EXHIBIT 10.2

 

DST SYSTEMS, INC.  2005 Equity Incentive Plan
(formerly the “1995 Stock Option and Performance Award Plan” (the “1995 Plan”))

 

Section 1.
Effective Date, Purpose and Duration

 

1.1                                 Effective Date of the Plan.  DST Systems,
Inc., a Delaware corporation (the “Company”), hereby amends and restates the DST
Systems, Inc. 2005 Equity Incentive Plan (the “Plan”).  The amended and restated
Plan was approved by the Company’s Board on February 23, 2010, and became
effective May 11, 2010 (the “Effective Date”), as a result of approval by the
Company’s stockholders.  The Plan was further amended and restated by the Board
on December 8, 2010, May 10, 2011, February 24, 2012 and September 12, 2012.

 

1.2                                 Purposes of the Plan.  The Plan is intended
to generate an increased incentive for eligible employees and consultants of the
Company, its subsidiaries and joint ventures, to contribute to the Company’s
future success, to secure for the Company and its stockholders the benefits
inherent in equity ownership by employees of the Company, its subsidiaries and
joint ventures, and to enhance the ability of the Company, and its subsidiaries
and joint ventures, to attract and retain exceptionally qualified employees upon
whom, in large measure, the sustained progress, growth and profitability of the
Company depend.  By encouraging employees of the Company and its affiliates to
acquire a proprietary interest in the Company’s growth and performance, through
both cash and stock Awards, the Company intends to more closely align the
interests of the Company’s employees, management and stockholders, and motivate
employees to enhance the value of the Company for the benefit of all
stockholders.

 

1.3                                 Duration of the Plan.  The Plan, as amended
and restated herein, shall apply as of the Effective Date and shall remain in
effect, subject to the right of the Board to amend or terminate the Plan at any
time, until the earlier of May 9, 2015, or the date on which all Shares subject
to the Plan shall have been delivered and the restrictions on all Restricted
Stock granted under the Plan shall have lapsed, according to the Plan’s
provisions.  The amendment and restatement of the Plan shall not, unless
otherwise expressly provided, adversely affect any Awards outstanding on the
Effective Date.  The termination or expiration of the Plan shall not adversely
affect any Awards outstanding on the date of termination or expiration.

 

Section 2.
Definitions

 

As used in the Plan, the following terms shall have the meanings set forth
below:

 

2.1                                 “Affiliate” and “Associate” shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the Exchange Act.

 

2.2                                 “Annual Incentive Award” means an Award
relating to a potential performance bonus opportunity determined under Section
12.

 

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2.3                                 “Award” means any Option, Stock Appreciation
Right, Performance Unit, Restricted Stock, Shares, Restricted Stock Unit,
Deferred Stock, Annual Incentive Award, Service Award, Substitute Award, or
Dividend Equivalent.

 

2.4                                 “Award Agreement” means the written
agreement which evidences an Award and sets forth such applicable terms,
conditions and limitations as the Committee establishes for the Award.

 

2.5                                 “Beneficiary” or “Beneficiaries” means the
person designated to receive Plan benefits, if any, following the Grantee’s or
Permitted Transferee’s death in accordance with Section 17.

 

2.6                                 “Board” means the Board of Directors of the
Company.

 

2.7                                 “Bonus Opportunity” means the threshold,
target and maximum potential bonus opportunities under an Annual Incentive Award
for an individual for a Year, based on threshold, target and maximum bonus
levels as determined by the Committee.

 

2.8                                 “Change in Control” has the meaning set
forth in Section 14.

 

2.9                                 “Code” means the Internal Revenue Code of
1986.

 

2.10                           “Committee” has the meaning set forth in Section
3.1(a).

 

2.11                           “Common Stock” means common stock, one cent
($.01) par value per share, of the Company.

 

2.12                           “Company” means DST Systems, Inc., a Delaware
corporation.

 

2.13                           “Consultant” means a non-employee consultant or
advisor to the Company, a Subsidiary or a Joint Venture who is a natural person
(other than a non-employee director) providing bona fide services that are not
in connection with an offer or sale of Company equity securities in a capital
raising transaction; provided the individual does not directly or indirectly
maintain or promote a market in Company securities.

 

2.14                           “Covered Employee” means a Grantee who, as of the
last day of the fiscal year in which the value of an Award is recognizable in
income for federal income tax purposes, is one of the groups of “covered
employees,” within the meaning of Code Section 162(m), with respect to the
Company.

 

2.15                           “Deferred Stock” means a right, granted as an
Award (under Section 11), to receive payment in the form of Shares (or measured
by the value of Shares) at the end of a specified deferral period.

 

2.16                           “Dividend Equivalent” means a right granted
appurtenant to an Award to receive payments equal to dividends or property paid
with respect to Shares underlying such Award, at such time and on such terms and
conditions as set forth in the Award Agreement.

 

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2.17                           “Effective Date” has the meaning set forth in
Section 1.1.

 

2.18                           “Eligible Person” means any employee of an
Employer, any individual expected to become an employee of an Employer, and any
Consultant.  A former employee of Employer shall also be treated as an Eligible
Person if and to the extent that such former employee is entitled to be granted
an Award under the Plan either as a result of an agreement entered into in
connection with such former employee’s Termination of Affiliation or pursuant to
the terms of an employment agreement or similar contract between the former
employee and the Employer that was entered into prior to such former employee’s
Termination of Affiliation.  Solely for purposes of Section 2.50, the term
Eligible Person includes any current or former employee or non-employee director
of, or consultant to, an Acquired Entity (as defined in Section 2.50) who holds
Acquired Entity Awards (as defined in Section 2.50) immediately prior to the
Acquisition Date (as defined in Section 2.50).

 

2.19                           “Employer” means, with respect to any Eligible
Person, the Company, the Subsidiary or the Joint Venture (as the case may be) by
whom he or she is employed.

 

2.20                           “Exchange Act” means the Securities and Exchange
Act of 1934.

 

2.21                           “Exercise Date” means the date the holder of an
Award that is subject to exercise delivers notice of such exercise to the
Company, accompanied by such payment, attestations, representations or other
documentation as the Committee may specify; provided that if such notice is
delivered after 11:00 a.m. Central Time (or such other time as the Committee may
specify), the Exercise Date shall be the following day.

 

2.22                           “Fair Market Value” means

 

(a)                                  with respect to a Share or other
securities, as of the applicable date of determination, (i) the average of the
highest and lowest reported sales prices on the New York Stock Exchange as
reported in a financial publication of general circulation as selected by the
Committee from time to time; (ii) if the Shares or other securities are not
listed on the New York Stock Exchange, the closing sales price of the Shares or
other securities on such other national exchange on which the Shares are
principally traded, or as reported by the National Market System, or similar
organization, as reported in a financial publication of general circulation as
selected by the Committee from time to time, or if no such quotations are
available, the average of the high bid and low asked quotations in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated or similar organizations; or (iii) in the event that there shall be
no public market for the Shares or other securities, the fair market value of
the Shares as determined (which determination shall be conclusive) in good faith
by the Committee.    Notwithstanding the preceding, for federal, state and local
income tax reporting purposes and for such other purposes as the Committee deems
appropriate, the fair market value shall be determined by the Committee in
accordance with uniform and nondiscriminatory standards adopted by it from time
to time;

 

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(b)                                 with respect to any property other than cash
or securities, the market value of such property determined by such methods or
procedures as shall be established from time to time by the Committee; and

 

(c)                                  with respect to cash, the value of such
cash in United States dollars.

 

2.23                           “Grant Date” means the date on which an Award is
granted or such later date as specified in advance by the Committee.  With
respect to Annual Incentive Awards payable in Shares, Options, Restricted Stock,
Restricted Stock Units or any other form of Award, the Grant Date shall be the
date on which the Committee certifies the attainment of the performance goals as
provided in Section 12.2(c), or such later date as specified in advance by the
Committee.

 

2.24                           “Grantee” means an Eligible Person who has been
granted an Award.

 

2.25                           “Incentive Stock Option” means an Option granted
as an Award under the Plan that is intended to meet the requirements of Section
422 of the Code.

 

2.26                           “Including” or “includes” means “including,
without limitation,” or “includes, without limitation,” respectively.

 

2.27                           “Joint Venture” means any Person in which the
Company has an ownership interest equal to at least fifty percent (50%) of the
common stock, voting rights or profits.

 

2.28                           “Non-Qualified Stock Option” means an Option
granted as an Award under the Plan that is not intended to be an Incentive Stock
Option.

 

2.29                           “Option” means an Incentive Stock Option or
Non-Qualified Stock Option.

 

2.30                           “Option Price” means the price at which a Share
may be purchased by a Grantee pursuant to an Option.

 

2.31                           “Performance-Based Exception” means the
performance-based exception from the tax deductibility limitations of Code
Section 162(m) contained in Code Section 162(m)(4)(C) (including the special
provision for stock options and stock appreciation rights thereunder).

 

2.32                           “Performance Measures” has the meaning set forth
in Section 4.4.

 

2.33                           “Performance Goals” means the objective or
subjective criteria determined by the Committee, the degree of attainment of
which will affect (a) in the case of an Award other than the Annual Incentive
Award, the amount of the Award the Grantee is entitled to receive or retain, and
(b) in the case of an Annual Incentive Award, the portion of the individual’s
Bonus Opportunity potentially payable as an Annual Incentive Award.  Performance
Goals may contain threshold, target, and maximum levels of achievement and, to
the extent the Committee intends an Award (including the Annual Incentive Award)
to comply with the Performance-Based Exception, the Performance Goals shall be
chosen from among the Performance Measures.

 

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2.34                           “Performance Period” means that period
established by the Committee at the time any Performance Unit is granted or at
any time thereafter during which the attainment of performance goals specified
by the Committee, with respect to such Award, are to be measured.  Except as
provided in Sections 6.2, 8.1, 9.2 and 10.2, a Performance Period may be a year
or a longer or shorter period.

 

2.35                           “Performance Unit” means an Award under the Plan
that is (a) a bonus consisting of cash or other property, the amount or value of
which, and/or the entitlement to which, is conditioned upon the attainment of
Performance Goals, or (b) a unit valued by reference to a designated amount of
cash or property other than Shares.

 

2.36                           “Person” means any individual, sole
proprietorship, corporation, partnership, joint venture, limited liability
company, association, joint stock company, trust, unincorporated organization,
institution, public benefit corporation, entity or government instrumentality,
division, agency, body or department.

 

2.37                           “Plan” has the meaning set forth in Section 1.1. 
If the Plan is amended, the term “Plan” shall mean the Plan as so amended.

 

2.38                           “Restricted Stock” means any Share issued as an
Award under the Plan that is subject to Restrictions.

 

2.39                           “Restricted Stock Unit” or “RSU” means the right
granted as an Award under the Plan to receive a Share, conditioned on the
satisfaction of Restrictions imposed by the Committee, which Restrictions may be
time-based or performance-based.

 

2.40                           “Restriction” means any restriction on a
Grantee’s free enjoyment of the Shares or other rights underlying Awards,
including (a) that the Grantee or other holder may not sell, transfer, pledge,
or assign a Share or right except as otherwise allowed under the Plan or as
specified in the Award Agreement, and (b) such other restrictions as the
Committee may impose in the Award Agreement (including, without limitation, any
restriction on the right to vote such Share, and the right to receive any
dividends or dividend equivalents).  Restrictions may be based on the passage of
time or the satisfaction of performance criteria (including Performance Goals)
or the occurrence of one or more events or conditions, and shall lapse
separately or in combination upon such conditions and at such time or times, in
installments or otherwise, as the Committee shall specify.  Awards subject to a
Restriction shall be forfeited if the Restriction does not lapse prior to such
date or the occurrence of such event or the satisfaction of such other criteria
as the Committee shall determine.

 

2.41                           “Retirement” means, unless otherwise defined in
an Award Agreement in which case such definition shall apply, a Termination of
Affiliation, other than a Termination of Affiliation for cause, on or after
reaching age fifty-nine and one-half (59-1/2).

 

2.42                           “Rule 16b-3” means Rule 16b-3 promulgated by the
SEC under the Exchange Act.

 

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2.43                           “SEC” means the United States Securities and
Exchange Commission, or any successor thereto.

 

2.44                           “Section 16 Person” means a person who is subject
to potential liability under Section 16(b) of the Exchange Act with respect to
transactions involving equity securities of the Company.

 

2.45                           “Service Award” means an Award of Shares
delivered automatically to an individual pursuant to Section 13 in recognition
of his or her service.

 

2.46                           “Share” means a share of the Common Stock.

 

2.47                           “Stock Appreciation Right” or “SAR” means a right
granted as an Award under the Plan to receive, as of the date specified in the
Award Agreement, an amount equal to the number of Shares with respect to which
the SAR is exercised, multiplied by the excess of (a) the Fair Market Value of
one Share on the Exercise Date, over (b) the Strike Price.

 

2.48                           “Strike Price” means the per-Share price used as
the baseline measure for the value of a SAR, as specified in the Award
Agreement.

 

2.49                           “Subsidiary” means, except as provided in Section
6.5 with respect to an ISO, an Affiliate controlled by the Company directly, or
indirectly, through one or more intermediaries.

 

2.50                           “Substitute Award” means an Award granted under
the Plan in substitution for stock or stock based awards (“Acquired Entity
Awards”) held by current and former employees or former non-employee directors
of, or consultants to, another corporation or entity who become Eligible Persons
as the result of a merger or consolidation of the employing corporation or other
entity (the “Acquired Entity”) with the Company, a Subsidiary or a Joint
Venture, or the acquisition by the Company, an Affiliate, or a Joint Venture, of
property or stock of, or other ownership interest in, the Acquired Entity
immediately prior to such merger, consolidation or acquisition (“Acquisition
Date”) as agreed to by the parties to such corporate transaction and as may be
set forth in the definitive purchase agreement.  The limitations of Sections 4.1
and 4.3 on the number of Shares reserved or available for grants, and the
limitations under Sections 6.3 and 7.3 with respect to Option Prices and Strike
Prices, shall not apply to Substitute Awards.  Any issuance of a Substitute
Award which relates to an Option or a SAR shall be completed in conformity with
the rules under Code Section 409A relating to the substitutions and assumptions
of stock rights by reason of a corporate transaction.

 

2.51                           “Term” means the period beginning on the Grant
Date of an Option, or SAR and ending on the date such Option or SAR expires,
terminates or is cancelled.

 

2.52                           “Termination of Affiliation” or similar phrase or
concept (e.g., cessation of employment, separation from service, termination of
employment, etc.) means, the first day on which an individual is for any reason
no longer providing services to an Employer in the capacity of an employee or
consultant or, with respect to an individual who is an employee of or a
consultant to a Subsidiary or a Joint Venture, the first day on which such
entity ceases to be a Subsidiary or a Joint Venture of the Company as
applicable; provided, however, (i) where such

 

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term, phrase or concept is otherwise defined or used in an Award Agreement, such
definition shall apply, or (ii) with respect to an Award subject to Code Section
409A where an applicable payment event is the Termination of Affiliation or
similar term, such definition shall have the same meaning as a “separation from
service” under Code section 409A(a)(2)(A)(i).

 

2.53                           “Year” means the fiscal year of the Company.  As
of the Effective Date, the Company’s fiscal year is the calendar year.

 

Section 3.
Administration

 

3.1                                 Committee.

 

(a)                                  Subject to Section 3.2, the Plan shall be
administered by a committee (the “Committee”), the members of which shall be
appointed by the Board from time to time and may be removed by the Board from
time to time.  Unless the Board otherwise specifies, the Compensation Committee
of the Board shall be the Committee.  To the extent the Board considers it
desirable to comply with Rule 16b-3 or meet the Performance-Based Exception, the
Committee shall consist of two or more directors of the Company, all of whom
qualify as “non-employee directors” within the meaning of Code Section 162(m)
and “outside directors” under Rule 16b-3.  The number of members of the
Committee shall from time to time be increased or decreased, and shall be
subject to conditions, in each case if and to the extent the Board deems it
appropriate to permit transactions in Shares pursuant to the Plan to qualify for
an exemption from Section 16(b) of the Exchange Act.

 

(b)                                 Subject to applicable law, the Committee may
delegate to the Chief Executive Officer or Chief Financial Officer of the
Company any or all of the authority of the Committee with respect to Awards to
Grantees, other than Grantees for whom (i) the Committee desires the Award to
qualify for an exemption from Section 16(b) of the Exchange Act as in effect at
the time any such delegated authority is exercised or (ii) the Committee
determines could be a Covered Employee at any time during the term of the Award.

 

3.2                                 Powers of the Committee.  Subject to and
consistent with the provisions of the Plan, the Committee shall have full power
and authority and sole discretion as follows:

 

(a)                                  to determine when, to whom and in what
types and amounts Awards (including Substitute Awards) should be granted;

 

(b)                                 to grant Awards to Eligible Persons in any
number, and to determine the terms and conditions applicable to each Award;

 

(c)                                  to determine, as to all or part of any
Award as to any Grantee, at the time the Award is granted or thereafter, that
the exercisability or vesting of an Award shall be accelerated upon a Grantee’s
death, disability, retirement, Change in Control, or Termination of Affiliation
following a Change in Control, to determine that Awards shall

 

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continue to become exercisable or vested in full or in installments after
Termination of Affiliation, to extend the period for exercise of Options or SARs
following Termination of Affiliation (but not beyond ten (10) years from the
Grant Date of the Option or SAR) or to provide that any Restricted Stock Award,
Restricted Stock Unit Award, Performance Unit Award or Service Award shall in
whole or in part not be forfeited upon Grantee’s death, disability, retirement,
Change in Control or Termination of Affiliation following a Change in Control,
provided the Committee shall consider potential tax consequences in making any
such determinations or taking any such actions;

 

(d)                                 to determine the benefit payable under any
Performance Unit or Dividend Equivalent, and to determine whether any
performance or vesting conditions have been satisfied;

 

(e)                                  to determine whether or not specific Awards
shall be granted in connection with other specific Awards, and if so, whether
they shall be exercisable cumulatively with, or alternatively to, such other
specific Awards and all other matters to be determined in connection with an
Award;

 

(f)                                    to determine, with respect to Restricted
Stock, whether to permit or require the payment of cash dividends thereon, and
whether Restricted Stock (including Restricted Stock acquired upon the exercise
of an Option) shall be held in escrow or other custodial arrangement;

 

(g)                                 to determine whether, to what extent, and
under what circumstances an Award may be settled in, or the exercise price of an
Award may be paid in, cash, Shares, other Awards, or other property;

 

(h)                                 to determine whether, to what extent, and
under what circumstances an Award may be vested, canceled, forfeited or
surrendered, or, in connection with a Grantee’s death, disability, retirement,
Change in Control, or Termination of Affiliation following a Change in Control,
whether and to what extent any terms of, or restrictions on, an Award may be
waived or accelerated (including the acceleration of the exercisability of, or
waiver of all of the terms and conditions applicable to, any Award or any group
of Awards for any reason and at any time) or to extend the period subsequent to
the Termination of Affiliation within which an Award may be exercised;

 

(i)                                     to determine whether, to what extent and
under what circumstances cash, Shares, other Awards, other property and other
amounts payable with respect to an Award (other than with respect to an Option
or a SAR for which no additional deferral opportunity beyond the deferral
inherent in such Option or SAR is permitted under this Plan) will be deferred,
either at the election of the Grantee, or, if and to the extent specified in the
Award Agreement, automatically or at the election of the Committee (whether to
limit loss of deductions pursuant to Code Section 162(m) or otherwise), and to
provide for the payment of interest or other rate of return determined with
reference to a predetermined actual investment or independently set interest
rate, or with respect to other bases permitted under Code Sections 162(m), 409A
or otherwise, for the period

 

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between the Exercise Date, the date Restrictions Lapse, or the maturity of an
Award, as applicable, and the date of payment or settlement of the Award;

 

(j)                                     to grant Awards in replacement of Awards
previously granted under this Plan or any other compensation plan of an
Employer, provided that any such replacement grant that would be considered a
repricing shall be subject to shareholder approval;

 

(k)                                  to make, amend, suspend, waive and rescind
rules and regulations relating to the Plan;

 

(l)                                     to appoint such agents as the Committee
may deem necessary or advisable to administer the Plan;

 

(m)                               with the consent of the Grantee, to amend any
Award Agreement at any time; provided that the consent of the Grantee shall not
be required for any amendment (i) that, in the Committee’s determination, does
not materially adversely affect the rights of the Grantee, or (ii) which is
necessary or advisable (as determined by the Committee) to carry out the purpose
of the Award as a result of any new applicable law or change in an existing
applicable law, or (iii) to the extent the Award Agreement specifically permits
amendment without consent;

 

(n)                                 to impose such additional terms and
conditions upon the grant, exercise or retention of Awards as the Committee may,
before or concurrently with the grant thereof, deem appropriate, including
limiting the amount or percentage of Awards which may from time to time be
exercised by a Grantee, and including requiring the Grantee to enter into
restrictive covenants;

 

(o)                                 without the consent of the Grantee, to make
adjustments in the terms and conditions of, and the criteria in, Awards in
recognition of unusual or nonrecurring events (including events described in
Section 4.2) affecting an Employer or the financial statements of an Employer,
or in response to changes in applicable laws, regulations or accounting
principles; provided, however, that in no event shall such adjustment increase
the value of an Award for a person expected to be a Covered Employee for whom
the Committee desires to have the Performance-Based Exception apply;

 

(p)                                 to make such adjustments or modifications to
Awards or to adopt such sub-plans for Eligible Persons working outside of the
United States as are advisable to fulfill the purposes of the Plan;

 

(q)                                 to correct any defect or supply any omission
or reconcile any inconsistency, and to construe and interpret the Plan, the
rules and regulations, and Award Agreement or any other instrument entered into
or relating to an Award under the Plan, and to make all determinations,
including factual determinations, necessary or advisable for the administration
of the Plan;

 

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(r)                                    to cause the forfeiture of any Award or
recover any Shares, cash or other property attributable to an Award for
violations of any Company ethics policy or pursuant to any Company compensation
clawback policy;

 

(s)                                   to take any other action with respect to
any matters relating to the Plan for which it is responsible and to make all
other decisions and determinations as may be required under the terms of the
Plan or as the Committee may deem necessary or advisable for the administration
of the Plan; and

 

(t)                                    in addition to the delegation authority
in Section 3.1(b), to delegate to officers or managers of the Company, any
Affiliate or any Joint Venture, the authority, subject to such terms as the
Committee shall determine, to perform specified functions under the Plan
(subject to Section 4.3); provided that actions required to permit Awards to
Section 16 Persons to qualify for an exemption from Section 16(b) of the
Exchange Act shall not be delegated and provided further that actions required
to be taken by the Committee to permit an Award to qualify for the
Performance-Based Exception shall not be delegated.

 

Any action of the Committee with respect to the Plan shall be final, conclusive
and binding on all Persons, including the Company, its Affiliates, any Joint
Venture, any Grantee, any Eligible Person, any Person claiming any rights under
the Plan from or through any Grantee, and stockholders, except to the extent the
Committee may subsequently modify, or take further action not consistent with,
its prior action.  If not specified in the Plan, the time at which the Committee
must or may make any determination shall be determined by the Committee, and any
such determination may thereafter be modified by the Committee.  The express
grant of any specific power to the Committee, and the taking of any action by
the Committee, shall not be construed as limiting any power or authority of the
Committee.

 

Unless otherwise expressly provided in the Plan, all determinations,
designations, interpretations, and other decisions of the Committee shall be
final, conclusive and binding upon all Persons, including the Company, any
Grantee, any Eligible Person, any stockholder, and any employee of the Company,
or any Affiliate or Joint Venture.  All determinations of the Committee shall be
made only if there is a quorum for Committee action and by a majority of
Committee members present, but no less than two members; provided that any
determination affecting any Awards made or to be made to a member of the
Committee may, at the Board’s election, be made by the Board.

 

Section 4.
Shares Subject to the Plan, Maximum Awards and 162(m) Compliance

 

4.1                               Number of Shares Available for Grants.

 

Subject to adjustment as provided in Section 4.2, the number of Shares reserved
for delivery under the Plan shall be the sum of (a) four million (4,000,000),
plus (b) the number of remaining Shares under the 1995 Plan (not subject to
outstanding Awards under the 1995 Plan and not delivered out of the Shares
reserved thereunder) as of the date of the initial stockholder

 

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approval of this Plan, plus (c) the number of Shares that became available under
the 1995 Plan after the date of the initial stockholder approval of this Plan
pursuant to forfeiture, termination, lapse or satisfaction of an Award in cash
or property other than Shares, application as payment for an Award, or, except
with respect to Restricted Stock, to satisfy tax withholding, plus (d) any
Shares required to satisfy Substitute Awards (the sum of (a), (b), (c) and (d),
the “Maximum Share Limit”).  The Shares may be divided among the various Awards
eligible to be granted under the Plan as the Committee shall determine;
provided, however, the maximum number of Shares that may be issued pursuant to
Incentive Stock Options shall be the Maximum Share Limit.

 

If any Shares subject to an Award granted hereunder are forfeited or such Award
otherwise terminates or lapses without the delivery of such Shares, the Shares
subject to such Award, to the extent of any such forfeiture, termination, or
lapse shall again be available for grant under the Plan.  If a SAR is settled in
Shares, only the number of Shares delivered in settlement of a SAR shall cease
to be available for grant under the Plan, regardless of the number of Shares
with respect to which the SAR was exercised.  If any Shares subject to an Award
granted hereunder are withheld or applied as payment in connection with the
exercise of an Award (including the withholding of Shares on the exercise of a
SAR that is settled in Shares) or, except with respect to Shares of Restricted
Stock, the withholding or payment of taxes related thereto, such Shares shall
again be available for grant under the Plan.

 

The Committee shall, from time to time, determine the appropriate methodology
for calculating the number of Shares that have been delivered pursuant to the
Plan.

 

Shares delivered pursuant to the Plan may be, in whole or in part, authorized
and unissued Shares, or treasury Shares, including Shares repurchased by the
Company for purposes of the Plan.

 

4.2                               Adjustments in Authorized Shares and Awards. 
In the event of any corporate event or transaction (including, but not limited
to, a change in the Shares of the Company or the capitalization of the Company)
after the Effective Date such as a merger, consolidation, reorganization,
recapitalization, separation, stock dividend, stock split, reverse stock split,
split up, spin-off, or other distribution of stock or property of the Company,
combination of Shares, exchange of Shares, dividend in kind, special cash
dividend, or other like change in capital structure or distribution (other than
normal cash dividends) to shareholders of the Company, or any similar corporate
event or transaction, the Committee, as necessary in order to prevent dilution
or enlargement of the benefits or potential benefits intended to be made
available under the Plan, shall appropriately and equitably substitute or
adjust, as applicable, the number and kind of Shares that may be issued under
this Plan or under particular forms of Awards, the number and kinds of Shares
subject to outstanding Awards, the Option Price or Strike Price applicable to
outstanding Awards, the annual individual limitations set forth below in Section
4.3(b), and other value determinations applicable to outstanding Awards;
provided, in each case, that with respect to Awards of Incentive Stock Options
intended to continue to qualify as Incentive Stock Options after such
adjustment, no such adjustment shall be authorized to the extent that such
adjustment would cause the Incentive Stock Option to violate Section 424(a) of
the Code; and provided further that the number of Shares subject to any Award
denominated in Shares shall always be a whole number.

 

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4.3                               Compliance With Code Section 162(m).

 

(a)                                 Section 162(m) Compliance.  To the extent
the Committee determines that compliance with the Performance-Based Exception is
desirable with respect to an Award (including Annual Incentive Awards under
Section 12), this Section 4.3(a) shall apply.  In the event that changes are
made to Code Section 162(m) to permit flexibility with respect to the Award or
Awards available under the Plan, the Committee may, subject to this Section 4.3,
make any adjustments to such Awards as it deems appropriate.

 

(b)                                 Annual Individual Limitations.  No Grantee
may be granted Awards of Options, SARs, Restricted Stock, Restricted Stock Units
or Performance Units (or any other Award which is denominated in Shares) with
respect to a number of Shares in any one calendar year which, when added to the
Shares subject to any other Award denominated in Shares granted to such Grantee
in the same calendar year shall exceed Eight Hundred Thousand (800,000) Shares. 
If an Award denominated in Shares is cancelled, the cancelled Award continues to
count against the maximum number of Shares for which an Award denominated in
Shares may be granted to a Grantee in any calendar year.  The Share limit shall
be adjusted to the extent necessary to reflect adjustments to Shares required by
Section 4.2.  No Grantee may be granted cash Annual Incentive Awards or other
cash Awards in any one calendar year, the maximum payout for which, when added
to the maximum payout for all other cash Awards granted to such Grantee in the
same calendar year, shall exceed 600% of the Grantee’s annual base salary (up to
a maximum of $2,000,000 of base salary) as of the first day of such calendar
year (or, if later, as of the date on which the Grantee becomes an employee of
the Company, a Subsidiary or a Joint Venture); provided, however, that if the
Performance Period applicable to a Performance Unit exceeds twelve months, the
600% limit shall apply to each 12-month period in the Performance Period.

 

4.4                               Performance-Based Exception Under Section
162(m).

 

(a)                                 Performance Measures.  Unless and until the
Company’s stockholders approve a change in the general Performance Measures set
forth in this Section 4.4, for Awards (other than Options or SARs) designed to
qualify for the Performance-Based Exception, objective performance criteria
shall be one or more of the following (each a “Performance Measure”), which may
be measured either in the aggregate or on per Share basis:

 

(i)                                     Earnings measures, including net
earnings on either a LIFO, FIFO or other basis;

 

(ii)                                  Operating measures, including operating
income, operating earnings or operating margin;

 

(iii)                               Income or loss measures, including net
income or net loss;

 

(iv)                              Cash flow measures, including cash flow or
free cash flow;

 

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(v)                                 Revenue measures;

 

(vi)                              Reductions in expense measures;

 

(vii)                           Operating and maintenance cost management and
employee productivity measures;

 

(viii)                        Company return measures, including return on
assets, investments, equity, or sales;

 

(ix)                              Growth or rate of growth of any of the
Performance Measures set forth herein;

 

(x)                                 Share price (including attainment of a
specified per-Share price during the Performance Period; growth measures and
total stockholder return or attainment by the Shares of a specified price for a
specified period of time);

 

(xi)                              Strategic business criteria, consisting of one
or more objectives based on meeting specified revenue, market share, market
penetration, business expansion targets, project milestones, production volume
levels and cost targets;

 

(xii)                           Accomplishment of, or goals related to, mergers,
acquisitions, dispositions, public offerings or similar extraordinary business
transactions; or

 

(xiii)                        Achievement of business or operational goals such
as market share, business development and/or customer objectives;

 

provided that applicable Performance Measures may be applied on a pre- or
post-tax basis; may be established and measured on a Company-wide basis, on a
subsidiary basis, business unit or units basis or other Company division or
segment basis; and provided further that the Committee may, on the Grant Date of
an Award intended to comply with the Performance-Based Exception, and in the
case of other grants, within the allowable adjustment period set forth below in
Section 4.4(c), provide that the formula for such Award may include or exclude
items to measure specific objectives, such as losses from discontinued
operations, extraordinary gains or losses, the cumulative effect of accounting
changes, acquisitions or divestitures, foreign exchange impacts and any unusual,
nonrecurring gain or loss.

 

(b)                                 Flexibility as to Timing, Weighting,
Applicable Business Unit.  For Awards intended to comply with the
Performance-Based Exception, the Committee shall set the Performance Goals
within the time period prescribed by Section 162(m) of the Code.  The levels of
performance required with respect to Performance Measures may be expressed in
absolute or relative levels and may be based upon a set increase, a set positive
result, maintenance of the status quo, a set decrease or a set negative result. 
Performance Measures may differ for Awards to different Grantees.  The Committee
shall specify the weighting (which may be the same or different for multiple
objectives) to be given to each performance objective for purposes of
determining the final amount

 

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payable with respect to any such Award.  Any one or more of the Performance
Measures may apply to a Grantee, to the Company as a whole, to one or more
Affiliates or to a department, unit, division or function within the Company,
within any one or more Affiliates or any one or more Joint Ventures, and may
apply either alone or relative to the performance of other businesses or
individuals (including industry or general market indices).

 

(c)                                  Discretion to Adjust.  The Committee shall
have the discretion to adjust the determinations of the degree of attainment of
the pre-established performance goals; provided, however, that any such
adjustments must be determined prior to the end of the Performance Period and
that the degree of attainment of Awards which are designed to qualify for the
Performance-Based Exception may not (unless the Committee determines to amend
the Award so that it no longer qualifies for the Performance-Based Exception) be
adjusted upward.  The Committee shall retain the discretion to adjust such
Awards downward prior to the end of the Performance Period.  The Committee may
not, unless the Committee determines to amend the Award so that it no longer
qualifies for the Performance-Based Exception, delegate any responsibility with
respect to Awards intended to qualify for the Performance-Based Exception.  All
determinations by the Committee as to the achievement of the Performance
Measure(s) shall be certified in writing prior to payment of the Award.

 

(d)                                 Alteration of Performance Measures.  In the
event that applicable laws allow an Award to qualify for the Performance-Based
Exception even if the Committee alters the governing Performance Measures
without obtaining stockholder approval, the Committee shall have sole discretion
to make such changes without obtaining stockholder approval.

 

Section 5.
Eligibility and General Conditions of Awards

 

5.1                               Eligibility.  The Committee may in its
discretion grant Awards to any Eligible Person, whether or not he or she has
previously received an Award; provided, however, eligibility to receive Annual
Incentive Awards shall be in accordance with Section 12 and eligibility to
receive Service Awards shall be in accordance with Section 13.

 

5.2                               Award Agreement.  To the extent not set forth
in the Plan, the terms and conditions of each Award shall be set forth in an
Award Agreement.

 

5.3                               General Terms and Termination of Affiliation. 
Except as provided in an Award Agreement or as otherwise determined by the
Committee, all Options or SARs that have not been exercised, or any other Awards
that remain subject to a Restriction or that have outstanding Performance
Periods, or (in the case of Service Awards) that have not been granted, shall be
cancelled and forfeited to the Company upon a Termination of Affiliation.  If
Dividend Equivalents have been credited with respect to any Award or dividends
have accrued on Restricted Stock, and such Award (in whole or in part) is
forfeited, all Dividend Equivalents or

 

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dividends credited or accrued in connection with such forfeited Award (or
portion of an Award) shall also be forfeited to the Company.

 

5.4                               Nontransferability of Awards.

 

(a)                                 Each Award and each right under any Award
shall be exercisable only by the Grantee during the Grantee’s lifetime, or, if
permissible under applicable law, by the Grantee’s guardian or legal
representative.

 

(b)                                 No Award (prior to the time, if applicable,
Shares are delivered in respect of such Award), and no right under any Award,
may be assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Grantee otherwise than by will or by the laws of descent and
distribution (or in the case of Restricted Stock, to the Company), and any such
purported assignment, alienation, pledge, attachment, sale, transfer or
encumbrance shall be void and unenforceable against the Company, any Affiliate
or any Joint Venture; provided that the designation of a Beneficiary to receive
benefits in the event of the Grantee’s death shall not constitute an assignment,
alienation, pledge, attachment, sale, transfer or encumbrance.

 

(c)                                  Notwithstanding subsections (a) and (b)
above, to the extent allowed by the Committee or as may be provided in the Award
Agreement, an Award (other than an Incentive Stock Option) may be transferred,
without consideration other than nominal consideration, to a Permitted
Transferee.  For this purpose, a “Permitted Transferee” in respect of any
Grantee means any member of the Immediate Family of such Grantee, any trust of
which all of the primary beneficiaries are such Grantee or members of his or her
Immediate Family, or any partnership (including limited liability companies and
similar entities) of which all of the partners or members are such Grantee or
members of his or her Immediate Family; and the “Immediate Family” of a Grantee
includes any child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships, any person sharing the Grantee’s household (other than a
tenant or employee), a trust in which these persons have more than fifty percent
of the beneficial interest, a foundation in which these persons (or the Grantee)
control the management of assets, and any other entity in which these persons
(or the Grantee) control the management of assets, and any other entity in which
these persons (or the Grantee) own more than fifty percent of the voting
interests.  Such Award may be exercised by such transferee in accordance with
the terms of such Award.  If so determined by the Committee, a Grantee may, in
the manner established by the Committee, designate a Beneficiary or
Beneficiaries to exercise the rights of the Grantee and to receive any
distribution with respect to any Award upon the death of the Grantee.  A
transferee, Beneficiary, guardian, legal representative or other person claiming
any rights under the Plan from or through any Grantee shall be subject to any
restrictions or limitations in the Plan or in any applicable Award Agreement,
and to any additional restrictions or limitations deemed necessary or
appropriate by the Committee.

 

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(d)                                 Nothing herein shall be construed as
requiring the Committee to honor the order of a domestic relations court
regarding an Award, except to the extent required under applicable law.

 

5.5                               Cancellation and Rescission of Awards;
Clawback Policy.  Unless the Award Agreement specifies otherwise, the Committee
may cancel, rescind, suspend, withhold, or otherwise limit or restrict any
unexercised Award at any time if the Grantee is not in compliance with all
applicable provisions of the Award Agreement and the Plan, or is in violation of
any restrictive covenant or other agreement with the Company, an Affiliate or a
Joint Venture, or has a Termination of Affiliation.  All Awards granted under
this Plan, any property, including Shares, received in connection with any
exercise or vesting of, or lapse of Restriction on, any Awards, and any proceeds
received from the disposition of any such property, shall be subject to any
clawback policy adopted, and amended from time to time, by the Committee.

 

5.6                               Stand-Alone, Tandem and Substitute Awards.

 

Subject to any limitation as set forth in Section 2.50, Awards granted under the
Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan or any award or benefit granted by an Employer under any other
plan, program, arrangement, contract or agreement (a “Non-Plan Award”); provided
that if the stand-alone, tandem or substitute Award is intended to qualify for
the Performance-Based Exception, it must separately satisfy the requirements of
the Performance-Based Exception.  If an Award is granted in substitution for
another Award or any Non-Plan Award, the Committee shall require the surrender
of such other Award or Non-Plan Award as consideration for the grant of the new
Award.  Awards granted in addition to or in tandem with other Awards or Non-Plan
Awards may be granted either at the same time as or at a different time from the
grant of such other Awards or Non-Plan Awards.

 

The Committee may, in its discretion and on such terms and conditions as the
Committee considers appropriate in the circumstances, grant Substitute Awards
under the Plan.

 

5.7                               Deferral of Award Payouts.  The Committee may
permit a Grantee to defer, or if and to the extent specified in an Award
Agreement require the Grantee to defer, receipt of the payment of cash or the
delivery of Shares that would otherwise be due under the Award Agreement
pursuant to the lapse or waiver of Restrictions with respect to Restricted Stock
or Restricted Stock Units, or the satisfaction of any requirements or goals with
respect to Performance Units. If any such deferral is required or permitted, the
Committee shall, in its sole discretion, establish rules and procedures
governing such deferrals that are in accordance with the Plan and Code
Section 409A. Except as otherwise provided in an Award Agreement, any payment or
any Shares that are subject to such deferral shall be made or delivered to the
Grantee as specified in the Award Agreement or pursuant to the Grantee’s
deferral election.  No deferral shall be permitted with respect to an Option
unless, the deferral only defers the recognition of income until the later of
(i) the exercise or disposition of the option under Treasury Regulation section
1.83-7 or (ii) the time the stock acquired pursuant to the exercise of the
Option first becomes substantially vested under Treasury Regulation section
1.83-3(b).  No deferral shall be permitted with respect to a SAR other than the
deferral of recognition of income until the exercise of the SAR.

 

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5.8                               Exercise by Non-Grantee.  If any Award is
exercised as permitted by the Plan by any Person other than the Grantee, the
exercise notice shall be accompanied by documentation as may reasonably be
required by the Committee, including evidence of the authority of such Person or
Persons to exercise the Award and, if the Committee so specifies, evidence
satisfactory to the Company that any death taxes payable with respect to such
Shares have been paid or provided for.

 

5.9                               No Cash Consideration for Awards.  Awards may
be granted for no cash consideration or for such minimal cash consideration as
may be required by applicable law.

 

5.10                        No Fractional Shares.  No fractional Shares shall be
issued or delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash, other securities, or other property shall be paid or
transferred in lieu of any fractional Shares, or whether such fractional Shares
or any rights thereto shall be canceled, terminated, or otherwise eliminated.

 

5.11                        Tax Obligations.  No Award shall be settled, whether
in cash or Shares, unless the applicable tax withholding requirements have been
met to the satisfaction of the Committee.

 

Section 6.
Stock Options

 

6.1                               Grant of Options.

 

(a)                                 Committee Grant.  Subject to and consistent
with the provisions of the Plan, Options may be granted to any Eligible Person
in such number, and upon such terms, and at any time and from time to time as
shall be determined by the Committee.

 

(b)                                 Option Election.  In addition, if and to the
extent permitted by the Committee, an Eligible Person may elect (an “Option
Election”) at such times and in accordance with such rules and procedures
adopted by the Committee, to receive all or any portion of his salary and/or
bonus (including any cash Award payable under this Plan) in the form of an Award
of Options (which the Committee shall duly grant) having a fair market value (as
determined by the Committee using a Black Scholes option pricing model or
similar option pricing model, applied on the basis of such risk-free interest
rate, expected option life, volatility, average stock price, and other
applicable parameters, or formula therefor, as the Committee in its sole
discretion deems appropriate) equal to the amount of salary and/or bonus subject
to such Option Election.

 

6.2                               Award Agreement.  Each Option shall be
evidenced by an Award Agreement that shall specify the Option Price, the Option
Term (ten (10) years from its Grant Date unless a longer or shorter term is
specified in the Award Agreement), the number of Shares to which the Option
pertains, and such other provisions as the Committee shall determine, including
the period of time in which and the conditions under which the Option may become
exercisable (“Restrictions”).  The Restrictions may be based on the achievement
of specific performance goals, may be time-based following the achievement of
specific performance goals, may be  based on the occurrence of a specified
event, and/or may be imposed under applicable securities

 

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laws; provided that any time-based Restrictions (other than time-based
Restrictions following the achievement of specific performance goals) shall
remain in effect (in whole or in part) at least until the third anniversary of
the Grant Date, except as may otherwise be provided in an Award Agreement for
accelerated exercisability in the event of death, disability, retirement, Change
in Control or a Termination of Affiliation following a Change in Control.  In
the case of Option exercisability based on performance in a Performance Period,
the Performance Period will not be less than one year.

 

6.3                               Option Price.  The Option Price shall be
determined by the Committee; provided, however, that except with respect to
Substitute Options, the Option Price shall not be less than one hundred percent
(100%) of the Fair Market Value of a Share on the Grant Date; provided that if
the Committee so determines, in the case of any Option retroactively granted in
tandem with or in substitution for another Award or any outstanding Award
granted under any other plan of the Company, the purchase price per Share shall
not be less than the purchase price on the Grant Date of such other Award or
award under another Company plan.

 

6.4                               Repriced Options Subject to Stockholder
Approval.  The Committee may grant Options in replacement of Options previously
granted under this Plan or any other compensation plan of an Employer, for such
purposes and on such terms (including Option Price) as it deems appropriate,
subject to stockholder approval if such grant would be deemed to be a repricing
under the rules of the New York Stock Exchange.

 

6.5                               Grant of Incentive Stock Options.  At the time
of the grant of any Option, the Committee may, in its discretion, designate that
such Option shall be made subject to additional restrictions to permit it to
qualify as an Incentive Stock Option.  Any Option designated as an Incentive
Stock Option:

 

(a)                                 shall not be granted more than ten (10)
years after the Effective Date;

 

(b)                                 shall be granted only to an employee of the
Company or a Subsidiary Corporation (as defined below);

 

(c)                                  shall have an Option Price of not less than
100% of the Fair Market Value of a Share on the Grant Date, and, if granted to a
person who owns capital stock (including stock treated as owned under Section
424(d) of the Code), possessing more than 10% of the total combined voting power
of all classes of capital stock of the Company or any Subsidiary Corporation (a
“10% Owner”), have an Option Price not less than 110% of the Fair Market Value
of a Share on its Grant Date;

 

(d)                                 shall have an Option Term of not more than
ten (10) years (five years if the Grantee is a 10% Owner) from its Grant Date,
and shall be subject to earlier termination as provided herein or in the
applicable Award Agreement;

 

(e)                                  shall not have an aggregate Fair Market
Value (as of the Grant Date) of the Shares with respect to which Incentive Stock
Options (whether granted under the Plan or any other stock option plan of the
Grantee’s employer or any parent or Subsidiary

 

18

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Corporation (“Other Plans”)) are exercisable for the first time by such Grantee
during any calendar year (“Current Grant”), determined in accordance with the
provisions of Section 422 of the Code, which exceeds $100,000 (the “$100,000
Limit”);

 

(f)                                   shall, if the aggregate Fair Market Value
of the Shares (determined on the Grant Date) with respect to the Current Grant
and all Incentive Stock Options previously granted under the Plan and any Other
Plans which are exercisable for the first time during a calendar year (“Prior
Grants”), would exceed the $100,000 Limit, be, as to the portion in excess of
the $100,000 Limit, exercisable as a separate option that is not an Incentive
Stock Option at such date or dates as are provided in the Current Grant;

 

(g)                                  shall require the Grantee to notify the
Committee of any disposition of any Shares delivered pursuant to the exercise of
the Incentive Stock Option under the circumstances described in Section 421(b)
of the Code (relating to holding periods and certain disqualifying dispositions)
(“Disqualifying Disposition”), within 10 days of such a Disqualifying
Disposition;

 

(h)                                 shall by its terms not be assignable or
transferable other than by will or the laws of descent and distribution, and may
be exercised, during the Grantee’s lifetime, only by the Grantee; provided,
however, that the Grantee may, to the extent provided in the Plan, in any manner
specified by the Committee, designate in writing a Beneficiary to exercise his
or her Incentive Stock Option after the Grantee’s death; and

 

(i)                                     shall, if such Option nevertheless fails
to meet the foregoing requirements, or otherwise fails to meet the requirements
of Section 422 of the Code for an Incentive Stock Option, be treated for all
purposes of this Plan, except as otherwise provided in subsections (d) and (e)
above, as an Option that is not an Incentive Stock Option.

 

For purposes of this Section 6.5, “Subsidiary Corporation” means a corporation
other than the Company, in an unbroken chain of corporations beginning with the
Company, if, at the time of granting the Option, each of the corporations other
than the last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.  Notwithstanding the foregoing and Section
3.2, the Committee may, without the consent of the Grantee, at any time before
the exercise of an Option (whether or not an Incentive Stock Option), take any
action necessary to prevent such Option from being treated as an Incentive Stock
Option.

 

6.6                               Method of Option Exercise.

 

(a)                                 Except as may otherwise be provided by the
Committee in an Award Agreement, Options shall be exercised by the delivery of a
written notice to the Company, setting forth the number of Shares with respect
to which the Option is to be exercised, accompanied by full payment (including
any applicable tax withholding) for the Shares made by any one or more of the
following means on the Exercise Date (or such other date as may be permitted in
writing by the Secretary of the Company):

 

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(i)                                     cash, personal check or wire transfer;

 

(ii)                                  with the approval of the Committee, Shares
valued at their Fair Market Value on the Exercise Date (including, in lieu of
actually surrendering to the Company a number of Shares then owned by the
Grantee, the Company may, in its discretion, permit the Grantee to submit to the
Company a statement affirming ownership by the Grantee of such number of Shares
and request that such Shares, although not actually surrendered, be deemed to
have been surrendered by the Grantee as payment of the exercise price);

 

(iii)                               subject to applicable law (including the
prohibited loan provisions of Section 402 of the Sarbanes-Oxley Act of 2002),
through the sale of the Shares acquired on exercise of the Option through a
broker dealer to whom the Grantee has submitted an irrevocable notice of
exercise and irrevocable instructions to deliver promptly to the Company the
amount of sale or loan proceeds sufficient to pay for such Shares, together
with, if requested by the Company, the amount of federal, state, local or
foreign withholding taxes payable by Grantee by reason of such exercise;

 

(iv)                              with the approval of the Committee, for any
Nonqualified Stock Option, by a “net exercise” arrangement pursuant to which the
Company will not require a payment of the Option Price but will reduce the
number of Shares upon the exercise by the largest number of whole Shares that
has a Fair Market Value on the date of exercise that does not exceed the
aggregate Option Price; or

 

(v)                                 Any combination of (i) through (iv) above.

 

(b)                                 The Committee may in its discretion and
subject to applicable tax laws including Section 409A, specify that, if any
Shares of Restricted Stock (“Tendered Restricted Shares”) are used to pay the
Option Price, (x) all the Shares acquired on exercise of the Option shall be
subject to the same restrictions as the Tendered Restricted Shares, determined
as of the Exercise Date, or (y) a number of Shares acquired on exercise of the
Option equal to the number of Tendered Restricted Shares shall be subject to the
same restrictions as the Tendered Restricted Shares, determined as of the
Exercise Date.

 

(c)                                  At the discretion of the Committee and
subject to applicable law (including the prohibited loan provisions of
Section 402 of the Sarbanes-Oxley Act of 2002), the Company may loan a Grantee
all or any portion of the amount payable by the Grantee to the Company upon
exercise of the Option.

 

6.7                                 Shareholder Privileges.  No Grantee or
Permitted Transferee shall have any rights as a shareholder with respect to any
Shares covered by an Option until the Grantee/Permitted Transferee becomes the
holder of record of such Shares, and no adjustments shall be made for dividends
or other distributions or other rights as to which there is a record date
preceding the

 

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date such Grantee/Permitted Transferee becomes the holder of record of such
Shares, except as provided in Section 4.2.

 

Section 7.
Stock Appreciation Rights

 

7.1                                 Grant of SARs.  Subject to and consistent
with the provisions of the Plan, the Committee, at any time and from time to
time, may grant SARs to any Eligible Person either alone or in addition to other
Awards granted under the Plan.  SARs may, but need not, be granted in connection
with a specific Option.  Any SAR related to a Non-Qualified Option may be
granted at the same time such Option is granted or at any time thereafter before
exercise or expiration of such Option, but in no event may the Strike Price of a
SAR granted related to a Non-Qualified Option be less than the Option Price of
the related Non-Qualified Option.  Any SAR related to an Incentive Stock Option
must be granted at the same time such Option is granted.  The Committee may
impose such conditions or restrictions on the exercise of any SAR as it shall
deem appropriate.  In no event may the compensation payable under a SAR be
greater than the excess of the Fair Market Value of the Share on the date the
SAR is exercised over the Fair Market Value of the Share on the date of grant of
the SAR.  The stock appreciation right does not include any feature for the
deferral of compensation other than the deferral of recognition of income until
the exercise of the stock appreciation right.

 

7.2                                 Award Agreements.  Each SAR shall be
evidenced by an Award Agreement in such form as the Committee may approve, which
shall contain such terms and conditions not inconsistent with the provisions of
the Plan as shall be determined from time to time by the Committee.  Unless
otherwise provided in the Award Agreement, (a) no SAR grant shall have a Term of
more than ten (10) years from the date of grant of the SAR, and (b) SARs granted
in tandem with Options shall vest at the same time and in the same proportions
as the underlying Options.

 

7.3                                 Strike Price.  The Strike Price of a SAR
shall be determined by the Committee in its sole discretion; provided that the
Strike Price shall not be less than the lesser of 100% of the Fair Market Value
of a Share on the Grant Date of the SAR or the Option Price under the
Non-Qualified Option to which the SAR relates.

 

7.4                                 Exercise and Payment.  Except as may
otherwise be provided by the Committee in an Award Agreement, SARs shall be
exercised by the delivery of a written notice to the Company, setting forth the
number of Shares with respect to which the SAR is to be exercised.  Payments
made in connection with the exercise of a SAR shall be made on or as soon as
administratively practicable following the exercise date.  No payment of a SAR
shall be made unless applicable tax withholding requirements have been satisfied
in accordance with Section 16.1(a) or otherwise. Any payment by the Company in
respect of a SAR may be made in cash, Shares, other property, or any combination
thereof, as the Committee, in its sole discretion, shall determine.

 

7.5                                 Grant Limitations.  The Committee may at any
time impose any other limitations upon the exercise of SARs which it deems
necessary or desirable in order for the

 

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Grant to qualify for an exemption from Section 16(b) of the Exchange Act, an
exemption from Code Section 162(m) or to achieve any other desirable tax results
for the Grantee or the Company.

 

Section 8.
Performance Units

 

8.1                                 Grant of Performance Units.  Subject to and
consistent with the provisions of the Plan, Performance Units may be granted to
any Eligible Person in such number, and upon such terms, and at any time and
from time to time, as shall be determined by the Committee.  Performance Units
shall be evidenced by an Award Agreement in such form as the Committee may
approve, which shall contain such terms and conditions not inconsistent with the
provisions of the Plan as shall be determined from time to time by the
Committee.  If entitlement to Performance Units is conditioned upon the
attainment of Performance Goals in a Performance Period, the Performance Period
will not be less than one year.

 

8.2                                 Value/Performance Goals.  The Committee
shall set Performance Goals which, depending on the extent to which they are met
during a Performance Period, will determine the number or value of Performance
Units that will be paid to the Grantee at the end of the Performance Period.  To
the extent the Committee deems it appropriate to comply with Section 162(m) of
the Code, all Performance Goals shall be objective, and shall be based on
Performance Measures.

 

8.3                                 Earning of Performance Units.  After the
applicable Performance Period has ended, the holder of Performance Units shall
be entitled to payment based on the performance level attained with respect to
Performance Goals set by the Committee and as described in Section 8.2.  If the
Performance Unit Award is intended to comply with the Performance-Based
Exception, the Committee shall certify the level of attainment of the
Performance Goals in writing before the Award is settled.  At the discretion of
the Committee, the Award Agreement may specify that an Award of Performance
Units is payable in cash, Shares, Restricted Stock, or Restricted Stock Units.

 

8.4                                 Adjustment on Change of Position.  If a
Grantee is promoted, demoted or transferred to a different business unit of the
Company during a Performance Period, then, to the extent the Committee
determines that the Award, the performance goals, or the Performance Period are
no longer appropriate, (taking into account the desirability of satisfying the
Performance-Based Exception), the Committee may adjust, change, eliminate or
cancel the Award, the performance goals, or the applicable Performance Period,
as it deems appropriate in order to make them appropriate and comparable to the
initial Award, the performance goals, or the Performance Period.

 

8.5                                 Crediting of Dividend Equivalents.  At the
discretion of the Committee, a Grantee may be entitled to receive Dividend
Equivalents declared with respect to any Shares underlying any Performance
Units.  To the extent such Dividend Equivalents are eligible to be received, at
the discretion of the Committee and as set forth in the Award Agreement, such
accrued Dividend Equivalents may be credited in the form of additional property
(including

 

22

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additional Performance Units), having a value not to exceed the aggregate value
of such Dividend Equivalents on the payment date of the related dividends, or
credited into a notional deferred cash account, which may or may not accrue
interest.  Any additional amounts or property attributable to the payment of
Dividend Equivalents as provided herein shall be subject to the same
restrictions and other terms as apply to the Performance Units with respect to
which such Dividend Equivalents are credited and in no event will the payment of
such property or deferred cash be made before the underlying Performance Units
are payable.

 

Section 9.
Restricted Stock

 

9.1                                 Grant of Restricted Stock.  Subject to and
consistent with the provisions of the Plan, the Committee, at any time and from
time to time, may grant Restricted Stock to any Eligible Person in such amounts
as the Committee shall determine.

 

9.2                                 Award Agreement.  Each grant of Restricted
Stock shall be evidenced by an Award Agreement that shall specify the
Restrictions, the number of Shares subject to the Restricted Stock Award, and
such other provisions as the Committee shall determine.  The Committee may
impose such Restrictions on any Restricted Stock, including time-based
Restrictions, Restrictions based upon the achievement of specific performance
goals, time-based Restrictions following the achievement of specific performance
goals, and/or restrictions under applicable securities laws; provided that any
time-based Restrictions (other than time-based Restrictions following the
achievement of specific performance goals) shall remain in effect (in whole or
in part) at least until the third anniversary of the Grant Date, except as may
otherwise be provided in an Award Agreement for accelerated vesting in the event
of death, disability, retirement, Change in Control or a Termination of
Affiliation following a Change in Control.  In the case of Restricted Stock
awarded based on performance in a Performance Period, the Performance Period
will be no less than one year.

 

9.3                                 Consideration for Restricted Stock.  The
Committee shall determine the amount, if any, that a Grantee shall pay for
Restricted Stock.

 

9.4                                 Effect of Forfeiture.  If Restricted Stock
is forfeited, and if the Grantee paid for such Restricted Stock or acquired such
Restricted Stock upon the exercise of an Option, the Grantee shall be deemed to
have resold such Restricted Stock to the Company at a price equal to the lesser
of (x) the amount paid by the Grantee for such Restricted Stock or the exercise
price of the Option, as applicable, or (y) the Fair Market Value of a Share on
the date of such forfeiture.  The Company shall pay to the Grantee the deemed
sale price as soon as is administratively practical.  Such Restricted Stock
shall cease to be outstanding, and shall no longer confer on the Grantee thereof
any rights as a stockholder of the Company, from and after the date of the event
causing the forfeiture, whether or not the Grantee accepts the Company’s tender
of payment for such Restricted Stock.

 

9.5                                 Escrow; Legends.  The Committee may provide
that the evidence of ownership of Shares of Restricted Stock (x) shall be held
(together with a stock power executed in blank by the Grantee) in escrow or
other custodial arrangement by the Secretary of the Company until

 

23

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such Restricted Stock becomes nonforfeitable or is forfeited and/or (y) shall
bear an appropriate legend restricting the transfer of such Restricted Stock
under the Plan.  If any Restricted Stock becomes nonforfeitable, the Company
shall cause certificates (or other evidence of ownership) for such Shares to be
delivered without such legend or shall cause a release of restrictions on a book
entry account maintained by the Company’s transfer agent.

 

9.6                                 Stockholder Rights in Restricted Stock. 
Restricted Stock, whether held by a Grantee or in escrow or other custodial
arrangement by the Secretary of the Company, shall confer on the Grantee all
rights of a stockholder of the Company, except as otherwise provided in the Plan
or Award Agreement.  Unless otherwise provided in an Award Agreement, any cash
dividends paid with respect to Shares of Restricted Stock will automatically be
deferred and reinvested in additional Shares of Restricted Stock and any cash
dividends or stock dividends paid with respect to Restricted Stock shall be
subject to the same restrictions and other terms as apply to the Shares of
Restricted Stock with respect to which such dividends are issued.  The Committee
may in its discretion provide for payment of interest on deferred cash
dividends.  Notwithstanding any of the foregoing, in no event may any cash
dividends or stock dividends paid with respect to Restricted Stock be paid to
the Grantee earlier than the date the underlying Shares of Restricted Stock
become vested.

 

Section 10.
Restricted Stock Units

 

10.1                           Grant of Restricted Stock Units.  Subject to and
consistent with the provisions of the Plan and Code Sections 409A(a)(2), (3) and
(4), the Committee, at any time and from time to time, may grant Restricted
Stock Units to any Eligible Person, in such amount and upon such terms as the
Committee shall determine.  A Grantee shall have no voting rights in Restricted
Stock Units.

 

10.2                           Award Agreement.  Each grant of Restricted Stock
Units shall be evidenced by an Award Agreement that shall specify the
Restrictions, the number of Shares subject to the Restricted Stock Units
granted, and such other provisions as the Committee shall determine in
accordance with the Plan and Code Section 409A.  The Committee may impose such
Restrictions on Restricted Stock Units, including time-based Restrictions,
Restrictions based on the achievement of specific performance goals, time-based
Restrictions following the achievement of specific performance goals,
Restrictions based on the occurrence of a specified event, and/or restrictions
under applicable securities laws; provided that any time-based restrictions
(other than time-based Restrictions following the achievement of specific
performance goals) shall remain in effect (in whole or in part) at least until
the third anniversary of the Grant Date, except as may otherwise be provided in
an Award Agreement for accelerated vesting in the event of death, disability,
retirement, Change in Control or a Termination of Affiliation following a Change
in Control.  In the case of Restricted Stock Units awarded based on performance
in a Performance Period, the Performance Period will not be less than one year.

 

10.3                           Crediting Restricted Stock Units.  The Company
shall establish an account (“RSU Account”) on its books for each Eligible Person
who receives a grant of Restricted Stock Units.  Restricted Stock Units shall be
credited to the Grantee’s RSU Account as of the Grant

 

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Date of such Restricted Stock Units.  RSU Accounts shall be maintained for
recordkeeping purposes only and the Company shall not be obligated to segregate
or set aside assets representing securities or other amounts credited to RSU
Accounts.  The obligation to make distributions of securities or other amounts
credited to RSU Accounts shall be an unfunded, unsecured obligation of the
Company.

 

(a)                                  Crediting of Dividend Equivalents.  Except
as otherwise provided in an Award Agreement, whenever dividends are paid or
distributions are made with respect to Shares, Dividend Equivalents shall be
credited to RSU Accounts on all Restricted Stock Units credited thereto, as of
the record date for such dividend or distribution.  Such Dividend Equivalents
shall be credited to the RSU Account either (i) in the form of additional
Restricted Stock Units (in a number determined by dividing the aggregate value
of such Dividend Equivalents by the Fair Market Value of a Share at the payment
date of such dividend or distribution) or (ii) deferred cash.  Any additional
RSUs or deferred cash amounts shall be subject to the same restrictions and
other terms as apply to the RSUs with respect to which such Dividend Equivalents
are credited and in no event will the payment of such property or deferred cash
be made before the underlying RSUs are payable.

 

(b)                                 Settlement of RSU Accounts.  The Company
shall settle an RSU Account by delivering to the holder thereof (which may be
the Grantee or his or her Beneficiary, as applicable) a number of Shares equal
to the whole number of Shares underlying the Restricted Stock Units then
credited to the Grantee’s RSU Account (or a specified portion in the event of
any partial settlement); provided that any fractional Shares underlying
Restricted Stock Units remaining in the RSU Account on the Settlement Date shall
be distributed in cash in an amount equal to the Fair Market Value of a Share as
of the Settlement Date multiplied by the remaining fractional Restricted Stock
Unit.  Subject to any deferral election made by the Grantee or the terms of any
Award Agreement providing for a deferral of settlement of Shares underlying the
Restricted Stock Units or alternative settlement date, the “Settlement Date” for
all Restricted Stock Units credited to a Grantee’s RSU Account and that
otherwise have not been forfeited shall be the earlier of (i) when Restrictions
applicable to an Award of Restricted Stock Units have lapsed, or (ii) as soon as
administratively practical following the Grantee’s death, disability,
retirement, Change in Control or Termination of Affiliation following a Change
in Control; provided, however, to the extent an RSU is subject to Code
Section 409A, no settlement shall be made on account of a disability unless such
disability meets the definition of “disability” as defined in Code
Section 409A(a)(2)(C)(i)), and no settlement shall be made on account of a
retirement or Termination of Affiliation unless such retirement or Termination
of Affiliation constitutes a “separation from service” (as provided in Code
Section 409A(a)(2)(A)(i)).

 

Section 11.
Deferred Stock

 

11.1                           Grant of Deferred Stock.  Subject to and
consistent with the provisions of the Plan and Code Sections 409A(a)(2), (3),
and (4), the Committee, at any time and from time to

 

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time, may grant Deferred Stock to any Eligible Person in such number, and upon
such terms, as the Committee, at any time and from time to time, shall
determine, including grants at the election of a Grantee to convert Shares to be
acquired upon lapse of restrictions on Restricted Stock or Restricted Stock
Units into such Deferred Stock.  A Grantee shall have no voting rights in
Deferred Stock.

 

11.2                           Award Agreement.  Each grant of Deferred Stock
shall be evidenced by an Award Agreement that shall specify the number of Shares
underlying the Deferred Stock subject to an Award, the date such Shares of
Deferred Stock shall be settled and such other provisions as the Board shall
determine that are in accordance with the Plan and Code Section 409A.

 

11.3                           Deferred Stock Elections.

 

(a)                                  Making of Deferral Elections.  If and to
the extent permitted by the Committee, an Eligible Person may elect (a “Deferral
Election”) at such times and in accordance with rules and procedures adopted by
the Committee (which shall comport with Code Section 409A), to receive all or
any portion of his salary and/or bonus (including any cash or Share Award
payable under this Plan) in the form of a number of shares of Deferred Stock
equal to the quotient of the amount of salary and/or cash bonus or other Award
to be paid in the form of Deferred Stock divided by the Fair Market Value of a
Share on the date such salary or bonus or other Award would otherwise be paid in
cash.  The Grant Date for an Award of Deferred Stock made pursuant to a Deferral
Election shall be the date the Deferrable Amount subject to a Deferral Election
would otherwise have been paid to the Grantee in cash or Shares.

 

(b)                                 Timing of Deferral Elections.  An initial
Deferral Election must be filed with the Controller of the Company no later than
December 31 of the year preceding the calendar year in which the amounts subject
to the Deferral Election would otherwise be earned, subject to such restrictions
and advance filing requirements as the Company may impose.  A Deferral Election
shall be irrevocable as of the filing deadline.  Each Deferral Election shall
remain in effect with respect to subsequently earned amounts unless the Eligible
Person revokes or changes such Deferral Election.  Any such revocation or change
shall have prospective application only.

 

11.4                           Deferral Account.

 

(a)                                  Establishment of Deferral Accounts.  The
Company shall establish an account (“Deferral Account”) on its books for each
Eligible Person who receives a grant of Deferred Stock or makes a Deferral
Election.  Deferred Stock shall be credited to the Grantee’s Deferral Account as
of the Grant Date of such Deferred Stock.  Deferral Accounts shall be maintained
for recordkeeping purposes only and the Company shall not be obligated to
segregate or set aside assets representing securities or other amounts credited
to Deferral Accounts.  The obligation to make distributions of securities or
other amounts credited to Deferral Accounts shall be an unfunded, unsecured
obligation of the Company.

 

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(b)                                 Crediting of Dividend Equivalents.  Except
as otherwise provided in an Award Agreement, whenever dividends are paid or
distributions made with respect to Shares, Dividend Equivalents shall be
credited to Deferral Accounts on all Deferred Stock credited thereto as of the
record date for such dividend or distribution.  Such Dividend Equivalents shall
be credited to the Deferral Account either (i) in the form of additional
Deferred Stock (in a number determined by dividing the aggregate value of such
Dividend Equivalents by the Fair Market Value of a Share at the payment date of
such dividend or distribution) or (ii) deferred cash.  Any additional Deferred
Stock or deferred cash amounts shall be subject to the same restrictions and
other terms as apply to the Shares with respect to which such Dividend
Equivalents are credited and in no event will the payment of such property or
deferred cash be made before the underlying Shares are payable.

 

(c)                                  Settlement of Deferral Accounts.  The
Company shall settle a Deferral Account by delivering to the holder thereof
(which may be the Grantee or his or her Beneficiary or estate, as applicable) a
number of Shares equal to the whole number of Shares of Deferred Stock then
credited to the Grantee’s Deferral Account (or a specified portion in the event
of any partial settlement); provided that any fractional Shares of Deferred
Stock remaining in the Deferral Account on the Settlement Date shall be
distributed in cash in an amount equal to the Fair Market Value of a Share as of
the Settlement Date multiplied by the remaining fractional Share.  The
“Settlement Date” for all Deferred Stock credited to a Grantee’s Deferral
Account shall be determined in accordance with Code Section 409A.

 

Section 12.
Annual Incentive Awards

 

12.1                           Annual Incentive Awards.  Subject to and
consistent with the provisions of the Plan, Annual Incentive Awards may be
granted to any Eligible Person in accordance with this Section 12. The Committee
shall from time to time designate the individuals eligible to be granted an
Annual Incentive Award for a Year and may designate an Eligible Person as
eligible for a full Year or for a period of less than a full Year. Any Annual
Incentive Award granted to a Covered Employee (or to an Eligible Person whom the
Committee believes may be a Covered Employee at the end of the Year) shall be
made not later than ninety (90) days after the commencement of the Performance
Period or, in the case of a Covered Employee (or to an Eligible Person whom the
Committee believes may be a Covered Employee at the end of the Year) who becomes
eligible for an Annual Incentive Award due to being hired or promoted during the
Year, such designation shall not be made after more than 25% of the Performance
Period has elapsed; provided in each case, however, that these requirements do
not apply if the  Committee does not intend the Annual Incentive Award granted
to an Eligible Person to qualify for the Performance-Based Exception.  An
Eligible Person who, for any reason, is designated as eligible to be granted an
Annual Incentive Award for a Year after the Performance Goals for the Year have
been set shall only be eligible to defer a portion of the Annual Incentive Award
in accordance with applicable guidance under Section 409A of the Code.

 

27

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12.2                           Determination of Amount of Annual Incentive
Awards.

 

(a)                                  Aggregate Maximum.  The Committee may
establish guidelines as to the maximum aggregate amount of Annual Incentive
Awards payable for any year.

 

(b)                                 Establishment of Performance Goals and Bonus
Opportunities.  Provided that the outcome is substantially uncertain at the time
established, within the first ninety (90) days of each Performance Period, or
within the first 25% of the Performance Period if the Performance Period for an
Eligible Person is less than a full Year, the Committee shall establish, in
writing, Performance Goals for the Year (which may be the same or different for
some or all Eligible Persons) and shall establish the threshold, target and
maximum Bonus Opportunity for each Participant for the attainment of specified
threshold, target and maximum Performance Goals.  Performance Goals and Bonus
Opportunities may be weighted for different factors and measures as the
Committee shall determine.

 

(c)                                  Committee Certification and Determination
of Amount of Annual Incentive Award.  The Committee shall determine and certify
in writing the degree of attainment of Performance Goals as soon as
administratively practicable after the end of each Year but not later than
ninety (90) days after the end of such Year.  The Committee shall initially
determine each individual’s Annual Incentive Award based solely on the level of
attainment of the Performance Goals (as certified by the Committee) and the
individual’s Bonus Opportunity.  The Committee (or for any non-Covered Employee,
the Committee’s delegate), shall then, in accordance with the following rules,
determine the actual amount of the Eligible Person’s Annual Incentive Award to
be paid to such Eligible Person.

 

(i)                                     At any time prior to payment, the
Committee (or for any Non-Covered Employee the Committee’s delegate) reserves
the discretion to increase or decrease (but not below zero) the amount of such
individual’s Annual Incentive Award and Bonus Opportunity that was based solely
on the Committee-certified level of attainment of the Performance Goals;
provided, however, that the Committee may not increase the amount of a Covered
Person’s Annual Incentive Award and Bonus Opportunity above the amount to which
the Covered Person would otherwise have been entitled based solely on the
Committee-certified level of Performance Goal achievement.

 

(ii)                                  In no event shall the election of the
Committee (or of the Committee’s delegate if applicable for non-Covered
Employees) to increase or decrease, on an individual basis, the amount of an
Eligible Person’s Annual Incentive Award and Bonus Opportunity result in an
increase or decrease in the total amount of payable Annual Incentive Awards
based on the total level of Performance Goal achievement (as certified by the
Committee) at the end of the Year applicable to Eligible Persons to whom such
Performance Goals apply.

 

(d)                                 Termination of Affiliation.  If an
individual has a Termination of Affiliation during the Year, the Committee may
authorize the payment of an Annual Incentive Award to such individual, and in
the absence of such authorization, the individual shall receive no Annual
Incentive Award for such Year.

 

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12.3                           Time of Payment of Annual Incentive Awards. 
Annual Incentive Awards shall be paid as soon as administratively practicable
after the Committee certifies the degree of attainment of the Performance Goals
and determines the amount of the Annual Incentive Award, but not later than 2 ½
months following the end of the Year to which the Annual Incentive Award
pertains.

 

12.4                           Form of Payment of Annual Incentive Awards.  An
individual’s Annual Incentive Award for a Year shall be paid in cash, Shares,
Restricted Stock, Options, or any other form of Award or any combination thereof
as is provided in the Award Agreement.  The Committee may provide in an Award
Agreement that payment of an Annual Incentive Award may be deferred in
accordance with any rules or procedures that may be established by the Committee
from time to time, either before or after the decision or election to defer is
made.

 

Section 13.
Service Awards

 

13.1                           Service Awards.  Subject to and consistent with
the provisions of the Plan, Service Awards shall be granted in accordance with
this Section 13.

 

13.2                           Definitions.  For purposes of this Section 13,
the following terms have the meaning set forth below:

 

(a)                                  “Anniversary Date” means the 12-month
anniversary of an individual’s Hire Date.

 

(b)                                 “Five-Year Anniversary Date” means each
Anniversary Date as of which an individual’s number of years of service is a
whole number that is a multiple of five.

 

(c)                                  “Hire Date” means the date an individual
first performed services as an employee for the Company, for an entity that is a
Designated Subsidiary (as defined in Section 13.6), or (except as provided in
Section 13.4(c)) for Kansas City Southern Industries, Inc. or its successor
(“KCSI”); provided, however, that the Chief Executive Officer of the Company (or
the Committee with respect to Section 16 Persons) can determine that the Hire
Date shall be the date an individual first performs service for an entity that
later becomes a Designated Subsidiary.

 

(d)                                 “Quarter End” means the last day of the
calendar quarter in which (or on which) occurs a Five-Year Anniversary Date with
respect to an Eligible Person.

 

13.3                           Granting of Service Awards.  Each Eligible Person
who is an employee of the Company or a Designated Subsidiary shall (subject to
Committee approval in the case of a Section 16 Person) be granted a Service
Award as of the Quarter End for the calendar quarter in which each Five-Year
Anniversary Date occurs; provided that such Eligible Person (a) is an employee
of the Company or a Designated Subsidiary on such Quarter End, or (b) died or
had a Termination of Affiliation on account of disability or Retirement on or
after the Eligible Person’s

 

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relevant Five-Year Anniversary Date and prior to such Quarter End.  The number
of Shares to be delivered in satisfaction of the Service Award shall be
determined under the following table:

 

Years of Service

 

Shares to Be Awarded

 

 

 

5

 

5

10

 

10

15

 

15

20

 

20

25

 

25

30

 

30

35

 

35

40

 

40

45

 

45

50

 

50

 

For five year increment anniversaries above fifty years of service, the number
of Shares awarded shall, as shown above, equal the number of years of service.

 

13.4                           Determination of Years of Service.  An employee
of the Company or a Designated Subsidiary shall be credited with one year of
service for each 12-month period of continuous full time employment (regularly
employed more than 20 hours per week) with the Company or a Designated
Subsidiary or, except as provided in Section 13.4(c), with KCSI, measured from
the individual’s Hire Date and anniversaries of the Hire Date, subject to the
special rules set forth below:

 

(a)                                  If an Employee has a Termination of
Affiliation and then becomes reemployed with the Company or a Designated
Subsidiary within five years of such Termination of Affiliation, the Employee’s
complete (but not partial) Years of Service earned prior to such Termination of
Affiliation shall continue to count towards the individual’s Years of Service. 
In such case, the individual’s Hire Date (for purposes of determining the date
of the Five-Year Anniversary Date) shall be deemed to be the date the individual
returns to employment with the Company or a Designated Subsidiary.  No credit
shall be given for any partial or complete Years of Service which occurred prior
to a five (5) year or more break in employment with the Company and its
Designated Subsidiaries.

 

(b)                                 An individual’s service shall be deemed
continuous throughout an approved leave of absence not exceeding one year,
provided the individual returns to employment with the Company or a Designated
Subsidiary for at least 30 days upon the conclusion of the approved leave of
absence.  If the individual does not so return, the individual shall be deemed
to have had a Termination of Affiliation at the commencement of the approved
leave of absence.  Thus, any Service Award that would be delivered to an
individual during an approved leave of absence shall not be delivered until the
individual has completed at least 30 days of employment following the conclusion
of the approved leave of absence.

 

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(c)                                  With respect to any individual who became
an employee of the Company or a Designated Subsidiary on or after October 7,
2002, service with KCSI after June 28, 2000, shall be disregarded.

 

The Committee shall establish rules for determining the years of service in
cases not covered by the foregoing.

 

13.5                           Delivery of Service Awards.

 

(a)                                  Service Awards shall be delivered as soon
as administratively practical following the applicable Quarter End, provided the
individual (i) is an Eligible Person on such Quarter End, or (ii) died or had a
Termination of Affiliation on account of disability (as defined by the
Committee, or if not so defined, as defined in Code Section 409A(a)(2)(C)(i)) or
Retirement on or after the individual’s relevant Five-Year Anniversary and prior
to applicable Quarter End.  Service Awards may be accompanied by such cash
payments as the Committee determines to be appropriate to reduce or eliminate
the tax effect of the receipt of a Service Award by an individual.

 

(b)                                 All Shares issued in connection with a
Service Award shall be subject to the other provisions of the Plan.

 

13.6                           Designation of Subsidiaries.  The Committee shall
designate those Subsidiaries and Joint Ventures whose employees shall be
eligible for Service Awards.  Such Subsidiaries and Joint Ventures shall be
“Designated Subsidiaries” for purposes of this Section 13.  The Committee shall
keep records of Designated Subsidiaries, together with any special terms and
conditions applicable to participation by employees of a Designated Subsidiary.

 

13.7                           Committee Delegation.  The Committee hereby
delegates its authority under Section 3 with respect to this Section 13 to the
Chief Executive Officer of the Company; provided that the Committee’s authority
with respect to Section 16 Persons is not delegated.  The Committee reserves the
right to revoke this delegation in whole or in part at any time.

 

Section 14.
Change in Control

 

14.1                           Special Treatment in the Event of a Change in
Control.

 

(a)                                  In order to maintain the Grantee’s rights
in the event of any Change in Control of the Company, as hereinafter defined,
the Committee, as constituted before such Change in Control, may, in its sole
discretion, as to any Award, either at the time an Award is made hereunder or
any time thereafter, take any one (1) or more of the following actions:
(i) provide for the purchase by the Company of any such Award, upon the
Grantee’s request, for an amount of cash equal to the amount that could have
been attained upon the exercise of such Award or realization of the Grantee’s
rights had such Award been currently exercisable or payable; (ii) make such
adjustment to any such Award then outstanding as the Committee deems appropriate
to reflect such Change in Control; or (iii) cause any such Award then
outstanding to be assumed, or new rights

 

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substituted therefor, by the acquiring or surviving corporation after such
Change in Control.

 

(b)                                 Except where an Award Agreement or other
agreement approved by the Committee to which a Grantee is a party addresses the
effect of a Change in Control or Termination of Affiliation following a Change
in Control on an Award, in which case such agreement will control, in the event
that within the period commencing on a Change in Control of the Company and
ending on the third anniversary of the Change in Control, the Company terminates
a Grantee’s employment other than for cause (as defined in the Award Agreement),
there shall be an automatic acceleration of any time periods relating to the
exercise or realization of any such Award (other than Service Awards) and all
performance goals relating to Performance Units and/or Annual Incentive Awards
shall be deemed satisfactorily completed without any action required by the
Committee so that such Award may be exercised or realized in full on or before a
date fixed by the Committee.  The Committee may, in its discretion, include such
further provisions and limitations in any Award Agreement as it may deem in the
best interests of the Company.

 

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

 

(a)                                  the Incumbent Directors cease for any
reason to constitute at least seventy-five percent (75%) of the directors of the
Company then serving;

 

(b)                                 any “person” (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act) other than the Company or any
majority-owned Subsidiary of the Company, or an employee benefit plan of the
Company or of any majority-owned Subsidiary of the Company shall have become the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) directly or
indirectly, of securities of the Company representing twenty percent (20%) or
more (calculated in accordance with Rule 13d-3) of the combined voting power of
the Company’s then outstanding voting securities (a “Substantial Owner);
provided, however, that a person’s becoming such a Substantial Owner shall not
constitute a Change in Control if (1) such person is a party to an agreement
that limits the ability of such person and its Affiliates to obtain and exercise
control over the management and policies of the Company, or (2) such person is a
person who, together with all Affiliates and Associates of such person, would
become a Substantial Owner solely as a result of a reduction of the number of
Shares, which reduction increases the percentage of outstanding Shares
beneficially owned by such person, unless and until such person, Affiliate or
Associate, after becoming aware that such person has become a Substantial Owner,
thereafter becomes the beneficial owner of additional Shares (other than Shares
received directly from the Company pursuant to a plan approved by a majority of
those members of the Board who, while serving on the Board, are not Substantial
Owners, Affiliates or Associates of a Substantial Owner, or a representative or
nominee of a Substantial Owner or of any such Affiliate or Associate)
representing one percent (1%) or more of the number of Shares then outstanding;

 

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(c)                                  a Reorganization Transaction is
consummated, other than a Reorganization Transaction which results in the Voting
Securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into Voting
Securities of the surviving entity) at least sixty percent (60%) of the total
voting power represented by the Voting Securities of such surviving entity
outstanding immediately after the Reorganization Transaction, if the voting
rights of each Voting Security relative to the other Voting Securities were not
altered in the Reorganization Transaction; or

 

(d)                                 the stockholders of the Company approve a
plan of complete liquidation of the Company, other than in connection with a
Reorganization Transaction.

 

Notwithstanding the occurrence of any of the foregoing events, (x) a Change in
Control shall not occur with respect to a Grantee if, in advance of such event,
the Grantee agrees in writing that such event shall not constitute a Change in
Control, and (y) to the extent that any payment under the Plan is subject to
Code Section 409A and an applicable payment event is a Change in Control, in
addition to satisfying the above definition of Change in Control, such Change in
Control must also constitute a Change in Control under Code Section 409A.

 

14.3                           Definitions.  For purposes of this Section 14 and
the definition of Change in Control, the following terms have the meaning set
forth below:

 

(a)                                  “Incumbent Directors” means (i) an
individual who was a member of the Board on the Effective Date; or (ii) an
individual whose election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least seventy-five percent (75%) of
the members of the Board then still in office who were members of the Board on
the Effective Date; or (iii) individuals whose election, or nomination for
election by the Company’s stockholders, was approved by a vote of at least
seventy-five percent (75%) of the members of the Board then still in office who
were elected in the manner described in (i) or (ii) above; provided that no
director whose election was in connection with a proposed transaction which, if
consummated, would be a Change in Control, shall be an Incumbent Director.

 

(b)                                 “Related Party” means (i) a majority-owned
Subsidiary of the Company; or (ii) an employee or group of employees of the
Company or of any majority-owned Subsidiary of the Company; or (iii) an employee
benefit plan of the Company or of any majority-owned Subsidiary of the Company;
or (iv) a corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportion as their ownership of the voting
power of Voting Securities of the Company.

 

(c)                                  “Reorganization Transaction” means a
merger, reorganization, consolidation, or similar transaction or a sale of all
or substantially all of the Company’s assets other than any such sale which
would result in a Related Party owning or acquiring more than fifty percent
(50%) of the assets owned by the Company immediately prior to the sale.

 

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(d)                                 “Voting Securities” of a corporation means
securities of such corporation that are entitled to vote generally in the
election of directors, but not including any other class of securities of such
corporation that may have voting power by reason of the occurrence of a
contingency.

 

Section 15.
Amendment, Modification, and Termination

 

15.1                           Amendment, Modification, and Termination.

 

(a)                                  Board Authority.  Subject to Section 15.2,
the Board may, at any time and from time to time, alter, amend, suspend,
discontinue or terminate the Plan in whole or in part without the approval of
the Company’s stockholders, except that (i) any amendment or alteration shall be
subject to the approval of the Company’s stockholders if such stockholder
approval is required by any federal or state law or regulation or the rules of
any stock exchange or automated quotation system on which the Shares may then be
listed or quoted, and (ii) the Board may otherwise, in its discretion, determine
to submit other such amendments or alterations to stockholders for approval, or
if such amendment, in the determination of the Board, materially increases
benefits accruing to Plan participants, and (iii) any Plan amendment or
termination will not accelerate the timing of any payments that constitute
deferred compensation under Code Section 409A unless such acceleration of
payment is permitted by Code Section 409A.

 

(b)                                 Delegation to Chief Executive Officer. 
Notwithstanding Section 15.1(a), the authority to amend (or terminate)
Section 13 (other than the schedule of Shares to be delivered as Service
Awards), is hereby delegated to the Chief Executive Officer of the Company.  The
Board reserves the right to revoke this delegation in whole or in part at any
time.

 

15.2                           Awards Previously Granted.  Except as otherwise
specifically permitted in the Plan (including Sections 3.2(m), 3.2(o), and 5.5
of the Plan) or an Award Agreement, no termination, amendment, or modification
of the Plan shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Grantee of such
Award.

 

15.3                           Pro Rata Annual Incentive.  With respect to
Annual Incentive Awards and Performance Units and subject to the attainment of
the established Performance Goals, in the event of a termination of the Plan or
an amendment which adversely affects the computation of an award to a
Participant which occurs during a Year or other applicable Performance Period,
the Participant shall be entitled to receive (i) a pro rata award to the
effective date of such termination or amendment, calculated under the terms and
conditions of the Plan immediately prior to such effective date and (ii) any
award provided by such amended Plan for the balance of such Year or other
applicable Performance Period. Any such pro rata payment shall be made as soon
as administratively practicable following certification of the Performance
Goals.

 

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Section 16.
Withholding

 

16.1                           Required Withholding.

 

(a)                                  The Committee in its sole discretion may
provide that when taxes are to be withheld in connection with the exercise of an
Option or of a SAR, or upon the lapse of Restrictions on an Award, or upon
payment of any other benefit or right under this Plan (the Exercise Date, date
such Restrictions lapse or such payment of any other benefit or right occurs
hereinafter referred to as the “Tax Date”), the Grantee may elect to make
payment for the withholding of federal, state and local taxes, including Social
Security and Medicare (“FICA”) taxes by one or a combination of the following
methods:

 

(i)                                     payment of an amount in cash equal to
the amount to be withheld;

 

(ii)                                  requesting the Company to withhold from
those Shares that would otherwise be received upon exercise of the Option or the
SAR payable in Shares, upon the lapse of Restrictions on an Award, a number of
Shares having a Fair Market Value on the Tax Date equal to the amount to be
withheld; or

 

(iii)                               withholding from any compensation otherwise
due to the Grantee.

 

The Committee in its sole discretion may provide that the maximum amount of tax
withholding upon exercise of an Option or a SAR payable in Shares to be
satisfied by withholding Shares upon exercise of such Option or SAR pursuant to
clause (iii) above shall not exceed the minimum amount of taxes, including FICA
taxes, required to be withheld under federal, state and local law.  An election
by Grantee under this subsection is irrevocable.  Any fractional share amount
and any additional withholding not paid by the withholding or surrender of
Shares must be paid in cash.  If no timely election is made, the Grantee must
deliver cash to satisfy all tax withholding requirements.

 

(b)                                 Any Grantee who makes a Disqualifying
Disposition (as defined in Section 6.5(g)) or an election under Section 83(b) of
the Code shall remit to the Company an amount sufficient to satisfy all
resulting tax withholding requirements, if any, in the same manner as set forth
in subsection (a).

 

16.2                           Notification Under Code Section 83(b).  If the
Grantee, in connection with the grant of Restricted Stock, makes the election
permitted under Section 83(b) of the Code to include in such Grantee’s gross
income in the year of transfer the amounts specified in Section 83(b) of the
Code, then such Grantee shall notify the Company of such election within 10 days
of filing the notice of the election with the Internal Revenue Service, in
addition to any filing and notification required pursuant to regulations issued
under Section 83(b) of the Code.  The Committee may, in connection with the
grant of an Award or at any time thereafter, prohibit a Grantee from making the
election described above.

 

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Section 17.
Beneficiary Designation

 

Each Grantee under the Plan may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his or her death before he or
she receives any or all of such benefit.  Each such designation shall revoke all
prior designations by the same Grantee, shall be in a form prescribed by the
Company, and will be effective only when filed by the Grantee in writing with
the Company during the Grantee’s lifetime.  In the absence of any such
designation, benefits remaining unpaid at the Grantee’s death shall be paid to
the Grantee’s estate.

 

Section 18.
Additional Provisions

 

18.1                           Governing Law.  The validity, construction, and
effect of the Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of the State of Delaware, other than its
law respecting choice of laws and applicable Federal law.

 

18.2                           Severability.  If any provision of this Plan or
any Award is or becomes or is deemed to be invalid, illegal or unenforceable in
any jurisdiction, or as to any Person or Award, or would disqualify the Plan or
any Award under any law deemed applicable by the Committee, such provision shall
be construed or deemed amended to conform to applicable laws, or if it cannot be
construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Award, it shall be stricken
and the remainder of the Plan and any such Award shall remain in full force and
effect.

 

18.3                           Successors.  All obligations of the Company under
the Plan with respect to Awards granted hereunder shall be binding on any
successor to the Company, whether the existence of such successor is the result
of a direct or indirect purchase, merger, consolidation, or otherwise of all or
substantially all of the business and/or assets of the Company.

 

18.4                           Requirements of Law.  The granting of Awards and
the delivery of Shares under the Plan shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required. Notwithstanding any provision
of the Plan or any Award, Grantees shall not be entitled to exercise, or receive
benefits under, any Award, and the Company (and any Affiliate or Joint Venture)
shall not be obligated to deliver any Shares or deliver benefits to a Grantee,
if such exercise or delivery would constitute a violation by the Grantee or the
Company, or an Affiliate or Joint Venture, of any applicable law or regulation.

 

18.5                           Securities Law Compliance.  If the Committee
deems it necessary to comply with any applicable securities law, or the
requirements of any stock exchange upon which Shares may be listed, the
Committee may impose any restriction on Awards or Shares acquired pursuant to
Awards under the Plan as it may deem advisable.  All evidence of Share ownership
delivered pursuant to any Award or the exercise thereof shall be subject to such
stop transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations and other

 

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requirements of the SEC, any stock exchange upon which Shares are then listed,
and any applicable securities law.  If so requested by the Company, the Grantee
shall make a written representation to the Company that he or she will not sell
or offer to sell any Shares unless a registration statement shall be in effect
with respect to such Shares under the Securities Act of 1933, as amended, and
any applicable state securities law, or unless he or she shall have furnished to
the Company, in form and substance satisfactory to the Company, that such
registration is not required.

 

If the Committee determines that the exercise or nonforfeitability of, or
delivery of benefits pursuant to, any Award would violate any applicable
provision of securities laws or the listing requirements of any national
securities exchange or national market system on which are listed any of the
Company’s equity securities, then the Committee may postpone any such exercise,
nonforfeitability or delivery, as applicable, but the Company shall use all
reasonable efforts to cause such exercise, nonforfeitability or delivery to
comply with all such provisions at the earliest practicable date.

 

18.6                           No Rights as a Stockholder.  No Grantee shall
have any rights as a stockholder of the Company with respect to the Shares
(except as provided in Section 9.6 with respect to Restricted Stock) which may
be deliverable upon exercise or payment of such Award until such Shares have
been delivered to him or her.

 

18.7                           Awards Not Taken into Account for Other
Benefits.  Awards shall be special incentive payments to the Grantee and shall
not be taken into account in computing the amount of salary or compensation of
the Grantee for purposes of determining any pension, retirement, death or other
benefit under (a) any pension, retirement, profit-sharing, bonus, insurance or
other employee benefit plan of an Employer, except as such plan shall otherwise
expressly provide, or (b) any agreement between an Employer and the Grantee,
except as such agreement shall otherwise expressly provide.

 

18.8                           Employment Agreement Supersedes Award Agreement. 
In the event a Grantee is a party to an employment agreement with the Company or
an Affiliate that provides for vesting, extended exercisability or
transferability of equity compensation awards on terms more favorable to the
Grantee than the Grantee’s Award Agreement, the employment agreement shall be
controlling; provided that (a) if the Grantee is a Section 16 Person, any terms
in the employment agreement requiring Board Compensation Committee, Board, or
stockholder approval in order for an exemption from Section 16(b) of the
Exchange Act to be available shall have been approved by the Board Compensation
Committee, Board or stockholders, as applicable, and (b) the employment
agreement shall not be controlling to the extent the Grantee and Grantee’s
Employer agree it shall not be controlling.

 

18.9                           Non-Exclusivity of Plan.  Neither the adoption of
the Plan by the Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board to adopt such other compensatory arrangements for employees as it may deem
desirable.

 

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18.10                     Unfunded Status of Awards; Creation of Trusts.  The
Plan is intended to constitute an “unfunded” plan for incentive and deferred
compensation.  With respect to any payments not yet made to a Grantee pursuant
to an Award, nothing contained in the Plan or any Award Agreement shall give any
such Grantee any rights that are greater than those of a general creditor of the
Company; provided, however, that the Committee may authorize the creation of
trusts or make other arrangements to meet the Company’s obligations under the
Plan to deliver cash, Shares or other property pursuant to any Award which
trusts or other arrangements shall be consistent with the “unfunded” status of
the Plan unless the Committee otherwise determines.

 

18.11                     No Right to Continued Employment or Awards.  No
employee shall have the right to be selected to receive an Award under this Plan
or, having been so selected, to be selected to receive a future Award.  Neither
receipt of an Award hereunder, nor eligibility for an Award shall interfere with
or limit in any way the right of the Company, an Affiliate or a Joint Venture to
terminate any individual’s employment or affiliation at any time, nor confer on
any Grantee the right to continue in the employ of, or as a consultant to, the
Company, any Affiliate or any Joint Venture.

 

18.12                     Military Service.  Awards shall be administered in
accordance with Section 414(u) of the Code and the Uniformed Services Employment
and Reemployment Rights Act of 1994.

 

18.13                     Construction.  The following rules of construction
will apply to the Plan: (a) the word “or” is disjunctive but not necessarily
exclusive, (b) words in the singular include the plural, words in the plural
include the singular, and words in the neuter gender include the masculine and
feminine genders and words in the masculine or feminine gender include the other
neuter genders, (c) the terms “hereof,” “herein,” and “herewith” and words of
similar import shall, unless otherwise stated, be construed to refer to this
Plan and not to any particular provision of this Plan, and references to
Sections are references to the Sections of this Plan unless otherwise specified;
(d) the word “including” and words of similar import when used in this Plan
shall mean “including, without limitation,” unless otherwise specified; and
(e) any reference to any U.S.  federal, state, or local statute or law shall be
deemed to also refer to all amendments or successor provisions thereto, as well
as all rules and regulations promulgated under such statute or law, unless the
context otherwise requires.  The headings of sections and subsections are
included solely for convenience of reference, and if there is any conflict
between such headings and the text of this Plan, the text shall control.

 

18.14                     Obligations.  Unless otherwise specified in the Award
Agreement, the obligation to deliver, pay or transfer any amount of money or
other property pursuant to Awards under this Plan shall be the sole obligation
of a Grantee’s employer; provided that the obligation to deliver or transfer any
Shares pursuant to Awards under this Plan shall be the sole obligation of the
Company.

 

18.15                     Stockholder Approval.  All Awards granted on or after
the Effective Date and prior to the date the Company’s stockholders approve the
amended and restated Plan are expressly conditioned upon and subject to approval
of the amended and restated Plan by the Company’s stockholders.

 

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