Cabot Microelectronics Corporation 2007 Employee Stock Purchase Plan

1.01  

Purpose .  The purpose of the Cabot Microelectronics Corporation Employee Stock Purchase Plan (the “Plan”) is to provide employees of Cabot Microelectronics Corporation (the “Company”) and its Designated Subsidiary Corporations with an opportunity to purchase Common Stock of the Company through accumulated payroll deductions.

1.02  

Rules of Interpretation .  It is the intention of the Company to have the Plan qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”), and the provisions of the Plan, accordingly, shall be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code; provided, however, that the Committee shall have the discretion to cause the options granted in one or more Offering Periods under the Plan to be options to which Section 423 of the Code does not apply.

2.01  

“ Board ” shall mean the Board of Directors of the Company.

2.02  

“Change in Capitalization” shall mean any increase or reduction in the number of shares of Common Stock, or any change (including, but not limited to, in the case of a spin-off, dividend or other distribution in respect of shares of Common Stock, a change in value) in the shares of Common Stock or exchange of shares of Common Stock for a different number or kind of shares, other equity interests or other property of the Company or another entity, by reason of a reclassification, recapitalization, merger, consolidation, reorganization, spin-off, split-up, issuance of warrants or rights or debentures, stock dividend, stock split or reverse stock split, cash dividend, property dividend, combination or exchange of shares, repurchase of shares, change in corporate structure or otherwise.

2.03  

“ Change in Control ” shall be as defined in Appendix A.

2.04  

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

2.05  

” Common Stock ” shall mean the Common Stock of the Company.

2.06  

“ Company ” shall mean Cabot Microelectronics Corporation, a Delaware corporation.

2.07  

“ Compensation ” shall mean the gross cash compensation (including base salary, shift premium, overtime earnings and cash bonuses exclusive of relocation and sign-on bonuses) paid by the Company or a Designated Subsidiary Corporation in accordance with the terms of employment, but excluding all bonus payments, expense allowances and compensation paid in a form other than cash.

2.08  

“ Committee ” shall mean the committee described in Article XI.

2.09  

“ Designated Subsidiary Corporation ” shall mean any Subsidiary of the Company which has been designated by the Committee from time to time in its sole discretion as eligible to participate in the Plan.

2.10  

“ Employee ” shall mean any individual who is a common law employee of the Company or a Designated Subsidiary Corporation for tax purposes whose customary employment with the Company is at least twenty (20) hours per week and more than five (5) months in any calendar year.

2.11  

“ Enrollment Date ” shall mean the first day of each Offering Period.

2.12  

“ Exercise Date ” shall mean the last day of each Offering Period.

2.13  

“ Fair Market Value ” shall mean, as of any date, the value of a share of Common Stock determined as follows:

2.13.1  

If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for a share of Common Stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the date of such determination, as reported in The Wall Street Journal or such other source as the Committee deems reliable, or

2.13.2  

If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean of the closing bid and asked prices for a share of the Common Stock on the date of such determination, as reported in The Wall Street Journal or such other source as the Committee deems reliable, or

2.13.3  

In the absence of an established market for the Common Stock, the Fair Market Value of a share thereof shall be determined in good faith by the Committee.

2.14  

“ Offering Period ” shall mean a period of approximately six (6) months commencing on the first Trading Day on or after January 1 ^st and terminating on the last Trading Day in the period ending the following June 30 ^th , or commencing on the first Trading Day on or after July 1 ^st and terminating on the last Trading Day in the period ending the following December 31 ^st , provided, however, that the first Offering Period under the Plan shall commence on the first date on which quotations are available for the Common Stock on any established stock exchange or a national market system and shall end on a Trading Day selected by the Committee consistent with Section 423 of the Code.  The duration of Offering Periods may be changed pursuant to Sections 13.05 and 13.06.

2.15  

“ Plan Representative ” shall mean any person designated from time to time by the Committee to receive certain notices and take certain other administrative actions relating to participation in the Plan.

2.16  

“ Plan ” shall mean the Cabot Microelectronics Corporation Employee Stock Purchase Plan.

2.17  

" Prior Plan " shall mean the Cabot Microelectronics Corporation Employee Stock Purchase Plan, effective March 24, 2000.

2.18  

“ Purchase Price ” shall mean an amount set by the Committee, but not less than the lesser of 85% of the Fair Market Value of a share of Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower; provided, however, that the Purchase Price may be adjusted by the Board pursuant to Section 13.06.

2.19  

“ Subsidiary ” shall mean a corporation, domestic or foreign, of which not less than 50% of the voting shares are held by the Company or a Subsidiary, whether or not such corporation now exists or is hereafter organized or acquired by the Company or a Subsidiary.

2.20  

“ Trading Day ” shall mean a day on which national stock exchanges and the Nasdaq System are open for trading.

3.01  

Eligibility .  Each Employee on an Enrollment Date of an Offering Period shall be eligible to participate in such Offering Period.  Persons who are not Employees shall not be eligible to participate in such Offering Period.  Employees of Cabot Corporation and its subsidiaries, other than the Company and its Designated Subsidiary Corporations, are not eligible to participate in the Plan.

3.02  

Restrictions on Participation .  Notwithstanding any provision of the Plan to the contrary, no Employee shall be granted an option to purchase shares of Common Stock under the Plan:

3.02.1  

If, immediately after the grant, such Employee would own stock and/or hold outstanding options to purchase stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company (for purposes of this paragraph, the rules of Section 424(d) of the Code shall apply in determining stock ownership of any Employee); or

3.02.2  

If such Employee’s rights to purchase stock under all employee stock purchase plans of the Company accrue at a rate which exceeds $25,000 of Fair Market Value of the stock (determined at the time such option is granted) for each calendar year in which such option is outstanding at any time.

3.03  

Commencement of Participation .  An Employee may become a participant by completing an authorization for payroll deductions on the form provided by the Company and filing the completed form with the Plan Representative on or before the filing date set therefor by the Committee, which date shall be prior to the next Enrollment Date.  Payroll deductions for a participant shall commence on the next following Enrollment Date after the Employee’s authorization for payroll deductions becomes effective and shall continue until termination of the Plan, the participant’s earlier termination of participation in the Plan, or the participant’s change in payroll deductions pursuant to Section 5.03.  Each participant in the Plan shall be deemed to continue participation until termination of the Plan or such participant’s earlier termination of participation in the Plan pursuant to Article VIII below.

4.01  

Stock Subject to the Plan .  Subject to the provisions of Section 13.03 of the Plan, the Board shall reserve for issuance under the Plan an amount equal to the sum of (i) five hundred thousand (500,000) shares of the Company’s Common Stock, and (ii) the number of shares of the Company’s Common Stock previously reserved for issuance under the Prior Plan but not issued before the adoption of this Plan, which shares shall be authorized but unissued shares of Common Stock, treasury shares, or shares of Common Stock purchased by the Company or the Plan on an established stock exchange or a national market system.

4.02  

Offerings .  The Plan will be implemented by two annual offerings of the Company’s Common Stock each calendar year.  Each offering will be outstanding during the applicable Offering Period.

5.01  

Amount of Deduction .  The form described in Section 3.03 will permit a participant to elect payroll deductions of any whole percentage from one percent (1%) through ten percent (10%), or any whole dollar amount that equates to from one percent (1%) through ten percent (10%), of such participant’s Compensation for each pay period during an Offering Period.

5.02  

Participant’s Account .  All payroll deductions made for a participant shall be credited to an account established for such participant under the Plan.  A participant may not make any separate cash payment into such account.

5.03  

Changes in Payroll Deductions .  A participant may reduce or increase future payroll deductions (within the limits described in Section 5.01) by filing with the Plan Representative a form provided by the Company for such purpose.  The effective date of any increase or reduction in future payroll deductions will be the next following payroll period succeeding processing of the change form.

6.01  

Number of Option Shares .  On an Enrollment Date each participant shall be deemed to have been granted an option to purchase a number of shares of Common Stock determined by dividing the participant’s accumulated payroll deductions on the Exercise Date by the lower of (i) 100% of the Fair Market Value of a share of Common Stock on the Enrollment Date or (ii) 100% of the Fair Market Value of a share of Common Stock on the Exercise Date; subject, however, to any applicable limitations contained in this Plan.  In addition, the maximum number of shares a participant may purchase with respect to any Offering Period is that number of shares determined by dividing $12,500 by the Fair Market Value of a share of Common Stock on the Enrollment Date; provided, however, the maximum number of shares a participant may purchase with respect to the first Offering Period is that number of shares determined by dividing $25,000 by the Fair Market Value of a share of Common Stock on the Enrollment Date.

7.01  

Automatic Exercise .  Subject to the next following sentence, each Plan participant’s option for the purchase of stock with payroll deductions made during any Offering Period will be exercised automatically on the applicable Exercise Date for the purchase of the number of full and deemed fractional shares of Common Stock that the accumulated payroll deductions in the participant’s account at the time will purchase at the Purchase Price (but not in excess of the maximum number of shares determined pursuant to Section 6.01).  The Committee shall have the discretion to reduce the number of shares of Common Stock to be purchased by participants with respect to an Offering Period and to allocate such reduced number of shares of Common Stock among participants in such Offering Period, so long as such reduction and allocation is done in a manner consistent with Section 423 of the Code.  Any payroll deductions not applied to the purchase of shares of Common Stock by reason of the limitations of or reduction pursuant to this Section 7.01 shall be