Document:

exv10w1

Exhibit 10.1

CARRIAGE SERVICES, INC.

PERFORMANCE UNIT AWARD AGREEMENT

 

Grantee

	 	 	 	 	 
	Award Date:

	 	January 1, 2009

	 
	Performance Unit Value:

	 	$	1.00	 
	 
	Number of Performance Units Awarded:

	 	        
            

AWARD OF PERFORMANCE UNITS

     The Compensation Committee (the “Committee”) of the Board of Directors of Carriage Services,
Inc., a Delaware corporation (the “Company”), pursuant to the Carriage Services, Inc. 2006
Long-Term Incentive Plan (the “Plan”), hereby awards to you, the above-named Grantee, effective as
of the Award Date set forth above, that number of Performance Units set forth above (each, a
“Performance Unit”, and collectively, the “Performance Units”), on the terms and conditions set
forth in this Performance Unit Award Agreement (this “Agreement”).

     One-half of the Performance Units awarded under this Agreement (the “Peer Group 1 Performance
Units”) provide you an opportunity to earn a cash payment based upon the Total Shareholder Return
achieved by the Company for the period beginning January 1, 2009, and ending December 31, 2011 (the
“Performance Period”) as compared with the Total Shareholder Return achieved by the companies
constituting the Russell Microcap Index as reported by Russell Investment Group (Russell). The
Russell Microcap Index is reconstituted annually to add or eliminate stocks according to Russell’s
microcap segment criteria. For purposes of the Plan, the Shareholder Return reported by Russell
for each period shall be used to calculate cash payments without adjustment for changes in the
companies constituting the Microcap Index. The other one-half of the Performance Units awarded
under this Agreement (the “Peer Group 2 Performance Units”) provide you an opportunity to earn a
cash payment based upon the Total Shareholder Return achieved by the Company for the Performance
Period as compared with the Total Shareholder Return achieved by Service Corporation International
and Stewart Enterprises, Inc. The Committee may not increase the amount payable under this
Agreement.

     “Total Shareholder Return” shall mean the difference between (i) the per share closing price
on the last trading day of the Performance Period of the common stock of the entity with respect to
which such computation is being made as reported by the principal stock exchange on which such
entity’s common stock is traded, and (ii) the per share closing price of such common stock on
December 31, 2008, as reported by the principal stock exchange on which the entity’s common stock
is traded, calculated assuming all cash and other dividends paid on such common stock during the
Performance Period are immediately reinvested in shares of such common stock.

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     As soon as reasonably practicable after the end of the Performance Period, the Committee will
calculate the Total Shareholder Returns for the Performance Period of the Company and each of the
members of Performance Peer Group 1 and Performance Peer Group 2. If the following conditions
exist with respect to the Performance Period:

     (1) your employment with the Company and all of its Affiliates has not
terminated on or before the last day of the Performance Period; and

     (2) a Corporate Change does not occur on or before the last day of the
Performance Period;

then you shall receive a cash payment under this Agreement equal to the sum of (i) the Peer Group 1
Performance Payment and (ii) the Peer Group 2 Performance Payment.

     The Peer Group 1 Performance Payment shall be equal to:

     (A) multiplied by (B) multiplied by (C)

where (A) is the number of Peer Group 1 Performance Units, (B) is the Peer Group 1 Earned Award
Factor (as that term has been defined by the attached table) and (C) the Performance Unit Value set
forth above.

     The Peer Group 2 Performance Payment shall be equal to:

     (X) multiplied by (Y) multiplied by (Z)

where (X) is the number of Peer Group 2 Performance Units, (Y) is the Peer Group 2 Earned Award
Factor (as that term has been defined by the attached table) and (Z) is the Performance Unit Value
set forth above.

     If the Peer Group 1 Earned Award Factor and the Peer Group 2 Earned Award Factor for the
Performance Period are both zero and a Corporate Change of the Company has not occurred on or
before the last day of the Performance Period, then the award pursuant to this Agreement shall
lapse and be forfeited as of December 31, 2011.

     The Committee’s determination of Total Shareholder Return for the Company and each member of
Performance Peer Group 1 and Performance Peer Group 2 for the Performance Period for purposes of
this Agreement shall be binding upon all persons.

     Any amount payable to you pursuant to this Agreement will be paid to you by the Company on
March 15, 2012, unless otherwise provided as hereinafter otherwise set out. Such payment will be
made to you in exchange for the Performance Units and thereafter you shall have no further rights
with respect to such Performance Units or this Agreement.

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     The following provisions 1.1 to 1.5 will apply in the event a Corporate Change of the Company
occurs, or your employment with the Company and all Affiliates (collectively, the “Company Group”)
terminates, before the last day of the Performance Period.

1.1 Termination Generally. If your employment with the Company Group terminates on
or before the last day of the Performance Period for any reason other than one of the
reasons described in Sections 1.2 through 1.5 below, all of your rights in this Agreement,
including all rights to the Performance Units awarded to you, will lapse and be completely
forfeited on the date your employment terminates.

1.2 Potential or Actual Corporate Change.

(i) Termination Without Cause or for Good Reason in Connection With a Potential
Corporate Change on or Before the Last Day of the Performance Period. If
(a) the Company Group terminates your employment without Cause on or before the last
day of the Performance Period prior to a Corporate Change of the Company (whether or
not a Corporate Change ever occurs) and such termination is at the request or
direction of a person who has entered into an agreement with the Company the
consummation of which would constitute a Corporate Change of the Company or is
otherwise in connection with or in anticipation of a Corporate Change of the Company
(whether or not a Corporate Change ever occurs) or (b) you terminate your employment
with the Company Group for Good Reason on or before the last day of the Performance
Period prior to a Corporate Change of the Company (whether or not a Corporate Change
ever occurs) and such termination or the circumstance or event which constitutes
Good Reason occurs at the request or direction of a person who has entered into an
agreement with the Company the consummation of which would constitute a Corporate
Change of the Company or is otherwise in connection with or in anticipation of a
Corporate Change of the Employer (whether or not a Corporate Change ever occurs),
then the Company will pay to you in cash an amount determined under the following
formula in lieu of any other amounts under this Agreement:

(1) multiplied by (2)

where (1) is the Performance Unit Value set forth in this Agreement and (2) is the
number of Performance Units that were awarded to you under this Agreement. Any
amount payable to you pursuant to this Section 1.2(i) will be paid by the Company to
you ten (10) business days after the date of your Separation From Service if you are
not a Specified Employee or on the date that is six months following your Separation
From Service if you are a Specified Employee. Such payment will be made to you in
exchange for the Performance Units and thereafter you shall have no further rights
with respect to such Performance Units or this Agreement and the Company Group will
have no further obligations to you pursuant to the Performance Units or this
Agreement. For purposes of this Agreement, “Separation From Service” has the
meaning ascribed to that term in Section 409A and “Specified Employee” means a
person who is, as of the date of the person’s Separation From Service, a “specified
employee” within the meaning of Section 409A, taking into account the elections made
and procedures established in resolutions adopted by the Board of Directors of the
Company. For purposes of this Agreement, “Section 409A” means section 409A of the
Internal

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Revenue Code of 1986, as amended and the Department of Treasury rules and
regulations issued thereunder.

(ii) Employment Not Terminated Before a Corporate Change on or Before the Last
Day of the Performance Period. If a Corporate Change of the Company occurs on
or before the last day of the Performance Period and your employment with the
Company Group does not terminate before the date the Corporate Change of the Company
occurs, then the Company will pay to you in cash an amount determined under the
following formula in lieu of any other amounts under this Agreement:

(1) multiplied by (2)

where (1) is the Performance Unit Value set forth in this Agreement and (2) is the
number of Performance Units that were awarded to you under this Agreement. Any
amount payable to you pursuant to this Section 1.2(ii) will be paid by the Company
to you (a) ten (10) business days after the date the Corporate Change of the Company
occurs if the Corporate Change of the Company qualifies as a change in the ownership
or effective control of the corporation, or in the ownership of a substantial
portion of the assets of the corporation, within the meaning of Section 409A, or (b)
on March 15, 2011, if the Corporate Change of the Company does not so qualify. Such
payment will be made to you in exchange for the Performance Units and thereafter you
shall have no further rights with respect to such Performance Units or this
Agreement and the Company Group will have no further obligations to you pursuant to
the Performance Units or this Agreement.

1.3 Disability. Notwithstanding any other provision of this Agreement to the
contrary, if you become permanently disabled on or after the date that is one month after
the Award Date and is before the last day of the Performance Period, while in the active
employ of one or more members of the Company Group, then the Employer will pay to you in
cash an amount determined under the following formula in lieu of any other amounts under
this Agreement:

(1) multiplied by (2) multiplied by (3) divided by (4)

where (1) is the Performance Unit Value set forth in this Agreement, (2) is the number of
Performance Units that were awarded to you under this Agreement, (3) is the number of days
from (and including) the first day of the Performance Period to (and including) the day you
become permanently disabled, and (4) is the number of days during the Performance Period.
Any amount payable to you pursuant to this Section 1.3 will be paid by the Company to you
ten (10) business days after the date you become permanently disabled. Such payment will be
made to you in exchange for the Performance Units and thereafter you shall have no further
rights with respect to such Performance Units or this Agreement and the Company Group will
have no further obligations to you pursuant to the Performance Units or this Agreement. For
purposes of this Section 1.3, you will be “permanently disabled” if you (a) are unable to
engage in any substantial gainful activity by reason of any medically determinable physical
or mental impairment which can be expected to result in death or can be expected to last for
a continuous period of not less than 12 months, or (b) are, by reason of any medically
determinable physical or mental

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impairment which can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months, receiving income replacement benefits for a
period of not less than three (3) months under an accident and health plan covering
employees of the Company Group.

1.4 Death. Notwithstanding any other provision of this Agreement to the contrary,
if you die before the last day of the Performance Period and while in the active employ of
one or more members of the Company Group, then the Employer will pay to your estate in cash
an amount determined under the following formula in lieu of any other amounts under this
Agreement:

(1) multiplied by (2) multiplied by (3) divided by (4)

where (1) is the Performance Unit Value set forth in this Agreement, (2) is the number of
Performance Units that were awarded to you under this Agreement, (3) is the number of days
from (and including) the first day of the Performance Period to (and including) the date of
your death, and (4) is the number of days during the Performance Period. Any amount payable
to your estate pursuant to this Section 1.4 will be paid to your estate by the Employer
ten (10) business days after the date of your death. Such payment will be made in exchange
for the Performance Units and thereafter your estate and heirs, executors, and
administrators shall have no further rights with respect to such Performance Units or this
Agreement and the Company Group will have no further obligations pursuant to the Performance
Units or this Agreement.

1.5 Retirement. Notwithstanding any other provision of this Agreement to the
contrary, if your employment with the Company Group terminates as a result of your
Retirement before the last day of the Performance Period, then the number of Performance
Units issued to you under this Agreement shall automatically be reduced (without further
action by you and/or the Company) on the date your employment relationship with the Company
Group terminates to that number of Performance Units determined under the following formula
(the “Retirement Adjusted Performance Units”):

(1) multiplied by (2) divided by (3)

where (1) is the number of Performance Units that were originally awarded to you under this
Agreement, (2) is the number of days from (and including) the first day of the Performance
Period to (and including) the day before the date your employment relationship with the
Company Group terminates due to Retirement, and (3) is the number of days during the
Performance Period. Your Peer Group 1 Performance Units and Peer Group 2 Performance Units
under this Agreement shall be reduced accordingly to reflect the Retirement Adjusted
Performance Units and the excess of the Performance Units that were originally awarded to
you under this Agreement over the Retirement Adjusted Performance Units shall be immediately
forfeited on the date of the termination of your employment relationship with the Company
Group due to Retirement. Any amount payable to you pursuant to this Agreement will be paid
on March 15, 2011. For purposes of this Section 1.5, the term “Retirement” means the
voluntary termination of your employment relationship with the Company Group on or after the
date on which the sum of your age and years of service with the Company Group equals 65.

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     PROHIBITED ACTIVITY. Notwithstanding any other provision of this Agreement, if you engage in
a “Prohibited Activity,” as described below, while employed by one or more members of the Company
Group, during the Performance Period or within two years after the date your employment with the
Company Group terminates, then your right to receive payment under this Agreement, to the extent
still outstanding at that time, shall be completely forfeited. A “Prohibited Activity” shall be
deemed to have occurred, as determined by the Committee in its sole and absolute discretion, if you
divulge any non-public, confidential or proprietary information of the Company or of its past,
present or future affiliates (collectively, the “Carriage Services Inc. Group”), but excluding
information that (a) becomes generally available to the public other than as a result of your
public use, disclosure, or fault, or (b) becomes available to you on a non-confidential basis after
your employment termination date from a source other than a member of the Carriage Services Inc.
Group prior to the public use or disclosure by you, provided that such source is not bound by a
confidentiality agreement or otherwise prohibited from transmitting the information by a
contractual, legal or fiduciary obligation.

     TAX WITHHOLDING. To the extent that the receipt of the Performance Units or any payment
pursuant to this Agreement results in income, wages or other compensation to you for any income,
employment or other tax purposes with respect to which the Company or any other member of the
Company Group has a withholding obligation, you shall deliver to the Company at the time of such
receipt or payment, as the case may be, such amount of money as the Company Group may require to
meet its obligation under applicable tax laws or regulations, and, if you fail to do so, the
Company is authorized to withhold from any payment under this Agreement or from any cash or stock
remuneration or other payment then or thereafter payable to you any tax required to be withheld by
reason of such taxable income, wages or compensation.

     NONTRANSFERABILITY. This Agreement is not transferable by you otherwise than by will or by the
laws of descent and distribution.

     CAPITAL ADJUSTMENTS AND REORGANIZATIONS. The existence of the Performance Units shall not
affect in any way the right or power of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in its capital structure or its business, engage
in any merger or consolidation, issue any debt or equity securities, dissolve or liquidate, or
sell, lease, exchange or otherwise dispose of all or any part of its assets or business, or engage
in any other corporate act or proceeding.

     PERFORMANCE UNITS DO NOT AWARD ANY RIGHTS OF A STOCKHOLDER. You shall not have the voting
rights or any of the other rights, powers or privileges of a holder of the stock of the Company
with respect to the Performance Units that are awarded hereby.

     EMPLOYMENT RELATIONSHIP. For purposes of this Agreement, you shall be considered to be in the
employment of the Company Group as long as you have an employment relationship with the Company
Group. The Committee shall determine any questions as to whether and when there has been a
termination of such employment relationship, and the cause of such termination, under the Plan and
the Committee’s determination shall be final and binding on all persons.

     NOT AN EMPLOYMENT AGREEMENT. This Agreement is not an employment agreement, and no provision
of this Agreement shall be construed or interpreted to create an employment relationship between
you and the Company or any Affiliate or guarantee the right to remain employed by the Company or
any Affiliate for any specified term.

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     LIMIT OF LIABILITY. Under no circumstances will the Company or an Affiliate be liable for any
indirect, incidental, consequential or special damages (including lost profits) of any form
incurred by any person, whether or not foreseeable and regardless of the form of the act in which
such a claim may be brought, with respect to the Plan.

     EMPLOYER LIABLE FOR PAYMENT. Except as specified in Section 1.2, the legal entity that is a
member of the Company Group and that is classified by the Company Group as your employer (the
“Employer”) is liable for the payment of any amounts that become due under this Agreement.

     MISCELLANEOUS. This Agreement is awarded pursuant to and is subject to all of the provisions
of the Plan, including amendments to the Plan, if any. In the event of a conflict between this
Agreement and the Plan provisions, the Plan provisions will control. The term “you” and “your”
refer to the Grantee named in this Agreement. Capitalized terms that are not defined herein shall
have the meanings ascribed to such terms in the Plan.

     The Performance Units that are hereby awarded to you shall be subject to the prohibitions and
restrictions set forth herein with respect to the sale or other disposition of such Performance
Units and the obligation to forfeit and surrender such Performance Units.

     The Performance Units and your rights under this Agreement may not be sold, assigned, pledged,
exchanged, hypothecated or otherwise transferred, encumbered or disposed of (other than by will or
the applicable laws of descent and distribution). Any such attempted sale, assignment, pledge,
exchange, hypothecation, transfer, encumbrance or disposition in violation of this Agreement shall
be void and the Company Group shall not be bound thereby.

     In accepting the award of Performance Units set forth in this Agreement you accept and agree
to be bound by all the terms and conditions of the Plan, and this Agreement.

	 	 	 	 	 
	 

	 	CARRIAGE SERVICES, INC.	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 

	 	Name: Melvin C. Payne	 	 
	 
	 

	 	Title: Chairman and CEO	 	 

Tables to follow:

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PERFORMANCE GOALS

FOR PERFORMANCE UNIT AWARDS GRANTED IN 2009 UNDER

THE CARRIAGE SERVICES, INC. 2006 LONG-TERM INCENTIVE PLAN

     Peer Group 1 Earned Award Factor

     For Performance Units granted by the Company under the Plan, the Peer Group 1 Earned Award
Factor shall be the factor specified in the table below; provided, however, that if the Company’s
Total Shareholder Return for the Performance Period is zero or less than zero the Peer Group 1
Earned Award Factor for the Performance Period shall be zero.

	 	 	 	 	 
	Percentile Rank of the Company’s Total Shareholder Return for	 	 
	the Performance Period as Compared to the Total Shareholder	 	Peer Group 1
	Returns of the Other Members of Performance Peer Group 1 for	 	Earned Award
	the Performance Period.	 	Factor
	Less than 50th

	 	 	0.0	%
	50th

	 	 	50.0	%
	51st

	 	 	55.0	%
	52nd

	 	 	60.0	%
	53rd

	 	 	65.0	%
	54th

	 	 	70.0	%
	55th

	 	 	75.0	%
	56th

	 	 	80.0	%
	57th

	 	 	85.0	%
	58th

	 	 	90.0	%
	59th

	 	 	95.0	%
	60th

	 	 	100.0	%
	61st

	 	 	102.5	%
	62nd

	 	 	105.0	%
	63rd

	 	 	107.5	%
	64th

	 	 	110.0	%
	65th

	 	 	112.5	%
	66th

	 	 	115.0	%
	67th

	 	 	117.5	%
	68th

	 	 	120.0	%
	69th

	 	 	122.5	%
	70th

	 	 	125.0	%
	71st

	 	 	127.5	%
	72nd

	 	 	130.0	%
	73rd

	 	 	132.5	%
	74th

	 	 	135.0	%
	75th

	 	 	137.5	%
	76th

	 	 	140.0	%
	77th

	 	 	142.5	%
	78th

	 	 	145.0	%
	79th

	 	 	147.5	%
	80th and above

	 	 	150.0	%

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     The Committee shall have the discretion to calculate Total Shareholder Returns for the Company
and each company included in Performance Peer Group 1 and to determine the formula to achieve such
calculations.

     1. Peer Group 2 Earned Award Factor

     For Performance Units granted by the Company under the Plan, if the common stock of both of
the members of Performance Peer Group 2 Earned Award Factor shall be the factor specified in the
table below; provided, however, that (a) if the Company’s Total Shareholder Return for the
Performance Period is zero or less than zero then the Peer Group 2 Earned Award Factor for the
Performance Period shall be zero and (b) if the common stock of either or both of the members of
Performance Peer Group 2 is not publicly traded on the last day of the Performance Period then the
Peer Group 2 Earned Award Factor shall be the amount of the Peer Group 1 Earned Award Factor for
such Performance Period.

	 	 	 	 
	Rank of the Company’s Total Shareholder Return for the	 	 	 
	Performance Period as Compared to the Total Shareholder	 	Peer Group 2
	Returns of the Other Members of the Performance Peer	 	Earned Award
	Group 2 for the Performance Period	 	Factor
	First

	 	150.0	%
	Second
	 	100.0	%
	Less than Second
	 	0.0	%

     The Committee shall have the discretion to calculate Total Shareholder Returns for the Company and
each company included in Performance Peer Group 2 and to determine the formula to achieve such
calculations.

9exv10w3

Exhibit 10.3

BROADCOM CORPORATION

PERFORMANCE BONUS PLAN

(as amended and restated April 24, 2008)

     I. PURPOSES OF THE PLAN

          A. The Broadcom Corporation Performance Bonus Plan (the “Plan”) is intended to promote the
interests of Broadcom Corporation (the “Company”) and its shareholders by establishing a
compensation program to provide key employees with incentive awards tied to the achievement of
goals relating to the performance of the Company and/or the achievement of individual performance
goals.

          B. The Plan shall be in effect for the year ending December 31, 2007 and for each of the next
four (4) years through the year ending December 31, 2011. Each year for which the Plan is in
effect shall be designated a “Plan Year,” and bonuses may be earned under the Plan on the basis of
the Company’s performance for each Plan Year.

     II. PLAN ADMINISTRATION

          A. The Plan shall be administered by the Compensation Committee of the Company’s Board of
Directors. The Compensation Committee in its capacity as administrator of the Plan (the “Plan
Administrator”) shall have full power and authority (subject to the express provisions of the Plan)
to:

               (i) establish the specific performance objectives that must be attained for each Plan Year at
one or more designated levels (e.g. threshold, above-threshold, target and above-target);

               (ii) establish the maximum bonus pool to be paid in total under the Plan for each Plan Year.

               (iii) set the bonus potential for each eligible participant at each designated level of
performance; and

               (iv) approve the actual bonus (if any) to be paid to each participant.

          B. The Plan Administrator shall also have full power and authority to interpret and construe
the provisions of the Plan and adopt rules and regulations for the administration of the Plan.

          C. Decisions of the Plan Administrator shall be final and binding upon all parties who may
have an interest in the Plan or any bonus amount payable under the Plan.

 

 

III. ELIGIBILITY AND PARTICIPATION

          A. The individuals eligible to participate in the Plan shall be limited to (i) all employees
of the Company (or its subsidiaries) at the level of Director or above, provided, however, that if
one or more the Company’s executive officers who are subject to the short-swing profit liability
provisions of Section 16 of the Securities and Exchange Act of 1934, as amended (“Section 16
Officers”) is selected for participation in the Executive Officer Bonus Plan for any given Plan
Year, then such Section 16 officer(s) shall not be eligible to participate in this Plan for that
same Plan Year and (ii) any other employees of the Company (or its subsidiaries) identified by
management as key contributors to the Company’s growth and financial success and selected for
participation in the Plan, subject to the approval the Company’s Chief Executive Officer and the
Plan Administrator. All Section 16 Officers shall be eligible to participate in this Plan for the
2008 Plan Year, and for each subsequent Plan Year, the Plan Administrator shall determine which
Section 16 Officers, if any, shall participate in the Executive Officer Bonus Plan and which, if
any, shall participate in this Plan within the first ninety (90) days of that Plan Year.

          B. An individual selected for participation in the Plan shall cease to be a participant and
shall not be entitled to any bonus payment under the Plan for a given Plan Year if that participant
ceases Employee status for any reason prior to the date that bonuses for that Plan Year are paid
under the Plan (the “Distribution Date”); provided, however, that the following participants shall
receive a portion of the actual bonus to which they would otherwise have been entitled pursuant to
Articles IV and V on the basis of actual Company performance had they continued in Employee status
through the Distribution Date:

          (i) any participant who ceases Employee status prior to the Distribution Date by reason
of death or Disability;

          (ii) any participant whose Employee status terminates under circumstances that entitle
that individual to a full or pro-rata bonus pursuant to the express terms of any agreement
or arrangement to which that individual and the Company are parties; and

          (iii) any participant whose Employee status terminates under special circumstances that
warrant, in the Plan Administrator’s sole discretion, a pro-rated bonus award under the Plan
for the applicable Plan Period.

          C. For purposes of this Article III, the following definitions shall be in effect:

          (i) A participant shall be deemed to continue in “Employee” status for so long as that
individual remains in the employ of the Company or any subsidiary of the Company.

          (ii) A participant shall be deemed to have ceased Employee status by reason of a
“Disability” if such cessation of Employee status is occasioned by his or her inability to
engage in any substantial gainful activity by reason of any medically determinable physical
or mental impairment which is expected to result in death or has lasted or can be expected
to last for a continuous period of twelve (12) months or longer.

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          (iii) The “Plan Period” shall mean the period beginning with the first day of the Plan
Year and ending with the Distribution Date for the bonuses earned for that Plan Year.

          (vi) Each corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company shall be considered to be a “subsidiary” of the Company, provided
that each such corporation (other than the last corporation in the unbroken chain) owns, at
the time of determination, stock possessing more than fifty percent (50%) of the total
combined voting power of all classes of stock in one of the other corporations in such
chain.

          D. A participant who is absent from active Employee status for a portion of a Plan Period by
reason of an authorized leave of absence shall not be deemed to have ceased Employee status during
the period of that leave. However, any bonus to which such participant may otherwise become
entitled under the Plan for that Plan Year may be pro-rated based on the portion of the Plan Period
during which that individual is in active working status and not on such leave of absence, unless
the Plan Administrator otherwise deems it appropriate under the circumstances to provide that
individual with a full bonus for the Plan Period.

     IV. DETERMINATION OF PERFORMANCE GOALS AND POTENTIAL BONUS AMOUNTS

          A. Participants will be eligible to receive cash awards under the Plan for each Plan Year for
which one or more performance objectives established for that Plan Year by the Plan Administrator
are attained. The Plan Administrator shall, as soon as practicable at the beginning of each Plan
Year, other than the Plan Year ending December 31, 2007, establish the specific performance
objectives for that Plan Year. In no event may a performance objective be established at a time
when there exists no substantial uncertainty as to its attainment.

          B. For the Plan Year ending December 31, 2007, the Plan Administrator shall set the applicable
performance objectives on the basis of the following measures: (i) net revenue, (ii) non-GAAP
gross margin, (iii) non-GAAP operating margin, (iv) non-GAAP earnings per share and (v) non-GAAP
free cash flow. In determining whether the non-GAAP measures under clauses (ii), (iii), (iv) and
(v) are attained, the Plan Administrator shall apply the dollar amounts that the Company reports
for those items in accordance with U.S. generally accepted accounting principles (“GAAP”), as
adjusted for certain non-cash, non-recurring, extraordinary and other items set forth in Paragraph
IV.D.

          C. For the Plan Year ending December 31, 2008, the Plan Administrator shall set the applicable
performance objectives on the basis of the following measures: (i) net revenue; (ii) non-GAAP
earnings per share and (iii) working capital, as measured by days sales outstanding and inventory
turns. In determining whether the non-GAAP measures under clauses (ii) and (iii) are attained, the
Plan Administrator shall apply the dollar amounts that the Company reports for those items in
accordance with GAAP as adjusted for certain non-cash, non-recurring, extraordinary and other items
set forth in Paragraph IV.D. Each of the three performance objectives for the 2008 Plan Year shall
be measured separately in terms of actual level of attainment and shall be weighted as follows in
determining the actual dollar amount of the total

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bonus pool: (i) the net revenue objective at 0.4, (ii) non-GAAP earnings per share objective
at 0.4 and (iii) working capital objective at 0.2.

          D. For each subsequent Plan Year during the term of the Plan, the performance objectives may
include one or more of the measures used as the 2007 or 2008 Plan Year performance objectives as
well as one or more of the following:  (i) return on total shareholder equity; (ii) net income or
operating income; (iii) earnings before interest, taxes, deprecation, amortization and stock-based
compensation costs, or operating income before depreciation and amortization; (iv) return on
assets, capital or investment; (v) market share in one or more markets; (vi) cost reduction goals;
(vii) budget comparisons; (viii) implementation or completion of projects or processes strategic or
critical to the Company’s business operations; (ix) measures of customer satisfaction; (x) the
formation of joint ventures, research and development collaborations, marketing or customer service
collaborations, or the completion of other corporate transactions intended to enhance the Company’s
revenue or profitability or expand its customer base; (xi) completion of project milestones; and
(xii) any combination of, or a specified increase in, any of the foregoing provided, however, that
for purposes of items (ii) and (vi) above (as well as items (ii), (iii), (iv) and (v) of Paragraph
IV.B and items (ii) and (iii) of Paragraph IV.C above), the Plan Administrator may, at the time the
performance objects are established, specify certain adjustments to such items as reported in
accordance with GAAP, which will exclude from the calculation of those performance objectives one
or more of the following: certain charges related to acquisitions, stock-based compensation,
employer payroll tax expense on certain stock option exercises, settlement costs, restructuring
costs, gains or losses on strategic investments, non-operating gains, certain other non-cash
charges, valuation allowance on deferred tax assets, and the related income tax effects, purchases
of property and equipment, and any extraordinary non-recurring items as described in Accounting
Principles Board Opinion No. 30. In addition, such performance objectives may be based upon the
attainment of specified levels of the Company’s performance under one or more of the measures
described above relative to the performance of other entities and may also be based on the
performance of any of the Company’s business groups or division thereof or any parent or
subsidiary.

          E. For each performance objective, the Plan Administrator may establish up to four (4)
designated levels of attainment: threshold, above-threshold, target and above-target levels of
attainment.

          F. The Plan Administrator shall also establish the maximum bonus pool to be paid in total
under the Plan for each designated level of performance for a Plan Year. For the Plan Year ending
December 31, 2007, the maximum bonus pool payable at each designated level of performance shall be
as follows: for performance at the threshold level, the pool shall be $0, for performance at the
above-threshold level, the pool shall be $7,550,000 for performance at the target level, the pool
shall be $15,100,000, and for performance at the above-target level the pool shall be $22,650,000.

          For the Plan Year ending December 31, 2008, the maximum bonus pool payable at each designated
level of performance shall be as follows: for performance at threshold level, the pool shall be $0,
for performance at the target level, the pool shall be $24,000,000, and for performance at the
above-target level the pool shall be $45,600,000.

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          G. The actual bonus pool for each Plan Year shall be determined by the Plan Administrator on
the basis of the Company’s actual performance relative to each of the performance objectives
established for that Plan Year; provided, however, that the Plan Administrator shall have the full
power and authority to increase or decrease the total actual bonus pool as so determined for any
Plan Year as it deems appropriate or advisable. Each performance objective shall be measured
separately in terms of actual level of attainment and shall be weighted, equally or in such other
proportion as the Plan Administrator shall determine at the time such performance objectives are
established, in determining the actual total bonus pool. For example, if five (5) performance
objectives are established and weighted equally, then each of those objectives attained at target
level will contribute to the total bonus pool for the Plan Year in an amount equal to twenty
percent (20%) of the total bonus pool payable at target level for that Plan Year, and each
objective attained at above-target level will contribute to the total bonus pool for that Plan Year
in an amount equal to twenty percent (20%) of the total bonus pool at above-target level. If the
actual level of attainment for any performance objective is between two specified levels, then the
bonus amount attributable to that performance objective shall be interpolated on a straight-line
basis. The dollar amount of the actual bonus pool shall be determined by the Plan Administrator as
soon as administratively practicable following the completion of the audit of the Company’s
financial statements for the applicable Plan Year by the Company’s independent registered public
accounting firm.

     V. INDIVIDUAL BONUS AWARDS

          A. The actual bonus award to be made to each participant who is a Section 16 Officer shall be
determined at the sole discretion of the Plan Administrator, and the actual bonus award made to
each participant ) who is not a Section 16 Officer shall be approved by the Plan Administrator,
based upon the recommendation of the Company’s management.

          B. Except as otherwise provided in Paragraphs III.B and C, no participant shall accrue any
right to receive a bonus award under the Plan unless and until that participant remains in Employee
status through the Distribution Date. Accordingly, no bonus payment shall be made to any
participant who ceases Employee status prior to the Distribution Date, provided, however, that the
provisions of Paragraph III.B and C shall govern the bonus entitlement of participants whose
Employee status terminates under the various circumstances set forth in those provisions.

          C. The Distribution Date for the individual bonus amount payable to each participant for a
particular Plan Year shall occur as soon as practicable following the completion of that Plan Year
and the Plan Administrator’s determination of the actual performance levels for that Plan Year, but
in no event shall such Distribution Date occur at any time prior to the date the Company’s
independent registered public accounting firm completes its audit of the Company’s financial
statements for that Plan Year or at any time after the last day of the calendar year immediately
succeeding such Plan Year

          D. All bonus payments shall be made in cash, subject to the Company’s collection of all
applicable federal, state and local income and employment withholding taxes.

5

 

     VI. GENERAL PROVISIONS

          A. The Plan and all rights hereunder shall be construed, administered and governed in all
respects in accordance with the laws of the State of California without resort to its
conflict-of-laws provisions. If any provision of the Plan shall be held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions of the Plan shall continue in
full force and effect.

          B. Neither the action of the Company in establishing or maintaining the Plan, nor any action
taken under the Plan by the Plan Administrator, nor any provision of the Plan itself shall be
construed to grant any person the right to remain in Employee status for any period of specific
duration, and each participant shall at all times remain an Employee at-will and may accordingly be
discharged at any time, with or without cause and with or without advance notice of such discharge.

          C. Should a participant die before payment is made of the actual bonus to which he or she has
become entitled under the Plan, then that bonus shall be paid to the executor or other legal
representative of his or her estate.

          D. No participant shall have the right to transfer, alienate, pledge or encumber his or her
interest in the Plan, and such interest shall not (to the maximum permitted by law) be subject to
the claims of the participant’s creditors or to attachment, execution or other process of law.

          E. The terms and conditions of the Plan, together with the obligations and liabilities of the
Company that accrue hereunder, shall be binding upon any successor to the Company, whether by way
of merger, consolidation, reorganization or other change in ownership or control of the Company.

          F.. No amounts accrued or earned under the Plan shall actually be funded, set aside or to
otherwise segregated prior to actual payment. The obligation to pay the bonuses that actually
become due and payable under the Plan shall at all times be an unfunded and unsecured obligation of
the Company. Participants shall have the status of general creditors and shall look solely and
exclusively to the general assets of the Company for payment.

          G. Any disputes between the Company and a participant arising out of or relating to the Plan,
his or her entitlement to any bonus award hereunder or the amount or method of payment of such
award shall be settled exclusively by binding arbitration to be held in the county in which the
participant is (or has most recently been) employed by the Company (or any subsidiary) at the time
of such arbitration. The arbitration proceedings shall be governed by (i) the national rules of the
American Arbitration Association then in effect for the resolution of employment disputes and (ii)
the Federal Arbitration Act. The decision of the arbitrator shall be final and binding on the
parties to the arbitration and shall be in lieu of the rights those parties may otherwise have to a
jury trial.

6

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