Exhibit 10.6**DIAMOND HILL INVESTMENT GROUP, INC.****AMENDED & RESTATED****2005 EMPLOYEE AND DIRECTOR EQUITY INCENTIVE PLAN**(Effective January 1, 2008)     **1. ****Purposes of the Plan****.**The purposes of this Plan are (a) to attract and retain thebest available personnel for positions of substantial responsibility, (b) to provide additionalincentive to Employees, Directors and Consultants, and (c) to promote the success of the Company’sbusiness.     The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, RestrictedStock Units, Restricted Stock, Stock Grants and Stock Appreciation Rights.     **2. ****Definitions**. As used herein, the following definitions shall apply: (a) “*Administrator*” means the Board or any of its Committees as shall beadministering the Plan, in accordance with Section 4 of the Plan.  (b) “*Applicable Laws*” means the requirements relating to theadministration of equity-based awards under U.S. state corporate laws,U.S. federal and state securities laws, the Code, any stock exchangeor quotation system on which the Common Stock is listed or quoted andthe applicable laws of any foreign country or jurisdiction whereAwards are, or will be, granted under the Plan.  (c) “*Award*” means, individually or collectively, a grant under the Plan ofIncentive Stock Options, Nonstatutory Stock Options, Restricted StockUnits, Restricted Stock, Stock Grants or Stock Appreciation Rights.  (d) “*Award Agreement*” means the written or electronic agreement settingforth the terms and provisions applicable to each Award granted underthe Plan. The Award Agreement is subject to the terms and conditionsof the Plan.  (e) “*Board*” means the Board of Directors of the Company.  (f) “*Cash Position*” means as to any Performance Period, the Company’slevel of cash and cash equivalents.  (g) “*Change in Control*” means the occurrence of any of the following events: (i) Any “person” (as such term is used in Sections 13(d) and 14(d) of theExchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3of the Exchange Act), directly or indirectly, of securities of theCompany representing fifty percent (50%) or more of the total votingpower represented by the Company’s then outstanding voting securities;  (ii) The consummation of the sale or disposition by the Company of all orsubstantially all of the Company’s assets;  (iii) A change in the composition of the Board occurring within a two-yearperiod, as a result of which fewer than a majority of the directorsare Incumbent Directors; or  (iv) The consummation of a merger or consolidation of the Company with anyother corporation, other than a merger or consolidation which wouldresult in the voting securities of the Company outstandingimmediately prior thereto continuing to represent (either byremaining outstanding or by being converted into voting securities ofthe surviving entity or its Parent) at least fifty percent (50%) ofthe total voting power represented by the voting securities of theCompany or such surviving entity or its Parent outstandingimmediately after such merger or consolidation. (h) “*Code*” means the Internal Revenue Code of 1986, as amended.
 

 
 (i) “*Committee*” means a committee of Directors appointed by the Board inaccordance with Section 4 of the Plan.  (j) “*Common Stock*” means the common stock of the Company.  (k) “*Company*” means Diamond Hill Investment Group, Inc., an Ohio corporation.  (l) “*Consultant*” means any natural person, including an advisor, engagedby the Company to render services to the Company.  (m) “*Director*” means a member of the Board.  (n) “*Disability*” means total and permanent disability as defined in Section 22(e)(3) of the Code.  (o) “*Earnings Per Share*” means as to any Performance Period, the Company’sor a business unit’s Net Income, divided by a weighted average numberof Common Stock outstanding and dilutive common equivalent sharesdeemed outstanding.  (p) “*Employee*” means any person, including an Officer or Director,employed by the Company or any Parent or Subsidiary of the Company,with the status of employment determined based upon such factors asare deemed appropriate by the Administrator in its discretion, subjectto any requirements of the Code or the Applicable Laws. Neitherservice solely as a Director nor payment of a Director’s fee by theCompany shall be sufficient to constitute “employment” by the Company.  (q) “*Exchange Act*” means the Securities Exchange Act of 1934, as amended.  (r) “*Fair Market Value*” means, as of any date, the value of Common Stock determined as follows: (i) If the Common Stock is listed on any established stock exchange or anational market system including, without limitation, The NASDAQNational Market or The NASDAQ SmallCap Market of The NASDAQ StockMarket, its Fair Market Value shall be the closing sales price forsuch stock (or the closing bid, if no sales were reported) as quotedon such exchange or system on the day of determination, as reported inThe Wall Street Journal or such other source as the Administratordeems reliable;  (ii) If the Common Stock is regularly quoted by a recognized securitiesdealer but selling prices are not reported, the Fair Market Value ofa Share of Common Stock shall be the arithmetic mean between thehighest price and lowest price for the Common Stock on the day ofdetermination, as reported in The Wall Street Journal or such othersource as the Administrator deems reliable; or  (iii) In the absence of an established market for the Common Stock, theFair Market Value shall be determined by the Administrator throughthe reasonable application of a reasonable valuation method, takinginto account all information material to the value of thecorporation, within the meaning of Section 409A of the Code. (s) “*Fiscal Year*” means the fiscal year of the Company.  (t) “*Freestanding SAR*” means a Stock Appreciation Right that is granted independent of any Option.  (u) “*Incentive Stock Option*” means an Option intended to qualify as anincentive stock option within the meaning of Section 422 of the Codeand the regulations promulgated thereunder.  (v) “*Incumbent Directors*” means directors who either (i) are Directors asof the effective date of the Plan, or (ii) are elected, or nominatedfor election, to the Board with the affirmative votes of at least amajority of the Incumbent Directors at the time of such election ornomination (but will not include an individual whose election ornomination is in connection with an actual or threatened proxy contestrelating to the election of directors to the Company).  (w) “*Individual Objectives*” means as to a Participant for any PerformancePeriod, the objective and measurable goals set by a process andapproved by the Administrator (in its discretion).
2

 
 (x) “*Net Income*” means as to any Performance Period, the Company’s or abusiness unit’s income after taxes.  (y) “*Nonstatutory Stock Option*” means an Option not intended to qualify as an Incentive Stock Option.  (z) “*Officer*” means a person who is an officer of the Company within themeaning of Section 16 of the Exchange Act and the rules andregulations promulgated thereunder.  (aa) “*Operating Cash Flow*” means as to any Performance Period, theCompany’s or a business unit’s sum of Net Income plus depreciationand amortization less capital expenditures plus changes in workingcapital comprised of accounts receivable, inventories, other currentassets, trade accounts payable, accrued expenses, product warranty,advance payments from customers and long-term accrued expenses.  (bb) “*Operating Income*” means as to any Performance Period, the Company’sor a business unit’s income from operations but excluding any unusualitems.  (cc) “*Option*” means an Award of a right to purchase Common Stock grantedpursuant to Section 6 of the Plan.  (dd) “*Parent*” means a “parent corporation”, whether now or hereafterexisting, as defined in Section 424(e) of the Code  (ee) “*Participant*” means the holder of an outstanding Award.  (ff) “*Performance Goals*” means the goal(s) (or combined goal(s))determined by the Administrator (in its discretion) to be applicableto a Participant with respect to an Award. As determined by theAdministrator, the Performance Goals applicable to an Award mayprovide for a targeted level or levels of achievement using one ormore of the following measures: (i) Cash Position, (ii) Earnings PerShare, (iii) Individual Objectives, (iv) Net Income, (v) OperatingCash Flow, (vi) Operating Income, (vii) Return on Assets, (viii)Return on Equity, (ix) Return on Sales, (x) Revenue, and (xi) TotalShareholder Return. The Performance Goals may differ from Participantto Participant and from Award to Award. Prior to the grant date, theAdministrator shall determine whether any significant element(s)shall be included in or excluded from the calculation of anyPerformance Goal with respect to any Participant. For example (butnot by way of limitation), the Administrator may determine that themeasures for one or more Performance Goals shall be based upon theCompany’s pro-forma results and/or results in accordance withgenerally accepted accounting principles.  (gg) “*Performance Period*” means any Fiscal Year or such other period asdetermined by the Administrator in its sole discretion.  (hh) “*Plan*” means this plan, the Diamond Hill Investment Group, Inc.Amended and Restated 2005 Employee and Director Equity IncentivePlan.  (ii) “*Restricted Stock*” means Common Stock acquired pursuant to an Awardthat is subject to a vesting schedule and the Company’s repurchaseoption.  (jj) “*Restricted Stock Unit*” means the right to receive a number of Shares(or a payment equal to the Fair Market Value of a number of Shares)pursuant to a grant under Section 7 of the Plan.  (kk) “*Return on Assets*” means, as to any Performance Period, thepercentage equal to the Company’s or a business unit’s OperatingIncome before incentive compensation, divided by average net Companyor business unit, as applicable, assets.  (ll) “*Return on Equity*” means as to any Performance Period, the percentageequal to the Company’s Net Income divided by average shareholder’sequity.  (mm) “*Return on Sales*” means as to any Performance Period, the percentageequal to the Company’s or a business unit’s Operating Income beforeincentive compensation, divided by the Company’s or the businessunit’s, as applicable, Revenue.
3

 
 (nn) “*Revenue*” means as to any Performance Period, the Company’s or business unit’s net sales.  (oo) “*Rule 16b-3*” means Rule 16b-3 of the Exchange Act or any successor toRule 16b-3, as in effect when discretion is being exercised withrespect to the Plan.  (pp) “*Section 16(b)*” means Section 16(b) of the Exchange Act.  (qq) “*Service Provider*” means an Employee, Director or Consultant of the Company.  (rr) “*Share*” means a share of Common Stock or Restricted Stock, as thecase may be and as adjusted in accordance with Section 15 of thePlan.  (ss) “*Stock Appreciation Right*” or “*SAR*” means an Award, granted alone orin connection with an Option, that is designated as a StockAppreciation Right pursuant to Section 9 of the Plan.  (tt) *“Stock Grant”*means an Award of Shares of Common Stock acquiredpursuant to a grant under Section 8 of the Plan.  (uu) “*Subsidiary*” means a “subsidiary corporation”, whether now orhereafter existing, as defined in Section 424(f) of the Code.  (vv) *“Tandem SAR*” means a Stock Appreciation Right that is granted inconnection with a related Option, the exercise of which will requireforfeiture of the right to purchase an equal number of Shares underthe related Option (and when a Share is purchased under the Option,the Stock Appreciation Right will be canceled to the same extent).  (ww) *“Ten Percent Holder”*means a person who owns stock representing morethan ten percent (10%) of the voting power of all classes of stock ofthe Company or any Parent or Subsidiary.  (xx) *“Total Shareholder Return*” means as to any Performance Period, thetotal return (change in Share price plus reinvestment of anydividends) of a Share.  **3.** **Stock Subject to the Plan.**  (a) *Number of Shares*. Subject to the provisions of Section 15 of the Plan,the maximum aggregate number of Shares that may be granted and/or soldunder the Plan is the total of (i) 500,000 Shares and (ii) an annualincrease to be added on the last day of the Fiscal Year beginning in2005, equal to the lesser of (A) 100,000 Shares, (B) 5% of theCompany’s total outstanding Shares on such date, or (C) a lesseramount determined by the Board. The Shares may be authorized, butunissued, or reacquired Common Stock. Shares will not be deemed tohave been issued pursuant to the Plan with respect to any portion ofan Award that is settled in cash. Upon payment in Shares pursuant tothe exercise of a SAR, the number of Shares available for issuanceunder the Plan will be reduced only by the number of Shares actuallyissued in such payment. If the exercise price of an Award is paid bytender to the Company of Shares owned by the Participant, the numberof Shares available for issuance under the Plan will be reduced by thegross number of Shares for which the Award is exercised.  (b) *Share Usage.*If an Award expires or becomes unexercisable withouthaving been exercised in full, the unpurchased Shares which weresubject thereto shall become available for future grant or sale underthe Plan (unless the Plan has terminated); *provided, however*, thatShares that have actually been issued under the Plan shall not bereturned to the Plan and shall not become available for futuredistribution under the Plan, except that if unvested Shares ofRestricted Stock are repurchased by the Company, such Shares shallbecome available for future grant under the Plan.  **4.** **Administration of the Plan.**  (a) *Procedure.* (i) *Section 162(m)*. To the extent that the Administrator determines it tobe desirable to qualify Awards granted hereunder as “performance-basedcompensation” within the meaning of Section 162(m) of
4

 
   the Code, thePlan shall be administered by a Committee of two or more “outsidedirectors” within the meaning of Section 162(m) of the Code.  (ii) *Rule 16b-3*. To the extent desirable to qualify transactions hereunderas exempt under Rule 16b-3, the transactions contemplated hereundershall be structured to satisfy the requirements for exemption underRule 16b-3.  (iii) *Other Administration*. Other than as provided above, the Plan shallbe administered by (A) the Board, or (B) a Committee, whichcommittee shall be constituted to satisfy Applicable Laws. (b) *Powers of the Administrator*. Subject to the provisions of the Plan,and in the case of a Committee, subject to the specific dutiesdelegated by the Board to such Committee, the Administrator shall havethe authority, at its discretion: (i) to determine the Fair Market Value;  (ii) to select the Service Providers to whom Awards may be granted hereunder;  (iii) to determine the number of Shares of Common Stock to be covered byeach Award granted hereunder;  (iv) to approve forms of agreement for use under the Plan;  (v) to determine the terms and conditions, not inconsistent with the termsof the Plan, of any Award granted hereunder. Such terms and conditionsinclude, but are not limited to, the exercise price, the time or timeswhen Awards may be exercised (which may be based on performancecriteria), any vesting acceleration or waiver of forfeiturerestrictions, and any restriction or limitation regarding any Award orthe Shares of Common Stock relating thereto, based in each case onsuch factors as the Administrator, in its sole discretion, shalldetermine;  (vi) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;  (vii) to prescribe, amend and rescind rules and regulations relating tothe Plan, including rules and regulations relating to sub-plansestablished for the purpose of satisfying applicable foreign laws;  (viii) to modify or amend each Award (subject to Section 25 of the Plan);  (ix) to allow Participants to satisfy withholding tax obligations byelecting to have the Company withhold from the Shares to be issuedupon exercise of an Award that number of Shares having a Fair MarketValue equal to the minimum amount required to be withheld;  (x) to authorize any person to execute on behalf of the Company anyinstrument required to effect the grant of an Award previously grantedby the Administrator; and  (xi) to make all other determinations deemed necessary or advisable for administering the Plan. (c) *Effect of Administrator’s Decision*. The Administrator’s decisions,determinations and interpretations shall be final and binding on allParticipants and any other holders of Awards.     **5. ****Eligibility**. Awards may be granted to Service Providers; *provided, however*, thatIncentive Stock Options may be granted only to Employees.     **6. ****Options****.** (a) *Share Limitations.* (i) No Service Provider shall be granted, in any Fiscal Year, Options topurchase more than 25,000 Shares. Notwithstanding the foregoinglimitation, in connection with his or her initial service as a ServiceProvider, a Service Provider may be granted Options to purchase up toan additional 25,000 Shares. The foregoing limitations shall beadjusted proportionately in connection with any change in
5

 
   the Company’s capitalization as described in Section 15.  (ii) Each Option shall be designated in the Award Agreement as either anIncentive Stock Option or a Nonstatutory Stock Option; provided,however, that Incentive Stock Options shall not be granted to anyService Provider who is not an Employee. Notwithstanding suchdesignation, to the extent that the aggregate Fair Market Value ofthe Shares with respect to which Incentive Stock Options areexercisable for the first time by the Participant during any calendaryear (under all plans of the Company and any Parent or Subsidiary)exceeds $100,000, such Options shall be treated as Nonstatutory StockOptions. For purposes of this Section 6(a)(ii), Incentive StockOptions shall be taken into account in the order in which they weregranted. The Fair Market Value of the Shares shall be determined asof the time the Option with respect to such Shares is granted.  (iii) If an Option is cancelled in the same Fiscal Year in which it wasgranted (other than in connection with a transaction described inSection 15), the cancelled Option will be counted against the limitsset forth in subsections (i) and (ii) above. (b) *Term of Option*. The term of each Option shall be stated in the AwardAgreement. In the case of an Incentive Stock Option, the term shall beten (10) years from the date of grant or such shorter term as may beprovided in the Award Agreement. Moreover, in the case of an IncentiveStock Option granted to a Participant who, at the time the IncentiveStock Option is granted, is a Ten Percent Holder, the term of theIncentive Stock Option shall be five (5) years from the date of grantor such shorter term as may be provided in the Award Agreement.  (c) *Waiting Period and Exercise Dates.*At the time an Option is granted,the Administrator shall fix the period within which the Option may beexercised and shall determine any conditions that must be satisfiedbefore the Option may be exercised.  (d) *Option Exercise Price.*The per share exercise price for the Shares tobe issued pursuant to exercise of an Option shall be determined by theAdministrator, subject to the following: (i) In the case of an Incentive Stock Option that is: (a) granted to an Employee who, at the time the Incentive Stock Option isgranted, is a Ten Percent Holder, the per Share exercise price shallbe no less than one hundred ten percent (110%) of the Fair MarketValue per Share on the date of grant; and  (b) granted to any Employee other than a Ten Percent Holder, the per Shareexercise price shall be no less than one hundred percent (100%) of theFair Market Value per Share on the date of grant. (ii) In the case of a Nonstatutory Stock Option, including a NonstatutoryStock Option intended to qualify as “performance-based compensation”within the meaning of Section 162(m) of the Code, the per Shareexercise price shall be no less than one hundred percent (100%) ofthe Fair Market Value per Share on the date of grant. (e) *Notification Upon Disqualifying Disposition Under**Section 421(b)**ofthe Code.*Each Award Agreement with respect to an Incentive StockOption shall require the Participant to notify the Company of anydisposition of Shares issued pursuant to the exercise of such Optionunder the circumstances described in Section 421(b) of the Code(relating to certain disqualifying dispositions), within ten (10) daysof such disposition     **7. ****Restricted Stock Units/Restricted Stock****.** (a) *Grant of Restricted Stock Units or Restricted Stock*. Subject to theterms and provisions of the Plan, the Administrator, at any time andfrom time to time, may grant Restricted Stock or Restricted StockUnits to Participants in such amounts as the Administrator shalldetermine, in its sole discretion, provided that during any FiscalYear, no Service Provider will receive grants of Restricted Stock for,or Restricted Stock Units representing, more than an aggregate of25,000 Shares of Restricted Stock. Notwithstanding the
6

 
   foregoing limitation, in connection with his or her initial service as a ServiceProvider, a Service Provider may be granted an aggregate of up to anadditional 25,000 Shares of Restricted Stock and/or Shares ofRestricted Stock underlying Restricted Stock Units. The foregoinglimitations shall be adjusted proportionately in connection with anychange in the Company’s capitalization as described in Section 15.  (b) *Issue and Vesting Date(s)*. At the time of the grant of RestrictedStock or Restricted Stock Units, the Administrator shall establishissue and vesting date(s) with respect to the Restricted Stock orRestricted Stock Units. The Administrator may divide the RestrictedStock or Restricted Stock Units into classes and assign differentissue dates or vesting schedules to such classes.  (c) *Award Agreement; Repurchase Option*. Each Restricted Stock Unit orRestricted Stock grant shall be evidenced by an Award Agreement. TheAward Agreement will grant the Company a repurchase option withrespect to any unvested Shares of Restricted Stock, exercisable uponthe voluntary or involuntary termination of the Service Provider’srelationship with the Company for any reason (including death orDisability). The purchase price for Shares repurchased pursuant to theAward Agreement will be the original purchase price paid for theShares, if any, and may be paid by cancellation of any indebtedness ofthe purchaser to the Company. The repurchase option will lapse at arate determined by the Administrator.  (d) *Other Restrictions*. The Administrator shall impose such otherconditions and/or restrictions on the grant of Restricted Stock Unitsor Restricted Stock pursuant to the Plan as it may deem advisableincluding, without limitation, a requirement that Participants pay astipulated purchase price for each share of Restricted Stock and/orrestrictions under applicable federal or state securities laws.  (e) *Rights as a Shareholder*. The holder of Restricted Stock shall have therights equivalent to those of a shareholder and may exercise fullvoting powers with respected to the Restricted Stock during therestriction period. The holder of Restricted Stock Units shall haveno rights with respect to the Shares underlying the grant, except theright to receive payment as set forth in this Plan.  (f) *Dividends And Other Distributions*. During the period of restriction,Participants may, if the Administrator so determines, be credited withdividends, in the case of Restricted Stock, or dividend equivalentrights, in the case of Restricted Stock Units, that are paid withrespect to the underlying Shares while they are so held. TheAdministrator may apply any restrictions to the dividends or dividendequivalent rights that the Administrator deems appropriate. Any suchdividends or dividend equivalent rights shall be paid at the same timeas dividends are paid with respect to Shares. Without limiting thegenerality of the preceding sentence, if the grant or vesting ofRestricted Stock or Restricted Stock Units granted to a Participant isdesigned to comply with the requirements of “performance-basedcompensation” under Section 162(m) of the Code, the Administrator mayapply any restrictions it deems appropriate to the payment ofdividends or dividend equivalent rights declared with respect to suchRestricted Stock or Restricted Stock Units, such that the dividends,dividend equivalent rights, Restricted Stock and/or Restricted StockUnits maintain eligibility therefor.  **8.** **Stock Grants****.**  (a) *Stock Grants*. Subject to the terms and provisions of the Plan, theAdministrator, at any time and from time to time, may award StockGrants in such amounts as the Administrator shall determine, in itssole discretion, provided that during any Fiscal Year, no ServiceProvider will receive Stock Grants for more than an aggregate of25,000 Shares of Common Stock. Notwithstanding the foregoinglimitation, in connection with his or her initial service as a ServiceProvider, a Service Provider may be granted an aggregate of up to anadditional 25,000 Shares pursuant to Stock Grants. The foregoinglimitations shall be adjusted proportionately in connection with anychange in the Company’s capitalization as described in Section 15.  (b) *Restrictions*. Generally, Shares issued in connection with a StockGrant will not have any vesting requirements or other restrictions;*provided, however*, that the Administrator may impose such otherconditions and/or restrictions on the Common Stock issued pursuant toStock Grants as it may deem advisable, in its sole discretion. EachStock Grant shall be evidenced by an Award Agreement.
7

 
 **9.** **Stock Appreciation Rights****.**  (a) *Grant of SARs*. Subject to the terms and conditions of the Plan, a SARmay be granted to Service Providers at any time and from time to timeas will be determined by the Administrator, in its sole discretion,provided that during any Fiscal Year, no Service Provider will begranted SARs covering more than 25,000 Shares. Notwithstanding theforegoing limitation, in connection with his or her initial service asa Service Provider, a Service Provider may be granted SARs covering upto an additional 25,000 Shares. The foregoing limitations shall beadjusted proportionately in connection with any change in theCompany’s capitalization as described in Section 15. The Administratormay grant Freestanding SARs, Tandem SARs, or any combination thereof.  (b) *Base Value and Other Terms.*The Administrator, subject to theprovisions of the Plan, will have complete discretion to determine theterms and conditions of SARs granted under the Plan. The base value ofTandem SARs will equal the exercise price of the related Option;*provided, however,*that the base value of a Tandem SAR shall not beless than one hundred percent (100%) of the Fair Market Value of aShare on the grant date. The base value of a Freestanding SAR shallbe not less than one hundred percent (100%) of the Fair Market Valueof a Share on the grant date. A SAR may be exercised for all or anyportion of the Shares as to which it is exercisable; provided, that nopartial exercise of a SAR shall be for an aggregate base value of lessthan $1,000. The partial exercise of a SAR shall not cause theexpiration, termination or cancellation of the remaining portionthereof.  (c) *Exercise of Tandem SARs*. Tandem SARs may be exercised for all or partof the Shares subject to the related Option upon the surrender of theright to exercise the equivalent portion of the related Option. ATandem SAR may be exercised only with respect to the Shares for whichits related Option is then exercisable. With respect to a Tandem SARgranted in connection with an Incentive Stock Option: (i) the TandemSAR will expire no later than the expiration of the underlyingIncentive Stock Option; (ii) payment upon exercise of a Tandem SARshall not be greater than one hundred percent (100%) of the excess ofthe Fair Market Value of a Share on the date of exercise over theexercise price of a Share underlying the Option with respect to whichsuch Tandem SAR was granted; and (iii) the Tandem SAR will beexercisable only when the Fair Market Value of the Shares subject tothe Incentive Stock Option exceeds the exercise price of the IncentiveStock Option.  (d) *Exercise of Freestanding SARs*. Freestanding SARs will be exercisableon such terms and conditions as the Administrator, in its solediscretion, will determine.  (e) *Payment of SAR Amount*. Upon exercise of a SAR, a Participant will beentitled to receive payment from the Company in an amount not toexceed: (i) The difference between: (1) the Fair Market Value of a Share on thedate of exercise; over (2) the Exercise Price of the SAR; multipliedby  (ii) The number of Shares with respect to which the SAR is exercised.At the discretion of the Administrator, payment upon exercise of a SAR may be made in cash,Shares or a combination thereof. (f) *Other Provisions*. Each SAR grant will be evidenced by an AwardAgreement that will specify the base value, the term of the SAR, theconditions of exercise, and such other terms and conditions as theAdministrator, in its sole discretion, will determine.     **10. ****Performance-Based Restrictions on Awards**. Any Award granted under the Plan mayvest subject to the satisfaction of one or more performance objectives. The Administrator may setperformance objectives, in its sole discretion, and the time period during which the performanceobjectives must be met will be called the “Performance Period.” (a) *General Performance Objectives*. The Administrator may set performanceobjectives based upon the achievement of Company-wide, divisional, orindividual goals, or any other basis determined by the Administratorin its discretion.
8

 
 (b) *Section **162(m)**Performance Objectives*. For purposes of qualifyingAwards as “performance-based compensation” under Section 162(m) of theCode, the Committee, in its discretion, may determine that theperformance objectives applicable to Awards will be based on theachievement of Performance Goals. The Performance Goals will be set bythe Committee on or before the latest date permissible to enable theAwards to qualify as “performance-based compensation” under Section162(m) of the Code. In granting Awards which are intended to qualifyas “performance-based compensation” under Section 162(m) of the Code,the Committee will follow any procedures determined by it from time totime to be necessary or appropriate to ensure qualification of theAwards under Section 162(m) of the Code (e.g., in determining thePerformance Goals).  **11.** **Exercise and Settlement of Awards****.**  (a) *Procedure for Exercise of Options.*Any Option granted under the Planshall be exercisable, to the extent applicable, according to the termsof the Plan and at such times and under such conditions as determinedby the Administrator and set forth in the Award Agreement applicableto such Option. An Option may not be exercised for a fraction of aShare. An Option shall be deemed exercised when the Company receives:(A) written or electronic notice of exercise (in accordance with theAward Agreement) from the person entitled to exercise the Option, and(B) full payment, as required by the Award Agreement and the Plan, forthe Shares with respect to which the Option is exercised. Sharesissued upon exercise of an Option shall be issued in the name of theParticipant or, if requested by the Participant, in the name of theParticipant and his or her spouse and/or to a trust if, under CodeSection 671 and applicable state law, the Participant remains thebeneficial owner of the Shares. Exercising an Option in any mannershall decrease the number of Shares thereafter available, both forpurposes of the Plan and for issuance under the Option, by the numberof Shares as to which the Option is exercised.  (b) *Settlement or Payment of Stock Grants, Restricted Stock.*Upon grantingof any Stock Grants or the vesting of any Restricted Stock, theAdministrator shall issue or cause to be issued any Shares withinsixty (60) days following the date of grant, settlement or lapse ofsubstantial risk of forfeiture, as the case may be, of such StockGrant or Restricted Stock.  (c) *Payment or Settlement of Restricted Stock Units*. Upon the vesting ofany Restricted Stock Unit, the Administrator shall pay or cause to bepaid to an amount equal to the Fair Market Value of a Share on thedate of vesting multiplied by the number of vested Shares. TheAdministrator may, in its discretion and in lieu of payment, issue orcause to be issued a number of Shares with a value equal the FairMarket Value of a Share on the date of vesting. Any fractionalShares shall be paid in cash. Any payment or issuance of Shares withrespect to a Restricted Stock Unit shall be made within sixty (60)days following the vesting of such Restricted Stock Unit.  (d) *Rights as a Shareholder.*Except with respect to grants of RestrictStock or Restricted Stock Units, no right to vote or receive dividendsor any other rights as a shareholder shall exist with respect to theShares, notwithstanding the exercise of the Award until the Shares areissued (as evidenced by the appropriate entry on the books of theCompany or of a duly authorized transfer agent of the Company). Noadjustment will be made for a dividend or other right for which therecord date is prior to the date the Shares are issued, except asprovided in Section 15 of the Plan.  (e) *Termination of Relationship as a Service Provider*. If a Participantceases to be a Service Provider, other than upon the Participant’sdeath or Disability, the Participant may exercise, as applicable, hisor her Award to the extent that such Award is vested on the date oftermination, within three (3) months following the Participant’stermination in the case of an Incentive Stock Option, or, in the caseof an Award other than an Incentive Stock Option, a greater/lesserperiod if specified in the Award Agreement (but in no event later thanthe expiration of the term of such Award as set forth in the AwardAgreement). If, on the date of termination, the Participant is notvested as to his or her entire Award, the Shares covered by orunderlying the unvested portion of such Award shall revert to thePlan; *provided, however*, that unvested Shares of Restricted Stockshall not automatically revert to the Plan but shall be subject to theCompany’s repurchase option as provided in the Award Agreement. If,after termination, the Participant does not exercise his or her Award,as applicable, within the time specified herein, the Award shallterminate, and the Shares covered by such Award shall revert to thePlan.
9

 
 (f) *Disability of Participant*. If a Participant ceases to be a ServiceProvider as a result of the Participant’s Disability, the Participantmay exercise, as applicable, his or her Award, to the extent that theAward is vested on the date of termination, within twelve (12) monthsfollowing the Participant’s termination, in the case of an IncentiveStock Option, or, in the case of an Award other than an IncentiveStock Option, a greater/lesser period if specified in the AwardAgreement or the Plan (but in no event later than the expiration ofthe term of such Award as set forth in the Award Agreement or thePlan). If, on the date of termination, the Participant is not vestedas to his or her entire Award of Restricted Stock or Restricted StockUnits, the Shares covered by or underlying the unvested portion of theAward shall revert to the Plan; *provided, however*, that unvestedShares of Restricted Stock shall not automatically revert to the Planbut shall be subject to the Company’s repurchase option as provided inthe Award Agreement. If, after a termination due to Disability, theParticipant does not exercise his or her Award, as applicable, withinthe time specified herein, the Award shall terminate, and the Sharescovered by such Award shall revert to the Plan.  (f) *Death of Participant*. If a Participant dies while a Service Provider,the Award may be exercised, as applicable, by the Participant’sdesignated beneficiary, provided such beneficiary has been designatedprior to Participant’s death in a form acceptable to theAdministrator, to the extent that the Award is vested on the date oftermination, within twelve (12) months following Participant’s deathor a greater/lesser period if specified in the Award Agreement of thePlan (but in no event later than the expiration of the term of suchAward as set forth in the Award Agreement of the Plan). If no suchbeneficiary has been designated by the Participant, then such Awardmay be exercised by the personal representative of the Participant’sestate or by the person(s) to whom the Award is transferred pursuantto the Participant’s will or in accordance with the laws of descentand distribution. If, at the time of death, Participant is not vestedas to his or her entire Award of Restricted Stock or Restricted StockUnits, the Shares covered by or underlying the unvested portion of theAward shall immediately revert to the Plan; *provided, however*, thatunvested Shares of Restricted Stock shall not automatically revert tothe Plan but shall be subject to the Company’s repurchase option asprovided in the Award Agreement. If the Award is not so exercised, asapplicable, within the time specified herein, the Award shallterminate, and the Shares covered by such Award shall revert to thePlan.     **12. ****Form of Consideration****.**The Administrator shall determine the acceptable form ofconsideration for exercising an Award, including the method of payment. In the case of an IncentiveStock Option, the Administrator shall determine the acceptable form of consideration at the time ofgrant. Such consideration may consist entirely of: (a) cash;  (b) check;  (c) other Shares which, in the case of Shares acquired directly orindirectly from the Company, (i) have been owned by the Participantfor more than six (6) months on the date of surrender, and (ii) have aFair Market Value on the date of surrender equal to the exercise priceor base value of the Shares as to which said Award shall be exercised;  (d) consideration received by the Company under a cashless exerciseprogram implemented by the Company in connection with the Plan;  (e) any combination of the foregoing methods of payment; or  (f) such other consideration and method of payment for the issuance ofShares to the extent permitted by Applicable Laws.     **13. ****Transferability of Awards****.**Unless determined otherwise by the Administrator,Awards may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any mannerother than by will or by the laws of descent or distribution and may be exercised, during thelifetime of the Participant, only by the Participant. If the Administrator makes an Awardtransferable, such Award shall contain such additional terms and conditions as the Administratordeems appropriate. Notwithstanding the foregoing, Incentive Stock Options may not sold, pledged,
10

 
assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the lawsof descent or distribution and may be exercised, during the lifetime of the Participant, only bythe Participant.***[NOTE: The transferability of Incentive Stock Options is limited by Section 422 of the Code. Wehave clarified that the Administrator may not exercise discretion with respect to transferabilityof Incentive Stock Options.]***     **14. ****Leaves of Absence****.**Unless the Administrator provides otherwise, vesting of Awardsgranted hereunder will be suspended during any unpaid leave of absence. A Service Provider will notcease to be an Employee in the case of any bona fide leave of absence approved by the Company. Forpurposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemploymentupon expiration of such leave is guaranteed by statute or contract. If reemployment upon expirationof a leave of absence approved by the Company is not so guaranteed, then an additional three (3)months following the end of the original three (3) month term of such leave, any Incentive StockOption held by the Participant will cease to be treated as an Incentive Stock Option and will betreated for tax purposes as a Nonstatutory Stock Option.     **15. ****Adjustments Upon Changes in Capitalization, Merger or Change in Control****.** (a) *Changes in Capitalization*. Subject to any required action by theshareholders of the Company, the number of Shares of Common Stock thathave been authorized for issuance under the Plan but as to which noAwards have yet been granted or which have been returned to the Planupon cancellation or expiration of an Award, the number of Shares thatmay be added annually to the Plan pursuant to Section 3(a), the numberof Shares of Common Stock as well as the price per share of CommonStock covered by each such outstanding Award, and the numerical Sharelimits in Sections 3(a), 6(a), 7(a), 8(a) and 9(a) shall beproportionately adjusted for any increase or decrease in the number ofissued Shares of Common Stock resulting from a stock split, reversestock split, stock dividend, combination or reclassification of theCommon Stock, or any other increase or decrease in the number ofissued Shares of Common Stock effected without receipt ofconsideration by the Company; *provided, however*, that conversion ofany convertible securities of the Company shall not be deemed to havebeen “effected without receipt of consideration.” Such adjustmentshall be made by the Board, whose determination in that respect shallbe final, binding and conclusive. Except as expressly provided herein,no issuance by the Company of shares of stock of any class, orsecurities convertible into shares of stock of any class, shallaffect, and no adjustment by reason thereof shall be made with respectto, the number or price of Shares of Common Stock subject to an Award.Any adjustment pursuant to this Section 15 shall, to the extentapplicable, be made in accordance with the requirements of Sections409A and 422 of the Code.  (b) *Dissolution or Liquidation*. In the event of the proposed dissolutionor liquidation of the Company, the Administrator shall notify eachParticipant as soon as practicable prior to the effective date of suchproposed transaction. The Administrator in its discretion may providefor a Participant to have the right to exercise his or her Award untilten (10) days prior to such transaction as to all Shares coveredthereby, including Shares as to which the Award would not otherwise beexercisable. In addition, the Administrator may provide that anyCompany repurchase option applicable to any Restricted Stock shalllapse as to all such Shares, provided the proposed dissolution orliquidation takes place at the time and in the manner contemplated. Tothe extent it has not been previously exercised, an Award willterminate immediately prior to the consummation of such proposedaction.  (c) *Merger or Change in Control*. In the event of a merger of the Companywith or into another corporation, or a Change in Control, eachoutstanding Award shall be assumed or an equivalent option or rightsubstituted by the successor corporation or a Parent or Subsidiary ofthe successor corporation.     In the event that the successor corporation refuses to assume or substitute for the Award, theParticipant shall fully vest in and have the right to exercise his or her Awards as to all Sharescovered thereby, including Shares as to which such Awards would not otherwise be vested orexercisable. All restrictions on Restricted Stock or other vesting criteria will lapse, asdetermined by the Board. In addition, if an Award becomes fully vested and exercisable in lieu ofassumption or substitution in the event of a Change in Control, the Administrator shall notify theParticipant in writing or electronically that the Award shall be fully vested and exercisable for aperiod of fifteen (15) days from the date of such notice, and the Award shall terminate upon theexpiration of such period.
11

 
     For the purposes of this subsection (c), an Award shall be considered assumed if, followingthe merger or Change in Control, the Award confers the right to purchase or receive, for each Sharesubject to the Award immediately prior to the merger or Change in Control, the consideration(whether stock, cash, or other securities or property); *provided, however*, that if suchconsideration received in the merger or Change in Control is not solely common stock of thesuccessor corporation or its Parent, the Administrator may, with the consent of the successorcorporation, provide for the consideration to be received upon the exercise of the Award, for eachShare subject to such Award, to be solely common stock of the successor corporation or its Parentequal in fair market value to the per share consideration received by holders of Common Stock inthe merger or Change in Control.     Notwithstanding anything in this Section 15(c) to the contrary, an Award that vests, is earnedor paid-out upon the satisfaction of one or more Performance Goals, will not be considered assumedif the Company or its successor modifies any of such Performance Goals without the Participant’sconsent; *provided, however*, a modification to such Performance Goals only to reflect the successorcorporation’s post-Change in Control corporate structure will not be deemed to invalidate anotherwise valid Award assumption.     **16. ****No Effect on Employment or Service.** Neither the Plan nor any Award shall conferupon a Participant any right with respect to continuing the Participant’s relationship as a ServiceProvider with the Company, nor shall they interfere in any way with the Participant’s right or theCompany’s right to terminate such relationship at any time, with or without cause.     **17. ****Date of Grant****.**The date of grant of an Award shall be, for all purposes, the dateon which the Administrator makes the determination granting such Award, or such other later date asis determined by the Administrator. Notice of the determination shall be provided to eachParticipant within a reasonable time after the date of such grant.     **18. ****Conditions Upon Issuance of Shares****.** (a) *Legal Compliance*. Shares shall not be issued pursuant to the exerciseof an Award unless the exercise of such Award and the issuance anddelivery of such Shares shall comply with Applicable Laws and shall befurther subject to the approval of counsel for the Company withrespect to such compliance.  (b) *Investment Representations*. As a condition to the exercise of anAward, the Company may require the person exercising such Award torepresent and warrant at the time of any such exercise that the Sharesare being purchased only for investment and without any presentintention to sell or distribute such Shares if, in the opinion ofcounsel for the Company, such a representation is required.     **19. ****Inability to Obtain Authority****.**The inability of the Company to obtain authorityfrom any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel tobe necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company ofany liability in respect of the failure to issue or sell such Shares as to which such requisiteauthority shall not have been obtained.     **20. ****Reservation of Shares****.**The Company, during the term of this Plan, will at alltimes reserve and keep available such number of Shares as shall be sufficient to satisfy therequirements of the Plan.     **21. ****Withholding Taxes****.** (a) *Cash*. Whenever cash is to be paid pursuant to an Award, the Companyshall have the right to deduct therefrom an amount sufficient tosatisfy any federal, state and local withholding tax requirementsrelated thereto.  (b) *Shares*. Whenever Shares are to be delivered pursuant to an Award, theCompany shall have the right to require the Participant to remit tothe Company in cash an amount sufficient to satisfy any federal, stateand local withholding tax requirements related thereto. With theapproval of the Administrator, in its sole discretion, a Participantmay satisfy the foregoing requirement by electing to have the Companywithhold from delivery Shares having a value equal to the amount oftax to be withheld. Such Shares shall be valued at their Fair MarketValue on the date as of which the amount of tax to be withheld isdetermined. Fractional share amounts shall be settled in cashcontemporaneously with the settlement or exercise of the Award. Such awithholding election may be made with respect to all or any portion ofthe Shares to be
12

 
   delivered pursuant to an Award. All elections by aParticipant to have Shares withheld for these purposes shall be madein such form and under such conditions as the Administrator may deemnecessary or advisable.     **22. ****Notification of Election Under****Section 83(b)****of The Code****.**If any Participantshall, in connection with the acquisition of Shares under the Plan, make the election permittedunder Section 83(b) of the Code (i.e., an election to include in gross income in the year oftransfer the amounts specified in Section 83(b)), such Participant shall notify the Company of suchelection within ten (10) days of filing notice of the election with the Internal Revenue Service,in addition to any filing and notification required pursuant to regulations issued under theauthority of Code Section 83(b).     **23. ****Escrow****.**Each share of Restricted Stock issued pursuant to the terms of the Planwhich has not vested shall be held in escrow pursuant to the terms of the Award Agreement. TheCompany may retain the certificates representing the Restricted Stock in the Company’s possessionuntil such time as all conditions and/or restrictions applicable to such Shares have beensatisfied.     **24. Shareholder Approval; Term**. The Plan became effective on May 12, 2005 and shall expire ata date ten (10) years from this date unless terminated earlier under Section 25 of the Plan.Notwithstanding the foregoing, the expiration of this Plan shall have no effect the rights ofParticipants under Awards previously granted to them, and all unexpired Awards shall continue inforce and operation after termination of the Plan except as they may lapse or be terminated bytheir own terms and conditions.     **25. ****Amendment and Termination of the Plan****.** (a) *Amendment and Termination*. The Board may at any time amend, alter, suspend or terminate the Plan.  (b) *Shareholder Approval*. The Company shall obtain shareholder approval ofany Plan amendment to the extent necessary and desirable to complywith Applicable Laws.  (c) *Effect of Amendment or Termination*. No amendment, alteration,suspension or termination of the Plan shall impair the rights of anyParticipant, unless mutually agreed otherwise between the Participantand the Administrator, which agreement must be in writing and signedby the Participant and the Company. Termination of the Plan shall notaffect the Administrator’s ability to exercise the powers granted toit hereunder with respect to Awards granted under the Plan prior tothe date of such termination.          **26.****Compliance with Section 409A of the Code**This Plan is intended to be exempt from Section 409A of the Code and, to the maximum extentpermitted by law, shall be interpreted, administered and operated consistent with this intent.Nothing in this Plan should be construed as a guarantee of any particular tax treatment to aParticipant.
13