ROSS STORES, INC.

NOTICE OF GRANT OF PERFORMANCE
SHARES 

The Participant has been granted
an award of Performance Shares (the “Award”) pursuant to the Ross Stores, Inc. 2008 Equity Incentive
Plan (the “Plan”) and the Performance Share
Agreement attached hereto (the “Agreement”), as follows: 

	Participant:	          	 	 	Employee ID: 	  	 	 
	 
	Grant Date:		 	 	     Grant No.: 	  	 	 
	 
	Target Number of		 	 		 
	Performance Shares:		
      [______________], subject to adjustment as provided by the
      Agreement.
	 
	 
	Maximum Number of
Performance Shares:		
      [______________], subject to adjustment as
      provided by the Agreement. [Not to exceed 500,000 shares for each full
      fiscal year in the Performance Period]
	 
	 
	Adjusted Pre-Tax Profit		 	 		 
	Target:	 	$_____________________	 		 
	 
	Performance Period:		
      Company fiscal year
      beginning ____________, and ending ____________.
	 
	 
	Performance Share			
	Vesting Date:		
      March 31,
      _____, except as provided by the Agreement.  
	 
	 
	Vested Performance
Shares:		
      Provided that
      the Participant’s Service has not terminated prior to the Performance
      Share Vesting Date, except as provided by the Agreement, on the
      Performance Share Vesting Date the number of Vested Performance Shares
      (not to exceed the Maximum Number of Performance Shares) shall be
      determined by multiplying the Target Number of Performance Shares by the
      Adjusted Pre-Tax Profit Multiplier (as defined by the
      Agreement).

	 
	Settlement Date: 		
      The Performance Share
      Vesting Date, except as otherwise provided by the
  Agreement.

	 
	Vested Common Shares: 		
      Except as provided by the
      Agreement and provided that the Participant’s Service has not terminated
      prior to the relevant date, the number of Vested Common Shares shall
      cumulatively increase on each respective date set forth below by the
      Vested Percentage set forth opposite such date, as
  follows:

	 
	 		Common Share Vesting
      Date 	           	Vested
      Percentage  	 
	 		Settlement Date 	 	30%  	
	 		1st Anniversary of Settlement Date 	 	30%  	
	 		2nd Anniversary of Settlement Date 	 	40%  	
	 
	Employment Agreement: 		Executive Employment Agreement between the Company and the
      Participant, as in effect at any applicable time. 	 



By their signatures below or by
electronic acceptance or authentication in a form authorized by the Company, the
Company and the Participant agree that the Award is governed by this Notice and
by the provisions of the Plan and the Performance Share Agreement, both of which
are made a part of this document. The Participant acknowledges that copies of
the Plan, Performance Share Agreement and the prospectus for the Plan are
available on the Company’s internal web site and may be viewed and printed by
the Participant for attachment to the Participant’s copy of this Grant Notice.
The Participant represents that the Participant has read and is familiar with
the provisions of the Plan and Performance Share Agreement, and hereby accepts
the Award subject to all of their terms and conditions.





	ROSS STORES, INC.  	  	PARTICIPANT  
	  
	By:
    	 	 	  	  	   
	  	  	  	Signature  
	Its:   	 	 	   	 	  
	  	  	  	Date  
	Address:     	4440 Rosewood Drive  	 	  
	  	Pleasanton, CA 94588  	 	Address  
	  	 
	  
	ATTACHMENTS:	  	
      2008 Equity Incentive Plan,
      as amended to the Grant Date, Performance Share Agreement and Plan
      Prospectus







ROSS STORES,
INC.
PERFORMANCE SHARE
AGREEMENT

     Ross
Stores, Inc. has granted to the Participant named in the Notice of Grant of
Performance Shares (the “Grant Notice”) to which
this Performance Share Agreement (the “Agreement”)
is attached an Award consisting of Performance Shares subject to the terms and
conditions set forth in the Grant Notice and this Agreement. The Award has been
granted pursuant to and shall in all respects be subject to the terms and
conditions of the Ross Stores, Inc. 2008 Equity Incentive Plan (the
“Plan”), as amended to the Grant Date, the
provisions of which are incorporated herein by reference. By signing the Grant
Notice, the Participant: (a) acknowledges
receipt of and represents that the Participant has read and is familiar with the
Grant Notice, this Agreement, the Plan and a prospectus for the Plan (the
“Plan Prospectus”) in the form most recently
prepared in connection with the registration with the Securities and Exchange
Commission of shares issuable pursuant to the Plan, (b) accepts the Award
subject to all of the terms and conditions of the Grant Notice, this Agreement
and the Plan and (c) agrees to accept as binding, conclusive and final all
decisions or interpretations of the Committee upon any questions arising under
the Grant Notice, this Agreement or the Plan.

     1. DEFINITIONS AND
CONSTRUCTION.

          1.1 Definitions. Unless otherwise defined
herein, capitalized terms shall have the meanings assigned in the Grant Notice
or the Plan. Whenever used herein, the following terms shall have their
respective meanings set forth below: 

               (a) “Adjusted Pre-Tax Profit”
means the earnings before taxes as reported in the Consolidated Statements of
Earnings of the Company for the fiscal year of the Company coinciding with the
Performance Period, adjusted to exclude from the determination of such amount
the reduction in earnings resulting from the accrual of compensation expense for
Performance Awards under the Plan and incentive awards under the Second Amended
and Restated Ross Stores, Inc. Incentive Compensation Plan, granted in each
case, with respect to the Performance Period. 

               (b) “Adjusted
Pre-Tax Profit Multiplier” means a number determined as
follows: 

	         	Percentage of Adjusted Pre- 	 	Adjusted Pre-Tax Profit 
		Tax Profit Target
      Achieved 	  	Multiplier 
		Less than 90% 	  	0.00% 
		90%
      		66.70%
      
		95% 		83.33% 
		100%
      		100.00%
      
		105% 		140.00% 
		110%
      		165.00%
      
		115% 		185.00% 
		Equal to
      or greater than 120% 	  	200.00%
      






The Adjusted Pre-Tax Profit
Multiplier for percentages of Adjusted Pre-Tax Profit Target achieved falling
between the percentages set forth in the table above shall be determined by
linear interpolation. 

               (c) “Change in
Control” means a “Change in Control” as defined by the Employment
Agreement.

               (d) “Common
Shares” mean shares of Stock issued in settlement of the
Award.

               (e) “Expiration
of Participant’s Employment Agreement Due to Non-Renewal” means the
expiration of the Employment Agreement due to its “Non-Renewal,” as provided by
the Employment Agreement.

               (f) “Performance Share” means a right to receive on the
Settlement Date one (1) Common Share, subject to further restrictions as
provided by this Agreement, if such Performance Share is then a Vested
Performance Share.

               (g) “Termination Due to Disability” means the termination of the
Participant’s employment due to “Disability” as defined by and upon terms set
forth in the Employment Agreement.

               (h) “Termination for Cause” means the termination of the
Participant’s employment for “Cause” as defined by the Employment
Agreement.

               (i) “Termination for Good Reason” means the Participant’s
termination of employment for “Good Reason” as defined by the Employment
Agreement.

               (j) “Termination Without Cause” means the termination of the
Participant’s employment “Without Cause” as defined by the Employment
Agreement.

               (k) “Voluntary
Termination” means the “Voluntary Termination” of the Participant’s
employment as defined by the Employment Agreement.

          1.2 Construction. Captions and titles
contained herein are for convenience only and shall not affect the meaning or
interpretation of any provision of this Agreement. 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. 

     2. ADMINISTRATION. 

          All questions of interpretation concerning the Grant
Notice, this Agreement and the Plan shall be determined by the Committee. All
determinations by the Committee shall be final and binding upon all persons
having an interest in the Award as provided by the Plan. Any Officer shall have
the authority to act on behalf of the Company with respect to any matter, right,
obligation, or election which is the responsibility of or which is allocated to
the Company herein,

2 




provided the Officer has apparent
authority with respect to such matter, right, obligation, or election. If the
Participant is a Covered Employee, compensation realized by the Participant
pursuant to the Award is intended to constitute qualified performance-based
compensation within the meaning of Section 162(m) of the Code and the
regulations thereunder, and the provisions of this Agreement shall be construed
and administered in a manner consistent with this intent. The Company intends
that the Award comply with Section 409A of the Code (including any amendments or
replacements of such section) and the regulations thereunder, and the provisions
of this Agreement shall be construed and administered in a manner consistent
with this intent.

     3.
THE AWARD. 


          3.1 Grant of Performance Shares. On the Grant Date, the Participant shall acquire, subject
to the provisions of this Agreement, a right to receive a number of Performance
Shares which shall not exceed the Maximum Number of Performance Shares set forth
in the Grant Notice, subject to adjustment as provided in Section 12. The number
of Performance Shares, if any, ultimately earned by the Participant, shall be
that number of Performance Shares which become Vested Performance
Shares.

          3.2 No Monetary Payment Required. The Participant is not required to make any monetary
payment (other than applicable tax withholding, if any) as a condition to
receiving the Performance Shares or the Common Shares issued upon settlement of
the Performance Shares, the consideration for which shall be past services
actually rendered and/or future services to be rendered to a Participating
Company or for its benefit. Notwithstanding the foregoing, if required by
applicable state corporate law, the Participant shall furnish consideration in
the form of cash or past services rendered to a Participating Company or for its
benefit having a value not less than the par value of the Common Shares issued
upon settlement of the Performance Shares.

     4.
CERTIFICATION OF THE COMMITTEE. 

          4.1 Level of Adjusted Pre-Tax Profit Attained.
As soon as practicable following
completion of the Performance Period, and in any event prior to the Performance
Share Vesting Date, the Committee shall certify in writing the level of
attainment of Adjusted Pre-Tax Profit during the Performance Period and the
resulting number of Performance Shares which shall become Vested Performance
Shares on the Performance Share Vesting Date, subject to the Participant’s
continued Service until the Performance Share Vesting Date, except as otherwise
provided by Section 5. The Company shall promptly notify the Participant of the
determination by the Plan Administrator.

          4.2 Adjustment to Adjusted Pre-Tax Profit for Extraordinary
Items. The Committee shall adjust
Adjusted Pre-Tax Profit, as it deems appropriate, to exclude the effect (whether
positive or negative) of any of the following occurring after the grant of the
Award: (a) a change in accounting standards required by generally accepted
accounting principles or (b) any extraordinary, unusual or nonrecurring item.
Each such adjustment, if any, shall be made solely for the purpose of providing
a consistent basis from period to period for the calculation of

3 




Adjusted Pre-Tax Profit in order
to prevent the dilution or enlargement of the Participant’s rights with respect
to the Award.

     5.
VESTING OF
PERFORMANCE
SHARES.

          5.1 In General. Except as provided by this Section 5 and Section 11, the Performance
Shares shall vest and become Vested Performance Shares as provided in the Grant
Notice and certified by the Committee.

          5.2 Effect of Termination for Cause or Voluntary Termination.
In the event of the Termination for
Cause or Voluntary Termination of the Participant prior to the Performance Share
Vesting Date, the Participant shall forfeit and the Company shall automatically
reacquire all of the Performance Shares subject to the Award. The Participant
shall not be entitled to any payment for such forfeited Performance
Shares.

          5.3 Effect of Death, Termination Due to Disability,
Termination Without Cause or Termination for Good Reason. In the event of the death, Termination Due to Disability,
Termination Without Cause or Termination for Good Reason of the Participant
prior to the Performance Share Vesting Date, then on the Performance Share
Vesting Date a number of Performance Shares shall become Vested Performance
Shares equal to that number of Performance Shares that would have become Vested
Performance Shares had no such death or termination occurred.

          5.4 Effect of Expiration of Participant’s Employment
Agreement Due to Non-Renewal. In the
event of the Expiration of Participant’s Employment Agreement Due to Non-Renewal
prior to the Performance Share Vesting Date, then on the Performance Share
Vesting Date the number of Performance Shares that shall become Vested
Performance Shares shall determined by multiplying (a) that number of
Performance Shares that would have become Vested Performance Shares had no such
expiration of the Employment Agreement occurred by (b) a percentage equal to
either (i) if such expiration of the Employment Agreement occurs prior to the
last day of the Performance Period, thirty percent (30%) multiplied by the ratio
of the number of full months of the Participant’s employment with the Company
during the Performance Period to the number of full months contained in the
Performance Period or (ii) if such expiration of the Employment Agreement occurs
on or after the last day of the Performance Period but prior to the Performance
Share Vesting Date, thirty (30%).

          5.5 Forfeiture of Unvested Performance Shares.
Except as otherwise provided by this
Section 5 or Section 11, on the Performance Share Vesting Date, the Participant
shall forfeit and the Company shall automatically reacquire all Performance
Shares subject to the Award which have not become Vested Performance Shares
(“Unvested Performance Shares”). The Participant shall not be
entitled to any payment for such forfeited Performance Shares.

          5.6 Ownership Change Event,
Dividends, Distributions and Adjustments. Upon the occurrence of an
Ownership Change Event, a dividend or distribution to the stockholders of the
Company paid in shares of Stock or other property, or any other adjustment upon
a change in the capital structure of the Company as described in Section 4.4 of
the Plan, any and all new, substituted or additional securities or other
property (other than regular, periodic

4 




dividends paid on Stock pursuant
to the Company’s dividend policy) to which the Participant is entitled by reason
of the Participant’s ownership of Unvested Performance Shares shall be
immediately subject to the Company Reacquisition Right and included in the terms
“Performance Shares” and “Unvested Performance Shares” for all purposes of this
Section 5 with the same force and effect as the Unvested Performance Shares
immediately prior to the Ownership Change Event, dividend, distribution or
adjustment, as the case may be. For purposes of determining the number of Vested
Performance Shares following an Ownership Change Event, dividend, distribution
or adjustment, credited Service shall include all Service with any corporation
which is a Participating Company at the time the Service is rendered, whether or
not such corporation is a Participating Company both before and after any such
event.

     6.
SETTLEMENT OF THE
AWARD.

          6.1 Issuance of Common Shares. Subject to
the provisions of Section 6.3 below, the Company shall issue to the Participant
on the Settlement Date with respect to each Vested Performance Share one (1)
Common Share. Common Shares issued in settlement of Performance Shares shall be
subject to the vesting conditions, Company Reacquisition Right and restrictions
on transfer set forth in Sections 7, 8.1 and 15, respectively, and any such
other restrictions as may be required pursuant to Section 6.3, Section 10 or the
Insider Trading Policy.

          6.2 Beneficial Ownership of
Common Shares; Certificate Registration. The Participant hereby
authorizes the Company, in its sole discretion, to deposit for the benefit of
the Participant with any broker with which the Participant has an account
relationship of which the Company has notice any or all vested Common Shares
acquired by the Participant pursuant to the settlement of the Award. Further,
the Participant hereby authorizes the Company, in its sole discretion, to
deposit unvested Common Shares with the Company’s transfer agent, including any
successor transfer agent, to be held in book entry form during the term of the
Escrow pursuant to Section 9. Except as otherwise provided by this Section, a
certificate for the Common Shares as to which the Award is settled shall be
registered in the name of the Participant, or, if applicable, in the names of
the heirs of the Participant.

          6.3 Restrictions on Grant of
the Award and Issuance of Common Shares. The grant of the Award and
issuance of Common Shares upon settlement of the Award shall be subject to
compliance with all applicable requirements of federal, state law or foreign law
with respect to such securities. No Common Shares may be issued hereunder 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.
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 of any Common Shares subject to the Award shall
relieve the Company of any liability in respect of the failure to issue such
shares as to which such requisite authority shall not have been obtained. As a
condition to the settlement of the 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.

5 




          6.4 Fractional Shares. The Company shall not be
required to issue fractional Common Shares upon the settlement of the Award. Any
fractional share resulting from the determination of the number of Vested
Performance Shares shall be rounded up to the nearest whole number. 

     7.
VESTING OF
COMMON
SHARES. 


          7.1 In General. Except as provided by this Section 7 and Section 11, the Common Shares
issued in settlement of the Award shall vest and become Vested Common Shares as
provided in the Grant Notice; provided however, that Common Shares that would
otherwise become Vested Common Shares on a date (the “Original
Vesting Date”) on which a sale of such shares by the Participant would
violate the Insider Trading Policy shall, not withstanding the vesting schedule
set forth in the Grant Notice, become Vested Common Shares on the first to occur
of (a) the next business day on which such sale would not violate the Insider
Trading Policy or (b) the later of (i) the last day of the calendar year in
which the Original Vesting Date occurred or (ii) the last day of the Company’s
taxable year in which the Original Vesting Date occurred.

          7.2 Effect of Termination for Cause or Voluntary Termination.
In the event of the Termination for
Cause or Voluntary Termination of the Participant on or after the Settlement
Date, no additional Common Shares shall become Vested Common Shares.

          7.3 Effect of Death, Termination Due to Disability,
Termination Without Cause or Termination for Good Reason. In the event of the death, Termination Due to Disability,
Termination Without Cause or Termination for Good Reason of the Participant
prior to the Performance Share Vesting Date, then on the Settlement Date the
Company shall issue to the Participant one (1) Vested Common Share for each
Vested Performance Share determined in accordance with Section 5.3. In the event
of the death, Termination Due to Disability, Termination Without Cause or Termination for Good Reason of the
Participant on or after the Settlement Date, then the vesting of all Unvested
Common Shares issued in settlement of the Award shall be accelerated in full
effective as of the date of such death or termination.

          7.4 Effect of Expiration of Participant’s Employment
Agreement Due to Non-Renewal. In the
event of the Expiration of Participant’s Employment Agreement Due to Non-Renewal
prior to the Performance Share Vesting Date, then on the Settlement Date the
Company shall issue to the Participant one (1) Vested Common Share for each
Vested Performance Share determined in accordance with Section 5.4. In the event
of the Expiration of Participant’s Employment Agreement Due to Non-Renewal on or
after the Settlement Date, then the vesting of the then Unvested Common Shares
issued in settlement of the Award shall be accelerated effective as of the date
of such termination on a pro rata basis. The number of such additional Common
Shares that shall become vested as of the date of such expiration of the
Employment Agreement shall be that number of additional Common Shares that would
have become vested through the date of such expiration in accordance with the
vesting schedule set forth in the Grant Notice had such vesting schedule
provided for the accrual of vesting on a daily basis (based on a 365 day year).
Pro rata vesting for the Common Shares that would vest on the first anniversary
of the Settlement Date shall be accrued at a daily rate of 0.1370%, and pro
rata

6 




vesting for the Common Shares that
would vest on the second anniversary of the Settlement Date shall be accrued at
a daily rate of 0.0913%.

     8.
COMPANY REACQUISITION
RIGHT.

          8.1 Grant of Company Reacquisition
Right. Except to the extent otherwise provided by this
Agreement, in the event that (a) the Participant’s Service terminates or (b) the
Participant, the Participant’s legal representative, or other holder of the
shares, attempts to sell, exchange, transfer, pledge, or otherwise dispose of
(other than pursuant to an Ownership Change Event), including, without
limitation, any transfer to a nominee or agent of the Participant, any Common
Shares which are not Vested Common Shares (“Unvested Common
Shares”), the Company shall automatically reacquire the Unvested
Common Shares, and the Participant shall not be entitled to any payment therefor
(the “Company Reacquisition Right”).

          8.2 Ownership Change Event, Non-Cash Dividends, Distributions
and Adjustments.
Upon the occurrence of an Ownership
Change Event, a dividend or distribution to the stockholders of the Company paid
in shares of Stock or other property, or any other adjustment upon a change in
the capital structure of the Company as described in Section 4.4 of the Plan,
any and all new, substituted or additional securities or other property (other
than regular, periodic cash dividends paid on Stock pursuant to the Company’s
dividend policy) to which the Participant is entitled by reason of the
Participant’s ownership of Unvested Common Shares shall be immediately subject
to the Company Reacquisition Right and included in the terms “Common Shares,”
“Stock” and “Unvested Common Shares” for all purposes of the Company
Reacquisition Right with the same force and effect as the Unvested Common Shares
immediately prior to the Ownership Change Event, dividend, distribution or
adjustment, as the case may be. For purposes of determining the number of Vested
Common Shares following an Ownership Change Event, dividend, distribution or
adjustment, credited Service shall include all Service with any corporation
which is a Participating Company at the time the Service is rendered, whether or
not such corporation is a Participating Company both before and after any such
event.

          8.3 Obligation to Repay Certain Cash Dividends and
Distributions. The Participant shall, at
the discretion of the Company, be obligated to promptly repay to the Company
upon termination of the Participant’s Service any dividends and other
distributions paid to the Participant in cash with respect to Unvested Common
Shares reacquired by the Company pursuant to the Company Reacquisition
Right.

     9.
ESCROW. 

          9.1 Appointment of Agent. To ensure that Common Shares subject to the Company Reacquisition Right
will be available for reacquisition, the Participant and the Company hereby
appoint the Secretary of the Company, or any other person designated by the
Company, as their agent and as attorney-in-fact for the Participant (the
“Agent”) to hold any and all Unvested Common Shares and to sell,
assign and transfer to the Company any such Unvested Common Shares reacquired by
the Company pursuant to the Company Reacquisition Right. The Participant
understands that appointment of the Agent is a material inducement to make
this

7 




Agreement and that such
appointment is coupled with an interest and is irrevocable. The Agent shall not
be personally liable for any act the Agent may do or omit to do hereunder as
escrow agent, agent for the Company, or attorney in fact for the Participant
while acting in good faith and in the exercise of the Agent’s own good judgment,
and any act done or omitted by the Agent pursuant to the advice of the Agent’s
own attorneys shall be conclusive evidence of such good faith. The Agent may
rely upon any letter, notice or other document executed by any signature
purporting to be genuine and may resign at any time.

          9.2 Establishment of Escrow. The
Participant authorizes the Company to deposit the Unvested Common Shares with
the Company’s transfer agent to be held in book entry form, as provided in
Section 6.2, and the Participant agrees to deliver to and deposit with the Agent
each certificate, if any, evidencing the Unvested Common Shares and, if required
by the Company, an Assignment Separate from Certificate with respect to such
book entry shares and each such certificate duly endorsed (with date and number
of Common Shares blank) in the form attached to the Notice, to be held by the
Agent under the terms and conditions of this Section 9 (the “Escrow”). Upon the occurrence of a Change in Control or a
change, as described in Section 12, in the character or amount of any
outstanding stock of the corporation the stock of which is subject to the
provisions of this Agreement, any and all new, substituted or additional
securities or other property to which the Participant is entitled by reason of
his or her ownership of the Unvested Common Shares that remain, following such
Change in Control or change described in Section 12, subject to the Company
Reacquisition Right shall be immediately subject to the Escrow to the same
extent as the Unvested Common Shares immediately before such event. The Company
shall bear the expenses of the Escrow.

          9.3 Delivery of Common Shares to
Participant. The Escrow shall continue with respect to any Common
Shares for so long as such Common Shares remain subject to the Company
Reacquisition Right. Upon termination of the Company Reacquisition Right with
respect to Common Shares, the Company shall so notify the Agent and direct the
Agent to deliver such number of Common Shares to the Participant. As soon as
practicable after receipt of such notice, the Agent shall cause to be delivered
to the Participant the Common Shares specified by such notice, and the Escrow
shall terminate with respect to such Common Shares.

     10.
TAX
MATTERS.

          10.1 Tax
Withholding.

               (a) In General. At
the time the Grant Notice is executed, or at any time thereafter as requested by
the Company, the Participant hereby authorizes withholding from payroll and any
other amounts payable to the Participant, and otherwise agrees to make adequate
provision for, any sums required to satisfy the federal, state, local and
foreign tax withholding obligations of the Company, if any, which arise in
connection with the Award or the issuance of Common Shares in settlement
thereof. The Company shall have no obligation to process the settlement of the
Award or to deliver Common Shares until the tax withholding obligations as
described in this Section have been satisfied by the Participant.

               (b) Assignment of Sale Proceeds; Payment of Tax Withholding
by Check. Subject to compliance with
applicable law and the Company’s Insider Trading Policy,

8 




the Company may permit the
Participant to satisfy the Participating Company’s tax withholding obligations
in accordance with procedures established by the Company providing for either
(i) delivery by the Participant to the Company or a broker approved by the
Company of properly executed instructions, in a form approved by the Company,
providing for the assignment to the Company of the proceeds of a sale with
respect to some or all of the Vested Shares, or (ii) payment by check. The
Participant shall deliver written notice of any such permitted election to the
Company on a form specified by the Company for this purpose at least thirty (30)
days (or such other period established by the Company) prior to the date on
which the Company’s tax withholding obligation arises (the “Withholding Date”). If the Participant elects
payment by check, the Participant agrees to deliver a check for the full amount
of the required tax withholding to the applicable Participating Company on or
before the third business day following the Withholding Date. If the Participant
elects payment by check but fails to make such payment as required by the
preceding sentence, the Company is hereby authorized, at its discretion, to
satisfy the tax withholding obligations through any means authorized by this
Section 10.1, including by directing a sale for the account of the Participant
of some or all of the Vested Shares from which the required taxes shall be
withheld, by withholding from payroll and any other amounts payable to the
Participant or by withholding shares in accordance with Section
10.1(c).

               (c) Withholding in Common Shares. The Company may require the Participant to satisfy its
tax withholding obligations by deducting from the Common Shares otherwise
deliverable to the Participant in settlement of the Award or from the Common
Shares otherwise to be released from the Company Reacquisition Right a number of
whole, Vested Common Shares having a fair market value, as determined by the
Company as of the date on which the tax withholding obligations arise, not in
excess of the amount of such tax withholding obligations determined by the
applicable minimum statutory withholding rates.

          10.2 Election Under Section
83(b) of the Code.

               (a) The Participant understands that Section 83 of the Code
taxes as ordinary income the difference between the amount paid for the Common
Shares, if anything, and the fair market value of the Common Shares as of the
date on which the Common Shares are “substantially vested,” within the meaning
of Section 83. In this context, “substantially vested” means that the right of
the Company to reacquire the Common Shares pursuant to the Company Reacquisition
Right has lapsed. The Participant understands that he or she may elect to have
his or her taxable income determined at the time he or she acquires the Common
Shares rather than when and as the Company Reacquisition Right lapses by filing
an election under Section 83(b) of the Code with the Internal Revenue Service no
later than thirty (30) days after the date of acquisition of the Common Shares.
The Participant understands that failure to make a timely filing under Section
83(b) will result in his or her recognition of ordinary income, as the Company
Reacquisition Right lapses, on the difference between the purchase price, if
anything, and the fair market value of the Common Shares at the time such
restrictions lapse. The Participant further understands, however, that if Common
Shares with respect to which an election under Section 83(b) has been made are
forfeited to the Company pursuant to its Company Reacquisition Right, such
forfeiture will be treated as a sale on which there is realized a loss equal to
the excess (if any) of the amount paid (if any) by the Participant for the
forfeited Common Shares over the amount realized (if any) upon their forfeiture.
If the Participant has

9 




paid nothing for the forfeited
Common Shares and has received no payment upon their forfeiture, the Participant
understands that he or she will be unable to recognize any loss on the
forfeiture of the Common Shares even though the Participant incurred a tax
liability by making an election under Section 83(b). 

               (b) The Participant understands that he or she should consult
with his or her tax advisor regarding the advisability of filing with the
Internal Revenue Service an election under Section 83(b) of the Code, which must
be filed no later than thirty (30) days after the date of the acquisition of the
Common Shares pursuant to this Agreement. Failure to file an election under
Section 83(b), if appropriate, may result in adverse tax consequences to the
Participant. The Participant acknowledges that he or she has been advised to
consult with a tax advisor regarding the tax consequences to the Participant of
the acquisition of Common Shares hereunder. ANY ELECTION UNDER SECTION 83(b) THE
PARTICIPANT WISHES TO MAKE MUST BE FILED NO LATER THAN 30 DAYS AFTER THE DATE ON
WHICH THE PARTICIPANT ACQUIRES THE COMMON SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE PARTICIPANT ACKNOWLEDGES THAT
TIMELY FILING OF A SECTION 83(b) ELECTION IS THE PARTICIPANT’S SOLE RESPONSIBILITY, EVEN IF THE PARTICIPANT REQUESTS THE
COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER
BEHALF.

               (c) The Participant will notify
the Company in writing if the Participant
files an election pursuant to Section 83(b) of the Code. The Company intends, in
the event it does not receive from the Participant evidence of such filing, to
claim a tax deduction for any amount which would otherwise be taxable to the
Participant in the absence of such an election.

     11.
CHANGE IN
CONTROL.

          11.1 Effect of Change in Control on Performance Shares.
In the event of the consummation of a
Change in Control prior to the Performance Share Vesting Date, the vesting of
100% of the Target Number of Performance Shares shall be accelerated and such
Performance Shares shall be deemed Vested Performance Shares effective as of the
date of the Change in Control. The Award shall be settled in full in accordance
with Section 6 immediately prior to the Change in Control, provided that the
Participant’s Service has not terminated prior to the Change in Control. In
settlement of the Award, the Company shall issue to the Participant one (1)
Vested Common Share for each Vested Performance Share determined in accordance
with this Section. The vesting of Performance Shares and settlement of the Award
that was permissible solely by reason of this Section shall be conditioned upon
the consummation of the Change in Control.

          11.2 Effect of Change in Control on Common Shares.
In the event of the consummation of a
Change in Control on or after the Settlement Date, the vesting of all Unvested
Common Shares issued in settlement of the Award shall be accelerated in full
effective as of the date of the Change in Control.

10 




          11.3 Federal Excise Tax Under
Section 4999 of the Code. 

               (a) Excess Parachute Payment. In the event that any acceleration of vesting the
Performance Shares or the Common Shares and any other payment or benefit
received or to be received by the Participant would subject the Participant to
any excise tax pursuant to Section 4999 of the Code due to the characterization
of such acceleration of vesting, payment or benefit as an “excess parachute
payment” under Section 280G of the Code, the amount of any acceleration of
vesting called for by this Agreement shall not exceed the amount which produces
the greatest after-tax benefit to the Participant.

               (b) Determination by Independent Accountants.
Upon the occurrence of any event that
might reasonably be anticipated to result in an “excess parachute payment” to
the Participant as described in Section 11.3(a) (an “Event”), the Company shall request a determination in writing
by independent public accountants selected by the Company (the “Accountants”). Unless the Company and the
Participant otherwise agree in writing, the Accountants shall determine and
report to the Company and the Participant within twenty (20) days of the date of
the Event the amount of such acceleration of vesting, payments and benefits
which would produce the greatest after-tax benefit to the Participant. For the
purposes of such determination, the Accountants may rely on reasonable, good
faith interpretations concerning the application of Sections 280G and 4999 of
the Code. The Company and the Participant shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make their required determination. The Company shall bear all fees and expenses
the Accountants may reasonably charge in connection with their services
contemplated by this Section.

     12.
ADJUSTMENTS FOR
CHANGES IN
CAPITAL
STRUCTURE.

          Subject to any required action by the stockholders of the
Company and the requirements of Section 409A of the Code to the extent
applicable, in the event of any change in the Stock effected without receipt of
consideration by the Company, whether through merger, consolidation,
reorganization, reincorporation, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, split-up, split-off, spin-off,
combination of shares, exchange of shares, or similar change in the capital
structure of the Company, or in the event of payment of a dividend or
distribution to the stockholders of the Company in a form other than Stock
(excepting normal cash dividends) that has a material effect on the Fair Market
Value of shares of Stock, appropriate adjustments shall be made in the number of
Performance Shares and/or the number and kind of shares to be issued in
settlement of the Award, in order to prevent dilution or enlargement of the
Participant’s rights under the Award. For purposes of the foregoing, conversion
of any convertible securities of the Company shall not be treated as “effected
without receipt of consideration by the Company.” Any fractional share resulting
from an adjustment pursuant to this Section shall be rounded down to the nearest
whole number. Such adjustments shall be determined by the Committee, and its
determination shall be final, binding and conclusive.

11 




     13.
RIGHTS AS A
STOCKHOLDER
OR EMPLOYEE.

          The Participant shall have no rights as a stockholder
with respect to any Common Shares which may be issued in settlement of this
Award until the date of the issuance of a certificate for such shares (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). No adjustment shall be made for
dividends, distributions or other rights for which the record date is prior to
the date such certificate is issued, except as provided in Section 12. If the
Participant is an Employee, the Participant understands and acknowledges that,
except as otherwise provided in a separate, written employment agreement between
the Company or a Parent or Subsidiary and the Participant, the Participant’s
employment is “at will” and is for no specified term. Nothing in this Agreement
shall confer upon the Participant any right to continue in Service interfere in
any way with any right of the Company or any Parent or Subsidiary to terminate
the Participant’s Service at any time.

     14.
LEGENDS.

          The Company may at any time place legends referencing any
applicable federal, state or foreign securities law restrictions on all
certificates representing Common Shares issued pursuant to this Agreement. The
Participant shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to this
Award in the possession of the Participant in order to carry out the provisions
of this Section. Unless otherwise specified by the Company, legends placed on
such certificates may include, but shall not be limited to, the following:


“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS SET FORTH
IN AN AGREEMENT BETWEEN THIS CORPORATION AND
THE REGISTERED HOLDER, OR HIS PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON
FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.”

     15. RESTRICTIONS ON
TRANSFER OF COMMON SHARES.

          No Common Shares may be sold, exchanged, transferred
(including, without limitation, any transfer to a nominee or agent of the
Participant), assigned, pledged, hypothecated or otherwise disposed of,
including by operation of law, in any manner which violates any of the
provisions of this Agreement and, except pursuant to an Ownership Change Event,
until the date on which such shares become Vested Common Shares, and any such
attempted disposition shall be void. The Company shall not be required (a) to
transfer on its books any Common Shares which will have been transferred in
violation of any of the provisions set forth in this Agreement or (b) to treat
as owner of such Common Shares or to accord the right to vote as such owner or
to pay dividends to any transferee to whom such Common Shares will have been so
transferred. In order to enforce its rights under this Section, the Company
shall be authorized to give a stop transfer instruction with respect to the
Common Shares to the Company’s transfer agent. 

     16.
COMPLIANCE WITH
SECTION
409A.

          It is intended
that any election, payment or benefit which is made or provided pursuant to or
in connection with this Award that may result in Section 409A Deferred


12 




Compensation shall comply in all
respects with the applicable requirements of Section 409A (including applicable
regulations or other administrative guidance thereunder, as determined by the
Committee in good faith) to avoid the unfavorable tax consequences provided
therein for non-compliance. In connection with effecting such compliance with
Section 409A, the following shall apply:

          16.1 Required Delay in Payment to Specified Employee.
If the Participant is a “specified
employee” of a publicly traded corporation as defined under Section
409A(a)(2)(B)(i) of the Code, unless subject to an applicable exception under
Section 409A, any payment of Section 409A Deferred Compensation in connection
with a “separation from service” (as determined for purposes of Section 409A)
shall not be made until six (6) months after the Participant’s separation from
service (the “Section 409A Deferral
Period”). In the event such payments are
otherwise due to be made in installments or periodically during the Section 409A
Deferral Period, to the extent permitted under Section 409A, the payments of
Section 409A Deferred Compensation which would otherwise have been made in the
Section 409A Deferral Period shall be accumulated and paid in a lump sum as soon
as the Section 409A Deferral Period ends, and the balance of the payments shall
be made as otherwise scheduled.

          16.2 Other Delays in Payment. Neither the Participant nor the Company shall take any action to
accelerate or delay the payment of any benefits under this Agreement in any
manner which would not be in compliance with Code Section 409A (including any
transition or grandfather rules thereunder).

          16.3 Amendments to Comply
with Section 409A; Indemnification. Notwithstanding any other provision of this Agreement to the contrary,
the Company is authorized to amend this Agreement, to void or amend any election
made by the Participant under this Agreement and/or to delay the payment of any
monies and/or provision of any benefits in such manner as may be determined by
the Company, in its discretion, to be necessary or appropriate to comply with
Section 409A (including any transition or grandfather rules thereunder) without
prior notice to or consent of the Participant. The Participant hereby releases
and holds harmless the Company, its directors, officers and stockholders from
any and all claims that may arise from or relate to any tax liability,
penalties, interest, costs, fees or other liability incurred by the Participant
in connection with the Award, including as a result of the application of
Section 409A.

          16.4 Advice of Independent Tax Advisor. The Company has not obtained a tax ruling or other
confirmation from the Internal Revenue Service with regard to the application of
Section 409A to the Award, and the Company does not represent or warrant that
this Agreement will avoid adverse tax consequences to the Participant, including
as a result of the application of Section 409A to the Award. The Participant
hereby acknowledges that he or she has been advised to seek the advice of his or
her own independent tax advisor prior to entering into this Agreement and is not
relying upon any representations of the Company or any of its agents as to the
effect of or the advisability of entering into this Agreement.

13 




     17.
MISCELLANEOUS
PROVISIONS.

          17.1 Termination or Amendment. The Committee may terminate or amend the Plan or this
Agreement at any time; provided, however, that except as provided in Section 11
in connection with a Change in Control, no such termination or amendment may
adversely affect the Participant’s rights under this Agreement without the
consent of the Participant unless such termination or amendment is necessary to
comply with applicable law or government regulation, including, but not limited
to, Section 409A. No amendment or addition to this Agreement shall be effective
unless in writing.

          17.2 Nontransferability of the Award. Prior the issuance of Common Shares on the Settlement
Date, neither this Award nor any Performance Shares subject to this Award shall
be subject in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance, or garnishment by creditors of the Participant
or the Participant’s beneficiary, except transfer by will or by the laws of
descent and distribution. All rights with respect to the Award shall be
exercisable during the Participant’s lifetime only by the Participant or the
Participant’s guardian or legal representative.

          17.3 Unfunded Obligation. The Participant shall have the status of a general unsecured creditor of
the Company. Any amounts payable to the Participant pursuant to the Award shall
be an unfunded and unsecured obligation for all purposes, including, without
limitation, Title I of the Employee Retirement Income Security Act of 1974. The
Company shall not be required to segregate any monies from its general funds, or
to create any trusts, or establish any special accounts with respect to such
obligations. The Company shall retain at all times beneficial ownership of any
investments, including trust investments, which the Company may make to fulfill
its payment obligations hereunder. Any investments or the creation or
maintenance of any trust or any Participant account shall not create or
constitute a trust or fiduciary relationship between the Committee or the
Company and the Participant, or otherwise create any vested or beneficial
interest in the Participant or the Participant’s creditors in any assets of the
Company. The Participant shall have no claim against the Company for any changes
in the value of any assets which may be invested or reinvested by the Company
with respect to the Award.

          17.4 Further Instruments. The parties hereto agree to execute such further instruments and to take
such further action as may reasonably be necessary to carry out the intent of
this Agreement.

          17.5 Binding Effect. This Agreement shall inure to the benefit of the successors and assigns
of the Company and, subject to the restrictions on transfer set forth herein, be
binding upon the Participant and the Participant’s heirs, executors,
administrators, successors and assigns.

          17.6 Delivery of Documents and Notices. Any document relating to participation in the Plan or any
notice required or permitted hereunder shall be given in writing and shall be
deemed effectively given (except to the extent that this Agreement provides for
effectiveness only upon actual receipt of such notice) upon personal delivery,
electronic delivery at the e-mail address, if any, provided for the Participant
by the Company or a Parent or

14 




Subsidiary, or upon deposit in the
U.S. Post Office or foreign postal service, by registered or certified mail, or
with a nationally recognized overnight courier service, with postage and fees
prepaid, addressed to the other party at the address shown below that party’s
signature to the Grant Notice or at such other address as such party may
designate in writing from time to time to the other party. 

               (a) Description of Electronic Delivery. The Plan
documents, which may include but do not necessarily include: the Plan, the Grant
Notice, this Agreement, the Plan Prospectus, and any reports of the Company
provided generally to the Company’s stockholders, may be delivered to the
Participant electronically. In addition, the Participant may deliver
electronically the Grant Notice to the Company or to such third party involved
in administering the Plan as the Company may designate from time to time. Such
means of electronic delivery may include but do not necessarily include the
delivery of a link to a Company intranet or the Internet site of a third party
involved in administering the Plan, the delivery of the document via e-mail or
such other means of electronic delivery specified by the Company. 

               (b) Consent to Electronic Delivery. The Participant acknowledges that the Participant has
read Section 17.6(a) of this Agreement and consents to the electronic delivery
of the Plan documents and Grant Notice, as described in Section 17.6(a). The
Participant acknowledges that he or she may receive from the Company a paper
copy of any documents delivered electronically at no cost to the Participant by
contacting the Company by telephone or in writing. The Participant further
acknowledges that the Participant will be provided with a paper copy of any
documents if the attempted electronic delivery of such documents fails.
Similarly, the Participant understands that the Participant must provide the
Company or any designated third party administrator with a paper copy of any
documents if the attempted electronic delivery of such documents fails. The
Participant may revoke his or her consent to the electronic delivery of
documents described in Section 17.6(a) or may change the electronic mail address
to which such documents are to be delivered (if Participant has provided an
electronic mail address) at any time by notifying the Company of such revoked
consent or revised e-mail address by telephone, postal service or electronic
mail. Finally, the Participant understands that he or she is not required to
consent to electronic delivery of documents described in Section 17.6(a).


          17.7 Integrated Agreement. The Grant Notice, this Agreement and the Plan, together with the
Employment Agreement, shall constitute the entire understanding and agreement of
the Participant and the Company with respect to the subject matter contained
herein or therein and supersede any prior agreements, understandings,
restrictions, representations, or warranties between the Participant and the
Company with respect to such subject matter other than those as set forth or
provided for herein or therein. To the extent contemplated herein or therein,
the provisions of the Grant Notice, this Agreement and the Plan shall survive
any settlement of the Award and shall remain in full force and
effect.

          17.8 Applicable Law. This Agreement shall be governed by the laws of the State of California
as such laws are applied to agreements between California residents entered into
and to be performed entirely within the State of California.

15 




          17.9 Counterparts. The
Grant Notice may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. 

16