, as will not cause such Award to provide other than “performance-based
compensation” within the meaning of Section 162(m) of the Code.

 

7.8  Awards to
Participants Outside the United States.  The Committee may modify the terms of any
Award under the Plan granted to a Participant who is, at the time of grant or
during the term of the Award, resident or primarily employed outside of the
United States in any manner deemed by the Committee to be necessary or
appropriate to conform that Award to laws, regulations, and customs of the
country in which the Participant is then resident or primarily employed, or so
that the value and other benefits of the Award to the Participant, as affected
by foreign tax laws and other restrictions applicable as a result of the
Participant’s residence or employment abroad, shall be comparable to the value
of such an Award to a Participant who is resident or primarily employed in the
United States. The Committee may establish supplements to, or amendments,
restatements, or alternative versions of, the Plan for the purpose of granting
and administrating any such modified Award. No such modification, supplement,
amendment, restatement or alternative version may increase the share limit of
Section 4.

 

8.                                      Adjustment Provisions

 

8.1  Adjustment
for Corporate Actions.  All of
the share numbers set forth in the Plan reflect the capital structure of the
Company as of the Effective Date. Subject to Section 8.2, if subsequent to
that date the outstanding shares of Stock (or any other securities covered by
the Plan by reason of the prior application of this Section) are increased,
decreased, or exchanged for a different number or kind of shares or other
securities, or if additional shares or new or different shares or other
securities are distributed with respect to shares of Stock, through a merger,
consolidation, sale of all or substantially all the property of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split, or other similar distribution with respect to such
shares of Stock, an appropriate and proportionate adjustment will be made in 

 

A-8

 

(i) the maximum numbers
and kinds of shares provided in Section 4, (ii) the numbers and kinds
of shares or other securities subject to the then outstanding Awards,
(iii) the exercise price for each share or other unit of any other
securities subject to then outstanding Options and Stock Appreciation Rights
(without change in the aggregate purchase price as to which such Options or
Rights remain exercisable), and (iv) the repurchase price of each share of
Restricted Stock then subject to a Risk of Forfeiture in the form of a Company
repurchase right.

 

8.2           Treatment
in Certain Acquisitions.

 

(a)           Subject to any provisions of then
outstanding Awards granting greater rights to the holders thereof, in the event
of an Acquisition, the Committee may, either in advance of the Acquisition or
at the time thereof and upon such terms as it may deem appropriate, provide for
the Acceleration of any then outstanding Awards in full if, and only if, such
Awards are not assumed or replaced by comparable Awards referencing shares of
the capital stock of the successor or acquiring entity or parent thereof, and
after a reasonable period following such Acceleration, as determined by the Committee,
such Accelerated Awards and all other then outstanding Awards not assumed or
replaced by comparable Awards shall terminate. As to any one or more
outstanding Awards which are not otherwise Accelerated in full by reason of
such Acquisition, the Committee may also, either in advance of an Acquisition
or at the time thereof and upon such terms as it may deem appropriate, provide
for the Acceleration of such outstanding Awards in the event that the
employment of the Participants should subsequently terminate following the
Acquisition. Each outstanding Award that is assumed in connection with an
Acquisition, or is otherwise to continue in effect subsequent to the
Acquisition, will be appropriately adjusted, immediately after the Acquisition,
as to the number and class of securities and other relevant terms in accordance
with Section 8.1.

 

(b)           For the purposes of this
Section 8.2, an Award shall be considered assumed or replaced by a
comparable Award if, following the Acquisition, the Award confers the right to
purchase, for each share of Stock subject to the Award immediately prior to the
Acquisition, the consideration (whether stock, cash or other securities or
property) received in the Acquisition by holders of Stock on the effective date
of the Acquisition (and if holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
shares of Stock); provided, however,
that if such consideration received in the Acquisition was not solely common stock
of the successor corporation or its parent or subsidiary, the Committee may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Award for each share of Stock subject to
the Award to be solely common stock of the successor corporation or its parent
or subsidiary equal in fair market value to the per share consideration
received by holders of Stock in the Acquisition, or any combination of cash and
common stock, (including the payment of cash equal to the net of Market Value
over the exercise price of the shares of Stock subject to the Award) so
approved by the Committee with the consent of the successor corporation; and
provided further that such Award may continue to be subject to the same vesting
requirements or Risks of Forfeiture after the Acquisition.

 

8.3  Dissolution
or Liquidation.  Upon the
dissolution or liquidation of the Company, other than as part of an Acquisition
or similar transaction, each outstanding Option and Stock Appreciation Right
shall terminate, but the Optionee or Stock Appreciation Right holder shall have
the right, immediately prior to the dissolution or liquidation, to exercise the
Option or Stock Appreciation Right to the extent exercisable on the date of the
dissolution or liquidation.

 

8.4  Adjustment of
Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events.  In the event of any corporate action not
specifically covered by the preceding Sections, including but not limited to an
extraordinary cash distribution on Stock, a corporate separation or other
reorganization or liquidation, the Committee may make such adjustment of
outstanding Awards and their terms, if any, as it, in its sole discretion, may
deem equitable and appropriate in the circumstances. The Committee may make
adjustments in the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events (including, without
limitation, the events described in this Section) affecting the Company or the
financial statements of the Company or of changes in applicable laws,
regulations, or accounting principles, whenever the Committee determines that
such adjustments are appropriate in order to prevent the dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan.

 

8.5  Related
Matters.  Any adjustment in
Awards made pursuant to this Section 8 shall be determined and made, if at
all, by the Committee and shall include any correlative modification of terms,
including of Option exercise prices, rates of vesting or exercisability, Risks
of Forfeiture, applicable repurchase prices for Restricted Stock, and
Performance Goals and other financial objectives which the Committee may deem
necessary or appropriate so as to ensure the rights of the Participants in
their respective Awards are not substantially diminished nor enlarged as a
result of the adjustment and corporate action other than as expressly
contemplated in this Section 8. No fraction of a share shall be purchasable
or deliverable upon exercise, but in the event any adjustment hereunder of the
number of shares covered by an Award shall cause such number to include a
fraction of a share, such number of shares shall be adjusted to the nearest
smaller whole number of shares. No adjustment of an Option exercise price per
share pursuant to this Section 8 shall result in an exercise price which
is less than the par value of the Stock.

 

A-9

 

9.                                      Settlement of Awards

 

9.1  In General.  Options and Restricted Stock shall be settled
in accordance with their terms. All other Awards may be settled in cash, Stock,
or other Awards, or a combination thereof, as determined by the Committee at or
after grant and subject to any contrary Award Agreement. The Committee may not
require settlement of any Award in Stock pursuant to the immediately preceding
sentence to the extent issuance of such Stock would be prohibited or
unreasonably delayed by reason of any other provision of the Plan.

 

9.2  Violation of
Law.  Notwithstanding any
other provision of the Plan or the relevant Award Agreement, if, at any time,
in the reasonable opinion of the Company, the issuance of shares of Stock
covered by an Award may constitute a violation of law, then the Company may
delay such issuance and the delivery of a certificate for such shares until
(i) approval shall have been obtained from such governmental agencies,
other than the Securities and Exchange Commission, as may be required under any
applicable law, rule, or regulation and (ii) in the case where such
issuance would constitute a violation of a law administered by, or a regulation
of, the Securities and Exchange Commission, one of the following conditions
shall have been satisfied:

 

(a)           the shares are at the time of the
issue of such shares effectively registered under the Securities Act of 1933,
as amended; or

 

(b)           the Company shall have determined, on
such basis as it deems appropriate (including an opinion of counsel in form and
substance satisfactory to the Company) that the sale, transfer, assignment,
pledge, encumbrance or other disposition of such shares or such beneficial
interest, as the case may be, does not require registration under the
Securities Act of 1933, as amended, or any applicable State securities laws.

 

The
Company shall make all reasonable efforts to bring about the occurrence of said
events.

 

9.3  Corporate
Restrictions on Rights in Stock. 
Any Stock to be issued pursuant to Awards granted under the Plan shall
be subject to all restrictions upon the transfer thereof which may be now or
hereafter imposed by the certificate of incorporation and by-laws (or similar
charter documents) of the Company.

 

9.4  Investment
Representations.  The Company
shall be under no obligation to issue any shares covered by any Award unless
the shares to be issued pursuant to Awards granted under the Plan have been
effectively registered under the Securities Act of 1933, as amended, or the
Participant shall have made such written representations to the Company (upon
which the Company believes it may reasonably rely) as the Company may deem
necessary or appropriate for purposes of confirming that the issuance of such
shares will be exempt from the registration requirements of that Act and any
applicable state securities laws and otherwise in compliance with all
applicable laws, rules and regulations, including but not limited to that
the Participant is acquiring the shares for his or her own account for the
purpose of investment and not with a view to, or for sale in connection with,
the distribution of any such shares.

 

9.5  Registration.  If the Company shall deem it necessary or
desirable to register under the Securities Act of 1933, as amended or other
applicable statutes any shares of Stock issued or to be issued pursuant to
Awards granted under the Plan, or to qualify any such shares of Stock for
exemption from the Securities Act of 1933, as amended, or other applicable
statutes, then the Company shall take such action at its own expense. The Company
may require from each recipient of an Award, or each holder of shares of Stock
acquired pursuant to the Plan, such information in writing for use in any
registration statement, prospectus, preliminary prospectus or offering circular
as is reasonably necessary for that purpose and may require reasonable
indemnity to the Company and its officers and directors from that holder
against all losses, claims, damage and liabilities arising from use of the
information so furnished and caused by any untrue statement of any material
fact therein or caused by the omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made. In addition, the
Company may require of any such person that he or she agree that, without the
prior written consent of the Company or the managing underwriter in any public
offering of shares of Stock, he or she will not sell, make any short sale of,
loan, grant any option for the purchase of, pledge or otherwise encumber, or
otherwise dispose of, any shares of Stock during the 180 day period
commencing on the effective date of the registration statement relating to the
underwritten public offering of securities. Without limiting the generality of
the foregoing provisions of this Section 9.5, if in connection with any
underwritten public offering of securities of the Company the managing
underwriter of such offering requires that the Company’s directors and officers
enter into a lock-up agreement containing provisions that are more restrictive
than the provisions set forth in the preceding sentence, then (a) each
holder of shares of Stock acquired pursuant to the Plan (regardless of whether
such person has complied or complies with the provisions of clause (b) below)
shall be bound by, and shall be deemed to have agreed to, the same lock-up
terms as those to which the Company’s directors and officers are required to
adhere; and (b) at the request of the Company or such managing underwriter,
each such person shall execute and deliver a lock-up agreement in form and
substance equivalent to that which is required to be executed by the Company’s
directors and officers.

 

A-10

 

9.6  Placement of
Legends; Stop Orders; etc. 
Each share of Stock to be issued pursuant to Awards granted under the
Plan may bear a reference to the investment representation made in accordance
with Section 9.4 in addition to any other applicable restriction under the
Plan, the terms of the Award and if applicable under the Stockholders’
Agreement and to the fact that no registration statement has been filed with
the Securities and Exchange Commission in respect to such shares of Stock. All
certificates for shares of Stock or other securities delivered under the Plan
shall be subject to such stock transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
requirements of any stock exchange upon which the Stock is then listed, and any
applicable federal or state securities law, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.

 

9.7  Tax
Withholding.  Whenever shares
of Stock are issued or to be issued pursuant to Awards granted under the Plan,
the Company shall have the right to require the recipient to remit to the
Company an amount sufficient to satisfy federal, state, local or other
withholding tax requirements if, when, and to the extent required by law
(whether so required to secure for the Company an otherwise available tax
deduction or otherwise) prior to the delivery of any certificate or
certificates for such shares. The obligations of the Company under the Plan
shall be conditional on satisfaction of all such withholding obligations and
the Company shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the recipient of an
Award. However, in such cases Participants may elect, subject to the approval
of the Committee, to satisfy an applicable withholding requirement, in whole or
in part, by having the Company withhold shares to satisfy their tax
obligations. Participants may only elect to have Shares withheld having a
Market Value on the date the tax is to be determined equal to the minimum
statutory total tax which could be imposed on the transaction. All elections
shall be irrevocable, made in writing, signed by the Participant, and shall be
subject to any restrictions or limitations that the Committee deems
appropriate.

 

10.                               Reservation of Stock

 

The
Company shall at all times during the term of the Plan and any outstanding
Awards granted hereunder reserve or otherwise keep available such number of
shares of Stock as will be sufficient to satisfy the requirements of the Plan
(if then in effect) and the Awards and shall pay all fees and expenses
necessarily incurred by the Company in connection therewith.

 

11.                               Limitation of Rights in Stock; No Special Service Rights

 

A
Participant shall not be deemed for any purpose to be a stockholder of the
Company with respect to any of the shares of Stock subject to an Award, unless
and until a certificate shall have been issued therefor and delivered to the
Participant or his agent. Nothing contained in the Plan or in any Award
Agreement shall confer upon any recipient of an Award any right with respect to
the continuation of his or her employment or other association with the Company
(or any Affiliate), or interfere in any way with the right of the Company (or
any Affiliate), subject to the terms of any separate employment or consulting
agreement or provision of law or corporate articles, by-laws or similar charter
documents to the contrary, at any time to terminate such employment or
consulting agreement or to increase or decrease, or otherwise adjust, the other
terms and conditions of the recipient’s employment or other association with
the Company and its Affiliates.

 

12.                               Unfunded Status of Plan

 

The
Plan is intended to constitute an “unfunded” plan for incentive compensation,
and the Plan is not intended to constitute a plan subject to the provisions of
the Employee Retirement Income Security Act of 1974, as amended. With respect
to any payments not yet made to a Participant by the Company, nothing contained
herein shall give any such Participant any rights that are greater than those
of a general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments with respect to Options,
Stock Appreciation Rights and other Awards hereunder, provided, however, that the existence of
such trusts or other arrangements is consistent with the unfunded status of the
Plan.

 

13.                               Nonexclusivity of the Plan

 

Neither
the adoption of the Plan by the Board nor the submission of the Plan to the
stockholders of the Company shall be construed as creating any limitations on
the power of the Board to adopt such other incentive arrangements as it may
deem desirable, including without limitation, the granting of stock options and
restricted stock other than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.

 

A-11

 

14.                               Termination and Amendment of the Plan

 

The
Board may at any time terminate the Plan or make such modifications of the Plan
as it shall deem advisable. Unless the Board otherwise expressly provides, no
amendment of the Plan shall affect the terms of any Award outstanding on the
date of such amendment.

 

The
Committee may amend the terms of any Award theretofore granted, prospectively
or retroactively, provided that the Award as amended is consistent with the
terms of the Plan. Also within the limitations of the Plan, the Committee may
modify, extend or assume outstanding Awards or may accept the cancellation of
outstanding Awards or of outstanding stock options or other equity-based
compensation awards granted by another issuer in return for the grant of new
Awards for the same or a different number of shares and on the same or
different terms and conditions (including but not limited to the exercise price
of any Option). Furthermore, the Committee may at any time (a) offer to
buy out for a payment in cash or cash equivalents an Award previously granted
or (b) authorize the recipient of an Award to elect to cash out an Award
previously granted, in either case at such time and based upon such terms and
conditions as the Committee shall establish.

 

No
amendment or modification of the Plan by the Board, or of an outstanding Award
by the Committee, shall impair the rights of the recipient of any Award
outstanding on the date of such amendment or modification or such Award, as the
case may be, without the Participant’s consent; provided, however, that no such consent shall be required if
(i) the Board or Committee, as the case may be, determines in its sole
discretion and prior to the date of any Acquisition that such amendment or
alteration either is required or advisable in order for the Company, the Plan
or the Award to satisfy any law or regulation, including without limitation the
provisions of Section 409A of the Code or to meet the requirements of or
avoid adverse financial accounting consequences under any accounting standard,
or (ii) the Board or Committee, as the case may be, determines in its sole
discretion that such amendment or alteration is not reasonably likely to
significantly diminish the benefits provided under the Award, or that any such
diminution has been adequately compensated.

 

15.                               Notices and Other Communications

 

Any
notice, demand, request or other communication hereunder to any party shall be
deemed to be sufficient if contained in a written instrument delivered in
person or duly sent by first class registered, certified or overnight mail,
postage prepaid, or telecopied with a confirmation copy by regular, certified
or overnight mail, addressed or telecopied, as the case may be, (i) if to
the recipient of an Award, at his or her residence address last filed with the
Company and (ii) if to the Company, at its principal place of business,
addressed to the attention of its Treasurer, or to such other address or
telecopier number, as the case may be, as the addressee may have designated by
notice to the addressor. All such notices, requests, demands and other
communications shall be deemed to have been received: (i) in the case of
personal delivery, on the date of such delivery; (ii) in the case of
mailing, when received by the addressee; and (iii) in the case of
facsimile transmission, when confirmed by facsimile machine report.

 

16.                               Governing Law

 

The
Plan and all Award Agreements and actions taken thereunder shall be governed,
interpreted and enforced in accordance with the laws of the State of Delaware,
without regard to the conflict of laws principles thereof.

 

A-12

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