Document:

Form of Stock Option Agreement for use under the 2003 Stock Incentive Plan

 EXHIBIT 10.2 
  
 Option No.             
  
 CERADYNE, INC. 
  
 STOCK OPTION AGREEMENT 
  
 Type of Option (check one):     ̈
Incentive                     ̈ Nonqualified 
  
 This Stock Option
Agreement (the “Agreement”) is entered into as of                     , 200    , by and between Ceradyne,
Inc., a Delaware corporation (the “Company”), and
                                        
(the “Optionee”) pursuant to the Company’s 2003 Stock Incentive Plan, as amended (the “Plan”). Any capitalized term not defined herein shall have the same meaning ascribed to it in the Plan. 
  
 1. Grant of Option. The Company hereby grants to
Optionee an option (the “Option”) to purchase all or any portion of a total of _____________________________ (__________) shares (the “Shares”) of the Common Stock of the Company at a purchase price of _________________________
($__________) per share (the “Exercise Price”), subject to the terms and conditions set forth herein and the provisions of the Plan. If the box marked “Incentive” above is checked, then this Option is intended to qualify as an
“incentive stock option” as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). If this Option fails in whole or in part to qualify as an incentive stock option, or if the box marked
“Nonqualified” is checked, then this Option shall to that extent constitute a nonqualified stock option. 
  
 2. Vesting of Option. The right to exercise this Option shall vest in installments, and this Option shall be exercisable from time to
time in whole or in part as to any vested installment, as follows: 
  

					
	 	  	 On or After:

	 	 This Option shall be
Exercisable as to:

	(i)	  	_______________________, 20___:	 	______________________ shares
			
	(ii)	  	_______________________, 20___: an additional	 	______________________ shares
			
	(iii)	  	_______________________, 20___: an additional	 	______________________ shares
			
	(iv)	  	_______________________, 20___: an additional	 	______________________ shares
			
	(v)	  	_______________________, 20___: an additional	 	______________________ shares

  
 No additional Shares
shall vest after the date of termination of Optionee’s “Continuous Service” (as defined below), but this Option shall continue to be exercisable in accordance with Section 3 hereof with respect to that number of shares that have
vested as of the date of termination of Optionee’s Continuous Service. 
  
 As used herein, the term “Continuous Service” means (i) employment by either the Company or any parent or subsidiary corporation of the Company, or by a corporation or a parent or subsidiary 

  

 
of a corporation issuing or assuming a stock option in a transaction to which Section 424(a) of the Code applies, which is uninterrupted except for
vacations, illness (except for permanent disability, as defined in Section 22(e)(3) of the Code), or leaves of absence which are approved in writing by the Company or any of such other employer corporations, if applicable, (ii) service as a member
of the Board of Directors of the Company until Optionee resigns, is removed from office, or Optionee’s term of office expires and he or she is not reelected, or (iii) so long as Optionee is engaged as a Service Provider to the Company or other
corporation referred to in clause (i) above. 
  
 3.
Term of Option. The right of the Optionee to exercise this Option shall terminate upon the first to occur of the following: 
  
 (a) the expiration of ten (10) years from the date of this Agreement; 
  
 (b) the expiration of three (3) months from the date of termination of Optionee’s Continuous Service if
such termination occurs for any reason other than permanent disability, death or voluntary resignation; provided, however, that if Optionee dies during such three-month period the provisions of Section 3(e) below shall apply; 
  
 (c) the expiration of one (1) month from the date of
termination of Optionee’s Continuous Service if such termination occurs due to voluntary resignation; provided, however, that if Optionee dies during such one-month period the provisions of Section 3(e) below shall apply; 
  
 (d) the expiration of one (1) year from the date of
termination of Optionee’s Continuous Service if such termination is due to permanent disability of the Optionee (as defined in Section 22(e)(3) of the Code); 
  
 (e) the expiration of one (1) year from the date of termination of Optionee’s Continuous Service if
such termination is due to Optionee’s death or if death occurs during either the three-month or one-month period following termination of Optionee’s Continuous Service pursuant to Section 3(b) or 3(c) above, as the case may be; or

  
 (f) upon the consummation of a “Change
in Control” (as defined in Section 2.4 of the Plan), unless such Option is otherwise assumed or replaced with a new option of comparable value or other New Incentives pursuant to Section 8 below. 
  
 4. Exercise of Option. On or after the vesting of any
portion of this Option in accordance with Sections 2 or 8 hereof, and until termination of the right to exercise this Option in accordance with Section 3 above, the portion of this Option which has vested may be exercised in whole or in part by the
Optionee (or, after his or her death, by the person designated in Section 5 below) upon delivery of the following to the Company at its principal executive offices: 
  
 (a) a written notice of exercise which identifies this Agreement and states the number of Shares then being
purchased (but no fractional Shares may be purchased); 
  
 (b) a check or cash in the amount of the Exercise Price (or payment of the Exercise Price in such other form of lawful consideration as the Administrator may approve from time to time under the provisions of Section 5.4 of the Plan);

  

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 (c) a check or cash in the amount reasonably requested by the Company to satisfy the
Company’s withholding obligations under federal, state or other applicable tax laws with respect to the taxable income, if any, recognized by the Optionee in connection with the exercise of this Option (unless the Company and Optionee shall
have made other arrangements for deductions or withholding from Optionee’s wages, bonus or other compensation payable to Optionee, or by the withholding of Shares issuable upon exercise of this Option or the delivery of Shares owned by the
Optionee in accordance with Section 11.1 of the Plan, provided such arrangements satisfy the requirements of applicable tax laws); and 
  
 (d) a letter, if requested by the Company, in such form and substance as the Company may require, setting forth the investment intent of
the Optionee, or person designated in Section 5 below, as the case may be. 
  
 5. Death of Optionee; No Assignment. The rights of the Optionee under this Agreement may not be assigned or transferred except by will or by the laws of descent and distribution, and may be
exercised during the lifetime of the Optionee only by such Optionee. Any attempt to sell, pledge, assign, hypothecate, transfer or dispose of this Option in contravention of this Agreement or the Plan shall be void and shall have no effect. If the
Optionee’s Continuous Service terminates as a result of his or her death, and provided Optionee’s rights hereunder shall have vested pursuant to Section 2 hereof, Optionee’s legal representative, his or her legatee, or the person who
acquired the right to exercise this Option by reason of the death of the Optionee (individually, a “Successor”) shall succeed to the Optionee’s rights and obligations under this Agreement. After the death of the Optionee, only a
Successor may exercise this Option. 
  
 6.
Representation of Optionee. Optionee acknowledges receipt of a copy of the Plan and understands that all rights and obligations connected with this Option are set forth in this Agreement and the Plan. 
  
 7. Adjustments Upon Changes in Capital Structure. In the
event that the outstanding shares of Common Stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of a recapitalization, stock
split, reverse stock split, reclassification, stock dividend or other similar change in the capital structure of the Company, then appropriate adjustment shall be made by the Administrator to the number of Shares subject to the unexercised portion
of this Option and to the Exercise Price per share, in order to preserve, as nearly as practical, but not to increase, the benefits of the Optionee under this Option, in accordance with the provisions of Section 4.2 of the Plan. 
  
 8. Change in Control. In the event of a Change in
Control (as defined in Section 2.4 of the Plan): 
  
 (a) The right to exercise this Option shall accelerate automatically and vest in full (notwithstanding the provisions of Section 2 above) effective as of immediately prior to the consummation of the Change in Control unless this
Option is to be assumed by the acquiring or successor entity (or parent thereof) or a new option or New Incentives are to be issued in exchange therefor, as provided in subsection (b) below. If vesting of this Option will accelerate pursuant to the
preceding sentence, the Administrator in its discretion may provide, in connection with the Change in Control transaction, for the purchase or exchange of this Option for an amount of cash or other property having a value equal to the difference (or
“spread”) between: (x) the value of the cash or other property that the Optionee would have received pursuant to the Change in Control transaction 

  

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in exchange for the Shares issuable upon exercise of this Option had this Option been exercised immediately prior to the Change in Control, and (y) the
aggregate Exercise Price for such Shares. If the vesting of this Option will accelerate pursuant to this subsection (a), then the Administrator shall cause written notice of the Change in Control transaction to be given to the Optionee not less than
fifteen (15) days prior to the anticipated effective date of the proposed transaction. 
  
 (b) The vesting of this Option shall not accelerate if and to the extent that: (i) this Option (including the unvested portion
thereof) is to be assumed by the acquiring or successor entity (or parent thereof) or a new option of comparable value is to be issued in exchange therefor pursuant to the terms of the Change in Control transaction, or (ii) in the event the
consideration to be received by the stockholders of the Company in connection with the Change in Control does not consist of securities, this Option (including the unvested portion thereof) is to be replaced by the acquiring or successor entity (or
parent thereof) with other incentives of comparable value under a new incentive program (“New Incentives”) containing such terms and provisions as the Administrator in its discretion may consider equitable. If this Option is assumed, or if
a new option of comparable value is issued in exchange therefor, then this Option or the new option shall be appropriately adjusted, concurrently with the Change in Control, to apply to the number and class of securities or other property that the
Optionee would have received pursuant to the Change in Control transaction in exchange for the Shares issuable upon exercise of this Option had this Option been exercised immediately prior to the Change in Control, and appropriate adjustment also
shall be made to the Exercise Price such that the aggregate Exercise Price of this Option or the new option shall remain the same as nearly as practicable. 
  
 (c) If the provisions of subsection (b) above apply, then this Option, the new option or the New Incentives shall continue to vest in
accordance with the provisions of Section 2 hereof and shall continue in effect for the remainder of the term of this Option in accordance with the provisions of Section 3 hereof. However, in the event of an Involuntary Termination (as defined
below) of Optionee’s Continuous Service within twelve (12) months following such Change in Control, then vesting of this Option, the new option or the New Incentives shall accelerate in full automatically effective upon such Involuntary
Termination. 
  
 (d) For purposes of this Section
8, the following terms shall have the meanings set forth below: 
  
 (i) “Involuntary Termination” shall mean the termination of Optionee’s Continuous Service by reason of: 
  
 (A) Optionee’s involuntary dismissal or discharge by the Company, or by the acquiring or successor entity (or parent or any
subsidiary thereof employing the Optionee) for reasons other than Misconduct (as defined below), or 
  
 (B) Optionee’s voluntary resignation following (x) a change in Optionee’s position with the Company, the acquiring or successor
entity (or parent or any subsidiary thereof) which materially reduces Optionee’s duties and responsibilities or the level of management to which Optionee reports, (y) a reduction in Optionee’s level of compensation (including base salary,
fringe benefits and target bonus under any performance based bonus or incentive programs) by more than ten percent (10%), or (z) a relocation of Optionee’s principal place of employment by more than thirty (30) miles, provided and only if such
change, reduction or relocation is effected without Optionee’s written consent. 
  

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 (ii) “Misconduct” shall mean (A) the commission of any act of fraud,
embezzlement or dishonesty by Optionee which materially and adversely affects the business of the Company, the acquiring or successor entity (or parent or any subsidiary thereof), (B) any unauthorized use or disclosure by Optionee of confidential
information or trade secrets of the Company, the acquiring or successor entity (or parent or any subsidiary thereof), (C) the continued refusal or omission by the Optionee to perform any material duties required of him if such duties are consistent
with duties customary for the position held with the Company, the acquiring or successor entity (or parent or any subsidiary thereof), (D) any material act or omission by the Optionee involving malfeasance or gross negligence in the performance of
Optionee’s duties to, or material deviation from any of the policies or directives of, the Company or the acquiring or successor entity (or parent or any subsidiary thereof), (E) conduct on the part of Optionee which constitutes the breach of
any statutory or common law duty of loyalty to the Company, the acquiring or successor entity (or parent or any subsidiary thereof), or (F) any illegal act by Optionee which materially and adversely affects the business of the Company, the acquiring
or successor entity (or parent or any subsidiary thereof), or any felony committed by Optionee, as evidenced by conviction thereof. The provisions of this Section shall not limit the grounds for the dismissal or discharge of Optionee or any other
individual in the service of the Company, the acquiring or successor entity (or parent or any subsidiary thereof). 
  
 9. No Employment Contract Created. Neither the granting of this Option nor the exercise hereof shall be construed as granting to the
Optionee any right with respect to continuance of employment by the Company or any of its subsidiaries. The right of the Company or any of its subsidiaries to terminate at will the Optionee’s employment at any time (whether by dismissal,
discharge or otherwise), with or without cause, is specifically reserved. 
  
 10. Rights as Stockholder. The Optionee (or transferee of this option by will or by the laws of descent and distribution) shall have no rights as a stockholder with respect to any Shares covered
by this Option until such person has duly exercised this Option, paid the Exercise Price and become a holder of record of the Shares purchased. 
  
 11. “Market Stand-Off” Agreement. Optionee agrees that, if requested by the Company or the managing underwriter of any
proposed public offering of the Company’s securities, Optionee will not sell or otherwise transfer or dispose of any Shares held by Optionee without the prior written consent of the Company or such underwriter, as the case may be, during such
period of time, not to exceed 180 days following the effective date of the registration statement filed by the Company with respect to such offering, as the Company or the underwriter may specify. 
  
 12. Interpretation. This Option is granted pursuant to
the terms of the Plan, and shall in all respects be interpreted in accordance therewith. The Administrator shall interpret and construe this Option and the Plan, and any action, decision, interpretation or determination made in good faith by the
Administrator shall be final and binding on the Company and the Optionee. As used in this Agreement, the term “Administrator” shall refer to the committee of the Board of Directors of the Company appointed to administer the Plan, and if no
such committee has been appointed, the term Administrator shall mean the Board of Directors. 
  
 13. Limitation of Liability for Nonissuance. During the term of the Plan, the Company agrees at all times to reserve and keep available, and to use its reasonable best efforts to obtain from any
regulatory body having jurisdiction any requisite authority in order to issue and sell, such number of shares of its Common Stock as shall be sufficient to satisfy its obligations hereunder and 

  

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the requirements of the Plan. Inability of the Company to obtain, from any regulatory body having jurisdiction, authority deemed by the Company’s
counsel to be necessary for the lawful issuance and sale of any shares of its Common Stock hereunder and under the Plan shall relieve the Company of any liability in respect of the nonissuance or sale of such shares as to which such requisite
authority shall not have been obtained. 
  
 14.
Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed given when delivered personally or three (3) days after being deposited in the United
States mail, as certified or registered mail, with postage prepaid, (or by such other method as the Administrator may from time to time deem appropriate), and addressed, if to the Company, at its principal place of business, Attention: the Chief
Financial Officer, and if to the Optionee, at his or her most recent address as shown in the employment or stock records of the Company. 
  
 15. Governing Law. The validity, construction, interpretation, and effect of this Option shall be governed by and determined in
accordance with the laws of the State of California except for matters related to corporate law, in which case the provisions of the Delaware General Corporation Law shall govern. 
  
 16. Severability. Should any provision or portion of this Agreement be held to be unenforceable or
invalid for any reason, the remaining provisions and portions of this Agreement shall be unaffected by such holding. 
  
 17. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of
which together shall be deemed one instrument. 
  
 [Remainder of
page intentionally blank] 
  

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 18. Tax Consequences and Reporting Obligation Upon Sale of Shares. If this Option is
an “incentive stock option,” the tax benefits afforded to incentive stock options will be obtained by the Optionee only if the Shares received upon exercise of this Option are held for at least one year after the date of exercise of this
Option and two years after the date this Option was granted to the Optionee. If the Optionee sells or otherwise transfers the Shares before the expiration of either of these one- or two-year periods, the sale or transfer will be treated for tax
purposes as a “disqualifying disposition,” resulting in the following tax consequences: (a) the Optionee will not obtain the tax benefits afforded to incentive stock options, (b) the “spread” as of the date of exercise will be
taxed to the Optionee at ordinary income tax rates, and (c) the amount of ordinary income resulting from the disqualifying disposition will be included in the Optionee’s W-2. These tax consequences are described in more detail in the prospectus
that relates to the Company’s 2003 Stock Incentive Plan, a copy of which was delivered to the Optionee with this Option. To assure that the Company has the information necessary to comply with its tax reporting obligations, Optionee agrees
to promptly notify the Company if any Shares are sold or transferred less than one year after the date of exercise or less than two years after the date this Option was granted, and report information regarding the disqualifying disposition in
accordance with procedures established by the Company for this purpose. 
  
 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. 
  

									
	 CERADYNE, INC.
 a Delaware
corporation
	 	 	 	 OPTIONEE

					
	By:	 	 	 	 	 	By:	 	 
	 	 	 	 	 	 	 	 	(Signature)
					
	 Name: 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	(Type or print name)
					
	 Its:
	 	 	 	 	 	 Address:
	 	 
					
	 	 	 	 	 	 	 	 	 
					
	 	 	 	 	 	 	 	 	 

  

 7Form of Restricted Stock Unit Award Agreement

 EXHIBIT 10.3 
  
 CERADYNE, INC. 
  
 RESTRICTED STOCK UNIT AWARD AGREEMENT 
  
 This Restricted Stock Unit Award Agreement (the “Agreement”) by and between Ceradyne, Inc., a Delaware corporation (the
“Company”), and                                  (the
“Grantee”) evidences the Restricted Stock Unit Award (the “Award”) granted by the Company to the Grantee on             , 200  
(the “Effective Date”) as to the number of Restricted Stock Units (the “Units”) set forth below. Each Unit represents the right to receive one share of the Company’s Common Stock when the Unit vests. The
conditions for vesting are set forth below. 
  
 NUMBER OF UNITS:
                                       
 (            ) 
  
 VESTING OF UNITS SHALL BE AS FOLLOWS: 

			
	 
	
	 
	
	 

  
 This Award is granted
pursuant to the Company’s 2003 Stock Incentive Plan, as amended (the “Plan”) and is subject to the Additional Terms and Conditions (the “Terms”) attached hereto (and incorporated herein as part of this Agreement) and
the Plan. In the event there is a conflict or inconsistency between any provision in this Agreement and one or more provisions of the Plan, the provisions of the Plan shall govern. Capitalized terms used in this Agreement that are not otherwise
defined herein shall have the same meanings as defined in the Plan. The parties agree to the terms of the Award as set forth in this Agreement. The Grantee acknowledges receipt of copies of both this Agreement (including the Terms) and the Plan.

  

									
	“GRANTEE”	 	 	 	 CERADYNE, INC., a Delaware corporation

				
	 	 	 	 	By:	 	 
	 	 	 	 	 	 	 Name:
	 	 
	 	 	 	 	 	 	 Title:
	 	 
				
	 Grantee’s Address:
	 	 	 	 	 	 
				
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

  

 1 

 ADDITIONAL TERMS AND CONDITIONS OF RESTRICTED STOCK UNIT AWARD 
  
 The terms and conditions set forth below constitute part of the Restricted
Stock Unit Award Agreement to which they are attached, and references herein to the “Agreement” include both documents as one agreement.  
  
 1. Restricted Stock Units. 
  
 (a) As used herein, the term “Restricted Stock Unit” means the right to receive one share of the Company’s Common
Stock and shall be used solely as a device for the determination of any payment to be eventually made to the Grantee if and when Restricted Stock Units vest pursuant to the conditions set forth in this Agreement. 
  
 (b) The Restricted Stock Units create no fiduciary duty to
the Grantee and this Agreement creates only a contractual obligation on the part of the Company to make payments, subject to vesting and the other terms and conditions hereof, as provided in Section 5 below. The Restricted Stock Units shall not be
treated as property or as a trust fund of any kind. No assets have been secured or set aside by the Company with respect to the Award and, if amounts become payable to the Grantee pursuant to this Agreement, the Grantee’s rights with respect to
such amounts shall be no greater than the rights of any general unsecured creditor of the Company. 
  
 2. Vesting of Units. The Restricted Stock Units subject to this Agreement shall vest in one or more installments in accordance with
the provisions set forth on the cover page of this Agreement and the other terms and conditions set forth herein. Vesting shall cease upon a termination of “Continuous Service” (as provided in Section 4 below) and vesting may accelerate
upon or following a “Change in Control” (as provided in Section 8 below). 
  
 3. Continuous Service. 
  
 (a) The vesting of Units under this Agreement requires Continuous Service (as defined below) by Grantee through each applicable vesting date as a condition to the vesting of the applicable installment of the Award.
Service for only a portion of the vesting period, even if a substantial portion, will not entitle the Grantee to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of Continuous
Service as provided in Section 4 below. 
  
 (b)
Nothing contained in this Agreement constitutes an employment commitment by the Company or any Affiliated Company (as defined in the Plan), confers upon the Grantee any right to remain employed by the Company or any Affiliated Company, or interferes
in any way with the right of the Company or any Affiliated Company at any time to terminate such employment. Nothing in this paragraph, however, is intended to adversely affect any independent contractual right of the Grantee under any written
employment agreement with the Company or any Affiliated Company. 
  
 (c) For purposes of this Agreement, the term “Continuous Service” means either of the following which applies to the Grantee: (1) employment by either the Company or any Affiliated Company which is
uninterrupted other than by vacations, illness (except for permanent disability, as defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended), or leaves of absence which are approved in writing by the Company or any Affiliated
Company, if 

  

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applicable; (2) service as a member of the Board of Directors of the Company until Grantee resigns, is removed from office, or Grantee’s term of office
expires and he is not reelected; or (3) so long as Grantee is engaged as a Service Provider (as such term is defined in the Plan) to the Company or an Affiliated Company. 
  
 4. Effect of Termination of Continuous Service. Any Restricted Stock Units subject to this Agreement,
to the extent not vested as of the date of termination of Grantee’s Continuous Service, shall terminate as of such date (regardless of the reason for such termination, including, without limitation, a termination due to death or permanent
disability), and the Grantee shall have no further rights with respect to such Restricted Stock Units. 
  
 5. Timing and Manner of Payment of Restricted Stock Units. Restricted Stock Units subject to this Agreement that vest in accordance
with the conditions set forth in this Agreement shall be paid in an equivalent number of shares of Common Stock, which shall be fully paid and non-assessable, promptly on or as soon as practicable after the vesting date of such Units. Such payment
shall be subject to the tax withholding provisions of Section 6 and subject to adjustment as provided in Section 7, and shall be in complete satisfaction of such vested Restricted Stock Units. The Grantee shall deliver to the Company any
representations or other documents or assurances required pursuant to Section 11 and Section 12. 
  
 6. Tax Withholding. The Company shall reasonably determine the amount of any federal, state, local or other income, employment, or
other taxes which the Company or any of its affiliates may reasonably be obligated to withhold with respect to the grant, vesting, or other event with respect to the Restricted Stock Units. The Company may, in its sole discretion, withhold a
sufficient number of shares of Common Stock in connection with the vesting of the Restricted Stock Units at the Fair Market Value (as defined in the Plan) of the Common Stock (determined as of the date of measurement of the amount of income subject
to such withholding) to satisfy the amount of any such withholding obligations that arise with respect to the vesting of such Restricted Stock Units. The Company may take such action(s) without notice to the Grantee and shall remit to the Grantee
the balance of any proceeds from withholding such shares in excess of the amount reasonably determined to be necessary to satisfy such withholding obligations. The Grantee shall have no discretion as to the satisfaction of tax withholding
obligations in such manner. If, however, any withholding event occurs with respect to the Restricted Stock Units other than upon the vesting of such Units, or if the Company for any reason does not satisfy the withholding obligations with respect to
the vesting of the Units as provided above in this Section 6, the Company shall be entitled to require a cash payment by or on behalf of the Grantee and/or to deduct from other compensation payable to the Grantee the amount of any such withholding
obligations. 
  
 7. Adjustments Upon Specified
Events. 
  
 (a) Upon or in contemplation
of any reclassification, recapitalization, stock split, reverse stock split or stock dividend; any merger, combination, consolidation or other reorganization; any split-up, spin-off, or similar extraordinary dividend distribution in respect of the
Common Stock (whether in the form of securities or property); any exchange of Common Stock or other securities of the Company, or any similar, unusual or extraordinary corporate transaction in respect of the Common Stock; or a sale of substantially
all the assets of the Company as an entirety; then the Company shall, in such manner, to such extent (if any) and at such time as it deems appropriate and equitable in the circumstances, make adjustments if appropriate in the number of 

  

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Restricted Stock Units subject to this Agreement and the number and kind of securities that may be issued in respect of such Units. 
  
 (b) If the vesting conditions set forth on the cover page of
this Agreement include the achievement of specified performance measures or performance goals, then the Company shall adjust the performance measures, performance goals, relative weights of the measures, and other provisions of this Agreement to the
extent (if any) it determines that the adjustment is necessary or advisable to preserve the intended incentives and benefits to reflect (1) any stock split, reverse stock split, stock dividend, material change in corporate capitalization, any
material corporate transaction (such as a reorganization, combination, separation, merger, acquisition, or any combination of the foregoing), or any complete or partial liquidation of the Company, (2) any change in accounting policies or practices,
(3) the effects of any special charges to the Company’s earnings, or (4) any other similar special circumstances. 
  
 8. Effect of Change in Control. 
  
 (a) In the event there occurs a Change in Control (as such term is defined in the Plan) of the Company, then, except as provided below,
the portion of the Award that is outstanding and unvested immediately prior to such occurrence shall accelerate and become fully vested upon (or, as may be necessary to effect such acceleration, immediately prior to) the consummation of the Change
in Control. 
  
 (b) If, however, this Agreement
is assigned by the Company and assumed by the acquiring or successor entity (or parent thereof) in connection with such Change in Control transaction, then vesting of the Units shall not accelerate and the provisions regarding vesting set
forth on the cover page of this Agreement shall continue to apply in accordance with their terms (subject to any adjustments made pursuant to Section 7 hereof). However, in the event there is an Involuntary Termination (as defined below) of
Grantee’s Continuous Service within twelve (12) months following such Change in Control, then vesting of the Units shall accelerate in full automatically effective upon such Involuntary Termination. 
  
 (c) For purposes of this Agreement, the following terms
shall have the meanings set forth below: 
  
 (i)
“Involuntary Termination” shall mean the termination of Grantee’s Continuous Service by reason of: 
  
 (A) Grantee no longer serving as a member of the Board of Directors of the Company or of the acquiring or successor entity (or parent or
any subsidiary thereof) for any reason other than voluntary resignation or refusal to stand for reelection to the Board; or 
  
 (B) Grantee’s involuntary dismissal or discharge by the Company, or by the acquiring or successor entity (or parent or any
subsidiary thereof) for reasons other than Misconduct (as defined below), or 
  
 (C) Grantee’s voluntary resignation following (x) a change in Grantee’s position with the Company, the acquiring or successor entity (or parent or any subsidiary thereof) which materially reduces
Grantee’s duties and responsibilities or the level of management to which Grantee reports, (y) a reduction in Grantee’s level of compensation (including base salary, 

  

 4 

 
fringe benefits and target bonus under any performance based bonus or incentive programs) by more than ten percent (10%), or (z) a relocation of
Grantee’s principal place of employment by more than thirty (30) miles, provided and only if such change, reduction or relocation is effected without Grantee’s written consent. 
  
 (ii) “Misconduct” shall mean (A) the commission of any act of fraud, embezzlement or
dishonesty by Grantee which materially and adversely affects the business of the Company, the acquiring or successor entity (or parent or any subsidiary thereof), (B) any unauthorized use or disclosure by Grantee of confidential information or trade
secrets of the Company, the acquiring or successor entity (or parent or any subsidiary thereof), (C) the continued refusal or omission by the Grantee to perform any material duties required of him if such duties are consistent with duties customary
for the position held with the Company, the acquiring or successor entity (or parent or any subsidiary thereof), (D) any material act or omission by the Grantee involving malfeasance or gross negligence in the performance of Grantee’s duties
to, or material deviation from any of the policies or directives of, the Company or the acquiring or successor entity (or parent or any subsidiary thereof), (E) conduct on the part of Grantee which constitutes the breach of any statutory or common
law duty of loyalty to the Company, the acquiring or successor entity (or parent or any subsidiary thereof), or (F) any illegal act by Grantee which materially and adversely affects the business of the Company, the acquiring or successor entity (or
parent or any subsidiary thereof), or any felony committed by Grantee, as evidenced by conviction thereof. The provisions of this Section shall not limit the grounds for the dismissal or discharge of Grantee by the Company, the acquiring or
successor entity (or parent or any subsidiary thereof), but are provided solely for the purpose of determining whether vesting of the Units will accelerate upon the termination of Grantee’s Continuous Service following a Change in Control.

  
 9. No Stockholder Rights. The Grantee
shall have no rights as a stockholder of the Company, no dividend rights and no voting rights with respect to the Restricted Stock Units or any shares of Common Stock issuable in respect of such Restricted Stock Units, until shares of Common Stock
are actually issued to and held of record by the Grantee. No adjustments will be made for dividends or other rights of a holder for which the record date is prior to the date of issuance of the stock certificate evidencing the shares, except as
provided in Section 7 hereof. 
  
 10. Restrictions on
Transfer. Neither the Restricted Stock Units comprising the Award nor any interest therein or amount payable in respect thereof may be sold, assigned, transferred, pledged or otherwise disposed of, alienated or encumbered by the Grantee,
either voluntarily or involuntarily, other than by will or the laws of descent and distribution. The transfer restrictions of this Section 10 shall not apply to transfers to the Company. 
  
 11. Compliance with Laws. The Award and the offer, issuance and delivery of securities under this
Agreement are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities laws) and to such approvals by any listing, regulatory or governmental authority as may,
in the opinion of counsel for the Company, be necessary or advisable in connection therewith. The Grantee will, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to
assure compliance with all applicable legal requirements. The Company will cause such action to be taken, and such filings to be made, so that the grant hereunder shall comply with the rules of the Nasdaq National Market or the principal stock
exchange on which shares of the Company’s Common Stock are then listed for trading. 
  

 5 

 12. Representations and Warranties. In the event, and only in the event, that any
Restricted Stock Units are to be paid in shares of Common Stock pursuant to this Agreement at a time when the Company does not have an effective Form S-8 Registration Statement on file with the Securities and Exchange Commission with respect to the
offer and sale of the shares of Common Stock covered by this Agreement, the Grantee, at the time he acquires such shares, shall represent and warrant to the Company that: 
  
 (a) the shares of Common Stock that may be acquired by the Grantee pursuant to this Agreement will be
acquired for the Grantee’s own account and not with a view to, or in connection with, a distribution thereof in violation of the Securities Act of 1933, as amended (the “Securities Act”), or any applicable state securities laws, and
the shares of Common Stock will not be disposed of in contravention of the Securities Act or any applicable state securities laws; 
  
 (b) the Grantee is an “accredited investor” as such term is defined in Rule 501 promulgated under the Securities Act and is
sophisticated in financial matters; 
  
 (c) the
Grantee is able to bear the economic risk of his investment in the shares for an indefinite period of time because the shares have not been registered under the Securities Act and, therefore, cannot be sold unless subsequently registered under the
Securities Act or an exemption from such registration is available; and 
  
 (d) the Grantee has had the opportunity to ask questions of, and receive answers from, the Company and its management concerning the terms and conditions of the offering of the Common Stock and to obtain information
regarding the Company’s condition (financial and otherwise) and operations. 
  
 13. Legends. In the event, and only in the event, that, at the time any Restricted Stock Units are to be paid in shares of Common Stock pursuant to this Agreement, the Company does not have an
effective Form S-8 Registration Statement on file with the Securities and Exchange Commission with respect to the offer and sale of shares of Common Stock covered by this Agreement, the certificates, if any, representing the shares of Common Stock
so paid will bear a legend in substantially the following form: 
  
 “THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY
APPLICABLE STATE LAW, OR (2) AN OPINION (SATISFACTORY TO THE COMPANY) OF COUNSEL (SATISFACTORY TO THE COMPANY) THAT REGISTRATION IS NOT REQUIRED.” 
  
 14. Tax Consequences. The Restricted Stock Unit Award evidenced by this Agreement, and the issuance of shares of Common Stock to the
Grantee in settlement of vested Units, is intended to be taxed under the provisions of Section 83 of the Internal Revenue Code of 1986, as amended (the “Code”), and is not intended to provide and does not provide for the deferral of
compensation within the meaning of Section 409A(d) of the Code. Therefore, the Company intends to report as includible in the Grantee’s gross income for any taxable year an amount equal to the Fair Market Value of the shares of Common Stock
covered by the Units that vest (if any) during such taxable year, determined as of the date such Units vest. In furtherance of this intended tax treatment, all 

  

 6 

 
vested Units shall be automatically settled and payment to the Grantee shall be made as provided in Section 5 hereof, but in no event later than March 15th
of the year following the calendar year in which such Units vest. The Grantee shall have no power to affect the timing of such settlement or payment. The Company reserves the right to amend this Agreement, without the Grantee’s consent, to the
extent it reasonably determines from time to time that such amendment is necessary in order to achieve the purposes of this Section. 
  
 15. Number and Gender. Where the context requires, the singular shall include the plural, the plural shall include the singular, and
any gender shall include all other genders. 
  
 16.
Section Headings. The section headings of, and titles of paragraphs and subparagraphs contained in, this Agreement are for the purpose of convenience only, and they neither form a part of this Agreement nor are they to be used in
the construction or interpretation thereof. 
  
 17.
Governing Law. The validity, construction, interpretation, and effect of this Agreement shall be governed by and determined in accordance with the laws of the State of California except for matters related to corporate law, in
which case the provisions of the Delaware General Corporation Law shall govern. 
  
 18. Severability. If any provision of this Agreement or the application thereof is held to be invalid, the invalidity shall not affect other provisions or applications of this Agreement which can
be given effect without the invalid provisions or applications, and to this end the provisions of this Agreement are declared to be severable. 
  
 19. Entire Agreement. This Agreement embodies the entire agreement of the parties hereto respecting the matters within the scope of
this Agreement and supersedes all prior and contemporaneous agreements of the parties hereto that directly or indirectly bears upon the subject matter hereof. Any prior negotiations, correspondence, agreements, proposals or understandings relating
to the subject matter hereof shall be deemed to have been merged into this Agreement, and to the extent inconsistent herewith, such negotiations, correspondence, agreements, proposals, or understandings shall be deemed to be of no force or effect.
There are no representations, warranties, or agreements, whether express or implied, or oral or written, with respect to the subject matter hereof, except as expressly set forth herein. This Agreement is an integrated Agreement as to the subject
matter hereof. 
  
 20. Modifications. This
Agreement may not be amended, modified or changed (in whole or in part), except by a written agreement expressly referring to this Agreement, which agreement is executed by both of the parties hereto. Notwithstanding the foregoing, amendments made
pursuant to Section 14 hereof may be effectuated solely by the Company. 
  
 21. Successors and Assigns. This Agreement shall inure to the benefit of the successors and assigns of the Company and be binding upon the Grantee and his heirs, executors, administrators, successors and permitted
assigns. 
  
 22. Waiver. Neither the failure
nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, 

  

 7 

 
remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to
have granted such waiver. 
  
 23. Notices.
All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given and effective (i) when delivered by hand, (ii) when otherwise delivered against
receipt therefor, or (iii) three (3) business days after being mailed if sent by registered or certified mail, postage prepaid, return receipt requested. Any notice shall be addressed to the parties as follows or at such other address as a party may
designate by notice given to the other party in the manner set forth herein: 
  
 (a) if to the Company: 
  
 Ceradyne, Inc. 
 3169 Red Hill Avenue 
 Costa Mesa, CA 92626 
 Attention: Chief Financial Officer 
  
 (b) if to the Grantee, at the address shown on page one of
this Agreement or at his most recent address as shown in the employment or stock records of the Company. 
  
 24. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against
any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of
all of the parties reflected hereon as the signatories. Copies of such signed counterparts may be used in lieu of the originals for any purpose. 
  
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