Document:

Exhibit
10.37

 

SANMINA-SCI CORPORATION

 

2009 INCENTIVE PLAN

 

(As amended on December 7, 2009 and approved by stockholders on
February 8, 2010)

 

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 additional incentive to Employees,
Directors, and Consultants, 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)                                  “Accounts Payable Days” means as
to any Performance Period the ratio of 365 days to Accounts Payable Turns.

 

(b)                                 “Accounts Payable Turns” means as
to any Performance Period the ratio of four times the Company’s cost of goods
sold for the Performance Period to accounts payable on the last day of the
Performance Period, in each case calculated in accordance with GAAP.

 

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

 

(d)                                 “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.

 

(e)                                  “Annual Revenue” means the
Company’s or a business unit’s net sales for the Performance Period, determined
in accordance with GAAP.

 

(f)                                    “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.

 

(g)                                 “Award” means, individually or
collectively, a grant under the Plan of Options, Restricted Stock, Restricted
Stock Units, Stock Appreciation Rights, Performance Units

 

 

(including Performance
Units payable in cash), Performance Shares and other stock or cash awards as
the Administrator may determine.

 

(h)                                 “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.

 

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

 

(j)                                     “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.

 

(k)                                  “Cash Cycle Days” means the ratio
of 365 days to Inventory Turns, plus Days Sales Outstanding minus Accounts
Payable Days.

 

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

 

  (i)                               A change in the ownership of the Company  which occurs on the date that any one
person, or more than one person acting as a group, (“Person”) acquires
ownership of the stock of the Company that, together with the stock held by
such Person, constitutes more than 50% of the total voting power of the stock
of the Company; provided, however, that for purposes of this subsection (i),
the acquisition of additional stock by any one Person, who is considered to own
more than 50% of the total voting power of the stock of the Company will not be
considered a Change in Control; or

 

 (ii)                               A change in the effective control of the
Company which occurs on the date that a majority of members of the Board is
replaced during any twelve (12) month period by Directors whose appointment or
election is not endorsed by a majority of the members of the Board prior to the
date of the appointment or election.  For
purposes of this clause (ii), if any Person is considered to effectively
control the Company, the acquisition of additional control of the Company by
the same Person will not be considered a Change in Control; or

 

(iii)                               A change in the ownership of a
substantial portion of the Company’s assets which occurs on the date that any
Person acquires (or has acquired during the twelve (12) month period ending on
the date of the most recent acquisition by such person or persons) assets from
the Company that have a total gross fair market value equal to or more than 50%
of the total gross fair market value of all of the assets of the Company
immediately prior to such acquisition or acquisitions; provided, however, that
for purposes of this subsection (iii), the following will not constitute a
change in the ownership of a substantial portion of the Company’s assets:
(A) a transfer to an entity that is controlled by the Company’s
stockholders immediately after the transfer, or (B) a transfer of assets
by the Company to: (1) a stockholder of the Company (immediately before
the asset transfer) in exchange for or with respect to the Company’s stock,
(2) an entity, 50% or more of the total value or voting power of which is
owned, directly or indirectly, by the Company, (3) a Person, that owns,
directly or indirectly, 50% or more of the total value or voting power of all
the outstanding stock of the Company, or (4) an entity, at least 50% of
the total value or voting power of which is owned, directly or indirectly, by a
Person described in this subsection (iii)(B)(3).  For purposes of this subsection (iii), gross
fair market value means the value of the assets of the

 

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Company, or the value of
the assets being disposed of, determined without regard to any liabilities
associated with such assets.

 

(iv)                              For purposes of this Section 2(l),
persons will be considered to be acting as a group if they are owners of a
corporation that enters into a merger, consolidation, purchase or acquisition
of stock, or similar business transaction with the Company.

 

(m)                               “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.

 

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

 

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

 

(p)                                 “Company” means Sanmina-SCI
Corporation, a Delaware corporation, or any successor thereto.

 

(q)                                 “Consultant” means any person,
including an advisor, who is (i) engaged by the Company or an Affiliate to
render consulting or advisory services and is compensated for such services, or
(ii) serving as a member of the Board of Directors of an Affiliate and is
compensated for such services.  However,
service solely as a Director, or payment of a fee for such service, shall not
cause a Director to be considered a “Consultant” for purposes of the Plan.

 

(r)                                    “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.

 

(s)                                  “Days Sales Outstanding” means as
to any Performance Period the ratio of accounts receivable, net, on the last
day of the Performance Period calculated in accordance with GAAP, to average
daily net sales for the Performance Period

 

(t)                                    “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 Code
Section 162(m).

 

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

 

(v)                                 “Disability” means total and
permanent disability as defined in Code Section 22(e)(3), 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.

 

(w)                               “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.

 

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(x)                                   “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.

 

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

 

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

 

  (i)                               If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the New York Stock Exchange, the Nasdaq Global Market, the Nasdaq
Global Select Market or the Nasdaq Capital Market, its Fair Market Value will
be the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for such date, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;

 

 (ii)                               If the Common Stock is regularly quoted
by a recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock will be the mean between the high bid
and low asked prices for the Common Stock for such date, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable; or

 

(iii)                               In the absence of an established market
for the Common Stock, the Fair Market Value will be determined in good faith by
the Administrator.

 

(iv)                              Notwithstanding the preceding, for
federal, state, and local income tax reporting purposes and for such other
purposes as the Administrator deems appropriate, the Fair Market Value shall be
determined by the Administrator in accordance with uniform and
nondiscriminatory standards adopted by it from time to time.

 

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

 

(bb)                          “Free Cash Flow” means as to any
Performance Period the combination of cash provided by (used in) operations of
the Company and cash provided by (used in) investing activities of the Company,
in each case determined in accordance with GAAP.

 

(cc)                            “GAAP” means United States
Generally Accepted Accounting Principles.

 

(dd)                          “Gross Margin” means as to any
Performance Period Gross Profit of the Company or any business unit divided by
gross revenue of the Company or such business unit, in each case determined in
accordance with GAAP.

 

(ee)                            “Gross Profit” means as to any
Performance Period the difference between gross revenue of the Company or any
business unit and cost of goods sold of the Company or such business unit, in
each case determined in accordance with GAAP.

 

(ff)                                “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 Code Section 422 and the
regulations promulgated thereunder.

 

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(gg)                          “Inventory Turns” means as to any
Performance Period the ratio of four times cost of goods sold for the
Performance Period to inventory on the last day of the Performance Period, in
each case calculated in accordance with GAAP.

 

(hh)                          “Net Income” means as to any
Performance Period, the income after taxes of the Company determined in
accordance with GAAP.

 

(ii)                                  “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.

 

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

 

(kk)                            “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.

 

(ll)                                  “Operating Income” means as to any
Performance Period, the difference between Gross Profit and operating expenses,
determined in accordance with GAAP.

 

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

 

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

 

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

 

(pp)                          “Performance-Based Award” means
any Awards that are subject to the terms and conditions set forth in
Section 13.  All Performance-Based
Awards are intended to qualify as qualified performance-based compensation
under Code Section 162(m).

 

(qq)                          “Performance Bonus Award” means a
cash award set forth in Section 12.

 

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

 

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

 

(tt)                                “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.

 

(uu)                          “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, in the
Administrator’s sole discretion, may be settled for cash, Shares or other
securities or a combination of the foregoing pursuant to Section 10, in
the Administrator’s sole discretion.

 

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(vv)                          “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.

 

(ww)                      “Plan” means this 2009 Incentive
Plan.

 

(xx)                              “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.

 

(yy)                          “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.

 

(zz)                              “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.

 

(aaa)                      “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.

 

(bbb)                   “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.

 

(ccc)                      “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.

 

(ddd)                   “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.

 

(eee)                      “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.

 

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

 

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

 

(hhh)                   “Share” means a share of the Common Stock, as
adjusted in accordance with Section 17 of the Plan.

 

(iii)                               “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.

 

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

 

(kkk)                      “Successor Corporation” has the
meaning given to such term in Section 17(c) of the Plan.

 

3.                                       Stock Subject to the Plan.

 

(a)                                  Stock Subject to the Plan. 
Subject to the provisions of Section 17 of the Plan, the maximum
aggregate number of Shares that may be awarded and sold under the Plan is
10,200,000 Shares.  The Shares may be
authorized, but unissued, or reacquired Common Stock.

 

(b)                                 Full Value Awards. 
Any Shares subject to Awards other than Options or Stock Appreciation
Rights will be counted against the numerical limits of this Section 3 as
1.24 Shares for every one 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), 1.24 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 which are to be settled in
Shares, 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).  Upon exercise of a Stock Appreciation Right
settled in Shares, the gross number of Shares covered by the portion of the
Award so exercised will cease to be available under the Plan.  If unvested Shares of Restricted Stock, or
unvested Shares issued pursuant to Awards of Restricted Stock Units,
Performance Shares or Performance Units are repurchased by or forfeited to the
Company, such Shares will become available for future grant under the
Plan.  Shares used to pay the tax and
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 and,
subject to adjustment provided in Section 17, 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
allowable under Code Section 422, any Shares that become available for
issuance under the Plan under this Section 3(b).

 

(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.

 

7

 

 (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 Code Section 162(m), the Plan will be administered by a
Committee of two or more “outside directors” within the meaning of Code Section 162(m).

 

(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)                              Delegation to an Officer.  The Board may delegate to one or
more Officers of the Company the authority to do one or both of the following
(i) designate Employees or Consultants of the Company or any of its
Subsidiaries who are not Officers to be recipients of Options, Restricted Stock
and Restricted Stock Units and the terms thereof, and (ii) determine the
number of shares of Common Stock to be subject to such Awards granted to such
Employees and Consultants; provided,
however, that the Board resolutions regarding such delegation shall
specify the total number of shares of Common Stock that may be subject to the
Awards granted by such Officer.  Notwithstanding anything to the contrary
in this Section 4(a), the Board may not delegate to an Officer authority
to determine the Fair Market Value of the Common Stock pursuant to
Section 4(b) below.

 

 (v)                              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 22(c) of the Plan). 
Notwithstanding the previous sentence, the Administrator may not 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 17), and neither may the
Administrator cancel any outstanding Option or Stock Appreciation Right in
exchange for cash,

 

8

 

other awards  or an Option or Stock Appreciation Right
with an exercise price that is less than the exercise price of the original
Option or  Stock Appreciation
Right, unless such action is approved by stockholders prior to such action
being taken;

 

 (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; and

 

  (ix)                          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, Stock Appreciation Rights, Restricted Stock,
Restricted Stock Units, 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 Shares subject to an Option granted to any Participant, provided that during
any Fiscal Year, no Participant will be granted an Option covering more than
833,333 Shares.  Notwithstanding the
limitation in the previous sentence, an Employee may be granted Options overing
up to an additional 833,333 Shares during the fiscal year in which his or her
initial service as an Employee begins.

 

(c)                                  Term of Option. 
The Administrator will determine the term of each Option in its sole
discretion; provided, however, that the term will be no more than ten
(10) years from the date of grant thereof. 
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.

 

9

 

(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(c),
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, Code Section 424(a).

 

 (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, which forms of consideration shall be set
forth in the Award Agreement at the time of grant.

 

(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 specifies 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 any
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 17 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
ninety (90) days 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

 

10

 

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
five (5) years 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 of all of the shares subject to
the Option, including Shares that had not yet 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 forth in the Award Agreement), by the Participant’s
designated beneficiary, provided such beneficiary has been designated 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 five (5) years
following Participant’s death. 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 ninety (90) days 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.

 

11

 

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 833,333 Shares. Notwithstanding the limitation in the
previous sentence, an Employee may be granted Stock Appreciation Rights
covering up to an additional 833,333 Shares during the fiscal year in which his
or her initial service as an Employee begins.

 

(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.

 

(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; provided, however, that the term will be no more than ten
(10) years from the date of grant thereof. 
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)                                 Dividends and Other Distributions. 
Service Providers holding unvested Stock Appreciation Rights shall not
be entitled to receive dividends or other distributions in respect of such
Awards until the time specified for payout of the Stock Appreciation Rights in
the Award Agreement.

 

12

 

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 Code Section 162(m), during any Fiscal
Year no Participant will receive more than an aggregate of 333,333 Shares of
Restricted Stock.  Notwithstanding the
foregoing limitation, for restricted stock intended to qualify as “performance-based
compensation” within the meaning of Code Section 162(m), an Employee may
be granted up to 333,333 additional Shares of Restricted Stock during the
fiscal year in which his or her initial service as an Employee begins. Unless
the 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 16, 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 and contained in the Award Agreement on the date of grant,
including granting an Award of Restricted Stock subject to the requirements of Section 13.

 

(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 Performance Units/Shares as “performance-based
compensation” under Code Section 162(m), the

 

13

 

Compensation
Committee, in its discretion, may set restrictions based upon the achievement
of Performance Goals.  The Performance
Goals will be set by the Compensation Committee on or before the Determination
Date.  In granting Performance
Units/Shares which are intended to qualify under Code Section 162(m), the
Compensation Committee will follow the provisions of Section 13 any
procedures determined by it from time to time to be necessary or appropriate to
ensure qualification of the Award under Code Section 162(m) (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 Code Section 162(m),
during any Fiscal Year of the Company, no Participant will receive more than an
aggregate of 333,333 Restricted
Stock Units. Notwithstanding
the foregoing limitation, for Restricted Stock Units intended to qualify as “performance-based
compensation” within the meaning of Code Section 162(m), an Employee may
be granted up to   333,333 additional
Restricted Stock Units during the fiscal year in which his or her initial
service as an Employee begins.

 

(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, including granting an Award of Restricted Stock Units
subject to the requirements of Section 13. 
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.

 

(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.

 

(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.

 

14

 

(f)                                    Section 162(m) Performance
Restrictions.  For
purposes of qualifying grants of Performance Units/Shares as “performance-based
compensation” under Code Section 162(m), the Compensation Committee, in
its discretion, may set restrictions based upon the achievement of Performance
Goals.  The Performance Goals will be set
by the Compensation Committee on or before the Determination Date.  In granting Performance Units/Shares which
are intended to qualify under Code Section 162(m), the Compensation
Committee will follow the provisions of Section 13 any procedures
determined by it from time to time to be necessary or appropriate to ensure
qualification of the Award under Code Section 162(m) (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 Code Section 162(m),
(i) no Participant will receive Performance Units having an initial value
greater than $5,000,000, and (ii) no Participant will receive more than
333,333 Performance Shares. 
Notwithstanding the foregoing limitation, for Performance Shares
intended to qualify as “performance-based compensation” within the meaning of
Code Section 162(m), in connection with his or her initial service, a
Service Provider may be granted up to an additional 333,333 Performance Shares
and additional Performance Units having an initial value up to $5,000,000.

 

(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 Goals 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 the number or value of
Performance Units/Shares that will be paid out to the Participant, including
granting an Award of Performance Units and Performance Shares subject to the
requirements of Section 13.  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, Performance Goals,
any other vesting provisions 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

 

15

 

Administrator, in its
sole discretion, may reduce or waive any performance objectives or other
vesting provisions for such Performance Unit/Share.

 

(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 and achievement of the performance criteria and
other vesting provisions.  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 to the extent such Performance Units/Shares
were payable in Shares.

 

(g)                                 Section 162(m) Performance
Restrictions.  For
purposes of qualifying grants of Performance Units/Shares as “performance-based
compensation” under Code Section 162(m), the Compensation Committee, in
its discretion, may set restrictions based upon the achievement of Performance
Goals.  The Performance Goals will be set
by the Compensation Committee on or before the Determination Date.  In granting Performance Units/Shares which
are intended to qualify under Code Section 162(m), the Compensation
Committee will follow the provisions of Section 13 any procedures
determined by it from time to time to be necessary or appropriate to ensure
qualification of the Award under Code Section 162(m) (e.g., in determining
the Performance Goals).

 

11.                                 Performance Goals.  The granting and/or vesting of Awards of
Options, Restricted Stock, Restricted Stock Units, Performance Shares and
Performance Units (including Performance Units payable in cash) and other
incentives under the Plan may be made subject to the attainment of performance
goals (“Performance Goals”) relating to one or more of the following
measures: (a) Accounts Payable Days, (b) Accounts Payable Turns, (c) Annual
Revenue, (d) Cash Collections, (e) Cash Cycle Days, (f) Customer
Satisfaction MBOs, (g) Days Sales Outstanding, (h) Earnings Per
Share, (i) Free Cash flow, (j) Gross Margin, (k) Gross Profit, (l) Inventory
Turns, (m) Net Income, (n) New Orders, (o) Operating Income, (p) Pro
Forma Net Income, (q) Return on Designated Assets, (r) Return on
Equity, (s) Return on Sales, and (t) 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. The Compensation Committee
may provide that partial achievement of the Performance Goals may result in the
payment or vesting corresponding to a partial (but not necessarily
proportional) portion of the Award. 
Prior to the Determination Date, the Compensation Committee is
authorized to make adjustments in the method of calculating the attainment of
Performance Goals for a Performance Period as follows: (i) to exclude
restructuring and integration charges (including employee severance and
benefits costs and charges related to excess facilities and assets); (ii) to
exclude impairment charges for goodwill and intangible assets and amortization
expense; (iii) to exclude exchange rate effects, as applicable, for
non-U.S. dollar denominated net sales and operating earnings; (iv) to
exclude the effects of changes to GAAP required by the Financial Accounting
Standards Board; (v) to exclude the effects of any statutory adjustments
to corporate tax rates; (vi) to exclude stock-based compensation expense

 

16

 

determined under generally accepted accounting principles; (vii) to
exclude any other unusual, non-recurring gain or loss or extraordinary item; (vii) to
respond to, or in anticipation of, any unusual or extraordinary corporate item,
transaction, event or development; (viii) to respond to, or in
anticipation of, changes in applicable laws, regulations, accounting
principles, or business conditions; (ix) to exclude the dilutive effects
of acquisitions or joint ventures; (x) to assume that any business
divested by the Company achieved performance objectives at targeted levels
during the balance of a Performance Period following such divestiture; (xi) to
reflect a corporate transaction, such as a merger, consolidation, separation
(including a spinoff or other distribution of stock or property by a
corporation), or reorganization (whether or not such reorganization comes
within the definition of such term in Code Section 368); and (xii) to
reflect any partial or complete corporate liquidation.  The Compensation
Committee also retains the discretion to reduce or eliminate the compensation
or economic benefit due upon attainment of Performance Goals.

 

12.                                 Performance Bonus Awards.  Any Service
Provider selected by the Compensation Committee may be granted one or more
Performance-Based Awards in the form of a cash bonus payable upon the
attainment of Performance Goals that are established by the Compensation
Committee for a Performance Period prior to the Determination Date.  Performance-Based Awards in the form of cash
bonuses may not exceed more than $5,000,000 in any Fiscal Year.  Performance Bonus Awards established for any
Participant who would be considered a “covered employee” within the meaning of Code Section 162(m) (hereinafter a “Covered
Employee”) will be based upon Performance Goals established in accordance
with Section 13.  The provisions contained in this Plan permitting the Company to
grant Performance-Based Awards in the form of cash bonuses shall not be the
exclusive means for the payment of bonuses or other incentive compensation to
Participants, including Covered Employees.

 

13.                                 Terms and Conditions of Any
Performance-Based Award.

 

(a)                                  Purpose.  The purpose of this Section 13 is to
provide the Compensation Committee of the Board (the “Compensation Committee”)
the ability to qualify Awards (other than Options and SARs) that are granted
pursuant to the Plan as qualified performance-based compensation under Code Section 162(m).  If the Compensation Committee, in its
discretion, decides to grant a Performance-Based Award subject to Performance
Goals to a Covered Employee, the provisions of this Section 13 will control
over any contrary provision in the Plan; provided, however, that the
Compensation Committee may in its discretion grant Awards that are not intended
to qualify as “performance-based compensation” under Code Section 162(m) 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 13.

 

(b)                                 Applicability.  This Section 13 will apply to those
Covered Employees who are selected by the Compensation Committee to receive any
Award subject to Performance Goals.  The
designation of a Covered Employee as being subject to Code Section 162(m) will
not in any manner entitle the Covered Employee to receive an Award under the
Plan.  Moreover, designation of a Covered
Employee subject to Code Section 162(m) for a particular Performance
Period will not require designation of such Covered Employee in any subsequent
Performance Period and designation of one Covered Employee will not require
designation of any other Covered Employee in such period or in any other
period.

 

17

 

(c)                                  Procedures with Respect to
Performance Based Awards.  To
the extent necessary to comply with the performance-based compensation
requirements of Code Section 162(m), 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 Code Section 162(m)), the
Compensation Committee will, in writing, (a) designate one or more
Participants who are Covered Employees, (b) select the Performance Goals
applicable to the Performance Period, (c) establish the Performance Goals,
and amounts or methods of computation of such Awards, as applicable, which may
be earned for such Performance Period, and (d) specify the relationship
between Performance Goals and the amounts or methods of computation of such
Awards, as applicable, to be earned by each Covered Employee for such
Performance Period.  Following the
completion of each Performance Period, the Compensation Committee will certify
in writing whether the applicable Performance Goals have been achieved for such
Performance Period.  In determining the
amounts earned by a Covered Employee, the Compensation Committee 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
Compensation Committee may deem relevant to the assessment of individual or
corporate performance for the Performance Period.

 

(d)                                 Payment of Performance Based Awards. 
Unless otherwise provided in the applicable Award Agreement, a Covered
Employee must be employed by the Company or an Affiliate on the day a
Performance-Based Award for such Performance Period is paid to the Covered
Employee.  Furthermore, a Covered
Employee will be eligible to receive payment pursuant to a Performance-Based
Award for a Performance Period only if the Performance Goals for such period
are achieved.

 

(e)                                  Additional Limitations. 
Notwithstanding any other provision of the Plan, any Award which is
granted to a Covered Employee 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 Code Section 162(m))
or any regulations and ruling issued thereunder that are requirements for
qualification as qualified performance-based compensation as described in Code Section 162(m),
and the Plan will be deemed amended to the extent necessary to conform to such
requirements.

 

14.                                 Compliance With Code Section 409A.  Awards will be designed and operated in such
a manner that they are either exempt from the application of, or comply with,
the requirements of Code Section 409A such that the grant, payment,
settlement or deferral will not be subject to the additional tax or interest
applicable under Code Section 409A, except as otherwise determined in the
sole discretion of the Administrator. 
The Plan and each Award Agreement under the Plan is intended to meet
the requirements of Code Section 409A and will be construed and
interpreted in accordance with such intent, except as otherwise determined in
the sole discretion of the Administrator. 
To the extent that an Award or payment, or the settlement or deferral
thereof, is subject to Code Section 409A the Award will be granted, paid,
settled or deferred in a manner that will meet the requirements of Code Section 409A,
such that the grant, payment, settlement or deferral will not be subject to the
additional tax or interest applicable under Code Section 409A.

 

15.                                 Leaves of Absence/Transfer
Between Locations.  Unless the
Administrator provides otherwise or as provided by written Company policies,
vesting of Awards granted hereunder will be

 

18

 

suspended during any unpaid leave of absence or as provided by written
Company policies.  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.

 

16.                                 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 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 13, “immediate
family” will 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).

 

17.                                 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

 

19

 

Parent or Subsidiary of
the successor corporation (the “Successor Corporation”).  In the event that the Successor Corporation
does not 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 the Successor Corporation
does not assume or substitute an Option or Stock Appreciation Right 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 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 17(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.

 

18.                                 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 required to
be withheld with respect to such Award (or exercise thereof).

 

20

 

(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.

 

19.                                 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.

 

20.                                 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.

 

21.                                 Term of Plan. 
The Plan will become effective upon its approval by the stockholders and
no Awards may be made under the Plan until such approval is obtained. The Plan
shall continue in effect for a term of ten (10) years after the date it
becomes effective, unless terminated earlier under Section 22  of the Plan.

 

22.                                 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

 

23.                                 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.

 

24.                                 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.

 

25.                                 Stockholder Approval.

 

(a)                                  General.  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.

 

(b)                                 Section 162(m). 
Subject to Section 22 (regarding the Administrator’s right to amend
or terminate the Plan), the provisions of Section 13 relating to Awards
intended to qualify as “performance based compensation” under Code Section 162(m) shall
remain in effect thereafter through the Company’s 2013 Annual Meeting.

 

22Exhibit
10.1

 

Evolving Systems, Inc.

Consulting Agreement

 

I, Stephen K. Gartside, Jr., agree to serve as a Consultant to Evolving
Systems, Inc. (Evolving Systems) on the terms described below, which I
have read, and accept:

 

1.                                      Duties.

 

1.1                               General
Advice.  As requested, you will consult
with Evolving Systems concerning Evolving Systems’ products, services, and
market opportunities, as well as other matters in your area of expertise. Your
primary point of contact will be Thad Dupper, President and CEO.

 

1.2                               Compliance
with Law and Policies.  In
performing the work required under this Agreement, you will comply with all
applicable laws and regulations, and with Evolving Systems’ policies and
procedures.

 

2.                                      Evolving
Systems’ Duties.

 

2.1                               Expenses.  Evolving Systems will
reimburse you for any reasonable pre-approved expenses you incur in performing
services under this Agreement, according to Evolving Systems’ corporate policy
for its senior employees. Evolving Systems will reimburse those expenses
promptly on receiving reimbursement requests in a form and supported by such
reasonable documentation as Evolving Systems may request.

 

2.2                               Scheduling.  Evolving Systems will give you as much
advance notice as is reasonably feasible of meetings, and work with you to schedule
other consultations at convenient times.

 

2.3                               Office,
Equipment.  You will be
responsible for providing your own office and computer equipment to be used in
performing your consulting services.

 

3.                                      Term &
Compensation.

 

3.1                               Term.  This Agreement begins on March 12,
2010 and continues through December 31, 2010,
unless terminated earlier as a result of your death, long term disability that
prevents you from performing your duties or upon thirty (30) days’ advance
written notice from you that you no longer want to continue providing services
to the company.

 

3.2                               Compensation. As
compensation for your services under this Agreement, Evolving Systems will pay
you a fee of $7,000 for your services under this Agreement, payable in equal
quarterly increments beginning with the quarter ending June 30, 2010.

 

4.                                      Status
of Consultant.  You will be
an independent contractor and not an employee of Evolving Systems.  Except as specifically set forth in this
paragraph, you acknowledge that you have no rights in or under any health,
liability or disability or other insurance policies maintained by Evolving
Systems, nor to any overtime, vacation, holiday, sick leave, seniority or other
benefits.  You further acknowledge that
you have no right to claim unemployment compensation, worker’s compensation or
disability compensation pursuant to this Agreement, or as a result of your
relationship with Evolving Systems.  You 

 

 

will
be responsible for all self-employment, social security and other taxes, fines,
penalties or other liability to the Internal Revenue Service of the United
States, the Department of Revenue of the State of Colorado, and to any other
entity with taxing jurisdiction.

 

5.                                      Confidentiality.  You acknowledge that in the course of
providing services and advice to Evolving Systems, you may acquire confidential
or proprietary information of Evolving Systems. 
You agree to continue to be bound by the terms and conditions of the
Confidentiality Agreement entered into between you and Evolving Systems.  The Company agrees not to disclose material
non-public information to you under this Agreement.

 

6.                                  Non-Solicitation. You agree that
for the duration of this Agreement you will not directly or indirectly induce
or solicit any of Evolving Systems’ employees to leave their employment or to
become employed by any other entity, nor shall you refer any of Evolving
Systems’ employees to any other entity or person for purposes of inducing or
soliciting such employees to leave Evolving Systems’ employment or to become
employed by any other person or entity. You represent and warrant that the
provision of services under this Agreement does not violate your
confidentiality, non-disclosure, or non-competition obligations, if any, to any
other person or entity.

 

7.                                      Authority.  You shall not: (a) have any authority to
incur any expenditure in the name of or for the account of Evolving Systems
unless Evolving Systems shall have agreed in advance to it being so incurred;
or (b) hold yourself out or permit yourself to be held out as having any
authority to do or say anything on behalf of or in the name of Evolving Systems
unless Evolving Systems shall have consented in advance to you so doing or
saying.

 

8.                                      General.

 

8.1                               Notice.  Notice will be sent, if to you, at your home
address as maintained in the Company’s records, and if to Evolving Systems, at
Evolving Systems’ headquarters location, attn: Thad Dupper, President &
CEO.  Notice is effective when received
by the person to whom Notice is required to be given, if sent by any means that
leaves a permanent record in the recipient’s hands.  Notice is also effective if properly
addressed and sent postage prepaid by any method resulting in a return receipt
from the courier.  Notice sent by this
method is effective on the earlier of the date actually received, or on the
date the return receipt shows it was refused or returned undeliverable.  Either party may change its Notice address,
by Notice.

 

8.2                               Governing
Law, Enforcement, Priority.  This Agreement is governed by Colorado
law.  Enforcement may be sought in
Douglas County, Colorado, where you and Evolving Systems both consent to
jurisdiction.  This Agreement supersedes
all prior agreements between the parties as to the terms of any consulting
arrangement.

 

Effective the 12th day of March,
2010.

 

 

	
  /s/
  STEPHEN K. GARTSIDE, JR.

  	
   

  
	
  Stephen
  K. Gartside, Jr.

  	
   

  
	
   

  	
   

  
	
  Evolving
  Systems, Inc.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /S/
  ANITA T. MOSELEY

  	
   

  
	
   

  	
   

  
	
  Name:
  Anita T. Moseley

  	
   

  
	
   

  	
   

  
	
  Title:
  Sr. Vice President & General Counsel

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