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Exhibit 10.3  


 
 

PROS HOLDINGS, INC.
  2007 Equity Incentive Plan    
    








   TABLE OF CONTENTS  



	 
	 	 
	 	Page

	1.	 	Establishment, Purpose and Term of Plan	 	1
	 	1.1	 	Establishment	 	1
	 	1.2	 	Purpose	 	1
	 	1.3	 	Term of Plan	 	1
	2.	 	Definitions and Construction	 	1
	 	2.1	 	Definitions	 	1
	 	2.2	 	Construction	 	7
	3.	 	Administration	 	7
	 	3.1	 	Administration by the Committee	 	7
	 	3.2	 	Authority of Officers	 	7
	 	3.3	 	Administration with Respect to Insiders	 	7
	 	3.4	 	Committee Complying with Section 162(m)	 	7
	 	3.5	 	Powers of the Committee	 	8
	 	3.6	 	Indemnification	 	8
	4.	 	Shares Subject to Plan	 	9
	 	4.1	 	Maximum Number of Shares Issuable	 	9
	 	4.2	 	Annual Increase in Maximum Number of Shares Issuable	 	9
	 	4.3	 	Share Accounting	 	9
	 	4.4	 	Adjustments for Changes in Capital Structure	 	9
	5.	 	Eligibility, Participation and Award Limitations	 	10
	 	5.1	 	Persons Eligible for Awards	 	10
	 	5.2	 	Participation in the Plan	 	10
	 	5.3	 	Award Limitations	 	10
	6.	 	Stock Options	 	11
	 	6.1	 	Exercise Price	 	11
	 	6.2	 	Exercisability and Term of Options	 	11
	 	6.3	 	Payment of Exercise Price	 	11
	 	6.4	 	Effect of Termination of Service	 	12
	 	6.5	 	Transferability of Options	 	13
	7.	 	Stock Appreciation Rights	 	13
	 	7.1	 	Types of SARs Authorized	 	13
	 	7.2	 	Exercise Price	 	13
	 	7.3	 	Exercisability and Term of SARs	 	13
	 	7.4	 	Exercise of SARs	 	14
	 	7.5	 	Deemed Exercise of SARs	 	14
	 	7.6	 	Effect of Termination of Service	 	14
	 	7.7	 	Transferability of SARs	 	14
	8.	 	Restricted Stock Awards	 	14
	 	8.1	 	Types of Restricted Stock Awards Authorized	 	15
	 	8.2	 	Purchase Price	 	15
	 	8.3	 	Purchase Period	 	15
	 	8.4	 	Payment of Purchase Price	 	15
	 	8.5	 	Vesting and Restrictions on Transfer	 	15
	 	8.6	 	Voting Rights; Dividends and Distributions	 	15
	 	8.7	 	Effect of Termination of Service	 	16
	 	8.8	 	Nontransferability of Restricted Stock Award Rights	 	16
	9.	 	Restricted Stock Unit Awards	 	16
	 	9.1	 	Grant of Restricted Stock Unit Awards	 	16
	 	 	 	 	 





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	 	9.2	 	Purchase Price	 	16
	 	9.3	 	Vesting	 	16
	 	9.4	 	Voting Rights, Dividend Equivalent Rights and Distributions	 	16
	 	9.5	 	Effect of Termination of Service	 	17
	 	9.6	 	Settlement of Restricted Stock Unit Awards	 	17
	 	9.7	 	Nontransferability of Restricted Stock Unit Awards	 	18
	10.	 	Performance Awards	 	18
	 	10.1	 	Types of Performance Awards Authorized	 	18
	 	10.2	 	Initial Value of Performance Shares and Performance Units	 	18
	 	10.3	 	Establishment of Performance Period, Performance Goals and Performance Award Formula	 	18
	 	10.4	 	Measurement of Performance Goals	 	18
	 	10.5	 	Settlement of Performance Awards	 	20
	 	10.6	 	Voting Rights; Dividend Equivalent Rights and Distributions	 	21
	 	10.7	 	Effect of Termination of Service	 	21
	 	10.8	 	Nontransferability of Performance Awards	 	22
	11.	 	Deferred Compensation Awards	 	22
	 	11.1	 	Establishment of Deferred Compensation Award Programs	 	22
	 	11.2	 	Terms and Conditions of Deferred Compensation Awards	 	22
	12.	 	Cash-Based Awards and Other Stock-Based Awards	 	23
	 	12.1	 	Grant of Cash-Based Awards	 	23
	 	12.2	 	Grant of Other Stock-Based Awards	 	23
	 	12.3	 	Value of Cash-Based and Other Stock-Based Awards	 	24
	 	12.4	 	Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards	 	24
	 	12.5	 	Voting Rights; Dividend Equivalent Rights and Distributions	 	24
	 	12.6	 	Effect of Termination of Service	 	24
	 	12.7	 	Nontransferability of Cash-Based Awards and Other Stock-Based Awards	 	24
	13.	 	Nonemployee Director Awards	 	25
	14.	 	Standard Forms of Award Agreement	 	25
	 	14.1	 	Award Agreements	 	25
	 	14.2	 	Authority to Vary Terms	 	25
	15.	 	Change in Control	 	25
	 	15.1	 	Effect of Change in Control on Awards	 	25
	 	15.2	 	Effect of Change in Control on Nonemployee Director Awards	 	26
	 	15.3	 	Federal Excise Tax Under Section 4999 of the Code	 	26
	16.	 	Compliance with Securities Law	 	27
	17.	 	Tax Withholding	 	27
	 	17.1	 	Tax Withholding in General	 	27
	 	17.2	 	Withholding in Shares	 	27
	18.	 	Amendment or Termination of Plan	 	28
	19.	 	Compliance with Section 409A	 	28
	 	19.1	 	Awards Subject to Section 409A	 	28
	 	19.2	 	Deferral and/or Distribution Elections	 	28
	 	19.3	 	Subsequent Elections	 	29
	 	19.4	 	Distributions Pursuant to Deferral Elections	 	29
	 	19.5	 	Unforeseeable Emergency	 	30
	 	19.6	 	Disabled	 	30
	 	19.7	 	Death	 	30
	 	19.8	 	No Acceleration of Distributions	 	30
	20.	 	Miscellaneous Provisions	 	31
	 	 	 	 	 



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	 	20.1	 	Repurchase Rights	 	31
	 	20.2	 	Forfeiture Events	 	31
	 	20.3	 	Provision of Information	 	31
	 	20.4	 	Rights as Employee, Consultant or Director	 	31
	 	20.5	 	Rights as a Stockholder	 	31
	 	20.6	 	Delivery of Title to Shares	 	31
	 	20.7	 	Fractional Shares	 	32
	 	20.8	 	Retirement and Welfare Plans	 	32
	 	20.9	 	Beneficiary Designation	 	32
	 	20.10	 	Severability	 	32
	 	20.11	 	No Constraint on Corporate Action	 	32
	 	20.12	 	Unfunded Obligation	 	32
	 	20.13	 	Choice of Law	 	32




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PROS HOLDINGS, INC.
  2007 Equity Incentive Plan    
    



        1.    ESTABLISHMENT, PURPOSE AND TERM OF PLAN.    


        1.1   Establishment. The PROS Holdings, Inc. 2007 Equity Incentive Plan (the  "Plan") is hereby established
effective as of March 26, 2007, the date of its approval by the
Board (the "Effective Date"). 



        1.2   Purpose. The purpose of the Plan is to advance the interests of the Participating Company Group and its stockholders by
providing an incentive to attract, retain and reward persons performing services for the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the
Participating Company Group. The Plan seeks to achieve this purpose by providing for Awards in the form of Options, Stock Appreciation Rights, Restricted Stock Purchase Rights, Restricted Stock
Bonuses, Restricted Stock Units, Performance Shares, Performance Units, Deferred Compensation Awards, Cash-Based and Other Stock-Based Awards and Nonemployee Director Awards. 



        1.3   Term of Plan. The Plan shall continue in effect until its termination by the Committee; provided, however, that all
Awards shall be granted, if at all, within ten (10) years from the Effective Date. 


        2.    DEFINITIONS AND CONSTRUCTION.    


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



        (a)   "Affiliate" means (i) an entity, other than a Parent Corporation,
that directly, or indirectly through one or more intermediary entities, controls the Company or (ii) an entity, other than a Subsidiary
Corporation, that is controlled by the Company directly or indirectly through one or more intermediary entities. For this purpose, the term "control" (including the term "controlled by") means the
possession, direct or indirect, of the power to direct or cause the direction of the management and policies of the relevant entity, whether through the ownership of voting securities, by contract or
otherwise; or shall have such other meaning assigned such term for the purposes of registration on Form S-8 under the Securities Act. 



        (b)   "Award" means any Option, Stock Appreciation Right, Restricted Stock
Purchase Right, Restricted Stock Bonus, Restricted Stock Unit, Performance Share, Performance Unit, Deferred Compensation Award, Cash-Based Award, Other Stock-Based Award or Nonemployee
Director Award granted under the Plan. 


        (c)   "Award Agreement" means a written or electronic agreement between the
Company and a Participant setting forth the terms, conditions and restrictions of the Award granted to the Participant. 



        (d)   "Board" means the Board of Directors of the Company. 


        (e)   "Cash-Based Award" means an Award denominated in cash and granted pursuant to Section 12. 


        (f)    "Cause" means, unless such term or an equivalent term is otherwise
defined with respect to an Award by the Participant's Award Agreement or by a written contract of employment or service, any of the following: (i) the Participant's theft, dishonesty, willful
misconduct, breach of fiduciary duty for personal profit, or falsification of any Participating Company documents or records; (ii) the Participant's material failure to abide by a Participating
Company's code of conduct or other policies (including, without limitation, policies relating to confidentiality and reasonable workplace conduct); (iii) the Participant's unauthorized use,
misappropriation, 



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destruction
or diversion of any tangible or intangible asset or corporate opportunity of a Participating Company (including, without limitation, the Participant's improper use or disclosure of a
Participating Company's confidential or proprietary information); (iv) any intentional act by the Participant which has a material detrimental effect on a Participating Company's reputation or
business; (v) the Participant's repeated failure or inability to perform any reasonable assigned duties after written notice from a Participating Company of, and a reasonable opportunity to
cure, such failure or inability; (vi) any material breach by the Participant of any employment, service, non-disclosure, non-competition, non-solicitation or
other similar agreement between the Participant and a Participating Company, which breach is not cured pursuant to the terms of such agreement; or (vii) the Participant's conviction (including
any plea of guilty or nolo contendere) of any criminal act involving fraud, dishonesty, misappropriation or moral turpitude, or which impairs the Participant's ability to perform his or her duties
with a Participating Company. 


        (g)   "Change in Control" means, unless such term or an equivalent term is
otherwise defined with respect to an Award by the Participant's Award Agreement or by a written contract of employment or service, the occurrence of any of the following: 



        (i)    any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total combined voting power of the Company's
then-outstanding securities entitled to vote generally in the election of Directors; provided, however, that the following acquisitions shall not constitute a Change in Control:
(1) an acquisition by any such person who on the Effective Date is the beneficial owner of more than fifty percent (50%) of such voting power, (2) any acquisition directly from the
Company, including, without limitation, a public offering of securities, (3) any acquisition by the Company, (4) any acquisition by a trustee or other fiduciary under an employee benefit
plan of a Participating Company or (5) any acquisition by an entity owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of
the voting securities of the Company; or 


        (ii)   an
Ownership Change Event or series of related Ownership Change Events (collectively, a  "Transaction") in which the stockholders of the Company
immediately before the Transaction do not retain
immediately after the Transaction direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding securities entitled to vote generally
in the election of Directors or, in the case of an Ownership Change Event described in Section 2.1(ee) (iii), the entity to which the assets of the Company were transferred (the  "Transferee"), as the case may be; or 


        (iii)  a
liquidation or dissolution of the Company; 





provided,
however, that a Change in Control shall be deemed not to include a transaction described in subsections (i) or (ii) of this Section 2.1(g) in which a majority of the members of
the board of directors of the continuing, surviving or successor entity, or parent thereof, immediately after such transaction is comprised of Incumbent Directors. Notwithstanding the foregoing, to
the extent that any amount constituting Section 409A Deferred Compensation would become payable under this Plan by reason of a Change in Control, such amount shall become payable only if the
event constituting a Change in Control would also constitute a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the
Company within the meaning of Section 409A. 


        For
purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more
corporations or other business entities which own the Company or the Transferee, as the case may be, either directly or 


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through
one or more subsidiary corporations or other business entities. The Committee shall have the right to determine whether multiple sales or exchanges of the voting securities of the Company or
multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive. 



        (h)   "Code" means the Internal Revenue Code of 1986, as amended, and any
applicable regulations or administrative guidelines promulgated thereunder. 


        (i)    "Committee" means the Compensation Committee and such other committee or
subcommittee of the Board, if any, duly appointed to administer the Plan and having such powers in each instance as shall be specified by the Board. If, at any time, there is no committee of the Board
then authorized or properly constituted to administer the Plan, the Board shall exercise all of the powers of the Committee granted herein, and, in any event, the Board may in its discretion exercise
any or all of such powers. 


        (j)    "Company" means PROS Holdings, Inc., a Delaware corporation, or
any successor corporation thereto. 


        (k)   "Consultant" means a person engaged to provide consulting or advisory
services (other than as an Employee or a member of the Board) to a Participating Company, provided that the identity of such person, the nature of such services or the entity to which such services
are provided would not preclude the Company from offering or selling securities to such person pursuant to the Plan in reliance on registration on Form S-8 under the Securities Act. 


        (l)    "Covered Employee" means, at any time the Plan is subject to Section 162(m), any Employee
who is or may reasonably be expected to become a "covered employee" as defined in Section 162(m), or any successor statute, and who is designated, either as an individual Employee or a member
of a class of Employees, by the Committee no later than (i) the date ninety (90) days after the beginning of the Performance Period, or (ii) the date on which
twenty-five percent (25%) of the Performance Period has elapsed, as a "Covered Employee" under this Plan for such applicable Performance Period. 


        (m)  "Deferred Compensation Award" means an award granted to a Participant
pursuant to Section 11. 


        (n)   "Director" means a member of the Board. 



        (o)   "Disability" means the permanent and total disability of the Participant,
within the meaning of Section 22(e)(3) of the Code. 


        (p)   "Dividend Equivalent Right" means the right of a Participant, granted at
the discretion of the Committee or as otherwise provided by the Plan, to receive a credit for the account of such Participant in an amount equal to the cash dividends paid on one share of Stock for
each share of Stock represented by an Award held by such Participant. 



        (q)   "Employee" means any person treated as an employee (including an Officer
or a member of the Board who is also treated as an employee) in the records of a Participating Company and, with respect to any Incentive Stock Option granted to such person, who is an employee for
purposes of Section 422 of the Code; provided, however, that neither service as a member of the Board nor payment of a director's fee shall be sufficient to constitute employment for purposes
of the Plan. The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such
individual's employment or termination of employment, as the case may be. For purposes of an individual's rights, if any, under the terms of the Plan as of the time of the Company's determination of
whether or not the individual is an Employee, all such determinations by the Company shall be final, binding and conclusive as to such rights, if any, notwithstanding that the 



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Company
or any court of law or governmental agency subsequently makes a contrary determination as to such individual's status as an Employee. 



        (r)   "Exchange Act" means the Securities Exchange Act of 1934, as amended. 


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



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


        (ii)   Notwithstanding
the foregoing, the Committee may, in its discretion, determine the Fair Market Value on the basis of the opening, closing, or average of the high and
low sale prices of a share of Stock on such date or the preceding trading day, the actual sale price of a share of Stock received by a Participant, any other reasonable basis using actual transactions
in the Stock as reported on a national or regional securities exchange or market system and consistently applied, or on any other basis consistent with the requirements of Section 409A. The
Committee may also determine the Fair Market Value upon the average selling price of the Stock during a specified period that is within thirty (30) days before or thirty (30) days after
such date, provided that, with respect to the grant of an Option or SAR, the commitment to grant such Award based on such valuation method must be irrevocable before the beginning of the specified
period and such valuation method must be used consistently for grants of Options and SARs under the same and substantially similar programs. The Committee may vary its method of determination of the
Fair Market Value as provided in this Section for different purposes under the Plan to the extent consistent with the requirements of Section 409A. 


        (iii)  If,
on such date, the Stock is not listed on a national or regional securities exchange or market system, the Fair Market Value of a share of Stock shall be as
determined by the Committee in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse, and in a manner consistent with the requirements of
Section 409A. 




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


        (u)   "Incumbent Director" means a director who either (i) is a member
of the Board as of the Effective Date or (ii) is elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of
such election or nomination, but who was not elected or nominated in connection with an actual or threatened proxy contest relating to the election of directors of the Company. 


        (v)   "Insider" means an Officer, Director or any other person whose
transactions in Stock are subject to Section 16 of the Exchange Act. 


        (w)  "Insider Trading Policy" means the written policy of the Company
pertaining to the purchase, sale, transfer or other disposition of the Company's equity securities by Directors, 



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Officers,
Employees or other service providers who may possess material, nonpublic information regarding the Company or its securities. 



        (x)   "Net-Exercise" means a procedure by which the Participant will be issued a number of shares of Stock upon the
exercise of an Option determined in accordance with the following formula: 



	

 	

  N=X(A-B)/A, where
	 	"N"=	the number of shares of Stock to be issued to the Participant upon exercise of the Option;
	 	"X"=	the total number of shares with respect to which the Participant has elected to exercise the Option;
	 	"A"=	the Fair Market Value of one (1) share of Stock determined on the exercise date; and
	 	"B"=	the exercise price per share (as defined in the Participant's Award Agreement)





        (y)   "Nonemployee Director" means a Director who is not an Employee. 


        (z)   "Nonemployee Director Award" means a Nonstatutory Stock Option, Stock
Appreciation Right, Restricted Stock Award or Restricted Stock Unit Award granted to a Nonemployee Director pursuant to Section 13 of the Plan. 



        (aa) "Nonstatutory Stock Option" means an Option not intended to be (as set
forth in the Award Agreement) an incentive stock option within the meaning of Section 422(b) of the Code. 


        (bb) "Officer" means any person designated by the Board as an officer of the
Company. 


        (cc) "Option" means an Incentive Stock Option or a Nonstatutory Stock Option
granted pursuant to Section 6 or Section 13. 


        (dd) "Other Stock-Based Award" means an Award denominated in shares of Stock and granted pursuant to Section 12. 


        (ee) "Ownership Change Event" means the occurrence of any of the following
with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the
voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange, or transfer of all or substantially all of the assets of the
Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company). 


        (ff)  "Parent Corporation" means any present or future "parent corporation" of
the Company, as defined in Section 424(e) of the Code. 


        (gg) "Participant" means any eligible person who has been granted one or more
Awards. 


        (hh) "Participating Company" means the Company or any Parent Corporation,
Subsidiary Corporation or Affiliate. 


        (ii)   "Participating Company Group" means, at any point in time, all entities
collectively which are then Participating Companies. 


        (jj)   "Performance Award" means an Award of Performance Shares or Performance
Units. 


        (kk) "Performance Award Formula" means, for any Performance Award, a formula
or table established by the Committee pursuant to Section 10.3 which provides the basis for computing the value of a Performance Award at one or more threshold levels of attainment of the
applicable Performance Goal(s) measured as of the end of the applicable Performance Period. 



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        (ll)   "Performance-Based Compensation" means compensation under an Award that satisfies the requirements of
Section 162(m) for certain performance-based compensation paid to Covered Employees. 


        (mm) "Performance Goal" means a performance goal established by the Committee
pursuant to Section 10.3. 


        (nn) "Performance Period" means a period established by the Committee
pursuant to Section 10.3 at the end of which one or more Performance Goals are to be measured. 


        (oo) "Performance Share" means a right granted to a Participant pursuant to
Section 10 to receive a payment equal to the value of a Performance Share, as determined by the Committee, based on performance. 


        (pp) "Performance Unit" means a right granted to a Participant pursuant to
Section 10 to receive a payment equal to the value of a Performance Unit, as determined by the Committee, based upon performance. 


        (qq) "Restricted Stock Award" means an Award of a Restricted Stock Bonus or a
Restricted Stock Purchase Right. 


        (rr)  "Restricted Stock Bonus" means Stock granted to a Participant pursuant
to Section 8 or Section 13. 


        (ss)  "Restricted Stock Purchase Right" means a right to purchase Stock
granted to a Participant pursuant to Section 8 or Section 13. 


        (tt)  "Restricted Stock Unit" or "Stock
Unit" means a right granted to a Participant pursuant to Section 9, Section 11 or Section 13 to receive a share of Stock on a date
determined in accordance with the provisions of such Sections, as applicable, and the Participant's Award Agreement. 



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


        (vv) "SAR" or "Stock
Appreciation Right" means a right granted to a Participant pursuant to Section 7 or Section 13 to receive payment, for each share of Stock
subject to such SAR, of an amount equal to the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR over the exercise price. 



        (ww) "Section 162(m)" means Section 162(m) of the Code. 


        (xx) "Section 409A" means Section 409A of the Code. 


        (yy) "Section 409A Deferred Compensation" means compensation provided
pursuant to the Plan that constitutes deferred compensation subject to and not exempted from the requirements of Section 409A. 



        (zz) "Securities Act" means the Securities Act of 1933, as amended. 


        (aaa) "Service" means a Participant's employment or service with the
Participating Company Group, whether in the capacity of an Employee, a Director or a Consultant. Unless otherwise provided by the Committee, a Participant's Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Participant renders such Service or a change in the Participating Company for which the Participant renders such Service, provided
that there is no interruption or termination of the Participant's Service. Furthermore, a Participant's Service shall not be deemed to have terminated if the Participant takes any military leave, sick
leave, or other bona fide leave of absence approved by the Company. However, unless otherwise provided by the Committee, if any such leave taken by a Participant exceeds ninety (90) days, then
on the ninety-first (91st) day following the commencement of such leave the Participant's Service shall be deemed to have terminated, unless the Participant's right to return to Service is guaranteed
by 



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statute
or contract. Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, an unpaid leave of absence shall not be treated as Service for purposes of
determining vesting under the Participant's Award Agreement. A Participant's Service shall be deemed to have terminated either upon an actual termination of Service or upon the entity for which the
Participant performs Service ceasing to be a Participating Company. Subject to the foregoing, the Company, in its discretion, shall determine whether the Participant's Service has terminated and the
effective date of such termination. 



        (bbb) "Stock" means the common stock of the Company, as adjusted from time to
time in accordance with Section 4.4. 


        (ccc) "Subsidiary Corporation" means any present or future "subsidiary
corporation" of the Company, as defined in Section 424(f) of the Code. 


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


        (eee) "Vesting Conditions" mean those conditions established in accordance
with the Plan prior to the satisfaction of which shares subject to an Award remain subject to forfeiture or a repurchase option in favor of the Company exercisable for the Participant's monetary
purchase price, if any, for such shares upon the Participant's termination of Service. 




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


        3.    ADMINISTRATION.    



        3.1   Administration by the Committee. The Plan shall be administered by the Committee. All questions of interpretation of the
Plan, of any Award Agreement or of any other form of agreement or other document employed by the Company in the administration of the Plan or of any Award shall be determined by the Committee, and
such determinations shall be final, binding and conclusive upon all persons having an interest in the Plan or such Award, unless fraudulent or made in bad faith. Any and all actions, decisions and
determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or Award Agreement or other agreement thereunder (other than determining questions of
interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest therein. 



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


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


        3.4   Committee Complying with Section 162(m). If the Company is a "publicly held corporation" within the meaning of
Section 162(m), the Board may establish a Committee of "outside directors" within the meaning of Section 162(m) to approve the grant of any Award intended to result in the payment of
Performance-Based Compensation. 


7







 



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



        (a)   to
determine the persons to whom, and the time or times at which, Awards shall be granted and the number of shares of Stock, units or monetary value to be subject to
each Award; 


        (b)   to
determine the type of Award granted; 


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


        (d)   to
determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and any shares acquired pursuant thereto, including, without
limitation, (i) the exercise or purchase price of shares pursuant to any Award, (ii) the method of payment for shares purchased pursuant to any Award, (iii) the method for
satisfaction of any tax withholding obligation arising in connection with Award, including by the withholding or delivery of shares of Stock, (iv) the timing, terms and conditions of the
exercisability or vesting of any Award or any shares acquired pursuant thereto, (v) the Performance Measures, Performance Period, Performance Award Formula and Performance Goals applicable to
any Award and the extent to which such Performance Goals have been attained, (vi) the time of the expiration of any Award, (vii) the effect of the Participant's termination of Service on
any of the foregoing, and (viii) all other terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto not inconsistent with the terms of the Plan; 


        (e)   to
determine whether an Award will be settled in shares of Stock, cash, or in any combination thereof; 


        (f)    to
approve one or more forms of Award Agreement; 


        (g)   to
amend, modify, extend, cancel or renew any Award or to waive any restrictions or conditions applicable to any Award or any shares acquired pursuant thereto; 


        (h)   to
accelerate, continue, extend or defer the exercisability or vesting of any Award or any shares acquired pursuant thereto, including with respect to the period
following a Participant's termination of Service; 


        (i)    to
prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt sub-plans or supplements to, or alternative versions of, the
Plan, including, without limitation, as the Committee deems necessary or desirable to comply with the laws or regulations of or to accommodate the tax policy, accounting principles or custom of,
foreign jurisdictions whose citizens may be granted Awards; and 


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




        3.6   Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or the
Committee or as officers or employees of the Participating Company Group, members of the Board or the Committee and any officers or employees of the Participating Company Group to whom authority to
act for the Board, the Committee or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys' fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act
under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in 


8







 

any
such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing,
the opportunity at its own expense to handle and defend the same. 


        4.    SHARES SUBJECT TO PLAN.    


        4.1   Maximum Number of Shares Issuable. Subject to adjustment as provided in Sections 4.2, 4.3 and 4.4, the maximum
aggregate number of shares of Stock that may be issued under the Plan shall be equal to One Million Eight Hundred Seventy Thousand (1,870,000) shares, and shall consist of authorized but unissued or
reacquired shares of Stock or any combination thereof. 


        4.2   Annual Increase in Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.4, the
maximum aggregate number of shares of Stock that may be issued under the Plan as set forth in Section 4.1 shall be cumulatively increased on January 1, 2008 and on each subsequent
January 1 through and including January 1, 2017, by a number of shares (the "Annual Increase") equal to the lesser of (i) 3.5% of
the number of shares of Stock issued and outstanding on the immediately preceding December 31, (ii) Nine Hundred Thousand (900,000) shares and (iii) an amount determined by the
Board. 


        4.3   Share Accounting. If an outstanding Award for any reason expires or is terminated or canceled without having been
exercised or settled in full, or if shares of Stock acquired pursuant to an Award subject to forfeiture or repurchase are forfeited or repurchased by the Company for an amount not greater than the
Participant's purchase price, the shares of Stock allocable to the terminated portion of such Award or such forfeited or repurchased shares of Stock shall again be available for issuance under the
Plan. Shares of Stock shall not be deemed to have been issued pursuant to the Plan (a) with respect to any portion of an Award that is settled in cash or (b) to the extent such shares
are withheld or reacquired by the Company in satisfaction of tax withholding obligations pursuant to Section 17.2. Upon payment in shares of Stock pursuant to the exercise of an SAR, the number
of shares available for issuance under the Plan shall be reduced only by the number of shares actually issued in such payment. If the exercise price of an Option is paid by tender to the Company, or
attestation to the ownership, of shares of Stock owned by the Participant, or by means of a Net-Exercise, the number of shares available for issuance under the Plan shall be reduced by the
net number of shares for which the Option is exercised. 


        4.4   Adjustments for Changes in Capital Structure. Subject to any required action by the stockholders of the Company, 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 and proportionate adjustments shall be made in the number and kind of shares subject to the Plan and to any outstanding Awards, in the
Award limits set forth in Section 5.3 and in the exercise or purchase price per share under any outstanding Award in order to prevent dilution or enlargement of Participants' rights under the
Plan. 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." If a majority of the
shares which are of the same class as the shares that are subject to outstanding Awards are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event)
shares of another corporation (the "New Shares"), the Committee may unilaterally amend the outstanding
Awards to provide that such Awards are for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise or purchase price per share of, the outstanding Awards
shall be 


9







 



adjusted
in a fair and equitable manner as determined by the Committee, in its discretion. Any fractional share resulting from an adjustment pursuant to this Section 4.4 shall be rounded down
to the nearest whole number, and in no event may the exercise or purchase price under any Award be decreased to an amount less than the par value, if any, of the stock subject to such Award. The
Committee in its sole discretion, may also make such adjustments in the terms of any Award to reflect, or related to, such changes in the capital structure of the Company or distributions as it deems
appropriate, including modification of Performance Goals, Performance Award Formulas and Performance Periods. The adjustments determined by the Committee pursuant to this Section shall be final,
binding and conclusive. 


        The
Committee may, without affecting the number of Shares reserved or available hereunder, authorize the issuance or assumption of benefits under this Plan in connection with any merger,
consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate, subject to compliance with Section 409A and any other applicable
provisions of the Code and related guidance issued by the U.S. Treasury Department. 



        5.    ELIGIBILITY, PARTICIPATION AND AWARD LIMITATIONS.    


        5.1   Persons Eligible for Awards. Awards, other than Deferred Compensation Awards or Nonemployee Director Awards, may be
granted only to Employees and Consultants. Deferred Compensation Awards may be granted only to Officers, Directors and individuals who are among a select group of management or highly compensated
Employees. Nonemployee Director Awards may be granted only to persons who, at the time of grant, are Nonemployee Directors. 



        5.2   Participation in the Plan. Awards are granted solely at the discretion of the Committee. Eligible persons may be granted
more than one Award. However, eligibility in accordance with this Section shall not entitle any person to be granted an Award, or, having been granted an Award, to be granted an additional Award. 


        5.3   Award Limitations.



        (a)   Incentive Stock Option Limitations.



        (i)    Maximum Number of Shares Issuable Pursuant to Incentive Stock Options. Subject to adjustment as provided in
Section 4.4, the maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to the exercise of Incentive Stock Options shall not exceed One Million Eight Hundred
Seventy Thousand (1,870,000), cumulatively increased on January 1, 2008 and on each subsequent January 1, through and including January 1, 2017, by a number of shares equal to the
smaller of the Annual Increase determined under Section 4.2 or Two Million (2,000,000) shares. The maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to all
Awards other than Incentive Stock Options shall be the number of shares determined in accordance with Section 4.1, subject to adjustment as provided in Sections 4.2, 4.3 and 4.4. 


        (ii)   Persons Eligible. An Incentive Stock Option may be granted only to a person who, on the effective date of grant, is an
Employee of the Company, a Parent Corporation or a Subsidiary Corporation (each being an "ISO-Qualifying
Corporation"). Any person who is not an Employee of an ISO-Qualifying Corporation on the effective date of the grant of an Option to such
person may be granted only a Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective Employee upon the condition that such person become an Employee of an
ISO-Qualifying Corporation shall be deemed granted effective on the date such person
commences Service as an Employee of an ISO-Qualifying Corporation, with an exercise price determined as of such date in accordance with Section 6.1. 




10









  




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





        6.    STOCK OPTIONS.    


        Options
shall be evidenced by Award Agreements specifying the number of shares of Stock covered thereby, in such form as the Committee shall from time to time establish. Award Agreements
evidencing Options may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions: 



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


        6.2   Exercisability and Term of Options. Options shall be exercisable at such time or times, or upon such event or events, and
subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such Option; provided, however, that
(a) no Option shall be exercisable after the expiration of ten (10) years after the effective date of grant of such Option and (b) no Incentive Stock Option granted to a Ten
Percent Owner shall be exercisable after the expiration of five (5) years after the effective date of grant of such Option. Subject to the foregoing, unless otherwise specified by the Committee
in the grant of an Option, each Option shall terminate ten (10) years after the effective date of grant of the Option, unless earlier terminated in accordance with its provisions. 


        6.3   Payment of Exercise Price.



        (a)   Forms of Consideration Authorized. Except as otherwise provided below, payment of the exercise price for the number of
shares of Stock being purchased pursuant to any Option shall be made (i) in cash or by check or cash equivalent, (ii) by tender to the Company, or attestation to the ownership, of shares
of Stock owned by the Participant having a Fair Market Value not less than the exercise price, (iii) by delivery of a properly executed notice of exercise together with irrevocable instructions
to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares being acquired upon the exercise of the 



11







 

Option
(including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve
System) (a "Cashless Exercise"), (iv) by delivery of a properly executed notice electing a
Net-Exercise, (v) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (vi) by any combination
thereof. The Committee may at any time or from time to time grant Options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or which otherwise
restrict one or more forms of consideration. 


        (b)   Limitations on Forms of Consideration.



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


        (ii)   Cashless Exercise. The Company reserves, at any and all times, the right, in the Company's sole and absolute discretion,
to establish, decline to approve or terminate any program or procedures for the exercise of Options by means of a Cashless Exercise, including with respect to one or more Participants specified by the
Company notwithstanding that such program or procedures may be available to other Participants. 





        6.4   Effect of Termination of Service.



        (a)   Option Exercisability. Subject to earlier termination of the Option as otherwise provided herein and unless otherwise
provided by the Committee, an Option shall terminate immediately upon the Participant's termination of Service to the extent that it is then unvested and shall be exercisable after the Participant's
termination of Service to the extent it is then vested only during the applicable time period determined in accordance with this Section and thereafter shall terminate: 



        (i)    Disability. If the Participant's Service terminates because of the Disability of the Participant, the Option, to the
extent unexercised and exercisable for vested shares on the date on which the Participant's Service terminated, may be exercised by the Participant (or the Participant's guardian or legal
representative) at any time prior to the expiration of twelve (12) months after the date on which the Participant's Service terminated, but in any event no later than the date of expiration of
the Option's term as set forth in the Award Agreement evidencing such Option (the "Option Expiration
Date"). 


        (ii)   Death. If the Participant's Service terminates because of the death of the Participant, the Option, to the extent
unexercised and exercisable for vested shares on the date on which the Participant's Service terminated, may be exercised by the Participant's legal representative or other person who acquired the
right to exercise the Option by reason of the Participant's death at any time prior to the expiration of twelve (12) months after the date on which the Participant's Service terminated, but in
any event no later than the Option Expiration Date. The Participant's Service shall be deemed to have terminated on account of death if the Participant dies within three (3) months after the
Participant's termination of Service. 


        (iii)  Termination for Cause. Notwithstanding any other provision of the Plan to the contrary, if the Participant's Service is
terminated for Cause or if, following the Participant's 




12







 





termination
of Service and during any period in which the Option otherwise would remain exercisable, the Participant engages in any act that would constitute Cause, the Option shall terminate in its
entirety and cease to be exercisable immediately upon such termination of Service or act. 


        (iv)  Other Termination of Service. If the Participant's Service terminates for any reason, except Disability, death or Cause,
the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participant's Service terminated, may be exercised by the Participant at any time prior to the
expiration of three (3) months after the date on which the Participant's Service terminated, but in any event no later than the Option Expiration Date. 




        (b)   Extension if Exercise Prevented by Law or Insider Trading Policy. Notwithstanding the foregoing, other than termination
of Service for Cause, if the exercise of an Option within the applicable time periods set forth in Section 6.4(a) is prevented by the provisions of Section 16 below or a sale of shares
pursuant to a Cashless Exercise of the Option would violate the provisions of the Insider Trading Policy, the Option shall remain exercisable until thirty (30) days after the date such exercise
or sale, as the case may be, would no longer be prevented by such provisions, but in any event no later than the Option Expiration Date. 




        6.5   Transferability of Options. During the lifetime of the Participant, an Option shall be exercisable only by the
Participant or the Participant's guardian or legal representative. An Option shall not 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. Notwithstanding the foregoing, to the extent
permitted by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Option, a Nonstatutory Stock Option shall be assignable or transferable subject to the applicable
limitations, if any, described in the General Instructions to Form S-8 under the Securities Act. 


        7.    STOCK APPRECIATION RIGHTS.    


        Stock
Appreciation Rights shall be evidenced by Award Agreements specifying the number of shares of Stock subject to the Award, in such form as the Committee shall from time to time
establish. Award Agreements evidencing SARs may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions: 


        7.1   Types of SARs Authorized. SARs may be granted in tandem with all or any portion of a related Option (a  "Tandem SAR") or may be granted independently of any Option (a  "Freestanding SAR"). A Tandem SAR may only be granted concurrently with the grant
of the related Option. 



        7.2   Exercise Price. The exercise price for each SAR shall be established in the discretion of the Committee; provided,
however, that (a) the exercise price per share subject to a Tandem SAR shall be the exercise price per share under the related Option and (b) the exercise price per share subject to a
Freestanding SAR shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the SAR. 


        7.3   Exercisability and Term of SARs.



        (a)   Tandem SARs. Tandem SARs shall be exercisable only at the time and to the extent, and only to the extent, that the
related Option is exercisable, subject to such provisions as the Committee may specify where the Tandem SAR is granted with respect to less than the full number of shares of Stock subject to the
related Option. The Committee may, in its discretion, provide in any Award Agreement evidencing a Tandem SAR that such SAR may not be exercised without the advance approval of the Company and, if such
approval is not given, then the Option shall nevertheless remain exercisable in accordance with its terms. A Tandem SAR shall terminate 



13







 

and
cease to be exercisable no later than the date on which the related Option expires or is terminated or canceled. Upon the exercise of a Tandem SAR with respect to some or all of the shares subject
to such SAR, the related Option shall be canceled automatically as to the number of shares with respect to which the Tandem SAR was exercised. Upon the exercise of an Option related to a Tandem SAR as
to some or all of the shares subject to such Option, the related Tandem SAR shall be canceled automatically as to the number of shares with respect to which the related Option was exercised. 



        (b)   Freestanding SARs. Freestanding SARs shall be exercisable at such time or times, or upon such event or events, and
subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such SAR; provided, however, that no
Freestanding SAR shall be exercisable after the expiration of ten (10) years after the effective date of grant of such SAR. 




        7.4   Exercise of SARs. Upon the exercise (or deemed exercise pursuant to Section 7.5) of an SAR, the Participant (or
the Participant's legal representative or other person who acquired the right to exercise the SAR by reason of the Participant's death) shall be entitled to receive payment of an amount for each share
with respect to which the SAR is exercised equal to the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR over the exercise price. Payment of such amount
shall be made (a) in the case of a Tandem SAR, solely in shares of Stock in a lump sum as soon as practicable following the date of exercise of the SAR and (b) in the case of a
Freestanding SAR, in cash, shares of Stock, or any combination thereof as determined by the Committee, in a lump sum as soon as practicable following the date of exercise of the SAR. When payment is
to be made in shares of Stock, the number of shares to be issued shall be determined on the basis of the Fair Market Value of a share of Stock on the date of exercise of the SAR. For purposes of
Section 7, an SAR shall be deemed exercised on the date on which the Company receives notice of exercise from the Participant or as otherwise provided in Section 7.5. 


        7.5   Deemed Exercise of SARs. If, on the date on which an SAR would otherwise terminate or expire, the SAR by its terms
remains exercisable immediately prior to such termination or expiration and, if so exercised, would result in a payment to the holder of such SAR, then any portion of such SAR which has not previously
been exercised shall automatically be deemed to be exercised as of such date with respect to such portion. 



        7.6   Effect of Termination of Service. Subject to earlier termination of the SAR as otherwise provided herein and unless
otherwise provided by the Committee in the grant of an SAR and set forth in the Award Agreement, an SAR shall be exercisable after a Participant's termination of Service only to the extent and during
the applicable time period determined in accordance with Section 6.4 (treating the SAR as if it were an Option) and thereafter shall terminate. 


        7.7   Transferability of SARs. During the lifetime of the Participant, an SAR shall be exercisable only by the Participant or
the Participant's guardian or legal representative. An SAR shall not 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. Notwithstanding the foregoing, to the extent permitted by the
Committee, in its discretion, and set forth in the Award Agreement evidencing such Award, a Tandem SAR related to a Nonstatutory Stock Option or a Freestanding SAR shall be assignable or transferable
subject to the applicable limitations, if any, described in the General Instructions to Form S-8 under the Securities Act. 


        8.    RESTRICTED STOCK AWARDS.    



        Restricted
Stock Awards shall be evidenced by Award Agreements specifying whether the Award is a Restricted Stock Bonus or a Restricted Stock Purchase Right and the number of shares of
Stock 


14







 



subject
to the Award, in such form as the Committee shall from time to time establish. Award Agreements evidencing Restricted Stock Awards may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and conditions: 



        8.1   Types of Restricted Stock Awards Authorized. Restricted Stock Awards may be granted in the form of either a Restricted
Stock Bonus or a Restricted Stock Purchase Right. Restricted Stock Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of
one or more Performance Goals described in Section 10.4. If either the grant of or satisfaction of Vesting Conditions applicable to a Restricted Stock Award is to be contingent upon the
attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 10.3 through 10.5(a). 



        8.2   Purchase Price. The purchase price for shares of Stock issuable under each Restricted Stock Purchase Right shall be
established by the Committee in its discretion. No monetary payment (other than applicable tax withholding) shall be required as a condition of receiving shares of Stock pursuant to a Restricted Stock
Bonus, the consideration for which shall be services actually 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 shares of Stock
subject to a Restricted Stock Award. 


        8.3   Purchase Period. A Restricted Stock Purchase Right shall be exercisable within a period established by the Committee,
which shall in no event exceed thirty (30) days from the effective date of the grant of the Restricted Stock Purchase Right. 


        8.4   Payment of Purchase Price. Except as otherwise provided below, payment of the purchase price for the number of shares of
Stock being purchased pursuant to any Restricted Stock Purchase Right shall be made (a) in cash or by check or cash equivalent, (b) by such other consideration as may be approved by the
Committee from time to time to the extent permitted by applicable law, or (c) by any combination thereof. 


        8.5   Vesting and Restrictions on Transfer. Shares issued pursuant to any Restricted Stock Award may (but need not) be made
subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described
in Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. During any period in which shares acquired pursuant to a Restricted Stock
Award remain subject to Vesting Conditions, such shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of other than pursuant to an Ownership Change Event or as
provided in Section 8.8. The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Award that, if the satisfaction of Vesting Conditions with respect to
any shares subject to such Restricted Stock Award would otherwise occur on a day on which the sale of such shares would violate the provisions of the Insider Trading Policy, then satisfaction of the
Vesting Conditions automatically shall be determined on the next trading day on which the sale of such shares would not violate the Insider Trading Policy. Upon request by the Company, each
Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates
representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions. 


        8.6   Voting Rights; Dividends and Distributions. Except as provided in this Section, Section 8.5 and any Award
Agreement, during any period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, the Participant shall have all of the rights of a stockholder of the
Company holding shares of Stock, including the right to vote such shares and to receive all dividends and other distributions paid with respect to such shares. However, in the event of a dividend 


15







 



or
distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.4, any and all new,
substituted or additional securities or other property (other than normal cash dividends) to which the Participant is entitled by reason of the Participant's Restricted Stock Award shall be
immediately subject to the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which such dividends or distributions were paid or adjustments were made. 



        8.7   Effect of Termination of Service. Unless otherwise provided by the Committee in the Award Agreement evidencing a
Restricted Stock Award, if a Participant's Service terminates for any reason, whether voluntary or involuntary (including the Participant's death or disability), then (a) the Company shall have
the option to repurchase for the purchase price paid by the Participant any shares acquired by the Participant pursuant to a Restricted Stock Purchase Right which remain subject to Vesting Conditions
as of the date of the Participant's termination of Service and (b) the Participant shall forfeit to the Company any shares acquired by the Participant pursuant to a Restricted Stock Bonus which
remain subject to Vesting Conditions as of the date of the Participant's termination of Service. The Company shall have the right to assign at any time any repurchase right it may have, whether or not
such right is then exercisable, to one or more persons as may be selected by the Company. 


        8.8   Nontransferability of Restricted Stock Award Rights. Rights to acquire shares of Stock pursuant to a Restricted Stock
Award shall not 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 the laws of descent and distribution. All rights with respect to a Restricted Stock Award granted to a Participant hereunder shall be exercisable during his or
her lifetime only by such Participant or the Participant's guardian or legal representative. 


        9.    RESTRICTED STOCK UNIT AWARDS.    


        Restricted
Stock Unit Awards shall be evidenced by Award Agreements specifying the number of Restricted Stock Units subject to the Award, in such form as the Committee shall from time to
time establish. Award Agreements evidencing Restricted Stock Units may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and
conditions: 


        9.1   Grant of Restricted Stock Unit Awards. Restricted Stock Unit Awards may be granted upon such conditions as the Committee
shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 10.4. If either the grant of a Restricted Stock Unit Award or the
Vesting Conditions with respect to such Award is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set
forth in Sections 10.3 through 10.5(a). 


        9.2   Purchase Price. No monetary payment (other than applicable tax withholding, if any) shall be required as a condition of
receiving a Restricted Stock Unit Award, the consideration for which shall be services actually 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 shares of Stock issued upon settlement of the Restricted Stock Unit Award. 



        9.3   Vesting. Restricted Stock Unit Awards may (but need not) be made subject to Vesting Conditions based upon the
satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be
established by the Committee and set forth in the Award Agreement evidencing such Award. 


        9.4   Voting Rights, Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to
shares of Stock represented by Restricted Stock Units until the date of the 


16







 



issuance
of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion, may
provide in the Award Agreement evidencing any Restricted Stock Unit Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock
during the period beginning on the date such Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date the Award is settled or the date on which it is
terminated. Such Dividend Equivalent Rights, if any, shall be paid by crediting the Participant with additional whole Restricted Stock Units as of the date of payment of such cash dividends on Stock.
The number of additional Restricted Stock Units (rounded to the nearest whole number) to be so credited shall be determined by dividing (a) the amount of cash dividends paid on such date with
respect to the number of shares of Stock represented by the Restricted Stock Units previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date. Such
additional Restricted Stock Units shall be subject to the same terms and conditions and shall be settled in the same manner and at the same time as the Restricted Stock Units originally subject to the
Restricted Stock Unit Award. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as
described in Section 4.4, appropriate adjustments shall be made in the Participant's Restricted Stock Unit Award so that it represents the right to receive upon settlement any and all new,
substituted or additional securities or other property (other than normal cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of the
Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Vesting Conditions as are applicable to the Award. 


        9.5   Effect of Termination of Service. Unless otherwise provided by the Committee and set forth in the Award Agreement
evidencing a Restricted Stock Unit Award, if a Participant's Service terminates for any reason, whether voluntary or involuntary (including the Participant's death or disability), then the Participant
shall forfeit to the Company any Restricted Stock Units pursuant to the Award which remain subject to Vesting Conditions as of the date of the Participant's termination of Service. 


        9.6   Settlement of Restricted Stock Unit Awards. The Company shall issue to a Participant on the date on which Restricted
Stock Units subject to the Participant's Restricted Stock Unit Award vest or on such other date determined by the Committee, in its discretion, and set forth in the Award Agreement one
(1) share of Stock (and/or any other new, substituted or additional securities or other property pursuant to an adjustment described in Section 9.4) for each Restricted Stock Unit then
becoming vested or otherwise to be settled on such date, subject to the withholding of applicable taxes, if any. If permitted by the Committee, the Participant may elect, consistent with the
requirements of Section 409A, to defer receipt of all or any portion of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section, and such deferred
issuance date(s) and amount(s) elected by the Participant shall be set forth in the Award Agreement. Notwithstanding the foregoing, the Committee, in its discretion, may provide for settlement of any
Restricted Stock Unit Award by payment to the Participant in cash of an amount equal to the Fair Market Value on the payment date of the shares of Stock or other property otherwise issuable to the
Participant pursuant to this Section. The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Unit Award that, if the satisfaction of Vesting Conditions with
respect to any shares subject to the Award would otherwise occur on a day on which the sale of such shares would violate the provisions of the Insider Trading Policy, then the satisfaction of the
Vesting Conditions automatically shall be determined on the first to occur of (a) the next trading day on which the sale of such shares would not violate the Insider Trading Policy or
(b) the later of (i) 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. 


17







 



        9.7   Nontransferability of Restricted Stock Unit Awards. The right to receive shares pursuant to a Restricted Stock Unit Award
shall not 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 a Restricted Stock Unit Award granted to a Participant hereunder shall be exercisable during
his or her lifetime only by such Participant or the Participant's guardian or legal representative. 


        10.    PERFORMANCE AWARDS.    


        Performance
Awards shall be evidenced by Award Agreements in such form as the Committee shall from time to time establish. Award Agreements evidencing Performance Awards may incorporate
all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions: 



        10.1 Types of Performance Awards Authorized. Performance Awards may be granted in the form of either Performance Shares or
Performance Units. Each Award Agreement evidencing a Performance Award shall specify the number of Performance Shares or Performance Units subject thereto, the Performance Award Formula, the
Performance Goal(s) and Performance Period applicable to the Award, and the other terms, conditions and restrictions of the Award. 


        10.2 Initial Value of Performance Shares and Performance Units. Unless otherwise provided by the Committee in granting a
Performance Award, each Performance Share shall have an initial monetary value equal to the Fair Market Value of one (1) share of Stock, subject to adjustment as provided in Section 4.4,
on the effective date of grant of the Performance Share, and each Performance Unit shall have an initial monetary value established by the Committee at the time of grant. The final value payable to
the Participant in settlement of a Performance Award determined on the basis of the applicable Performance Award Formula will depend on the extent to which Performance Goals established by the
Committee are attained within the applicable Performance Period established by the Committee. 


        10.3 Establishment of Performance Period, Performance Goals and Performance Award Formula. In granting each Performance
Award, the Committee shall establish in writing the applicable Performance Period, Performance Award Formula and one or more Performance Goals which, when measured at the end of the Performance
Period, shall determine on the basis of the Performance Award Formula the final value of the Performance Award to be paid to the Participant. Unless otherwise permitted in compliance with the
requirements under Section 162(m) with respect to each Performance Award intended to result in the payment of Performance-Based Compensation, the Committee shall establish the Performance
Goal(s) and Performance Award Formula applicable to each Performance Award no later than the earlier of (a) the date ninety (90) days after the commencement of the applicable Performance
Period or (b) the date on which 25% of the Performance Period has elapsed, and, in any event, at a time when the outcome of the Performance Goals remains substantially uncertain. Once
established, the Performance Goals and Performance Award Formula applicable to a Covered Employee shall not be changed during the Performance Period. The Company shall notify each Participant granted
a Performance Award of the terms of such Award, including the Performance Period, Performance Goal(s) and Performance Award Formula. 


        10.4 Measurement of Performance Goals. Performance Goals shall be established by the Committee on the basis of targets to be
attained ("Performance Targets") with respect to one or more measures of business or financial
performance (each, a "Performance Measure"), subject to the following: 



        (a)   Performance Measures. Performance Measures shall have the same meanings as used in the Company's financial statements,
or, if such terms are not used in the Company's financial statements, they shall have the meaning applied pursuant to generally accepted accounting 



18







 

principles,
or as used generally in the Company's industry. Performance Measures shall be calculated with respect to the Company and each Subsidiary Corporation consolidated therewith for financial
reporting purposes or such division or other business unit as may be selected by the Committee. For purposes of the Plan, the Performance Measures applicable to a Performance Award shall be calculated
in accordance with generally accepted accounting principles, if applicable, but prior to the accrual or payment of any Performance Award for the same Performance Period and excluding the effect
(whether positive or negative) of any change in accounting standards or any extraordinary, unusual or nonrecurring item, as determined by the Committee, occurring after the establishment of the
Performance Goals applicable to the Performance Award. 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
Performance Measures in order to prevent the dilution or enlargement of the Participant's rights with respect to a Performance Award. Performance Measures may be one or more of the following, as
determined by the Committee: 



        (i)    revenue;



        (ii)   sales;



        (iii)  expenses; 


        (iv)  operating
income; 


        (v)   gross
margin; 


        (vi)  operating
margin; 


        (vii) earnings
before any one or more of: stock-based compensation expense, interest, taxes, depreciation and amortization; 



        (viii) pre-tax
profit; 


        (ix)  net
operating income; 


        (x)   net
income; 


        (xi)  economic
value added; 


        (xii) free
cash flow; 


        (xiii) operating
cash flow; 


        (xiv) balance
of cash, cash equivalents and marketable securities; 


        (xv) stock
price; 


        (xvi) earnings
per share; 


        (xvii) return
on stockholder equity; 


        (xviii) return
on capital; 


        (xix) return
on assets; 


        (xx) return
on investment; 


        (xxi) employee
satisfaction; 


        (xxii) employee
retention; 


        (xxiii) market
share; 


        (xxiv) customer
satisfaction; 




19









  




        (xxv) product
development; 


        (xxvi) research
and development expenses; 


        (xxvii) completion
of an identified special project; 


        (xxviii) completion
of a joint venture or other corporate transaction; and 


        (xxix) bookings. 




        (b)   Performance Targets. Performance Targets may include a minimum, maximum, target level and intermediate levels of
performance, with the final value of a Performance Award determined under the applicable Performance Award Formula by the level attained during the applicable Performance Period. A Performance Target
may be stated as an absolute value or as a value determined relative to an index, budget or other standard selected by the Committee. 




        10.5 Settlement of Performance Awards.



        (a)   Determination of Final Value. As soon as practicable following the completion of the Performance Period applicable to a
Performance Award, the Committee shall certify in writing the extent to which the applicable Performance Goals have been attained and the resulting final value of the Award earned by the Participant
and to be paid upon its settlement in accordance with the applicable Performance Award Formula. 



        (b)   Discretionary Adjustment of Award Formula. In its discretion, the Committee may, either at the time it grants a
Performance Award or at any time thereafter, provide for the positive or negative adjustment of the Performance Award Formula applicable to a Performance Award granted to any Participant who is not a
Covered Employee to reflect such Participant's individual performance in his or her position with the Company or such other factors as the Committee may determine. If permitted under a
Covered Employee's Award Agreement, the Committee shall have the discretion, on the basis of such criteria as may be established by the Committee, to reduce some or all of the value of the Performance
Award that would otherwise be paid to the Covered Employee upon its settlement notwithstanding the attainment of any Performance Goal and the resulting value of the Performance Award determined in
accordance with the Performance Award Formula. No such reduction may result in an increase in the amount payable upon settlement of another Participant's Performance Award that is intended to result
in Performance-Based Compensation. 


        (c)   Effect of Leaves of Absence. Unless otherwise required by law or a Participant's Award Agreement, payment of the final
value, if any, of a Performance Award held by a Participant who has taken in excess of thirty (30) days in unpaid leaves of absence during a Performance Period shall be prorated on the basis of
the number of days of the Participant's Service during the Performance Period during which the Participant was not on a leave of absence. 


        (d)   Notice to Participants. As soon as practicable following the Committee's determination and certification in accordance
with Sections 10.5(a) and (b), the Company shall notify each Participant of the determination of the Committee. 


        (e)   Payment in Settlement of Performance Awards. As soon as practicable following the Committee's determination and
certification in accordance with Sections 10.5(a) and (b), but in any event within the Short-Term Deferral Period described in Section 19.1 (except as otherwise provided
below or consistent with the requirements of Section 409A), payment shall be made to each eligible Participant (or such Participant's legal representative or other person who acquired the right
to receive such payment by reason of the Participant's death) of the final value of the Participant's Performance Award. Payment of such amount shall be made in cash, shares of Stock, or a combination
thereof as determined by the Committee. Unless otherwise provided in the 



20







 




Award
Agreement evidencing a Performance Award, payment shall be made in a lump sum. If permitted by the Committee, the Participant may elect, consistent with the requirements of Section 409A,
to defer receipt of all or any portion of the payment to be made to Participant pursuant to this Section, and such deferred payment date(s) elected by the Participant shall be set forth in the Award
Agreement. If any payment is to be made on a deferred basis, the Committee may, but shall not be obligated to, provide for the payment during the deferral period of Dividend Equivalent Rights or
interest. 


        (f)    Provisions Applicable to Payment in Shares. If payment is to be made in shares of Stock, the number of such shares shall
be determined by dividing the final value of the Performance Award by the Fair Market Value of a share of Stock determined by the method specified in the Award Agreement. Shares of Stock issued in
payment of any Performance Award may be fully vested and freely transferable shares or may be shares of Stock subject to Vesting Conditions as provided in Section 8.5. Any shares subject to
Vesting Conditions shall be evidenced by an appropriate Award Agreement and shall be subject to the provisions of Sections 8.5 through 8.8 above. 




        10.6 Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to
shares of Stock represented by Performance Share Awards until the date of the issuance of such shares, if any (as evidenced by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company). However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Performance Share Award that the Participant shall be entitled to Dividend
Equivalent Rights` with respect to the payment of cash dividends on Stock during the period beginning on the date the Award is granted and ending, with respect to each share subject to the Award, on
the earlier of the date on which the Performance Shares are settled or the date on which they are forfeited. Such Dividend Equivalent Rights, if any, shall be credited to the Participant in the form
of additional whole Performance Shares as of the date of payment of such cash dividends on Stock. The number of additional Performance Shares (rounded to the nearest whole number) to be so credited
shall be determined by dividing (a) the amount of cash dividends paid on the dividend payment date with respect to the number of shares of Stock represented by the Performance Shares previously
credited to the Participant by (b) the Fair Market Value per share of Stock on such date. Dividend Equivalent Rights may be paid currently or may be accumulated and paid to the extent that
Performance Shares become nonforfeitable, as determined by the Committee. Settlement of Dividend Equivalent Rights may be made in cash, shares of Stock, or a combination thereof as determined by the
Committee, and may be paid on the same basis as settlement of the related Performance Share as provided in Section 10.5. Dividend Equivalent Rights shall not be paid with respect to Performance
Units. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in
Section 4.4, appropriate adjustments shall be made in the Participant's Performance Share Award so that it represents the right to receive upon settlement any and all new, substituted or
additional securities or other property (other than normal cash dividends) to which the Participant would entitled by reason of the shares of Stock issuable upon settlement of the Performance Share
Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Performance Goals as are applicable to the Award. 


        10.7 Effect of Termination of Service. Unless otherwise provided by the Committee and set forth in the Award Agreement
evidencing a Performance Award, the effect of a Participant's termination of Service on the Performance Award shall be as follows: 



        (a)   Death or Disability. If the Participant's Service terminates because of the death or Disability of the Participant before
the completion of the Performance Period applicable to the Performance Award, the final value of the Participant's Performance Award shall be determined by the extent to which the applicable
Performance Goals have been attained with respect to the entire 



21







 

Performance
Period and shall be prorated based on the number of months of the Participant's Service during the Performance Period. Payment shall be made following the end of the Performance Period in
any manner permitted by Section 10.5. 


        (b)   Other Termination of Service. If the Participant's Service terminates for any reason except death or Disability before
the completion of the Performance Period applicable to the Performance Award, such Award shall be forfeited in its entirety; provided, however, that in the event of an involuntary termination of the
Participant's Service, the Committee, in its sole discretion, may waive the automatic forfeiture of all or any portion of any such Award. 




        10.8 Nontransferability of Performance Awards. Prior to settlement in accordance with the provisions of the Plan, no
Performance 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 a Performance Award granted to a Participant hereunder shall be exercisable
during his or her lifetime only by such Participant or the Participant's guardian or legal representative. 



        11.    DEFERRED COMPENSATION AWARDS.    


        11.1 Establishment of Deferred Compensation Award Programs. This Section 11 shall not be effective unless and until
the Committee determines to establish a program pursuant to this Section. The Committee, in its discretion and upon such terms and conditions as it may determine, consistent with the requirements of
Section 409A, may establish one or more programs pursuant to the Plan under which: 



        (a)   Elective Cash Compensation Reduction Awards. Participants designated by the Committee who are Officers, Directors or
otherwise among a select group of management or highly compensated Employees may irrevocably elect, prior to a date specified by the Committee in compliance with Section 409A, to reduce such
Participant's compensation otherwise payable in cash (subject to any minimum or maximum reductions imposed by the Committee) and to be granted automatically at such time or times as specified by the
Committee one or more Awards of Stock Units with respect to such numbers of shares of Stock as determined in accordance with the rules of the program established by the Committee and having such other
terms and conditions as established by the Committee. 


        (b)   Stock Issuance Deferral Awards. Participants designated by the Committee who are Officers, Directors or otherwise among a
select group of management or highly compensated Employees may irrevocably elect, prior to a date specified by the Committee in compliance with Section 409A, to be granted automatically an
Award of Stock Units with respect to such number of shares of Stock and upon such other terms and conditions as established by the Committee in lieu of: 



        (i)    shares
of Stock otherwise issuable to such Participant upon the exercise of an Option; 


        (ii)   cash
or shares of Stock otherwise issuable to such Participant upon the exercise of an SAR; or 


        (iii)  cash
or shares of Stock otherwise issuable to such Participant upon the settlement of a Performance Award. 





        11.2 Terms and Conditions of Deferred Compensation Awards. Deferred Compensation Awards granted pursuant to this
Section 11 shall be evidenced by Award Agreements in such form as the Committee shall from time to time establish. Award Agreements evidencing Deferred Compensation 


22







 

Awards
may incorporate all or any of the terms of the Plan by reference and, except as provided below, shall comply with and be subject to the terms and conditions of Section 9. 



        (a)   Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to
shares of Stock represented by Stock Units until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of
the Company). However, a Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date the Stock Units are
granted automatically to the Participant and ending on the earlier of the date on which such Stock Units are settled or the date on which they are forfeited. Such Dividend Equivalent Rights shall be
paid by crediting the Participant with additional whole Stock Units as of the date of payment of such cash dividends on Stock. The number of additional Stock Units (rounded to the nearest whole
number) to be so credited shall be determined by dividing (A) the amount of cash dividends paid on the dividend payment date with respect to the number of shares of Stock represented by the
Stock Units previously credited to the Participant by (B) the Fair Market Value per share of Stock on such date. Such additional Stock Units shall be subject to the same terms and conditions
and shall be settled in the same manner and at the same time as the Stock Units originally subject to the Stock Unit Award. In the event of a dividend or distribution paid in shares of Stock or other
property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.4, appropriate adjustments shall be made in the Participant's Stock Unit
Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant
would entitled by reason of the shares of Stock issuable upon settlement of the Award. 



        (b)   Settlement of Deferred Compensation Awards. A Participant electing to receive an Award of Stock Units pursuant to this
Section 11 shall specify at the time of such election a settlement date with respect to such Award in compliance with the requirements of Section 409A. The Company shall issue to the
Participant on the settlement date elected by the Participant, or as soon thereafter as practicable, a number of whole shares of Stock equal to the number of vested Stock Units subject to the Stock
Unit Award. Such shares of Stock shall be fully vested, and the Participant shall not be required to pay any additional consideration (other than applicable tax withholding) to acquire such shares. 




        12.    CASH-BASED AWARDS AND OTHER STOCK-BASED AWARDS.    


        Cash-Based
Awards and Other Stock-Based Awards shall be evidenced by Award Agreements in such form as the Committee shall from time to time establish. Award Agreements
evidencing Cash-Based Awards and Other Stock-Based Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and
conditions: 


        12.1 Grant of Cash-Based Awards. Subject to the provisions of the Plan, the Committee, at any time and from time
to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms and conditions, including the achievement of performance criteria, as the Committee may determine. 


        12.2 Grant of Other Stock-Based Awards. The Committee may grant other types of equity-based or equity-related Awards not
otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted securities, stock-equivalent units, stock appreciation units, securities or debentures convertible
into common stock or other forms determined by the Committee) in such amounts and subject to such terms and conditions as the Committee shall determine. Such Awards may involve the transfer of actual
shares of Stock to Participants, or payment in cash or otherwise of amounts based on the value of Stock and may include, without limitation, Awards designed to comply with or take advantage of the
applicable local laws of jurisdictions other than the United States. 


23







 



        12.3 Value of Cash-Based and Other Stock-Based Awards. Each Cash-Based Award shall specify a monetary
payment amount or payment range as determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of shares of Stock or units based on such shares of Stock, as determined by the
Committee. The Committee may require the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in
Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. If the Committee exercises its discretion to establish performance criteria,
the final value of Cash-Based Awards or Other Stock-Based Awards that will be paid to the Participant will depend on the extent to which the performance criteria are met. The establishment
of performance criteria with respect to the grant or vesting of any Cash-Based Award or Other Stock-Based Award intended to result in Performance-Based Compensation shall follow procedures
substantially equivalent to those applicable to Performance Awards set forth in Section 10. 



        12.4 Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards. Payment or settlement, if any, with
respect to a Cash-Based Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash, shares of Stock or other securities or any combination thereof
as the Committee determines. The determination and certification of the final value with respect to any Cash-Based Award or Other Stock-Based Award intended to result in Performance-Based
Compensation shall comply with the requirements applicable to Performance Awards set forth in Section 10. To the extent applicable, payment or settlement with respect to each
Cash-Based Award and Other Stock-Based Award shall be made in compliance with the requirements of Section 409A. 



        12.5 Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to
shares of Stock represented by Other Stock-Based Awards until the date of the issuance of such shares of Stock (as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), if any, in settlement of such Award. However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Other Stock-Based Award
that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date such Award is granted and ending,
with respect to each share subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated. Such Dividend Equivalent Rights, if any, shall be paid in
accordance with the provisions set forth in Section 9.4. Dividend Equivalent Rights shall not be granted with respect to Cash-Based Awards. 


        12.6 Effect of Termination of Service. Each Award Agreement evidencing a Cash-Based Award or Other Stock-Based
Award shall set forth the extent to which the Participant shall have the right to retain such Award following termination of the Participant's Service. Such provisions shall be determined in the sole
discretion of the Committee, need not be uniform among all Cash-Based Awards or Other Stock-Based Awards, and may reflect distinctions based on the reasons for termination. 



        12.7 Nontransferability of Cash-Based Awards and Other Stock-Based Awards. Prior to the payment or settlement of
a Cash-Based Award or Other Stock-Based Award, the Award shall not 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. The Committee may impose such additional restrictions
on any shares of Stock issued in settlement of Cash-Based Awards and Other Stock-Based Awards as it may deem advisable, including, without limitation, minimum holding period requirements,
restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such shares of Stock are then listed and/or traded, or under any state
securities laws applicable to such shares of Stock. 


24









   
        13.    NONEMPLOYEE DIRECTOR AWARDS.    


        From
time to time, the Board or the Committee shall set the amount(s) and type(s) of Nonemployee Director Awards that shall be granted to all Nonemployee Directors on a periodic,
nondiscriminatory basis pursuant to the Plan, as well as the additional amount(s) and type(s) of Nonemployee Director Awards, if any, to be awarded, also on a periodic, nondiscriminatory basis, in
consideration of one or more of the following: (a) the initial election or appointment of an individual to the Board as a Nonemployee Director, (b) a Nonemployee Director's service as
Chairman or Lead Director of the Board, (c) a Nonemployee Director's service as the chairman of a committee of the Board, and (d) a Nonemployee Director's service other than as the
chairman of a committee of the Board. The terms and conditions of each Nonemployee Director Award shall comply with the applicable provisions of the Plan. The Board or the Committee shall grant
Nonemployee Director Awards having such terms and conditions as it shall from time to time determine. 



        14.    STANDARD FORMS OF AWARD AGREEMENT.    


        14.1 Award Agreements. Each Award shall comply with and be subject to the terms and conditions set forth in the appropriate
form of Award Agreement approved by the Committee and as amended from time to time. No Award or purported Award shall be a valid and binding obligation of the Company unless evidenced by a fully
executed Award Agreement. Any Award Agreement may consist of an appropriate form of Notice of Grant and a form of Agreement incorporated therein by reference, or such other form or forms, including
electronic media, as the Committee may approve from time to time. 


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


        15.    CHANGE IN CONTROL.    



        15.1 Effect of Change in Control on Awards. Subject to the requirements and limitations of Section 409A if applicable,
the Committee may provide for any one or more of the following: 



        (a)   Accelerated Vesting. The Committee may, in its discretion, provide in any Award Agreement or, in the event of a Change in
Control, may take such actions as it deems appropriate to provide for the acceleration of the exercisability, vesting and/or settlement in connection with such Change in Control of each or any
outstanding Award or portion thereof and shares acquired pursuant thereto upon such conditions, including termination of the Participant's Service prior to, upon, or following such Change in Control,
to such extent as the Committee shall determine. 


        (b)   Assumption, Continuation or Substitution. In the event of a Change in Control, the surviving, continuing, successor, or
purchasing corporation or other business entity or parent thereof, as the case may be (the "Acquiror"),
may, without the consent of any Participant, either assume or continue the Company's rights and obligations under each or any Award or portion thereof outstanding immediately prior to the Change in
Control or substitute for each or any such outstanding Award or portion thereof a substantially equivalent award with respect to the Acquiror's stock, as applicable. For purposes of this Section, if
so determined by the Committee, in its discretion, an Award denominated in shares of Stock shall be deemed assumed if, following the Change in Control, the Award confers the right to receive, subject
to the terms and conditions of the Plan and the applicable Award Agreement, for each share of Stock subject to the Award immediately prior to the Change in Control, the consideration (whether stock,
cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled; provided, however, that if such
consideration 



25







 




is
not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise or settlement of the Award, for each
share of Stock subject to the Award, to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in
Control. Any Award or portion thereof which is neither assumed or continued by the Acquiror in connection with the Change in Control nor exercised or settled as of the time of consummation of the
Change in Control shall become immediately exercisable and vested in full (a) as of ten (1) days prior to, and subject to, the consummation of the Change in Control or (b) settled
effective immediately prior to the time of consummation of the Change in Control, as applicable. Any Award or portion thereof that is immediately exercisable and vested in full pursuant to the
preceding sentence to the extent unexercised immediately prior to the consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of the consummation of
the Change in Control. 


        (c)   Termination in Connection with a Change in Control. Notwithstanding any other provision of the Plan to the contrary, if
the Participant's Service is terminated without Cause or the Participant voluntarily terminates the Participant's employment after a reduction of the Participant's base salary of fifteen percent (15%)
or greater without the Participant's express written consent within eighteen (18) months following the consummation of a Change in Control, such Participant's Awards shall become immediately
exercisable and vested in full as of the date of such termination. Such immediately exercisable and fully vested Awards shall be settled to the extent possible on the date of the
Participant's termination pursuant to this subsection (c). Awards requiring the Participant's exercise, may be exercised by the Participant at any time prior to the expiration of three
(3) months after the date on which the Participant's Service terminated, but in any event no later than the Option Expiration Date. 



        (d)   Cash-Out of Outstanding Stock-Based Awards. The Committee may, in its discretion and without the consent of
any Participant, determine that, upon the occurrence of a Change in Control, each or any Award denominated in shares of Stock or portion thereof outstanding immediately prior to the Change in Control
and not previously exercised or settled shall be canceled in exchange for a payment with respect to each vested share (and each unvested share, if so determined by the Committee) of Stock subject to
such canceled Award in (i) cash, (ii) stock of the Company or of a corporation or other business entity a party to the Change in Control, or (iii) other property which, in any
such case, shall be in an amount having a Fair Market Value equal to the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control, reduced by the exercise or
purchase price per share, if any, under such Award. In the event such determination is made by the Committee, the amount of such payment (reduced by applicable withholding taxes, if any) shall be paid
to Participants in respect of the vested portions of their canceled Awards as soon as practicable following the date of the Change in Control and in respect of the unvested portions of their canceled
Awards in accordance with the vesting schedules applicable to such Awards. 




        15.2 Effect of Change in Control on Nonemployee Director Awards. Subject to the requirements and limitations of
Section 409A, if applicable, in the event of a Change in Control, each outstanding Nonemployee Director Award shall become immediately exercisable and vested in full and, except to the extent
assumed, continued or substituted for pursuant to Section 15.1(b), shall be settled effective immediately prior to the time of consummation of the Change in Control. 


        15.3 Federal Excise Tax Under Section 4999 of the Code.



        (a)   Excess Parachute Payment. In the event that any acceleration of vesting pursuant to an Award and any other payment or
benefit received or to be received by a Participant would subject the Participant to any excise tax pursuant to Section 4999 of the Code due to the characterization 



26







 

of
such acceleration of vesting, payment or benefit as an "excess parachute payment" under Section 280G of the Code, the Participant may elect, in his or her sole discretion, to reduce the
amount of any acceleration of vesting called for under the Award in order to avoid such characterization. 



        (b)   Determination by Independent Accountants. To aid the Participant in making any election called for under
Section 15.3(a), no later than the date of the occurrence of any event that might reasonably be anticipated to result in an "excess parachute payment" to the Participant as described in
Section 15.3(a), the Company shall request a determination in writing by independent public accountants selected by the Company (the  "Accountants"). As soon as practicable thereafter, the Accountants shall determine
and report to the Company and the Participant 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. 




        16.    COMPLIANCE WITH SECURITIES LAW.    



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


        17.    TAX WITHHOLDING.    



        17.1 Tax Withholding in General. The Company shall have the right to deduct from any and all payments made under the Plan, or
to require the Participant, through payroll withholding, cash payment or otherwise, to make adequate provision for, the federal, state, local and foreign taxes, if any, required by law to be withheld
by the Participating Company Group with respect to an Award or the shares acquired pursuant thereto. The Company shall have no obligation to deliver shares of Stock, to release shares of Stock from an
escrow established pursuant to an Award Agreement, or to make any payment in cash under the Plan until the Participating Company Group's tax withholding obligations have been satisfied by the
Participant. 


        17.2 Withholding in Shares. The Company shall have the right, but not the obligation, to deduct from the shares of Stock
issuable to a Participant upon the exercise or settlement of an Award, or to accept from the Participant the tender of, a number of whole shares of Stock having a Fair Market Value, as determined by
the Company, equal to all or any part of the tax withholding obligations of the Participating Company Group. The Fair Market Value of any shares of Stock withheld or tendered to 


27







 



satisfy
any such tax withholding obligations shall not exceed the amount determined by the applicable minimum statutory withholding rates. 


        18.    AMENDMENT OR TERMINATION OF PLAN.    


        The
Committee may amend, suspend or terminate the Plan at any time. However, without the approval of the Company's stockholders, there shall be (a) no increase in the maximum
aggregate number of shares of Stock that may be issued under the Plan (except by operation of the provisions of Section 4.4), (b) no change in the class of persons eligible to receive
Incentive Stock Options, and (c) no other amendment of the Plan that would require approval of the Company's stockholders under any applicable law, regulation or rule, including the rules of
any stock exchange or market system upon which the Stock may then be listed. No amendment, suspension or termination of the Plan shall affect any then outstanding Award unless expressly provided by
the Committee. Except as provided by the next sentence, no amendment, suspension or termination of the Plan may adversely affect any then outstanding Award without the consent of the Participant.
Notwithstanding any other provision of the Plan to the contrary, the Committee may, in its sole and absolute discretion and without the consent of any Participant, amend the Plan or any Award
Agreement, to take effect retroactively or otherwise, as it deems necessary or advisable for the purpose of conforming the Plan or such Award Agreement to any present or future law, regulation or rule
applicable to the Plan, including, but not limited to, Section 409A. 


        19.    COMPLIANCE WITH SECTION 409A.    


        19.1 Awards Subject to Section 409A. The provisions of this Section 19 shall apply to any Award or portion
thereof that is or becomes subject to Section 409A, notwithstanding any provision to the contrary contained in the Plan or the Award Agreement applicable to such Award. Awards subject to
Section 409A include, without limitation: 



        (a)   Any
Nonstatutory Stock Option or SAR that permits the deferral of compensation other than the deferral of recognition of income until the exercise of the Award. 


        (b)   Each
Deferred Compensation Award. 


        (c)   Any
Restricted Stock Unit Award, Performance Award, Cash-Based Award or Other Stock-Based Award if either (i) the Award provides by its terms for
settlement of all or any portion of the Award on one or more dates following the Short-Term Deferral Period (as defined below) or (ii) the Committee permits or requires the
Participant to elect one or more dates on which the Award will be settled. 




        Subject
to any applicable U.S. Treasury Regulations promulgated pursuant to Section 409A or other applicable guidance, the term  "Short-Term Deferral Period" means the period ending on the later of (i) the 15th day
of the third month following the end of the Company's fiscal year in which the applicable portion of the Award is no longer subject to a substantial risk of forfeiture or (ii) the 15th day of
the third month following the end of the Participant's taxable year in which the applicable portion of the Award is no longer subject to a substantial risk of forfeiture. For this purpose, the term
"substantial risk of forfeiture" shall have the meaning set forth in any applicable U.S. Treasury Regulations promulgated pursuant to Section 409A or other applicable guidance. 


        19.2 Deferral and/or Distribution Elections. Except as otherwise permitted or required by Section 409A or any
applicable U.S. Treasury Regulations promulgated pursuant to Section 409A or other applicable guidance, the following rules shall apply to any deferral and/or distribution elections (each, an
"Election") that may be permitted or required by the Committee pursuant to an Award subject to Section 409A: 



        (a)   All
Elections must be in writing and specify the amount of the distribution in settlement of an Award being deferred, as well as the time and form of distribution as
permitted by this Plan. 



28







 

        (b)   All
Elections shall be made by the end of the Participant's taxable year prior to the year in which services commence for which an Award may be granted to such
Participant; provided, however, that if the Award qualifies as "performance-based compensation" for purposes of Section 409A and is based on services performed over a period of at least twelve
(12) months, then the Election may be made no later than six (6) months prior to the end of such period. 


        (c)   Elections
shall continue in effect until a written election to revoke or change such Election is received by the Company, except that a written election to revoke or
change such Election must be made prior to the last day for making an Election determined in accordance with paragraph (b) above or as permitted by Section 19.3. 




        19.3 Subsequent Elections. Except as otherwise permitted or required by Section 409A or any applicable U.S. Treasury
Regulations promulgated pursuant to Section 409A or other applicable guidance, any Award subject to Section 409A which permits a subsequent Election to delay the distribution or change
the form of distribution in settlement of such Award shall comply with the following requirements: 



        (a)   No
subsequent Election may take effect until at least twelve (12) months after the date on which the subsequent Election is made; 


        (b)   Each
subsequent Election related to a distribution in settlement of an Award not described in Section 19.4(b), 19.4(c) or 19.4(f) must result in a delay of the
distribution for a period of not less than five (5) years from the date such distribution would otherwise have been made; and 



        (c)   No
subsequent Election related to a distribution pursuant to Section 19.4(d) shall be made less than twelve (12) months prior to the date of the first
scheduled payment under such distribution. 




        19.4 Distributions Pursuant to Deferral Elections. Except as otherwise permitted or required by Section 409A or any
applicable U.S. Treasury Regulations promulgated pursuant to Section 409A or other applicable guidance, no distribution in settlement of an Award subject to Section 409A may commence
earlier than: 



        (a)   Separation
from service (as determined by the Secretary of the United States Treasury); 


        (b)   The
date the Participant becomes Disabled (as defined below); 


        (c)   Death;



        (d)   A
specified time (or pursuant to a fixed schedule) that is either (i) specified by the Committee upon the grant of an Award and set forth in the Award Agreement
evidencing such Award or (ii) specified by the Participant in an Election complying with the requirements of Section 19.2 and/or 19.3, as applicable; 



        (e)   To
the extent provided by the Secretary of the U.S. Treasury, a change in the ownership or effective control or the Company or in the ownership of a substantial portion
of the assets of the Company; or 


        (f)    The
occurrence of an Unforeseeable Emergency (as defined by applicable U.S. Treasury Regulations promulgated pursuant to Section 409A). 




        Notwithstanding
anything else herein to the contrary, to the extent that a Participant is a "Specified Employee" (as defined in Section 409A(a)(2)(B)(i) of the Code) of the
Company, no distribution pursuant to Section 19.4(a) in settlement of an Award subject to Section 409A may be made before the date (the  "Delayed Payment Date") which is six (6) months after such Participant's date of separation from
service, or, if earlier, the date of the Participant's death. All such amounts that 


29







 

would,
but for this paragraph, become payable prior to the Delayed Payment Date shall be accumulated and paid on the Delayed Payment Date. 


        19.5 Unforeseeable Emergency. The Committee shall have the authority to provide in the Award Agreement evidencing any Award
subject to Section 409A for distribution in settlement of all or a portion of such Award in the event that a Participant establishes, to the satisfaction of the Committee, the occurrence of an
Unforeseeable Emergency. In such event, the amount(s) distributed with respect to such Unforeseeable Emergency cannot exceed the amounts necessary to satisfy such Unforeseeable Emergency plus amounts
necessary to pay taxes reasonably anticipated as a result of such distribution(s), after taking into account the extent to which such hardship is or may be relieved through reimbursement or
compensation by insurance or otherwise, by liquidation of the Participant's assets (to the extent the liquidation of such assets would not itself cause severe financial hardship) or by cessation of
deferrals under the Award. All distributions with respect to an Unforeseeable Emergency shall be made in a lump sum as soon as practicable following the Committee's determination that an Unforeseeable
Emergency has occurred. 


        The
occurrence of an Unforeseeable Emergency shall be judged and determined by the Committee. The Committee's decision with respect to whether an Unforeseeable Emergency has occurred and
the manner in which, if at all, the distribution in settlement of an Award shall be altered or modified, shall be final, conclusive, and not subject to approval or appeal. 


        19.6 Disabled. The Committee shall have the authority to provide in any Award subject to Section 409A for distribution
in settlement of such Award in the event that the Participant becomes Disabled. A Participant shall be considered "Disabled" if either: 



        (a)   the
Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less than twelve (12) months, or 


        (b)   the
Participant is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering
employees of the Participant's employer. 




        All
distributions payable by reason of a Participant becoming Disabled shall be paid in a lump sum or in periodic installments as established by the Participant's Election, commencing as
soon as practicable following the date the Participant becomes Disabled. If the Participant has made no Election with respect to distributions upon becoming Disabled, all such distributions shall be
paid in a lump sum as soon as practicable following the date the Participant becomes Disabled. 


        19.7 Death. If a Participant dies before complete distribution of amounts payable upon settlement of an Award subject to
Section 409A, such undistributed amounts shall be distributed to his or her beneficiary under the distribution method for death established by the Participant's Election as soon as
administratively possible following receipt by the Committee of satisfactory notice and confirmation of the Participant's death. If the Participant has made no Election with respect to distributions
upon death, all such distributions shall be paid in a lump sum as soon as practicable following the date of the Participant's death. 


        19.8 No Acceleration of Distributions. Notwithstanding anything to the contrary herein, this Plan does not permit the
acceleration of the time or schedule of any distribution under an Award Subject to Section 409A, except as provided by Section 409A and/or the Secretary of the U.S. Treasury. 


30







 



        20.    MISCELLANEOUS PROVISIONS.    


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


        20.2 Forfeiture Events.



        (a)   The
Committee may specify in an Award Agreement that the Participant's rights, payments, and benefits with respect to an Award shall be subject to reduction,
cancellation, forfeiture, or recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but
shall not be limited to, termination of Service for Cause or any act by a Participant, whether before or after termination of Service, that would constitute Cause for termination of Service. 


        (b)   If
the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting
requirement under the securities laws, any Participant who knowingly or through gross negligence engaged in the misconduct, or who knowingly or through gross negligence failed to prevent the
misconduct, and any Participant who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, shall reimburse the Company the amount of any
payment in settlement of an Award earned or accrued during the twelve- (12-) month period following the first public issuance or filing with the United States Securities and Exchange
Commission (whichever first occurred) of the financial document embodying such financial reporting requirement. 




        20.3 Provision of Information. Each Participant shall be given access to information concerning the Company equivalent to
that information generally made available to the Company's common stockholders. 


        20.4 Rights as Employee, Consultant or Director. No person, even though eligible pursuant to Section 5, shall have a
right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. Nothing in the Plan or any Award granted under the Plan shall confer on any Participant a
right to remain an Employee, Consultant or Director or interfere with or limit in any way any right of a Participating Company to terminate the Participant's Service at any time. To the extent that an
Employee of a Participating Company other than the Company receives an Award under the Plan, that Award shall in no event be understood or interpreted to mean that the Company is the Employee's
employer or that the Employee has an employment relationship with the Company. 


        20.5 Rights as a Stockholder. A Participant shall have no rights as a stockholder with respect to any shares covered by an
Award until the date of the issuance of 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 shares are issued, except as provided in Section 4.4 or another provision of the Plan. 



        20.6 Delivery of Title to Shares. Subject to any governing rules or regulations, the Company shall issue or cause to be
issued the shares of Stock acquired pursuant to an Award and shall deliver such shares to or for the benefit of the Participant by means of one or more of the following: (a) by 


31







 



delivering
to the Participant evidence of book entry shares of Stock credited to the account of the Participant, (b) by depositing such shares of Stock for the benefit of the Participant with
any broker with which the Participant has an account relationship, or (c) by delivering such shares of Stock to the Participant in certificate form. 


        20.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise or settlement of any
Award. 


        20.8 Retirement and Welfare Plans. Neither Awards made under this Plan nor shares of Stock or cash paid pursuant to such
Awards may be included as "compensation" for purposes of computing the benefits payable to any Participant under any Participating Company's retirement plans (both qualified and
non-qualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant's benefit. 


        20.9 Beneficiary Designation. Subject to local laws and procedures, each Participant may file with the Company a written
designation of a beneficiary who is to receive any benefit under the Plan to which the Participant is entitled in the event of such Participant's death before he or she receives any or all of such
benefit. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing
with the Company during the Participant's lifetime. If a married Participant designates a beneficiary other than the Participant's spouse, the effectiveness of such designation may be subject to the
consent of the Participant's spouse. If a Participant dies without an effective designation of a beneficiary who is living at the time of the Participant's death, the Company will pay any remaining
unpaid benefits to the Participant's legal representative. 


        20.10 Severability. If any one or more of the provisions (or any part thereof) of this Plan shall be held invalid, illegal or
unenforceable in any respect, such provision shall be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions (or any part
thereof) of the Plan shall not in any way be affected or impaired thereby. 


        20.11 No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise
affect the Company's or another Participating Company's right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or
consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or another Participating Company to take any
action which such entity deems to be necessary or appropriate. 


        20.12 Unfunded Obligation. Participants shall have the status of general unsecured creditors of the Company. Any amounts
payable to Participants pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act
of 1974. No Participating Company shall 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 any Participating Company and a Participant,
or otherwise create any vested or beneficial interest in any Participant or the Participant's creditors in any assets of any Participating Company. The Participants shall have no claim against any
Participating Company for any changes in the value of any assets which may be invested or reinvested by the Company with respect to the Plan. 


        20.13 Choice of Law. Except to the extent governed by applicable federal law, the validity, interpretation, construction and
performance of the Plan and each Award Agreement shall be governed by the laws of the State of Texas, without regard to its conflict of law rules. 


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PROS HOLDINGS, INC. 2007 Equity Incentive Plan


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