Document:

exv10w1

 

Exhibit 10.1

SECOND AMENDMENT TO EMPLOYMENT AGREEMENT

     This Second Amendment to Employment Agreement (this “Second Amendment”) is made and entered
into as of the 15th day of May, 2007, by and between Cadence Design Systems, Inc. (“Cadence”) and
Michael J. Fister (“Executive”).

W I T N E S S E T H:

     WHEREAS, Cadence and Executive have entered into that certain Employment Agreement effective
May 12, 2004 (the “Original Agreement”);

     WHEREAS, Cadence and Executive have entered into that certain Amendment to Employment
Agreement effective May 17, 2005 (the “First Amendment”);

     WHEREAS, the Original Agreement, as amended by the First Amendment, is hereinafter referred to
as the “Agreement”; and

     WHEREAS, Cadence and Executive desire to amend the Agreement as more particularly set forth
herein.

     NOW, THEREFORE, for and in consideration of the premises, the mutual covenants and agreements
herein set forth, and for other good and valuable consideration, the receipt, adequacy and
sufficiency of which are hereby expressly acknowledged by the parties hereto, the parties hereto do
hereby covenant and agree as follows:

     1. Relocation Benefits. Section 3(c)(ii) of the Agreement is hereby modified by
deleting the date “May 15, 2007” and inserting in lieu thereof the date “December 31, 2007”.

     2. Ratification. The Agreement, as modified by this Second Amendment, is hereby
ratified and confirmed by Cadence and Executive.

 

 

     IN WITNESS WHEREOF, the undersigned have caused this Second Amendment to be executed and
delivered as of the date first above written.

	 	 	 	 	 	 	 	 	 
	CADENCE DESIGN SYSTEMS, INC.	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	By:

	 	/s/ R.L. Smith McKeithen
	 	 	 	/s/ Michael J. Fister	 	 
	 

	 	 
	 	 	 	 	 	 
	Name: R.L. Smith McKeithen	 	 	 	Michael J. Fister	 	 
	Title: Senior Vice President & General Counsel	 	 	 	 

- 2 -exv10w2

 

Exhibit 10.2

CADENCE DESIGN SYSTEMS, INC.

1987 STOCK INCENTIVE PLAN

Termination Date: May 8, 2017

     1. Purposes of the Plan. The purposes of the Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide additional incentive to
the Employees and Consultants of the Company and its Affiliates, and to promote the success of the
Company’s business.

     2. Definitions. As used herein, the following definitions shall apply:

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

          (b) “Board” shall mean the Committee, if one has been appointed, or the Board of Directors, if
no Committee is appointed.

          (c) “Board of Directors” shall mean the Board of Directors of the Company.

          (d) “Code” shall mean the Internal Revenue Code of 1986, as amended, and the Treasury
Regulations promulgated thereunder.

          (e) “Committee” shall mean the Committee appointed by the Board of Directors in accordance
with paragraph (a) of Section 4 of the Plan, if one is appointed.

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

          (g) “Company” shall mean Cadence Design Systems,
Inc., a Delaware corporation.

          (h) “Consultant” shall mean any consultant, independent contractor or adviser rendering
services to the Company or an Affiliate (provided that such person renders bona fide services not
in connection with the offering and sale of securities in capital raising transactions).

          (i) “Continuous Status as an Employee or Consultant” shall mean the absence of any
interruption or termination of service, whether as an Employee or Consultant. The Board shall
determine whether Continuous Status as an Employee or Consultant shall be considered interrupted in
the case of: (i) any approved leave of absence, including sick leave, military leave, or any other
personal leave; or (ii) transfers between the Company, Affiliates or their successors. Continuous
Status as an Employee or Consultant shall not be deemed to have terminated merely because of a
change in the capacity in which the Participant renders service to the Company or any Affiliate,
provided that there is no interruption or termination thereof.

 

 

          (j) “Employee” shall mean any person, including officers and directors, employed by the
Company or any Affiliate. The payment of a director’s fee or other compensation paid solely on
account of service as a director by the Company shall not be sufficient to constitute “employment”
by the Company.

          (k) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.

          (l) “Fair Market Value” means, with respect to any relevant date prior to January 1, 2007, the
average of the high and low prices of the Common Stock on such date, as reported on the NASDAQ
Global Select Market or such other primary national exchange on which the Common Stock is listed,
and, with respect to any relevant date on or after January 1, 2007, the closing price of the Common
Stock on such date, as reported on the NASDAQ Global Select Market or such other primary national
exchange on which the Common Stock is listed. In the event the Common Stock is not listed on an
exchange as described in the previous sentence, Fair Market Value with respect to any relevant date
shall be determined in good faith by the Board.

          (m) “Incentive Stock” means shares of Common Stock granted to a Participant pursuant to
Section 10 hereof.

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

          (o) “Incentive Stock Option” shall mean an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code.

          (p) “Nonstatutory Stock Option” shall mean an Option not intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code.

          (q) “Option” shall mean a stock option granted pursuant to the Plan, which may be either an
Incentive Stock Option or a Nonstatutory Stock Option, at the discretion of the Board and as
reflected in the terms of the applicable Stock Option Agreement.

          (r) “Optioned Stock” shall mean the Common Stock subject to an Option.

          (s) “Parent” shall mean a “parent corporation” of the Company, whether now or hereafter
existing, as defined in Section 424(e) of the Code.

          (t) “Participant” shall mean an Employee or Consultant who receives a Stock Award.

          (u) “Plan” shall mean this 1987 Stock Incentive Plan, as amended from time to time.

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          (v) “Qualifying Performance Criteria” shall mean any one or more of the following performance
criteria as determined pursuant to an objective formula, either individually, alternatively or in
any combination, applied to either the Company as a whole or to a business unit, segment or
Affiliate, either individually, alternatively or in any combination, and measured over a
performance period determined by the Board, on an absolute basis or relative to a pre-established
target, or compared to previous results or to a designated comparison group, in each case as
specified by the Board in a Stock Award: (a) cash flow (including measures of operating or free
cash flow), (b) earnings per share (including measures of GAAP earnings per share or non-GAAP
measures such as non-GAAP earnings per-share or per-share earnings before interest, taxes,
depreciation and amortization), (c) return on equity, (d) total stockholder return, (e) return on
capital, (f) return on assets or net assets, (g) revenue, (h) income or net income (on a GAAP basis
or a non-GAAP basis), (i) operating income or net operating income (on a GAAP basis or a non-GAAP
basis), (j) operating profit or net operating profit (on a GAAP basis or a non-GAAP basis), (k)
operating margin (on a GAAP basis or a non-GAAP basis), (l) return on operating revenue (on a GAAP
basis or a non-GAAP basis), (m) market share, (n) bookings and segments of bookings such as net
product bookings, (o) market penetration, (p) technology development or proliferation, or (q)
customer loyalty or satisfaction as measured by a customer loyalty or satisfaction index determined
by an independent consultant expert in measuring such matters.

          (w) “Rule 16b-3” shall mean Rule 16b-3 of the Exchange Act, or any successor to
Rule 16b-3, as
in effect when discretion is being exercised with respect to the Plan.

          (x) “Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

          (y) “Share” shall mean a share of Common Stock, as may be adjusted in accordance with Section
12 of the Plan.

          (z) “Stock Award” shall mean any right granted under the Plan, including an Option or
Incentive Stock.

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

          (bb) “Subsidiary” shall mean a “subsidiary corporation” of the Company, whether now or
hereafter existing, as defined in Section 424(f) of the Code.

     3. Stock Subject to the Plan.

          (a) Share Reserve. Subject to the provisions of Sections 3(b) and 12 of the Plan, the number
of shares reserved for issuance under the Plan is seventy-five million three hundred seventy
thousand one hundred (75,370,100) shares of Common Stock; provided,
however, that no more than five million (5,000,000) shares of Common Stock authorized under
the Plan may be issued pursuant to Awards of Incentive Stock.

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          (b) Reversion of Shares to the Share Reserve. If a Stock Award should expire, become
unexercisable, be forfeited or otherwise terminate for any reason without having been exercised in
full, the then unpurchased or forfeited Shares that were subject thereto shall, unless the Plan
shall have been terminated, become available for future grant under the Plan; provided, however,
that if a Stock Award is canceled, forfeited or treated as having been canceled for purposes of
Section 162(m) of the Code, then the canceled Stock Award shall count against the maximum number of
shares for which a Stock Award may be granted to any person under the terms of the Plan.

          (c) Source of Shares. Shares issued under the Plan may be authorized, but unissued, or
reacquired Common Stock.

     4. Administration of the Plan.

          (a) Procedure. The Plan shall be administered by the Board of Directors. The Board of
Directors may appoint a Committee consisting of one or more members of the Board of Directors, to
administer the Plan on behalf of the Board of Directors, subject to such terms and conditions as
the Board of Directors may prescribe. In such event, any references in the Plan to the Board of
Directors shall be deemed to refer to the Committee. To the extent required to satisfy the
requirements of Rule 16b-3 or Section 162(m) of the Code, the Committee shall consist of two or
more “Non-Employee Directors” (i.e., a director who is receiving no compensation from the Company
other than for service on the Board of Directors or who does not receive such additional
compensation which exceeds the limits specified in the definition of such term under Rule 16b-3 and
otherwise meets the requirement under Rule 16b-3 for “non-employee directors”) or “Outside
Directors” (i.e., a director who is not either a current or former officer of the Company nor a
current employee of the Company, and who is receiving no compensation from the Company other than
for service on the Board of Directors or who does not receive such additional compensation which
exceeds the limits specified in the definition of such term under Section 162(m) of the Code).
Once appointed, the Committee shall continue to serve until otherwise directed by the Board of
Directors. From time to time the Board of Directors may increase or decrease the size of the
Committee and appoint additional members thereof, remove members (with or without cause), and
appoint new members in substitution therefor, fill vacancies however caused and remove all members
of the Committee, and thereafter directly administer the Plan. Notwithstanding anything in this
Section 4 to the contrary, at any time the Board of Directors or the Committee may delegate to a
committee of one or more members of the Board of Directors the authority to grant Stock Awards to
all Employees and Consultants or any portion or class thereof. Members of the Board of Directors
who are either eligible for Stock Awards or have been granted Stock Awards may vote on any matters
affecting the administration of the Plan or grant of any Stock Awards pursuant to the Plan, except
that no such member shall act upon the granting of a Stock Award to himself, but any such member
may be counted in determining the existence of a quorum at any meeting of the Board during which
action is taken with respect to the granting of Stock Awards to him or her.

          (b) Powers of the Board. Subject to the provisions of the Plan, the Board shall have the
authority, in its discretion: (i) to grant Stock Awards under the Plan; (ii) to

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determine the
exercise or sales price per share of Stock Awards to be granted, which exercise price shall be
determined in accordance with Sections 8(a) and 10(c) of the Plan, as applicable; (iii) to
determine the Employees or Consultants to whom, and the time or times at which, Stock Awards shall
be granted, the number of Shares to be represented by each Stock Award, and the terms of such Stock
Awards; (iv) to interpret the Plan; (v) to prescribe, amend and rescind rules and regulations
relating to the Plan; (vi) to determine the terms and provisions of each Stock Award granted (which
need not be identical) in accordance with the Plan, and, with the consent of the holder thereof
with respect to any adverse change, modify or amend each Stock Award; (vii) to accelerate or defer
(the latter with the consent of the Participant) the exercise date and vesting of any Stock Award;
(viii) to authorize any person to execute on behalf of the Company any instrument required to
effectuate the grant of a Stock Award previously granted by the Board; and (ix) to make all other
determinations deemed necessary or advisable for the administration of the Plan. The Board, in the
exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any
Stock Option Agreement or Incentive Stock Agreement, in a manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective.

          (c) Effect of Board’s Decision. All decisions, determinations and interpretations of the
Board shall be final and binding on all Participants and any other holders of any Stock Awards
granted under the Plan.

     5. Eligibility. Stock Awards may be granted only to Employees or Consultants. An Employee or
Consultant who has been granted a Stock Award may, if he or she is otherwise eligible, be granted
an additional Stock Award.

          Incentive Stock Options may only be granted to Employees. The aggregate Fair Market Value
(determined at the time the Option is granted) of the stock with respect to which Incentive Stock
Options are exercisable for the first time by such individual during any calendar year (under the
Plan or under any other incentive stock option plan of the Company or any Parent or Subsidiary of
the Company) shall not exceed $100,000. To the extent that the grant of an Option exceeds this
limit, the portion of the Option that exceeds such limit shall be treated as a Nonstatutory Stock
Option.

          The Plan shall not confer upon any Participant any right with respect to continuation of
employment or consultancy by the Company or any Affiliate, as applicable, nor shall it interfere in
any way with the Participant’s right or the Company’s or any Affiliate’s right to terminate the
Participant’s employment at any time or the Participant’s consultancy pursuant to the terms of the
Consultant’s agreement with the Company or any Affiliate.

          No person shall be eligible to be granted Stock Awards covering more than 2,216,702 shares of
Common Stock in any calendar year. The foregoing limit shall be adjusted pursuant to the
provisions of Section 12 hereof.

     6. Term of the Plan. The Plan became effective upon its adoption by the Board of Directors.
Subsequently amended, the Plan shall continue in effect until May 8, 2017 unless sooner terminated
under Section 14 hereof.

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7. Term of Option; Vesting Provisions.

          (a) Option Term. From and after October 1, 2006, the term of each Option shall be seven (7)
years from the date of grant thereof or such shorter term as may be provided in the applicable
Stock Option Agreement. Prior to October 1, 2006, the maximum term for each Option was ten (10)
years from the date of grant thereof or such shorter term as may have been provided in the
applicable Stock Option Agreement. However, in the case of an Incentive Stock Option granted to an
Employee, who immediately before the Incentive Stock Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, and the term of the Incentive Stock Option shall be five (5) years from the
date of grant thereof or such shorter time as may be provided in the applicable Stock Option
Agreement.

          (b) Vesting Provisions. The terms on which each Option shall vest shall be determined by the
Board in its discretion, and shall be set forth in the Stock Option Agreement relating to each such
Option. Without limiting the discretion of the Board, vesting provisions may include time-based
vesting or vesting based on achievement of performance or other criteria. Performance criteria
may, but need not, be based on Qualifying Performance Criteria. The provisions of this Section
7(b) are subject to any Option provisions governing the minimum number of Shares as to which an
Option may be exercised.

     8. Option Exercise Price and Consideration.

          (a) Exercise Price. The per Share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Board, but shall be subject to
the following:

               (i) In the case of an Incentive Stock Option:

                    (1) Granted to an Employee who, immediately before the
grant of such Incentive Stock Option,
owns stock representing more than ten percent (10%) of the voting power of all classes of stock of
the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.

                    (2) Granted to any Employee to whom
Section 8(a)(i)(1) hereof is not applicable, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

               (ii) In the case of an Option granted on or after the effective date of registration of
any
class of equity security of the Company pursuant to Section 12 of the Exchange Act and prior to six
months after the termination of such registration, the per Share exercise price shall be not less
than 100% of the Fair Market Value per Share on the date of grant.

               (iii) Notwithstanding the provisions of this Section 8(a), an Option (whether an
Incentive
Stock Option or Nonstatutory Stock Option) may be granted with an exercise price lower than set
forth in this Section 8(a) if such Option is granted pursuant to an

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assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the Code.

          (b) Consideration. Subject to applicable law, the consideration to be paid for the Shares to
be issued upon exercise of an Option, including the method of payment, shall be determined by the
Board and may consist entirely of cash, check, shares of Common Stock having a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to which said Option
shall be exercised, or any combination of such methods of payment, or such other consideration and
method of payment for the issuance of Shares as may be determined by the Board. In making its
determination as to the type of consideration to accept, the Board shall consider if acceptance of
such consideration may be reasonably expected to benefit the Company.

     9. Exercise of Options.

          (a) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder shall be
exercisable at such times and under such conditions as determined by the Board, including
performance criteria with respect to the Company and/or the Participant, and as shall be
permissible under the terms of the Plan.

          An Option may not be exercised for a fraction of a Share.

          An Option shall be deemed to be exercised when written notice of such exercise has been given
to the Company in accordance with the terms of the Option by the person entitled to exercise the
Option and full payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan. Until the issuance
(as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is issued, except as
provided in Section 12 of the Plan.

          Exercise of an Option in any manner shall result in a decrease in the number of Shares that
thereafter may be available, both for purposes of the Plan and for sale under the Option, by the
number of Shares as to which the Option is exercised.

          (b) Termination of Status as an Employee or Consultant. If a Participant ceases to serve as
an Employee or Consultant for any reason other than death, the Participant may, but only within
such period of time ending on the earlier of (i) 30 days (or such other period of time as is
determined by the Board) after the date the Participant ceases to be an Employee or Consultant or
(ii) the expiration of the term of the Option, exercise the Option to the extent that
the Participant was entitled to exercise it at the date of such termination. To the extent
that the Participant was not entitled to exercise the Option at the date of such termination, or if
the Participant does not exercise such Option (which the Participant was entitled to exercise)
within the time specified herein, the Option shall terminate.

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          (c) Death of Participant. In the event of the death of a Participant:

               (i) during the term of the Option who is at the time of the Participant’s death an
Employee or
Consultant and who shall have been in Continuous Status as an Employee or Consultant since the date
of grant of the Option, the Option may be exercised at any time within three (3) months (or such
longer period of time as determined by the Board) following the date of death, by the Participant’s
estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent of the right to exercise that would have accrued had the Participant continued
living three (3) months (or such longer period of time as determined by the Board) after the date
of death; or

               (ii) within one (1) month (or such longer period of time as determined by the
Board) after the
termination of Continuous Status as an Employee or Consultant, the Option may be exercised, at any
time within three (3) months (or such longer period of time as determined by the Board) following
the date of death, by the Participant’s estate or by a person who acquired the right to exercise
the Option by bequest or inheritance, but only to the extent of the right to exercise that had
accrued at the date of termination.

     10. Incentive Stock.

          (a) General. Incentive Stock is an award or issuance of shares of Common Stock under the
Plan, the grant, issuance, retention, vesting and/or transferability of which is subject during
specified periods of time to such conditions (including continued service or performance
conditions) and terms as the Board deems appropriate. The Board may specify that the grant,
vesting or retention of any or all Incentive Stock is intended to satisfy the requirements for
“performance-based compensation” under Section 162(m) of the Code. To the extent that any
Incentive Stock is designated by the Board as “performance-based compensation” under Section 162(m)
of the Code, (i) the performance criteria for the grant, vesting or retention of any such Incentive
Stock shall be a measure based on one or more Qualifying Performance Criteria selected by the
Board, specified at the time the Incentive Stock is granted, and shall be a preestablished goal
under Treasury Regulation Section 1.162-27(e)(2)(i), (ii) the Board shall certify the extent to
which any Qualifying Performance Criteria has been satisfied, and the amount payable as a result
thereof, prior to payment of any Incentive Stock that is intended to satisfy the requirements for
“performance-based compensation” under Section 162(m) of the Code, and (iii) the award shall comply
with all other applicable requirements relating to “performance based compensation” under Section
162(m) of the Code. To the extent a performance-based award is not intended to satisfy the
requirements for “performance-based compensation” under Section 162(m) of the Code, the performance
criteria for the grant, vesting or retention of any such Incentive Stock may be a measure based on
one or more Qualifying Performance Criteria selected by the Board, or any other criteria deemed
appropriate by the Board.

          (b) Incentive Stock Agreement. Each Incentive Stock Agreement shall contain provisions
regarding (i) the number of shares of Common Stock subject to such award or a formula for
determining such number, (ii) the purchase price of the Shares, if any, and the means of payment
for the Shares, (iii) the performance criteria, if any, and level of achievement

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of these criteria
that shall determine the number of Shares granted, issued, retainable and/or vested, (iv) such
terms and conditions on the grant, issuance, vesting and/or forfeiture of the Shares as may be
determined from time to time by the Board, (v) restrictions on the transferability of the Shares
and (vi) such further terms and conditions in each case not inconsistent with the Plan as may be
determined from time to time by the Board. Shares of Incentive Stock may be issued in the name of
the Participant and held by the Participant or held by the Company, in each case as the Board may
provide.

          (c) Sales Price. Subject to the requirements of applicable law, the Board shall determine the
price, if any, at which shares of Incentive Stock shall be sold or awarded to a Participant, which
price may vary from time to time and among Participants and which may be below the Fair Market
Value of such shares at the date of grant or issuance.

          (d) Share Vesting. Except as set forth herein, the grant, issuance, retention and/or vesting
of shares of Incentive Stock shall be at such time and in such installments as determined by the
Board. The Board shall have the right to make the timing of the grant and/or the issuance, ability
to retain and/or vesting of shares of Incentive Stock subject to continued service, passage of time
and/or such performance criteria as deemed appropriate by the Board; provided that, in no event
shall an award of Incentive Stock vest sooner than (i) three (3) years after the date of grant, if
the vesting of the Incentive Stock is based solely on Continuous Status as an Employee or
Consultant and the grant of Incentive Stock is not a form of payment of earned incentive
compensation or other performance-based compensation, provided, however, that notwithstanding the
foregoing vesting limitations, shares of Incentive Stock vesting under this clause (i) may vest in
installments so long as the vesting schedule, at any point in time, is not more favorable than what
would be vested under a monthly pro rata installment schedule (i.e., 1/36 per month for 3 years),
or (ii) one (1) year after the date of grant, if the vesting of Incentive Stock is subject to the
achievement of performance goals. Notwithstanding the foregoing, the Board may accelerate vesting
(in a Stock Award agreement or otherwise) of any Stock Award in the event of a Participant’s
termination of service as an Employee or Consultant, a Change in Control or similar event, provided
that, in the case of award of Incentive Stock that is intended to qualify as “performance based
compensation” under Section 162(m), such acceleration shall comply with the requirements set forth
in Treasury Regulation Section 1.162-27(e)(2)(iii).

          (e) Transferability. Shares of Incentive Stock shall be transferable by the Participant only
upon such terms and conditions as are set forth in the applicable Incentive Stock Agreement, as the
Board shall determine in its discretion, so long as Incentive Stock awarded under the Incentive
Stock Agreement remains subject to the terms of the Incentive Stock Agreement.

          (f) Discretionary Adjustments. Notwithstanding satisfaction of any performance goals, the
number of shares granted, issued, retainable and/or vested under an award of Incentive Stock on
account of either financial performance or personal performance
evaluations may be reduced by the Board on the basis of such further considerations as the
Board shall determine, but may not be increased. In addition, the Board may appropriately adjust
any evaluation of performance under the Qualifying Performance Criteria to exclude any of the
following events that occurs during a performance period: (i) asset write-downs, (ii) litigation
or

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claim judgments or settlements, (iii) the effect of changes in tax law, accounting principles or
other such laws or provisions affecting reported results, (iv) accruals for reorganization and
restructuring programs and (v) any extraordinary non-recurring items as described in Accounting
Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial
condition and results of operations appearing in the Company’s annual report to stockholders for
the applicable year.

     11. Non-Transferability of Stock Awards. Except as otherwise expressly provided in the terms
of the applicable Stock Option Agreement or Incentive Stock Agreement, a Stock Award may not be
sold, pledged, assigned, hypothecated, transferred or otherwise disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised, during the lifetime of
the Participant, only by the Participant or the Participant’s legal representative.
Notwithstanding the foregoing, the Participant may, by delivering written notice to the Company, in
a form satisfactory to the Company, designate a third party who, in the event of the death of the
Participant, shall thereafter be entitled to exercise the Stock Award.

     12. Adjustments upon Changes in Capitalization or Change in Control. The number of Shares
covered by each outstanding Stock Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Stock Awards have yet been granted or which have been
returned to the Plan upon cancellation, expiration, forfeiture or other termination of a Stock
Award, as well as the price per Share covered by each such outstanding Stock Award, shall be
equitably adjusted for any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split or the payment of a stock dividend with respect to the Common Stock or
any other increase or decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of any convertible
securities of the Company shall not be deemed to have been “effected without receipt of
consideration.” Such adjustments shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number
or price of shares of Common Stock subject to a Stock Award.

     For purposes of the Plan, a “Change in Control” shall be deemed to occur upon the consummation
of any one of the following events: (a) a sale of all or substantially all of the assets of the
Company; (b) a merger or consolidation in which the Company is not the surviving corporation (other
than a transaction the principal purpose of which is to change the state of the Company’s
incorporation or a transaction in which the voting securities of the Company are exchanged for
beneficial ownership of at least 50% of the voting securities of the controlling acquiring
corporation); (c) a merger or consolidation in which the Company is the surviving corporation and
less than 50% of the voting securities of the Company that are outstanding immediately after the
consummation of such transaction are beneficially owned, directly or indirectly, by the persons who
owned such voting securities immediately prior to such
transaction; (d) any transaction or series of related transactions after which any person (as
such term is defined in Section 13(d)(3) of the Exchange Act), other than any employee benefit plan
(or related trust) sponsored or maintained by the Company or any subsidiary of the Company,

10

 

becomes
the beneficial owner of voting securities of the Company representing 40% or more of the combined
voting power of all of the voting securities of the Company; (e) during any period of two
consecutive years, individuals who at the beginning of such period constitute the membership of the
Company’s Board of Directors (“Incumbent Directors”) cease for any reason to have authority to cast
at least a majority of the votes which all directors on the Board of Directors are entitled to
cast, unless the election, or the nomination for election by the Company’s stockholders, of a new
director was approved by a vote of at least two-thirds of the votes entitled to be cast by the
Incumbent Directors, in which case such director shall also be treated as an Incumbent Director in
the future; or (f) the liquidation or dissolution of the Company.

     In the event of a Change in Control, then: (a) any surviving or acquiring corporation shall
assume Stock Awards outstanding under the Plan or shall substitute similar awards (including an
option to acquire the same consideration paid to stockholders in the transaction described in this
Section 12 for those outstanding Options under the Plan), or (b) in the event any surviving or
acquiring corporation refuses to assume such Stock Awards or to substitute similar awards for those
outstanding under the Plan, (i) with respect to Stock Awards held by persons then performing
services as Employees or Consultants, the vesting of such Stock Awards and the time during which
such Stock Awards may be exercised shall be accelerated prior to such event and the Stock Awards
terminated if not exercised after such acceleration and at or prior to such event, and (ii) with
respect to any other Options outstanding under the Plan, such Options shall be terminated if not
exercised prior to such event.

     13. Miscellaneous.

          (a) Acceleration of Exercisability and Vesting. The Board shall have the power to accelerate
the time at which a Stock Award may first be exercised or the time during which a Stock Award or
any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Stock
Award stating the time at which it may first be exercised or the time during which it will vest.
If the Board, at its sole discretion, permits acceleration as to all or any part of a Stock Award,
the aggregate Fair Market Value (determined at the time Stock Award is granted) of stock with
respect to which Incentive Stock Options first become exercisable in the year of such dissolution,
liquidation, sale of assets or merger cannot exceed $100,000. Any remaining accelerated Incentive
Stock Options shall be treated as Nonstatutory Stock Options.

          (b) Additional Restrictions on Stock Awards. Either at the time a Stock Award is granted or
by subsequent action, the Board may, but need not, impose such restrictions, conditions or
limitations as it determines appropriate as to the timing and manner of any resales by a
Participant or other subsequent transfers by an Participant of any Shares issued under a Stock
Award, including without limitation (i) restrictions under an insider trading policy, (ii)
restrictions designed to delay and/or coordinate the timing and manner of sales by Participants,
and (iii) restrictions as to the use of a specified brokerage firm for such resales or other
transfers.

          (c) Stockholder Rights. No Participant shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares of Common Stock subject to

11

 

such Option unless
and until such Participant has satisfied all requirements for exercise of the Option pursuant to
its terms.

          (d) Investment Assurances. The Company may require a Participant, as a condition to
exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances
satisfactory to the Company as to the Participant’s knowledge and experience in financial and
business matters and/or to employ a purchaser representative reasonably satisfactory to the Company
who is knowledgeable and experienced in financial and business matters and that he or she is
capable of evaluating, alone or together with the purchaser representative, the merits and risks of
the Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the
Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own account
and not with any present intention of selling or otherwise distributing the Common Stock. The
foregoing requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (1) the issuance of the shares of Common Stock upon exercise of the Option or
acquisition of Common Stock under the Plan has been registered under a then currently effective
registration statement under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may, upon advice of counsel
to the Company, place legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws, including, but not
limited to, legends restricting the transfer of the Common Stock represented thereby.

          (e) Withholding Obligations. To the extent provided by the terms of a Stock Option Agreement
or Incentive Stock Agreement, the Participant may satisfy any federal, state or local tax
withholding obligation relating to a Stock Award by any of the following means (in addition to the
Company’s right to withhold from any compensation paid to the Participant by the Company) or by a
combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold
shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a
result of the Stock Award, provided, however, that no shares of Common Stock are withheld with a
value exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering to
the Company owned and unencumbered shares of Common Stock.

     14. Amendment and Termination of the Plan.

          (a) Amendment and Termination. The Board may at any time terminate the Plan or amend the Plan
from time to time in such respects as the Board may deem advisable; provided that, no amendment
shall be effective unless approved by the stockholders of the Company to the extent stockholder
approval is necessary for the Plan to satisfy the requirements of Section 422 of the Code, Rule
16b-3 or any listing requirements of any securities exchange or national market system on which the
Common Stock is traded.

          (b) Effect of Amendment or Termination. Any such amendment or termination of the Plan shall
not adversely affect Stock Awards already granted and such Stock Awards shall remain in full force
and effect as if the Plan had not been amended or terminated,

12

 

unless mutually agreed otherwise
between the Participant and the Board, which agreement must be in writing and signed by the
Participant and the Company.

     15. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to a Stock Award
unless the exercise of the Option, if applicable, and the issuance and delivery of such Shares
pursuant the Stock Award shall comply with all relevant provisions of the law, including without
limitation, the Securities Act, the Exchange Act and the requirements of any stock exchange or
national market system upon which the Shares may then be listed, and shall be further subject to
the approval of counsel for the Company with respect to such compliance.

     16. Liability of Company. The Company and any Affiliate which is in existence or hereafter
comes into existence shall not be liable to a Participant or other persons as to:

          (a) The non-issuance or sale of Shares as to which the Company has been unable to obtain from
any regulatory body having jurisdiction the authority deemed by the Company’s counsel to be
necessary to the lawful issuance and sale of any Shares hereunder; or

          (b) Any tax consequence expected, but not realized, by any Participant or other person due to
the receipt, exercise or settlement of any Stock Award granted hereunder.

     17. Reservation of Shares. The Company, during the term of the Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements
of the Plan. The Company’s inability to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s counsel to be necessary for the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of
the failure to issue or sell such Shares as to which such requisite authority shall not have been
obtained.

     18. Stock Award Agreement. All Stock Awards shall be evidenced by written award agreements in
such form as the Board shall approve.

     19. Choice of Law. The law of the State of Delaware, without regard to its conflict of laws
rules, shall govern all questions concerning the construction, validity and interpretation of the
Plan.

13

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