Document:

exv10w17

Exhibit 10.17

F5 NETWORKS, INC

1999 EMPLOYEE STOCK PURCHASE PLAN

ORIGINALLY ADOPTED BY BOARD OF DIRECTORS APRIL 5 , 1999

ORIGINALLY APPROVED BY SHAREHOLDERS MARCH 25, 1999

AMENDMENT ADOPTED BY BOARD OF DIRECTORS JANUARY 26, 2004

AMENDMENT ADOPTED BY SHAREHOLDERS APRIL 29, 2004

SECOND AMENDMENT ADOPTED BY BOARD OF DIRECTORS JANUARY 7, 2009

SECOND AMENDMENTMENT ADOPTED BY SHAREHOLDERS MARCH 12, 2009

TERMINATION DATE: NONE

1. PURPOSE.

     (a) The purpose of the Plan is to provide a means by which Employees of the Company and
certain designated Affiliates may be given an opportunity to purchase Shares of the Company.

     (b) The Company, by means of the Plan, seeks to retain the services of such Employees, to
secure and retain the services of new Employees and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its Affiliates.

     (c) The Company intends that the Rights to purchase Shares granted under the Plan be
considered options issued under an “employee stock purchase plan,” as that term is defined in
Section 423(b) of the Code.

2. DEFINITIONS.

     (a) “Affiliate” means any parent corporation or subsidiary corporation, whether now or
hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the
Code.

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

     (c) “Code” means the United States Internal Revenue Code of 1986, as amended.

     (d) “Committee” means a Committee appointed by the Board in accordance with subparagraph 3(c)
of the Plan.

     (e) “Company” means F5 Networks, Inc., a Washington corporation.

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

     (g) “Eligible Employee” means an Employee who meets the requirements set forth in the Offering
for eligibility to participate in the Offering.

     (h) “Employee” means any person, including Officers and Directors, employed by the Company or
an Affiliate of the Company. Neither service as a Director nor payment of a director’s fee shall
be sufficient to constitute “employment” by the Company or the Affiliate.

     (i) “Employee Stock Purchase Plan” means a plan that grants rights intended to be options
issued under an “employee stock purchase plan,” as that term is defined in Section 423(b) of the
Code.

     (j) “Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

 

 

     (k) “Fair Market Value” means the value of a security, as determined in good faith by the
Board. If the security is listed on any established stock exchange or traded on the Nasdaq
National Market or the Nasdaq SmallCap Market, then, except as otherwise provided in the Offering,
the Fair Market Value of the security shall be the closing sales price (rounded up where necessary
to the nearest whole cent) for such security (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest volume of trading in
the relevant security of the Company) on the trading day prior to the relevant determination date,
as reported in The Wall Street Journal or such other source as the Board deems reliable.

     (l) “Non-Employee Director” means a Director who either (i) is not a current Employee or
Officer of the Company or its parent or subsidiary, does not receive compensation (directly or
indirectly) from the Company or its parent or subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S K promulgated pursuant to the Securities Act
(“Regulation S-K”)), does not possess an interest in any other transaction as to which disclosure
would be required under Item 404(a) of Regulation S-K, and is not engaged in a business
relationship as to which disclosure would be required under Item 404(b) of Regulation S-K; or (ii)
is otherwise considered a “non-employee director” for purposes of Rule 16b-3.

     (m) “Offering” means the grant of Rights to purchase Shares under the Plan to Eligible
Employees.

     (n) “Offering Date” means a date selected by the Board for an Offering to commence.

     (o) “Outside Director” means a Director who either (i) is not a current employee of the
Company or an “affiliated corporation” (within the meaning of the Treasury regulations promulgated
under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated
corporation” receiving compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an “affiliated corporation” at any time, and is
not currently receiving direct or indirect remuneration from the Company or an “affiliated
corporation” for services in any capacity other than as a Director, or (ii) is otherwise considered
an “outside director” for purposes of Section 162(m) of the Code.

     (p) “Participant” means an Eligible Employee who holds an outstanding Right granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding Right granted under the
Plan.

     (q) “Plan” means this F5 Networks, Inc. 1999 Employee Stock Purchase Plan.

     (r) “Purchase Date” means one or more dates established by the Board during an Offering on
which Rights granted under the Plan shall be exercised and purchases of Shares carried out in
accordance with such Offering.

     (s) “Right” means an option to purchase Shares granted pursuant to the Plan.

     (t) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3 as in
effect with respect to the Company at the time discretion is being exercised regarding the Plan.

     (u) “Securities Act” means the United States Securities Act of 1933, as amended.

     (v) “Share” means a share of the common stock of the Company.

3. ADMINISTRATION.

     (a) The Board shall administer the Plan unless and until the Board delegates administration to
a Committee, as provided in subparagraph 3(c). Whether or not the Board has delegated
administration,

 

 

the Board shall have the final power to determine all questions of policy and expediency that
may arise in the administration of the Plan.

     (b) The Board (or the Committee) shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:

          (i) To determine when and how Rights to purchase Shares shall be granted and the provisions of
each Offering of such Rights (which need not be identical).

          (ii) To designate from time to time which Affiliates of the Company shall be eligible to
participate in the Plan.

          (iii) To construe and interpret the Plan and Rights granted under it, and to establish, amend
and revoke rules and regulations for its administration. The Board, in the exercise of this power,
may correct any defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.

          (iv) To amend the Plan as provided in paragraph 14.

          (v) Generally, to exercise such powers and to perform such acts as it deems necessary or
expedient to promote the best interests of the Company and its Affiliates and to carry out the
intent that the Plan be treated as an Employee Stock Purchase Plan.

     (c) The Board may delegate administration of the Plan to a Committee of the Board composed of
two (2) or more members, all of the members of which Committee may be, in the discretion of the
Board, Non-Employee Directors and/or Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, including the power to delegate to a subcommittee of two (2) or
more Outside Directors any of the administrative powers the Committee is authorized to exercise
(and references in this Plan to the Board shall thereafter be to the Committee or such a
subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the
Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any
time and revest in the Board the administration of the Plan.

4. SHARES SUBJECT TO THE PLAN.

     (a) Subject to the provisions of paragraph 13 relating to adjustments upon changes in
securities, the Shares that may be sold pursuant to Rights granted under the Plan shall not exceed
in the aggregate two million (2,000,000) Shares. If any Right granted under the Plan shall for
any reason terminate without having been exercised, the Shares not purchased under such Right shall
again become available for the Plan.

     (b) The Shares subject to the Plan may be unissued Shares or Shares that have been bought on
the open market at prevailing market prices or otherwise.

5. GRANT OF RIGHTS; OFFERING.

     (a) The Board may from time to time grant or provide for the grant of Rights to purchase
Shares of the Company under the Plan to Eligible Employees in an Offering on an Offering Date or
Dates selected by the Board. Each Offering shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate, which shall comply with the requirements of Section
423(b)(5) of the Code that all Employees granted Rights to purchase Shares under the Plan shall
have the same rights and privileges. The terms and conditions of an Offering shall be incorporated
by reference into the Plan and treated as part of the Plan. The provisions of separate Offerings
need not be identical, but each Offering shall include (through incorporation of the provisions of
this Plan by reference in the document comprising the Offering or otherwise) the period during
which the Offering shall be effective, which period shall not

 

 

exceed twenty-seven (27) months beginning with the Offering Date, and the substance of the
provisions contained in paragraphs 6 through 9, inclusive.

     (b) If a Participant has more than one Right outstanding under the Plan, unless he or she
otherwise indicates in agreements or notices delivered hereunder: (i) each agreement or notice
delivered by that Participant will be deemed to apply to all of his or her Rights under the Plan,
and (ii) an earlier-granted Right (or a Right with a lower exercise price, if two Rights have
identical grant dates) will be exercised to the fullest possible extent before a later-granted
Right (or a Right with a higher exercise price if two Rights have identical grant dates) will be
exercised.

6. ELIGIBILITY.

     (a) Rights may be granted only to Employees of the Company or, as the Board may designated as
provided in subparagraph 3(b), to Employees of an Affiliate. Except as provided in subparagraph
6(b), an Employee shall not be eligible to be granted Rights under the Plan unless, on the Offering
Date, such Employee has been in the employ of the Company or the Affiliate, as the case may be, for
such continuous period preceding such grant as the Board may require, but in no event shall the
required period of continuous employment be equal to or greater than two (2) years.

     (b) The Board may provide that each person who, during the course of an Offering, first
becomes an Eligible Employee will, on a date or dates specified in the Offering which coincides
with the day on which such person becomes an Eligible Employee or which occurs thereafter, receive
a Right under that Offering, which Right shall thereafter be deemed to be a part of that Offering.
Such Right shall have the same characteristics as any Rights originally granted under that
Offering, as described herein, except that:

          (i) the date on which such Right is granted shall be the “Offering Date” of such Right for all
purposes, including determination of the exercise price of such Right;

          (ii) the period of the Offering with respect to such Right shall begin on its Offering Date
and end coincident with the end of such Offering; and

          (iii) the Board may provide that if such person first becomes an Eligible Employee within a
specified period of time before the end of the Offering, he or she will not receive any Right under
that Offering.

     (c) No Employee shall be eligible for the grant of any Rights under the Plan if, immediately
after any such Rights are granted, such Employee owns stock possessing five percent (5%) or more of
the total combined voting power or value of all classes of stock of the Company or of any
Affiliate. For purposes of this subparagraph 6(c), the rules of Section 424(d) of the Code shall
apply in determining the stock ownership of any Employee, and stock which such Employee may
purchase under all outstanding rights and options shall be treated as stock owned by such Employee.

     (d) An Eligible Employee may be granted Rights under the Plan only if such Rights, together
with any other Rights granted under all Employee Stock Purchase Plans of the Company and any
Affiliates, as specified by Section 423(b)(8) of the Code, do not permit such Eligible Employee’s
rights to purchase Shares of the Company or any Affiliate to accrue at a rate which exceeds twenty
five thousand dollars ($25,000) of the fair market value of such Shares (determined at the time
such Rights are granted) for each calendar year in which such Rights are outstanding at any time.

     (e) The Board may provide in an Offering that Employees who are highly compensated Employees
within the meaning of Section 423(b)(4)(D) of the Code shall not be eligible to participate.

7. RIGHTS; PURCHASE PRICE.

     (a) On each Offering Date, each Eligible Employee, pursuant to an Offering made under the
Plan, shall be granted the Right to purchase up to the number of Shares purchasable either:

 

 

          (i) with a percentage designated by the Board not exceeding fifteen percent (15%) of such
Employee’s Earnings (as defined by the Board in each Offering) during the period which begins on
the Offering Date (or such later date as the Board determines for a particular Offering) and ends
on the date stated in the Offering, which date shall be no later than the end of the Offering; or

          (ii) with a maximum dollar amount designated by the Board that, as the Board determines for a
particular Offering, (1) shall be withheld, in whole or in part, from such Employee’s Earnings (as
defined by the Board in each Offering) during the period which begins on the Offering Date (or such
later date as the Board determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no later than the end of the Offering and/or (2) shall be
contributed, in whole or in part, by such Employee during such period.

     (b) The Board shall establish one or more Purchase Dates during an Offering on which Rights
granted under the Plan shall be exercised and purchases of Shares carried out in accordance with
such Offering.

     (c) In connection with each Offering made under the Plan, the Board may specify a maximum
amount of Shares that may be purchased by any Participant as well as a maximum aggregate amount of
Shares that may be purchased by all Participants pursuant to such Offering. In addition, in
connection with each Offering that contains more than one Purchase Date, the Board may specify a
maximum aggregate amount of Shares which may be purchased by all Participants on any given Purchase
Date under the Offering. If the aggregate purchase of Shares upon exercise of Rights granted under
the Offering would exceed any such maximum aggregate amount, the Board shall make a pro rata
allocation of the Shares available in as nearly a uniform manner as shall be practicable and as it
shall deem to be equitable.

     (d) The purchase price of Shares acquired pursuant to Rights granted under the Plan shall be
not less than the lesser of:

          (i) an amount equal to eighty-five percent (85%) of the fair market value of the Shares on the
Offering Date; or

          (ii) an amount equal to eighty-five percent (85%) of the fair market value of the Shares on
the Purchase Date.

8. PARTICIPATION; WITHDRAWAL; TERMINATION.

     (a) An Eligible Employee may become a Participant in the Plan pursuant to an Offering by
delivering a participation agreement to the Company within the time specified in the Offering, in
such form as the Company provides. Each such agreement shall authorize payroll deductions of up to
the maximum percentage specified by the Board of such Employee’s Earnings during the Offering (as
defined in each Offering). The payroll deductions made for each Participant shall be credited to a
bookkeeping account for such Participant under the Plan and either may be deposited with the
general funds of the Company or may be deposited in a separate account in the name of, and for the
benefit of, such Participant with a financial institution designated by the Company. To the extent
provided in the Offering, a Participant may reduce (including to zero) or increase such payroll
deductions. To the extent provided in the Offering, a Participant may begin such payroll
deductions after the beginning of the Offering. A Participant may make additional payments into
his or her account only if specifically provided for in the Offering and only if the Participant
has not already had the maximum permitted amount withheld during the Offering.

     (b) At any time during an Offering, a Participant may terminate his or her payroll deductions
under the Plan and withdraw from the Offering by delivering to the Company a notice of withdrawal
in such form as the Company provides. Such withdrawal may be elected at any time prior to the end
of the Offering except as provided by the Board in the Offering. Upon such withdrawal from the
Offering by a Participant, the Company shall distribute to such Participant all of his or her
accumulated payroll deductions (reduced to the extent, if any, such deductions have been used to
acquire Shares for the

 

 

Participant) under the Offering, without interest unless otherwise specified in the Offering,
and such Participant’s interest in that Offering shall be automatically terminated. A
Participant’s withdrawal from an Offering will have no effect upon such Participant’s eligibility
to participate in any other Offerings under the Plan but such Participant will be required to
deliver a new participation agreement in order to participate in subsequent Offerings under the
Plan.

     (c) Rights granted pursuant to any Offering under the Plan shall terminate immediately upon
cessation of any participating Employee’s employment with the Company or a designated Affiliate for
any reason (subject to any post-employment participation period required by law) or other lack of
eligibility. The Company shall distribute to such terminated Employee all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been used to acquire Shares
for the terminated Employee) under the Offering, without interest unless otherwise specified in the
Offering. If the accumulated payroll deductions have been deposited with the Company’s general
funds, then the distribution shall be made from the general funds of the Company, without interest.
If the accumulated payroll deductions have been deposited in a separate account with a financial
institution as provided in subparagraph 8(a), then the distribution shall be made from the separate
account, without interest unless otherwise specified in the Offering.

     (d) Rights granted under the Plan shall not be transferable by a Participant otherwise than by
will or the laws of descent and distribution, or by a beneficiary designation as provided in
paragraph 15 and, otherwise during his or her lifetime, shall be exercisable only by the person to
whom such Rights are granted.

9. EXERCISE.

     (a) On each Purchase Date specified therefor in the relevant Offering, each Participant’s
accumulated payroll deductions and other additional payments specifically provided for in the
Offering (without any increase for interest) will be applied to the purchase of Shares up to the
maximum amount of Shares permitted pursuant to the terms of the Plan and the applicable Offering,
at the purchase price specified in the Offering. No fractional Shares shall be issued upon the
exercise of Rights granted under the Plan unless specifically provided for in the Offering.

     (b) Unless otherwise specifically provided in the Offering, the amount, if any, of accumulated
payroll deductions remaining in any Participant’s account after the purchase of Shares that is
equal to the amount required to purchase one or more whole Shares on the final Purchase Date of the
Offering shall be distributed in full to the Participant at the end of the Offering, without
interest. If the accumulated payroll deductions have been deposited with the Company’s general
funds, then the distribution shall be made from the general funds of the Company, without interest.
If the accumulated payroll deductions have been deposited in a separate account with a financial
institution as provided in subparagraph 8(a), then the distribution shall be made from the separate
account, without interest unless otherwise specified in the Offering.

     (c) No Rights granted under the Plan may be exercised to any extent unless the Shares to be
issued upon such exercise under the Plan (including Rights granted thereunder) are covered by an
effective registration statement pursuant to the Securities Act and the Plan is in material
compliance with all applicable state, foreign and other securities and other laws applicable to the
Plan. If on a Purchase Date in any Offering hereunder the Plan is not so registered or in such
compliance, no Rights granted under the Plan or any Offering shall be exercised on such Purchase
Date, and the Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall not be delayed more
than twelve (12) months and the Purchase Date shall in no event be more than twenty-seven (27)
months from the Offering Date. If, on the Purchase Date of any Offering hereunder, as delayed to
the maximum extent permissible, the Plan is not registered and in such compliance, no Rights
granted under the Plan or any Offering shall be exercised and all payroll deductions accumulated
during the Offering (reduced to the extent, if any, such deductions have been used to acquire
Shares) shall be distributed to the Participants, without interest unless otherwise specified in
the Offering. If the accumulated payroll deductions have been deposited with the Company’s general
funds, then the

 

 

distribution shall be made from the general funds of the Company, without interest. If the
accumulated payroll deductions have been deposited in a separate account with a financial
institution as provided in subparagraph 8(a), then the distribution shall be made from the separate
account, without interest unless otherwise specified in the Offering.

10. COVENANTS OF THE COMPANY.

     (a) During the terms of the Rights granted under the Plan, the Company shall ensure that the
amount of Shares required to satisfy such Rights are available.

     (b) The Company shall seek to obtain from each federal, state, foreign or other regulatory
commission or agency having jurisdiction over the Plan such authority as may be required to issue
and sell Shares upon exercise of the Rights granted under the Plan. If, after reasonable efforts,
the Company is unable to obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of Shares under the Plan,
the Company shall be relieved from any liability for failure to issue and sell Shares upon exercise
of such Rights unless and until such authority is obtained.

11. USE OF PROCEEDS FROM SHARES.

     Proceeds from the sale of Shares pursuant to Rights granted under the Plan shall constitute
general funds of the Company.

12. RIGHTS AS A SHAREHOLDER.

     A Participant shall not be deemed to be the holder of, or to have any of the rights of a
holder with respect to, Shares subject to Rights granted under the Plan unless and until the
Participant’s Shares acquired upon exercise of Rights under the Plan are recorded in the books of
the Company.

13. ADJUSTMENTS UPON CHANGES IN SECURITIES.

     (a) If any change is made in the Shares subject to the Plan, or subject to any Right, without
the receipt of consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the Company), the Plan
will be appropriately adjusted in the class(es) and maximum number of Shares subject to the Plan
pursuant to subparagraph 4(a), and the outstanding Rights will be appropriately adjusted in the
class(es), number of Shares and purchase limits of such outstanding Rights. The Board shall make
such adjustments, and its determination shall be final, binding and conclusive. (The conversion of
any convertible securities of the Company shall not be treated as a transaction that does not
involve the receipt of consideration by the Company.)

     (b) In the event of: (i) a dissolution, liquidation, or sale of all or substantially all of
the assets of the Company; (ii) a merger or consolidation in which the Company is not the surviving
corporation; or (iii) a reverse merger in which the Company is the surviving corporation but the
Shares outstanding immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise, then: (1) any surviving or
acquiring corporation shall assume Rights outstanding under the Plan or shall substitute similar
rights (including a right to acquire the same consideration paid to Shareholders in the transaction
described in this subparagraph 13(b)) for those outstanding under the Plan, or (2) in the event any
surviving or acquiring corporation refuses to assume such Rights or to substitute similar rights
for those outstanding under the Plan, then, as determined by the Board in its sole discretion such
Rights may continue in full force and effect or the Participants’ accumulated payroll deductions
(exclusive of any accumulated interest which cannot be applied toward the purchase of Shares under
the terms of the Offering) may be used to purchase Shares immediately prior to the transaction
described above under the ongoing Offering and the Participants’ Rights under the ongoing Offering
thereafter terminated.

 

 

14. AMENDMENT OF THE PLAN.

     (a) The Board at any time, and from time to time, may amend the Plan. However, except as
provided in paragraph 13 relating to adjustments upon changes in securities and except as to minor
amendments to benefit the administration of the Plan, to take account of a change in legislation or
to obtain or maintain favorable tax, exchange control or regulatory treatment for Participants or
the Company or any Affiliate, no amendment shall be effective unless approved by the shareholders
of the Company to the extent shareholder approval is necessary for the Plan to satisfy the
requirements of Section 423 of the Code, Rule 16b-3 under the Exchange Act and any Nasdaq or other
securities exchange listing requirements. Currently under the Code, shareholder approval within
twelve (12) months before or after the adoption of the amendment is required where the amendment
will:

          (i) Increase the amount of Shares reserved for Rights under the Plan;

          (ii) Modify the provisions as to eligibility for participation in the Plan to the extent such
modification requires shareholder approval in order for the Plan to obtain employee stock purchase
plan treatment under Section 423 of the Code or to comply with the requirements of Rule 16b-3; or

          (iii) Modify the Plan in any other way if such modification requires shareholder approval in
order for the Plan to obtain employee stock purchase plan treatment under Section 423 of the Code
or to comply with the requirements of Rule 16b 3.

     (b) It is expressly contemplated that the Board may amend the Plan in any respect the Board
deems necessary or advisable to provide Employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated thereunder relating to
Employee Stock Purchase Plans and/or to bring the Plan and/or Rights granted under it into
compliance therewith.

     (c) Rights and obligations under any Rights granted before amendment of the Plan shall not be
impaired by any amendment of the Plan, except with the consent of the person to whom such Rights
were granted, or except as necessary to comply with any laws or governmental regulations, or except
as necessary to ensure that the Plan and/or Rights granted under the Plan comply with the
requirements of Section 423 of the Code.

15. DESIGNATION OF BENEFICIARY.

     (a) A Participant may file a written designation of a beneficiary who is to receive any Shares
and/or cash, if any, from the Participant’s account under the Plan in the event of such
Participant’s death subsequent to the end of an Offering but prior to delivery to the Participant
of such Shares and cash. In addition, a Participant may file a written designation of a
beneficiary who is to receive any cash from the Participant’s account under the Plan in the event
of such Participant’s death during an Offering.

     (b) The Participant may change such designation of beneficiary at any time by written notice.
In the event of the death of a Participant and in the absence of a beneficiary validly designated
under the Plan who is living at the time of such Participant’s death, the Company shall deliver
such Shares and/or cash to the executor or administrator of the estate of the Participant, or if no
such executor or administrator has been appointed (to the knowledge of the Company), the Company,
in its sole discretion, may deliver such Shares and/or cash to the spouse or to any one or more
dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.

16. TERMINATION OR SUSPENSION OF THE PLAN.

     (a) The Board in its discretion may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate at the time that all of the Shares subject to the Plan’s
reserve, as

 

 

increased and/or adjusted from time to time, have been issued under the terms of the Plan. No
Rights may be granted under the Plan while the Plan is suspended or after it is terminated.

     (b) Rights and obligations under any Rights granted while the Plan is in effect shall not be
impaired by suspension or termination of the Plan, except as expressly provided in the Plan or with
the consent of the person to whom such Rights were granted, or except as necessary to comply with
any laws or governmental regulation, or except as necessary to ensure that the Plan and/or Rights
granted under the Plan comply with the requirements of Section 423 of the Code.

17. EFFECTIVE DATE OF PLAN.

     The Plan shall become effective as determined by the Board, but no Rights granted under the
Plan shall be exercised unless and until the Plan has been approved by the shareholders of the
Company within twelve (12) months before or after the date the Plan is adopted by the Board, whichexv10w21

Exhibit 10.21

F5 Networks, Inc.

2005 Equity Incentive Plan

Adopted December 31, 2004

Original Approval By Shareholders February 24, 2005

Amended By Board of Directors on January 8, 2007, January 23, 2007, August 5, 2007 (to reflect

two-for-one forward stock split effective August 20, 2007), and January 7, 2009

Termination Date: December 30, 2014

1. Purposes.

     (a) Eligible Stock Award Recipients. The persons eligible to receive Stock Awards are the
Employees, Directors and Consultants of the Company and its Affiliates.

     (b) Available Stock Awards. The purpose of the Plan is to provide a means by which eligible
recipients of Stock Awards may be given an opportunity to benefit from increases in value of the
Common Stock through the granting of the following Stock Awards: (i) Options and (ii) Stock Units.

     (c) General Purpose. The Company, by means of the Plan, seeks to retain the services of the
group of persons eligible to receive Stock Awards, to secure and retain the services of new members
of this group and to provide incentives for such persons to exert maximum efforts for the success
of the Company and its Affiliates.

2. Definitions.

     (a) “Affiliate” means any parent corporation or subsidiary corporation of the Company, whether
now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of
the Code.

     (b) “Applicable Laws” means the legal requirements relating to the administration of equity
compensation plans, including under applicable U.S. state corporate laws, U.S. federal and
applicable state securities laws, other U.S. federal and state laws, the Code, any stock exchange
rules or regulations and the applicable laws, rules and regulations of any other country or
jurisdiction where Stock Awards are granted under the Plan, as such laws, rules, regulations and
requirements shall be in place from time to time.

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

     (d) “Code” means the Internal Revenue Code of 1986, as amended.

     (e) “Committee” means a committee appointed by the Board in accordance with subsection 3(c).

     (f) “Common Stock” means the common stock of the Company.

     (g) “Company” means F5 Networks, Inc., a Washington corporation.

     (h) “Consultant” means any person, including an advisor, (i) who is engaged by the Company or
an Affiliate to render services other than as an Employee or as a Director or (ii) who is a member
of the Board of Directors of an Affiliate.

     (i) “Continuous Service” means that the Participant’s service with the Company or an
Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. The
Participant’s Continuous Service shall not be deemed to have terminated merely because of a change
in the capacity in which the Participant renders service to the Company or an Affiliate as an
Employee, Consultant or Director or a change in the entity among the Company or an Affiliate for
which the Participant renders such

 

 

service, provided that there is no interruption or termination of the Participant’s Continuous
Service. For example, a change in status from an Employee of the Company to a Consultant of an
Affiliate or a Director of the Company will not constitute an interruption of Continuous Service.
Subject to Section 6(e)(ii), the Board or the chief executive officer of the Company, in that
party’s sole discretion, may determine whether Continuous Service shall be considered interrupted
in the case of any leave of absence approved by that party, including sick leave, military leave or
any other personal leave.

     (j) “Covered Employee” means the chief executive officer and the four (4) other highest
compensated officers of the Company for whom total compensation is required to be reported to
shareholders under the Exchange Act, as determined for purposes of Section 162(m) of the Code.

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

     (l) “Disability” means the permanent and total disability of a person within the meaning of
Section 22(e)(3) of the Code.

     (m) “Employee” means any person employed by the Company or an Affiliate. Subject to the
Applicable Laws, the determination of whether an individual (including a leased and temporary
employees) is an Employee hereunder shall be made by the Board (or its Committee), in its sole
discretion. Mere service as a Director or payment of a director’s fee by the Company or an
Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.

     (n) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     (o) “Fair Market Value” means, as of any date, the value of the Common Stock determined as
follows:

          (i) If the Common Stock is listed on any established stock exchange or traded on the Nasdaq
National Market, the Fair Market Value of a Share shall be the closing sales price for such stock
(or the closing bid, if no sales were reported) as quoted on such exchange or market (or such other
exchange or market with the greatest volume of trading in the Common Stock) on the day of
determination or, if the day of determination is not a market trading day, then on the last market
trading day prior to the day of determination, as reported in such source or sources as the Board
deems reliable, or

          (ii) In the absence of such markets for the Common Stock, the Fair Market Value shall be
determined in good faith by the Board.

     (p) “Independent Director” means a Director who qualifies as an “independent” director under
applicable Nasdaq rules (or the rules of any exchange on which the Common Stock is then listed or
approved for listing).

     (q) “Non-Employee Director” means a Director of the Company who either (i) is not a current
Employee or Officer of the Company or its parent or a subsidiary, does not receive compensation
(directly or indirectly) from the Company or its parent or a subsidiary for services rendered as a
consultant or in any capacity other than as a Director (except for an amount as to which disclosure
would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities
Act (“Regulation S-K”)), does not possess an interest in any other transaction as to which
disclosure would be required under Item 404(a) of Regulation S-K and is not engaged in a business
relationship as to which disclosure would be required under Item 404(b) of Regulation S-K; or (ii)
is otherwise considered a “non-employee director” for purposes of Rule 16b-3.

     (r) “Officer” means a person who is an officer of the Company within the meaning of Section 16
of the Exchange Act and the rules and regulations promulgated thereunder.

     (s) “Option” means a nonstatutory stock option (meaning, an option not intended to qualify as
an incentive stock option under Code Section 422) granted pursuant to the Plan.

     (t) “Outside Director” means a Director of the Company who either (i) is not a current
Employee of the Company or an “affiliated corporation” (within the meaning of Treasury Regulations
promulgated under Section 162(m) of the Code), is not a former Employee of the Company or an
“affiliated corporation” receiving compensation for prior services (other than benefits under a tax
qualified pension plan), was not an officer of the Company or an “affiliated corporation” at any
time and is not currently receiving

2

 

direct or indirect remuneration from the Company or an “affiliated corporation” for services
in any capacity other than as a Director or (ii) is otherwise considered an “outside director” for
purposes of Section 162(m) of the Code.

     (u) “Participant” means a person to whom a Stock Award is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Stock Award.

     (v) “Plan” means this F5 Networks, Inc. 2005 Equity Incentive Plan.

     (w) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule
16b-3, as in effect from time to time.

     (x) “Securities Act” means the Securities Act of 1933, as amended.

     (y) “Share” means a share of the Common Stock, as adjusted in accordance with Section 11
below.

     (z) “Stock Award” means any right involving Shares granted under the Plan, including an Option
or Stock Unit.

     (aa) “Stock Award Agreement” means a written agreement between the Company and a holder of a
Stock Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock
Award Agreement shall be subject to the terms and conditions of the Plan.

     (bb) “Stock Unit” means an award giving the right to receive Shares granted under Section 7
below.

3. Administration.

     (a) Administration by Board. The Board shall administer the Plan unless and until the Board
delegates administration to a Committee or an administrator, as provided in subsection 3(c).

     (b) Powers of Board. The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:

          (i) To determine from time to time which of the persons eligible under the Plan shall be
granted Stock Awards; when and how each Stock Award shall be granted; what type or combination of
types of Stock Awards shall be granted; the provisions, terms and conditions of each Stock Award
granted (which need not be identical as among Participants or as among types of Stock Awards),
including, without limitation: the time or times when a person shall be permitted to receive Shares
pursuant to a Stock Award, the number of Shares with respect to which a Stock Award shall be
granted to each such person, the exercise or purchase price (if any) of a Stock Award, the time or
times when Stock Awards may be exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, any pro rata adjustment to vesting as a result
of a Participant’s transitioning from full- to part-time service (or vice versa), and any other
restriction (including forfeiture restriction), limitation or term of any Stock Award, based in
each case on such factors as the Board, in its sole discretion, shall determine; provided, however,
that such provisions, terms and conditions are not inconsistent with the terms of the Plan.

          (ii) In order to fulfill the purposes of the Plan and without amending the Plan, to modify
grants of Stock Awards to Participants who are foreign nationals or employed outside of the United
States in order to recognize differences in local law, tax policies or customs.

          (iii) To construe and interpret the Plan and Stock Awards granted under it, and to establish,
amend and revoke rules and regulations for its administration. The Board, in the exercise of this
power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.

          (iv) To amend the Plan or a Stock Award as provided in Section 12.

          (v) Generally, to exercise such powers and to perform such acts as the Board deems necessary
or expedient to promote the best interests of the Company which are not in conflict with the
provisions of the Plan.

3

 

     (c) Delegation to Committee. The Board may delegate administration of the Plan to a Committee
or Committees of one or more members of the Board, and the term “Committee” shall apply to any
person or persons to whom such authority has been delegated. In the discretion of the Board, the
Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of
the Code, and/or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3,
and/or solely of two or more Independent Directors under applicable Nasdaq (or other exchange)
rules. The Board or the Committee may further delegate its authority and responsibilities under
the Plan to an Officer. However, if administration is delegated to an Officer, such Officer may
grant Stock Awards only within guidelines established by the Board or the Committee, and only the
Board or the Committee may make a Stock Award to an Officer or Director. If administration is
delegated to a Committee, the Committee shall have, in connection with the administration of the
Plan, the powers theretofore possessed by the Board, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or subcommittee, or an
Officer to whom authority has been delegated), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board.
The Board may abolish the Committee at any time and revest in the Board the administration of the
Plan, and unless otherwise specified by the Board shall retain any authority granted to a committee
or individual hereunder unto itself.

4. Shares Subject to the Plan.

     (a) Share Reserve. Subject to the provisions of Section 11 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall not exceed in the
aggregate Twelve Million Four Hundred Thousand (12,400,000)1 Shares of Common Stock.

     (b) Section 162(m) Limitation on Share Numbers. No Employee shall be eligible to be granted
Stock Awards covering more than Two Million (2,000,000) Shares during any fiscal year of the
Company.

     (c) Reversion of Shares to the Share Reserve. If any Stock Award shall for any reason expire
or otherwise terminate, in whole or in part, without having been exercised in full, the Shares not
acquired under such Stock Award shall revert to and again become available for issuance under the
Plan. Further, if any previously-issued Shares are forfeited under the terms and conditions of the
Stock Award, then any Shares so forfeited shall revert to and again become available for issuance
under the Plan. The provisions of this Section 4(c) are qualified by Section 4(a) such that the
total number of Shares issued and outstanding under the Plan at any time may not exceed the number
set forth in Section 4(a) (as adjusted under Section 11).

     (d) Source of Shares. The stock subject to the Plan may be unissued Shares or reacquired
Shares, bought on the market or otherwise.

5.   Eligibility.

       Stock Awards may be granted to Employees, Directors and Consultants.

6.    Option Provisions.

       Each Option shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The provisions of separate Options need not be identical, but each Option
shall include (through incorporation of provisions hereof by reference in the Option or otherwise)
the substance of each of the following provisions:

       (a) Term. No Option shall be exercisable after the expiration of ten (10) years from the date
it was granted.

       (b) Exercise Price of an Option. The exercise price of each Option shall be at least equal to
the Fair Market Value of the stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, an Option may be granted with an exercise price lower than that set
forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution
for another option in a manner satisfying the provisions of Section 424(a) of the Code.

 

			
	1	 	As adjusted to reflect two-for-one forward stock split
effective August 20, 2007

4

 

     (c) Consideration. The purchase price of stock acquired pursuant to an Option shall be paid,
to the extent permitted by applicable statutes and regulations, either (i) in cash, check or wire
transfer at the time the Option is exercised or (ii) at the discretion of the Board at the time of
the grant of the Option or subsequently by (1) by delivery to the Company of other Shares that have
a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as
to which the Option is exercised, provided that in the case of Shares acquired, directly or
indirectly, from the Company, such Shares must have been owned by the Participant for more than six
(6) months on the date of surrender (or such other period as may be required to avoid the Company’s
incurring an adverse accounting charge), (2) if, as of the date of exercise of an Option the
Company then is permitting Employees to engage in a “same-day sale” cashless brokered exercise
program involving one or more brokers, through such a program that complies with the Applicable
Laws (including without limitation the requirements of Regulation T and other applicable
regulations promulgated by the Federal Reserve Board) and that ensures prompt delivery to the
Company of the amount required to pay the exercise price and any applicable withholding taxes, (3)
in any other form of legal consideration that may be acceptable to the Board, or (4) any
combination of the foregoing methods. In making its determination as to the type of consideration
to accept, the Board shall consider if acceptance of such consideration may be reasonably expected
to benefit the Company and the Board may, in its sole discretion, refuse to accept a particular
form of consideration at the time of any Option exercise.

     (d) Transferability of an Option. The Option shall not be transferable except by will or by
the laws of descent and distribution and shall be exercisable during the lifetime of the
Participant only by the Participant. Notwithstanding the foregoing provisions of this subsection
6(d), the Participant may, by delivering written notice to the Company, in a form satisfactory to
the Company, designate a third party who, in the event of the death of the Participant, shall
thereafter be entitled to exercise the Option.

     (e) Vesting.

          (i) Generally. The total number of Shares of Common Stock subject to an Option may, but need
not, vest and therefore become exercisable in periodic installments which may, but need not, be
equal. The Option may be subject to such other terms and conditions on the time or times when it
may be exercised (which may be based on performance or other criteria) as the Board may deem
appropriate. The vesting provisions of individual Options may vary. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum number of Shares as to
which an Option may be exercised.

          (ii) Leave of Absence. The Board (or any other party to whom such authority has been
delegated, including under this Plan) shall have the discretion to determine whether and to what
extent the vesting of Options shall be tolled during any unpaid leave of absence; provided,
however, that in the absence of such determination, vesting of Options shall be tolled during any
such unpaid leave (unless otherwise required by the Applicable Laws). In the event of military
leave, vesting shall toll during any unpaid portion of such leave, provided that, upon a
Participant’s returning from military leave (under conditions that would entitle him or her to
protection upon such return under the Uniform Services Employment and Reemployment Rights Act), he
or she shall be given vesting credit with respect to Options to the same extent as would have
applied had the Participant continued to provide services to the Company throughout the leave on
the same terms as he or she was providing services immediately prior to such leave.

     (f) Termination of Continuous Service. In the event a Participant’s Continuous Service
terminates (other than upon the Participant’s death or Disability), the Participant may exercise
his or her Option (to the extent that the Participant was vested in the Option Shares and entitled
to exercise such Option as of the date of termination) but only within such period of time ending
on the earlier of (i) the date three (3) months following the termination of the Participant’s
Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii)
the expiration of the term of the Option as set forth in the Option Agreement. If, after
termination, the Participant does not exercise his or her Option within the time specified in the
Option Agreement, the Option shall terminate.

     (g) Extension of Termination Date. Following the termination of the Participant’s Continuous
Service (other than upon the Participant’s death or Disability), if the Participant would be
prohibited at any time solely because the issuance of Shares would violate the registration
requirements under the Securities Act or violate any prohibition on trading on the basis of
possession of material nonpublic information involving the Company and its business, then the
Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in
subsection 6(a), or (ii) the expiration of a period of three (3) months after the termination of
the Participant’s Continuous Service during which the exercise of the Option would not be in
violation of such requirements.

     (h) Disability of Participant. In the event a Participant’s Continuous Service terminates as
a result of the Participant’s Disability, the Participant may exercise his or her Option (to the
extent that the Participant was vested in the Option Shares and entitled to exercise the Option as
of the date of termination), but only within such period of time ending on the earlier of (i) the
date

5

 

twelve (12) months following such termination (or such longer or shorter period specified in
the Option Agreement) or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Participant does not exercise his or her Option within the
time specified herein, the Option shall terminate.

     (i) Death of Participant. In the event (i) an Participant’s Continuous Service terminates as
a result of the Participant’s death or (ii) the Participant dies within the period (if any)
specified in the Option Agreement after the termination of the Participant’s Continuous Service for
a reason other than death, then the Option may be exercised (to the extent the Participant was
vested in the Option Shares and entitled to exercise the Option as of the date of death) by the
Participant’s estate, by a person who acquired the right to exercise the Option by bequest or
inheritance or by a person designated to exercise the Option upon the Participant’s death pursuant
to subsection 6(d), but only within the period ending on the earlier of (1) the date eighteen (18)
months following the date of death (or such longer or shorter period specified in the Option
Agreement) or (2) the expiration of the term of such Option as set forth in the Option Agreement.
If, after death, the Option is not exercised within the time specified herein, the Option shall
terminate.

     (j) Exercise Generally. Options shall be considered exercised when the Company (or its
authorized agent) receives (i) written or electronic notice from the person entitled to exercise
the Option of intent to exercise a specific number of Shares, (ii) full payment or appropriate
provision for payment in a form and method acceptable to the Board or Committee, for the Shares
being exercised, and (iii) if applicable, payment or appropriate provision for payment of any
withholding taxes due on exercise. An Option may not be exercised for a fraction of a Share. The
Option may, at the discretion of the Board or Committee, include a provision whereby the
Participant may elect to exercise the Option as to Shares that are not yet vested. Unvested Shares
exercised in such manner may be subject to a Company repurchase right under Section 10(f) or such
other restrictions or conditions as the Board or Committee may determine.

     (k) Administrator Discretion. Notwithstanding the provisions of this Section 6, the Board or
the Committee shall have complete discretion exercisable at any time to (i) extend the period of
time for which an Option is to remain exercisable, following the Participant’s termination of
Continuous Service, but in no event beyond the expiration date for the Option, and (ii) permit the
Option to be exercised, during the applicable post-termination exercise period, not only with
respect to the number of Shares that were vested on the date of termination, cut also with respect
to additional Shares on such terms and conditions as the Board or Committee may determine.

7. Provisions of Stock Awards other than Options.

     Each Stock Award Agreement reflecting the issuance of a Stock Unit shall be in such form and
shall contain such terms and conditions as the Board shall deem appropriate. The terms and
conditions of such agreements may change from time to time, and the terms and conditions of
separate agreements need not be identical, but each such agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:

          (a) Consideration. A Stock Unit may be awarded in consideration for such property or services
as is permitted under Applicable Law, including for past services actually rendered to the Company
or an Affiliate for its benefit.

          (b) Vesting; Restrictions. Shares of Common Stock awarded under the agreement reflecting a
Stock Unit award may, but need not, be subject to a Share repurchase option, forfeiture restriction
or other conditions in favor of the Company in accordance with a vesting or lapse schedule to be
determined by the Board.

          (c) Termination of Participant’s Continuous Service. In the event a Participant’s Continuous
Service terminates, the Company may reacquire any or all of the Shares of Common Stock held by the
Participant which have not vested or which are otherwise subject to forfeiture or other conditions
as of the date of termination under the terms of the agreement.

          (d) Transferability. Rights to acquire Shares of Common Stock under a Stock Unit agreement
shall not be transferable except by will or by the laws of descent and distribution, and Shares of
Common Stock issued upon vesting of a Stock Unit shall be issuable during the lifetime of the
Participant only to the Participant. Notwithstanding the foregoing provisions of this subsection
7(d), the Participant may, by delivering written notice to the Company, in a form satisfactory to
the Company, designate a third party who, in the event of the death of the Participant, shall
thereafter be entitled to receive Shares of Common Stock issued upon vesting of a Stock Unit.

6

 

8. Covenants of the Company.

     (a) Availability of Shares. During the terms of the Stock Awards, the Company shall keep
available at all times the number of Shares of Common Stock required to satisfy such Stock Awards.

     (b) Securities Law Compliance. The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be required to grant
Stock Awards and to issue and sell Shares upon exercise of the Stock Awards; provided, however,
that this undertaking shall not require the Company to register under the Securities Act the Plan,
any Stock Award or any stock issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency
the authority which counsel for the Company deems necessary for the lawful issuance and sale of
stock under the Plan, the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such Stock Awards unless and until such authority is obtained.

9. Use of Proceeds from Stock; Unfunded Plan.

     Proceeds from the sale of stock pursuant to Stock Awards shall constitute general funds of the
Company. The Plan shall be unfunded. Although bookkeeping accounts may be established with
respect to Participants who are granted Stock Awards hereunder, any such accounts will be used
merely as a bookkeeping convenience. The Company shall not be required to segregate any asset
which may at any time be represented by Stock Awards, nor shall this Plan be construed as providing
for such segregation, nor shall the Company nor any party authorized to administer the Plan be
deemed to be a trustee of stock or cash to be awarded under the Plan. Any liability of the Company
to any Participant with respect to a Stock Award shall be based solely upon any contractual
obligations which may be created by the Plan; no such obligation of the Company shall be deemed to
be secured by any pledge or other encumbrance on any property of the Company. Neither the Company
nor any party authorized to administer the Plan shall be required to give any security or bond for
the performance of any obligation which may be created by this Plan.

10. Miscellaneous.

     (a) Acceleration of Exercisability and Vesting. The Board shall have the power to accelerate
the time at which a Stock Award may first be exercised or the time during which a Stock Award or
any part thereof will vest, become exercisable or be settled in accordance with the Plan,
notwithstanding the provisions in the Stock Award stating the time at which it may first vest, be
exercised or be settled.

     (b) Shareholder Rights. No Participant shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any Shares subject to such Stock Award unless and until
such Participant has satisfied all requirements for exercise of the Stock Award pursuant to its
terms.

     (c) No Employment or other Service Rights. Nothing in the Plan or any instrument executed or
any Stock Award granted pursuant thereto shall confer upon any Participant or other holder of Stock
Awards any right to continue to serve the Company or an Affiliate in the capacity in effect at the
time the Stock Award was granted or shall affect the right of the Company or an Affiliate to
terminate (i) the employment of an Employee with or without notice and with or without cause, (ii)
the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the Company or an
Affiliate, and any applicable provisions of the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be.

     (d) Investment Assurances. The Company may require a Participant, as a condition of
exercising or acquiring Shares under any Stock Award, (i) to give written assurances satisfactory
to the Company as to the Participant’s knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and risks of exercising
the Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the
Participant is acquiring the stock subject to the Stock Award for the Participant’s own account and
not with any present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be inoperative if the
issuance of the Shares upon the exercise or acquisition of stock under the Stock Award has been
registered under a then currently effective registration statement under the Securities Act; or as
to any particular requirement, a determination is made by counsel for the Company that such
requirement need not be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock certificates issued

7

 

under the Plan as such counsel deems necessary or appropriate in order to comply with
applicable securities laws, including, but not limited to, legends restricting the transfer of the
stock.

     (e) Withholding Obligations. To the extent provided by the terms of a Stock Award Agreement,
the Participant may satisfy any federal, state or local tax withholding obligation relating to the
exercise or acquisition of Shares under a Stock Award by any of the following means (in addition to
the Company’s right to withhold from any compensation paid to the Participant by the Company) or by
a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to
withhold Shares from the Shares otherwise issuable to the Participant as a result of the exercise
or acquisition of stock under the Stock Award; or (iii) delivering to the Company owned and
unencumbered Shares.

     (f) Stock Unit Repurchase Limitation. The terms of any repurchase option for a Stock Unit
shall be specified in the Stock Award and may be at the Fair Market Value of the stock subject to
the Stock Award at the time of repurchase, at the original price or on such terms and conditions as
the Board may determine (and as shall be reflected in the Stock Award Agreement); provided however
that this Section 10(f) shall in no way limit the Company’s ability to adjust any Stock Award as
provided under Section 11 below.

     (g) Cancellation and Re-Grant of Stock Awards. The Company may not reprice any outstanding
Stock Awards under the Plan, including implement any program whereby outstanding Stock Awards will
be cancelled and replaced with Stock Awards bearing a lower purchase or exercise price or exchanged
for cash, without first obtaining the approval of the shareholders of the Company; provided however
that this Section 10(g) shall in no way limit the Company’s ability to adjust Stock Awards as
provided under Section 11 below.

     (h) Interpretation of Plan and Stock Awards. In the event that any provision of the Plan or
any Stock Award granted under the Plan is declared to be illegal, invalid or otherwise
unenforceable by a court of competent jurisdiction, such provision shall be reformed, if possible,
to the extent necessary to render it legal, valid and enforceable, or otherwise deleted, and the
remainder of the terms of the Plan and/or Stock Award shall not be affected to the extent necessary
to reform or delete such illegal, invalid or unenforceable provision. All questions arising under
the Plan or under any Stock Award shall be decided by the Board or the Committee in its or their
total and absolute discretion and such decisions shall be final and binding on all parties.

     (i) Electronic Communication. Any document required to be delivered under the Plan, including
under the Applicable Laws, may be delivered in writing or electronically. Signature may also be
electronic if permitted by the Board or the Committee, and if permitted by Applicable Law.

     (j) Escrow of Shares. To enforce any restriction applicable to Shares issued under the Plan,
the Board or the Committee may require a Participant or other holder of such Shares to deposit the
certificates representing such Shares, with approved stock powers or other transfer instruments
endorsed in blank, with the Company or an agent of the Company until the restrictions have lapsed.
Such certificates (or other notations representing the Shares) may bear a legend or legends
referencing the applicable restrictions.

11. Adjustments upon Changes in Stock.

     (a) Capitalization Adjustments. If any change is made in the stock subject to the Plan, or
subject to any Stock Award, without the receipt of consideration by the Company (through merger,
consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of securities subject to the Plan pursuant to subsection 4(a) and the maximum number of
securities subject to award to any person pursuant to subsection 4(b), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of securities and price per Share
of stock subject to such outstanding Stock Awards. The Board, the determination of which shall be
final, binding and conclusive, shall make such adjustments. (The conversion of any convertible
securities of the Company shall not be treated as a transaction “without receipt of consideration”
by the Company.)

     (b) Change in Control—Dissolution or Liquidation. In the event of a dissolution or
liquidation of the Company, then such Stock Awards shall be terminated if not exercised (if
applicable) prior to such event.

     (c) Change in Control—Asset Sale, Merger, Consolidation or Reverse Merger or Acquisition of
Stock.

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          (i) In the event of (1) a sale of substantially all of the assets of the Company, or (2) a
merger or consolidation in which the Company is not the surviving corporation, or (3) a reverse
merger in which the Company is the surviving corporation but the shares of Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into other property, whether
in the form of securities, cash or otherwise, or (4) the direct or indirect acquisition (including
by way of a tender or exchange offer) by any person, or persons acting as a group, of beneficial
ownership or a right to acquire beneficial ownership of shares representing a majority of the
voting power of the then outstanding shares of capital stock of the Company, then any surviving
corporation or acquiring corporation shall assume any Stock Awards outstanding under the Plan or
shall substitute similar awards (including with respect to a Stock Award an award to acquire the
same consideration paid to the shareholders in the transaction described in this subsection 11(c)
for those outstanding under the Plan).

          (ii) For purposes of subsection 11(c) a Stock Award shall be deemed assumed if, following the
change in control, the Stock Award confers the right to purchase in accordance with its terms and
conditions, for each share of Common Stock subject to the Stock Award immediately prior to the
change in control, the consideration (whether stock, cash or other securities or property) to which
a holder of a share of Common Stock on the effective date of the change in control was entitled.

          (iii) Subject to the provisions of any Stock Award Agreement, in the event any surviving
corporation or acquiring corporation refuses to assume such Stock Awards or to substitute similar
stock awards for those outstanding under the Plan, then with respect to Stock Awards held by
Participants whose Continuous Service has not terminated, the vesting of 50% of such Stock Awards
(and, if applicable, the time during which such Stock Awards may be exercised or settled) shall be
accelerated in full, and the Stock Awards shall terminate if not exercised or settled (if
applicable) at or prior to such event. With respect to any other Stock Awards outstanding under
the Plan, such Stock Awards shall terminate if not exercised (if applicable) prior to such event.

          (iv) The Board shall at all times have the authority, in its sole discretion, to provide for
additional or different vesting, exercisability, settlement or forfeiture conditions with respect
to Stock Awards than that reflected in this Section 11(c), provided that its determinations in this
regard shall be reflected in the Stock Award Agreement (including in amendments thereto) issued to
the affected Participant.

12. Amendment of the Plan and Stock Awards.

     (a) Amendment of Plan. The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 11 relating to adjustments upon changes in stock, no
amendment shall be effective unless approved by the shareholders of the Company to the extent
shareholder approval is necessary to satisfy the requirements of Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.

     (b) Shareholder Approval. The Board may, in its sole discretion, submit any other amendment
to the Plan for shareholder approval, including, but not limited to, amendments to the Plan
intended to satisfy the requirements of Section 162(m) of the Code and the regulations thereunder
regarding the exclusion of performance-based compensation from the limit on corporate deductibility
of compensation paid to certain executive officers.

     (c) Contemplated Amendments. It is expressly contemplated that the Board may amend the Plan
in any respect the Board deems necessary or advisable to provide eligible Employees with the
maximum benefits provided or to be provided under the provisions of the Code or any other
Applicable Law.

     (d) No Impairment of Rights. Rights under any Stock Award granted before amendment of the
Plan shall not be materially impaired by any amendment of the Plan unless (i) the Company requests
the consent of the Participant and (ii) the Participant consents in writing.

     (e) Amendment of Stock Awards. The Board at any time, and from time to time, may amend the
terms of any one or more Stock Awards; provided, however, that the rights under any Stock Award
shall not be materially impaired by any such amendment unless (i) the Company requests the consent
of the Participant and (ii) the Participant consents in writing.

13. Termination or Suspension of the Plan.

     (a) Plan Term. The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on the day before the tenth (10th) anniversary of the date the
Plan is adopted by the Board or approved by the shareholders

9

 

of the Company, whichever is earlier. No Stock Awards may be granted under the Plan while the
Plan is suspended or after it is terminated.

     (b) No Impairment of Rights. Suspension or termination of the Plan shall not materially
impair rights and obligations under any Stock Award granted while the Plan is in effect except with
the written consent of the Participant.

14. Effective Date of Plan.

     The Plan shall become effective as determined by the Board, but no Stock Award shall be
exercised unless and until the Plan has been approved by the shareholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan is adopted by the
Board.

15. Governing Law. 

     All questions concerning the construction, validity and interpretation of this Plan shall be
governed by the law of the State of Washington, without regard to such states conflict of laws
rules.

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