Exhibit 10.6
D. R. HORTON, INC.
2006 STOCK INCENTIVE PLAN
1. Purpose
     The purpose of D. R. Horton, Inc. 2006 Stock Incentive Plan (the “Plan”) is
to advance the interests of D. R. Horton, Inc. (the “Company”) by stimulating
the efforts of employees, officers and, to the extent provided by Sections 5(e)
and (f), non-employee directors and certain other service providers, in each
case who are selected to be participants, by heightening the desire of such
persons to continue in working toward and contributing to the success and
progress of the Company. The Plan supersedes the Company’s 1991 Stock Incentive
Plan with respect to future awards, and provides for the grant of Incentive and
Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock and
Restricted Stock Units, any of which may be performance-based, and for Incentive
Bonuses, which may be paid in cash or stock or a combination thereof, as
determined by the Administrator.
2. Definitions
     As used in the Plan, the following terms shall have the meanings set forth
below:
     (a) “Administrator” means the Administrator of the Plan in accordance with
Section 17.
     (b) “Award” means an Incentive Stock Option, Nonqualified Stock Option,
Stock Appreciation Right, Restricted Stock, Restricted Stock Unit or Incentive
Bonus granted to a Participant pursuant to the provisions of the Plan, any of
which the Administrator may structure to qualify in whole or in part as a
Performance Award.
     (c) “Award Agreement” means a written agreement or other instrument as may
be approved from time to time by the Administrator implementing the grant of
each Award. An Agreement may be in the form of an agreement to be executed by
both the Participant and the Company (or an authorized representative of the
Company) or certificates, notices or similar instruments as approved by the
Administrator.
     (d) “Board” means the board of directors of the Company.
     (e) “Code” means the Internal Revenue Code of 1986, as amended from time to
time, and the rulings and regulations issues thereunder.
     (f) “Company” means D. R. Horton, Inc., a Delaware corporation.
     (g) “Incentive Bonus” means a bonus opportunity awarded under Section 9
pursuant to which a Participant may become entitled to receive an amount based
on satisfaction of such performance criteria as are specified in the Award
Agreement.

 

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     (h) “Incentive Stock Option” means a stock option that is intended to
qualify as an “incentive stock option” within the meaning of Section 422 of the
Code.
     (i) “Nonemployee Director” means each person who is, or is elected to be, a
member of the Board and who is not an employee of the Company or any Subsidiary.
     (j) “Nonqualified Stock Option” means a stock option that is not intended
to qualify as an “incentive stock option” within the meaning of Section 422 of
the Code.
     (k) “Option” means an Incentive Stock Option and/or a Nonqualified Stock
Option granted pursuant to Section 6.
     (l) “Participant” means any individual described in Section 3 to whom
Awards have been granted from time to time by the Administrator and any
authorized transferee of such individual.
     (m) “Performance Award” means an Award, the grant, issuance, retention,
vesting or settlement of which is subject to satisfaction of one or more
Qualifying Performance Criteria established pursuant to Section 13.
     (n) “Plan” means D. R. Horton, Inc. 2006 Stock Incentive Plan as set forth
herein and as amended from time to time.
     (o) “Prior Plan” means D. R. Horton, Inc. 1991 Stock Incentive Plan, as
amended and restated on February 21, 2002.
     (p) “Qualifying Performance Criteria” has the meaning set forth in
Section 13(b).
     (q) “Restricted Stock” means Shares granted pursuant to Section 8.
     (r) “Restricted Stock Unit” means an Award granted to a Participant
pursuant to Section 8 pursuant to which Shares or cash in lieu thereof may be
issued in the future.
     (s) “Service Provider” means a consultant or advisor to the Company or any
Subsidiary who (i) is a natural person, (ii) provides bona fide services to the
Company or any Subsidiary, (iii) provides services other than in connection with
the offer or sale of securities in a capital-raising transaction, and (iv) does
not directly or indirectly promote or maintain a market for the Company’s
securities, in each case, within the meaning of the General Instructions to Form
S-8 under the Securities Act of 1933, as amended.
     (t) “Share” means a share of the Company’s common stock, par value $.01,
subject to adjustment as provided in Section 12.
     (u) “Stock Appreciation Right” means a right granted pursuant to Section 7
that entitles the Participant to receive, in cash or Shares or a combination
thereof, as determined by the Administrator, value equal to or otherwise based
on the excess of (i) the market price of a specified number of Shares at the
time of exercise over (ii) the exercise price of the right, as established by
the Administrator on the date of grant.

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     (v) “Subsidiary” means (i) any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company where each of the
corporations in the unbroken chain other than the last corporation owns stock
possessing at least 50 percent or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain, (ii) other than
with respect to Incentive Stock Options, any limited liability company, limited
partnership, general partnership or other entity, the majority of the equity or
ownership interests in which are owned, directly or indirectly, by the Company,
and (iii) if specifically determined by the Administrator in the context other
than with respect to Incentive Stock Options, any entity in which the Company
has a significant ownership interest or that is directly or indirectly
controlled by the Company.
     (w) “Substitute Awards” means Awards granted or Shares issued by the
Company in assumption of, or in substitution or exchange for, awards previously
granted, or the right or obligation to make future awards, by a person or entity
acquired by the Company or any Subsidiary or with which the Company or any
Subsidiary merges or combines.
     (x) “Termination of Employment” means ceasing to serve as a full-time
employee of the Company and its Subsidiaries or, with respect to a Nonemployee
Director or other Service Provider, ceasing to serve as such for the Company,
except that with respect to all or any Awards held by a Participant (i) the
Administrator may determine, subject to Section 6(d), that an approved leave of
absence or approved employment on a less than full-time basis is not considered
a “Termination of Employment,” (ii) the Administrator may determine that a
transition of employment to service with a partnership, joint venture or
corporation not meeting the requirements of a Subsidiary in which the Company or
a Subsidiary is a party is not considered a “Termination of Employment,”
(iii) service as a member of the Board shall constitute continued employment
with respect to Awards granted to a Participant while he or she served as an
employee and (iv) service as an employee of the Company or a Subsidiary shall
constitute continued employment with respect to Awards granted to a Participant
while he or she served as a member of the Board. The Administrator shall
determine whether any corporate transaction, such as a sale or spin-off of a
division or subsidiary that employs a Participant, shall be deemed to result in
a Termination of Employment with the Company and its Subsidiaries for purposes
of any affected Participant’s Options, and the Administrator’s decision shall be
final and binding.
3. Eligibility
     Any person who is a current or prospective officer or employee (including,
without limitation, any director who is also an employee, in his or her capacity
as such) of the Company or of any Subsidiary shall be eligible for selection by
the Administrator for the grant of Awards hereunder. To the extent provided by
Section 5(e), any Nonemployee Director shall be eligible for the grant of Awards
hereunder as determined by the Administrator. In addition, to the extent
provided by Section 5(f), any Service Provider shall be eligible for selection
by the Administrator for the grant of Awards hereunder. Options intending to
qualify as Incentive Stock Options may only be granted to employees of the
Company or any Subsidiary within the meaning of Section 424(f) the Code, as
selected by the Administrator.

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4. Effective Date and Termination of Plan
     This Plan was adopted by the Board on November 17, 2005, and it will become
effective (the “Effective Date”) when it is approved by the Company’s
stockholders. All Awards granted under this Plan are subject to, and may not be
exercised before, the approval of this Plan by the stockholders prior to the
first anniversary date of the adoption date of the Plan, by the affirmative vote
of the holders of a majority of the outstanding Shares of the Company present,
or represented by proxy, and entitled to vote, at a meeting of the Company’s
stockholders in accordance with the laws of the State of Delaware; provided that
if such approval by the stockholders of the Company is not forthcoming, all
Awards previously granted under this Plan shall be void. The Plan shall remain
available for the grant of Awards until the tenth (10th) anniversary of the
Effective Date. Notwithstanding the foregoing, the Plan may be terminated at
such earlier time as the Board may determine. Termination of the Plan will not
affect the rights and obligations of the Participants and the Company arising
under Awards theretofore granted and then in effect.
5. Shares Subject to the Plan and to Awards
     (a) Aggregate Limits. The aggregate number of Shares issuable pursuant to
all Awards shall not exceed 28,000,000, plus (i) any Shares that were authorized
for issuance under the Prior Plan that, as of January 26, 2006, remain available
for issuance under the Prior Plan (not including any Shares that are subject to,
as of January 26, 2006, outstanding awards under the Prior Plan or any Shares
that prior to January 26, 2006 were issued pursuant to awards granted under the
Prior Plan) and (ii) any Shares subject to outstanding awards under the Prior
Plan as of January 26, 2006 that on or after such date cease for any reason to
be subject to such awards (other than by reason of exercise or settlement of the
awards to the extent they are exercised for or settled in vested and
nonforfeitable shares); provided that any Shares granted under Options or Stock
Appreciation Rights shall be counted against this limit on a one-for-one basis
and any Shares granted as Awards other than Options or Stock Appreciation Rights
shall be counted against this limit as 1.75 Shares for every one Share subject
to such Award. The aggregate number of Shares available for grant under this
Plan and the number of Shares subject to outstanding Awards shall be subject to
adjustment as provided in Section 12. The Shares issued pursuant to Awards
granted under this Plan may be shares that are authorized and unissued or shares
that were reacquired by the Company, including, without limitation, shares
purchased in the open market.
     (b) Issuance of Shares. For purposes of Section 5(a), the aggregate number
of Shares issued under this Plan at any time shall equal only the number of
Shares actually issued upon exercise or settlement of an Award. Notwithstanding
the foregoing, Shares subject to an Award under the Plan may not again be made
available for issuance under the Plan if such Shares are: (i) Shares that were
subject to a stock-settled Stock Appreciation Right and were not issued upon the
net settlement or net exercise of such Stock Appreciation Right, (ii) Shares
used to pay the exercise price of a Stock Option, (iii) Shares delivered to or
withheld by the Company to pay the withholding taxes related to a Stock Option
or a Stock Appreciation Right, or (iv) Shares repurchased on the open market
with the proceeds of a Stock Option exercise. Shares subject to Awards that have
been canceled, expired, forfeited or otherwise not issued under an Award and
Shares subject to Awards settled in cash shall not count as Shares issued under
this Plan.

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     (c) Substitute Awards. Substitute Awards shall not reduce the Shares
authorized for issuance under the Plan or authorized for grant to a Participant
in any calendar year. In addition, in the event that a person or entity acquired
by the Company or any Subsidiary, or with which the Company or any Subsidiary
merges or combines, has shares available under a pre-existing plan approved by
its stockholders and not adopted in contemplation of such acquisition, merger or
combination, the shares available for grant pursuant to the terms of such
pre-existing plan (as adjusted, to the extent appropriate, using the exchange
ratio or other adjustment or valuation ratio or formula used in such
acquisition, merger or combination to determine the consideration payable to the
holders of common stock of the entities party to such transaction) may be used
for Awards under the Plan and, notwithstanding any other provision hereof, shall
not reduce the Shares authorized for issuance under the Plan; provided that
Awards using such available shares shall not be made after the date awards or
grants could have been made under the terms of the pre-existing plan, absent the
acquisition, merger or combination, and shall only be made to individuals who
were employees, directors or Service Providers of such acquired, merged or
combined company before such acquisition, merger or combination.
     (d) Tax Code Limits. The aggregate number of Shares subject to Awards
granted under this Plan during any calendar year to any one Participant shall
not exceed 500,000, which number shall be calculated and adjusted pursuant to
Section 12 only to the extent that such calculation or adjustment will not
affect the status of any Award intended to qualify as “performance based
compensation” under Section 162(m) of the Code but which number shall not count
any tandem SARs (as defined in Section 7). The aggregate number of Shares that
may be issued pursuant to the exercise of Incentive Stock Options granted under
this Plan shall not exceed 28,000,000, which number shall be calculated and
adjusted pursuant to Section 12 only to the extent that such calculation or
adjustment will not affect the status of any option intended to qualify as an
Incentive Stock Option under Section 422 of the Code. The maximum amount payable
pursuant to that portion of an Incentive Bonus granted with respect any
specified performance period to any Participant under this Plan that is intended
to satisfy the requirements for “performance based compensation” under Section
162(m) of the Code shall not exceed two percent (2%) of the Company’s
consolidated pre-tax income for such performance period.
     (e) Director Awards. The aggregate number of Shares subject to Awards
granted under this Plan during any calendar year to any one Nonemployee Director
shall not exceed 10,000, which limit shall not count any tandem SARs (as defined
in Section 7).
     (f) Awards to Service Providers. The aggregate number of Shares issued
under this Plan pursuant to all Awards granted to Service Providers shall not
exceed 300,000.
     (g) Effect on Prior Plan. From and after the Effective Date, no further
grants or awards shall be made under the Prior Plan. Grants and awards made
under the Prior Plan before the Effective Date, however, shall continue in
effect in accordance with their terms.
6. Options
     (a) Option Awards. Options may be granted at any time and from time to time
prior to the termination of the Plan to Participants as determined by the
Administrator. No Participant shall have any rights as a stockholder with
respect to any Shares subject to Options hereunder

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until such Shares have been issued, except that the Administrator may authorize
dividend equivalent accruals with respect to such Shares. Each Option shall be
evidenced by an Award Agreement. Options granted pursuant to the Plan need not
be identical but each Option must contain and be subject to the terms and
conditions set forth below.
     (b) Price. The Administrator will establish the exercise price per Share
under each Option, which, in no event will be less than the fair market value of
the Shares on the date of grant; provided, however, that the exercise price per
Share with respect to an Option that is granted in connection with a merger or
other acquisition as a substitute or replacement award for options held by
optionees of the acquired entity may be less than 100% of the market price of
the Shares on the date such Option is granted if such exercise price is based on
a formula set forth in the terms of the options held by such optionees or in the
terms of the agreement providing for such merger or other acquisition. The
exercise price of any Option may be paid in Shares, cash or a combination
thereof, as determined by the Administrator, including, without limitation, an
irrevocable commitment by a broker to pay over such amount from a sale of the
Shares issuable under an Option, the delivery of previously owned Shares and
withholding of Shares deliverable upon exercise.
     (c) No Repricing. Other than in connection with a change in the Company’s
capitalization (as described in Section 12), the exercise price of an Option may
not be reduced without stockholder approval (including, without limitation,
canceling previously awarded Options and regranting them with a lower exercise
price).
     (d) Provisions Applicable to Options. The date on which Options become
exercisable shall be determined at the sole discretion of the Administrator and
set forth in an Award Agreement. Unless provided otherwise in the applicable
Award Agreement, to the extent that the Administrator determines that an
approved leave of absence or employment on a less than full-time basis is not a
Termination of Employment, the vesting period and/or exercisability of an Option
shall be adjusted by the Administrator during or to reflect the effects of any
period during which the Participant is on an approved leave of absence or is
employed on a less than full-time basis.
     (e) Term of Options and Termination of Employment. The Administrator shall
establish the term of each Option, which in no case shall exceed a period of ten
(10) years from the date of grant. In addition, the Award Agreement evidencing
the grant of each Option shall set forth the terms and conditions applicable to
such Option upon a Participant’s Termination of Employment.
     (f) Incentive Stock Options. Notwithstanding anything to the contrary in
this Section 6, in the case of the grant of an Option intending to qualify as an
Incentive Stock Option: (i) if the Participant owns stock possessing more than
10 percent of the combined voting power of all classes of stock of the Company
(a “10% Shareholder”), the exercise price of such Option must be at least
110 percent of the fair market value of the Shares on the date of grant and the
Option must expire within a period of not more than five (5) years from the date
of grant, and (ii) Termination of Employment will occur when the person to whom
an Award was granted ceases to be an employee (as determined in accordance with
Section 3401(c) of the Code and the regulations promulgated thereunder) of the
Company and its Subsidiaries. Notwithstanding

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anything in this Section 6 to the contrary, options designated as Incentive
Stock Options shall not be eligible for treatment under the Code as Incentive
Stock Options (and will be deemed to be Nonqualified Stock Options) to the
extent that either (a) the aggregate fair market value of Shares (determined as
of the time of grant) with respect to which such Options are exercisable for the
first time by the Participant during any calendar year (under all plans of the
Company and any Subsidiary) exceeds $100,000, taking Options into account in the
order in which they were granted, or (b) such Options otherwise remain
exercisable but are not exercised within three (3) months of Termination of
Employment (or such other period of time provided in Section 422 of the Code).
7. Stock Appreciation Rights
     Stock Appreciation Rights may be granted to Participants from time to time
either in tandem with or as a component of other Awards granted under the Plan
(“tandem SARs”) or not in conjunction with other Awards (“freestanding SARs”)
and may, but need not, relate to a specific Option granted under Section 6. The
provisions of Stock Appreciation Rights need not be the same with respect to
each grant or each recipient. Any Stock Appreciation Right granted in tandem
with an Award may be granted at the same time such Award is granted or at any
time thereafter before exercise or expiration of such Award. All freestanding
SARs shall be granted subject to the same terms and conditions applicable to
Options as set forth in Section 6 (including, without limitation, no repricing)
and all tandem SARs shall have the same exercise price, vesting, exercisability,
forfeiture and termination provisions as the Award to which they relate. Subject
to the provisions of Section 6 and the immediately preceding sentence, the
Administrator may impose such other conditions or restrictions on any Stock
Appreciation Right as it shall deem appropriate. Stock Appreciation Rights may
be settled in Shares, cash or a combination thereof, as determined by the
Administrator and set forth in the applicable Award Agreement.
8. Restricted Stock and Restricted Stock Units
     (a) Restricted Stock and Restricted Stock Unit Awards. Restricted Stock and
Restricted Stock Units may be granted at any time and from time to time prior to
the termination of the Plan to Participants as determined by the Administrator.
Restricted Stock is an award or issuance of Shares the grant, issuance,
retention, vesting and/or transferability of which is subject during specified
periods of time to such conditions (including, without limitation, continued
employment or performance conditions) and terms as the Administrator deems
appropriate. Restricted Stock Units are Awards denominated in units of Shares
under which the issuance of Shares is subject to such conditions (including,
without limitation, continued employment or performance conditions) and terms as
the Administrator deems appropriate. Each grant of Restricted Stock and
Restricted Stock Units shall be evidenced by an Award Agreement. Unless
determined otherwise by the Administrator, each Restricted Stock Unit will be
equal to one Share and will entitle a Participant to either the issuance of
Shares or payment of an amount of cash determined with reference to the value of
Shares. To the extent determined by the Administrator, Restricted Stock and
Restricted Stock Units may be satisfied or settled in Shares, cash or a
combination thereof. Restricted Stock and Restricted Stock Units granted
pursuant to the Plan need not be identical but each grant of Restricted Stock
and Restricted Stock Units must contain and be subject to the terms and
conditions set forth below.

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     (b) Contents of Agreement. Each Award Agreement shall contain provisions
regarding (i) the number of Shares or Restricted Stock Units subject to such
Award or a formula for determining such number, (ii) the purchase price of the
Shares, if any, and the means of payment, (iii) the performance criteria, if
any, and level of achievement versus these criteria that shall determine the
number of Shares or Restricted Stock Units granted, issued, retainable and/or
vested, (iv) such terms and conditions on the grant, issuance, vesting and/or
forfeiture of the Shares or Restricted Stock Units as may be determined from
time to time by the Administrator, (v) the term of the performance period, if
any, as to which performance will be measured for determining the number of such
Shares or Restricted Stock Units, and (vi) restrictions on the transferability
of the Shares or Restricted Stock Units. Shares issued under a Restricted Stock
Award may be issued in the name of the Participant and held by the Participant
or held by the Company, in each case as the Administrator may provide.
     (c) Vesting and Performance Criteria. The grant, issuance, retention,
vesting and/or, subject to Section 10, settlement of shares of Restricted Stock
and Restricted Stock Units will occur when and in such installments as the
Administrator determines or under criteria the Administrator establishes, which
may include Qualifying Performance Criteria. The grant, issuance, retention,
vesting and/or settlement of Shares under any such Award that is based on
performance criteria and level of achievement versus such criteria will be
subject to a performance period of not less than one (1) year, and the grant,
issuance, retention, vesting and/or settlement of Shares under any Restricted
Stock or Restricted Stock Unit Award that is based solely upon continued
employment and/or the passage of time may not vest or be settled in full over a
period of less than three (3) years but may be subject to pro-rata vesting over
such period, except that the Administrator may provide for the satisfaction
and/or lapse of all conditions under any such Award in the event of the
Participant’s death, disability, retirement or in connection with a change in
control of the Company, and the Administrator may provide that any such
restriction or limitation will not apply in the case of a Restricted Stock or
Restricted Stock Unit Award that is issued in payment or settlement of
compensation that has been earned by the Participant or that qualifies as a
Substitute Award. Notwithstanding anything in this Plan to the contrary, the
performance criteria for any Restricted Stock or Restricted Stock Unit that is
intended to satisfy the requirements for “performance-based compensation” under
Section 162(m) of the Code will be a measure based on one or more Qualifying
Performance Criteria selected by the Administrator and specified when the Award
is granted.
     (d) Discretionary Adjustments and Limits. Subject to the limits imposed
under Section 162(m) of the Code for Awards that are intended to qualify as
“performance based compensation,” notwithstanding the satisfaction of any
performance goals, the number of Shares granted, issued, retainable and/or
vested under an Award of Restricted Stock or Restricted Stock Units on account
of either financial performance or personal performance evaluations may, to the
extent specified in the Award Agreement, be reduced by the Administrator on the
basis of such further considerations as the Administrator shall determine.
     (e) Voting Rights. Unless otherwise determined by the Administrator,
Participants holding shares of Restricted Stock granted hereunder may exercise
full voting rights with respect to those shares during the period of
restriction. Participants shall have no voting rights with respect to Shares
underlying Restricted Stock Units unless and until such Shares are reflected as
issued and outstanding shares on the Company’s stock ledger.

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     (f) Dividends and Distributions. Participants in whose name Restricted
Stock is granted shall be entitled to receive all dividends and other
distributions paid with respect to those Shares, unless determined otherwise by
the Administrator. The Administrator will determine whether any such dividends
or distributions will be automatically reinvested in additional shares of
Restricted Stock and subject to the same restrictions on transferability as the
Restricted Stock with respect to which they were distributed or whether such
dividends or distributions will be paid in cash. Shares underlying Restricted
Stock Units shall be entitled to dividends or dividend equivalents only to the
extent provided by the Administrator.
     (g) Termination of Employment. The Award Agreement evidencing the grant of
an Award of Restricted Stock or Restricted Stock Units shall set forth the terms
and conditions applicable to such Award upon a Participant’s Termination of
Employment.
9. Incentive Bonuses
     (a) General. Each Incentive Bonus Award will confer upon the Participant
the opportunity to earn a future payment tied to the level of achievement with
respect to one or more performance criteria established for a performance period
of not less than one year (if payable in Shares), and not less than one calendar
quarter (if payable solely in cash).
     (b) Incentive Bonus Document. The terms of any Incentive Bonus will be set
forth in an Award Agreement. Each Award Agreement evidencing an Incentive Bonus
shall contain provisions regarding (i) the target and maximum amount payable to
the Participant as an Incentive Bonus, (ii) the performance criteria and level
of achievement versus these criteria that shall determine the amount of such
payment, (iii) the term of the performance period as to which performance shall
be measured for determining the amount of any payment, (iv) the timing of any
payment earned by virtue of performance, (v) restrictions on the alienation or
transfer of the Incentive Bonus prior to actual payment, (vi) forfeiture
provisions and (vii) such further terms and conditions, in each case not
inconsistent with this Plan as may be determined from time to time by the
Administrator.
     (c) Performance Criteria. The Administrator shall establish the performance
criteria and level of achievement versus these criteria that shall determine the
target and maximum amount payable under an Incentive Bonus, which criteria may
be based on financial performance and/or personal performance evaluations. The
Administrator may specify the percentage of the target Incentive Bonus that is
intended to satisfy the requirements for “performance-based compensation” under
Section 162(m) of the Code. Notwithstanding anything to the contrary herein, the
performance criteria for any portion of an Incentive Bonus that is intended by
the Administrator to satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code shall be a measure based on one
or more Qualifying Performance Criteria (as defined in Section 13(b)) selected
by the Administrator and specified at the time the Incentive Bonus is granted.
The Administrator shall certify the extent to which any Qualifying Performance
Criteria has been satisfied, and the amount payable as a result thereof, prior
to payment of any Incentive Bonus that is intended to satisfy the requirements
for “performance-based compensation” under Section 162(m) of the Code.

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     (d) Timing and Form of Payment. The Administrator shall determine the
timing of payment of any Incentive Bonus. Payment of the amount due under an
Incentive Bonus may be made in cash or in Shares, as determined by the
Administrator. Subject to Section 10, the Administrator may provide for or,
subject to such terms and conditions as the Administrator may specify, may
permit a Participant to elect for the payment of any Incentive Bonus to be
deferred to a specified date or event.
     (e) Discretionary Adjustments. Notwithstanding satisfaction of any
performance goals, the amount paid under an Incentive Bonus on account of either
financial performance or personal performance evaluations may, to the extent
specified in the Award Agreement, be reduced by the Administrator on the basis
of such further considerations as the Administrator shall determine.
10. Deferral of Gains
     The Administrator may, in an Award Agreement or otherwise, provide for the
deferred delivery of Shares or cash upon settlement, vesting or other events
with respect to Restricted Stock or Restricted Stock Units, or in payment or
satisfaction of an Incentive Bonus. Notwithstanding anything herein to the
contrary, in no event will any deferral of the delivery of Shares or any other
payment with respect to any Award be allowed if the Administrator determines
that the deferral would result in the imposition of the additional tax under
Section 409A(a)(1)(B) of the Code.
11. Conditions and Restrictions Upon Securities Subject to Awards
     The Administrator may provide that the Shares issued upon exercise of an
Option or Stock Appreciation Right or otherwise subject to or issued under an
Award shall be subject to such further agreements, restrictions, conditions or
limitations as the Administrator in its discretion may specify prior to the
exercise of such Option or Stock Appreciation Right or the grant, vesting or
settlement of such Award, including, without limitation, conditions on vesting
or transferability, forfeiture or repurchase provisions and method of payment
for the Shares issued upon exercise, vesting or settlement of such Award
(including, without limitation, the actual or constructive surrender of Shares
already owned by the Participant) or payment of taxes arising in connection with
an Award. Without limiting the foregoing, such restrictions may address the
timing and manner of any resales by the Participant or other subsequent
transfers by the Participant of any Shares issued under an Award, including,
without limitation (i) restrictions under an insider trading policy or pursuant
to applicable law, (ii) restrictions designed to delay and/or coordinate the
timing and manner of sales by Participant and holders of other Company equity
compensation arrangements, (iii) restrictions as to the use of a specified
brokerage firm for such resales or other transfers and (iv) provisions requiring
Shares to be sold on the open market or to the Company in order to satisfy tax
withholding or other obligations.
12. Adjustment of and Changes in the Stock
     The number and kind of Shares available for issuance under this Plan
(including, without limitation, under any Awards then outstanding), and the
number and kind of Shares subject to the individual limits set forth in
Section 5 of this Plan, may be adjusted by the Administrator as it

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determines appropriate to reflect any reorganization, reclassification,
combination or exchange of shares, repurchase of shares, stock split, reverse
stock split, spin-off, dividend or other distribution of securities, property or
cash (other than regular, quarterly cash dividends), or any other event or
transaction that affects the number or kind of Shares of the Company
outstanding. Such adjustment may be designed to comply with Section 425 of the
Code or, except as otherwise expressly provided in Section 5(d) of this Plan,
may be designed to treat the Shares available under the Plan and subject to
Awards as if they were all outstanding on the record date for such event or
transaction or to increase the number of such Shares to reflect a deemed
reinvestment in Shares of the amount distributed to the Company’s
securityholders. The terms of any outstanding Award may also be adjusted by the
Administrator as to price, number or kind of Shares subject to such Award and
other terms to reflect the foregoing events, which adjustments need not be
uniform as between different Awards or different types of Awards.
     In the event there shall be any change in the number or kind of outstanding
Shares, or any stock or other securities into which such Shares shall have been
changed, or for which it shall have been exchanged, by reason of a change of
control, merger, consolidation or otherwise, then the Administrator may, in its
sole discretion, determine the appropriate adjustment, if any, to be effected.
Without limiting the generality of the foregoing, in the event of any such
change, the Administrator may, in its sole discretion, (i) provide for the
assumption or substitution of, or adjustment to, each outstanding Award;
(ii) accelerate the vesting of and terminate any restrictions on outstanding
Awards; (iii) provide for cancellation of accelerated Awards that are not
exercised within a time prescribed by the Administrator; or (iv) provide for the
cancellation of any outstanding Awards in exchange for a cash payment to the
holders thereof.
     No right to purchase fractional shares shall result from any adjustment in
Awards pursuant to this Section 12. In case of any such adjustment, the Shares
subject to the Award shall be rounded down to the nearest whole share. The
Company shall notify Participants holding Awards subject to any adjustments
pursuant to this Section 12 of such adjustment, but (whether or not notice is
given) such adjustment shall be effective and binding for all purposes of the
Plan.
13. Qualifying Performance-Based Compensation
     (a) General. The Administrator may establish performance criteria and level
of achievement versus such criteria that shall determine the number of Shares to
be granted, retained, vested, issued or issuable under or in settlement of or
the amount payable pursuant to an Award, which criteria may be based on
Qualifying Performance Criteria or other standards of financial performance
and/or personal performance evaluations. In addition, the Administrator may
specify that an Award or a portion of an Award is intended to satisfy the
requirements for “performance-based compensation” under Section 162(m) of the
Code, provided that the performance criteria for such Award or portion of an
Award that is intended by the Administrator to satisfy the requirements for
“performance-based compensation” under Section 162(m) of the Code shall be a
measure based on one or more Qualifying Performance Criteria selected by the
Administrator and specified at the time the Award is granted. The Administrator
shall certify the extent to which any Qualifying Performance Criteria has been
satisfied, and the amount payable as a result thereof, prior to payment,
settlement or vesting of any Award that is intended to satisfy the requirements
for “performance-based compensation”

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under Section 162(m) of the Code. Notwithstanding satisfaction of any
performance goals, the number of Shares issued under or the amount paid under an
award may, to the extent specified in the Award Agreement, be reduced by the
Administrator on the basis of such further considerations as the Administrator
in its sole discretion shall determine.
     (b) Qualifying Performance Criteria. For purposes of this Plan, the term
“Qualifying Performance Criteria” shall mean any one or more of the following
performance criteria, either individually, alternatively or in any combination,
applied to either the Company as a whole or to a business unit or Subsidiary,
either individually, alternatively or in any combination, and measured either
quarterly, annually or cumulatively over a period of years, on an absolute basis
or relative to a pre-established target, to previous years’ results or to a
designated comparison group, in each case as specified by the Administrator:
(i) cash flow (before or after dividends), (ii) earnings per share (including,
without limitation, earnings before interest, taxes, depreciation and
amortization), (iii) stock price, (iv) return on equity, (v) stockholder return
or total stockholder return, (vi) return on capital (including, without
limitation, return on total capital or return on invested capital), (vii) return
on investment, (viii) return on assets or net assets, (ix) market
capitalization, (x) economic value added, (xi) debt leverage (debt to capital),
(xii) revenue, (xiii) sales or net sales, (xiv) backlog, (xv) income, pre-tax
income or net income, (xvi) operating income or pre-tax profit, (xvii) operating
profit, net operating profit or economic profit, (xviii) gross margin, operating
margin or profit margin, (xix) return on operating revenue or return on
operating assets, (xx) cash from operations, (xxi) operating ratio,
(xxii) operating revenue, (xxiii) market share improvement, (xxiv) general and
administrative expenses or (xxv) customer service. To the extent consistent with
Section 162(m) of the Code, the Administrator may appropriately adjust any
evaluation of performance under a Qualifying Performance Criteria to exclude any
of the following events that occurs during a performance period: (i) asset
write-downs, (ii) litigation, claims, judgments or settlements, (iii) the effect
of changes in tax law, accounting principles or other such laws or provisions
affecting reported results, (iv) accruals for reorganization and restructuring
programs and (v) any extraordinary, unusual, non-recurring or non-comparable
items (A) as described in Accounting Principles Board Opinion No. 30, (B) as
described in management’s discussion and analysis of financial condition and
results of operations appearing in the Company’s Annual Report to stockholders
for the applicable year, or (C) publicly announced by the Company in a press
release or conference call relating to the Company’s results of operations or
financial condition for a completed quarterly or annual fiscal period.
14. Transferability
     Unless the Administrator specifies otherwise and to the extent permitted
under the General Instructions to Form S-8 under the Securities Act of 1933, as
amended, an Award may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated by a Participant other than by will or the laws of
descent and distribution, and each Option or Stock Appreciation Right shall be
exercisable only by the Participant during his or her lifetime, and thereafter
by the legal representative of the Participant’s estate or the individual to
whom such Award was transferred by the Participant’s will or the laws of descent
and distribution.

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15. Compliance with Laws and Regulations
     This Plan, the grant, issuance, vesting, exercise and settlement of Awards
thereunder, and the obligation of the Company to sell, issue or deliver Shares
under such Awards, shall be subject to all applicable foreign, federal, state
and local laws, rules and regulations, stock exchange rules and regulations, and
to such approvals by any governmental or regulatory agency as may be required.
The Company shall not be required to register in a Participant’s name or deliver
any Shares prior to the completion of any registration or qualification of such
shares under any foreign, federal, state or local law or any ruling or
regulation of any government body which the Administrator shall determine to be
necessary or advisable. To the extent the Company is unable to or the
Administrator deems it infeasible to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company’s counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, the Company
and its Subsidiaries shall be relieved of any liability with respect to the
failure to issue or sell such Shares as to which such requisite authority shall
not have been obtained. No Option shall be exercisable and no Shares shall be
issued and/or transferable under any other Award unless a registration statement
with respect to the Shares underlying such Option is effective and current or
the Company has determined that such registration is unnecessary.
     In the event an Award is granted to or held by a Participant who is
employed or providing services outside the United States, the Administrator may,
in its sole discretion, modify the provisions of the Plan or of such Award as
they pertain to such individual to comply with applicable foreign law or to
recognize differences in local law, currency or tax policy. The Administrator
may also impose conditions on the grant, issuance, exercise, vesting, settlement
or retention of Awards in order to comply with such foreign law and/or to
minimize the Company’s obligations with respect to tax equalization for
Participants employed outside their home country.
16. Withholding
     To the extent required by applicable federal, state, local or foreign law,
a Participant shall be required to satisfy, in a manner satisfactory to the
Company, any withholding tax obligations that arise by reason of an Option
exercise, disposition of Shares issued under an Incentive Stock Option, the
vesting of or settlement of an Award, an election pursuant to Section 83(b) of
the Code or otherwise with respect to an Award. The Company and its Subsidiaries
shall not be required to issue Shares, make any payment or to recognize the
transfer or disposition of Shares until such obligations are satisfied. The
Administrator may provide for or permit these obligations to be satisfied
through the mandatory or elective sale of Shares and/or by having the Company
withhold a portion of the Shares that otherwise would be issued to him or her
upon exercise of the Option or the vesting or settlement of an Award, or by
tendering Shares previously acquired.
17. Administration of the Plan
     (a) Administrator of the Plan. The Plan shall be administered by the
Administrator who shall be the Compensation Committee of the Board or, in the
absence of a Compensation Committee, the Board itself; provided, however, that
with respect to Awards to Nonemployee

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Directors, the Administrator shall be the full Board. Any power of the
Administrator may also be exercised by the Board, except to the extent that the
grant or exercise of such authority would cause any Award or transaction to
become subject to (or lose an exemption under) the short-swing profit recovery
provisions of Section 16 of the Securities Exchange Act of 1934 or cause an
Award designated as a Performance Award not to qualify for treatment as
performance-based compensation under Section 162(m) of the Code. To the extent
that any permitted action taken by the Board conflicts with action taken by the
Administrator, the Board action shall control. The Administrator may by
resolution authorize one or more officers of the Company to grant Awards under
the Plan, which shall be on the terms and within the limits provided in the
authorizing resolution to the extent required by Delaware General Corporation
Law. No such officer shall designate himself or herself or any executive officer
or director of the Company as a recipient of any Awards granted under authority
delegated to such officer. In addition, the Administrator may delegate any or
all aspects of the day-to-day administration of the Plan to one or more officers
or employees of the Company or any Subsidiary, and/or to one or more agents.
     (b) Powers of Administrator. Subject to the express provisions of this
Plan, the Administrator shall be authorized and empowered to do all things that
it determines to be necessary or appropriate in connection with the
administration of this Plan, including, without limitation: (i) to prescribe,
amend and rescind rules and regulations relating to this Plan and to define
terms not otherwise defined herein; (ii) to determine which persons are
Participants, to which of such Participants, if any, Awards shall be granted
hereunder and the timing of any such Awards; (iii) to grant Awards to
Participants and determine the terms and conditions thereof, including, without
limitation, the number of Shares subject to Awards and the exercise or purchase
price of such Shares and the circumstances under which Awards become exercisable
or vested or are forfeited or expire, which terms may but need not be
conditioned upon the passage of time, continued employment, the satisfaction of
performance criteria, the occurrence of certain events (including, without
limitation, events which the Board or the Administrator determine constitute a
change of control), or other factors; (iv) to establish and verify the extent of
satisfaction of any performance goals or other conditions applicable to the
grant, issuance, exercisability, vesting and/or ability to retain any Award;
(v) to prescribe and amend the terms of the agreements or other documents
evidencing Awards made under this Plan (which need not be identical) and the
terms of or form of any document or notice required to be delivered to the
Company by Participants under this Plan; (vi) to determine whether, and the
extent to which, adjustments are required pursuant to Section 12; (vii) to
interpret and construe this Plan, any rules and regulations under this Plan and
the terms and conditions of any Award granted hereunder, and to make exceptions
to any such provisions in good faith and for the benefit of the Company; and
(viii) to make all other determinations deemed necessary or advisable for the
administration of this Plan.
     (c) Determinations by the Administrator. All decisions, determinations and
interpretations by the Administrator regarding the Plan, any rules and
regulations under the Plan and the terms and conditions of or operation of any
Award granted hereunder, shall be final and binding on all Participants,
beneficiaries, heirs, assigns or other persons holding or claiming rights under
the Plan or any Award. The Administrator shall consider such factors as it deems
relevant, in its sole and absolute discretion, to making such decisions,
determinations and interpretations including, without limitation, the
recommendations or advice of any officer or other employee of the Company and
such attorneys, consultants and accountants as it may select.

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     (d) Subsidiary Awards. In the case of a grant of an Award to any
Participant employed by a Subsidiary, such grant may, if the Administrator so
directs, be implemented by the Company issuing any subject Shares to the
Subsidiary, for such lawful consideration as the Administrator may determine,
upon the condition or understanding that the Subsidiary will transfer the Shares
to the Participant in accordance with the terms of the Award specified by the
Administrator pursuant to the provisions of the Plan. Notwithstanding any other
provision hereof, such Award may be issued by and in the name of the Subsidiary
and shall be deemed granted on such date as the Administrator shall determine.
18. Amendment of the Plan or Awards
     The Board or the Compensation Committee of the Board may amend, alter or
discontinue this Plan, and the Administrator may amend or alter any agreement or
other document evidencing an Award made under this Plan but, except as provided
pursuant to the provisions of Section 12, no such amendment shall, without the
approval of the stockholders of the Company:
     (a) increase the maximum number of Shares for which Awards may be granted
under this Plan;
     (b) reduce the price at which Options or Stock Appreciation Rights may be
granted below the price provided for in Section 6(b);
     (c) reduce the exercise price of outstanding Options or Stock Appreciation
Rights;
     (d) extend the term of this Plan;
     (e) change the class of persons eligible to be Participants;
     (f) otherwise amend the Plan in any manner requiring stockholder approval
by law or under the New York Stock Exchange listing requirements; or
     (g) increase the individual maximum limits in Sections 5(d) and (e).
     No amendment or alteration to the Plan or an Award or Award Agreement shall
be made which would impair the rights of the holder of an Award, without such
holder’s consent, provided that no such consent shall be required if (i) the
Administrator determines in its sole discretion and prior to the date of any
change of control (as defined in the applicable Award Agreement) that such
amendment or alteration either is required or advisable in order for the
Company, the Plan or the Award to satisfy any law or regulation or to meet the
requirements of or avoid adverse financial accounting consequences under any
accounting standard, or (ii) the Administrator determines in its sole discretion
that such amendment or alteration is not reasonably likely to significantly
diminish the benefits provided under the Award, or that any such diminution has
been adequately compensated.
19. No Liability of Company
     The Company and any Subsidiary or affiliate which is in existence or
hereafter comes into existence shall not be liable to a Participant or any other
person as to: (i) the non-issuance or

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sale of Shares as to which the Company has been unable to obtain from any
regulatory body having jurisdiction the authority deemed by the Company’s
counsel to be necessary to the lawful issuance and sale of any Shares hereunder;
and (ii) any tax consequence expected, but not realized, by any Participant or
other person due to the receipt, exercise or settlement of any Award granted
hereunder.
20. Non-Exclusivity of Plan
     Neither the adoption of this Plan by the Board nor the submission of this
Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board or the Administrator to adopt
such other incentive arrangements as either may deem desirable, including,
without limitation, the granting of restricted stock or stock options otherwise
than under this Plan or an arrangement that is or is not intended to qualify
under Code Section 162(m), and such arrangements may be either generally
applicable or applicable only in specific cases.
21. Governing Law
     This Plan and any agreements or other documents hereunder shall be
interpreted and construed in accordance with the laws of the Delaware and
applicable federal law. Any reference in this Plan or in the agreement or other
document evidencing any Awards to a provision of law or to a rule or regulation
shall be deemed to include any successor law, rule or regulation of similar
effect or applicability.
22. No Right to Employment, Reelection or Continued Service
     Nothing in this Plan or an Award Agreement shall interfere with or limit in
any way the right of the Company, its Subsidiaries and/or its affiliates to
terminate any Participant’s employment, service on the Board or service for the
Company at any time or for any reason not prohibited by law, nor shall this Plan
or an Award itself confer upon any Participant any right to continue his or her
employment or service for any specified period of time. Neither an Award nor any
benefits arising under this Plan shall constitute an employment contract with
the Company, any Subsidiary and/or its affiliates. Subject to Sections 4 and 18,
this Plan and the benefits hereunder may be terminated at any time in the sole
and exclusive discretion of the Board without giving rise to any liability on
the part of the Company, its Subsidiaries and/or its affiliates.
23. Unfunded Plan
     The Plan is intended to be an unfunded plan. Participants are and shall at
all times be general creditors of the Company with respect to their Awards. If
the Administrator or the Company chooses to set aside funds in a trust or
otherwise for the payment of Awards under the Plan, such funds shall at all
times be subject to the claims of the creditors of the Company in the event of
its bankruptcy or insolvency.

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