Document:

Exhibit
10.1

 

OCCAM
NETWORKS, INC.

 

2006
EQUITY INCENTIVE PLAN

 

(As amended and restated April 1, 2009)

 

1.     Purposes
of the Plan.  The purposes of
this Plan are:

 

·                  to
attract and retain the best available personnel for positions of substantial
responsibility,

 

·                  to
provide incentives to individuals who perform services to the Company, and

 

·                  to
promote the success of the Company’s business.

 

The Plan permits the grant of Incentive Stock Options, Nonstatutory
Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation
Rights, Performance Units, Performance Shares and other stock or cash awards as
the Administrator may determine.

 

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

 

(a)   “Administrator” means the Board or any of
its Committees as will be administering the Plan, in accordance with Section 4
of the Plan.

 

(b)   “Affiliate”
means any corporation or any other entity (including, but not limited to,
partnerships and joint ventures) controlling, controlled by, or under common
control with the Company.

 

(c)   “Annual
Revenue” means the Company’s or a business unit’s net sales for the
Performance Period, determined in accordance with generally accepted accounting
principles; provided, however, that prior to the Performance Period, the
Administrator shall determine whether any significant item(s) shall be
excluded or included from the calculation of Annual Revenue with respect to one
or more Participants.

 

(d)   “Applicable
Laws” means the requirements relating to the administration of
equity-based awards under U.S. state corporate laws, U.S. federal and state
securities laws, the Code, any stock exchange or quotation system on which the
Common Stock is listed or quoted and the applicable laws of any foreign country
or jurisdiction where Awards are, or will be, granted under the Plan.

 

(e)   “Award”
means, individually or collectively, a grant under the Plan of Options,
Restricted Stock, Restricted Stock Units, Stock Appreciation Rights,
Performance Units, Performance Shares and other stock or cash awards as the
Administrator may determine.

 

(f)    “Award
Agreement” means the written or electronic agreement setting forth
the terms and provisions applicable to each Award granted under the Plan. The
Award Agreement is subject to the terms and conditions of the Plan.

 

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

 

(h)   “Cash
Collections” means the actual cash or other freely negotiable
consideration, in any currency, received in satisfaction of accounts receivable
created by the sale of any Company products or services.

 

(i)    “Change
in Control” means the occurrence of any of the following events:

 

(i)    Any “person” (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial
owner” (as defined in Rule 13d-3 of the Exchange Act), directly

 

1

 

or indirectly,
of securities of the Company representing fifty percent (50%) or more of the
total voting power represented by the Company’s then outstanding voting
securities;

 

(ii)   The consummation of the sale or disposition
by the Company of all or substantially all of the Company’s assets;

 

(iii)  A change in the composition of the Board
occurring within a two-year period, as a result of which fewer than a majority
of the directors are Incumbent Directors. “Incumbent Directors” means directors
who either (A) are Directors as of the effective date of the Plan, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but will not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to the
election of directors to the Company); or

 

(iv)  The consummation of a merger or consolidation
of the Company with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity or its parent) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity or
its parent outstanding immediately after such merger or consolidation.

 

With respect to Awards granted on or after April 1,
2009, the following sentence shall apply. Notwithstanding the foregoing,
neither of the foregoing events will be deemed a Change in Control unless the
event qualifies as a change in control event within the meaning of Section 409A
of the Code, as it has been and may be amended from time to time, and any
proposed or final Treasury Regulations and Internal Revenue Service guidance
that has been promulgated or may be promulgated thereunder from time to time.

 

(j)    “Code” means the
Internal Revenue Code of 1986, as amended. Any reference to a section of the
Code herein will be a reference to any successor or amended section of the
Code.

 

(k)   “Committee”
means a committee of Directors or of other individuals satisfying Applicable
Laws appointed by the Board in accordance with Section 4 hereof.

 

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

 

(m)  “Company” means
Occam Networks, Inc., a Delaware corporation, or any successor thereto.

 

(n)   “Consultant”
means any person, including an advisor, engaged by the Company or its
Affiliates to render services to such entity.

 

(o)   “Customer Satisfaction MBOs”
means as to any Participant, the objective and measurable individual goals set
by a “management by objectives” process and approved by the Administrator,
which goals relate to the satisfaction of external or internal customer
requirements.

 

(p)   “Determination Date”
means the latest possible date that will not jeopardize the qualification of an
Award granted under the Plan as “performance-based compensation” under Section 162(m) of
the Code.

 

(q)   “Director” means
a member of the Board.

 

(r)    “Disability”
means total and permanent disability as defined in Section 22(e)(3) of
the Code, provided that in the case of Awards other than Incentive Stock
Options, the Administrator in its discretion may determine whether a permanent
and total disability exists in accordance with uniform and non-discriminatory
standards adopted by the Administrator from time to time.

 

2

 

(s)   “Earnings Per Share”
means as to any Performance Period, the Company’s Net Income or a business unit’s
Pro Forma Net Income, divided by a weighted average number of Shares
outstanding and dilutive common equivalent Shares deemed outstanding.

 

(t)    “Employee” means
any person, including Officers and Directors, employed by the Company or its
Affiliates. Neither service as a Director nor payment of a director’s fee by
the Company will be sufficient to constitute “employment” by the Company.

 

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

 

(v)   “Exchange Program”
means a program under which (i) outstanding Awards are surrendered or
cancelled in exchange for Awards of the same type (which may have lower or
higher exercise prices and different terms), awards of a different type, and/or
cash, (ii) Participants would have the opportunity to transfer any
outstanding Awards to a financial institution or other person or entity
selected by the Administrator, and/or (iii) the exercise price of an
outstanding Award is reduced or increased. The Administrator will determine the
terms and conditions of any Exchange Program in its sole discretion.

 

(w)  “Fair Market Value”
means, as of any date, the value of Common Stock as the Administrator may
determine in good faith by reference to the price of such stock on any
established stock exchange or a national market system, including without
limitation The Nasdaq Global Select Market, the Nasdaq Global Market or The
Nasdaq Capital Market of The Nasdaq Stock Market, on the day of determination
if the Common Stock is so listed on any established stock exchange or a
national market system. If the Common Stock is not listed on any established
stock exchange or a national market system, the value of the Common Stock will
be determined by the Administrator in good faith.

 

(x)    “Fiscal Year”
means the fiscal year of the Company.

 

(y)   “Incentive Stock Option”
means an Option that by its terms qualifies and is otherwise intended to
qualify as an incentive stock option within the meaning of Section 422 of
the Code and the regulations promulgated thereunder.

 

(z)    “Net Income”
means as to any Performance Period, the income after taxes of the Company
determined in accordance with generally accepted accounting principles,
provided that prior to the Performance Period, the Administrator shall
determine whether any significant item(s) shall be included or excluded
from the calculation of Net Income with respect to one or more participants.

 

(aa) “New Orders”
means as to any Performance Period, the firm orders for a system, product,
part, or service that are being recorded for the first time as defined in the
Company’s order recognition policy.

 

(bb) “Non-Owner Outside Director”
means an Outside Director who is not the beneficial owner of more than 5% of
the Company’s outstanding capital stock.

 

(cc) “Nonstatutory Stock Option”
means an Option that by its terms does not qualify or is not intended to
qualify as an Incentive Stock Option.

 

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

 

(ee) “Operating Profit”
means as to any Performance Period, the difference between revenue and related
costs and expenses, excluding income derived from sources other than regular
activities and before income deductions.

 

(ff)   “Option” means a
stock option granted pursuant to Section 6 of the Plan.

 

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

 

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

 

(ii)   “Participant”
means the holder of an outstanding Award.

 

(jj)   “Performance Goals”
will have the meaning set forth in Section 11 of the Plan.

 

(kk) “Performance Period”
means any Fiscal Year of the Company or such other period as determined by the
Administrator in its sole discretion.

 

(ll)   “Performance Share”
means an Award denominated in Shares which may be earned in whole or in part
upon attainment of Performance Goals or other vesting criteria as the
Administrator may determine pursuant to Section 10.

 

(mm) “Performance Unit” means an Award which may be earned in
whole or in part upon attainment of Performance Goals or other vesting criteria
as the Administrator may determine and which may be settled for cash, Shares or
other securities or a combination of the foregoing pursuant to Section 10.

 

(nn) “Period of Restriction”
means the period during which the transfer of Shares of Restricted Stock are
subject to restrictions and therefore, the Shares are subject to a substantial
risk of forfeiture. Such restrictions may be based on the passage of time, the
achievement of target levels of performance, or the occurrence of other events
as determined by the Administrator.

 

(oo) “Plan” means
this 2006 Equity Incentive Plan.

 

(pp) “Pro Forma Net Income”
means as to any business unit for any Performance Period, the Net Income of
such business unit, minus allocations of designated corporate expenses.

 

(qq) “Product Shipments”
means as to any Performance Period, the quantitative and measurable number of units
of a particular product that shipped during such Performance Period.

 

(rr)   “Restricted Stock”
means Shares issued pursuant to an Award of Restricted Stock under Section 8
of the Plan, or issued pursuant to the early exercise of an Option.

 

(ss) “Restricted Stock Unit”
means a bookkeeping entry representing an amount equal to the Fair Market Value
of one Share, granted pursuant to Section 9. Each Restricted Stock Unit
represents an unfunded and unsecured obligation of the Company.

 

(tt)   “Return on Designated
Assets” means as to any Performance Period, the Pro Forma Net Income
of a business unit, divided by the average of beginning and ending business
unit designated assets, or Net Income of the Company, divided by the average of
beginning and ending designated corporate assets.

 

(uu) “Return on Equity”
means, as to any Performance Period, the percentage equal to the value of the
Company’s or any business unit’s common stock investments at the end of such
Performance Period, divided by the value of such common stock investments at
the start of such Performance Period, excluding any common stock investments so
designated by the Administrator.

 

(vv) “Return on Sales”
means as to any Performance Period, the percentage equal to the Company’s Net
Income or the business unit’s Pro Forma Net Income, divided by the Company’s or
the business unit’s Annual Revenue.

 

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

 

(xx)  “Section 16(b)”
means Section 16(b) of the Exchange Act.

 

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(yy) “Service Provider”
means an Employee, Director or Consultant.

 

(zz)  “Share” means a
share of the Common Stock, as adjusted in accordance with Section 15 of
the Plan.

 

(aaa)  “Stock Appreciation Right”
means an Award, granted alone or in connection with an Option, that pursuant to
Section 7 is designated as a Stock Appreciation Right.

 

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

 

(ccc)  “Successor Corporation” has the meaning given
to such term in Section 15(c) of the Plan.

 

3.     Stock Subject to the Plan.

 

(a)   Stock
Subject to the Plan.  Subject
to the provisions of Section 15 of the Plan, the maximum aggregate number
of Shares that may be awarded and sold under the Plan is 4,174,689 Shares plus (i) any
Shares subject to stock options or similar awards granted under the Company’s
2000 Stock Incentive Plan (the “2000 Plan”), that expire or otherwise terminate
after April 1, 2009, without having been exercised in full and Shares
issued pursuant to awards granted under the 2000 Plan, that are forfeited to or
repurchased by the Company after April 1, 2009, up to a maximum of
1,518,683 Shares, and (ii) an annual increase to be added on the first day
of the Company’s fiscal year beginning in 2010, equal to the lesser of (a) 750,000
shares, (b) three percent (3%) of the outstanding shares on such date, or (c) an
amount determined by the Board. The Shares may be authorized, but unissued, or
reacquired Common Stock.

 

(b)   Full Value
Awards.  Any Shares subject to
Awards granted of Restricted Stock, Restricted Stock Units, Performance Units
and Performance Shares will be counted against the numerical limits of this Section 3
as two (2) Shares for every one (1) Share subject thereto. Further,
if Shares acquired pursuant to any such Award are forfeited or repurchased by
the Company and would otherwise return to the Plan pursuant to Section 3(c),
two (2) times the number of Shares so forfeited or repurchased will return
to the Plan and will again become available for issuance.

 

(c)   Lapsed
Awards.  If an Award expires
or becomes unexercisable without having been exercised in full, or, with
respect to Restricted Stock, Restricted Stock Units, Performance Shares or
Performance Units, is forfeited to or repurchased by the Company, the
unpurchased Shares (or for Awards other than Options and Stock Appreciation
Rights, the forfeited or repurchased Shares) which were subject thereto will
become available for future grant or sale under the Plan (unless the Plan has
terminated). With respect to Stock Appreciation Rights, all of the Shares
covered by the Award (that is, Shares actually issued pursuant to a Stock
Appreciation Right, as well as the Shares that represent payment of the
exercise price) will cease to be available under the Plan. However, Shares that
have actually been issued under the Plan under any Award will not be returned
to the Plan and will not become available for future distribution under the
Plan; provided, however, that if unvested Shares of Restricted Stock,
Restricted Stock Units, Performance Shares or Performance Units are repurchased
by the Company or are forfeited to the Company, such Shares will become
available for future grant under the Plan. Shares used to pay the tax and/or
exercise price of an Award will not become available for future grant or sale
under the Plan. To the extent an Award under the Plan is paid out in cash
rather than Shares, such cash payment will not result in reducing the number of
Shares available for issuance under the Plan. Notwithstanding the foregoing
provisions of this Section 3(c), subject to adjustment provided in Section 15,
the maximum number of Shares that may be issued upon the exercise of Incentive
Stock Options will equal the aggregate Share number stated in Section 3(a),
plus, to the extent

 

5

 

allowable under Section 422 of the Code, any Shares that become
available for issuance under the Plan under this Section 3(c).

 

(d)   Share
Reserve.  The Company, during
the term of this Plan, will at all times reserve and keep available such number
of Shares as will be sufficient to satisfy the requirements of the Plan.

 

4.     Administration of the Plan.

 

(a)   Procedure.

 

(i)    Multiple Administrative
Bodies.  Different Committees
with respect to different groups of Service Providers may administer the Plan.

 

(ii)   Section 162(m).  To the extent that the Administrator
determines it to be desirable to qualify Awards granted hereunder as “performance-based
compensation” within the meaning of Section 162(m) of the Code, the
Plan will be administered by a Committee of two (2) or more “outside
directors” within the meaning of Section 162(m) of the Code.

 

(iii)  Rule 16b-3.  To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions
contemplated hereunder will be structured to satisfy the requirements for exemption
under Rule 16b-3.

 

(iv)  Other Administration.  Other than as provided above, the Plan will
be administered by (A) the Board or (B) a Committee, which committee
will be constituted to satisfy Applicable Laws.

 

(b)   Powers of
the Administrator.  Subject to
the provisions of the Plan, and in the case of a Committee, subject to the
specific duties delegated by the Board to such Committee, the Administrator
will have the authority, in its discretion:

 

(i)    to determine the Fair Market Value;

 

(ii)   to select the Service Providers to whom
Awards may be granted hereunder;

 

(iii)  to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Award granted hereunder;

 

(iv)  to construe and interpret the terms of the
Plan and Awards granted pursuant to the Plan;

 

(v)   to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating
to sub-plans established for the purpose of satisfying applicable foreign laws;

 

(vi)  to modify or amend each Award (subject to Section 20(c) of
the Plan). Notwithstanding the previous sentence, the Administrator may not,
without the approval of the Company’s stockholders, modify or amend an Option
or Stock Appreciation Right to reduce the exercise price of such Option or
Stock Appreciation Right after it has been granted (except for adjustments made
pursuant to Section 15), and neither may the Administrator cancel any
outstanding Option or Stock Appreciation Right and immediately replace it with
a new Option or Stock Appreciation Right with a lower exercise price;

 

(vii) to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an Award previously
granted by the Administrator;

 

(viii) to
allow a Participant to defer the receipt of the payment of cash or the delivery
of Shares that would otherwise be due to such Participant under an Award
pursuant to such procedures as the Administrator may determine;

 

6

 

(ix)   to determine the terms and conditions of any,
and with the approval of the Company’s stockholders, to institute an Exchange
Program; and

 

(x)    to make all other determinations deemed
necessary or advisable for administering the Plan.

 

(c)   Effect of
Administrator’s Decision.  The
Administrator’s decisions, determinations and interpretations will be final and
binding on all Participants and any other holders of Awards.

 

5.     Eligibility.  Nonstatutory Stock Options, Restricted Stock,
Restricted Stock Units, Stock Appreciation Rights, Performance Units,
Performance Shares and such other cash or stock awards as the Administrator
determines may be granted to Service Providers. Incentive Stock Options may be
granted only to employees of the Company or any Parent or Subsidiary of the
Company.

 

6.     Stock Options.

 

(a)   Limitations.  Each Option will be designated in the Award
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Participant during any calendar year
(under all plans of the Company and any Parent or Subsidiary) exceeds $100,000,
such Options will be treated as Nonstatutory Stock Options. For purposes of
this Section 6(a), Incentive Stock Options will be taken into account in
the order in which they were granted. The Fair Market Value of the Shares will
be determined as of the time the Option with respect to such Shares is granted.

 

(b)   Number of
Shares.  The Administrator
will have complete discretion to determine the number of Options granted to any
Participant, provided that during any Fiscal Year, no Participant will be
granted Options covering more than 150,000 Shares. Notwithstanding the
foregoing limitation, in connection with a Participant’s initial service as an
Employee, an Employee may be granted Options covering up to an additional
150,000 Shares.

 

(c)   Term of
Option.  The Administrator
will determine the term of each Option in its sole discretion. Any Option
granted under the Plan will not be exercisable after the expiration of ten (10) years
from the date of grant or such shorter term as may be provided in the Award
Agreement. Moreover, in the case of an Incentive Stock Option granted to a
Participant who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option will be five (5) years from the date of grant
or such shorter term as may be provided in the Award Agreement.

 

(d)   Option Exercise Price and Consideration.

 

(i)    Exercise Price.  The per share exercise price for the Shares
to be issued pursuant to exercise of an Option will be determined by the
Administrator, but will be no less than 100% of the Fair Market Value per Share
on the date of grant. In addition, in the case of an Incentive Stock Option
granted to an Employee who, at the time the Incentive Stock Option is granted,
owns stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the per Share
exercise price will be no less than 110% of the Fair Market Value per Share on
the date of grant. Notwithstanding the foregoing provisions of this Section 6(d),
Options may be granted with a per Share exercise price of less than 100% of the
Fair Market Value per Share on the date of grant pursuant to a transaction
described in, and in a manner consistent with, Section 424(a) of the
Code. The Administrator may not modify or amend an Option to reduce the
exercise price of such Option after it has been granted (except for adjustments
made pursuant to

 

7

 

Section 15 of the Plan) nor may the
Administrator cancel any outstanding Option and replace it with a new Option,
Stock Appreciation Right, or other Award with a lower exercise price, unless,
in either case, such action is approved by the Company’s stockholders.

 

(ii)   Waiting Period and
Exercise Dates.  At the time
an Option is granted, the Administrator will fix the period within which the
Option may be exercised and will determine any conditions that must be
satisfied before the Option may be exercised.

 

(iii)  Form of
Consideration.  The
Administrator will determine the acceptable form(s) of consideration for
exercising an Option, including the method of payment, to the extent permitted
by Applicable Laws.

 

(e)   Exercise of Option.

 

(i)    Procedure for Exercise;
Rights as a Stockholder.  Any
Option granted hereunder will be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the Award Agreement. An Option may not be exercised for a
fraction of a Share.

 

An Option will be deemed exercised when the
Company receives: (i) notice of exercise (in such form as the
Administrator may specify from time to time) from the person entitled to
exercise the Option, and (ii) full payment for the Shares with respect to
which the Option is exercised (together with an applicable withholding taxes).
No adjustment will be made for a dividend or other right for which the record
date is prior to the date the Shares are issued, except as provided in Section 15
of the Plan.

 

(ii)   Termination of
Relationship as a Service Provider. 
If a Participant ceases to be a Service Provider, other than upon the
Participant’s termination as the result of the Participant’s death or
Disability, the Participant may exercise his or her Option within such period
of time as is specified in the Award Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Award Agreement). In the absence of
a specified time in the Award Agreement, the Option will remain exercisable for
three (3) months following the Participant’s termination. Unless otherwise
provided by the Administrator, if on the date of termination the Participant is
not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option will revert to the Plan. If after termination the
Participant does not exercise his or her Option within the time specified by
the Administrator, the Option will terminate, and the Shares covered by such
Option will revert to the Plan.

 

(iii)  Disability of Participant.  If a Participant ceases to be a Service
Provider as a result of the Participant’s Disability, the Participant may
exercise his or her Option within such period of time as is specified in the
Award Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Award Agreement). In the absence of a specified time in the Award
Agreement, the Option will remain exercisable for twelve (12) months
following the Participant’s termination. Unless otherwise provided by the
Administrator, if on the date of termination the Participant is not vested as
to his or her entire Option, the Shares covered by the unvested portion of the
Option will revert to the Plan. If after termination the Participant does not
exercise his or her Option within the time specified herein, the Option will
terminate, and the Shares covered by such Option will revert to the Plan.

 

(iv)  Death of Participant.  If a Participant dies while a Service
Provider, the Option may be exercised following the Participant’s death within
such period of time as is specified in the Award Agreement to the extent that
the Option is vested on the date of death (but in no event may the option be
exercised later than the expiration of the term of such Option as set

 

8

 

forth in the Award Agreement), by the
Participant’s designated beneficiary, provided such beneficiary has been
designated prior to Participant’s death in a form acceptable to the
Administrator. If no such beneficiary has been designated by the Participant,
then such Option may be exercised by the personal representative of the
Participant’s estate or by the person(s) to whom the Option is transferred
pursuant to the Participant’s will or in accordance with the laws of descent and
distribution. In the absence of a specified time in the Award Agreement, the
Option will remain exercisable for twelve (12) months following
Participant’s death. Unless otherwise provided by the Administrator, if at the
time of death Participant is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option will immediately revert to
the Plan. If the Option is not so exercised within the time specified herein,
the Option will terminate, and the Shares covered by such Option will revert to
the Plan.

 

(v)   Other Termination.  A Participant’s Award Agreement may also
provide that if the exercise of the Option following the termination of
Participant’s status as a Service Provider (other than upon the Participant’s
death or Disability) would result in liability under Section 16(b), then
the Option will terminate on the earlier of (A) the expiration of the term
of the Option set forth in the Award Agreement, or (B) the 10th day
after the last date on which such exercise would result in such liability under
Section 16(b). Finally, a Participant’s Award Agreement may also provide
that if the exercise of the Option following the termination of the Participant’s
status as a Service Provider (other than upon the Participant’s death or
Disability) would be prohibited at any time solely because the issuance of
Shares would violate the registration requirements under the Securities Act,
then the Option will terminate on the earlier of (A) the expiration of the
term of the Option, or (B) the expiration of a period of three (3) months
after the termination of the Participant’s status as a Service Provider during
which the exercise of the Option would not be in violation of such registration
requirements.

 

(vi)  Administrator Discretion.  The Administrator, in its sole discretion,
may, after an Option is granted, extend the maximum term of an Option (subject
to Section 6(c) regarding Incentive Stock Options) or the
post-termination exercisability period of an Option provided, however, that
such Option shall terminate no later than following the expiration of ten (10) years
from the Grant Date. Unless otherwise determined by the Committee, any
extension of the term or post-termination exercisability period of an Option
pursuant to this Section 6(e)(vi) shall comply with Section 409A
of the Code.

 

7.               Stock
Appreciation Rights.

 

(a)   Grant of
Stock Appreciation Rights. 
Subject to the terms and conditions of the Plan, a Stock Appreciation
Right may be granted to Service Providers at any time and from time to time as
will be determined by the Administrator, in its sole discretion.

 

(b)   Number of
Shares.  The Administrator
will have complete discretion to determine the number of Stock Appreciation
Rights granted to any Participant, provided that during any Fiscal Year, no
Participant will be granted Stock Appreciation Rights covering more than
125,000 Shares. Notwithstanding the foregoing limitation, in connection with a
Participant’s initial service as an Employee, an Employee may be granted Stock
Appreciation Rights covering up to an additional 200,000 Shares.

 

9

 

(c)   Exercise Price and Other Terms.  The Administrator, subject to the provisions
of the Plan, will have complete discretion to determine the terms and
conditions of Stock Appreciation Rights granted under the Plan, provided,
however, that the exercise price will be not less than 100% of the Fair Market
Value of a Share on the date of grant. The Administrator may not modify or
amend a Stock Appreciation Right to reduce the exercise price of such Stock
Appreciation Right after it has been granted (except for adjustments made
pursuant to Section 15 of the Plan) nor may the Administrator cancel any
outstanding Stock Appreciation Right and replace it with a new Stock
Appreciation Right, Option, or other Award with a lower exercise price, unless,
in either case, such action is approved by the Company’s stockholders.

 

(d)   Stock
Appreciation Right Agreement. 
Each Stock Appreciation Right grant will be evidenced by an Award
Agreement that will specify the exercise price, the term of the Stock
Appreciation Right, the conditions of exercise, and such other terms and
conditions as the Administrator, in its sole discretion, will determine.

 

(e)   Expiration
of Stock Appreciation Rights. 
A Stock Appreciation Right granted under the Plan will expire upon the
date determined by the Administrator, in its sole discretion, and set forth in
the Award Agreement. Notwithstanding the foregoing, the rules of Section 6(e) also
will apply to Stock Appreciation Rights.

 

(f)    Payment
of Stock Appreciation Right Amount. 
Upon exercise of a Stock Appreciation Right, a Participant will be
entitled to receive payment from the Company in an amount determined by
multiplying:

 

(i)    The difference between the Fair Market Value
of a Share on the date of exercise over the exercise price; times

 

(ii)   The number of Shares with respect to which
the Stock Appreciation Right is exercised.

 

At the discretion of the Administrator, the
payment upon Stock Appreciation Right exercise may be in cash, in Shares of
equivalent value, or in some combination thereof.

 

(g)   Administrator
Discretion.  The
Administrator, in its sole discretion, may, after a Stock Appreciation Right is
granted, extend the maximum term of a Stock Appreciation Right or the
post-termination exercisability period of a Stock Appreciation Right provided,
however, that such Stock Appreciation Right shall terminate no later than
following the expiration of ten (10) years from the Grant Date. Unless
otherwise determined by the Committee, any extension of the term or
post-termination exercisability period of a Stock Appreciation Right pursuant
to this Section 7(g) shall comply with Section 409A of the Code.

 

8.     Restricted Stock.

 

(a)   Grant of Restricted Stock.  Subject to the terms and provisions of the
Plan, the Administrator, at any time and from time to time, may grant Shares of
Restricted Stock to Service Providers in such amounts as the Administrator, in
its sole discretion, will determine.

 

(b)   Restricted Stock Agreement.  Each Award of Restricted Stock will be
evidenced by an Award Agreement that will specify the Period of Restriction,
the number of Shares granted, and such other terms and conditions as the
Administrator, in its sole discretion, will determine. Notwithstanding the
foregoing sentence, for Restricted Stock intended to qualify as “performance-based
compensation” within the meaning of Section 162(m) of the Code,
during any Fiscal Year no Participant will receive more than an aggregate of
125,000 Shares of Restricted Stock; provided, however, that in connection with
a Participant’s initial service as an Employee, for Restricted Stock intended
to qualify as “performance-based compensation” within the meaning of Section 162(m) of
the Code, an Employee may be granted an aggregate of up to an additional
200,000 Shares of Restricted Stock. Unless the

 

10

 

Administrator determines
otherwise, Shares of Restricted Stock will be held by the Company as escrow
agent until the restrictions on such Shares have lapsed.

 

(c)   Transferability.  Except as provided in this Section 8,
Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated until the end of the applicable Period of
Restriction.

 

(d)   Other
Restrictions.  The
Administrator, in its sole discretion, may impose such other restrictions on
Shares of Restricted Stock as it may deem advisable or appropriate.

 

(e)   Removal of
Restrictions.  Except as
otherwise provided in this Section 8, Shares of Restricted Stock covered
by each Restricted Stock grant made under the Plan will be released from escrow
as soon as practicable after the last day of the Period of Restriction. The
Administrator, in its discretion, may accelerate the time at which any
restrictions will lapse or be removed.

 

(f)    Voting Rights.  During the Period of Restriction, Service
Providers holding Shares of Restricted Stock granted hereunder may exercise
full voting rights with respect to those Shares, unless the Administrator
determines otherwise.

 

(g)   Dividends
and Other Distributions. 
During the Period of Restriction, Service Providers holding Shares of
Restricted Stock will be entitled to receive all dividends and other
distributions paid with respect to such Shares unless otherwise provided in the
Award Agreement. If any such dividends or distributions are paid in Shares, the
Shares will be subject to the same restrictions on transferability and
forfeitability as the Shares of Restricted Stock with respect to which they
were paid.

 

(h)   Return of
Restricted Stock to Company. 
On the date set forth in the Award Agreement, the Restricted Stock for
which restrictions have not lapsed will revert to the Company and again will
become available for grant under the Plan.

 

(i)    Section 162(m) Performance
Restrictions.  For purposes of
qualifying grants of Restricted Stock as “performance-based compensation” under
Section 162(m) of the Code, the Administrator, in its discretion, may
set restrictions based upon the achievement of Performance Goals. The
Performance Goals will be set by the Administrator on or before the
Determination Date. In granting Restricted Stock which is intended to qualify
under Section 162(m) of the Code, the Administrator will follow any
procedures determined by it from time to time to be necessary or appropriate to
ensure qualification of the Award under Section 162(m) of the Code
(e.g., in determining the Performance Goals).

 

9.     Restricted Stock Units.

 

(a)   Grant.  Restricted Stock Units may be granted at any
time and from time to time as determined by the Administrator. Each Restricted
Stock Unit grant will be evidenced by an Award Agreement that will specify such
other terms and conditions as the Administrator, in its sole discretion, will
determine, including all terms, conditions, and restrictions related to the grant,
the number of Restricted Stock Units and the form of payout, which, subject to Section 9(d),
may be left to the discretion of the Administrator. Notwithstanding anything to
the contrary in this subsection (a), for Restricted Stock Units intended
to qualify as “performance-based compensation” within the meaning of Section 162(m) of
the Code, during any Fiscal Year of the Company, no Participant will receive
more than an aggregate of 125,000 Restricted Stock Units; provided, however,
for Restricted Stock Units intended to qualify as “performance-based
compensation” within the meaning of Section 162(m) of the Code, in
connection with a Participant’s initial service as an Employee, an Employee may
be granted an aggregate of up to an additional 200,000 Restricted Stock Units.

 

11

 

(b)   Vesting
Criteria and Other Terms.  The
Administrator will set vesting criteria in its discretion, which, depending on
the extent to which the criteria are met, will determine the number of
Restricted Stock Units that will be paid out to the Participant. After the
grant of Restricted Stock Units, the Administrator, in its sole discretion, may
reduce or waive any restrictions for such Restricted Stock Units. Each Award of
Restricted Stock Units will be evidenced by an Award Agreement that will
specify the vesting criteria, and such other terms and conditions as the
Administrator, in its sole discretion, will determine. The Administrator, in
its discretion, may accelerate the time at which any restrictions will lapse or
be removed.

 

(c)   Earning
Restricted Stock Units.  Upon
meeting the applicable vesting criteria, the Participant will be entitled to
receive a payout as specified in the Award Agreement. Notwithstanding the
foregoing, at any time after the grant of Restricted Stock Units, the
Administrator, in its sole discretion, may reduce or waive any vesting criteria
that must be met to receive a payout, provided that, unless the Administrator
determines otherwise, the payout of such accelerated Award shall be structured
to comply with Section 409A of the Code.

 

(d)   Form and
Timing of Payment.  Payment of
earned Restricted Stock Units will be made as soon as practicable after the
date(s) set forth in the Award Agreement. The Administrator, in its sole
discretion, may pay earned Restricted Stock Units in cash, Shares, or a
combination thereof. Shares represented by Restricted Stock Units that are
fully paid in cash again will be available for grant under the Plan.

 

(e)   Cancellation.  On the date set forth in the Award Agreement,
all unearned Restricted Stock Units will be forfeited to the Company.

 

(f)    Section 162(m) Performance
Restrictions.  For purposes of
qualifying grants of Restricted Stock Units as “performance-based compensation”
under Section 162(m) of the Code, the Administrator, in its
discretion, may set restrictions based upon the achievement of Performance
Goals. The Performance Goals will be set by the Administrator on or before the
Determination Date. In granting Restricted Stock Units which are intended to
qualify under Section 162(m) of the Code, the Administrator will
follow any procedures determined by it from time to time to be necessary or
appropriate to ensure qualification of the Award under Section 162(m) of
the Code (e.g., in determining the Performance Goals).

 

10.   Performance Units and Performance Shares.

 

(a)   Grant of
Performance Units/Shares. 
Performance Units and Performance Shares may be granted to Service
Providers at any time and from time to time, as will be determined by the
Administrator, in its sole discretion. The Administrator will have complete
discretion in determining the number of Performance Units/Shares granted to
each Participant provided that during any Fiscal Year, for Performance Units or
Performance Shares intended to qualify as “performance-based compensation”
within the meaning of Section 162(m) of the Code, (i) no
Participant will receive Performance Units having an initial value greater than
$750,000, and (ii) no Participant will receive more than 125,000
Performance Shares. Notwithstanding the foregoing limitation, for Performance
Shares intended to qualify as “performance-based compensation” within the
meaning of Section 162(m) of the Code, in connection with a
Participant’s initial service as an Employee, an Employee may be granted up to
an additional 200,000 Performance Shares.

 

(b)   Value of
Performance Units/Shares. 
Each Performance Unit will have an initial value that is established by
the Administrator on or before the date of grant. Each Performance Share will
have an initial value equal to the Fair Market Value of a Share on the date of
grant.

 

(c)   Performance
Objectives and Other Terms. 
The Administrator will set performance objectives or other vesting
provisions (including, without limitation, continued status as a Service
Provider) in its discretion which, depending on the extent to which they are
met, will determine

 

12

 

the number or value of Performance
Units/Shares that will be paid out to the Participant. The Administrator may
set performance objectives based upon the achievement of Company-wide,
divisional, or individual goals, or any other basis determined by the
Administrator in its discretion. Each Award of Performance Units/Shares will be
evidenced by an Award Agreement that will specify the Performance Period, and
such other terms and conditions as the Administrator, in its sole discretion,
will determine.

 

(d)   Earning of
Performance Units/Shares. 
After the applicable Performance Period has ended, the holder of
Performance Units/Shares will be entitled to receive a payout of the number of
Performance Units/Shares earned by the Participant over the Performance Period,
to be determined as a function of the extent to which the corresponding
performance objectives or other vesting provisions have been achieved. After
the grant of a Performance Unit/Share, the Administrator, in its sole
discretion, may reduce or waive any performance objectives or other vesting
provisions for such Performance Unit/Share, provided that, unless the
Administrator determines otherwise, the payout of such accelerated Award shall
be structured to comply with Section 409A of the Code.

 

(e)   Form and
Timing of Payment of Performance Units/Shares.  Payment of earned Performance Units/Shares
will be made as soon as practicable after the expiration of the applicable
Performance Period. The Administrator, in its sole discretion, may pay earned
Performance Units/Shares in the form of cash, in Shares (which have an
aggregate Fair Market Value equal to the value of the earned Performance
Units/Shares at the close of the applicable Performance Period) or in a
combination thereof.

 

(f)    Cancellation
of Performance Units/Shares. 
On the date set forth in the Award Agreement, all unearned or unvested
Performance Units/Shares will be forfeited to the Company, and again will be
available for grant under the Plan.

 

(g)   Section 162(m) Performance
Restrictions.  For purposes of
qualifying grants of Performance Units/Shares as “performance-based
compensation” under Section 162(m) of the Code, the Administrator, in
its discretion, may set restrictions based upon the achievement of Performance
Goals. The Performance Goals will be set by the Administrator on or before the
Determination Date. In granting Performance Units/Shares which are intended to
qualify under Section 162(m) of the Code, the Administrator will
follow any procedures determined by it from time to time to be necessary or
appropriate to ensure qualification of the Award under Section 162(m) of
the Code (e.g., in determining the Performance Goals).

 

11.   Performance-Based Compensation Under Code Section 162(m).

 

(a)   General.  If the Administrator, in its discretion,
decides to grant an Award intended to qualify as “performance-based
compensation” under Section 162(m) of the Code, the provisions of
this Section 11 will control over any contrary provision in the Plan;
provided, however, that the Administrator may in its discretion grant Awards
that are not intended to qualify as “performance-based compensation” under Section 162(m) of
the Code to such Participants that are based on Performance Goals or other
specific criteria or goals but that do not satisfy the requirements of this Section 11.

 

(b)   Performance
Goals.  The granting and/or
vesting of Awards of Restricted Stock, Restricted Stock Units, Performance
Shares and Performance Units and other incentives under the Plan may be made
subject to the attainment of performance goals relating to one or more business
criteria within the meaning of Section 162(m) of the Code and may
provide for a targeted level or levels of achievement (“Performance Goals”)
including one or more of the following measures: (a) Annual Revenue, (b) Cash
Collections, (c) Customer Satisfaction MBOs, (d) Earnings Per Share, (e) Net
Income, (f) New Orders, (g) Operating Profit, (h) Pro Forma Net
Income,

 

13

 

(i) Return
on Designated Assets, (j) Return on Equity, (k) Return on Sales, and (l) Product
Shipments. Any Performance Goals may be used to measure the performance of the
Company as a whole or a business unit of the Company and may be measured
relative to a peer group or index. The Performance Goals may differ from
Participant to Participant and from Award to Award. Any criteria used may be (i) measured
in absolute terms, (ii) compared to another company or companies, (iii) measured
against the performance of the Company as a whole or a segment of the Company
and/or (iv) measured on a pre-tax or post-tax basis (if applicable). Prior
to the Determination Date, the Administrator will determine whether any
significant element(s) will be included in or excluded from the
calculation of any Performance Goal with respect to any Participant.

 

(c)   Procedures.  To the extent necessary to comply with the
performance-based compensation provisions of Section 162(m) of the
Code, with respect to any Award granted subject to Performance Goals, within
the first twenty-five percent (25%) of the Performance Period, but in no event
more than ninety (90) days following the commencement of any Performance
Period (or such other time as may be required or permitted by Section 162(m) of
the Code), the Administrator will, in writing, (i) designate one or more
Participants to whom an Award will be made, (ii) select the Performance
Goals applicable to the Performance Period, (iii) establish the
Performance Goals, and amounts of such Awards, as applicable, which may be
earned for such Performance Period, and (iv) specify the relationship
between Performance Goals and the amounts of such Awards, as applicable, to be
earned by each Participant for such Performance Period. Following the
completion of each Performance Period, the Administrator will certify in
writing whether the applicable Performance Goals have been achieved for such
Performance Period. In determining the amounts earned by a Participant, the
Administrator will have the right to reduce or eliminate (but not to increase)
the amount payable at a given level of performance to take into account
additional factors that the Administrator may deem relevant to the assessment
of individual or corporate performance for the Performance Period. A
Participant will be eligible to receive payment pursuant to an Award for a
Performance Period only if the Performance Goals for such period are achieved.

 

(d)   Additional
Limitations.  Notwithstanding
any other provision of the Plan, any Award which is granted to a Participant
and is intended to constitute qualified performance based compensation under
Code Section 162(m) will be subject to any additional limitations set
forth in the Code (including any amendment to Section 162(m)) or any
regulations and ruling issued thereunder that are requirements for
qualification as qualified performance-based compensation as described in Section 162(m) of
the Code, and the Plan will be deemed amended to the extent necessary to
conform to such requirements.

 

12.   [Reserved]

 

13.   Leaves of Absence/Transfer Between Locations.  Unless the Administrator provides otherwise,
vesting of Awards granted hereunder will be suspended during any unpaid leave
of absence. A Service Provider will not cease to be an Employee in the case of (i) any
leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company and its Affiliates. For
purposes of Incentive Stock Options, no such leave may exceed three (3) months,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, then six (6) months and one day following
the commencement of such leave any Incentive Stock Option held by the
Participant will cease to be treated as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option.

 

14.   Transferability of Awards.  Unless determined otherwise by the
Administrator, an Award may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by

 

14

 

will or by the laws of descent
or distribution and may be exercised, during the lifetime of the Participant,
only by the Participant. With the approval of the Administrator, a Participant
may, in a manner specified by the Administrator, (a) transfer an Award to
a Participant’s spouse or former spouse pursuant to a court-approved domestic
relations order which relates to the provision of child support, alimony
payments or marital property rights, and (b) transfer an Option by bona
fide gift and not for any consideration, to (i) a member or members of the
Participant’s immediate family, (ii) a trust established for the exclusive
benefit of the Participant and/or member(s) of the Participant’s immediate
family, (iii) a partnership, limited liability company of other entity
whose only partners or members are the Participant and/or member(s) of the
Participant’s immediate family, or (iv) a foundation in which the
Participant and/or member(s) of the Participant’s immediate family control
the management of the foundation’s assets. For purposes of this Section 14,
“immediate family” shall mean the Participant’s spouse, former spouse,
children, grandchildren, parents, grandparents, siblings, nieces, nephews,
parents-in-law, sons-in-law, daughters-in-law, brothers-in-law, sisters-in-law,
including adoptive or step relationships and any person sharing the Participant’s
household (other than as a tenant or employee).

 

15.   Adjustments; Dissolution or Liquidation;
Merger or Change in Control.

 

(a)   Adjustments.  In the event that any dividend or other
distribution (whether in the form of cash, Shares, other securities, or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, or exchange
of Shares or other securities of the Company, or other change in the corporate
structure of the Company affecting the Shares occurs, the Administrator, in
order to prevent diminution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, will adjust the number
and class of Shares that may be delivered under the Plan and/or the number,
class, and price of Shares covered by each outstanding Award, and the numerical
Share limits set forth in Sections 3, 6, 7, 8, 9 and 10.

 

(b)   Dissolution
or Liquidation.  In the event
of the proposed dissolution or liquidation of the Company, the Administrator
will notify each Participant as soon as practicable prior to the effective date
of such proposed transaction. To the extent it has not been previously
exercised, an Award will terminate immediately prior to the consummation of
such proposed action.

 

(c)   Change in
Control.  In the event of a
Change in Control, each outstanding Award will be assumed or an equivalent
option or right substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation (the “Successor
Corporation”). In the event that the Successor Corporation refuses
to assume or substitute for the Award, the Participant will fully vest in and
have the right to exercise all of his or her outstanding Options and Stock
Appreciation Rights, including Shares as to which such Awards would not
otherwise be vested or exercisable, all restrictions on Restricted Stock will
lapse, and, with respect to Restricted Stock Units, Performance Shares and
Performance Units, all Performance Goals or other vesting criteria will be
deemed achieved at target levels and all other terms and conditions met. In
addition, if an Option or Stock Appreciation Right is not assumed or
substituted for in the event of a Change in Control, the Administrator will
notify the Participant in writing or electronically that the Option or Stock
Appreciation Right will be fully vested and exercisable for a period of time
determined by the Administrator in its sole discretion, and the Option or Stock
Appreciation Right will terminate upon the expiration of such period.

 

For the purposes of this subsection (c),
an Award will be considered assumed if, following the Change in Control, the
Award confers the right to purchase or receive, for each Share subject to the
Award immediately prior to the Change in Control, the consideration (whether
stock, cash, or other securities or property) or, in the case of a Stock
Appreciation Right upon the exercise of which the Administrator determines to
pay cash or a Performance Share or Performance Unit which the

 

15

 

Administrator can determine to
pay in cash, the fair market value of the consideration received in the merger
or Change in Control by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the Change in Control is not solely common stock of the Successor
Corporation, the Administrator may, with the consent of the Successor
Corporation, provide for the consideration to be received upon the exercise of
an Option or Stock Appreciation Right or upon the payout of a Restricted Stock
Unit, Performance Share or Performance Unit, for each Share subject to such
Award (or in the case of an Award settled in cash, the number of implied shares
determined by dividing the value of the Award by the per share consideration
received by holders of Common Stock in the Change in Control), to be solely
common stock of the Successor Corporation equal in fair market value to the per
share consideration received by holders of Common Stock in the Change in
Control.

 

Notwithstanding anything in this Section 15(c) to
the contrary, an Award that vests, is earned or paid-out upon the satisfaction
of one or more Performance Goals will not be considered assumed if the Company
or its successor modifies any of such Performance Goals without the Participant’s
consent; provided, however, a modification to such Performance Goals only to
reflect the Successor Corporation’s post-Change in Control corporate structure
will not be deemed to invalidate an otherwise valid Award assumption.

 

16.   Tax Withholding

 

(a)   Withholding
Requirements.  Prior to the
delivery of any Shares or cash pursuant to an Award (or exercise thereof), the
Company will have the power and the right to deduct or withhold, or require a
Participant to remit to the Company, an amount sufficient to satisfy federal,
state, local, foreign or other taxes (including the Participant’s FICA obligation)
required to be withheld with respect to such Award (or exercise thereof).

 

(b)   Withholding
Arrangements.  The
Administrator, in its sole discretion and pursuant to such procedures as it may
specify from time to time, may permit a Participant to satisfy such tax
withholding obligation, in whole or in part by (without limitation) (i) paying
cash, (ii) electing to have the Company withhold otherwise deliverable
cash or Shares having a Fair Market Value equal to the minimum amount required
to be withheld, (iii) delivering to the Company already-owned Shares
having a Fair Market Value equal to the amount required to be withheld, or (iv) selling
a sufficient number of Shares otherwise deliverable to the Participant through
such means as the Administrator may determine in its sole discretion (whether
through a broker or otherwise) equal to the amount required to be withheld. The
amount of the withholding requirement will be deemed to include any amount
which the Administrator agrees may be withheld at the time the election is
made, not to exceed the amount determined by using the maximum federal, state
or local marginal income tax rates applicable to the Participant with respect
to the Award on the date that the amount of tax to be withheld is to be determined.
The Fair Market Value of the Shares to be withheld or delivered will be
determined as of the date that the taxes are required to be withheld.

 

17.   No Effect on Employment or Service.  Neither the Plan nor any Award will confer
upon a Participant any right with respect to continuing the Participant’s
relationship as a Service Provider with the Company, nor will they interfere in
any way with the Participant’s right or the Company’s right to terminate such
relationship at any time, with or without cause, to the extent permitted by
Applicable Laws.

 

18.   Date of Grant.  The date of grant of an Award will be, for
all purposes, the date on which the Administrator makes the determination
granting such Award, or such other later date as is determined by the Administrator.
Notice of the determination will be provided to each Participant within a
reasonable time after the date of such grant.

 

16

 

19.   Term of Plan.  Subject to Section 23 of the Plan, the
Plan will become effective upon its adoption by the Board. It will continue in
effect for a term of ten (10) years unless terminated earlier under Section 20
of the Plan.

 

20.   Amendment and Termination of the Plan.

 

(a)   Amendment and Termination.  The Administrator may at any time amend,
alter, suspend or terminate the Plan.

 

(b)   Stockholder Approval.  The Company will obtain stockholder approval
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.

 

(c)   Effect of Amendment or Termination.  No amendment, alteration, suspension or
termination of the Plan will impair the rights of any Participant, unless
mutually agreed otherwise between the Participant and the Administrator, which
agreement must be in writing and signed by the Participant and the Company.
Termination of the Plan will not affect the Administrator’s ability to exercise
the powers granted to it hereunder with respect to Awards granted under the
Plan prior to the date of such termination.

 

21.   Conditions Upon Issuance of Shares.

 

(a)   Legal
Compliance.  Shares will not
be issued pursuant to the exercise of an Award unless the exercise of such
Award and the issuance and delivery of such Shares will comply with Applicable
Laws and will be further subject to the approval of counsel for the Company
with respect to such compliance.

 

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

 

22.   Inability to Obtain Authority.  The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, will relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite
authority will not have been obtained.

 

23.   Stockholder Approval.  The Plan will be subject to approval by the
stockholders of the Company within twelve (12) months after the date the
Plan is adopted. Such stockholder approval will be obtained in the manner and
to the degree required under Applicable Laws.

 

17Exhibit 10.1

 

NBI HF, national ID no. 471008-0280, Austurstraeti 11, Reykjavík
(Landsbankinn herein) and deCODE Genetics Inc, Sturlugata 8, 101 Reykjavík
(deCODE herein) enter into the following

 

AGREEMENT

 

regarding Landsbankinn’s purchase of Securities (1. Auction Rate
Securities), totaling at nominal value USD33,500,000.- as specified in Appendix
1 to this agreement (“the Securities” herein) from deCODE, on the right of sale
and right of purchase of the Securities, as further specified in this
agreement.

 

Article 1

 

deCODE undertakes to sell and Landsbankinn to purchase the Securities
and to pay for them in three phases, further a) ISK750,000,000.- upon the
signing of this agreement, b) ISK375,000,000.- on 27 January 2009, and c)
ISK250,000,000.- on 13 February 2009, or totaling ISK1,375,000,000.- (“the
Purchase Price” herein), and the payments shall be deposited into account no.
0115-26-3846 owned by Íslensk erfdagreining EHF, national ID no. 691295-3549, (‘“ÍE”
herein).

 

Article 2

 

Considering that Landsbankinn has not examined the contents of the
Securities or whether and what kind of restrictions exist regarding their
transfer from deCODE to Landsbankinn, deCODE guarantees towards Landsbankinn
that deCODE is authorized to transfer the Securities and that they are the
property of deCODE and free of any liens and encumbrances, or other
ownership-right restrictions. If, for some reason, it materializes during the
agreement’s period of validity that the transfer of the Securities, one or
more, was unauthorized, deCODE furthermore guarantees that it will immediately
redeem the Securities and pay for them in conformity with Article 6 of
this agreement.

 

If it turns out during this agreement’s period of validity that the
payer of any of the Securities (one or more) has sought composition, requested
moratorium or been declared insolvent, deCODE shall redeem all of the relevant
Securities and shall pay for them the amount Landsbankinn paid for the said
Securities, plus the required rate of return, i.e. an amount which is the same percentage of the Purchase Price and the nominal
value of the said Securities of the total nominal value of the Securities
according to Appendix 1.

 

 

Article 3

 

Landsbankinn is not obligated to pay the
Purchase Price until the Securities have been transferred to the bank in
accordance with the instructions of Landsbankinn thereon, and after the
transfer, Landsbankinn shall have full rights according to the Securities and
shall furthermore bear all commitments that they place upon the holder of their
rights. The Securities shall be delivered to the account of Landsbankinn no.
13151 at Clearstream, “Free-of-Payment”.

 

Article 4

 

Landsbankinn shall have the right to demand
that deCODE purchases, as a whole, all of the Securities of the bank (i.e. Put
Option) and this right shall be active irrespective of which of the following
occurs first: a) upon receipt of the initial payment and the signing of a
binding purchase agreement of deCODE and a third party on the sale of the
majority or all share capital of ÍE, or of the part of the activities of ÍE as specified in Appendix 2 to this agreement, or b) that the time
strikes 12:00 noon on 16 December 2009. In both instances deCODE shall
have 14 days to finalize the purchase and to pay the Repurchase Price to
Landsbankinn.

 

Article 5

 

deCODE shall at any time have the right to
demand that Landsbankinn sells the Securities to deCODE (i.e. Call Option) and
this right shall remain throughout the agreement’s period of validity. In order
for deCODE being able to exercise this right, the company must exercise this
right wholly, i.e. to buy all the Securities in full, not in part.

 

Article 6

 

Upon repurchase/sale of the Securities in
accordance with Articles 4 or 5 above, the Securities’ sales price shall be the
Purchase Price plus Reibor interest as registered on the day of the signing of
this agreement, plus a 5% interest differential p.a. (“the Repurchase Price”
herein). Payments in respect of the purchase of the Securities, cf. Articles 4
or 5, shall be in cash.

 

Article 7

 

A party wishing to exercise its sales
right/purchase right, cf. Articles 4 and 5 above, shall send a notification
thereon to the counterparty and the delivery date of the Securities shall be 14
days after the notification is received about the exercising of the sales
right/purchase right.

 

 

Article 8

 

In conformity with Article 3,
Landsbankinn receives all interest payments and/or advance payments made in
respect of the Securities during the agreement’s period of validity. The
interest installments that are paid to Landsbankinn until the sales-/purchase
right becomes active, shall be deducted from the Repurchase Price, cf. Article 6.
The same rule shall apply if payment is made on the principal amount, in
part or in full, of some of the Securities during the agreement’s period of
validity. Calculating the deductibles, cf. the aforementioned, shall be based
on the central rate of exchange of the Central Bank of Iceland (USD-ISK) on the
date Landsbankinn receives a payment, whereas the installments on the
Securities shall be made in dollars.

 

Article 9

 

Although the total amount of interest and
advance payments, received by Landsbankinn according to Article 8, turns
out to be higher than the Repurchase Price, cf. Article 6, Landsbankinn
shall, upon the purchase/sale of the Securities, cf. Articles 4 or 5,
nevertheless only be obligated to present to deCODE the Securities (with the
limitations specified in Article 10) in addition to the total amount the
bank may have received, cf. Article 8, and exceeds ISK375,000,000 plus the
Repurchase Price.

 

Article 10

 

If one ore more Securities are paid in full
during the agreement’s period of validity, Landsbankinn shall be obligated to
illustrate to deCODE in a satisfactory manner that the relevant Securities have
been paid in full. The parties agree that a Security that has been paid in full
during the agreement’s period of validity shall be taken off the list of
Securities in Appendix 1; the list may change during the agreement’s period of
validity.

 

Article 11

 

The contents of this agreement shall be
confidential between the parties and the parties shall not disclose information
about its contents, unless otherwise provided for by Icelandic and American
laws and the regulations of stock exchanges or the parties agree to disclose
information.

 

Article 12

 

Notifications, which the parties dispatch to
each other because of the sales right, shall be sent to the following:

 

·                  NBI hf, Hafnarstraeti 5, 155 Reykjavík, fax: 410-3008, attn: Treasury.

·                  deCODE Genetics Inc, Sturlugata 8, 101 Reykjavík, fax: 570-1806, attn. Legal Division.

 

 

Article 13

 

If neither party to this agreement has
exercised the rights stipulated in Articles 4 and 5, the rights cf. the
relevant articles of the agreement will be deemed as cancelled not later than
on 1 January 2010.

 

Article 14

 

If a disagreement arises between the parties
on the contents or execution of this agreement, which shall be signed in two
identical copies, the parties are authorized to bring such disagreement before
the District Court of Reykjavík.

 

So done in Reykjavík, 14 January 2009

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY
LEFT BLANK, THE SIGNATURE SHEET FOLLOWS ON THE NEXT PAGE]

 

 

On behalf of deCODE Genetics Inc

 

	
   

  	
  Sign.

  	
  Kári Stefánsson

  	
  Sign.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  On behalf of NBI HF

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Sign.

  	
  Arni T. Thorbjornsson

  	
  Sign.

  	
  Jon T. Oddleifsson

  

 

 

Witnesses to the signatures and date:

 

	
  Sign.

  	
  Jóhann Hjartarson

  	
  Sign.

  	
  Ómar Karl Jóhannesson

  
	
   

  	
  District Court Attorney 

  	
   

  	
  District Court Attorney

  
	
   

  	
  National ID no: 080263-2289

  	
   

  	
  National ID no: 060870-4549

  
	
   

  	
   

  	
   

  	
   

  
	
  Sign.

  	
  Thórir Haraldsson

  	
  Sign.

  	
  Einar Kristján Jónsson

  
	
   

  	
  District Court Attorney 

  	
   

  	
  District Court Attorney

  
	
   

  	
  National ID no: 270264-2049

  	
   

  	
  National ID no: 231173-4719

  

 

 

Appendix 1

 

December 31, 2008

 

	
  Security

  	
   

  	
  Issue
  Date

  	
   

  	
  Maturity

  Date

  	
   

  	
  Estimated

  Monthly

  Interest

  Payment

  (1)

  	
   

  	
  Interest

  Frequency

  	
   

  	
  Current
  Interest

  Rate

  	
   

  	
  CUSIP

  	
   

  	
  Units

  	
   

  	
  Total
  Cost

  	
   

  
	
  MBIA Preferred
  Stock/Formerly North Castle

  	
   

  	
  23.12.02

  	
   

  	
  Perpetual

  	
   

  	
  Paid

  Quarterly

  	
   

  	
  90 days

  	
   

  	
  30 year libor plus

  200 basis
  points

  	
   

  	
  55276G204

  	
   

  	
  41

  	
   

  	
  4.100.000,00

  	
   

  
	
  Grand Central

  	
   

  	
  19.07.04

  	
   

  	
  Perpetual

  	
   

  	
  28th

  	
   

  	
  28 days

  	
   

  	
  1 month Libor plus

  200 basis
  points

  	
   

  	
  38528d203

  	
   

  	
  40

  	
   

  	
  4.000.000,00

  	
   

  
	
  Ambac Preferred
  Stock/Formerly Dutch Harbor

  	
   

  	
  03.12.01

  	
   

  	
  Perpetual

  	
   

  	
  8th

  	
   

  	
  28 days

  	
   

  	
  1 month Libor plus

  200 basis
  points

  	
   

  	
  23138886

  	
   

  	
  56

  	
   

  	
  1.400.000,00

  	
   

  
	
  Sutton Capital

  	
   

  	
  23.06.03

  	
   

  	
  Perpetual

  	
   

  	
  3rd & 31st

  	
   

  	
  28 days

  	
   

  	
  1 month Libor plus

  150 basis points

  	
   

  	
  86943v209

  	
   

  	
  35

  	
   

  	
  3.500.000,00

  	
   

  
	
  Athilon Cap

  	
   

  	
  21.12.04

  	
   

  	
  03.02.45

  	
   

  	
  1st & 29th

  	
   

  	
  28 days

  	
   

  	
  1 month Libor plus

  250 basis points

  	
   

  	
  047468ab9

  	
   

  	
  5.000.000

  	
   

  	
  5.000.000,00

  	
   

  
	
  Primus

  	
   

  	
  19.12.02

  	
   

  	
  Perpetual

  	
   

  	
  10th

  	
   

  	
  Monthly

  	
   

  	
  1 month Libor plus 

  300 basis
  points

  	
   

  	
  52519g802

  	
   

  	
  30

  	
   

  	
  3.000.000,00

  	
   

  
	
  Insurance Nt
  Capital Riverlake 2006-5

  	
   

  	
  28.07.03

  	
   

  	
  17.08.33

  	
   

  	
  26th

  	
   

  	
  Monthly

  	
   

  	
  1 month Libor plus 

  200 basis
  points

  	
   

  	
  45805eaa9

  	
   

  	
  3.000.000

  	
   

  	
  3.000.000,00

  	
   

  
	
  Insurance Nt
  Capital Riverlake 2003-6

  	
   

  	
  16.12.03

  	
   

  	
  31.12.33

  	
   

  	
  16th

  	
   

  	
  Monthly

  	
   

  	
  1 month Libor plus 

  200 basis
  points

  	
   

  	
  45804qaa3

  	
   

  	
  2.000.000

  	
   

  	
  2.000.000,00

  	
   

  
	
  Insurance Nt
  Capital Rivermont 2006-3

  	
   

  	
  31.10.06

  	
   

  	
  26.12.50

  	
   

  	
  12th

  	
   

  	
  Monthly

  	
   

  	
  1 month Libor plus 

  200 basis
  points

  	
   

  	
  45804caa4

  	
   

  	
  2.500.000

  	
   

  	
  2.500.000,00

  	
   

  
	
  Double Oak

  	
   

  	
  23.07.07

  	
   

  	
  16.07.52

  	
   

  	
  19th

  	
   

  	
  Monthly

  	
   

  	
  1 month Libor plus 

  200 basis
  points

  	
   

  	
  25857eaa8

  	
   

  	
  5.000.000

  	
   

  	
  5.000.000,00

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  33.500.000,00

  	
   

  

 

 

Appendix 2

 

deCODE genetics Inc (“deCODE”) is an American
public company, registered in the State of Delaware, USA. The shares in deCODE
are registered at NASDAQ. deCODE is a holding company without any independent
activities, which primarily take place in the subsidiaries.

 

Íslensk erfdagreining (“ÍE”) is an Icelandic
private limited company which is fully owned by deCODE and engages, among other
things, in the development and sale of genetic analysis tests, as well as ÍE,
selling genetic analysis services to third parties. A part of ÍE’s
developmental work is financed with grants from public parties, for example,
the European Union and the American health institute, NIH. All of ÍE’s personnel
are stationed in Iceland, except for the sales personnel who sell the company’s
products abroad.

 

deCODE’s subsidiaries in the USA engage in
the development, sale and services in the field of reference medicinal
products.

 

The operation of the deCODE conglomerate is
currently being reorganized with the goal of future strengthening, among other
things, through the selling of ÍE stock in full or in part, or the entire
operation that ÍE has engaged in and as described above. If selling this
operation is realized without this pertaining to the sale of share capital, the
conditions of the sales right, cf. Article 4 of the principal text of the
agreement between deCODE and NBI HF, are deemed as having been met.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00158-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00158-of-00352.parquet"}]]