Document:

exv10w06

Exhibit 10.06

1997 STOCK OPTION PLAN

OF

CHATHAM TECHNOLOGIES, INC.

     1. PURPOSES OF THE PLAN. This stock option plan (the “Plan”) is intended to provide
an incentive to key employees (including directors and officers who are key employees) and to
consultants and directors who are not employees of CHATHAM TECHNOLOGIES, INC., a Delaware
corporation (the “Company”), or any of its Subsidiaries (as defined in Paragraph 19), and to offer
an additional inducement in obtaining the services of such persons. The Plan provides for the
grant of “incentive stock options” (“ISOs”) within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”) and nonqualified stock options which do not qualify
as ISOs (“NQSOs”). The Company makes no representation or warranty, express or implied, as to the
qualification of any option as an “incentive stock option” under the Code.

     2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph 12, the
aggregate number of shares of Class A Common Stock, $.01 par value per share, of the Company
(“Common Stock”) for which options may be granted under the Plan shall not exceed 150,000. Such
shares of Common Stock shall consist of authorized but unissued shares of Common Stock. Subject to
the provisions of Paragraph 13, any shares of Common Stock subject to an option which for any
reason expires, is canceled or is terminated unexercised or which ceases for any reason to be
exercisable, shall again become available for the granting of options under the Plan. The Company
shall at all times during the term of the Plan reserve and keep available such number of shares of
Common Stock as will be sufficient to satisfy the requirements of the Plan.

     3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Board of
Directors of the Company (the “Board of Directors”) or a committee of the Board of Directors
(collectively, the “Committee”). Except as otherwise provided by the Board of Directors, the
By-laws of the Company or applicable law, a majority of the members of the Committee shall
constitute a quorum, and the acts of a majority of the members present at any meeting at which a
quorum is present, and any acts approved in writing by all members without a meeting, shall be the
acts of the Committee.

     Subject to the express provisions of the Plan, the Committee shall have the authority, in its
sole discretion, to determine: the key employees, consultants and Non-Employee Directors (as
defined in Paragraph 19) who shall be granted options; the type of option to be granted to a key
employee; the times when an option shall be granted; the number of shares of Common Stock to be
subject to each option; the term of each option; the date each option shall become exercisable;
whether an option shall be exercisable in whole, in part or in installments and, if in
installments, the number of shares of Common Stock to be subject to each installment, whether the
installments shall be cumulative, the date each installment shall become exercisable and the term
of each installment; whether to accelerate the date of exercise of any option or installment;
whether shares of Common Stock may be issued upon the exercise of an option as partly paid and, if
so, the dates when future installments of the exercise price shall become due and the amounts of
such installments; the exercise price of each option; the form of payment of the exercise price;
whether to restrict the sale or other disposition of the shares of Common Stock acquired upon the
exercise of an option and, if so, whether and under what conditions to waive any such restriction;
whether and under what conditions to subject all or a portion of the grant or exercise of an option
or the shares acquired pursuant to the exercise of an option to the fulfillment of certain
restrictions or contingencies as specified in the contract referred to in Paragraph 11 hereof (the
“Contract”), including without limitation, restrictions or contingencies relating to entering into
a covenant not to compete with the Company, any of its Subsidiaries or a Parent (as defined in
Paragraph 19), to financial objectives for the Company, any of its Subsidiaries or a Parent, a
division of any of the foregoing, a product line or other category, and/or to the period of
continued employment of the optionee with the Company, any of its Subsidiaries or a Parent, and to
determine whether such restrictions or contingencies have been met; whether an optionee is Disabled
(as defined in Paragraph 19); the amount, if any, necessary to satisfy the obligation of the
Company, a Subsidiary or Parent to withhold taxes or other amounts; the fair market value of a
share of Common Stock; to construe the respective Contracts and the Plan; with the consent of the
optionee, to cancel or modify an option, provided, that the modified provision is permitted to be
included in an option granted

 

 

under the Plan on the date of the modification, and further, provided, that in the case of a
modification (within the meaning of Section 424(h) of the Code) of an ISO, such option as modified
would be permitted to be granted on the date of such modification under the terms of the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan; and to make all other
determinations necessary or advisable for administering the Plan. Any controversy or claim arising
out of or relating to the Plan, any option granted under the Plan or any Contract shall be
determined unilaterally by the Committee in its sole discretion. The determinations of the
Committee on the matters referred to in this Paragraph 3 shall be conclusive and binding on the
parties. No member or former member of the Committee shall be liable for any action, failure to
act or determination made in good faith with respect to the Plan, any Contract or any option
hereunder.

     4. ELIGIBILITY. The Committee may from time to time, in its sole discretion,
consistent with the purposes of the Plan, grant options to (a) key employees (including officers
and directors who are key employees) of the Company or any of its Subsidiaries, (b) consultants to
the Company or any of its Subsidiaries and (c) Non-Employee Directors. In no event, however, may
any consultant or Non-Employee Director participate in the Plan if such participation is (a)
prohibited, or (b) restricted (either absolutely or subject to various securities requirements,
whether legal or administrative, being complied with), in the jurisdiction in which such consultant
or Non-Employee Director is resident under the relevant securities laws of that jurisdiction.
Provided Always That in the case of (b) above, the relevant consultant’s or Non-Employee Director’s
participation in the Plan may be effected at the absolute discretion of the Committee if compliance
with the relevant securities requirements of the jurisdiction in which such consultant or
Non-Employee Director is resident is not impractical (having regard to the nature of those
requirements) and would not involve undue expense. Such options granted shall cover such number of
shares of Common Stock as the Committee may determine, in its sole discretion, as set forth in the
applicable Contract; provided, however, that the aggregate market value (determined at the time the
option is granted in accordance with Paragraph 5) of the shares of Common Stock for which any
eligible employee may be granted ISOs under the Plan or any other plan of the Company, or of a
Parent or a Subsidiary of the Company, which are exercisable for the first time by such optionee
during any calendar year shall not exceed $100,000. Such ISO limitation shall be applied by taking
ISOs into account in the order in which they were granted. Any option granted in excess of such
ISO limitation amount shall be treated as a NQSO to the extent of such excess.

     5. EXERCISE PRICE. The exercise price of the shares of Common Stock under each option
shall be determined by the Committee, in its sole discretion, as set forth in the applicable
Contract; provided, however, that the exercise price of an ISO shall not be less than the fair
market value of the Common Stock subject to such option on the date of grant; and further,
provided, that if, at the time an ISO is granted, the optionee owns (or is deemed to own under
Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company, of any of its Subsidiaries or of a Parent, the exercise price
of such ISO shall not be less than 110% of the fair market value of the Common Stock subject to
such ISO on the date of grant. In no event may the exercise price be less than the par value of a
share.

     The fair market value of a share of Common Stock on any day shall be (a) if the principal
market for the Common Stock is a national securities exchange, the average of the highest and
lowest sales prices per share of Common Stock on such day as reported by such exchange or on a
composite tape reflecting transactions on such exchange, (b) if the principal market for the Common
Stock is not a national securities exchange and the Common Stock is quoted on The Nasdaq Stock
Market (“Nasdaq”), and (i) if actual sales price information is available with respect to the
Common Stock, the average of the highest and lowest sales prices per share of Common Stock on such
day on Nasdaq, or (ii) if such information is not available, the average of the highest bid and
lowest asked prices per share of Common Stock on such day on Nasdaq, or (c) if the principal market
for the Common Stock is not a national securities exchange and the Common Stock is not quoted on
Nasdaq, the average of the highest bid and lowest asked prices per share of Common Stock on such
day as reported on the OTC Bulletin Board Service or by National Quotation Bureau, Incorporated or
a comparable service; provided, however, that if clauses (a), (b) and (c) of this Paragraph are all
inapplicable, or if no trades have been made or no quotes are available for such day, the fair
market value of the Common Stock shall be determined by the Board of Directors or the Committee by
any method consistent with applicable regulations adopted by the Treasury Department relating to
stock options.

     6. TERM. The term of each option granted pursuant to the Plan shall be such term as
is established by the Committee, in its sole discretion, as set forth in the applicable Contract;
provided, however, that the term of

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each ISO granted pursuant to the Plan shall be for a period not exceeding 10 years from the
date of grant thereof; and further, provided, that if, at the time an ISO is granted, the optionee
owns (or is deemed to own under Section 424(d) of the Code) stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company, of any of its Subsidiaries or
of a Parent, the term of the ISO shall be for a period not exceeding five years from the date of
grant. Options shall be subject to earlier termination as hereinafter provided.

     7. EXERCISE. An option (or any part or installment thereof), to the extent then
exercisable, shall be exercised by giving written notice to the Company at its principal office
stating which option is being exercised, specifying the number of shares of Common Stock as to
which such option is being exercised and accompanied by payment in full of the aggregate exercise
price therefor (or the amount due on exercise if the applicable Contract permits installment
payments) in cash or by certified check equal to the aggregate exercise price of all options being
exercised, or with any combination of cash, certified check or shares of Common Stock having such
value. The Company shall not be required to issue any shares of Common Stock pursuant to any such
option until all required payments, including any required withholding, have been made.

     A person entitled to receive Common Stock upon the exercise of an option shall not have the
rights of a stockholder with respect to such shares of Common Stock until the date of allotment of
such shares.

     In no case may a fraction of a share of Common Stock be purchased or issued under the Plan.

     8. TERMINATION OF RELATIONSHIP. Except as may otherwise be expressly provided in the
applicable Contract, an optionee whose relationship with the Company, its Parent and Subsidiaries
as an employee or a consultant has terminated for any reason (other than as a result of the death
or Disability of the optionee) may exercise his options, to the extent exercisable on the date of
such termination, at any time within three months after the date of termination, but not thereafter
and in no event after the date the option would otherwise have expired; provided, however, that if
such relationship is terminated either (a) for Cause (as defined in Paragraph 19), or (b) without
the consent of the Company, such option shall terminate immediately. Except as may otherwise be
expressly provided in the applicable Contract, options granted under the Plan to an employee or
consultant shall not be affected by any change in the status of the optionee so long as the
optionee continues to be an employee of, or a consultant to, the Company, or any of the
Subsidiaries or a Parent (regardless of having changed from one to the other or having been
transferred from one corporation to another).

     For the purposes of the Plan, an employment relationship shall be deemed to exist between an
individual and the Company, any of its Subsidiaries or a Parent if, at the time of the
determination, the individual was an employee of such corporation for purposes of Section 422(a) of
the Code. As a result, an individual on military, sick leave or other bona fide leave of absence
shall continue to be considered an employee for purposes of the Plan during such leave if the
period of the leave does not exceed 90 days, or, if longer, so long as the individual’s right to
reemployment with the Company, any of its Subsidiaries or a Parent is guaranteed either by statute
or by contract. If the period of leave exceeds 90 days and the individual’s right to reemployment
is not guaranteed by statute or by contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.

     Except as may otherwise be expressly provided in the applicable Contract, an optionee whose
relationship with the Company as a Non-Employee Director ceases for any reason (other than as a
result of his death or Disability) may exercise his options, to the extent exercisable on the date
of such termination, at any time within three months after the date of termination, but not
thereafter and in no event after the date the option would otherwise have expired; provided,
however, that if such relationship is terminated for Cause, such option shall terminate
immediately. Except as may otherwise be expressly provided in the applicable Contract, options
granted to a Non-Employee Director shall not be affected by the optionee becoming an employee of
the Company, any of its Subsidiaries or a Parent.

     Nothing in the Plan or in any option granted under the Plan shall confer on any optionee any
right to continue in the employ of, or as a consultant to, the Company, any of its Subsidiaries or
a Parent, or as a director of the Company, or interfere in any way with any right of the Company,
any of its Subsidiaries or a Parent to terminate the optionee’s relationship at any time for any
reason whatsoever without liability to the Company, any of its Subsidiaries or a Parent.

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     9. DEATH OR DISABILITY OF AN OPTIONEE. Except as may otherwise be expressly provided
in the applicable Contract, if an optionee dies (a) while he is an employee of, or consultant to,
the Company, any of its Subsidiaries or a Parent, (b) within three months after the termination of
such relationship (unless such termination was for Cause or without the consent of the Company) or
(c) within one year following the termination of such relationship by reason of his Disability, the
options that were granted to him as an employee or consultant may be exercised, to the extent
exercisable on the date of his death, by his Legal Representative (as defined in Paragraph 19) at
any time within one year after death, but not thereafter and in no event after the date the option
would otherwise have expired.

     Except as may otherwise be expressly provided in the applicable Contract, any optionee whose
relationship as an employee of, or consultant to, the Company, its Parent and Subsidiaries has
terminated by reason of such optionee’s Disability may exercise the options that were granted to
him as an employee or consultant, to the extent exercisable upon the effective date of such
termination, at any time within one year after such date, but not thereafter and in no event after
the date the option would otherwise have expired.

     Except as may otherwise be expressly provided in the applicable Contract, any optionee whose
relationship as a Non-Employee Director ceases as a result of his death or Disability may exercise
the options that were granted to him as a Non-Employee Director, to the extent exercisable on the
date of such termination, at any time within one year after the date of termination, but not
thereafter and in no event after the date the option would otherwise have expired. In the case of
the death of the Non-Employee Director, the option may be exercised by his Legal Representative.

     10. COMPLIANCE WITH SECURITIES LAWS. The Committee may require, in its sole
discretion, as a condition to the exercise of any option that either (a) a Registration Statement
under the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of
Common Stock to be issued upon such exercise shall be effective and current at the time of
exercise, or (b) there is an exemption from registration under the Securities Act for the issuance
of the shares of Common Stock upon such exercise. Nothing herein shall be construed as requiring
the Company to register shares subject to any option under the Securities Act or to keep any
Registration Statement effective or current.

     The Committee may require, in its sole discretion, as a condition to the receipt of an option
or the exercise of any option that the optionee execute and deliver to the Company his
representations and warranties, in form, substance and scope satisfactory to the Committee, which
the Committee determines are necessary or convenient to facilitate the perfection of an exemption
from the registration requirements of the Securities Act, applicable state securities laws or other
legal requirement, including without limitation that (a) the shares of Common Stock to be issued
upon the exercise of the option are being acquired by the optionee for his own account, for
investment only and not with a view to the resale or distribution thereof, and (b) any subsequent
resale or distribution of shares of Common Stock by such optionee will be made only pursuant to (i)
a Registration Statement under the Securities Act which is effective and current with respect to
the shares of Common Stock being sold, or (ii) a specific exemption from the registration
requirements of the Securities Act, but in claiming such exemption, the optionee shall prior to any
offer of sale or sale of such shares of Common Stock provide the Company with a favorable written
opinion of counsel satisfactory to the Company, in form, substance and scope satisfactory to the
Company, as to the applicability of such exemption to the proposed sale or distribution.

     In addition, if at any time the Committee shall determine, in its sole discretion, that the
listing or qualification of the shares of Common Stock subject to any option on any securities
exchange, Nasdaq or under any applicable law, or the consent or approval of any governmental agency
or regulatory body, is necessary or desirable as a condition to, or in connection with, the
granting of an option or the issuing of shares of Common Stock thereunder, such option may not be
granted and such option may not be exercised in whole or in part unless such listing,
qualification, consent or approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.

     11. CONTRACTS. Each option shall be evidenced by an appropriate Contract which shall
be duly executed by the Company and the optionee, and shall contain such terms, provisions and
conditions not inconsistent herewith as may be determined by the Committee. The terms of each
option and Contract need not be identical.

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     12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwithstanding any other provision of
the Plan, in the event of:

     (a) a stock dividend, recapitalization, merger or consolidation in which the Company is
the surviving corporation, or a spin-off, split-up, combination or exchange of shares or the
like which results in a change in the number or kind of shares of Common Stock which is
outstanding immediately prior to such event, the Committee shall appropriately adjust the
aggregate number and kind of shares subject to the Plan, the aggregate number and kind of
 shares subject to each outstanding option and the exercise price thereof. Such adjustments
shall be conclusive and binding on all parties and may provide for the elimination of
fractional shares which might otherwise be subject to options without payment therefor.

     (b) the liquidation or dissolution of the Company, or a merger to which the Company is
a party whether or not it is the surviving corporation or a consolidation or a sale by the
Company of all or substantially all of its assets, then, except as set forth below, the
options granted hereunder which are outstanding or unvested as of the date of such event,
shall continue to be outstanding and the optionee shall be entitled to receive an option to
acquire the type and amount of consideration which he would have been entitled to receive if
he had exercised the options granted hereunder immediately prior to the transaction and
actually owned the shares of common stock subject to such option. The exercise price of the
resultant option shall be determined by the Committee in its sole discretion such that the
aggregate exercise price payable with respect to the resultant option shall be equal to the
aggregate exercise price payable with respect to the option granted under the Plan.

Notwithstanding the foregoing, the Company shall have the right, by written notice, provided to an
optionee sent no later than 15 days prior to the proposed liquidation, dissolution, merger or other
transaction, to advise the optionee that upon consummation of the transaction all options granted
to any optionee under the Plan shall terminate and be void, in which event, the optionee shall have
right to exercise all options then currently exercisable in accordance with the terms of the
applicable option Contract within 10 days after the date of the notice from the Company.

     13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by the Board of
Directors on August 13, 1997. No ISO may be granted under the Plan after August 12, 2007: The
Board of Directors, without further approval of the Company’s stockholders, may at any time suspend
or terminate the Plan, in whole or in part, or amend it from time to time in such respects as it
may deem advisable, including, without limitation, in order that ISOs granted hereunder meet the
requirements for “incentive stock options” under the Code, to comply with any change in applicable
law, regulations, rulings or interpretations of any administrative agency; provided, however, that
no amendment shall be effective without the requisite prior or subsequent stockholder approval
which would (a) except as contemplated in Paragraph 12, increase the maximum number of shares of
Common Stock for which options may be granted under the Plan, (b) change the eligibility
requirements to receive options hereunder or (c) make any other change for which applicable law
requires stockholder approval. No termination, suspension or amendment of the Plan shall, without
the consent of the optionee, adversely affect his rights under any option granted under the Plan.
The power of the Committee to construe and administer any option granted under the Plan prior to
the termination or suspension of the Plan nevertheless shall continue after such termination or
during such suspension.

     14. NON-TRANSFERABILITY. No option granted under the Plan shall be transferable
otherwise than by will or the laws of descent and distribution, and options may be exercised,
during the lifetime of the optionee, only by the optionee or his Legal Representatives. Except to
the extent provided above, options may not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process, and any such attempted assignment, transfer, pledge,
hypothecation or disposition shall be null and void ab initio and of no force or effect.

     15. WITHHOLDING TAXES. The Company, a Subsidiary or Parent may withhold cash, in an
amount equal to the amount which the Committee determines is necessary to satisfy the obligation of
the Company, a Subsidiary or Parent to withhold Federal, state and local income taxes or other
amounts incurred by reason of the grant, vesting, exercise or disposition of an option, or the
disposition of the underlying shares of Common Stock.

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Alternatively, the Company may require the holder to pay to the Company such amount, in cash,
promptly upon demand.

     16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such legend or legends upon
the certificates for shares of Common Stock issued upon exercise of an option under the Plan and
may issue such “stop transfer” instructions to its transfer agent in respect of such shares as it
determines, in its discretion, to be necessary or appropriate to (a) prevent a violation of, or to
perfect an exemption from, the registration requirements of the Securities Act and any applicable
state securities laws, (b) implement the provisions of the Plan or any agreement between the
Company and the optionee with respect to such shares of Common Stock, or (c) permit the Company to
determine the occurrence of a “disqualifying disposition,” as described in Section 421(b) of the
Code, of the shares of Common Stock issued or transferred upon the exercise of an ISO granted under
the Plan.

     The Company shall pay all issuance taxes with respect to the issuance of shares of Common
Stock upon the exercise of an option granted under the Plan, as well as all fees and expenses
incurred by the Company in connection with such issuance.

     17. USE OF PROCEEDS. The cash proceeds received upon the exercise of an option under
the Plan shall be added to the general funds of the Company and used for such corporate purposes as
the Board of Directors may determine.

     18. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT CORPORATIONS.
Anything in this Plan to the contrary notwithstanding, the Board of Directors may, without further
approval by the stockholders, substitute new options for prior options of a Constituent Corporation
(as defined in Paragraph 19) or assume the prior options of such Constituent Corporation.

     19. DEFINITIONS. For purposes of the Plan, the following terms shall be defined as
set forth below:

     (a) “Cause” shall mean (i) in the case of an employee or consultant, if there
is a written employment or consulting agreement between the optionee and the Company, any of
its Subsidiaries or a Parent which defines termination of such relationship for cause, cause
as defined in such agreement, and (ii) in all other cases, cause as defined by applicable
state law.

     (b) “Constituent Corporation” shall mean any corporation which engages with the
Company, any of its Subsidiaries or a Parent in a transaction to which Section 424(a) of the
Code applies (or would apply if the option assumed or substituted were an ISO), or any
Parent or any Subsidiary of such corporation.

     (c) “Disability” shall mean a permanent and total disability within the meaning
of Section 22(e)(3) of the Code.

     (d) “Legal Representative” shall mean the executor, administrator or other
person who at the time is entitled by law to exercise the rights of a deceased or
incapacitated optionee with respect to an option granted under the Plan.

     (e) “Non-Employee Director” shall mean a person who is a director of the
Company, but is not an employee of the Company, any of its Subsidiaries or a Parent.

     (f) “Parent” shall have the same definition as “parent corporation” in Section
424(e) of the Code.

     (g) “Subsidiary” shall have the same definition as “subsidiary corporation” in
Section 424(f) of the Code.

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     20. GOVERNING LAW; CONSTRUCTION. The Plan, the options and Contracts hereunder and
all related matters shall be governed by, and construed in accordance with, the laws of the State
of Delaware, without regard to conflict of law provisions that would defer to the substantive laws
of another jurisdiction.

     Neither the Plan nor any Contract shall be construed or interpreted with any presumption
against the Company by reason of the Company causing the Plan or Contract to be drafted. Whenever
from the context it appears appropriate, any term stated in either the singular or plural shall
include the singular and plural, and any term stated in the masculine, feminine or neuter gender
shall include the masculine, feminine and neuter.

     21. PARTIAL INVALIDITY. The invalidity, illegality or unenforceability of any
provision in the Plan, any option or Contract shall not affect the validity, legality or
enforceability of any other provision, all of which shall be valid, legal and enforceable to the
fullest extent permitted by applicable law.

     22. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by a majority of the
votes present in person or by proxy and entitled to vote hereon at the next duly held meeting of
the Company’s stockholders at which a quorum is present. No options granted hereunder may be
exercised prior to such approval; provided, however, that the date of grant of any option shall be
determined as if the Plan had not been subject to such approval. Notwithstanding the foregoing, if
the Plan is not approved by a vote of the stockholders of the Company on or before August 17, 1998,
then the Plan and any options granted hereunder shall terminate.

     23. OPTION EXCHANGE PROGRAM.

     Notwithstanding any other provision of this Plan to the contrary, upon approval of this
amendment by the shareholders of Flextronics International Ltd. (“Flextronics”), the Board of
Directors of Flextronics, the Compensation Committee of its board or any designee of its board or
the committee may provide for, and Flextronics may implement, a one-time Option exchange offer,
pursuant to which certain outstanding Options would, at the election of the holder of such Options
be surrendered to Flextronics for cancellation, whereupon the surrendered Options shall terminate
and have no legal effect whatsoever, in exchange for the grant of a lesser number of new Options,
which new Options may have reduced exercise prices and different vesting and expiration periods
from the surrendered Options; provided, however, that such offer shall be commenced within twelve
months of the date of such shareholder approval. For the avoidance of doubt, the surrendering and
cancellation of the Options shall not at any time, result in Flextronics acquiring, directly or
indirectly, a right or interest in the surrendered Options.

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Exhibit 10.07

THE DII GROUP, INC.

1994 STOCK INCENTIVE PLAN

I. PURPOSES AND SCOPE OF PLAN

     The DII Group, Inc. (the “Company”) desires to afford certain salaried officers and other
salaried key employees of the Company and its subsidiaries who are in a position to affect
materially the profitability and growth of the Company and its subsidiaries an opportunity to
acquire a proprietary interest in the Company, and thus to create in such persons interest in and a
greater concern for the welfare of the Company. Directors who are salaried key employees within
the meaning of the foregoing are eligible to participate in the 1994 Stock Incentive Plan (the
“Plan”). These objectives will be promoted through the granting to such key employees of equity
instruments including (i) incentive stock options (“Incentive Options”) which are intended to
qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”); (ii)
options which are not intended to so qualify (“NQSOs”); and (iii) performance shares (“Performance
Shares”).

     The awards offered pursuant to this Plan are a matter of separate inducement and are not in
lieu of any salary or other compensation for services.

     The Company, by means of the Plan, seeks to retain the services of persons now holding key
positions and to secure the services of persons capable of filling such positions.

II. AMOUNT OF STOCK SUBJECT TO THE PLAN

     The total number of shares of the Company reserved and available for distribution pursuant to
options and awards granted hereunder shall not exceed, in the aggregate, 5,500,000 shares, S$0.01
par value, per share, of the Company (the “Shares”), subject to adjustment described below.

     Shares which may be acquired under the Plan shall be authorized but unissued Shares. Whenever
any outstanding option or award or portion thereof expires, is canceled, is forfeited or is
otherwise terminated for any reason without having been exercised or payment having been made in
respect of the entire option or award, the Shares allocable to the expired, canceled, forfeited or
otherwise terminated portion of the option or award may again be the subject of options or awards
granted hereunder.

     In the event of any stock dividend, stock split, combination or exchange of Shares,
recapitalization or other change in the capital structure of the Company, corporate separation or
division (including, but not limited to, split-up, spin-off or distribution to Company shareholders
other than a normal cash dividend), sale by the Company of all or a substantial portion of its
assets, rights offering, merger, consolidation, reorganization or partial or complete liquidation,
or any other corporate transaction or event having an effect similar to any of the foregoing, the
aggregate number of Shares reserved for issuance under the Plan, the number and option price of
Shares subject to outstanding options, the financial performance goals of the Shares contained in a
Performance Share award, the number of Shares subject to a Performance Share award agreement and
any other characteristics or terms of the options and awards as the Committee (as hereinafter
defined) shall deem necessary or appropriate to reflect equitably the effects of such changes to
the holders of options and awards, shall be appropriately substituted for new shares or adjusted,
as determined by the Committee in its discretion. Notwithstanding the foregoing, (i) each such
adjustment with respect to an Incentive Option shall comply with the rules of Section 424(a) of the
Code, and (ii) in no event shall any adjustment be made which would render any Incentive Option
granted hereunder other than an incentive stock option for purposes of Section 422 of the Code
without the consent of the grantee.

III. ADMINISTRATION

     The Compensation Committee (the “Committee”), or the Board of Directors of the Company (the
“Board of Directors”) if there is no Committee, will have sole and exclusive authority to
administer the Plan. The

 

 

Committee shall consist of no fewer than two (2) members of the Board of Directors, each of
whom shall be a “non-employee Director” within the meaning of Rule 16b-3 or any successor rule or
regulation (“Rule 16b-3”) promulgated under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). The Committee shall administer the Plan so as to comply at all times with Rule
16b-3. A majority of the members of the Committee shall constitute a quorum, and a resolution
passed by a majority of the members of the Committee shall be a resolution of the Committee. Any
member of the Committee may be removed at any time, either with or without cause, by resolution
adopted by a majority of the Board of Directors, and any vacancy on the Committee may at any time
be filled by resolution adopted by a majority of the Board of Directors.

     Subject to the express provisions of the Plan, the Board of Directors or the Committee, as the
case may be, shall have authority, in its discretion, to (i) select employees of the Company as
recipients of options or awards; (ii) determine the number and type of options or awards to be
granted; (iii) determine the terms and conditions, not inconsistent with the terms hereof, of any
options or awards granted; (iv) adopt, alter and repeal such administrative rules, guidelines and
practices governing the Plan as it shall, from time to time, deem advisable; (v) interpret the
terms and provisions of the Plan and any option or award granted and any agreements relating
thereto; and (vi) otherwise supervise the administration of the Plan.

     The determination of the Board of Directors or the Committee, as the case may be, on matters
referred to in this Article III shall be conclusive.

     The Board of Directors or the Committee, as the case may be, may employ such legal counsel,
consultants and agents as it may deem desirable for the administration of the Plan and may rely
upon any opinion received from any such counsel or consultant and any computation received from any
such consultant or agent. Expenses incurred by the Board of Directors or the Committee in the
engagement of such counsel, consultant or agent shall be paid by the Company. No member or former
member of the Committee or of the Board of Directors shall be liable for any action or
determination made in good faith with respect to the Plan or any option or award granted hereunder.

     The Company shall indemnify each member of the Committee for all costs and expenses and, to
the extent permitted by applicable law, any liability incurred in connection with defending any
proceedings arising in connection with any actions in administering the Plan or in authorizing or
denying authorization to any transaction hereunder in which judgment is given in his favor or in
which he is acquitted or in connection with any application, in relation to such liability, in
which relief is granted to him by the court.

IV. ELIGIBILITY

     Options and Performance Share awards may be granted only to certain salaried officers and
other salaried key employees of the Company and its subsidiaries who are not members of the
Committee; provided, that no person shall be eligible for any award if the granting of such award
to such person would prevent the satisfaction by the Plan of the general exemptive conditions of
Rule 16b-3. No employee shall be granted or awarded stock option and Performance Shares covering,
in aggregate, more than 300,000 Shares in any fiscal year of the Company (subject to adjustment as
provided in II. above).

V. SHARE OPTIONS

     1. General. Options may be granted alone or in addition to other awards granted under
the Plan. Any options granted under the Plan shall be on such terms as the Committee may from time
to time approve and the provisions of the option grants need not be the same with respect to each
optionee. Options granted under the Plan may be either Incentive Options or NQSOs. The Committee
may grant to any optionee Incentive Options, NQSOs or both types of options.

     Options granted under the Plan shall be subject to the following terms and conditions and
shall contain such additional terms and conditions not inconsistent with the terms of the Plan, as
the Committee deems appropriate. Each option grant shall be evidenced by an agreement executed on
behalf of the Company by an officer designated by the Committee and accepted by the optionee. Such
agreement shall describe the options and state that such 2

-2-

 

options are subject to all the terms and provisions of the Plan and shall contain such other
terms and provisions, consistent with the Plan, as the Committee may approve.

     2. Exercise Price and Payment. The price per Share under any option granted hereunder
shall be such amount as the Board of Directors or the Committee, as the case may be, shall
determine, provided, however, that such price shall not be less than one hundred percent (100%) of
the fair market value of the Shares subject to such option, as determined below, at the date the
option is granted (110% in the case of an Incentive Option granted to any person who, at the time
the option is granted, owns shares of the Company or any subsidiary or parent of the Company
possessing more than ten percent (10%) of the total combined voting power of all classes of shares
of the Company or of any subsidiary or parent of the Company (a “10% Shareholder”)), and provided
further that in no event may the price be less than the par value of a Share.

     If the Shares are listed on a national securities exchange in the United States on the date
any option is granted, the fair market value per Share shall be deemed to be the highest sales
price at which such Shares are sold on such national securities exchange in the United States on
the date upon which the option is granted, but if the Shares are not traded on such date, or such
national securities exchange is not open for business on such date, the fair market value per Share
shall be the closing price per share determined as of the closest preceding date on which such
exchange shall have been open for business and the Shares were traded. If the Shares are listed on
more than one national securities exchange in the United States on the date any such option is
granted, the Board of Directors or the Committee, as the case may be, shall determine which
national securities exchange shall be used for the purpose of determining the fair market value per
Share. If the Shares are not listed on a national securities exchange but are reported on the
National Association of Securities Dealers, Inc. Automated Quotation System (“Nasdaq”), the fair
market value per share shall be deemed to be the average of the high bid and low asked prices on
the date upon which the option is granted as reported by Nasdaq.

     For purposes of this Plan, the determination by the Board of Directors or the Committee, as
the case may be, of the fair market value of a Share shall be conclusive.

     3. Term of Options and Limitations on the Right of Exercise. The term of each option
will be for such period as the Board of Directors or the Committee, as the case may be, shall
determine, provided that, except as otherwise provided herein, in no event may any option granted
hereunder be exercisable more than ten (10) years from the date of grant of such option (five years
in the case of an Incentive Option granted to a 10% Shareholder). Each option shall become
exercisable in such installments and at such times as may be designated by the Board of Directors
or the Committee, as the case may be, and set forth in the agreement related to the grant of
options. To the extent not exercised, installments shall accumulate and be exercisable, in whole
or in part, at any time after becoming exercisable, but not later than the date the option expires.

     The Board of Directors or the Committee, as the case may be, shall have the right to limit,
restrict or prohibit, in whole or in part, from time to time, conditionally or unconditionally,
rights to exercise any option granted hereunder.

     To the extent that an option is not exercised within the period of exercisability specified
therein, it shall expire as to the then unexercised part.

     4. Exercise of Options. Options granted under the Plan shall be exercised by the
optionee as to all or part of the Shares covered thereby by the giving of written notice of the
exercise thereof to the Company at the principal business office of the Company, specifying the
number of Shares to be purchased, accompanied by payment therefor made to the Company for the full
purchase price of such Shares. The date of actual receipt by the Company of such notice shall be
deemed the date of exercise of the option with respect to the Shares being purchased.

     Upon the exercise of an option granted hereunder, the Company shall cause the purchased Shares
to be issued only when it shall have received the full purchase price for the Shares in cash.

-3-

 

Notwithstanding the foregoing, the Company, in its sole discretion, may establish cashless exercise
procedures whereby an option holder, subject to the requirements of Rule 16b-3, Regulation T,
federal income tax laws, and other federal, state and local tax and securities laws, can exercise
an option or a portion thereof without making a direct payment of the option price to the Company,
including a program whereby option shares would be sold on behalf of and at the request of an
option holder by a designated broker and the exercise price would be satisfied out of the sale
proceeds and delivered to the Company. If the Company so elects to establish a cashless exercise
program, the Company shall determine, in its sole discretion, and from time to time, such
administrative procedures and policies as it deems appropriate and such procedures and policies
shall be binding on any option holder wishing to utilize the cashless exercise program.

     5. Nontransferability of Options. An option granted hereunder shall not be
transferable, whether by operation of law or otherwise, other than by will or the laws of descent
and distribution, and any option granted hereunder shall be exercisable, during the lifetime of the
holder, only by such holder.

     The option of any person to acquire Shares and all his rights thereunder shall terminate
immediately if the holder: (a) attempts to or does sell, assign, transfer, pledge, hypothecate or
otherwise dispose of the option or any rights thereunder to any other person except as permitted
above; or (b) becomes insolvent or bankrupt or becomes involved in any manner so that the option or
any rights thereunder becomes subject to being taken from him to satisfy his debts or liabilities.

     6. Termination of Employment. Upon termination of employment of any option holder,
any option previously granted to such option holder, unless otherwise specified by the Board of
Directors or the Committee, as the case may be, shall, to the extent not theretofore exercised,
terminate and become null and void, provided that:

          (a) if the option holder shall die while in the employ of the Company or any subsidiary of the
Company, and at a time when such employee was entitled to exercise an option as herein provided,
his estate or the legatees or distributees of his estate or of the option, as the case may be, of
such option holder, may, within one (1) year following the date of death, but not beyond that time
and in no event later than the expiration date of the option, exercise such option, to the extent
not theretofore exercised, in respect of any or all of such number of Shares which the option
holder was entitled to purchase; and

          (b) if the employment of any option holder to whom such option shall have been granted shall
terminate by reason of the option holder’s retirement on or after he reaches the age of 60 years in
such manner as would entitle him to receive full Social Security benefits if he were then 65 years
of age, or disability (as described in Section 22(e)(3) of the Code), and while such employee is
entitled to exercise such option as herein provided, such option holder shall have the right to
purchase under the option the number of Shares, if any, which he was entitled to purchase at the
time of such termination, at any time up to and including three (3) months after the date of such
termination of employment, but not beyond that time and in no event shall an option be exercised
later than the expiration date of the option.

     In no event shall any person be entitled to exercise any option after the expiration of the
period of exercisability of such option as specified therein.

     Except as otherwise determined by the Board of Directors or the Committee, as the case may be,
and other than as set forth above, if an option holder voluntarily terminates his or her
employment, or is discharged, any option granted hereunder shall be canceled and the option holder
shall have no further rights to exercise any such option and all of the option holder’s rights
thereunder shall terminate as of the effective date of such termination of employment.

     If an option granted hereunder shall be exercised by the legal representative of a deceased
option holder or former option holder or by a person who acquired an option granted hereunder by
bequest or inheritance or by reason of the death of any option holder or former option holder,
written notice of such exercise shall be accompanied by a certified copy of letters testamentary or
equivalent proof of the right of such legal representative or other person to exercise such option.

-4-

 

     For the purposes of the Plan, an employment relationship shall be deemed to exist between an
individual and a corporation if, at the time of the determination, the individual was an “employee”
of such corporation for purposes of Section 422(a) of the Code.

     A termination of employment shall not be deemed to occur by reason of (i) the transfer of an
employee from employment by the Company to employment by a subsidiary of the Company or (ii) the
transfer of an employee from employment by a subsidiary of the Company to employment by the Company
or by another subsidiary of the Company.

     7. Maximum Allotment of Incentive Options. If the aggregate fair market value of
Shares with respect to which Incentive Options are exercisable for the first time by an employee
during any calendar year (under all share option plans of the Company and any parent or any
subsidiary of the Company) exceeds $100,000, any options which otherwise qualify as Incentive
Options, to the extent of the excess, will be treated as NQSOs.

VI. PERFORMANCE SHARES

     1. General. Performance Shares may be granted alone or in addition to any other
awards granted under the Plan. The provisions of Performance Share awards need not be the same
with respect to each recipient. Performance Share awards granted under the Plan shall be in such
form as the Board of Directors or the Committee, as the case may be, may from time to time approve.
Each grant of a Performance Share award shall be evidenced by an agreement executed on behalf of
the Company by an officer designated by the Board of Directors or the Committee, as the case may
be, and accepted by the recipient. Such agreement shall describe the Performance Share award and
state that such award is subject to all the terms and provisions of the Plan and shall contain such
other terms and provisions, consistent with the Plan, as the Board of Directors or the Committee,
as the case may be, may approve.

     2. Price. The purchase price for Performance Shares shall be such amount as the Board
of Directors or the Committee, as the case may be, shall determine, and subject to applicable law,
such purchase price may be zero. The purchase price for Performance Shares, if any, shall be made
in cash.

     3. Restrictions. Each Performance Share award shall be subject to restrictions
related to (A) the passage of time and/or (B) the attainment by the Company of specified
performance objectives. Company financial performance objectives may be expressed in terms of (i)
earnings per Share, (ii) pre-tax profits, (iii) net earnings or net worth, (iv) return on equity or
assets, (v) any combination of the foregoing, or (vi) any other standard or standards deemed
appropriate by the Board of Directors or the Committee, as the case may be, at the time the award
is granted. Such time periods (the “Performance Period”) and financial performance goals shall be
set by the Board of Directors or the Committee, as the case may be, in its sole discretion.

     Performance Shares shall become vested in a recipient upon the lapse of the Performance
Period, if any, and the attainment of the associated financial performance goals set forth in the
agreement between the recipient and the Company or, in the discretion of the Board of Directors or
the Committee, as the case may be, upon the death, disability or retirement of the recipient.

     4. Share Certificate and Legends. Performance Shares shall be registered in the name
of the recipient of an award thereof, provided that the recipient has executed a Performance Share
agreement evidencing the award, appropriate blank stock powers and, in the discretion of the Board
of Directors or the Committee, as the case may be, an escrow agreement and any other documents
which the Board of Directors or the Committee, as the case may be, may require as a condition to
the issuance of such Shares. If a recipient shall fail to execute the agreement evidencing a
Performance Share award, the appropriate blank stock powers and, in the discretion of the Board of
Directors or the Committee, as the case may be, an escrow agreement and any other documents which
the Board of Directors or the Committee, as the case may be, may require within the time period
prescribed by the Board of Directors or the Committee, as the case may be, at the time the award is
granted, the award shall be null and void. At the discretion of the Board of Directors or the
Committee, as the case may be, Shares issued in connection with a
Performance Share award shall be deposited together with the stock powers with an escrow agent
(which may be the Company) designated by the Board of Directors or the Committee, as the case may
be.

-5-

 

     5. Treatment of Dividends. At the time the Performance Share award is granted, the
Board of Directors or the Committee, as the case may be, may, in its discretion, determine that the
payment to the recipient of dividends, or a specified portion thereof, declared or paid on such
Shares by the Company shall be (i) deferred until the lapsing of the restrictions imposed upon such
Performance Shares and (ii) held by the Company for the account of the recipient until such time.
Payment of deferred dividends in respect of Performance Shares shall be made upon the lapsing of
restrictions imposed on the Performance Shares in respect of which the deferred dividends were
paid, and any dividends deferred in respect of any Performance Shares shall be forfeited upon the
forfeiture of such Performance Shares.

     6. Share Restrictions. Subject to the provisions of this Plan and the applicable
agreement, during the period when the Performance Shares have not vested, the recipient shall not
be permitted to sell, transfer, pledge, assign or otherwise encumber Performance Shares awarded
under the Plan.

     7. Shareholder Rights. Subject to applicable laws, the recipient shall have no
rights, with respect to the Performance Shares until they have vested, including no right to vote
the Performance Shares.

     8. Termination of Employment. Upon termination of employment with the Company because
of death, disability or retirement, the Committee, at its discretion, may provide for waiver of all
or a portion of the restrictions applicable to unvested Performance Shares. If termination occurs
for any other reason, all shares still subject to restriction shall be forfeited by the recipient.

VII. CHANGE OF CONTROL

     Notwithstanding anything to the contrary contained herein, upon a Change of Control (as
defined below) of the Company, (i) all options shall immediately vest and become exercisable in
full during the remaining term thereof, and shall remain so, whether or not the option holder to
whom such options have been granted remains an employee of the Company or its subsidiaries, and
(ii) the restrictions applicable to any or all Performance Share awards shall lapse and such awards
shall be fully vested.

     A Change of Control shall be deemed to have taken place upon the occurrence of any of the
following events:

          (i) any Person (which shall mean and include any individual, corporation, partnership,
group, association or other “person”, as such term is used in Sections 13 and 14 of the
Exchange Act) is, becomes, or has the right to become the beneficial owner, directly or
indirectly, of securities of the Company representing 20% or more of the Shares then
outstanding, whether or not such Person continues to be the beneficial owner of securities
representing 20% or more of the outstanding Shares; or

          (ii) as the result of, or in connection with, any tender or exchange offer, merger or
other business combination, sale of assets or contested election, any announcement of an
intention to make any of the foregoing transactions, or any combination of the foregoing
transactions (a “Transaction”), those persons who were directors of the Company before the
Transaction and were otherwise unaffiliated with any other party to the Transaction shall
cease to constitute a majority of the Board of Directors of the Company or any successor to
the Company (a “Change in the Board”);

     or

          (iii) the shareholders of the Company approve any merger, consolidation,
reorganization, liquidation, dissolution, or sale of all or substantially all of the
Company’s assets in which
neither the Company nor a successor resulting from a change in domicile or form of
organization will survive as an independent, publicly owned corporation.

-6-

 

     Notwithstanding anything herein to the contrary, no Change of Control (only with respect to
the particular option holder or award grantee referred to therein in the case of (i)(A) and (ii)
below) shall be deemed to have occurred by virtue of any event which results in any of the
following:

     (i) the acquisition, directly or indirectly, of 20% or more of the outstanding Shares
by (A) the option holder or Performance Share recipient or a person including the option
holder or Performance Share recipient, (B) the Company, or (C) any employee benefit plan of
the Company or of a subsidiary, or any entity holding securities of the Company recognized,
appointed, or established by the Company or by a subsidiary for or pursuant to the terms of
such plan; or

     (ii) a Change in the Board resulting from any Transaction in which the option holder or
Performance Share recipient or a Person including the option holder or Performance Share
recipient participates directly or indirectly with any party to the Transaction other than
the Company.

VIII. PURCHASE FOR INVESTMENT

     Except as hereafter provided, the Company may require the recipient of Shares pursuant to an
option or award granted hereunder, upon receipt thereof, to execute and deliver to the Company a
written statement, in form satisfactory to the Company, in which such holder represents and
warrants that such holder is purchasing or acquiring the Shares acquired thereunder for such
holder’s own account, for investment only and not with a view to the resale or distribution
thereof, and agrees that any subsequent offer for sale or sale or distribution of any of such
Shares shall be made only pursuant to either (a) a Registration Statement on an appropriate form
under the Securities Act of 1993, as amended (the “Act”), which Registration Statement has become
effective and is current with regard to the Shares being offered or sold, or (b) a specific
exemption from the registration requirements of the Act, but in claiming such exemption the holder
shall, prior to any offer for sale or sale of such Shares, obtain a prior favorable written
opinion, in form and substance satisfactory to the Company, from counsel for or approved by the
Company, as to the applicability of such exemption thereto. The foregoing restriction shall not
apply to (i) issuances by the Company so long as the Shares being issued are registered under the
Act and a prospectus in respect thereof is current or (ii) reofferings of Shares by affiliates of
the Company (as defined in Rule 405 or any successor rule or regulation promulgated under the Act)
if the Shares being reoffered are registered under the Act and a prospectus in respect thereof is
current.

IX. ISSUANCE OF CERTIFICATES; LEGENDS; PAYMENT OF EXPENSES

     The Company may endorse such legend or legends upon the certificates for Shares issued
pursuant to a grant hereunder and may issue such “stop transfer” instructions to its transfer agent
in respect of such Shares as, in its discretion, it determines to be necessary or appropriate to
(i) prevent a violation of, or to perfect an exemption from, the registration requirements of the
Act, (ii) implement the provisions of the Plan and any agreement between the Company and the
optionee or grantee with respect to such Shares, or (iii) permit the Company to determine the
occurrence of a disqualifying disposition, as described in Section 421(b) of the Code, of Shares
transferred upon exercise of an Incentive Option granted under the Plan.

     The Company shall pay all issue or transfer taxes with respect to the issuance or transfer of
Shares upon exercise of an option or issuance of Performance Shares, as well as all fees and
expenses necessarily incurred by the Company in connection with such issuance or transfer, except
fees and expenses which may be necessitated by the filing or amending of a Registration Statement
under the Act, which fees and expenses shall be borne by the recipient of the Shares unless such
Registration Statement has been filed by the Company for its own corporate purposes (and the
Company so states) in which event the recipient of the Shares shall bear only such fees and
expenses as are attributable solely to the inclusion of the Shares he or she receives in the
Registration Statement, provided that the Company shall have no obligation to include any Shares in
any Registration Statement.

     All Shares issued as provided herein shall be fully paid and non-assessable to the extent
permitted by law.

-7-

 

X. WITHHOLDING TAXES

     The Company may require an employee exercising an NQSO or disposing of Shares acquired
pursuant to the exercise of an Incentive Option in a disqualifying disposition (within the meaning
of Section 421(b) of the Code) or pursuant to the award of Performance Shares to reimburse the
Company for any taxes required by any government to be withheld or otherwise deducted and paid by
the Company in respect of the issuance or disposition of Shares. In lieu thereof, the Company
shall have the right to withhold the amount of such taxes from any other sums due or to become due
from the Company to the employee upon such terms and conditions as the Board of Directors or the
Committee, as the case may be, shall prescribe. Notwithstanding the foregoing, the Committee may,
by the adoption of rules or otherwise, modify the provisions of this Article X or impose such other
restrictions or limitations as may be necessary to ensure that the withholding transactions
described above will be exempt transactions under Section 16(b) of the Exchange Act.

     If an optionee makes a disposition, within the meaning of Section 424(c) of the Code and
regulations promulgated thereunder, of any Share or Shares issued to such optionee pursuant to the
exercise of an Incentive Option within the two-year period commencing on the day after the date of
the grant, the optionee shall, within ten (10) days of such disposition, notify the Company
thereof, by delivery of written notice to the Company at its principal executive office.

XI. LISTING OF SHARES AND RELATED MATTERS

     If at any time the Board of Directors or the Committee, as the case may be, shall determine in
its discretion that the listing, registration or qualification of the Shares covered by the Plan
upon any national securities exchange or under any state or federal law or the consent or approval
of any governmental regulatory body, is necessary or desirable as a condition of, or in connection
with, the sale or purchase of Shares under the Plan, no Shares shall be issued unless and until
such listing, registration, qualification, consent or approval shall have been effected or
obtained, or otherwise provided for, free of any conditions not acceptable to the Board of
Directors or the Committee, as the case may be.

XII. AMENDMENT OF THE PLAN

     The Board of Directors or the Committee, as the case may be, may, from time to time, amend the
Plan, provided that no amendment shall be made, without the approval of the shareholders of the
Company, that will (i) increase the total number of Shares which may be issued under the Plan
(other than an increase resulting from an adjustment provided for in Article II), (ii) modify the
provisions of the Plan relating to eligibility, (iii) materially increase the benefits accruing to
participants under the Plan, or (iv) extend the maximum period of the Plan. The Board of Directors
or the Committee, as the case may be, shall be authorized to amend the Plan and the awards granted
hereunder to permit the Incentive Options granted hereunder to qualify as incentive stock options
within the meaning of Section 422 of the Code. The rights and obligations under any option or
award granted before amendment of the Plan or any unexercised portion of such option shall not be
adversely affected by amendment of the Plan or the option without the consent of the holder of the
option.

XIII. TERMINATION OR SUSPENSION OF THE PLAN

     The Board of Directors or the Committee, as the case may be, may at any time suspend or
terminate the Plan. The Plan, unless sooner terminated by action of the Board of Directors or the
Committee, as the case may be, shall terminate at the close of business on March 14, 2004. An
option or award may not be granted while the Plan is suspended or after it is terminated. Rights
and obligations under any option or award granted while the Plan is in effect shall not be altered
or impaired by suspension or termination of the Plan, except upon the consent of the person to whom
the option or award was granted. The power of the Board of Directors or the Committee, as the case
may be, to construe and administer any options and awards granted prior to the termination or
suspension of the Plan under Article III nevertheless shall continue after such termination or
during such suspension.

-8-

 

XIV. GOVERNING LAW

     The Plan, such options and awards as may be granted thereunder and all related matters shall
be governed by, and construed and enforced in accordance with, the laws of the State of Delaware.

XV. PARTIAL INVALIDITY

     The invalidity or illegality of any provision herein shall not be deemed to affect the
validity of any other provision.

XVI. EFFECTIVE DATE

     The Plan shall become effective upon the adoption by the Board of Directors.

XVII. DEFERRAL

     An employee may elect to defer (i) all or part of his Performance Shares upon vesting or (ii)
the Option Profit (as hereinafter defined) with respect to any Shares subject to an NQSO, all in
accordance with the provisions of the Company’s Deferred Compensation Plan. Any such deferral
shall be made in writing in accordance with the provisions of the Deferred Compensation Plan. In
cases of deferral, Shares otherwise issuable to the employee shall be issued to the Trust
established pursuant to the Deferred Compensation Plan. For purposes of this provision, Option
Profit shall mean the amount by which the fair market value of a Share subject to an NQSO exceeds
the exercise price of an NQSO, as calculated under the Deferred Compensation Plan.

XVIII. OPTION EXCHANGE PROGRAM

     Notwithstanding any other provision of this Plan to the contrary, upon approval of this
amendment by the shareholders of Flextronics International Ltd. (“Flextronics”), the Board of
Directors of Flextronics, the Compensation Committee of its board or any designee of its board or
the committee may provide for, and Flextronics may implement, a one-time Option exchange offer,
pursuant to which certain outstanding Options would, at the election of the holder of such Options
be surrendered to Flextronics for cancellation, whereupon the surrendered Options shall terminate
and have no legal effect whatsoever, in exchange for the grant of a lesser number of new Options,
which new Options may have reduced exercise prices and different vesting and expiration periods
from the surrendered Options; provided, however, that such offer shall be commenced within twelve
months of the date of such shareholder approval. For the avoidance of doubt, the surrendering and
cancellation of the Options shall not at any time, result in Flextronics acquiring, directly or
indirectly, a right or interest in the surrendered Options.

-9-

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