Exhibit 10.8

 

ITERIS, INC.

 

2016 OMNIBUS INCENTIVE PLAN

 

ARTICLE 1

 

GENERAL PROVISIONS

 

1.1                               PURPOSE OF THE PLAN

 

This 2016 Omnibus Incentive Plan (the “Plan”) is intended to promote the
interests of Iteris, Inc., a Delaware corporation, by providing eligible persons
in the Corporation’s service with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Corporation
as an incentive for them to remain in such service.

 

The Plan serves as the successor to the Corporation’s 2007 Omnibus Incentive
Plan (the “Predecessor Plan”), and no further awards shall be made under the
Predecessor Plan on or after the Plan Effective Date.  All awards outstanding
under the Predecessor Plan on the Plan Effective Date shall remain outstanding
under the Predecessor Plan and shall be governed solely by the terms of the
documents evidencing such award, and no provision of the Plan shall be deemed to
affect or otherwise modify the rights or obligations of the holders of such
awards.

 

Capitalized terms shall have the meanings assigned to such terms in the attached
Appendix.

 

1.2                               TYPES OF AWARDS

 

Awards may be made under the Plan in the form of (i) options, (ii) stock
appreciation rights, (iii) stock awards, (iv) restricted stock units, (v) cash
incentive awards and (vi) dividend equivalent rights.

 

1.3                               ADMINISTRATION OF THE PLAN

 

(a)                                 The Compensation Committee shall have sole
and exclusive authority to administer the Plan with respect to Section 16
Insiders.  Administration of the Plan with respect to all other persons eligible
to participate in the Plan may, at the Board’s discretion, be vested in the
Compensation Committee or a Secondary Board Committee, or the Board may retain
the power to administer those programs with respect to such persons.  To the
extent permitted by law, the Board or the Compensation Committee may delegate
any or all of its authority to administer the Plan with respect to one or more
classes of eligible persons (other than Section 16 Insiders) to one or more
officers of the Corporation.

 

(b)                                 Members of the Compensation Committee or any
Secondary Board Committee shall serve for such period of time as the Board may
determine and may be removed by the Board at any time.  The Board may also at
any time terminate the functions of any Secondary Board Committee and reassume
all powers and authority previously delegated to such committee.

 

--------------------------------------------------------------------------------

 

(c)                                  Each Plan Administrator shall, within the
scope of its administrative functions under the Plan, have full authority to
determine (i) which eligible persons are to receive Awards under the Plan,
(ii) the type, size, terms and conditions of the Awards to be made to each
Participant, (iii) the time or times when those Awards are to be made, (iv) the
number of shares or amount of payment to be covered by each such Award, (v) the
time or times when the Award is to become exercisable, (vi) the status of an
option for federal tax purposes, (vii) the maximum term for which an Award is to
remain outstanding, (viii) the vesting and issuance schedules applicable to the
shares which are the subject of the Award, (ix) the cash consideration (if any)
payable for those shares and the form (cash or shares of Common Stock) in which
the Award is to be settled, (x) the vesting schedule for a cash incentive award,
and (xi) with respect to performance—based Awards, the performance objectives
for each such Award, the amounts payable at designated levels of attained
performance, any applicable service vesting requirements, and the payout
schedule for each such Award.

 

(d)                                 Each Plan Administrator shall, within the
scope of its administrative functions under the Plan, have full power and
authority (subject to the provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for proper administration of the Plan and
to make such determinations under, and issue such interpretations of, the
provisions of the Plan and any outstanding Awards thereunder as it may deem
necessary or advisable.  Decisions of the Plan Administrator within the scope of
its administrative functions under the Plan shall be final and binding on all
parties who have an interest in the Plan under its jurisdiction or any Award
thereunder.

 

(e)                                  Service as a Plan Administrator by the
members of the Compensation Committee or the Secondary Board Committee shall
constitute service as Board members, and the members of each such committee
shall accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee.  No member of the Compensation
Committee or the Secondary Board Committee shall be liable for any act or
omission made in good faith with respect to the Plan or any Award thereunder.

 

1.4                               ELIGIBILITY

 

(a)                                 The persons eligible to participate in the
Plan are as follows:

 

(i)                                     Employees,

 

(ii)                                  Non-Employee Directors and non-employee
members of the board of any Parent or Subsidiary, and

 

(iii)                               consultants and other independent advisors
who provide services to the Corporation (or any Parent or Subsidiary).

 

2

--------------------------------------------------------------------------------

 

1.5                               STOCK SUBJECT TO THE PLAN

 

(a)                                 The stock issuable under the Plan shall be
shares of authorized but unissued or reacquired Common Stock, including shares
repurchased by the Corporation on the open market.  Subject to
Section 1.5(h) and adjustment pursuant to Section 1.5(j), the number of shares
reserved for issuance under the Plan shall be 3,404,771.  However, such share
reserve shall be reduced by one (1) share for every one (1) share that was
subject to an option or stock appreciation right granted after July 22, 2016 and
prior to the Plan Effective Date under the Predecessor Plan and 1.79 shares for
every one (1) share that was subject to an award (other than an option or stock
appreciation right) granted after July 22, 2016 and prior to the Plan Effective
Date under the Predecessor Plan (such awards granted after July 22, 2016 and
prior to the Plan Effective Date under the Predecessor Plan, the “Interim Period
Awards”).

 

(b)                                 Subject to adjustment pursuant to
Section 1.5(j), the maximum number of shares of Common Stock that may be issued
pursuant to Incentive Options granted under the Plan shall be 3,404,771.

 

(c)                                  The maximum number of shares of Common
Stock for which options and stock appreciation rights that are settled in shares
may be granted to any person under the Plan in any fiscal year shall not exceed
2,000,000 shares of Common Stock in the aggregate.

 

(d)                                 The maximum number of shares of Common Stock
for which Awards (other than options and stock appreciation rights that are
settled in shares) may be granted to any person under the Plan in any fiscal
year shall not exceed 2,000,000 shares of Common Stock (which limit shall refer
to the maximum amount that can be earned) in the aggregate.

 

(e)                                  During any fiscal year no Participant may
be granted cash incentive awards under which a total of more than $3,000,000 may
be earned for each twelve (12) months in the performance period.

 

(f)                                   The maximum aggregate grant date fair
value (computed as of the date of grant in accordance with applicable financial
accounting rules) of all Awards made to any Non-Employee Director under the Plan
in any fiscal year, taken together with any cash payments (including the annual
retainer and any other compensation) paid to such Non-Employee Director in
respect of such fiscal year, shall not exceed $250,000 in total value.

 

(g)                                  The number of shares of Common Stock
reserved for award and issuance under this Plan pursuant to Section 1.5(a) shall
be reduced on a one-for-one basis for each share of Common Stock subject to an
option or stock appreciation right and by a fixed ratio of 1.79 shares of Common
Stock for each share of Common Stock subject to a Full Value Award.

 

(h)                                 Shares of Common Stock subject to
outstanding Awards (including awards granted under the Predecessor Plan) shall
be available for subsequent award and issuance under the Plan to the extent
those Awards expire, are forfeited or cancelled or terminate for any reason
prior to the issuance of the shares of Common Stock subject to those Awards. 
Any shares that again become available for Awards under the Plan pursuant to
this Section shall be added as (i) one (1) share for every one (1) share subject
to options or stock appreciation rights granted under the Plan and the
Predecessor Plan, (ii) as 1.79 shares for every one (1) share subject to

 

3

--------------------------------------------------------------------------------

 

Awards other than options or stock appreciation rights granted under the Plan
and the Predecessor Plan, and (iii) for each unvested share issued under the
Plan and the Predecessor Plan for cash consideration not less than the Fair
Market Value per share of Common Stock on the date of grant and subsequently
repurchased by the Corporation, at a price per share not greater than the
original issue price paid per share, pursuant to the Corporation’s repurchase
rights under the Plan and Predecessor Plan, as applicable, one share shall
become available for subsequent award and issuance under the Plan.

 

(i)                                     Should the exercise price of an option
or any withholding taxes incurred in connection with the exercise of an option
under the Plan (or any options granted under the Predecessor Plan) be paid with
shares of Common Stock (whether through the withholding of a portion of the
otherwise issuable shares or through the tender of actual outstanding shares),
then in each such case, the shares so tendered or withheld shall be added to the
shares of Common Stock available for grant under the Plan on a one-for-one
basis.  Upon the exercise of any stock appreciation right under the Plan (and
any Interim Period Awards), the share reserve shall be reduced only by the net
number of shares issued upon such exercise and not by the gross number of shares
as to which such right is exercised.  If shares of Common Stock are withheld by
the Corporation, or if shares of Common Stock are tendered by the Participant,
in either case, in satisfaction of the withholding taxes incurred in connection
with the vesting or settlement of a Full Value Award (or an award other than a
stock option or stock appreciation right that was granted under the Predecessor
Plan), then in each such case the shares of Common Stock so tendered or withheld
shall be added to the shares of Common Stock available for issuance under the
Plan in accordance with the ratio described in Sections 1.5(h) above.

 

(j)                                    Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares, spin-off transaction or other change
affecting the outstanding Common Stock as a class without the Corporation’s
receipt of consideration, or should the value of outstanding shares of Common
Stock be substantially reduced as a result of a spin-off transaction or an
extraordinary dividend or distribution, or should there occur any merger,
consolidation, reincorporation or other reorganization, then equitable
adjustments shall be made by the Plan Administrator to (i) the maximum number
and/or class of securities issuable under the Plan, (ii) the maximum number
and/or class of securities for which any one person may be granted options and
Stand-alone Rights that are settled in shares under the Plan in any fiscal year,
(iii) the maximum number and/or class of securities for which any one person may
be granted Awards (other than Stock options and Stand-alone Rights that are
settled in shares) under the Plan in any fiscal year, (iv) the maximum number
and/or class of securities that may be issued pursuant to Incentive Options,
(v) the number and/or class of securities and the exercise or base price per
share in effect under each outstanding Award under the Plan (including the
Interim Period Awards) and the consideration (if any) payable per share, and
(vi) the number and/or class of securities subject to the Corporation’s
outstanding repurchase rights under the Plan and the repurchase price payable
per share.  The adjustments shall be made in such manner as the Plan
Administrator deems appropriate and such adjustments shall be final, binding and
conclusive.  In addition, in the event of a Change in Control, the provisions of
Section 2.7 shall apply.

 

(k)                                 Outstanding Awards granted pursuant to the
Plan shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

 

4

--------------------------------------------------------------------------------

 

(l)                                     Substitute Awards shall not reduce the
shares authorized for issuance under the Plan or the limitations on grants to a
Participant under Section 1.5(c) or 1.5(d), nor shall shares subject to a
terminated, cancelled or forfeited Substitute Award be added to the shares
available for issuance under the Plan as provided above.  Additionally, in the
event that a company acquired by the Company or any Subsidiary (or Parent) or
with which the Company or any Subsidiary (or Parent) combines has shares
available under a pre-existing plan approved by stockholders and not adopted in
contemplation of such acquisition or combination, the shares available for grant
pursuant to the terms of such pre-existing plan (as adjusted, to the extent
appropriate, using the exchange ratio or other adjustment or valuation ratio or
formula used in such acquisition or combination to determine the consideration
payable to the holders of common stock of the entities party to such acquisition
or combination) may be used for Awards under the Plan and shall not reduce the
shares authorized for issuance under the Plan (and shares subject to such Awards
shall not be added to the shares available for issuance under the Plan as
provided above); provided that Awards using such available shares shall not be
made after the date awards or grants could have been made under the terms of the
pre-existing plan, absent the acquisition or combination, and shall only be made
to individuals who were not Employees or Non-Employee Directors prior to such
acquisition or combination.  For purposes of this section, “Substitute Awards”
shall mean Awards granted or shares issued by the Company in assumption of, or
in substitution or exchange for, awards previously granted, or the right or
obligation to make future awards, in each case by a company acquired by the
Company or any Subsidiary (or Parent) or with which the Company or any
Subsidiary (or Parent) combines.

 

ARTICLE 2

 

AWARDS

 

2.1                               OPTIONS

 

(a)                                 Authority.  The Plan Administrator shall
have full power and authority, exercisable in its sole discretion, to grant
Incentive Options and Non-Statutory Options evidenced by an Award Agreement in
the form approved by the Plan Administrator; provided, however, that the terms
of each such agreement shall not be inconsistent with the terms specified
below.  Each agreement evidencing an Incentive Option shall, in addition, be
subject to the provisions of Section 2.1(f) below.

 

(b)                                 Exercise Price.

 

(i)                                     The exercise price per share shall be
fixed by the Plan Administrator; provided, however, that such exercise price
shall not be less than one hundred percent (100%) of the Fair Market Value per
share of Common Stock on the grant date.

 

(ii)                                  The exercise price shall be payable in one
or more of the following forms as determined by the Plan Administrator and
specified in the Award Agreement:

 

(A)                               cash or check made payable to the Corporation,

 

5

--------------------------------------------------------------------------------

 

(B)                               shares of Common Stock (whether delivered in
the form of actual stock certificates or through attestation of ownership) held
for the requisite period (if any) necessary to avoid any resulting charge to the
Corporation’s earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date,

 

(C)                               shares of Common Stock otherwise issuable
under the option but withheld by the Corporation in satisfaction of the exercise
price, with such withheld shares to be valued at Fair Market Value on the
exercise date, or

 

(D)                               to the extent the option is exercised for
vested shares of Common Stock, through a special sale and remittance procedure
pursuant to which the Participant shall concurrently provide instructions to
(a) a brokerage firm (reasonably satisfactory to the Corporation for purposes of
administering such procedure in compliance with the Corporation’s
pre-clearance/pre-notification policies) to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable income and
employment taxes required to be withheld by the Corporation by reason of such
exercise and (b) the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm on such settlement date in
order to complete the sale.

 

Except to the extent such sale and remittance procedure is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.

 

(c)                                  Exercise and Term of Options.  Each option
shall be exercisable at such time or times, during such period and for such
number of shares as shall be determined by the Plan Administrator and set forth
in the Award Agreement evidencing the option, subject to Section 2.9.  However,
no option shall have a term in excess of ten (10) years measured from the option
grant date.

 

(d)                                 Effect of Termination of Service.

 

(i)                                     The following provisions shall govern
the exercise of any options that are outstanding at the time of the
Participant’s cessation of Service or death:

 

(A)                               Any option outstanding at the time of the
Participant’s cessation of Service for any reason shall remain exercisable for
such period of time thereafter as shall be determined by the Plan Administrator
and set forth in the documents evidencing the option, but no such option shall
be exercisable after the expiration of the option term.

 

(B)                               Any option held by the Participant at the time
of the Participant’s death and exercisable in whole or in part at that time may
be subsequently exercised by the personal representative of the Participant’s
estate or by the person or persons to whom the option is transferred pursuant to
the Participant’s will or the laws of inheritance or by the Participant’s
designated beneficiary or beneficiaries of that option.

 

(C)                               Should the Participant’s Service be terminated
for Misconduct or should the Participant otherwise engage in Misconduct while
holding one or more outstanding options, then all of those options shall
terminate immediately and cease to be outstanding.

 

6

--------------------------------------------------------------------------------

 

(D)                               During the applicable post-Service exercise
period, the option may not be exercised for more than the number of vested
shares for which the option is at the time exercisable.  No additional shares
shall vest under the option following the Participant’s cessation of Service
except to the extent (if any) specifically authorized by the Plan Administrator
in its sole discretion pursuant to an express written agreement with the
Participant.  Upon the expiration of the applicable exercise period or (if
earlier) upon the expiration of the option term, the option shall terminate and
cease to be outstanding for any shares for which the option has not been
exercised.

 

(ii)                                  The Plan Administrator shall have complete
discretion, exercisable either at the time an option is granted or at any time
while the option remains outstanding, to:

 

(A)                               extend the period of time for which the option
is to remain exercisable following the Participant’s cessation of Service from
the limited exercise period otherwise in effect for that option to such greater
period of time as the Plan Administrator shall deem appropriate, but in no event
beyond the expiration of the option term;

 

(B)                               include an automatic extension provision
whereby the specified post-Service exercise period in effect for any option
shall automatically be extended by an additional period of time equal in
duration to any interval within the specified post-Service exercise period
during which the exercise of that option or the immediate sale of the shares
acquired under such option could not be effected in compliance with applicable
federal and state securities laws, but in no event shall such an extension
result in the continuation of such option beyond the expiration date of the term
of that option; and/or

 

(C)                               permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the number of
vested shares of Common Stock for which such option is exercisable at the time
of the Participant’s cessation of Service but also with respect to one or more
additional installments in which the Participant would have vested had the
Participant continued in Service.

 

(e)                                  Repurchase Rights.  The Plan Administrator
shall have the discretion to grant options which are exercisable for unvested
shares of Common Stock.  Should the Participant exercise an option for unvested
shares and subsequently cease Service while such shares are unvested, the
Corporation shall have the right to repurchase any or all of those unvested
shares at a price per share equal to the lower of (i) the exercise price paid
per share or (ii) the Fair Market Value per share of Common Stock at the time of
repurchase.  The terms upon which such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate vesting
schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right.

 

(f)                                   Incentive Options.  The terms specified
below shall be applicable to all Incentive Options.  Except as modified by the
provisions of this Section 2.1(f), all the provisions of the Plan shall be
applicable to Incentive Options.  Options which are specifically designated as
Non-Statutory Options when issued under the Plan shall not be subject to the
terms of this Section 2.1(f).

 

7

--------------------------------------------------------------------------------

 

(i)                                     Eligibility.  Incentive Options may only
be granted to Employees.

 

(ii)                                  Dollar Limitation.  The aggregate Fair
Market Value of the shares of Common Stock (determined as of the respective date
or dates of grant) for which one or more options granted to any Employee under
the Plan (or any other option plan of the Corporation or any Parent or
Subsidiary) may for the first time become exercisable as Incentive Options
during any one calendar year shall not exceed the sum of One Hundred Thousand
Dollars ($100,000).

 

To the extent the Employee holds two (2) or more such options which become
exercisable for the first time in the same calendar year, then for purposes of
the foregoing limitations on the exercisability of those options as Incentive
Options, such options shall be deemed to become first exercisable in that
calendar year on the basis of the chronological order in which they were
granted, except to the extent otherwise provided under applicable law or
regulation.

 

(iii)                               10% Stockholder.  If any Employee to whom an
Incentive Option is granted is a 10% Stockholder, then the exercise price per
share shall not be less than one hundred ten percent (110%) of the Fair Market
Value per share of Common Stock on the option grant date, and the option term
shall not exceed five (5) years measured from the option grant date.

 

2.2                               STOCK APPRECIATION RIGHTS

 

(a)                                 Authority.  The Plan Administrator shall
have full power and authority, exercisable in its sole discretion, to grant
stock appreciation rights evidenced by an Award Agreement in the form approved
by the Plan Administrator; provided, however, that the terms of each such
agreement shall not be inconsistent with the terms specified below.

 

(b)                                 Types.  Two types of stock appreciation
rights shall be authorized for issuance under this Section 2.2:  (i) tandem
stock appreciation rights (“Tandem Rights”) and (ii) stand-alone stock
appreciation rights (“Stand-alone Rights”).

 

(c)                                  Tandem Rights.  The following terms and
conditions shall govern the grant and exercise of Tandem Rights.

 

(i)                                     One or more Participants may be granted
a Tandem Right, exercisable upon such terms and conditions as the Plan
Administrator may establish, subject to Section 2.9, to elect between the
exercise of the underlying option for shares of Common Stock or the surrender of
that option in exchange for a distribution from the Corporation in an amount
equal to the excess of (i) the Fair Market Value (on the option surrender date)
of the number of shares in which the Participant is at the time vested under the
surrendered option (or surrendered portion thereof) over (ii) the aggregate
exercise price payable for such vested shares.

 

(ii)                                  Any distribution to which the Participant
becomes entitled upon the exercise of a Tandem Right may be made in (i) shares
of Common Stock valued at Fair Market Value on the option surrender date,
(ii) cash or (iii) a combination of cash and shares of Common Stock, as
specified in the applicable Award Agreement.

 

8

--------------------------------------------------------------------------------

 

(d)                                 Stand-Alone Rights.  The following terms and
conditions shall govern the grant and exercise of Stand-alone Rights:

 

(i)                                     One or more Participants may be granted
a Stand-alone Right not tied to any underlying option.  The Stand-alone Right
shall relate to a specified number of shares of Common Stock and shall be
exercisable upon such terms and conditions as the Plan Administrator may
establish, subject to Section 2.9.  In no event, however, may the Stand-alone
Right have a maximum term in excess of ten (10) years measured from the grant
date.

 

(ii)                                  Upon exercise of the Stand-alone Right,
the holder shall be entitled to receive a distribution from the Corporation in
an amount equal to the excess of (i) the aggregate Fair Market Value (on the
exercise date) of the shares of Common Stock underlying the exercised right over
(ii) the aggregate base price in effect for those shares.

 

(iii)                               The number of shares of Common Stock
underlying each Stand-alone Right and the base price in effect for those shares
shall be determined by the Plan Administrator in its sole discretion at the time
the Stand-alone Right is granted.  In no event, however, may the base price per
share be less than the Fair Market Value per underlying share of Common Stock on
the grant date.

 

(iv)                              The distribution with respect to an exercised
Stand-alone Right may be made in (i) shares of Common Stock valued at Fair
Market Value on the exercise date, (ii) cash or (iii) a combination of cash and
shares of Common Stock, as specified in the applicable Award agreement.

 

(v)                                 The holder of a Stand-alone Right shall have
no stockholder rights with respect to the shares subject to the Stand-alone
Right unless and until such person shall have exercised the Stand-alone Right
and become a holder of record of the shares of Common Stock issued upon the
exercise of such Stand-alone Right.

 

(e)                                  Post-Service Exercise.  The provisions
governing the exercise of Tandem and Stand-alone Rights following the cessation
of the Participant’s Service shall be substantially the same as those set forth
in Section 2.1(d) for the options granted under the Plan, and the Plan
Administrator’s discretionary authority under Section 2.1(d)(ii) shall also
extend to any outstanding Tandem or Stand-alone Appreciation Rights.

 

2.3                               STOCK AWARDS

 

(a)                                 Authority.  The Plan Administrator shall
have full power and authority, exercisable in its sole discretion, to grant
stock awards either as vested or unvested shares of Common Stock, through direct
and immediate issuances.  Each stock award shall be evidenced by an Award
Agreement in the form approved by the Plan Administrator; provided, however,
that the terms of each such agreement shall not be inconsistent with the terms
specified below.

 

9

--------------------------------------------------------------------------------

 

(b)                                 Consideration.

 

Shares of Common Stock may be issued under a stock award for any of the
following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:

 

(i)                                     cash or check made payable to the
Corporation,

 

(ii)                                  past services rendered to the Corporation
(or any Parent or Subsidiary); or

 

(iii)                               any other valid consideration under the
State in which the Corporation is at the time incorporated.

 

(c)                                  Vesting Provisions.

 

(i)                                     Stock awards may, in the discretion of
the Plan Administrator, be fully and immediately vested upon issuance as a bonus
for Service rendered or may vest in one or more installments over the
Participant’s period of Service and/or upon the attainment of specified
performance objectives.  The elements of the vesting schedule applicable to any
stock award shall be determined by the Plan Administrator and incorporated into
the Award Agreement.

 

(ii)                                  The Plan Administrator shall also have the
discretionary authority, consistent with Code Section 162(m), to structure one
or more stock awards so that the shares of Common Stock subject to those Awards
shall vest upon the achievement of pre-established performance objectives based
on one or more Performance Goals and measured over the performance period
specified by the Plan Administrator at the time of the grant of the Award.

 

(iii)                               Should the Participant cease to remain in
Service while holding one or more unvested shares of Common Stock issued under a
stock award or should the performance objectives not be attained with respect to
one or more such unvested shares of Common Stock, then those shares shall be
immediately surrendered to the Corporation for cancellation, and the Participant
shall have no further stockholder rights with respect to those shares.  To the
extent the surrendered shares were previously issued to the Participant for
consideration paid in cash or cash equivalent, the Corporation shall repay to
the Participant the lower of (i) the cash consideration paid for the surrendered
shares or (ii) the Fair Market Value of those shares at the time of
cancellation.

 

(iv)                              The Plan Administrator may in its discretion
waive the surrender and cancellation of one or more unvested shares of Common
Stock which would otherwise occur upon the cessation of the Participant’s
Service or the non-attainment of the performance objectives applicable to those
shares.  Any such waiver shall result in the immediate vesting of the
Participant’s interest in the shares of Common Stock as to which the waiver
applies.  However, no vesting requirements tied to the attainment of performance
objectives may be waived with respect to shares which were intended at the time
of issuance to qualify as performance-based compensation under Code
Section 162(m), except in the event of the Participant’s death or Permanent
Disability or a Change in Control.

 

10

--------------------------------------------------------------------------------

 

(v)                                 Any new, substituted or additional
securities or other property (including money paid other than as a regular cash
dividend) which the Participant may have the right to receive with respect to
the Participant’s unvested shares of Common Stock by reason of any stock
dividend, stock split, recapitalization, combination of shares, exchange of
shares, spin-off transaction, extraordinary dividend or distribution or other
change affecting the outstanding Common Stock as a class without the
Corporation’s receipt of consideration shall be issued subject to (i) the same
vesting requirements applicable to the Participant’s unvested shares of Common
Stock and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate, unless and to the extent the Plan Administrator determines at the
time to vest and distribute such securities or other property.  Notwithstanding
the provisions of this Section, cash dividends, stock and any other property
(other than cash) distributed as a dividend or otherwise with respect to any
stock Award that vests based on achievement of Performance Goals shall be
accumulated, subject to restrictions and risk of forfeiture to the same extent
as the underlying Award, and shall be paid at the time such restrictions and
risk of forfeiture lapse.  Equitable adjustments to reflect each such
transaction shall also be made by the Plan Administrator to the repurchase price
payable per share by the Corporation for any unvested securities subject to its
existing repurchase rights under the Plan; provided the aggregate repurchase
price shall in each instance remain the same.

 

2.4                               RESTRICTED STOCK UNITS

 

(a)                                 Authority.  The Plan Administrator shall
have the full power and authority, exercisable in its sole discretion, to grant
restricted stock units evidenced by an Award Agreement in the form approved by
the Plan Administrator; provided, however, that the terms of each such agreement
shall not be inconsistent with the terms specified below.

 

(b)                                 Terms.  Each restricted stock unit award
shall entitle the Participant to receive the shares underlying that Award (or an
amount based on the value of the shares) upon vesting or upon the expiration of
a designated time period following the vesting of those Awards.  Payment of
shares underlying a restricted stock unit Award may be deferred for a period
specified by the Plan Administrator at the time the restricted stock unit is
initially granted or (to the extent permitted by the Plan Administrator)
designated by the Participant pursuant to a timely deferral election made in
accordance with the requirements of Code Section 409A.  Restricted stock units
subject to performance vesting may also be structured so that the underlying
shares are convertible into shares of Common Stock (or a payment based on the
value of the shares), but the rate at which each share is to so convert shall be
based on the attained level of performance for each applicable performance
objective.

 

(c)                                  Vesting Provisions.

 

(i)                                     Restricted stock units may, in the
discretion of the Plan Administrator, vest in one or more installments over the
Participant’s period of Service or upon the attainment of specified performance
objectives.

 

(ii)                                  The Plan Administrator shall also have the
discretionary authority, consistent with Code Section 162(m), to structure one
or more restricted stock unit awards so that the shares of Common Stock subject
to those Awards shall vest (or vest and become

 

11

--------------------------------------------------------------------------------

 

issuable) upon the achievement of pre-established performance objectives based
on one or more Performance Goals and measured over the performance period
specified by the Plan Administrator at the time of the grant of the Award.

 

(iii)                               Outstanding restricted stock units shall
automatically terminate without any payment if the designated Performance Goals
or Service requirements established for those Awards are not attained or
satisfied.  The Plan Administrator, however, shall have the discretionary
authority to make a payment under one or more outstanding Awards of restricted
stock units as to which the designated Performance Goals or Service requirements
have not been attained or satisfied.  However, no vesting requirements tied to
the attainment of Performance Goals may be waived with respect to Awards which
were intended, at the time those Awards were granted, to qualify as
performance-based compensation under Code Section 162(m), except in the event of
the Participant’s death or Permanent Disability or a Change in Control.

 

(d)                                 Payment.  Restricted stock units that vest
may be settled in (i) cash, (ii) shares of Common stock valued at Fair Market
Value on the payment date or (iii) a combination of cash and shares of Common
Stock, as determined by the Plan Administrator in its sole discretion.

 

2.5                               CASH INCENTIVE AWARDS

 

(a)                                 The Plan Administrator shall have full power
and authority, exercisable in its sole discretion, to grant cash incentive
awards.  The Plan Administrator shall determine the terms and conditions
applicable to cash incentive awards, including the criteria for the vesting and
payment of cash incentive awards.  Cash incentive awards shall be based on such
measures as the Plan Administrator deems appropriate and need not relate to the
value of shares of Common Stock.  Cash incentive awards may, in the discretion
of the Plan Administrator, vest in one or more installments over the
Participant’s period of Service or upon the attainment of specified performance
objectives.  Payment of cash incentive awards may be deferred for a period
specified by the Plan Administrator at the time the Award is initially granted
or (to the extent permitted by the Plan Administrator) designated by the
Participant pursuant to a timely deferral election made in accordance with the
requirements of Code Section 409A.

 

(b)                                 The Plan Administrator shall also have the
discretionary authority, consistent with Code Section 162(m), to structure one
or more cash incentive awards so that the awards shall vest upon the achievement
of pre-established performance objectives based on one or more Performance Goals
and measured over the performance period specified by the Plan Administrator at
the time of the grant of the Award.

 

(c)                                  Outstanding cash incentive awards units
shall automatically terminate without any payment if the designated Performance
Goals or Service requirements established for those Awards are not attained or
satisfied.  The Plan Administrator, however, shall have the discretionary
authority to make a payment under one or more outstanding cash incentive awards
as to which the designated Performance Goals or Service requirements have not
been attained or satisfied.  However, no vesting requirements tied to the
attainment of Performance Goals may be waived with respect to cash incentive
awards which were intended, at the time those Awards

 

12

--------------------------------------------------------------------------------

 

were granted, to qualify as performance-based compensation under Code
Section 162(m), except in the event of the Participant’s death or Permanent
Disability or a Change in Control.

 

2.6                               DIVIDEND EQUIVALENT RIGHTS

 

(a)                                 Authority.  The Plan Administrator shall
have full power and authority, exercisable in its sole discretion, to grant
dividend equivalent rights evidenced by an Award Agreement in the form approved
by the Plan Administrator; provided however, that the terms of each such
agreement shall not be inconsistent with the terms specified below.

 

(b)                                 Terms.  The dividend equivalent rights may
be granted as stand-alone awards or in tandem with other Awards made under the
Plan, except dividend equivalent rights shall not be granted in connection with
an option, stock appreciation right or cash incentive award.  The term of each
dividend equivalent right award shall be established by the Plan Administrator
at the time of grant, but no such award shall have a term in excess of ten
(10) years.

 

(c)                                  Entitlement.  Each dividend equivalent
right shall represent the right to receive the economic equivalent of each
dividend or distribution, whether in cash, securities or other property (other
than shares of Common Stock), which is made per issued and outstanding share of
Common Stock during the term the dividend equivalent right remains outstanding. 
A special account on the books of the Corporation shall be maintained for each
Participant to whom a dividend equivalent right is granted, and that account
shall be credited per dividend equivalent right with each such dividend or
distribution made per issued and outstanding share of Common Stock during the
term of that dividend equivalent right remains outstanding.

 

(d)                                 Timing of Payment.  Payment of the amounts
credited to such book account may be made to the Participant either concurrently
with the actual dividend or distribution made per issued and outstanding share
of Common Stock or may be deferred for a period specified by the Plan
Administrator at the time the dividend equivalent right is initially granted or
(to the extent permitted by the Plan Administrator) designated by the
Participant pursuant to a timely deferral election made in accordance with the
requirements of Code Section 409A.  In no event, however, shall any dividend
equivalent right award made with respect to an Award subject to
performance-vesting conditions vest or become payable prior to the vesting of
that Award (or the portion thereof to which the dividend equivalent right award
relates) upon the attainment of the applicable Performance Goals and shall
accordingly be subject to cancellation and forfeiture to the same extent as the
underlying Award.

 

(e)                                  Form of Payment.  Payment of the amounts
due with respect to dividend equivalent rights may be made in (i) cash,
(ii) shares of Common Stock or (iii) a combination of cash and shares of Common
Stock, as determined by the Plan Administrator in its sole discretion and set
forth in the Award Agreement.  If payment is to be made in the form of Common
Stock, the number of shares of Common Stock into which the cash dividend or
distribution amounts are to be converted for purposes of the Participant’s book
account may be based on the Fair Market Value per share of Common Stock on the
date of conversion, a prior date or an average of the Fair Market Value per
share of Common Stock over a designated period, as determined by the Plan
Administrator in its sole discretion.

 

13

--------------------------------------------------------------------------------

 

2.7                               EFFECT OF CHANGE IN CONTROL

 

Unless otherwise provided in an Award Agreement, the following provisions shall
apply with respect to Awards in the event of a Change in Control:

 

(a)                                 In the event of a Change in Control, each
outstanding Award, as determined by the Plan Administrator in its sole
discretion, may be (i) assumed by the successor corporation (or parent thereof),
(ii) canceled and substituted with an Award granted by the successor corporation
(or parent thereof), (iii) otherwise continued in full force and effect pursuant
to the terms of the Change in Control transaction, or (iv) replaced with a cash
retention program of the Corporation or any successor corporation (or parent
thereof) which preserves the spread existing on the unvested Award shares
subject to the Award at the time of the Change in Control (the excess of the
Fair Market Value of those shares over the aggregate purchase price payable for
such shares) and, subject to Section 2.7(c) below, provides for subsequent
payout of that spread in accordance with the same exercise/vesting schedule
applicable to those unvested Award shares, but only if such replacement cash
program would not result in the treatment of the Award as an item of deferred
compensation subject to Code Section 409A.

 

(b)                                 To the extent an outstanding Award is not
assumed, substituted, continued or replaced in accordance with Section 2.7(a),
such Award shall automatically vest in full immediately prior to the effective
date of the Change in Control, unless the acceleration of such Award is subject
to other limitations imposed by the Plan Administrator at the time of the grant
of the Award.  The Plan Administrator in its sole discretion shall have the
authority to provide that to the extent any such Award, as so accelerated,
remains unexercised and outstanding on the effective date of the Change in
Control, such Award shall terminate and cease to be outstanding.  The holder of
such Award shall become entitled to receive, upon consummation of the Change in
Control and subject to Section 2.7(c), a lump sum cash payment in an amount
equal to the product of (i) number of shares of Common Stock subject to such
Award and (ii) the excess of (a) the Fair Market Value per share of Common Stock
on the date of the Change in Control over (b) the per share exercise price or
purchase price in effect for such Award.  However, any such Award shall be
subject to cancellation and termination, without cash payment or other
consideration due the Award holder, if the Fair Market Value per share of Common
Stock on the date of such Change in Control is less than the per share exercise
price or purchase price in effect for such Award.  Notwithstanding the
foregoing, if any Award is subject to a performance-vesting condition tied to
the attainment of one or more specified Performance Goals, and such Award is not
to be so assumed, substituted, continued, or replaced, that Award shall vest
immediately prior to the effective date of the actual Change in Control
transaction, based on actual performance as of the Change in Control, and the
shares of Common Stock underlying the portion of the Award that vests on such
accelerated basis (if any) shall be issued in accordance with the applicable
Award Agreement, unless such accelerated vesting is precluded by other
limitations imposed in the Award Agreement.

 

(c)                                  The Plan Administrator shall have the
authority to provide that any escrow, holdback, earn-out or similar provisions
in the definitive agreement effecting the Change in Control shall apply to any
cash payment made pursuant to Section 2.7(a) or Section 2.7(b) to the same
extent and in the same manner as such provisions apply to a holder of a share of
Common Stock.

 

14

--------------------------------------------------------------------------------

 

(d)                                 Immediately following the consummation of
the Change in Control, all outstanding Awards shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof) or otherwise continued in full force and effect pursuant to the
terms of the Change in Control transaction.

 

(e)                                  In the event of any Change in Control, the
Plan Administrator in its sole discretion may determine that all outstanding
repurchase rights (i) are to be assigned to the successor corporation (or parent
thereof) or otherwise continued in full force and effect pursuant to the terms
of the Change in Control transaction or (ii) are to be terminated and the shares
of Common Stock subject to those terminated rights are to immediately vest in
full, unless such accelerated vesting is precluded by limitations imposed by the
Plan Administrator at the time the repurchase right is issued.

 

(f)                                   Each Award which is assumed in connection
with a Change in Control or otherwise continued in effect shall be appropriately
adjusted, immediately after such Change in Control, to apply to the number and
class of securities into which the shares of Common Stock subject to that Award
would have been converted in consummation of such Change in Control had those
shares actually been outstanding at that time.  Appropriate adjustments to
reflect such Change in Control shall also be made to (i) the exercise or base
price or cash consideration payable per share in effect under each outstanding
Award, provided the aggregate exercise or base price or cash consideration in
effect for such securities shall remain the same, (ii) the maximum number and/or
class of securities available for issuance over the remaining term of the Plan,
(iii) the maximum number and/or class of securities for which Incentive Options
may be granted under the Plan, (iv) the maximum number and/or class of
securities for which any one person may be granted Awards under the Plan per
calendar year and (v) the number and/or class of securities subject to the
Corporation’s outstanding repurchase rights under the Plan and the repurchase
price payable per share.  To the extent the actual holders of the Corporation’s
outstanding Common Stock receive cash consideration for their Common Stock in
consummation of the Change in Control, the successor corporation may, in
connection with the assumption or continuation of the outstanding Awards under
the Plan and subject to the Plan Administrator’s approval, substitute, for the
securities underlying those assumed Awards, one or more shares of its own common
stock with a fair market value equivalent to the cash consideration paid per
share of Common Stock in such Change in Control transaction, provided such
common stock is readily traded on an established U.S. securities exchange or
market.

 

(g)                                  The Plan Administrator shall have the
discretion, exercisable either at the time an Award is granted or at any time
while an Award remains outstanding, to structure such Award so that (i) it shall
automatically accelerate and vest in full (and any repurchase rights of the
Corporation with respect to the unvested shares subject to that Award shall
immediately terminate) upon the occurrence of a Change in Control, whether or
not such Award is to be assumed in the Change in Control or otherwise continued
in effect or (ii) the shares subject to such Award will automatically vest on an
accelerated basis should the Participant’s Service terminate by reason of an
Involuntary Termination within a designated period following the effective date
of any Change in Control in which the Award is assumed or otherwise continued in
effect and the repurchase rights applicable to those shares do not otherwise
terminate.

 

15

--------------------------------------------------------------------------------

 

(h)                                 The portion of any Incentive Option
accelerated in connection with a Change in Control shall remain exercisable as
an Incentive Option only to the extent the applicable One Hundred Thousand
Dollar ($100,000) limitation is not exceeded.  To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall be
exercisable as a Non-Statutory Option under the Federal tax laws.

 

2.8                               REPRICING PROGRAMS

 

The Plan Administrator shall not have the discretionary authority, except
pursuant to Section 1.5(j), to (i) implement cancellation/regrant programs
pursuant to which outstanding options or stock appreciation rights under the
Plan are cancelled and new options or stock appreciation rights are granted in
replacement with a lower exercise or base price per share, (ii) cancel
outstanding options or stock appreciation rights under the Plan with exercise or
base prices per share in excess of the then current Fair Market Value per share
of Common Stock for consideration payable in cash, other Awards, or in equity
securities of the Corporation (except in the event of a Change in Control) or
(iii) reduce the exercise or base price in effect for outstanding options or
stock appreciation rights under the Plan, in any case without stockholder
approval.

 

2.9                               MINIMUM VESTING

 

No option or stock appreciation right may vest over a period of less than one
year from the date of grant of the award.  Notwithstanding the foregoing, up to
5% of the available shares of Common Stock authorized for issuance under the
Plan as of the Plan Effective Date may be issued pursuant to options or stock
appreciation rights that vest (in full or in part) over a period of less than
one year from the date of grant of the awards (the “5% Basket”).  Any option or
stock appreciation right granted under the Plan may vest in full or in part upon
death or disability of the Participant, or upon a Change in Control, under
Section 2.7 or the applicable Award Agreement, and such vesting shall not count
against the 5% Basket.

 

ARTICLE 3

 

MISCELLANEOUS

 

3.1                               DEFERRED COMPENSATION

 

(a)                                 The Plan Administrator may, in its sole
discretion, structure one or more Awards (other than options and stock
appreciation rights) so that the Participants may be provided with an election
to defer the compensation associated with those Awards for federal income tax
purposes.  Any such deferral opportunity shall comply with all applicable
requirements of Code Section 409A.

 

(b)                                 The Plan Administrator may implement a
non-employee Board member retainer fee deferral program under the Plan so as to
allow the non-employee Board members the opportunity to elect, prior to the
start of each calendar year, to convert the Board and Board committee retainer
fees to be earned for such year into restricted stock units under the Plan that
will defer the issuance of the shares of Common Stock that vest under those
restricted stock units until a permissible date or event under Code
Section 409A.  If such program is implemented, the

 

16

--------------------------------------------------------------------------------

 

Plan Administrator shall have the authority to establish such rules and
procedures as it deems appropriate for the filing of such deferral elections and
the designation of the permissible distribution events under Code Section 409A.

 

(c)                                  To the extent the Corporation maintains one
or more separate non-qualified deferred compensation arrangements which allow
the Participants the opportunity to make notional investments of their deferred
account balances in shares of Common Stock, the Plan Administrator may authorize
the share reserve under the Plan to serve as the source of any shares of Common
Stock that become payable under those deferred compensation arrangements.  In
such event, the share reserve under the Plan shall be reduced on a
share-for-share basis for each share of Common Stock issued under the Plan in
settlement of the deferred compensation owed under those separate arrangements.

 

3.2                               TRANSFERABILITY OF AWARDS

 

The transferability of Awards granted under the Plan shall be governed by the
following provisions:

 

(a)                                 Incentive Options.  During the lifetime of
the Participant, Incentive Options shall be exercisable only by the Participant
and shall not be assignable or transferable other than by will or the laws of
inheritance following the Participant’s death.

 

(b)                                 Other Awards.  All other Awards shall be
subject to the same limitation on transfer as Incentive Options, except that the
Plan Administrator may structure one or more such Awards so that the Award may
be assigned in whole or in part during the Participant’s lifetime to one or more
Family Members of the Participant or to a trust established exclusively for the
Participant and/or such Family Members, to the extent such assignment is in
connection with the Participant’s estate plan or pursuant to a domestic
relations order.  The assigned portion of an Award may only be exercised (if
applicable) by the person or persons who acquire a proprietary interest in the
Award pursuant to the assignment.  The terms applicable to the assigned portion
of the Award shall be the same as those in effect for the Award immediately
prior to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.

 

(c)                                  Beneficiary Designation.  Notwithstanding
the foregoing, a Participant may, to the extent permitted by the Plan
Administrator, designate one or more persons as the beneficiary or beneficiaries
of some or all of his or her outstanding Awards, and those Awards shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Participant’s death while holding those
Awards.  Such beneficiary or beneficiaries shall take the transferred Awards
subject to all the terms and conditions of the applicable agreement evidencing
each such transferred Award, including (without limitation) the limited time
period during which the Award may be exercised (if applicable) following the
Participant’s death.

 

3.3                               STOCKHOLDER RIGHTS

 

A Participant shall not have any of the rights of a stockholder with respect to
shares of Common Stock covered by an Award until the Participant becomes the
holder of record of such shares.  However, a Participant may be granted the
right to receive dividend equivalents under Section 2.6 with respect to one or
more outstanding Awards.

 

17

--------------------------------------------------------------------------------

 

3.4                               TAX WITHHOLDING

 

(a)                                 The Corporation’s obligation to deliver
shares of Common Stock upon the exercise, issuance or vesting of an Award under
the Plan shall be subject to the satisfaction of all applicable tax withholding
requirements.

 

(b)                                 The Plan Administrator may, in its
discretion, provide Participants to whom Awards are made under the Plan with the
right to use shares of Common Stock in satisfaction of all or part of the
Withholding Taxes to which such holders may become subject in connection with
the issuance, exercise, vesting or settlement of those Awards or the issuance of
shares of Common Stock thereunder.  Such right may be provided to any such
holder in either or both of the following formats:

 

(i)                                     Stock Withholding: The election to have
the Corporation withhold, from the shares of Common Stock otherwise issuable
upon the issuance, exercise, vesting or settlement of such Award or the issuance
of shares of Common Stock thereunder, a portion of those shares with an
aggregate Fair Market Value at the time of delivery equal to the percentage of
the Withholding Taxes based on the minimum required tax withholding rate for the
Participant, or such other rate as determined by the Plan Administrator.

 

(ii)                                  Stock Delivery: The election to deliver to
the Corporation, at the time of the issuance, exercise, vesting or settlement of
such Award, one or more shares of Common Stock previously acquired by such
individual (other than in connection with the exercise, share issuance or share
vesting triggering the Withholding Taxes) with an aggregate Fair Market Value
equal to the percentage of the Withholding Taxes (not to exceed one hundred
percent (100%)) designated by the individual.

 

3.5                               SHARE ESCROW/LEGENDS

 

Unvested shares may, in the Plan Administrator’s discretion, be held in escrow
by the Corporation until the Participant’s interest in such shares vests or may
be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.

 

3.6                               EFFECTIVE DATE AND TERM OF THE PLAN

 

(a)                                 The Plan shall become effective on the Plan
Effective Date.

 

(b)                                 The Plan shall terminate upon the earliest
to occur of (i) the date immediately preceding the tenth anniversary of the Plan
Effective Date, (ii) the date on which all shares available for issuance under
the Plan shall have been issued as fully vested shares, (iii) the termination of
all outstanding Awards in connection with a Change in Control, or (iii) the
termination of the Plan by the Board.  Should the Plan terminate under
subsection (i) above, then all Awards outstanding at that time shall continue to
have force and effect in accordance with the provisions of the documents
evidencing those Awards.

 

18

--------------------------------------------------------------------------------

 

3.7                               AMENDMENT OF THE PLAN

 

(a)                                 The Board shall have complete and exclusive
power and authority to amend or modify the Plan in any or all respects, subject
to stockholder approval to the extent required under applicable law or
regulation or pursuant to the listing standards of the Stock Exchange on which
the Common Stock is at the time primarily traded.  However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
Awards at the time outstanding under the Plan unless the Participant consents to
such amendment or modification.

 

(b)                                 The Compensation Committee shall have the
discretionary authority to adopt and implement from time to time such addenda or
subplans to the Plan as it may deem necessary in order to bring the Plan into
compliance with applicable laws and regulations of any foreign jurisdictions in
which Awards are to be made under the Plan and/or to obtain favorable tax
treatment in those foreign jurisdictions for the individuals to whom the Awards
are made.

 

(c)                                  Awards may be made under the Plan that
involve shares of Common Stock in excess of the number of shares then available
for issuance under the Plan, provided no shares shall actually be issued
pursuant to those Awards until the number of shares of Common Stock available
for issuance under the Plan is sufficiently increased by stockholder approval of
an amendment of the Plan authorizing such increase.  If such stockholder
approval is not obtained within twelve (12) months after the date the first
excess Award is made, then all Awards granted on the basis of such excess shares
shall terminate and cease to be outstanding.

 

3.8                               USE OF PROCEEDS

 

Any cash proceeds received by the Corporation from the sale of shares of Common
Stock under the Plan shall be used for general corporate purposes.

 

3.9                               REGULATORY APPROVALS

 

(a)                                 The implementation of the Plan, the granting
of any Award under the Plan and the issuance of any shares of Common Stock in
connection with the issuance, exercise, vesting or settlement of any Award under
the Plan shall be subject to the Corporation’s procurement of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the Awards made under the Plan and the shares of Common Stock issuable pursuant
to those Awards.

 

(b)                                 No shares of Common Stock or other assets
shall be issued or delivered under the Plan unless and until there shall have
been compliance with all applicable requirements of applicable securities laws,
and all applicable listing requirements of any Stock Exchange on which Common
Stock is then listed for trading.

 

3.10                        NO EMPLOYMENT/SERVICE RIGHTS

 

Nothing in the Plan shall confer upon the Participant any right to continue in
Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining such person) or of the Participant, which rights are
hereby expressly reserved by each, to terminate such person’s Service at any
time for any reason, with or without cause.

 

19

--------------------------------------------------------------------------------

 

3.11                        RECOUPMENT

 

Participants shall be subject to any clawback, recoupment or other similar
policy required by law or regulations or adopted by the Board as in effect from
time to time and Awards and any cash, shares of Common Stock or other property
or amounts due, paid or issued to a Participant shall be subject to the terms of
such policy, as in effect from time to time.

 

20

--------------------------------------------------------------------------------

 

APPENDIX

 

The following definitions shall be in effect under the Plan:

 

(a)                                 Award shall mean any of the following awards
authorized for issuance or grant under the Plan:  options, stock appreciation
rights, stock awards, restricted stock units, cash incentive awards and dividend
equivalents.

 

(b)                                 Award Agreement shall mean the written
agreement(s) (which may be in electronic form) between the Corporation and the
Participant evidencing a particular Award made to that individual under the
Plan, as such agreement(s) may be in effect from time to time.

 

(c)                                  Board shall mean the Corporation’s Board of
Directors.

 

(d)                                 Change in Control shall, with respect to
each Award made under the Plan, be defined in accordance with the following
provisions:

 

(i)                                     Change in Control shall have the meaning
assigned to such term in the Award Agreement for the particular Award or in any
other agreement incorporated by reference into the Award Agreement for purposes
of defining such term.

 

(ii)                                  In the absence of any other Change in
Control definition in the Award Agreement (or in any other agreement
incorporated by reference into the Award Agreement), Change in Control shall
mean a change in ownership or control of the Corporation effected through any of
the following transactions:

 

(A)                               consummation of a merger, consolidation or
other reorganization approved by the Corporation’s stockholders, unless
securities representing at least fifty percent (50%) of the total combined
voting power of the voting securities of the successor corporation are
immediately thereafter beneficially owned, directly or indirectly and in
substantially the same proportion, by the persons who beneficially owned the
Corporation’s outstanding voting securities immediately prior to such
transaction,

 

(B)                               a sale, transfer or other disposition of all
or substantially all of the Corporation’s assets,

 

(C)                               the closing of any transaction or series of
related transactions pursuant to which any person or any group of persons
comprising a “group” within the meaning of Rule 13d-5(b)(1) of the 1934 Act
(other than the Corporation or a person that, prior to such transaction or
series of related transactions, directly or indirectly controls, is controlled
by or is under common control with, the Corporation) becomes directly or
indirectly (whether as a result of a single acquisition or by reason of one or
more acquisitions within the twelve (12)-month period ending with the most
recent acquisition) the beneficial owner (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing (or convertible into or exercisable for
securities possessing) more than fifty percent (50%) of the total combined
voting power of the Corporation’s securities (as measured in terms of the power
to vote with respect to the election of Board members) outstanding immediately
after the consummation of such transaction or series of related transactions,
whether such transaction involves a direct issuance from the Corporation or the
acquisition of outstanding securities held by one or more of the Corporation’s
existing stockholders, or

 

A-1

--------------------------------------------------------------------------------

 

(D)                               a change in the composition of the Board over
a period of twenty-four (24) consecutive months or less such that a majority of
the Board members ceases to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period (“Incumbent
Directors”) or (B) have been elected or nominated for election as Board members
during such period by at least a majority of the Incumbent Directors who were
still in office at the time the Board approved such election or nomination;
provided that any individual who becomes a Board member subsequent to the
beginning of such period and whose election or nomination was approved by
two-thirds of the Board members then comprising the Incumbent Directors will be
considered an Incumbent Director.

 

(e)                                  Code shall mean the Internal Revenue Code
of 1986, as amended.

 

(f)                                   Common Stock shall mean the Corporation’s
Common Stock.

 

(g)                                  Compensation Committee shall mean the
Compensation Committee of the Board comprised of two (2) or more non-employee
Board members, each of whom is intended to qualify as a “non-employee director”
(as defined in Rule 16b-3 under the Exchange Act), an “outside director” for
purposes of Section 162(m) of the Code and an “independent director” under the
rules of any securities exchange or automated quotation system on which the
Common Stock is then listed, quoted or traded; provided that any action taken by
the Compensation Committee shall be valid and effective, whether or not one or
more members of the Compensation Committee at the time of such action are later
determined not to have satisfied the requirements for membership set forth in
this definition or otherwise provided in the charter of the Compensation
Committee.

 

(h)                                 Corporation shall mean Iteris, Inc., a
Delaware corporation, and any corporate successor to all or substantially all of
the assets or voting stock of Iteris, Inc.

 

(i)                                     Employee shall mean an individual who is
in the employ of the Corporation (or any Parent or Subsidiary, whether now
existing or subsequently established), subject to the control and direction of
the employer entity as to both the work to be performed and the manner and
method of performance.

 

(j)                                    Exercise Date shall mean the date on
which the Corporation shall have received written notice of the option exercise.

 

(k)                                 Fair Market Value per share of Common Stock
on any relevant date shall be determined in accordance with the following
provisions:

 

(i)                                     If the Common stock is at the time
traded on a Stock Exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock at the close of regular hours trading
(i.e., before after-hours trading begins) on date in question on the Stock
Exchange serving as the primary market for the Common Stock, as such price is
reported by the National Association of Securities Dealers (if primarily traded
on the Nasdaq Global or Global Select Market) or as officially quoted in the
composite tape of transactions on any other

 

A-2

--------------------------------------------------------------------------------

 

Stock Exchange on which the Common Stock is then primarily traded.  If there is
no closing selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.

 

(ii)                                  If the Common Stock is at the time quoted
on a national or regional securities exchange or market system (including
over-the-counter markets and the Nasdaq Capital Market) determined by the Plan
Administrator to be the primary market for the Common Stock, then the Fair
Market Value shall be the closing selling price per share of Common Stock on the
date in question, as such price is officially reported by such exchange or
market system.  If there is no closing selling price for the Common Stock on the
date in question, then the Fair Market Value shall be the closing selling price
of a share of Common Stock on the last preceding date for which such quotation
exists.

 

(l)                                     Family Member shall mean, with respect
to a particular Participant, any 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.

 

(m)                             Full Value Award means an Award other than an
option or stock appreciation right.

 

(n)                                 Good Reason shall, with respect to each
Award made under the Plan, be defined in accordance with the following
provisions:

 

(i)                                     Good Reason shall have the meaning
assigned to such term in the Award Agreement for the particular Award or in any
other agreement incorporated by reference into the Award Agreement for purposes
of defining such term.

 

(ii)                                  In the absence of any other Good Reason
definition in the Award Agreement (or in any other agreement incorporated by
reference into the Award Agreement), Good Reason shall mean an individual’s
voluntary resignation following one or more of the following without the
individual’s consent; (A) a change in his or her position with the Corporation
(or any Parent or Subsidiary) which materially reduces his or her duties,
responsibilities or authority, (B) a material diminution in the duties,
responsibilities or authority of the person to whom such individual reports,
(C) a material reduction in such individual’s level of base compensation, with a
reduction of more than fifteen percent (15%) to be deemed material for such
purpose, or (D) a material relocation of such individual’s place of employment,
with a relocation of more than fifty (50) miles to be deemed material for such
purpose, provided, however, that a resignation for Good Reason may be effected
only after (i) the individual provides written notice to the Corporation of the
event or transaction constituting grounds for such resignation within sixty
(60) days after the occurrence of that event or transaction, (ii) the
Corporation fails to take the requisite remedial action with respect to such
event or transaction within thirty (30) days after receipt of such notice, and
(iii) the individual resigns within thirty (30) days after the expiration of the
Corporation’s cure period set forth in subsection (ii).

 

(o)                                 Incentive Option shall mean an option which
satisfies the requirements of Code Section 422.

 

A-3

--------------------------------------------------------------------------------

 

(p)                                 Involuntary Termination shall, with respect
to each Award made under the Plan, be defined in accordance with the following
provisions:

 

(i)                                     Involuntary Termination shall have the
meaning assigned to such term in the Award Agreement for the particular Award or
in any other agreement incorporated by reference into the Award Agreement for
purposes of defining such term.

 

(ii)                                  In the absence of any other Involuntary
Termination definition in the Award Agreement (or in any other agreement
incorporated by reference into the Award Agreement), Involuntary Termination
shall mean such individual’s involuntary dismissal or discharge by the
Corporation (or any Parent or Subsidiary) for reasons other than Misconduct, or
such individual’s voluntary resignation for Good Reason.

 

(q)                                 Misconduct shall, with respect to each Award
made under the Plan, be defined in accordance with the following provisions:

 

(i)                                     Misconduct shall have the meaning
assigned to such term in the Award Agreement for the particular Award or in any
other agreement incorporated by reference into the Award Agreement for purposes
of defining such term.

 

(ii)                                  In the absence of any other Misconduct
definition in the Award Agreement for a particular Award (or in any other
agreement incorporated by reference into the Award Agreement), Misconduct shall
mean the commission of any act of fraud, embezzlement or dishonesty by the
Participant, any unauthorized use or disclosure by such person of confidential
information or trade secrets of the Corporation (or any Parent or Subsidiary),
or any other intentional misconduct by such person adversely affecting the
business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner.  The foregoing definition shall not in any way preclude or
restrict the right of the Corporation (or any Parent or Subsidiary) to discharge
or dismiss any Participant or other person in the Service of the Corporation (or
any Parent or Subsidiary) for any other acts or omissions, but such other acts
or omissions shall not be deemed, for purposes of the Plan, to constitute
grounds for termination for Misconduct.

 

(r)                                    1934 Act shall mean the Securities
Exchange Act of 1934, as amended.

 

(s)                                   Non-Employee Director shall mean a
non-employee member of the Board.

 

(t)                                    Non-Statutory Option shall mean an option
not an Incentive Option.

 

(u)                                 Parent shall mean any corporation (other
than the Corporation) in an unbroken chain of corporations ending with the
Corporation, provided each corporation in the unbroken chain (other than the
Corporation) owns, at the time of the determination, 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.

 

(v)                                 Participant shall mean any eligible person
who is granted an Award under the Plan.

 

A-4

--------------------------------------------------------------------------------

 

(w)                               Permanent Disability shall mean the inability
of the Participant to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment expected to result in
death or to be of continuous duration of twelve (12) months or more.

 

(x)                                 Performance Goals shall mean any of the
following performance criteria upon which the vesting of one or more Awards
under the Plan may be based:  (i) cash flow; (ii) earnings (including earnings
before interest and taxes, earnings before taxes, earnings before interest,
taxes, depreciation, amortization and charges for stock-based compensation,
earnings before interest, taxes, depreciation and amortization, and net
earnings); (iii) earnings per share; (iv) growth in earnings or earnings per
share; (v) stock price; (vi) return on equity or average stockholder equity;
(vii) total stockholder return or growth in total stockholder return either
directly or in relation to a comparative group; (viii) return on capital;
(ix) return on assets or net assets; (x) invested capital, required rate of
return on capital or return on invested capital; (xi) revenue, growth in revenue
or return on sales; (xii) income or net income; (xiii) operating income, net
operating income or net operating income after tax; (xiv) operating profit or
net operating profit; (xv) operating margin or gross margin; (xvi) return on
operating revenue or return on operating profit; (xvii) market share,
(xviii) market capitalization, (xix) application approvals, (xx) litigation and
regulatory resolution goals, (xxi) implementation, completion or attainment of
key projects, product sales or milestones, (xxii) budget comparisons,
(xxiii) growth in stockholder value relative to the growth of a peer group or
index; (xxiv) development and implementation of strategic plans and/or
organizational restructuring goals; (xxv) development and implementation of risk
and crisis management programs; (xxvi) improvement in workforce diversity;
(xxvii) compliance requirements and compliance relief; (xxviii) productivity
goals; (xxix) workforce management and succession planning goals; (xxx) economic
value added (including typical adjustments consistently applied from generally
accepted accounting principles required to determine economic value added
performance measures); (xxxi) recruiting and maintaining personnel, employee
retention, measures of  customer satisfaction, employee satisfaction or staff
development; (xxxii) development or marketing collaborations, formations of
joint ventures or partnerships or the completion of other similar transactions
intended to enhance the Corporation’s revenue or profitability or enhance its
customer base; and (xxxiii) merger and acquisitions.  In addition, such
performance criteria may be based upon the attainment of specified levels of the
Corporation’s performance under one or more of the measures described above
relative to the performance of other entities and may also be based on the
performance of any of the Corporation’s business units or divisions or any
Parent or Subsidiary.  Any performance goals that are financial metrics, may be
determined in accordance with U.S. Generally Accepted Accounting Principles
(“GAAP”), in accordance with accounting principles established by the
International Accounting Standards Board (“IASB Principles”), or may be adjusted
when established to include or exclude any items otherwise includable or
excludable under GAAP or under IASB Principles.  Each applicable Performance
Goal may include a minimum threshold level of performance below which no Award
will be earned, levels of performance at which specified portions of an Award
will be earned and a maximum level of performance at which an Award will be
fully earned.  Each applicable Performance Goal may be structured at the time of
the Award to provide for appropriate adjustment for one or more of the following
items: (A) asset impairments or write-downs; (B) litigation or claim judgments
or settlements; (C) the effect of changes in tax law, accounting principles or
other such laws or provisions affecting reported results; (D) accruals for
reorganization and restructuring programs;

 

A-5

--------------------------------------------------------------------------------

 

(E) the operations of any business acquired by the Corporation; (F) the
divestiture of one or more business operations or the assets thereof; (G) the
effects of any corporate transaction, such as a merger, consolidation,
separation (including spin-off or other distributions of stock or property by
the Corporation) or reorganization;  (H) restructurings, discontinued
operations, extraordinary items, and other unusual, infrequently occurring or
non-recurring charges or events; (I) acquisitions or divestitures; (J) change in
the corporate structure or capital structure of the Corporation; (K) an event
either not directly related to the operations of the Corporation, Parent,
Subsidiary, division, business segment or business unit or not within the
reasonable control of management; (L) foreign exchange gains and losses; (M) a
change in the fiscal year of the Corporation; (N) the refinancing or repurchase
of bank loans or debt securities; (O) unbudgeted capital expenditures; (P) the
issuance or repurchase of equity securities and other changes in the number of
outstanding shares; (Q) conversion of some or all of convertible securities to
common stock; (R) any business interruption event; (S) the cumulative effects of
tax or accounting changes in accordance with GAAP; (T) the effect of changes in
other laws or regulatory rules affecting reported results; and (U) any other
adjustment consistent with the operation of the Plan.

 

(y)                                 Plan shall mean the Corporation’s 2016
Equity Omnibus Plan, as set forth in this document.

 

(z)                                  Plan Administrator shall mean the
particular entity, whether the Compensation Committee, the Board, the Secondary
Board Committee or any delegate of the Board or the Compensation Committee
authorized to administer the Plan with respect to one or more classes of
eligible persons, to the extent such entity is carrying out its administrative
functions under the Plan with respect to the persons under its jurisdiction.

 

(aa)                          Plan Effective Date shall mean the date upon which
the Plan is approved by the stockholders.

 

(bb)                          Predecessor Plan shall mean the Corporation’s 2007
Omnibus Incentive Plan.

 

(cc)                            Secondary Board Committee shall mean a committee
of one or more Board members appointed by the Board to administer the Plan with
respect to eligible persons other than Section 16 Insiders.

 

(dd)                          Section 16 Insider shall mean an officer or
director of the Corporation subject to the short-swing profit liabilities of
Section 16 of the 1934 Act.

 

(ee)                            Service shall, with respect to each Award made
under the Plan, be defined in accordance with the following provisions:

 

(i)                                     Service shall have the meaning assigned
to such term in the Award Agreement for the particular Award or in any other
agreement incorporated by reference into the Award Agreement for purposes of
defining such term.

 

(ii)                                  In the absence of any other definition of
Service in the Award Agreement for a particular Award (or in any other agreement
incorporated by reference into the Award Agreement), Service shall mean the
performance of services for the Corporation (or any

 

A-6

--------------------------------------------------------------------------------

 

Parent or Subsidiary, whether now existing or subsequently established) by a
person in the capacity of an Employee, a Non-Employee Director or a consultant
or independent advisor, except to the extent otherwise specifically provided in
the documents evidencing the Award.  For purposes of this particular definition
of Service, a Participant shall be deemed to cease Service immediately upon the
occurrence of the either of the following events:  (i) the Participant no longer
performs services in any of the foregoing capacities for the Corporation or any
Parent or Subsidiary or (ii) the entity for which the Participant is performing
such services ceases to remain a Parent or Subsidiary of the Corporation, even
though the Participant may subsequently continue to perform services for that
entity.

 

(iii)                               Service shall not be deemed to cease during
a period of military leave, sick leave or other personal leave approved by the
Corporation; provided, however, that should such leave of absence exceed three
(3) months, then for purposes of determining the period within which an
Incentive Option may be exercised as such under the federal tax laws, the
Participant’s Service shall be deemed to cease on the first day immediately
following the expiration of such three (3)-month period, unless Participant is
provided with the right to return to Service following such leave either by
statute or by written contract.  Except to the extent otherwise required by law
or expressly authorized by the Plan Administrator or by the Corporation’s
written policy on leaves of absence, no Service credit shall be given for
vesting purposes for any period the Participant is on a leave of absence.

 

(ff)                              Stand-alone Rights shall have the meaning set
forth in Section 2.2.

 

(gg)                            Stock Exchange shall mean the American Stock
Exchange, the Nasdaq Global or Global Select Market or the New York Stock
Exchange.

 

(hh)                          Subsidiary shall mean any corporation (other than
the Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, 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.

 

(ii)                                  Tandem Rights shall have the meaning set
forth in Section 2.2.

 

(jj)                                10% Stockholder shall mean the owner of
stock (as determined under Code Section 424(d)) possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Corporation (or any Parent or Subsidiary).

 

(kk)                          Withholding Taxes shall mean the applicable
federal, state and foreign income and employment withholding taxes and other
payments to which the holder of an Award under the Plan may become subject in
connection with the issuance, exercise, vesting or settlement of that Award.

 

A-7

--------------------------------------------------------------------------------