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  Exhibit 10.30    
    

January 6,
2010 

Mr. Richard
M. Weil

612 Vista Lane

Laguna Beach, CA 92651 

Dear
Dick: 

        We
have greatly enjoyed getting to know you over the last few months and are excited about you joining us as the Chief Executive Officer of Janus Capital Group Inc. We believe you
possess the personal and professional characteristics to lead this organization in the years ahead and will have the ability to make a significant impact on our future direction and growth. On behalf
of Janus Capital Group Inc. (the "Company"), I am pleased to extend to you an offer of employment with the Company on the following terms and conditions: 

	1.
	Position. You will serve as our Chief Executive Officer and shall be appointed as a member of our Board of
Directors (the "Board"). You will be based in Denver, Colorado at the Company's headquarters. Your start date will be no later than February 1, 2010 (the actual start date, the "Start Date").

	2.
	Target Annual Compensation. Your targeted annual compensation will be an aggregate of $10,000,000, subject to
review annually by the Compensation Committee of the Board (the "Committee"). The various components of your annual compensation are described in Sections 3 through 5.

	3.
	Base Salary. Your annual base salary will be $500,000, which will be paid in accordance with the Company's
customary payroll practices.

	4.
	Target Bonus. You will receive an annual bonus with a target of at least $3,500,000, subject to the
achievement by the Company of objectively determinable performance goals established by the Committee in consultation with you. The annual bonus will be payable in cash at the time that bonuses are
customarily paid, but in no event more that 2.5 months after the end of the bonus year. For 2010, you will be eligible to receive a bonus of at least $3,500,000, subject to the Company meeting
its 2010 Section 162(m) performance requirements. For 2009, the Company was required to achieve a minimum of a 20% pre-tax margin OR a 5% return on equity. 

For
2011 and beyond, you will be eligible for a target bonus of at least $3,500,000. The actual amount paid will be subject to the achievement of objectives determined by the Committee in consultation
with you.  

	5.
	Equity. Each year, you will be entitled to participate in the Company's long term incentive compensation
plan. On February 5, 2010, you will be granted (i) $3,000,000 of restricted stock, and (ii) stock options with a Black-Scholes value on February 5, 2010 of $3,000,000, in
accordance with the Company's LTI Granting Procedures adopted by the Committee. The number of shares of restricted stock and stock options granted will be based on the average of the high and low
stock prices of the Company's stock on February 5, 2010. The stock options shall have an exercise price equal to the average of the high and low stock prices of the Company's stock on
February 5, 2010. The restricted stock and stock options will vest, based upon your continued employment, in equal installments over a four year period on
February 1st of each year (or, if such day falls on a weekend, the next trading day). Your equity grants beginning in 2011 are expected to be a mixture of restricted stock,
stock options and mutual fund units, with an expected aggregate annual value, depending on the Company's and your performance, of approximately $6,000,000, as determined by the achievement of
objectives determined by the Committee in consultation with you. The restricted stock, stock 

options
and mutual fund units will be subject to the terms of the long-term incentive plan under which they are granted and any applicable award agreements.  

	6.
	Sign on Bonus. On February 5, 2010, you will also be granted an additional $10,000,000 of restricted
stock (the "Sign-On Bonus"). The number of shares for the Sign-On Bonus will be based on the average of the high and low stock prices of the Company's stock on
February 5, 2010. The Sign-On Bonus will vest, based upon your continued employment with the Company, 50% on December 31, 2010; 25% on January 1, 2012, and 25% on
January 1, 2013. The Sign-On Bonus will be subject to the terms of the long-term incentive plan under which they are granted and any applicable award agreements.

	7.
	Benefits. As a full-time employee, you will be eligible to participate in our benefits program.
This program currently includes life, medical, dental, vision and disability insurance, a 401(k) account plan (which includes a company match), contributions to a profit-sharing plan and an employee
stock ownership plan, paid holidays and vacation. All of these benefits are subject to the Company policies and the applicable plan documents, which may be amended and/or terminated by the Company at
any time.

	8.
	Vacation. You will be entitled to the vacation offered to other senior executive officers at the Company's
direction.

	9.
	Relocation. We will provide a relocation package which has the following
components:  

	•
	Temporary housing in Denver until June 30, 2010.   

	•
	Closing costs on the sale of the Laguna Beach house and closing costs on the purchase of the Denver home.  

	•
	Moving the contents of your Laguna Beach home and up to six months of temporary storage.   

	•
	Two house hunting trips for your family to Denver.   

	•
	$35,000 to be used in commuting from Denver to Laguna Beach until your family is able to join you in Denver on or about
June 30, 2010.   

	•
	Flights for you and your family for the final move to Denver.   

	•
	Up to $35,000 to reimburse you for costs incurred to retain legal counsel to advise you in connection with negotiating the
terms of your employment with the Company. 

The
Company will provide you with a tax gross up for any of the above-mentioned expenses which are taxable to you by December 31st of the year following the year in which
you remit the related taxes.  

	10.
	Employment. Your employment relationship with the Company is "at will," and the Company and you have the
right to terminate that employment relationship at any time. You represent that there are no contractual or other legal restrictions on your ability to accept this offer and fully perform your duties
on behalf of the Company.

	11.
	Severance. If your employment is terminated by the Company without "cause" or for "good reason" you will
receive a one-time cash payment of $5,000,000 and continuation of benefits for one year. In addition, we will accelerate the vesting of the restricted stock, stock options and
Sign-On Bonus. These matters will be addressed in and subject to a Severance Rights Agreement between you and the Company which will be entered into on your Start Date in substantially the
form attached hereto. You will also be eligible for change in control severance benefits in accordance with, and subject to, the terms of the Company's then standard change in control agreement which
will be entered into between you and the Company on your Start Date. 

	12.
	Indemnification. The Company shall indemnify and hold you harmless to the fullest extent permitted by law,
and shall cover you under any insurance policy the Company maintains for the errors and omissions of its directors and officers, in connection with your service as an officer and director of the
Company and at coverage levels appropriate for the Company and your positions with the Company (as determined from time to time by the Board). 

[continued
on following page] 

        This
offer expires on January 11, 2010. We look forward to supporting you in building a preeminent investment management organization and are confident we will achieve great
success under your leadership and direction. We are excited to have you join the Company and anxiously await your response to this offer. 

 

 

					
	 
	 	 
	 	 

	 	 	Sincerely,
	 	 	 	 	 
	 	 	JANUS CAPITAL GROUP, INC.
	 	 	 	 	 
	 	 	By:	 	 
	 	 	 	 	

  
	 	 	Name:
	 	 	Title:
	 	 	 	 	 
	 	 	Agreed and Accepted:
	 	 	 	 	 
	 	 	By:	 	 
	 	 	 	 	

  
	 	 	Richard M. Weil
	 	 	 	 	 
	 	 	Date:

 

 

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Exhibit 10.30EXHIBIT 10.06

 

 

2002 EQUITY INCENTIVE PLAN

 

As Adopted April 18, 2002

As Amended February 9, 2006, May 18, 2006, December 13, 2007, May 21,
2008, August 19, 2009 and December 10, 2009

 

1.                                      PURPOSE.  The purpose of this Plan is to provide
incentives to attract, retain and motivate eligible persons whose present and
potential contributions are important to the success of the Company, its Parent
and Subsidiaries, by offering them an opportunity to participate in the Company’s
future performance through awards of Options, Restricted Stock and Restricted
Stock Units.  Capitalized terms not
defined in the text are defined in Section 24.

 

2.                                      SHARES SUBJECT TO THE PLAN.

 

2.1                                 Number of Shares Available.  Subject to Sections 2.2 and 18, the total
number of Shares reserved and available for grant and issuance pursuant to this
Plan will be 500,000 Shares plus Shares that are subject to: (a) issuance
upon exercise of an Option but cease to be subject to such Option for any
reason other than exercise of such Option; (b) an Award granted hereunder
but are forfeited or are repurchased by the Company at the original issue
price; and (c) an Award that otherwise terminates without Shares being
issued.  In addition, any authorized
shares not issued or subject to outstanding grants under the Company’s
1996 Stock Option Plan, Incentive Option Plan and Management Incentive
Option Plan on the Effective Date (as defined below) and any shares issued
under the Company’s 1995 Stock Plan, 1996 Stock Option Plan, Incentive
Option Plan and Management Incentive Option Plan (the “Prior
Plans”) that are forfeited or repurchased by the Company or that
are issuable upon exercise of options granted pursuant to the Prior Plans that
expire or become unexercisable for any reason without having been exercised in
full, will no longer be available for grant and issuance under the Prior Plans,
but will be available for grant and issuance under this Plan.  In addition, on each January 1, the
aggregate number of Shares reserved and available for grant and issuance
pursuant to this Plan will be increased automatically by a number of Shares
equal to 5% of the total outstanding shares of the Company as of the
immediately preceding December 31; provided, that the Board may in
its sole discretion reduce the amount of the increase in any particular year;
and, provided further, provided that no more than 40,000,000 shares
shall be issued as ISOs (as defined in Section 5 below).  At all times the Company shall reserve and
keep available a sufficient number of Shares as shall be required to satisfy
the requirements of all outstanding Options granted under this Plan and all
other outstanding but unvested Awards granted under this Plan.

 

2.2                                 Adjustment of Shares.  In the event that the number of outstanding
shares is changed by a stock dividend, recapitalization, stock split, reverse
stock split, subdivision, combination, reclassification or similar change in
the capital structure of the Company without consideration, then (a) the
number of Shares reserved for issuance under this Plan, (b) the number of
Shares that may be granted pursuant to Sections 3 and 9 below, (c) the
Exercise Prices

 

 

of and number of Shares subject to outstanding
Options, and (d) the number of Shares subject to other outstanding Awards
shall, upon approval of the Board in its discretion, be proportionately
adjusted in compliance with applicable securities laws; provided, however,
that fractions of a Share will not be issued but will either be replaced by a
cash payment equal to the Fair Market Value of such fraction of a Share or will
be rounded up to the nearest whole Share, as determined by the Committee.

 

3.                                      ELIGIBILITY.  ISOs (as defined in Section 5 below) may
be granted only to employees (including officers and directors who are also
employees) of the Company or of a Parent or Subsidiary of the Company.  All other Awards may be granted to employees,
officers, directors, consultants, independent contractors and advisors of the
Company or any Parent or Subsidiary of the Company; provided such consultants,
contractors and advisors render bona fide services not in connection with the
offer and sale of securities in a capital-raising transaction.  No person will be eligible to receive more
than 1,000,000 Shares in any calendar year under this Plan pursuant to the
grant of Awards hereunder, other than new employees of the Company or of a
Parent or Subsidiary of the Company (including new employees who are also
officers and directors of the Company or any Parent or Subsidiary of the
Company), who are eligible to receive up to a maximum of 3,000,000 Shares in
the calendar year in which they commence their employment.  A person may be granted more than one Award
under this Plan.

 

4.                                      ADMINISTRATION.

 

4.1                                 Committee Authority.  This Plan will be administered by the
Committee or by the Board acting as the Committee.  Except for automatic grants to Outside
Directors pursuant to Section 9 hereof, and subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan.  Except for automatic grants to Outside
Directors pursuant to Section 9 hereof, the Committee will have the
authority to:

 

(a)                                  construe
and interpret this Plan, any Award Agreement and any other agreement or
document executed pursuant to this Plan;

 

(b)                                 prescribe,
amend and rescind rules and regulations relating to this Plan or any
Award;

 

(c)                                  select
persons to receive Awards;

 

(d)                                 determine
the form and terms of Awards;

 

(e)                                  determine
the number of Shares or other consideration subject to Awards;

 

(f)                                    determine
whether Awards will be granted singly, in combination with, in tandem with, in
replacement of, or as alternatives to, other Awards under this Plan or any
other incentive or compensation plan of the Company or any Parent or Subsidiary
of the Company;

 

(g)                                 grant
waivers of Plan or Award conditions;

 

2

 

(h)                                 determine
the vesting, exercisability and payment of Awards;

 

(i)                                     correct
any defect, supply any omission or reconcile any inconsistency in this Plan,
any Award or any Award Agreement;

 

(j)                                     determine
whether an Award has been earned; and

 

(k)                                  make
all other determinations necessary or advisable for the administration of this
Plan.

 

4.2                                 Committee Discretion.  Except for automatic grants to Outside
Directors pursuant to Section 9 hereof, any determination made by the
Committee with respect to any Award will be made in its sole discretion at the
time of grant of the Award or, unless in contravention of any express term of
this Plan or Award, at any later time, and such determination will be final and
binding on the Company and on all persons having an interest in any Award under
this Plan.  The Committee may delegate to
one or more officers of the Company the authority to grant an Award under this
Plan to Participants who are not Insiders of the Company.

 

5.                                      OPTIONS.  The Committee may grant Options to eligible
persons and will determine whether such Options will be Incentive Stock Options
within the meaning of the Code (“ISO”) or
Nonqualified Stock Options (“NQSOs”),
the number of Shares subject to the Option, the Exercise Price of the Option,
the period during which the Option may be exercised, and all other terms and
conditions of the Option, subject to the following:

 

5.1                                 Form of Option Grant.  Each Option granted under this Plan will be
evidenced by an Award Agreement which will expressly identify the Option as an
ISO or an NQSO (“Stock Option Agreement”),
and, except as otherwise required by the terms of Section 9 hereof, will
be in such form and contain such provisions (which need not be the same for
each Participant) as the Committee may from time to time approve, and which
will comply with and be subject to the terms and conditions of this Plan.

 

5.2                                 Date of Grant.  The date of grant of an Option will be the
date on which the Committee makes the determination to grant such Option,
unless otherwise specified by the Committee. 
The Stock Option Agreement will be delivered, and a copy of this Plan
will be made available, to the Participant within a reasonable time after the
granting of the Option.

 

5.3                                 Exercise Period.  Options may be exercisable within the times
or upon the events determined by the Committee as set forth in the Stock Option
Agreement governing such Option; provided, however, that no Option granted on
or before February 9, 2006 will be exercisable after the expiration of ten
(10) years from the date the Option is granted and no Option granted after
February 9, 2006 will be exercisable after the expiration of seven (7) years
from the date the Option is granted; and provided further that no ISO granted
to a person who directly or by attribution owns more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of
any Parent or Subsidiary of the Company (“Ten Percent Stockholder”)
will be exercisable after the expiration of five (5) years from the date
the ISO is granted.  The Committee also
may provide for Options to become exercisable at

 

3

 

one time or from time to time, periodically or
otherwise, in such number of Shares or percentage of Shares as the Committee
determines.

 

5.4                                 Exercise Price.  The Exercise Price of an Option will be
determined by the Committee when the Option is granted; provided that: (i) the
Exercise Price of an ISO will be not less than 100% of the Fair Market Value of
the Shares on the date of grant; and (ii) the Exercise Price of any ISO
granted to a Ten Percent Stockholder will not be less than 110% of the Fair
Market Value of the Shares on the date of grant.  Payment for the Shares purchased may be made
in accordance with Section 6 of this Plan.

 

5.5                                 Termination.  Notwithstanding the exercise periods set
forth in the Stock Option Agreement, exercise of an Option will always be
subject to the following:

 

(a)                                  If
the Participant is Terminated for any reason except death or Disability, then
the Participant may exercise such Participant’s Options only to the extent that
such Options would have been exercisable upon the Termination Date no later
than three (3) months after the Termination Date (or such shorter or
longer time period not exceeding five (5) years as may be determined by
the Committee, with any exercise beyond three (3) months after the
Termination Date deemed to be an NQSO), but in any event, no later than the
expiration date of the Options.

 

(b)                                 If
the Participant is Terminated because of Participant’s death or Disability (or
the Participant dies within three (3) months after a Termination other
than for Cause or because of Participant’s Disability), then Participant’s
Options may be exercised only to the extent that such Options would have been
exercisable by Participant on the Termination Date and must be exercised by
Participant (or Participant’s legal representative or authorized assignee) no
later than twelve (12) months after the Termination Date (or such shorter or
longer time period not exceeding five (5) years as may be determined by
the Committee, with any such exercise beyond (i) three (3) months
after the Termination Date when the Termination is for any reason other than
the Participant’s death or disability, within the meaning of Section 22(e)(3) of
the Code, or (ii) twelve (12) months after the Termination Date when the
Termination is for Participant’s disability, within the meaning of Section 22(e)(3) of
the Code, deemed to be an NQSO), but in any event no later than the expiration
date of the Options.

 

(c)                                  If
the Participant is terminated for Cause, then the Participant may exercise such
Participant’s Options only to the extent that such Options would have been
exercisable upon the Termination Date no later than one month after the
Termination Date (or such shorter or longer time period not exceeding five (5) years
as may be determined by the Committee, with any exercise beyond three (3) months
after the Termination Date deemed to be an NQSO), but in any event, no later
than the expiration date of the Options.

 

4

 

5.6                                 Limitations on Exercise.  The Committee may specify a reasonable
minimum number of Shares that may be purchased on any exercise of an Option,
provided that such minimum number will not prevent Participant from exercising
the Option for the full number of Shares for which it is then exercisable.

 

5.7                                 Limitations on ISO.  The aggregate Fair Market Value (determined
as of the date of grant) of Shares with respect to which ISO are exercisable
for the first time by a Participant during any calendar year (under this Plan
or under any other incentive stock option plan of the Company, Parent or
Subsidiary of the Company) will not exceed $100,000.  If the Fair Market Value of Shares on the
date of grant with respect to which ISO are exercisable for the first time by a
Participant during any calendar year exceeds $100,000, then the Options for the
first $100,000 worth of Shares to become exercisable in such calendar year will
be ISO and the Options for the amount in excess of $100,000 that become
exercisable in that calendar year will be NQSOs.  In the event that the Code or the regulations
promulgated thereunder are amended after the Effective Date of this Plan to
provide for a different limit on the Fair Market Value of Shares permitted to
be subject to ISO, such different limit will be automatically incorporated
herein and will apply to any Options granted after the effective date of such
amendment.

 

5.8                                 Modification, Extension or Renewal.  The Committee may modify, extend or renew
outstanding Options and authorize the grant of new Options in substitution
therefor, provided that any such action may not, without the written consent of
a Participant, impair any of such Participant’s rights under any Option
previously granted.  Any outstanding ISO
that is modified, extended, renewed or otherwise altered will be treated in
accordance with Section 424(h) of the Code.  The Committee may reduce the Exercise Price
of outstanding Options without the consent of Participants affected by a
written notice to them; provided, however, that the Exercise
Price may not be reduced below the minimum Exercise Price that would be
permitted under Section 5.4 of this Plan for Options granted on the date
the action is taken to reduce the Exercise Price.

 

5.9                                 No Disqualification.  Notwithstanding any other provision in this
Plan, no term of this Plan relating to ISO will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under Section 422
of the Code.

 

6.                                      PAYMENT
FOR OPTION SHARES.  The entire
Exercise Price of Shares issued upon exercise of Options and automatic grants
to Outside Directors pursuant to Section 9 shall be payable in cash at the
time when such Shares are purchased, except as follows and if so provided for
in an applicable Stock Option Agreement:

 

6.1                                 Surrender
of Stock.  Payment for all or any
part of the Exercise Price or Options may be made with shares of the Company’s
common stock which have already been owned by the Participant; provided that
the Committee may, in its sole discretion, require that shares tendered for
payment be previously held by the Participant for a minimum duration. Such
shares shall be valued at their Fair Market Value.

 

5

 

6.2                                 Cashless
Exercise.  Payment for all or any
part of the Exercise Price may be made through Cashless Exercise at the
Committee’s sole discretion.

 

6.3                                 Other
Forms of Payment.  Payment for all or
any part of the Exercise Price may be made in any other form that is consistent
with applicable laws, regulations and rules and approved by the Committee.

 

In the case of an ISO granted under the Plan, payment shall be made
only pursuant to the express provisions of the applicable Stock Option
Agreement.  The Stock Option Agreement
may specify that payment may be made in any form(s) described in this Section 6.  In the case of an NQSO granted under the
Plan, the Committee may, in its discretion at any time, accept payment in any
form(s) described in this Section 6.

 

7.                                      RESTRICTED STOCK
AWARD.

 

7.1                                 Amount
and Form of Restricted Stock Award.  Awards under this Section 7 may be
granted in the form of a Restricted Stock Award.  Restricted Stock Awards made pursuant to this
Plan will be evidenced by an Award Agreement (“Restricted
Stock Agreement”) that shall specify the number of Shares to
which the Restricted Stock Award pertains and shall be subject to adjustment of
such number in accordance with Section 2.2.

 

7.2                                 Restricted
Stock Agreement.  Each Restricted
Stock Award awarded under the Plan shall be evidenced and governed exclusively
by a Restricted Stock Agreement between the Participant and the Company. Each
Restricted Stock Award shall be subject to all applicable terms and conditions
of the Plan and may be subject to any other terms and conditions that are not
inconsistent with the Plan and that the Committee deems appropriate for
inclusion in the applicable Restricted Stock Agreement (including without
limitation any performance conditions). The provisions of the various
Restricted Stock Agreements entered into under the Plan need not be identical.

 

7.3                                 Payment
of Restricted Stock Awards. 
Restricted Stock Awards may be issued with or without cash consideration
or any other form of legally permissible consideration approved by the
Committee.

 

7.4                                 Vesting
Conditions.  Each Restricted Stock
Award may or may not be subject to vesting. Any such vesting provision may
provide that Shares shall vest based on service with the Company over time or
shall vest, in full or in installments, upon satisfaction of performance goals
specified in the Restricted Stock Agreement. 
A Restricted Stock Agreement may provide for accelerated vesting in the
event of the Participant’s death, Disability, or other events.

 

7.5                                 Assignment
or Transfer of Restricted Stock Awards. 
Except as provided in the applicable Restricted Stock Agreement, and
then only to the extent permitted by applicable law, Restricted Stock Awards
shall not be anticipated, assigned, attached, garnished, optioned, transferred
or made subject to any creditor’s process, whether voluntarily, involuntarily
or by operation of law. Any act in violation of this Section 7.5 shall be
void.

 

6

 

7.6                                 Voting
and Dividend Rights.  The holder of a
Restricted Stock Award under the Plan shall have the same voting, dividend and
other rights as the Company’s other shareholders. A Restricted Stock Agreement,
however, may require that the holder of such Restricted Stock Award invest any
cash dividends received in additional Shares subject to the Restricted Stock
Award.  Such additional Shares subject to
the Restricted Stock Award shall be subject to the same conditions and
restrictions as the Restricted Stock Award with respect to which the dividends
were paid.  Such additional Shares
subject to the Restricted Stock Award shall not reduce the number of Shares
available for issuance under Section 2.1.

 

7.7                                 Modification
or Assumption of Restricted Stock Awards. 
Within the limitations of the Plan, the Committee may modify or assume
outstanding restricted stock awards or may accept the cancellation of
outstanding restricted stock awards (including stock awards granted by another
issuer) in return for the Award of new Restricted Stock Awards for the same or
a different number of Shares and with the same or different vesting provisions.
Notwithstanding the preceding sentence or anything to the contrary herein, no
modification of a Restricted Stock Award shall, without the consent of the
Participant, impair his or her rights or obligations under such Restricted
Stock Award.

 

8.                                      RESTRICTED
STOCK UNITS.

 

8.1                                 Restricted
Stock Unit Agreement.  Each Award of
Restricted Stock Units under the Plan shall be evidenced and governed
exclusively by an Award Agreement (“Restricted Stock Unit
Agreement”) between the Participant and the Company. Such
Restricted Stock Units shall be subject to all applicable terms and conditions
of the Plan and may be subject to any other terms and conditions that are not
inconsistent with the Plan and that the Committee deems appropriate for
inclusion in the applicable Restricted Stock Unit Agreement (including without
limitation any vesting and performance conditions). The provisions of the
various Restricted Stock Unit Agreements entered into under the Plan need not
be identical. Restricted Stock Units may be awarded in consideration of a
reduction in the Participant’s other compensation.

 

8.2                                 Number
of Shares.  Each Restricted Stock
Unit Agreement shall specify the number of Shares to which the Restricted Stock
Unit Award pertains and shall be subject to adjustment of such number in
accordance with Section 2.2.

 

8.3                                 Payment
for Restricted Stock Units. 
Restricted Stock Units shall be issued without consideration.

 

8.4                                 Vesting
Conditions.  Each Restricted Stock
Unit may or may not be subject to vesting. 
Any such vesting provision may provide that Shares shall vest based on
service with the Company over time or shall vest, in full or in installments,
upon satisfaction of performance goals specified in the Restricted Stock Unit
Agreement.  A Restricted Stock Unit
Agreement may provide for accelerated vesting in the event of the Participant’s
death, Disability, or other events.

 

8.5                                 Voting
and Dividend Rights.  The holders of
Restricted Stock Units shall have no voting rights. Prior to settlement or
forfeiture, any Restricted Stock Unit awarded under

 

7

 

the Plan may, at the Committee’s discretion, carry
with it a right to dividend equivalents. Such right entitles the holder to be
credited with an amount equal to all cash dividends paid on one Share while the
Restricted Stock Unit is outstanding. Dividend equivalents may be converted
into additional Restricted Stock Units. Settlement of dividend equivalents may
be made in the form of cash, in the form of Shares, or in a combination of
both. Prior to distribution, any dividend equivalents which are not paid shall
be subject to the same conditions and restrictions as the Restricted Stock
Units to which they attach.

 

8.6                                 Form and
Time of Settlement of Restricted Stock Units.  Settlement of vested Restricted Stock Units
may be made in the form of (a) cash, (b) Shares or (c) any
combination of both, as determined by the Committee at the time of the grant of
the Restricted Stock Units, in its sole discretion. Methods of converting
Restricted Stock Units into cash may include (without limitation) a method
based on the average Fair Market Value of Shares over a series of trading days.
Vested Restricted Stock Units may be settled in a lump sum or in installments.
The distribution may occur or commence when the vesting conditions applicable
to the Restricted Stock Units have been satisfied or have lapsed, or it may be
deferred, in accordance with applicable law, to any later date. The amount of a
deferred distribution may be increased by an interest factor or by dividend
equivalents. Until an Award of Restricted Stock Units is settled, the number of
such Restricted Stock Units shall be subject to adjustment pursuant to Section 2.2.  Notwithstanding anything to the contrary in
any Award Agreement or the Plan, any Restricted Stock Units that, by their
terms, are settled on the applicable vesting date(s) shall be settled no
later than the fifteenth (15th) day of the third (3rd) month following the end
of the calendar year containing the applicable vesting date (or, if later, the
fifteenth (15th) day of the third (3rd) month following the end of the Company’s
taxable year).  In addition,
notwithstanding anything to the contrary in any Award Agreement or the Plan,
references to “termination of the Participant’s Service,” “Termination Date”
and similar references for Restricted Stock Units that are subject to Code Section 409A
shall mean the date of the Participant’s “separation from service” within the
meaning of Code Section 409A and such Restricted Stock Units shall be
settled no later than the time permitted by Treasury Regulation Section 1.409A-3(d).

 

8.7                                 Creditor’s
Rights.  A holder of Restricted Stock
Units shall have no rights other than those of a general creditor of the
Company. Restricted Stock Units represent an unfunded and unsecured obligation
of the Company, subject to the terms and conditions of the applicable
Restricted Stock Unit Agreement.

 

8.8                                 Modification
or Assumption of Restricted Stock Units. 
Within the limitations of the Plan, the Committee may modify or assume
outstanding restricted stock units or may accept the cancellation of
outstanding restricted stock units (including stock units granted by another
issuer) in return for the Award of new Restricted Stock Units for the same or a
different number of Shares and with the same or different vesting provisions.
Notwithstanding the preceding sentence or anything to the contrary herein, no
modification of a Restricted Stock Unit shall, without the consent of the
Participant, impair his or her rights or obligations under such Restricted
Stock Unit.

 

8.9                                 Assignment
or Transfer of Restricted Stock Units. 
Except as provided in the applicable Restricted Stock Unit Agreement,
and then only to the extent permitted by

 

8

 

applicable law, Restricted Stock Units shall not be
anticipated, assigned, attached, garnished, optioned, transferred or made
subject to any creditor’s process, whether voluntarily, involuntarily or by
operation of law. Any act in violation of this Section 8.9 shall be void.

 

9.                                      AUTOMATIC
GRANTS TO OUTSIDE DIRECTORS.

 

9.1                                 Types
of Options and Shares.  Awards
granted under this Plan and subject to this Section 9 may be NQSOs,
Restricted Stock Awards or Restricted Stock Units.

 

9.2                                 Eligibility.  Awards subject to this Section 9 shall
be granted only to Outside Directors.

 

9.3                                 Initial
Grant.  Each Outside Director who
first becomes a member of the Board after the Effective Date will automatically
be granted an Award for that number of Shares determined by the Board (an “Initial Grant”) on the date such
Outside Director first becomes a member of the Board.  Each Outside Director who became a member of
the Board on or prior to the Effective Date and who did not receive a prior
option grant (under this Plan or otherwise and from the Company or any of its
corporate predecessors) will receive an Initial Grant on the Effective Date.

 

9.4                                 Succeeding
Grants.  Immediately following each
Annual Meeting of stockholders, each Outside Director will automatically be
granted an Award for that number of Shares determined by the Board (a “Succeeding Grant”), provided, that
the Outside Director is a member of the Board on such date.

 

9.5                                 Vesting
and Exercisability.  Each Award may
or may not be subject to vesting.  Each
Award Agreement shall specify the vesting and exercise conditions for such Award
as determined by the Board.

 

9

 

Unless
deferred in accordance with the rules established by the Committee,
Restricted Stock Units will be settled in Shares upon the earlier of: (i) the
date on which such Restricted Stock Units are fully vested, or (ii) the
Outside Director’s Termination Date (or the first market trading day during an
open trading window thereafter if either the date on which such Restricted
Stock Units are fully vested or the Outside Director’s Termination Date is not
on a market trading day during an open trading window).

 

Notwithstanding
any provision to the contrary, in the event of a Corporate Transaction
described in Section 18.1, the vesting of all Awards granted to Outside
Directors pursuant to this Section 9 will accelerate in full prior to the
consummation of such event at such times and on such conditions as the
Committee determines which comply with Section 409A of the Code, and options
must be exercised, if at all, within three (3) months of the consummation
of said event.  Any options not exercised
within such three-month period shall expire.

 

9.6                                 Exercise Price.  The exercise price of an option pursuant to
an Initial Grant and Succeeding Grant shall be the Fair Market Value of the
Shares, at the time that the option is granted.

 

9.7                                 Director
Fees.  Each Outside Director may
elect to receive a Restricted Stock Award or Restricted Stock Unit under the
Plan in lieu of payment of a portion of his or her regular annual retainer
based on the Fair Market Value of the Shares on the date any regular annual
retainer would otherwise be paid.  For
purposes of the Plan, an Outside Director’s regular annual retainer shall
include any additional retainer paid in connection with service on any
committee of the Board or paid for any other reason.  Such an election may be for any dollar or
percentage amount equal to at least 25% of the Outside Director’s regular
annual retainer (up to a limit of 100% of the Outside Director’s regular annual
retainer).  The election must be made
prior to the beginning of the annual board of directors cycle which shall be
any twelve month continuous period designated by the Board.  Any amount of the regular annual retainer not
elected to be received as a Restricted Stock Award or Restricted Stock Unit
shall be payable in cash in accordance with the Company’s standard payment
procedures.

 

10

 

10.                               WITHHOLDING TAXES.

 

10.1                           Withholding Generally.  Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. 
Whenever, under this Plan, payments in satisfaction of Awards are to be
made in cash, such payment will be net of an amount sufficient to satisfy federal,
state, and local withholding tax requirements.

 

10.2                           Stock Withholding.  When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated
to pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be
issued that number of Shares having a Fair Market Value equal to the minimum
amount required to be withheld, determined on the date that the amount of tax
to be withheld is to be determined.  All
elections by a Participant to have Shares withheld for this purpose will be
made in accordance with the requirements established by the Committee and be in
writing in a form acceptable to the Committee.

 

11.                               TRANSFERABILITY.

 

11.1                           Except
as otherwise provided in this Section 11, Awards granted under this Plan,
and any interest therein, will not be transferable or assignable by
Participant, and may not be made subject to execution, attachment or similar
process, otherwise than by will or by the laws of descent and distribution or
as determined by the Committee and set forth in the Award Agreement with
respect to Awards that are not ISOs.

 

11.2                           All
Awards other than NQSO’s.  All Awards
other than NQSO’s shall be exercisable:  (i) during
the Participant’s lifetime, only by (A) the Participant, or (B) the
Participant’s guardian or legal representative; and (ii) after Participant’s
death, by the legal representative of the Participant’s heirs or legatees.

 

11.3                           NQSOs.  Unless otherwise restricted by the Committee,
an NQSO shall be exercisable:  (i) during
the Participant’s lifetime only by (A) the Participant, (B) the
Participant’s guardian or legal representative, (C) a Family Member of the
Participant who has acquired the NQSO by “permitted transfer;” and (ii) after
Participant’s death, by the legal representative of the Participant’s heirs or
legatees.  “Permitted transfer” means, as
authorized by this Plan and the Committee in an NQSO, any transfer effected by
the Participant during the Participant’s lifetime of an interest in such NQSO
but only such transfers which are by gift or domestic relations order.  A permitted transfer does not include any
transfer for value and neither of the following are transfers for value:  (a) a
transfer of under a domestic relations order in settlement of marital property
rights or (b) a transfer to an entity in which more than fifty percent of
the voting interests are owned by Family Members or the Participant in exchange
for an interest in that entity.

 

11

 

12.                               PRIVILEGES OF STOCK OWNERSHIP;
RESTRICTIONS ON SHARES.

 

12.1                           Voting and Dividends.  Unless otherwise provided under Section 7,
no Participant will have any of the rights of a stockholder with respect to any
Shares until the Shares are issued to the Participant.  After Shares are issued to the Participant,
the Participant will be a stockholder and have all the rights of a stockholder
with respect to such Shares, including the right to vote and receive all
dividends or other distributions made or paid with respect to such Shares; provided,
that the Participant will have no right to retain such stock dividends or stock
distributions with respect to Shares that are repurchased at the Participant’s
Purchase Price or Exercise Price pursuant to Section 12.

 

12.2                           Restrictions
on Shares.  At the discretion of the
Committee, the Company may reserve to itself and/or its assignee(s) in the
Award Agreement a right to repurchase a portion of or all Unvested Shares held
by a Participant following such Participant’s Termination at any time within
ninety (90) days after the later of Participant’s Termination Date and the date
Participant purchases Shares under this Plan, for cash and/or cancellation of
purchase money indebtedness, at the Participant’s Exercise Price or Purchase
Price, as the case may be.

 

13.                               CERTIFICATES.  All certificates for Shares or other
securities delivered under this Plan will be subject to such stock transfer
orders, legends and other restrictions as the Committee may deem necessary or
advisable, including restrictions under any applicable federal, state or
foreign securities law, or any rules, regulations and other requirements of the
SEC or any stock exchange or automated quotation system upon which the Shares
may be listed or quoted.

 

14.                               ESCROW; PLEDGE OF SHARES.  To enforce any restrictions on a Participant’s
Shares, the Committee may require the Participant to deposit all certificates
representing Shares, together with stock powers or other instruments of
transfer approved by the Committee, appropriately endorsed in blank, with the Company
or an agent designated by the Company to hold in escrow until such restrictions
have lapsed or terminated, and the Committee may cause a legend or legends
referencing such restrictions to be placed on the certificates.  Any Participant who is permitted to execute a
promissory note as partial or full consideration for the purchase of Shares
under this Plan will be required to pledge and deposit with the Company all or
part of the Shares so purchased as collateral to secure the payment of
Participant’s obligation to the Company under the promissory note; provided,
however, that the Committee may require or accept other or additional
forms of collateral to secure the payment of such obligation and, in any event,
the Company will have full recourse against the Participant under the
promissory note notwithstanding any pledge of the Participant’s Shares or other
collateral.  In connection with any
pledge of the Shares, Participant will be required to execute and deliver a
written pledge agreement in such form as the Committee will from time to time
approve.  The Shares purchased with the
promissory note may be released from the pledge on a pro rata basis as the
promissory note is paid.

 

15.                               EXCHANGE AND BUYOUT OF AWARDS.  The Committee may, at any time or from time
to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and
cancellation of any or all outstanding Awards. 
The Committee may at any time buy from a Participant an Award previously
granted

 

12

 

with payment in cash, Shares (including Restricted
Stock) or other consideration, based on such terms and conditions as the
Committee and the Participant may agree.

 

16.                               SECURITIES LAW AND OTHER REGULATORY COMPLIANCE.  An Award will not be effective unless such
Award is in compliance with all applicable federal and state securities laws, rules and
regulations of any governmental body, and the requirements of any stock
exchange or automated quotation system upon which the Shares may then be listed
or quoted, as they are in effect on the date of grant of the Award and also on
the date of exercise or other issuance. 
Notwithstanding any other provision in this Plan, the Company will have
no obligation to issue or deliver certificates for Shares under this Plan prior
to:  (a) obtaining any approvals from governmental agencies that the
Company determines are necessary or advisable; and/or (b) completion of
any registration or other qualification of such Shares under any state or
federal law or ruling of any governmental body that the Company determines to
be necessary or advisable.  The Company
will be under no obligation to register the Shares with the SEC or to effect
compliance with the registration, qualification or listing requirements of any
state securities laws, stock exchange or automated quotation system, and the
Company will have no liability for any inability or failure to do so.

 

17.                               NO OBLIGATION TO EMPLOY.  Nothing in this Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the
right of the Company or any Parent or Subsidiary of the Company to terminate
Participant’s employment or other relationship at any time, with or without
cause.

 

18.                               CORPORATE TRANSACTIONS.

 

18.1                           Assumption or Replacement of Awards by Successor.  Except for automatic grants to Outside
Directors pursuant to Section 9 hereof, in the event of (a) a
dissolution or liquidation of the Company, (b) a merger or consolidation
in which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is no
substantial change in the stockholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving
corporation but after which the stockholders of the Company immediately prior
to such merger (other than any stockholder that merges, or which owns or
controls another corporation that merges, with the Company in such merger)
cease to own their shares or other equity interest in the Company, (d) the
sale of substantially all of the assets of the Company, or (e) the
acquisition, sale, or transfer of more than 50% of the outstanding shares of
the Company by tender offer or similar transaction (each, a “Corporate Transaction”), any or all
outstanding Awards may be assumed, converted or replaced by the successor
corporation (if any), which assumption, conversion or replacement will be
binding on all Participants.  In the
alternative, the successor corporation may substitute equivalent Awards or
provide substantially similar consideration to Participants as was provided to
stockholders (after taking into account the existing provisions of the
Awards).  The successor corporation may
also issue, in place of outstanding Shares of the Company held by the Participants,
substantially

 

13

 

similar shares or other property subject to repurchase
restrictions no less favorable to the Participant.  In the event such successor corporation (if
any) refuses to assume or substitute Awards, as provided above, pursuant to a
transaction described in this SubSection 18.1, such Awards will expire on
such transaction at such time and on such conditions as the Committee will
determine.  Notwithstanding anything in
this Plan to the contrary, the Committee may, in its sole discretion, provide
that the vesting of any or all Awards granted pursuant to this Plan will
accelerate upon a transaction described in this Section 18.  If the Committee exercises such discretion
with respect to Options, such Options will become exercisable in full prior to
the consummation of such event at such time and on such conditions as the
Committee determines, and if such Options are not exercised prior to the
consummation of the corporate transaction, they shall terminate at such time as
determined by the Committee.

 

18.2                           Other Treatment of Awards.  Subject to any greater rights granted to
Participants under the foregoing provisions of this Section 18, in the
event of the occurrence of any Corporate Transaction described in Section 18.1,
any outstanding Awards will be treated as provided in the applicable agreement
or plan of merger, consolidation, dissolution, liquidation, or sale of assets.

 

18.3                           Assumption of Awards by the Company.  The Company, from time to time, also may
substitute or assume outstanding awards granted by another company, whether in
connection with an acquisition of such other company or otherwise, by either; (a) granting
an Award under this Plan in substitution of such other company’s award; or (b) assuming
such award as if it had been granted under this Plan if the terms of such
assumed award could be applied to an Award granted under this Plan.  Such substitution or assumption will be
permissible if the holder of the substituted or assumed award would have been
eligible to be granted an Award under this Plan if the other company had
applied the rules of this Plan to such grant.  In the event the Company assumes an award
granted by another company, the terms and conditions of such award will remain
unchanged (except that the exercise price and the number and nature of Shares
issuable upon exercise of any such option will be adjusted appropriately
pursuant to Section 424(a) of the Code).  In the event the Company elects to grant a
new Option rather than assuming an existing option, such new Option may be
granted with a similarly adjusted Exercise Price.

 

19.                               ADOPTION AND STOCKHOLDER APPROVAL.  This Plan will become effective on the date
on which the registration statement filed by the Company with the SEC under the
Securities Act registering the initial public offering of the Company’s Common
Stock is declared effective by the SEC (the “Effective Date”).  This Plan shall be approved by the
stockholders of the Company (excluding Shares issued pursuant to this Plan),
consistent with applicable laws, within twelve (12) months before or after the
date this Plan is adopted by the Board. 
Upon the Effective Date, the Committee may grant Awards pursuant to this
Plan; provided, however, that: 
(a) no Option may be exercised prior to initial stockholder
approval of this Plan; (b) no Option granted pursuant to an increase in
the number of Shares subject to this Plan approved by the Board will be
exercised prior to the time such increase has been approved by the stockholders
of the Company; (c) in the event that initial stockholder approval is not
obtained within the time period provided herein, all Awards granted hereunder
shall be cancelled, any Shares issued pursuant to any Awards shall be cancelled
and any purchase of Shares issued hereunder shall be rescinded; and (d) in
the event that stockholder approval of such

 

14

 

increase is not obtained within the time period
provided herein, all Awards granted pursuant to such increase will be
cancelled, any Shares issued pursuant to any Award granted pursuant to such
increase will be cancelled, and any purchase of Shares pursuant to such
increase will be rescinded.

 

20.                               TERM OF PLAN/GOVERNING
LAW.  Unless earlier terminated
as provided herein, this Plan will terminate ten (10) years from the date
this Plan is adopted by the Board or, if earlier, the date of stockholder
approval.  This Plan and all agreements
thereunder shall be governed by and construed in accordance with the laws of
the State of California.

 

21.                               AMENDMENT OR TERMINATION OF PLAN.  The Board may at any time terminate or amend
this Plan in any respect, including without limitation amendment of any form of
Award Agreement or instrument to be executed pursuant to this Plan; provided,
however, that the Board will not, without the approval of the
stockholders of the Company, amend this Plan in any manner that requires such
stockholder approval.

 

22.                               NONEXCLUSIVITY OF THE PLAN.  Neither the adoption of this Plan by the
Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.

 

23.                               INSIDER
TRADING POLICY.  Each Participant
and Outsider Director who receives an Award shall comply with any policy,
adopted by the Company from time to time covering transactions in the Company’s
securities by employees, officers and/or directors of the Company.

 

24.                               DEFINITIONS.  As used in this Plan, the following terms
will have the following meanings:

 

“Award” means any
award under this Plan, including any Option, Restricted Stock or Restricted
Stock Unit.

 

“Award Agreement”
means, with respect to each Award, the signed written agreement between the
Company and the Participant setting forth the terms and conditions of the
Award.

 

“Board” means the
Board of Directors of the Company.

 

“Cashless Exercise” 
means, to the extent that a Stock Option Agreement so provides and as
permitted by applicable law, a program approved by the Committee in which
payment may be made all or in part by delivery (on a form prescribed by the
Committee) of an irrevocable direction to a securities broker to sell Shares
and to deliver all or part of the sale proceeds to the Company in payment of
the aggregate Exercise Price and, if applicable, the amount necessary to
satisfy the Company’s withholding obligations at the minimum statutory
withholding rates, including, but not limited to, U.S. federal and state income
taxes, payroll taxes, and foreign taxes, if applicable.

 

15

 

“Cause” means (a) the
commission of an act of theft, embezzlement, fraud, dishonesty, (b) a
breach of fiduciary duty to the Company or a Parent or Subsidiary of the
Company or (c) a failure to materially perform the customary duties of
employee’s employment.

 

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

 

“Committee” means the
Compensation Committee of the Board.

 

“Company” means
FormFactor, Inc. or any successor corporation.

 

“Disability” means a
disability, whether temporary or permanent, partial or total, as determined by
the Committee.

 

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

 

“Exercise Price”
means the price at which a holder of an Option may purchase the Shares issuable
upon exercise of the Option.

 

“Fair Market Value”
means, as of any date, the value of a share of the Company’s Common Stock
determined as follows:

 

(a)                                  if
such Common Stock is then quoted on the Nasdaq Global Market, its closing price
on the Nasdaq Global Market on the date of determination as reported in The
Wall Street Journal;

 

(b)                                 if
such Common Stock is publicly traded and is then listed on a national
securities exchange, its closing price on the date of determination on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading as reported in The Wall Street Journal;

 

(c)                                  if
such Common Stock is publicly traded but is not quoted on the Nasdaq Global
Market nor listed or admitted to trading on a national securities exchange, the
average of the closing bid and asked prices on the date of determination as
reported in The Wall Street Journal;

 

(d)                                 in
the case of an Award made on the Effective Date, the price per share at which
shares of the Company’s Common Stock are initially offered for sale to the
public by the Company’s underwriters in the initial public offering of the
Company’s Common Stock pursuant to a registration statement filed with the SEC
under the Securities Act;  or

 

(e)                                  if
none of the foregoing is applicable, by the Committee in good faith.

 

“Family Member”
includes any of the following:

 

(a)                                  child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse,
sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law of the Participant,

 

16

 

including any such
person with such relationship to the Participant by adoption;

 

(b)                                 any
person (other than a tenant or employee) sharing the Participant’s household;

 

(c)                                  a
trust in which the persons in (a) and (b) have more than fifty
percent of the beneficial interest;

 

(d)                                 a
foundation in which the persons in (a) and (b) or the Participant
control the management of assets; or

 

(e)                                  any
other entity in which the persons in (a) and (b) or the Participant
own more than fifty percent of the voting interest.

 

“Insider” means an
officer or director of the Company or any other person whose transactions in
the Company’s Common Stock are subject to Section 16 of the Exchange Act.

 

“Option” means an
award of an option to purchase Shares pursuant to Section 5.

 

“Outside Director”
means a member of the Board who is not an employee of the Company or any Parent
or Subsidiary.

 

“Parent” means any
corporation (other than the Company) in an unbroken chain of corporations
ending with the Company if each of such corporations other than the Company
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.

 

“Participant” means a
person who receives an Award under this Plan.

 

“Performance Factors”
means the factors selected by the Committee from among the following measures
to determine whether the performance goals established by the Committee and
applicable to Awards have been satisfied:

 

(a)                                  Net
revenue and/or net revenue growth;

 

(b)                                 Earnings
before income taxes and amortization and/or earnings before income taxes and
amortization growth;

 

(c)                                  Operating
income and/or operating income growth;

 

(d)                                 Net
income and/or net income growth;

 

(e)                                  Earnings
per share and/or earnings per share growth;

 

(f)                                    Total
stockholder return and/or total stockholder return growth;

 

(g)                                 Return
on equity;

 

17

 

(h)                                 Operating
cash flow return on income;

 

(i)                                     Adjusted
operating cash flow return on income;

 

(j)                                     Economic
value added; and

 

(k)                                  Individual
confidential business objectives.

 

“Performance Period”
means the period of service determined by the Committee, not to exceed five
years, during which years of service or performance is to be measured for
Restricted Stock Awards Restricted Stock Units.

 

“Plan” means this
FormFactor, Inc. 2002 Equity Incentive Plan, as amended from time to time.

 

“Restricted Stock Award”
means an award of Shares pursuant to Section 7.

 

“Restricted Stock Unit” means a
bookkeeping entry representing the equivalent of one Share, as awarded under
the Plan pursuant to Section 8.

 

 “SEC” means the Securities and Exchange
Commission.

 

“Securities Act”
means the Securities Act of 1933, as amended.

 

“Shares” means shares
of the Company’s Common Stock reserved for issuance under this Plan, as
adjusted pursuant to Sections 2 and 18, and any successor security.

 

“Subsidiary” means any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

 

“Termination” or “Terminated” means,
for purposes of this Plan with respect to a Participant, that the Participant
has for any reason ceased to provide services as an employee, officer,
director, consultant, independent contractor, or advisor to the Company or a
Parent or Subsidiary of the Company.  An
employee will not be deemed to have ceased to provide services in the case of (i) sick
leave, (ii) military leave, or (iii) any other leave of absence
approved by the Committee, provided, that such leave is for a period of not
more than 90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute or unless provided otherwise pursuant to formal
policy adopted from time to time by the Company and issued and promulgated to
employees in writing.  In the case of any
employee on an approved leave of absence, the Committee may make such
provisions respecting suspension of vesting of the Award while on leave from
the employ of the Company or a Subsidiary as it may deem appropriate, except
that in no event may an Option be exercised after the expiration of the term
set forth in the Option agreement.  The
Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the “Termination Date”).

 

18

 

“Unvested Shares”
means “Unvested Shares” as defined in the Award Agreement.

 

“Vested Shares” means “Vested
Shares” as defined in the Award Agreement.

 

19

 

 

2002 EQUITY INCENTIVE PLAN

OUTSIDE
DIRECTOR STOCK OPTION AGREEMENT

 

FormFactor, Inc., a
Delaware corporation (the “Company”), hereby grants an option (this “Option”)
to the Optionee named below (“Optionee”) as of the Date of Grant set forth
below (the “Date of Grant”) pursuant to the Company’s 2002 Equity Incentive
Plan, as amended (the “Plan”) and this Stock Option Agreement (this
“Agreement”), which includes the Terms and Conditions (the “Terms and
Conditions”) set forth on Exhibit A hereto. Capitalized terms not defined
in this Agreement have the meaning ascribed to them in the Plan.

 

	
  Name of Optionee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Optionee’s Social Security
  #:

  	
  XXX-XX-           

  	
   

  
	
   

  	
   

  	
   

  
	
  Optionee’s Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Grant Number:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Number of Options Granted:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Option Exercise Price:

  	
  $

  
	
   

  	
   

  
	
  Vesting Schedule:

  	
  Provided the Optionee
  renders continuous service to the Company as a Director or a Consultant
  (“Service”), the Options will vest and become exercisable in thirty-six (36)
  equal monthly installments beginning                               ,
  such that the Options will vest in full upon completion of three
  (3) years of Board service.

  
	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
   

  
	
   

  	
   

  
	
  Type of Option Granted:

  	
  Non-Qualified Stock
  Option

  
					

 

The Company has signed this
Agreement effective as of the Date of Grant and has caused it to be executed in
duplicate by its duly authorized representative.

 

FORMFACTOR, INC.

 

MARIO RUSCEV

PRESIDENT & CEO

 

1

 

Exhibit A

 

STOCK OPTION AGREEMENT

2002 EQUITY INCENTIVE PLAN

TERMS AND CONDITIONS

 

This Option is subject to the
following Terms and Conditions and the terms and conditions of the Plan, which
are incorporated herein by reference. This Agreement and the Plan constitute
the entire agreement and understanding of the Company and the Optionee with
respect to this Option and supersede all prior understandings and agreements
with respect to such subject matter. If there is any discrepancy, conflict or
omission between this Agreement and the provisions of the Plan as interpreted
by the Committee, the provisions of the Plan shall apply.

 

1.   Grant of Option

 

The
Company hereby grants to Optionee this Option to purchase up to the total
number of shares of Common Stock of the Company (the “Shares”) at the Exercise
Price Per Share (the “Exercise Price”), each as set forth on the first page of
this Agreement, subject to the terms and conditions of this Agreement and the
Plan.

 

2.   Exercise Period

 

2.1  Vesting of Shares.  This Option is exercisable as it vests.  Subject to the terms and conditions of the
Plan and this Agreement, this Option shall vest and become exercisable as set
forth on the first page of this Agreement if Optionee has continuously
served as a director and/or consultant of the Company.

 

2.2  Acceleration of Vesting Upon a Corporate
Transaction.  In the event of a
Corporate Transaction (as defined in the Plan) the Shares shall vest and become
exercisable upon the terms and conditions of Section 9.5 of the Plan.

 

2.3  Acceleration of Vesting on Death or
Disability.  In the event Optionee
ceases to be either a member of the Board of Directors of the Company or a
consultant to the Company (“Board Member”) as a result of his or her death or
“permanent and total disability,” as such term is defined in Section 22(e)(3)
of the Code, then the Option and Shares subject to the Option shall become
vested and exercisable as to an additional number of Shares equal to the number
of Shares that would have vested and become exercisable during the twelve (12)
months following the date on which Optionee ceases to be a Board Member;  provided, however, such vested Option may be
exercised no later than twelve (12) months after the date Optionee ceases to be
a Board Member, but in any event no later than the Expiration Date.  The date on which Optionee ceases to be a
Board Member shall be referred to as the “Termination Date”

 

2.4  Expiration.  This Option expires on the Expiration Date
set forth on the first page of this Agreement and must be exercised, if at
all, on or before the earlier of the Expiration Date or the date on which this
Option is terminated in accordance with the provisions of this Section 2, Section 3
of this Agreement or Section 9 of the Plan.

 

3.   Termination

 

3.1  Termination for Any Reason Except Death or
Disability.  If Optionee ceases to be
a Board Member for any reason except Optionee’s death or Disability (as such
terms are defined in the Plan), then this Option, to the extent (and only to
the extent) that it is vested on the Termination Date in accordance with the
schedule set forth on the first page of this Agreement, may be exercised
by Optionee during the 

 

2

 

three (3) months
following the Termination Date, but in any event must be exercised no later
than the Expiration Date.

 

3.2  Termination Because of Death or Disability.  If Optionee ceases to be a Board Member due
to Optionee’s death or Disability (or Optionee dies within three (3) months
after Optionee ceases to be a Board Member for any reason except Optionee’s
Disability), then this Option, to the extent (and only to the extent) that it
is vested on the Termination Date in accordance with Section 2.3, may be
exercised by Optionee (or Optionee’s legal representative or authorized
assignee) during the twelve (12) months following the Termination Date, but in
any event must be exercised no later than the Expiration Date.

 

3.3  No Obligation or Right to Continue as
Board Member.  Nothing in the Plan or
this Agreement confers on Optionee any right or obligation to continue as a
Board Member or in any other relationship with the Company or any Parent or
Subsidiary of the Company (or any successor-in-interest to the Company), or
limits in any way the right of the Company or any Parent or Subsidiary of the
Company to terminate Optionee’s service or other relationship at any time, with
or without Cause.

 

4.   Manner of Exercise

 

4.1   Method of Payment.  In order to exercise this Option with respect
to all or any part of the Shares for which this Option is at the time
exercisable, Optionee (or any other person or persons exercising the Option)
must take the following actions:

 

a.     Pay the aggregate Exercise Price and taxes,
as applicable, for the purchased Shares in one or more of the following forms:

 

i.   cash or check which, in the Company’s sole
discretion, shall be made payable to a Company-designated brokerage firm or the
Company; or

 

ii.  as permitted by applicable law, through a
special sale and remittance procedure pursuant to which Optionee (or any other
person or persons exercising the Option) shall concurrently provide irrevocable
instructions (i) to a Company-designated brokerage firm (or in the case of
an executive officer or Board member of the Company, an Optionee-designated
brokerage firm) to effect the immediate sale of all or any part of the
purchased Shares and remit to the Company, out of the sale proceeds available
on the settlement date, sufficient funds to cover the aggregate Exercise Price
payable for the purchased Shares, plus, if applicable, the amount necessary to
satisfy the Company’s tax withholding obligations at the minimum statutory tax
withholding rates and (ii) to the Company to deliver the purchased Shares
directly to such brokerage firm in order to complete the sale transaction; or

 

iii. shares of the Company’s common stock held by
Optionee (or any other person or persons exercising the Option) valued at Fair
Market Value.

 

b.     Furnish to the Company appropriate
documentation that the person or persons exercising the Option (if other than
Optionee) have the right to exercise this Option.

 

c.     Make appropriate arrangements with the
Company (or Parent or Subsidiary employing or retaining Optionee) for the
satisfaction of all tax withholding requirements applicable to the Option
exercise.

 

4.2   Limitations on Exercise.  This Option may not be exercised (a) unless
such exercise is in compliance with all applicable federal and state securities
laws and with all applicable requirements of 

 

3

 

any stock
exchange on which the Company’s Common Stock may be listed at the time of such
issuance and (b) as to fewer than 100 Shares unless it is exercised as to
all Shares as to which this Option is then exercisable.  The Company is under no obligation to
register or qualify the Shares with the SEC, any state securities commission or
any stock exchange to effect such compliance. 
In no event may this Option be exercised for any fractional Shares.

 

4.3   Issuance of Shares.  As soon as practical after the exercise date,
the Company shall issue to or on behalf of Optionee (or any other person or
persons exercising this Option) the purchased Option Shares (as evidenced by an
appropriate entry on the books of the Company or a duly authorized transfer
agent of the Company), subject to the appropriate legends and/or stop transfer
instructions.

 

5.   Nontransferability of
Option and Shares

 

This
Option may not be transferred in any manner other than under the terms and
conditions of the Plan or by will or by the laws of descent and distribution
and may be exercised during the lifetime of Optionee only by Optionee. The
terms of this Option shall be binding upon the legal representatives and
authorized executors and assignees of Optionee.

 

6.   Tax Consequences

 

Optionee
should refer to the prospectus for the Plan for a description of the federal
tax consequences of exercising this Option and disposing of the Shares. A copy
of the Prospectus is available at the Human Resources/Benefits page of the
Company’s internal website, or upon request from the Company’s Stock
Administrator.

 

7.   Privileges of Stock
Ownership

 

Optionee
shall not have any of the rights of a stockholder with respect to any Shares
until the Shares are issued to Optionee.

 

8.   Notices

 

Any
notice required to be given or delivered to the Company under the terms of this
Agreement shall be in writing and addressed to the Corporate Secretary of the
Company at its principal corporate offices. Any notice required to be given or
delivered to Optionee shall be in writing and addressed to Optionee at the
address indicated on the first page of this Agreement or to such other
address as such party may designate in writing from time to time to the
Company. All notices shall be deemed to have been given or delivered upon:
personal delivery; three (3) days after deposit in the United States mail
by certified or registered mail (return receipt requested); one (1) business
day after deposit with any return receipt express courier (prepaid); or one (1) business
day after transmission by facsimile or email.

 

9.   Successors and Assigns

 

The
Company may assign any of its rights under this Agreement. This Agreement shall
be binding upon and inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer set forth herein, this
Agreement shall be binding upon Optionee and Optionee’s legal representatives
and authorized assignees.

 

10.   Further Instruments

 

The parties agree to execute such further instruments and to take such
further action as may be reasonably necessary to carry out the purposes and
intent of this Agreement.

 

4

 

11.   Governing Law

 

This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
California, without regard to that body of law pertaining to choice of law or
conflicts of law.

 

5

 

[GENERAL]

STOCK
OPTION AGREEMENT

2002
EQUITY INCENTIVE PLAN

TERMS
AND CONDITIONS

 

This Option is subject to the following Terms
and Conditions and the terms and conditions of the Plan, which are incorporated
herein by reference. This Agreement and the Plan constitute the entire
agreement and understanding of the Company and the Optionee with respect to
this Option and supersede all prior understandings and agreements with respect
to such subject matter.  If there is any
discrepancy, conflict or omission between this Agreement and the provisions of
the Plan as interpreted by the Committee, the provisions of the Plan shall
apply.

 

1.                                       Grant of Option

 

The
Company hereby grants to Optionee this Option to purchase up to the total
number of shares of Common Stock of the Company (the “Shares”)
at the Exercise Price Per Share (the “Exercise Price”),
each as set forth on the first page of this Agreement, subject to the
terms and conditions of this Agreement and the Plan.  If designated as an Incentive Stock Option, this
Option is intended to qualify to the extent permitted as an “incentive stock
option” (“ISO”) within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the “Code”).

 

2.                                       Exercise Period

 

2.1       Vesting of Shares.  This Option is exercisable as it vests.  Subject to the terms and conditions of the
Plan and this Agreement, this Option shall vest and become exercisable  as set forth on the first page of
this Agreement if Optionee has continuously provided services to the Company,
or any Parent or Subsidiary of the Company.

 

2.2       Acceleration of Vesting in
Certain Circumstances Following a Corporate Transaction.  In addition to the vesting provided herein,
the Option and Shares subject to this Option shall become vested and
exercisable immediately prior to the occurrence of a Non-Justifiable
Termination (as defined below) occurring during the period beginning on the
date of consummation of a Corporate Transaction (as defined in the Plan) and
ending twelve (12) months thereafter, as to an additional number of Shares
equal to the number of Shares that would have vested and become exercisable
during the twelve (12) months following the date of such Non-Justifiable
Termination (which accelerated vesting and exercisability is referred to herein
as the “Corporate
Transaction Vesting”).  “Non-Justifiable Termination”
means any Termination by the Company, or any Parent or Subsidiary of the
Company or the successor-in-interest to the Company following a Corporate
Transaction, other than for Cause (as defined below).  “Cause” (for purposes of this paragraph only)
means (i) any willful participation by Optionee in acts of either material
fraud or material dishonesty against the Company or any Subsidiary or Parent of
the Company or the successor-in-interest to the Company following a Corporate
Transaction; (ii) any indictment or conviction of Optionee of any felony
(excluding drunk driving); (iii) any willful act of gross misconduct by
Optionee which is materially and demonstrably injurious to the Company or any
Subsidiary or Parent of the Company or the successor-in-interest to the Company
following a Corporate Transaction; or (iv) the death or Disability of
Optionee.  Notwithstanding anything to
the contrary set forth in this Agreement, if a Corporate Transaction Vesting
occurs by reason of a Non-Justifiable Termination, then this Option may be
exercised by Optionee up to, but no later than, three (3) months after the
date of such Non-Justifiable Termination, but in any event no later than the
Expiration Date.

 

1

 

2.3       Acceleration of Vesting on
Death or Disability.  In the
event of Termination of Optionee as a result of his or her death or “permanent
and total disability,” as such term is defined in Section 22(e)(3) of
the Code, then, in addition to the vesting provided herein, the Option and
Shares subject to the Option shall become vested and exercisable as to an
additional number of Shares equal to the number of Shares that would have
vested and become exercisable during the twelve (12) months following the
Termination Date of Optionee; provided, however, such vested Option may be
exercised no later than twelve (12) months after the Termination Date, but in
any event no later than the Expiration Date.

 

2.4       Expiration.  This Option expires on the Expiration Date
set forth on the first page of this Agreement and must be exercised, if at
all, on or before the earlier of the Expiration Date or the date on which this
Option is terminated in accordance with the provisions of this Section 2, Section 3
of this Agreement or Section 18 of the Plan.

 

2.5       Additional Terms Applicable
to Incentive Stock Options.  In the event this Option is designated an ISO
on the first page of this Agreement, the following terms and conditions
shall also apply to the Option:

 

a.               This Option shall cease to qualify for
favorable tax treatment as an ISO if (and to the extent) this Option is
exercised for one or more Option Shares: (i) more than three (3) months
after the date Optionee ceases to be employed by the Company for any reason
other than death or Disability or (ii) more than twelve (12) months after
the date Optionee ceases to be employed by the Company by reason of Disability.

 

b.              If Optionee sells or otherwise disposes
of any of the Shares acquired pursuant to the ISO on or before the later of (i) the
date two (2) years after the Date of Grant, and (ii) the date one (1) year
after transfer of such Shares to Optionee upon exercise of this Option, then
Optionee shall immediately notify the Company in writing of such disposition.

 

3.                                       Termination

 

3.1       Termination for Any Reason Except Death,
Disability or Cause.  If Optionee
is Terminated for any reason except Optionee’s death, Disability or Cause (as
such terms are defined in the Plan), then this Option, to the extent (and only
to the extent) that it is vested on the Termination Date in accordance with the
schedule set forth on the first page of this Agreement, may be exercised
by Optionee during the three (3) months following the Termination Date,
but in any event must be exercised no later than the Expiration Date.

 

3.2       Termination Because of Death or Disability. If Optionee is Terminated because of
Optionee’s death or Disability (or Optionee dies within three (3) months
after Termination for any reason except Cause or Disability), then this Option,
to the extent (and only to the extent) that it is vested on the Termination
Date in accordance with the schedule set forth on the first page of this
Agreement, may be exercised by Optionee (or Optionee’s legal representative or
authorized assignee) during the twelve (12) months following the Termination
Date, but in any event must be exercised no later than the Expiration
Date.  Any exercise occurring more than
three months following the Termination Date (when the Termination is for any
reason other than Optionee’s death or disability (as defined in the Code)),
shall be deemed to be the exercise of a nonqualified stock option.

 

3.3       Termination for Cause. 
If Optionee is Terminated for Cause, then this Option, to the extent
(and only to the extent) that it is vested on the Termination Date in
accordance with the schedule set forth on the first page of this
Agreement, may be exercised by Optionee no later than one (1) month after
the Termination Date, but in any event must be exercised no later than the
Expiration Date.

 

2

 

3.4       No Obligation to Employ.  Nothing in the Plan or this Agreement confers
on Optionee any right to continue in the employ of, or other relationship with,
the Company or any Parent or Subsidiary of the Company (or any
successor-in-interest to the Company), or limits in any way the right of the
Company or any Parent or Subsidiary of the Company to terminate Optionee’s
employment or other relationship at any time, with or without Cause.

 

4.                                       Manner of Exercise

 

4.1       Method of Payment.  In order to exercise this Option with respect
to all or any part of the Shares for which this Option is at the time
exercisable, Optionee (or any other person or persons exercising the Option)
must take the following actions:

 

a.               Pay the aggregate Exercise Price  for the purchased Shares in one or more of
the following forms:

 

i.      cash or check which, in the Company’s
sole discretion, shall be made payable to a Company-designated brokerage firm
or the Company;

 

ii.   as permitted by applicable law, through a
special sale and remittance procedure pursuant to which Optionee (or any other
person or persons exercising the Option) shall concurrently provide irrevocable
written instructions (i) to a Company-designated brokerage firm (or in the
case of an executive officer or Board member of the Company, an
Optionee-designated brokerage firm) to effect the immediate sale of the
purchased Shares and remit to the Company, out of the sale proceeds available
on the settlement date, sufficient funds to cover the aggregate Exercise Price
payable for the purchased Shares, plus, if applicable, the amount necessary to
satisfy the Company’s tax withholding obligations at the minimum statutory tax withholding
rates and (ii) to the Company to deliver the certificates for the
purchased Shares directly to such brokerage firm in order to complete the sale
transaction; or

 

iii. shares of the Company’s common stock held by
Optionee (or any other person or persons exercising the Option) valued at Fair
Market Value.

 

b.              Furnish to the Company appropriate
documentation that the person or persons exercising the Option (if other than
Optionee) have the right to exercise this Option.

 

c.               Make appropriate arrangement with the
Company (or Parent or Subsidiary employing or retaining Optionee) for the
satisfaction of all tax withholding requirements applicable to the Option
exercise.

 

4.2       Limitations on Exercise.  This Option may not be exercised (a) unless
such exercise is in compliance with all applicable federal and state securities
laws and with all applicable requirements of any stock exchange on which the
Company’s Common Stock may be listed at the time of such issuance and (b) as
to fewer than 100 Shares unless it is exercised as to all Shares as to which
this Option is then exercisable.  The
Company is under no obligation to register or qualify the Shares with the SEC,
any state securities commission or any stock exchange to effect such compliance.  In no event may this Option be exercised for
any fractional Shares.

 

4.3       Issuance of Shares.  As soon as practical after the exercise date,
the Company shall issue to or on behalf of Optionee (or any other person or
persons exercising this Option) the purchased Option Shares (as evidenced by an
appropriate entry on the books of the Company or a duly authorized transfer
agent of the Company), subject to the appropriate legends and/or stop transfer
instructions.

 

3

 

4.4           Optionee Indebtedness.  Notwithstanding any other provisions of the
Plan, this Agreement or any other agreement to the contrary, if at the time
this Option is exercised, Optionee is indebted to the Company (or any Parent or
Subsidiary) for any reason, the following actions shall be taken, as deemed
appropriate by the Committee:

 

a.               any Shares to be issued upon such
exercise shall automatically be pledged against Optionee’s outstanding
indebtedness; and

 

b.              if this Option is exercised in accordance
with subparagraph 4.1(a)(ii) above, the after tax proceeds of the sale of
Optionee’s Shares shall automatically be applied to the outstanding balance of
Optionee’s indebtedness.

 

5.                                       Nontransferability of Option
and Shares

 

This Option may not be transferred in any manner
other than under the terms and conditions of the Plan or by will or by the laws
of descent and distribution and may be exercised during the lifetime of
Optionee only by Optionee.  The terms of
this Option shall be binding upon the legal representatives and authorized
executors and assignees of Optionee.

 

6.                                       Tax Consequences

 

Optionee should refer to the prospectus for the Plan
for a description of the federal tax consequences of exercising this Option  and disposing of the Shares.  A copy
of the Prospectus is available at the Finance/Stock Administration page of
the Company’s internal website, or upon request from the Company’s Stock
Administrator.

 

7.                                       Privileges of Stock Ownership

 

Optionee
shall not have any of the rights of a stockholder with respect to any Shares
until the Shares are issued to Optionee.

 

8.                                       Notices

 

Any
notice required to be given or delivered to the Company under the terms of this
Agreement shall be in writing and addressed to the Corporate Secretary of the
Company at its principal corporate offices. 
Any notice required to be given or delivered to Optionee shall be in
writing and addressed to Optionee at the address indicated on the first page of
this Agreement or to such other address as such party may designate in writing
from time to time to the Company.  All
notices shall be deemed to have been given or delivered upon:  personal delivery; three (3) days after
deposit in the United States mail by certified or registered mail (return
receipt requested); one (1) business day after deposit with any return
receipt express courier (prepaid); or one (1) business day after
transmission by facsimile or email.

 

9.                                       Successors and Assigns

 

The
Company may assign any of its rights under this Agreement.  This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer set
forth herein, this Agreement shall be binding upon Optionee and Optionee’s
legal representatives and authorized assignees.

 

4

 

10.                                 Further
Instruments

 

The
parties agree to execute such further instruments and to take such further
action as may be reasonably necessary to carry out the purposes and intent of
this Agreement.

 

11.                                 Governing Law

 

This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of California, without regard to that body of law pertaining
to choice of law or conflicts of law.

 

5

 

[GENERAL]

 

	
  

  	
   

  

 

FORMFACTOR, INC.

2002 EQUITY INCENTIVE PLAN

RESTRICTED STOCK UNIT AGREEMENT

TERMS AND CONDITIONS

 

This
Award is subject to the following Terms and Conditions and the terms and
conditions of the Plan, which are incorporated herein by reference. The
Participant and the Company agree to execute such further instruments and to
take such further action as may reasonably be necessary to carry out the intent
of this Restricted Stock Unit Agreement (the “Agreement”).

 

This Agreement and the Plan constitute the entire agreement and
understanding of the Company and the Participant with respect to this Award and
supersede all prior understandings and agreements with respect to such subject
matter. If there is any discrepancy, conflict or omission between this
Agreement and the provisions of the Plan as interpreted by the Committee, the
provisions of the Plan shall apply. Capitalized terms not defined in this
Agreement have the meaning ascribed to them in the Plan.

 

1.                                       EFFECT OF TERMINATION OF EMPLOYMENT. If the Participant’s
employment is terminated by the Participant or by the Company before an
applicable vesting date for any reason, all of the Restricted Stock Units
(“RSUs”) which have not yet vested shall be forfeited without consideration.

 

2.                                       SETTLEMENT. In accordance with the Plan, to the extent an
RSU becomes vested, and subject to the Participant’s satisfaction of any tax
withholding obligations as discussed below, each vested RSU will be settled in
Shares on the applicable vesting date(s) (or the first market trading day
during an open trading window thereafter if the vesting date is not on a market
trading day during an open trading window) in exchange for such RSU. Issuance
of Shares shall be in complete satisfaction of such vested RSUs. Such settled
RSUs shall be immediately cancelled and no longer outstanding and you shall
have no further rights or entitlements related to those settled RSUs.

 

3.                                       RESTRICTIONS ON ISSUANCE. The Company will not issue any
Shares if the issuance of such Shares at that time would violate any law or
regulation.

 

4.                                       TAX WITHHOLDING OBLIGATIONS. The Participant shall satisfy his or her withholding tax
obligations, but no more than the minimum statutory withholding amounts, in
such a manner determined by the Committee in its sole discretion which may
include the withholding or selling all or a portion of any Shares that
otherwise would be issued to the Participant.

 

5.                                       TAX ADVICE. The Participant represents, warrants and
acknowledges that the Company has made no warranties or representations to the
Participant with respect to the income tax consequences of the transactions
contemplated by this Agreement, and the Participant is in no manner relying on
the Company or the Company’s representatives for an assessment of such tax
consequences. THE PARTICIPANT UNDERSTANDS THAT THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. THE PARTICIPANT SHOULD CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING ANY RESTRICTED STOCK UNITS. NOTHING STATED HEREIN IS 

 

1

 

INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED,
FOR THE PURPOSE OF AVOIDING TAXPAYER PENALTIES.

 

6.                                       NON-TRANSFERABILITY. The RSUs may not be anticipated,
assigned, attached, garnished, optioned, transferred or made subject to any
creditor’s process, whether voluntarily or involuntarily or by operation of law
other than under the terms and conditions of the Plan. The terms of the RSUs
shall be binding upon the legal representatives and authorized executors and
assignees of Participant.

 

7.                                       RESTRICTION OF TRANSFER. Regardless of whether the transfer
or issuance of the Shares to be issued pursuant to the vesting of RSUs has been
registered under the Securities Act or has been registered or qualified under
the securities laws of any state, the Company may impose additional
restrictions upon the sale, pledge, or other transfer of the Shares (including
the placement of appropriate legends on stock certificates and the issuance of
stop-transfer instructions to the Company’s transfer agent) if, in the judgment
of the Company and the Company’s counsel, such restrictions are necessary in
order to achieve compliance with the provisions of the Securities Act, the
securities laws of any state, or any other law.

 

8.                                       RIGHTS AS SHAREHOLDER. The Participant holding RSUs shall
have no rights other than those of a general creditor of the Company. Subject
to the terms of this Agreement, the Participant holding outstanding RSUs has
none of the rights and privileges of a shareholder of the Company, including no
right to vote or to receive dividends (if any). Subject to the terms and
conditions of this Agreement, RSUs create no fiduciary duty of the Company to
the Participant and only represent an unfunded and unsecured contractual
obligation of the Company. The RSUs shall not be treated as property or as a
trust fund of any kind.

 

9.                                       ADMINISTRATION. The Committee shall have the power to
interpret the Plan and this Agreement and to adopt such rules for the
administration, interpretation, and application of the Plan as are consistent
therewith and to interpret or revoke any such rules. All actions taken and all
interpretations and determinations made by the Committee shall be final and
binding upon the Participant, the Company, and all other interested persons. No
member of the Committee shall be personally liable for any action,
determination, or interpretation made in good faith with respect to the Plan or
this Agreement.

 

10.                                 EFFECT ON OTHER EMPLOYEE BENEFIT PLANS. The value of the
RSUs awarded pursuant to this Agreement shall not be included as compensation,
earnings, salaries, or other similar terms used when calculating the
Participant’s benefits under any employee benefit plan sponsored by the Company
except as such plan otherwise expressly provides. The Company expressly
reserves its rights to amend, modify, or terminate any of the Company’s
employee benefit plans.

 

2

 

11.                                 NO EMPLOYMENT RIGHTS. The award of the RSUs pursuant to this
Agreement shall not give the Participant any right to remain employed by the
Company or a Subsidiary. The Participant agrees that the Participants rights
hereunder shall be subject to set-off by the Company for any valid debts the
Participant owes the Company.

 

12.                                 NOTICES. Any notice to be given under the terms of this
Agreement to the Company shall be addressed to the Company in care of its
Secretary. Any notice to be given to the Participant shall be addressed to the
Participant at the address listed in the employer’s records. By a notice given
pursuant to this Section, either party may designate a different address for
notices. Any notice shall have been deemed given when actually delivered.

 

13.                                 SEVERABILITY. If all or any part of this Agreement or the
Plan is declared by any court or governmental authority to be unlawful or
invalid, such unlawfulness or invalidity shall not invalidate any portion of
this Agreement or the Plan not declared to be unlawful or invalid. Any Section of
this Agreement (or part of such a Section) so declared to be unlawful or
invalid shall, if possible, be construed in a manner which will give effect to
the terms of such Section or part of a Section to the fullest extent
possible while remaining lawful and valid.

 

14.                                 CONSTRUCTION. The RSUs are being issued pursuant to the Plan
and are subject to the terms of the Plan. A copy of the Plan has been made
available to the Participant, and additional copies of the Plan are available
upon request during normal business hours at the principal executive offices of
the Company. To the extent that any provision of this Agreement violates or is
inconsistent with an express provision of the Plan, the Plan provision shall
govern and any inconsistent provision in this Agreement shall be of no force or
effect.

 

15.                                 ADJUSTMENTS. In the event of a stock split, a stock dividend
or a similar change in the Company stock, the number of outstanding RSUs
covered under this Agreement may be adjusted pursuant to the Plan.

 

16.                                 LIABILITY. The Company (or members of the Board or Committee)
shall not be liable to the Participant or other persons as to: (i) the
non-issuance or sale of Shares as to which the Company has been unable to
obtain from any regulatory body having jurisdiction the authority deemed by the
Company’s counsel to be necessary to the lawful issuance and sale of any Shares
hereunder; and (ii) any unexpected or adverse tax consequence realized by
the Participant or other person due to the award, receipt, or settlement of
RSUs or Shares under this Agreement.

 

17.                                 MISCELLANEOUS.

 

17.1                           This
Agreement shall be subject to all applicable laws, rules, and regulations, and
to such approvals by any governmental agencies or national securities exchanges
as may be required.

 

17.2                           The
Company may assign any of its rights under this Agreement. This Agreement shall
be binding upon and inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer set forth herein, this
Agreement shall be binding upon the Participant and Participant’s legal representatives
and authorized assignees.

 

17.3                           To
the extent not preempted by federal law, this Agreement shall be governed by,
and construed in accordance with, the laws of the State of California.

 

3

 

 

2002 EQUITY INCENTIVE PLAN

OUTSIDE DIRECTOR RESTRICED STOCK UNIT AGREEMENT

(OUTSIDE DIRECTOR *[INITIAL] OR [ANNUAL] EQUITY AWARD)

 

FormFactor, Inc., a
Delaware corporation (the “Company”), hereby awards Restricted Stock Units
(“RSUs”) to the Participant named below as of the Date of Award set forth below
pursuant to the Company’s 2002 Equity Incentive Plan, as amended (the “Plan”).
The terms and conditions of the Award are set forth in this cover sheet, in the
attached Restricted Stock Unit Agreement (the “Agreement”) and in the Plan.
Capitalized terms not defined in this Agreement have the meaning ascribed to
them in the Plan.

 

	
  Name
  of Participant:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Participant’s Social
  Security:

  	
   

  	
  XXX-XX-       

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Participant’s Address:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Award Number:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date of Award:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Number of Restricted Stock
  Units Awarded:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Amount Paid by Participant
  for the RSUs Awarded:

  	
   

  	
  $0.001

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Vesting Schedule:

  	
   

  	
  Provided the Participant
  renders continuous service to the Company as a Director or a Consultant
  (“Service”), the RSUs will vest in [thirty-six (36)] OR [twelve (12)]*
  equal monthly installments beginning                             ,
  such that the RSUs will vest in full upon completion of [three (3) years] OR
  [one (1) year]* of Board Service.

  
								

 

The Company has signed this
Agreement effective as of the Date of Award and has caused it to be executed in
duplicate by its duly authorized representative.

 

FORMFACTOR, INC.

 

MARIO RUSCEV

PRESIDENT
& CEO

 

* Select one depending whether initial
or annual equity award.

 

1

 

 

FORMFACTOR, INC.

2002 EQUITY INCENTIVE PLAN

OUTSIDE DIRECTOR RESTRICTED STOCK UNIT AGREEMENT

TERMS AND CONDITIONS

 

This
Award is subject to the following Terms and Conditions and the terms and
conditions of the Plan, which are incorporated herein by reference. The
Participant and the Company agree to execute such further instruments and to
take such further action as may reasonably be necessary to carry out the intent
of this Agreement.

 

This Agreement, the Plan and the preceding cover sheet constitute the
entire agreement and understanding of the Company and the Participant with
respect to this Award and supersede all prior understandings and agreements
with respect to such subject matter. If there is any discrepancy, conflict or
omission between this Agreement and the provisions of the Plan as interpreted
by the Committee, the provisions of the Plan shall apply.

 

1.                                       EFFECT OF TERMINATION OF SERVICE. If the Participant’s
Service is terminated by the Participant or by the Company before an applicable
vesting date for any reason, all of the RSUs which have not yet vested shall be
forfeited without consideration.

 

2.                                       SETTLEMENT. To the extent an RSU becomes vested and the Participant
has not elected to defer settlement of the RSU, each vested RSU will be settled
in Shares in exchange for such RSU on the earlier of: (i) the date on
which the RSUs subject to this Agreement are fully vested, or (ii) the
Participant’s separation from service within the meaning of Code Section 409A
(“Separation from Service”) (or the first market trading day during an open
trading window thereafter if either the date on which the RSUs subject to this
Agreement are fully vested or the Participant’s Separation from Service is not
on a market trading day during an open trading window).  To the extent an RSU becomes vested and the
Participant has elected to defer settlement of the RSU, each vested RSU will be
settled in Shares upon the Participant’s Separation
from Service (or the first market trading day during an open trading window
thereafter if the Participant’s Separation from Service is not on a market
trading day during an open trading window) in exchange for such RSU.  Issuance of Shares shall be in
complete satisfaction of such vested RSUs. Such settled RSUs shall be
immediately cancelled and no longer outstanding and you shall have no further
rights or entitlements related to those settled RSUs. Notwithstanding the
foregoing, to extent the RSUs are settled upon the Participant’s Separation
from Service, such settlement shall be delayed to the extent required under Code
Section 409A, until the Company’s first business day following the six-month
anniversary of his or her Separation from Service.

 

3.                                       RESTRICTIONS ON ISSUANCE. The Company will not issue any
Shares if the issuance of such Shares at that time would violate any law or
regulation.

 

4.                                       TAX ADVICE. The Participant represents, warrants and
acknowledges that the Company has made no warranties or representations to the
Participant with respect to the income tax consequences of the transactions
contemplated by this Agreement, and the Participant is in no manner relying on
the Company or the Company’s representatives for an assessment of such tax
consequences. THE PARTICIPANT UNDERSTANDS THAT THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. THE PARTICIPANT SHOULD CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING ANY RESTRICTED STOCK UNITS. NOTHING STATED HEREIN IS INTENDED OR
WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING TAXPAYER
PENALTIES.

 

1

 

5.                                       NON-TRANSFERABILITY. The RSUs may not be anticipated,
assigned, attached, garnished, optioned, transferred or made subject to any creditor’s
process, whether voluntarily or involuntarily or by operation of law other than
under the terms and conditions of the Plan. The terms of the RSUs shall be
binding upon the legal representatives and authorized executors and assignees
of Participant.

 

6.                                       RESTRICTION OF TRANSFER. Regardless of whether the transfer
or issuance of the Shares to be issued pursuant to the vesting of RSUs has been
registered under the Securities Act or has been registered or qualified under
the securities laws of any state, the Company may impose additional
restrictions upon the sale, pledge, or other transfer of the Shares (including
the placement of appropriate legends on stock certificates and the issuance of
stop-transfer instructions to the Company’s transfer agent) if, in the judgment
of the Company and the Company’s counsel, such restrictions are necessary in
order to achieve compliance with the provisions of the Securities Act, the
securities laws of any state, or any other law.

 

7.                                       RIGHTS AS SHAREHOLDER. The Participant holding RSUs shall
have no rights other than those of a general creditor of the Company. Subject
to the terms of this Agreement, the Participant holding outstanding RSUs has
none of the rights and privileges of a shareholder of the Company, including no
right to vote or to receive dividends (if any). Subject to the terms and
conditions of this Agreement, RSUs create no fiduciary duty of the Company to
the Participant and only represent an unfunded and unsecured contractual
obligation of the Company. The RSUs shall not be treated as property or as a
trust fund of any kind.

 

8.                                       ADMINISTRATION. The Committee shall have the power to
interpret the Plan and this Agreement and to adopt such rules for the
administration, interpretation, and application of the Plan as are consistent
therewith and to interpret or revoke any such rules. All actions taken and all
interpretations and determinations made by the Committee shall be final and
binding upon the Participant, the Company, and all other interested persons. No
member of the Committee shall be personally liable for any action,
determination, or interpretation made in good faith with respect to the Plan or
this Agreement.

 

9.                                       NOTICES. Any notice to be given under the terms of this
Agreement to the Company shall be addressed to the Company in care of its
Secretary. Any notice to be given to the Participant shall be addressed to the
Participant at the address listed in the Company’s records. By a notice given
pursuant to this Section, either party may designate a different address for
notices. Any notice shall have been deemed given when actually delivered.

 

10.                                 SEVERABILITY. If all or any part of this Agreement or the
Plan is declared by any court or governmental authority to be unlawful or
invalid, such unlawfulness or invalidity shall not invalidate any portion of
this Agreement or the Plan not declared to be unlawful or invalid. Any Section of
this Agreement (or part of such a Section) so declared to be unlawful or
invalid shall, if possible, be construed in a manner which will give effect to
the terms of such Section or part of a Section to the fullest extent
possible while remaining lawful and valid.

 

11.                                 CONSTRUCTION. The RSUs are being issued pursuant to the Plan
and are subject to the terms of the Plan. A copy of the Plan has been made
available to the Participant, and additional copies of the Plan are available
upon request during normal business hours at the principal executive offices of
the Company. To the extent that any provision of this Agreement violates or is
inconsistent with an express provision of the Plan, the Plan provision shall
govern and any inconsistent provision in this Agreement shall be of no force or
effect.

 

12.                                 ADJUSTMENTS. In the event of a stock split, a stock dividend
or a similar change in the Company stock, the number of outstanding RSUs
covered under this Agreement may be adjusted pursuant to the Plan.

 

2

 

13.                                 LIABILITY. The Company (or members of the Board or
Committee) shall not be liable to the Participant or other persons as to: (i) the
non-issuance or sale of Shares as to which the Company has been unable to
obtain from any regulatory body having jurisdiction the authority deemed by the
Company’s counsel to be necessary to the lawful issuance and sale of any Shares
hereunder; and (ii) any unexpected or adverse tax consequence realized by
the Participant or other person due to the award, receipt, or settlement of
RSUs or Shares under this Agreement.

 

14.                                 MISCELLANEOUS.

 

14.1                           This
Agreement shall be subject to all applicable laws, rules, and regulations, and
to such approvals by any governmental agencies or national securities exchanges
as may be required.

 

14.2                           The
Company may assign any of its rights under this Agreement. This Agreement shall
be binding upon and inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer set forth herein, this
Agreement shall be binding upon the Participant and Participant’s legal
representatives and authorized assignees.

 

14.3                           To
the extent not preempted by federal law, this Agreement shall be governed by,
and construed in accordance with, the laws of the State of California.

 

3

 

OUTSIDE DIRECTOR ELECTION UNDER THE

FORMFACTOR, INC. 2002 EQUITY INCENTIVE PLAN

INITIAL EQUITY AWARD

 

I,
                                                                ,
being a prospective new non-employee member of the Board of Directors of
FormFactor, Inc. (the “Company”) hereby irrevocably elect to defer the
settlement of the restricted stock unit portion of my initial equity award to
be granted under the 2002 Equity Incentive Plan on [                ], subject to and following my
appointment to the Board of Directors of the Company.

 

I
understand that this election will be effective only if received by Hank Feir ([insert e-mail address] (e-mail) or [insert fax number] (fax))
before [                       ].

 

I
understand that if I elect to defer the settlement of my initial restricted
stock unit grant, any vested portion of my stock unit grant will be settled in
shares of the Company’s common stock on, or as soon as practicable after, my “separation
from service” within the meaning of Section 409A of the Internal Revenue
Code (which generally will be the date my service as a member of the Board of
Directors of the Company terminates).  I
further understand that my receipt of shares of the Company’s common stock
pursuant to any stock unit grant will be taxed as ordinary income to me based
on the value of the shares on the date the stock unit grant is settled and I
receive shares of the Company’s common stock.

 

I
further understand that the election to defer settlement of the restricted
stock unit portion of my initial equity award is subject to approval of the
Company’s Board of Directors.  If such
approval is not obtained, I understand that this election shall be null and
void.

 

 

	
   

  	
   

  	
   

  
	
  Signature of Non-Employee
  Director

  	
   

  	
  Date

  

 

 

OUTSIDE DIRECTOR ELECTION UNDER THE

FORMFACTOR, INC. 2002 EQUITY INCENTIVE PLAN

ANNUAL EQUITY AWARD

 

I,
                                                                ,
being a non-employee member of the Board of Directors of FormFactor, Inc.
(the “Company”) hereby irrevocably elect to defer the settlement of my total
annual restricted stock unit award to be granted under the 2002 Equity
Incentive Plan (the “Plan”) on [        ]
immediately following the Company’s [      
] Annual Meeting of Stockholders.

 

I
understand that this election will be effective only if received by Hank Feir ([insert e-mail address] (e-mail) or [insert fax number] (fax))
before [                     ].

 

I
understand that if I elect to defer the settlement of my annual restricted
stock unit grant, any vested portion of my stock unit grant will be settled in
shares of the Company’s common stock on, or as soon as practicable after, my “separation
from service” within the meaning of Section 409A of the Internal Revenue
Code (which generally will be the date my service as a member of the Board of
Directors of the Company terminates).  I
further understand that my receipt of shares of the Company’s common stock
pursuant to any stock unit grant will be taxed as ordinary income to me based
on the value of the shares on the date the stock unit grant is settled and I
receive shares of the Company’s common stock.

 

I
further understand that the election to defer settlement of my total annual
restricted stock unit award is subject to approval of the amended and restated
terms of the Plan by the Company’s Board of Directors providing for the grant
of restricted stock unit awards.  If such
approval is not obtained, I understand that this election shall be null and
void.

 

 

	
   

  	
   

  	
   

  
	
  Signature of Non-Employee
  Director

  	
   

  	
  Date

  

 

 

NON-EMPLOYEE
DIRECTOR ELECTION UNDER 

THE FORMFACTOR, INC.  

2002 EQUITY INCENTIVE PLAN

ANNUAL RETAINER

 

I,
                                                                ,
being a non-employee member of the Board of Directors (“Board”) of FormFactor, Inc.
(the “Company”) hereby elect to receive (complete either (a) or (b) below:

 

(a)           %
(insert percentage between 25% and 100%) of my total regular annual retainer,
including any additional retainer paid in connection with service on any
committee of the Board (the “Retainer”) for the next year of Board service
commencing at the Company’s next Annual Meeting of Stockholders;

 

(b)           $                
(insert dollar amount between 25% and 100% of Retainer) of my Retainer for the
next year of Board service commencing at the Company’s next Annual Meeting of
Stockholders;

 

in the form of (check (i) or (ii) below,
as applicable):

 

(i)            a fully vested deferred stock unit grant which will be
granted under the Company’s 2002 Equity Incentive Plan (the “Plan”) on the date
the Retainer is paid based on the closing value of the Company’s common stock (“Common
Stock”) on that date.

 

(ii)           a fully vested stock grant which will be granted under the
Plan on the date the Retainer is paid based on the closing value of the Common
Stock on that date.

 

I understand that I may not elect to receive less
than 25% of my Retainer in a fully vested deferred stock unit grant or a fully
vested stock grant.  I further understand
that I will receive my Retainer in the form of cash to the extent that I do not
elect to receive it in the form of a fully vested deferred stock unit or fully
vested stock grant under the Plan.

 

I understand that my Retainer payment and deferral
elections above will be effective only if received by Hank Feir ([insert e-mail address] (e-mail)
or [insert fax number] (fax)) before [                       ].

 

I understand that any fully vested deferred stock
unit grant I elect to receive will be settled in Common Stock on, or as soon as
practicable after, my “separation from service” within the meaning of Section 409A
of the Internal Revenue Code (which generally will be the date my service as a
member of the Board of the Company terminates). 
I further understand that my receipt of Common Stock pursuant to any
fully vested deferred stock unit grant will be taxed as ordinary income to me
based on the value on the date of such settlement and receipt.

 

I understand that, if I elect to receive a fully
vested stock grant, I will receive the Common Stock representing any such fully
vested stock grant on, or as soon as practicable after, the date of the Company’s
Annual Meeting of Stockholders and that my stock grant receipt will be taxed as
ordinary income to me based on the value of such Common Stock on the date of
grant.

 

 

	
   

  	
   

  	
   

  
	
  Signature of Non-Employee
  Director

  	
   

  	
  Date

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