Document:

equityincentiveplan.htm

     

    
      
        

      

Exhibit 4.7

     

    ClearOne
      Communications, Inc.

    2007
      EQUITY INCENTIVE PLAN

    

    1.  Purpose

    

    The
      purpose of the ClearOne Communications, Inc. 2007 Equity Incentive Plan (the
      “Plan”) is to advance the interests of the ClearOne Communications, Inc. (the
“Company”) by stimulating the efforts of employees, officers, nonemployee
      directors and other service providers, in each case who are selected to be
      participants, by heightening the desire of such persons to continue in working
      toward and contributing to the success and progress of the Company. The Plan
      provides for the grant of Incentive and Nonqualified Stock Options, Stock
      Appreciation Rights, Restricted Stock and Restricted Stock Units, any of which
      may be performance-based, as determined by the Administrator.

    

    2.  Definitions
      As used in the Plan, the following terms shall have the meanings set
      forth below:

    

    (a)  “Administrator”
      means the Administrator of the Plan in accordance with Section 17.

    

    (b)  “Award”
      means an Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation
      Right, Restricted Stock or Restricted Stock Unit granted to a Participant
      pursuant to the provisions of the Plan, any of which the Administrator may
      structure to qualify in whole or in part as a Performance Award.

    

    (c)  “Award
      Agreement” means a written agreement or other instrument as may be approved from
      time to time by the Administrator implementing the grant of each Award. An
      Agreement may be in the form of an agreement to be executed by both the
      Participant and the Company (or an authorized representative of the Company)
      or
      certificates, notices or similar instruments as approved by the
      Administrator.

     

           
      (d)  “Board”
      means the board of directors of the Company.

    

    (e)  “Cause”
      means the commission of an act of fraud or theft against the Company; conviction
      (including a guilty plea or plea of nolo contendere) for any felony; conviction
      (including a guilty plea or plea of nolo contendere) for any misdemeanor
      involving moral turpitude which might, in the Company’s opinion, cause
      embarrassment to the Company; significant violation of any material Company
      policy; willful or repeated nonperformance or substandard performance of
      material duties which is not cured within thirty (30) days after written notice
      thereof to the Optionee; or violation of any material state or federal laws,
      rules or regulations in connection with or during performance of the Optionee’s
      work which, if such violation is curable, is not cured within thirty (30) days
      after notice thereof to the Optionee.

    

    (f)  “Code”
      means the Internal Revenue Code of 1986, as amended from time to time, and
      the
      rulings and regulations issues thereunder.

     

           
      (g)  “Company”
      means ClearOne Communications, Inc., a Utah corporation.

    

    (h)  “Incentive
      Bonus” means a bonus opportunity awarded under Section 9 pursuant to which a
      Participant may become entitled to receive an amount based on satisfaction
      of
      such performance criteria as are specified in the Award Agreement.

    

    (i)  “Incentive
      Stock Option” means a stock option that is intended to qualify as an “incentive
      stock option” within the meaning of Section 422 of the Code.

    

    (j)  “Nonemployee
      Director” means each person who is, or is elected to be, a member of the Board
      and who is not an employee of the Company or any Subsidiary.

    

    
      
        
        

      

      
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    (k)  “Nonqualified
      Stock Option” means a stock option that is not intended to qualify as an
“incentive stock option” within the meaning of Section 422 of the
      Code.

    

    (l)  “Option”
      means an Incentive Stock Option and/or a Nonqualified Stock Option granted
      pursuant to Section 6 of the Plan.

    

    (m)  “Participant”
      means any individual described in Section 3 to whom Awards have been granted
      from time to time by the Administrator and any authorized transferee of such
      individual.

    

    (n)  “Performance
      Award” means an Award, the grant, issuance, retention, vesting or settlement of
      which is subject to satisfaction of one or more performance criteria pursuant
      to
      Section 12.

    

    (o)  “Plan”
      means the ClearOne Communications, Inc. 2007 Equity Incentive Plan as set forth
      herein and as amended from time to time.

     

           
      (p)  “Qualifying
      Performance Criteria” has the meaning set forth in Section 13(b).

     

           
      (q)  “Restricted
      Stock” means Shares granted pursuant to Section 8 of the Plan.

    

    (r)  “Restricted
      Stock Unit” means an Award granted to a Participant pursuant to Section 8
      pursuant to which Shares or cash in lieu thereof may be issued in the
      future.

    

    (s)  “Retirement”
      has the meaning specified by the Administrator in the terms of an Award
      Agreement or, in the absence of any such term, for Participants other than
      Nonemployee Directors shall mean retirement from active employment with the
      Company and its Subsidiaries (i) at or after age [55] and with the approval
      of
      the Administrator or (ii) at or after age [65]. The determination of the
      Administrator as to an individual’s Retirement shall be conclusive on all
      parties.

    

    (t)  “Share”
      means a share of the Company’s common stock, par value $.001, subject to
      adjustment as provided in Section 11.

    

    (u)  “Stock
      Appreciation Right” means a right granted pursuant to Section 7 of the Plan that
      entitles the Participant to receive, in cash or Shares or a combination thereof,
      as determined by the Administrator, value equal to or otherwise based on the
      excess of (i) the market price of a specified number of Shares at the time
      of
      exercise over (ii) the exercise price of the right, as established by the
      Administrator on the date of grant.

    

    (v)  “Subsidiary”
      means any corporation (other than the Company) in an unbroken chain of
      corporations beginning with the Company where each of the corporations in the
      unbroken chain other than the last corporation owns stock possessing at least
      50
      percent or more of the total combined voting power of all classes of stock
      in
      one of the other corporations in the chain, and if specifically determined
      by
      the Administrator in the context other than with respect to Incentive Stock
      Options, may include an entity in which the Company has a significant ownership
      interest or that is directly or indirectly controlled by the
      Company.

    

    
      
        
        

      

      
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    (w)  “Termination
      of employment” means ceasing to serve as a full-time employee of the Company and
      its Subsidiaries or, with respect to a service provider, ceasing to serve as
      such for the Company, except that with respect to all or any Awards held by
      a
      Participant (i) the Administrator may determine, subject to Section 6(d), that
      an approved leave of absence or approved employment on a less than full-time
      basis is not considered a “termination of employment,” (ii) the Administrator
      may determine that a transition of employment to service with a partnership,
      joint venture or corporation not meeting the requirements of a Subsidiary in
      which the Company or a Subsidiary is a party is not considered a “termination of
      employment,” (iii) service as a member of the Board shall constitute continued
      employment with respect to Awards granted to a Participant while he or she
      served as an employee and (iv) service as an employee of the Company or a
      Subsidiary shall constitute continued employment with respect to Awards granted
      to a Participant while he or she served as a member of the Board. The
      Administrator shall determine whether any corporate transaction, such as a
      sale
      or spin-off of a division or subsidiary that employs a Participant, shall be
      deemed to result in a termination of employment with the Company and its
      Subsidiaries for purposes of any affected Participant’s Options, and the
      Administrator’s decision shall be final and binding.

    

    (x)  “Total
      and Permanent Disablement” has the meaning specified by the Administrator in the
      terms of an Award Agreement or, in the absence of any such term or in the case
      of an Option intending to qualify as an Incentive Stock Option, the inability
      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 which has lasted or can be expected to last for a continuous period
      of
      not less than 12 months. The determination of the Administrator as to an
      individual’s Total and Permanent Disablement shall be conclusive on all
      parties.

    

    3.  Eligibility

    

    Any
      person who is a current or prospective officer or employee (including any
      director who is also an employee, in his or her capacity as such) of the Company
      or of any Subsidiary shall be eligible for selection by the Administrator for
      the grant of Awards hereunder. To the extent provided by Section 5(d), any
      Nonemployee Director shall be eligible for the grant of Awards hereunder as
      determined by the Administrator. In addition any service provider who has been
      retained to provide consulting, advisory or other services to the Company or
      to
      any Subsidiary shall be eligible for selection by the Administrator for the
      grant of Awards hereunder. Options intending to qualify as Incentive Stock
      Options may only be granted to employees of the Company or any Subsidiary within
      the meaning of the Code, as selected by the Administrator. For purposes of
      this
      Plan, the Chairman of the Board’s status as an employee shall be determined by
      the Administrator.

    

    4.  Effective
      Date and Termination of Plan

    

    This
      Plan
      became effective on November 20, 2007 (the “Effective Date”), the date on which
      the Plan was approved by the Company’s shareholders and adopted by the Board of
      Directors. All Awards granted under this Plan are subject to, and may not be
      exercised before, the approval of this Plan by the shareholders prior to the
      first anniversary date of the effective date of the Plan, by the affirmative
      vote of the holders of a majority of the outstanding Shares of the Company
      present, or represented by proxy, and entitled to vote, at a meeting of the
      Company’s shareholders or by written consent in accordance with the laws of the
      State of Utah; provided that if such approval by the shareholders of the Company
      is not forthcoming, all Awards previously granted under this Plan shall be
      void.
      The Plan shall remain available for the grant of Awards until the tenth (10th)
      anniversary of the Effective Date. Notwithstanding the foregoing, the Plan
      may
      be terminated at such earlier time as the Board may determine. Termination
      of
      the Plan will not affect the rights and obligations of the Participants and
      the
      Company arising under Awards theretofore granted and then in
      effect.

    

    
      
        
        

      

      
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    5.  Shares
      Subject to the Plan and to Awards

    

    (a)  Aggregate
      Limits. The aggregate number of Shares issuable pursuant to all Awards
      under this Plan shall not exceed 1,000,000; provided that any Shares granted
      after the Effective Date under Options or Stock Appreciation Rights shall be
      counted against this limit on a one-for-one basis and any Shares granted as
      Awards other than Options or Stock Appreciation Rights shall be counted against
      this limit as two (2) Shares for every one (1) Share subject to such Award.
      The
      aggregate number of Shares available for grant under this Plan and the number
      of
      Shares subject to outstanding Awards shall be subject to adjustment as provided
      in Section 12. The Shares issued pursuant to Awards granted under this Plan
      may
      be shares that are authorized and unissued or shares that were reacquired by
      the
      Company, including shares purchased in the open market.

    

    (b)  Issuance
      of Shares. For purposes of Section 5(a), the aggregate number of Shares
      issued under this Plan at any time shall equal only the number of Shares
      actually issued upon exercise or settlement of an Award under this Plan.
      Notwithstanding the foregoing, Shares subject to an Award under this Plan may
      not again be made available for issuance under this Plan

    if
      such
      shares are: (i) shares that were subject to a stock-settled Stock Appreciation
      Right and were not issued upon the net settlement or net exercise of such Stock
      Appreciation Right,

    (ii)
      shares used to pay the exercise price of an Option, (iii) shares delivered
      to or
      withheld by the Company to pay the withholding taxes related to an Option or
      a
      Stock Appreciation Right, or (iv) shares repurchased on the open market with
      the
      proceeds of an Option exercise. Shares subject to Awards that have been
      canceled, expired, forfeited or otherwise not issued under an Award and shares
      subject to Awards settled in cash shall not count as shares issued under this
      Plan.

    

    6.  Options

    

    (a)  Option
      Awards. Options may be granted at any time and from time to time prior to
      the termination of the Plan to Participants as determined by the Administrator.
      No Participant shall have any rights as a shareholder with respect to any Shares
      subject to Option hereunder until said Shares have been issued, except that
      the
      Administrator may authorize dividend equivalent accruals with respect to such
      Shares. Each Option shall be evidenced by an Award Agreement. Options granted
      pursuant to the Plan need not be identical but each Option must contain and
      be
      subject to the terms and conditions set forth below.

    

    (b)  Price.
      The Administrator will establish the exercise price per Share under each
      Option, which, in no event will be less than the fair market value of the Shares
      on the date of grant; provided, however, that the exercise price per Share
      with
      respect to an Option that is granted in connection with a merger or other
      acquisition as a substitute or replacement award for options held by optionees
      of the acquired entity may be less than 100% of the market price of the Shares
      on the date such Option is granted if such exercise price is based on a formula
      set forth in the terms of the options held by such optionees or in the terms
      of
      the agreement providing for such merger or other acquisition. The exercise
      price
      of any Option may be paid in Shares, cash or a combination thereof, as
      determined by the Administrator, including an irrevocable commitment by a broker
      to pay over such amount from a sale of the Shares issuable under an Option,
      the
      delivery of previously owned Shares and withholding of Shares deliverable upon
      exercise.

    

    (c)  No
      Repricing. Other than in connection with a change in the Company’s
      capitalization (as described in Section 12) the exercise price of an Option
      may
      not be reduced without shareholder approval (including canceling previously
      awarded Options and regranting them with a lower exercise price).

    

    
      
        
        

      

      
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    (d)  Provisions
      Applicable to Options. The date on which Options become exercisable shall
      be determined at the sole discretion of the Administrator and set forth in
      an
      Award Agreement. Unless provided otherwise in the applicable Award Agreement,
      to
      the extent that the Administrator determines that an approved leave of absence
      or employment on a less than full-time basis is not a termination of employment,
      the vesting period and/or exercisability of an Option shall be adjusted by
      the
      Administrator during or to reflect the effects of any period during which the
      Participant is on an approved leave of absence or is employed on a less than
      full-time basis.

    

    (e)  Term
      of Options and Termination of Employment. The Administrator shall establish
      the term of each Option, which in no case shall exceed a period of ten (10)
      years from the date of grant. Unless an Option earlier expires upon the
      expiration date established pursuant to the foregoing sentence, upon the
      termination of the Participant’s employment, his or her rights to exercise an
      Option then held shall be only as follows, unless the Administrator specifies
      otherwise:

    

           
      (1)        Death. Upon the
      death of a Participant while in the employ of the Company or any Subsidiary
      or
      while serving as a member of the Board, the Participant’s Options then held
      shall be exercisable by his or her estate, heir or beneficiary at any time
      during the one (1) year period commencing on the date of death to the extent
      that the Options are exercisable as of that date. Any and all of the deceased
      Participant’s Options that are not exercised during the one (1) year commencing
      on the date of death shall terminate as of the end of such one (1) year period.
      To the extent that any Option is not exercisable as of the date of death, such
      portion of the Option shall remain unexercisable and shall terminate as of
      such
      date.

    

    If
      a
      Participant should die within thirty (30) days of his or her termination of
      employment with the Company and its Subsidiaries, an Option shall be exercisable
      by his or her estate, heir or beneficiary at any time during the one (1) year
      period commencing on the date of termination, but only to the extent of the
      number of Shares as to which such Option was exercisable as of the date of
      such
      termination. Any and all of the deceased Participant’s Options that are not
      exercised during the one (1) year period commencing on the date of termination
      shall terminate as of the end of such one (1) year period. A Participant’s
      estate shall mean his or her legal representative or other person who so
      acquires the right to exercise the Option by bequest or inheritance or by reason
      of the death of the Participant.

    

    (2)  Total
      and Permanent Disablement. Upon termination of employment as a result of
      the Total and Permanent Disablement of any Participant, the Participant’s
      Options then held shall be exercisable during the one (1) year period commencing
      on the date of termination to the extent that the Options are exercisable as
      of
      that date. Any and all Options that are not exercised during the one (1) year
      period commencing on the date of termination shall terminate as of the end
      of
      such one (1) year period. To the extent that any Option is not exercisable
      as of
      the date of termination, such portion of the Option shall remain unexercisable
      and shall terminate as of such date.

    

    (3)  Retirement.
      Upon Retirement of a Participant, the Participant’s Options then held shall
      be exercisable during the one (1) year period commencing on the date of
      Retirement. The number of Shares with respect to which the Options shall be
      exercisable shall equal the total number of Shares that were exercisable under
      the Participant’s Option on the date of his or her Retirement. Any and all
      Options that are not exercised during the one (1) year period commencing on
      the
      date of termination shall terminate as of the end of such one (1) year period.
      To the extent that any Option is not exercisable as of his or her Retirement,
      such portion of the Option shall remain unexercisable and shall terminate as
      of
      such date.

    

    (4)  Cause.
      Upon the date of a termination of a Participant’s employment for Cause, any
      Option that is unexercised prior to the date of termination shall terminate
      as
      of such date.

    

    
      
        
        

      

      
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    (5)  Other
      Reasons. Upon the date of a termination of a Participant’s employment for
      any reason other than those stated above in Sections 6(e)(1), (e)(2), (e)(3)
      and
      (e)(4) or as described in Section 15, (A) to the extent that any Option is
      not
      exercisable as of such termination date, such portion of the Option shall remain
      unexercisable and shall terminate as of such date, and (B) to the extent that
      any Option is exercisable as of such termination date, such portion of the
      Option shall expire on the earlier of (i) ninety (90) days following such date
      and (ii) the expiration date of such Option.

    

    (f)  Incentive
      Stock Options. Notwithstanding anything to the contrary in this Section 6,
      in the case of the grant of an Option intending to qualify as an Incentive
      Stock
      Option: (i) if the Participant owns stock possessing more than 10 percent of
      the
      combined voting power of all classes of stock of the Company (a “10%
      Shareholder”), the exercise price of such Option must be at least 110 percent of
      the fair market value of the Shares on the date of grant and the Option must
      expire within a period of not more than five (5) years from the date of grant,
      and (ii) termination of employment will occur when the person to whom an Award
      was granted ceases to be an employee (as determined in accordance with Section
      3401(c) of the Code and the regulations promulgated thereunder) of the Company
      and its Subsidiaries. Notwithstanding anything in this Section 6 to the
      contrary, options designated as Incentive Stock Options shall not be eligible
      for treatment under the Code as Incentive Stock Options (and will be deemed
      to
      be Nonqualified Stock Options) to the extent that either (a) the aggregate
      fair
      market value of Shares (determined as of the time of grant) with respect to
      which such Options are exercisable for the first time by the Participant during
      any calendar year (under all plans of the Company and any Subsidiary) exceeds
      $100,000, taking Options into account in the order in which they were granted,
      or (b) such Options otherwise remain exercisable but are not exercised within
      three (3) months of Termination of employment (or such other period of time
      provided in Section 422 of the Code).

    

    7.  Stock
      Appreciation Rights

    

    Stock
      Appreciation Rights may be granted to Participants from time to time either
      in
      tandem with or as a component of other Awards granted under the Plan (“tandem
      SARs”) or not in conjunction with other Awards (“freestanding SARs”) and may,
      but need not, relate to a specific Option granted under Section 6. The
      provisions of Stock Appreciation Rights need not be the same with respect to
      each grant or each recipient. Any Stock Appreciation Right granted in tandem
      with an Award may be granted at the same time such Award is granted or at any
      time thereafter before exercise or expiration of such Award. All freestanding
      SARs shall be granted subject to the same terms and conditions applicable to
      Options as set forth in Section 6 and all tandem SARs shall have the same
      exercise price, vesting, exercisability, forfeiture and termination provisions
      as the Award to which they relate. Subject to the provisions of Section 6 and
      the immediately preceding sentence, the Administrator may impose such other
      conditions or restrictions on any Stock Appreciation Right as it shall deem
      appropriate. Stock Appreciation Rights may be settled in Shares, cash or a
      combination thereof, as determined by the Administrator and set forth in the
      applicable Award Agreement. Other than in connection with a change in the
      Company’s capitalization (as described in Section 12) the exercise price of
      Stock Appreciation Rights may not be reduced without shareholder approval
      (including canceling previously awarded Stock Appreciation Rights and regranting
      them with a lower exercise price).

    

    
      
        
        

      

      
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    8.  Restricted
      Stock and Restricted Stock Units

    

    (a)  Restricted
      Stock and Restricted Stock Unit Awards. Restricted Stock and Restricted
      Stock Units may be granted at any time and from time to time prior to the
      termination of the Plan to Participants as determined by the Administrator.
      Restricted Stock is an award or issuance of Shares the grant, issuance,
      retention, vesting and/or transferability of which is subject during specified
      periods of time to such conditions (including continued employment or
      performance conditions) and terms as the Administrator deems appropriate.
      Restricted Stock Units are Awards denominated in units of Shares under which
      the
      issuance of Shares is subject to such conditions (including continued employment
      or performance conditions) and terms as the Administrator deems appropriate.
      Each grant of Restricted Stock and Restricted Stock Units shall be evidenced
      by
      an Award Agreement. Unless determined otherwise by the Administrator, each
      Restricted Stock Unit will be equal to one Share and will entitle a Participant
      to either the issuance of Shares or payment of an amount of cash determined
      with
      reference to the value of Shares. To the extent determined by the Administrator,
      Restricted Stock and Restricted Stock Units may be satisfied or settled in
      Shares, cash or a combination thereof. Restricted Stock and Restricted Stock
      Units granted pursuant to the Plan need not be identical but each grant of
      Restricted Stock and Restricted Stock Units must contain and be subject to
      the
      terms and conditions set forth below.

    

    (b)  Contents
      of Agreement. Each Award Agreement shall contain provisions regarding (i)
      the number of Shares or Restricted Stock Units subject to such Award or a
      formula for determining such number, (ii) the purchase price of the Shares,
      if
      any, and the means of payment, (iii) the performance criteria, if any, and
      level
      of achievement versus these criteria that shall determine the number of Shares
      or Restricted Stock Units granted, issued, retainable and/or vested, (iv) such
      terms and conditions on the grant, issuance, vesting and/or forfeiture of the
      Shares or Restricted Stock Units as may be determined from time to time by
      the
      Administrator, (v) the term of the performance period, if any, as to which
      performance will be measured for determining the number of such Shares or
      Restricted Stock Units, and (vi) restrictions on the transferability of the
      Shares or Restricted Stock Units. Shares issued under a Restricted Stock Award
      may be issued in the name of the Participant and held by the Participant or
      held
      by the Company, in each case as the Administrator may provide.

    

    (c)  Vesting
      and Performance Criteria. The grant, issuance, retention, vesting and/or
      settlement of shares of Restricted Stock and Restricted Stock Units will occur
      when and in such installments as the Administrator determines or under criteria
      the Administrator establishes, which may include Qualifying Performance
      Criteria. The grant, issuance, retention, vesting and/or settlement of Shares
      under any such Award that is based on performance criteria and level of
      achievement versus such criteria will be subject to a performance period of
      not
      less than six months, except that the Administrator may provide for the
      satisfaction and/or lapse of all conditions under any such Award in the event
      of
      the Participant’s death, disability, retirement or in connection with a change
      of control, and the Administrator may provide that any such restriction or
      limitation will not apply in the case of a Restricted Stock or Restricted Stock
      Unit Award that is issued in payment or settlement of compensation that has
      been
      earned by the Participant. Notwithstanding anything in this Plan to the
      contrary, the performance criteria for any Restricted Stock or Restricted Stock
      Unit that is intended to satisfy the requirements for “performance-based
      compensation” under Section 162(m) of the Code will be a measure based on one or
      more Qualifying Performance Criteria selected by the Administrator and specified
      when the Award is granted.

    

    (d)  Discretionary
      Adjustments and Limits. Subject to the limits imposed under Section 162(m)
      of the Code for Awards that are intended to qualify as “performance based
      compensation,” notwithstanding the satisfaction of any performance goals, the
      number of Shares granted, issued, retainable and/or vested under an Award of
      Restricted Stock or Restricted Stock Units on account of either financial
      performance or personal performance evaluations may, to the extent specified
      in
      the Award Agreement, be reduced by the Administrator on the basis of such
      further considerations as the Administrator shall determine.

    

    
      
        
        

      

      
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    (e)  Voting
      Rights. Unless otherwise determined by the Administrator, Participants
      holding shares of Restricted Stock granted hereunder may exercise full voting
      rights with respect to those shares during the period of restriction.
      Participants shall have no voting rights with respect to Shares underlying
      Restricted Stock Units unless and until such Shares are reflected as issued
      and
      outstanding shares on the Company’s stock ledger.

    

    (f)            Dividends
      and Distributions. Participants in whose name Restricted Stock is granted
      shall be entitled to receive all dividends and other distributions paid with
      respect to those Shares, unless determined otherwise by the Administrator.
      The
      Administrator will determine whether any such dividends or distributions will
      be
      automatically reinvested in additional shares of Restricted Stock and subject
      to
      the same restrictions on transferability as the Restricted Stock with respect
      to
      which they were distributed or whether such dividends or distributions will
      be
      paid in cash. Shares underlying Restricted Stock Units shall be entitled to
      dividends or dividend equivalents only to the extent provided by the
      Administrator.

    

    9.            Deferral
      of Gains

    

    The
      Administrator may, in an Award Agreement or otherwise, provide for the deferred
      delivery of Shares upon settlement, vesting or other events with respect to
      Restricted Stock or Restricted Stock Units, or in payment or satisfaction of
      an
      Incentive Bonus. Notwithstanding anything herein to the contrary, in no event
      will any deferral of the delivery of Shares or any other payment with respect
      to
      any Award be allowed if the Administrator determines, in its sole discretion,
      that the deferral would result in the imposition of the additional tax under
      Section 409A(a)(1)(B) of the Code.

    

    10.  Conditions
      and Restrictions Upon Securities Subject to Awards

    

    The
      Administrator may provide that the Shares issued upon exercise of an Option
      or
      Stock Appreciation Right or otherwise subject to or issued under an Award shall
      be subject to such further agreements, restrictions, conditions or limitations
      as the Administrator in its discretion may specify prior to the exercise of
      such
      Option or Stock Appreciation Right or the grant, vesting or settlement of such
      Award, including without limitation, conditions on vesting or transferability,
      forfeiture or repurchase provisions and method of payment for the Shares issued
      upon exercise, vesting or settlement of such Award (including the actual or
      constructive surrender of Shares already owned by the Participant) or payment
      of
      taxes arising in connection with an Award. Without limiting the foregoing,
      such
      restrictions may address the timing and manner of any resales by the Participant
      or other subsequent transfers by the Participant of any Shares issued under
      an
      Award, including without limitation (i) restrictions under an insider trading
      policy or pursuant to applicable law, (ii) restrictions designed to delay and/or
      coordinate the timing and manner of sales by Participant and holders of other
      Company equity compensation arrangements, (iii) restrictions as to the use
      of a
      specified brokerage firm for such resales or other transfers, and (iv)
      provisions requiring Shares to be sold on the open market or to the Company
      in
      order to satisfy tax withholding or other obligations.

    

    11.  Adjustment
      of and Changes in the Stock

    

    The
      number and kind of Shares available for issuance under this Plan (including
      under any Awards then outstanding), and the number and kind of Shares subject
      to
      the individual limits set forth in Section 5 of this Plan, shall be adjusted
      by
      the Administrator as it determines appropriate to reflect any reorganization,
      reclassification, combination of shares, stock split, reverse stock split,
      spin-off, dividend or distribution of securities, property or cash (other than
      regular, quarterly cash dividends), or any other event or transaction that
      affects the number or kind of Shares of the Company outstanding. Such adjustment
      may be designed to comply with Section 425 of the Code or, except as otherwise
      expressly provided in Section 5(c) of this Plan, may be designed to treat the
      Shares available under the Plan and subject to Awards as if they were all
      outstanding on the record date for such event or transaction or to increase
      the
      number of such Shares to reflect a deemed reinvestment in Shares of the amount
      distributed to the Company’s security holders. The terms of any outstanding
      Award may also be adjusted by the Administrator as to price, number or kind
      of
      Shares subject to such Award, vesting, and other terms to reflect the foregoing
      events, which adjustments need not be uniform as between different Awards or
      different types of Awards.

    

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    In
      the
      event there shall be any other change in the number or kind of outstanding
      Shares, or any stock or other securities into which such Shares shall have
      been
      changed, or for which it shall have been exchanged, by reason of a change of
      control, other merger, consolidation or otherwise, then the Administrator shall,
      in its sole discretion, determine the appropriate adjustment, if any, to be
      effected. In addition, in the event a change in control or of such other change
      described in this paragraph, the Administrator may accelerate the time or times
      at which any Award may be exercised and may provide for cancellation of such
      accelerated Awards that are not exercised within a time prescribed by the
      Administrator in its sole discretion.

    

    No
      right
      to purchase fractional shares shall result from any adjustment in Awards
      pursuant to this Section 12. In case of any such adjustment, the Shares subject
      to the Award shall be rounded down to the nearest whole share. The Company
      shall
      notify Participants holding Awards subject to any adjustments pursuant to this
      Section 12 of such adjustment, but (whether or not notice is given) such
      adjustment shall be effective and binding for all purposes of the
      Plan.

    

    12.  Qualifying
      Performance-Based Compensation

    

    (a)  General.
      The Administrator may establish performance criteria and level of
      achievement versus such criteria that shall determine the number of Shares
      or
      units to be granted, retained, vested, issued or issuable pursuant to an Award,
      which criteria may be based on Qualifying Performance Criteria or other
      standards of financial performance and/or personal performance evaluations.
      A
      Performance Award may be identified as “Performance Share”, “Performance
      Equity”, “Performance Unit” or other such term as chosen by the Administrator.
      In addition, the Administrator may specify that an Award or a portion of an
      Award is intended to satisfy the requirements for “performance-based
      compensation” under Section 162(m) of the Code, provided that the performance
      criteria for such Award or portion of an Award that is intended by the
      Administrator to satisfy the requirements for “performance-based compensation”
under Section 162(m) of the Code shall be a measure based on one or more
      Qualifying Performance Criteria selected by the Administrator and specified
      at
      the time the Award is granted. The Administrator shall certify the extent to
      which any Qualifying Performance Criteria has been satisfied, and the amount
      payable as a result thereof, prior to payment, settlement or vesting of any
      Award that is intended to satisfy the requirements for “performance-based
      compensation” under Section 162(m) of the Code. Notwithstanding satisfaction of
      any performance goals, the number of Shares issued under or the amount paid
      under an award may, to the extent specified in the Award Agreement, be reduced
      by the Administrator on the basis of such further considerations as the
      Administrator in its sole discretion shall determine.

    

    (b)  Qualifying
      Performance Criteria. For purposes of this Plan, the term “Qualifying
      Performance Criteria” shall mean any one or more of the following performance
      criteria, either individually, alternatively or in any combination, applied
      to
      either the Company as a whole or to a business unit or Subsidiary, either
      individually, alternatively or in any combination, and measured either annually
      or cumulatively over a period of years, on an absolute basis or relative to
      a
      preestablished target, to previous years’ results or to a designated comparison
      group, in each case as specified by the Administrator: (i) cash flow (before
      or
      after dividends), (ii) earning or earnings per share (including earnings before
      interest, taxes, depreciation and amortization), (iii) stock price, (iv) return
      on equity, (v) total shareholder return, (vi) return on capital or investment
      (including return on total capital, return on invested capital, or return on
      investment), (vii) return on assets or net assets, (viii) market capitalization,
      (ix) economic value added, (x) debt leverage (debt to capital), (xi) revenue,
      (xii) income or net income, (xiii) operating income, (xiv) operating profit
      or
      net operating profit, (xv) operating margin or profit margin, (xvi) return
      on
      operating revenue, (xvii) cash from operations, (xviii) operating ratio, (xix)
      operating revenue, (xx) NSR and/or Total backlog, (xxi) days sales outstanding,
      or (xxii) customer service. To the extent consistent with Section 162(m) of
      the
      Code, the Administrator (A) shall appropriately adjust any evaluation of
      performance under Qualifying Performance Criteria to eliminate the effects
      of
      charges for restructurings, discontinued operations, extraordinary items and
      all
      items of gain, loss or expense determined to be extraordinary or unusual in
      nature or related to the acquisition or disposal of a segment of a business
      or
      related to a change in accounting principle all as determined in accordance
      with
      standards established by opinion No. 30 of the Accounting Principles Board
      (APA
      Opinion No. 30) or other applicable or successor accounting provisions, as
      well
      as the cumulative effect of accounting changes, in each case as determined
      in
      accordance with generally accepted accounting principles or identified in the
      Company’s financial statements or notes to the financial statements, and (B) may
      appropriately adjust any evaluation of performance under Qualifying Performance
      Criteria to exclude any of the following events that occur during a performance
      period: (i) asset write-downs, (ii) litigation, claims, judgments or
      settlements, (iii) the effect of changes in tax law or other such laws or
      provisions affecting reported results, (iv) accruals for reorganization and
      restructuring programs and (v) accruals of any amounts for payment under this
      Plan or any other compensation arrangement maintained by the
      Company.

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    13.            Transferability

    

    Each
      Award may not be sold, transferred, pledged, assigned, or otherwise alienated
      or
      hypothecated by a Participant other than by will or the laws of descent and
      distribution, and each Option or Stock Appreciation Right shall be exercisable
      only by the Participant during his or her lifetime. Notwithstanding the
      foregoing, to the extent permitted by the Administrator, the person to whom
      an
      Award is initially granted (the “Grantee”) may transfer an Award to any “family
      member” of the Grantee (as such term is defined in Section 1 (a)(5) of the
      General Instructions to Form S-8 under the Securities Act of 1933, as amended
      (“Form S-8”)), to trusts solely for the benefit of such family members and to
      partnerships in which such family members and/or trusts are the only partners;
      provided that, (i) as a condition thereof, the transferor and the transferee
      must execute a written agreement containing such terms as specified by the
      Administrator, and (ii) the transfer is pursuant to a gift or a domestic
      relations order to the extent permitted under the General Instructions to Form
      S-8. Except to the extent specified otherwise in the agreement the Administrator
      provides for the Grantee and transferee to execute, all vesting, exercisability
      and forfeiture provisions that are conditioned on the Grantee’s continued
      employment or service shall continue to be determined with reference to the
      Grantee’s employment or service (and not to the status of the transferee) after
      any transfer of an Award pursuant to this Section 14, and the

    responsibility
      to pay any taxes in connection with an Award shall remain with the Grantee
      notwithstanding any transfer other than by will or intestate
      succession.

    

    14.           Suspension
      or Termination of Awards

    

    Except
      as
      otherwise provided by the Administrator, if at any time (including after a
      notice of exercise has been delivered or an award has vested) the Chief
      Executive Officer or any other person designated by the Administrator (each
      such
      person, an “Authorized Officer”) reasonably believes that a Participant may have
      committed an Act of Misconduct as described in this Section 15, the Authorized
      Officer, Administrator or the Board may suspend the Participant’s rights to
      exercise any Option, to vest in an Award, and/or to receive payment for or
      receive Shares in settlement of an Award pending a determination of whether
      an
      Act of Misconduct has been committed.

    

    If
      the
      Administrator or an Authorized Officer determines a Participant has committed
      an
      act of embezzlement, fraud, dishonesty, nonpayment of any obligation owed to
      the
      Company or any Subsidiary, breach of fiduciary duty, violation of Company ethics
      policy or code of conduct, or deliberate disregard of the Company or Subsidiary
      rules resulting in loss, damage or injury to the Company or any Subsidiary,
      or
      if a Participant makes an unauthorized disclosure of any Company or Subsidiary
      trade secret or confidential information, solicits any employee or service
      provider to leave the employ or cease providing services to the Company or
      any
      Subsidiary, breaches any intellectual property or assignment of inventions
      covenant, engages in any conduct constituting unfair competition, breaches
      any
      non-competition agreement, induces any Company or Subsidiary customer to breach
      a contract with the Company or any Subsidiary or to cease doing business with
      the Company or any Subsidiary, or induces any principal for whom the Company
      or
      any Subsidiary acts as agent to terminate such agency relationship (any of
      the
      foregoing acts, an “Act of Misconduct”), then except as otherwise provided by
      the Administrator, (i) neither the Participant nor his or her estate nor
      transferee shall be entitled to exercise any Option or Stock Appreciation Right
      whatsoever, vest in or have the restrictions on an Award lapse, or otherwise
      receive payment of an Award, (ii) the Participant will forfeit all outstanding
      Awards and (iii) the Participant may be required, at the Administrator’s sole
      discretion, to return and/or repay to the Company any then unvested Shares
      previously issued under the Plan. In making such determination, the
      Administrator or an Authorized Officer shall give the Participant an opportunity
      to appear and present evidence on his or her behalf at a hearing before the
      Administrator or its designee or an opportunity to submit written comments,
      documents, information and arguments to be considered by the Administrator.
      Any
      dispute by a Participant or other person as to the determination of the
      Administrator shall be resolved pursuant to Section 23 of the Plan.

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    15.  Compliance
      with Laws and Regulations

    

    This
      Plan, the grant, issuance, vesting, exercise and settlement of Awards
      thereunder, and the obligation of the Company to sell, issue or deliver Shares
      under such Awards, shall be subject to all applicable foreign, federal, state
      and local laws, rules and regulations, stock exchange rules and regulations,
      and
      to such approvals by any governmental or regulatory agency as may be required.
      The Company shall not be required to register in a Participant’s name or deliver
      any Shares prior to the completion of any registration or qualification of
      such
      shares under any foreign, federal, state or local law or any ruling or
      regulation of any government body which the Administrator shall determine to
      be
      necessary or advisable. To the extent the Company is unable to or the
      Administrator deems it infeasible to obtain authority from any regulatory body
      having jurisdiction, which authority is deemed by the Company’s counsel to be
      necessary to the lawful issuance and sale of any Shares hereunder, the Company
      and its Subsidiaries shall be relieved of any liability with respect to the
      failure to issue or sell such Shares as to which such requisite authority shall
      not have been obtained. No Option shall be exercisable and no Shares shall
      be
      issued and/or transferable under any other Award unless a registration statement
      with respect to the Shares underlying such Option is effective and current
      or
      the Company has determined that such registration is unnecessary.

    

    In
      the
      event an Award is granted to or held by a Participant who is employed or
      providing services outside the United States, the Administrator may, in its
      sole
      discretion, modify the provisions of the Plan or of such Award as they pertain
      to such individual to comply with applicable foreign law or to recognize
      differences in local law, currency or tax policy. The Administrator may also
      impose conditions on the grant, issuance, exercise, vesting, settlement or
      retention of Awards in order to comply with such foreign law and/or to minimize
      the Company’s obligations with respect to tax equalization for Participants
      employed outside their home country.

    

    16.            Withholding

    

    To
      the
      extent required by applicable federal, state, local or foreign law, a
      Participant shall be required to satisfy, in a manner satisfactory to the
      Company, any withholding tax obligations that arise by reason of an Option
      exercise, disposition of Shares issued under an Incentive Stock Option, the
      vesting of or settlement of an Award, an election pursuant to Section 83(b)
      of
      the Code or otherwise with respect to an Award. The Company and its Subsidiaries
      shall not be required to issue Shares, make any payment or to recognize the
      transfer or disposition of Shares until such obligations are satisfied. The
      Administrator may provide for or permit the minimum statutory withholding
      obligations to be satisfied through the mandatory or elective sale of Shares
      and/or by having the Company withhold a portion of the Shares that otherwise
      would be issued to him or her upon exercise of the Option or the vesting or
      settlement of an Award, or by tendering Shares previously acquired.

    

    17.  Administration
      of the Plan

    

    (a)  Administrator
      of the Plan. The Plan shall be administered by the Administrator who shall
      be the Compensation Committee of the Board or, in the absence of a Compensation
      Committee, a properly constituted Compensation Committee or the Board itself.
      Any power of the Administrator may also be exercised by the Board, except to
      the
      extent that the grant or exercise of such authority would cause any Award or
      transaction to become subject to (or lose an exemption under) the short-swing
      profit recovery provisions of Section 16 of the Securities Exchange Act of
      1934
      or cause an Award designated as a Performance Award not to qualify for treatment
      as performance-based compensation under Section 162(m) of the Code. To the
      extent that any permitted action taken by the Board conflicts with action taken
      by the Administrator, the Board action shall control. The Compensation Committee
      may by resolution authorize one or more officers of the Company to perform
      any
      or all things that the Administrator is authorized and empowered to do or
      perform under the Plan, and for all purposes under this Plan, such officer
      or
      officers shall be treated as the Administrator; provided, however, that the
      resolution so authorizing such officer or officers shall specify the total
      number of Awards (if any) such officer or officers may award pursuant to such
      delegated authority, and any such Award shall be subject to the form of Option
      agreement theretofore approved by the Compensation and Organization Committee.
      No such officer shall designate himself or herself as a recipient of any Awards
      granted under authority delegated to such officer. In addition, the Compensation
      Committee may delegate any or all aspects of the day-to-day administration
      of
      the Plan to one or more officers or employees of the Company or any Subsidiary,
      and/or to one or more agents.

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (b)  Powers
      of Administrator. Subject to the express provisions of this Plan, the
      Administrator shall be authorized and empowered to do all things that it
      determines to be necessary or appropriate in connection with the administration
      of this Plan, including, without limitation: (i) to prescribe, amend and rescind
      rules and regulations relating to this Plan and to define terms not otherwise
      defined herein; (ii) to determine which persons are Participants, to which
      of
      such Participants, if any, Awards shall be granted hereunder and the timing
      of
      any such Awards; (iii) to grant Awards to Participants and determine the terms
      and conditions thereof, including the number of Shares subject to Awards and
      the
      exercise or purchase price of such Shares and the circumstances under which
      Awards become exercisable or vested or are forfeited or expire, which terms
      may
      but need not be conditioned upon the passage of time, continued employment,
      the
      satisfaction of performance criteria, the occurrence of certain events
      (including events which constitute a change of control), or other factors;
      (iv)
      to establish and verify the extent of satisfaction of any performance goals
      or
      other conditions applicable to the grant, issuance, exercisability, vesting
      and/or ability to retain any Award; (v) to prescribe and amend the terms of
      the
      agreements or other documents evidencing Awards made under this Plan (which
      need
      not be identical) and the terms of or form of any document or notice required
      to
      be delivered to the Company by Participants under this Plan; (vi) to determine
      whether, and the extent to which, adjustments are required pursuant to Section
      12; (vii) to interpret and construe this Plan, any rules and regulations under
      this Plan and the terms and conditions of any Award granted hereunder, and
      to
      make exceptions to any such provisions in good faith and for the benefit of
      the
      Company; and (viii) to make all other determinations deemed necessary or
      advisable for the administration of this Plan.

    

    (c)  Determinations
      by the Administrator. All decisions, determinations and interpretations by
      the Administrator regarding the Plan, any rules and regulations under the Plan
      and the terms and conditions of or operation of any Award granted hereunder,
      shall be final and binding on all Participants, beneficiaries, heirs, assigns
      or
      other persons holding or claiming rights under the Plan or any Award. The
      Administrator shall consider such factors as it deems relevant, in its sole
      and
      absolute discretion, to making such decisions, determinations and
      interpretations including, without limitation, the recommendations or advice
      of
      any officer or other employee of the Company and such attorneys, consultants
      and
      accountants as it may select.

    

    (d)  Subsidiary
      Awards. In the case of a grant of an Award to any Participant employed by a
      Subsidiary, such grant may, if the Administrator so directs, be implemented
      by
      the Company issuing any subject Shares to the Subsidiary, for such lawful
      consideration as the Administrator may determine, upon the condition or
      understanding that the Subsidiary will transfer the Shares to the Participant
      in
      accordance with the terms of the Award specified by the Administrator
      pursuant to the provisions of the Plan. Notwithstanding any other provision
      hereof, such Award may be issued by and in the name of the Subsidiary and shall
      be deemed granted on such date as the Administrator shall
      determine.

    

    18.           Amendment
      of the Plan or Awards

    

    The
      Board
      may amend, alter or discontinue this Plan and the Administrator may amend,
      or
      alter any agreement or other document evidencing an Award made under this Plan
      but, except as provided pursuant to the provisions of Section 12, no such
      amendment shall, without the approval of the shareholders of the
      Company:

    

    (a)           increase
      the maximum number of Shares for which Awards may be granted under this
      Plan;

    

    (b)           reduce
      the price at which Options may be granted below the price provided for in
      Section 6(a);

    

    (c)           reduce
      the exercise price of outstanding Options;

    

    (d)           extend
      the term of this Plan;

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    (e)  change
      the class of persons eligible to be Participants;

    

    (f)  otherwise
      amend the Plan in any manner requiring shareholder approval by law or under
      the
      Nasdaq listing requirements; or

     

           
      (g)  increase
      the individual maximum limits in Sections 5(c) and (d).

    

    No
      amendment or alteration to the Plan or an Award or Award Agreement shall be
      made
      which would impair the rights of the holder of an Award, without such holder’s
      consent, provided that no such consent shall be required if the Administrator
      determines in its sole discretion and prior to the date of any change of control
      that such amendment or alteration either is required or advisable in order
      for
      the Company, the Plan or the Award to satisfy any law or regulation or to meet
      the requirements of or avoid adverse financial accounting consequences under
      any
      accounting standard.

    

    19.            No
      Liability of Company

    

    The
      Company and any Subsidiary or affiliate which is in existence or hereafter
      comes
      into existence shall not be liable to a Participant or any other person as
      to:
      (i) the non-issuance or sale of Shares as to which the Company has been unable
      to obtain from any regulatory body having jurisdiction or the authority deemed
      by the Company’s counsel to be necessary to the lawful issuance and sale of any
      Shares hereunder; and (ii) any tax consequence expected, but not realized,
      by
      any Participant or other person due to the receipt, exercise or settlement
      of
      any Award granted hereunder.

    

    20.            Non-Exclusivity
      of Plan

    

    Neither
      the adoption of this Plan by the Board nor the submission of this Plan to the
      shareholders of the Company for approval shall be construed as creating any
      limitations to the power of the Board or the Administrator to adopt such other
      incentive arrangements as either may deem desirable, including without
      limitation, the granting of restricted stock or stock options otherwise than
      under this Plan or an arrangement not intended to qualify under Code Section
      162(m), and such arrangements may be either generally applicable or applicable
      only in specific cases.

    

    21.  Governing
      Law

    

    This
      Plan
      and any agreements or other documents hereunder shall be interpreted and
      construed in accordance with the laws of the State of Utah and applicable
      federal law. Any reference in this Plan or in the agreement or other document
      evidencing any Awards to a provision of law or to a rule or regulation shall
      be
      deemed to include any successor law, rule or regulation of similar effect or
      applicability.

    

    22.  No
      Right to Employment, Reelection or Continued Service

    

    Nothing
      in this Plan or an Award Agreement shall interfere with or limit in any way
      the
      right of the Company, its Subsidiaries and/or its affiliates to terminate any
      Participant’s employment, service on the Board or service for the Company at any
      time or for any reason not prohibited by law, nor shall this Plan or an Award
      itself confer upon any Participant any right to continue his or her employment
      or service for any specified period of time. Neither an Award nor any benefits
      arising under this Plan shall constitute an employment contract with the
      Company, any Subsidiary and/or its affiliates. Subject to Sections 4 and 19,
      this Plan and the benefits hereunder may be terminated at any time in the sole
      and exclusive discretion of the Board without giving rise to any liability
      on
      the part of the Company, its Subsidiaries and/or its affiliates.

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    23.  Market
      Standoff

    

    To
      the extent requested by the Company
      and any underwriter of securities of the Company in connection with a firm
      commitment underwriting, no holder of any Shares received as part of an Award
      will sell or otherwise transfer any such Shares not included in such
      underwriting, or not previously registered pursuant to a registration statement
      filed under the Securities Act of 1933, during the one hundred eighty (180)
      day
      period following the effective date of the registration statement filed with
      the
      Securities and Exchange Commission in connection with such offering, which
      period may be reduced in the sole discretion of the Company.

    

    24.  Unfunded
      Plan

    

    The
      Plan
      is intended to be an unfunded plan. Participants are and shall at all times
      be
      general creditors of the Company with respect to their Awards. If the
      Administrator or the Company chooses to set aside funds in a trust or otherwise
      for the payment of Awards under the Plan, such funds shall at all times be
      subject to the claims of the creditors of the Company in the event of its
      bankruptcy or insolvency.

     

    14exv10w19

 

Exhibit 10.19

FISCAL YEAR 2008 MANAGEMENT BONUS PLAN

A. CASH BONUS PLAN

All ArcSight, Inc. (the “Company”) executives who do not otherwise receive variable compensation
will be eligible to participate in this cash bonus plan. Each eligible executive’s actual
participation level will be determined by their individual performance.

Cash bonus available will be based on a percentage of an executive’s base salary upon the Company’s
achievement of both revenue targets and operating income targets1, as described below.
In the event that the Company meets only a revenue target but not an operating income
target1, or vice versa, then bonuses, if any, will be available only at the level at
which both the revenue target and operating income target1 have been met.

1. Chief Executive Officer, President, Chief Financial Officer and Chief Technology Officer:

	 	 	 	 	 
	Percentage of Base Salary	 	Performance Relative To Revenue Target
(in accordance with the Company’s adjusted internal operating plan)	 	Operating Income Target (in accordance with the Company’s adjusted internal operating plan)
	 
	 	 	 	 
	0%

	 	<100% of revenue target
	 	N/A
	 
	 	 	 	 
	45%

	 	100% of revenue target
	 	3operating income target for 100% of revenue target
	 
	 	 	 	 
	55%

	 	>100% of revenue
target and <105% of
revenue target
	 	3operating income target for >100% of revenue
target and <105% of revenue target
	 
	 	 	 	 
	65%

	 	3105% of revenue target
and <110% of revenue
target
	 	3operating income target for 3105% of revenue
target and <110% of revenue target
	 
	 	 	 	 
	75%

	 	3110% of revenue target
and <115% of revenue
target
	 	3operating income target for 3110% of revenue
target and <115% of revenue target
	 
	 	 	 	 
	85%

	 	3115% of revenue target
and <120% of revenue
target
	 	3operating income target for 3115% of revenue
target and <120% of revenue target
	 
	 	 	 	 
	100%

	 	3120% of revenue target
	 	3operating income target for 3120% of revenue target

2. Other Executives:

	 	 	 	 	 
	Percentage of Base Salary	 	Performance Relative To Revenue Target
(in accordance with the Company’s adjusted internal operating plan)	 	Operating Income Target (in accordance with the Company’s adjusted internal operating plan)
	 
	 	 	 	 
	0%

	 	<100% of revenue target
	 	N/A
	 
	 	 	 	 
	35%

	 	100% of revenue target
	 	3operating income target for 100% of revenue target
	 
	 	 	 	 
	40%

	 	>100% of revenue
target and <105% of
revenue target
	 	>100% of revenue target and <105% of revenue target
	 
	 	 	 	 
	50%

	 	3105% of revenue target
and <110% of revenue
target
	 	3operating income target for 3105% of revenue target and
<110% of revenue target
	 
	 	 	 	 
	65%

	 	3110% of revenue target
and <115% of revenue
target
	 	3operating income target for 3110% of revenue target and
<115% of revenue target
	 
	 	 	 	 
	80%

	 	3115% of revenue target
and <120% of revenue
target
	 	3operating income target for 3115% of revenue target and
<120% of revenue target
	 
	 	 	 	 
	100%

	 	3120% of revenue target
	 	3operating income target for 3120% of revenue target

 

			
	1	 	The operating income targets exclude stock compensation expenses and amortization of
intangibles, but include the impact of any bonuses determined under the cash bonus plan.

 

 

B. EQUITY BONUS PLAN

Company executives will be eligible to participate in an equity pool of 237,500 shares of common
stock (in the form of options) on achievement of 100% of the revenue target and operating income of
break even or better. The Compensation Committee will determine the number of shares allocated to
the Company’s Chief Executive Officer and then the Compensation Committee, with input from the
Company’s Chief Executive Officer, will determine the allocation of the remainder of the shares
among the rest of the executive team. Options will vest according to standard vesting terms over
four years.

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