Exhibit 10.1
2006 PAYLESS SHOESOURCE, INC. STOCK INCENTIVE PLAN
Section 1: Purpose
The purpose of the 2006 Payless Shoesource, Inc. Stock Incentive Plan (the
“Plan”) is to promote the interests of Payless Shoesource, Inc. (the “Company”),
its Subsidiaries and stockholders by (i) attracting and retaining individuals
eligible to participate in the Plan; (ii) motivating such individuals by
providing incentive compensation; and (iii) aligning the interests of such
individuals with the interests of the Company’s stockholders.
Section 2: Definitions
The following terms, as used in the Plan, shall have the meanings specified
below. Other capitalized terms shall have the meanings specified in the Plan.

  a.   “Appreciation Value Award Vehicle” means an Award type structured to
correlate the realization of gains based on absolute Stock price appreciation.
May include but not be limited to Options, cash-settled stock appreciation
rights and stock-settled stock appreciation rights.     b.   “Award” means an
award granted pursuant to Section 4.     c.   “Award Agreement” means a document
described in Section 7 setting forth the terms and conditions applicable to the
Award granted to the Participant.     d.   “Board of Directors” means the Board
of Directors of the Company, as it may be comprised from time to time.     e.  
“Change of Control” means Change of Control as defined in Section 11.     f.  
“Code” means the Internal Revenue Code of 1986, and any successor statute, as it
or they may be amended from time to time.

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  g.   “Committee” means the Compensation, Nominating & Governance Committee of
the Board of Directors or such other committee as may be designated by the Board
of Directors from time to time. To the extent that compensation realized in
respect of Awards is intended to be “performance based” under Section 162(m) of
the Code and the Committee is not comprised solely of individuals who are
“outside directors” within the meaning of section 162(m) of the Code, or that
any member of one Committee is not a “non-employee director” within the meaning
of Rule 16b-3 under the Exchange Act, the Committee may from time to time
delegate some or all of its functions under the Plan to a committee or
subcommittee composed of members that meet the relevant requirements. The term
“Committee” includes only such committee or subcommittee, to the extent of the
Committee’s delegation.     h.   “Company” means Payless ShoeSource, Inc., a
Delaware corporation, and any successor thereto.     i.   “Covered Employee”
means a covered employee within the meaning of Code section 162(m)(3).     j.  
“Disability” means a permanent and total disability which enables the
Participant to be eligible for and receive a disability benefit under the
Federal Social Security Act.     k.   “Dividend Equivalent” means an amount
equal to the amount of cash dividends, if any, payable with respect to a share
of Stock after the date an Award is granted.     l.   “Employee” means any
person employed by Payless ShoeSource, Inc. or any of its Subsidiaries and
classified as a common law employee. Employee does not include independent
contractors or leased employees from third parties.     m.   “Exchange Act”
means the Securities Exchange Act of 1934, and any successor statute, as it may
be amended from time to time.     n.   “Fair Market Value” of a Stock, as later
defined, means the average of the high and low prices of the Stock on the New
York Stock Exchange Composite Transaction Tape on the date in question, (or if
the Stock is not then so traded, the average of the highest and lowest sale
prices of the Stock on the stock exchange or over-the-counter market on which
the Stock is principally trading on such date) or, if no sale or sales of the
Stock occurred on such exchange on that day, the average of the high and low

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      prices of the Stock on the last preceding day when the Stock was sold on
the exchange. In the event that no sale of the Stock occurred on such exchange
or the over the counter market on that day because the exchange was closed, then
Fair Market Value shall be the average of the high and low prices of the Stock
on the next day the exchange is open for trading. If Stock is no longer traded
on the New York Stock Exchange and if there is no public market for the Stock,
“Fair Market Value” shall be determined in good faith by the Committee using
other reasonable means.

  o.   “Full Value Award Vehicle” means an Award type structured to provide
equivalent value of a share of Stock based on a ratio of 1:1. Full Value Award
Vehicles may include but not be limited to restricted Stock, Stock Equivalent
Units and other Stock Awards such as unrestricted Stock, restricted Stock unit
grants and performance based shares.     p.   “Incentive Stock Option” means an
Option that is intended to qualify as an “incentive stock option” under
Section 422 of the Code and which is so designated in the applicable Award
Agreement. Under no circumstances shall an Option that is not specifically
designated as an Incentive Stock Option be considered an Incentive Stock Option.
    q.   “Insider” means any person who is subject to Section 16 of the Exchange
Act, and any successor statutory provision, as it may be amended from time to
time.     r.   “Non-Qualified Stock Option” means an Option that is not intended
to qualify as an “incentive stock option” under Section 422 of the Code.     s.
  “Option” means an option granted pursuant to Section 4(a).     t.  
“Participant” means any Employee who has been granted an Award.     u.  
“Performance Goal” means with respect to the Performance Measure(s) selected by
the Committee, the goal or goals established by the Committee, for an Award, for
a Performance Period. Performance Goals may vary from Performance Period to
Performance Period and from Participant to Participant and may be established on
a stand-alone basis, in tandem or in the alternative.

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  v.   “Performance Measure” means one or more of the following, either alone or
in combination, selected by the Committee to measure individual Participant,
Company or one or more operating units, groups or any Subsidiary performance for
a Performance Period, whether in absolute or relative terms: cash flow; cash
flow from operations; total earnings; earnings per share, diluted or basic;
earnings per share from continuing operations, diluted or basic; earnings before
interest and taxes; earnings before interest, taxes, depreciation, and
amortization; earnings from continuing operations; net asset turnover; inventory
turnover; net earnings; operating earnings; operating margin; return on equity;
return on assets or net assets; return on total assets; return on capital;
return on investment; return on investment capital; return on sales; revenues;
sales; store for store sales; net or gross sales; income or net income;
operating income or net operating income; operating profit or net operating
profit; gross margin; operating margin or profit margin; market share; economic
value added; expense reduction levels; cost of capital; change in assets; stock
price; total shareholder return; capital expenditures; debt; debt reduction;
working capital, completion of acquisitions; business expansion; product
diversification; productivity; new or expanded market penetration and other
financial and non-financial operating and management performance objectives. For
any Performance Period, Performance Measures may be determined on an absolute
basis or relative to internal goals or relative to levels attained in a year or
years prior to such Performance Period or relative to other companies or indices
or as ratios expressing relationships between two or more Performance Measures.
For any Performance Period, the Committee shall provide how any Performance
Measure shall be adjusted to the extent necessary to prevent dilution or
enlargement of any Award as a result of extraordinary events or circumstances,
as determined by the Committee, or to exclude the effects of extraordinary,
unusual, or non-recurring items; changes in applicable laws, regulations, or
accounting principles; currency fluctuations; discontinued operations; non-cash
items, such as amortization, depreciation, or reserves; or any recapitalization,
restructuring, reorganization, merger, acquisition, divestiture, consolidation,
spin-off, split-up, combination, liquidation, dissolution, sale of assets, or
other similar corporate transaction, or stock dividends, or stock splits or
combinations. Unless otherwise specified by the Committee, each such measure
shall be determined in accordance with generally accepted accounting principles
as consistently applied by the Company. Performance Measures may vary from

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      Performance Period to Performance Period and from Participant to
Participant and may be established on a stand-alone basis, in tandem or in the
alternative. Other Performance Measures may be used by the Committee in its sole
discretion, except that the Performance Measures set forth above in this
paragraph v shall be used if the compensation under the Award (other than an
Option) is intended to qualify as performance based under Section 162(m) of the
Code.

  w.   “Performance Period” means one or more periods of time (of not less than
364 calendar days), as the Committee may designate, over which the attainment of
one or more Performance Goals will be measured for the purpose of determining a
Participant’s rights in respect of an Award.     x.   “Plan” means the 2006
Payless ShoeSource, Inc. Stock Incentive Plan, as amended from time to time.    
y.   “Retirement” means a Participant’s termination of employment on or after
age 55 and after completing at least five (5) years of service with the Company
or a Subsidiary of the Company.     z.   “Stock” means common stock of the
Company, $ .01 par value, or any other equity securities of the Company
designated by the Committee, including any attached rights.     aa.   “Stock
Award” means a grant of Stock or the right to receive Stock or its cash
equivalent (or both).     bb.   “Subsidiary” means (i) any corporation or other
entity in which the Company, directly or indirectly, controls fifty percent
(50%) or more of the total combined voting power of such corporation or other
entity or (ii) any other corporation or other entity in which the Company has a
significant equity interest, in either case as determined by the Committee.    
cc.   “Ten-percent Stockholder” means any person who owns, directly or
indirectly, on the relevant date, securities having ten percent (10%) or more of
the combined voting power of all classes of the Company’s securities or of its
parent or subsidiaries. For purposes of applying the foregoing ten percent (10%)
limitation, the rules of Code section 424(d) shall apply.

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Section 3: Eligibility
The Committee may grant one or more Awards to any Employee designated by it to
receive an Award as the Committee shall select in its sole discretion.
Section 4: Awards
The Committee may grant any one or more of the following types of Awards, either
singly, in tandem or in combination with other types of Awards:
Appreciation Value Award Vehicles

  a.   Options. An Option is a right or rights (either an Incentive Stock Option
or a Non-Qualified Stock Option) to purchase a specific number of shares of
Stock exercisable at such time or times and subject to such terms and conditions
as the Committee may determine in its sole discretion subject to the Plan,
including but not limited to the achievement of specific Performance Goals.
Options may be settled in cash or stock.

  (1)   Incentive Stock Options shall be subject to the following provisions:

  A.   The aggregate Fair Market Value (determined on the date that such Option
is granted) of the shares of Stock subject to Incentive Stock Options which are
exercisable by one person for the first time during a particular calendar year
shall not exceed $100,000. To the extent that the aggregate Fair Market Value
(determined at the time of grant) of Stock with respect to which Incentive Stock
Options are exercisable for the first time by any Option holder during any
calendar year (under all plans of the Company and its Subsidiaries) exceeds
$100,000, or such other limit as may be set by applicable law, the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Non-Qualified Stock Options.     B.   Each
Award Agreement with respect to an Incentive Stock Option shall set forth the
periods during which the Option shall be exercisable, whether in whole or in
part. Such periods shall be

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      determined by the Committee in its discretion. No Incentive Stock Option
may be exercisable more than:

  (i)   in the case of an Employee who is not a Ten-Percent Stockholder on the
date that such Option is granted, seven (7) years from the date the Option is
granted or such earlier period as otherwise specified in the Plan or an Award
Agreement, and     (ii)   in the case of an Employee who is a Ten-Percent
Stockholder on the date such Option is granted, five (5) years from the date the
Option is granted.

  C.   Each Award Agreement with respect to an Incentive Stock Option shall set
forth the price at which a share of Stock may be acquired under the Option (the
“Exercise Price”), which shall be at least 100% of the Fair Market Value of a
share of Stock on the date the option is granted (except as permitted under
Section 424(a) of the Code with respect to Acquisition Awards (as defined in
Section 4(i)). In the case of an Employee who is a Ten-Percent Stockholder on
the date that such Option is granted, the Exercise Price of any Incentive Stock
Option shall not be less than 110% of the Fair Market Value of the Stock subject
to such Option on such date.     D.   No Incentive Stock Option may be granted
to an Employee who is not a Employee of the Company or a Subsidiary (as defined
in Section 2(bb) on the date that such Option is granted.     E.  
Notwithstanding any other provision of the Plan to the contrary, the maximum
aggregate number of shares of Stock that may be issued under the Plan pursuant
to Incentive Stock Options is 2 million shares of Stock (the “ISO Limit”),
subject to adjustments provided for in Section 10 of the Plan.

  b.   Appreciation Rights. An Appreciation Right is a right to receive an
amount payable entirely in cash, entirely in Stock or partly in cash and partly
in Stock and exercisable at such time or times and subject to such conditions as
the Committee

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      may determine in its sole discretion subject to the Plan, including but
not limited to the achievement of specific Performance Goals.

  c.   Other Awards. Subject to limitations under applicable law, the Committee
may from time to time grant other Awards under this Plan, using Appreciation
Value Award Vehicles, that provide the Participant with Stock or the right to
purchase Stock, or provide other incentive Awards that have a value derived from
the value of Stock, or an exercise or conversion privilege at a price related to
Stock, or that are otherwise payable in or convertible into shares of Stock.
These Awards shall be in a form and based upon the terms and conditions
determined by the Committee (including but not limited to the achievement of
specific Performance Goals if determined by the Committee), provided that the
Award shall not be inconsistent with the other terms of this Plan.

Full Value Award Vehicles

  d.   Stock Award. Stock Awards may include shares with or without
restrictions. Restricted Stock is Stock that is issued to a Participant subject
to restrictions on transfer and such other restrictions on incidents of
ownership, and/or other terms and conditions as the Committee may determine,
including but not limited to the achievement of specific Performance Goals. A
certificate for the shares of Restricted Stock, which certificate shall be
registered in the name of the Participant, shall bear an appropriate restrictive
legend and shall be subject to appropriate stop-transfer orders; provided,
however, that the certificates representing shares of Restricted Stock shall be
held in custody by the Company until the restrictions relating thereto otherwise
lapse, and the Participant shall deliver to the Company a stock power endorsed
in blank relating to the Restricted Stock or other form as appropriate.     e.  
Stock Equivalent Units. A Stock Equivalent Unit is an Award based on the Fair
Market Value of one share of Stock. All or part of any Stock Equivalent Units
Award may be subject to conditions and restrictions established by the
Committee, including but not limited to the achievement of specific Performance
Goals. Stock Equivalent Units may be settled in Stock or cash or both as
determined by the Committee.

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  f.   Other Awards. Subject to limitations under applicable law, the Committee
may from time to time grant other Full Value Awards under this Plan that provide
the Participants with Stock or the right to purchase Stock, or provide other
incentive Awards that have a value derived from the value of Stock, or an
exercise or conversion privilege at a price related to Stock, or that are
otherwise payable in or convertible into shares of Stock. These Awards shall be
in a form and based upon the terms and conditions determined by the Committee
(including but not limited to the achievement of specific Performance Goals if
determined by the Committee), provided that the Award shall not be inconsistent
with the other terms of this Plan.

Other Award Vehicles

  g.   Performance Units. A Performance Unit is an Award denominated in cash or
shares of Stock, the amount of which may be based on the achievement of specific
Performance Goals subject to terms and conditions established by the Committee.
The maximum amount of such compensation that may be paid to any one Participant
with respect to any one Performance Period shall be 100,000 shares of Stock or
the equivalent Fair Market Value thereof. Performance Units may be settled in
Stock or cash or both.     h.   Performance Compensation Awards.         (1) The
Committee may, at the time of grant of an Award (other than an Option),
designate such Award as a Performance Compensation Award in order that such
Award constitute qualified performance-based compensation under Code section
162(m). With respect to each such Performance Compensation Award, the Committee
shall (on or before the ninetieth (90th) day of the applicable Performance
Period), establish, in writing, the Performance Goal or Goals.         (2) A
Participant shall be eligible to receive payment in respect of a Performance
Compensation Award only to the extent that the Performance Goal(s) for such
Award are achieved as certified by the Committee.     i.   Acquisition Awards.
An Acquisition Award is an Award granted under this Plan in substitution for
options, rights, and such other awards with respect to the

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      capital stock of another corporation which is merged into, consolidated
with, or all or a substantial portion of the property or stock of which is
acquired by, the Company or one of its Subsidiaries.

  j.   Other Awards. Subject to limitations under applicable law and the Plan,
the Committee may from time to time grant other Awards under this Plan that
provide the Participants with Stock or the right to purchase Stock, or provide
other incentive Awards that have a value derived from the value of Stock, or an
exercise or conversion privilege at a price related to Stock, or that are
otherwise payable in or convertible into shares of Stock. The Awards shall be in
a form and based upon the terms and conditions determined by the Committee
(including but not limited to the achievement of specific Performance Goals),
provided that the Awards shall not be inconsistent with the other terms of this
Plan.

Section 5: Other General Terms and Conditions for Awards

  (a)   The term of an Award shall not exceed seven (7) years.     (b)   Unless
otherwise provided under the Plan or by the Committee, no Award (or any rights
or obligations thereunder) may be sold, exchanged, transferred, assigned,
pledged, hypothecated hedged, or otherwise disposed of (other than upon the
death of the Participant, by beneficiary designation, by last will and testament
or by the laws of descent and distribution) and shall be exercisable and subject
to receipt during the Participant’s lifetime only by the Participant.     (c)  
The Award price for each Award that allows for the purchase of a share of Stock
under an Award shall be specified in an Award Agreement containing the terms and
conditions as determined by the Committee and subject to the provisions of
Section 10, shall not be less than Fair Market Value on the date the Award is
granted; provided, however, that in no event shall the Award price per share be
less than the par value thereof. The Exercise Price, as applicable, of an Award
shall not be less than 100% of the Fair Market Value of the Stock on the date
such Award is granted and the exercise opportunity may be capped if the
Committee determines appropriate and so specifies in the Award Agreement
pertaining thereto.

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  (d)   There shall be no grant of an Appreciation Value Award to a Participant
in exchange for a Participant’s agreement to the cancellation of a higher-priced
Appreciation Value Award that was previously granted to such Participant.
Re-pricing of Appreciation Value Awards is prohibited.     (e)   The Exercise
Price, as applicable, of an Award may be paid in cash, personal check (subject
to collection), bank draft or such other method as the Committee may determine
from time to time. The Exercise Price may also be paid by the tender, by either
actual delivery or attestation, of Stock acceptable to the Committee and valued
at its Fair Market Value on the date of exercise; through a combination of Stock
and cash. Without limiting the foregoing, to the extent permitted by applicable
law: the Committee may, on such terms and conditions as it may determine, permit
a Participant to elect to pay the Exercise Price by authorizing a third party,
pursuant to a brokerage or similar arrangement approved in advance by the
Committee, to simultaneously sell all (or a sufficient portion) of the Stock
acquired upon exercise of such Award and to remit to the Company a sufficient
portion of the proceeds from such sale to pay the entire Exercise Price of such
Award and any required tax withholding resulting therefrom.     (f)   No Award
may be granted under this Plan on or after the tenth anniversary of the date
this Plan is approved by stockholders.     (g)   The exercise or delivery of
Stock or payment of cash pursuant to an Award shall be subject to the condition
that if at any time the Company shall determine in its discretion that the
satisfaction of withholding tax or other withholding liabilities under any state
or Federal law, or that the listing, registration or qualification of any shares
of Stock otherwise deliverable upon any securities exchange or under any state
or Federal Law, or that the consent or approval of any regulatory body, is
necessary or desirable as a condition of, or in connection with, such exercise
or the delivery or purchase of shares thereunder, then in any such event such
exercise or delivery shall not be effective unless such withholding, listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.

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  (h)   Each Participant shall agree that, subject to the provisions of Section
5(i) below,

  (i)   no later than the date as of which the restrictions mentioned in the
instrument evidencing the Award shall lapse, such Participant will pay to the
Company in cash, or, if the Committee approves, in Stock or make other
arrangements satisfactory to the Committee regarding payment of, any Federal,
state or local taxes of any kind required by law to be withheld with respect to
such Award, and     (ii)   the Company and its Subsidiaries shall, to the extent
permitted by law, have the right to deduct from any payment of any kind
otherwise due to the Participant any Federal, state or local taxes of any kind
required by law to be withheld with respect to the Award.

  (i)   If any Participant properly elects, as permitted by Code Section 83b (or
any successor Code provisions) within thirty (30) days of the date of the grant,
to include in gross income for Federal income tax purposes, an amount equal to
the Fair Market Value of the shares of Stock granted pursuant to an Award, such
Participant shall pay to the Company, or make arrangements satisfactory to the
Committee to pay to the Company, any Federal, state or local taxes required to
be withheld with respect to such shares. If such Participant shall fail to make
such payments, the Company and its Subsidiaries shall, to the extent permitted
by law, have the right to deduct from any payment of any kind otherwise due to
the employee any Federal, state or local taxes of any kind required by law to be
withheld with respect to such shares.

  (j)   Dividends or Dividend Equivalents may be granted with respect to all or
part of an Award. If dividends are granted they may be paid, as determined by
the Committee (i) in cash, (ii) in Dividend Equivalents or (iii) accumulated or
reinvested in Stock and held subject to the same restrictions as the Stock under
the Award.     (k)   Unless expressly provided otherwise in the Award Agreement
(and as provided in Section 4d) no Participant shall have any rights as a

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      stockholder with respect to any Stock covered by an Award until the date
the Participant becomes the holder of record thereof.

  (l)   With respect to each type of Award, the Committee may establish such
Performance Goals it deems appropriate, in its sole discretion. For each Award
established with Performance Goals, as soon as practicable after the close of
each Performance Period, the Committee shall review and certify in writing
whether, and to what extent, the Performance Goals(s) for the Performance Period
have been achieved and, if so, determine and certify in writing the amount of
the Performance Compensation Award earned by the Participant for such
Performance Period based upon such Participant’s achievement of the Performance
Goals. The Committee shall then determine the actual amount of the Performance
Compensation Award to be paid to the Participant. In so doing, the Committee may
use negative discretion to decrease any Participant Award based upon such
performance, but may not increase, the amount of the Award otherwise payable to
a Covered Employee based upon such performance. The maximum Performance
Compensation Award for any one Participant for any one Performance Period shall
be determined in accordance with Sections 4 and 6. If Performance Goals are
established for an Award to a Covered Employee, once established for a
Performance Period, such Performance Goals shall not be amended or otherwise
modified to the extent such amendment or modification would cause the
compensation payable pursuant to the Award to fail to constitute qualified
performance-based compensation under Code section 162(m).     (m)   Unless an
Award Agreement specifies otherwise, the Committee may cancel at any time any
Award or rescind any prior delivery of shares or value of shares, cash or
property, if the Participant is not in compliance with all other applicable
provisions of the Award Agreement or the Plan or if, within sixth months or such
longer period as specified with respect to the Participant, in any noncompete
entered into between the Participant and the Company, after exercise, as
applicable, the Participant:

  (i)   engages in a Competing Business, as such term is defined in the Award
Agreement; or

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  (ii)   solicits for employment, hires or offers employment to, or discloses
information to or otherwise aids or assists any other person or entity other
than the Company in soliciting for employment, hiring or offering employment to,
any employee of the Company; or     (iii)   takes any action which is intended
to harm the Company or its reputation, which the Company reasonably concludes
could harm the Company or its reputation or which the Company reasonably
concludes could lead to unwanted or unfavorable publicity to the Company; or    
(iv)   discloses to anyone outside of the Company, or uses in other than the
Company’s business, any “confidential information”, as such term is defined in
the Agreement.         The Company shall immediately notify the Participant in
writing of any cancellation of any unexercised or unvested Award. Following such
notice, the Participant shall have no further rights with respect to such Award.
In the event of the rescission of the exercise of an Award within six months (or
such longer period specified in any agreement between Participant and Company)
after the activity referred to above in this Section 5(m), the Company shall
notify the Participant in writing. Within ten (10) days after receiving such
notice from the Company, the Participant shall either (i) pay to the Company the
excess of the Fair Market Value of the Stock on the date of exercise of an Award
over the exercise price for the Award or the Fair Market Value of the Stock
and/or cash distributed to the Participant as a result of the exercise of an
Award or (ii) return the Stock received upon the exercise of an Award (in which
case the Company will return the exercise price to the Participant) or return
the Stock and/or cash delivered upon the exercise of this Award.

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  (n)   The Participant shall agree and consent to a deduction from any amounts
the Company owes to the Participant from time to time (including amounts owed as
wages or other compensation, fringe benefits, or vacation pay, as well as any
other amounts owed to the Participant by the Company), to the extent of the
amounts the Participant owes the Company under Section 5(m) above. Whether or
not the Company elects to make any set-off in whole or in part, if the Company
does not recover by means of set-off the full amount owed by the Participant,
calculated as set forth in Section 5(m) above, then the Participant agrees to
pay immediately the unpaid balance to the Company.     (o)   The Committee may
establish such other terms and conditions for an Award as it deems appropriate.
    (p)   The Committee may, at any time and in its sole discretion, determine
that any outstanding Awards granted under the Plan will be canceled and
terminated and that in connection with such cancellation and termination the
holder of such Awards may receive for each share of Stock subject to such Award
a cash payment (or the delivery of shares of stock, other securities or a
combination of cash, stock and securities equivalent to such cash payment) as
follows:

  1.   Appreciation Value Award Vehicles-whether or not exercisable, a cash
payment (or the delivery of shares of stock, other securities or a combination
of cash, stock, and securities equivalent to such cash payment) equal to the
difference, if any, between the amount determined by the Committee to be the
Fair Market Value of the Stock and the exercise price per share multiplied by
the number of shares of Stock subject to such Award; provided that if such
product is zero or less or to the extent that the Award is not then exercisable,
the Awards will be canceled and terminated without payment therefore.     2.  
Full Value Award Vehicles-a cash payment equal to the Fair Market Value of the
shares of Stock under the Award, as designated by the Committee.     3.   Other
Awards-a payment amount as determined in the sole discretion of the Committee.

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Section 6: Stock Available under Plan

  a.   Subject to the adjustment provisions of Section 10, the number of shares
of Stock with respect to which Awards may be granted (or, in the cases of Awards
that may be settled in cash or Stock) under the Plan shall not exceed
[2.25 million] shares of Stock (the “Maximum Limit). The following amounts shall
be reserved against the Maximum Limit for each type of Award:         RESERVES  
      Full Value Award Vehicles         the greater of (i) one share of Stock
for each Full Value Award or (ii) the maximum potential issuable pursuant to
each Award.         Appreciation Value Award Vehicle (other than Stock Settled
Stock Appreciation Rights)         The amount calculated based on the ratio set
forth in the below Exchange Ratio table.         Stock Settled Stock
Appreciation Rights (“SSSAR”)         The lesser of (i) 1 share of Stock for
each SSSAR granted under an Award or the maximum potential of shares issuable
upon exercise of a SSSAR.         Other Awards         The maximum number of
shares of Stock authorized to be issued pursuant to such Other Award Vehicle.  
      No single Participant shall receive, in any one calendar year, Awards in
the form of (i) Appreciation Value Award Vehicles with respect to more than
250,000 shares of Stock and/or (ii) Full Value Award Vehicles for more than
100,000 shares of Stock.

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                          EXCHANGE RATIO TABLE   Term of Grant   5 year   6 year
  7 year
Appreciation Value Vehicle Awards (other than SSSAR)
    .549       .598       .641  

       ACTUALS

      Upon exercise of each Award, all shares of Stock reserved for such Award
shall be released and the Maximum Limit shall be reduced by the number
following:         Full Value Awards & Other Awards- by the shares of Stock
actually issued pursuant to such Award.         Appreciation Value Awards (other
than a SSSAR)- by the number set forth in the Exchange Ratio table above.      
  SSSAR- by the amount of shares actually issued under the Award.     b.  
Awards payable entirely in cash shall not be counted against the Maximum Limit.
    c.   If at the time of payment of dividends or Dividend Equivalents there
are shares of Stock available that have not been previously reserved, then upon
payment they will be deducted from the Plan Maximum Limit. If such shares to pay
dividends are not available because all shares of Stock are currently reserved
under the Plan Maximum Limit, then such dividends will be paid in cash.     d.  
Shares of Stock covered by the unexercised or terminated or forfeited portion of
any Award that did not result in the delivery of Stock shall be available for
further Awards. Subject to Section 10, additional rules for determining the
number of shares of Stock granted under an Award type under the Plan may be
adopted by the Committee, as it deems necessary and appropriate and consistent
with the overall limits set forth in the Plan.     e.   The Stock that may be
issued pursuant to an Award under the Plan may be authorized and issued Stock
held in the Company’s treasury or authorized but

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      unissued Stock, or Stock may be acquired, subsequently or in anticipation
of the transaction, in the open market to satisfy the requirements of the Plan.

  f.   If any stock based award granted under the Company’s 1996 Stock Incentive
Plan shall for any reason subsequent to April 30, 2006 (i) expire, be cancelled
or otherwise terminate, in whole or in part, without having been exercised or
redeemed in full, or (ii) be reacquired by the Company prior to issuance without
restriction to the holder of such Award will be added to the Maximum Limit and
will become available for issuance under this Plan based on the following
formula: Full Value Award Vehicles made available under this provision shall
increase the Maximum Limit on a ratio of 1:1. Appreciation Value Vehicle Awards,
including SSSARs under this provision shall increase the Maximum Limit by 1/3
for each share of Stock covered by an Appreciation Value Vehicle Award.     g.  
Any shares of Stock delivered by the Company, any shares of Stock with respect
to which Awards are made by the Company and any shares of Stock with respect to
which the Company becomes obligated to make Awards, through the assumption of,
or in substitution for, outstanding awards previously granted by an acquired
entity, shall not be counted against the shares of Stock available for Awards
under this Plan.     h.   The Committee may direct that any stock certificate
evidencing shares issued pursuant to the Plan shall bear a legend setting forth
such restrictions on transferability as may apply to such shares pursuant to the
Plan.

Section 7: Award Agreements
Each Award granted under the Plan shall be evidenced by an Award Agreement. Each
Award Agreement shall set forth the terms and conditions applicable to the
Award, as determined by the Committee in its discretion and subject to the Plan,
including but not limited to provisions describing the treatment of an Award in
the event of the termination of a Participant’s status as an Employee for
reasons of Retirement, death or otherwise, or in the event of Participant’s
Disability or in the event the Participant engages in a “competing business” as
such term shall be defined in the Award Agreement. The Committee may deliver the
Award Agreement by

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interoffice mail, U.S. mail, email or other electronic means (including posting
on a web site maintained by the Company or by a third party under contract with
the Company) all documents relating to the Plan or any Award thereunder and
other documents that the Company is required to deliver to its security holders
unless otherwise prohibited by law. A Participant shall have no rights with
respect to an Award unless such Participant accepts the Award within such period
as the Committee shall specify by executing an Award Agreement in such form as
the Committee shall determine and, if the Committee shall so require, makes
payment to the Company in such amount as the Committee may determine.
Section 8: Amendment and Termination
The Board of Directors may at any time amend, suspend or terminate the Plan, in
whole or in part, and the Committee may, subject to the Plan, at any time alter
or amend any or all Award Agreements to the extent permitted by applicable law
and the Plan; provided that no such action shall impair the rights of any holder
of an Award without the holder’s consent. For purposes of the Plan, any action
of the Board of Directors or the Committee that alters or affects the tax
treatment of any Award shall not be considered to materially impair any rights
of any holder. Notwithstanding the foregoing, neither the Board of Directors nor
the Committee shall (except pursuant to Section 10) amend the Plan or any Award
Agreement, without the approval of the stockholders of the Company to
(i) increase the number of shares of Stock available for Awards as set forth in
Section 6 or (ii) decrease the Exercise Price of any Award or (iii) make any
other amendments to the Plan or Award Agreement which would require stockholder
approval under the General Corporation Law of the State of Delaware, New York
Stock Exchange Rules or such other rules as may govern the trading or quotation
of the Company’s Stock, Rule 16b-3 of the Securities Exchange Act of 1934, as
amended, or Section 162(m) of the Code.
Notwithstanding the above, the Board may, by resolution, amend the Plan in any
way that it deems necessary or appropriate in order to make income with respect
to the Plan deductible for Federal income tax purposes under Section 162(m) of
the Code and any such amendment shall be effective as of such date as is
necessary to make such income under the Plan so deductible.
Notwithstanding anything to the contrary in this Section, the Board of Directors
or the Committee shall have full discretion to amend the Plan to the extent
necessary to preserve fixed accounting treatment with respect to any Award and
any outstanding Award Agreement shall be deemed to be so amended to the same
extent, without obtaining the consent of any holder,

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without regard to whether such amendment adversely affects a holder’s rights
under the Plan or such Award Agreement.
Section 9: Administration

  a.   The Plan and all Awards shall be administered by the Committee, provided
that, in the absence of the Committee or to the extent determined by the Board
of Directors, any action that could be taken by the Committee may be taken by
the non-employee members of the Board of Directors. A majority of the members of
the Committee shall constitute a quorum. The majority of non-employee Board of
Director members shall constitute a quorum of the Board. The vote of a majority
of a quorum shall constitute action by the Committee and/or the Board.     b.  
The Committee shall have full and complete authority, in its sole and absolute
discretion, (i) to exercise all of the powers granted to it under the Plan,
(ii) to construe, interpret and implement the Plan, any Award Agreement and any
related document, (iii) to prescribe, amend and rescind rules relating to the
Plan including rules governing its own operation, (iv) to make all
determinations necessary or advisable in administering the Plan, (v) to correct
any defect, supply any omission and reconcile any inconsistency in the Plan,
(vi) to authorize any person to execute on behalf of the Company any instrument
required to effect the grant of an Award previously granted by the Committee,
(vii) to impose such restrictions, conditions or limitations as it determines
appropriate as to the timing and manner of any resales by a Participant or other
subsequent transfers by the Participant of any shares of Stock issued as a
result of or under an Award, including without limitation, restrictions under
the Company’s Trading in Securities Policy as may be amended from time to time,
(viii) to amend the Plan to reflect changes in applicable law, and (ix) to
determine whether, to what extent and under what circumstances Awards may be
settled or exercised in cash, shares of Stock, other securities, other Awards or
other property, or canceled, forfeited or suspended and the method or methods by
which Awards may be settled, canceled, forfeited or suspended. The actions and
determinations of the Committee on all matters relating to the Plan and any
Awards will be final and conclusive. The Committee’s determinations under the
Plan need not be uniform and may be made by it selectively among Employees and
Participants who receive, or who are

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      eligible to receive, Awards under the Plan, whether or not such persons
are similarly situated.

  c.   The Committee and others to whom the Committee has allocated or delegated
authority or duties shall keep a record of all their proceedings and actions and
shall maintain all such books of account, records and other data as shall be
necessary for the proper administration of the Plan.     d.   The Committee may
appoint such accountants, counsel, and other experts as it deems necessary or
desirable in connection with the administration of the Plan.     e.   The
Company shall pay all reasonable expenses of administering the Plan, including,
but not limited to, the payment of professional fees.     f.   It is the intent
of the Company that this Plan and Awards hereunder satisfy, and be interpreted
in a manner that satisfy, (i) in the case of Participants who are or may be
Insiders, the applicable requirements of Rule 16b-3 of the Exchange Act, so that
such persons will be entitled to the benefits of Rule 16b-3, or other exemptive
rules under Section 16, and will not be subjected to avoidable liability
thereunder and (ii) in the case of Performance Compensation Awards, the
applicable requirements of Code section 162(m). If any provision of this Plan or
of any Award Agreement would otherwise frustrate or conflict with the intent
expressed in this Section 9(f), that provision to the extent possible shall be
interpreted and deemed amended so as to avoid such conflict. To the extent of
any remaining irreconcilable conflict with such intent, such provision shall be
deemed void as applicable to Insiders and/or Covered Employees, as applicable.  
  g.   Except to the extent prohibited by applicable law or otherwise, the
Committee may from time to time allocate to one or more of its members and
delegate to one or more Employees all or any portion of its authority and
duties, provided that the Committee may not allocate or delegate any
discretionary authority with respect to substantive decisions or functions
regarding the Plan or Awards to the extent inconsistent with the intent
expressed in Section 9(f).     h.   No member of the Board of Directors or the
Committee or any employee of the Company or any of its subsidiaries or
affiliates (each such person a “Covered Person”) shall have any liability to any
person (including, without limitation, any

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      Participant) for any action taken or omitted to be taken or any
determination made in good faith with respect to the Plan or any Award. Each
Covered Person shall be indemnified and held harmless by the Company against and
from any loss, cost, liability or expense (including attorneys’ fees) that may
be imposed upon or incurred by such Covered Person in connection with or
resulting from any action, suit or proceeding to which such Covered Person may
be a party or in which such Covered Person may be involved by reason of any
action taken or omitted to be taken under the Plan and against and from any and
all amounts paid by such Covered Person, with the Company’s approval, in
settlement thereof, or paid by such Covered Person in satisfaction of any
judgment in any such action, suit or proceeding against such Covered Person,
provided that the Company shall have the right, at its own expense, to assume
and defend any such action, suit or proceeding and, once the Company gives
notice of its intent to assume the defense, the Company shall have sole control
over such defense with counsel of the Company’s choice. The foregoing right of
indemnification shall not be available to a Covered Person to the extent that a
court of competent jurisdiction in a final judgment or other final adjudication,
in either case, not subject to further appeal, determines that the acts or
omissions of such Covered Person giving rise to the indemnification claim
resulted from such Covered Person’s bad faith, fraud or willful criminal act or
omission. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which Covered Persons may be entitled under
the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any other power that the Company may have to indemnify such
persons or hold them harmless.

Section 10: Adjustment Provisions

  a.   In the event of any change in the outstanding shares of Stock by reason
of a stock dividend greater than 5% of the Stock price, stock split or reverse
stock split, recapitalization, merger or consolidation (whether or not the
Company is a surviving Company), reorganization, combination, exchange or
reclassification of shares, spin-off or other similar corporate changes or an
extraordinary dividend payable in cash or property, (i) the number of shares of
Stock (or other securities) then remaining subject to this Plan, including those
that are then covered by

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    outstanding Awards, and the maximum number of shares of Stock that may be
issued, or with respect to which Awards may be granted, to any single
Participant or in the aggregate pursuant to this Plan, (ii) the price or
exercise price for each share or right then covered by an outstanding Award and
(iii) the terms and conditions of each other outstanding Award may be
proportionally adjusted as the Committee deems equitable in its absolute
discretion to prevent dilution or enlargement of the rights of a Participant.
Any adjustment made by the Committee under this Section shall be final, binding
and conclusive on all persons.

  b.   The existence of the Plan and the Awards granted hereunder shall not
affect or restrict in any way the right or power of the Board of Directors or
the shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other capital structure of its business, any
merger or consolidation of the Company, any issue of bonds, debentures,
preferred or prior preference stock ahead of or affecting the Stock or the
rights thereof, the dissolution or liquidation of the Company or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding.     c.   No fractional shares of Stock will be issued or
accepted. Any fractional shares will be paid in the equivalent amount of cash.
The Committee may impose such other conditions, restrictions and contingencies
with respect to shares of Stock delivered pursuant to the exercise of an Award
as it deems desirable.

Section 11: Change of Control

  a.   In the event of a Change of Control, in addition to any action required
or authorized by the terms of an Award Agreement, the Committee may, in its sole
discretion, take any of the following actions as a result, or in anticipation,
of any such event to assure fair and equitable treatment of Participants:

  (i)   accelerate time periods for purposes of vesting in, or realizing gain
from, any outstanding Award made pursuant to this Plan and/or extend the time
during which an Award may be exercised following a Participant’s termination of
employment;

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  (ii)   offer to purchase any outstanding Award made pursuant to this Plan from
the holder for its equivalent cash value, as determined by the Committee, as of
the date of the Change of Control; or     (iii)   make adjustments or
modifications to outstanding Awards as the Committee deems appropriate to
maintain and protect the rights and interests of Participants following such
Change of Control.

  b.   “Change of Control” means:

  (i)   Any individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act (a “Person”) acquires beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (A) the then-outstanding shares of common stock of the Company
(the “Outstanding Company Common Stock”) or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the “Outstanding Company Voting Securities”);
provided, however, that, for purposes of this Section 11, none of the following
shall constitute a Change of Control: (a) any acquisition directly from the
Company of 30% or less of Outstanding Company Common Stock or Outstanding
Company Voting Securities provided that at least a majority of the members of
the Board of Directors of the Company following such acquisition were members of
the incumbent Board at the time of the Board’s approval of such acquisition,
(b) any acquisition by the Company, (c) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any affiliated
company, or (d) any acquisition by the Company which by reducing the number of
shares of Outstanding Company Common Stock or Outstanding Company Voting
Securities, increases the proportionate number of shares of Outstanding Company
Common Stock or Outstanding Company Voting Securities beneficially owned by any
Person to 20% or more of the Outstanding Company Common Stock or Outstanding
Company Voting Securities; provided, however, that, if such Person shall
thereafter become the beneficial owner of any additional shares of Outstanding
Company Common Stock or Outstanding Company Voting Securities and beneficially
owns 20% or

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      more of either the Outstanding Company Common Stock or the Outstanding
Company Voting Securities, then such additional acquisition shall constitute a
Change of Control; or

  (ii)   Individuals who, as of the date hereof, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or     (iii)   A
reorganization, merger, consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a “Business Combination”) is
consummated, in each case, unless, immediately following such Business
Combination, (A), more than 50%, respectively, of the then-outstanding shares of
common stock and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of (x) the corporation resulting from such Business Combination or (y) a
corporation that, as a result of such transaction, owns the Company or all or
substantially all of the Company’s assets whether directly or through one or
more Subsidiaries, is represented by the Outstanding Company Common Stock and
the Outstanding Company Voting Securities (or, if applicable, is represented by
shares into which Outstanding Company Common Stock or Outstanding Company Voting
Securities were converted pursuant to such Business Combination) in
substantially the same proportions as their ownership immediately prior to such
Business Combination of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities, as the case may be, (B) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of the

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      Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then-outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then-outstanding voting
securities of such corporation, except to the extent that such ownership existed
prior to the Business Combination, and (C) at least a majority of the members of
the Board of Directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement or of the action of the Board providing for such Business
Combination; or

  (iv)   The stockholders of the Company approve of a complete liquidation or
dissolution of the Company.

Section 12: Miscellaneous

  a.   Other Payments or Awards. Nothing contained in the Plan shall be deemed
in any way to limit or restrict the Company or a Subsidiary from making any
award or payment to any person under any other plan, arrangement or
understanding, whether now existing or hereafter in effect.     b.   Unfunded
Plan. The Plan shall be unfunded. No provision of the Plan or any Award
Agreement shall require the Committee, the Company or a Subsidiary, for the
purpose of satisfying any obligations under the Plan, to purchase assets or
place any assets in a trust or other entity to which contributions are made or
otherwise to segregate any assets, nor shall the Company or a Subsidiary
maintain separate bank accounts, books, records or other evidence of the
existence of a segregated or separately maintained or administered fund for such
purposes. Participants shall have no rights under the Plan other than as
unsecured general creditors of the Company or a Subsidiary.     c.   Limits of
Liability. Any liability of the Company or a Subsidiary to any Participant with
respect to an Award shall be based solely upon contractual obligations created
by the Plan and the Award Agreement.

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  d.   Rights of Employees. Status as an eligible Employee shall not be
construed as a commitment that any Award shall be made under this Plan to such
eligible Employee or to eligible Employees generally. Nothing contained in this
Plan or in any Award Agreement shall confer upon any Employee or Participant any
right to continue in the employ or other service of the Company or a Subsidiary
or constitute any contract or limit in any way the right of the Company or a
Subsidiary to change such person’s compensation or other benefits or to
terminate the employment or other service of such person with or without cause.
Except as provided otherwise in an Award Agreement, an Employee’s (i) transfer
from the Company to a Subsidiary or affiliate of the Company, whether or not
incorporated, or visa versa, or from one Subsidiary to another or (ii) leave of
absence, duly authorized in writing by the Company or a Subsidiary, shall not be
deemed a termination of such Employee’s employment or other service.     e.  
Section Headings. The section headings contained herein are for the purpose of
convenience only, and in the event of any conflict, the text of the Plan, rather
than the section headings, shall control.     f.   Construction. In interpreting
the Plan, the masculine gender shall include the feminine, the neuter gender
shall include the masculine or feminine, and the singular shall include the
plural unless the context clearly indicates otherwise.     g.   Invalidity. If
any term or provision contained herein or in any Award Agreement shall to any
extent be invalid or unenforceable, such term or provision will be reformed so
that it is valid, and such invalidity or unenforceability shall not affect any
other provision or part thereof.     h.   Applicable Law. The Plan, the Award
Agreements and all actions taken hereunder or thereunder shall be governed by,
and construed in accordance with, the laws of the State of Delaware without
regard to the conflict of law principles thereof.     i.   Supplementary Plans.
The Committee may authorize Supplementary Plans applicable to Employees subject
to the tax laws of one or more countries other than the United States and
providing for the grant of Awards to such Employees on terms and conditions,
consistent with the Plan, determined by the Committee which may differ from the
term and conditions of such Awards pursuant to the Plan for the

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      purpose of complying with the conditions for qualification of Awards for
favorable treatment under foreign tax and/or securities laws. Notwithstanding
any other provision hereof, Options granted under any Supplementary Plan shall
include provisions that conform with Sections 4(a); and Restricted Stock granted
under any Supplementary Plan shall include provisions that conform with
Section 4(d).

  j.   Effective Date and Term. The Plan was adopted by the Board of Directors
effective as of May 25, 2006, subject to approval by the Company’s stockholders.
The Committee may grant Awards prior to stockholder approval, provided, however,
that Awards granted prior to such stockholder approval are automatically
canceled if stockholder approval is not obtained at or prior to the period
ending twelve months after the date the Plan is effective and provided further
that no Award may be settled prior to the date stockholder approval is obtained.
Unless sooner terminated, the Plan shall remain in effect until May 25, 2016.
Termination of the Plan shall not affect any Award previously made.     k.   No
Third Party Beneficiaries. Except as expressly provided therein, neither the
Plan nor any Award Agreement shall confer on any person other than the Company
and the grantee of any Award any rights or remedies thereunder.     l.  
Successors and Assigns. The terms of this Plan shall be binding upon and inure
to the benefit of the Company and its successors and assigns.

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