Document:

exv10w4

 

Exhibit
10.4

NOVELLUS SYSTEMS, INC.

AMENDED AND RESTATED 1992 EMPLOYEE STOCK PURCHASE PLAN

(amended and restated February 15, 2007)

     The following constitute the provisions of the Amended and Restated 1992 Employee Stock
Purchase Plan of Novellus Systems, Inc.

     1. Purpose. The purpose of the Plan is to provide employees of the Company and its
Designated Subsidiaries with an opportunity to purchase Common Stock of the Company through
accumulated payroll deductions. It is the intention of the Company to have the Plan qualify as an
“Employee Stock Purchase Plan” under Section 423 of the Internal Revenue Code of 1986, as amended.
The provisions of the Plan shall, accordingly, be construed so as to extend and limit participation
in a manner consistent with the requirements of that section of the Code.

     2. Definitions.

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

          (b) “Code” shall mean the Internal Revenue Code of 1986, as amended.

          (c) “Common Stock” shall mean the Common Stock, no par value, of the Company.

          (d) “Company” shall mean Novellus Systems, Inc., a California corporation.

          (e) “Compensation” shall mean all regular straight time gross earnings, exclusive of
payments for overtime, shift premium, incentive compensation, incentive payments, bonuses,
commissions or other compensation.

          (f) “Continuous Status as an Employee” shall mean the absence of any interruption or
termination of service as an Employee. Continuous Status as an Employee shall not be considered
interrupted in the case of a leave of absence agreed to in writing by the Company, provided that
such leave is for a period of not more than three (3) months or reemployment upon the expiration of
such leave is guaranteed by contract or statute. Where the period of leave exceeds three (3)
months and the individual’s right to reemployment is not guaranteed either by statute or by
contract, the employment relationship will be deemed to have terminated on the first day after such
three (3) month leave, for purposes of determining eligibility to participate in the Plan.

          (g) “Designated Subsidiaries” shall mean the Subsidiaries which have been designated
by the Board from time to time in its sole discretion as eligible to participate in the Plan.

          (h) “Employee” shall mean any person, including an officer, who is customarily
employed for at least twenty (20) hours per week and more than five (5) months in a calendar year
by the Company or one of its Designated Subsidiaries.

 

 

          (i) “Exercise Date” shall mean the last day of each offering period of the Plan.

          (j) “Offering Date” shall mean the first day of each offering period of the Plan.

          (k) “Plan” shall mean this 1992 Employee Stock Purchase Plan, as amended and restated.

          (l) “Subsidiary” shall mean a corporation, domestic or foreign, of which not less than
50% of the voting shares are held by the Company or a Subsidiary, whether or not such corporation
now exists or is hereafter organized or acquired by the Company or a Subsidiary.

     3. Eligibility.

          (a) Any person who is an Employee as of the Offering Date of a given offering period shall be
eligible to participate in such offering period under the Plan, subject to the requirements of
paragraph 5(a) and the limitations imposed by Section 423(b) of the Code.

          (b) Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted
an option under the Plan (i) if, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own
stock and/or hold outstanding options to purchase stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Company or of any subsidiary of
the Company, or (ii) which permits his rights to purchase stock under all employee stock purchase
plans (described in Section 423 of the Code) of the Company and its subsidiaries to accrue at a
rate which exceeds Twenty-five Thousand dollars ($25,000) of fair market value of such stock
(determined at the time such option is granted) for each calendar year in which such option is
outstanding at any time.

     4. Offering Periods. The Plan shall be implemented by overlapping or consecutive
offering periods of no more than six (6) months duration until the Plan is terminated in accordance
with paragraph 19 hereof. The Board of Directors of the Company shall have the power to change the
duration of offering periods with respect to future offerings without shareholder approval if such
change is announced at least fifteen (15) days prior to the scheduled beginning of the first
offering period to be affected.

     5. Participation.

          (a) An eligible Employee may become a participant in the Plan by completing a subscription
agreement authorizing payroll deduction on the form provided by the Company and filing it with the
Company’s Human Resource department during the open enrollment period prior to the applicable
Offering Date, unless a later time for filing the subscription agreement is set by the Board for
all eligible Employees with respect to a given offering.

          (b) Payroll deductions for a participant shall commence on the first payroll following the
Offering Date and shall end on the Exercise Date of the offering to which such

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authorization is
applicable, unless sooner terminated by the participant as provided in paragraph 10.

     6. Payroll Deductions.

          (a) At the time a participant files his subscription agreement, he shall elect to have payroll
deductions made on each payday during the offering period in an amount not exceeding fifteen
percent (15%) of the Compensation which he received on the payday immediately preceding the
Offering Date, and the aggregate of such payroll deductions during the offering period shall not
exceed the lesser of (i) 15% of his aggregate Compensation during said offering period, (ii) $5,000
or (iii) such lesser amount determined by the Board at least fifteen (15) days prior to the
scheduled beginning of the first offering period to be affected.

          (b) All payroll deductions made by a participant shall be credited to his account under the
Plan. A participant may not make any additional payments into such account.

          (c) A participant may discontinue his participation in the Plan as provided in paragraph 10,
or may lower, but not increase, the rate of his payroll deductions during the offering period by
completing or filing with the Company a new authorization for payroll deduction. The change in
rate shall be effective fifteen (15) days following the Company’s receipt of the new authorization.

     7. Grant of Option.

          (a) On the Offering Date of each offering period, each eligible Employee participating in the
Plan shall be granted an option to purchase (at the per share option price determined in accordance
with paragraph 7(b), below) a number of shares of the Company’s Common Stock determined by dividing
such Employee’s payroll deductions to be accumulated during such offering period (not to exceed the
amount determined in accordance with paragraph 6(a), above) by the option price per share
determined in accordance with paragraph 7(b), below, subject to the limitations set forth in
paragraphs 3(b) and 12 hereof; provided, however, that the maximum number of shares that may be
purchased by any Employee under any offering period is 1,000 shares.

          (b) The option price per share of the shares offered in a given offering period shall be the
lower of: (i) 85% of the fair market value of a share of the Common Stock of the Company on the
Offering Date; or (ii) 85% of the fair market value of a share of the Common Stock of the Company
on the Exercise Date. The fair market value of the Company’s Common Stock on a given date shall be
determined by the Board in its good faith discretion; provided, however, that where there is a
public market for the Common Stock, the fair market value per share shall be the closing bid price
or last sale price of the Common Stock for such date (or, if no closing bid or last sales price was
reported on such date, on the last trading date such closing bid or last sales price was reported),
as reported in the Wall Street Journal (or, if not so reported, as reported in such other
source as the Board deems reliable).

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     8. Exercise of Option. Unless a participant withdraws from the Plan as provided in
paragraph 10, his option for the purchase of shares will be exercised automatically on the Exercise
Date of the offering period, and the maximum number of full shares subject to option will be
purchased for him at the applicable option price with the accumulated payroll deductions in his
account. The shares purchased upon exercise of an option hereunder shall be deemed to be
transferred to the participant on the Exercise Date. During his lifetime, a participant’s option
to purchase shares hereunder is exercisable only by him.

     9. Delivery. After the Exercise Date of each offering period, the Company shall
arrange the delivery to each participant, or to a broker designated by the Company, as appropriate,
of the shares purchased upon exercise of his option. Any cash remaining to the credit of a
participant’s account under the Plan after a purchase by him of shares at the termination of each
offering period, or which is insufficient to purchase a full share of Common Stock of the Company,
shall be returned to said participant.

     10. Withdrawal; Termination of Employment.

          (a) A participant may withdraw all but not less than all the payroll deductions credited to
his account under the Plan at any time up to fifteen (15) days prior to the Exercise Date of the
offering period by giving written notice to the Company. All of the participant’s payroll
deductions credited to his account will be paid to him after receipt of his notice of withdrawal
and his option for the current period will be automatically terminated, and no further payroll
deductions for the purchase of shares will be made during the offering period.

          (b) Upon termination of the participant’s Continuous Status as an Employee prior to the
Exercise Date of the offering period for any reason, including retirement or death, the payroll
deductions credited to his account will be returned to him or, in the case of his death, to the
person or persons entitled thereto under paragraph 14, and his option will be automatically
terminated.

          (c) In the event an Employee fails to remain in Continuous Status as an Employee of the
Company for at least twenty (20) hours per week during the offering period in which the employee is
a participant, he will be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to his account will be returned to him and his option terminated.

          (d) A participant’s withdrawal from an offering will not have any effect upon his eligibility
to participate in a succeeding offering or in any similar plan which may hereafter be adopted by
the Company. If a participant withdraws from an offering, payroll deductions will not resume at
the beginning of a succeeding offering period unless the participant delivers to the Company a new
subscription agreement in accordance with paragraph 5(a).

     11. Interest. No interest shall accrue on the payroll deductions of a participant in
the Plan.

     12. Stock.

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          (a) The maximum number of shares of the Company’s Common Stock which shall be made available
for sale under the Plan shall be 5,900,000 shares, subject to adjustment upon changes in
capitalization of the Company as provided in paragraph 18. If the total number of shares which
would otherwise be subject to options granted pursuant to paragraph 7(a) hereof on the Offering
Date of an offering period exceeds the number of shares then available under the Plan (after
deduction of all shares for which options have been exercised or are then outstanding), the Company
shall make a pro rata allocation of the shares remaining available for option grant
in as uniform a manner as shall be practicable and as it shall determine to be equitable. In such
event, the Company shall give written notice of such reduction of the number of shares subject to
the option to each Employee affected thereby and shall similarly reduce the rate of payroll
deductions, if necessary.

          (b) The participant will have no interest or voting right in shares covered by his option
until such option has been exercised.

          (c) Shares to be delivered to a participant under the Plan will be registered in the name of
the participant.

     13. Administration. The Plan shall be administered by the Board of the Company or a
committee of members of the Board appointed by the Board. The administration, interpretation or
application of the Plan by the Board or its committee shall be final, conclusive and binding upon
all participants. Members of the Board who are eligible Employees are permitted to participate in
the Plan, provided that:

          (a) Members of the Board who are eligible to participate in the Plan may not vote on any
matter affecting the administration of the Plan or the grant of any option pursuant to the Plan.

          (b) If a Committee is established to administer the Plan, no member of the Board who is
eligible to participate in the Plan may be a member of the Committee.

     14. Designation of Beneficiary.

          (a) A participant may file a written designation of a beneficiary who is to receive any shares
and cash, if any, from the participant’s account under the Plan in the event of such participant’s
death subsequent to the end of the offering period but prior to delivery to him of such shares and
cash. In addition, a participant may file a written designation of a beneficiary who is to receive
any cash from the participant’s account under the Plan in the event of such participant’s death
prior to the Exercise Date of the offering period.

          (b) Such designation of beneficiary may be changed by the participant at any time by written
notice. In the event of the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant’s death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of the Company), the
Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse,
dependent or

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relative is known to the Company, then to such other person as the Company may
designate.

     15. Transferability. Neither payroll deductions credited to a participant’s account
nor any rights with regard to the exercise of an option or to receive shares under the Plan may be
assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of
descent and distribution or as provided in paragraph 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without effect, except that
the Company may treat such act as an election to withdraw funds in accordance with paragraph 10.

     16. Use of Funds. All payroll deductions received or held by the Company under the
Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated
to segregate such payroll deductions.

     17. Reports. Individual accounts will be maintained for each participant in the Plan.

     18. Adjustments Upon Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by each option under the
Plan which has not yet been exercised and the number of shares of Common Stock which have been
authorized for issuance under the Plan but have not yet been placed under option (collectively, the
“Reserves”), as well as the price per share of Common Stock covered by each option under the Plan
which has not yet been exercised, shall be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stocks resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any other increase or
decrease in the number of 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 adjustment shall be made
by the Board, whose determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issue 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 an
option.

     In the event of the proposed dissolution or liquidation of the Company, the offering period
will terminate immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board. In the event of a proposed sale of all or substantially all of the assets
of the Company, or the merger of the Company with or into another corporation, each option under
the Plan shall be assumed by such successor corporation or a parent or subsidiary of such successor
corporation, unless the Board, in the exercise of its sole discretion and in lieu of such
assumption, determines to shorten the offering period then in progress by setting a new Exercise
Date (the “New Exercise Date”). If the Board shortens the offering period then in progress in lieu
of assumption, the Board shall notify each participant in writing at least ten (10) business days
prior to the New Exercise Date, that the Exercise Date for the participant’s option has been
changed to the New Exercise Date and that either:

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          (a) the participant’s option will be exercised automatically on the New Exercise Date, unless
prior to such date the participant has withdrawn from the offering period as provided in Section
10; or

          (b) the Company shall pay to the participant on the New Exercise Date an amount in cash, cash
equivalents, or property as determined by the Board that is equal to the excess, if any, of (i) the
fair market value of the shares subject to the option over (ii) the aggregate option price had the
participant’s option been exercised automatically under part (a) above. In addition, all remaining
accumulated payroll deduction amounts shall be returned to the participant.

     For purposes of this paragraph 18, an option granted under the Plan shall be deemed to be
assumed if the option is replaced with a comparable option with respect to shares of capital stock
of the successor corporation or parent thereof. The determination of option comparability shall be
made by the Board and its determination shall be final, binding and conclusive on all persons.

     The Board may, if it so determines in the exercise of its sole discretion, also make provision
for adjusting the Reserves, as well as the price per share of Common Stock covered by each
outstanding option, in the event that the Company effects one or more reorganizations,
recapitalizations, rights offerings or other increases or reductions of shares of its outstanding
Common Stock, and in the event of the Company being consolidated with or merged into any other
corporation.

     19. Amendment or Termination. The Board of Directors of the Company may at any time
terminate or amend the Plan. Except as provided in paragraph 18, no such termination can affect
options previously granted, nor may an amendment make any change in any option theretofore granted
which adversely affects the rights of any participant, nor may an amendment be made without prior
approval of the shareholders of the Company (obtained in the manner described in paragraph 21) if
such amendment would:

          (a) Increase the number of shares that may be issued under the Plan;

          (b) Permit payroll deductions at a rate in excess of the lesser of (i) fifteen percent (15%)
of the participant’s Compensation or (ii) $5,000 per offering period;

          (c) Change the designation of the employees (or class of employees) eligible for participation
in the Plan; or

          (d) If the Company has a class of equity securities registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) at the time of such amendment,
materially increase the benefits which may accrue to participants under the Plan.

     If any amendment requiring shareholder approval under this paragraph 19 of the Plan is made
subsequent to the first registration of any class of equity securities by the Company under Section
12 of the Exchange Act, such shareholder approval shall be solicited as described in paragraph 21
of the Plan.

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     20. Notices. All notices or other communications by a participant to the Company
under or in connection with the Plan shall be deemed to have been duly given when received in the
form specified by the Company at the location, or by the person, designated by the Company for the
receipt thereof.

     21. Shareholder Approval.

          (a) Continuance of the Plan shall be subject to approval by the shareholders of the Company
within twelve (12) months before or after the date the Plan is adopted. If such shareholder
approval is obtained at a duly held shareholders’ meeting, it must be obtained by the affirmative
vote of the holders of a majority of the votes cast at a shareholders’ meeting at which a quorum
representing a majority of all outstanding voting stock is, either in person or by proxy, present
and voting on the Plan; or if such shareholder approval is obtained by written consent, it must be
obtained by the written consent of the holders of a majority of the outstanding shares of the
Company entitled to vote on the Plan; provided, however, that approval at a meeting or by written
consent may be obtained by a lesser degree of shareholder approval if the Board determines, in its
discretion after consultation with the Company’s legal counsel, that such a lesser degree of
shareholder approval will comply with all applicable laws and will not adversely affect the
qualification of the Plan under Section 423 of the Code.

          (b) If any required approval by the shareholders of the Plan itself or of any amendment
thereto is solicited at any time otherwise than substantially in accordance with Section 14(a) of
the Exchange Act and the rules and regulations promulgated thereunder, then the Company shall, at
or prior to the first annual meeting of shareholders held subsequent to the granting of an option
hereunder to an officer or director, do the following:

               (i) furnish in writing to the holders entitled to vote for the Plan substantially the same
information which would be required (if proxies to be voted with respect to approval or disapproval
of the Plan or amendment were then being solicited) by the rules and regulations in effect under
Section 14(a) of the Exchange Act at the time such information is furnished; and

               (ii) file with, or mail for filing to, the Securities and Exchange Commission four copies of
the written information referred to in subsection (i) hereof not later than the date on which such
information is first sent or given to shareholders.

     22. Conditions Upon Issuance of Shares. Shares shall not be issued with respect to an
option unless the exercise of such option and the issuance and delivery of such shares pursuant
thereto shall comply with all applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Securities Act of 1934, as amended, the
rules and regulations promulgated thereunder, and the requirements of any stock exchange 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.

     23. Term of Plan. The Plan shall become effective upon the earlier to occur of its
adoption by the Board of Directors or its approval by the shareholders of the Company as
described in paragraph 21. It shall continue in effect for a term of twenty (20) years unless
sooner

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terminated under paragraph 19.

     24. Plan History. In May 1992 the Board adopted, and the shareholders approved, the
Plan. In January 1995 the Board adopted, and in May 1995 the shareholders ratified, an amendment
to the Plan to increase the number of shares available for issuance under the Plan from 150,000 to
250,000 shares. In March 1996, the Board approved, and in May 1996 the shareholders ratified, an
amendment to the Plan to increase the number of shares available for issuance thereunder from
250,000 shares to 290,000 shares. In April 1997, the Board approved, and in May 1997 the
shareholders ratified, an amendment to the Plan increasing the number of shares available for
issuance thereunder from 290,000 shares to 350,000 shares. In September 1997, the Company declared
a stock split, thus increasing the number of shares reserved for issuance under the Plan to 700,000
shares. In March 1998, the Board approved, and in May 1998 the shareholders ratified, an amendment
to the Plan increasing the number of shares available for issuance thereunder from 700,000 shares
to 950,000 shares. In February 1999, the Board approved, and in May 1999 the shareholders
ratified, an amendment to the Plan increasing the number of shares available for issuance
thereunder from 950,000 shares to 1,300,000 shares. In December 1999, the Company declared a stock
split, thus increasing the number of shares reserved for issuance under the Plan to 3,900,000
shares. In March 2002, the Board approved, and in May 2002 the shareholders ratified, an amendment
to the Plan increasing the number of shares available for issuance thereunder by 1,000,000 shares
from 3,900,000 shares to 4,900,000 shares. In March 2005, subject to shareholder approval, the
Board approved an amendment to the Plan in order to (a) increase the number of shares available for
issuance thereunder by 1,000,000 shares from 4,900,000 shares to 5,900,000 shares and (b) revise
various administrative provisions of the Plan as well as the termination provisions (under
paragraph 18 of the Plan) in the event of a sale of all or substantially all of the assets of the
Company or a merger of the Company. The amendment of the various administrative provisions and
paragraph 18 of the Plan, if approved by the shareholders, shall be effective for offering periods
beginning on or after May 1, 2005. In February 2007, subject to shareholder approval, the Board
approved an amendment to the Plan increasing the number of shares available for issuance thereunder
by 1,000,000 shares from 4,900,000 shares to 5,900,000 shares.

10exv10w10

 

Exhibit
10.10

NOVELLUS SYSTEMS, INC.

2001 STOCK INCENTIVE PLAN

(Amended and Restated February 15, 2007)

     1. Purposes of the Plan. The purposes of this Stock Incentive Plan are to attract and
retain the best available personnel, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company’s business.

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

          (a) “Administrator” means the Board or any of the Committees appointed to administer
the Plan.

          (b) “Affiliate” and “Associate” shall have the respective meanings ascribed to
such terms in Rule 12b-2 promulgated under the Exchange Act.

          (c) “Applicable Laws” means the legal requirements relating to the administration of
stock incentive plans, if any, under applicable provisions of federal securities laws, state
corporate and securities laws, the Code, the rules of any applicable stock exchange or national
market system, and the rules of any foreign jurisdiction applicable to Awards granted to residents
therein.

          (d) “Award” means the grant of an Option, Restricted Stock or Restricted Stock Unit
under the Plan.

          (e) “Award Agreement” means the written agreement evidencing the grant of an Award
executed by the Company and the Grantee, including any amendments thereto.

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

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

          (h) “Committee” means any committee appointed by the Board to administer the Plan.

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

          (j) “Company” means Novellus Systems, Inc., a California corporation.

          (k) “Consultant” means any person (other than an Employee or a Director, solely with
respect to rendering services in such person’s capacity as a Director) who is engaged by the
Company or any Related Entity to render consulting or advisory services to the Company or such
Related Entity.

          (l) “Continuous Service” means that the provision of services to the Company or a
Related Entity in any capacity of Employee, Director or Consultant is not interrupted or
terminated. In jurisdictions requiring notice in advance of an effective termination as an
Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual
cessation of providing services to the Company or a Related Entity notwithstanding any required
notice period that must be fulfilled before a termination as an Employee, Director or Consultant
can be effective under Applicable Laws. A Grantee’s Continuous Service shall be deemed to have
terminated either upon an actual termination of Continuous Service or upon the entity for which the
Grantee provides services ceasing to be a Related Entity. Continuous Service shall not be
considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the
Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant,
or (iii) any change in status as long as the individual remains in the service of the Company or a
Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in
the Award Agreement). An approved leave of absence shall include sick leave, military leave, or
any other authorized personal leave. For purposes of each Incentive Stock Option granted under the
Plan, if such leave exceeds three (3) months, and reemployment

upon expiration of such leave is not guaranteed by statute or contract, then the Incentive Stock
Option shall be treated as a Nonstatutory Stock Option on the day three (3) months and one (1) day
following the expiration of such three (3) month period.

 

 

          (m) “Corporate Transaction” means any of the following transactions:

               (i) a merger or consolidation in which the Company is not the surviving entity, except for a
transaction the principal purpose of which is to change the state in which the Company is
incorporated;

               (ii) the sale, transfer or other disposition of all or substantially all of the assets of the
Company (including the capital stock of the Company’s subsidiary corporations);

               (iii) approval by the Company’s shareholders of any plan or proposal for the complete
liquidation or dissolution of the Company;

               (iv) any reverse merger or series of related transactions culminating in a reverse merger
(including, but not limited to, a tender offer followed by a reverse merger) in which the Company
is the surviving entity but (A) the shares of Common Stock outstanding immediately prior to such
merger are converted or exchanged by virtue of the merger into other property, whether in the form
of securities, cash or otherwise, or (B) in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company’s outstanding securities are transferred to
a person or persons different from those who held such securities immediately prior to such merger
or the initial transaction culminating in such merger; or

               (v) acquisition in a single or series of related transactions by any person or related group
of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than
fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but
excluding any such transaction or series of related transactions that the Administrator determines
shall not be a Corporate Transaction.

          (n) “Covered Employee” means an Employee who is a “covered employee” under Section
162(m)(3) of the Code.

          (o) “Director” means a member of the Board or the board of directors of any Related
Entity.

          (p) “Disability” means a Grantee would qualify for benefit payments under the
long-term disability policy of the Company or the Related Entity to which the Grantee provides
services regardless of whether the Grantee is covered by such policy. If the Company or the
Related Entity to which the Grantee provides service does not have a long-term disability plan in
place, “Disability” means that a Grantee is permanently unable to carry out the responsibilities
and functions of the position held by the Grantee by reason of any medically determinable physical
or mental impairment. A Grantee will not be considered to have incurred a Disability unless he or
she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.

          (q) “Employee” means any person, including an Officer or Director, who is an employee
of the Company or any Related Entity. The payment of a director’s fee by the Company or a Related
Entity shall not be sufficient to constitute “employment” by the Company.

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

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

               (i) If the Common Stock is listed on one or more established stock exchanges or national
market systems, including without limitation The NASDAQ Global Select Market, The NASDAQ Global
Market or The NASDAQ Capital Market of The NASDAQ Stock Market LLC, its Fair Market Value shall be
the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on
the principal exchange or system on which the Common Stock is listed (as determined by the
Administrator) on the date of

determination (or, if no closing sales price or closing bid was reported on that date, as
applicable, on the last trading date such closing sales price or closing bid was reported), as
reported in The Wall Street Journal or such other source as the Administrator deems reliable;

               (ii) If the Common Stock is regularly quoted on an automated quotation system (including the
OTC Bulletin Board) or by a recognized securities dealer, its Fair Market Value shall be the

 

 

closing sales price for such stock as quoted on such system or by such securities dealer on
the date of determination, but if selling prices are not reported, the Fair Market Value of a share
of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on
the date of determination (or, if no such prices were reported on that date, on the last date such
prices were reported), as reported in The Wall Street Journal or such other source as the
Administrator deems reliable; or

               (iii) In the absence of an established market for the Common Stock of the type described in
(i) and (ii), above, the Fair Market Value thereof shall be determined by the Administrator in good
faith.

          (t) “Grantee” means an Employee, Director or Consultant who receives an Award pursuant
to an Award Agreement under the Plan.

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

          (v) “Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.

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

          (x) “Option” means an option to purchase Shares pursuant to an Award Agreement granted
under the Plan.

          (y) “Outside Director” means a Director who is not an Employee.

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

          (aa) “Performance — Based Compensation” means compensation qualifying as
“performance-based compensation” under Section 162(m) of the Code.

          (bb) “Plan” means this 2001 Stock Incentive Plan.

          (cc) “Related Entity” means any Parent, Subsidiary and any business, corporation,
partnership, limited liability company or other entity in which the Company, a Parent or a
Subsidiary holds a substantial ownership interest, directly or indirectly.

          (dd) “Related Entity Disposition” means the sale, distribution or other disposition by
the Company, a Parent or a Subsidiary of all or substantially all of the interests of the Company,
a Parent or a Subsidiary in any Related Entity effected by a sale, merger or consolidation or other
transaction involving that Related Entity or the sale of all or substantially all of the assets of
that Related Entity, other than any Related Entity Disposition to the Company, a Parent or a
Subsidiary.

          (ee) “Restricted Stock” means Shares issued under the Plan to the Grantee for such
consideration, if any, and subject to such restrictions on transfer, rights of first refusal,
repurchase provisions, forfeiture provisions, and other terms and conditions as established by the
Administrator.

          (ff) “Restricted Stock Units” means an Award which may be earned in whole or in part
upon the passage of time or the attainment of performance criteria established by the Administrator
and which may be settled for cash, Shares or other securities or a combination of cash, Shares or
other securities as established by the Administrator.

          (gg) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor
thereto.

          (hh) “Share” means a share of the Common Stock.

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

     3. Stock Subject to the Plan.

          (a) Subject to the provisions of Section 10, below, the maximum aggregate number of Shares
which may be issued pursuant to all Awards is 14,860,000 Shares, plus the number of Shares that
remain

 

 

available for grants of awards under the Company’s 2001 Non-Qualified Stock Option Plan (the
2001 NQ Plan) as of May 11, 2007, plus any Shares that would otherwise return to the 2001 NQ Plan
as a result of forfeiture, termination or expiration of awards previously granted under the 2001 NQ
Plan; provided, however, that the maximum aggregate number of Shares which may be issued pursuant
to all Awards of Restricted Stock and Restricted Stock Units is 4,636,000 and that the maximum
aggregate number of Shares which may be issued pursuant to all Awards of Incentive Stock Options is
14,000,000 Shares (with all such Share amounts and limits subject to the provisions of Section 10,
below). The Shares to be issued pursuant to Awards may be authorized, but unissued, or reacquired
Common Stock.

          (b) Any Shares covered by an Award (or portion of an Award) which is forfeited or canceled,
expires or is settled in cash, shall be deemed not to have been issued for purposes of determining
the maximum aggregate number of Shares which may be issued under the Plan. Shares that actually
have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall
not become available for future issuance under the Plan, except that if unvested Shares are
forfeited, or repurchased by the Company at the lower of their original purchase price or their
Fair Market Value at the time of repurchase, such Shares shall become available for future grant
under the Plan. Notwithstanding anything to the contrary contained herein: (i) Shares tendered or
withheld in payment of an Option exercise price shall not be returned to the Plan and shall not
become available for future issuance under the Plan; and (ii) Shares withheld by the Company to
satisfy any tax withholding obligation shall not be returned to the Plan and shall not become
available for future issuance under the Plan.

     4. Administration of the Plan.

          (a) Plan Administrator.

               (i) Administration with Respect to Directors and Officers. With respect to grants of
Awards to Directors or Employees who are also Officers or Directors of the Company, the Plan shall
be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the Applicable Laws and to permit such grants and
related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in
accordance with Rule 16b-3. Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board.

               (ii) Administration With Respect to Consultants and Other Employees. With respect to
grants of Awards to Employees or Consultants who are neither Directors nor Officers of the Company,
the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which
Committee shall be constituted in such a manner as to satisfy the Applicable Laws. Once appointed,
such Committee shall continue to serve in its designated capacity until otherwise directed by the
Board.

               (iii) Administration With Respect to Covered Employees. Notwithstanding the
foregoing, grants of Awards to any Covered Employee intended to qualify as Performance-Based
Compensation shall be made only by a Committee (or subcommittee of a Committee) which is comprised
solely of two or more Directors eligible to serve on a committee making Awards qualifying as
Performance-Based Compensation. In the case of such Awards granted to Covered Employees,
references to the “Administrator” or to a “Committee” shall be deemed to be references to such
Committee or subcommittee.

 

 

               (iv) Administration Errors. In the event an Award is granted in a manner inconsistent
with the provisions of this subsection (a), such Award shall be presumptively valid as of its grant
date to the extent permitted by the Applicable Laws.

          (b) Powers of the Administrator. Subject to Applicable Laws and the provisions of the
Plan (including any other powers given to the Administrator hereunder), and except as otherwise
provided by the Board, the Administrator shall have the authority, in its discretion:

               (i) to select the Employees, Directors and Consultants to whom Awards may be granted from time
to time hereunder;

               (ii) to determine whether and to what extent Awards are granted hereunder;

               (iii) to determine the number of Shares or the amount of other consideration to be covered by
each Award granted hereunder;

               (iv) to approve forms of Award Agreements for use under the Plan;

               (v) to determine the terms and conditions of any Award granted hereunder;

               (vi) to amend the terms of any outstanding Award granted under the Plan, provided that (A) any
amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be
made without the Grantee’s written consent, provided, however, that an amendment or modification
that may cause an Incentive Stock Option to become a Non-Qualified Stock Option shall not be
treated as adversely affecting the rights of the Grantee, (B) the reduction of the exercise price
of any Option awarded under the Plan shall be subject to shareholder approval and (C) canceling an
Option at a time when its exercise price exceeds the Fair Market Value of the underlying Shares, in
exchange for another Option, Restricted Stock or other Award shall be subject to shareholder
approval, unless the cancellation and exchange occurs in connection with a Corporate Transaction;

               (vii) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan,
including without limitation, any notice of Award or Award Agreement, granted pursuant to the Plan;

               (viii) to grant Awards to Employees, Directors and Consultants employed outside the United
States on such terms and conditions different from those specified in the Plan as may, in the
judgment of the Administrator, be necessary or desirable to further the purpose of the Plan; and

               (ix) to take such other action, not inconsistent with the terms of the Plan, as the
Administrator deems appropriate.

     The express grant in the Plan of any specific power to the Administrator shall not be
construed as limiting any power or authority of the Administrator; provided that the Administrator
may not exercise any right or power reserved to the Board. Any decision made, or action taken, by
the Administrator or in connection with the administration of this Plan shall be final, conclusive
and binding on all persons having an interest in the Plan.

     5. Eligibility. Awards other than Incentive Stock Options may be granted to
Employees, Directors and Consultants. Incentive Stock Options may be granted only to Employees of
the Company, a Parent or a Subsidiary. An Employee, Director or Consultant who has been granted an
Award may, if otherwise eligible, be granted additional Awards. Awards may be granted to such
Employees, Directors or Consultants who are residing in foreign jurisdictions as the Administrator
may determine from time to time.

     6. Terms and Conditions of Awards.

          (a) Type of Awards. The Administrator is authorized under the Plan to award Options,
Restricted Stock and Restricted Stock Units with a fixed or variable price related to the Fair
Market Value of the Shares and with an exercise or conversion privilege related to the passage of
time, the occurrence of one or more events, or the satisfaction of performance criteria or other
conditions.

 

 

          (b) Designation of Award. Each Award shall be designated in the Award Agreement. In
the case of an Option, the Option shall be designated as either an Incentive Stock Option or a
Nonstatutory Stock Option. However, notwithstanding such designation, an Option will qualify as an
Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation of Section
422(d) of the Code is not exceeded. The $100,000 limitation of Section 422(d) of the Code is
calculated based on the aggregate Fair Market Value of the Shares subject to Options designated as
Incentive Stock Options which become exercisable for the first time by a Grantee during any
calendar year (under all plans of the Company or any Parent or Subsidiary of the Company). For
purposes of this calculation, Incentive Stock Options shall be taken into account in the order in
which they were granted, and the Fair Market Value of the Shares shall be determined as of the
grant date of the relevant Option.

          (c) Conditions of Award. Subject to the terms of the Plan, the Administrator shall
determine the provisions, terms, and conditions of each Award including, but not limited to, the
Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form
of payment (cash, Shares, or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The performance criteria established
by the Administrator may be based on any one of, or combination of, the following: (i) increase in
share price, (ii) earnings per share, (iii) total shareholder return, (iv) operating margin, (v)
gross margin, (vi) return on equity, (vii) return on assets, (viii) return on investment, (ix)
operating income, (x) net operating income, (xi) pre-tax profit, (xii) cash flow, (xiii) revenue,
(xiv) expenses, (xv) earnings before interest, taxes and depreciation, (xvi) economic value added
and (xvii) market share. For Awards that are not intended to qualify as Performance-Based
Compensation, the performance criteria established by the Administrator may be based on personal
management objectives, or other measures of performance selected by the Administrator. The
performance criteria may be applicable to the Company, Related Entities and/or any individual
business units of the Company or any Related Entity. Partial achievement of the specified criteria
may result in a payment or vesting corresponding to the degree of achievement as specified in the
Award Agreement.

          (d) Acquisitions and Other Transactions. The Administrator may issue Awards under the
Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant
future awards in connection with the Company or a Related Entity acquiring another entity, an
interest in another entity or an additional interest in a Related Entity whether by merger, stock
purchase, asset purchase or other form of transaction.

          (e) Deferral of Award Payment. The Administrator may establish one or more programs
under the Plan to permit selected Grantees the opportunity to elect to defer receipt of
consideration upon exercise of an Award, satisfaction of performance criteria, or other event that
absent the election would entitle the Grantee to payment or receipt of Shares or other
consideration under an Award. The Administrator may establish the election procedures, the timing
of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if
any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules
and procedures that the Administrator deems advisable for the administration of any such deferral
program.

          (f) Separate Programs. The Administrator may establish one or more separate programs
under the Plan for the purpose of issuing particular forms of Awards to one or more classes of
Grantees on such terms and conditions as determined by the Administrator from time to time.

          (g) Individual Limitations on Awards.

               (i) Individual Limit for Options. The maximum number of Shares with respect to which
Options may be granted to any Grantee in any fiscal year of the Company shall be 600,000 Shares.
In connection with a Grantee’s commencement of Continuous Service, a Grantee may be granted Options
for up to an additional 1,200,000 Shares which shall not count against the limit set forth in the
previous sentence. The foregoing limitations shall be adjusted proportionately in connection with
any change in the Company’s capitalization pursuant to Section 10, below. To the extent required
by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitations
with respect to a Grantee, if any Option is

 

 

canceled, the canceled Option shall continue to count against the maximum number of Shares with
respect to which Options may be granted to the Grantee. For this purpose, the repricing of an
Option shall be treated as the cancellation of the existing Option and the grant of a new Option
(if approved by shareholders).

               (ii) Individual Limit for Restricted Stock and Restricted Stock Units. For awards of
Restricted Stock and Restricted Stock Units that are intended to be Performance-Based Compensation,
the maximum number of Shares with respect to which such Awards may be granted to any Grantee in any
fiscal year of the Company shall be 600,000 Shares. The foregoing limitation shall be adjusted
proportionately in connection with any change in the Company’s capitalization pursuant to Section
10, below.

               (iii) Deferral. If the vesting or receipt of Shares under an Award is deferred to a
later date, any amount (whether denominated in Shares or cash) paid in addition to the original
number of Shares subject to such Award will not be treated as an increase in the number of Shares
subject to the Award if the additional amount is based either on a reasonable rate of interest or
on one or more predetermined actual investments such that the amount payable by the Company at the
later date will be based on the actual rate of return of a specific investment (including any
decrease as well as any increase in the value of an investment).

          (h) Early Exercise. The Award Agreement may, but need not, include a provision
whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any
part or all of the Award prior to full vesting of the Award. Any unvested Shares received pursuant
to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity
or to any other restriction the Administrator determines to be appropriate.

          (i) Term of Award. The term of each Award shall be the term stated in the Award
Agreement provided, however, that the term shall be no more than ten (10) years from the date of
grant thereof. However, in the case of an Incentive Stock Option granted to a Grantee who, at the
time the 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 of the Company, the term of the
Incentive Stock Option shall be five (5) years from the date of grant thereof or such shorter term
as may be provided in the Award Agreement. Notwithstanding the foregoing, the specified term of
any Award shall not include any period for which the Grantee has elected to defer the receipt of
the Shares or cash issuable pursuant to the Award.

          (j) Transferability of Awards. Incentive Stock Options may not be sold, pledged,
assigned, hypothecated, transferred, or 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 Grantee, only by the
Grantee. Other Awards shall be transferable (i) by will and by the laws of descent and
distribution and (ii) during the lifetime of the Grantee, to the extent and in the manner
authorized by the Administrator, but only to the extent such transfers are made to family members,
to family trusts, to family controlled entities, to charitable organizations, and pursuant to
domestic relations orders or agreements, in all cases without payment for such transfers to the
Grantee. Notwithstanding the foregoing, the Grantee may designate one or more beneficiaries of the
Grantee’s Award in the event of the Grantee’s death on a beneficiary designation form provided by
the Administrator.

          (k) Time of Granting Awards. The date of grant of an Award shall for all purposes be
the date on which the Administrator makes the determination to grant such Award, or such other date
as is determined by the Administrator. Notice of the grant determination shall be given to each
Employee, Director or Consultant to whom an Award is so granted within a reasonable time after the
date of such grant.

     7. Award Exercise or Purchase Price, Consideration and Taxes.

          (a) Exercise or Purchase Price. The exercise or purchase price, if any, for an Award
shall be as follows:

               (i) In the case of an Incentive Stock Option granted to an Employee who, at the time of 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 not less than one hundred ten percent (110%) of the Fair Market Value per
Share on the date of grant.

               (ii) In cases other than the case described in the preceding paragraph, the per Share exercise
price of an Option shall be not less than one hundred percent (100%) of the Fair Market Value per
Share on the date of grant.

               (iii) In the case of Awards intended to qualify as Performance-Based Compensation, the
exercise or purchase price, if any, shall be not less than one hundred percent (100%) of the Fair
Market Value per Share on the date of grant.

               (iv) In the case of a Restricted Stock or Restricted Stock Units grant, such price, if any,
shall be determined by the Administrator.

               (v) Notwithstanding the foregoing provisions of this Section 7(a), in the case of an Award
issued pursuant to Section 6(d), above, the exercise or purchase price for the Award shall be
determined in accordance with the provisions of the relevant instrument evidencing the agreement to
issue such Award.

          (b) Consideration. Subject to Applicable Laws, the consideration to be paid for the
Shares to be issued upon exercise or purchase of an Award including the method of payment, shall be
determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined
at the time of grant). In addition to any other types of consideration the Administrator may
determine, the Administrator is authorized to accept as consideration for Shares issued under the
Plan the following:

               (i) cash;

               (ii) check;

               (iii) surrender of Shares or delivery of a properly executed form of attestation of ownership
of Shares as the Administrator may require (including withholding of Shares otherwise deliverable
upon exercise of the Award) which have a Fair Market Value on the date of surrender or attestation
equal to the aggregate exercise price of the Shares as to which said Award shall be exercised (but
only to the extent that such exercise of the Award would not result in an accounting compensation
charge with respect to the Shares used to pay the exercise price unless otherwise determined by the
Administrator);

               (iv) with respect to Options, payment through a broker-dealer sale and remittance procedure
pursuant to which the Grantee (A) shall provide written instructions to a Company designated
brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the
Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and
(B) shall provide written directives to the Company to deliver the certificates for the purchased
Shares directly to such brokerage firm in order to complete the sale transaction;

               (v) with respect to Options, payment through a “net exercise” such that, without the payment
of any funds, the Grantee may exercise the Option and receive the net number of Shares equal to (i)
the number of Shares as to which the Option is being exercised, multiplied by (ii) a fraction, the
numerator of which is the Fair Market Value per Share (on such date as is determined by the
Administrator) less the Exercise Price per Share, and the denominator of which is such Fair Market
Value per Share (the number of net Shares to be received shall be rounded down to the nearest whole
number of Shares); or

               (vi) any combination of the foregoing methods of payment.

     The Administrator may at any time or from time to time, by adoption of or by amendment to the
standard forms of Award Agreement described in Section 4(b)(iv), or by other means, grant Awards
which do not permit all of the foregoing forms of consideration to be used in payment for the
Shares or which otherwise restrict one or more forms of consideration.

          (c) Taxes. No Shares shall be delivered under the Plan to any Grantee or other person
until such Grantee or other person has made arrangements acceptable to the Administrator for the
satisfaction of any foreign, federal, state, or local income and employment tax withholding
obligations, including, without

 

 

limitation, obligations incident to the receipt of Shares or the disqualifying disposition of
Shares received on exercise of an Incentive Stock Option. Upon exercise of an Award, the Company
shall withhold or collect from Grantee an amount sufficient to satisfy such tax obligations.

     8. Exercise of Award.

          (a) Procedure for Exercise; Rights as a Shareholder.

               (i) Any Award granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator under the terms of the Plan and specified in the Award
Agreement.

               (ii) An Award 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 Award by the person entitled to exercise
the Award and full payment for the Shares with respect to which the Award is exercised, including,
to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase
price as provided in Section 7(b)(v).

          (b) Exercise of Award Following Termination of Continuous Service.

               (i) An Award may not be exercised after the termination date of such Award set forth in the
Award Agreement and may be exercised following the termination of a Grantee’s Continuous Service
only to the extent provided in the Award Agreement.

               (ii) Where the Award Agreement permits a Grantee to exercise an Award following the
termination of the Grantee’s Continuous Service for a specified period, the Award shall terminate
to the extent not exercised on the last day of the specified period or the last day of the original
term of the Award, whichever occurs first.

               (iii) Any Award designated as an Incentive Stock Option to the extent not exercised within the
time permitted by law for the exercise of Incentive Stock Options following the termination of a
Grantee’s Continuous Service shall convert automatically to a Nonstatutory Stock Option and
thereafter shall be exercisable as such to the extent exercisable by its terms for the period
specified in the Award Agreement.

     9. Conditions Upon Issuance of Shares.

          (a) If at any time the Administrator determines that the delivery of Shares pursuant to the
exercise, vesting or any other provision of an Award is or may be unlawful under Applicable Laws,
the vesting or right to exercise an Award or to otherwise receive Shares pursuant to the terms of
an Award shall be suspended until the Administrator determines that such delivery is lawful and
shall be further subject to the approval of counsel for the Company with respect to such
compliance. The Company shall have no obligation to effect any registration or qualification of
the Shares under federal or state laws.

          (b) As a condition to the exercise of an Award, the Company may require the person exercising
such Award to represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is required by any Applicable
Laws.

     10. Adjustments Upon Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of Shares covered by each outstanding Award, and the number
of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet
been granted or which have been returned to the Plan, the exercise or purchase price of each such
outstanding Award, the maximum number of Shares with respect to which Awards may be granted to any
Grantee in any fiscal year of the Company, as well as any other terms that the Administrator
determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in
the number of issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Shares, or similar event affecting the Shares, (ii) any
other increase or decrease in the number of issued Shares effected without receipt of consideration
by the Company, or (iii) any other transaction with respect to Common Stock including a corporate
merger, consolidation, acquisition of property or stock, separation (including a spin-off or other
distribution of stock or property), reorganization, liquidation (whether partial or complete) or
any similar transaction; provided, however that conversion of any convertible securities of the
Company shall not be

 

 

deemed to have been “effected without receipt of consideration.” In connection with the
foregoing adjustments, the Administrator may, in its discretion, prohibit the exercise of Awards or
other issuance of Shares, cash or other consideration

pursuant to Awards during certain periods of time. Except as the Administrator determines, no
issuance by the Company of shares of any class, or securities convertible into shares of any class,
shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price
of Shares subject to an Award.

     11. Corporate Transactions and Related Entity Dispositions. Except as may be provided
in an Award Agreement:

          (a) The Administrator shall have the authority, exercisable either in advance of any actual or
anticipated Corporate Transaction or Related Entity Disposition or at the time of an actual
Corporate Transaction or Related Entity Disposition and exercisable at the time of the grant of an
Award under the Plan or any time while an Award remains outstanding, to provide for the full or
partial automatic vesting and exercisability of one or more outstanding unvested Awards under the
Plan and the full or partial release from restrictions on transfer and repurchase or forfeiture
rights of such Awards in connection with a Corporate Transaction or Related Entity Disposition, on
such terms and conditions as the Administrator may specify. The Administrator also shall have the
authority to condition any such Award vesting and exercisability or release from such limitations
upon the subsequent termination of the Continuous Service of the Grantee within a specified period
following the effective date of the Corporate Transaction or Related Entity Disposition. The
Administrator may provide that any Awards so vested or released from such limitations in connection
with a Related Entity Disposition, shall remain fully exercisable until the expiration or sooner
termination of the Award. Effective upon the consummation of a Corporate Transaction, all
outstanding Awards under the Plan shall terminate unless assumed by the successor company or its
parent.

          (b) The portion of any Incentive Stock Option accelerated under this Section 11 in connection
with a Corporate Transaction or Related Entity Disposition shall remain exercisable as an Incentive
Stock Option under the Code only to the extent the $100,000 dollar limitation of Section 422(d) of
the Code is not exceeded. To the extent such dollar limitation is exceeded, the accelerated excess
portion of such Option shall be exercisable as a Nonstatutory Stock Option.

     12. Effective Date and Term of Plan. The Plan became effective in 2001. It shall
continue in effect for a term of ten (10) years unless sooner terminated. Subject to Applicable
Laws, Awards may be granted under the Plan upon its becoming effective.

     13. Amendment, Suspension or Termination of the Plan.

          (a) The Board may at any time amend, suspend or terminate the Plan; provided, however, that no
such amendment shall be made without the approval of the Company’s shareholders to the extent such
approval is required by Applicable Laws, or if such amendment would:

               (i) lessen the shareholder approval requirements of Section 4(b)(vi) or this Section 13(a);

               (ii) increase the benefits accrued to participants under the Plan;

               (iii) increase the number of securities which may be issued under the Plan; or

               (iv) modify the requirements for participation in the Plan.

          (b) No Award may be granted during any suspension of the Plan or after termination of the
Plan.

          (c) No suspension or termination of the Plan (including termination of the Plan under Section
11 above) shall adversely affect any rights under Awards already granted to a Grantee.

     14. Reservation of Shares.

          (a) 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.

 

 

          (b) The inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s counsel to be necessary to 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.

     15. No Effect on Terms of Employment/Consulting Relationship. The Plan shall not
confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it
interfere in any way with his or her right or the Company’s right to terminate the Grantee’s
Continuous Service at any time, with or without cause.

     16. No Effect on Retirement and Other Benefit Plans. Except as specifically provided
in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be
deemed compensation for purposes of computing benefits or contributions under any retirement plan
of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan
of any kind or any benefit plan subsequently instituted under which the availability or amount of
benefits is related to level of compensation. The Plan is not a “Retirement Plan” or “Welfare
Plan” under the Employee Retirement Income Security Act of 1974, as amended.

     17. Plan History. The Plan was initially approved by the Board and shareholders of
the Company in 2001. In February 2003, the Board approved an amendment to the Plan to increase the
automatic option grant to Outside Directors under Section 6(e) of the Plan from 10,000 shares to
18,000 shares, which amendment was not subject to shareholder approval. In March 2005, subject to
shareholder approval, the Board approved an amendment to the Plan in order to (i) increase the
number of shares available for issuance thereunder by 4,500,000 shares from 6,360,000 shares to
10,860,00 shares, (ii) provide that the maximum number of Shares which may be issued pursuant to
all Awards of Restricted Stock is 2,136,000 Shares, (iii) remove the automatic option grant program
for Outside Directors under Section 6(e) in order to permit greater flexibility in the granting of
awards to Outside Directors under the Plan and (iv) amend certain other administrative provisions
of the Plan. On July 20, 2006, the Board approved an amendment to the Plan to permit the grant of
Restricted Stock Units and to make such other changes to reflect current Applicable Laws. On
February 15, 2007, the Board approved an amendment and restatement of the Plan, subject to the
approval of the Company’s shareholders, (i) to increase the maximum number of Shares available
under the Plan; (ii) to impose a per person limit on the number of Shares subject to Awards of
Restricted Stock and Restricted Stock Units intended to qualify as Performance-Based Compensation
in any fiscal year of the Company; and (iii) to expand the definition of Corporate Transaction,
which shall take effect only for Awards granted on and after the date on which the Company’s
shareholders approve the amendment and restatement of the Plan.

     18. Unfunded Obligation. Grantees shall have the status of general unsecured
creditors of the Company. Any amounts payable to Grantees pursuant to the Plan shall be unfunded
and unsecured obligations for all purposes, including, without limitation, Title I of the Employee
Retirement Income Security Act of 1974, as amended. Neither the Company nor any Related Entity
shall be required to segregate any monies from its general funds, or to create any trusts, or
establish any special accounts with respect to such obligations. The Company shall retain at all
times beneficial ownership of any investments, including trust investments, which the Company may
make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance
of any trust or any Grantee account shall not create or constitute a trust or fiduciary
relationship between the Administrator, the Company or any Related Entity and a Grantee, or
otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any
assets of the Company or a Related Entity. The Grantees shall have no claim against the Company or
any Related Entity for any changes in the value of any assets that may be invested or reinvested by
the Company with respect to the Plan.

     19. Construction. Captions and titles contained herein are for convenience only and
shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise
indicated by the context, the singular shall include the plural and the plural shall include the
singular. Use of the term “or” is not intended to be exclusive, unless the context clearly
requires otherwise.

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