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|   | · | Retain Top Executive Management through a period of uncertainty |
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|   | · | Enhance the value of the entity to a prospective buyer |
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|   | · | Preserve the neutrality of the Executive Management team in negotiating and executing the transition |
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|   | · | Keep the Executive Management team focused on the business rather than on their personal financial security |
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|   | · | Bridge the unemployment gap |
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|   | · | Any person (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) or persons acting as a group, other than Pamela M. Lopker and Karl F. Lopker as joint holders, or either of them (the “Lopkers”) or a living trust for their benefit over which they maintain control of the assets of the trust and the voting rights for shares in the trust, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting securities. |
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|   | · | A merger or consolidation of the Company with any other corporation, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company; or such surviving entity outstanding immediately after such merger or consolidation; or |
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|   | · | The sale or other disposition by the Company of all, or substantially all, of the Company’s assets, other than a transfer to (i) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock, (ii) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (iii) a person, or persons acting as a group, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power represented by the Company’s then outstanding voting securities, or (iv) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by a person described in clause (iii). |
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|   | · | The Executive is assigned any duties which are wholly and clearly inconsistent with the position and status of an executive of the Company, or a substantial alteration in the nature, status or prestige of Executive’s official position resulting in a decrease in authority or responsibilities from those in effect immediately prior to a Change in Control; |
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|   | · | The Executive’s Base Monthly Salary is decreased by the Company, or the Executive’s benefits or opportunities under any employee benefit or incentive plan or program of the Company is or are materially reduced other than in connection with a reduction in salary or benefits generally applicable to all employees of the Company; |
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|   | · | The Executive’s principal office location is relocated to a location more than twenty-five (25) miles from the Executive’s then present location without the Executive’s written consent; |
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|   | · | The Company fails to pay the Executive any deferred payments under any bonus or incentive plans in a timely manner; |
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|   | · | The Company fails to reimburse the Executive for business expenses in accordance with the Company’s policies, procedures or practices; |
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|   | · | The Company fails to agree to or actually indemnify the Executive for the Executive’s actions and/or inactions, as either a director or officer of the Company, to the fullest extent permitted by Delaware law, and the Company fails to maintain reasonable levels of directors and officers liability insurance coverage for the Executive when such insurance is available; |
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|   | · | The Company fails to obtain a written agreement from any successor or assign of the Company to assume and perform Executive’s employment agreement as then in effect and the Change in Control Agreement; or |
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|   | · | The Company purports to terminate the Executive’s employment for Cause and such purported termination of employment is not effected in accordance with this Policy. |
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|   | · | Compensation Base is defined as an Executive’s highest fiscal year based salary in effect within two years prior to the Change in Control |
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|   | · | Average Annual Bonus is defined as an Executive’s average annual bonus for the two full fiscal years immediately preceding the Change in Control |
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|   | · | Vesting of any equity compensation granted under the QAD Inc. 2006 Stock Incentive Program ("Equity Compensation") to commence at time of termination of Executive’s employment |
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|   | · | Payment to compensate for employee benefits being received at time of termination of Executive’s employment |
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|   | · | Participation: Included in this Tier are the following Company Executives |
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|   | 1.  | Chief Executive Officer |
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|   | 2.   | President |
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|   | 3.   | Chief Financial Officer |
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|   | · | Benefits: |
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|   | · | Eighteen (18) months of compensation base |
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|   | · | One and one-half (1 1/2) multiple of average annual bonus |
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|   | · | Vesting of all Equity Compensation |
|--------|--------|------------------------------------|

|   | · | Eighteen (18) months benefit replacement payment |
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|   | · | Participation:     Included in this Tier, Executives with Position Title of Executive Vice President, and other members of the Company’s Executive Committee by prior approval of the Compensation Committee |
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|   | · | Benefits: |
|--------|--------|-----------|

|   | ● | Twelve (12) months of compensation base |
|--------|---------|----------------------------------------------|

|   | ● | One (1) multiple of average annual bonus |
|--------|---------|-----------------------------------------------|

|   | ● | Vesting of all Equity Compensation |
|--------|---------|------------------------------------|

|   | ● | Twelve (12) months benefit replacement payment |
|--------|---------|-----------------------------------------------------|

|   | · | Participation: | Included in this Tier are Executives with titles of Vice President by prior approval of the Compensation Committee and other individuals by prior approval of the Compensation Committee |
|--------|--------|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Benefits: |
|--------|--------|-----------|

|   | ● | Six (6) months of compensation base |
|--------|---------|------------------------------------------|

|   | ● | One (1) multiple of average annual bonus |
|--------|---------|-----------------------------------------------|

|   | ● | Vesting of all Equity Compensation |
|--------|---------|------------------------------------|

|   | ● | Six (6) months benefit replacement payment |
|--------|---------|-------------------------------------------------|

|   | · | Payment to Specified Employee:  If a payment obligation under the Agreement is made to an Executive upon his or her separation from service while he or she is a “specified employee” (as defined under Section 409A of the Code and determined in good faith by the Compensation Committee), any payment of “deferred compensation” (as defined under Treasury Regulation Section 1.409A-1(b)(1) after giving effect to the exemptions in Treasury Regulation Sections 1.409A-1(b)(3) through (b)(12 that is scheduled to be paid within six (6) months after such separation from service shall accrue with interest and shall be paid within 30 days after the end of the six-month period beginning on the date of such separation from service or, if earlier, within 30 days after the appointment of the personal representative or executor of the Executive’s estate following his death.  During the 6-month delay period, interest shall accrue at the prime rate of interest published in the northeast edition of The Wall Street Journal on the date of Executive’s separation from service.  Accordingly, subject to the requirements of Section 409A of the Code, an Executive may not receive his or her Change in Control Benefits payment until 6 months after separation from service. |
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|   | · | Compliance Intended:  This Policy is intended not to result in the imposition of any tax, interest charge or other assessment, penalty or addition under Section 409A of the Code.  In addition to any specific references to Section 409A of the Code in this Policy, all terms and conditions of this Policy are intended, and shall be interpreted and applied to the greatest extent possible in such manner as may be necessary, to comply with the provisions of Section 409A of the Code and any rules, regulations or other regulatory guidance issued under Section 409A of the Code.  However, the Company does not guarantee any particular tax effect to Executive.  The Company shall not be liable to Executive for any payment made under this Agreement that is determined to result in an additional tax, penalty, or interest under Section 409A of the Code, nor for reporting in good faith any payment made under this Agreement as an amount includible in gross income under Section 409A of the Code. |
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