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2004 Equity Incentive Plan

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EXHIBIT 10.2


LSI LOGIC STORAGE SYSTEMS, INC.


2004 EQUITY INCENTIVE PLAN


(EFFECTIVE FEBRUARY 12, 2004)


TABLE OF CONTENTS


PAGE
---- SECTION 1 Background and Purpose...................................... 1 1.1 Background and Effective Date............................... 1 1.2 Purpose of the Plan......................................... 1 SECTION 2 Definitions................................................. 1 2.1 "1934 Act".................................................. 1 2.2 "Affiliate"................................................. 1 2.3 "Affiliated SAR"............................................ 1 2.4 "Award"..................................................... 1 2.5 "Award Agreement"........................................... 1 2.6 "Board" or "Board of Directors"............................. 1 2.7 "Cash Flow"................................................. 1 2.8 "Code"...................................................... 1 2.9 "Committee"................................................. 1 2.10 "Company"................................................... 1 2.11 "Director".................................................. 2 2.12 "Disability"................................................ 2 2.13 "Earnings Per Share"........................................ 2 2.14 "Employee".................................................. 2 2.15 "Exchange Program".......................................... 2 2.16 "Exercise Price"............................................ 2 2.17 "Fair Market Value"......................................... 2 2.18 "Fiscal Year"............................................... 2 2.19 "Freestanding SAR".......................................... 2 2.20 "Grant Date"................................................ 2 2.21 "Incentive Stock Option".................................... 2 2.22 "Nonemployee Director"...................................... 2 2.23 "Nonqualified Stock Option"................................. 2 2.24 "Option".................................................... 2 2.25 "Parent".................................................... 2 2.26 "Participant"............................................... 2 2.27 "Performance Goals"......................................... 2 2.28 "Performance Share"......................................... 2 2.29 "Performance Unit".......................................... 3 2.30 "Period of Restriction"..................................... 3 2.31 "Plan"...................................................... 3 2.32 "Profit After Tax".......................................... 3 2.33 "Profit Before Tax"......................................... 3 2.34 "Restricted Stock".......................................... 3 2.35 "Retirement"................................................ 3 2.36 "Return on Capital"......................................... 3 2.37 "Return on Equity".......................................... 3 2.38 "Return on Sales"........................................... 3


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PAGE
---- 2.39 "Revenue"................................................... 3 2.40 "Rule 16b-3"................................................ 3 2.41 "Section 16 Person"......................................... 3 2.42 "Shares".................................................... 3 2.43 "Stock Appreciation Right" or "SAR"......................... 3 2.44 "Subsidiary"................................................ 3 2.45 "Tandem SAR"................................................ 3 2.46 "Termination of Service".................................... 3 2.47 "Total Shareholder Return".................................. 4 SECTION 3 Administration.............................................. 4 3.1 The Committee............................................... 4 3.2 Authority of the Committee.................................. 4 3.3 Delegation by the Committee................................. 4 3.4 Decisions Binding........................................... 4 SECTION 4 Shares Subject to the Plan.................................. 4 4.1 Number of Shares............................................ 4 4.2 Lapsed Awards............................................... 4 4.3 Adjustments in Awards and Authorized Shares................. 4 SECTION 5 Stock Options............................................... 5 5.1 Grant of Options............................................ 5 5.2 Award Agreement............................................. 5 5.3 Exercise Price.............................................. 5 5.4 Expiration of Options....................................... 6 5.5 Exercisability of Options................................... 6 5.6 Payment..................................................... 6 5.7 Restrictions on Share Transferability....................... 6 5.8 Certain Additional Provisions for Incentive Stock Options... 6 SECTION 6 Restricted Stock............................................ 6 6.1 Grant of Restricted Stock................................... 7 6.2 Restricted Stock Agreement.................................. 7 6.3 Transferability............................................. 7 6.4 Other Restrictions.......................................... 7 6.5 Removal of Restrictions..................................... 7 6.6 Voting Rights............................................... 7 6.7 Dividends and Other Distributions........................... 7 6.8 Return of Restricted Stock to Company....................... 7 SECTION 7 STOCK APPRECIATION RIGHTS................................... 8 7.1 Grant of SARs............................................... 8 7.2 SAR Agreement............................................... 8 7.3 Expiration of SARs.......................................... 8 7.4 Payment of SAR Amount....................................... 8


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PAGE
---- SECTION 8 Performance Units and Performance Shares.................... 8 8.1 Grant of Performance Units/Shares........................... 8 8.2 Value of Performance Units/Shares........................... 8 8.3 Performance Objectives and Other Terms...................... 8 8.4 Earning of Performance Units/Shares......................... 9 8.5 Form and Timing of Payment of Performance Units/Shares...... 9 8.6 Cancellation of Performance Units/Shares.................... 9 SECTION 9 Nonemployee Director Options................................ 9 9.1 Granting of Options......................................... 9 9.2 Terms of Options............................................ 9 SECTION 10 Nonemployee Director Awards of Restricted Stock............. 10 10.1 Granting of Restricted Stock................................ 10 10.2 Terms of Restricted Stock................................... 10 SECTION 11 Miscellaneous............................................... 11 11.1 Deferrals................................................... 11 11.2 No Effect on Employment or Service.......................... 11 11.3 Participation............................................... 11 11.4 Indemnification............................................. 11 11.5 Successors.................................................. 11 11.6 Limited Transferability of Awards........................... 11 11.7 Beneficiary Designations.................................... 12 11.8 No Rights as Stockholder.................................... 12 SECTION 12 Amendment, Termination, and Duration........................ 12 12.1 Amendment, Suspension, or Termination....................... 12 12.2 Duration of the Plan........................................ 12 SECTION 13 Tax Withholding............................................. 12 13.1 Withholding Requirements.................................... 12 13.2 Withholding Arrangements.................................... 12 SECTION 14 Legal Construction.......................................... 13 14.1 Gender and Number........................................... 13 14.2 Severability................................................ 13 14.3 Requirements of Law......................................... 13 14.4 Securities Law Compliance................................... 13 14.5 Governing Law............................................... 13 14.6 Captions.................................................... 13 EXECUTION.................................................................. 13


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LSI LOGIC STORAGE SYSTEMS, INC.
2004 EQUITY INCENTIVE PLAN


SECTION 1


BACKGROUND AND PURPOSE


1.1 Background and Effective Date. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, and Restricted Stock, SARs, Performance Units, and Performance Shares. The Plan is effective as of February 12, 2004, subject to ratification by an affirmative vote of the holders of a majority of the Shares.


1.2 Purpose of the Plan. The Plan is intended to attract, motivate, and retain (a) employees of the Company and its Affiliates and (b) directors of the Company who are employees of neither the Company nor of any affiliate. The Plan also is designed to encourage stock ownership by Participants, thereby aligning their interests with those of the Company's shareholders and to permit the payment of compensation that qualifies as performance-based compensation under section 162(m) of the Code.


SECTION 2


DEFINITIONS


The following words and phrases shall have the following meanings unless a different meaning is plainly required by the context:


2.1 "1934 Act" means the Securities Exchange Act of 1934, as amended. Reference to a specific section of the 1934 Act or regulation thereunder shall include such section or regulation, any valid regulation promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.


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


2.3 "Affiliated SAR" means an SAR that is granted in connection with a related Option, and which automatically will be deemed to be exercised at the same time that the related Option is exercised.


2.4 "Award" means, individually or collectively, a grant under the Plan of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock, SARs, Performance Units, and/or Performance Shares.


2.5 "Award Agreement" means the written agreement setting forth the terms and provisions applicable to each Award granted under the Plan.


2.6 "Board" or "Board of Directors" means the Board of Directors of the Company.


2.7 "Cash Flow" means the Company's or a business unit's sum of Profit After Tax plus depreciation and amortization less capital expenditures plus changes in working capital comprised of accounts receivable, inventories, other current assets, trade accounts payable, accrued expenses, product warranty, advance payments from customers and long-term accrued expenses, determined in accordance with generally acceptable accounting principles.


2.8 "Code" means the Internal Revenue Code of 1986, as amended. Reference to a specific section of the Code or regulation thereunder shall include such section or regulation, any valid regulation promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.


2.9 "Committee" means the committee appointed by the Board (pursuant to Section 3.1) to administer the Plan.


2.10 "Company" means LSI Logic Storage Systems, Inc., a Delaware corporation, or any successor thereto.


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2.11 "Director" means any individual who is a member of the Board of Directors of the Company.


2.12 "Disability" means a permanent and total disability determined in accordance with uniform and nondiscriminatory standards adopted by the Committee from time to time.


2.13 "Earnings Per Share" means the Company's or a business unit's Profit After Tax, divided by a weighted average number of all classes of common shares outstanding and dilutive common equivalent shares deemed outstanding, determined in accordance with generally accepted accounting principles.


2.14 "Employee" means any employee of the Company or of an Affiliate, whether such employee is so employed at the time the Plan is adopted or becomes so employed subsequent to the adoption of the Plan.


2.15 "Exchange Program" means a program established by the Committee under which outstanding Awards are amended or surrendered or cancelled in exchange for (a) Awards with a different Exercise Price, (b) a different type of Award, (c) cash, or (d) a combination of (a), (b) and/or (c).


2.16 "Exercise Price" means the price at which a Share may be purchased by a Participant pursuant to the exercise of an Option.


2.17 "Fair Market Value" means the closing price per Share on the Nasdaq National Market on the relevant date, or if there were no sales on such date, the closing price per Share on the nearest day before the relevant date, as determined by the Committee. In the absence of an established market for the Shares, fair market value shall be determined in good faith by the Committee. Notwithstanding the preceding, for federal, state, and local income tax reporting purposes, fair market value shall be determined by the Committee (or its delegate) in accordance with uniform and nondiscriminatory standards adopted by it from time to time.


2.18 "Fiscal Year" means the fiscal year of the Company.


2.19 "Freestanding SAR" means a SAR that is granted independently of any Option.


2.20 "Grant Date" means, with respect to an Award, the date that the Award was granted.


2.21 "Incentive Stock Option"means an Option to purchase Shares that is designated as an Incentive Stock Option and is intended to meet the requirements of Section 422 of the Code.


2.22 "Nonemployee Director" means a Director who is an employee of neither the Company nor of any Affiliate.


2.23 "Nonqualified Stock Option" means an option to purchase Shares that is not intended to be an Incentive Stock Option.


2.24 "Option" means an Incentive Stock Option or a Nonqualified Stock Option.


2.25 "Parent" means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of the corporations (other than the Company) in the unbroken chain then owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.2.26 "Participant" means an Employee or Nonemployee Director who has an outstanding Award.


2.27 "Performance Goals" means the goal(s) (or combined goal(s)) determined by the Committee (in its discretion) to be applicable to a Participant with respect to an Award. As determined by the Committee, the Performance Goals applicable to an Award may provide for a targeted level or levels of achievement using one or more of the following measures: (a) Cash Flow, (b) Earnings per Share, (c) Profit After Tax, and (d) Profit Before Tax, (e) Return on Capital, (f) Return on Equity, (g) Return on Sales, (h) Revenue, (i) Total Shareholder Return. The Performance Goals may differ from Participant to Participant and from Award to Award. Prior to the Determination Date, the Committee shall determine whether any significant element(s) shall be included in or excluded from the calculation of any Performance Goal with respect to any Participants.


2.28 "Performance Share" means an Award granted to a Participant pursuant to Section 8.


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2.29 "Performance Unit" means an Award granted to a Participant pursuant to Section 8.


2.30 "Period of Restriction" means the period during which the transfer of Shares of Restricted Stock are subject to restrictions and therefore, the Shares are subject to a substantial risk of forfeiture. As provided in Section 6, such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events or conditions, as determined by the Committee, in its discretion; provided, however, that with respect to Awards granted pursuant to Section 10, the restrictions shall be based on the passage of time in accordance with Section 10.2.3.


2.31 "Plan" means the LSI Logic Storage Systems, Inc. Corporation 2004 Equity Incentive Plan, as set forth in this instrument and as hereafter amended from time to time.


2.32 "Profit After Tax" means the Company's or a business unit's income after taxes, determined in accordance with generally accepted accounting principles.


2.33 "Profit Before Tax" means the Company's or a business unit's income before taxes, determined in accordance with generally accepted accounting principles.


2.34 "Restricted Stock" means an Award granted to a Participant pursuant to Section 6.


2.35 "Retirement" means a Termination of Service occurring on or after the earlier of (a) age sixty-five (65), or (b) age fifty-five (55) and the completion of ten (10) years of service with the Company or an Affiliate.


2.36 "Return on Capital" means the Company's or a business unit's Profit After Tax divided by Company's or business unit's, as applicable, average invested capital, determined in accordance with generally accepted accounting principles.


2.37 "Return on Equity" means the percentage equal to the Company's Profit After Tax divided by average stockholder's equity, determined in accordance with generally accepted accounting principles.


2.38 "Return on Sales" means the percentage equal to the Company's or a business unit's Profit After Tax, divided by the Company's or the business unit's, as applicable, Revenue, determined in ac
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