EXHIBIT 10.1

 

SECOND AMENDED AND RESTATED WESTWOOD HOLDINGS GROUP, INC.

STOCK INCENTIVE PLAN

 

1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

 

  1.1 Establishment. This Second Amended and Restated Westwood Holdings Group,
Inc. Stock Incentive Plan (the “Plan”) is hereby established effective as of
January 1, 2005.

 

  1.2 Purpose. The purpose of the Plan is to advance the interests of the
Participating Company Group and its stockholders by providing an incentive to
attract and retain persons performing services for the Participating Company
Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group.

 

  1.3 Term of Plan. The Plan shall continue in effect until the earlier of its
termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued and all restrictions on
such shares (if any) under the terms of the Plan and the agreements evidencing
the Awards granted under the Plan have lapsed. However, all Awards shall be
granted, if at all, within ten (10) years from the earlier of the date the Plan
is adopted by the Board or the date the Plan is duly approved by the
stockholders of the Company.

 

2. DEFINITIONS AND CONSTRUCTION.

 

  2.1 Definitions. Whenever used herein, the following terms shall have their
respective meanings set forth below:

 

  (a) “Acquiring Corporation” has the meaning given to it in Section 14.2.

 

  (b) “Annual Incentive Award” has the meaning given to it in Section 11.1.

 

  (c) “Award” means any form of incentive or performance award granted under the
Plan, whether singly or in combination, to a Participant by the Board pursuant
to such terms, conditions, restrictions and/or limitations (if any) as the Board
may establish. Awards granted under the Plan may include:

 

  (i) Options awarded pursuant to Sections 6-8;

 

  (ii) Restricted Stock awarded pursuant to Section 9;

 

  (iii) Purchase Rights awarded pursuant to Section 10;

 

  (iv) Annual Incentive Awards awarded pursuant to Section 11;

 

  (v) Performance-Based Awards awarded pursuant to Section 12; and

 

  (vi) Discretionary Bonus Awards awarded pursuant to Section 13.

 

  (d) “Award Certificate” has the meaning given to it in Section 12.3.

 

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  (e) “Board” means the Board of Directors of the Company. If one or more
Committees have been appointed by the Board to administer the Plan, “Board” also
means such Committee(s).

 

  (f) “Cashless Exercise” has the meaning given to it in Section 6.3(a).

 

  (g) “Cause” shall mean any of the following: (i) the Participant’s theft of a
Participating Company’s property or falsification of any Participating Company
documents or records; (ii) the Participant’s improper use or disclosure of a
Participating Company’s confidential or proprietary information; (iii) any
action by the Participant which has a detrimental effect on a Participating
Company’s reputation or business; (iv) the Participant’s failure or inability to
perform any reasonable assigned duties after written notice from the
Participating Company Group or any Participating Company of, and a reasonable
opportunity to cure, such failure or inability; (v) any material breach by the
Participant of any employment agreement between the Participant and the
Participating Company Group or any Participating Company, which breach is not
cured pursuant to the terms of such agreement; or (vi) the Participant’s
conviction (including any plea of guilty or nolo contendere) of any felony or
any other criminal act which impairs the Participant’s ability to perform his or
her duties with the Participating Company Group or any Participating Company.

 

  (h) “Change in Control” has the meaning given to it in Section 14.1.

 

  (i) “Code” means the Internal Revenue Code of 1986, as amended, and any
applicable regulations promulgated thereunder.

 

  (j) “Committee” means the Compensation Committee or other committee of the
Board duly appointed to administer the Plan and having such powers as shall be
specified by the Board. Unless the powers of the Committee have been
specifically limited, the Committee shall have all of the powers of the Board
granted herein, including, without limitation, the power to amend or terminate
the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law.

 

  (k) “Company” means Westwood Holdings Group, Inc., a Delaware corporation, or
any successor corporation thereto.

 

  (l) “Consultant” means a person engaged to provide consulting or advisory
services (other than as an Employee or a Director) to a Participating Company,
provided that the identity of such person, the nature of such services or the
entity to which such services are provided would not preclude the Company from
offering or selling securities to such person pursuant to the Plan in reliance
on either the exemption from registration provided by Rule 701 under the
Securities Act or, if the Company is required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act, registration on a Form S-8 Registration
Statement under the Securities Act.

 

  (m) “Director” means a member of the Board or of the board of directors of any
other Participating Company.

 

  (n) “Disability” means the permanent and total disability of the Participant
within the meaning of Section 22(e)(3) of the Code.

 

  (o) “Employee” means any person treated as an employee (including an officer
or a Director who is also treated as an employee) in the records of a
Participating Company and, with respect to any Incentive Stock Option granted to
such person, who is an employee for purposes of Section 422 of the Code;
provided, however, that neither service as a Director nor payment of a
director’s fee shall be sufficient to constitute employment for purposes of the
Plan.

 

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

 

  (q) “Exercise Period” has the meaning given to it in Section 10.1.

 

  (r) “Fair Market Value” means, as of any date, the value of a share of Stock
or other property as determined by the Board, in its discretion, or by the
Company, in its discretion, if such determination is expressly allocated to the
Company herein, subject to the following:

 

  (i) If, on such date, the Stock is listed on a national or regional securities
exchange or market system, the Fair Market Value of a share of Stock shall be
the closing price of a share of Stock (or the mean of the closing bid and asked
prices of a share of Stock if the Stock is so quoted instead) as quoted on the
Nasdaq National Market, the Nasdaq SmallCap Market or such other national or
regional securities exchange or market system constituting the primary market
for the Stock, as reported in THE WALL STREET JOURNAL or such other source as
the Company deems reliable. If the relevant date does not fall on a day on which
the Stock has traded on such securities exchange or market system, the date on
which the Fair Market Value shall be established shall be the last day on which
the Stock was so traded prior to the relevant date, or such other appropriate
day as shall be determined by the Board, in its discretion.

 

  (ii) If, on such date, the Stock is not listed on a national or regional
securities exchange or market system, the Fair Market Value of a share of Stock
shall be as determined by the Board in good faith without regard to any
restriction other than a restriction which, by its terms, will never lapse.

 

  (s) “Good Reason” means (i) a resignation occurring within ninety (90) days
following a Change in Control; (ii) the relocation of the principal place of
business of the Participating Company for which the Participant renders Service
to a location more than 100 miles from its location as of the date of the Change
in Control without the Participant’s consent; or (iii) a material reduction in
the Participant’s salary or bonus opportunity, or the Participant’s
responsibilities.

 

  (t) “Incentive Stock Option” means an Option intended to be (as set forth in
the Option Agreement), and which qualifies as, an incentive stock option within
the meaning of Section 422(b) of the Code.

 

  (u) “Insider” means an officer or a Director of the Company or any other
person whose transactions in Stock are subject to Section 16 of the Exchange
Act.

 

  (v) “Non-Employee Director” has the meaning given to it in Article 8.

 

  (w) “Nonstatutory Stock Option” means an Option not intended to be (as set
forth in the Option Agreement), or which does not qualify as, an Incentive Stock
Option.

 

  (x) “Option” means a right to purchase Stock (subject to adjustment as
provided in Section 4.2) pursuant to the terms and conditions of the Plan. An
Option may be either an Incentive Stock Option or a Nonstatutory Stock Option.

 

  (y)

“Option Agreement” means a written agreement between the Company and a
Participant setting forth the terms, conditions and restrictions of the Option
granted to the Participant and any shares acquired upon the exercise thereof. An
Option Agreement may consist of

 

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a form of “Notice of Grant of Stock Option” and a form of “Stock Option
Agreement” incorporated therein by reference, or such other form or forms as the
Board may approve from time to time

 

  (z) “Option Expiration Date” has the meaning given to it in Section 6.6(a)(i).

 

  (aa) “Ownership Change Event” has the meaning given to it in Section 14.1.

 

  (bb) “Parent” means (i) any “parent corporation” as defined in Section 424(e)
of the Code and any successor provisions; (ii) any other entity that is taxed as
a corporation under Section 7701(a)(3) of the Code and is a member of the
“affiliated group” as defined in Section 1504(a) of the Code of which the
Company is a common subsidiary corporation, and (iii) any other entity as may be
permitted from time to time by the Code or the Internal Revenue Service to be an
employer of employees to whom Options may be granted; provided, however, that in
each case the Company must be consolidated in the Parent’s financial statements.

 

  (cc) “Participant” means a person who has been granted one or more awards
pursuant to the terms and conditions of the Plan.

 

  (dd) “Participating Company” means the Company or any Parent or Subsidiary.

 

  (ee) “Participating Company Group” means, at any point in time, all
corporations or other entities collectively which are then Participating
Companies.

 

  (ff) “Performance Cycle” means (i) with respect to any Annual Incentive Award,
the twelve (12) month period beginning on January 1, 2005 and each January 1
thereafter, and (ii) with respect to any Performance-Based Award, the period
determined by the Committee over which the Company’s level of attainment of a
Performance Measure shall be determined.

 

  (gg) “Performance Goals” means, with respect to any Annual Incentive Award or
Performance-Based Award, one or more targets, goals or levels of attainment
required to be achieved in terms of the specified Performance Measure during a
fiscal year or specified Performance Cycle, as applicable.

 

  (hh) “Performance Measure” means, with respect to any Annual Incentive Award
or Performance-Based Award, the business criteria established by the Committee
to measure the level of performance of the Company during the fiscal year or
Performance Cycle, as applicable. The Committee may select as the Performance
Measure any one or combination of financial measures, as interpreted by the
Committee, which (to the extent applicable) can be determined either on a pro
forma or GAAP basis, and either pre-tax or after-tax, such as: earnings per
share, return on equity, return on invested capital, relative total shareholder
return, revenue growth, Stock performance, net income, return on sales, return
on assets, economic value added, cash flow and net operating income.

 

  (ii) “Performance-Based Award” has the meaning given to it in Section 12.1.

 

  (jj) “Permitted Transferees” has the meaning given to it in Section 6.7.

 

  (kk) “Plan” has the meaning given to it in Section 1.1.

 

  (ll) “Purchase Right” means the right to purchase Stock in accordance with the
provisions of Section 10.

 

  (mm) “Restricted Period” has the meaning given to it in Section 9.1.

 

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  (nn) “Restricted Stock” means an award of Stock made under Section 9, which is
subject to vesting provisions.

 

  (oo) “Rule 16b-3” means Rule 16b-3 under the Exchange Act, as amended from
time to time, or any successor rule or regulation.

 

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

 

  (qq) “Service” means a Participant’s employment or service with the
Participating Company Group, whether in the capacity of an Employee, a Director
or a Consultant. A Participant’s Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Participant renders
Service to the Participating Company Group or a change in the Participating
Company for which the Participant renders such Service, provided that there is
no interruption or termination of the Participant’s Service. Furthermore, a
Participant’s Service with the Participating Company Group shall not be deemed
to have terminated if the Participant takes any military leave, sick leave, or
other bona fide leave of absence approved by the Company; provided, however,
that if any such leave exceeds ninety (90) days, on the ninety-first (91st) day
of such leave the Participant’s Service shall be deemed to have terminated
unless the Participant’s right to return to Service with the Participating
Company Group is guaranteed by statute or contract. Notwithstanding the
foregoing, unless otherwise designated by the Company or required by law, a
leave of absence shall not be treated as Service for purposes of determining
vesting under any Option Agreement. The Participant’s Service shall be deemed to
have terminated either upon an actual termination of Service or upon the
corporation for which the Participant performs Service ceasing to be a
Participating Company. Subject to the foregoing, the Company, in its discretion,
shall determine whether the Participant’s Service has terminated and the
effective date of such termination.

 

  (rr) “Stock” means the common stock of the Company, as adjusted from time to
time in accordance with Section 4.2.

 

  (ss) “Subsidiary” means (i) any “subsidiary corporation” of the Company, as
defined in Section 424(f) of the Code and any successor provisions, (ii) any
other entity that is taxed as a corporation under Section 7701(a)(3) of the Code
and is a member of the “affiliated group” as defined in Section 1504(a) of the
Code of which the Company is a common parent corporation, and (iii) any other
entity as may be permitted from time to time by the Code or the Internal Revenue
Service to be an employer of employees to whom Options may be granted; provided,
however, that in each case the subsidiary corporation must be consolidated in
the Company’s financial statements.

 

  (tt) “Ten Percent Owner Participant” means a Participant who, at the time an
Option is granted to the Participant, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of a
Participating Company within the meaning of Section 422(b)(6) of the Code.

 

  2.2 Construction. Captions and titles contained herein are for convenience
only and shall not affect the meaning or interpretation of any provision of the
Plan. Except when otherwise indicated by the context, the singular shall include
the plural and the plural shall include the singular. Use of the term “or” is
not intended to be exclusive, unless the context clearly requires otherwise.

 

3. ADMINISTRATION.

 

  3.1 Administration by the Board. The Plan shall be administered by the Board.
All questions of interpretation of the Plan or of any Award shall be determined
by the Board, and such determinations shall be final and binding upon all
persons having an interest in the Plan.

 

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  3.2 Authority of Officers. Any officer of a Participating Company shall have
the authority to act on behalf of the Company with respect to any matter, right,
obligation, determination or election which is the responsibility of or which is
allocated to the Company herein, provided the officer has apparent authority
with respect to such matter, right, obligation, determination or election.

 

  3.3 Powers of the Board. In addition to any other powers set forth in the Plan
and subject to the provisions of the Plan, the Board shall have the full and
final power and authority, in its discretion:

 

  (a) to determine the persons to whom, and the time or times at which, Awards
shall be granted and, if applicable, the number of shares of Stock to be subject
thereto;

 

  (b) to designate Options as Incentive Stock Options or Nonstatutory Stock
Options;

 

  (c) to determine the Fair Market Value of shares of Stock or other property;

 

  (d) to determine the terms, conditions and restrictions applicable to each
Award (which need not be identical) and, if applicable, any shares acquired upon
the exercise thereof, including, without limitation, (i) the exercise price of
an Option or Purchase Right, (ii) the method of payment for shares purchased
upon the exercise of the Option or Purchase Right, (iii) the method for
satisfaction of any tax withholding obligation arising in connection with the
Award or such shares of Stock issued or cash provided thereunder, including by
the withholding or delivery of shares of Stock or cash, (iv) the timing, terms
and conditions of the exercisability of the Award or the vesting of any shares
acquired upon the exercise thereof, (v) the time of the expiration of the Award,
(vi) the effect of the Participant’s termination of Service with the
Participating Company Group on any of the foregoing, and (vii) all other terms,
conditions and restrictions applicable to the Award not inconsistent with the
terms of the Plan;

 

  (e) to approve one or more forms of Option Agreement or Award Certificate;

 

  (f) to amend, modify, extend, cancel or renew any Award, or to waive any
restrictions or conditions applicable to any Award or any shares of Stock
acquired upon the exercise thereof, provided, however, the Board shall not have
the right to (i) lower the Exercise Price of an existing Option or (ii) take any
action which would be treated as a “repricing” under generally accepted
accounting principles;

 

  (g) to accelerate, continue, extend or defer the exercisability of any Award
or the vesting of any shares acquired upon the exercise thereof, including with
respect to the period following a Participant’s termination of Service with the
Participating Company Group;

 

  (h) to prescribe, amend or rescind rules, guidelines and policies relating to
the Plan, or to adopt supplements to, or alternative versions of, the Plan,
including, without limitation, as the Board deems necessary or desirable to
comply with the laws of, or to accommodate the tax policy or custom of, foreign
jurisdictions whose citizens may be granted Options; and

 

  (i) to correct any defect, supply any omission or reconcile any inconsistency
in the Plan, any Option Agreement or any Award Certificate and to make all other
determinations and take such other actions with respect to the Plan or any
Option as the Board may deem advisable to the extent not inconsistent with the
provisions of the Plan or applicable law.

 

  3.4 Administration with Respect to Insiders. With respect to participation by
Insiders in the Plan, at any time that any class of equity security of the
Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall
be administered in compliance with the requirements, if any, of Rule 16b-3.

 

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  3.5 Indemnification. In addition to such other rights of indemnification as
they may have as members of the Board or officers or employees of the
Participating Company Group, members of the Board and any officers or employees
of the Participating Company Group to whom authority to act for the Board or the
Company is delegated shall be indemnified by the Company against all reasonable
expenses, including attorneys’ fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan, or
any right granted hereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such person is liable
for gross negligence, bad faith or intentional misconduct in duties; provided,
however, that within sixty (60) days after the institution of such action, suit
or proceeding, such person shall offer to the Company, in writing, the
opportunity at its own expense to handle and defend the same.

 

4. SHARES SUBJECT TO PLAN.

 

  4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in
Section 4.2, the maximum aggregate number of shares of Stock that may be issued
under the Plan shall be 948,100 shares, and shall consist of authorized but
unissued or reacquired shares of Stock or any combination thereof. If an
outstanding Award for any reason expires or is terminated or canceled or if
shares of Stock are acquired upon the exercise of an Award or otherwise subject
to a Company repurchase option and are repurchased by the Company at the
Participant’s exercise price, or if shares of Restricted Stock are forfeited
unvested, the shares of Stock shall again be available for issuance under the
Plan. Subject to adjustment as provided in Section 4.2, the maximum aggregate
number of Options for shares of Stock that may be awarded in any year to any
Participant may not exceed 316,033 shares.

 

  4.2 Adjustments for Changes in Capital Structure. In the event of any stock
dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number and class of shares subject
to the Plan and to any outstanding Awards (if applicable) and in the exercise
price per share of any outstanding Awards (if applicable). If a majority of the
shares which are of the same class as the shares that are subject to outstanding
Awards are exchanged for, converted into, or otherwise become (whether or not
pursuant to an Ownership Change Event, as defined in Section 14.1) shares of
another corporation (the “New Shares”), the Board may unilaterally amend the
outstanding Awards to provide that such Awards are exercisable for New Shares.
In the event of any such amendment, the number of shares subject to, and the
exercise price per share of, the outstanding Awards shall be adjusted in a fair
and equitable manner as determined by the Board, in its discretion.
Notwithstanding the foregoing, any fractional share resulting from an adjustment
pursuant to this Section 4.2 shall be rounded down to the nearest whole number,
and in no event may the exercise price of any Award be decreased to an amount
less than the par value, if any, of the stock subject to the Award. The
adjustments determined by the Board pursuant to this Section 4.2 shall be final,
binding and conclusive.

 

5. ELIGIBILITY AND OPTION LIMITATIONS.

 

  5.1 Persons Eligible for Awards. Awards may be granted pursuant to this Plan
only to Employees, Consultants, and Directors. For purposes of the foregoing
sentence, “Employees,” “Consultants” and “Directors” shall include prospective
Employees, prospective Consultants and prospective Directors to whom Awards are
granted in connection with written offers of an employment or other service
relationship with the Participating Company Group. Eligible persons may be
granted more than one (1) Award.

 

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  5.2 Option Grant Restrictions. Any person who is not an Employee on the
effective date of the grant of an Option to such person may be granted only a
Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective
Employee upon the condition that such person become an Employee shall be deemed
granted effective on the date such person commences Service with a Participating
Company, with an exercise price determined as of such date in accordance with
Section 6.1.

 

  5.3 Fair Market Value Limitation. To the extent that Options designated as
Incentive Stock Options (granted under all stock option plans of the
Participating Company Group, including the Plan) become exercisable by a
Participant for the first time during any calendar year for Stock having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000), the portions
of such Options which exceed such amount shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5.3, options designated as Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of Stock shall be determined as of the time the Option
with respect to such Stock is granted. If the Code is amended to provide for a
different limitation from that set forth in this Section 5.3, such different
limitation shall be deemed incorporated herein effective as of the date and with
respect to such Options as required or permitted by such amendment to the Code.
If an Option is treated as an Incentive Stock Option in part and as a
Nonstatutory Stock Option in part by reason of the limitation set forth in this
Section 5.3, the Participant may designate which portion of such Option the
Participant is exercising. In the absence of such designation, the Participant
shall be deemed to have exercised the Incentive Stock Option portion of the
Option first. Separate certificates representing each such portion shall be
issued upon the exercise of the Option.

 

6. TERMS AND CONDITIONS OF OPTIONS.

 

Options shall be evidenced by Option Agreements specifying the number of shares
of Stock covered thereby, in such form as the Board shall from time to time
establish. No Option or purported Option shall be a valid and binding obligation
of the Company unless evidenced by a fully executed Option Agreement. Option
Agreements may incorporate all or any of the terms of the Plan by reference and
shall comply with and be subject to the following terms and conditions:

 

  6.1 Exercise Price. The exercise price for each Option shall be established in
the discretion of the Board; provided, however, that (a) the exercise price per
share for an Option shall be not less than the Fair Market Value of a share of
Stock on the effective date of grant of the Option, and (b) no Incentive Stock
Option granted to a Ten Percent Owner Participant shall have an exercise price
per share less than one hundred ten percent (110%) of the Fair Market Value of a
share of Stock on the effective date of grant of the Option. Notwithstanding the
foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock
Option) may be granted with an exercise price lower than the minimum exercise
price set forth above if such Option is granted pursuant to an assumption or
substitution for another option in a manner qualifying under the provisions of
Section 424(a) of the Code.

 

  6.2 Exercisability and Term of Options. Options shall be exercisable at such
time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria and restrictions as shall be determined by the
Board and set forth in the Option Agreement evidencing such Option; provided,
however, that (a) no Option shall be exercisable after the expiration of ten
(10) years after the effective date of grant of such Option, (b) no Incentive
Stock Option granted to a Ten Percent Owner Participant shall be exercisable
after the expiration of five (5) years after the effective date of grant of such
Option, and (c) no Option granted to a prospective Employee, prospective
Consultant or prospective Director may become exercisable prior to the date on
which such person commences Service with a Participating Company. Subject to the
foregoing, unless otherwise specified by the Board in the grant of an Option,
any Option granted hereunder shall terminate ten (10) years after the effective
date of grant of the Option, unless earlier terminated in accordance with its
provisions.

 

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  6.3 Payment of Exercise Price.

 

  (a) Forms of Consideration Authorized. Except as otherwise provided below,
payment of the exercise price for the number of shares of Stock being purchased
pursuant to any Option shall be made (i) in cash, by check or cash equivalent,
(ii) by tender to the Company, or attestation to the ownership, of shares of
Stock owned by the Participant having a Fair Market Value (as determined by the
Company without regard to any restrictions on transferability applicable to such
stock by reason of federal or state securities laws or agreements with an
underwriter for the Company) not less than the exercise price, (iii) by delivery
of a properly executed notice together with irrevocable instructions to a broker
providing for the assignment to the Company of the proceeds of a sale or loan
with respect to some or all of the shares being acquired upon the exercise of
the Option (including, without limitation, through an exercise complying with
the provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System) (a “Cashless Exercise”), (iv) by such
other consideration as may be approved by the Board from time to time to the
extent permitted by applicable law, or (v) by any combination thereof. In no
event shall the Company accept a promissory note in payment of the exercise
price, or make a loan to a Participant to enable the Participant to exercise an
Option. The Board may at any time or from time to time, by approval of or by
amendment to the standard forms of Option Agreement described in Section 7, or
by other means, grant Options which do not permit all of the foregoing forms of
consideration to be used in payment of the exercise price or which otherwise
restrict one or more forms of consideration.

 

  (b) Limitations on Forms of Consideration.

 

  (i) Tender of Stock. Notwithstanding the foregoing, an Option may not be
exercised by tender to the Company, or attestation to the ownership, of shares
of Stock to the extent such tender or attestation would constitute a violation
of the provisions of any law, regulation or agreement restricting the redemption
of the Company’s stock. Unless otherwise provided by the Board, an Option may
not be exercised by tender to the Company, or attestation to the ownership, of
shares of Stock unless such shares either have been owned by the Participant for
more than six (6) months or were not acquired, directly or indirectly, from the
Company.

 

  (ii) Cashless Exercise. The Company reserves, at any and all times, the right,
in the Company’s sole and absolute discretion, to establish, decline to approve
or terminate any program or procedures for the exercise of Options by means of a
Cashless Exercise.

 

  6.4 Tax Withholding. The Company shall have the right, but not the obligation,
to deduct from the shares of Stock issuable upon the exercise of an Option, or
to accept from the Participant the tender of, a number of whole shares of Stock
having a Fair Market Value, as determined by the Company, equal to all or any
part of the federal, state, local and foreign taxes, if any, required by law to
be withheld by the Participating Company Group with respect to such Option or
the shares acquired upon the exercise thereof. Alternatively or in addition, in
its discretion, the Company shall have the right to require the Participant,
through payroll withholding, cash payment or otherwise, including by means of a
Cashless Exercise, to make adequate provision for any such tax withholding
obligations of the Participating Company Group arising in connection with the
Option or the shares acquired upon the exercise thereof the Fair Market Value of
any shares of Stock withheld or tendered to satisfy any such tax withholding
obligations shall not exceed the amount determined by the applicable minimum
statutory withholding rates, the Company shall have no obligation to deliver
shares of Stock or to release shares of Stock from an escrow established
pursuant to the Option Agreement until the Participating Company Group’s tax
withholding obligations have been satisfied by the Participant.

 

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  6.5 Repurchase Rights. Shares issued under the Plan may be subject to a right
of first refusal, one or more repurchase options, or other conditions and
restrictions as determined by the Board in its discretion at the time the Option
is granted. The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable, to
one or more persons as may be selected by the Company. Upon request by the
Company, each Participant shall execute any agreement evidencing such transfer
restrictions prior to the receipt of shares of Stock hereunder and shall
promptly present to the Company any and all certificates representing shares of
Stock acquired hereunder for the placement on such certificates of appropriate
legends evidencing any such transfer restrictions.

 

  6.6 Effect of Termination of Service.

 

  (a) Option Exercisability. Subject to earlier termination of the Option as
otherwise provided herein and unless otherwise provided by the Board in the
grant of an Option and set forth in the Option Agreement, an Option shall be
exercisable after a Participant’s termination of Service only during the
applicable time period determined in accordance with this Section 6.6 and
thereafter shall terminate:

 

  (i) Disability. If the Participant’s Service with the Participating Company
Group terminates because of the Disability of the Participant, the Option, to
the extent unexercised and exercisable on the date on which the Participant’s
Service terminated, may be exercised by the Participant (or the Participant’s
guardian or legal representative) at any time prior to the expiration of one (1)
year (or such other period of time as determined by the Board, in its
discretion) after the date on which the Participant’s Service terminated, but in
any event no later than the date of expiration of the Option’s term as set forth
in the Option Agreement evidencing such Option (the “Option Expiration Date”).

 

  (ii) Death. If the Participant’s Service with the Participating Company Group
terminates because of the death of the Participant, the Option, to the extent
unexercised and exercisable on the date on which the Participant’s Service
terminated, may be exercised by the Participant’s legal representative or other
person who acquired the right to exercise the Option by reason of the
Participant’s death at any time prior to the expiration of one (1) year (or such
other period of time as determined by the Board, in its discretion) after the
date on which the Participant’s Service terminated, but in any event no later
than the Option Expiration Date. The Participant’s Service shall be deemed to
have terminated on account of death if the Participant dies within three (3)
months (or such other period of time as determined by the Board, in its
discretion) after the Participant’s termination of Service.

 

  (iii) Cause. If the Participant’s Service with the Participating Company Group
is terminated for Cause, the Option shall terminate and cease to be exercisable
immediately upon such termination of Service.

 

  (iv) Termination of Service. If the Participant’s Service with the
Participating Company Group terminates for any reason, except Disability, death
or Cause, the Option, to the extent unexercised and exercisable by the
Participant on the date on which the Participant’s Service terminated, may be
exercised by the Participant at any time prior to the expiration of three (3)
months (or such other period of time as determined by the Board, in its
discretion) after the date on which the Participant’s Service terminated, but in
any event no later than the Option Expiration Date.

 

  (b)

Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the
exercise of an Option within the applicable time periods set forth in Section
6.6(a) is

 

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prevented by the provisions of Section 17 below, the Option shall remain
exercisable until three (3) months (or such longer period of time as determined
by the Board, in its discretion) after the date the Participant is notified by
the Company that the Option is exercisable, but in any event no later than the
Option Expiration Date.

 

  (c) Extension if Participant Subject to Section 16(b). Notwithstanding the
foregoing, if a sale within the applicable time periods set forth in Section
6.6(a) of shares acquired upon the exercise of the Option would subject the
Participant to suit under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Participant would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Participant’s termination of Service, or (iii) the Option Expiration
Date.

 

  6.7 Transferability of Options. Incentive Stock Options granted under the Plan
shall not be transferable otherwise than by will or the laws of descent and
distribution, or pursuant to a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder. Incentive Stock Options shall be exercisable
during the lifetime of the Participant only by the Participant or by the
Participant’s guardian or legal representative (unless such exercise would
disqualify an Option as an Incentive Stock Option). With the approval of the
Board, the Option Agreement (other than an Incentive Stock Option) may provide
that such Option may be transferred without consideration to one or more
Permitted Transferees. Any attempted assignment, transfer, pledge, hypothecation
or other disposition of an Option or other award contrary to the provisions
hereof, or the levy of any execution, attachment or similar process upon an
Option or other award shall be null and void and without effect. As used herein,
“Permitted Transferees” means a member of a Participant’s immediate family,
trusts for the exclusive benefit of such Participant and/or such Participant’s
immediate family members, and partnerships or other entities in which the
Participant and/or such immediate family members are the only partners, provided
that no consideration is provided for the transfer. Immediate family members
shall include a Participant’s spouse, descendants (children, grandchildren and
more remote descendants), spouses of descendants, and shall include
step-children and relationships arising from legal adoption.

 

7. STANDARD FORMS OF OPTION AGREEMENT.

 

  7.1 Option Agreement. Unless otherwise provided by the Board at the time the
Option is granted, an Option shall comply with and be subject to the terms and
conditions set forth in the form of Option Agreement approved by the Board
concurrently with its adoption of the Plan and as amended from time to time.

 

  7.2 Authority to Vary Terms. The Board shall have the authority from time to
time to vary the terms of any standard form of Option Agreement described in
this Section 7 either in connection with the grant or amendment of an individual
Option or in connection with the authorization of a new standard form or forms;
provided, however, that the terms and conditions of any such new, revised or
amended standard form or forms of Option Agreement are not inconsistent with the
terms of the Plan.

 

8. AWARDS TO NON-EMPLOYEE DIRECTORS

 

Each Non-Employee Director shall, upon each date of election and annually
thereafter, be awarded 1,500 shares of Restricted Stock. The Compensation
Committee shall make the award each year and shall determine the date of grant
for each award. The Restricted Stock shall fully vest at the expiration of
twelve (12) months from the date of the grant. The Restricted Stock is not
transferable until vested, and shall be forfeited if the Non-Employee Director’s
service as a Director ceases before the vesting date.

 

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9. AWARD AND DELIVERY OF RESTRICTED STOCK

 

  9.1 Restricted Period. At the time an award of Restricted Stock is made, the
Committee shall establish a period or periods of time (each a “Restricted
Period”) or such other restrictions on the vesting of the Restricted Stock as it
shall deem appropriate or applicable to such award. Each award of Restricted
Stock may have a different Restricted Period or Restricted Periods. The
Committee may, in its sole discretion, at the time an award is made, provide for
the incremental lapse of Restricted Periods with respect to a portion or
portions of the Restricted Stock awarded, and for the lapse or termination of
restrictions upon all or any portion of the Restricted Stock upon the
satisfaction of other conditions in addition to or other than the expiration of
the applicable Restricted Period. The Committee may also, in its sole
discretion, shorten or terminate a Restricted Period or waive any conditions for
the lapse or termination of restrictions with respect to all or any portion of
the Restricted Stock.

 

  9.2 Rights and Privileges. At the time a grant of Restricted Stock is made to
a Participant, a stock certificate representing a number of shares of the
Company’s common stock equal to the number of shares of such Restricted Stock
shall be registered in the Participant’s name but shall be held in custody by
the Company for such Participant’s account. The Participant shall generally have
the rights and privileges of a stockholder as to such Restricted Stock,
including, without limitation, the right to vote the Restricted Stock, except
that, subject to the earlier lapse or termination of restrictions as herein
provided, the following restrictions shall apply: (i) the Participant shall not
be entitled to delivery of the stock certificate evidencing Restricted Stock
until the expiration or termination of the Restricted Period applicable to such
shares and the satisfaction of any other conditions prescribed by the Committee;
(ii) none of the shares then subject to a Restricted Period shall be sold,
transferred, assigned, pledged, or otherwise encumbered or disposed of during
the Restricted Period applicable to such shares and until the satisfaction of
any other conditions prescribed by the Committee; and (iii) all of the shares
then subject to a Restricted Period shall be forfeited and all rights of the
Participant to such Restricted Stock shall terminate without further obligation
on the part of the Company if the Participant ceases to be an Employee,
Consultant or Director of the Company or any of its subsidiaries before the
expiration or termination of such Restricted Period and the satisfaction of any
other conditions prescribed by the Committee applicable to such Restricted
Stock. Dividends on Restricted Stock shall be currently paid; provided, however,
that in lieu of paying currently a dividend of shares of Common Stock in respect
of Restricted Stock, the Committee may, in its sole discretion, register in the
name of a Participant a stock certificate representing such shares of Common
Stock issued as a dividend on Restricted Stock, and may cause the Company to
hold such certificate in custody for the Participant’s account subject to the
same terms and conditions as such Restricted Stock. Upon the forfeiture of any
Restricted Stock, such forfeited Restricted Stock shall be transferred to the
Company without further action by the Participant.

 

  9.3 Expiration of Restricted Period. Upon the expiration or termination of the
Restricted Period applicable to Restricted Stock and the satisfaction of any
other conditions prescribed by the Committee or at such earlier time as provided
for herein, the restrictions applicable to the Restricted Stock to such
Restricted Period shall lapse and a certificate for a number of shares of Common
Stock equal to the number of shares of Restricted Stock with respect to which
the restrictions have expired or terminated shall be delivered, free of all such
restrictions, except any that may be imposed by law, to the Participant. The
Company shall not be required to deliver any fractional share of Common Stock
but shall pay to the Participant, in lieu thereof, the product of (i) the Fair
Market Value per share (determined as of the date the restrictions expire or
terminate) and (ii) the fraction of a share to which such Participant would
otherwise be entitled.

 

  9.4 Tax Withholding. Upon termination of the Restricted Period with respect to
an award of Restricted Stock (or such earlier time, if any, as an election is
made by the employee under Code Section 83(b), or any successor provisions
thereto, to include the value of such shares in taxable income), the Company
shall have the right to require the Participant to pay to the Company the amount
of taxes that the Company is required to withhold with respect to such shares of
Stock or, in lieu thereof, to retain or sell without notice a sufficient number
of shares of Stock held by it to cover the amount required to be withheld.

 

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10. AWARD AND DELIVERY OF PURCHASE RIGHTS

 

  10.1 Purchase Rights. At the time an award of Purchase Rights is made, the
Committee shall establish a period or periods of time during which the Purchase
Right may be exercised (each an “Exercise Period”) or such other restrictions as
it shall deem appropriate and applicable to such award. Each award of Purchase
Rights may have a different Exercise Period or Exercise Periods. Each award
shall specify the method of payment (which shall not permit payment with
promissory notes) to purchase Stock and shall set forth any repurchase rights or
calls applicable to the purchased Stock.

 

11. ANNUAL INCENTIVE AWARDS.

 

  11.1 Annual Incentive Awards. The Committee may grant annual incentive awards
of Stock or cash (each an “Annual Incentive Award”) to such Participants as the
Committee may from time to time recommend, in such amounts and subject to such
terms and conditions as the Committee in its discretion may determine. The
Committee shall establish the maximum amount of Annual Incentive Awards that may
be granted for each Performance Cycle. Notwithstanding the foregoing, all Annual
Incentive Awards shall be subject to the provisions of paragraphs (a) through
(d) below:

 

  (a) Annual Incentive Awards shall be granted in connection with a 12-month
Performance Cycle, which shall be the fiscal year of the Company.

 

  (b) Subject to Section 4.1, the Committee shall determine the Participants who
shall be eligible to receive an Annual Incentive Award for such Performance
Cycle.

 

  (c) The Committee shall fix and establish, in writing, (A) the Performance
Measure(s) that shall apply to such Performance Cycle, (B) an objective formula
for computing the amount of the Annual Incentive Awards for such Performance
Cycle, where the amount shall be based upon the attainment of various
Performance Goals for the applicable Performance Measure(s).

 

  (d) Annual Incentive Awards shall be paid in the form of cash, Stock
(including Restricted Stock) or any combination thereof, in the discretion of
the Committee.

 

12. PERFORMANCE-BASED AWARDS.

 

12.1 Performance-Based Awards. The Committee may grant to officers and other key
Employees of either the Company or any Subsidiary the prospective contingent
right, expressed in Units, to receive payments of Stock, cash or any combination
thereof, with each Unit equivalent in value to one share of Stock, or equivalent
to such other value or monetary amount as may be designated or established by
the Committee (“Performance-Based Awards”). Performance-Based Awards shall be
earned by Participants only if specified Performance Goals are satisfied in the
applicable Performance Cycle. The Committee shall, in its sole discretion,
determine the officers and other key Employees eligible to receive
Performance-Based Awards. At the time each grant of a Performance-Based Award is
made, the Committee shall establish the applicable Performance Cycle, the
Performance Measure and Performance Goals in respect of such Performance-Based
Award. The number of shares of Stock and/or the amount of cash earned and
payable in settlement of a Performance-Based Award shall be determined by the
Committee at the end of the Performance Cycle.

 

12.2 The Committee may grant Performance-Based Awards to a Participant in such
amounts as the Committee may determine, subject to the limitations set forth in
Section 4.1.

 

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12.3 A certificate (an “Award Certificate”) for each Performance-Based Award
shall provide that, in order for a Participant to earn all or a portion of the
Units subject to such Performance-Based Award, the Company must achieve certain
Performance Goals over a designated Performance Cycle having a minimum duration
of one year. The Performance Goals and Performance Cycle shall be established by
the Committee in its sole discretion. The Committee shall establish a
Performance Measure for each Performance Cycle for determining the portion of
the Performance-Based Award, which will be earned or forfeited, based on the
extent to which the Performance Goals are achieved or exceeded. Performance
Goals may include minimum, maximum and target levels of performance, with the
size of the Performance-Based Award based on the level attained. Once
established by the Committee and specified in the Award Certificate, and if and
to the extent provided in or required by the Award Certificate, the Performance
Goals and the Performance Measure in respect of any Performance-Based Award
shall not be changed. The Committee may, in its discretion, eliminate or reduce
(but not increase) the amount of any Performance-Based Award that otherwise
would be payable to a Participant upon attainment of the Performance Goal(s)
unless the Participant has a vested right under applicable employment law to
receive the full Performance-Based Award.

 

12.4 Performance-Based Awards may be made on such terms and conditions not
inconsistent with the Plan, and in such form or forms, as the Committee may from
time to time approve. Performance-Based Awards may be made alone, in addition to
in tandem with, or independent of other grants and awards under the Plan.
Subject to the terms of the Plan, the Committee shall, in its discretion,
determine the number of Units subject to each Performance Grant made to a
Participant and the Committee may impose different terms and conditions on any
particular Performance–Based Award made to any Participant. The Performance
Goals, the Performance Cycle and the Performance Measure applicable to a
Performance Grant shall be set forth in the relevant Award Certificate.

 

12.5 Each Participant shall be entitled to receive payment in an amount equal to
the aggregate Fair Market Value (if the Unit is equivalent to a share of Stock),
or such other value as the Committee shall specify, of the Units earned in
respect of such Performance Award. Payment in settlement of a Performance-Based
Award may be made in Stock, in cash, or in any combination of Stock and cash,
and at such time or times, as the Committee, in its discretion, shall determine.

 

13. DISCRETIONARY BONUS AWARDS.

 

13.1 Discretionary Bonus Awards. The Committee may grant discretionary bonus
awards of Stock or cash (each a “Discretionary Bonus Award”) to officers and
other key Employees of either the Company or any Subsidiary, in such amounts and
subject to such terms and conditions as the Committee in its discretion may
determine.

 

13.2 The Committee may grant Discretionary Bonus Awards to eligible Participants
in such amounts as the Committee may determine, subject to the limitations set
forth in Section 4.1.

 

13.3 Discretionary Bonus Awards shall be paid in the form of cash, Stock
(including Restricted Stock) or any combination thereof, in the discretion of
the Committee.

 

14. CHANGE IN CONTROL.

 

  14.1 Definitions.

 

  (a) An “Ownership Change Event” shall be deemed to have occurred if any of the
following occurs with respect to the Company: (i) the direct or indirect sale or
exchange in a single or series of related transactions by the stockholders of
the Company of more than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company is a party; (iii) the sale,
exchange, or transfer of all or substantially all of the assets of the Company;
or (iv) a liquidation or dissolution of the Company.

 

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  (b) A “Change in Control” shall mean (i) a merger or consolidation of the
Company with or into another corporation in which the Company shall not be the
surviving corporation (other than a merger undertaken solely in order to
reincorporate in another state) (for purposes hereof, the Company shall not be
deemed the surviving corporation in any such transaction if, as the result
thereof, it becomes a wholly-owned subsidiary of another corporation), (ii) a
dissolution of the Company, (iii) a transfer of all or substantially all of the
assets of the Company in one transaction or a series of related transactions to
one or more other persons or entities, (iv) a transaction or series of
transactions that results in any entity, “Person” or “Group” (as defined below),
becoming the beneficial owner, directly or indirectly, of securities of the
Company representing more than 50% of the combined voting power of the Company’s
then outstanding securities, or (v) during any period of two (2) consecutive
years commencing on or after January 1, 2005, individuals who at the beginning
of the period constituted the Company’s Board of Directors cease for any reason
to constitute at least a majority, unless the election of each director who was
not a director at the beginning of the period has been approved in advance by
directors representing at least two-thirds (2/3) of the directors then in office
who were directors at the beginning of the period; provided, however, that a
“Change in Control” shall not be deemed to have occurred if the ownership of 50%
or more of the combined voting power of the surviving corporation, asset
transferee or Company (as the case may be), after giving effect to the
transaction or series of transactions, is directly or indirectly held by (A) a
trustee or other fiduciary under an employee benefit plan maintained by the
Company, (B) one or more of the “executive officers” of the Company that held
such positions prior to the transaction or series of transactions, or any
entity, Person or Group under their control. As used herein, “Person” and
“Group” shall have the meanings set forth in Sections 13(d)(3) and/or 14(d)(2)
of the Securities Exchange Act of 1934, as amended, and “executive officer”
shall have the meaning set forth in Rule 3b-7 promulgated under such Act .

 

  14.2 Effect of Change in Control on Awards. In the event of a Change in
Control, the surviving, continuing, successor, or purchasing corporation or
Parent thereof, as the case may be (the “Acquiring Corporation”), may either
assume the Company’s rights and obligations under outstanding Awards or
substitute for outstanding Awards substantially equivalent awards, including
awards for the Acquiring Corporation’s stock, if applicable. For purposes of
this Section 14.2, an Award shall be deemed assumed if, following the Change in
Control, the Award confers the right to purchase in accordance with its terms
and conditions, for each share of Stock subject to the Award immediately prior
to the Change in Control, the consideration (whether stock, cash or other
securities or property) to which a holder of a share of Stock on the effective
date of the Change in Control was entitled. Upon a Change in Control, each
outstanding Award shall become 100% vested and exercisable as of the date ten
(10) days prior to the date of the Change in Control, provided that the
Participant’s Service has not terminated prior to such date. The exercise or
vesting of any Award that was permissible solely by reason of this Section 14.2
shall be conditioned upon the consummation of the Change in Control. Any Award
which is neither assumed or substituted for by the Acquiring Corporation in
connection with the Change in Control nor exercised as of the date of the Change
in Control shall terminate and cease to be outstanding effective as of the date
of the Change in Control. Notwithstanding the foregoing, shares acquired upon
exercise of an Award prior to the Change in Control and any consideration
received pursuant to the Change in Control with respect to such shares shall
continue to be subject to all applicable provisions of the applicable Option
Agreement, Award Certificate or Stock Purchase Agreement, except as otherwise
provided therein. Furthermore, notwithstanding the foregoing, if the Change in
Control results from an Ownership Change Event described in Section 14.1(a)(i)
and the Company is the surviving or continuing corporation and immediately after
such Change in Control less than fifty percent (50%) of the total combined
voting power of its voting stock is held by another corporation or by other
corporations that are members of an affiliated group within the meaning of
Section 1504(a) of the Code without regard to the provisions of Section 1504(b)
of the Code, the outstanding Awards shall not terminate unless the Board
otherwise provides in its discretion.

 

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15. PROVISION OF INFORMATION.

 

Each Participant shall be given access to information concerning the Company
equivalent to that information generally made available to the Company’s common
stockholders.

 

16. COMPLIANCE WITH SECURITIES LAW.

 

The grant of an Award and the issuance of shares of Stock upon exercise of an
Award, if applicable, shall be subject to compliance with all applicable
requirements of federal, state and foreign law with respect to such securities.
An Award may not be exercised for shares of Stock if the issuance of such shares
would constitute a violation of any applicable federal, state or foreign
securities laws or other law or regulations or the requirements of any stock
exchange or market system upon which the Stock may then be listed. In addition,
no Award may be exercised for shares of Stock unless (a) a registration
statement under the Securities Act shall at the time of exercise of the Award be
in effect with respect to the shares of Stock issuable upon exercise of the
Award or (b) in the opinion of legal counsel to the Company, the shares of Stock
issuable upon exercise of the Award may be issued in accordance with the terms
of an applicable exemption from the registration requirements of the Securities
Act. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company’s legal counsel to be
necessary to the lawful issuance and sale of any shares of Stock hereunder shall
relieve the Company of any liability in respect of the failure to issue or sell
such shares of Stock as to which such requisite authority shall not have been
obtained. As a condition to the exercise of any Award, the Company may require
the Participant to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect thereto as may be requested by
the Company.

 

17. TERMINATION OR AMENDMENT OF PLAN.

 

The Board may terminate or amend the Plan at any time. However, subject to
changes in applicable law, regulations or rules that would permit otherwise,
without the approval of the Company’s stockholders, there shall be (a) no
increase in the maximum aggregate number of shares of Stock that may be issued
under the Plan (except by operation of the provisions of Section 4.2), (b) no
change in the class of persons eligible to receive Incentive Stock Options, and
(c) no other amendment of the Plan that would require approval of the Company’s
stockholders under any applicable law, regulation or rule. No termination or
amendment of the Plan shall affect any then outstanding Award unless expressly
provided by the Board. In any event, no termination or amendment of the Plan may
adversely affect any then outstanding Award without the consent of the
Participant, unless such termination or amendment is required to enable an
Option designated as an Incentive Stock Option to qualify as an Incentive Stock
Option or is necessary to comply with any applicable law, regulation or rule.

 

18. STOCKHOLDER APPROVAL.

 

Any increase in the maximum aggregate number of shares of Stock issuable under
the Plan as provided in Section 4.1 (the “Authorized Shares”) shall be approved
by the stockholders of the Company within twelve (12) months of the date of
adoption thereof by the Board. Awards granted in excess of the Authorized Shares
previously approved by the stockholders shall become exercisable no earlier than
the date of stockholder approval of such increase in the Authorized Shares.

 

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PLAN HISTORY

 

February 1, 2002

   Board adopts Plan, with an initial reserve of 948.35 shares.

February 8, 2002

   Stockholders approve Plan, with an initial reserve of 948.35 shares.

May 21, 2002

   Board adopts amended Plan, with a reserve of 948,100 shares.

May 24, 2002

   Stockholders approve amended Plan, with a reserve of 948,100 shares.

July 1, 2002

   Board adopts amended Plan; including discretionary bonus awards

February 8, 2005

   Compensation Committee adopts Second Amended and Restated Plan

 

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RESTRICTED STOCK AGREEMENT

UNDER THE SECOND AMENDED AND RESTATED

WESTWOOD HOLDINGS GROUP, INC. STOCK INCENTIVE PLAN

 

WHEREAS, WESTWOOD HOLDINGS GROUP, INC., a Delaware corporation (the “Company”)
previously established the Second Amended and Restated Westwood Holdings Group,
Inc. Stock Incentive Plan (the “Plan”); and

 

WHEREAS, this RESTRICTED STOCK AGREEMENT (the “Agreement”), is made as of the
     day of                     , 200  , between the Company and
                             (the “Employee”), and sets forth the terms of the
Restricted Shares (as defined below) issued to Employee pursuant to the Plan’s
terms; and

 

WHEREAS, all of the terms and provisions of the Plan are incorporated herein by
reference and made a part hereof, and all capitalized terms used but not defined
in this Agreement have the meanings set forth in the Plan.

 

NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth,
the parties hereto agree as follows:

 

1. Grant of Restricted Stock. The Company hereby grants to Employee, on the
terms and conditions hereinafter set forth,              shares of the presently
authorized but unissued Common Stock, $.01 par value per share, of the Company
(the “Restricted Stock”).

 

2. Issue Date and Vesting.

 

  A. The Issue Date of the Restricted Stock shall be
                            , 200  .

 

  B. The Restricted Stock granted to Employee hereunder, subject to the other
terms and conditions set forth herein, shall become vested in accordance with
the following schedule:

 

VESTING DATE

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

 

CUMULATIVE PERCENTAGE

OF STOCK VESTED

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

Issue Date          0% _________________________           %
_________________________           % _________________________           %
_________________________           %

 

  C. Upon termination of employment of Employee, any shares of Restricted Stock
that have not vested shall be forfeited to the Company without consideration.

 

3. Employment of Employee. As an inducement to the Company to issue the
Restricted Stock to Employee, and as a condition thereto, Employee acknowledges
and agrees that, without limitation of his or her rights under his or her
employment agreement with the Company, if any, neither the issuance of the
Restricted Stock to Employee nor any provision contained herein shall entitle
Employee to remain in the employment of the Company or its affiliates or affect
the right of the Company to terminate Employee’s employment at any time.

 

4. Restrictions on Transfer.

 

  A. Any shares of Restricted Stock granted hereunder, whether vested or
unvested, shall not be sold, assigned, transferred, pledged or otherwise
encumbered for a period of one (1) year from the Issue Date, except to a
Permitted Transferee (as defined in the Plan) with the written consent of the
Committee.

 

  B. Under no circumstances shall any sale or other transfer of any shares of
Restricted Stock be valid unless and until the shares proposed to be sold or
transferred are fully vested.

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

  C. The spouse of Employee shall execute a signature page to this Agreement as
of the date hereof and agree to be bound in all respects by the terms hereof to
the same extent as Employee. The spouse further agrees that should he/she
predecease Employee or become divorced from Employee, any of the shares of
Restricted Stock which such spouse may own or in which he/she may have an
interest shall remain subject to this Agreement.

 

5. Notices; Deliveries. Any notice or delivery required to be given under the
terms of this Agreement shall be addressed to the Company at its principal
office, and any notice or delivery to be given to Employee shall be addressed to
him or her at the address given by him or her beneath his or her signature
hereto or such other address as either party hereto may hereafter designate in
writing to the other. Any such notice or delivery shall be deemed to have been
duly given when addressed as aforesaid, registered or certified mail, and
deposited (postage or registration or certification fee prepaid) in a post
office or branch post office regularly maintained by the United States.

 

6. Disputes. As a condition of the granting of the Restricted Stock hereby,
Employee and his or her heirs and successors agree that any dispute or
disagreement which may arise hereunder shall be determined by the Company’s
Board of Directors in its sole discretion and judgment, and that any such
determination and any interpretation by the Board of Directors of the terms of
this grant of Restricted Stock shall be final and shall be binding and
conclusive, for all purposes, upon the Company, Employee, his or her heirs and
personal representatives.

 

7. Certificates.

 

  A. The certificate(s) representing the shares of Restricted Stock granted
hereby will be stamped or otherwise imprinted with the legend required by the
Plan with respect to any applicable restrictions on the sale or transfer of such
shares, and the stock transfer records of the Company will reflect stop transfer
instructions with respect to such shares.

 

  B. At the election of the Company, the Company may retain the certificate(s)
representing the shares of Restricted Stock granted to Employee pursuant to this
Agreement until such time as the vesting restrictions set forth in Section 2
have lapsed and the restrictions on the transfer of such Restricted Stock set
forth in Section 4 have terminated or are removed by the Board of Directors.
Within a reasonable time thereafter, the Company will deliver to Employee a new
certificate representing such shares, free of the legend referred to in
paragraph A above. The issuance of such certificate shall not affect any
restrictions upon the transferability of such shares pursuant to applicable law
or otherwise.

 

  C. If the Company elects to issue the certificate(s) representing the shares
of Restricted Stock granted hereunder prior to the termination or lapse of the
restrictions on vesting and transfer, the legend referred to in paragraph A
above shall remain on such certificate(s) until such time as the vesting and
transfer restrictions have terminated or lapsed or are removed by the Board of
Directors.

 

8. Restricted Stock Subject to Plan. The Restricted Stock granted hereby is
subject to the Plan. If a conflict exists between any term or provision
contained herein and a term or provision of the Plan, the applicable terms and
provisions of the Plan will govern and prevail.

 

9. Miscellaneous.

 

  A. Employee hereby agrees that (i) Employee is acquiring the Restricted Stock
for investment purposes and not with a view to the resale or distribution
thereof; (ii) the Company may withhold from Employee any payment or
consideration to be paid to Employee by the Company, any tax which the Company
believes is required to be withheld with respect to any benefit under the Plan
or this Restricted Stock Agreement, and to hold as security for the amount to be
withheld any property otherwise distributable to Employee under the Plan until
the amounts required to be withheld have been so withheld; and (iii) Employee
will make appropriate arrangements with the Company for satisfaction of any
applicable federal, state or local income tax, withholding requirements or like
requirements.

 

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  B. If any party to this Agreement so required under this Agreement falls or
refuses to comply with the provisions of this Agreement, then in addition to any
other remedies provided by law or this Agreement, the party affected thereby may
institute and maintain a proceeding to compel the specific performance of this
Agreement by the party so defaulting.

 

  C. Within 30 days after the date of this Agreement, Employee may make an
election with the Internal Revenue Service under Section 83(b) of the Internal
Revenue Code and the regulations promulgated thereunder.

 

  D. This Agreement shall be binding upon and inure to the benefit of any
successor or successors of the Company.

 

  E. The interpretation, performance and enforcement of this Agreement shall be
governed by the laws of the State of Texas.

 

  F. This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original, but all of which collectively shall constitute a
single instrument.

 

  G. If any one or more of the provisions or parts of a provision contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement or any other jurisdiction, but this Agreement shall be reformed
and construed in any such jurisdiction as if such invalid or illegal or
unenforceable provision or part of a provision had never been contained herein
and such provision or part shall be reformed so that it would be valid, legal
and enforceable to the maximum extent permitted in such jurisdiction.

 

IN WITNESS WHEREOF, the Company has, as of the date and place first above
written, caused this Agreement to be executed on its behalf by its authorized
officer and Employee has hereunto set his or her hand as of the date and place
first above written.

 

WESTWOOD HOLDINGS GROUP, INC.

By:

 

 

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

Name:

 

Brian O. Casey

Its:

 

President and Chief Operating Officer

 

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EMPLOYEE SIGNATURE PAGE

TO RESTRICTED STOCK AGREEMENT

 

Employee Name:

 

 

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

Signature

 

 

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

Address:

 

 

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

   

 

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

 

I, the undersigned, being the spouse of the above-named Employee, hereby
acknowledge that I have read and understand the foregoing Restricted Stock
Agreement under the Second Amended and Restated Westwood Holdings Group, Inc.
Stock Incentive Plan, and I agree to be bound by the terms thereof.

 

Spouse Name:  

 

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

Signature

 

 

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

Address:

 

 

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

 

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NON-QUALIFIED STOCK OPTION AGREEMENT

UNDER THE SECOND AMENDED AND RESTATED WESTWOOD HOLDINGS GROUP, INC.

STOCK INCENTIVE PLAN

 

DATE OF GRANT:

                      , 20xx

NAME OF OPTIONEE:

        

NUMBER OF SHARES:

        

PRICE PER SHARE:

       $xx.xx per share, 100% of the Fair Market Value per Share of the Shares
as of the date of grant as determined in accordance with the Second Amended and
Restated Westwood Holdings Group, Inc. Stock Incentive Plan.

TERM/EXPIRATION DATE:

       10 years/                    , 20xx

 

Westwood Holdings Group, Inc., a Delaware corporation (the “Company”), hereby
grants to the above-named optionee (the “Optionee”) an option (the “Option”) to
purchase from the Company, for the price per share set forth above, the number
of shares of Common Stock (the “Stock”), of the Company set forth above pursuant
to the Second Amended and Restated Westwood Holdings Group, Inc. Stock Incentive
Plan (the “Plan”). This Option is not intended to constitute an “incentive stock
option” within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the “Code”).

 

The terms and conditions of the Option granted hereby, to the extent not
controlled by the terms and conditions contained in the Plan, are as follows:

 

  1. PRICE. The price at which each share of Stock subject to this Option may be
purchased shall be the price set forth above, subject to any adjustments that
may be made pursuant to the terms of the Plan.

 

  2. VESTING. The Option shall become vested as follows:
                                        
                                        .

 

  3. EMPLOYMENT REQUIRED. Except as provided in the Plan, this Option may not be
exercised unless the Optionee is an employee of the Company, a Parent or any
Subsidiary at the time of such exercise. Section 6.6 of the Plan shall govern in
determining the exercisability of this Option following termination of the
Optionee’s employment.

 

  4. TERMS OF EXERCISE. The Optionee (or his representative, guardian, devisee
or heir, as applicable) may exercise any portion of this Option that has become
exercisable in accordance with the terms hereof as to all or any of the shares
of Stock then available for purchase by delivering to the Company written notice
specifying:

 

  (i) the number of whole shares of Stock to be purchased together with payment
in full of the aggregate option price of such shares, provided that this Option
may not be exercised for less than one hundred (100) shares of Stock or the
number of shares of Stock remaining subject to this Option, whichever is
smaller;

 

  (ii) the address to which dividends, notices, reports, etc. are to be sent;
and

 

  (iii) the Optionee’s social security number.

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Payment shall be in cash, by certified or cashier’s check payable to the order
of the Company, free from all collection charges, by tender or attestation to
the ownership of shares of Common Stock already owned by the Optionee and having
a fair market value equal to the aggregate Option Price (provided, however, that
such shares have been owned by the Optionee for more than six (6) months or were
not acquired, directly or indirectly, from the Company), or by a combination of
cash and shares of Common Stock. Payment may also be made by delivery to the
Company of a properly executed exercise notice together with irrevocable
instructions to a broker approved by the Company that upon such broker’s sale of
shares of Stock with respect to which the Option is exercised, it is to deliver
promptly to the Company the amount of sale proceeds necessary to satisfy the
Exercise Price and any required withholding taxes. The Optionee shall not be
entitled to any rights and privileges as a shareholder of the Company in respect
of any shares of Stock covered by this Option until such shares of Stock shall
have been paid for in full and issued to the Optionee.

 

  (a) Stock Restrictions and Agreements. As soon as practicable after the
Company receives payment for shares of Stock covered by this Option, it shall
deliver a certificate or certificates representing the shares of Stock so
purchased to the Optionee. Such certificate shall be registered in the name of
the Optionee. As a condition to issuance of Shares, the Company may place
legends on Shares, issue stop transfer orders and require such agreements or
undertakings as the Company may deem necessary or advisable to assure compliance
with applicable federal or state securities laws or regulations.

 

  (b) Restrictions on Transfer of Options. Except as expressly permitted by the
Plan, this Option is personal to the Optionee and during the Optionee’s lifetime
may be exercised only by the Optionee or his guardian or representative upon the
events and in accordance with the terms and conditions set forth in the Plan.
This Option shall not be transferable other than by will or the laws of descent
and distribution.

 

  5. NO RIGHT TO EMPLOYMENT. This Option does not confer on the Optionee any
right to continue in the employ of the Company, the Parent or any Subsidiary or
interfere in any way with the right of the Company, the Parent or any Subsidiary
to determine the terms of the Optionee’s employment.

 

  6. PLAN TO CONTROL. This Option and the terms and conditions herein set forth
are subject in all respects to the terms and conditions of the Plan, which shall
be controlling and are incorporated herein by reference. Capitalized terms used
but not otherwise defined herein shall have the meanings ascribed to such terms
in the Plan. All interpretations or determinations of the Board of Directors
with respect to the Plan and this Option shall be binding and conclusive upon
the Optionee and his legal representatives with respect to any question arising
hereunder.

 

  7. BOARD AND COMMITTEE. Optionee acknowledges and agrees that any powers,
rights or responsibilities of the Company’s Board of Directors set forth herein
may be delegated to and exercised by the Committee as defined in and as
permitted under the Plan.

 

  8. NOTICES. All notices hereunder to the parties to this Non-Qualified Stock
Option Agreement shall be delivered or mailed to the following addresses:

 

  (a) If to the Company, to its headquarters address, to the attention of the
Chief Financial Officer, and

 

  (b) if to the Optionee, at the address set forth with the Optionee’s signature
below.

 

Such addresses for the service of notices may be changed at any time provide
notice of such change is furnished in advance to the other party.

 

-2-

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  9. GOVERNING LAW. This Non-Qualified Stock Option Agreement shall be governed
by and construed in accordance with the laws of the State of Texas without
application of the conflict of laws principles thereof, except to the extent
preempted by federal law, which shall govern to such extent.

 

[The remainder of this page is intentionally left blank.]

 

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IN WITNESS WHEREOF, the undersigned have caused this Non-Qualified Stock Option
Agreement to be duly executed as of the date first above written.

 

WESTWOOD HOLDINGS GROUP, INC.

By:

 

 

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

Name:

 

 

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

Title:

 

 

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

OPTIONEE:

Printed Name:

 

 

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

Address:

 

 

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

 

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

Social Security No:

 

 

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