Document:

Exhibit 10.8

 

EXPENSE ADVANCEMENT AGREEMENT

 

THIS EXPENSE ADVANCEMENT
AGREEMENT (this “Agreement”), dated as of ________, 2018, is made and entered into by and between Boxwood
Merger Corp., a Delaware corporation (the “Corporation”) and Boxwood Sponsor, LLC (the “Sponsor”).

 

RECITALS

 

 WHEREAS, the Corporation
is pursuing an initial public offering (the “Offering”) pursuant to which the Corporation will issue
and sell up to 23,000,000 units (the “Units”) (including up to 3,000,000 Units subject to an over-allotment
option granted to the underwriters of the Offering), with each Unit comprised of one share of Class A common stock, par value
$0.0001 per share (the “Common Stock”), of the Corporation and one warrant, each warrant exercisable
to purchase one share of Common Stock at $11.50 per share, subject to certain adjustments (each, a “Warrant,”
and collectively, the “Warrants”); 

 

 WHEREAS, the Corporation
has filed with the Securities and Exchange Commission a registration statement on Form S-1, File No. 333-228018 (the
“Registration Statement”) for the registration, under the Securities Act of 1933, (the “Securities
Act”), of the Units, and the Warrants and Common Stock comprising the Units, including a related prospectus (the
“Prospectus”); 

 

 WHEREAS, the gross
proceeds of the Offering will be deposited in a trust account (the “Trust Account”) at JPMorgan Chase
Bank, N.A. and managed by Continental Stock Transfer & Trust Company, as trustee, as described in the Registration
Statement and the Prospectus; and 

 

WHEREAS, the Sponsor desires
to enter into this Agreement in order to facilitate the Offering and the other transactions contemplated in the Registration Statement
and the Prospectus, including any merger, capital stock exchange, asset acquisition, stock purchase, reorganization, recapitalization
or other similar business combination by the Corporation with one or more businesses as described in the Registration Statement
and the Prospectus (a “Business Combination”).

 

NOW, THEREFORE, in
consideration of the representations, covenants and agreements contained herein, and certain other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:

 

1.           (a)            From
time to time, as may be requested by the Corporation, the Sponsor agrees to advance to the Corporation up to $1,000,000 in the
aggregate, in each instance pursuant to the terms of a promissory note, substantially in the form attached as Exhibit A
hereto (the “Note”), as may be necessary to fund the Corporation’s expenses relating to investigating
and selecting a target business and for other working capital requirements following the Offering and prior to any potential Business
Combination.

 

(b)          The
Sponsor represents to the Corporation that it is capable of making such advances to satisfy its obligations under clause (a) of
this Section 1.

 

(c)          Notwithstanding
anything to the contrary herein or in the Note, the Sponsor hereby waives any and all right, title, interest or claim of any kind
(“Claim”) in or to any distribution from the Trust Account in which the proceeds of the Offering,
as described in greater detail in the Registration Statement and the Prospectus, will be deposited, and hereby agrees not to seek
recourse, reimbursement, payment or satisfaction for any Claim against the Trust Account for any reason whatsoever; provided,
however, that if the Corporation completes its Business Combination, the Corporation shall repay such loaned amounts out
of the proceeds released to the Corporation from the Trust Account.

 

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2.           This
Agreement, together with the Note, constitutes the entire agreement and understanding of the parties hereto in respect of the subject
matter hereof and supersedes all prior understandings, agreements, or representations by or among the parties hereto, written or
oral, to the extent they relate in any way to the subject matter hereof or the transactions contemplated hereby. This Agreement
may not be changed, amended, modified or waived (other than to correct a typographical error) as to any particular provision, except
by a written instrument executed by the parties hereto.

 

3.           No
party may assign either this Agreement or any of his, her or its rights, interests, or obligations hereunder without the prior
written consent of the other party. Any purported assignment in violation of this paragraph shall be void and ineffectual and shall
not operate to transfer or assign any interest or title to the purported assignee. This Agreement shall be binding on the undersigned
and each of his or its heirs, personal representatives, successors and assigns.

 

4.           Any
notice, statement or demand authorized by this Agreement shall be sufficiently given (i) when so delivered if by hand or overnight
delivery, (ii) the date and time shown on an electronic or telefacsimile transmission confirmation, or (iii) if sent by certified
mail or private courier service within five (5) days after deposit of such notice, postage prepaid. Such notice, statement
or demand shall be addressed as follows:

 

If to the Corporation:

Boxwood Merger Corp.

1112 Montana Avenue, Suite 901

Santa Monica, CA 90403

Attn: Stephen M. Kadenacy

Facsimile:

Email:

 

with a copy in each case (which shall not constitute
notice) to:

 

Greenberg Traurig, LLP

MetLife Building

200 Park Avenue

New York, NY 10166

Attn: Alan Annex, Esq.

Facsimile: (202) 801-9201

Email: annexa@gtlaw.com

 

If to the Sponsor:

Boxwood Sponsor, LLC

1112 Montana Avenue, Suite 901

Santa Monica, CA 90403

Attn: Stephen M. Kadenacy

Facsimile:

Email:

 

with a copy in each case (which shall not constitute
notice) to:

 

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5.           This
Agreement may be executed in any number of original, electronic or facsimile counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

 

6.           This
Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the
validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid
or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision
as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.

 

7.           This
Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving
effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. The
parties hereto (i) agree that any action, proceeding, claim or dispute arising out of, or relating in any way to, this Agreement
shall be brought and enforced in the courts of New York, in the State of New York, and irrevocably submits to such jurisdiction
and venue, which jurisdiction and venue shall be exclusive and (ii) waives any objection to such exclusive jurisdiction and venue
or that such courts represent an inconvenient forum.

 

[Signature
Page Follows]

 

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IN WITNESS WHEREOF, the
undersigned have caused this Agreement to be executed as of the date first written above.

 

	 	BOXWOOD MERGER CORP., a Delaware corporation

 

	 	By:	 
	 	 	Name:  Stephen M. Kadenacy
	 	 	Title:  Chief Executive Officer

 

	 	BOXWOOD SPONSOR, LLC, a Delaware limited liability company

 

	 	By:	 
	 	 	Name:
	 	 	Title:

 

	 	By:	 
	 	 	Name:
	 	 	Title:

 

[Signature Page to Expense Advancement Agreement]

 

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EXHIBIT A

 

FORM OF PROMISSORY NOTE

 

THIS PROMISSORY NOTE (“NOTE”) HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”).  THIS
NOTE HAS BEEN ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF THE RESALE
THEREOF UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED.

 

PROMISSORY NOTE

 

	Principal Amount:  Up to $1,000,000	
        Dated as of               ,
        20__

        Santa Monica, California

 

Pursuant to that certain
Expense Advancement Agreement (the “Agreement”) dated as of                ,
2018, by and between Boxwood Merger Corp., a Delaware corporation (the “Maker”) and Boxwood Sponsor,
LLC, a Delaware limited liability company, or its registered assigns or successors in interest (the
“Payee”), the Maker hereby promises to pay to the order of the Payee the principal sum of One Million
Dollars ($1,000,000) or such lesser amount as shall have been advanced by Payee to Maker and shall remain unpaid (or not otherwise
converted as provided for in Section 15) under this Note on the Maturity Date (as defined below) in lawful money of the United
States of America, on the terms and conditions described below.  All payments on this Note shall be made by check or
wire transfer of immediately available funds or as otherwise determined by the Maker to such account as the Payee may from time
to time designate by written notice in accordance with the provisions of this Note. Certain terms used herein but not defined herein
shall have the meaning given to such terms in the Agreement.

 

1.           Principal.
The entire unpaid principal balance of the Note (less any amounts converted as provided for in Section 15 hereof) shall be
payable on the date on which Maker consummates its Business Combination (the “Maturity Date”). 
All or any portion of the principal balance may be prepaid without penalty at any time. Under no circumstances shall any individual,
including but not limited to any officer, director, employee or shareholder of the Maker, be obligated personally for any obligations
or liabilities of the Maker hereunder.

 

2.           Drawdown
Requests. Maker and Payee agree that Maker may request, from time to time, up to One Million Dollars ($1,000,000) in aggregate
draw downs under this Note to be used for working capital, or costs and expenses related to the Offering and the pursuit of a Business
Combination. The principal amount of this Note may be drawn down from time to time prior to the Maturity Date upon written request
from Maker to Payee (each, a “Drawdown Request”) and set forth on the Drawdown Request Schedule included
as Annex A hereto. Each Drawdown Request must state the amount to be drawn down, and must not be in an amount less than
Ten Thousand Dollars ($10,000). Payee shall fund each Drawdown Request no later than three (3) business days after receipt of a
Drawdown Request; provided, however, that the maximum amount of drawdowns to be made under this Note may not exceed One Million
Dollars ($1,000,000). No fees, payments or other amounts shall be due to Payee in connection with, or as a result of, any Drawdown
Request by Maker.

 

3.           Interest.
No interest shall accrue on the unpaid principal balance of this Note.

 

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4.           Application
of Payments.  All payments shall be applied first to payment in full of any costs incurred in the collection of any sum
due under this Note, including (without limitation) reasonable attorney’s fees, then to the payment in full of any late charges
and finally to the reduction of the unpaid principal balance of this Note.

 

5.           Events
of Default.  The following shall constitute an event of default (“Event of Default”) under this
Note:

 

(a)          Failure
to Make Required Payments. Failure by Maker to pay the principal amount due pursuant to this Note within five (5) business
days of the Maturity Date.

 

(b)          Voluntary
Bankruptcy, Etc. The commencement by Maker of a voluntary case under any applicable bankruptcy, insolvency, reorganization,
rehabilitation or other similar law, or the consent by it to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official) of Maker or for any substantial part of its property, or
the making by it of any assignment for the benefit of creditors, or the failure of Maker generally to pay its debts as such debts
become due, or the taking of corporate action by Maker in furtherance of any of the foregoing.

 

(c)          Involuntary
Bankruptcy, Etc. The entry of a decree or order for relief by a court having jurisdiction in the premises in respect of Maker
in an involuntary case under any applicable bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of Maker or for any substantial part of its property, or ordering
the winding-up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period
of 60 consecutive days.

 

6.           Remedies.

 

(a)          Upon
the occurrence of an Event of Default specified in Section 5(a) hereof, Payee may, by written notice to Maker, declare this Note
to be due immediately and payable, whereupon the unpaid principal amount of this Note, and all other amounts payable hereunder,
shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby
expressly waived, anything contained herein or in the documents evidencing the same to the contrary notwithstanding.

 

(b)          Upon
the occurrence of an Event of Default specified in Sections 5(b) or 5(c), the unpaid principal balance of this Note, and all other
sums payable with regard to this Note, shall automatically and immediately become due and payable, in all cases without any action
on the part of Payee.

 

7.           Waivers. 
Maker and all endorsers and guarantors of, and sureties for, this Note waive presentment for payment, demand, notice of dishonor,
protest, and notice of protest with regard to the Note, all errors, defects and imperfections in any proceedings instituted by
Payee under the terms of this Note, and all benefits that might accrue to Maker by virtue of any present or future laws exempting
any property, real or personal, or any part of the proceeds arising from any sale of any such property, from attachment, levy or
sale under execution, or providing for any stay of execution, exemption from civil process, or extension of time for payment; and
Maker agrees that any real estate that may be levied upon pursuant to a judgment obtained by virtue hereof, on any writ of execution
issued hereon, may be sold upon any such writ in whole or in part in any order desired by Payee.

 

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8.           Unconditional
Liability.  Maker hereby waives all notices in connection with the delivery, acceptance, performance, default, or enforcement
of the payment of this Note, and agrees that its liability shall be unconditional, without regard to the liability of any other
party, and shall not be affected in any manner by any indulgence, extension of time, renewal, waiver or modification granted or
consented to by Payee, and consents to any and all extensions of time, renewals, waivers, or modifications that may be granted
by Payee with respect to the payment or other provisions of this Note, and agrees that additional makers, endorsers, guarantors,
or sureties may become parties hereto without notice to Maker or affecting Maker’s liability hereunder.

 

9.           Notices. 
All notices, statements or other documents which are required or contemplated by this Agreement shall be: (i) in writing and delivered
personally or sent by first class registered or certified mail, overnight courier service or facsimile or electronic transmission
to the address designated in writing, (ii) by facsimile to the number most recently provided to such party or such other address
or fax number as may be designated in writing by such party and (iii) by electronic mail, to the electronic mail address most
recently provided to such party or such other electronic mail address as may be designated in writing by such party.  Any
notice or other communication so transmitted shall be deemed to have been given on the day of delivery, if delivered personally,
on the business day following receipt of written confirmation, if sent by facsimile or electronic transmission, one (1) business
day after delivery to an overnight courier service or five (5) days after mailing if sent by mail.

 

10.         Construction. 
THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS
THEREOF.

 

11.         Severability. 
Any provision contained in this Note which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other
jurisdiction.

 

12.         Trust
Waiver.  Notwithstanding anything herein to the contrary, the Payee hereby waives any and all right, title, interest
or claim of any kind (each, a “Claim”) in or to any distribution of or from the Trust Account to be established
in which the proceeds of the Offering conducted by Maker (including the deferred underwriters discounts and commissions) and the
proceeds from the sale of certain warrants to be issued and sold by the Maker in a private placement to close simultaneously with
the closing of the Offering are to be deposited, to be described in greater detail in the registration statement and prospectus
to be filed with the Securities and Exchange Commission in connection with the Offering, and hereby agrees not to seek recourse,
reimbursement, payment or satisfaction for any Claim against the Trust Account for any reason whatsoever; provided, however, that
if the Maker completes its Business Combination, the Maker shall repay the entire unpaid principal balance of the Note.

 

13.         Amendment;
Waiver.  Any amendment hereto or waiver of any provision hereof may be made with, and only with, the written consent
of the Maker and the Payee.

 

14.         Assignment.  No
assignment or transfer of this Note or any rights or obligations hereunder may be made by any party hereto (by operation of law
or otherwise) without the prior written consent of the other party hereto and any attempted assignment without the required consent
shall be void; provided, however, that the foregoing shall not apply to an affiliate of the Payee who agrees to be bound by the
terms of this Note.

 

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15.         Conversion.

 

 (a)          At
the Payee’s option upon notice to the Maker, at any time prior to payment in full of the principal balance of this Note,
the Payee may elect to convert up to Two Hundred Fifty Thousand ($250,000) of the principal balance of this Note into a number
of warrants (the “Warrants”) to purchase shares of the Maker’s Class A common stock, par value
$0.0001 per share (“Common Stock”). Each $1.00 of such principal balance shall be converted into one
(1) Warrant. Each Warrant shall have the same terms and conditions as the warrants issued by the Maker pursuant to the private
placement, as described in Maker’s Registration Statement on Form S-1 (333-228018). The Warrants, the shares of the Common
Stock of Maker underlying the Warrants and any other equity security of Maker issued or issuable with respect to the foregoing
by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, amalgamation, consolidation
or reorganization (the “Warrant Shares”), shall be entitled to the registration rights set forth in
Section 16 hereof. 

 

(b)          Upon
any complete or partial conversion of the principal amount of this Note, (i) such principal amount shall be so converted and
such converted portion of this Note shall become fully paid and satisfied, (ii) the Payee shall surrender and deliver this Note,
duly endorsed, to Maker or such other address which Maker shall designate against delivery of the Warrants, (iii) Maker shall promptly
deliver a new duly executed Note to the Payee in the principal amount that remains outstanding, if any, after any such conversion
and (iv) in exchange for all or any portion of the surrendered Note, Maker shall deliver to Payee the Warrants, which shall bear
such legends as are required, in the opinion of counsel to Maker or by any other agreement between Maker and the Payee and applicable
state and federal securities laws.

 

(c)          The
Payee shall pay any and all issue and other taxes that may be payable with respect to any issue or delivery of the Warrants upon
conversion of this Note pursuant hereto; provided, however, that the Payee shall not be obligated to pay any transfer taxes resulting
from any transfer requested by the Payee in connection with any such conversion.

 

(d)          The
Warrants shall not be issued upon conversion of this Note unless such issuance and such conversion comply with all applicable provisions
of law.

 

16.         Registration
Rights.

 

(a)          Reference
is made to that certain Registration Rights Agreement between the Maker and the parties thereto, dated as of the date hereof (the
“Registration Rights Agreement”). 

 

(b)          The
holders (“Holders”) of the Warrants (or the Warrant Shares) and the Maker, as applicable, shall have
all of the same rights, duties and obligations set forth in the Registration Rights Agreement with respect to a Registrable Security
(as defined in the Registration Rights Agreement).

 

[Signature
page follows]

 

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IN WITNESS WHEREOF,
Maker, intending to be legally bound hereby, has caused this Note to be duly executed by the undersigned as of the day and year
first above written.

 

	 	BOXWOOD MERGER CORP.

 

	 	By:	 
	 	 	Name:
	 	 	Title:

 

    	 	 	 

     

    

 

Annex A

 

Drawdown Request Schedule

 

	Date of Drawdown	 	Amount of Drawdown	 	Aggregate Drawdownutsi-ex41_6.htm

Exhibit 4.1

UTSTARCOM HOLDINGS CORP.

2006 EQUITY INCENTIVE PLAN

(As Assumed and Amended on January 21, 2016)

1.Purposes of the Plan.  The purposes of this Plan are:

	
 
	
•
	
to attract and retain the best available personnel for positions of substantial responsibility,

	
 
	
•
	
to provide incentives to individuals who perform services to the Company, and

	
 
	
•
	
to promote the success of the Company’s business.

The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted   Stock,   Restricted   Stock   Units,   Stock   Appreciation   Rights,   Performance   Units, Performance Shares and other shares or cash awards as the Administrator may determine.

2.Definitions.  As used herein, the following definitions will apply:

(a)“Administrator” means the Board or any of its Committees as will be administering the Plan, in accordance with Section 4 of the Plan.

(b)“Affiliate” means any corporation or any other entity (including, but not limited to, partnerships and joint ventures) controlling, controlled by, or under common control with the Company.

(c)“Annual Revenue” means the Company’s or a business unit’s net sales for the Performance Period, determined in accordance with generally accepted accounting principles; provided, however, that prior to the Performance Period, the Administrator shall determine whether any significant item(s) shall be excluded or included from the calculation of Annual Revenue with respect to one or more Participants.

(d)“Applicable Laws” means the requirements relating to the administration of equity-based awards under Cayman Islands laws, U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.

(e)“Award” means,  individually  or  collectively,  a  grant  under  the  Plan  of Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units, Performance Shares and other shares or cash awards as the Administrator may determine.

(f)“Award Agreement” means the written or electronic agreement setting forth the terms and provisions applicable to each Award granted under the Plan.  The Award Agreement is subject to the terms and conditions of the Plan.

 

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

(h)“Cash Collections” means   the actual   cash   or other freely negotiable consideration, in any currency, received in satisfaction of accounts receivable created by the sale of any Company products or services.

(i)“Change in Control” means the occurrence of any of the following events:

(i)A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group, (“Person”) acquires ownership of the shares of the Company that, together with the shares held by such Person, constitutes more than fifty percent (50%) of the total voting power of the shares of the Company; provided, however, that for purposes of this subsection (i), the acquisition of additional shares by any one Person, who is considered to own more than fifty percent (50%) of the total voting power of the shares of the Company will not be considered a Change in Control; or

(ii)A change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election.  For purposes of this clause (ii), if any Person is considered to effectively control the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change in Control; or

(iii)A change in the ownership of a substantial portion of the Company’s assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition  or  acquisitions;  provided,  however,  that  for  purposes  of  this  subsection  (iii),  the following will not constitute a change in the ownership of a substantial portion of the Company’s assets: (A) a transfer to an entity that is controlled by the Company’s shareholders immediately after the transfer, or (B) a transfer of assets by the Company to: (1) a shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s shares, (2) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (3) a Person, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding shares of the Company, or (4) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a Person described in this subsection (iii)(B)(3).  For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

For purposes of this Section 2(i), Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of shares, or similar business transaction with the Company.

Notwithstanding the foregoing provisions of this definition, a transaction shall not be deemed a Change in Control unless the transaction qualifies as a change in control event within the meaning of Code Section 409A.

 

(j)“Code” means the Internal Revenue Code of 1986, as amended.  Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code.

(k)“Committee”  means  a  committee  of  Directors  or  of  other  individuals satisfying Applicable Laws appointed by the Board in accordance with Section 4 hereof.

(l)“Common Stock” means the ordinary shares of the Company.

(m)“Company” means UTStarcom Holdings Corp., an exempted Cayman Islands company, or any successor thereto.

(n)“Consultant” means any person, including an advisor, engaged by the

Company or its Affiliates to render services to such entity.

(o)“Customer Satisfaction MBOs” means as to any Participant, the objective and measurable individual goals set by a “management by objectives” process and approved by the Administrator, which goals relate to the satisfaction of external or internal customer requirements.

(p)“Determination Date” means the latest possible date that will not jeopardize the qualification of an Award granted under the Plan as “performance-based compensation” under Section 162(m) of the Code.

(q)“Director” means a member of the Board.

(r)“Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code, provided that in the case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time.

(s)“Earnings Per Share” means as to any Performance Period, the Company’s Net Income or a business unit’s Pro Forma Net Income, divided by a weighted average number of Shares outstanding and dilutive common equivalent Shares deemed outstanding.

(t)“Employee” means any person, including Officers and Directors, employed by the Company or its Affiliates.  Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.

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

(v)“Fair Market Value” means, as of any date, the value of Common Stock as the Administrator  may  determine  in  good  faith  by  reference  to  the  price  of  such  shares  on  any established stock exchange or a national market system on the day of determination if the Common Stock is so listed on any established stock exchange or a national market system.  If the Common Stock is not listed on any established stock exchange or a national market system, the value of the Common Stock will be determined by the Administrator in good faith.

(w)“Fiscal Year” means the fiscal year of the Company.

 

(x)“Incentive Stock Option” means an Option that by its terms qualifies and is otherwise intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

(y)“Net Income” means as to any Performance Period, the income after taxes of the Company determined in accordance with generally accepted accounting principles, provided that prior to the Performance Period, the Administrator shall determine whether any significant item(s) shall be included or excluded from the calculation of Net Income with respect to one or more participants.

(z)“New Orders” means as to any Performance Period, the firm orders for a system,  product,  part,  or  service  that  are  being  recorded  for  the  first  time  as  defined  in  the Company’s order recognition policy.

(aa)“Nonstatutory Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.

(bb)“Officer”  means  a  person  who  is  an  officer  of  the  Company  within  the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

(cc)“Operating Profit” means as to any Performance Period, the difference between revenue and related costs and expenses, excluding income derived from sources other than regular activities and before income deductions.

(dd)“Option” means a stock option granted pursuant to the Plan.

(ee)“Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

(ff)“Participant” means the holder of an outstanding Award.

(gg)“Performance Goals” will have the meaning set forth in Section 11 of the Plan.

(hh)“Performance Period” means any Fiscal Year of the Company or such other period as determined by the Administrator in its sole discretion.

(ii)“Performance Share” means an Award denominated in Shares which may be earned in whole or in part upon attainment of Performance Goals or other vesting criteria as the Administrator may determine pursuant to Section 10.

(jj)“Performance Unit” means an Award which may be earned in whole or in part upon attainment of Performance Goals or other vesting criteria as the Administrator may determine and which may be settled for cash, Shares or other securities or a combination of the foregoing pursuant to Section 10.

(kk)“Period of Restriction” means the period during which the transfer of Shares of Restricted Stock are subject to restrictions and therefore, the Shares are subject to a substantial risk of forfeiture.  Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as determined by the Administrator.

 

(ll)“Plan” means this 2006 Equity Incentive Plan.

(mm)“Pro Forma Net Income” means as to any business unit for any Performance Period, the Net Income of such business unit, minus allocations of designated corporate expenses.

(nn)“Product Shipments” means as to any Performance Period, the quantitative and measurable number of units of a particular product that shipped during such Performance Period.

(oo)“Restricted Stock” means Shares issued pursuant to an Award of Restricted Stock under Section 8 of the Plan, or issued pursuant to the early exercise of an Option.

(pp)“Restricted Stock Unit” means a bookkeeping entry representing an amount equal to the Fair Market Value of one Share, granted pursuant to Section 9.  Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company.

(qq)“Return on Designated Assets” means as to any Performance Period, the Pro Forma Net Income of a business unit, divided by the average of beginning and ending business unit designated assets, or Net Income of the Company, divided by the average of beginning and ending designated corporate assets.

(rr)“Return on Equity” means, as to any Performance Period, the percentage equal to the value of the Company’s or any business unit’s common stock investments at the end of such Performance Period, divided by the value of such common stock investments at the start of such Performance Period, excluding any common stock investments so designated by the Administrator.

(ss)“Return on Sales” means as to any Performance Period, the percentage equal to the Company’s Net Income or the business unit’s Pro Forma Net Income, divided by the Company’s or the business unit’s Annual Revenue.

(tt)“Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan. 

(uu)“Section 16(b)” means Section 16(b) of the Exchange Act.

(vv)“Service Provider” means an Employee, Director or Consultant.

(ww)“Share” means a share of the Common Stock, as adjusted in accordance with Section 14 of the Plan.

(xx)“Stock Appreciation Right” means an Award, granted alone or in connection with an Option, that pursuant to Section 7 is designated as a Stock Appreciation Right.

(yy)“Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.

(zz)“Successor Corporation” has the meaning given to such term in Section 14(c) of the Plan.

 

3.Shares Subject to the Plan.

(a)Shares Subject to the Plan.  Subject to the provisions of Section 14 of the Plan, the maximum aggregate number of Shares that may be awarded and sold under the Plan is 6,000,000 Shares plus (i) any Shares that, as of July 21, 2006, have been reserved but not issued pursuant to any awards granted under UTStarcom, Inc.’s 1997 Stock Plan (the “1997 Plan”), UTStarcom, Inc.’s Amended 2001 Director Option Plan (the “2001 Plan”), and UTStarcom, Inc.’s 2003 Non-Statutory Stock Option Plan (the “2003 Plan”), each as assumed and amended by the Company, and are not subject to any awards granted thereunder, and (ii) any Shares subject to stock options or similar awards granted under the 1997 Plan, the 2001 Plan, and the 2003 Plan that expire or otherwise terminate without having been exercised in full and Shares issued pursuant to awards granted under the 1997 Plan, the 2001 Plan, and the 2003 Plan that are forfeited to or repurchased by the Company. The Shares may be authorized, but unissued, or reacquired Common Stock.

(b)Lapsed  Awards.    If  an  Award  expires  or  becomes  unexercisable  without having been exercised in full, or, with respect to Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units, is forfeited to or repurchased by the Company, the unpurchased Shares (or for Awards other than Options and Stock Appreciation Rights, the forfeited or repurchased Shares) which were subject thereto will become available for future grant or sale under the Plan (unless the Plan has terminated).  With respect to Stock Appreciation Rights, all of the Shares covered by the Award (that is, Shares actually issued pursuant to a Stock Appreciation Right, as well as the Shares that represent payment of the exercise price) will cease to be available under the Plan.  However, Shares that have actually been issued under the Plan under any Award will not be returned to the Plan and will not become available for future distribution under the Plan; provided, however, that if unvested Shares of Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units are repurchased by the Company or are forfeited to the Company, such Shares will become available for future grant under the Plan.  Shares used to pay the tax and exercise price of an Award will not become available for future grant or sale under the Plan.  To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan.  Notwithstanding the foregoing and, subject to adjustment provided in Section 14, the maximum number of Shares that may be issued upon the exercise of Incentive Stock Options will equal the aggregate Share number stated in Section 3(a), plus, to the extent allowable under Section 422 of the Code, any Shares that become available for issuance under the Plan under this Section 3(b).

4.Administration of the Plan.

(a)Procedure.

(i)Multiple Administrative Bodies.  Different Committees with respect to different groups of Service Providers may administer the Plan.

(ii)Section 162(m).  To the extent that the Administrator determines it to be desirable to qualify Awards granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Plan will be administered by a Committee of two or more “outside directors” within the meaning of Section 162(m) of the Code.

 

(iii)Rule 16b-3.  To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3.

(iv)Other Administration.  Other than as provided above, the Plan will be administered by (A) the Board or (B) a Committee, which committee will be constituted to satisfy Applicable Laws.

(b)Powers of the Administrator.  Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion:

(i)to determine the Fair Market Value;

(ii)to  select  the  Service  Providers  to  whom  Awards  may  be  granted hereunder;

(iii)to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder;

(iv)to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;

(v)to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws;

(vi)to modify or amend each Award (subject to Section 19(c) of the Plan). Notwithstanding the previous sentence, the Administrator may not modify or amend an Option or Stock Appreciation Right to reduce the exercise price of such Option or Stock Appreciation Right after it has been granted (except for adjustments made pursuant to Section 14), and neither may the Administrator cancel any outstanding Option or Stock Appreciation Right and immediately replace it with a new Option or Stock Appreciation Right with a lower exercise price;

(vii)to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;

(viii)to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Award pursuant to such procedures as the Administrator may determine; and

(ix)to make all other determinations deemed necessary or advisable for administering the Plan.

(c)Effect of Administrator’s Decision.  The Administrator’s decisions, determinations and interpretations will be final and binding on all Participants and any other holders of Awards.

 

5.Eligibility. Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units, Performance Shares and such other cash or share awards as the Administrator determines may be granted to Service Providers.   Incentive Stock Options may be granted only to employees of the Company or any Parent or Subsidiary of the Company.

6.Stock Options.

(a)Limitations.  Each Option will be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.  However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options will be treated as Nonstatutory Stock Options.  For purposes of this Section 6(a), Incentive Stock Options will be taken into account in the order in which they were granted.  The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted.

(b)Number of Shares.  Administrator will have complete discretion to determine the number of Options granted to any Participant, provided that during any Fiscal Year, no Participant will be granted Options covering more than 1,000,000 Shares.  Notwithstanding the foregoing limitation, in connection with a Participant’s initial service as an Employee, an Employee may be granted Options covering up to an additional 2,000,000 Shares.

(c)Term of Option.   The Administrator will determine the term of each Option in its sole discretion.  Any Option granted under the Plan will not be exercisable after the expiration of seven (7) years from the date of grant or such shorter term as may be provided in the Award Agreement.  Moreover, in the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns shares representing more than ten percent (10%) of the total combined voting power of all classes of shares of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement.

(d)Option Exercise Price and Consideration.

(i)Exercise Price.  The per share exercise price for the Shares to be issued pursuant to exercise of an Option will be determined by the Administrator, but will be no less than 100% of the Fair Market Value per Share on the date of grant. In addition, in the case of an Incentive Stock Option granted to an Employee who, at the time the Incentive Stock Option is granted, owns shares representing more than ten percent (10%) of the voting power of all classes of shares of the Company or any Parent or Subsidiary, the per Share exercise price will be no less than 110% of the Fair Market Value per Share on the date of grant.  Notwithstanding the foregoing provisions of this Section 6(c), Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code.  The Administrator may not modify or amend an Option to reduce the exercise price of such Option after it has been granted (except for adjustments made pursuant to Section 14 of the Plan) nor may the Administrator cancel any outstanding Option and replace it with a new Option, Stock Appreciation Right, or other Award with a lower exercise price, unless, in either case, such action is approved by the Company’s shareholders.

 

(ii)Waiting Period and Exercise Dates.  At the time an Option is granted, the Administrator will fix the period within which the Option may be exercised and will determine any conditions that must be satisfied before the Option may be exercised.

(iii)Form of Consideration.  The Administrator will determine the acceptable form(s) of consideration for exercising an Option, including the method of payment, to the extent permitted by Applicable Laws.

(e)Exercise of Option.

(i)Procedure for Exercise; Rights as a Shareholder.  Any Option granted hereunder will be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement.  An Option may not be exercised for a fraction of a Share.

An Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as the Administrator specify from time to time) from the person entitled to exercise the Option and (ii) full payment for the Shares with respect to which the Option is exercised (together with an applicable withholding taxes).   Until the Shares are issued (as evidenced by the appropriate entry on the register of members of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Shares, notwithstanding the exercise of the Option.  No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 14 of the Plan.

(ii)Termination of Relationship as a Service Provider.  If a Participant ceases to be a Service Provider, other than upon the Participant’s termination as the result of the Participant’s death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement).  In the absence of a specified time in the Award Agreement, the Option will remain exercisable for three (3) months following the Participant’s termination.  Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan.  If after termination the Participant does not exercise his or her Option within the time specified by the Administrator, the Option will terminate, and the Shares covered by such Option will revert to the Plan.

(iii)Disability of Participant.   If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement).   In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan.  If after termination the Participant does not exercise his or her Option within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.

 

(iv)Death of Participant.  If a Participant dies while a Service Provider, the Option may be exercised following the Participant’s death within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of death (but in no event may the option be exercised later than the expiration of the term of such Option as set forth in the Award Agreement), by the Participant’s designated beneficiary, provided such beneficiary has been designated prior to Participant’s death in a form acceptable to the Administrator.   If no such beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution.  In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following Participant’s death.  Unless otherwise provided by the Administrator, if at the time of death Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will immediately revert to the Plan.   If the Option is not so exercised within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.

(v)Other Termination.   A  Participant’s  Award  Agreement  may  also provide that if the exercise of the Option following the termination of Participant’s status as a Service Provider (other than upon the Participant’s death or Disability) would result in liability under Section 16(b), then the Option will terminate on the earlier of (A) the expiration of the term of the Option set forth in the Award Agreement, or (B) the 10th day after the last date on which such exercise  would  result  in  such  liability  under  Section  16(b).    Finally,  a  Participant’s  Award Agreement may also provide that if the exercise of the Option following the termination of the Participant’s status as a Service Provider (other than upon the Participant’s death or disability) would be prohibited at any time solely because the issuance of Shares would violate the registration requirements under the Securities Act, then the Option will terminate on the earlier of (A) the expiration of the term of the Option, or (B) the expiration of a period of three (3) months after the termination of the Participant’s status as a Service Provider during which the exercise of the Option would not be in violation of such registration requirements.

7.Stock Appreciation Rights.

(a)Grant of Stock Appreciation Rights.  Subject to the terms and conditions of the Plan, a Stock Appreciation Right may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion.

(b)Number of Shares.  The Administrator will have complete discretion to determine the number of Stock Appreciation Rights granted to any Participant, provided that during any Fiscal Year, no Participant will be granted Stock Appreciation Rights covering more than 1,000,000 Shares.   Notwithstanding the foregoing limitation, in connection with a Participant’s initial service as an Employee, an Employee may be granted Stock Appreciation Rights covering up to an additional 2,000,000 Shares.

 

(c)Exercise Price and Other Terms.  The Administrator, subject to the provisions of the Plan, will have complete discretion to determine the terms and conditions of Stock Appreciation Rights granted under the Plan, provided, however, that the exercise price will be not less than 100% of the Fair Market Value of a Share on the date of grant.  The Administrator may not modify or amend a Stock Appreciation Right to reduce the exercise price of such Stock Appreciation Right after it has been granted (except for adjustments made pursuant to Section 14 of the Plan) nor may the Administrator cancel any outstanding Stock Appreciation Right and replace it with a new Stock Appreciation Right, Option, or other Award with a lower exercise price, unless, in either case, such action is approved by the Company’s shareholders.

(d)Stock Appreciation Right Agreement.  Each Stock Appreciation Right grant will be evidenced by an Award Agreement that will specify the exercise price, the term of the Stock Appreciation Right, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine.

(e)Expiration of Stock Appreciation Rights.  A Stock Appreciation Right granted under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement.  Notwithstanding the foregoing, the rules of Section 6(e) also will apply to Stock Appreciation Rights.

(f)Payment of Stock Appreciation Right Amount.  Upon exercise of a Stock Appreciation Right, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying:

(i)The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times

(ii)The number of Shares with respect to which the Stock Appreciation Right is exercised.

At the discretion of the Administrator, the payment upon Stock Appreciation Right exercise may be in cash, in Shares of equivalent value, or in some combination thereof.

8.Restricted Stock.

(a)Grant of Restricted Stock.  Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, will determine.

(b)Restricted  Stock  Agreement.    Each Award of Restricted Stock  will  be evidenced by an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will determine.  Notwithstanding the foregoing sentence, during any Fiscal Year no Participant will receive more than an aggregate of 300,000 Shares of Restricted Stock; provided, however, that in connection with a Participant’s initial service as an Employee, an Employee may be granted an aggregate of up to an additional 600,000 Shares of Restricted Stock.  Unless the Administrator determines otherwise, Shares of Restricted Stock will be entered in the register of members of the Company under the name of the holder of such Shares subject to restrictions applicable to such Shares until the restrictions on such Shares have lapsed.

 

(c)Transferability.   Except as provided in this Section 8, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.

(d)Other Restrictions.  The Administrator, in its sole discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate.

(e)Removal of Restrictions.   Except as otherwise provided in this Section 8, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of the Period of Restriction.  The Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed.

(f)Voting Rights.  During the Period of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise.

(g)Dividends and Other Distributions.  During the Period of Restriction, Service Providers holding Shares of Restricted Stock will be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Award Agreement.  If any such dividends or distributions are paid in Shares, the Shares will be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid.

(h)Return of Restricted Stock to Company.  On the earlier of the Expiration Date set forth in the Award Agreement and Participant’s termination as a Service Provider, the balance of the Shares of Restricted Stock that have not vested at the time of Participant’s termination as a Service Provider for any reason will be forfeited and automatically reacquired by the Company at no cost to the Company upon the date of such termination.  Participant will not be entitled to a refund of the price paid for the Shares of Restricted Stock, if any, returned to the Company pursuant to this Section 8.

9.Restricted Stock Units.

(a)Grant.  Restricted Stock Units may be granted at any time and from time to time as determined by the Administrator.  Each Restricted Stock Unit grant will be evidenced by an Award Agreement that will specify such other terms and conditions as the Administrator, in its sole discretion, will determine, including all terms, conditions, and restrictions related to the grant, the number of Restricted Stock Units and the form of payout, which, subject to Section 9(d), may be left to the discretion of the Administrator.  Notwithstanding anything to the contrary in this subsection (a), during any Fiscal Year of the Company, no Participant will receive more than an aggregate of 300,000 Restricted Stock Units; provided, however, that in connection with a Participant’s initial service as an Employee, an Employee may be granted an aggregate of up to an additional 600,000 Restricted Stock Units.

 

(b)Vesting Criteria and Other Terms.  The Administrator will set vesting criteria in its discretion, which, depending on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant.   After the grant of Restricted Stock Units, the Administrator, in its sole discretion, may reduce or waive any restrictions for such Restricted Stock Units.  Each Award of Restricted Stock Units will be evidenced by an Award Agreement that will specify the vesting criteria, and such other terms and conditions as the Administrator, in its sole discretion, will determine.

(c)Earning Restricted Stock Units.  Upon meeting the applicable vesting criteria, the Participant will be entitled to receive a payout as specified in the Award Agreement. Notwithstanding the foregoing, at any time after the grant of Restricted Stock Units, the Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be met to receive a payout.

(d)Form and Timing of Payment.  Payment of earned Restricted Stock Units will be made as soon as practicable after the date(s) set forth in the Award Agreement.   The Administrator, in its sole discretion, may pay earned Restricted Stock Units in cash, Shares, or a combination thereof.  Shares represented by Restricted Stock Units that are fully paid in cash again will be available for grant under the Plan.

(e)Cancellation.   On the date set forth in the Award Agreement, all unearned Restricted Stock Units will be forfeited to the Company.

10.Performance Units and Performance Shares.

(a)Grant of Performance Units/Shares.  Performance Units and Performance Shares may be granted to Service Providers at any time and from time to time, as will be determined by the Administrator, in its sole discretion.  The Administrator will have complete discretion in determining the number of Performance Units/Shares granted to each Participant provided that during any Fiscal Year, (a) no Participant will receive Performance Units having an initial value greater than $2,000,000, and (b) no Participant will receive more than 300,000 Performance Shares. Notwithstanding the foregoing limitation, in connection with a Participant’s initial service as an Employee, an Employee may be granted up to an additional 600,000 Performance Shares and additional Performance Units having an initial value up to $2,000,000.

(b)Value of Performance Units/Shares.  Each Performance Unit will have an initial  value  that  is  established  by  the  Administrator  on  or  before  the  date  of  grant.    Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant.

(c)Performance Objectives and Other Terms. The Administrator will set performance objectives or other vesting provisions (including, without limitation, continued status as a Service Provider) in its discretion which, depending on the extent to which they are met, will determine the number or value of Performance Units/Shares that will be paid out to the Participant. The Administrator may set performance objectives based upon the achievement of Company-wide, divisional, or individual goals, or any other basis determined by the Administrator in its discretion. Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will specify the Performance Period, and such other terms and conditions as the Administrator, in its sole discretion, will determine.

 

(d)Earning of Performance Units/Shares.  After  the  applicable  Performance Period has ended, the holder of Performance Units/Shares will be entitled to receive a payout of the number of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives or other vesting provisions have been achieved.   After the grant of a Performance Unit/Share, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such Performance Unit/Share.

(e)Form and Timing of Payment of Performance Units/Shares.  Payment of earned Performance Units/Shares will be made as soon as practicable after the expiration of the applicable Performance Period.   The Administrator, in its sole discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period) or in a combination thereof.

(f)Cancellation of Performance Units/Shares.  On the date set forth in the Award Agreement, all unearned or unvested Performance Units/Shares will be forfeited to the Company, and again will be available for grant under the Plan.

11.Performance Goals.  The granting and/or vesting of Awards of Restricted Stock, Restricted Stock Units, Performance Shares and Performance Units and other incentives under the Plan may be made subject to the attainment of performance goals relating to one or more business criteria within the meaning of Section 162(m) of the Code and may provide for a targeted level or levels of achievement (“Performance Goals”) including one or more of the following measures: (a) Annual Revenue, (b) Cash Collections, (c) Customer Satisfaction MBOs, (d) Earnings Per Share, (e) Net Income, (f) New Orders, (g) Operating Profit, (h) Pro Forma Net Income, (i) Return on Designated Assets, (j) Return on Equity, (k) Return on Sales, and (l) Product Shipments.  Any Performance Goals may be used to measure the performance of the Company as a whole or a business unit of the Company and may be measured relative to a peer group or index.   The Performance Goals may differ from Participant to Participant and from Award to Award.  Any criteria used may be (i) measured in absolute terms, (ii) compared to another company or companies, (iii) measured against the performance of the Company as a whole or a segment of the Company and/or (iv) measured on a pre-tax or post-tax basis (if applicable).  Prior to the Determination Date, the Administrator will determine whether any significant element(s) will be included in or excluded from the calculation of any Performance Goal with respect to any Participant.

12.Leaves of Absence/Transfer Between Locations.  Unless the Administrator provides otherwise, vesting of Awards granted hereunder will be suspended during any unpaid leave of absence.  A Service Provider will not cease to be an Employee in the case of (i) any leave of absence approved  by the  Company  or  (ii) transfers  between  locations  of  the  Company or  between  the Company and its Affiliates.  For purposes of Incentive Stock Options, no such leave may exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by statute or contract.  If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then three (3) months following the ninety-first (91st) day of such leave any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option.

 

13.Transferability of Awards.  Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant.  With the approval of the Administrator, a Participant may, in a manner specified by the Administrator, (a) transfer an Award to a Participant’s spouse or former spouse pursuant to a court-approved domestic relations order which relates to the provision of child support, alimony payments or marital property rights, and (b) transfer an Option by bona fide gift and not for any consideration, to (i) a member or members of the Participant’s immediate family, (ii) a  trust  established  for  the  exclusive  benefit  of  the  Participant  and/or  member(s)  of  the Participant’s immediate family, (iii) a partnership, limited liability company of other entity whose only partners or members are the Participant and/or member(s) of the Participant’s immediate family, or (iv) a foundation in which the Participant and/or member(s) of the Participant’s immediate family control the management of the foundation’s assets.  For purposes of this Section 13, “immediate family” shall mean the Participant's spouse, former spouse, children, grandchildren, parents, grandparents, siblings, nieces, nephews, parents-in-law, sons-in-law, daughters-in-law, brothers-in- law, sisters-in-law, including adoptive or step relationships and any person sharing the Participant's household (other than as a tenant or employee).

14.Adjustments; Dissolution or Liquidation; Merger or Change in Control.

(a)Adjustments.  In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, share split, reverse share split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, shall adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Award, and the numerical Share limits set forth in Sections 3, 6, 7, 8, 9 and 10.

(b)Dissolution or Liquidation.  In the event of the proposed dissolution or liquidation of the Company, the Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction.  To the extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such proposed action.

(c)Change in Control.  In the event of a Change in Control, each outstanding Award will be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation (the “Successor Corporation”).  In the event that the Successor Corporation refuses to assume or substitute for the Award, the Participant will fully vest in and have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock will lapse, and, with respect to Restricted Stock Units, Performance Shares and Performance Units, all Performance Goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions met.  In addition, if the Successor Corporation refuses to assume or substitute an Option or Stock Appreciation Right in the event of a Change in Control, the Administrator will notify the Participant in writing or electronically that the Option or Stock Appreciation Right will be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate upon the expiration of such period.

 

For the purposes of this subsection (c), an Award will be considered assumed if, following the Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether shares, cash, or other securities or property) or, in the case of a Stock Appreciation Right upon the exercise of which the Administrator determines to pay cash or a Performance Share or Performance Unit which the Administrator can determine to pay in cash, the fair market value of the consideration received in the merger or Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change in Control is not solely common stock of the Successor Corporation, the Administrator may, with the consent of the Successor Corporation, provide for the consideration to be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a Restricted Stock Unit, Performance Share or Performance Unit, for each Share subject to such Award (or in the case of an Award settled in cash, the number of implied shares determined by dividing the value of the Award by the per share consideration received by holders of Common Stock in the Change in Control), to be solely common stock of the Successor Corporation equal in fair market value to the per share consideration received by holders of Common Stock in the Change in Control.

Notwithstanding anything in this Section 14(c) to the contrary, an Award that vests, is earned or paid-out upon the satisfaction of one or more Performance Goals will not be considered assumed if the Company or its successor modifies any of such Performance Goals without the Participant’s consent; provided, however, a modification to such Performance Goals only to reflect the Successor Corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption.

15.Tax Withholding

(a)Withholding Requirements.  Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof), the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, foreign or other taxes required to be withheld with respect to such Award (or exercise thereof).

(b)Withholding Arrangements.  The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (without limitation) (a) paying cash, (b) electing to have the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the minimum amount required to be withheld, (c) delivering to the Company already- owned Shares having a Fair Market Value equal to the amount required to be withheld, or (d) selling a sufficient number of Shares otherwise deliverable to the Participant through such means as the Administrator may determine in its sole discretion (whether through a broker or otherwise) equal to the amount required to be withheld.  The amount of the withholding requirement will be deemed to include any amount which the Administrator agrees may be withheld at the time the election is made, not to exceed the amount determined by using the maximum federal, state or local marginal income tax rates applicable to the Participant with respect to the Award on the date that the amount of tax to be withheld is to be determined.  The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld.

 

16.No Effect on Employment or Service.  Neither the Plan nor any Award will confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Company, nor will they interfere in any way with the Participant’s right or the Company’s right to terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws.

17.Date of Grant.  The date of grant of an Award will be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator.  Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant.

18.Term of Plan.  Subject to Section 22 of the Plan, the Plan will become effective upon its adoption by the Board.  It will continue in effect for a term of ten (10) years unless terminated earlier under Section 19 of the Plan.

19.Amendment and Termination of the Plan.

(a)Amendment and Termination.  The Administrator may at any time amend, alter, suspend or terminate the Plan.

(b)Shareholder Approval.  The Company will obtain shareholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.

(c)Effect of Amendment or Termination.  No amendment, alteration, suspension or termination of the Plan will impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company.  Termination of the Plan will not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.

20.Conditions Upon Issuance of Shares.

(a)Legal Compliance.  Shares will not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the Company with respect to such compliance.

(b)Investment Representations.  As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.

21.Inability to Obtain Authority.  The inability of the Company 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, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority will not have been obtained.

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