Exhibit 10.1

 

Performance-Based Vesting Version

 

CUBIC CORPORATION

2015 INCENTIVE AWARD PLAN

 

RESTRICTED STOCK UNIT AWARD GRANT NOTICE AND

RESTRICTED STOCK UNIT AWARD AGREEMENT

Cubic Corporation, a Delaware corporation (the “Company”), pursuant to its 2015
Incentive Award Plan (the “Plan”), hereby grants to the participant listed below
(“Participant”), an award of restricted stock units (“Restricted Stock Units” or
“RSUs”) with respect to the number of shares of the Company’s Common Stock (the
“Shares”) indicated below. Each RSU is hereby granted in tandem with a
corresponding dividend equivalent, as further described in Article II of the
Restricted Stock Unit Agreement (the “Dividend Equivalents”).  This award for
Restricted Stock Units and the corresponding Dividend Equivalents (this “Award”)
is subject to all of the terms and conditions as set forth herein, in the
Restricted Stock Unit Award Agreement attached hereto as Exhibit A (the
“Restricted Stock Unit Agreement”) and in the Plan, each of which are
incorporated herein by reference. Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Grant Notice
and the Restricted Stock Unit Agreement.

 

Participant:

 

Grant Date:

 

Target Number of RSUs (as adjusted pursuant to Article II and Section 4.2):

 

Distribution Schedule:

Subject to the terms of the Restricted Stock Unit Agreement, the RSUs (and their
corresponding Dividend Equivalents) shall be distributable in accordance with
Section 1.1 of the Restricted Stock Unit Agreement.

Vesting Schedule:

Subject to the terms of the Restricted Stock Unit Agreement, the RSUs shall vest
as set forth on Exhibit B to this Grant Notice.

 

By electronically accepting this Grant Agreement, Participant agrees to be bound
by the terms and conditions of the Plan, the Restricted Stock Unit Agreement and
this Grant Notice.  In addition, Participant explicitly acknowledges and agrees
to be bound by the Restrictive Covenants set forth in Section 3.6 of the
Restricted Stock Unit Agreement.  Participant has reviewed the Restricted Stock
Unit Agreement, the Plan and this Grant Notice in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Grant Notice
and fully understands all provisions of this Grant Notice, the Restricted Stock
Unit Agreement and the Plan.  Participant has been provided with a copy or
electronic access to a copy of the prospectus for the Plan. Participant hereby
agrees to accept as binding, conclusive and final all decisions or
interpretations of the Board (or any Committee to which administration of the
Plan has been delegated by the Board) upon any questions arising under the Plan,
this Grant Notice or the Restricted Stock Unit Agreement.  The Award is subject
to the terms and conditions of the Plan which are incorporated herein by
reference. In the event of any inconsistency between the Plan and the Restricted
Stock Unit Agreement, the terms of the Plan shall control.

 

Participant acknowledges that his or her acceptance of the terms and conditions
of the Plan, the Restricted Stock Unit Agreement and this Grant Notice by his or
her electronic acceptance of the Grant Agreement is a condition to the receipt
of this Award.  As a result, unless otherwise determined by the Board (or any
Committee to which administration of the Plan has been delegated by the Board),
in the event Participant does not electronically accept this Grant Notice within
ninety (90) days of the Grant Date, this Award shall be forfeited and
Participant shall have no further rights thereto.

 

Participant acknowledges that Section 4.5 of the Restricted Stock Unit Agreement
amends the governing law of Participant’s Invention & Secrecy Agreement (as
defined in the Restricted Stock Unit Agreement) and hereby agrees to such
amendment.

 

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EXHIBIT A

 

TO RESTRICTED STOCK UNIT AWARD GRANT NOTICE

 

RESTRICTED STOCK UNIT AWARD AGREEMENT

 

Pursuant to the Restricted Stock Unit Award Grant Notice (the “Grant Notice”) to
which this Restricted Stock Unit Award Agreement (this “Agreement”) is attached,
the Company has granted to Participant the right to receive the number of RSUs
set forth in the Grant Notice, and their corresponding Dividend Equivalents
pursuant to Article II, subject to all of the terms and conditions set forth in
this Agreement, the Grant Notice and the Plan.

 

ARTICLE I

 

AWARD OF RESTRICTED STOCK UNITS

 

1.1         Award of Restricted Stock Units.

 

(a)         Award. In consideration of Participant’s continued employment or
service with the Company or any Affiliate thereof and for other good and
valuable consideration, the Company hereby grants to Participant the right to
receive the number of RSUs set forth in the Grant Notice and their corresponding
Dividend Equivalents pursuant to Article II, subject to all of the terms and
conditions set forth in this Agreement, the Grant Notice and the Plan. Prior to
actual issuance of any Shares, the RSUs, the Dividend Equivalents and the Award
represent an unsecured obligation of the Company, payable only from the general
assets of the Company.

 

(b)         Vesting. The RSUs subject to the Award shall vest in accordance with
the Vesting Schedule set forth in Exhibit B to the Grant Notice. Unless and
until the RSUs have vested in accordance with the Vesting Schedule set forth in
the Grant Notice, Participant will have no right to any distribution with
respect to such RSUs.  Unless otherwise provided in Exhibit B to the Grant
Notice, in the event of Participant’s Termination of Service prior to the
vesting of all of the RSUs, any unvested RSUs will terminate automatically
without any further action by the Company and be forfeited without further
notice and at no cost to the Company.

 

(c)         Distribution of RSUs.

 

(i)          Shares of Common Stock shall be distributed to Participant (or in
the event of Participant’s death, to his or her estate) with respect to
Participant’s vested RSUs within ten (10) days following the date on which such
RSUs vest as specified in the Vesting Schedule set forth in Exhibit B to the
Grant Notice (or, in the event the vesting date is the date of a Change in
Control, the RSUs (and their corresponding Dividend Equivalents) shall be
settled immediately prior to such Change in Control), subject to the terms and
provisions of the Plan and this Agreement.

 

(ii)         All distributions of the RSUs shall be made by the Company in the
form of whole shares of Common Stock.

 

(iii)        Neither the time nor form of distribution of Common Stock with
respect to the RSUs and the Dividend Equivalents may be changed, except as may
be permitted by the Board (or any Committee to which administration of the Plan
has been delegated by the Board) in accordance with the Plan and Section 409A of
the Code and the Treasury Regulations thereunder.

 

 

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(d)         Generally. Shares issued under the Award shall be issued to
Participant or Participant’s beneficiaries, as the case may be, at the sole
discretion of the Board (or any Committee to which administration of the Plan
has been delegated by the Board), in either (i) uncertificated form, with the
Shares recorded in the name of Participant in the books and records of the
Company’s transfer agent with appropriate notations regarding the restrictions
on transfer imposed pursuant to this Agreement; or (ii) certificate form.  In no
event will fractional shares be issued upon settlement of the Award.  In lieu of
any fractional Share, the Company shall make a cash payment to Participant equal
to the Fair Market Value of such fractional Share on the date the RSUs and the
Dividend Equivalents are settled pursuant to this Section 1.1.

 

1.2         Tax Withholding.

 

(a)         The Company shall not be obligated to deliver any certificate
representing Shares issuable with respect to the RSUs or any cash payment in
respect of the Dividend Equivalents to Participant or his or her legal
representative unless and until Participant or his or her legal representative
shall have paid or otherwise satisfied in full the amount of all federal, state,
local and foreign taxes applicable with respect to the taxable income of
Participant resulting from the vesting of the RSUs or the Dividend Equivalents,
the distribution of the Shares issuable with respect thereto, the settlement of
the Dividend Equivalents, or any other taxable event related to the RSUs or the
Dividend Equivalents (the “Tax Withholding Obligation”).

 

(b)         Unless Participant elects to satisfy the Tax Withholding Obligation
by some other means in accordance with clause (c) below, prior to the time the
Tax Withholding Obligation arises, Participant’s acceptance of this Award
constitutes Participant’s instruction and authorization to the Company to, and
the Company shall, withhold a net number of vested Shares otherwise issuable
pursuant to the RSUs having a then-current Fair Market Value not exceeding the
amount necessary to satisfy the Tax Withholding Obligation of the Company and
its Affiliates with respect to the vesting or distribution of the RSUs based on
the minimum applicable statutory withholding rates.  In the event Participant’s
Tax Withholding Obligation will be satisfied under this Section 1.2(b), then the
Company may elect to instruct any brokerage firm determined acceptable to the
Company for such purpose to sell on Participant’s behalf a whole number of
shares from those Shares issuable to Participant upon settlement of the RSUs as
the Company determines to be appropriate to generate cash proceeds sufficient to
satisfy Participant’s Tax Withholding Obligation with respect to the vesting or
distribution of the RSUs.  Participant’s acceptance of this Award constitutes
Participant’s instruction and authorization to the Company and such brokerage
firm to complete the transactions described above, including the transactions
described in the previous sentence, as applicable.  Any Shares to be sold at the
Company’s direction through a broker-assisted sale will be sold on the day the
Tax Withholding Obligation with respect to the vesting or distribution of the
RSUs arises or as soon thereafter as practicable.  The Shares may be sold as
part of a block trade with other participants of the Plan in which all
participants receive an average price.  Participant will be responsible for all
broker’s fees and other costs of sale, and Participant agrees to indemnify and
hold the Company harmless from any losses, costs, damages, or expenses relating
to any such sale. To the extent the proceeds of such sale exceed Participant’s
Tax Withholding Obligation with respect to the vesting or distribution of the
RSUs, the Company agrees to pay such excess in cash to Participant as soon as
practicable. Participant acknowledges that the Company or its designee is under
no obligation to arrange for such sale at any particular price, and that the
proceeds of any such sale may not be sufficient to satisfy Participant’s Tax
Withholding Obligation.

 

(c)         At any time not less than five (5) business days before any Tax
Withholding Obligation arises, Participant may elect to satisfy the Tax
Withholding Obligation by delivering to the

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Company an amount that the Company determines is sufficient to satisfy the Tax
Withholding Obligation in one or more of the forms specified below:

 

(i)          by the deduction of such amount from other compensation payable to
Participant;

 

(ii)         by tendering vested Shares owned by Participant having a
then-current Fair Market Value not exceeding the amount necessary to satisfy the
Tax Withholding Obligation of the Company and its Affiliates based on the
minimum applicable statutory withholding rates;

 

(iii)        through the delivery of a notice that Participant has placed a
market sell order with a broker acceptable to the Company with respect to the
Shares issuable pursuant to the RSUs then vesting and that the broker has been
directed to pay a sufficient portion of the net proceeds of the sale to the
Company or its Affiliate with respect to which the Tax Withholding Obligation
arises in satisfaction of such obligation; provided that payment of such
proceeds is then made to the Company or the applicable Affiliate at such time as
may be required by the Board (or any Committee to which administration of the
Plan has been delegated by the Board), but in any event not later than the
settlement of such sale; or

 

(iv)        in any combination of the foregoing.

 

(d)         To the maximum extent permitted by applicable law, the Company
further has the authority to deduct or withhold such amount as is necessary to
satisfy any Tax Withholding Obligation from other compensation payable to
Participant with respect to any taxable event arising from vesting of the RSUs
or the Dividend Equivalents, the receipt of the Shares upon settlement of the
RSUs or the settlement of the Dividend Equivalents.

 

ARTICLE II

 

DIVIDEND EQUIVALENTS

 

2.1         Grant of Dividend Equivalents.  The Company hereby grants to
Participant an award of Dividend Equivalents as set forth in this Article II
(the “Dividend Equivalents”), subject to all of the terms and conditions in this
Agreement and the Plan.  The Dividend Equivalents hereunder shall remain
outstanding from the Grant Date through the earlier to occur of (a) the
termination or forfeiture for any reason of the RSU to which such Dividend
Equivalent corresponds, or (b) the delivery to Participant of the shares of
Common Stock underlying the RSU to which such Dividend Equivalent
corresponds.  Participant shall not be entitled to any payment under a Dividend
Equivalent with respect to any dividend with a record date that occurs prior to
the Grant Date or after the termination of such RSU for any reason, whether due
to payment, forfeiture or otherwise.  If any RSU linked to a Dividend Equivalent
fails to vest and is forfeited for any reason, then (a) the linked Dividend
Equivalent shall be forfeited as well, (b) any amounts otherwise payable in
respect of such Dividend Equivalent shall be forfeited without payment, and (c)
the Company shall have no further obligations in respect of such Dividend
Equivalent.

 

2.2         Payment of Dividend Equivalents.  Dividend Equivalents shall be paid
in cash only on the number of shares of Common Stock underlying the RSUs that
vest in accordance with this Agreement by determining the sum of the cash
dividends paid or payable on such number of shares of Common Stock with respect
to each record date that occurs between the Grant Date and the date on which the
RSUs are settled pursuant to Section 1.1(c) (without any interest or
compounding).  The payment of cash in settlement of the Dividend Equivalents
shall occur at the same time as the vested RSUs to which such Dividend
Equivalents correspond are settled pursuant to Section 1.1(c).

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2.3         Separate Payments.  Dividend Equivalents and any amounts that may
become distributable in respect thereof shall be treated separately from the
RSUs and the rights arising in connection therewith for purposes of the
designation of time and form of payments required by Section 409A of the Code.

 

ARTICLE III

 

RESTRICTIONS

 

3.1         Award and Interests Not Transferable. This Award, including the RSUs
and the Dividend Equivalents awarded hereunder, may not be sold, pledged,
assigned or transferred in any manner other than by will or the laws of descent
and distribution, unless and until the Shares issuable pursuant to the Award
have been issued, and all restrictions applicable to such Shares have lapsed.
This Award and the rights and privileges conferred hereby, including the RSUs
and the Dividend Equivalents awarded hereunder, shall not be liable for the
debts, contracts or engagements of Participant or his or her successors in
interest and shall not be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect, except to the extent that such disposition is permitted
by the preceding sentence.

 

3.2         Rights as Stockholder. Neither Participant nor any person claiming
under or through Participant shall have any of the rights or privileges of a
stockholder of the Company in respect of any Shares issuable hereunder unless
and until certificates representing such Shares (which may be in uncertificated
form) will have been issued and recorded on the books and records of the Company
or its transfer agents or registrars, and delivered to Participant (including
through electronic delivery to a brokerage account). After such issuance,
recordation and delivery, Participant shall have all the rights of a stockholder
of the Company, including with respect to the right to vote the Shares and the
right to receive any cash or share dividends or other distributions paid to or
made with respect to the Shares.

 

3.3         Trading Restrictions.  The Company may establish periods from time
to time during which Participant’s ability to engage in transactions involving
the Company’s Common Stock is subject to specific restrictions (“Restricted
Periods”).  Participant may be subject to restrictions giving rise to a
Restricted Period for any reason that the Company determines appropriate,
including, restrictions generally applicable to employees or groups of employees
or restrictions applicable to Participant during an investigation of allegations
of misconduct or conduct detrimental to the Company or any Affiliate by
Participant.

 

3.4         Award Subject to Clawback.  This Award, including the RSUs and the
Dividend Equivalents awarded hereunder, and any Shares issuable upon vesting of
the RSUs or the cash issuable upon settlement of the Dividend Equivalents, are
subject to forfeiture, recovery by the Company or other action pursuant to, in
addition to the provisions set forth in Section 3.6 of this Agreement, any
clawback or recoupment policy which the Company may adopt from time to time
pursuant to laws or regulations, including without limitation, any such policy
which the Company may be required to adopt under the Dodd-Frank Wall Street
Reform and Consumer Protection Act and implementing rules and regulations
thereunder, or as otherwise required by applicable law.

 

3.5         Conditions to Issuance of Shares or Settlement of Award.  The
Company shall not be required to issue or deliver any Shares issuable upon the
vesting of the RSUs or settle the Dividend Equivalents prior to the fulfillment
of all of the following conditions:  (a) the admission of the Shares to listing
on all stock exchanges on which such Shares are then listed, (b) the completion
of any registration or other qualification of the Shares under any state or
federal law or under rulings or regulations of the U.S. Securities and Exchange
Commission or other governmental regulatory body, which the Board (or any

 

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Committee to which administration of the Plan has been delegated by the Board)
shall, in its sole and absolute discretion, deem necessary and advisable, (c)
the obtaining of any approval or other clearance from any state or federal
governmental agency that the Board (or any Committee to which administration of
the Plan has been delegated by the Board) shall, in its absolute discretion,
determine to be necessary or advisable, (d) the lapse of any such reasonable
period of time following the date the RSUs vest as the Board (or any Committee
to which administration of the Plan has been delegated by the Board) may from
time to time establish for reasons of administrative convenience, and (e) the
receipt by the Company of full payment of any applicable withholding tax in any
manner permitted under Section 1.2 above.

 

3.6         Restrictive Covenants.

 

(a)         Forfeiture for Violation of Restrictive Covenants.  The grant of the
RSUs provided herein and Participant’s agreement to the Restrictive Covenants
(as defined below) are intended to be mutually dependent promises and in the
event Participant breaches or threatens to breach the Restrictive Covenants,
then to the greatest extent permitted by applicable law: (i) RSUs that have not
yet been settled (whether vested or unvested) shall immediately be cancelled;
(ii) any Shares issued upon settlement of the RSUs during the time period that
is twelve (12) months prior to and twelve (12) months following Participant’s
Termination of Service that have not yet been sold by Participant shall be
forfeited back to the Company for no consideration; and (iii) if Participant
received Shares upon settlement of the RSUs during the time period that is
twelve (12) months prior to and twelve (12) months following Participant’s
Termination of Service and subsequently sold the received Share(s), any gain
represented by the fair market value of the Shares issued upon settlement of the
RSUs on the settlement date multiplied by the number of Shares issued to
Participant upon settlement of the RSUs shall be paid by Participant to the
Company, in cash, without regard to any market price decrease or increase
subsequent to the settlement of the RSUs.

 

(b)         Certain Covenants.  Participant acknowledges that, to assist
Participant in the performance of Participant’s duties, the Company agrees to
provide and shall provide and has provided Participant with Confidential
Information (as defined below) and materials.  Due to the sensitive nature of
this Confidential Information, Participant acknowledges that the Company has
legitimate business and competitive interests and legal rights to require
non-disclosure of the Confidential Information to other companies and/or
individuals and to require that the Confidential Information be used only for
the benefit of the Company.  Therefore, in order to protect the Company’s
Confidential Information and the Company’s business goodwill and competitive
position, and in exchange for the Company providing Participant the
consideration set forth herein, and in order to protect the value of the
equity-based compensation provided to Participant in this Agreement, Participant
agrees:

 

(i)          At any time during the term of Participant’s service to the Company
and thereafter for so long as such Confidential Information remains
confidential, other than by reason of its wrongful disclosure (whether directly
or indirectly) by Participant, Participant will not use, disclose or allow to be
disclosed to any person, firm, or corporation, the Company’s Confidential
Information, unless previously authorized by the Company for use in the pursuit
of Company business;

 

(ii)         During the term of Participant’s service to the Company (which for
purposes of this Section shall be deemed to include any period for which
Participant continues to be paid by the Company following termination or
resignation) and for a period of twelve (12) months following Participant’s
termination of service, whether voluntary or involuntary, Participant will not,
anywhere in the world, directly or indirectly, compete with any portion of the
Business (as defined below) of the Company in any way, or act as an officer,
director, employee, consultant, lender, partner, trustee, member, shareholder,
or agent of any person or entity that is engaged in any business in competition
with the Business as now conducted by the Company or its Affiliates or in which
the Company or its Affiliates becomes engaged during the term of Participant’s
service to the Company, including, without limitation,

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any member of the Competitive Group.  Notwithstanding the foregoing, this clause
(ii) shall not (A) preclude Participant from going to work for a separate
business unit of any member of the Competitive Group that is not engaged in the
Business, or (B) apply to services rendered by Participant in California after
the date Participant’s service by the Company terminates (which for purposes of
this Section shall be deemed to include any period for which Participant
continues to be paid by the Company following termination or resignation); and

 

(iii)        Both during Participant’s service to the Company and for a period
of twelve (12) months following Participant’s termination of service, whether
voluntary or involuntary, Participant will not: (A) directly or indirectly
solicit, entice, induce or attempt to induce or influence any employee or
independent contractor of the Company to terminate or alter his, her or its
relationship with the Company; and (B) provide any information about the
Company’s employees or independent contractors to any other person for the
purpose of assisting any third party to solicit the Company’s employees for
outside employment.

 

(c)         Use of Certain Information.  Participant shall not knowingly use in
his or her work for the Company, any ideas, processes, code, inventions,
improvements, developments and discoveries subject to any right or obligation of
a third party, including trade secrets, patents, copyrights, trademarks, or open
source obligations.

 

(d)         Business Opportunities.  Participant will promptly disclose to the
Company any business opportunity of which Participant becomes aware during
his/her employment or service to the Company that relates to any products or
services planned, under development, developed, produced or marketed by the
Company.  Participant will not take advantage of or divert any such opportunity
for his/her (or any other person or entity) own gain, profit or benefit, without
the prior written consent of the Company.

 

(e)         Company Materials.  All Company Materials are the Company’s property
and may not be copied or removed from the Company’s premises (physically or
electronically), unless done for the sole benefit of the Company as part of
Participant’s job responsibilities or expressly approved by an authorized
representative of the Company, for the benefit of the Company.

 

(f)          Return of Company Materials.  Immediately upon the Participant’s
Termination of Service for any reason, or upon Company’s request at any other
time, Participant will deliver to Company all Company Materials.  Participant
shall not retain, copy, or remove (either physically or electronically) any
Company Materials from Company premises, computers, or other electronic
equipment or storage devices.

 

(g)         Definitions.  For purposes of this Section 3.6:

 

(i)          The term “Business” shall mean the business of providing integrated
payment and information solutions and related services for intelligent travel
applications to transportation and traffic management entities, as well as
providing mission-centered training systems and services, C4ISR systems,
intelligence, and cyber solutions for the United States and allied nations.

 

(ii)         The term “Confidential Information” or “Company Confidential
Information” means all forms and types of business, technical, financial,
economic, sales, marketing or customer information of the Company that
Participant receives, develops or has access to as a result of his/her
employment or service to the Company, which has not been previously disclosed to
the general public by an authorized Company representative or customer,
regardless of whether such information would be deemed a trade secret under
applicable law.  Confidential Information shall be interpreted broadly and
includes, but is not limited to, business strategies and plans, financial
information, projections, pricing and

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cost information, proposals, lists of present or future customers, all
information obtained from or about current or future customers, supplier lists
and information, plans and results of research and development, reports,
manuals, policies, personnel information (other than Participant’s own
information), evaluations, designs, specifications, blueprints, drawings,
patterns, compilations, formulas, programs, software, prototypes, methods,
processes, devices, procedures, “Inventions,” special techniques of any kind
peculiar to the Company’s operations, or other confidential or proprietary
information or intellectual property related to the Business, products,
services, or plans of the Company, whether tangible or intangible, and whether
stored or memorialized physically, electronically, photographically, or in
Participant’s memory.  This specifically includes all information the Company
receives from customers or other third parties that is not generally known to
the public or is subject to a confidentiality agreement.

 

(iii)        The term “Company” means the Company, its subsidiaries and its
Affiliates.

 

(iv)        The term “Company Materials” means all forms of written or recorded
information, data, or materials, including, but not limited to, documents,
files, memoranda, notes, lists, as well as photographs, drawings, blueprints,
and schematics (and all copies thereof) relating to the Company’s business,
customers, suppliers, products or services, whether in tangible or electronic
form (including items stored in computer memories, computer disks, thumb drives,
CDs, or any other electronic means), whether made or compiled by Participant or
others.

 

(v)         The term “Competitive Group” includes, but is not limited to, the
following entities: ACS, Accenture, Active Exhaust, BAE Systems, Bering Sea
Environmental, Boeing, Booz Allen Hamilton, DRS Training & Control Systems,
Elbit Systems, Engility, General Dynamics, HP Enterprise Services, Information
Assurance Specialist, IBM, Israeli Aircraft Industries, Kapsch-Group
Beteiligungs, L-3, LG, Leidos, Lockheed Martin, Northrup Grumman, Raytheon,
Rockwell Collins, Royal Imtech, Ruag, SAIC, Saab Training Systems, Scheidt and
Bachmann, Thales, Xerox, Siemens, TransCore, Trapeze Group, IVU Traffic
Technologies, Indra Sistemas, Init AG (and U.S. subsidiaries), Econolite Group,
Trafficware, and Q-Free ASA (and U.S. subsidiaries), as well as any entity that
is a successor to, acquires a majority of the assets of, or merges in whole or
in part with any of the foregoing entities.

 

(vi)        The term “Inventions” includes, but is not limited to, any creation,
discovery, development, idea, technique, formula, method, process, use,
apparatus, product, device, machine, composition, code, design, program,
technical data, configuration of any kind, or improvements to any of these
things, which is discovered, conceived, developed, made or produced by
Participant (alone or in conjunction with others), whether or not patentable or
registerable under patent, copyright or similar statutes.

 

(vii)       The term “Restrictive Covenants” means the restrictions set forth in
this Section 3.6 or, if Participant is a party to an employment agreement with
the Company, which agreement sets forth provisions regarding Confidential
Information, non-solicitation or non-competition that are more restrictive than
the provisions set forth in this Section 3.6, the provisions set forth in such
employment agreement.

 

(h)         Reasonableness of Restrictions.  Participant has carefully read and
considered the Restrictive Covenants, and, having done so, agrees and
acknowledges that the Restrictive Covenants limit Participant’s ability to
engage in competition during the period provided for above.  Participant
expressly warrants and represents that these restrictions with respect to time
and scope of activity are reasonable and necessary to protect the Confidential
Information and the Company’s business goodwill and competitive position.

 

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(i)          Remedies for Breach.  In the event of a breach of any of the
Restrictive Covenants, in addition to the forfeiture provisions set forth in
Section 3.6(a), the Company shall have the right to seek monetary damages for
any such breach.  In addition, in the event of a breach or threatened breach of
any of the Restrictive Covenants, the Company shall have the right to seek
equitable relief, including specific performance by means of an injunction
against Participant or against Participant’s partners, agents, representatives,
servants, employers, employees, and/or any and all persons acting directly or
indirectly by or with him or her, to prevent or restrain any such breach.

 

(j)          Blue Penciling.  In the event a court of competent jurisdiction
determines that the geographic area, duration, or scope of activity of any
restriction under this Agreement is more extensive than is necessary to protect
the legitimate business interests of the Company and its affiliates or are
otherwise unenforceable, the Company may, in its sole discretion, reform and
modify the restrictions under this Agreement to the extent required to render
them valid and enforceable under applicable law.

 

(k)         Defend Trade Secrets Act.  The federal Defend Trade Secrets Act of
2016 provides immunity in certain circumstances to employees, contractors, and
consultants for limited disclosures of a company’s trade secrets. Specifically,
employees, contractors, and consultants may disclose trade secrets: (i) in
confidence, either directly or indirectly, to a federal, state, or local
government official, or to an attorney, solely for the purpose of reporting or
investigating a suspected violation of law; or (ii) in a complaint or other
document filed in a lawsuit or other proceeding, if such filing is made under
seal. Additionally, employees, contractors, and consultants who file retaliation
lawsuits for reporting a suspected violation of law may also: (A) disclose the
trade secret to his/her attorney, and (B) use the information in related court
proceeding, as long as the individual files documents containing the trade
secret under seal, and does not otherwise disclose the trade secret except
pursuant to court order.

 

ARTICLE IV

 

OTHER PROVISIONS

 

4.1         No Right to Continued Employment, Service or Awards.

 

(a)         Nothing in the Plan, the Grant Notice, or this Agreement shall
confer upon Participant any right to continue in the employ or service of the
Company or any Affiliate or shall interfere with or restrict in any way the
rights of the Company and any Affiliate, which rights are hereby expressly
reserved, to discharge or terminate the services of Participant at any time for
any reason whatsoever, except to the extent expressly provided otherwise in a
written agreement between the Company or any Affiliate and Participant.

 

(b)         The grant of the Award is a one-time benefit and does not create any
contractual or other right to receive a grant of Awards or benefits in lieu of
Awards in the future.  Future grants, if any, will be at the sole discretion of
the Company.  In addition, the value of the Award is an extraordinary item of
compensation outside the scope of any employment contract.  As such, the Award
is not part of normal or expected compensation for purposes of calculating any
severance, resignation, redundancy, end of service payments, bonuses,
long-service awards, pension or retirement benefits or similar payments. The
future value of the underlying Common Stock is unknown and cannot be predicted
with certainty.

 

4.2         Adjustments. Participant acknowledges that the Award, including the
vesting of the Award and the number of Shares subject to the Award, is subject
to adjustment in the discretion of the Board (or any Committee to which
administration of the Plan has been delegated by the Board) upon the occurrence
of certain events as provided in this Agreement and Section 11 of the Plan.

 

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4.3         Notices.  Any notice to be given under the terms of this Agreement
to the Company shall be addressed to the Company in care of the Secretary of the
Company at the Company’s corporate headquarters or to the then-current email
address for the Secretary of the Company, and any notice to be given to
Participant shall be addressed to Participant at the most recent physical or
email address for Participant listed in the Company’s personnel records. By a
notice given pursuant to this Section 4.3, either party may hereafter designate
a different address for notices to be given to that party. Any notice shall be
deemed duly given when sent via email or when sent by certified mail (return
receipt requested) and deposited (with postage prepaid) in a post office or
branch post office regularly maintained by the United States Postal Service.

 

4.4         Titles.  Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of this Agreement.

 

4.5         Governing Law; Venue; Severability. The laws of the state in which
Participant resides shall govern the interpretation, validity, administration,
enforcement and performance of the terms of this Agreement regardless of the law
that might be applied under principles of conflicts of laws. The parties agree
that any suit, action, or proceeding arising out of or relating to the Plan or
this Agreement shall be brought in the United States District Court for the
Southern District of California (or should such court lack jurisdiction to hear
such action, suit or proceeding, in a California state court in San Diego
County, California) and that the parties shall submit to the jurisdiction of
such court. The parties irrevocably waive, to the fullest extent permitted by
law, any objection a party may have to the laying of venue for any such suit,
action or proceeding brought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY
RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR
PROCEEDING. If any one or more provisions of this Agreement shall for any reason
be held invalid or unenforceable, it is the specific intent of the parties that
such provisions shall be modified to the minimum extent necessary to make it or
its application valid and enforceable.    Notwithstanding anything to the
contrary contained in the Participant’s Employee Inventions & Secrecy Agreement
(the “Inventions & Secrecy Agreement”), Section 16 of such agreement is hereby
amended to be consistent with this Section 4.5 and this constitutes an amendment
of such Inventions & Secrecy Agreement to change the governing law of such
agreement to be consistent with this Section 4.5 (with references therein to the
“Agreement” to continue to be deemed references to the Inventions & Secrecy
Agreement).

 

4.6         Conformity to Securities Laws. Participant acknowledges that the
Plan, the Grant Notice and this Agreement are intended to conform to the extent
necessary with all provisions of the Securities Act and the Exchange Act and any
and all regulations and rules promulgated thereunder by the United States
Securities and Exchange Commission, including, without limitation, Rule 16b-3
under the Exchange Act. Notwithstanding anything herein to the contrary, the
Plan shall be administered, and the Awards are granted, only in such a manner as
to conform to such laws, rules and regulations. To the extent permitted by
applicable law, the Plan, the Grant Notice and this Agreement shall be deemed
amended to the extent necessary to conform to such laws, rules and regulations.

 

4.7         Tax Representations. Participant has reviewed with Participant’s own
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by the Grant Notice and this
Agreement. Participant is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents. Participant
understands that Participant (and not the Company) shall be responsible for
Participant’s own tax liability that may arise as a result of this investment or
the transactions contemplated by this Agreement.

 

4.8         Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns

 

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of the Company. Subject to the restrictions on transfer set forth herein, this
Agreement shall be binding upon Participant and his or her heirs, executors,
administrators, successors and assigns.

 

4.9         Limitations Applicable to Section 16 Persons. Notwithstanding any
other provision of the Plan or this Agreement, if Participant is subject to
Section 16 of the Exchange Act, the RSUs, the Dividend Equivalents, the Plan and
this Agreement shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
this Agreement shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.

 

4.10       Amendment, Suspension and Termination. To the extent permitted by the
Plan, this Agreement may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board (or any
Committee to which administration of the Plan has been delegated by the Board);
provided that, except as may otherwise be provided by the Plan, no amendment,
modification, suspension or termination of this Agreement shall impair any
rights or obligations under this Agreement in any material way without the prior
written consent of Participant.

 

4.11       Paperless Administration.  By accepting this Award, Participant
hereby agrees to receive documentation related to the Award by electronic
delivery, such as a system using an internet website or interactive voice
response, maintained by the Company or a third party designated by the Company.

 

4.12       Entire Agreement.  The Plan, the Grant Notice, this Agreement and the
Inventions & Secrecy Agreement constitute the entire agreement of the parties
and supersede in their entirety all oral, implied or written promises,
statements, understandings, undertakings and agreements between the Company and
Participant with respect to the subject matter hereof, including without
limitation, the provisions of any employment agreement or offer letter regarding
equity awards to be awarded to Participant by the Company, or any other oral,
implied or written promises, statements, understandings, undertakings or
agreements by the Company or any of its representatives regarding equity awards
to be awarded to Participant by the Company. Notwithstanding the foregoing,
Section 3.6 of this Agreement is in addition to and does not limit the effect of
other agreements or understandings between Participant and the Company or any
Affiliate with respect to matters addressed therein, including the Inventions &
Secrecy Agreement or any other agreement with respect to prohibitions against
solicitation and the protection of the Company’s trade secrets and confidential
information and noncompetition and nonsolicitation covenants of Participant;
provided, however, that to the extent the provisions of Section 3.6 of this
Agreement are more restrictive that any such agreements, including the
Inventions & Secrecy Agreement, Participant and the company agree that the
provisions of Section 3.6 of this Agreement shall govern.

 

4.13       Section 409A.

 

(a)         Notwithstanding any other provision of the Plan, this Agreement or
the Grant Notice, the Plan, this Agreement and the Grant Notice shall be
interpreted in accordance with, and incorporate the terms and conditions
required by, Section 409A of the Code (together with any Treasury Regulations
and other interpretive guidance issued thereunder, including without limitation
any such regulations or other guidance that may be issued after the Grant Date,
“Section 409A”). The Board (or any Committee to which administration of the Plan
has been delegated by the Board) may, in its discretion, adopt such amendments
to the Plan, this Agreement or the Grant Notice or adopt other policies and
procedures (including amendments, policies and procedures with retroactive
effect), or take any other actions, as the Board (or any Committee to which
administration of the Plan has been delegated by the Board) determines are
necessary or appropriate to comply with the requirements of Section 409A.

 

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(b)         This Agreement is not intended to provide for any deferral of
compensation subject to Section 409A of the Code, and, accordingly, the Shares
issuable pursuant to the RSUs and the cash issuable upon settlement of the
Dividend Equivalents corresponding thereto shall be distributed to Participant
no later than the later of: (i) the fifteenth (15th) day of the third month
following Participant’s first taxable year in which such RSUs are no longer
subject to a substantial risk of forfeiture, and (ii) the fifteenth (15th) day
of the third month following first taxable year of the Company in which such
RSUs are no longer subject to substantial risk of forfeiture, as determined in
accordance with Section 409A and any Treasury Regulations and other guidance
issued thereunder.

 

(c)         For purposes of Section 409A of the Code (including, without
limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)),
each payment that Participant may be eligible to receive under this Agreement
shall be treated as a separate and distinct payment.

 

 

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EXHIBIT B

 

TO RESTRICTED STOCK UNIT AWARD GRANT NOTICE

 

VESTING SCHEDULE

 

1.           Performance-Based Vesting.  The RSUs shall vest based on the
Company’s Sales Growth Rate (as defined below), Return on Equity (as defined
below) and Adjusted EBITDA Growth Rate (as defined below) for the Performance
Period (as defined below) as follows:

 

(a)         Performance Vesting Provisions.  In the event the Measurement Date
(as defined below) occurs on September 30, [Year 3], such number of RSUs shall
vest on the Determination Date (as defined below) as is determined as follows:

 

(i)          Sales Growth.  Such number of RSUs shall vest based on the
Company’s calculated Sales Growth Factor during the Performance Period as is
determined by multiplying (i) the Target RSUs set forth in the Grant Notice, by
(ii) 40%, by (iii) Sales Growth Achievement Percentage (as defined in the chart
below) determined pursuant to the chart set forth below as of the Measurement
Date.

 

Sales Growth Rate For
Performance Period

Sales Growth Factor

Sales Growth Achievement
Percentage

 

 

 

 

 

 

 

 

 

 

 

 

 

If the Company’s Sales Growth Factor during the Performance Period is between
two achievement levels, the Sales Growth Achievement Percentage shall be
determined by linear interpolation between the applicable achievement levels.

 

(ii)         Return on Equity Performance.  Such number of RSUs shall vest based
on the Company’s Return on Equity during the Performance Period as is determined
by multiplying (i) the Target RSUs set forth in the Grant Notice, by (ii) 20%,
by (iii) the Return on Equity Achievement Percentage (as defined in the chart
below) determined pursuant to the chart set forth below as of the Measurement
Date.

 

Return on Equity Achieved
During Performance Period

Return on Equity Achievement
Percentage

 

 

 

 

 

 

 

 

 

If the Company’s Return on Equity achievement is between two achievement levels,
the Return on Equity Achievement Percentage shall be determined by linear
interpolation between the applicable achievement levels.

 

(iii)      Adjusted EBITDA Growth.  Such number of RSUs shall vest based on the
Company’s calculated Adjusted EBITDA Growth Factor during the Performance Period
as is determined by multiplying (i) the Target RSUs set forth in the Grant
Notice, by (ii) 40%, by (iii) Adjusted EBITDA

 

 

 

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Growth Achievement Percentage (as defined in the chart below) determined
pursuant to the chart set forth below as of the Measurement Date.

 

Adjusted EBITDA Growth Rate
for Performance Period

Adjusted EBITDA
Growth Factor

Adjusted EBITDA
Growth Achievement
Percentage

 

 

 

 

 

 

 

 

 

 

 

 

 

If the Company’s Adjusted EBITDA Growth Factor during the Performance Period is
between two achievement levels, the Adjusted EBITDA Growth Achievement
Percentage shall be determined by linear interpolation between the applicable
achievement levels.

 

(iv)        Continued Service Requirement.  Subject to clauses (b), (c) and (d)
below, Participant must not have experienced a Termination of Service prior to
September 30, [Year 3] in order to be eligible for vesting pursuant to this
clause (a).

 

(b)         Vesting Upon a Change in Control.  Notwithstanding the foregoing,
such number of RSUs shall vest immediately prior to the date of such Change in
Control as is equal to the Target RSUs.  Participant must not have experienced a
Termination of Service prior to the date of such Change in Control in order to
be eligible for vesting pursuant to this clause (b).

 

(c)         Vesting Upon Covered Termination or Disability.  Notwithstanding the
foregoing, in the event Participant’s Service terminates as a result of his or
her Covered Termination or Disability, the RSUs shall continue to be eligible to
vest on the Determination Date pursuant to clause (a) based on the Company's
performance for the Performance Period, with the exception that the number of
RSUs that shall vest pursuant to clause (a), if any, shall be multiplied by the
percentage determined by dividing (x) the number of calendar days elapsed from
the beginning of the Performance Period through and including the date of such
Covered Termination or Disability, by (y) one thousand ninety-five.

 

(d)         Vesting Upon Death.  Notwithstanding the foregoing, such number of
RSUs shall vest immediately in the event Participant’s service terminates as a
result of his or her death as is determined by multiplying (i) the Target RSUs,
by (ii) the percentage determined by dividing (x) the number of calendar days
elapsed from the beginning of the Performance Period through and including the
date of death, by (y) one thousand ninety-five.

 

2.           Forfeiture.  Any portion of the Award and any RSUs which do not
vest pursuant to Section 1 above shall automatically and without further action
be cancelled and forfeited by Participant, and Participant shall have no further
right or interest in or with respect to such portion of the Award or RSUs.

 

3.           Definitions.  For purposes of this Agreement, the following terms
shall have the meanings given below:

 

(a)         “Actual Cumulative Sales Amount” means the aggregate of the
Company’s Sales during the Performance Period.

 

(b)         “Actual Cumulative Adjusted EBITDA Amount” means the aggregate of
the Company’s Adjusted EBITDA (as defined below) during the Performance Period,
as presented in the

 

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Company’s filings with the U.S. Securities and Exchange Commission.

 

(c)         “Adjusted EBITDA” means (i) net income (loss) attributable to the
Company if the Company has no discontinued operations in accordance with
accounting principles generally accepted in the United States during the
Performance Period or (ii) income (loss) from continuing operations if the
Company has discontinued operations in accordance with accounting principles
generally accepted in the United States during the Performance Period, in either
case plus or minus the following amounts to the extent that these items were
added or deducted in determining net income (loss) or income (loss) from
continuing operations, as applicable: plus interest expense, less interest
income, plus provision for income taxes, less benefit for income taxes, plus
depreciation, plus amortization of purchased intangible assets, plus goodwill
impairment charges, plus intangible asset impairment charges, plus fixed asset
and other long-lived asset impairment charges, plus other non-operating expense,
less non-operating income, plus expenses incurred to implement the Company’s
Enterprise Resource Planning (ERP) systems and improve its supply chain
management, plus expenses incurred related to contemplated or completed business
acquisitions including retention bonus expenses, due diligence and consulting
costs incurred in connection with the acquisitions, expense recognized as a
result of the seller modifying employee equity awards or cash bonuses, expenses
recognized related to the change in the fair value of contingent consideration
for acquisitions, plus expenses incurred related to restructuring the Company,
including the costs of a reduction in force and other associated costs, such as
presented in the Company’s 8-K filing with the U.S. Securities and Exchange
Commission on November 20, [Year 0]. If the Company adopts Accounting Standards
Update No. 2014-09, Revenue for Contracts with Customers (ASU 2014-09), using
the cumulative effect method of adoption (modified retrospective method),
amounts included in the calculation of Adjusted EBITDA as described above during
the Performance Period will be determined for fiscal years [Year 1] and [Year 2]
excluding any impacts of adoption of ASU 2014-09. If the Company adopts ASU
2014-09 using the cumulative effect method of adoption (modified retrospective
method), the amount of Adjusted EBITDA for fiscal year [Year 3] will be equal to
the Adjusted EBITDA for fiscal year [Year 3] as reported in the fiscal year
[Year 3] earnings release filed on Form 8-K multiplied by the ratio calculated
as (i) the fiscal [Year 2] Adjusted EBITDA calculated with net income (loss) or
income (loss) from continuing operations and income tax provision (benefit)
disclosed in the footnotes of the [Year 2] Form 10-K which discloses the amount
that these amounts would have been absent the adoption of ASU 2014-09 using the
cumulative effect method of adoption (modified retrospective method), divided by
(ii) the fiscal [Year 2] Adjusted EBITDA calculated with net income (loss) or
income (loss) from continuing operations and income tax provision (benefit)
disclosed on the income statement of the [Year 2] Form 10-K which were impacted
by the adoption of ASU 2014-09. If the Company adopts ASU 2014-09 using the full
retrospective method of adoption, all amounts will be determined for fiscal year
[Year 1] as reported in the fiscal [Year 1] financial statements in the Annual
Report on Form 10-K filed by the Company for the fiscal year ending September
30, [Year 1]  (the “[Year 1] 10-K”) and the earnings release filed on Form 8-K
in connection with that filing. If the full retrospective method of adoption is
used, the amount of net income attributable to the Company and the income tax
provision (benefit) for fiscal years [Year 2] and [Year 3] will be equal to the
respective amounts for fiscal years [Year 2] and [Year 3] as reported in the
Annual Report on Form 10-K filed by the Company for the fiscal year ending
September 30, [Year 3] (the “[Year 3] 10-K”) multiplied by the ratio calculated
as (i) the sum of the fiscal [Year 1] and fiscal [Year 0] amounts as reported in
the [Year 1] Form 10-K divided by (ii) the sum of the fiscal [Year 1] and fiscal
[Year 0] amounts as reported in the [Year 2] Form 10-K.

 

(d)         “Adjusted EBITDA Growth Factor” for the Performance Period shall
mean (i) the Company’s Actual Cumulative Adjusted EBITDA for the Performance
Period divided by (ii) the Baseline Cumulative Adjusted EBITDA Amount, and the
“Adjusted EBITDA Growth Factor” shall be calculated to the fourth decimal point.

 

(e)         “Baseline Cumulative Sales Amount” means $[______] if the Company
has no

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discontinued operations (as determined in accordance with accounting principles
generally accepted in the United States during the Performance Period).  If the
Company does have discontinued operations during the Performance Period (as
determined in accordance with accounting principles generally accepted in the
United States during the Performance Period), the Baseline Cumulative Sales
Amount means $[______].

 

(f)          “Baseline Cumulative Adjusted EBITDA Amount” means $[______] if the
Company has no discontinued operations (as determined in accordance with
accounting principles generally accepted in the United States during the
Performance Period).  If the Company does have discontinued operations during
the Performance Period (as determined in accordance with accounting principles
generally accepted in the United States during the Performance Period), the
Baseline Cumulative Adjusted EBITDA Amount means $[______].

 

(g)         “Constructive Termination” means a voluntary termination of
employment by Participant after one of the following is undertaken without
Participant’s express written consent:

 

(i)          a substantial reduction in the nature or scope of Participant’s
authority, duties, function or responsibilities (and not simply a change in
title or reporting relationships);

 

(ii)         a material reduction in Participant’s base compensation (except for
base compensation decreases generally applicable to the Company’s other
similarly-situated employees); or

 

(iii)        an increase in Participant’s one-way driving distance from
Participant’s principal personal residence to the principal office or business
location at which Participant is required to perform services of more than 50
miles, except for required travel for the Company’s business to the extent
substantially consistent with Participant’s prior business travel obligations;

 

(iv)        a material breach by the Company of any provisions of this Agreement
or any enforceable written agreement between the Company and Participant.

 

Notwithstanding the foregoing, a voluntary termination shall not be deemed a
Constructive Termination unless (x) Participant provides the Company with
written notice that Participant believes that an event described above has
occurred, (y) such notice is given within three (3) months of the date the event
occurred, and (z) the Company does not rescind or cure the conduct giving rise
to the event described above within ten (10) days of receipt by the Company of
such notice from Participant.  A Participant’s resignation from employment with
the Company for Good Reason must occur within ninety (90) days following the
expiration of the foregoing cure period.

 

(h)         “Covered Termination” shall mean Participant’s Involuntary
Termination Without Cause or Constructive Termination.

 

(i)          “Determination Date” means the date on which the Committee
certifies in writing the Company’s Sales Growth Rate, Return on Equity and
Adjusted EBITDA for the Performance Period.  The Company expects the
Determination Date will occur prior to November 30, [Year 3], but in all events
such date shall occur during [Year 3].

 

(j)          “Involuntary Termination Without Cause” shall mean Participant’s
involuntary termination of employment by the Company other than for one of the
following reasons:

 

(i)        The willful and continued failure of Participant to perform
substantially his or her duties to the Company as those duties exist on the date
of termination, other than any failure resulting from circumstances outside
Participant’s control, or from incapacity of Participant due to physical

 

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or mental illness or Disability, or following Participant’s delivery of notice
of Constructive Termination, after a written demand for substantial performance
is delivered to Participant, which demand specifically identifies the manner in
which the Company believes the Participant has not substantially performed his
or her duties satisfactorily, and provided that the Company demonstrates that
such failure has a demonstrably harmful impact on the Company or its reputation,
and provided further that Participant has been given a period of at least thirty
(30) days to cure his or her failure in performance.  No act or failure to act
shall be considered “willful” unless it is done, or omitted to be done, in bad
faith or without reasonable belief that the action was in the best interests of
the Company or its Affiliates;

 

(ii)        Participant’s gross negligence or breach of fiduciary duty to the
Company involving personal profit, personal dishonesty or recklessness, or
Participant’s material breach of any agreement with the Company, including a
material violation of Company policies and procedures; provided that such
termination of employment occurs within twelve (12) months following the
Company’s discover of such event; or

 

(iii)        Participant’s conviction (which has become final) or entry of a
plea of guilty or nolo contendere regarding an act that would be deemed a felony
under California or Federal criminal statutes (or any comparable criminal laws
of any jurisdiction in which Participant is permanently employed by the Company
or an Affiliate) that has a demonstrably harmful impact on the Company’s
business or reputation, as determined in good faith by the Company’s Executive
Compensation Committee, provided that such termination of employment occurs
within twelve (12) months following the Company’s discover of such event.

 

(k)         “Measurement Date” means September 30, [Year 3].

 

(l)          “Performance Period” means the period beginning on October 1, [Year
0] and ending on the Measurement Date.

 

(m)        “Return on Equity” for the Performance Period shall mean the
Company’s net income return on equity for the Performance Period, expressed as
an average annual percentage of beginning equity (to the third decimal point),
determined as follows:

 

(i)          the sum of:

 

(A)        the percentage determined by dividing (A) the Company’s net income
for the fiscal year ending September 30, [Year 1], by (B) the Company’s
beginning equity as of October 1, [Year 0]; plus

 

(B)         the percentage determined by dividing (A) the Company’s net income
for the fiscal year ending September 30, [Year 2], by (B) the Company’s
beginning equity as of October 1, [Year 1]; plus

 

(C)         the percentage determined by dividing (A) the Company’s net income
for the fiscal year ending September 30, [Year 3], by (B) the Company’s
beginning equity as of October 1, [Year 2];

 

(ii)         divided by three (3).

 

The Company’s Return on Equity shall be determined in accordance with accounting
principles generally accepted in the United States. If the Company adopts ASU
2014-09 using the cumulative effect method of adoption (modified retrospective
method), the net income and beginning equity amounts for

 

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fiscal years [Year 1], [Year 2], and [Year 3]will be determined for such fiscal
years excluding any impacts of adoption of ASU 2014-09. If the Company adopts
ASU 2014-09 using the full retrospective method of adoption, the net income and
beginning equity amounts for fiscal years [Year 1], [Year 2], and [Year 3]will
be determined as the amounts that are reported for such fiscal years,
respectively, in the [Year 3] Form 10-K.

 

(n)        “Sales” shall mean the revenues from the Company’s sales, determined
in accordance with accounting principles generally accepted in the United
States. If the Company adopts ASU 2014-09 using the cumulative effect method of
adoption (modified retrospective method), Sales for fiscal years [Year 1] and
[Year 2] will be determined excluding any impacts of adoption of ASU 2014-09. If
the Company adopts ASU 2014-09 using the cumulative effect method of adoption
(modified retrospective method), Sales for fiscal year [Year 3] will be equal to
the Sales for fiscal year [Year 3] as reported in the [Year 3] Form 10-K
multiplied by the ratio calculated as (i) the fiscal [Year 2] Sales disclosed in
the footnotes of the [Year 2] Form 10-K which discloses the amount that Sales
would have been absent the adoption of ASU 2014-09 using the cumulative effect
method of adoption (modified retrospective method), divided by (ii) the fiscal
[Year 2] Sales as reported in the [Year 2] Form 10-K. If the Company adopts ASU
2014-09 using the full retrospective method of adoption, Sales for fiscal [Year
1] will be determined as reported in the fiscal [Year 1] financial statements in
the [Year 1] Form 10-K. If the full retrospective method of adoption is used,
the amount of Sales for fiscal years [Year 2] and [Year 3] will be equal to the
Sales for fiscal years [Year 2] and [Year 3] as reported in the [Year 3] Form
10-K multiplied by the ratio calculated as (i) the sum of the fiscal [Year 1]
and fiscal [Year 0] Sales as reported in the [Year 1] Form 10-K divided by (ii)
the sum of the fiscal [Year 1] and fiscal [Year 0] Sales as reported in the
[Year 2] Form 10-K.

 

(o)         “Sales Growth Factor” for the Performance Period shall mean (i) the
Company’s Actual Cumulative Sales Amount for the Performance Period divided by
(ii) the Baseline Cumulative Sales Amount, and the “Sales Growth Factor” shall
be calculated to the fourth decimal point.

 

 

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