Document:

exv10w33

 

Exhibit 10.33

First Amendment of Lease

     This first amendment of lease (“First Amendment”) is made and entered into this 31st day
of January, 2007 by and between NMSBPCSLDHB, a California Limited Partnership (“Landlord”) and
Packeteer, Inc., a Delaware corporation (“Tenant”) with reference to the following facts:

	A.	 	Landlord and Tenant entered into that certain lease dated July 15, 2002 (“Lease”) pursuant to
which the Landlord agreed to lease to Tenant approximately 69,015 square feet of space
comprising the first and second floors of a three story building located at 10201 North De
Anza Boulevard, Cupertino, California (“Original Premises”).
	 
	B.	 	Landlord and Tenant wish to amend the terms of the Lease so as to provide for 1) an extension
of the term of the Lease for a period of seven years (“Extended Term”), 2) an expansion of the
Original Premises to include the third floor (the new total square footage is approximately
104,990 square feet) (“Amended Premises”), 3) the tenant improvements to be performed by the
Landlord relating to the Original Premises and later the “Amended Premises” and 4) two options
to extend the Extended Term.
	 
	C.	 	Landlord warrants that the term of the third floor lease, currently in effect, is coterminous
with the term of Tenant’s current lease term and that there are no options to extend the third
floor lease beyond the current term.

     NOW THEREFORE, the parties do hereby agree to amend the Lease as follows:

Agreement

	1.	 	Extended Term. The Extended Term will be for seven years commencing December 20,
2007 and terminating December 19, 2014 for the space described in paragraph 2 below.
	 
	2.	 	Amended Premises. That approximately 104,990 square feet comprising the entire three
story building located at 10201 North De Anza Boulevard, Cupertino, California.
	 
	3.	 	Rent. The rent for the Amended Premises will be $1.98 per square foot modified net
for the first year of the Extended Term with three percent (3%) annual rent escalations to
follow.
	 
	4.	 	Operating Expenses. Effective at the commencement of the Extended Term, Tenant will
be responsible for the cost of real property taxes, property insurance (fire and extended
policy), janitorial and the cost of utilities. All other costs of the Amended Premises will
be borne by the Landlord and will not be reimbursed by the Tenant.
	 
	5.	 	Tenant Improvements.

	 	a.	 	Prior to January 31, 2007 Landlord, at Landlord’s sole expense, will perform the
following work:

	 	i)	 	Perform a full survey of the HVAC system that services the Amended Premises by a
licensed mechanical contractor.
	 
	 	ii)	 	Clear the roof of debris and patch the roof where required.
	 
	 	iii)	 	Provide a new elevator technician.

 

 

	 	iv)	 	Restore the freight elevator to good working condition.
	 
	 	v)	 	Fix the leak/leaks associated with the third floor balcony.

	 	b.	 	Prior to February 15, 2007, Landlord, at Landlord’s sole expense, will start the
immediately required repairs and replacements of the HVAC system as directed by the
findings of the HVAC survey and will complete said work no later than March 15, 2007.
Furthermore during the term of the Lease and the Extended Term, Landlord will be very
proactive about all required repairs and replacements.
	 
	 	c.	 	As early as possible during the spring of 2007 but in no event later than May 31,
2007, Landlord will replace the entire roof of the Amended Premises.
	 
	 	d.	 	Within one week of Vocera vacating the third floor, Landlord will reset lobby
elevators so that they open on all three floors and reset the freight elevator so that it
services all three floors.
	 
	 	e.	 	Upon Vocera vacating the third floor, the tenant improvement schedule will be as
follows:

	 	i)	 	Landlord will restore the third floor to the floor plan shown in and
attached as Exhibit “A”. Prior to commencing this restoration process Landlord
will consult with Tenant to see if Tenant wants to retain any of the improvements
marked for restoration. If Tenant does retain some of these improvements, Tenant
will have no obligation to restore them at the expiration of Tenant’s Extended Term
or any extensions to the Extended Term.
	 
	 	ii)	 	Once restoration is complete and all of Vocera’s cubicles have been
removed, Landlord will clean all carpeted areas and replace carpet where necessary.
No patching of carpet, if required, will be visible nor will there be a change of
carpet mid-room. In addition Landlord will repaint all interior walls of the third
floor.
	 
	 	iii)	 	Landlord will deliver the third floor to Tenant with all systems in
good working order and condition, including but not limited to plumbing, electrical
(including panels and outlets), sprinklers, lighting, ceiling tiles, window
coverings and mechanical systems.
	 
	 	iv)	 	During the time Landlord is performing Landlord’s work on the third
floor, as described in section 5 of the First Amendment, Landlord will not charge
Tenant rent or operating expenses for the third floor. Following completion of
Landlord’s work, Landlord will grant Tenant an additional three (3) months of free
rent and no operating expenses for the third floor for Tenant’s installation of
Tenant’s tenant improvements, cabling and fit up. As long as Tenant does not
interfere with Landlord’s work on the third floor, Tenant may also utilize the
period of time during which Landlord is performing Landlord’s work for Tenant’s
tenant improvements.

	 	f.	 	In the event Landlord does not perform all of the prior described tenant
improvements within the time frames called for above, Tenant may contract with
appropriate third parties to affect any tenant improvements not yet completed. Any
monies paid by Tenant to these third parties will be credited against rent owed by Tenant
to Landlord.

	6.	 	Options to Extend. Tenant will have two (2) five (5) year options to extend the
Extended Term on the same general terms and conditions of Section 35 in said Lease, at the
then prevailing market rent.

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	7.	 	Parking. During the extended term Tenant shall be entitled to the exclusive use of
all parking belonging to the Amended Premises.

All other terms of the Lease will remain unchanged.

Each individual signing this agreement warrants and represents that he or she has been authorized
by the appropriate action of the party who he or she represents to enter into this agreement.

IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the date first above
written.

	 	 	 
	Landlord:

	 	Tenant:
	 
	 	 
	NMSBPCSLDHB, 

a California limited partnership

	 	Packeteer, Inc.,

a Delaware corporation
	 
	 	 
	/s/ Bob Granum

	 	/s/ David C. Yntema

	 

	 	 
	By: Bob Granum

	 	By: David C. Yntema
	 
	 	 
	Its: General Partner

	 	Its: Chief Financial Officer

3exv10w34

 

Exhibit 10.34

PACKETEER, INC.

1999 STOCK INCENTIVE PLAN

Amended and Restated Effective as of February 5, 2007

ARTICLE ONE

GENERAL PROVISIONS

	     I.	 	PURPOSE OF THE PLAN

          This 1999 Stock Incentive Plan is intended to promote the interests of Packeteer, Inc., a
Delaware corporation, by providing eligible persons in the Corporation’s service with the
opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in
the Corporation as an incentive for them to remain in such service.

          Capitalized terms shall have the meanings assigned to such terms in the attached Appendix.

	     II.	 	STRUCTURE OF THE PLAN

          A. The Plan shall be divided into four separate equity programs:

	 	•	 	the Discretionary Option/SAR Program under which eligible persons may,
at the discretion of the Plan Administrator, be granted Options and/or Stock Appreciation
Rights;
	 
	 	•	 	the Restricted Stock/Restricted Stock Unit Program under which
eligible persons may, at the discretion of the Plan Administrator, be granted Restricted
Stock Purchase Rights, Restricted Stock Bonuses and/or Restricted Stock Units;

	 
	 	•	 	the Performance Award Program under which eligible persons may, at the
discretion of the Plan Administrator, be granted Performance Shares and/or Performance
Units; and
	 
	 	•	 	the Automatic Option Grant Program under which eligible non-employee
Board members shall automatically receive Option grants at designated intervals over their
period of continued Board service.

          B. The provisions of Articles One and Six shall apply to all equity programs under the Plan
and shall govern the interests of all persons under the Plan.

	     III.	 	ADMINISTRATION OF THE PLAN

          A. The Primary Committee shall have sole and exclusive authority to administer the
Discretionary Option/SAR Grant Program, Restricted Stock/Restricted Stock Unit

 

 

Program and Performance Award Program with respect to Section 16 Insiders and Covered
Employees. Administration of the Discretionary Option/SAR Grant Program, Restricted
Stock/Restricted Stock Unit Program and Performance Award Program with respect to all other persons
eligible to participate in those programs may, at the Board’s discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board may retain the power to administer those programs
with respect to all such persons. However, any Awards granted to members of the Primary Committee
under the Discretionary Option/SAR Grant Program, Restricted Stock/Restricted Stock Unit Program or
Performance Award Program shall be made by a disinterested majority of the Board.

          B. The Board may, in its discretion by resolution adopted by the Board, authorize one or more
officers of the Corporation to grant one or more Awards of Options, SARs and/or Restricted Stock
Units under the Discretionary Option/SAR Grant Program and the Restricted Stock/Restricted Stock
Unit Program, without further approval of the Board or the Primary or Secondary Committee, to any
Employee, other than a person who, at the time of such grant, is a Section 16 Insider or a Covered
Employee, and to determine the number and vesting terms of the shares of Common Stock or Restricted
Stock Units to be subject to such Awards; provided, however, that (1) no Employee shall be granted
in any calendar year Option or SAR Awards for more than 50,000 shares of Common Stock or Restricted
Stock Unit Awards for more than 25,000 such units, (2) the number of shares of Common Stock or
Restricted Stock Units subject to each such Option , SAR or Restricted Stock Unit Award shall
comply with guidelines established from time to time by the Board or the Primary Committee, and (3)
each such Option, SAR and Restricted Stock Unit Award shall be subject to the terms and conditions
of the appropriate standard form of Award Agreement approved by the Board or the Primary Committee
and shall conform to the provisions of the Plan and such other guidelines as shall be established
from time to time by the Board or the Primary Committee. Any officer or officers so authorized by
the Board shall be deemed the Plan Administrator solely for the purpose of granting such Option,
SAR and Restricted Stock Unit Awards.

          C. Members of the Primary Committee or any Secondary Committee shall serve for such period of
time as the Board may determine and may be removed by the Board at any time. The Board may also at
any time terminate the functions of any Secondary Committee and any officer delegated authority
pursuant to Section III.B above and reassume all powers and authority previously delegated to such
committee or officer.

          D. Except for an officer delegated limited authority pursuant to Section III.B above, each
Plan Administrator shall, within the scope of its administrative functions under the Plan, have
full power and authority (subject to the provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for proper administration of the Discretionary Option/SAR
Grant Program, Restricted Stock/Restricted Stock Unit Program and Performance Award Program and to
make such determinations under, and issue such interpretations of, the provisions of those programs
and any outstanding Awards thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan shall be final and
binding on all parties who have an interest in the Discretionary Option/SAR Grant Program,
Restricted Stock/Restricted Stock Unit Program or Performance Award Program under its jurisdiction
or any Award thereunder.

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          E. Service on the Primary Committee or the Secondary Committee shall constitute service as a
Board member, and members of each such committee shall accordingly be entitled to full
indemnification and reimbursement as Board members for their service on such committee. No member
of the Primary Committee or the Secondary Committee shall be liable for any act or omission made in
good faith with respect to the Plan or any Awards under the Plan.

          F. Administration of the Automatic Option Grant Program shall be self-executing in accordance
with the terms of that program, and no Plan Administrator shall exercise any discretionary
functions with respect to any Option grants made under that program.

	     IV.	 	ELIGIBILITY

          A. The persons eligible to participate in the Discretionary Option/SAR Grant Program,
Restricted Stock/Restricted Stock Unit Program and Performance Award Program are as follows:

          (i) Employees,

          (ii) non-employee members of the Board or the board of directors of any Parent
or Subsidiary, and

          (iii) consultants and other independent advisors who provide services to the
Corporation (or any Parent or Subsidiary).

          B. Except for an officer delegated limited authority pursuant to Section III.B above, each
Plan Administrator shall, within the scope of its administrative jurisdiction under the Plan, have
full authority to determine with respect to Awards granted under the Discretionary Option/SAR Grant
Program, Restricted Stock/Restricted Stock Unit Program and Performance Award Program (i) the type
of Award to be granted, (ii) which eligible persons are to receive such Awards, (iii) the time or
times when those Awards are to be granted, (iv) the number of shares to be covered by each such
Award, (v) the exercise or purchase price, if any, under each such Award, (vi) the timing, terms
and conditions of the exercisability or vesting (if any) of each such Award or any shares acquired
pursuant thereto, (vii) the maximum term for which the Award is to remain outstanding, (viii) the
Performance Measures, Performance Period, Performance Award Formula and Performance Goals
applicable to any Award and the extent to which such Performance Goals have been attained, (ix) the
effect of the Participant’s termination of Service on any of the foregoing, and (x) all other
terms, conditions and restrictions applicable to any Award or Shares acquired pursuant thereto not
inconsistent with the terms of the Plan.

          C. The individuals who shall be eligible to participate in the Automatic Option Grant Program
shall be limited to (i) those individuals who first become non-employee Board members on or after
the Underwriting Date, whether through appointment by the Board or election by the Corporation’s
stockholders, and (ii) those individuals who continue to serve as non-employee Board members at one
or more Annual Stockholders Meetings held after the Underwriting Date. A non-employee Board member
who has previously been in the employ of the Corporation (or any Parent or Subsidiary) shall not be
eligible to receive the initial automatic Option grant under the Automatic Option Grant Program at
the time he or she first becomes a

3.

 

non-employee Board member, but shall be eligible to receive one or more annual automatic
Option grants under the Automatic Option Grant Program while he or she continues to serve as a
non-employee Board member.

	     V.	 	STOCK SUBJECT TO THE PLAN

          A. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired
Common Stock, including shares repurchased by the Corporation on the open market. The number of
shares of Common Stock reserved for issuance over the term of the Plan shall not exceed the sum of
(i) 3,845,917 shares plus (ii) the additional shares of Common Stock automatically added to the
share reserve each year pursuant to the provisions of Section V.B. of this Article One.

          B. The number of shares of Common Stock available for issuance under the Plan shall
automatically increase on the first trading day of January each calendar year during the term of
the Plan, beginning with calendar year 2000, by an amount equal to five percent (5 %) of the total
number of shares of Common Stock outstanding on the last trading day in December of the immediately
preceding calendar year, but in no event shall any such annual increase exceed 3,000,000 shares.

          C. No Participant may be granted Options or Freestanding SARs for more than 1,000,000 shares
of Common Stock in the aggregate per calendar year. No Participant may be granted Restricted Stock
Awards or Awards of Restricted Stock Units intended, in either case, to result in the payment of
Performance-Based Compensation for more than 500,000 shares of Common Stock in the aggregate per
calendar year. No Participant may be granted Performance Shares intended to result in the payment
of Performance-Based Compensation for more than 150,000 shares of Common Stock in the aggregate for
each year contained in the Performance Period with respect to such Award. No Participant may be
granted Performance Units intended to result in the payment of Performance-Based Compensation for
more than $1,500,000 for each year contained in the Performance Period with respect to such Award.

          D. Shares of Common Stock subject to outstanding Options (including Options incorporated into
this Plan from the Predecessor Plan) or Freestanding SARs shall be available for subsequent
issuance under the Plan to the extent those Options or Freestanding SARs expire or terminate for
any reason prior to exercise in full. Unvested shares issued under the Plan and subsequently
forfeited, cancelled or repurchased by the Corporation at the original issue price paid per share
and unvested shares subject to Restricted Stock Unit Awards or Performance Share Awards cancelled
prior to settlement shall be added back to the number of shares of Common Stock reserved for
issuance under the Plan and shall accordingly be available for reissuance through one or more
subsequent Awards granted under the Plan. However, should the exercise price of an Option under
the Plan be paid with shares of Common Stock or should shares of Common Stock otherwise issuable
under the Plan be withheld by the Corporation in satisfaction of the withholding taxes incurred in
connection with the exercise, vesting or settlement of an Award under the Plan, then the number of
shares of Common Stock available for issuance under the Plan shall be reduced by the gross number
of shares for which the Award is exercised, becomes vested or is settled, and not by the net number
of shares of Common Stock

4.

 

issued to the holder of such Award. Shares of Common Stock underlying one or more SARs
exercised under the Plan shall not be available for subsequent issuance under the Plan.

          E. If any change is made to the Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation’s receipt of consideration, appropriate
adjustments shall be made by the Plan Administrator to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the maximum number and/or class of securities for which
any one person may be granted one or more Awards under the Plan within a specified period of time
as provided in Section V.C of this Article One, (iii) the number and/or class of securities for
which grants are subsequently to be made under the Automatic Option Grant Program to new and
continuing non-employee Board members, (iv) the number and/or class of securities and the exercise
price per share in effect under each outstanding Option and SAR under the Plan, (v) the number
and/or class of securities in effect under each outstanding Restricted Stock Award, Restricted
Stock Unit Award and Performance Share Award under the Plan, (vi) the number and/or class of
securities and price per share in effect under each outstanding Option incorporated into this Plan
from the Predecessor Plan and (vii) the maximum number and/or class of securities by which the
share reserve is to increase automatically each calendar year pursuant to the provisions of Section
V.B. of this Article One. Such adjustments to the outstanding Awards are to be effected in a
manner which shall preclude the enlargement or dilution of rights and benefits under such Awards.
The adjustments determined by the Plan Administrator shall be final, binding and conclusive.

5.

 

ARTICLE TWO

DISCRETIONARY OPTION/SAR GRANT PROGRAM

     I. OPTION TERMS

          Each Option shall be evidenced by an Award Agreement in the form approved by the Plan
Administrator; provided, however, that the Award Agreement shall comply with the terms
specified below. Each Award Agreement evidencing an Incentive Option shall, in addition, be
subject to the provisions of the Plan applicable to such Options.

          A. Exercise Price.

               1. The exercise price per share shall be fixed by the Plan Administrator but shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the Option
grant date.

               2. The exercise price shall become immediately due upon exercise of the Option and shall,
subject to the provisions of the Award Agreement evidencing the Option, be payable in one or more
of the forms specified below:

               (i) cash or check made payable to the Corporation,

               (ii) shares of Common Stock held for the requisite period (if any) necessary to
avoid a charge to the Corporation’s earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date, or

               (iii) to the extent the Option is exercised for vested shares, through a
special sale and remittance procedure pursuant to which the Participant shall
concurrently provide irrevocable instructions to (a) a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date, sufficient
funds to cover the aggregate exercise price payable for the purchased shares plus
all applicable Federal, state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (b) the Corporation to
deliver the certificates for the purchased shares directly to such brokerage firm in
order to complete the sale.

          Except to the extent such sale and remittance procedure is utilized, payment of the exercise
price for the purchased shares must be made on the Exercise Date.

          B. Exercise and Term of Options. Each Option shall be exercisable at such time or
times, during such period and for such number of shares as shall be determined by the Plan
Administrator and set forth in the Award Agreement evidencing the Option. However, no Option shall
have a term in excess of ten (10) years measured from the Option grant date.

6.

 

          C. Effect of Termination of Service.

               1. The following provisions shall govern the exercise of any Options held by the Participant
at the time of cessation of Service or death:

               (i) Any Option outstanding at the time of the Participant’s cessation of
Service for any reason shall remain exercisable for such period of time thereafter
as shall be determined by the Plan Administrator and set forth in the Award
Agreement evidencing the Option, but no such Option shall be exercisable after the
expiration of the Option term.

               (ii) Any Option held by the Participant at the time of death and exercisable in
whole or in part at that time may be subsequently exercised by the personal
representative of the Participant’s estate or by the person or persons to whom the
Option is transferred pursuant to the Participant’s will or in accordance with the
laws of descent and distribution or by the Participant’s designated beneficiary or
beneficiaries of that Option.

               (iii) Should the Participant’s Service be terminated for Misconduct, then all
outstanding Options held by the Participant shall terminate immediately and cease to
be outstanding.

               (iv) During the applicable post-Service exercise period, the Option may not be
exercised in the aggregate for more than the number of vested shares for which the
Option is exercisable on the date of the Participant’s cessation of Service. Upon
the expiration of the applicable exercise period or (if earlier) upon the expiration
of the Option term, the Option shall terminate and cease to be outstanding for any
vested shares for which the Option has not been exercised. However, the Option
shall, immediately upon the Participant’s cessation of Service, terminate and cease
to be outstanding to the extent the Option is not otherwise at that time exercisable
for vested shares.

               2. The Plan Administrator shall have complete discretion, exercisable either at the time an
Option is granted or at any time while the Option remains outstanding, to:

               (i) extend the period of time for which the Option is to remain exercisable
following the Participant’s cessation of Service from the limited exercise period
otherwise in effect for that Option to such greater period of time as the Plan
Administrator shall deem appropriate, but in no event beyond the expiration of the
Option term, and/or

               (ii) permit the Option to be exercised, during the applicable post-Service
exercise period, not only with respect to the number of vested shares of Common
Stock for which such Option is exercisable at the time of the Participant’s
cessation of Service but also with respect to one or more additional installments in
which the Participant would have vested had the Participant continued in Service.

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          D. Stockholder Rights. The holder of an Option shall have no stockholder rights with
respect to the shares subject to the Option until such person shall have exercised the Option, paid
the exercise price and become a holder of record of the purchased shares.

          E. Repurchase Rights. The Plan Administrator shall have the discretion to grant
Options which are exercisable for unvested shares of Common Stock. Should the Participant cease
Service while holding such unvested shares, the Corporation shall have the right to repurchase, at
the exercise price paid per share, any or all of those unvested shares. The terms upon which such
repurchase right shall be exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right.

          F. Limited Transferability of Options. During the lifetime of the Participant,
Incentive Options shall be exercisable only by the Participant and shall not be assignable or
transferable other than by will or by the laws of descent and distribution following the
Participant’s death. However, a Non-Statutory Option may, in connection with the Participant’s
estate plan, be assigned in whole or in part during the Participant’s lifetime to one or more
members of the Participant’s immediate family or to a trust established exclusively for one or more
such family members. The assigned portion may only be exercised by the person or persons who
acquire a proprietary interest in the Option pursuant to the assignment. The terms applicable to
the assigned portion shall be the same as those in effect for the Option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as the Plan
Administrator may deem appropriate. Notwithstanding the foregoing, the Participant may also
designate one or more persons as the beneficiary or beneficiaries of his or her outstanding Options
under this Article Two, and those Options shall, in accordance with such designation, automatically
be transferred to such beneficiary or beneficiaries upon the Participant’s death while holding
those Options. Such beneficiary or beneficiaries shall take the transferred Options subject to all
the terms and conditions of the applicable agreement evidencing each such transferred Option,
including (without limitation) the limited time period during which the Option may be exercised
following the Participant’s death.

     II. INCENTIVE OPTIONS

          The terms specified below shall be applicable to all Incentive Options. Except as modified by
the provisions of this Section II, all the provisions of Articles One, Two and Six shall be
applicable to Incentive Options. Options which are specifically designated as Non-Statutory
Options when issued under the Plan shall not be subject to the terms of this Section II.

          A. Eligibility. Incentive Options may only be granted to Employees.

          B. Dollar Limitation. The aggregate Fair Market Value of the shares of Common Stock
(determined as of the respective date or dates of grant) for which one or more Options granted to
any Employee under the Plan (or any other Option plan of the Corporation or any Parent or
Subsidiary) may for the first time become exercisable as Incentive Options during any one calendar
year shall not exceed the sum of One Hundred Thousand Dollars ($100,000).

8.

 

To the extent the Employee holds two (2) or more such Options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the exercisability of such
Options as Incentive Options shall be applied on the basis of the order in which such Options are
granted.

          C. 10% Stockholder. If any Employee to whom an Incentive Option is granted is a 10%
Stockholder, then the exercise price per share shall not be less than one hundred ten percent
(110%) of the Fair Market Value per share of Common Stock on the Option grant date, and the Option
term shall not exceed five (5) years measured from the Option grant date.

     III. STOCK APPRECIATION RIGHTS

          Each SAR shall be evidenced by an Award Agreement in the form approved by the Plan
Administrator; provided, however, that the Award Agreement shall comply with the terms
specified below.

          A. Types of SARs Authorized. A SAR may be a Freestanding SAR granted independently of
any Option, a Tandem SAR granted in tandem with all or any portion of a related Option, or a
Limited SAR granted to a Section 16 Insider with respect to an outstanding Option. A Tandem SAR or
a Limited SAR may be granted either concurrently with the grant of the related Option or at any
time thereafter prior to the complete exercise, termination, expiration or cancellation of such
related Option.

          B. Terms and Conditions of Freestanding SARs.

               1. Exercise Price. The exercise price per share subject to a Freestanding SAR shall be fixed
by the Plan Administrator but shall not be less than one hundred percent (100%) of the Fair Market
Value per share of Common Stock on the grant date.

               2. Exercisability and Term of Freestanding SARs. Each Freestanding SAR shall be exercisable
at such time or times, during such period and for such number of shares as shall be determined by
the Plan Administrator and set forth in the Award Agreement evidencing such Award. However, no
Freestanding SAR shall have a term in excess of ten (10) years measured from the grant date.

               3. Exercise of Freestanding SARs and Settlement in Stock. Upon the exercise (or deemed
exercise pursuant to paragraph 5 below) of a Freestanding SAR authorizing settlement solely in
shares of stock, the Participant (or the Participant’s legal representative or other person who
acquired the right to exercise such SAR by reason of the Participant’s death) shall be entitled to
receive payment of an amount for each share with respect to which such SAR is exercised equal to
the excess, if any, of the Fair Market Value of a share of Common Stock on the Exercise Date of
such SAR over the exercise price. Payment of such amount shall be made in whole shares of Common
Stock as soon as practicable following the Exercise Date. The number of shares to be issued shall
be determined on the basis of the Fair Market Value of a share of Common Stock on the Exercise Date
of the Freestanding SAR.

               4. Exercise of Freestanding SARs and Settlement in Cash. Subject to the provisions of Section
I of Article Six with respect to Code Section 409A, the Plan

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Administrator may grant Freestanding SARs that provide for payment in cash. The Exercise
Date(s) applicable to any such SAR shall be established in compliance with the provisions of
Section I of Article Six with respect to Code Section 409A either by the Plan Administrator in
granting such SAR, or, if permitted by the Plan Administrator, by an advance election of the
Participant in a manner complying with the requirements of Code Section 409A. Upon the exercise
(or deemed exercise pursuant to paragraph 5 below) of any such Freestanding SAR, the Participant
(or the Participant’s legal representative or other person who acquired the right to exercise such
SAR by reason of the Participant’s death) shall be entitled to receive payment of an amount for
each share with respect to which such SAR is exercised equal to the excess, if any, of the Fair
Market Value of a share of Common Stock on the Exercise Date of such SAR over the exercise price.
Payment of such amount shall be made in cash as soon as practicable following the Exercise Date.

               5. Deemed Exercise of Freestanding SARs. If, on the date on which a Freestanding SAR would
otherwise terminate or expire, such SAR by its terms remains exercisable immediately prior to such
termination or expiration and, if so exercised, would result in a payment to the holder of such
SAR, then any portion of such SAR which has not previously been exercised shall automatically be
deemed to be exercised as of such date with respect to such portion.

               6. Effect of Termination of Service. Subject to earlier termination of a Freestanding SAR as
otherwise provided herein and unless otherwise provided by the Plan Administrator in the Award
Agreement evidencing such SAR, a Freestanding SAR shall be exercisable after a Participant’s
termination of Service only during the applicable time period determined in accordance with Section
I.C of this Article Two (treating the SAR as if it were an Option) and thereafter shall terminate.

          C. Terms and Conditions of Tandem SARs.

               1. One or more Participants may be granted the right, exercisable upon such terms as the Plan
Administrator may establish, to elect between the exercise of the underlying Option for shares of
Common Stock and the surrender of that Option in exchange for a distribution from the Corporation
in an amount equal to the excess of (a) the Fair Market Value (on the Option surrender date) of the
number of shares in which the Participant is at the time vested under the surrendered Option (or
surrendered portion thereof) over (b) the aggregate exercise price payable for such shares.

               2. No such Option surrender shall be effective unless it is approved by the Plan
Administrator, either at the time of the actual Option surrender or at any earlier time. If the
surrender is so approved, then the distribution to which the Participant shall be entitled shall be
made solely in whole shares of Common Stock valued at Fair Market Value on the Option surrender
date.

               3. If the surrender of an Option is not approved by the Plan Administrator, then the
Participant shall retain whatever rights the Participant had under the surrendered Option (or
surrendered portion thereof) on the Option surrender date and may exercise such rights at any time
prior to the later of (a) five (5) business days after the receipt of

10.

 

the rejection notice or (b) the last day on which the Option is otherwise exercisable in
accordance with the terms of the Award Agreement evidencing such Option, but in no event may such
rights be exercised more than ten (10) years after the Option grant date.

          D. Terms and Conditions of Limited SARs.

               1. Subject to the provisions of Section I of Article Six with respect to Code Section 409A,
one or more Section 16 Insiders may be granted Limited SARs with respect to their outstanding
Options.

               2. Upon the occurrence of a Hostile Take-Over, each individual holding one or more Options
with such a Limited SAR shall have the unconditional right (exercisable for a thirty (30)-day
period following such Hostile Take-Over) to surrender each such Option to the Corporation. In
return for the surrendered Option, the Participant shall receive a cash distribution from the
Corporation in an amount equal to the excess of (A) the Take-Over Price of the shares of Common
Stock at the time subject to such Option (whether or not the Participant is otherwise vested in
those shares) over (B) the aggregate exercise price payable for those shares. Such cash
distribution shall be paid within five (5) days following the Option surrender date.

               3. At the time such Limited SAR is granted, the Plan Administrator shall pre-approve any
subsequent exercise of that right in accordance with the terms of this Paragraph D. Accordingly,
no further approval of the Plan Administrator or the Board shall be required at the time of the
actual Option surrender and cash distribution.

          E. Stockholder Rights. The holder of an SAR shall have no stockholder rights with
respect to the shares subject to the SAR until such person shall have exercised the SAR and become
a holder of record of the shares issued in payment of such SAR.

          F. Limited Transferability of SARs. During the lifetime of the Participant, an SAR
shall be exercisable only by the Participant and shall not be assignable or transferable other than
by will or by the laws of descent and distribution following the Participant’s death. However, a
Tandem SAR related to a Non-Statutory Option or a Freestanding SAR to be settled in shares of
Common Stock may, in connection with the Participant’s estate plan, be assigned in whole or in part
during the Participant’s lifetime to one or more members of the Participant’s immediate family or
to a trust established exclusively for one or more such family members. The assigned portion may
only be exercised by the person or persons who acquire a proprietary interest in the Freestanding
SAR or both the Tandem SAR and related Non-Statutory Option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the SAR immediately
prior to such assignment and shall be set forth in such documents issued to the assignee as the
Plan Administrator may deem appropriate. Notwithstanding the foregoing, the Participant may also
designate one or more persons as the beneficiary or beneficiaries of his or her outstanding SARs
under this Article Two, and those SARs shall, in accordance with such designation, automatically
be transferred to such beneficiary or beneficiaries upon the Participant’s death while holding
those SARs. Such beneficiary or beneficiaries shall take the transferred SARs subject to all the
terms and conditions of the applicable agreement evidencing each such transferred SAR, including
(without

11.

 

limitation) the limited time period during which the SAR may be exercised following the
Participant’s death.

     IV. CORPORATE TRANSACTION/CHANGE IN CONTROL

          A. In the event of any Corporate Transaction, each outstanding Option and SAR shall
automatically accelerate so that each such Award shall, immediately prior to the effective date of
the Corporate Transaction, become fully exercisable for the total number of shares of Common Stock
at the time subject to such Award and may be exercised for any or all of those shares as fully
vested shares of Common Stock. However, an outstanding Option or SAR shall not become exercisable
on such an accelerated basis if and to the extent: (i) such Award is, in connection with the
Corporate Transaction, to be assumed by the successor corporation (or parent thereof) or (ii)
subject to compliance with the provisions of Section I of Article Six with respect to Code Section
409A, such Award is to be replaced with a cash incentive program of the successor corporation which
preserves the spread existing at the time of the Corporate Transaction on any shares for which the
Award is not otherwise at that time exercisable and provides for subsequent payout in accordance
with the same exercise/vesting schedule applicable to those Award shares or (iii) the acceleration
of such Award is subject to other limitations imposed by the Plan Administrator at the time of the
Award grant.

          B. All outstanding repurchase rights shall automatically terminate, and the shares of Common
Stock subject to those terminated rights shall immediately vest in full, in the event of any
Corporate Transaction, except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate Transaction or (ii)
such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the
time the repurchase right is issued.

          C. Immediately following the consummation of the Corporate Transaction, all outstanding
Options and SARs (other than a Limited SAR to the extent provided by Section III.F of this Article
Two) shall terminate and cease to be outstanding, except to the extent assumed by the successor
corporation (or parent thereof).

          D. Each Option and SAR which is assumed in connection with a Corporate Transaction shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and
class of securities which would have been issued to the Participant had such Award been exercised
immediately prior to such Corporate Transaction. If the holders of Common Stock receive cash
consideration in connection with the Corporate Transaction, the assumed Option or SAR may be
adjusted, at the option of the successor corporation, to apply to the number of shares of its
common stock with a fair market value equivalent to the cash consideration paid per share of Common
Stock in such Corporate Transaction. Appropriate adjustments to reflect such Corporate Transaction
shall also be made to (i) the exercise price per share under each outstanding Option and SAR,
provided the aggregate exercise price for such securities shall remain the same, (ii) the
maximum number and/or class of securities available for issuance over the remaining term of the
Plan and (iii) the maximum number and/or class of securities for which any one person may be
granted Awards under the Plan per calendar year and (iv) the maximum number and/or class of
securities by which the share reserve is to increase automatically each calendar year. All such
adjustments shall be made in compliance with the

12.

 

requirements of Code Sections 409A, 422 and 424 and any related guidance issued by the U.S.
Treasury Department, if applicable.

          E. The Plan Administrator shall have the discretionary authority to structure one or more
outstanding Options or SARs under the Discretionary Option/SAR Grant Program so that those Awards
shall, immediately prior to the effective date of such Corporate Transaction, become fully
exercisable for the total number of shares of Common Stock at the time subject to those Awards and
may be exercised for any or all of those shares as fully vested shares of Common Stock, whether or
not those Awards are to be assumed in the Corporate Transaction. In addition, the Plan
Administrator shall have the discretionary authority to structure one or more of the Corporation’s
repurchase rights under the Discretionary Option/SAR Grant Program so that those rights shall not
be assignable in connection with such Corporate Transaction and shall accordingly terminate upon
the consummation of such Corporate Transaction, and the shares subject to those terminated rights
shall thereupon vest in full.

          F. The Plan Administrator shall have full power and authority to structure one or more
outstanding Options or SARs under the Discretionary Option/SAR Grant Program so that those Awards
shall become fully exercisable for the total number of shares of Common Stock at the time subject
to those Awards in the event the Participant’s Service is subsequently terminated by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18) months) following
the effective date of any Corporate Transaction in which those Awards are assumed and do not
otherwise accelerate. Any Options or SARs so accelerated shall remain exercisable for fully vested
shares until the earlier of (i) the expiration of the Award term or (ii) the expiration of
the one (1) year period measured from the effective date of the Involuntary Termination. In
addition, the Plan Administrator may structure one or more of the Corporation’s repurchase rights
so that those rights shall immediately terminate with respect to any shares held by the Participant
at the time of his or her Involuntary Termination, and the shares subject to those terminated
repurchase rights shall accordingly vest in full at that time.

          G. The Plan Administrator shall have the discretionary authority to structure one or more
outstanding Options or SARs under the Discretionary Option/SAR Grant Program so that those Awards
shall, immediately prior to the effective date of a Change in Control, become fully exercisable for
the total number of shares of Common Stock at the time subject to those Awards and may be exercised
for any or all of those shares as fully vested shares of Common Stock. In addition, the Plan
Administrator shall have the discretionary authority to structure one or more of the Corporation’s
repurchase rights under the Discretionary Option/SAR Grant Program so that those rights shall
terminate automatically upon the consummation of such Change in Control, and the shares subject to
those terminated rights shall thereupon vest in full. Alternatively, the Plan Administrator may
condition the automatic acceleration of one or more outstanding Options or SARs under the
Discretionary Option/SAR Grant Program and the termination of one or more of the Corporation’s
outstanding repurchase rights under such program upon the subsequent termination of the
Participant’s Service by reason of an Involuntary Termination within a designated period (not to
exceed eighteen (18) months) following the effective date of such Change in Control. Each Option
or SAR so accelerated shall remain exercisable for fully vested shares until the earlier of
(i) the expiration of the Award term or (ii) the expiration of the one (1) year period measured
from the effective date of Participant’s cessation of Service.

13.

 

          H. The portion of any Incentive Option accelerated in connection with a Corporate Transaction
or Change in Control shall remain exercisable as an Incentive Option only to the extent the
applicable One Hundred Thousand Dollar ($100,000) limitation is not exceeded. To the extent such
dollar limitation is exceeded, the accelerated portion of such Option shall be exercisable as a
Nonstatutory Option under the Federal tax laws.

          I. The outstanding Options and SARs shall in no way affect the right of the Corporation to
adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

     V. PROHIBITION OF OPTION OR SAR REPRICING WITHOUT STOCKHOLDER APPROVAL

          Without the affirmative vote of holders of a majority of the shares of Common Stock cast in
person or by proxy at a meeting of the stockholders of the Corporation at which a quorum
representing a majority of all outstanding shares of Common Stock is present or represented by
proxy, the Plan Administrator shall not approve a program providing for either (a) the cancellation
of outstanding Options or SARs and the grant in substitution therefore of new Options or SARs
having a lower exercise price or (b) the amendment of outstanding Options or SARs to reduce the
exercise price thereof. This paragraph shall not be construed to apply to “issuing or assuming a
stock option in a transaction to which section 424(a) applies,” within the meaning of Code Section
424.

14.

 

ARTICLE THREE

RESTRICTED STOCK/RESTRICTED STOCK UNIT PROGRAM

     I. RESTRICTED STOCK AWARDS

          Shares of Common Stock may be issued under the Restricted Stock/Restricted Stock Unit Program
through direct and immediate issuances without any intervening Option or SAR Award. Restricted
Stock Awards shall be evidenced by Award Agreements specifying whether the Award is a Restricted
Stock Bonus or a Restricted Stock Purchase Right and the number of shares of Common Stock subject
to the Award, in such form as the Plan Administrator shall from time to time establish. Award
Agreements evidencing Restricted Stock Awards may incorporate all or any of the terms of the Plan
by reference and shall comply with and be subject to the following terms and conditions:

          A. Types of Restricted Stock Awards Authorized. Restricted Stock Awards may be in the
form of either a Restricted Stock Bonus or a Restricted Stock Purchase Right. Restricted Stock
Awards may be granted upon such conditions as the Plan Administrator shall determine, including,
without limitation, upon the attainment of one or more Performance Goals described in Section I.D
of Article Four. If either the grant or vesting of a Restricted Stock Award is to be contingent
upon the attainment of one or more Performance Goals and is to result in the payment of
Performance-Based Compensation, the Plan Administrator shall follow procedures substantially
equivalent to those set forth in Sections I.C through I.E.1 of Article Four.

          B. Purchase Price. The purchase price for shares of Common Stock issuable under each
Restricted Stock Purchase Right shall be established by the Plan Administrator in its discretion.
No monetary payment (other than applicable tax withholding) shall be required as a condition of
receiving shares of Common Stock pursuant to a Restricted Stock Bonus, the consideration for which
shall be services actually rendered to the Corporation (or any Parent or Subsidiary) or for its
benefit. Notwithstanding the foregoing, if required by applicable state corporations law, the
Participant shall furnish consideration in the form of cash or past services rendered to the
Corporation (or any Parent or Subsidiary) or for its benefit having a value not less than the par
value of the shares of Common Stock subject to such Restricted Stock Award.

          C. Purchase Period. A Restricted Stock Purchase Right shall be exercisable within a
period established by the Plan Administrator, which shall in no event exceed thirty (30) days from
the effective date of the grant of the Restricted Stock Purchase Right.

          D. Payment of Purchase Price. Payment of the purchase price for the number of shares
of Common Stock being purchased pursuant to any Restricted Stock Purchase Right shall be made (a)
in cash or cash equivalent or by check made payable to the Corporation or (b) by past services
rendered to the Corporation (or any Parent or Subsidiary) or for its benefit.

15.

 

          E. Vesting Provisions.

               1. Shares of Common Stock issued pursuant to a Restricted Stock Award may, in the discretion
of the Plan Administrator, be fully and immediately vested upon
issuance or may vest in one or more installments over the Participant’s period of Service or
upon attainment of specified performance objectives, including, without limitation, Performance
Goals described in Section I.D of Article Four. The elements of the vesting schedule applicable to
any unvested shares of Common Stock issued pursuant to a Restricted Stock Award shall be determined
by the Plan Administrator and incorporated into the Award Agreement.

               2. Any new, substituted or additional securities or other property (including money paid other
than as a regular cash dividend) which the Participant may have the right to receive with respect
to the Participant’s unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation’s receipt of consideration shall be
issued subject to (i) the same vesting requirements applicable to the Participant’s unvested shares
of Common Stock and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

               3. The Participant shall have full stockholder rights with respect to any shares of Common
Stock issued to the Participant pursuant to a Restricted Stock Award, whether or not the
Participant’s interest in those shares is vested. Accordingly, the Participant shall have the
right to vote such shares and to receive any regular cash dividends paid on such shares.

               4. Should the Participant cease to remain in Service while holding one or more unvested shares
of Common Stock issued pursuant to a Restricted Stock Award or should the performance objectives or
Performance Goals not be attained with respect to one or more such unvested shares of Common Stock,
then those shares shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those shares. To the extent
the surrendered shares were previously issued to the Participant for consideration paid in cash or
cash equivalent, the Corporation shall repay to the Participant the cash consideration paid for the
surrendered shares.

               5. The Plan Administrator may in its discretion waive the surrender and cancellation of one or
more unvested shares of Common Stock which would otherwise occur upon the cessation of the
Participant’s Service or the non-attainment of the performance objectives or Performance Goals
applicable to those shares. Such waiver shall result in the immediate vesting of the Participant’s
interest in the shares of Common Stock as to which the waiver applies. Such waiver may be effected
at any time, whether before or after the Participant’s cessation of Service or the attainment or
non-attainment of the applicable performance objectives or Performance Goals.

     II. RESTRICTED STOCK UNIT AWARDS

          Subject to the provisions of Section I of Article Six with respect to Code Section 409A,
shares of Common Stock may be issued under the Restricted Stock/Restricted Stock Unit

16.

 

Program on a
deferred basis through the grant of Restricted Stock Units. Restricted Stock Unit Awards shall be
evidenced by Award Agreements specifying the number of shares of Common Stock subject to the Award,
in such form as the Plan Administrator shall from time to time establish. Award Agreements
evidencing Restricted Stock Unit Awards may incorporate all or
any of the terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:

          A. Grant of Restricted Stock Unit Awards. Restricted Stock Unit Awards may be granted
upon such conditions as the Plan Administrator shall determine, including, without limitation, upon
the attainment of one or more Performance Goals described in Section I.D of Article Four. If
either the grant or vesting of a Restricted Stock Unit Award is to be contingent upon the
attainment of one or more Performance Goals, the Plan Administrator shall follow procedures
substantially equivalent to those set forth in Sections I.C through I.E.1 of Article Four.

          B. Purchase Price. No monetary payment (other than applicable tax withholding, if
any) shall be required as a condition of receiving a Restricted Stock Unit Award, the consideration
for which shall be services actually rendered to the Corporation (or any Parent or Subsidiary) or
for its benefit. Notwithstanding the foregoing, if required by applicable state corporations law,
the Participant shall furnish consideration in the form of cash or past services rendered to the
Corporation (or any Parent or Subsidiary) or for its benefit having a value not less than the par
value of the shares of Common Stock issued upon settlement of the Restricted Stock Unit Award.

          C. Vesting Provisions. Restricted Stock Units may or may not be made subject to
vesting conditions based upon the satisfaction of such Service requirements, conditions,
restrictions or performance objectives , including, without limitation, Performance Goals as
described in Section I.D of Article Four, as shall be established by the Plan Administrator and set
forth in the Award Agreement evidencing such Award.

          D. Voting Rights, Dividend Equivalent Rights and Distributions. Participants shall
have no voting rights with respect to shares of Common Stock represented by Restricted Stock Units
until the date of the issuance of such shares (as evidenced by the appropriate entry on the books
of the Corporation or of a duly authorized transfer agent of the Corporation). However, the Plan
Administrator, in its discretion, may grant Dividend Equivalent Rights pursuant to the Award
Agreement evidencing any Restricted Stock Unit Award with respect to the payment of cash dividends
on Common Stock paid prior to the date on which Restricted Stock Units held by such Participant are
settled. A Participant granted Dividend Equivalent Rights shall be credited with additional whole
Restricted Stock Units as of the date of payment of such cash dividends on Common Stock. The
number of additional Restricted Stock Units (rounded to the nearest whole number) to be so credited
shall be determined by dividing (a) the amount of cash dividends paid on such date with respect to
the number of shares of Common Stock represented by the Restricted Stock Units previously credited
to the Participant by (b) the Fair Market Value per share of Common Stock on such date. Such
additional Restricted Stock Units shall be subject to the same terms and conditions and shall be
settled in the same manner and at the same time (or as soon thereafter as practicable) as the
Restricted Stock Units originally subject to the Restricted Stock Unit Award. In the event of a
dividend or

17.

 

distribution paid in shares of Common Stock or any other adjustment made upon a change
to the Common Stock as described in Section V.E of Article One, appropriate adjustments shall be
made in the Participant’s Restricted Stock Unit Award so that it represents the right to receive
upon settlement any and all new, substituted or additional securities or other property (other than
normal cash dividends) to which the Participant would entitled by reason of the shares of
Common Stock issuable upon settlement of the Award, and all such new, substituted or additional
securities or other property shall be immediately subject to the same vesting conditions as are
applicable to the Award.

          E. Effect of Termination of Service. Unless otherwise provided by the Plan
Administrator and set forth in the Award Agreement evidencing a Restricted Stock Unit Award, if a
Participant’s Service terminates for any reason, whether voluntary or involuntary (including the
Participant’s death or disability), then the Participant shall forfeit to the Corporation any
Restricted Stock Units pursuant to the Award which remain subject to vesting conditions as of the
date of the Participant’s termination of Service.

          F. Settlement of Restricted Stock Unit Awards. The Corporation shall issue to a
Participant on the date on which Restricted Stock Units subject to the Participant’s Restricted
Stock Unit Award vest or, subject to the provisions of Section I of Article Six with respect to
Code Section 409A, on such other date determined by the Plan Administrator, in its discretion, and
set forth in the Award Agreement one (1) share of Common Stock (and/or any other new, substituted
or additional securities or other property pursuant to an adjustment described in Section II.D
above) for each Restricted Stock Unit then becoming vested or otherwise to be settled on such date,
subject to the withholding of applicable taxes. If permitted by the Plan Administrator, and
subject to the provisions of Section I of Article Six with respect to Code Section 409A, the
Participant may elect to defer receipt of all or any portion of the shares of Common Stock or other
property otherwise issuable to the Participant pursuant to this Section, and such deferred issuance
date(s) elected by the Participant shall be set forth in the Award Agreement. Notwithstanding the
foregoing, the Plan Administrator, in its discretion, may provide for settlement of any Restricted
Stock Unit Award by payment to the Participant in cash of an amount equal to the Fair Market Value
on the payment date of the shares of Common Stock or other property otherwise issuable to the
Participant pursuant to this Section.

          G. Nontransferability of Restricted Stock Unit Awards. Prior to the settlement of a
Restricted Stock Unit Award, the Award shall not be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors
of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of
descent and distribution. All rights with respect to a Restricted Stock Unit Award granted to a
Participant hereunder shall be exercisable during his or her lifetime only by such Participant or
the Participant’s guardian or legal representative.

     III. CORPORATE TRANSACTION/CHANGE IN CONTROL

          A. All of the Corporation’s outstanding repurchase rights under Restricted Stock Awards shall
terminate automatically, and all the shares of Common Stock subject to those terminated rights and
outstanding Restricted Stock Unit Awards shall immediately vest in full, in the event of any
Corporate Transaction, except to the extent (i) those repurchase rights are to be

18.

 

assigned to the
successor corporation (or parent thereof) in connection with such Corporate Transaction, (ii)
substantially equivalent rights for stock of the successor corporation (or parent thereof) are
substituted for outstanding Restricted Stock Units in connection with such Corporate
Transaction or (iii) such accelerated vesting is precluded by other limitations imposed in the
Award Agreement.

          B. The Plan Administrator shall have the discretionary authority to structure one or more of
the Corporation’s repurchase rights under Restricted Stock Awards so that those rights shall
automatically terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights or to Restricted Stock Unit Awards shall immediately vest, in the event the
Participant’s Service should subsequently terminate by reason of an Involuntary Termination within
a designated period (not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those repurchase rights are assigned to the successor corporation
(or parent thereof) or substantially equivalent rights for stock of the successor corporation (or
parent thereof) are substituted for outstanding Restricted Stock Units in connection with such
Corporate Transaction.

          C. The Plan Administrator shall also have the discretionary authority to structure one or more
of the Corporation’s repurchase rights under Restricted Stock Awards so that those rights shall
automatically terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights or to Restricted Stock Unit Awards shall immediately vest, in the event the
Participant’s Service should subsequently terminate by reason of an Involuntary Termination within
a designated period (not to exceed eighteen (18) months) following the effective date of any Change
in Control.

     IV. SHARE ESCROW/LEGENDS

          Unvested shares may, in the Plan Administrator’s discretion, be held in escrow by the
Corporation until the Participant’s interest in such shares vests or may be issued directly to the
Participant with restrictive legends on the certificates evidencing those unvested shares.

19.

 

ARTICLE FOUR

PERFORMANCE AWARD PROGRAM

     I. TERMS OF PERFORMANCE AWARDS

          Subject to the provisions of Section I of Article Six with respect to Code Section 409A,
Performance Awards may be granted to Participants in such amount and upon such terms as shall be
determined by the Plan Administrator, in its sole discretion. Performance Awards shall be
evidenced by Award Agreements in such form as the Plan Administrator shall from time to time
establish. Award Agreements evidencing Performance Awards may incorporate all or any of the terms
of the Plan by reference and shall comply with and be subject to the following terms and
conditions:

          A. Types of Performance Awards Authorized. Performance Awards may be in the form of
either Performance Shares or Performance Units. Each Award Agreement evidencing a Performance
Award shall specify the number of Performance Shares or Performance Units subject thereto, the
Performance Award Formula, the Performance Goal(s) and Performance Period applicable to the Award,
and the other terms, conditions and restrictions of the Award.

          B. Initial Value of Performance Shares and Performance Units. Unless otherwise
provided by the Plan Administrator in granting a Performance Award, each Performance Share shall
have an initial value equal to the Fair Market Value of one (1) share of Stock, subject to
adjustment as provided in Section V.E of Article One, on the effective date of grant of the
Performance Share. Each Performance Unit shall have an initial monetary value determined by the
Plan Administrator at the time of grant. The final value payable to the Participant in settlement
of a Performance Award determined on the basis of the applicable Performance Award Formula will
depend on the extent to which Performance Goals established by the Plan Administrator are attained
within the applicable Performance Period established by the Plan Administrator.

          C. Establishment of Performance Period, Performance Goals and Performance Award
Formula. In granting each Performance Award, the Plan Administrator shall establish in writing
the applicable Performance Period, Performance Award Formula and one or more Performance Goals
which, when measured at the end of the Performance Period, shall determine on the basis of the
Performance Award Formula the final value of the Performance Award to be paid to the Participant.
Unless otherwise permitted in compliance with the requirements under Code Section 162(m), with
respect to each Performance Award intended to result in the payment of Performance-Based
Compensation, the Plan Administrator shall establish the Performance Goal(s) and the Performance
Award Formula applicable to the Performance Award no later than the earlier of (a) the date ninety
(90) days after the commencement of the applicable Performance Period or (b) the date on which 25%
of the Performance Period has elapsed, and, in any event, at a time when the outcome of the
Performance Goals remains substantially uncertain. Once established, the Performance Goals and
Performance Award Formula applicable to a Performance Award intended to result in the

20.

 

payment of Performance-Based Compensation shall not be changed during the Performance Period.
The Corporation shall notify each Participant granted a Performance Award of the terms of such
Award, including the Performance Period, Performance Goal(s) and Performance Award Formula.

          D. Measurement of Performance Goals. Performance Goals shall be established by the
Plan Administrator on the basis of targets to be attained (“Performance Targets”) with respect to
one or more measures of business or financial performance (each, a “Performance Measure”), subject
to the following:

               1. Performance Measures. Performance Measures shall have the same meanings as used in the
Corporation’s financial statements, or, if such terms are not used in the Corporation’s financial
statements, they shall have the meaning applied pursuant to generally accepted accounting
principles, or as used generally in the Corporation’s industry. Performance Measures shall be
calculated with respect to the Corporation and each Subsidiary consolidated therewith for financial
reporting purposes or such division or other business unit as may be selected by the Plan
Administrator. For purposes of the Plan, the Performance Measures applicable to a Performance
Award shall be calculated in accordance with generally accepted accounting principles, but prior to
the accrual or payment of any Performance Award for the same Performance Period and excluding the
effect (whether positive or negative) of any change in accounting standards or any extraordinary,
unusual or nonrecurring item, as determined by the Plan Administrator, occurring after the
establishment of the Performance Goals applicable to the Performance Award. Each such adjustment,
if any, shall be made solely for the purpose of providing a consistent basis from period to period
for the calculation of Performance Measures in order to prevent the dilution or enlargement of the
Participant’s rights with respect to a Performance Award. Performance Measures may be one or more
of the following, as determined by the Plan Administrator:

                    (i) revenue;

                    (ii) sales;

                    (iii) expenses;

                    (iv) operating income;

                    (v) gross margin;

                    (vi) operating margin;

                    (vii) earnings before any one or more of: stock-based compensation expense,
interest, taxes and depreciation, and amortization;

                    (viii) pre-tax profit;

                    (ix) net operating income;

                    (x) net income;

21.

 

                    (xi) economic value added;

                    (xii) free cash flow;

                    (xiii) operating cash flow;

                    (xiv) the market price of the Common Stock;

                    (xv) earnings per share;

                    (xvi) return on stockholder equity;

                    (xvii) return on capital;

                    (xviii) return on assets;

                    (xix) return on investment;

                    (xx) balance of cash, cash equivalents and marketable securities;

                    (xxi) market share;

                    (xxii) number of customers;

                    (xxiii) customer satisfaction;

                    (xxiv) product development; and

                    (xxv) completion of a joint venture or other corporate transaction.

               2. Performance Targets. Performance Targets may include a minimum, maximum, target level and
intermediate levels of performance, with the final value of a Performance Award determined under
the applicable Performance Award Formula by the level attained during the applicable Performance
Period. A Performance Target may be stated as an absolute value or as a value determined relative
to an index, budget or other standard selected by the Plan Administrator.

          E. Settlement of Performance Awards.

               1. Determination of Final Value. As soon as practicable following the completion of the
Performance Period applicable to a Performance Award, the Plan Administrator shall certify in
writing the extent to which the applicable Performance Goals have been attained and the resulting
final value of the Award earned by the Participant and to be paid upon its settlement in accordance
with the applicable Performance Award Formula.

               2. Discretionary Adjustment of Award Formula. In its discretion, the Plan Administrator may,
either at the time it grants a Performance Award or at any time

22.

 

thereafter, provide for the positive or negative adjustment of the Performance Award Formula
applicable to a Performance Award granted to any Participant who is not a Covered Employee to
reflect such Participant’s individual performance in his or her position with the Corporation or
such other factors as the Plan Administrator may determine. If permitted under a Covered
Employee’s Award Agreement, the Plan Administrator shall have the discretion, on the basis of such
criteria as may be established by the Plan Administrator, to reduce some or all of the value of the
Performance Award that would otherwise be paid to the Covered Employee upon its settlement
notwithstanding the attainment of any Performance Goal and the resulting value of the Performance
Award determined in accordance with the Performance Award Formula. No such reduction may result in
an increase in the amount payable upon settlement of another Participant’s Performance Award.

               3. Effect of Leaves of Absence. Unless otherwise required by law, payment of the final value,
if any, of a Performance Award held by a Participant who has taken in excess of thirty (30) days in
leaves of absence during a Performance Period shall be prorated on the basis of the number of days
of the Participant’s Service during the Performance Period during which the Participant was not on
a leave of absence.

               4. Notice to Participants. As soon as practicable following the Plan Administrator’s
determination and certification in accordance with paragraphs 1 and 2 above, the Corporation shall
notify each Participant of the determination of the Plan Administrator.

               5. Payment in Settlement of Performance Awards. Subject to the provisions of Section I of
Article Six with respect to Code Section 409A, as soon as practicable following the Plan
Administrator’s determination and certification in accordance with paragraphs 1 and 2 above or on
such other date(s) determined by the Plan Administrator, in its discretion, and set forth in the
Award Agreement, payment shall be made to each eligible Participant of the final value of the
Participant’s Performance Award. Payment of such amount shall be made in the form of cash, Shares,
or a combination thereof as determined by the Plan Administrator. Unless otherwise provided in the
Award Agreement evidencing a Performance Award, payment shall be made in a lump sum. If permitted
by the Plan Administrator, and subject to the provisions of Section I of Article Six with respect
to Code Section 409A, the Participant may elect to defer receipt of all or any portion of the
payment to be made to the Participant pursuant to this paragraph, and such deferred payment date(s)
elected by the Participant shall be set forth in the Award Agreement.

               6. Provisions Applicable to Payment in Shares. If payment is to be made in shares of Common
Stock, the number of such shares shall be determined by dividing the final value of the Performance
Award by the value of a share of Common Stock determined by the method specified in the Award
Agreement. Such methods may include, without limitation, the closing market price on a specified
date (such as the settlement date) or an average of market prices over a series of trading days.
Shares of Common Stock issued in payment of any Performance Award may be fully vested and freely
transferable shares or may be subject to vesting conditions as provided in Section I.E.1 of Article
Three.

          F. Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall
have no voting rights with respect to shares of Common Stock represented by

23.

 

Performance Share Awards until the date of the issuance of such shares, if any (as evidenced
by the appropriate entry on the books of the Corporation or of a duly authorized transfer agent of
the Corporation). However, the Plan Administrator, in its discretion, may grant Dividend
Equivalent Rights pursuant to the Award Agreement evidencing any Performance Share Award with
respect to the payment of cash dividends on Common Stock paid prior to the date on which the
Performance Shares are settled or forfeited. A Participant granted Dividend Equivalent Rights
shall be credited with additional whole Performance Shares as of the date of payment of such cash
dividends on Common Stock. The number of additional Performance Shares (rounded to the nearest
whole number) to be so credited shall be determined by dividing (a) the amount of cash dividends
paid on such date with respect to the number of shares of Common Stock represented by the
Performance Shares previously credited to the Participant by (b) the Fair Market Value per share of
Common Stock on such date. Such additional Performance Shares shall be subject to the same terms,
conditions and restrictions and shall be settled in the same manner and at the same time (or as
soon thereafter as practicable) as the shares originally subject to the Award. Dividend Equivalent
Rights shall not be granted with respect to Performance Units. In the event of a dividend or
distribution paid in shares of Common Stock or any other adjustment made upon a change to the
Common Stock as described in Section V.E of Article One, appropriate adjustments shall be made in
the Participant’s Performance Share Award so that it represents the right to receive upon
settlement any and all new, substituted or additional securities or other property (other than
normal cash dividends) to which the Participant would entitled by reason of the shares of Common
Stock issuable upon settlement of the Performance Share Award, and all such new, substituted or
additional securities or other property shall be immediately subject to the same Performance Goals
as are applicable to the Award.

          G. Effect of Termination of Service. Unless otherwise provided by the Plan
Administrator and set forth in the Award Agreement evidencing a Performance Award, if a
Participant’s Service terminates for any reason, whether voluntary or involuntary (including the
Participant’s death or disability) before completion of the Performance Period applicable to the
Performance Award, then the Participant shall forfeit the Award in its entirety.

          H. Nontransferability of Performance Awards. Prior to settlement in accordance with
the provisions of the Plan, no Performance Award shall be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors
of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of
descent and distribution. All rights with respect to a Performance Award granted to a Participant
hereunder shall be exercisable during his or her lifetime only by such Participant or the
Participant’s guardian or legal representative.

     II. CORPORATE TRANSACTION/CHANGE IN CONTROL

          The Plan Administrator may, in its discretion, provide in any Award Agreement evidencing a
Performance Award that, in the event of a Corporate Transaction or Change in Control, the
Performance Award held by a Participant whose Service has not terminated prior to the Change in
Control or whose Service terminated by reason of the Participant’s death or Permanent Disability
shall become vested and payable effective as of the date of the Corporate Transaction or Change in
Control to such extent as specified in such Award Agreement.

24.

 

ARTICLE FIVE

AUTOMATIC OPTION GRANT PROGRAM

          The provisions of the Automatic Option Grant Program have been revised as of February 8, 2002,
subject to approval by the Corporation’s stockholders at the 2002 Annual Stockholders Meeting.

     I. OPTION TERMS

          A. Grant Dates. Option grants shall be made on the dates specified below:

               1. Each individual who is first elected or appointed as a non-employee Board member at any
time on or after the 2002 Annual Stockholders Meeting shall automatically be granted, on the date
of such initial election or appointment, a Non-Statutory Option to purchase 30,000 shares of Common
Stock, provided that individual has not previously been in the employ of the Corporation or any
Parent or Subsidiary.

               2. On the date of each Annual Stockholders Meeting, beginning with the 2002 Annual
Stockholders Meeting, each individual who is to continue to serve as a non-employee Board member,
whether or not that individual is standing for re-election to the Board at that particular Annual
Stockholders Meeting, shall automatically be granted a Non-Statutory Option to purchase 15,000
shares of Common Stock. There shall be no limit on the number of such annual automatic Option
grants any one non-employee Board member may receive over his or her period of Board service, and a
non-employee Board member who has previously been in the employ of the Corporation (or any Parent
or Subsidiary) or who has otherwise received one or more stock Option grants from the Corporation
shall be eligible to receive one or more such annual automatic Option grants over his or her period
of continued Board service.

               3. Stockholder approval of the amendment contained in this 2002 Restatement at the 2002 Annual
Stockholders Meeting shall constitute pre-approval of each Option granted on or after that Annual
Meeting pursuant to the express terms of this Automatic Option Grant Program on the basis of the
amendments to this program effected by such Restatement and the subsequent exercise of that Option
in accordance with its terms.

          B. Exercise Price.

               1. The exercise price per share shall be equal to one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the Option grant date.

               2. The exercise price shall be payable in one or more of the alternative forms authorized
under the Discretionary Option/SAR Grant Program. Except to the extent the sale and remittance
procedure specified thereunder is utilized, payment of the exercise price for the purchased shares
must be made on the Exercise Date.

          C. Option Term. Each Option shall have a term of ten (10) years measured from the
Option grant date.

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          D. Exercise and Vesting of Options. Each Option shall be immediately exercisable for
any or all of the Option shares. However, any shares purchased under the Option shall be subject
to repurchase by the Corporation, at the exercise price paid per share, upon the Participant’s
cessation of Board service prior to vesting in those shares. The shares subject to each initial
automatic Option grant shall vest, and the Corporation’s repurchase right shall lapse, in a series
of six (6) successive equal semi-annual installments upon the Participant’s completion of each six
(6)-month period of service as a Board member over the thirty-six (36)-month period measured from
the Option grant date. The shares subject to each annual automatic Option grant shall vest, and
the Corporation’s repurchase right shall lapse, in a series of two (2) successive equal annual
installments upon the Participant’s completion of each twelve (12)-month period of service as a
Board member over the twenty-four (24)-month period measured from the Option grant date.

          E. Limited Transferability of Options. Each Option under this Article Five may, in
connection with the Participant’s estate plan, be assigned in whole or in part during the
Participant’s lifetime to one or more members of the Participant’s immediate family or to a trust
established exclusively for one or more such family members. The assigned portion may only be
exercised by the person or persons who acquire a proprietary interest in the Option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as those in effect for
the Option immediately prior to such assignment and shall be set forth in such documents issued to
the assignee as the Plan Administrator may deem appropriate. The Participant may also designate
one or more persons as the beneficiary or beneficiaries of his or her outstanding Options under
this Article Five, and those Options shall, in accordance with such designation, automatically be
transferred to such beneficiary or beneficiaries upon the Participant’s death while holding those
Options. Such beneficiary or beneficiaries shall take the transferred Options subject to all the
terms and conditions of the applicable agreement evidencing each such transferred Option, including
(without limitation) the limited time period during which the Option may be exercised following the
Participant’s death.

          F. Termination of Board Service. The following provisions shall govern the exercise
of any Options held by the Participant at the time the Participant ceases to serve as a Board
member:

                    (i) The Participant (or, in the event of Participant’s death, the personal
representative of the Participant’s estate or the person or persons to whom the
Option is transferred pursuant to the Participant’s will or in accordance with the
laws of descent and distribution or by the designated beneficiary or beneficiaries
of such Option) shall have a twelve (12)-month period following the date of such
cessation of Board service in which to exercise each such Option.

                    (ii) During the twelve (12)-month exercise period, the Option may not be
exercised in the aggregate for more than the number of vested shares of Common Stock
for which the Option is exercisable at the time of the Participant’s cessation of
Board service.

26.

 

                    (iii) Should the Participant cease to serve as a Board member by reason of
death or Permanent Disability, then all shares at the time subject to the Option
shall immediately vest so that such Option may, during the twelve (12)-month
exercise period following such cessation of Board service, be exercised for all or
any portion of those shares as fully-vested shares of Common Stock.

                    (iv) In no event shall the Option remain exercisable after the expiration of
the Option term. Upon the expiration of the twelve (12)-month exercise period or
(if earlier) upon the expiration of the Option term, the Option shall terminate and
cease to be outstanding for any vested shares for which the Option has not been
exercised. However, the Option shall, immediately upon the Participant’s cessation
of Board service for any reason other than death or Permanent Disability, terminate
and cease to be outstanding to the extent the Option is not otherwise at that time
exercisable for vested shares.

     II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

          A. In the event of any Corporate Transaction while the Participant remains in Service, the
shares of Common Stock at the time subject to each outstanding Option held by such Participant
under this Automatic Option Grant Program but not otherwise vested shall automatically vest in full
so that each such Option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for all of the shares of Common Stock at the time subject to
such Option and may be exercised for all or any portion of those shares as fully-vested shares of
Common Stock. Immediately following the consummation of the Corporate Transaction, each automatic
Option grant shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof).

          B. In connection with any Change in Control while the Participant remains in Service, the
shares of Common Stock at the time subject to each outstanding Option held by such Participant
under this Automatic Option Grant Program but not otherwise vested shall automatically vest in full
so that each such Option shall, immediately prior to the effective date of the Change in Control,
become fully exercisable for all of the shares of Common Stock at the time subject to such Option
and may be exercised for all or any portion of those shares as fully-vested shares of Common Stock.
Each such Option shall remain exercisable for such fully-vested Option shares until the expiration
or sooner termination of the Option term or the surrender of the Option in connection with a
Hostile Take-Over.

          C. All outstanding repurchase rights under this Automatic Option Grant Program shall
automatically terminate, and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction or Change in Control.

          D. Subject to the provisions of Section I of Article Six with respect to Code Section 409A,
upon the occurrence of a Hostile Take-Over while the Participant remains in Service, the
Participant shall have a thirty (30)-day period in which to surrender to the

27.

 

Corporation each of his or her outstanding Options under this Automatic Option Grant Program.
The Participant shall in return be entitled to a cash distribution from the Corporation in an
amount equal to the excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered Option (whether or not the Participant is otherwise at the time vested
in those shares) over (ii) the aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the surrender of the Option to the
Corporation. No approval or consent of the Board or any Plan Administrator shall be required at
the time of the actual Option surrender and cash distribution.

          E. Each Option which is assumed in connection with a Corporate Transaction shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and
class of securities which would have been issuable to the Participant in consummation of such
Corporate Transaction had the Option been exercised immediately prior to such Corporate
Transaction. If the holders of Common Stock receive cash consideration in connection with the
Corporate Transaction, the assumed Option may be adjusted, at the Option of the successor
corporation, to apply to the number of shares of its common stock with a fair market value
equivalent to the cash consideration paid per share of Common Stock in such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per share under each
outstanding Option, provided the aggregate exercise price payable for such securities shall
remain the same. All such adjustments shall be made in compliance with the requirements of Code
Section 409A, if applicable.

          F. The grant of Options under the Automatic Option Grant Program shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.

     III. REMAINING TERMS

          The remaining terms of each Option granted under the Automatic Option Grant Program shall be
the same as the terms in effect for Option grants made under the Discretionary Option/SAR Grant
Program.

28.

 

ARTICLE SIX

MISCELLANEOUS

     I. COMPLIANCE WITH CODE SECTION 409A

          A. Awards Subject to Code Section 409A. The provisions of this Section I shall apply
to any Award or portion thereof that is or becomes subject to Code Section 409A. Awards subject to
Code Section 409A include, without limitation:

               1. Any Non-Statutory Option or SAR that permits the deferral of compensation other than the
deferral of recognition of income until the exercise of the Award.

               2. Any Restricted Stock Unit Award or Performance Award that either (a) provides by its terms
for settlement of all or any portion of the Award on one or more dates following the Short-Term
Deferral Period (as defined below) or (b) permits or requires the Participant to elect one or more
dates on which the Award will be settled.

          Subject to any applicable U.S. Treasury Regulations promulgated pursuant to Code Section 409A
or other applicable guidance, the term “Short-Term Deferral Period” means the period ending on the
later of (i) the date that is two and one-half months from the end of the taxable year of the
Corporation in which the applicable portion of the Award is no longer subject to a substantial risk
of forfeiture or (ii) the date that is two and one-half months from the end of the Participant’s
taxable year in which the applicable portion of the Award is no longer subject to a substantial
risk of forfeiture. For this purpose, the term “substantial risk of forfeiture” shall have the
meaning set forth in any applicable U.S. Treasury Regulations promulgated pursuant to Code Section
409A or other applicable guidance.

          B. Deferral and/or Distribution Elections. Except as otherwise permitted or required
by Section 409A or any applicable U.S. Treasury Regulations promulgated pursuant to Code Section
409A or other applicable guidance, the following rules shall apply to any deferral and/or
distribution elections (each, an “Election”) that may be permitted or required by the Plan
Administrator pursuant to an Award subject to Code Section 409A:

               1. All Elections must be in writing and specify the amount of the distribution in settlement
of an Award being deferred, as well as the time and form of distribution as permitted by this Plan.

               2. All Elections shall be made by the end of the Participant’s taxable year prior to the year
in which services commence for which an Award may be granted to such Participant; provided,
however, that if the Award qualifies as “performance-based compensation” for purposes of Code
Section 409A and is based on services performed over a period of at least twelve (12) months, then
the Election may be made no later than six (6) months prior to the end of such period.

29.

 

               3. Elections shall continue in effect until a written election to revoke or change such
Election is received by the Corporation, except that a written election to revoke or change such
Election must be made prior to the last day for making an Election determined in accordance with
paragraph 2 above or as permitted by Section I.C below.

          C. Subsequent Elections. Any Award subject to Code Section 409A which permits a
subsequent Election to delay the distribution or change the form of distribution in settlement of
such Award shall comply with the following requirements:

               1. No subsequent Election may take effect until at least twelve (12) months after the date on
which the subsequent Election is made;

               2. Each subsequent Election related to a distribution in settlement of an Award not described
in Section I.D.2, I.D.3, or I.D.6 below must result in a delay of the distribution for a period of
not less than five (5) years from the date such distribution would otherwise have been made; and

               3. No subsequent Election related to a distribution pursuant to Section I.D.4 below shall be
made less than twelve (12) months prior to the date of the first scheduled payment under such
distribution.

          D. Distributions Pursuant to Deferral Elections. No distribution in settlement of an
Award subject to Code Section 409A may commence earlier than:

               1. Separation from service (as determined by the Secretary of the United States Treasury);

               2. The date the Participant becomes Disabled (as defined below);

               3. Death;

               4. A specified time (or pursuant to a fixed schedule) that is either (i) specified by the Plan
Administrator upon the grant of an Award and set forth in the Award Agreement evidencing such Award
or (ii) specified by the Participant in an Election complying with the requirements of Section I.B
and/or I.C above, as applicable;

               5. To the extent provided by the Secretary of the U.S. Treasury, a change in the ownership or
effective control or the Corporation or in the ownership of a substantial portion of the assets of
the Corporation; or

               6. The occurrence of an Unforeseeable Emergency (as defined below).

          Notwithstanding anything else herein to the contrary, to the extent that a Participant is a
“Specified Employee” (as defined in Code Section 409A(a)(2)(B)(i)) of the Corporation, no
distribution pursuant to Section I.D.1 above in settlement of an Award subject to Code Section 409A
may be made before the date which is six (6) months after such Participant’s date of separation
from service, or, if earlier, the date of the Participant’s death.

30.

 

          E. Unforeseeable Emergency. The Plan Administrator shall have the authority to provide
in any Award subject to Code Section 409A for distribution in settlement of all or a portion of
such Award in the event that a Participant establishes, to the satisfaction of the Plan
Administrator, the occurrence of an Unforeseeable Emergency. In such event, the amount(s)
distributed with respect to such Unforeseeable Emergency cannot exceed the amounts necessary to
satisfy such Unforeseeable Emergency plus amounts necessary to pay taxes reasonably anticipated as
a result of such distribution(s), after taking into account the extent to which such hardship is or
may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation
of the Participant’s assets (to the extent the liquidation of such assets would not itself cause
severe financial hardship). All distributions with respect to an Unforeseeable Emergency shall be
made in a lump sum as soon as practicable following the Plan Administrator’s determination that an
Unforeseeable Emergency has occurred.

          The occurrence of an Unforeseeable Emergency shall be judged and determined by the Plan
Administrator. The Plan Administrator’s decision with respect to whether an Unforeseeable
Emergency has occurred and the manner in which, if at all, the distribution in settlement of an
Award shall be altered or modified, shall be final, conclusive, and not subject to approval or
appeal.

          F. Disabled. The Plan Administrator shall have the authority to provide in any Award
subject to Code Section 409A for distribution in settlement of such Award in the event that the
Participant becomes Disabled. A Participant shall be considered “Disabled” if either:

               1. the Participant is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to result in death or
can be expected to last for a continuous period of not less than twelve (12) months, or

               2. the Participant is, by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a continuous period of not
less than twelve (12) months, receiving income replacement benefits for a period of not less than
three (3) months under an accident and health plan covering employees of the Participant’s
employer.

          All distributions payable by reason of a Participant becoming Disabled shall be paid in a lump
sum or in periodic installments as established by the Participant’s Election, commencing as soon as
practicable following the date the Participant becomes Disabled. If the Participant has made no
Election with respect to distributions upon becoming Disabled, all such distributions shall be paid
in a lump sum as soon as practicable following the date the Participant becomes Disabled.

          G. Death. If a Participant dies before complete distribution of amounts payable upon
settlement of an Award subject to Code Section 409A, such undistributed amounts shall be
distributed to his or her beneficiary under the distribution method for death established by the
Participant’s Election as soon as administratively possible following receipt by the Plan
Administrator of satisfactory notice and confirmation of the Participant’s death. If the

31.

 

Participant has made no Election with respect to distributions upon death, all such
distributions shall be paid in a lump sum as soon as practicable following the date of the
Participant’s death.

          H. No Acceleration of Distributions. Notwithstanding anything to the contrary herein, this
Plan does not permit the acceleration of the time or schedule of any distribution under this Plan,
except as provided by Code Section 409A and/or the Secretary of the U.S. Treasury.

     II. TAX WITHHOLDING

          A. The Corporation’s obligation to deliver shares of Common Stock upon the exercise of Options
or the issuance or vesting of such shares under the Plan or payment of cash in settlement of any
Award shall be subject to the satisfaction of all applicable Federal, state and local income and
employment tax withholding requirements.

          B. The Plan Administrator may, in its discretion, provide any or all Participants holding
Awards under the Plan (other than the Options granted or the shares issued under the Automatic
Option Grant Program) with the right to use shares of Common Stock in satisfaction of all or part
of the Withholding Taxes to which such Participants may become subject in connection with the
exercise, vesting, issuance of shares or other settlement of their Awards. Such right may be
provided to any such holder in either or both of the following formats:

               Stock Withholding: The election to have the Corporation withhold, from the shares of
Common Stock otherwise issuable upon the exercise or settlement of an Award, a portion of those
shares which are fully vested and which have an aggregate Fair Market Value equal to the percentage
of the Withholding Taxes (not to exceed one hundred percent (100%)) designated by the holder, but
not in any event in excess of the amount determined by the applicable minimum statutory withholding
rates.

               Stock Delivery: The election to deliver to the Corporation, at the time shares of
Common Stock previously issued vest, one or more such shares of Common Stock with an aggregate Fair
Market Value equal to the percentage of the Withholding Taxes (not to exceed one hundred percent
(100%)) designated by the holder, but not in any event in excess of the amount determined by the
applicable minimum statutory withholding rates.

     III. EFFECTIVE DATE AND TERM OF THE PLAN

          A. The Plan shall become effective immediately on the Plan Effective Date.

          B. The Plan shall serve as the successor to the Predecessor Plan, and no further Option grants
or direct stock issuances shall be made under the Predecessor Plan after the Plan Effective Date.
All Options outstanding under the Predecessor Plan on the Plan Effective Date shall be incorporated
into the Plan at that time and shall be treated as outstanding Options under the Plan. However,
each outstanding Option so incorporated shall continue to be governed solely by the terms of the
Award Agreement evidencing such Option, and no provision of the Plan shall be deemed to affect or
otherwise modify the rights or obligations of the holders of such incorporated Options with respect
to their acquisition of shares of Common Stock.

32.

 

          C. One or more provisions of the Plan, including (without limitation) the Option/vesting
acceleration provisions of Article Two relating to Corporate Transactions and Changes in Control,
may, in the Plan Administrator’s discretion, be extended to one or more Options incorporated from
the Predecessor Plan which do not otherwise contain such provisions.

          D. The Plan shall terminate upon the earliest to occur of (i) May 18, 2009, (ii) the
date on which all shares available for issuance under the Plan shall have been issued as
fully-vested shares or (iii) the termination of all outstanding Options in connection with a
Corporate Transaction. Should the Plan terminate on May 18, 2009, then all Option grants and
unvested stock issuances outstanding at that time shall continue to have force and effect in
accordance with the provisions of the Award Agreements evidencing such grants or issuances.

     IV. AMENDMENT OF THE PLAN

          A. The Board shall have complete and exclusive power and authority to amend or modify the Plan
or any Award Agreement in any or all respects. However, except as provided in Section V.B below,
no such amendment or modification shall adversely affect the rights and obligations with respect to
Awards at the time outstanding under the Plan unless the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval pursuant to
applicable laws or regulations.

          B. Notwithstanding any other provision of this Plan to the contrary, the Board may, in its
sole and absolute discretion and without the consent of any Participant, amend the Plan or any
Award Agreement, to take effect retroactively or otherwise, as it deems necessary or advisable for
the purpose of conforming the Plan or such Award Agreement to any present or future law relating to
plans of this or similar nature (including, but not limited to, Code Section 409A), and to the
administrative regulations and rulings promulgated thereunder.

          C. Options to purchase shares of Common Stock may be granted under the Discretionary
Option/SAR Grant and shares of Common Stock may be issued under the Restricted Stock Awards that
are in each instance in excess of the number of shares then available for issuance under the Plan,
provided any excess shares actually issued under those programs shall be held in escrow until there
is obtained stockholder approval of an amendment sufficiently increasing the number of shares of
Common Stock available for issuance under the Plan. If such stockholder approval is not obtained
within twelve (12) months after the date the first such excess issuances are made, then (i) any
unexercised Options granted on the basis of such excess shares shall terminate and cease to be
outstanding and (ii) the Corporation shall promptly refund to the Participants the exercise or
purchase price paid for any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares were held in escrow,
and such shares shall thereupon be automatically cancelled and cease to be outstanding.

     V. USE OF PROCEEDS

          Any cash proceeds received by the Corporation from the sale of shares of Common Stock under
the Plan shall be used for general corporate purposes.

33.

 

     VI. REGULATORY APPROVALS

          A. The implementation of the Plan, the granting of any stock Option under the Plan and the
issuance of any shares of Common Stock pursuant to any Award shall be subject to the Corporation’s
procurement of all approvals and permits required by regulatory authorities having jurisdiction
over the Plan.

          B. No shares of Common Stock or other assets shall be issued or delivered under the Plan
unless and until there shall have been compliance with all applicable requirements of Federal and
state securities laws, including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and all applicable listing
requirements of any stock exchange (or the Nasdaq National Market, if applicable) on which Common
Stock is then listed for trading.

     VII. NO EMPLOYMENT/SERVICE RIGHTS

          Nothing in the Plan shall confer upon the Participant any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way the rights of the
Corporation (or any Parent or Subsidiary employing or retaining such person) or of the Participant,
which rights are hereby expressly reserved by each, to terminate such person’s Service at any time
for any reason, with or without cause.

34.

 

APPENDIX

          The following definitions shall be in effect under the Plan:

          A. Automatic Option Grant Program shall mean the automatic Option grant program in
effect under Article Five of the Plan.

          B. Award shall mean an Option, Stock Appreciation Right, Restricted Stock Purchase
Right, Restricted Stock Bonus, Restricted Stock Unit, Performance Share or Performance Unit granted
under the Plan.

          C. Award Agreement shall mean one or more written or electronic documents constituting
an agreement between the Corporation and a Participant and setting forth the terms, conditions and
restrictions of an Award granted to the Participant.

          D. Board shall mean the Corporation’s Board of Directors.

          E. Change in Control shall mean a change in ownership or control of the Corporation
effected through either of the following transactions:

                    (i) the acquisition, directly or indirectly by any person or related group of
persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Corporation), of
beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Corporation’s outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation’s stockholders, or

                    (ii) a change in the composition of the Board over a period of thirty-six (36)
consecutive months (twelve (12) months in the case of any Award subject to Code
Section 409A) or less such that a majority of the Board members ceases, by reason of
one or more contested elections for Board membership, to be comprised of individuals
who either (A) have been Board members continuously since the beginning of such
period or (B) have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in clause (A) who
were still in office at the time the Board approved such election or nomination.

          F. Code shall mean the Internal Revenue Code of 1986, as amended, and any applicable
regulations promulgated thereunder.

          G. Common Stock shall mean the Corporation’s common stock.

          H. Corporate Transaction shall mean any of the following transactions to which the
Corporation is a party:

 

 

                    (i) a stockholder-approved merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting power of the
Corporation’s outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction, or

                    (ii) a merger or consolidation (whether or not stockholder-approved) following
a Change in Control in which voting securities of the Corporation are transferred to
the person or persons (or affiliates of such persons) who acquired ownership or
control of the Corporation pursuant to the Change in Control; or

                    (iii) the sale, transfer or other disposition of all or substantially all of
the Corporation’s assets in complete liquidation or dissolution of the Corporation.

          I. Corporation shall mean Packeteer, Inc., a Delaware corporation, and any corporate
successor to all or substantially all of the assets or voting stock of Packeteer, Inc.. which shall
by appropriate action adopt the Plan.

          J. Covered Employee shall mean any Employee who is or may become a “covered employee,”
as defined in Code Section 162(m), or any successor statute, and who is designated, either as an
individual Employee or member of a class of Employees, by the Primary Committee no later than the
earlier of (i) the date ninety (90) days after the beginning of the Performance Period, or (ii) the
date on which twenty-five percent (25%) of the Performance Period has elapsed, as a “Covered
Employee” under the Plan for such applicable Performance Period.

          K. Discretionary Option/SAR Grant Program shall mean the discretionary Option and
Stock Appreciation Right grant program in effect under Article Two of the Plan.

          L. Dividend Equivalent Right shall mean the right of a Participant, granted at the
discretion of the Plan Administrator or as otherwise provided by the Plan, to receive a credit for
the account of such Participant in an amount equal to the cash dividends paid on one share of
Common Stock represented by an Award held by such Participant.

          M. Employee shall mean an individual who is in the employ of the Corporation (or any
Parent or Subsidiary), subject to the control and direction of the employer entity as to both the
work to be performed and the manner and method of performance.

          N. Exercise Date shall mean the date on which the Corporation shall have received
written notice of the Option or SAR exercise.

          O. Fair Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:

                    (i) If the Common Stock is at the time traded on the Nasdaq National Market,
then the Fair Market Value shall be the closing selling

A-1.

 

price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq National
Market and published in The Wall Street Journal. If there is no closing
selling price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for which such
quotation exists.

                    (ii) If the Common Stock is at the time listed on any Stock Exchange, then the
Fair Market Value shall be the closing selling price per share of Common Stock on
the date in question on the Stock Exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such price is officially quoted in
the composite tape of transactions on such exchange and published in The Wall
Street Journal. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing selling price
on the last preceding date for which such quotation exists.

                    (iii) For purposes of any Option grants made on the Underwriting Date, the Fair
Market Value shall be deemed to be equal to the price per share at which the Common
Stock is to be sold in the initial public offering pursuant to the Underwriting
Agreement.

          P. Freestanding SAR shall mean an SAR that is granted independently of any Options, as
described in Article Two.

          Q. Hostile Take-Over shall mean the acquisition, directly or indirectly, by any person
or related group of persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Corporation) of beneficial
ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation’s stockholders which the
Board does not recommend such stockholders to accept.

          R. Incentive Option shall mean an Option which satisfies the requirements of Code
Section 422.

          S. Involuntary Termination shall mean the termination of the Service of any individual
which occurs by reason of:

                    (i) such individual’s involuntary dismissal or discharge by the Corporation for
reasons other than Misconduct, or

                    (ii) such individual’s voluntary resignation following (A) a change in his or
her position with the Corporation which materially reduces his or her duties and
responsibilities or the level of management to which he or she reports, (B) a
reduction in his or her level of compensation (including base salary, fringe
benefits and target bonus under any corporate-performance based bonus or incentive
programs) by more than fifteen percent (15%) or (C) a relocation of such
individual’s place of employment by more than fifty (50) miles,

A-2.

 

provided and only if such change, reduction or relocation is effected by the
Corporation without the individual’s consent.

          T. Misconduct shall mean the commission of any act of fraud, embezzlement or
dishonesty by the Participant, any unauthorized use or disclosure by such person of confidential
information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other
intentional misconduct by such person adversely affecting the business or affairs of the
Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or any Parent or
Subsidiary) may consider as grounds for the dismissal or discharge of any Participant or other
person in the Service of the Corporation (or any Parent or Subsidiary).

          U. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.

          V. Non-Statutory Option shall mean an Option not intended to satisfy the requirements
of Code Section 422.

          W. Option shall mean an Option to purchase Common Stock granted under the Plan. An
Option may be either an Incentive Option or a Non-Statutory Option.

          X. Parent shall mean any corporation (other than the Corporation) in an unbroken chain
of corporations ending with the Corporation, provided each corporation in the unbroken chain (other
than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of the other corporations
in such chain.

          Y. Participant shall mean any person who has been granted an Award.

          Z. Performance Award shall mean and Award of Performance Shares or Performance Units.

          AA. Performance Award Formula shall mean, for any Performance Award, a formula or
table established by the Plan Administrator which provides the basis for computing the value of a
Performance Award at one or more threshold levels of attainment of the applicable Performance
Goal(s) measured as of the end of the applicable Performance Period.

          BB. Performance-Based Compensation shall mean compensation realized by a Participant
under an Award that constitutes performance-based compensation within the meaning of Code Section
162(m) and the applicable treasury regulations thereunder.

          CC. Performance Measures shall mean one or more measures of business or financial
performance described in Article Four which are approved by the Corporation’s stockholders pursuant
to this Plan in order to qualify compensation payable under Awards based upon the attainment of
Performance Goals established with respect to such Performance Measures as Performance-Based
Compensation.

A-3.

 

          DD. Performance Period shall mean the period of time at the end of which the
attainment of one or more Performance Goals is measured in order to determine the extent of the
vesting of an Award or the amount of the payment to be made upon the settlement of an Award.

          EE. Performance Share shall mean a bookkeeping unit granted to a Participant pursuant
to an Award described in Article Four, representing the right to receive a value denominated in
shares and in an amount, determined at the time such unit becomes payable, which is a function of
the extent to which one or more Performance Goals established with respect to the Award have been
achieved.

          FF. Performance Unit shall mean a bookkeeping unit granted to a Participant pursuant
to an Award described in Article Four, representing the right to receive a value denominated in
money and in an amount, determined at the time such unit becomes payable, which is a function of
the extent to which one or more Performance Goals established with respect to the Award have been
achieved.

          GG. Permanent Disability or Permanently Disabled shall mean the inability of the
Participant to engage in any substantial gainful activity by reason of any medically determinable
physical or mental impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant Program, Permanent
Disability or Permanently Disabled shall mean the inability of the non-employee Board member to
perform his or her usual duties as a Board member by reason of any medically determinable physical
or mental impairment expected to result in death or to be of continuous duration of twelve (12)
months or more.

          HH. Plan shall mean the Corporation’s 1999 Stock Incentive Plan, as set forth in this
document.

          II. Plan Administrator shall mean the particular entity, whether the Primary
Committee, the Board or the Secondary Committee, which is authorized to administer the Plan with
respect to one or more classes of eligible persons, to the extent such entity is carrying out its
administrative functions with respect to the persons under its jurisdiction. Plan Administrator
shall also mean any officer or officers to the extent authorized by the Board pursuant to Section
III.A of Article One to grant Options and SARs under the Discretionary Option/SAR Grant Program.

          JJ. Plan Effective Date shall mean the date the Plan shall become effective and shall
be coincident with the Underwriting Date.

          KK. Predecessor Plan shall mean the Corporation’s 1996 Equity Incentive Plan in effect
immediately prior to the Plan Effective Date hereunder.

          LL. Primary Committee shall mean the committee of two (2) or more non-employee Board
members appointed by the Board to administer the Discretionary Option/SAR Grant Program, Restricted
Stock/Restricted Stock Unit Program and Performance Award Program with respect to Section 16
Insiders and Covered Employees.

A-4.

 

          MM. Restricted Stock Award shall mean an Award of a Restricted Stock Bonus or a
Restricted Stock Purchase Right.

          NN. Restricted Stock Bonus shall mean shares of Common Stock granted to a Participant
pursuant to Article Three of the Plan.

          OO. Restricted Stock Purchase Right shall mean a right to purchase shares of Common
Stock granted to a Participant to Article Three of the Plan.

          PP. Restricted Stock/Restricted Stock Unit Program shall mean the Restricted Stock
Purchase Right, Restricted Stock Bonus and Restricted Stock Unit program in effect under Article
Four of the Plan.

          QQ. Restricted Stock Unit shall mean a bookkeeping unit granted to a Participant
pursuant to an Award described in Article Three, representing the right to receive one share of
Common Stock or its equivalent in cash at a date following the date of grant.

          RR. Secondary Committee shall mean a committee of one or more Board members appointed
by the Board to administer the Discretionary Option/SAR Grant Program, Restricted Stock/Restricted
Stock Unit Program and Performance Award Program with respect to eligible persons other than
Section 16 Insiders and Covered Employee.

          SS. Section 16 Insider shall mean an officer or director of the Corporation subject to
the short-swing profit liabilities of Section 16 of the 1934 Act.

          TT. Service shall mean the performance of services for the Corporation (or any Parent
or Subsidiary) by a person in the capacity of an Employee, a non-employee member of the board of
directors or a consultant or independent advisor, except to the extent otherwise specifically
provided in the Award Agreement evidencing an Award. A Participant’s Service shall not be deemed
to have terminated merely because of a change in the capacity in which the Participant renders such
Service, provided that such change is from Employee to non-employee member of the Board, from
non-employee member of the Board to Employee or from consultant or other independent advisor to
Employee or non-employee member of the Board, provided that there is no interruption or termination
of the Participant’s Service. However, a Participant’s Service shall be deemed terminated upon a
change from Employee to consultant or other independent advisor. A Participant’s Service shall not
be deemed to have terminated merely because of a change in the entity within the group consisting
of the Corporation, any Parent and all Subsidiaries for which the Participant renders Service,
provided that there is no interruption or termination of the Participant’s Service. Furthermore, a
Participant’s Service shall not be deemed to have terminated if the Participant takes any military
leave, sick leave, or other bona fide leave of absence approved by the Corporation. However, if
any such leave taken by a Participant exceeds ninety (90) days, then on the ninety-first (91st) day
following the commencement of such leave the Participant’s Service shall be deemed to have
terminated unless the Participant’s right to return to Service is guaranteed by statute or
contract. Notwithstanding the foregoing, unless otherwise designated by the Corporation or
required by law, a leave of absence shall not be treated as Service for purposes of determining
vesting under the Participant’s Award Agreement. A Participant’s Service shall be deemed to have
terminated

A-5.

 

either upon an actual termination of Service or upon the entity for which the Participant
performs Service ceasing to be the group consisting of the Corporation, any Parent and all
Subsidiaries. Subject to the foregoing, the Corporation, in its discretion, shall determine
whether the Participant’s Service has terminated and the effective date of such termination.

          UU. Stock Appreciation Right or SAR shall mean a bookkeeping entry
representing, for each share of Common Stock subject to such Award, a right to receive payment of
an amount equal to the excess, if any, of the Fair Market Value of such share on the date of
exercise of the Award over the exercise price for such share. A Stock Appreciation Rights may be a
Freestanding SAR, a Tandem SAR or a Limited SAR.

          VV. Stock Exchange shall mean either the American Stock Exchange or the New York Stock
Exchange.

          WW. Subsidiary shall mean any corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation, provided each corporation (other than the
last corporation) in the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.

          XX. Take-Over Price shall mean the greater of (i) the Fair Market Value per
share of Common Stock on the date the Option is surrendered to the Corporation in connection with a
Hostile Take-Over or (ii) the highest reported price per share of Common Stock paid by the tender
offeror in effecting such Hostile Take-Over. However, if the surrendered Option is an Incentive
Option, the Take-Over Price shall not exceed the clause (i) price per share.

          YY. Tandem SAR shall mean an SAR that is granted in connection with a related Option
pursuant to Article Two, the exercise of which shall require forfeiture of the right to purchase a
share under the related Option (and when a share is purchased under the Option, the Tandem SAR
shall similarly be canceled).

          ZZ. 10% Stockholder shall mean the owner of stock (as determined under Code Section
424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of
stock of the Corporation (or any Parent or Subsidiary).

          AAA. Underwriting Agreement shall mean the agreement between the Corporation and the
underwriter or underwriters managing the initial public offering of the Common Stock.

          BBB. Underwriting Date shall mean the date on which the Underwriting Agreement is
executed and priced in connection with an initial public offering of the Common Stock.

          CCC. Withholding Taxes shall mean the Federal, state and local income and employment
withholding taxes to which a Participant may become subject in connection with an Award.

A-6.

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