Document:

Exhibit 10.3

 

EXECUTION VERSION

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (this “Agreement”) is dated as of February    , 2016 by and among Adam Blank (the “Executive”), Mattress Firm Holding Corp., a Delaware corporation (“MFHC”) and Mattress Firm, Inc., a Delaware corporation (“MFI”) (MFHC and MFI are referred to herein collectively, as the “Company”).

 

WHEREAS, Executive currently serves as the Chief Operating Officer and General Counsel of HMK Intermediate Holdings LLC, a Delaware limited liability company (the “Subsidiary”);

 

WHEREAS, effective as of the date hereof, the Company has indirectly acquired all of the outstanding equity interests in the Subsidiary pursuant to the terms and conditions of the certain Securities Purchase Agreement dated November 25, 2015, by and among MFI, HMK Mattress Holdings LLC and the Executive, among others (the “Purchase Agreement”) ; and

 

WHEREAS, the Company desires to enter into an employment agreement with the Executive to set forth certain terms of his employment relationship and as a means to incentivize the Executive to continue in an employment relationship with the Company;

 

NOW, THEREFORE, in consideration of the premises and mutual agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, MFHC, the Executive and MFI agree as follows:

 

Section 1. Agreement to Employ; No Conflicts. Upon the terms and subject to the conditions of this Agreement, the Company hereby agrees to continue to employ the Executive, and the Executive hereby accepts such continued employment with the Company. The Executive represents and agrees that (a) he is entering into this Agreement voluntarily and that his employment hereunder and compliance with the terms and conditions hereof will not conflict with or result in the breach by him of any agreement to which he is a party or by which he may be bound, (b) he has not violated, and in connection with his employment with the Company will not violate, any non-competition, non-solicitation or other similar covenant or agreement by which he is or may be bound and (c) in connection with his employment with the Company he will not use any confidential or proprietary information he may have obtained in connection with his employment with any prior employer other than the Subsidiary or its affiliates.

 

Section 2. Employment Duties. During the Term (as defined below), the Executive shall serve as President, Sleepy’s of the Company and shall report to, and be subject to the direction and control of, the Company’s Chief Executive Officer. In such capacity, the Executive shall have the authority and responsibility to oversee, manage and direct the operations of the Subsidiary, primarily focusing on the activities, strategy, training, development and efficiencies of the Subsidiary’s field operations as well as managing the back office operations and shall have duties in connection therewith that include cost management, management of departments, overseeing and directing the strategic growth and direction of the Subsidiary, ensuring efficiency of operations throughout the organization, developing and implementing plans for the operational infrastructure of systems, processes, and personnel designed to accommodate the rapid growth objectives of the Company and otherwise providing senior executive level support to the Company as from time to time requested by the Board of Directors of MFHC (the “Board”) or Chief Executive Officer. During the Term, the Executive shall devote his business time, energy, experience and talents to such employment, shall devote his best efforts to advance the interests of the Company and its subsidiaries, including the Subsidiary, and other Affiliates and shall not engage in any other business activities, as an employee, director, consultant or in any other capacity, whether or not he receives any compensation therefor, without the prior written consent of the Board; provided that the Executive may perform the following activities without the prior written consent of the Board, provided that such activities do not interfere with or otherwise affect the performance of his duties hereunder: (i) if invited to do so, serve on the board of directors of another company, subject to the approval of the Board, which shall not be withheld unreasonably; (ii) manage his personal and family investments and estate planning in a manner not in violation of this Agreement; (iii) provide financial advice to David Acker in connection with Mr. Acker’s personal and family trusts in a manner not in violation of this Agreement; and (iv) engage in philanthropic, charitable and community activities. For purposes of this Agreement,

 

Employment Agreement — Adam Blank

 

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“Affiliate” shall mean any person or entity that, directly or indirectly, is controlled by MFHC. As used herein, “controlled by” means the possession, directly or indirectly, of the power to vote 50% or more of the outstanding voting securities of, or voting interest in, such person or entity or otherwise direct the management policies of such person or entity, by contract, agreement or otherwise.

 

Section 3. Term of Employment. The term of the Executive’s employment under this Agreement shall commence on the date hereof, and, unless earlier terminated pursuant to Section 7, will continue under this Agreement until and through the last day of the Company’s fiscal year ending closest to January 31, 2019 (the “Initial Expiration Date”), provided, however, that effective upon the Initial Expiration Date and the last day of each subsequent fiscal year of the Company (each, an “Extension Date”), the Term shall be automatically extended upon the same terms and conditions for an additional period of one (1) fiscal year from the scheduled expiration of the Term (prior to giving effect to such one (1) year extension) unless either the Company or the Executive shall have notified the other in writing at least three (3) months prior to the next Extension Date that such party does not desire to have the Term so extended. The term of this Agreement, as from time to time extended or renewed, is hereafter referred to as the “Term.”

 

Section 4. Place of Employment. The Executive’s principal place of employment shall be Hicksville, New York or such other location as mutually agreed upon by the Executive and the Company. The Executive will not be required to relocate to Houston, Texas.  Notwithstanding the foregoing, the Executive acknowledges that the duties to be performed by the Executive hereunder are such that the Executive may be required to travel extensively, subject to the terms and conditions hereof.

 

Section 5. Compensation; Reimbursement. During the remainder of the Term, the Company shall pay or provide to the Executive, in full satisfaction for his services provided hereunder, the following:

 

(a) Base Salary. During the first twelve months  of the Term the Company shall pay the Executive a base salary of $400,000 per year (the “Initial Base Salary”), payable not less frequently than semi-monthly in accordance with the payroll policies of the Company for senior executives as from time to time in effect (the “Payroll Policies”), less such amounts as may be required to be withheld by applicable federal, state and local law and regulations.  During fiscal year 2016, the Company intends to engage Pearl Meyer to perform a comparative analysis of compensation packages payable to equivalent executive positions at the Company’s peer companies, which such analysis shall take into account the Executive’s location in the New York City metropolitan area.  Following the first anniversary of the Term , the Executive and the Company shall mutually agree upon a base salary (the “Adjusted Base Salary”) that will be no less than $700,000, which shall be payable to the Executive during the remainder of the Term, subject to the approval of the Compensation Committee of the Board.  If the Company does not receive the compensation study from Pearl Meyer for any reason, the Executive’s annual base salary shall be $700,000 starting on the one year anniversary of the commencement of the Term unless otherwise agreed by the Chief Executive Officer and the Executive, subject to the approval of the Compensation Committee of the Board.  The Initial Base Salary and the Adjusted Base Salary, as applicable, shall be referred to herein as the “Base Salary.”

 

(b) Cash Bonus.

 

(i) For each fiscal year of the Company during the Term, the Executive will be eligible to receive a cash bonus, with the amount of the bonus to be determined by the Company based on the EBITDA achieved by the Company in such fiscal year relative to the annual EBITDA target for such fiscal year set forth in the Company’s annual management plan pursuant to the Mattress Firm Holding Corp. Executive Annual Incentive Plan (or such other bonus plan maintained by the Company for its senior executives) (as to a given fiscal year, the “Annual EBITDA Target”). The Executive’s target bonus for each fiscal year will be a percentage of Base Salary established by the Compensation Committee of the Board for such fiscal year, but shall be no less than a target bonus of $200,000 for such fiscal year if the Company achieves 100% of the Annual EBITDA Target for such fiscal year. If the Company achieves more than 100% of the Annual EBITDA Target, the Executive may receive a bonus of up to twice the established target bonus amount pursuant to

 

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terms established by the Compensation Committee of the Board. If the Company does not achieve more than 90% of the Annual EBITDA Target, the Executive will be entitled to no cash bonus. If the Company achieves between 90% and 100% of the Annual EBITDA Target, the cash bonus will be determined by linear interpolation between 0% and 100% of the established target bonus amount. “EBITDA” shall be determined as provided in the Mattress Firm Holding Corp. Executive Annual Incentive Plan (or such other bonus plan maintained by the Company for its senior executives). The actual bonus received will be calculated using the Executive’s actual earned base salary during the applicable fiscal year.

 

(ii)  In addition to the bonus described above, with respect to each fiscal year of the Company during the Term, the Executive will be eligible to share with other members of senior management of the Company, in a percentage to be determined by the Board, an incremental bonus pool of 10% of the amount of annual EBITDA in excess of a second, higher annual EBITDA target for such fiscal year as set forth in the Company’s annual management plan pursuant to the Mattress Firm Holding Corp. Executive Annual Incentive Plan (or such other bonus plan maintained by the Company for its senior executives) (the “Maximum Annual EBITDA Target”).

 

(iii) The Annual EBITDA Target and the Maximum Annual EBITDA Target for each fiscal year shall be determined annually by the Board or the Compensation Committee of the Board in good faith. Whether the Annual EBITDA Target or the Maximum EBITDA Target for any fiscal year has been achieved, in whole or in part, will be determined by the Board or the Compensation Committee of the Board.

 

(iv) Any bonus payable hereunder for an applicable fiscal year shall be paid after the Board has reviewed the Company’s final audited consolidated financial statements for the applicable fiscal year, provided, however, that the bonus payable for a fiscal year shall be paid no later than the date that is two and one-half months after the end of the calendar year in which such fiscal year ended. The Executive must be employed by the Company on the last day of the applicable fiscal year for which a bonus is payable hereunder in order to receive any such bonus for such fiscal year. If for any reason other than the Company’s termination of the Executive’s employment for Cause or the Executive’s resignation without Good Reason, the employment of the Executive terminates on or after the last day of any fiscal year for which a bonus is payable hereunder but before such bonus has been paid, the Executive shall be paid such bonus in accordance with this Section 5(b)(iv) (including, for the avoidance of doubt, in the event that the employment of the Executive is terminated due to the provision of notification pursuant to Section 3 that the Term will not continue beyond its then scheduled expiration date).

 

(v) On the first payroll date following the date hereof, the Company shall pay the Executive a cash bonus equal to the product of (A) the Executive’s target annual bonus under the Subsidiary’s bonus plan for the Subsidiary’s fiscal year in which the closing of the transactions contemplated by the Purchase Agreement occurs, (B) multiplied by a fraction, (x) the numerator of which is the number of days from the first day of such fiscal year to the date hereof, and (y) the denominator of which is 365.

 

(c) Expenses. The Company shall pay or reimburse the Executive for ordinary and necessary business expenses incurred by him in the performance of his duties contemplated hereby in accordance with the Company’s usual policies upon receipt from the Executive of written substantiation of such expenses in accordance with the Company’s usual policies. Such payments under this Section 5(c) shall be made within ten (10) business days after the delivery of the Executive’s written request for the payment accompanied by such evidence of fees and expenses incurred as the Company may reasonably require, provided that such request is made no later than thirty (30) days after such expense is incurred. The amount of expenses eligible for reimbursement pursuant to this Section 5(c) during a given taxable year of the Executive shall not affect the amount of expenses eligible for reimbursement in any other taxable year of the Executive. The right to reimbursement pursuant to this Section 5(c) is not subject to liquidation or exchange for another benefit.  In addition, the Company shall provide Executive a Company credit card,

 

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subject to the applicable policies of the Company, including the Travel and Expense Reimbursement Policy.

 

(d)  Vacation and Other Time Off. The Executive shall be entitled to twenty (20) days of vacation per year, accrued in accordance with the Company’s vacation policy, prorated for any partial years of service.

 

(e) Benefits. During the remainder of the Term, the Executive shall be entitled to participate in all medical, dental, disability insurance, life insurance, retirement, savings and any other employee benefit plans or programs (other than a car allowance) which are otherwise generally made available by the Company to its senior executives; provided, however, that the Company shall be entitled to amend or terminate any employee benefit plans which are applicable generally to the Company’s senior executives, officers or other employees.

 

(f) Signing Bonus. As a further incentive to the Executive to accept and continue employment with the Company, the Executive shall receive a cash bonus equal to $300,000 (the “Signing Bonus”), payable in four equal quarterly installments, in arrears, commencing as soon as administratively feasible under the Payroll Policies.

 

Section 6. Equity Participation. The Executive shall be eligible to receive equity grants under the Mattress Firm Holding Corp. 2011 Omnibus Incentive Plan as may be awarded by the Compensation Committee of the Board from time to time.  Notwithstanding the foregoing, subject to the approval of the Compensation Committee of the Board, on the date hereof, the Executive shall receive an equity grant having an aggregate equivalent fair value on the date of grant equal to $350,000, (i)one-third of which shall be awarded in the form of time-based stock options, vesting in equal annual installments over four years, (ii) one-third of which shall be awarded in the form of shares of restricted stock, vesting in equal annual installments over four years and (iii) one-third of which shall be awarded in the form of restricted stock, vesting in equal annual installments over four years provided that the specified annual stock price increase targets are satisfied. The terms of each equity grant shall be subject to the approval of the Compensation Committee of the Board and shall be identical to those of equity grants made to the Company’s executive officers (provided that the foregoing shall not require the participation of the Executive in any special equity grants to one or more executive officers that may be approved from time to time by the Compensation Committee of the Board).  The Executive shall not participate in the general equity grant expected to be awarded by the Compensation Committee of the Board in September 2016.

 

Section 7. Termination. The Executive’s employment hereunder may be terminated as follows:

 

(a) Upon Disability.

 

(i) If during the Term, the Executive shall become physically or mentally disabled, whether totally or partially, either permanently or so that the Executive, in the good faith judgment of the Board based on the opinion of a physician selected by the Board who may but need not be the Executive’s normal treating physician, is unable as a result of such disability, with or without a reasonable accommodation, to substantially and competently perform his duties hereunder for a period of ninety (90) consecutive days or for one hundred twenty (120) days during any six-month period (a “Disability”), the Company may terminate the Executive’s employment hereunder. In order to assist the Board in making that determination, the Executive shall, as reasonably requested by the Board, (A) make himself available for medical examinations by one or more physicians chosen by the Board and (B) use his best efforts to cause his own physician(s) to be available to discuss with the Board such Disability.

 

(ii) Upon termination of the Executive’s employment for Disability, the Company shall not be obligated to make any salary, bonus or other payments or to provide any benefits under this Agreement (other than payments in respect of the Base Salary then in effect for services rendered or expenses incurred through the date of such termination or accrued and unpaid benefits pursuant to any medical, dental, disability insurance, life insurance, retirement, savings or any other

 

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employee benefit plans or programs in which the Executive participates on the Executive’s last day of employment hereunder, which shall be paid in accordance with the Company’s plans and applicable law (collectively, “Accrued Termination Obligations”)); provided, however, that, in addition to the Accrued Termination Obligations, the Company shall (A) pay to the Executive, or the legal representative of the Executive, the Base Salary at the rate in effect on the date of termination (less any amounts that the Executive receives pursuant to any Company-sponsored long-term disability insurance policy for the Executive as and if in effect at the date of termination) in equal installments in accordance with the Payroll Policies for a period of twelve (12) months following such termination, (B) reimburse the Executive for the premiums the Executive pays for any continued medical and dental coverage for the Executive and the Executive’s eligible dependents under the Company’s group health plans for twelve (12) months following the date of such termination as provided in Section 7(j) and (C) if applicable, continue to provide disability insurance coverage for the Executive to the extent necessary to continue benefits which the Executive became entitled to receive prior to the termination of his employment with the Company; and provided, further, that the Company shall be entitled to amend or terminate any plans which are applicable generally to the Company’s senior executives, officers or other employees. If at the time of termination of employment accrued vacation is paid out under the Company’s policies as then generally applicable to senior executives, then such accrued vacation shall be treated for all purposes of this Agreement as an Accrued Termination Obligation hereunder to the extent such accrued vacation is otherwise payable under such policies. If the Executive is not a “specified employee” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and Final Department of Treasury Regulations issued thereunder (collectively, “Section 409A”) at the time of termination (“Specified Employee”), and the Executive has timely signed and delivered to the Company, by the deadline established by the Company, a general release of claims in form and substance reasonably satisfactory to the Company (a “Release”), which has become irrevocable by the time set forth below, the Company shall pay the Executive the cash severance benefits described in clause (A) in accordance with the Payroll Policies commencing on the first payroll date under the Payroll Policies that coincides with or immediately follows the date that is sixty (60) days following the date of the Executive’s “separation from service” within the meaning of Section 409A (“Separation From Service”). The Executive will not be permitted to specify the year in which his payment will be made. If the 60-day period spans two taxable years of the Executive, the cash severance benefits will begin to be paid in the later of such taxable years. In the event that the Company is described in Section 409A(a)(2)(B)(i) of the Code and the Executive is a Specified Employee and the Executive has timely signed and delivered to the Company, by the deadline established by the Company, a Release, which has become irrevocable by the time set forth below, the Company shall pay the Executive the cash severance benefits described in clause (A) in accordance with the Payroll Policies; provided, however, that the payments for the first six (6) months, to the extent (if any) such payments are subject to Section 409A of the Code, shall be accumulated and paid to the Executive on the date that is six (6) months and one day following the date of the Executive’s Separation From Service to the extent that earlier payment would result in adverse tax consequences under Section 409A. Whether the Executive is or is not a Specified Employee, the Executive will not be paid the cash severance benefits described in clause (A) or entitled to the benefits described in clause (B) (except for the Executive’s rights under section 4980B of the Code and the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”)) and the Executive shall forfeit any right to such payments and benefits, unless (i) the Executive has signed and delivered to the Company the Release and (ii) the period for revoking the Release shall have expired (in the case of both clauses (i) and (ii)) prior to the date that is sixty (60) days following the date of the Executive’s Separation From Service.

 

(b) Upon Death.

 

(i) If the Executive dies during the Term, the Executive’s employment hereunder shall automatically terminate as of the close of business on the date of his death.

 

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(ii) Upon termination of the Executive’s employment as result of the Executive’s death, the Company shall not be obligated to make any salary, bonus or other payments or to provide any benefits under this Agreement (other than the Accrued Termination Obligations); provided, however, that, in addition to the Accrued Termination Obligations, the Company shall pay to the Executive’s estate the Base Salary at the rate in effect on the date of termination in equal installments in accordance with the Payroll Policies for a period of twelve (12) months. These installment payments shall be paid in accordance with the Payroll Policies commencing on the first payroll date under the Payroll Policies that coincides with or immediately follows the date of the Executive’s death.

 

(c) For Cause. The Company may terminate the Executive’s employment hereunder at any time, effective immediately upon written notice to the Executive, for Cause (as defined below) and all of the Executive’s rights to payments and any other benefits otherwise due hereunder (other than Accrued Termination Obligations) shall cease upon such termination. The Company shall have “Cause” for termination of the Executive if any of the following has occurred:

 

(i) the Executive’s dishonesty or bad faith in connection with the performance of his duties;

 

(ii) a refusal or failure by the Executive to use his reasonable efforts to perform duties of a reasonably objective standard that are consistent with the office(s) held by him as requested by the Board which would not give rise to Good Reason and which is not cured within thirty (30) days after written notice is delivered by the Board to the Executive;

 

(iii) the Executive’s conviction of a felony;

 

(iv) the failure of the Executive to notify the Board of any material relationships between him and/or any member of his immediate family with any person or entity with whom the Company or any of its subsidiaries has a material business relationship; or

 

(v) a material breach of the provisions of Section 8, Section 9 or Section 10 of this Agreement by the Executive.

 

(d) Without Cause.

 

(i) The Company may terminate the Executive’s employment hereunder without Cause at any time upon written notice to the Executive. Upon such termination, the Executive shall, in addition to the Accrued Termination Obligations, have the right to receive from the Company, payable over twelve (12) months in accordance with the Payroll Policies (all such payments, collectively, the “Severance Payments”), (A) the Base Salary at the rate in effect on the date of termination, and (B) solely if such termination occurs prior to the first anniversary of the date of this Agreement, an additional $300,000. In addition, Executive shall receive reimbursement from the Company for the premiums the Executive pays for any continued medical and dental coverage for the Executive and the Executive’s eligible dependents under the Company’s group health plans for twelve (12) months following the date of such termination as provided in Section 7(j); provided, however, that the Company shall be entitled to amend or terminate any plans which are applicable generally to the Company’s senior executives, officers or other employees. Notwithstanding the foregoing, if the Executive accepts other employment, the Company’s obligation under Section 7(j) to reimburse the Executive for the premiums paid by the Executive for COBRA Coverage (as that term is defined below in Section 7(j)) shall immediately cease upon Executive’s becoming eligible to participate in comparable medical and dental coverage pursuant to such other employer’s plans, subject to his right to continue coverage at the Executive’s own expense to the extent required under COBRA. If the Executive is not a Specified Employee as of the date of termination and the Executive has timely signed and delivered to the Company, by the deadline established by the Company, a Release, which has become irrevocable by the time set forth below, the Company shall pay the Executive the cash severance benefits described in clause

 

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(A) in accordance with the Payroll Policies commencing on the first payroll date under the Payroll Policies that coincides with or immediately follows the date that is sixty (60) days following the date of the Executive’s Separation From Service. The Executive will not be permitted to specify the year in which his payment will be made. If the 60-day period spans two taxable years of the Executive, the cash severance benefits will begin to be paid in the later of such taxable years. In the event that the Company is described in Section 409A(a)(2)(B)(i) of the Code and the Executive is a Specified Employee and the Executive has timely signed and delivered to the Company, by the deadline established by the Company, a Release, which has by that time become irrevocable, the Company shall pay the Executive the cash severance benefits described in clauses (A) and (B) in accordance with the Payroll Policies; provided, however, that the payments for the first six (6) months, to the extent (if any) such payments are subject to Section 409A, shall be accumulated and paid to the Executive on the date that is six (6) months and one day following the date of the Executive’s Separation From Service to the extent that earlier payment would result in adverse tax consequences under Section 409A. Whether the Executive is or is not a Specified Employee, the Executive will not be paid the cash severance benefits described in clause (A) or (B) or entitled to the benefits described in clause (C) (subject to the Executive’s rights under COBRA) and the Executive shall forfeit any right to such payments and benefits, unless (i) the Executive has signed and delivered to the Company the Release and (ii) the period for revoking the Release shall have expired (in the case of both clauses (i) and (ii)) prior to the date that is sixty (60) days following the date of the Executive’s Separation From Service.

 

(ii) It is further acknowledged and agreed by the parties that the actual damages to the Executive in the event of termination under this Section 7(d) would be difficult if not impossible to ascertain, and, therefore, the salary and benefit continuation provisions set forth in this Section 7(d) shall be the Executive’s sole and exclusive remedy in the case of termination under this Section 7(d) and shall, as liquidated damages or severance pay or both, be considered for all purposes in lieu of any other rights or remedies, at law or in equity, which the Executive may have in the case of such termination.

 

(e) Resignation Without Good Reason. The Executive shall have the right to terminate his employment hereunder upon one (1) month’s prior written notice to the Company, and upon such termination, all of the Executive’s rights to payments and any other benefits otherwise due hereunder (other than Accrued Termination Obligations) shall cease upon such termination.

 

(f) Resignation For Good Reason.

 

(i) The Executive shall have the right to terminate his employment hereunder at any time for Good Reason (as defined below). Upon such termination, the Executive shall, in addition to the Accrued Termination Obligations, have the right to receive from the Company the same Severance Payments and benefits that he would have been entitled to receive had the Executive been terminated by the Company in accordance with Section 7(d) above, payable as provided in Section 7(d) above (including the provisions of Section 7(d) relating to the requirement of a Release).  Notwithstanding the foregoing, if the Executive terminates his employment hereunder due to the Company’s relocation of the Executive’s principal place of employment to Houston, Texas, the Executive shall be entitled to receive the greater of (A) $2,100,000 less all amounts paid to the Executive pursuant to Sections 5(a) and 5(f) of this Agreement through the date of termination, or (B) the sum of (i) the Base Salary at the rate in effect on the date of termination, and (ii) solely if such termination occurs prior to the first anniversary of the date of this Agreement, an additional $300,000, which aggregate amount shall be in lieu of the Severance Obligations payable pursuant to Section 7(d) above, and shall be payable over twelve (12) months in accordance with the Payroll Policies if the Executive has timely signed and delivered to the Company, by the deadline established by the Company, a Release, which has by that time become irrevocable.  In such event, the Executive shall also be able to receive the COBRA Coverage benefits as described in Section 7(d), subject to the terms thereof.

 

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(ii) The Executive shall have “Good Reason” for termination of his employment hereunder if any of the following has occurred without the Executive’s prior written consent; provided that the Executive shall not be deemed to have Good Reason unless (i) notice of the event or condition purportedly giving rise to Good Reason is given by the Executive in writing no later than ninety (90) days after the time at which the event or condition purportedly giving rise to Good Reason first occurs or arises, (ii) there does not exist an event or condition which could serve as the basis of a termination of the Executive’s employment for Cause, (iii) the Company has had thirty (30) days from the date written notice of such termination is given (the “Cure Period”) to cure such event or condition and has not done so and (iv) the Executive resigns no later than ninety (90) days following expiration of the Cure Period:

 

(A) a material diminution in Executive’s duties or authority;

 

(B) any reduction in the Base Salary, material perquisites (including vacation allowance) or the overall level of other benefits aside from (A) general changes made to benefit plans available to the employees or senior management of the Company for which the Executive is eligible or for any reductions required by law, and (B) any such reduction which is materially commensurate with any such reduction borne by the Chief Executive Officer of the Company;

 

(C) if, in respect of any fiscal year commencing after December 31, 2015, Executive’s total target compensation package (including annual base salary, cash bonus at target levels and grant date fair value of long-term equity awards) is less than $1,250,000;

 

(D) relocation of the Executive’s principal place of employment more than twenty-five (25) miles from its location as of the date of this Agreement; or

 

(E) a material breach by the Company of this Agreement.

 

Notwithstanding the foregoing, the Executive shall not have “Good Reason” to terminate his employment if, after full reasonable disclosure by the Company of the relevant applicable facts and circumstances, he has consented in writing to any event set forth above. For the avoidance of doubt, a disagreement between the Executive and the Board with respect to the policies and strategies adopted or approved by the Board with respect to the Company’s business and affairs, including without limitation matters set forth in any annual operating budget or strategic plan approved by the Board, shall not constitute “Good Reason” for purposes of this Agreement.

 

(g) Upon Expiration of the Term. In the event the Company notifies the Executive that the Term will not automatically extend in accordance with Section 3 and there is an expiration of the Term at its regularly scheduled expiration date under Section 3 (a “Scheduled Expiration”), then, following the expiration of the Term and a concurrent termination of the Executive’s employment (regardless of whether such termination is by the Company or the Executive), the Executive shall, in addition to the Accrued Termination Obligations, have the right to receive from the Company, for nine (9) months, (A) continued payment of the Base Salary at the rate in effect at the expiration of the Term in accordance with the Payroll Policies and (B) reimbursement from the Company for the premiums the Executive pays for any continued medical and dental coverage for the Executive and the Executive’s eligible dependents under the Company’s group health plans for nine (9) months following the date of such expiration of the Term and such concurrent termination as provided in Section 7(j); provided, however, that the Company shall be entitled to amend or terminate any plans which are applicable generally to the Company’s senior executives, officers or other employees. Notwithstanding the foregoing, if the Executive accepts other employment, the Company’s obligation under Section 7(j) to reimburse the Executive for the premiums paid by the Executive for COBRA Coverage (as that term is defined below in Section 7(j)) shall immediately cease upon Executive’s becoming eligible to participate in comparable medical and dental coverage pursuant to such other employer’s plans, subject to his right to continue coverage at the Executive’s own expense to the extent required under COBRA. If the Executive is not a Specified Employee as of expiration of the Term and the Executive has timely signed and delivered to the Company,

 

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by the deadline established by the Company, a Release, which has by that time become irrevocable, the Company shall pay the Executive the cash severance benefits described in clause (A) in the event of a Scheduled Expiration and such concurrent termination in accordance with the Payroll Policies commencing on the first payroll date under the Payroll Policies that coincides with or immediately follows the date that is sixty (60) days following the date of the Executive’s Separation From Service. The Executive will not be permitted to specify the year in which his payment will be made. If the 60-day period spans two taxable years of the Executive, the cash severance benefits will begin to be paid in the later of such taxable years. In the event that the Company is described in Section 409A(a)(2)(B)(i) of the Code and the Executive is a Specified Employee and the Executive has timely signed and delivered to the Company, by the deadline established by the Company, a Release, which has by that time become irrevocable, the Company shall pay the Executive the cash severance benefits described in clause (A) in the event of a Scheduled Expiration and such concurrent termination in accordance with the Payroll Policies; provided, however, that the payments for the first six (6) months, to the extent (if any) such payments are subject to Section 409A of the Code, shall be accumulated and paid to the Executive on the date that is six (6) months following the date of the Executive’s Separation From Service to the extent that earlier payment would result in adverse tax consequences under Section 409A. Whether the Executive is or is not a Specified Employee, the Executive will not be paid the cash severance benefits described in clause (A) or entitled to the benefits described in clause (B) (subject to the Executive’s rights under COBRA) and the Executive shall forfeit any right to such payments and benefits unless (i) the Executive has signed and delivered to the Company the Release and (ii) the period for revoking the Release shall have expired (in the case of both clauses (i) and (ii)) prior to the earlier of the deadline established by the Company or the applicable payment date (the date that is the first payroll date that coincides with or immediately follows the date that is sixty (60) days following the date of the Executive’s Separation From Service. For the avoidance of doubt, in no event shall Section 7(a)-(f) apply in the case of a termination covered by this Section 7(g) unless the Company prior to its notice shall have received notice of Good Reason from the Executive. For the avoidance of doubt, in the event that the Executive notifies the Company that he does not desire to extend the Term in accordance with Section 3 above, then all of the Executive’s rights to payments and any other benefits otherwise due hereunder (other than any rights that the Executive may have under Section 5(b)(vi) in accordance with its terms and, in the case of a concurrent termination of the Executive’s employment, the Accrued Termination Obligations) shall cease upon the expiration of the Term.

 

(h) Release. For the avoidance of doubt, as a condition to the payments under Section 7(a), 7(d), 7(f) or 7(g), the Executive (or the Executive’s or his estate’s representative, if the Executive is incompetent or dead) shall execute and deliver to the Company a Release executed and delivered first by the Company and then by the Executive and, subject thereto, become irrevocable within sixty (60) days following termination.  No payment or benefits under Section 7(a), 7(d), 7(f) or 7(g) shall be required to be paid or provided unless or until the foregoing release requirements are satisfied, including the expiration of the revocation period.  Prior to the date that is sixty (60) days following the date of the Executive’s Separation from Service, the Executive must have signed and delivered to the Company the Release and the revocation period shall have expired.  This Section 7(h) is not intended to have any effect on the Company’s obligations hereunder except as expressly set forth herein or the Executive’s rights under COBRA.

 

(i) Section 409A. This Agreement is intended to comply with the provisions of Section 409A of the Code, and shall be interpreted in a manner consistent with Section 409A, or, if applicable, an exclusion therefrom. For purposes of this Agreement, all references to “termination”, “termination of employment” and correlative phrases shall mean a Separation From Service. Each payment made under this Agreement shall be treated for the purposes of Section 409A as a separate payment and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments. Any reimbursements provided for in this Agreement shall be made consistent with the requirements of Section 1.409A-1(b)(9)(v) of the Treasury Regulations.

 

(j) Reimbursement of COBRA Premiums. If, at the time the Executive’s employment with the Company terminates under Section 7(a), (d) or (f) or at the time the Term expires due to the election of the Company pursuant to Section 3 not to extend the Term beyond its then scheduled expiration date, the Executive is an active participant in the Company’s group medical plan and/or the Company’s group dental plan (collectively, the “Group Health Plan”) and the Executive timely elects under COBRA to continue the

 

9

 

Executive’s and any qualifying dependent’s Group Health Plan coverage (“COBRA Coverage”) the Company will reimburse the Executive for the full amount of the premiums the Executive pays for COBRA Coverage under the Group Health Plan for up to the first 12 months the Executive maintains such COBRA Coverage (or for up to the first 9 months in the case the Term expires due to the election of the Company pursuant to Section 3 not to extend the Term beyond its then scheduled expiration date), subject, with respect to each month, to the Executive’s submission of reasonable documentation that he has paid such premium, if reasonably requested by the Company. Any reimbursements by the Company to the Executive required under this Section 7(j) shall be made on the last day of each month the Executive pays the amount required for such COBRA Coverage, for up to the first 12 months of COBRA Coverage if the Executive’s employment with the Company terminates under Section 7(a), (d) or (f) or for up to the first nine (9) months in the case the Term expires due to the election of the Company pursuant to Section 3 not to extend the Term beyond its then scheduled expiration date. If the Executive is a Specified Employee and the benefits specified in this Section 7(j) are taxable to the Executive and not otherwise exempt from Section 409A then any amounts to which the Executive would otherwise be entitled under this Section 7(j) during the first six (6) months following the date of the Executive’s Separation From Service shall be accumulated and paid to the Executive on the date that is six (6) months following the date of the Executive’s Separation From Service. Except for any reimbursements under the applicable Group Health Plan that are subject to a limitation on reimbursements during a specified period, the amount of expenses eligible for reimbursement under this Section 7(j), or in-kind benefits provided, during the Executive’s taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year of the Executive. The Executive’s right to reimbursement or in-kind benefits pursuant to this Section 7(j) shall not be subject to liquidation or exchange for another benefit. Subject to the Executive’s Group Health Plan continuation rights under COBRA, the benefits listed in this Section 7(j) shall be reduced to the extent benefits of the same type are received by the Executive, the Executive’s spouse or any eligible dependent from any other person during such period, and provided, further, that the Executive shall have the obligation to notify the Company that the Executive or his spouse or other eligible dependent is receiving such benefits. The Company shall retain the discretion to reasonably modify the manner in which the benefits described in this Section 7(j) are provided by the Company to the Executive to the extent reasonably necessary to comply with applicable law; provided, however, that the Company shall make such modifications so as to allow the Executive to continue to receive to the maximum extent possible the economic benefits contemplated by this Section 7(j).

 

Section 8. Protection of Confidential Information; Non-Competition; Non-Solicitation.

 

(a) Acknowledgment. The Executive agrees and acknowledges that in the course of rendering services to the Company and its clients and customers he will acquire access to and become acquainted with confidential information about the professional, business and financial affairs of the Company, its subsidiaries and Affiliates that is non-public, confidential or proprietary in nature. The Executive acknowledges that the Company is engaged in a highly competitive business and the success of the Company in the marketplace depends upon its good will and reputation. The Executive agrees and acknowledges that reasonable limits on his ability to engage in activities competitive with the Company are warranted to protect its substantial investment in developing and maintaining its status in the marketplace, reputation and goodwill. The Executive recognizes that in order to guard the legitimate interests of the Company, it is necessary for it to protect all confidential information. The existence of any claim or cause of action by the Executive against the Company shall not constitute and shall not be asserted as a defense to the enforcement by the Company of this Agreement.

 

(b) Confidential Information. During and at all times after the Term, the Executive shall keep secret all non-public information, matters and materials of the Company (including the Subsidiary, any other subsidiaries or Affiliates), including, but not limited to, know-how, trade secrets, mail order and customer lists, vendor or supplier information, pricing policies, operational methods, any information relating to the Company’s (including the Subsidiary’s, any other subsidiaries’ or Affiliates’) products or product development, processes, product specifications and formulations, artwork, designs, graphics, services, budgets, business and financial plans, marketing and sales plans and techniques, employee lists and other business, financial, commercial and technical information of the Company (including the Subsidiary, any other subsidiaries and Affiliates) (collectively, the “Confidential Information”), to which he

 

10

 

has had or may have access and shall not use or disclose such Confidential Information to any person other than (i) the Company, its authorized employees and such other persons to whom the Executive has been instructed to make disclosure by the Board or the Chief Executive Officer of the Company, or to the extent necessary or desirable in the course of the Executive’s service to the Company or as otherwise expressly required in connection with court process, (ii) as may be required by law and then only after consultation with the Board to the extent possible or (iii) to the Executive’s personal advisors for purposes of enforcing or interpreting this Agreement, or to a court for the purpose of enforcing or interpreting this Agreement, and who in each case have been informed as to the confidential nature of such Confidential Information and, as to advisors, their obligation to keep such Confidential Information confidential. “Confidential Information” shall not include any information which is in the public domain during the period of service of the Executive, provided such information is not in the public domain as a consequence of disclosure by the Executive in violation of this Agreement or by any other party in violation of a confidentiality or nondisclosure agreement with the Company. Upon termination of his employment for any reason or at such earlier time requested by the Board, the Executive shall deliver to the Company all documents, data, papers and records of any nature and in any medium (including, but not limited to, electronic media) in his possession or subject to his control that (x) belong to the Company or (y) contain or reflect any Confidential Information concerning the Company, its subsidiaries and Affiliates.

 

(c) Non-Competition. In addition to, and without limitation of, the Executive’s obligations under the Purchase Agreement, during the Term and, provided that the Executive is receiving the remuneration and other benefits to which he is entitled under Section 7(d), Section 7(f), and Section 7(g), thereafter for a period equal to twelve (12) months (without consideration of whether any termination benefits otherwise available to the Executive under Section 7 are eliminated as a result of Executive’s acceptance of other employment), the Executive shall not, in any capacity, anywhere in the United States or on the internet, whether for his own account or on behalf of any other person or organization, directly or indirectly, with or without compensation, (A) own, operate, manage, or control, (B) serve as an officer, director, partner, member, employee, agent, consultant, advisor or developer or in any similar capacity to or (C) have any financial interest in, or assist anyone else in the conduct of the business of any Competitor (as defined below); provided, however, that the Executive shall be permitted to own less than 5% of any class of publicly traded securities of any company. For purposes of this Section 8, “Competitor” means any person or entity engaged in or which proposes to engage in the business of the retail sale of mattresses.

 

(d) Non-Solicitation. In addition to, and without limitation of, the Executive’s obligations under the Purchase Agreement, during the Term and for a period of twelve (12) months thereafter, the Executive shall not, in any capacity, whether for his own account or on behalf of any other person or organization, directly or indirectly, with or without compensation, (i) solicit, divert or encourage any officers, directors or key employees of the Company (including the Subsidiary, any other subsidiary or Affiliate) to terminate his or her relationship with the Company (including the Subsidiary, any other subsidiary or Affiliate), or hire any such officer, director or key employee, (ii) solicit, divert or encourage any officers, directors or key employees of the Company (including the Subsidiary, any other subsidiary or Affiliate) to become officers, directors, employees, agents, consultants or representatives of another business, enterprise or entity, or (iii) influence, attempt to influence or otherwise cause any of the clients, vendors, distributors or business partners of the Company (including the Subsidiary, any other subsidiary or Affiliate) to transfer his, her or its business or patronage from the Company to any Competitor.

 

(e) Remedies for Breach. The Company and the Executive agree that the restrictive covenants contained in this Agreement are severable and separate, and the unenforceability of any specific covenant herein shall not affect the validity of any other covenant set forth herein. The Executive acknowledges that the Company will suffer irreparable harm as a result of a breach of such restrictive covenants by the Executive for which an adequate monetary remedy does not exist and a remedy at law may prove to be inadequate. Accordingly, in the event of any actual or threatened breach by the Executive of any provision of this Agreement, the Company shall, in addition to any other remedies permitted by law, be entitled to obtain remedies in equity, including, but not limited to, specific performance, injunctive relief, a temporary restraining order, and a preliminary or permanent injunction in any court of competent jurisdiction, and to prevent or otherwise restrain a breach of this Section 8 without the necessity of proving damages or posting a bond or other security, to the maximum extent permitted by applicable law. Such relief shall be in

 

11

 

addition to and not in substitution of any other remedies available to the Company. The Executive shall not defend on the basis that there is an adequate remedy at law, but the Executive shall be entitled to contest on the grounds that no such breach or threatened breach has occurred. In addition to and not in lieu of any other remedy that the Company may have under this Section 8 or otherwise, in the event of any breach of any provision of this Section 8, Section 9 or Section 10 during the period during which the Executive is entitled to receive payments and benefits pursuant to Section 7, such period shall be deemed to have terminated as of the date of such breach and the Executive shall not thereafter be entitled to receive any salary or other payments or benefits under this Agreement with respect to periods following such date.

 

(f) Modification. The parties agree and acknowledge that the duration, scope and geographic area of the covenants described in this Section 8 are fair, reasonable and necessary in order to protect the Confidential Information, goodwill and other legitimate interests of the Company and that adequate consideration has been received by the Executive for such obligations. The Executive further acknowledges that after termination of his employment with the Company for any reason, he will be able to earn a livelihood without violating the covenants described in this Section 8 and the Executive’s ability to earn a livelihood without violating such covenants is a material condition to his employment with the Company. If, however, for any reason any court of competent jurisdiction determines that the restrictions in this Section 8 are not reasonable, that consideration is inadequate or that the Executive has been prevented unlawfully from earning a livelihood, such restrictions shall be interpreted, modified or rewritten to include the maximum duration, scope and geographic area identified in this Section 8 as will render such restrictions valid and enforceable.

 

Section 9. Certain Agreements.

 

(a) Suppliers. The Executive does not have, and at any time during the Term shall not have, any employment with or any direct or indirect interest in (as owner, partner, shareholder, employee, director, officer, agent, consultant or otherwise) any supplier, landlord or vendor to the Company (including the Subsidiary, any other subsidiaries or Affiliates); provided, however, that the Executive shall be permitted to own less than five percent (5%) of any class of publicly traded securities of any company.

 

(b) Certain Activities. During the Term, the Executive shall not knowingly (i) without the prior approval of the Board give or agree to give, any gift or similar benefit of more than nominal value to any customer, supplier, or governmental employee or official or any other person who is or may be in a position to assist or hinder the Company in connection with any proposed transaction, which gift or similar benefit, if not given or continued in the future, might adversely affect the business or prospects of the Company, (ii) use any corporate or other funds for unlawful contributions, payments, gifts or entertainment, (iii) make any unlawful expenditures relating to political activity to government officials or others, (iv) establish or maintain any unlawful or unrecorded funds in violation of Section 30A of the Securities Exchange Act of 1934, as amended, and (v) accept or receive any unlawful contributions, payments, gifts, or expenditures.

 

Section 10. Intellectual Property. All copyrights, trademarks, trade names, service marks and all ideas, inventions, discoveries, secret processes and methods and improvements, together with any and all patents that may be issued thereon, and all other intangible or intellectual property rights that may be invented, conceived, developed or enhanced by Executive during the term of his employment that relate to the business or operations of the Company or any subsidiary or Affiliate thereof or that result from any work performed by the Executive for the Company or any such subsidiary or Affiliate shall be the sole property of the Company or such subsidiary or Affiliate, as the case may be, and Executive hereby waives any right or interest that he may otherwise have in respect thereof. Upon the reasonable request of the Company, Executive shall execute, acknowledge and deliver any instrument or document reasonably necessary or appropriate to give effect to this Section 10 and, at the Company’s cost, do all other acts and things reasonably necessary to enable the Company or such subsidiary or Affiliate, as the case may be, to exploit the same or to obtain patents or similar protection with respect thereto. All copyrightable works that the Executive creates shall be considered “work made for hire” and shall, upon creation, be owned exclusively by the Company.

 

Section 11.    Certain SEC Filings.  So long as the Executive remains an officer of the Company, the Company shall, at its sole cost and expense, prepare on behalf of the Executive any reports required to be filed by

 

12

 

the Executive under Section 16 or Section 13(d) of the Securities Exchange Act of 1934, as amended, regarding the Executive’s direct or indirect holdings or transactions in equity securities of the Company, so long as the Executive timely provides the Company all information required to prepare such reports.

 

Section 12. Notices. All notices or other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered personally, (b) upon confirmation of receipt when such notice or other communication is sent by facsimile, (c) one day after delivery to an overnight delivery courier, or (d) on the fifth (5th) day following the date of deposit in the United States mail if sent first class, postage prepaid, by registered or certified mail. The addresses for such notices shall be as follows:

 

(i) For notices and communications to MFHC and MFI:

Mattress Firm Holding Corp.
 5815 Gulf Freeway

Houston, Texas 77023
 Attn: William E. Watts

 

with a copy to:

Mattress Firm Holding Corp.
 5815 Gulf Freeway

Houston, Texas 77023
 Attn: General Counsel

 

(ii) For notices and communications to the Executive:

 

Adam Blank

1000 South Oyster Bay Road

Hicksville, NY 11801

 

with a copy to:

Gibson, Dunn & Crutcher LLP

200 Park Avenue

New York, NY 10166

Attn:  Sean P. Griffiths

 

Any party hereto may, by notice to the other, change its address for receipt of notices hereunder.

 

Section 13. General.

 

(a) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof.

 

(b) Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, THE PARTIES HERETO HEREBY WAIVE AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT TO ANY CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF AND/OR THE EXECUTIVE’S EMPLOYMENT WITH THE COMPANY OR SEPARATION THEREFROM. THE EXECUTIVE ACKNOWLEDGES THAT HE HAS BEEN INFORMED BY THE COMPANY THAT THIS SECTION 13(b) CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THE COMPANY IS RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 13(b) WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

 

13

 

(c) Amendment; Waiver. This Agreement may be amended, modified, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument executed by the parties hereto or, in the case of a waiver, by the party waiving compliance. The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. No waiver by any party of the breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement.

 

(d) Successors and Assigns. This Agreement shall be binding upon the Executive, without regard to the duration of his employment by the Company or reasons for the cessation of such employment, and inure to the benefit of his administrators, executors, heirs and assigns, although the obligations of the Executive are personal and may be performed only by him. The Company may assign this Agreement and its rights, together with its obligations, hereunder in connection with any sale, transfer or other disposition of all or substantially all of its assets or business(es), whether by merger, consolidation or otherwise. This Agreement shall also be binding upon and inure to the benefit of the Company and its subsidiaries, successors and assigns.

 

(e) Withholding. The Company shall be entitled to withhold from any payments or deemed payments any amount of withholding required by law.

 

(f) Counterparts; Effectiveness. This Agreement may be executed in multiple counterparts, each of which shall be considered to have the force and effect of an original and all of which together shall be considered one and the same agreement, and will become effective when each of the Company and the Executive receives a counterpart hereof that has been executed by the other.

 

(g) Severability. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative.

 

(h) Effective Time; Entire Agreement. This Agreement constitutes the entire agreement between the Executive and the Company and any of their respective affiliates with respect to the terms and conditions of the Executive’s employment with the Company and his rights and obligations as an equity holder of Holdings and supersedes all prior agreements, arrangements, promises and understandings, whether written or oral, between the Executive and the Company and any of their respective affiliates with respect to those subject matters.  The Executive and the Company hereby acknowledge and agree that that certain Employment Agreement dated March 30, 2012 between the Executive and the Subsidiary and all other prior employment agreements between the Executive and the Subsidiary or any of its Affiliates are hereby terminated and cancelled, and the Executive waives any and all severance payments he may have been entitled to thereunder.

 

(Signatures on following page.)

 

14

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

	
 
    	
MATTRESS FIRM HOLDING   CORP.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Alex Weiss
    
	
 
    	
Name:
    	
Alex   Weiss
    
	
 
    	
Title:
    	
Chief   Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
MATTRESS   FIRM, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Alex Weiss
    
	
 
    	
Name:
    	
Alex   Weiss
    
	
 
    	
Title:
    	
Chief   Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Adam Blank
    
	
 
    	
Adam Blank
    

 

15pure_EX10_1

		

			Exhibit 10.1

		

		
			Amended and Restated
		

		
			 
		

		
			PURE Bioscience
		

		
			 
		

		
			2007 Equity Incentive Plan
		

		
			 
		

		
			 
		

		

		 

 

		

			Table of Contents

		

		

			 

		

		

			 

		

	
					
						 

					
					
						 

					
					
						 

					
					
						Page

				
	
					
						1.      ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

					
1
				
	
					
						        1.1     Establishment

					
1
				
	
					
						        1.2     Purpose.

					
1
				
	
					
						        1.3     Term of Plan

					
1
				
	
					
						2.      DEFINITIONS AND CONSTRUCTION.

					
1
				
	
					
						        2.1     Definitions

					
1
				
	
					
						        2.2     Construction

					
7
				
	
					
						3.      ADMINISTRATION.

					
7
				
	
					
						        3.1     Administration by the Committee

					
7
				
	
					
						        3.2     Authority of Officers

					
7
				
	
					
						        3.3     Administration with Respect to Insiders

					
7
				
	
					
						        3.4     Committee Complying with Section 162(m)

					
7
				
	
					
						        3.5     Powers of the Committee

					
7
				
	
					
						        3.6     Indemnification

					
9
				
	
					
						        3.7     Arbitration

					
9
				
	
					
						        3.8     Repricing Prohibited

					
9
				
	
					
						4.     SHARES SUBJECT TO PLAN.

					
9
				
	
					
						        4.1     Maximum Number of Shares Issuable

					
9
				
	
					
						        4.2     Adjustments for Changes in Capital Structure

					
10
				
	
					
						5.     ELIGIBILITY AND AWARD LIMITATIONS.

					
11
				
	
					
						        5.1     Persons Eligible for Awards

					
11
				
	
					
						        5.2     Participation

					
11
				
	
					
						        5.3     Incentive Stock Option Limitations.

					
11
				
	
					
						        5.4     Award Limits.

					
12
				
	
					
						6.     TERMS AND CONDITIONS OF OPTIONS.

					
12
				
	
					
						        6.1     Exercise Price

					
12
				
	
					
						        6.2     Exercisability and Term of Options.

					
13
				
	
					
						        6.3     Payment of Exercise Price.

					
13
				
	
					
						        6.4     Effect of Termination of Service.

					
14
				
	
					
						        6.5     Transferability of Options

					
14
				

		 

		

			i

		

 

		

			Table of Contents

		

		

			(continued)

		

		

			 

		

	

      

         

      

    	

       

    	

       

    	

      

        Page

      

    
	
					
						7.     TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS.

					
15
				
	
					
						        7.1     Types of SARs Authorized

					
15
				
	
					
						        7.2     Exercise Price

					
15
				
	
					
						        7.3     Exercisability and Term of SARs

					
15
				
	
					
						        7.4     Deemed Exercise of SARs

					
15
				
	
					
						        7.5     Effect of Termination of Service

					
15
				
	
					
						        7.6     Nontransferability of SARs

					
15
				
	
					
						8.     TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS.

					
16
				
	
					
						        8.1     Types of Restricted Stock Awards Authorized

					
16
				
	
					
						        8.2     Purchase Price

					
16
				
	
					
						        8.3     Purchase Period

					
16
				
	
					
						        8.4     Vesting and Restrictions on Transfer

					
16
				
	
					
						        8.5     Voting Rights; Dividends and Distributions

					
16
				
	
					
						        8.6     Effect of Termination of Service

					
17
				
	
					
						        8.7     Nontransferability of Restricted Stock Award Rights

					
17
				
	
					
						9.     TERMS AND CONDITIONS OF PERFORMANCE AWARDS.

					
17
				
	
					
						        9.1     Types of Performance Awards Authorized

					
17
				
	
					
						        9.2     Initial Value of Performance Shares and Performance Units

					
17
				
	
					
						        9.3     Establishment of Performance Period, Performance Goals and Performance Award Formula

					
18
				
	
					
						        9.4     Measurement of Performance Goals

					
18
				
	
					
						        9.5     Settlement of Performance Awards

					
19
				
	
					
						        9.6     Voting Rights; Dividend Equivalent Rights and Distributions

					
20
				
	
					
						        9.7     Effect of Termination of Service

					
20
				
	
					
						        9.8     Nontransferability of Performance Awards

					
21
				
	
					
						10.   TERMS AND CONDITIONS OF RESTRICTED STOCK UNIT AWARDS.

					
21
				
	
					
						        10.1   Grant of Restricted Stock Unit Awards

					
21
				
	
					
						        10.2   Vesting

					
21
				
	
					
						        10.3   Voting Rights, Dividend Equivalent Rights and Distributions

					
21
				
	
					
						        10.4   Effect of Termination of Service

					
22
				

		 

		

			ii

		

 

		

			Table of Contents

		

		

			(continued)

		

		

			 

		

	

      

         

      

    	

       

    	

       

    	

      

        Page

      

    
	
					
						        10.5   Settlement of Restricted Stock Unit Awards

					
22
				
	
					
						        10.6   Nontransferability of Restricted Stock Unit Awards

					
22
				
	
					
						11.   DEFERRED COMPENSATION AWARDS.

					
22
				
	
					
						        11.1   Establishment of Deferred Compensation Award Programs

					
22
				
	
					
						        11.2   Terms and Conditions of Deferred Compensation Awards

					
23
				
	
					
						12.   OTHER STOCK-BASED AWARDS.

					
24
				
	
					
						13.   EFFECT OF CHANGE IN CONTROL ON OPTIONS AND SARS.

					
24
				
	
					
						        13.1   Accelerated Vesting

					
24
				
	
					
						        13.2   Assumption or Substitution

					
24
				
	
					
						        13.3   Effect of Change in Control on Restricted Stock and Other Type of Awards

					
25
				
	
					
						14.   COMPLIANCE WITH SECURITIES LAW.

					
25
				
	
					
						15.   TAX WITHHOLDING.

					
26
				
	
					
						        15.1   Tax Withholding in General

					
26
				
	
					
						        15.2   Withholding in Shares

					
26
				
	
					
						16.   AMENDMENT OR TERMINATION OF PLAN.

					
26
				
	
					
						17.   Miscellaneous Provisions.

					
26
				
	
					
						        17.1   Repurchase Rights

					
26
				
	
					
						        17.2   Provision of Information

					
27
				
	
					
						        17.3   Rights as Employee, Consultant or Director

					
27
				
	
					
						        17.4   Rights as a Shareholder

					
27
				
	
					
						        17.5   Fractional Shares

					
27
				
	
					
						        17.6   Severability

					
27
				
	
					
						        17.7   Beneficiary Designation

					
27
				
	
					
						        17.8   Unfunded Obligation

					
27
				
	
					
						        17.9   Clawback or Recoupment.

					
28
				
	
					
						CALIFORNIA ADDENDUM TO PURE BIOSCIENCE 2007 EQUITY INCENTIVE PLAN

					
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Amended and Restated
		

		
			PURE Bioscience
		

		
			2007 Equity Incentive Plan
		

		
			 
		

		
			1.         Establishment, Purpose and Term of Plan.
		

		
			 
		

		
			1.1       Establishment.    This Amended and Restated PURE Bioscience 2007 Equity Incentive Plan (the “Plan”) was originally adopted in January 2007.   This amendment and restatement of the Plan was approved by the Board of Directors of the Company on December 9, 2015, and shall become effective on February 4, 2016 (the date of such approval, the “Effective Date”), contingent upon approval of the Plan by the stockholders of the Company at the 2016 Annual Meeting of Stockholders scheduled to be held on the Effective Date.    
		

		
			 
		

		
			1.2       Purpose.  The purpose of the Plan is to advance the interests of the Participating Company Group and its shareholders by providing an incentive to attract and retain the best qualified personnel to perform services for the Participating Company Group, by motivating such persons to contribute to the growth and profitability of the Participating Company Group, by aligning their interests with interests of the Company’s shareholders, and by rewarding such persons for their services by tying a significant portion of their total compensation package to the success of the Company.  The Plan seeks to achieve this purpose by providing for Awards in the form of Options, Stock Appreciation Rights, Restricted Stock Awards, Performance Shares, Performance Units, Restricted Stock Units, Deferred Compensation Awards and other Stock-Based Awards as described below.    
		

		
			 
		

		
			1.3       Term of Plan.  The Plan shall continue in effect until the earlier of its termination by the Board or the date on which all of the shares of Stock available for issuance under the Plan have been issued and all restrictions on such shares under the terms of the Plan and the agreements evidencing Awards granted under the Plan have lapsed.  However, Awards shall not be granted later than ten (10) years from the Effective Date.  The Company intends that the Plan comply with Section 409A of the Code (including any amendments to or replacements of such section), and the Plan shall be so construed.
		

		
			 
		

		
			2.         Definitions and Construction.
		

		
			 
		

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

		
			 
		

		
			(a)       “Affiliate” means (i) an entity, other than a Parent Corporation, that directly, or indirectly through one or more intermediary entities, controls the Company or (ii) an entity, other than a Subsidiary Corporation, that is controlled by the Company directly, or indirectly through one or more intermediary entities.  For this purpose, the term “control” (including the term “controlled by”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of the relevant entity, whether through the ownership of voting securities, by contract or otherwise; or shall have such other 
		

		
			
		

		 

		

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			meaning assigned such term for the purposes of registration on Form S‐8 under the Securities Act.
		

		
			 
		

		
			(b)       “Award” means any Option, SAR, Restricted Stock Award, Performance Share, Performance Unit, Restricted Stock Unit or Deferred Compensation Award or other Stock-Based Award granted under the Plan.
		

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

		
			(i)       an Ownership Change Event or a series of related Ownership Change Events (collectively, a “Transaction”) in which the shareholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting securities of the Company or, in the case of an Ownership Change Event described in Section 2.1(y)(iii), the entity to which the assets of the Company were transferred (the “Transferee”), as the case may be; or
		

		
			 
		

		
			(ii)       the liquidation or dissolution of the Company.
		

		
			 
		

		
			For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary corporations or other business entities.  The Board shall have the right to determine whether multiple sales or exchanges of the voting securities of the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive.
		

		
			 
		

		
			(f)       “Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated thereunder.
		

		
			 
		

		
			(g)       “Committee” means the Compensation Committee or other committee of the Board duly appointed to administer the Plan and having such powers as shall be specified by the Board.  If no committee of the Board has been appointed to administer the Plan, the Board shall exercise all of the powers of the Committee granted herein, and, in any event, the Board may in its discretion exercise any or all of such powers.  The Committee shall have the exclusive authority to administer the Plan and shall have all of the powers granted herein, including, without limitation, the power to amend or terminate the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law.  
		

		
			
		

		 

		

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			(h)       “Company” means PURE Bioscience, a California corporation, or any Successor.
		

		
			 
		

		
			(i)       “Consultant” means a person engaged to provide consulting or advisory services (other than as an Employee or a member of the Board) to a Participating Company.    
		

		
			 
		

		
			(j)       “Deferred Compensation Award” means an award of Stock Units granted to a Participant pursuant to Section 11 of the Plan.
		

		
			 
		

		
			(k)       “Director” means a member of the Board or of the board of directors of any Participating Company.
		

		
			 
		

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

		
			 
		

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

		
			 
		

		
			(n)       “Employee” means any person treated as an employee (including an Officer or a member of the Board who is also treated as an employee) in the records of a Participating Company and, with respect to any Incentive Stock Option granted to such person, who is an employee for purposes of Section 422 of the Code; provided, however, that neither service as a member of the Board nor payment of a director’s fee shall be sufficient to constitute employment for purposes of the Plan.  The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such individual’s employment or termination of employment, as the case may be.  For purposes of an individual’s rights, if any, under the Plan as of the time of the Company’s determination, all such determinations by the Company shall be final, binding and conclusive, notwithstanding that the Company or any court of law or governmental agency subsequently makes a contrary determination.
		

		
			 
		

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

		
			 
		

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

		
			 
		

		
			(i)       Except as otherwise determined by the Committee, if, on such date, the Stock is listed on a national or regional securities exchange or market system, the Fair Market Value of a share of Stock shall be the closing price of a share of Stock as quoted on such national or regional securities exchange or market system constituting the primary market for the Stock on the date of determination, as reported in The Wall Street Journal or such other source as the Company deems reliable.
		

		
			
		

		 

		

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			(ii)       Notwithstanding the foregoing, the Committee may, in its discretion, determine the Fair Market Value on the basis of the closing, high, low or average sale price of a share of Stock or the actual sale price of a share of Stock received by a Participant, on such date, the preceding trading day, the next succeeding trading day or an average determined over a period of trading days.  The Committee may vary its method of determination of the Fair Market Value as provided in this Section for different purposes under the Plan.
		

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

		
			(s)       “Non-Control Affiliate” means any entity in which any Participating Company has an ownership interest and which the Committee shall designate as a Non-Control Affiliate.
		

		
			 
		

		
			(t)        “Nonemployee Director” means a Director who is not an Employee.
		

		
			 
		

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

		
			 
		

		
			(v)        “Officer” means any person designated by the Board as an officer of the Company.
		

		
			 
		

		
			(w)       “Option” means the right to purchase Stock at a stated price for a specified period of time granted to a Participant pursuant to Section 6 of the Plan.  An Option may be either an Incentive Stock Option or a Nonstatutory Stock Option.
		

		
			 
		

		
			(x)       “Option Expiration Date” means the date of expiration of the Option’s term as set forth in the Award Agreement.
		

		
			 
		

		
			(y)       An “Ownership Change Event” shall be deemed to have occurred if any of the following occurs with respect to the Company:  (i) the direct or indirect sale or exchange in a single or series of related transactions by the shareholders of the Company of more than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange, or transfer of all or substantially all, as determined by the Board in its discretion, of the assets of the Company.
		

		
			
		

		 

		

			4

		

 

		

			 

		

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

		
			 
		

		
			(aa)       “Participant” means any eligible person who has been granted one or more Awards.
		

		
			 
		

		
			(bb)       “Participating Company” means the Company or any Parent Corporation, Subsidiary Corporation or Affiliate.
		

		
			 
		

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

		
			 
		

		
			(dd)       “Performance Award” means an Award of Performance Shares or Performance Units.
		

		
			 
		

		
			(ee)       “Performance Award Formula” means, for any Performance Award, a formula or table established by the Committee pursuant to Section 9.3 of the Plan which provides the basis for computing the value of a Performance Award at one or more threshold levels of attainment of the applicable Performance Goal(s) measured as of the end of the applicable Performance Period.
		

		
			 
		

		
			(ff)       “Performance Goal” means a performance goal established by the Committee pursuant to Section 9.3 of the Plan.
		

		
			 
		

		
			(gg)       “Performance Period” means a period established by the Committee pursuant to Section 9.3 of the Plan at the end of which one or more Performance Goals are to be measured.
		

		
			 
		

		
			(hh)       “Performance Share” means a bookkeeping entry representing a right granted to a Participant pursuant to Section 9 of the Plan to receive a payment equal to the value of a Performance Share, as determined by the Committee, based on performance.
		

		
			 
		

		
			(ii)       “Performance Unit” means a bookkeeping entry representing a right granted to a Participant pursuant to Section 9 of the Plan to receive a payment equal to the value of a Performance Unit, as determined by the Committee, based upon performance.
		

		
			 
		

		
			(jj)       “Restricted Stock Award” means an Award of Restricted Stock.
		

		
			 
		

		
			(kk)       “Restricted Stock Unit” or “Stock Unit” means a bookkeeping entry representing a right granted to a Participant pursuant to Section 10 or Section 11 of the Plan, respectively, to receive a share of Stock on a date determined in accordance with the provisions of Section 10 or Section 11, as applicable, and the Participant’s Award Agreement.
		

		
			 
		

		
			(ll)       “Restriction Period” means the period established in accordance with Section 8.4 of the Plan during which shares subject to a Restricted Stock Award are subject to Vesting Conditions.
		

		
			
		

		 

		

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			(mm)      “Rule 16b‐3” means Rule 16b‐3 under the Exchange Act, as amended from time to time, or any successor rule or regulation.
		

		
			 
		

		
			(nn)       “SAR” or “Stock Appreciation Right” means a bookkeeping entry representing, for each share of Stock subject to such SAR, a right granted to a Participant pursuant to Section 7 of the Plan to receive payment in any combination of shares of Stock or cash of an amount equal to the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR over the exercise price.
		

		
			 
		

		
			(oo)       “Section 162(m)” means Section 162(m) of the Code.
		

		
			 
		

		
			(pp)       “Securities Act” means the Securities Act of 1933, as amended.
		

		
			 
		

		
			(qq)       “Service” means a Participant’s employment or service with the Participating Company Group, whether in the capacity of an Employee, a Director or a Consultant.  Unless otherwise provided by the Committee, a Participant’s Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders such Service or a change in the Participating Company for which the Participant renders such Service, provided that there is no interruption or termination of the Participant’s Service.  Furthermore, a Participant’s Service shall not be deemed to have terminated if the Participant takes any military leave, sick leave, or other bona fide leave of absence approved by the Company.  However, if any such leave taken by a Participant exceeds ninety (90) days, then on the ninety-first (91st) day following the commencement of such leave the Participant’s Service shall be deemed to have terminated, unless the Participant’s right to return to Service is guaranteed by statute or contract.  Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, a leave of absence shall not be treated as Service for purposes of determining vesting under the Participant’s Award Agreement.  A Participant’s Service shall be deemed to have terminated either upon an actual termination of Service or upon the entity for which the Participant performs Service ceasing to be a Participating Company.  Subject to the foregoing, the Company, in its discretion, shall determine whether the Participant’s Service has terminated and the effective date of such termination.
		

		
			 
		

		
			(rr)       “Stock” means the common stock of the Company, as adjusted from time to time in accordance with Section 4.2 of the Plan.
		

		
			 
		

		
			(ss)       “Stock-Based Awards” means any award that is valued in whole or in part by reference to, or is otherwise based on, the Stock, including dividends on the Stock, but not limited to those Awards described in Sections 6 through 11 of the Plan.
		

		
			 
		

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

		
			 
		

		
			(uu)       “Successor” means a corporation into or with which the Company is merged or consolidated or which acquires all or substantially all of the assets of the Company and which is designated by the Board as a Successor for purposes of the Plan.  
		

		
			 
		

		
			(vv)       “Ten Percent Owner” means a Participant who, at the time an Option is granted to the Participant, owns stock possessing more than ten percent (10%) of the 
		

		 

		

			6

		

 

		

			 

		

		
			total combined voting power of all classes of stock of a Participating Company (other than an Affiliate) within the meaning of Section 422(b)(6) of the Code.
		

		
			 
		

		
			(ww)       “Vesting Conditions” means those conditions established in accordance with Section 8.4 or Section 10.2 of the Plan prior to the satisfaction of which shares subject to a Restricted Stock Award or Restricted Stock Unit Award, respectively, remain subject to forfeiture or a repurchase option in favor of the Company upon the Participant’s termination of Service.
		

		
			 
		

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

		
			 
		

		
			3.         Administration.
		

		
			 
		

		
			3.1       Administration by the Committee.  The Plan shall be administered by the Committee.  All questions of interpretation of the Plan or of any Award shall be determined by the Committee, and such determinations shall be final and binding upon all persons having an interest in the Plan or such Award.
		

		
			 
		

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

		
			 
		

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

		
			 
		

		
			3.4       Committee Complying with Section 162(m).  While the Company is a “publicly held corporation” within the meaning of Section 162(m), the Board may establish a Committee of “outside directors” within the meaning of Section 162(m) to approve the grant of any Award which might reasonably be anticipated to result in the payment of employee remuneration that would otherwise exceed the limit on employee remuneration deductible for income tax purposes pursuant to Section 162(m).
		

		
			 
		

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

		
			 
		

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

		
			 
		

		
			(b)       to determine the type of Award granted and to designate Options as Incentive Stock Options or Nonstatutory Stock Options;
		

		
			
		

		 

		

			7

		

 

		

			 

		

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

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

		
			(i)       without the consent of the affected Participant and notwithstanding the provisions of any Award Agreement to the contrary, to unilaterally substitute at any time a Stock Appreciation Right providing for settlement solely in shares of Stock in place of any outstanding Option, provided that such Stock Appreciation Right covers the same number of shares of Stock and provides for the same exercise price (subject in each case to adjustment in accordance with Section 4.2) as the replaced Option and otherwise provides substantially equivalent terms and conditions as the replaced Option, as determined by the Committee;
		

		
			 
		

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

		
			 
		

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

		
			
		

		 

		

			8

		

 

		

			 

		

		
			(l)       to delegate to any proper Officer the authority to grant one or more Awards, without further approval of the Committee, to any person eligible pursuant to Section 5, other than a person who, at the time of such grant, is an Insider; provided, however, that (i) the exercise price per share of each such Option shall be equal to the Fair Market Value per share of the Stock on the effective date of grant, and (ii) each such Award shall be subject to the terms and conditions of the appropriate standard form of Award Agreement approved by the Committee and shall conform to the provisions of the Plan and such other guidelines as shall be established from time to time by the Committee.
		

		
			 
		

		
			3.6       Indemnification.  In addition to such other rights of indemnification as they may have as members of the Board or the Committee or as officers or employees of the Participating Company Group, members of the Board or the Committee and any officers or employees of the Participating Company Group to whom authority to act for the Board, the Committee or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same.
		

		
			 
		

		
			3.7       Arbitration.  Any dispute or claim concerning any Awards granted (or not granted) pursuant to this Plan and any other disputes or claims relating to or arising out of the Plan shall be fully, finally and exclusively resolved by binding arbitration conducted pursuant to the Commercial Arbitration Rules of the American Arbitration Association.  By accepting an Award, Participants and the Company waive their respective rights to have any such disputes or claims tried by a judge or jury.    
		

		
			 
		

		
			3.8       Repricing and Reloading Prohibited.  Without the affirmative vote of holders of a majority of the shares of Stock cast in person or by proxy at a meeting of the shareholders of the Company at which a quorum representing a majority of all outstanding shares of Stock is present or represented by proxy, the Committee shall not approve a program providing for either (a) the cancellation of outstanding Options or SARs and the grant in substitution therefore of new Awards having a lower exercise price or (b) the amendment of outstanding Options or SARs to reduce the exercise price thereof.  This paragraph shall not be construed to apply to the issuance or assumption of an Award in a transaction to which Code section 424(a) applies, within the meaning of Section 424 of the Code.    
		

		
			 
		

		
			4.         Shares Subject to Plan.
		

		
			 
		

		
			4.1       Maximum Number of Shares Issuable.  Subject to adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be issued
		

		 

		

			9

		

 

		

			 

		

		
			under the Plan shall be four million six hundred twenty-five thousand (4,625,000) and shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof.  If an outstanding Award for any reason expires or is terminated or canceled without having been exercised or settled in full, or if unvested shares of Stock acquired pursuant to an Award subject to forfeiture or repurchase are forfeited or repurchased by the Company, the shares of Stock allocable to the terminated portion of such Award or such forfeited or repurchased shares of Stock shall again be available for issuance under the Plan.  In contrast, if the Company repurchases vested shares of Stock acquired or issuable pursuant to an Award, the repurchased shares of Stock shall not be available for future issuance under the Plan.  in addition, when a SAR settled in shares of Stock is exercised, the total number of shares subject to the SAR Agreement with respect to which the exercise occurs shall count against the limit, regardless of the number of shares actually issued in settlement of the SAR.  Further, shares used to pay the exercise price of an option shall not again become available for future grant or issuance under the Plan, andshares used to satisfy tax withholding obligations shall not become available for future grant or issuance under the Plan.  To the extent an Award is settled in cash rather than shares of Stock, such cash payment shall not reduce the number of shares available for issuance under the Plan.
		

		
			 
		

		
			4.2       Adjustments for Changes in Capital Structure.  Subject to any required action by the shareholders of the Company, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the shareholders of the Company in a form other than Stock (excepting normal cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate adjustments shall be made in the number and kind of shares subject to the Plan and to any outstanding Awards, in the Award limits set forth in Section 5.4, and in the exercise or purchase price per share under any outstanding Award in order to prevent dilution or enlargement of Participants’ rights under the Plan.  For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.”  If a majority of the shares which are of the same class as the shares that are subject to outstanding Awards are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the “New Shares”), the Committee may unilaterally amend the outstanding Options to provide that such Options are exercisable for New Shares.  In the event of any such amendment, the number of shares subject to, and the exercise price per share of, the outstanding Awards shall be adjusted in a fair and equitable manner as determined by the Board, in its discretion.  Any fractional share resulting from an adjustment pursuant to this Section 4.2 shall be rounded down to the nearest whole number.  The Committee in its sole discretion, may also make such adjustments in the terms of any Award to reflect, or related to, such changes in the capital structure of the Company or distributions as it deems appropriate, including modification of Performance Goals, Performance Award Formulas and Performance Periods.  The adjustments determined by the Committee pursuant to this Section 4.2 shall be final, binding and conclusive.
		

		
			
		

		 

		

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			5.         Eligibility and Award Limitations.
		

		
			 
		

		
			5.1       Persons Eligible for Awards.    Awards may be granted only to Employees, Consultants and Directors.  For purposes of the foregoing sentence, “Employees,” “Consultants” and “Directors” shall include prospective Employees, prospective Consultants and prospective Directors to whom Awards are offered to be granted in connection with written offers of an employment or other service relationship with the Participating Company Group; provided, however, that no Stock subject to any such Award shall vest, become exercisable or be issued prior to the date on which such person commences Service.
		

		
			 
		

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

		
			 
		

		
			5.3       Incentive Stock Option Limitations.
		

		
			 
		

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

		
			 
		

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

		
			
		

		 

		

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				 5.4
			

			
	
			
			       Award Limits.

		
			 
		

		
			(a)       Maximum Number of Shares Issuable Pursuant to Incentive Stock Options.    Subject to adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to the exercise of Incentive Stock Options shall not exceed four million six hundred twenty-five thousand (4,625,000) shares.  The maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to all Awards other than Incentive Stock Options shall be the number of shares determined in accordance with Section 4.1, subject to adjustment as provided in Section 4.2.
		

		
			 
		

		
			(b)       Section 162(m) Award Limits.  The following limits shall apply to the grant of any Award if, at the time of grant, the Company is a “publicly held corporation” within the meaning of Section 162(m).
		

		
			 
		

		
			(i)       Options and SARs.  Subject to adjustment as provided in Section 4.2, no Employee shall be granted within any fiscal year of the Company one or more Options or Freestanding SARs which in the aggregate are for more than four hundred sixty-two thousand five hundred (462,500) shares of Stock reserved for issuance under the Plan.
		

		
			 
		

		
			(ii)       Restricted Stock, Restricted Stock Unit Awards and Performance Shares.    Subject to adjustment as provided in Section 4.2, no Employee shall be granted within any fiscal year of the Company one or more Restricted Stock Awards or Restricted Stock Unit Awards, subject to Vesting Conditions based on the attainment of Performance Goals, or Performance Shares, for more than two hundred thirty-one thousand two hundred fifty (231,250) shares of Stock in the aggregate under the Plan.
		

		
			 
		

		
			(iii)       Performance Units.  Subject to adjustment as provided in Section 4.2, no Employee shall be granted Performance Units which could result in such Employee receiving more than five million dollars ($5,000,000) for each full fiscal year of the Company contained in the Performance Period for such Award.  No Participant may be granted more than one Performance Award for the same Performance Period.
		

		
			 
		

		
			6.         Terms and Conditions of Options.
		

		
			 
		

		
			Options shall be evidenced by Award Agreements specifying the number of shares of Stock covered thereby, in such form as the Committee shall from time to time establish.  No Option or purported Option shall be a valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement.  Award Agreements evidencing Options may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
		

		
			 
		

		
			6.1       Exercise Price.   The exercise price for each Option shall be established in the discretion of the Committee; provided, however, that (a) the exercise price per share shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the Option and (b) no Incentive Stock Option granted to a Ten Percent Owner shall have an exercise price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option.  Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
		

		 

		

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			exercise price lower than the minimum exercise price set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner qualifying under the provisions of Section 424(a) of the Code.
		

		
			 
		

		
			6.2       Exercisability and Term of Options.    
		

		
			 
		

		
			(a)       Option Vesting and Exercisability.  Options shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such Option; provided, however, that (a) no Option shall be exercisable after the expiration of ten (10) years after the effective date of grant of such Option, (b) no Incentive Stock Option granted to a Ten Percent Owner shall be exercisable after the expiration of five (5) years after the effective date of grant of such Option, and (c) no Option offered or granted to a prospective Employee, prospective Consultant or prospective Director may become exercisable prior to the date on which such person commences Service.  Subject to the foregoing, unless otherwise specified by the Committee in the grant of an Option, any Option granted hereunder shall terminate ten (10) years after the effective date of grant of the Option, unless earlier terminated in accordance with its provisions, or the terms of the Plan.
		

		
			 
		

		
			(b)       Participant Responsibility for Exercise of Option.  Each Participant is responsible for taking any and all actions as may be required to exercise any Option in a timely manner, and for properly executing any documents as may be required for the exercise of an Option in accordance with such rules and procedures as may be established from time to time.  By signing an Option Agreement each Participant acknowledges that information regarding the procedures and requirements for the exercise of any Option is available upon such Participant’s request.  The Company shall have no duty or obligation to notify any Participant of the expiration date of any Option.
		

		
			 
		

		
			6.3      Payment of Exercise Price.
		

		
			 
		

		
			(a)       Forms of Consideration Authorized.  Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option shall be made (i) in cash, by check or in cash equivalent, (ii) by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Participant having a Fair Market Value not less than the exercise price, (iii) at the discretion of the Administrator, by cashless or net exercise, (iv) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (v) by any combination thereof.  The Committee may at any time or from time to time grant Options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of consideration.
		

		
			 
		

		
			(b)       Limitations on Forms of Consideration.
		

		
			 
		

		
			(i)       Tender of Stock.  Notwithstanding the foregoing, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or attestation would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.  
		

		 

		

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			(ii)       Payment by Promissory Note.   No promissory note shall be permitted if the exercise of an Option using a promissory note would be a violation of any law.  Any permitted promissory note shall be on such terms as the Committee shall determine.  The Committee shall have the authority to permit or require the Participant to secure any promissory note used to exercise an Option with the shares of Stock acquired upon the exercise of the Option or with other collateral acceptable to the Company.  Unless otherwise provided by the Committee, if the Company at any time is subject to the regulations promulgated by the Board of Governors of the Federal Reserve System or any other governmental entity affecting the extension of credit in connection with the Company’s securities, any promissory note shall comply with such applicable regulations, and the Participant shall pay the unpaid principal and accrued interest, if any, to the extent necessary to comply with such applicable regulations.  
		

		
			 
		

		
			6.4      Effect of Termination of Service.
		

		
			 
		

		
			(a)       Option Exercisability.  Subject to earlier termination of the Option as otherwise provided herein and unless otherwise provided by the Committee, an Option shall be exercisable after a Participant’s termination of Service only during the applicable time periods provided in the Award Agreement.
		

		
			 
		

		
			(b)       Extension if Exercise Prevented by Law.   Notwithstanding the foregoing, unless the Committee provides otherwise in the Award Agreement, if the exercise of an Option within the applicable time periods is prevented by the provisions of Section 14 below, the Option shall remain exercisable until three (3) months (or such longer period of time as determined by the Committee, in its discretion) after the date the Participant is notified by the Company that the Option is exercisable, but in any event no later than the Option Expiration Date.
		

		
			 
		

		
			(c)       Extension if Participant Subject to Section 16(b).   Notwithstanding the foregoing, if a sale within the applicable time periods of shares acquired upon the exercise of the Option would subject the Participant to suit under Section 16(b) of the Exchange Act, the Option shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following the date on which a sale of such shares by the Participant would no longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day after the Participant’s termination of Service, or (iii) the Option Expiration Date.
		

		
			 
		

		
			6.5      Transferability of Options.  During the lifetime of the Participant, an Option shall be exercisable only by the Participant or the Participant’s guardian or legal representative.  Prior to the issuance of shares of Stock upon the exercise of an Option, the Option shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution.  Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Option, a Nonstatutory Stock Option shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S‐8 Registration Statement under the Securities Act.    
		

		
			
		

		 

		

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			7.         Terms and Conditions of Stock Appreciation Rights.
		

		
			 
		

		
			Stock Appreciation Rights shall be evidenced by Award Agreements specifying the number of shares of Stock subject to the Award, in such form as the Committee shall from time to time establish.  No SAR or purported SAR shall be a valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement.  Award Agreements evidencing SARs may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
		

		
			 
		

		
			7.1       Types of SARs Authorized.  SARs may be granted in tandem with all or any portion of a related Option (a “Tandem SAR”) or may be granted independently of any Option (a “Freestanding SAR”).  A Tandem SAR may be granted either concurrently with the grant of the related Option or at any time thereafter prior to the complete exercise, termination, expiration or cancellation of such related Option.
		

		
			 
		

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

		
			 
		

		
			7.3      Exercisability and Term of SARs.
		

		
			 
		

		
			(a)       Tandem SARs.   Tandem SARs shall be exercisable only at the time and to the extent, and only to the extent, that the related Option is exercisable, subject to such provisions as the Committee may specify where the Tandem SAR is granted with respect to less than the full number of shares of Stock subject to the related Option.
		

		
			 
		

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

		
			 
		

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

		
			 
		

		
			7.5      Effect of Termination of Service.  Subject to earlier termination of the SAR as otherwise provided herein and unless otherwise provided by the Committee in the grant of an SAR and set forth in the Award Agreement, an SAR shall be exercisable after a Participant’s termination of Service only as provided in the Award Agreement.
		

		
			 
		

		
			7.6      Nontransferability of SARs.  During the lifetime of the Participant, an SAR shall be exercisable only by the Participant or the Participant’s guardian or legal representative.  Prior to the exercise of an SAR, the SAR shall not be subject in any manner to 
		

		 

		

			15

		

 

		

			 

		

		
			anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution.
		

		
			 
		

		
			8.         Terms and Conditions of Restricted Stock Awards.
		

		
			 
		

		
			Restricted Stock Awards shall be evidenced by Award Agreements specifying the number of shares of Stock subject to the Award, in such form as the Committee shall from time to time establish.  No Restricted Stock Award or purported Restricted Stock Award shall be a valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement.  Award Agreements evidencing Restricted Stock Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
		

		
			 
		

		
			8.1       Types of Restricted Stock Awards Authorized.  Restricted Stock Awards may or may not require the payment of cash compensation for the stock.  Restricted Stock Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 9.4.  If either the grant of a Restricted Stock Award or the lapsing of the Restriction Period is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 9.3 through 9.5(a).
		

		
			 
		

		
			8.2       Purchase Price.  The purchase price, if any, for shares of Stock issuable under each Restricted Stock Award and the means of payment shall be established by the Committee in its discretion.    
		

		
			 
		

		
			8.3       Purchase Period.  A Restricted Stock Award requiring the payment of cash consideration shall be exercisable within a period established by the Committee; provided, however, that no Restricted Stock Award granted to a prospective Employee, prospective Consultant or prospective Director may become exercisable prior to the date on which such person commences Service.
		

		
			 
		

		
			8.4       Vesting and Restrictions on Transfer.  Shares issued pursuant to any Restricted Stock Award may or may not be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 9.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award.  During any Restriction Period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, such shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of other than as provided in the Award Agreement or as provided in Section 8.7.  Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder.
		

		
			 
		

		
			8.5       Voting Rights; Dividends and Distributions.  Except as provided in this Section, Section 8.4 and any Award Agreement, during the Restriction Period applicable to shares subject to a Restricted Stock Award, the Participant shall have all of the rights of a shareholder of the Company holding shares of Stock, including the right to vote such shares and
		

		 

		

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			to receive all dividends and other distributions paid with respect to such shares.  However, in the event of a dividend or distribution paid in shares of Stock or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.2, any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant is entitled by reason of the Participant’s Restricted Stock Award shall be immediately subject to the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which such dividends or distributions were paid or adjustments were made.
		

		
			 
		

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

		
			 
		

		
			8.7       Nontransferability of Restricted Stock Award Rights.  Prior to the issuance of shares of Stock pursuant to a Restricted Stock Award, rights to acquire such shares shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or the laws of descent and distribution.  All rights with respect to a Restricted Stock Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.
		

		
			 
		

		
			9.         Terms and Conditions of Performance Awards.
		

		
			 
		

		
			Performance Awards shall be evidenced by Award Agreements in such form as the Committee shall from time to time establish.  No Performance Award or purported Performance Award shall be a valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement.  Award Agreements evidencing Performance Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
		

		
			 
		

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

		
			 
		

		
			9.2       Initial Value of Performance Shares and Performance Units.  Unless otherwise provided by the Committee in granting a Performance Award, each Performance Share shall have an initial value equal to the Fair Market Value of one (1) share of Stock, subject to
		

		
			
		

		 

		

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			adjustment as provided in Section 4.2, on the effective date of grant of the Performance Share.  Each Performance Unit shall have an initial value determined by the Committee.  The final value payable to the Participant in settlement of a Performance Award determined on the basis of the applicable Performance Award Formula will depend on the extent to which Performance Goals established by the Committee are attained within the applicable Performance Period established by the Committee.
		

		
			 
		

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

		
			 
		

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

		
			 
		

		
			(a)       Performance Measures.  Performance Measures shall have the same meanings as used in the Company’s financial statements, or, if such terms are not used in the Company’s financial statements, they shall have the meaning applied pursuant to generally accepted accounting principles, or as used generally in the Company’s industry.  Performance Measures shall be calculated with respect to the Company and each Subsidiary Corporation consolidated therewith for financial reporting purposes or such division or other business unit as may be selected by the Committee.  For purposes of the Plan, the Performance Measures applicable to a Performance Award shall be calculated in accordance with generally accepted accounting principles, but prior to the accrual or payment of any Performance Award for the same Performance Period and excluding the effect (whether positive or negative) of any change in accounting standards or any extraordinary, unusual or nonrecurring item, as determined by the Committee, occurring after the establishment of the Performance Goals applicable to the Performance Award.  Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of Performance Measures in order to prevent the dilution or enlargement of the Participant’s rights with respect to a Performance Award.  Performance Measures may be one or more of the following, as determined by the Committee:  (i) sales revenue; (ii) gross margin; (iii) operating margin; (iv) operating income; (v) pre-tax profit; (vi) earnings before stock-based compensation expense,
		

		
			
		

		 

		

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			interest, taxes and depreciation and amortization; (vii) earnings before interest, taxes and depreciation and amortization; (viii) earnings before interest and taxes; (ix) net income; (x) expenses; (xi) the market price of the Stock; (xii) stock price; (xiii) earnings per share; (xiv) return on shareholder equity; (xv) return on capital; (xvi) return on net assets; (xvii) economic value added; (xviii) market share; (xix) customer service; (xx) customer satisfaction; (xxi) safety; (xxii) total shareholder return; (xxiii) free cash flow; (xxiv) net operating income; (xxv) operating cash flow; (xxvi) return on investment; (xxvii) employee satisfaction; (xxviii) employee retention; (xxix) balance of cash, cash equivalents and marketable securities; (xxx) product development; (xxxi) research and development expenses; (xxxii) completion of an identified special project; (xxxiii) completion of a joint venture or other corporate transaction; or (xxxiv) such other measures as determined by the Committee consistent with this Section 9.4(a).
		

		
			 
		

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

		
			 
		

		
			9.5      Settlement of Performance Awards.
		

		
			 
		

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

		
			 
		

		
			(b)       Discretionary Adjustment of Award Formula.  In its discretion, the Committee may, either at the time it grants a Performance Award or at any time thereafter, provide for the positive or negative adjustment of the Performance Award Formula applicable to a Performance Award that is not intended to constitute “qualified performance based compensation” to a “covered employee” within the meaning of Section 162(m) (a “Covered Employee”) to reflect such Participant’s individual performance in his or her position with the Company or such other factors as the Committee may determine.  With respect to a Performance Award intended to constitute qualified performance-based compensation to a Covered Employee, the Committee shall have the discretion to reduce some or all of the value of the Performance Award that would otherwise be paid to the Covered Employee upon its settlement notwithstanding the attainment of any Performance Goal and the resulting value of the Performance Award determined in accordance with the Performance Award Formula.  
		

		
			 
		

		
			(c)       Payment in Settlement of Performance Awards.  As soon as practicable following the Committee’s determination and certification in accordance with Sections 9.5(a) and (b), payment shall be made to each eligible Participant (or such Participant’s legal representative or other person who acquired the right to receive such payment by reason of the Participant’s death) of the final value of the Participant’s Performance Award.  Payment of such amount shall be made in cash in a lump sum or in installments, shares of Stock (either fully vested or subject to vesting), or a combination thereof, as determined by the Committee.  
		

		 

		

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			9.6      Voting Rights; Dividend Equivalent Rights and Distributions.  Participants shall have no voting rights with respect to shares of Stock represented by Performance Share Awards until the date of the issuance of such shares, if any (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company).  However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Performance Share Award that the Participant shall be entitled to receive Dividend Equivalents with respect to the payment of cash dividends on Stock having a record date prior to the date on which the Performance Shares are settled or forfeited.  Such Dividend Equivalents, if any, shall be credited to the Participant in the form of additional whole Performance Shares as of the date of payment of such cash dividends on Stock.  The number of additional Performance Shares (rounded to the nearest whole number) to be so credited shall be determined by dividing (a) the amount of cash dividends paid on such date with respect to the number of shares of Stock represented by the Performance Shares previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date.  Dividend Equivalents may be paid currently or may be accumulated and paid to the extent that Performance Shares become nonforfeitable, as determined by the Committee.  Settlement of Dividend Equivalents may be made in cash, shares of Stock, or a combination thereof as determined by the Committee, and may be paid on the same basis as settlement of the related Performance Share as provided in Section 9.5.  Dividend Equivalents shall not be paid with respect to Performance Units.  In the event of a dividend or distribution paid in shares of Stock or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.2, appropriate adjustments shall be made in the Participant’s Performance Share Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant would entitled by reason of the shares of Stock issuable upon settlement of the Performance Share Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Performance Goals as are applicable to the Award.
		

		
			 
		

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

		
			 
		

		
			(a)       Death or Disability.  If the Participant’s Service terminates because of the death or Disability of the Participant before the completion of the Performance Period applicable to the Performance Award, the final value of the Participant’s Performance Award shall be determined by the extent to which the applicable Performance Goals have been attained with respect to the entire Performance Period and shall be prorated based on the number of months of the Participant’s Service during the Performance Period.  Payment shall be made following the end of the Performance Period in any manner permitted by Section 9.5.
		

		
			 
		

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

		
			
		

		 

		

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			9.8      Nontransferability of Performance Awards.  Prior to settlement in accordance with the provisions of the Plan, no Performance Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution.  All rights with respect to a Performance Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.
		

		
			 
		

		
			10.       Terms and Conditions of Restricted Stock Unit Awards.
		

		
			 
		

		
			Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying the number of Restricted Stock Units subject to the Award, in such form as the Committee shall from time to time establish.  No Restricted Stock Unit Award or purported Restricted Stock Unit Award shall be a valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement.  Award Agreements evidencing Restricted Stock Units may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
		

		
			 
		

		
			10.1       Grant of Restricted Stock Unit Awards.  Restricted Stock Unit Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 9.4.  If either the grant of a Restricted Stock Unit Award or the Vesting Conditions with respect to such Award is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 9.3 through 9.5(a).
		

		
			 
		

		
			10.2       Vesting.  Restricted Stock Units may or may not be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 9.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award.
		

		
			 
		

		
			10.3       Voting Rights, Dividend Equivalent Rights and Distributions.  Participants shall have no voting rights with respect to shares of Stock represented by Restricted Stock Units until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company).  However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Restricted Stock Unit Award that the Participant shall be entitled to receive Dividend Equivalents with respect to the payment of cash dividends on Stock having a record date prior to the date on which Restricted Stock Units held by such Participant are settled.  Such Dividend Equivalents, if any, shall be paid by crediting the Participant with additional whole Restricted Stock Units as of the date of payment of such cash dividends on Stock.  The number of additional Restricted Stock Units (rounded to the nearest whole number) to be so credited shall be determined by dividing (a) the amount of cash dividends paid on such date with respect to the number of shares of Stock represented by the Restricted Stock Units previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date.  Such additional Restricted Stock Units shall be subject to the same terms and conditions and shall be settled in the same manner and at the same
		

		 

		

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			time (or as soon thereafter as practicable) as the Restricted Stock Units originally subject to the Restricted Stock Unit Award.  In the event of a dividend or distribution paid in shares of Stock or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.2, appropriate adjustments shall be made in the Participant’s Restricted Stock Unit Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant would entitled by reason of the shares of Stock issuable upon settlement of the Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Vesting Conditions as are applicable to the Award.
		

		
			 
		

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

		
			 
		

		
			10.5       Settlement of Restricted Stock Unit Awards.  The Company shall issue to a Participant on the date on which Restricted Stock Units subject to the Participant’s Restricted Stock Unit Award vest or on such other date determined by the Committee, in its discretion, and set forth in the Award Agreement one (1) share of Stock (and/or any other new, substituted or additional securities or other property pursuant to an adjustment described in Section 10.3) for each Restricted Stock Unit then becoming vested or otherwise to be settled on such date, subject to the withholding of applicable taxes.  Notwithstanding the foregoing, if permitted by the Committee and set forth in the Award Agreement, the Participant may elect in accordance with terms specified in the Award Agreement to defer receipt of all or any portion of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section.
		

		
			 
		

		
			10.6       Nontransferability of Restricted Stock Unit Awards.  Prior to the issuance of shares of Stock in settlement of a Restricted Stock Unit Award, the Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution.  All rights with respect to a Restricted Stock Unit Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.
		

		
			 
		

		
			11.       Deferred Compensation Awards.
		

		
			 
		

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

		
			 
		

		
			(a)       Participants designated by the Committee who are Insiders or otherwise among a select group of highly compensated Employees may irrevocably elect, prior
		

		
			
		

		 

		

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			to a date specified by the Committee, to reduce such Participant’s compensation otherwise payable in cash (subject to any minimum or maximum reductions imposed by the Committee) and to be granted automatically at such time or times as specified by the Committee one or more Awards of Stock Units with respect to such numbers of shares of Stock as determined in accordance with the rules of the program established by the Committee and having such other terms and conditions as established by the Committee.
		

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

		
			11.2    Terms and Conditions of Deferred Compensation Awards.  Deferred Compensation Awards granted pursuant to this Section 11 shall be evidenced by Award Agreements in such form as the Committee shall from time to time establish.  No such Deferred Compensation Award or purported Deferred Compensation Award shall be a valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement.  Award Agreements evidencing Deferred Compensation Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
		

		
			 
		

		
			(a)       Vesting Conditions.  Deferred Compensation Awards shall not be subject to any vesting conditions.
		

		
			 
		

		
			(b)       Terms and Conditions of Stock Units.
		

		
			 
		

		
			(i)       Voting Rights; Dividend Equivalent Rights and Distributions.  Participants shall have no voting rights with respect to shares of Stock represented by Stock Units until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company).  However, a Participant shall be entitled to receive Dividend Equivalents with respect to the payment of cash dividends on Stock having a record date prior to date on which Stock Units held by such Participant are settled.  Such Dividend Equivalents shall be paid by crediting the Participant with additional whole and/or fractional Stock Units as of the date of payment of such cash dividends on Stock.  The method of determining the number of additional Stock Units to be so credited shall be specified by the Committee and set forth in the Award Agreement.  Such additional Stock Units shall be subject to the same terms and conditions and shall be settled in the same manner and at the same time (or as soon thereafter as practicable) as the Stock Units
		

		 

		

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			originally subject to the Stock Unit Award.  In the event of a dividend or distribution paid in shares of Stock or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.2, appropriate adjustments shall be made in the Participant’s Stock Unit Award so that it represent the right to receive upon settlement any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of the Award.
		

		
			 
		

		
			(ii)       Settlement of Stock Unit Awards.  A Participant electing to receive an Award of Stock Units pursuant to this Section 11 shall specify at the time of such election a settlement date with respect to such Award.  The Company shall issue to the Participant as soon as practicable following the earlier of the settlement date elected by the Participant or the date of termination of the Participant’s Service, a number of whole shares of Stock equal to the number of whole Stock Units subject to the Stock Unit Award.  Such shares of Stock shall be fully vested, and the Participant shall not be required to pay any additional consideration (other than applicable tax withholding) to acquire such shares.  Any fractional Stock Unit subject to the Stock Unit Award shall be settled by the Company by payment in cash of an amount equal to the Fair Market Value as of the payment date of such fractional share.
		

		
			 
		

		
			(iii)      Nontransferability of Stock Unit Awards.  Prior to their settlement in accordance with the provision of the Plan, no Stock Unit Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution.  All rights with respect to a Stock Unit Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.
		

		
			 
		

		
			12.         Other Stock-Based Awards.
		

		
			 
		

		
			In addition to the Awards set forth in Sections 6 through 11 above, the Committee, in its sole discretion, may carry out the purpose of this Plan by awarding Stock-Based Awards as it determines to be in the best interests of the Company and subject to such other terms and conditions as it deems necessary and appropriate.
		

		
			 
		

		
			13.        Effect of Change in Control on Options and SARs.
		

		
			 
		

		
			13.1     Accelerated Vesting.  The Committee, in its sole discretion, may provide in any Award Agreement or, in the event of a Change in Control, may take such actions as it deems appropriate to provide for the acceleration of the exercisability and vesting in connection with such Change in Control of any or all outstanding Options and SARs and shares acquired upon the exercise of such Options and SARs upon such conditions and to such extent as the Committee shall determine.    
		

		
			 
		

		
			13.2     Assumption or Substitution.  In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the “Acquiring Corporation”), may, without the consent of the Participant, either assume the Company’s rights and obligations under outstanding Options and
		

		 

		

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			SARs or substitute for outstanding Options and SARs substantially equivalent options or stock appreciation rights for the Acquiring Corporation’s stock.  Any Options or SARs which are neither assumed or substituted for by the Acquiring Corporation in connection with the Change in Control nor exercised as of the date of the Change in Control shall terminate and cease to be outstanding effective as of the date of the Change in Control.  Notwithstanding the foregoing, shares acquired upon exercise of an Option or SAR prior to the Change in Control and any consideration received pursuant to the Change in Control with respect to such shares shall continue to be subject to all applicable provisions of the Award Agreement evidencing such Award except as otherwise provided in such Award Agreement.  Furthermore, notwithstanding the foregoing, if the corporation the stock of which is subject to the outstanding Options or SARs immediately prior to an Ownership Change Event described in Section 2.1(y)(i) constituting a Change in Control is the surviving or continuing corporation and immediately after such Ownership Change Event less than fifty percent (50%) of the total combined voting power of its voting stock is held by another corporation or by other corporations that are members of an affiliated group within the meaning of Section 1504(a) of the Code without regard to the provisions of Section 1504(b) of the Code, the outstanding Options and SARs shall not terminate unless the Board otherwise provides in its discretion.
		

		
			 
		

		
			13.3     Effect of Change in Control on Restricted Stock and Other Type of Awards.  The Committee may, in its discretion, provide in any Award Agreement evidencing a Restricted Stock or Other Type of Award that, in the event of a Change in Control, the lapsing of any applicable Vesting Condition, Restriction Period or Performance Goal applicable to the shares subject to such Award held by a Participant whose Service has not terminated prior to the Change in Control shall be accelerated and/or waived effective immediately prior to the consummation of the Change in Control to such extent as specified in such Award Agreement; provided, however, that such acceleration or waiver shall not occur to the extent an Award is assumed or substituted with a substantially equivalent Award in connection with the Change in Control.  Any acceleration, waiver or the lapsing of any restriction that was permissible solely by reason of this Section 13.3 and the provisions of such Award Agreement shall be conditioned upon the consummation of the Change in Control.    
		

		
			 
		

		
			14.        Compliance with Securities Law.
		

		
			 
		

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

		
			

		 

		

			25

		

 

		

			 

		

evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
		

		
			 
		

		
			15.       Tax Withholding.
		

		
			 
		

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

		
			 
		

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

		
			 
		

		
			16.       Amendment or Termination of Plan.
		

		
			 
		

		
			The Board or the Committee may amend, suspend or terminate the Plan at any time.  However, without the approval of the Company’s shareholders, there shall be (a) no increase in the maximum aggregate number of shares of Stock that may be issued under the Plan (except by operation of the provisions of Section 4.2), (b) no change in the class of persons eligible to receive Incentive Stock Options, and (c) no other amendment of the Plan that would require approval of the Company’s shareholders under any applicable law, regulation or rule.  No amendment, suspension or termination of the Plan shall affect any then outstanding Award unless expressly provided by the Board or the Committee.  In any event, no amendment, suspension or termination of the Plan may adversely affect any then outstanding Award without the consent of the Participant unless necessary to comply with any applicable law, regulation or rule.
		

		
			 
		

		
			17.       Miscellaneous Provisions.
		

		
			 
		

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

		
			
		

		 

		

			26

		

 

		

			 

		

		
			representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.
		

		
			 
		

		
			17.2       Provision of Information.  Each Participant shall be given access to information concerning the Company equivalent to that information generally made available to the Company’s common shareholders.
		

		
			 
		

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

		
			 
		

		
			17.4       Rights as a Shareholder.  A Participant shall have no rights as a shareholder with respect to any shares covered by an Award until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company).  No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such shares are issued, except as provided in Section 4.2 or another provision of the Plan.
		

		
			 
		

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

		
			 
		

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

		
			 
		

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

		
			 
		

		
			17.8       Unfunded Obligation.  Participants shall have the status of general unsecured creditors of the Company.  Any amounts payable to Participants pursuant to the Plan
		

		 

		

			27

		

 

		

			 

		

		
			shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974.  No Participating Company shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations.  The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder.  Any investments or the creation or maintenance of any trust or any Participant account shall not create or constitute a trust or fiduciary relationship between the Committee or any Participating Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s creditors in any assets of any Participating Company.  The Participants shall have no claim against any Participating Company for any changes in the value of any assets which may be invested or reinvested by the Company with respect to the Plan.  Each Participating Company shall be responsible for making benefit payments pursuant to the Plan on behalf of its Participants or for reimbursing the Company for the cost of such payments, as determined by the Company in its sole discretion.  In the event the respective Participating Company fails to make such payment or reimbursement, a Participant’s (or other individual’s) sole recourse shall be against the respective Participating Company, and not against the Company.  A Participant’s acceptance of an Award pursuant to the Plan shall constitute agreement with this provision.
		

		
			 
		

		
			17.9       Clawback or Recoupment. Unless otherwise specified in the Award Agreement or determined in the Administrator’s sole discretion, all Awards, and all Shares and cash payable under each Award, are subject to any clawback or recoupment policy adopted by the Company (including any policy required under the Dodd-Frank Wall Street Reform and Consumer Protection Act or other Applicable Laws), regardless of whether the policy is adopted after the date on which the Award is granted, vests or becomes exercisable, or is exercised or settled by issuance of Shares, payment of cash, or a combination of both.
		

		
			 
		

		
			

		 

		

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CALIFORNIA ADDENDUM TO
		

		
			 
		

		
			PURE BIOSCIENCE 2007 EQUITY INCENTIVE PLAN
		

		
			 
		

		
			This Addendum to the Amended and Restated PURE Bioscience 2007 Equity Incentive Plan (the “Plan”) is intended to apply to all Awards granted under the Plan.  Capitalized terms contained herein shall have the same meanings given to them in the Plan, unless otherwise provided in this Addendum.  Notwithstanding any provision contained in the Plan to contrary and to the extent required by applicable law, the Plan is hereby amended as follows:
		

		
			 
		

		
			1.       Exercise Price.  To the extent required by applicable securities law of California (“Applicable California Law”), the exercise price per share for an Award shall be not less than eighty five percent (85%) of the Fair Market Value of a share of Stock on the effective date of grant of the Award.  Notwithstanding the above, to the extent required by Applicable California Law, the exercise price per share for an Award shall be not less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective date of grant of the Award if the recipient possesses more than 10% of the total combined voting power of the Company as described by Applicable California Law.
		

		
			 
		

		
			2.       Exercisability of stock options.  To the extent required by Applicable California Law, with the exception of an Option granted to an officer, a director or a consultant of the Company, no Option shall become exercisable at a rate less than twenty percent (20%) per year over a period of five (5) years from the effective date of grant of such Option, subject to the Participant’s continued Service.
		

		
			 
		

		
			3.       Effect of Termination of Service.  Subject to earlier termination of the Option as otherwise provided by the Plan or Option Agreement and unless a longer exercise period is provided by the Committee in the grant of an Option and set forth in the Option Agreement, an Option shall terminate immediately upon the Participant’s termination of Service to the extent that it is then unvested.  To the extent required by Applicable California Law, the Option shall be exercisable after the Participant’s termination of Service to the extent it is then vested only during the applicable time period determined in accordance with this section (or such longer period specified in the Option Agreement and thereafter shall terminate:
		

		
			 
		

		
			A.       Death or Disability.  If the Participant’s Service terminates because of the death or Disability of the Participant, the Option, to the extent unexercised and exercisable on the date on which the Participant’s Service terminated, may be exercised by the Participant (or the Participant’s guardian, legal representative, or other person who acquired the right to exercise the Option by reason of the Participant’s death, as applicable) at any time prior to the expiration of six (6) months after the date on which the Participant’s Service terminated, but in any event no later than the date of expiration of the Option (the “Option Expiration Date”).
		

		
			 
		

		
			B.       Other Termination of Service.  If the Participant’s Service terminates for any reason, except for Disability or death, the Option, to the extent unexercised and exercisable by the Participant on the date on which the Participant’s Service terminated, 
		

		
			
		

		
			

		 

		

			29

		

 

		

			 

		

may be exercised by the Participant at any time prior to the expiration of three (3) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.
		

		
			 
		

		
			4.       Repurchase Provisions.  Unless otherwise provided by the Committee in the grant of a Restricted Stock Award or RSU and set forth in the Agreement memorializing the Award, if a Participant’s Service terminates for any reason, whether voluntary or involuntary (including the Participant’s death or Disability), then the Company shall have the option to repurchase for the cash purchase price paid by the Participant any shares acquired by the Participant which remain subject to restrictions as of the date of the Participant’s termination of Service; provided, however, that with the exception of shares acquired by an officer, a director or a consultant of the Company, the Company’s repurchase option must lapse, to the extent required by Applicable California Law, at the rate of at least twenty percent (20%) of the shares per year over the period of five (5) years from the effective date of grant of the Award and the repurchase option must be exercised, if at all, for cash or cancellation of purchase money indebtedness for the shares within ninety (90) days following the Participant’s termination of Service.  The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company.
		

		
			 
		

		
			5.       Information.  To the extent required by Applicable California Law, at least annually, copies of the Company’s balance sheet and income statement for the just completed fiscal year shall be made available to each Participant.  The Company shall not be required to provide such information to key employees whose duties in connection with the Company assure them access to equivalent information. 
		

		
			 
		

		
			 
		

		 

		

			30

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