Document:

exhibit_10-1.htm

    Exhibit
10.1

    

    THE
ULTIMATE SOFTWARE GROUP, INC.

    

    AMENDED
AND RESTATED 2005 EQUITY AND INCENTIVE PLAN

     

    The Ultimate Software Group, Inc., a
Delaware corporation (together with its affiliates and subsidiaries, the
“Company”), hereby amends and restates The Ultimate Software Group, Inc. 2005
Equity and Incentive Plan (as so amended and restated, the “Plan”), effective as
of May 12, 2009, the date of the Company’s 2009 annual meeting of stockholders,
or the date of any adjournment thereof, to provide in its entirety as
follows:

     

    
      	
              1.  

            	
              PURPOSE

            

    

     

    The
objectives of the Plan are (i) to provide a vehicle for compensating the
Company’s key personnel by giving them the opportunity to acquire a proprietary
interest in the Company’s Common Stock by receiving equity-based incentive
compensation; (ii) to provide management with an equity ownership in the Company
commensurate with Company performance, as reflected in increased stockholder
value; (iii) to attract, motivate and retain key employees, non-employee
directors and other service providers by maintaining competitive compensation
levels; and (iv) to provide an incentive to management for continuous employment
with or service to the Company.

     

    
      	
              2.  

            	
              DEFINITIONS

            

    

     

    Wherever
the following capitalized terms are used in the Plan, they shall have the
meanings specified below:

     

    (a) “Award” means an award
of an Option, Stock Appreciation Right, Restricted Stock Award, Stock Unit
Award, Stock Award or Performance Award granted under the Plan.

     

    (b) “Award Agreement”
means an agreement entered into between the Company and a Participant setting
forth the terms and conditions of an Award granted to a
Participant.

     

    (c) “Board” means the
Board of Directors of the Company.

     

    (d) “Change in Control”
shall have the meaning set forth in Section 14.2
hereof.

     

    (e) “Code” means the
Internal Revenue Code of 1986, as amended.

     

    (f) “Committee” means the
Compensation Committee of the Board or a successor thereof, or any other
committee of the Board appointed by the Board to administer the Plan from time
to time.

     

    (g) “Common Stock” means
the Company’s Common Stock, par value $.01 per share.

     

    (h) “Company” means The
Ultimate Software Group, Inc., a Delaware corporation.

     

    (i) “Date of Grant” means
the date on which an Award under the Plan is made by the Committee, or such
later date as the Committee may specify to be the effective date of the
Award.

     

    (j) “Director Fee Option”
means an Option granted in lieu of certain directors’ fees under Section 13 of the Plan.

     

    (k) “Disability” means a
condition in which a Participant is considered “disabled” within the meaning of
Section 409A(a)(2)(C) of the Code, unless otherwise provided in an Award
Agreement.

     

    (l) “Eligible Person”
means any person who is an employee, officer, director, consultant or advisor of
the Company or any Subsidiary, as determined by the Committee, or any person who
is determined by the Committee to be a prospective employee, officer, director,
consultant or advisor of the Company or any Subsidiary.

     

    (m) “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

     

    (n) “Fair Market Value”
with respect to the value of a share of Common Stock as of a particular day,
shall mean the last reported sale price (as reported on the NASDAQ) of the
Common Stock on such day (unless such day is not a trading day, in which case,
on the last trading day immediately preceding such day on which the Common Stock
is traded on the NASDAQ).  If the Common Stock is not listed on the
NASDAQ, the Committee shall determine in good faith the Fair Market Value in
whatever manner it considers appropriate.

     

    (o) “Incentive Stock
Option” means an Option to purchase shares of Common Stock granted under
Section 6 hereof that is intended to meet the
requirements of Section 422 of the Code and the regulations promulgated
thereunder.

     

    (p) “NASDAQ” means The
Nasdaq Stock Market’s National Market.

     

    (q) “Non-Employee
Director” means any member of the Board who is not an officer or employee
of the Company.

     

    (r) “Nonqualified Stock
Option” means an Option to purchase shares of Common Stock granted under
Section 6 hereof that is not an Incentive Stock
Option.

     

    (s) “Option” means an
Incentive Stock Option or a Nonqualified Stock Option granted under the
Plan.

     

    (t) “Participant” means
any Eligible Person who holds an outstanding Award under the Plan.

     

    (u) “Performance Awards”
means an Award under Section 11 hereof entitling a
Participant to a payment in cash at the end of a performance period, if the
performance and other conditions established by the Committee are
satisfied.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    (v) “Plan” means The
Ultimate Software Group, Inc. 2005 Equity and Incentive Plan as set forth
herein, as amended from time to time.

     

    (w) “Prior Plan” means The
Ultimate Software Group, Inc. Nonqualified Stock Option Plan, as amended and
restated as of December 20, 2002.

     

    (x) “Restricted Stock
Award” means an Award under Section 8 hereof
entitling a Participant to shares of Common Stock that are nontransferable and
subject to forfeiture until specific conditions established by the Committee are
satisfied.

     

    (y) “Section 162(m) Award”
means any Award that is intended to qualify for the performance-based
compensation exception under Section 162(m) of the Code and the regulations
promulgated thereunder.

     

    (z) “Stock Appreciation
Right” means an Award under Section 7 hereof
entitling a Participant to receive a payment, representing the difference
between a base price per share and the Fair Market Value of a share of Common
Stock on the date of exercise.

     

    (aa) “Stock Award” means an
Award under Section 10 hereof entitling a
Participant to shares of Common Stock that are free of transfer restrictions and
forfeiture conditions imposed by the Plan.

     

    (bb) “Stock Unit Award”
means an Award under Section 9 hereof entitling a
Participant to a payment of a unit value based on the Fair Market Value of a
share of Common Stock.

     

    (cc) “Subsidiary” means an
entity (whether or not a corporation) that is wholly or majority owned or
controlled, directly or indirectly, by the Company, or any other affiliate of
the Company that is so designated, from time to time, by the Committee;
provided, however, that with respect to Incentive Stock Options, the term
“Subsidiary” shall include only an entity that qualifies under Section 424(f) of
the Code as a “subsidiary corporation” with respect to the Company.

     

    
      	
              3.  

            	
              ADMINISTRATION

            

    

     

    Section
3.1 Committee
Members.  The Plan shall be administered by a Committee
comprised of no fewer than two members of the Board.  Solely to the
extent deemed necessary or advisable by the Board, each Committee member shall
satisfy the requirements for (i) an “independent director” under rules adopted
by the NASDAQ, (ii) a “nonemployee director” for purposes of such Rule 16b-3
under the Exchange Act and (iii) an “outside director” under Section 162(m) of
the Code.  The Committee shall have such powers and authority as may
be necessary or appropriate for the Committee to carry out its functions as
described in the Plan.  No member of the Committee shall be liable for
any action or determination made in good faith by the Committee with respect to
the Plan or any Award thereunder.

     

    Section
3.2 Committee
Authority.  Subject to the express limitations of the Plan, the
Committee shall have authority in its discretion to determine the Eligible
Persons to whom, and the time or times at which, Awards may be granted, the
number of shares, units or other rights subject to each Award, the exercise,
base or purchase price of an Award (if any), the time or times at which an Award
will become vested, exercisable or payable, the performance criteria,
performance goals and other conditions of an Award, the duration of the Award,
and all other terms of the Award.  Subject to the terms of the Plan,
the Committee shall have the authority to amend the terms of an Award in any
manner that is permitted by the Plan for the grant of an Award, provided that no
such action shall adversely affect the rights of a Participant with respect to
an outstanding Award without the Participant’s consent.  The Committee
shall also have discretionary authority to interpret the Plan, to make all
factual determinations under the Plan, and to make all other determinations
necessary or advisable for Plan administration, including, without limitation,
to correct any defect, to supply any omission or to reconcile any inconsistency
in the Plan or any Award Agreement hereunder.  The Committee may
prescribe, amend, and rescind rules and regulations relating to the
Plan.  The Committee’s determinations under the Plan need not be
uniform and may be made by the Committee selectively among Participants and
Eligible Persons, whether or not such persons are similarly
situated.  All interpretations, determinations, and actions by the
Committee shall be final, conclusive, and binding upon all parties.

     

    Section
3.3 Delegation of
Authority.  The Committee shall have the right, from time to
time, to delegate to one or more officers of the Company the authority of the
Committee to grant and determine the terms and conditions of Awards granted
under the Plan, subject to the requirements of Section 157(c) of the Delaware
General Corporation Law and such other limitations as the Committee shall
determine.  In no event shall such authority be delegated with respect
to Awards to any members of the Board or any Participant who the Committee
determines may be subject to Rule 16b-3 under the Exchange Act or Section 162(m)
of the Code.  In the event that authority is delegated to an officer
or officers in accordance with the foregoing, all provisions of the Plan
relating to the Committee shall be interpreted in a manner consistent with the
foregoing by treating any such reference as a reference to such officer or
officers for such purpose.

     

    Section
3.4 Grants to Committee
Members.  Any Awards under the Plan made to Non-Employee
Directors shall be approved by the Board.  With respect to awards to
such directors, all rights, powers and authorities vested in the Committee under
the Plan shall instead be exercised by the Board, and all provisions of the Plan
relating to the Committee shall be interpreted in a manner consistent with the
foregoing by treating any such reference as a reference to the Board for such
purpose.

     

    
      	
              4.  

            	
              SHARES SUBJECT TO THE
      PLAN

            

    

     

    Section
4.1 Share
Limitation.  No further grants may be made under the Prior
Plan, but awards made under the Prior Plan shall remain outstanding in
accordance with their terms.  Subject to adjustment pursuant to Section 4.2 hereof, the maximum aggregate number of
shares of Common Stock which may be issued under all (i) stock options granted
under the Prior Plan and (ii) Awards granted to Participants under the Plan
shall be 12,500,000 shares.  Shares of Common Stock issued under the
Plan may be either authorized but unissued shares or shares held in the
Company’s treasury.  To the extent that any Award under the Plan or
any stock option under the Prior Plan payable in shares of Common Stock is
forfeited, cancelled, returned to the Company for failure to satisfy vesting
requirements or upon the occurrence of other forfeiture events, or otherwise
terminates without payment being made thereunder, the shares of Common Stock
covered thereby will no longer be counted against the foregoing maximum share
limitation and may again be made subject to Awards under the Plan pursuant to
such limitation.  In addition, any shares of Common Stock exchanged by
a Participant or withheld from a Participant as full or partial payment to the
Company of the exercise price or tax withholding upon exercise or payment of an
Award under the Plan or any stock option under the Prior Plan shall be added to
the foregoing maximum share limitation and may be made subject to Awards under
the Plan pursuant to such limitation.  Any Awards under the Plan
settled in cash shall not be counted against the foregoing maximum share
limitation.  Notwithstanding the foregoing, the maximum number of
shares of Common Stock that may be returned or added to the aggregate share
reserve under the Plan upon the termination, forfeiture, cancellation or other
disposition of a stock option granted under the Prior Plan shall be limited to
6,000,000 shares.

     

    Section
4.2 Adjustments.  If
there shall occur any recapitalization, reclassification, stock dividend,
extraordinary dividend, stock split, reverse stock split, or other distribution
with respect to the shares of Common Stock, or any merger, reorganization,
consolidation or other change in corporate structure affecting the Common Stock,
the Committee shall, in the manner and to the extent that it deems appropriate
and equitable to the Participants and consistent with the terms of the Plan,
cause an adjustment to be made in (i) the maximum number and kind of shares
provided in Section 4.1 hereof, (ii) the
maximum number and kind of shares or units set forth in Sections 6.1, 7.1, 8.1,
9.1 and 10.1 hereof, (iii) the number and kind of shares of Common Stock,
units, or other rights subject to then outstanding Awards, (iv) the price
for each share or unit or other right subject to then outstanding Awards, (v)
the performance measures or goals relating to an Award and (v) any other
terms of an Award that are affected by the event to prevent dilution or
enlargement of a Participant’s rights under an Award.  Notwithstanding
the foregoing, in the case of Incentive Stock Options, any such adjustments
shall be made in a manner consistent with the requirements of
Section 424(a) of the Code.

     

    
      
        
        

      

      
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              5.  

            	
              ELIGIBILITY AND
      AWARDS

            

    

     

    All
Eligible Persons are eligible to be designated by the Committee to receive an
Award under the Plan.  The Committee has the authority, in its sole
discretion, to determine and designate from time to time those Eligible Persons
who are to be granted Awards, the types of Awards to be granted and the number
of shares or units subject to the Awards that are granted under the
Plan.  To the extent deemed necessary by the Committee, an Award will
be evidenced by an Award Agreement as described in Section 15.1 hereof.

     

    
      	
              6.  

            	
              STOCK
      OPTIONS

            

    

     

    Section
6.1 Grant of
Option.  An Option may be granted to any Eligible Person
selected by the Committee.  Subject to the provisions of Section 6.6 hereof and Section 422 of the Code, each
Option shall be designated, in the discretion of the Committee, as an Incentive
Stock Option or a Nonqualified Stock Option.  The maximum number of
shares of Common Stock that may be subject to Options granted to any Participant
during any calendar year shall be limited to 500,000 shares (subject to
adjustment as provided in Section 4.2
hereof).

     

    Section
6.2 Exercise
Price.  The exercise price under any Option granted to
Participants under the Plan shall be equal to 100 percent of the Fair Market
Value per share of the Common Stock on the Date of Grant, or such other amount
as may be determined by the Committee.

     

    Section
6.3 Vesting; Term of
Option.  The Committee, in its sole discretion, shall prescribe
the time or times at which, or the conditions upon which, an Option or portion
thereof shall become vested and/or exercisable, and may accelerate the
exercisability of any Option at any time.  The period during which a
vested Option may be exercised shall be ten years from the Date of Grant, unless
a shorter exercise period is specified by the Committee in an Award
Agreement.  An Option may be earlier terminated as specified by the
Committee and set forth in an Award Agreement upon or following the termination
of a Participant’s employment or other service with the Company or any
Subsidiary, including by reason of voluntary resignation, death, Disability,
termination for cause or any other reason.

     

    Section
6.4 Option Exercise; Tax
Withholding.  Subject to such terms and conditions as shall be
specified in an Award Agreement, an Option may be exercised in whole or in part
at any time during the term thereof by notice in the form required by the
Company, together with payment of the aggregate exercise price
therefor.  Payment of the exercise price shall be made in the manner
set forth in the Award Agreement, unless otherwise provided by the
Committee:  (i) in cash or by cash equivalent acceptable to the
Committee, (ii) by payment in shares of Common Stock that have been held by the
Participant for at least six months (or such other period as the Committee may
deem appropriate for purposes of applicable accounting rules), valued at the
Fair Market Value of such shares on the date of exercise, (iii) through an
open-market broker-assisted transaction, (iv) by a combination of the foregoing
methods, or (v) by such other method as may be approved by the Committee and set
forth in the Award Agreement.  In addition to and at the time of
payment of the exercise price, the Participant shall pay to the Company the full
amount of any and all applicable income tax and employment tax amounts required
to be withheld in connection with such exercise, payable under such of the
methods described above for the payment of the exercise price of the Options as
may be approved by the Committee and set forth in the Award
Agreement.

     

    Section
6.5 Limited Transferability of
Nonqualified Options.  All Options shall be nontransferable
except (i) upon the Participant’s death, by the Participant’s will or the laws
of descent and distribution or (ii) in the case of Nonqualified Stock Options
only, on a case-by-case basis as may be approved by the Committee in its
discretion, in accordance with the terms provided below.  An award for
a Nonqualified Stock Option may provide that the Participant shall be permitted
to, during his or her lifetime and subject to the prior approval of the
Committee at the time of proposed transfer, transfer all or part of the Option
to the Participant’s “family member,” as defined in the Award Agreement in a
manner consistent with the requirements for the Form S-8 registration statement
under the Securities Act of 1933, which may include a trust for the benefit of a
Participant and/or a Participant’s family member.  The transfer of a
Nonqualified Stock Option may be subject to such other terms and conditions as
the Committee may in its discretion impose from time to
time.  Subsequent transfers of an Option shall be prohibited other
than by will or the laws of descent and distribution upon the death of the
transferee.

     

    Section
6.6 Additional Rules for
Incentive Stock Options.

     

    (i) Eligibility.  An
Incentive Stock Option may only be granted to an Eligible Person who is
considered an employee of the Company or any Subsidiary for purposes of Treasury
Regulation §1.421-7(h).

     

    (ii) Annual
Limits.  No Incentive Stock Option shall be granted to a
Participant as a result of which the aggregate Fair Market Value (determined as
of the Date of Grant) of the stock with respect to which Incentive Stock Options
are exercisable for the first time in any calendar year under the Plan and any
other stock option plans of the Company or any Subsidiary would exceed $100,000,
determined in accordance with Section 422(d) of the Code.  This
limitation shall be applied by taking Incentive Stock Options into account in
the order in which granted.

     

    (iii) Ten Percent
Stockholders.  If an Option granted under the Plan is intended
to be an Incentive Stock Option, and if the Participant, at the time of grant,
owns stock possessing ten percent or more of the total combined voting power of
all classes of Common Stock of the Company or any Subsidiary, then (a) the
Option exercise price per share shall in no event be less than 110 percent of
the Fair Market Value of the Common Stock on the date of such grant and (b) such
Option shall not be exercisable after the expiration of five years following the
date such Option is granted.

     

    (iv) Termination of
Employment.  An Award of an Incentive Stock Option may provide
that such Option may be exercised not later than 3 months following termination
of employment of the Participant with the Company and all Subsidiaries, or not
later than one year following death or a permanent and total disability within
the meaning of Section 22(e)(3) of the Code, as and to the extent determined by
the Committee to comply with the requirements of Section 422 of the
Code.

     

    (v) Other Terms and Conditions;
Nontransferability.  Any Incentive Stock Option granted
hereunder shall contain such additional terms and conditions, not inconsistent
with the terms of the Plan, as are deemed necessary or desirable by the
Committee, which terms, together with the terms of the Plan, shall be intended
and interpreted to cause such Incentive Stock Option to qualify as an “incentive
stock option” under Section 422 of the Code.  An Award Agreement for
an Incentive Stock Option may provide that such Option shall be treated as a
Nonqualified Stock Option to the extent that certain requirements applicable to
“incentive stock options” under the Code shall not be satisfied.  An
Incentive Stock Option shall by its terms be nontransferable other than by will
or by the laws of descent and distribution, and shall be exercisable during the
lifetime of a Participant only by such Participant.

     

    (vi) Disqualifying
Dispositions.  If shares of Common Stock acquired by exercise
of an Incentive Stock Option are disposed of within two years following the Date
of Grant or one year following the issuance of such shares to the Participant
upon exercise, the Participant shall, promptly following such disposition,
notify the Company in writing of the date and terms of such disposition and
provide such other information regarding the disposition as the Company may
reasonably require.

     

    Section
6.7 Repricing of Stock Options
Prohibited.  The Committee shall not cause the cancellation,
substitution or amendment of an Option that would have the effect of reducing
the exercise price of an Option previously granted under the Plan, or otherwise
approve any modification to an Option that would be treated as a “repricing”
under the then applicable rules, regulations or listing requirements adopted by
the NASDAQ, except in accordance with an adjustment permitted under Section 4.2 hereof.

     

    
      
        
        

      

      
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              7.  

            	
              STOCK APPRECIATION
      RIGHTS

            

    

     

    Section
7.1 Grant of Stock Appreciation
Rights.  A Stock Appreciation Right may be granted to any
Eligible Person selected by the Committee.  A Stock Appreciation Right
granted to an Eligible Person is an Award in the form of a right to receive,
upon settlement or exercise of the right but without other payment, an amount
based on appreciation in the Fair Market Value of shares of Common Stock over a
base price established for the Award.  Stock Appreciation Rights shall
be settled or exercisable at such time or times and upon conditions as may be
approved by the Committee, provided that the Committee may accelerate the
settlement or exercisability of a Stock Appreciation Right at any
time.  The maximum number of shares of Common Stock that may be
subject to Stock Appreciation Rights granted to any Participant during any
calendar year shall be limited to 500,000 shares (subject to adjustment as
provided in Section 4.2 hereof).

     

    Section
7.2 Vesting; Term; Base Price of
Stock Appreciation Rights.  A Stock Appreciation Right shall be
settled or exercisable at such time or times as determined by the Committee, but
in no event after 10 years from the Date of Grant.  The base price of
a Stock Appreciation Right shall be determined by the Committee in its sole
discretion; provided, however, that the base price per share of any such Stock
Appreciation Right shall not be less than 100 percent of the Fair Market Value
of the shares of Common Stock on the Date of Grant.

     

    Section
7.3 Payment of Stock
Appreciation Rights.  A Stock Appreciation Right will entitle
the holder, upon settlement or exercise of the Stock Appreciation Right, as
applicable, to receive payment of an amount determined by
multiplying:  (i) the excess of the Fair Market Value of a share of
Common Stock on the date of settlement or exercise of the Stock Appreciation
Right over the base price of such Stock Appreciation Right, by (ii) the number
of shares as to which such Stock Appreciation Right is settled or
exercised.  Payment of the amount determined under the foregoing may
be made, as approved by the Committee and set forth in the Award Agreement, in
cash, in shares of Common Stock valued at their Fair Market Value on the date of
settlement or exercise, as applicable, or in a combination of cash and shares of
Common Stock, subject to applicable tax withholding requirements.

     

    Section
7.4 Repricing of Stock
Appreciation Rights Prohibited.  The Committee shall not cause
the cancellation, substitution or amendment of a Stock Appreciation Right that
would have the effect of reducing the base price of a Stock Appreciation Right
previously granted under the Plan, or otherwise approve any modification to a
Stock Appreciation Right that would be treated as a “repricing” under the then
applicable rules, regulations or listing requirements adopted by the NASDAQ,
except in accordance with an adjustment permitted under Section 4.2 hereof.

     

    
      	
              8.  

            	
              RESTRICTED STOCK
      AWARDS

            

    

     

    Section
8.1 Grant of Restricted Stock
Awards.  A Restricted Stock Award may be granted to any
Eligible Person selected by the Committee.  A Restricted Stock Award
granted to an Eligible Person represents shares of Common Stock that are issued
subject to such vesting and transfer restrictions as the Committee shall
determine and set forth in an Award Agreement.  The Committee may, in
connection with any Restricted Stock Award, require the payment of a specified
purchase price.  The Committee may grant Restricted Stock Awards that
are Section 162(m) Awards, as well as Restricted Stock Awards that are not
Section 162(m) Awards.  The maximum number of shares of Common Stock
that may be subject to Restricted Stock Awards granted to a Participant during
any one calendar year shall be limited to 250,000 shares (subject to adjustment
as provided in Section 4.2 hereof).

     

    Section
8.2 Vesting
Requirements.  The restrictions imposed on shares granted under
a Restricted Stock Award shall lapse in accordance with the vesting requirements
specified by the Committee in the Award Agreement, provided that the Committee
may accelerate the vesting of a Restricted Stock Award at any
time.  Such vesting requirements may be based on the continued
employment of the Participant with the Company or its Subsidiaries for a
specified time period or periods.  Such vesting requirements may also
be based on the attainment of specified performance goals or measures
established by the Committee in its sole discretion.  In the case of
any Restricted Stock Award that is a Section 162(m) Award, any such
performance-based vesting requirements shall be based upon the performance
criteria identified in Section 12.2 hereof, and the
terms of the Award shall otherwise comply with the requirements described in Section 12.3 hereof.  If the vesting
requirements of a Restricted Stock Award shall not be satisfied, the Award shall
be forfeited and returned to the Company, with any purchase price paid by the
Participant to be refunded, unless otherwise provided by the
Committee.

     

    Section
8.3 Restrictions.  Shares
granted under any Restricted Stock Award may not be transferred, assigned or
subject to any encumbrance, pledge, or charge until all applicable restrictions
are removed or have expired, unless otherwise allowed by the
Committee.  Failure to satisfy any applicable restrictions shall
result in the subject shares of the Restricted Stock Award being forfeited and
returned to the Company, with any purchase price paid by the Participant to be
refunded, unless otherwise provided by the Committee.  The Committee
may require in an Award Agreement that certificates representing the shares
granted under a Restricted Stock Award bear a legend making appropriate
reference to the restrictions imposed, and that certificates representing the
shares granted or sold under a Restricted Stock Award will remain in the
physical custody of an escrow holder until all restrictions are removed or have
expired.

     

    Section
8.4 Rights as
Stockholder.  Subject to the foregoing provisions of this
Section 8 and the applicable Award Agreement, the
Participant will have all rights of a stockholder with respect to the shares
granted to the Participant under a Restricted Stock Award, including the right
to vote the shares and receive all dividends and other distributions paid or
made with respect thereto, unless the Committee determines otherwise at the time
the Restricted Stock Award is granted.

     

    Section
8.5 Section 83(b)
Election.  If a Participant makes an election pursuant to
Section 83(b) of the Code with respect to a Restricted Stock Award, the
Participant shall be required to file, within 30 days following the Date of
Grant, a copy of such election with the Company and with the Internal Revenue
Service, in accordance with the regulations under Section 83 of the
Code.  The Committee may provide in an Award Agreement that the
Restricted Stock Award is conditioned upon the Participant’s refraining from
making an election with respect to the Award under Section 83(b) of the
Code.

     

    
      	
              9.  

            	
              STOCK UNIT
      AWARDS

            

    

     

    Section
9.1 Grant of Stock Unit
Awards.  A Stock Unit Award may be granted to any Eligible
Person selected by the Committee.  A Stock Unit Award is an Award to
an Eligible Person of a number of hypothetical share units with respect to
shares of Common Stock that are granted subject to such vesting and transfer
restrictions and conditions of payment as the Committee shall determine and set
forth in an Award Agreement.  The value of each unit under a Stock
Unit Award is equal to the Fair Market Value of the Common Stock on any
applicable date of determination.  The Committee may grant Stock Unit
Awards that are Section 162(m) Awards, as well as a Stock Unit Awards that are
not Section 162(m) Awards.  The maximum number of units that may be
subject to Stock Unit Awards granted to a Participant during any one calendar
year shall be limited to 250,000 units (subject to adjustment as provided in Section 4.2 hereof).  A Stock Unit Award
shall be subject to such restrictions and conditions as the Committee shall
determine.  A Stock Unit Award may be granted, at the discretion of
the Committee, together with a dividend equivalent right with respect to the
same number of shares of Common Stock.

     

    Section
9.2 Vesting of Stock Unit
Awards.  On the Date of Grant, the Committee shall determine,
in its sole discretion, any vesting requirements with respect to
a  Stock Unit Award, which shall be set forth in the Award Agreement,
provided that the Committee may accelerate the vesting of a Stock Unit Award at
any time.  Vesting requirements may be based on the continued
employment of the Participant with the Company or its Subsidiaries for a
specified time period or periods.  Vesting requirements may also be
based on the attainment of specified performance goals or measures established
by the Committee in its sole discretion.  In the case of any Stock
Unit Award that is a Section 162(m) Award, any such performance-based vesting
requirements shall be based upon the performance criteria identified in Section 12.2 hereof, and the terms of the Award shall
otherwise comply with the requirements described in Section 12.3 hereof.  A Stock Unit Award may
also be granted on a fully vested basis, with a deferred payment
date.

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    Section
9.3 Payment of Stock Unit
Awards.  A Stock Unit Award shall become payable to a
Participant at the time or times determined by the Committee and set forth in
the Award Agreement, which may be upon or following the vesting of the
Award.  The payment with respect to each share unit under a Stock Unit
Award shall be determined by reference to the Fair Market Value of one share of
Common Stock on each applicable payment date.  Payment may be made, at
the discretion of the Committee, in cash or in shares of Common Stock, or in a
combination thereof, subject to applicable tax withholding
requirements.  In accordance with Section
15.4 hereof, the Committee may permit a Participant to defer the receipt of
payment under a Stock Unit Award until such date or event as may be elected by
the Participant in accordance with rules established by the
Committee.

     

    Section
9.4  No
Rights as Stockholder.  The Participant shall not have any
rights as a stockholder with respect to the shares subject to a Stock Unit Award
until such time as shares of Common Stock are delivered to the Participant
pursuant to the terms of the Award Agreement.

     

    
      	
              10.  

            	
              STOCK
      AWARDS

            

    

     

    Section
10.1 Grant of Stock
Awards.  A Stock Award may be granted to any Eligible Person
selected by the Committee.  A Stock Award may be granted for past
services, in lieu of bonus or other cash compensation, directors’ fees or for
any other valid purpose as determined by the Committee.  A Stock Award
granted to an Eligible Person represents shares of Common Stock that are issued
free of restrictions on transfer and other incidents of ownership and free of
forfeiture conditions, except as otherwise provided in the Plan and the Award
Agreement.  The Committee may, in connection with any Stock Award,
require the payment of a specified purchase price.  The Committee may
grant Stock Awards that are Section 162(m) Awards, as well as Stock Awards that
are not Section 162(m) Awards.  The maximum number of shares of Common
Stock that may be subject to Stock Awards granted to a Participant during any
one calendar year shall be limited to 250,000 shares (subject to adjustment as
provided in Section 4.2 hereof).

     

    Section
10.2 Rights as
Stockholder.  Subject to the foregoing provisions of this
Section 10 and the applicable Award Agreement, the
Participant will have all rights of a stockholder with respect to the shares
granted to him under a Stock Award, including the right to vote the shares and
receive all dividends and other distributions paid or made with respect
thereto.

     

    
      	
              11.  

            	
              PERFORMANCE
      AWARDS

            

    

     

    Section
11.1 Grant of Performance
Awards.  The Committee may grant Performance Awards under the
Plan, which shall represent the right to receive a payment in cash if
performance goals established by the Committee for a performance period are
satisfied.  The Committee may grant Performance Awards that are
Section 162(m) Awards, as well as Performance Awards that are not Section 162(m)
Awards.  At the time a Performance Award is granted, the Committee
shall determine, in its sole discretion, the applicable performance period and
performance goals to be achieved during the performance period, as well as such
other conditions as the Committee deems appropriate.  The Committee
may also determine a target payment amount or a range of payment amounts for
each Award.  The performance goals applicable to a Performance Award
grant may be subject to adjustments as the Committee shall deem appropriate to
reflect significant unforeseen events, such as changes in law, accounting
practices or unusual or nonrecurring items or occurrences.  The
Committee’s authority to make such adjustments shall be subject to such
limitations as the Committee deems appropriate in the case of a Performance
Award that is a Section 162(m) Award.  In the case of any Performance
Award that is a Section 162(m) Award, performance goals shall be based upon the
performance criteria identified in Section 12.2
hereof, and the terms of the Award shall otherwise comply with the requirements
described in Section 12.3 hereof.  The
maximum amount of cash compensation that may be paid to a Participant during any
one calendar year under Performance Awards shall be $2,000,000.

     

    Section
11.2 Payment of Performance
Awards.  At the end of the performance period, the Committee
shall determine the extent to which performance goals have been attained, or a
degree of achievement between minimum and maximum levels, in order to establish
the level of payment to be made, if any.  Payments of Performance
Awards shall generally be made as soon as practicable following the end of the
performance period, subject to any tax withholding requirements.

     

    
      	
              12.  

            	
              SECTION 162(M)
      AWARDS

            

    

     

    Section
12.1 Awards.  Awards
of Options and Stock Appreciation Rights granted under the Plan are intended by
their terms to qualify as Section 162(m) Awards.  Restricted Stock
Awards, Stock Unit Awards, Stock Awards and Performance Awards granted under the
Plan may qualify as Section 162(m) Awards if the Awards are granted or become
payable or vested based upon pre-established performance goals in accordance
with this Section 12.

     

    Section
12.2 Performance
Criteria.  In the case of a Restricted Stock Award, Stock Unit
Award, Stock Award or Performance Award that is intended to be a Section 162(m)
Award, the performance criteria upon which the grant, payment or vesting may be
based shall be limited to one or more of the following performance measures,
which may be applied with respect to the Company, any Subsidiary or any business
unit:  annual recurring revenues; recurring revenues; services
revenues; license revenues; net or gross revenue; operating expenses; cash flow;
total earnings; earnings per share, diluted or basic; earnings before interest
and taxes; earnings before interest, taxes, depreciation, and amortization;
gross or operating margin; return on equity; return on capital; return on
investment; market share; economic value added; stock price; and total
stockholder return.  The foregoing performance criteria shall have any
reasonable definitions that the Committee may specify, which may include or
exclude any items specified by the Committee, including but not limited to any
or all of the following items:  discontinued operations,
extraordinary, unusual or non-recurring items, effects of accounting changes,
effects of currency or interest rate fluctuations, effects of financing
activities (e.g., effect on earnings per share of issuing convertible debt
securities), changes in tax rates, expenses for restructuring or productivity
initiatives, litigation losses, non-operating items, effects of acquisitions or
divestitures and changes of law or regulation affecting the Company’s
business.  The foregoing performance measures may be determined on an
absolute basis or relative to internal goals or relative to levels attained in
prior years, or related to other companies or indices, or as ratios expressing
relationships between two or more performance measures.  In the case
of Awards that are not Section 162(m) Awards, the Committee may designate
performance criteria from among the foregoing or such other performance criteria
as it shall determine in its sole discretion.

     

    Section
12.3 Section 162(m)
Requirements.  In the case of a Restricted Stock Award, Stock
Unit Award, Stock Award or Performance Award that is intended to be a Section
162(m) Award, the Committee shall make such determinations with respect to an
Award as required by Section 162(m) of the Code within 90 days after the
beginning of the performance period (or such other time period as is required
under Section 162(m) of the Code).  As and to the extent required
by Section 162(m) of the Code, the terms of an Award that is a Section
162(m) Award must state, in terms of an objective formula or standard, the
method of computing the amount of compensation payable under the Award, and must
preclude discretion to increase the amount of compensation payable under the
terms of the Award (but may allow the Committee discretion to decrease the
amount of compensation payable).

     

    
      	
              13.  

            	
              DIRECTOR FEE
      OPTIONS

            

    

     

    Section
13.1 Board
Discretion.  Subject to the express limitations of the Plan,
the Board shall have authority in its discretion to determine the Non-Employee
Directors of the Company to whom, and the time or times at which, Options may be
granted, the number of shares subject to each Option, the exercise price of an
Option, the time or times at which an Option will become vested and exercisable,
the duration of an Option, and all other terms of an Option.  Unless
otherwise provided by the Board and set forth in an Award Agreement,
Non-Employee Directors of the Company shall be granted Director Fee Options in
accordance with the provisions of this Section 13.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    Section
13.2 Grant of Director Fee
Option.  Subject to Sections 13.1 and 13.7 hereof, as of each
Date of Grant (determined under Section 13.3
hereof), each Non-Employee Director of the Company shall receive a grant of a
Director Fee Option at an exercise price (determined under Section 13.4 hereof) to purchase a number of shares of
Common Stock (determined under Section 13.5 hereof)
in lieu of directors’ fees which such Non-Employee Director earned during the
calendar quarter ending immediately prior to such Date of Grant.

     

    Section
13.3 Date of
Grant.  The Date of Grant of a Director Fee Option shall be the
first business day of the calendar quarter immediately following the calendar
quarter during which directors’ fees are earned by a Non-Employee Director, with
the first such Date of Grant to be January 3, 2005.

     

    Section
13.4 Exercise
Price.  The exercise price of each share of Common Stock
subject to a Director Fee Option shall be 30% of the Fair Market Value of a
share of Common Stock on the applicable Date of Grant, or such other amount as
may be determined by the Board.  Payment of the exercise price shall
be determined in accordance with the provisions of Section 6.4 hereof.

     

    Section
13.5 Number of
Shares.  The number of shares of Common Stock subject to any
Director Fee Option shall equal (i) the dollar amount of the Non-Employee
Director’s fees which were earned during the calendar quarter ending immediately
prior to the Date of Grant, divided by (ii) the excess of the Fair Market Value
of a share of Common Stock on the applicable Date of Grant over the exercise
price of the Director Fee Option (determined in accordance with Section 13.4 hereof), rounded to the nearest whole
share.

     

    Section
13.6 Vesting.  Each
Director Fee Option shall be fully vested on the Date of Grant.

     

    Section
13.7 Exercise.  A
Director Fee Option shall first become exercisable on the earliest to occur of
the following events:  (i) the fifth anniversary of the Date of Grant,
(ii) the date on which the Non-Employee Director ceases to be a member of the
Board, and (iii) the effective date of a Change in Control; and shall remain
exercisable for the period specified in the Award Agreement as provided by the
Committee at the time of grant.  To the extent that a Director Fee
Option is not exercised within the applicable time period (or is not otherwise
settled in accordance with Section 13.8 hereof),
such Director Fee Option shall be terminated and the Non-Employee Director’s
rights thereunder shall be automatically forfeited.

     

    Section
13.8 Cash
Settlement.  Notwithstanding the provisions of Section 13.7 hereof, the Committee may, in its
discretion, cancel the right of a Non-Employee Director to exercise a Director
Fee Option upon or following the occurrence of an exercise event as described in
Section 13.7 hereof in exchange for a cash payment
to the Non-Employee Director equal to the product of (i) the number of shares of
Common Stock subject to the Director Fee Option being cancelled, multiplied by
(ii) the excess of the per share Fair Market Value of the Common Stock on the
date of cancellation of the Director Fee Option over the exercise price per
share of the Director Fee Option.

     

    
      	
              14.  

            	
              CHANGE IN
      CONTROL

            

    

     

    Section
14.1 Effect of Change in
Control.  The Committee may, at the time of the grant of an
Award and as set forth in an Award Agreement, provide for the effect of a
“Change in Control” (as defined below) on an Award.  Such provisions
may include any one or more of the following:  (i) the
acceleration or extension of time periods for purposes of exercising, vesting
in, or realizing gain from any Award, (ii) the elimination or modification
of performance or other conditions related to the payment or other rights under
an Award, (iii) provision for the cash settlement of an Award for an
equivalent cash value, as determined by the Committee, or (iv) such other
modification or adjustment to an Award as the Committee deems appropriate to
maintain and protect the rights and interests of Participants upon or following
a Change in Control.  Unless otherwise provided by the Committee and
set forth in the Award Agreement, upon a Change in Control, (i) each outstanding
Option and Stock Appreciation Right, to the extent that it shall not otherwise
have become vested and exercisable, shall automatically become fully and
immediately vested and exercisable, without regard to any otherwise applicable
vesting requirement, (ii) each Restricted Stock Award shall become fully and
immediately vested and all forfeiture and transfer restrictions thereon shall
lapse, and (iii) each outstanding Stock Unit Award, Stock Award and Performance
Award shall become immediately and fully vested and payable.

     

    Section
14.2 Definition of Change in
Control.  For purposes of this Agreement, a “Change in Control”
shall be deemed to have occurred upon:

     

    (i) the
consummation of any consolidation or merger of the Company pursuant to which the
stockholders of the Company immediately prior to the merger or consolidation do
not represent, immediately after the merger or consolidation, the beneficial
owners (within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934 (the “Exchange Act”)) of 50% or more of the combined voting power of the
Company’s (or the surviving entity’s) then outstanding securities ordinarily
(and apart from rights occurring in special circumstances) having the right to
vote in the election of directors;

     

    (ii) the
consummation of any sale, lease, exchange or transfer (in any single transaction
or series of related transactions) of all or substantially all of the assets or
business of the Company and its Subsidiaries; or

     

    (iii) the
occurrence of any event the result of which is that any “person” (as such term
is used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), other than (A)
the Company or any Subsidiary, or (B) any employee benefit plan sponsored by the
Company or any Subsidiary, shall become the beneficial owner (within the meaning
of Rule 13d-3 under the Exchange Act) of securities of the Company representing
more than 50% of the combined voting power of the Company’s then outstanding
securities ordinarily (and apart from rights accruing in special circumstances)
having the right to vote in the election of directors, as a result of a tender,
leveraged buyout or exchange offer, open market purchases, privately negotiated
purchases, other arrangements or understandings or otherwise.

     

    
      	
              15.  

            	
              GENERAL
      PROVISIONS

            

    

     

    Section
15.1 Form of
Agreement.  To the extent deemed necessary by the Committee, an
Award under the Plan shall be evidenced by an Award Agreement in a form approved
by the Committee setting forth the number of shares of Common Stock or units
subject to the Award, the exercise price, base price, or purchase price of the
Award, the time or times at which an Award will become vested, exercisable or
payable and the term of the Award.  The Award Agreement shall also set
forth the effect on an Award of termination of employment under certain
circumstances.  The Award Agreement shall be subject to and
incorporate, by reference or otherwise, all of the applicable terms and
conditions of the Plan, and may also set forth other terms and conditions
applicable to the Award as determined by the Committee consistent with the
limitations of the Plan.  Award Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.

     

    Section
15.2 Forfeiture
Events.  The Committee may specify in an Award Agreement at the
time of the Award 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 certain specified events, in addition to any
otherwise applicable vesting or performance conditions of an
Award.  Such events shall include, but shall not be limited to,
termination of employment for cause, violation of material Company policies,
breach of noncompetition, confidentiality or other restrictive covenants that
may apply to the Participant, or other conduct by the Participant that is
detrimental to the business or reputation of the Company.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    Section
15.3 No Assignment or Transfer;
Beneficiaries.  Except as provided in Section 6.5 hereof, Awards under the Plan shall not be
assignable or transferable, except by will or by the laws of descent and
distribution, and during the lifetime of a Participant, an Award shall be
exercised only by such Participant or by his guardian or legal
representative.  Notwithstanding the foregoing, the Committee may
provide in the terms of an Award Agreement that the Participant shall have the
right to designate a beneficiary or beneficiaries who shall be entitled to any
rights, payments or other benefits specified under an Award following the
Participant’s death.

     

    Section
15.4 Deferrals of
Payment.  The Committee may permit a Participant to defer the
receipt of payment of cash or delivery of shares of Common Stock that would
otherwise be due to the Participant by virtue of the exercise of a right or the
satisfaction of vesting or other conditions with respect to an
Award.  If any such deferral is to be permitted by the Committee, the
Committee shall establish the rules and procedures relating to such deferral,
including, without limitation, the period of time in advance of payment when an
election to defer may be made, the time period of the deferral and the events
that would result in payment of the deferred amount, the interest or other
earnings attributable to the deferral and the method of funding, if any,
attributable to the deferred amount.

     

    Section
15.5 Rights as
Stockholder.  A Participant shall have no rights as a holder of
shares of Common Stock with respect to any unissued securities covered by an
Award until the date the Participant becomes the holder of record of such
securities.  Except as provided in Section
4.2 hereof, no adjustment or other provision shall be made for dividends or
other stockholder rights, except to the extent that the Award Agreement provides
for dividend payments or dividend equivalent rights.

     

    Section
15.6 Employment or
Service.  Nothing in the Plan, in the grant of any Award or in
any Award Agreement shall confer upon any Eligible Person any right to continue
in the service of the Company or any of its Subsidiaries, or to serve as a
director thereof, or interfere in any way with the right of the Company or any
of its Subsidiaries to terminate the Participant’s employment or other service
relationship for any reason at any time.

     

    Section
15.7 Securities
Laws.  No shares of Common Stock will be issued or transferred
pursuant to an Award unless and until all then applicable requirements imposed
by Federal and state securities and other laws, rules and regulations and by any
regulatory agencies having jurisdiction, and by any exchanges upon which the
shares of Common Stock may be listed, have been fully met.  As a
condition precedent to the issuance of shares pursuant to the grant or exercise
of an Award, the Company may require the Participant to take any reasonable
action to meet such requirements.  The Committee may impose such
conditions on any shares of Common Stock issuable under the Plan as it may deem
advisable, including, without limitation, restrictions under the Securities Act
of 1933, as amended, under the requirements of any exchange upon which such
shares of the same class are then listed, and under any blue sky or other
securities laws applicable to such shares.  The Committee may also
require the Participant to represent and warrant at the time of issuance or
transfer that the shares of Common Stock are being acquired only for investment
purposes and without any current intention to sell or distribute such
shares.

     

    Section
15.8 Tax
Withholding.  The Participant shall be responsible for payment
of any taxes or similar charges required by law to be withheld from an Award or
an amount paid in satisfaction of an Award, which shall be paid by the
Participant on or prior to the payment or other event that results in taxable
income in respect of an Award.  The Award Agreement shall specify the
manner in which the withholding obligation shall be satisfied with respect to
the particular type of Award.

     

    Section
15.9 Unfunded
Plan.  The adoption of the Plan and any setting aside of cash
amounts or shares of Common Stock by the Company with which to discharge its
obligations hereunder shall not be deemed to create a trust or other funded
arrangement.  The benefits provided under the Plan shall be a general,
unsecured obligation of the Company payable solely from the general assets of
the Company, and neither a Participant nor the Participant’s permitted
transferees or estate shall have any interest in any assets of the Company by
virtue of the Plan, except as a general unsecured creditor of the
Company.  Notwithstanding the foregoing, the Company shall have the
right to implement or set aside funds in a grantor trust, subject to the claims
of the Company’s creditors, to discharge its obligations under the
Plan.

     

    Section
15.10 Other Compensation and
Benefit Plans.  The adoption of the Plan shall not affect any
other share incentive or other compensation plans in effect for the Company or
any Subsidiary, nor shall the Plan preclude the Company from establishing any
other forms of share incentive or other compensation for employees of the
Company or any Subsidiary.  The amount of any compensation deemed to
be received by a Participant pursuant to an Award shall not constitute
compensation with respect to which any other employee benefits of such
Participant are determined, including, without limitation, benefits under any
bonus, pension, profit sharing, life insurance or salary continuation plan,
except as otherwise specifically provided by the terms of any such
plan.

     

    Section
15.11 Plan Binding on
Transferees.  The Plan shall be binding upon the Company, its
transferees and assigns, and the Participant, his or her executor, administrator
and permitted transferees and beneficiaries.

     

    Section
15.12 Construction and
Interpretation.  Whenever used herein, nouns in the singular
shall include the plural, and the masculine pronoun shall include the feminine
gender.  Headings of Sections hereof are inserted for convenience and
reference and constitute no part of the Plan.

     

    Section
15.13 Severability.  If
any provision of the Plan or any Award Agreement shall be determined to be
illegal or unenforceable by any court of law in any jurisdiction, the remaining
provisions hereof and thereof shall be severable and enforceable in accordance
with their terms, and all provisions shall remain enforceable in any other
jurisdiction.

     

    Section
15.14 Foreign
Jurisdictions. The Committee may adopt, amend and terminate such
arrangements and grant such Awards, not inconsistent with the intent of the
Plan, as it may deem necessary or desirable to comply with any tax, securities,
regulatory or other laws of other jurisdictions with respect to Awards that may
be subject to such laws.  The terms and conditions of such Awards may
vary from the terms and conditions that would otherwise be required by the Plan
solely to the extent the Committee deems necessary for such
purpose.  Moreover, the Board may approve such supplements to or
amendments, restatements or alternative versions of the Plan, not inconsistent
with the intent of the Plan, as it may consider necessary or appropriate for
such purposes, without thereby affecting the terms of the Plan as in effect for
any other purpose.

     

    Section
15.15 Governing
Law.  The Plan and all rights hereunder shall be subject to and
interpreted in accordance with the laws of the State of Delaware, without
reference to the principles of conflicts of laws, and to applicable Federal
securities laws.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    
      	
              16.  

            	
              EFFECTIVE DATE,
      AMENDMENT AND TERMINATION

            

    

     

    Section
16.1 Effective
Date.  The Plan shall become effective following its adoption
by the Board and upon its approval by the Company’s stockholders.  The
term of the Plan shall be 10 years from the date of such adoption by the Board,
subject to Section 16.3 hereof.

     

    Section
16.2 Amendment.  The
Board may at any time and from time to time and in any respect, amend or modify
the Plan; provided, however, that the Board may seek the approval of any
amendment or modification by the Company’s stockholders to the extent it deems
necessary or advisable in its sole discretion for purposes of compliance with
Section 162(m) or Section 422 of the Code, the listing requirements of
the NASDAQ or other exchange or securities market or for any other
purpose.  No amendment or modification of the Plan shall adversely
affect any Award theretofore granted without the consent of the Participant or
the permitted transferee of the Award.

     

    Section
16.3 Termination.  The
Plan shall terminate on December 15, 2014, which is the date immediately
preceding the tenth anniversary of the date of the Plan’s adoption by the
Board.  The Board may, in its sole discretion and at any earlier date,
terminate the Plan.  Notwithstanding the foregoing, no termination of
the Plan shall adversely affect any Award theretofore granted without the
consent of the Participant or the permitted transferee of the
Award.

     

    

    THE
ULTIMATE SOFTWARE GROUP, INC.

     

    
      
         

      

      
        8exhibit_10-2.htm

    Exhibit
10.2

    

    RESTRICTED
STOCK UNIT AWARD AGREEMENT

    

    The
Ultimate Software Group, Inc.

    

    

    

    This
RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Agreement”) made as of this _____
day of ________, 20__, between The Ultimate Software Group, Inc., a Delaware
corporation (the “Company”) and _______________________ (the “Participant”), is
made pursuant to the terms of The Ultimate Software Group, Inc. Amended and
Restated 2005 Equity and Incentive Plan (the “Plan”).

     

    Section
1.                       Definitions.  Capitalized
terms used herein but not defined shall have the meanings set forth in the
Plan.

     

    Section
2.                       Stock Unit
Award.  The Company has granted to the Participant a Stock Unit
Award representing a number of Stock Units of the Company (“Restricted Stock
Units”), identified in a written communication (an “Award Notice”) delivered to
the Participant by or on behalf of the Company, pursuant to the terms and
conditions set forth in this Agreement and subject to the terms and conditions
set forth in the Plan, a copy of which the Participant acknowledges having
received.  Each Restricted Stock Unit represents rights in respect of
one share of the Company’s Common Stock.  Additional Award Notices
shall be delivered to the Participant in the event that the Company grants to
the Participant additional Stock Unit Awards in the future.  All such
Award Notices shall indicate the number of Restricted Stock Units granted and
the applicable Date of Grant.  Unless the Committee should determine
otherwise, any future Awards of Restricted Stock Units shall be subject to the
terms and conditions provided in this Agreement and the Plan.

     

    Section
3.                       Vesting
Requirements.

     

    (a) Vesting of
Award.  Subject to Section 3(c) hereof, the Restricted Stock
Units shall vest in three equal annual installments of 33-1/3% of the number of
Restricted Stock Units on each of the first three anniversaries of the Date of
Grant thereof, subject to the Participant’s continued employment with the
Company or any of its Subsidiaries on each such vesting date, and shall be
payable in accordance with Section 5 hereof; provided, however, that if any
such anniversary is not a date on which the Company’s Common Stock is traded on
NASDAQ, then the vesting date shall be the next such date; and provided further,
however, that
if the Chief Financial Officer of the Company should determine that any such
anniversary falls within a period during which the Participant is prohibited
from trading the Company’s Common Stock under the Company’s Stock Trading
Policy, the Chief Financial Officer shall so advise the Participant in writing
and the vesting date shall be the date as of which the Chief Financial Officer
has determined that such period has ended.

     

    (b) Full Accelerated
Vesting.  Notwithstanding the provisions of Section 3(a)
hereof, upon (i) the Participant’s termination of employment as a result of the
Participant’s death or Disability, or (ii) a Change in Control of the Company,
all of the Restricted Stock Units shall become fully and immediately vested, and
shall be payable in accordance with Section 5 hereof, to the extent that they
have not previously been forfeited in accordance with Section 4
hereof.

     

    (c) Fractional
Units.  In the event that the calculation of the three equal
installments of Restricted Stock Units pursuant to Section 3(a) hereof would
result in a number of Restricted Stock Units that includes a fractional
Restricted Stock Unit, the fractional Restricted Stock Unit shall not vest until
and unless the third installment of Restricted Stock Units vests.

     

    Section
4.                       Termination of
Employment.  In the event of the Participant’s termination of
employment for any reason other than as a result of the Participant’s death or
Disability, any portion of the Award that has not previously become vested
hereunder shall be forfeited and automatically cancelled.

     

    Section
5.                       Distribution with respect to
Award.

     

    (a) Timing of
Distribution.  Distribution with respect to the Restricted
Stock Units shall be made upon the date such Restricted Stock Units become
vested as provided in this Agreement.

     

    (b) Amount and Methods of
Distributions.  Subject to the provisions of Section 5(c)
hereof, distributions with respect to the Restricted Stock Units shall be made,
at the discretion of the Committee, (i) in a number of shares of the Company’s
Common Stock equal to the number of Restricted Stock Units becoming vested, (ii)
in cash, in an amount equal to the Fair Market Value of a share of the Company’s
Common Stock on the vesting date multiplied by the number of Restricted Stock
Units becoming vested on such date or (iii) in a combination of
both.

     

    (c) Withholding.  Distributions
with respect to the Restricted Stock Units shall be made to the Participant
after deduction of applicable withholding taxes (the “Withholding Taxes”), which
shall be withheld at the applicable supplemental wage withholding rate, provided
that such amount shall not exceed the Participant’s estimated Federal, state and
local tax obligation with respect to payment of the Award.  Subject to
the limitations of applicable law, to the extent the payment of an Award is made
in shares of the Company’s Common Stock, the Participant hereby consents to the
collection of the Withholding Taxes by the Company retaining, and not issuing to
the Participant, a number of such shares of Common Stock (the “Withholding
Shares”) having a Fair Market Value on the vesting date equal to the amount of
the Withholding Taxes.  If and to the extent that the Committee
determines not to have the Company retain Withholding Shares pursuant to the
preceding sentence, the Company will notify the Participant at least 10 days
prior to the applicable vesting date.  Subject to the limitations of
applicable law, the Participant hereby consents and agrees that in such event,
the Company shall instruct a broker designated by the Company to sell in the
public market, on behalf of the Participant, the Withholding Shares and remit
the proceeds thereof to the Company unless the Participant has made a lump sum
cash payment to the Company, at or prior to the time of vesting, equal to the
Company’s estimate of the Withholding Taxes as provided in the Company’s
notice.  If the amount of the cash payment that the Participant
delivers to the Company exceeds the actual Withholding Taxes, the excess will be
repaid to the Participant promptly by the Company.  If such amount is
less than the actual Withholding Taxes, the Company will collect the balance
from the Participant immediately or instruct a broker designated by the Company
to sell shares of the Company’s Common Stock in the public market, on behalf of
the Participant, in an amount sufficient to cover the shortfall.

     

    (d) Fractional Withholding
Shares.  No fraction of a Withholding Share shall be withheld
or sold to satisfy tax withholding obligations pursuant to the foregoing
provisions of Section 5(c).  In the event that the calculation of the
number of Withholding Shares required to satisfy such withholding obligations
would result in a number of Withholding Shares that includes a fractional
Withholding Share, such number shall be rounded up to the next whole number of
Withholding Shares and such whole number of Withholding Shares shall be withheld
or sold as the case may be.  The excess amount withheld or realized in
a sale of Withholding Shares as a result of such rounding shall be paid in cash
by the Company to the Participant or included in the Withholding Tax paid by the
Company to the tax authorities on the Participant’s behalf.

     

    Section
6.                       Restrictions on
Transfer.  No portion of the Award hereunder may be sold,
assigned, transferred, encumbered, hypothecated or pledged by the Participant,
other than to the Company as a result of forfeiture of the Award as provided
herein, unless and until the payment of the Award in accordance with Section 5
hereof.

     

    
      
        
        

      

      
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    Section
7.                       Limitation of
Rights.  The Participant shall not have any privileges of a
stockholder of the Company with respect to the shares of Common Stock payable
hereunder, including without limitation any right to vote such shares or to
receive dividends or other distributions in respect thereof, until the date of
the issuance to the Participant of a stock certificate evidencing such Common
Stock.

     

    Section
8.                       Changes in
Capitalization.  All Awards hereunder shall be subject to the
provisions of Section 4.2 of the Plan relating to adjustments for changes in
corporate capitalization.

     

    Section
9.                       No Right of Continued
Employment.  Nothing in this Agreement shall confer upon the
Grantee any right to continue as an employee of the Company or any Subsidiary or
to interfere in any way with any right of the Company to terminate the Grantee’s
employment at any time.

     

    Section
10.                                 Notices.  Any
notice hereunder by the Participant shall be given to the Company in writing and
such notice shall be deemed duly given only upon receipt thereof by the
Secretary of the Company.  Any notice hereunder by the Company shall
be given to the Participant in writing and such notice shall be deemed duly
given only upon receipt thereof at such address as the Participant may have on
file with the Company.

     

    Section
11.                                 Construction.  This
Agreement and the Award hereunder are granted by the Company pursuant to the
Plan and are in all respects subject to the terms and conditions of the
Plan.  The Participant hereby acknowledges that a copy of the Plan has
been delivered to the Participant and accepts the Restricted Stock Units
hereunder subject to all terms and provisions of the Plan, which is incorporated
herein by reference.  In the event of a conflict or ambiguity between
any term or provision contained herein and a term or provision of the Plan, the
Plan will govern and prevail.  The construction of and decisions under
the Plan and this Agreement are vested in the Committee, whose determinations
shall be final, conclusive and binding upon the Participant.

     

    Section
12.                                 Governing
Law.  This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, excluding the choice of law
rules thereof.

     

    Section
13.                                 Counterparts.  This
Agreement may be executed in counterparts, each of which shall be deemed to be
an original but all of which together shall constitute one and the same
instrument.

     

    Section
14.                                 Binding
Effect.  This Agreement shall be binding upon and inure to the
benefit of the legatees, distributees, and personal representatives of the
Participant and the successors of the Company.

     

    Section
15.                                 Entire
Agreement.  This Agreement and the Plan constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof, merging any and all prior agreements.

     

    [SIGNATURES
ON FOLLOWING PAGE]

     

    
      
         

      

      
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    IN WITNESS WHEREOF, the Company and the
Participant have executed this Award Agreement effective as of the date first
above written.

    

    

    THE
ULTIMATE SOFTWARE GROUP, INC.

    

    By:           ____________________________________

    Name:  Scott
Scherr

    Title:    CEO

    

    

    PARTICIPANT

    

    

    By:           ____________________________________

    

    

    

    

    Name:  ____________________________________

                 (Printed)

     

    
      
         

      

      
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