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Exhibit 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement (“Agreement”) is entered into as of July 30, 2020 (the “Effective Date”) by and between Jon Sievert, an individual (“Executive”), and Douglas Dynamics, L.L.C., a Delaware limited liability company (the “Company”).
1.                    Employment by the Company.
(a)                 Full Time and Best Efforts. Subject to the terms set forth herein, the Company agrees to employ Executive as its Group President – Work Truck Solutions and in such other executive capacities as may be requested from time to time by the Company’s Board of Directors (the “Board”) or a duly authorized committee thereof, and Executive hereby accepts such employment.  Executive shall render such other services for each of the Company and corporations that control, are controlled by or are under common control with the Company, as the case may be, and to successor entities and assignees of the Company, as the case may be (the “Affiliates”) as the Company may from time to time reasonably request and shall be consistent with the duties Executive is to perform for the Company and with Executive’s experience. During the term of his employment with the Company, Executive will devote his full business time and use his best efforts to advance the business and welfare of the Company, and will not engage in any other employment or business activities for any direct or indirect remuneration that would be directly harmful or detrimental to, or that may compete with, the business and affairs of the Company, or that would interfere with his duties hereunder.
(b)                 Duties. Executive shall serve in an executive capacity and shall perform such duties as are customarily associated with his position, consistent with the Bylaws of the Company, and as reasonably required by the CEO and the Board.
(c)                 Company Policies. The employment relationship between the parties shall be governed by the general employment policies and practices of the Company, including but not limited to those relating to protection of confidential information and assignment of inventions, except that when the terms of this Agreement differ from or are in conflict with the Company’s general employment policies or practices, this Agreement shall control.
2.                    Compensation and Benefits.
(a)                 Base Salary. Executive shall receive for services to be rendered hereunder a salary at the rate of $312,425.00 per year, payable in biweekly payments of $12,016.35 and subject to payroll deductions as may be necessary or customary in respect of the Company’s salaried employees (the “Base Salary”). The Base Salary will be reviewed by and shall be subject to increase (but not decrease) at the sole discretion of the Board each year during the term of this Agreement.
(b)                 Participation in Benefit Plans; Vacation. During the term hereof, Executive shall be entitled to participate in any group insurance, hospitalization, medical, dental, health, accident, disability, 401(k) retirement savings plan or similar plan or program of the Company now existing or established hereafter to the extent that he is eligible under the general provisions thereof. The Company may, in its sole discretion and from time to time, amend, eliminate or establish additional benefit programs as it deems appropriate. Executive shall also participate in all fringe benefits, including without limitation annual vacation time, offered by the Company to any of its executives at such Executive’s level.  Notwithstanding anything otherwise provided under this Agreement, nothing contained herein shall obligate the Company or its Affiliates to continue or maintain any particular benefit plan or program on an ongoing basis.
3.                    Bonus.
(a)                 Annual Incentive Plan. Executive shall be eligible to participate in the Company’s Annual Incentive Plan, through which the Company awards performance-based cash bonuses on an annual calendar year basis provided the Company achieves performance targets established by the Company’s management and approved by the Compensation Committee of the Board for such calendar year. Executive shall be eligible to participate at a target bonus level as determined by the Compensation Committee of the Board from time to time, which shall be no less than 75% of his Base Salary.  Executive’s participation in such plan shall be governed by the terms and conditions of the plan as then in effect.
(b)                 If Executive resigns before the last day of a calendar year (other than for a Material Breach (as hereinafter defined)) or is discharged by the Company for Cause before the last day of such calendar year, Executive will not be entitled to receive a performance-based bonus pursuant to Section 3(a) for such calendar year. If Executive’s employment terminates prior to the last day of a calendar year for any other reason, Executive shall be entitled to receive a pro rata part of the performance-based bonus for such calendar year pursuant to Section 3(a) only if the Board, in its sole and absolute discretion, elects to pay a pro rata part of the performance-based bonus to Executive.
(c)                 Stock Incentive Plan.  Executive shall be eligible to participate in the Company’s 2010 Stock Plan (or any successor plan thereto), through which the Company grants equity awards to its key employees, pursuant to the separate terms and conditions of the 2010 Stock Plan (or any successor plan thereto).  Executive shall be eligible to participate in the Company’s 2010 Stock Plan (or any successor plan thereto) at a target level, as determined by the Compensation Committee of the Board, which shall
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be no less than 100% of Executive’s Base Salary.   Any grants made to the Executive under the 2010 Stock Plan (or any successor plan thereto) shall be subject to the terms and conditions of such plan and any applicable award agreements.
4.                    Reasonable Business Expenses and Support. Executive shall be reimbursed for documented and reasonable business expenses in connection with the performance of his duties hereunder, including appropriate professional fees and dues. Executive shall be furnished reasonable office space, assistance, including an administrative assistant and facilities.
5.                    Termination of Employment. The date on which Executive’s employment by the Company ceases, under any of the following circumstances, shall be defined herein as the “Termination Date.”
(a)                 Termination for Cause.
(i)                  Termination; Payment of Accrued Salary and Vacation. The Board may terminate Executive’s employment with the Company at any time for Cause, immediately upon notice to Executive of the circumstances leading to such termination for Cause. In the event that Executive’s employment is terminated for Cause, Executive shall receive payment for all accrued salary and vacation time through the Termination Date, less requisite withholdings for tax and social security purposes, which in this event shall be the date upon which notice of termination is given. The Company shall have no further obligation to pay severance of any kind whether under this Agreement or otherwise.
(ii)                Definition of Cause. “Cause” means the occurrence or existence of any of the following with respect to Executive, as determined in good faith by a majority of the disinterested directors of the Board: (a) a material breach by Executive of any of his material obligations hereunder which remains uncured after the lapse of 30 days following the date that the Company has given Executive written notice thereof; (b) a material breach by the Executive of his duty not to engage in any transaction that represents, directly or indirectly, self-dealing with the Company or any of its Affiliates which has not been approved by a majority of the disinterested directors of the Board, if in any such case such material breach remains uncured after the lapse of 30 days following the date that the Company has given the Executive written notice thereof; (c) the repeated material breach by the Executive of any material duty referred to in clause (a) or (b) above as to which at least two (2) written notices have been given pursuant to such clause (a) or (b); (d) any act of misappropriation, embezzlement, intentional fraud or similar conduct involving the Company or any of its Affiliates; (e) the conviction or the plea of nolo contendere or the equivalent in respect of a felony involving moral turpitude; (f) intentional infliction of any damage of a material nature to any property of the Company or its Affiliates; or (g) the repeated non- prescription abuse of any controlled substance or the repeated abuse of alcohol or any other non-controlled substance which, in any case described in this clause, the Board reasonably determines renders the Executive unfit to serve in his capacity as an officer or employee of the Company or its Affiliates.
(b)                 Termination by Executive.
(i)                  Executive shall have the right, at his election, to terminate his employment with the Company by written notice to the Company to that effect if (A) the Company shall have failed to perform a material condition or covenant of this Agreement (“Material Breach”); provided, however, that termination for Material Breach will not be effective until Executive shall have given written notice specifying the claimed breach and, provided such breach is curable, the Company fails to correct the claimed breach within thirty (30) days after the receipt of the applicable notice (but within ten (10) days if the failure to perform is a failure to pay monies when due under the terms of this Agreement), or (B) the Company repeatedly commits a Material Breach as to which at least two (2) written notices have been given pursuant to this Section 5(b)(i). If the Executive terminates his employment with the Company pursuant to this Section 5(b)(i), then the Executive shall be entitled to receive the benefits provided in Section 5(d)(i) hereof.
(ii)                Executive shall have the right, at his election, to terminate his employment with the Company for reason other than a Material Breach by sixty (60) days’ prior written notice to that effect. In the event of termination by Executive pursuant to this Section 5(b)(ii), the Company shall have no termination payment requirements except that Executive shall receive the accrued portion of any salary and vacation hereunder through the Termination Date, less requisite withholdings for tax and social security purposes.
(c)                 Termination Upon Disability. The Company may terminate Executive’s employment in the event Executive suffers a disability that renders Executive unable to perform the essential functions of his position, even with reasonable accommodation, for sixty (60) consecutive days or for ninety (90) days within any one hundred eighty (180) day period. After the Termination Date, which in this event shall be the date upon which notice of termination is given, no further compensation will be payable under this Agreement except that Executive shall receive the accrued portion of any salary and vacation hereunder through the Termination Date, less requisite withholdings for tax and social security purposes.
(d)                 Termination by Company Without Cause; Termination by Executive Pursuant to Section 5(b)(i). The Company may terminate Executive’s employment at any time for other than Cause or disability, pursuant to the following termination payment requirements and upon not less than sixty (60) days’ prior written notice to that effect.
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(i)                  Termination Payments. In the event that Executive’s employment is terminated by the Company without Cause or by Executive pursuant to Section 5(b)(i) hereof, the Company shall pay Executive as severance an amount equal to twelve (12) months of his then Base Salary. Such remuneration shall be paid, less requisite withholdings for tax and social security purposes, (A) in the case of Base Salary, over such term in monthly pro rata payments commencing as of the Termination Date and (B) in the case of the accrued portion of any vacation, promptly after such Termination Date in conformity with applicable law.
(ii)                The Company shall not be obligated to pay any termination payments under Sections 5(d)(i) above if Executive breaches in any material way the provisions of the Confidentiality Agreement (as defined below).
(e)                 Benefits Upon Termination. All benefits provided under Section 2(b) shall be extended, at Executive’s election and cost (such cost to Executive to be in the same amount as the cost for providing such benefits to existing employees), to the extent permitted by the Company’s insurance policies and benefit plans, for one year after Executive’s Termination Date, except (i) as required by law (e.g., COBRA health insurance continuation election) or (ii) in the event of a termination described in Section 5(a).
(f)                  Termination Upon Death. If Executive dies prior to the expiration of the term of this Agreement, the Company shall (i) continue coverage of Executive’s dependents (if any) under all benefit plans or programs of the type listed above in Section 2(b) herein for a period of six (6) months and (ii) pay to Executive’s estate the accrued portion of any salary and vacation through the Termination Date, less requisite withholdings for tax and social security purposes.
(g)                 Termination Upon Retirement. Executive shall provide notice to the Company of his retirement prior to the term of this Agreement not less than one hundred twenty (120) days prior to the effective date of Executive’s retirement as set forth in such notice (the “Retirement Notice”). In the event that Executive’s employment is terminated by Executive’s retirement prior to the term of this Agreement, the Termination Date shall be the effective date of Executive’s retirement as set forth in the Retirement Notice. After the Termination Date, no further compensation will be payable under this Agreement except that Executive shall receive the accrued portion of any salary and vacation hereunder through the Termination Date, less requisite withholdings for tax and social security purposes.
(h)                 Duty to Mitigate; Termination of Severance Benefits. Executive agrees that upon any termination pursuant to either of Section 5(b) or 5(d) hereof, Executive shall have a duty to mitigate his damages hereunder. The Company and Executive further agree that if, at any time following such a termination but prior to the expiration of the period during which monthly severance benefits are to be paid by the Company with respect to such termination, Executive secures employment, such monthly severance benefits shall not be reduced by the amount of monthly compensation Executive is to receive from such new employment as long as Executive does not breach in any material way the provisions of the Confidentiality Agreement; provided, however, that if Executive breaches in any material way the provisions of the Confidentiality Agreement, the Company shall not be obligated to pay any such severance benefits in accordance with Section 5(d)(ii) above.
6.                    Confidentiality and Noncompetition Agreement. Executive and the Company hereby acknowledge that, as of the date hereof, Executive and the Company have entered into a separate Confidentiality and Noncompetition Agreement governing matters related to confidential information, noncompetition, nonsolicitation of employees and assignment of inventions, among others, in connection with Executive’s employment with the Company (the “Confidentiality Agreement”).  Executive and the Company hereby ratify the terms of the Confidentiality Agreement and hereby agree that, notwithstanding the execution of this Agreement or the provisions of Section 7(c), the Confidentiality Agreement shall remain in full force and effect in accordance with the terms and conditions set forth therein.
7.                    Miscellaneous.
(a)                 Notices. Any notices provided hereunder must be in writing and shall be deemed effective upon the earlier of two days following personal delivery (including personal delivery facsimile), or the fourth day after mailing by reputable overnight courier or registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
To the Company:
Douglas Dynamics, L.L.C.
7777 North 73rd Street
Milwaukee, Wisconsin 53223
Attention: Chief Executive Officer
Facsimile: (414) 354-5939
With a copy to:
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Foley & Lardner LLP
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Jay O. Rothman
Facsimile: (414) 297-4900
To Executive:
Jon Sievert
1785 West Wedgewood Dr
Elm Grove, WI 53122
Facsimile: (       )        -
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or to such other address or to the attention of such other person as the recipient party will have specified by prior written notice to the sending party.
(b)                 Severability. Any provision of this Agreement which is deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this paragraph be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions hereof in such jurisdiction or rendering that or any other provisions of this Agreement invalid, illegal, or unenforceable in any other jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable because its scope is considered excessive, such covenant shall be modified so that the scope of the covenant is reduced only to the minimum extent necessary to render the modified covenant valid, legal and enforceable.
(c)                 Entire Agreement. This document, together with the Confidentiality Agreement, constitutes the final, complete, and exclusive embodiment of the entire agreement and understanding between the parties related to the subject matter hereof and supersedes and preempts any prior or contemporaneous understandings, agreements, or representations by or between the parties, written or oral.
(d)                 Counterparts. This Agreement may be executed on separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same agreement.
(e)                 Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive, the Company, and their respective successors and assigns, except that Executive may not assign any of his duties hereunder and he may not assign any of his rights hereunder without the prior written consent of the Company.
(f)                  Amendments. No amendments or other modifications to this Agreement may be made except by a writing signed by all parties. No amendment or waiver of this Agreement requires the consent of any individual, partnership, corporation or other entity not a party to this Agreement. Nothing in this Agreement, express or implied, is intended to confer upon any third person any rights or remedies under or by reason of this Agreement.
(g)                 Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the laws of the State of Delaware without giving effect to principles of conflicts of law.
(h)                 Survivorship. The provisions of this Agreement necessary to carry out the intention of the parties as expressed herein shall survive the termination or expiration of this Agreement.
(i)                  Waiver. Except as provided herein, the waiver by either party of the other party’s prompt and complete performance, or breach or violation, of any provision of this Agreement shall not operate nor be construed as a waiver of any subsequent breach or violation, and the failure by any party hereto to exercise any right or remedy which it may possess hereunder shall not operate nor be construed as a bar to the exercise of such right or remedy by such party upon the occurrence of any subsequent breach or violation.
(j)                  Captions. The captions of this Agreement are for convenience and reference only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any provision hereof.
(k)                 Construction. The parties acknowledge that this Agreement is the result of arm’s-length negotiations between sophisticated parties each afforded representation by legal counsel. Each and every provision of this Agreement shall be construed as though both parties participated equally in the drafting of the same, and any rule of construction that a document shall be construed against the drafting party shall not be applicable to this Agreement.
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8.                    Arbitration.
(a)                 Any disputes or claims arising out of or concerning the Executive’s employment or termination by the Company, whether arising under theories of liability or damages based upon contract, tort or statute, shall be determined exclusively by arbitration before a single arbitrator in accordance with the employment arbitration rules of the American Arbitration Association (“AAA”), except as modified by this Agreement. The arbitrator’s decision shall be final and binding on all parties. Judgment upon the award rendered by the arbitrator may be entered in any court of competent jurisdiction. In recognition of the fact that resolution of any disputes or claims in the courts is rarely timely or cost effective for either party, the Company and Executive enter this mutual agreement to arbitrate in order to gain the benefits of a speedy, impartial and cost-effective dispute resolution procedure.
(b)                 Any arbitration shall be held in the Executive’s place of employment with the Company. The arbitrator shall be an attorney with substantial experience in employment matters, selected by the parties alternately striking names from a list of five such persons provided by the AAA office located nearest to the place of employment, following a request by the party seeking arbitration for a list of five such attorneys with substantial professional experience in employment matters. If either party fails to strike names from the list, the arbitrator shall be selected from the list by the other party.
(c)                 Each party shall have the right to take the depositions of a maximum of three individuals, as deemed appropriate by such party. Each party shall also have the right to propound requests for production of documents to any party and the right to subpoena documents and witnesses for the arbitration. Additional discovery may be made only where the arbitrator selected so orders upon a showing of substantial need. The arbitrator shall have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure.
(d)                 The Company and Executive agree that they will attempt, and they intend that they and the arbitrator should use their best efforts in that attempt, to conclude the arbitration proceeding and have a final decision from the arbitrator within one hundred twenty (120) days from the date of selection of the arbitrator; provided, however, that the arbitrator shall be entitled to extend such 120-day period for a total of two one hundred twenty (120) day periods. The arbitrator shall immediately deliver a written award with respect to the dispute to each of the parties, who shall promptly act in accordance therewith.
(e)                 The Company shall pay the fees and expenses of the arbitrator. Each party shall pay its own attorney fees and costs including, without limitation, fees and costs of any experts. However, attorney fees and costs incurred by the party that prevails in any such arbitration commenced pursuant to this Section 8 or any judicial action or proceeding seeking to enforce the agreement to arbitrate disputes as set forth in this Section 8 or seeking to enforce any order or award of any arbitration commenced pursuant to this Section 8 may be assessed against the party or parties that do not prevail in such arbitration in such manner as the arbitrator or the court in such judicial action, as the case may be, may determine to be appropriate under the circumstances. Any controversy over whether a dispute is an arbitrable dispute or as to the interpretation or enforceability of this paragraph with respect to such arbitration shall be determined by the arbitrator.
(f)                  In a contractual claim under this Agreement, the arbitrator shall have no authority to add, delete or modify any term of this Agreement.
(g)                 In the event that more than one dispute is submitted to arbitration by the Company or Executive pursuant to any agreement between the Company and Executive, including under this Agreement, and one or more additional agreements to which the Company and Executive are parties, all such matters shall be consolidated into a single arbitration proceeding so as to avoid, to the extent possible, more than one simultaneous arbitration proceeding between the Company and Executive.
9.                    409A Compliance.
(a)                 The parties agree that this Agreement is intended to comply with the requirements of Section 409A of the Code and the regulations and guidance promulgated thereunder (“Section 409A”) or an exemption from Section 409A.  The Company shall undertake to administer, interpret, and construe this Agreement in a manner that does not result in the imposition on Executive of any additional tax, penalty, or interest under Section 409A, provided, however, that Executive understands and agrees that the Company shall not be held liable or responsible for any taxes, penalties, interests or other expenses incurred by Executive on account of non-compliance with Section 409A.
(b)                 A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”  If Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Section 409A(a)(2)(B) of the Code, then with regard to any payment or the provision of any benefit that is considered deferred compensation under Section 409A payable on account of a “separation from service,” and that is not exempt from Section 409A as involuntary separation pay or a short-term deferral (or otherwise), such payment or benefit shall be made or provided at the date which
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is the earlier of (i) the expiration of the six (6)-month period measured from the date of such “separation from service” of Executive or (ii) the date of Executive’s death (the “Delay Period”).  Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Subsection 9(b) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to Executive in a lump sum without interest, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.
(c)                 With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A, all such payments shall be made on or before the last day of calendar year following the calendar year in which the expense occurred.
[Signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date set forth above.
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	/s/ Jon Sievert

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	By: Jon Sievert

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	Date: July 30, 2020

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	DOUGLAS DYNAMICS, L.L.C.

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	/s/ Robert McCormick

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	By: Robert McCormick

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	Its: President and Chief Executive Officer

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	Date: July 30, 2020

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​EXHIBIT 10.1
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ITERIS, INC.
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PERFORMANCE STOCK UNIT ISSUANCE AGREEMENT
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RECITALS
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A.The Board has adopted the Iteris, Inc. 2016 Omnibus Incentive Plan (as amended from time to time, the “Plan”) for the purpose of retaining the services of selected Employees, non-employee members of the Board or the board of directors of any Parent or Subsidiary and consultants and other independent advisors in the service of the Corporation (or any Parent or Subsidiary).
B.The Participant is to render valuable services to the Corporation (or a Parent or Subsidiary), and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Corporation’s issuance of an equity incentive award under the Plan to the Participant.
C.All capitalized terms in this Agreement shall have the meaning assigned to them in Paragraph 16.
NOW, THEREFORE, it is hereby agreed as follows:
1.Grant of PSUs.  The Corporation hereby grants to the Participant, as of the Grant Date, an award of performance stock units (“PSUs”) under the Plan, which PSUs will be eligible to vest based on the attainment of the performance goals set by the Plan Administrator as set forth in Appendix 1 attached hereto.  Each PSU represents the right to receive one share of Common Stock (the “Share”) on the specified issuance date following the vesting of that PSU.  Each PSU is hereby granted in tandem with a corresponding dividend equivalent, as further described in Paragraph 4 of this Agreement (the “Dividend Equivalents,” and together with the PSUs, the “Award”).  The number of PSUs subject to the Award, the applicable vesting schedule for those PSUs, the date on which Shares underlying those vested PSUs shall become issuable to the Participant and the remaining terms and conditions governing the Award shall be as set forth in this Agreement.
AWARD SUMMARY
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	Grant Date:
	   
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	Target Number of PSUs
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	(subject to adjustment in
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	accordance with Paragraph 4
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	and Appendix 1):
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	Maximum Number of PSUs: 
	   
	200% of Target Number of PSUs 

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	Vesting Schedule:
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	Subject to Paragraph 5 below, the PSUs shall vest as set forth in Appendix 1 attached hereto.

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	Issuance Schedule:
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	Subject to Paragraph 5 below and Appendix 1, the Shares underlying the PSUs in which the Participant vests in accordance with the vesting schedule above shall be issued as provided in the Agreement and Appendix 1 (the date of such issuance, the “Issue Date”).  The issuance of the Shares shall be subject to the Corporation’s collection of all applicable Withholding Taxes.  The procedures pursuant to which the applicable Withholding Taxes are to be collected are set forth in Paragraph 7 of this Agreement.

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2.Limited Transferability.  Prior to the actual issuance of the Shares pursuant to PSUs which vest hereunder, the Participant may not transfer any interest in the Award or the underlying Shares; provided, however, any Shares issuable pursuant to vested PSUs hereunder but which otherwise remain unissued at the time of the Participant’s death may be transferred pursuant to the provisions of the Participant’s will or the laws of inheritance or to the Participant’s designated beneficiary or beneficiaries of this Award.  The Participant may also direct the Corporation to issue stock certificates for any Shares which become issuable hereunder to one or more designated Family Members or a trust established for the Participant and/or his or her Family Members.  The Participant may make a beneficiary designation or certificate directive for this Award at any time by filing the appropriate form with the Plan Administrator or its designee.
3.Cessation of Service; Death; Disability.  Except as set forth in Appendix 1 or Paragraph 5, should the Participant cease Service for any reason prior to vesting in the PSUs subject to this Award, then the Award will be immediately cancelled with respect to those unvested PSUs.  The Participant shall thereupon cease to have any right or entitlement to receive any Shares under those cancelled PSUs.
4.Stockholder Rights; Dividend Equivalents.
(a)Subject to Paragraph 4(b) below, Participant shall not have any stockholder rights, including voting or dividend rights, with respect to the Shares underlying the PSUs subject to the Award until the Participant becomes the record holder of those Shares following their actual issuance upon the Corporation’s collection of the applicable Withholding Taxes.
(b)(i)Each PSU granted hereunder is hereby granted in tandem with a corresponding Dividend Equivalent, which Dividend Equivalent shall remain outstanding from the Grant Date (or later date of grant of such Dividend Equivalent right) until the earlier of the settlement or forfeiture of the underlying PSU. Each Dividend Equivalent will entitle Participant to receive additional PSUs equal to the value of any dividends, whether in cash, securities or other property (other than shares of Common Stock), if any, that Participant would
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have received in respect of each Share underlying the PSUs subject to the Award, had such Share been outstanding on the applicable record date for such dividend.
(ii)When such dividends are so declared, the following shall occur:
(A)On the date that the Corporation pays a cash dividend in respect of outstanding Shares, the Corporation shall credit Participant with an additional number of PSUs as Dividend Equivalents equal to the quotient of (1) the total number of PSUs subject to this Award but not yet distributed (including any additional PSUs credited as Dividend Equivalents), multiplied by the per Share dollar amount of such dividend, divided by (2) the Fair Market Value of a Share on the date such dividend is paid.
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(B)On the date that the Corporation pays any other type of dividend in respect of outstanding Shares (other than in shares of Common Stock), the Corporation shall credit the Participant in an equitable manner based on the total number of PSUs subject to this Award but not yet distributed (including any additional PSUs credited as Dividend Equivalents), as determined in the sole discretion of the Plan Administrator and in accordance with the Plan.
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(iii)Dividend Equivalents credited as additional PSUs shall be subject to the same vesting terms and risks of forfeiture as the underlying PSUs to which they relate (e.g., the same vesting requirements as the underlying PSUs), shall thereafter be considered “PSUs” subject to this Award, and shall also carry corresponding Dividend Equivalent rights.
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5.Change in Control.
(a)Any PSUs subject to this Award at the time of a Change in Control may, as determined by the Plan Administrator in its sole discretion, be (i) assumed by the successor corporation (or parent thereof), (ii) canceled and substituted with an award granted by the successor corporation (or parent thereof), (iii) otherwise continued in full force and effect pursuant to the terms of the Change in Control transaction or (iv) replaced with a cash retention program of the Corporation or any successor corporation (or parent thereof) which preserves the Fair Market Value of the underlying Shares at the time of the Change in Control and provides for subsequent payout of that value in accordance with the vesting schedule set forth in Paragraph 1; provided, however, that in all such cases, the number of PSUs that shall be assumed, substituted, continued or replaced shall be determined by calculating the Vesting Eligible PSUs (as defined in Appendix 1) based on actual performance results under this Award as of the Change in Control, as determined by the Plan Administrator and calculated in accordance with Appendix 1 attached hereto, and converting the Vesting Eligible PSUs into a time-based award on the terms set forth in Appendix 1 attached hereto and the other terms and conditions of this Award.
(b)To the extent the Award is not assumed, substituted, continued or replaced in accordance with Paragraph 5(a), the Vesting Eligible PSUs then subject to this Award shall automatically vest immediately prior to (and contingent upon) the closing of the Change in Control based on actual performance results as of the Change in Control, as determined by the
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Plan Administrator and calculated in accordance with Appendix 1 attached hereto.  The PSUs shall be paid and settled immediately prior to (and contingent upon) the closing of the Change in Control.
(c)The Plan Administrator shall have the authority to provide that any escrow, holdback, earn-out or similar provisions in the definitive agreement effecting the Change in Control shall apply to any cash payment made under any cash retention program described in subsection (a) above to the same extent and in the same manner as such provisions apply to a holder of a Share.
(d)Immediately following the consummation of the Change in Control, this Award shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change in Control transaction.
(e)If the Award is assumed in connection with a Change in Control or otherwise continued in effect, then the PSUs subject to the Award shall be appropriately adjusted, immediately after such Change in Control, to apply to the number and class of securities which the Shares subject to those PSUs immediately prior to the Change in Control would have been converted in consummation of such Change in Control had those Shares actually been issued and outstanding at that time.  To the extent that the actual holders of the Corporation’s outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change in Control, the successor corporation (or parent thereof) may in connection with the assumption or continuation of this Award and subject to the Plan Administrator’s approval, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change in Control, provided such common stock is readily traded on an established U.S. securities market.
(f)This Agreement shall not in any way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
6.Adjustment in Shares.  Should any change be made to the outstanding Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, or should the value of outstanding shares of Common Stock be substantially reduced as a result of a spin-off transaction or an extraordinary dividend or distribution, or should there occur any merger, consolidation, reincorporation or other reorganization, then equitable adjustments shall be made to the total number and/or class of securities issuable pursuant to this Award in such manner as the Plan Administrator deems appropriate in order to reflect such change, and those adjustments shall be final, binding and conclusive.
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7.Withholding of Taxes.
(a)Upon the applicable Issue Date, the Corporation shall issue to or on behalf of the Participant a certificate (which may be in electronic form) for the applicable number of Shares, subject, however, to the Corporation’s collection of the applicable Withholding Taxes. The Corporation shall have the right to require the Participant to pay to the Corporation the amount of any Withholding Taxes in respect of the Shares or to take whatever action it deems necessary to protect the interests of the Corporation in respect of such Withholding Tax liabilities, in accordance with this Paragraph 7.
(b)If the Participant is not a Section 16 Insider at the time such obligation for Withholding Taxes arises, the Participant may elect to satisfy all or a portion of the Corporation’s obligation for Withholding Taxes in one or more of the following forms:
(i)in cash or check made payable to the Corporation;
(ii)by requesting that the Corporation withhold from the Shares otherwise deliverable to the Participant a number of whole Shares having a Fair Market Value as of the Issue Date, not in excess of the amount of such Withholding Taxes determined by using the applicable minimum statutory withholding rates, or such other amount or rate determined by the Corporation (the “Share Withholding Method”); or
(iii)subject to compliance with applicable law and the Corporation’s insider trading policies, through a special sale and remittance procedure pursuant to which the Participant shall concurrently provide instructions (A) to a brokerage firm (with such brokerage firm reasonably satisfactory to the Corporation for purposes of administering such procedure in compliance with the Corporation’s pre-clearance or pre-notification policies) to effect the immediate sale of a number of Shares issuable upon settlement of the PSUs and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Withholding Taxes payable in respect of the settlement of the PSUs on the Issue Date and (B) to the Corporation to deliver the certificates for the Shares to be sold directly to such brokerage firm on the settlement date in order to complete the sale.
Notwithstanding the foregoing, if the Corporation’s obligations for Withholding Taxes are not satisfied by the Participant prior to the date on which the obligation for Withholding Taxes arises, and the Participant is not a Section 16 Insider at such time, the Corporation may satisfy the Corporation’s obligation for Withholding Taxes using the Share Withholding Method without further action by the Participant.
(c)If the Participant is a Section 16 Insider at the time such obligation for Withholding Taxes arises, the Corporation shall satisfy the Corporation’s obligation for Withholding Taxes using the Share Withholding Method.
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(d)Notwithstanding the provisions of subparagraphs (b) and (c) of this Paragraph 7, the employee portion of the federal, state and local employment taxes required to be withheld by the Corporation in connection with the vesting of the PSUs (the “Employment Taxes”) shall in all events be collected from the Participant no later than the last business day of the calendar year in which the PSUs vest hereunder.  Accordingly, to the extent the Issue Date for one or more vested PSUs is to occur in a year subsequent to the calendar year in which those PSUs vest, the Participant shall, on or before the last business day of the calendar year in which the PSUs vest, deliver to the Corporation a check payable to its order in the dollar amount equal to the Employment Taxes required to be withheld with respect to those PSUs.  The provisions of this Paragraph 7(d) shall be applicable only to the extent necessary to comply with the applicable tax withholding requirements of Code Section 3121(v).
(e)Except as otherwise provided in Paragraph 5, the settlement of all PSUs which vest under the Award shall be made solely in shares of Common Stock.  In no event, however, shall any fractional Shares be issued.  Accordingly, the total number of Shares to be issued pursuant to the Award shall, to the extent necessary, be rounded down to the next whole Share in order to avoid the issuance of a fractional Share.
8.Compliance with Laws and Regulations.
(a)The issuance of Shares pursuant to the Award shall be subject to compliance by the Corporation and the Participant with all applicable requirements of law relating thereto and with all applicable regulations of any Stock Exchange on which the Common Stock may be listed for trading at the time of such issuance.
(b)The inability of the Corporation to obtain approval from any regulatory body having authority deemed by the Corporation to be necessary to the lawful issuance and sale of any Common Stock pursuant to this Award shall relieve the Corporation of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained.  The Corporation, however, shall use its best efforts to obtain all such approvals.
9.Successors and Assigns.  Except to the extent otherwise provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and the Participant, the Participant’s assigns and the legal representatives, heirs and legatees of the Participant’s estate and any beneficiaries of the Award designated by the Participant.
10.Notices.  Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate offices.  Any notice required to be given or delivered to the Participant shall be in writing and addressed to the Participant at the address indicated on the Corporation’s personnel records.  All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.
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11.Construction.  This Agreement and the Award evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan.  All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in this Award.
12.Governing Law.  The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware without resort to that state’s conflict-of-laws rules.
13.Stockholder Approval.  If the Shares covered by this Agreement exceed, as of the Grant Date, the number of shares of Common Stock which may be issued under the Plan as last approved by the stockholders, then this Award shall be void with respect to such excess Shares, unless stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan.
14.Employment at Will.  Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining the Participant) or of the Participant, which rights are hereby expressly reserved by each, to terminate the Participant’s Service at any time for any reason, with or without cause.
15.Section 409A.
(a)It is intended that all of the payments payable under this Agreement satisfy, to the greatest extent possible, the exemption from the application of Section 409A of the Code (together with any Treasury Regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Grant Date, “Section 409A”), provided under Treasury Regulations 1.409A-1(b)(4), and this Agreement will be construed to the greatest extent possible as consistent with those provisions, and to the extent not so exempt, this Agreement (and any definitions hereunder) will be construed in a manner that complies with Section 409A (including to incorporate the terms and conditions required by Section 409A.  In furtherance of the foregoing intention, the Shares issuable pursuant to the PSUs hereunder shall be distributed to Participant no later than the later of:  (i) the fifteenth (15th) day of the third month following Participant’s first taxable year in which such PSUs are no longer subject to a substantial risk of forfeiture, and (ii) the fifteenth (15th) day of the third month following first taxable year of the Company in which such PSUs are no longer subject to substantial risk of forfeiture, as determined in accordance with Section 409A and any Treasury Regulations and other guidance issued thereunder. Neither the time nor form of distribution of Shares with respect to the RSUs may be changed, except as may be permitted by the Plan Administrator in accordance with the Plan and Section 409A of the Code and the Treasury Regulations thereunder.
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(b)For purposes of Section 409A (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), each payment that Participant may be eligible to receive under this Award shall be treated as a separate and distinct payment.
(c)Notwithstanding any provision to the contrary in the Plan or this Agreement, to the extent any payments to Participant pursuant to this Agreement constitute “non-qualified deferred compensation” subject to Section 409A, then, to the extent required by Section 409A of the Code, no amount shall be payable upon Participant’s termination of employment unless such termination constitutes a “separation from service” as defined in Section 409A (“Separation from Service”).
(d)Notwithstanding any provision to the contrary in this Agreement, if Participant is deemed by the Corporation at the time of Participant’s Separation from Service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i), and if any of the payments upon Separation from Service set forth herein are deemed to constitute “non-qualified deferred compensation,” then, to the extent required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) and the related adverse taxation under Section 409A, the delivery of Shares upon such Separation from Service shall be delayed until the earliest of (i) the expiration of the six-month and one day period measured from the date of Participant’s Separation from Service with the Corporation, (ii) the date of Participant’s death or (iii) such earlier date as permitted under Section 409A without the imposition of adverse taxation.  No interest shall be due on any amounts so deferred.
(e)Notwithstanding any provision to the contrary in this Agreement, if any of the payments triggered upon the occurrence of a Change in Control set forth herein are deemed to constitute “non-qualified deferred compensation,” then, to the extent required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) and the related adverse taxation under Section 409A, such Change in Control must also constitute a “change in control event” (as defined in Treasury Regulation §1.409A-3(i)(5)).
(f)Dividend Equivalent rights and any amounts that may become distributable in respect thereof shall be treated separately from the PSUs and the rights arising in connection therewith for purposes of the designation of time and form of payments required by Section 409A.
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16.Definitions.  Defined terms used herein without definition shall have the meanings given to such terms in the Plan.  In addition, the following definitions shall be in effect under the Agreement:
(a)Agreement shall mean this Performance Stock Unit Issuance Agreement.
(b)Good Reason shall mean (unless otherwise defined in an employment or other agreement between the Corporation and the Participant): Participant’s voluntary resignation from the Corporation upon any of the following events without Participant’s written consent: (i) a material reduction in the Participant’s authority, duties or responsibilities
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(and not simply a change in title or reporting relationships); (ii) a material reduction in the Participant’s base salary (for the avoidance of doubt, a greater than ten (10%) percent reduction in the level of base salary shall constitute a material reduction in the Participant’s compensation, unless the reduction is part of a Corporation-wide reduction that affects all similarly situated employees in substantially the same proportion; (iii) a relocation of the Participant’s principal place of work to a location that would increase the Participant’s one-way commute from his or her personal residence to the new principal place of work by more than fifty (50) miles; or (iv) any breach by the Corporation of its obligations under any employment agreement with Participant that results in a material negative change to Participant. Notwithstanding the foregoing, “Good Reason” shall only be found to exist if the Participant provides written notice (each, a “Good Reason Notice”) to the Corporation identifying and describing the event resulting in Good Reason within ninety (90) days of the initial existence of such event, the Corporation does not cure such event within thirty (30) days following receipt of the Good Reason Notice from the Participant and the Participant terminates his or her employment during the ninety (90)-day period after the Participant’s delivery of the Good Reason Notice. If the Participant does not terminate his or her employment for Good Reason within ninety (90) days after delivery of the Good Reason Notice, then the Participant will be deemed to have waived his or her right to terminate for Good Reason with respect to such grounds.
(c)Grant Date shall mean the date the PSUs are awarded to Participant pursuant to the Agreement and shall be the date indicated in Paragraph 1 of the Agreement.
(d)Issue Date shall have the meaning indicated in Paragraph 1 of the Agreement.
(e)Notwithstanding any contrary definition of “Misconduct” set forth in the Plan, Misconduct for purposes of this Agreement shall mean (unless otherwise defined in an employment or other agreement between the Corporation and the Participant): (i) Participant’s misappropriation of the Corporation’s funds or property, or any attempt by Participant to secure any personal profit related to the business or business opportunities of the Corporation without the informed, written approval of the Audit Committee of the Board; (ii) any unauthorized use or disclosure by Participant of confidential information or trade secrets of the Corporation (or any parent of the Corporation); (iii) Participant’s gross negligence or reckless misconduct in the performance of Participant’s duties; (iv) Participant’s willful failure to comply with any valid and legal directive of the Board or the person to whom Participant reports; (v) Participant’s conviction of, or plea of nolo contendre to, any felony or misdemeanor involving moral turpitude or fraud, or of any other crime involving material harm to the standing or reputation of the Corporation; (vi) any other willful misconduct by Participant that the Board determines in good faith has had a material adverse effect upon the business or reputation of the Corporation; or (vii) any other material breach or violation by the Participant of any employment agreement with the Corporation or any other material written policy of the Corporation; provided, however, that the Corporation shall have provided the Participant with written notice that such breach or violation has occurred, and the Participant has been afforded at least ten (10) business days to cure such breach or violation. Notwithstanding the foregoing, (A) the cure period shall not apply to violations of the Corporation’s code of conduct, code of ethics or prohibition against unlawful harassment, and (B) such cure period shall only apply to breaches, violations, failures or neglect that in the Board’s
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sole judgment are capable of or amenable to such cure. Notwithstanding the foregoing, prong (b) of this definition is not intended to, and shall be interpreted in a manner that does not, limit or restrict a Participant from exercising any legally protected whistleblower rights (including pursuant to Rule 21F under the 1934 Act).
(f)Participant shall mean the person to whom the Award is made pursuant to the Agreement.
(g)PSU shall have the meaning set forth in Paragraph 1 of the Agreement.
(h)Withholding Taxes shall mean (i) the employee portion of the federal, state and local employment taxes required to be withheld by the Corporation in connection with the vesting of PSUs  under the Award and (ii) the federal, state and local income taxes required to be withheld by the Corporation in connection with the issuance of the Shares underlying those vested PSUs (or any other property).
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IN WITNESS WHEREOF, the parties have executed this Agreement on the respective dates indicated below.
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	ITERIS, INC.

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	PARTICIPANT

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APPENDIX 1
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1.Performance-Based Vesting.  Participant is hereby granted the Target Number of PSUs set forth in the Award Summary.  Subject to Paragraph 5 of the Agreement and Paragraphs 1(b) and (c)(ii) below, the PSUs shall be eligible to vest based on the Corporation’s Revenues per Share (as defined below) and Cash Flow from Operations (as defined below) and rTSR (as defined below) for the Performance Periods (as defined below) as provided in this Section 1, subject to Participant not experiencing a cessation of Service prior to March 31, [Year 4].
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(a)Performance Vesting Provisions if Measurement Date is March 31, [Year 4]. In the event the Measurement Date occurs on March 31, [Year 4], provided that Participant has not experienced a cessation of Service prior to March 31, [Year 4], on the Certification Date, the Plan Administrator shall determine the number of PSUs that shall be issued to Participant under this Award on the Issue Date with respect to the Corporation’s financial performance during the Performance Periods.  The resulting number of PSUs shall be paid and settled within thirty (30) days following the Certification Date.
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(i)Financial Performance.  Subject to adjustment under clause (a)(ii) below, such number of PSUs shall be eligible to vest on the Certification Date based on the Corporation’s Revenues per Share and Cash Flow from Operations during the Performance Periods equal to the sum of:
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(A)50% of the Target Number of PSUs (as adjusted pursuant to Paragraph 4(b) of the Agreement), multiplied by the Average Revenues Achievement Factor, plus
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(B)50% of the Target Number of PSUs (as adjusted pursuant to Paragraph 4(b) of the Agreement), multiplied by the Average Cash Flow from Operations Achievement Factor.
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(ii)rTSR Modifier. The number of PSUs in which Participant will be eligible to vest on the Certification Date based on financial performance under Paragraph 1(a)(i) is subject to an additional modifier based on the Corporation’s relative TSR (“rTSR”) performance versus the Russell 2000 (as defined below) over the Three-Year Performance Period (as defined below), which will adjust the total number of PSUs eligible to vest determined under Paragraph 1(a)(i) from .75x-to-1.25x (the “rTSR Multiplier”) as follows:
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	Corporation rTSR versus Russell 2000
	rTSR Multiplier

	81st-100th Percentile
	1.25

	71st-80th Percentile
	1.15

	61st-70th Percentile
	1.10

	41st-60th Percentile
	1.00

	31st-40th Percentile
	.90

	21st-30th Percentile
	.85

	0-20th Percentile
	.75

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(b)Effect of a Change in Control.  Upon the occurrence of a Change in Control prior to March 31, [Year 4], the number of PSUs in which Participant shall be eligible to vest pursuant to this Award (the “Vesting Eligible PSUs”) shall be determined on the Certification Date and shall be equal to such number of PSUs as would vest pursuant to Paragraph 1(a) above for the Performance Periods as determined as of the Measurement Date, provided that (i) the Revenues per Share Achievement Percentage and the Cash Flow from Operations Achievement Percentage to be used for the averages required under Paragraph 1(a)(i) for any Performance Period that has commenced but is not yet completed as of the date of such Change in Control shall be equal to such percentage determined by the Plan Administrator by reference to performance relative to the objectives through the date of such Change in Control (and if the Plan Administrator determines that such performance-to-date is not reasonably determinable, the Revenues per Share Achievement Percentage and Cash Flow from Operations Achievement Percentage shall be set at 100% for such partial Performance Period), (ii) if any Performance Period has not yet commenced as of the date of such Change in Control, 100% shall be used as the Revenues per Share Achievement Percentage and the Cash Flow from Operations Achievement Percentage for such Performance Period for the averages required under Paragraph 1(a)(i), and (iii) the rTSR Multiplier shall be calculated based on performance for the Three-Year Performance Period through the date of the Change in Control.  Subject to Paragraph 1(c)(ii) below and Paragraph 5 of the Agreement, the Vesting Eligible PSUs will vest on March 31, [Year 4], provided Participant does not incur a cessation of Service prior to such date; provided, however, that (A) if Participant’s Service terminates by reason of death or Permanent Disability at any time following a Change in Control, or (B) if Participant incurs an involuntary termination by the Corporation or its successor other than as a result of Participant’s Misconduct, or the Participant voluntarily terminates employment for Good Reason, in each case in this clause (B) within eighteen (18) months following the effective date of a Change in Control of the Corporation, then such number of the Vesting Eligible PSUs as would have vested by their terms during the two (2) year period following the date of such termination, if any, shall vest upon such termination. The resulting number of PSUs that vest pursuant to this Paragraph 1(b) shall be paid and settled within thirty (30) days following Participant’s cessation of Service.  Any PSUs which are not Vesting Eligible PSUs following the date of the Change in Control shall automatically and without further action be cancelled and forfeited by Participant, and Participant shall have no further right or interest in or with respect to such portion of the Award or PSUs.
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(c)Effect of Cessation of Service; Forfeiture.
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(i)Subject to Paragraph 5 of the Agreement and Paragraph 1(b) above and 1(c)(ii) below, Participant must not have experienced a cessation of Service prior to March 31, [Year 4] in order to be eligible for vesting in the PSUs.  Any portion of the PSUs subject to this Award that does not vest pursuant to this Appendix 1 (or after any date during the Performance Periods is no longer eligible to possibly vest under the terms of the Agreement and this Appendix 1 due to performance during such Performance Period being below “maximum” levels) shall automatically and without further action be cancelled and forfeited by Participant, and Participant shall have no further right or interest in or with respect to such PSUs.
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(ii)In the event of the Participant’s cessation of Service due to death or Permanent Disability prior to a Change in Control, a pro-rata portion of the PSUs shall be eligible to vest on the date of such cessation of Service based on the amount of time elapsed in the Performance Period and based on actual performance results at the time of separation. The total number of PSUs subject to this Award which shall be eligible to vest upon a cessation from Service due to death or Permanent Disability shall be calculated as the product of (A) and (B), where (A) is the number of PSUs subject to this Award that the Plan Administrator determines have been earned as of the Certification Date, which shall be equal to such number of PSUs as would vest pursuant to Paragraph 1(a) above for the Performance Periods as determined as of the Measurement Date, provided that (1) the Revenues per Share Achievement Percentage and the Cash Flow from Operations Achievement Percentage to be used for the averages required under Paragraph 1(a)(i) for any Performance Period that has commenced but is not yet completed as of the date of such termination shall be equal to such percentage determined by the Plan Administrator by reference to performance relative to the objectives through the date of such termination (and if the Plan Administrator determines that such performance-to-date is not reasonably determinable, the Revenues per Share Achievement Percentage and Cash Flow from Operations Achievement Percentage shall be set at 100% for such partial Performance Period), (2) if any Performance Period has not yet commenced as of the date of such Change in Control, 100% shall be used as the Revenues per Share Achievement Percentage and the Cash Flow from Operations Achievement Percentage for such Performance Period for the averages required under Paragraph 1(a)(i), and (3) the rTSR Multiplier shall be calculated based on performance for the Three-Year Performance Period through the date of such termination, and (B) is a fraction, the numerator of which is the number of calendar days from the first day of the Three-Year Performance Period through the date of cessation of Service and the denominator of which is one thousand ninety-five (1,095). The resulting number of PSUs that vest pursuant to this Paragraph 1(c)(ii) shall be paid and settled within thirty (30) days following Participant’s cessation of Service.
(e)Maximum PSUs.  In no event will more than the Maximum Number of PSUs set forth in the Award Summary vest pursuant to this Appendix 1.
2.Definitions.  For purposes of this Appendix 1, the following terms shall have the meanings given below:
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(a)Average Cash Flow from Operations Achievement Percentage means (i) the sum of the Cash Flow from Operations Achievement Percentage for the First Performance Period plus the Cash Flow from Operations Achievement Percentage for the Second Performance Period plus the Cash Flow from Operations Achievement Percentage for the Third Performance Period, divided by (ii) three (3).
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(b)Average Revenues per Share Achievement Percentage means (i) the sum of the Revenues per share Achievement Percentage for the First Performance Period plus the Revenues per Share Achievement Percentage for the Second Performance Period plus the Revenues per Share Achievement Percentage for the Third Performance Period, divided by (ii) three (3).
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(c)Cash Flow from Operations means the Corporation’s cash flow from operations as set forth in the Corporation’s audited financial statements for the relevant period.
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(d)Cash Flow from Operations Achievement Percentage means a payout percentage relative to target determined by the Plan Administrator based on Cash Flow from Operations relative to the Cash Flow from Operations Budget for each of the First Performance Period, the Second Performance Period and the Third Performance Period determined as follows (linear interpolation for points in between):
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	Payout Level
	Cash Flow from
Operations
	Payout as % of
Target

	Maximum
	[___]% of Budget
	160%

	Target
	100% of Budget
	100%

	Threshold
	[___]% of Budget
	50%

	Below Threshold
	<[___]% of Budget
	0%

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If there is a change in applicable law or accounting principles that affects the Company’s measurement of Cash Flow from Operations, the Plan Administrator shall consider, in good faith, the effect of any such changes in determining the Cash Flow from Operations relative to the Cash Flow from Operations Budget for each Performance Period and the resulting Cash Flow from Operations Achievement Percentage.
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(e)Cash Flow from Operations Budget means the target level of Cash Flow from Operations for each of the First Performance Period, the Second Performance Period and the Third Performance Period, which target level shall be determined by the Plan Administrator within ninety (90) days following the beginning of each Performance Period.
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(f)Certification Date means the date on which the Plan Administrator certifies the Corporation’s results relative to the performance objectives described in this Appendix 1 for the Performance Periods, which certification shall occur no later than (i) if the Measurement Date is March 31, [Year 4], then June 15, [Year 4], (ii) if the Measurement Date is the date of a Change in Control, then the date of such Change in Control, or (iii) if the Measurement Date is the date of Participant’s cessation of Service by reason of death or Permanent Disability prior to a Change in Control, within thirty (30) days following such date.
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(g)First Performance Period means the first fiscal year occurring during the Three-Year Performance Period (which period will terminate early in the event of a Change in Control prior to the end of such fiscal year).
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(h)Measurement Date means the earlier of (i) March 31, [Year 4], (ii) the date of a Change in Control, or (iii) the date of Participant’s cessation of Service by reason of death or Permanent Disability prior to a Change in Control.
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(h)Performance Periods means each of the First Performance Period, the Second Performance Period, the Third Performance Period and the Three-Year Performance Period.
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(i)Revenues per Share means revenues as set forth in the Corporation’s audited financial statements for the relevant period divided by the Corporation’s total number of fully diluted shares of Common Stock per the Corporation’s audited financial statements at the end of the relevant period.
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(j)Revenues per Share Achievement Percentage means a payout percentage relative to target determined by the Plan Administrator based on Revenues per Share relative to the Revenues per Share Budget for each of the First Performance Period, the Second Performance Period and the Third Performance Period determined as follows (linear interpolation for points in between):
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	Payout Level
	Revenues per Share
	Payout as % of
Target

	Maximum
	[___]% of Budget
	160%

	Target
	100% of Budget
	100%

	Threshold
	[___]% of Budget
	50%

	Below Threshold
	<[___]% of Budget
	0%

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If there is a change in applicable law or accounting principles that affects the Company’s measurement of Revenues per Share, the Plan Administrator shall consider, in good faith, the effect of any such changes in determining the Revenues per Share relative to the Revenues per Share Budget for each Performance Period and the resulting Revenues per Share Achievement Percentage.
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(k)Revenues per Share Budget means the target level of Revenues per Share for each of the First Performance Period, the Second Performance Period and the Third Performance Period, which target level shall be determined by the Plan Administrator within ninety (90) days following the beginning of each Performance Period.
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(l)Russell 2000 means the companies in the index on the first day of the Three-Year Performance Period, with (i) bankruptcies assigned a TSR of -100% (including any company that files for bankruptcy, reorganization or liquidation under any chapter of the U.S. Bankruptcy Code; is the subject of an involuntary bankruptcy proceeding that is not dismissed within thirty (30) days; is the subject of a stockholder approved plan or liquidation or dissolution; or otherwise becomes involved or ceases to conduct substantial business operations); and (ii) those acquired, or otherwise cease to have a class of equity securities that is both registered under the 1934 Act and actively traded on a U.S. public securities market at the end of the Three-Year Performance Period eliminated.
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(m) Second Performance Period means the second fiscal year occurring during the Three-Year Performance Period (which period will terminate early in the event of a Change in Control prior to the end of such fiscal year).
(n)Third Performance Period means the third fiscal year occurring during the Three-Year Performance Period (which period will terminate early in the event of a Change in Control prior to the end of such fiscal year).
(o)Three-Year Performance Period means the period commencing on April 1, [Year 1] and ending on the Measurement Date.
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(p) TSR is calculated using the twenty (20)-day average stock price at the beginning and end of the Three-Year Performance Period; the value of the common stock on the first day of the Three-Year Performance Period shall be deemed to be the average of the closing price of the applicable company’s common stock for the twenty (20) trading days prior to the first trading day of the Three-Year Performance Period and the value of the applicable company’s common stock for the last day of the Three-Year Performance Period shall be deemed to be the average of the closing price of the applicable company’s common stock for the twenty (20) trading days ending on the last trading day of the Three-Year Performance Period; and the value of dividends and other distributions that have an ex-dividend date during such twenty (20) trading-day period shall be determined by treating them as reinvested in additional shares of the applicable company’s common stock at the closing market price on the date of distribution. In the event of a Change in Control, the ending price for purposes of calculating the Corporation’s TSR shall be the price per Share paid by the acquirer in the Change in Control transaction.

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