Exhibit 10.2

Community Health Systems, Inc.

2009 STOCK OPTION AND AWARD PLAN

(As Adopted March 24, 2009 and Amended and Restated March 18, 2011, March 20,
2013 and March 19, 2014)

 

1. Purpose.

The purpose of this Plan is to strengthen Community Health Systems, Inc., a
Delaware corporation (the “Company”), and its Subsidiaries by providing an
incentive to its and their employees, officers, consultants and directors and
thereby encouraging them to devote their abilities and industry to the success
of the Company’s and its Subsidiaries’ business enterprises. It is intended that
this purpose be achieved by extending to employees (including future employees
who have received a formal written offer of employment), officers, consultants
and directors of the Company and its Subsidiaries an added long-term incentive
for high levels of performance and unusual efforts through the grant of
Incentive Stock Options, Non-qualified Stock Options, Stock Appreciation Rights,
Performance Units, Performance Shares, Share Awards, Restricted Stock and
Restricted Stock Units (as each term is herein defined).

 

2. Definitions.

For purposes of the Plan:

2.1       “2000 Stock Option and Award Plan” means the Community Health Systems,
Inc. 2000 Stock Option and Award Plan, as amended and restated March 20, 2013.

2.2       “Affiliate” means any entity, directly or indirectly, controlled by,
controlling or under common control with the Company or any corporation or other
entity acquiring, directly or indirectly, all or substantially all the assets
and business of the Company, whether by operation of law or otherwise.

2.3       “Agreement” means the written agreement between the Company and an
Optionee or Grantee evidencing the grant of an Option or Award and setting forth
the terms and conditions thereof.

2.4       “Award” means a grant of Restricted Stock, Restricted Stock Units, a
Stock Appreciation Right, a Performance Award, a Share Award or any or all of
them.

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

2.6       “Cause” means, except as otherwise set forth herein,

(a)      in the case of an Optionee or Grantee whose employment with the Company
or a Subsidiary is subject to the terms of an employment agreement between such
Optionee or Grantee and the Company or Subsidiary, which employment agreement
includes a definition of “Cause”, the term “Cause” as used in this Plan or any
Agreement shall have the meaning set forth in such employment agreement during
the period that such employment agreement remains in effect; and

 

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(b)      in all other cases, (i) intentional failure to perform reasonably
assigned duties, (ii) dishonesty or willful misconduct in the performance of
duties, (iii) involvement in a transaction in connection with the performance of
duties to the Company or any of its Subsidiaries which transaction is adverse to
the interests of the Company or any of its Subsidiaries and which is engaged in
for personal profit or (iv) willful violation of any law, rule or regulation in
connection with the performance of duties (other than traffic violations or
similar offenses); provided, however, that following a Change in Control clause
(i) of this Section 2.6(b) shall not constitute “Cause.”

2.7       “Change in Capitalization” means any increase or reduction in the
number of Shares, or any change (including, but not limited to, in the case of a
spin-off, dividend or other distribution in respect of Shares, a change in
value) in the Shares or exchange of Shares for a different number or kind of
shares or other securities of the Company or another corporation, by reason of a
reclassification, recapitalization, merger, consolidation, reorganization,
spin-off, split-up, issuance of warrants or rights or debentures, stock
dividend, stock split or reverse stock split, cash dividend, property dividend,
extraordinary cash dividend, combination or exchange of shares, repurchase of
shares, change in corporate structure or otherwise.

2.8       A “Change in Control” shall mean the occurrence of any of the
following, unless otherwise determined by the Committee in the applicable
Agreement or other written agreement approved by the Committee:

(a)      An acquisition (other than directly from the Company) of any voting
securities of the Company (the “Voting Securities”) by any “Person” (as the term
person is used for purposes of Section 13(d) or 14(d) of the Exchange Act),
immediately after which such Person has “Beneficial Ownership” (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of more than fifty
percent (50%) of the then outstanding Shares or the combined voting power of the
Company’s then outstanding Voting Securities; provided, however, that in
determining whether a Change in Control has occurred pursuant to this
Section 2.8(a), Shares or Voting Securities which are acquired in a “Non-Control
Acquisition” (as hereinafter defined) shall not constitute an acquisition which
would cause a Change in Control. A “Non-Control Acquisition” shall mean an
acquisition by (i) an employee benefit plan (or a trust forming a part thereof)
maintained by (A) the Company or (B) any corporation or other Person the
majority of the voting power, voting equity securities or equity interest of
which is owned, directly or indirectly, by the Company (for purposes of this
definition, a “Related Entity”), (ii) the Company or any Related Entity, or
(iii) any Person in connection with a “Non-Control Transaction” (as hereinafter
defined);

(b)      The individuals who, as of March 20, 2013, are members of the Board
(the “Incumbent Board”), cease for any reason to constitute at least a majority
of the members of the Board or, following a Merger (as hereinafter defined)
which results in a Parent Corporation (as hereinafter defined), the board of
directors of the ultimate Parent Corporation; provided, however, that if the
election, or nomination for election by the Company’s common stockholders, of
any new director was approved by a vote of at least two-thirds of the Incumbent
Board, such new director shall, for purposes of this Plan, be considered a
member of the Incumbent Board; provided further, however, that no individual
shall be considered a member of the Incumbent Board if such individual initially
assumed office as a result of the actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board (a “Proxy Contest”)
including by reason of any agreement intended to avoid or settle any Proxy
Contest; or

 

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(c)      The consummation of:

(i)     A merger, consolidation or reorganization with or into the Company or in
which securities of the Company are issued (a “Merger”), unless such Merger is a
“Non-Control Transaction.” A “Non-Control Transaction” shall mean a Merger
where:

(A)      the stockholders of the Company immediately before such Merger own
directly or indirectly immediately following such Merger at least fifty percent
(50%) of the combined voting power of the outstanding voting securities of
(x) the corporation resulting from such Merger (the “Surviving Corporation”), if
fifty percent (50%) or more of the combined voting power of the then outstanding
voting securities of the Surviving Corporation is not Beneficially Owned,
directly or indirectly, by another Person (a “Parent Corporation”), or (y) if
there is one or more than one Parent Corporation, the ultimate Parent
Corporation; and

(B)      the individuals who were members of the Incumbent Board immediately
prior to the execution of the agreement providing for such Merger constitute at
least a majority of the members of the board of directors of (x) the Surviving
Corporation, if there is no Parent Corporation, or (y) if there is one or more
than one Parent Corporation, the ultimate Parent Corporation;

(ii)    A complete liquidation or dissolution of the Company; or

(iii)   The sale or other disposition of all or substantially all of the assets
of the Company to any Person (other than a transfer to a Related Entity or under
conditions that would constitute a Non-Control Transaction with the disposition
of assets being regarded as a Merger for this purpose or the distribution to the
Company’s stockholders of the stock of a Related Entity or any other assets).

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (the “Subject Person”) acquired Beneficial Ownership
of more than the permitted amount of the then outstanding Shares or Voting
Securities as a result of the acquisition of Shares or Voting Securities by the
Company which, by reducing the number of Shares or Voting Securities then
outstanding, increases the proportional number of shares Beneficially Owned by
the Subject Persons, provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of Shares or
Voting Securities by the Company, and after such share acquisition by the
Company, the Subject Person becomes the Beneficial Owner of any additional
Shares or Voting Securities which increases the percentage of the then
outstanding Shares or Voting Securities Beneficially Owned by the Subject
Person, then a Change in Control shall occur.

If an Optionee’s or Grantee’s employment is terminated by the Company without
Cause prior to the date of a Change in Control but the Optionee or Grantee
reasonably demonstrates that the termination (A) was at the request of a third
party who has indicated an intention or taken steps reasonably calculated to
effect a change in control or (B) otherwise arose in connection with, or in
anticipation of, a Change in Control which has been threatened or proposed, such
termination shall be deemed to have occurred after a Change in Control for
purposes of this Plan provided a Change in Control shall actually have occurred.

2.9       “Code” means the Internal Revenue Code of 1986, as amended.

 

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2.10    “Committee” means a committee, as described in Section 3.1, appointed by
the Board from time to time to administer the Plan and to perform the functions
set forth herein.

2.11    “Company” means Community Health Systems, Inc.

2.12    “Director” means a director of the Company.

2.13    “Disability” means:

(a)      in the case of an Optionee or Grantee whose employment with the Company
or a Subsidiary is subject to the terms of an employment agreement between such
Optionee or Grantee and the Company or Subsidiary, which employment agreement
includes a definition of “Disability”, the term “Disability” as used in this
Plan or any Agreement shall have the meaning set forth in such employment
agreement during the period that such employment agreement remains in effect;

(b)      in the case of an Optionee or Grantee to whom Section 2.13(a) does not
apply and who participates in the Company’s long-term disability plan, if any,
the term “Disability” as used in such plan; or

(c)      in all other cases, a physical or mental infirmity which impairs the
Optionee’s or Grantee’s ability to perform substantially all his or her duties
for a period of ninety-one (91) consecutive days.

2.14    “Division” means any of the operating units or divisions of the Company
designated as a Division by the Committee.

2.15    “Dividend Equivalent Right” means a right to receive all or some portion
of the cash dividends that are or would be payable with respect to Shares.

2.16    “Eligible Individual” means any of the following individuals who is
designated by the Committee as eligible to receive Options or Awards subject to
the conditions set forth herein: (a) any director, officer or employee of the
Company or a Subsidiary, (b) any individual to whom the Company or a Subsidiary
has extended a formal, written offer of employment, or (c) any consultant or
advisor of the Company or a Subsidiary.

2.17    “Exchange Act” means the Securities Exchange Act of 1934, as amended.

2.18    “Fair Market Value” on any date means the closing sales prices of the
Shares on such date on the principal national securities exchange on which such
Shares are listed or admitted to trading, or, if such Shares are not so listed
or admitted to trading, the closing sales prices of the Shares as reported by
The Nasdaq Stock Market at the close of the primary trading session on such
dates and, in either case, if the Shares were not traded on such date, on the
next preceding day on which the Shares were traded. In the event that Fair
Market Value cannot be determined in a manner described above, the Fair Market
Value shall be the value established by the Board in good faith and, in the case
of an Incentive Stock Option, in accordance with Section 422 of the Code.

 

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2.19    For purposes of this Plan,

(a)      “Good Reason” shall mean the occurrence after a Change in Control of
any of the following events or conditions:

(1)    a change in the Optionee’s or Grantee’s status, title, position or
responsibilities (including reporting responsibilities) which, in the Optionee’s
or Grantee’s reasonable judgment, represents an adverse change from the
Optionee’s or Grantee’s status, title, position or responsibilities as in effect
immediately prior thereto; the assignment to the Optionee or Grantee of any
duties or responsibilities which, in the Optionee’s or Grantee’s reasonable
judgment, are inconsistent with the Optionee’s or Grantee’s status, title,
position or responsibilities; or any removal of the Optionee or Grantee from or
failure to reappoint or reelect the Optionee or Grantee to any of such offices
or positions, except in connection with the termination of the Optionee’s or
Grantee’s employment for Disability, Cause, as a result of the Optionee’s or
Grantee’s death or by the Optionee or Grantee other than for Good Reason;

(2)    a reduction in the Optionee’s or Grantee’s annual base salary below the
amount as in effect immediately prior to the Change in Control;

(3)    the relocation of the offices of the Optionee’s or Grantee’s place of
employment to a location more than twenty-five (25) miles from the location of
such employment immediately prior to such Change in Control, or requiring the
Grantee to be based anywhere other than such offices, except to the extent the
Grantee was not previously assigned to a principal location and except for
required travel on business to the extent substantially consistent with the
Optionee’s or Grantee’s business travel obligations at the time of the Change in
Control;

(4)    the failure to pay to the Optionee or Grantee any portion of the
Optionee’s or Grantee’s current compensation or to pay to the Optionee or
Grantee any portion of an installment of deferred compensation under any
deferred compensation program of the Company or any of its Subsidiaries in which
the Optionee or Grantee participated, within seven (7) days of the date such
compensation is due;

(5)    the failure to (A) continue in effect (without reduction in benefit
level, and/or reward opportunities) any material compensation or employee
benefit plan in which the Optionee or Grantee was participating immediately
prior to the Change in Control, unless a substitute or replacement plan has been
implemented which provides substantially identical compensation or benefits to
the Optionee or Grantee or (B) provide the Optionee or Grantee with compensation
and benefits, in the aggregate, at least equal (in terms of benefit levels
and/or reward opportunities) to those provided for under each other compensation
or employee benefit plan, program and practice in which the Optionee or Grantee
was participating immediately prior to the Change in Control; or

(6)    the failure of the Company to obtain from its successors or assigns the
express assumption and agreements required under Section 13 hereof.

(b)      Any event or condition described in Section 2.19(a)(1), (2), (3), (4),
or (6) which occurs at any time prior to the date of a Change in Control and
(A) which occurred after the Company entered into a definitive agreement, the
consummation of which would constitute a Change in Control or (B) which the
Optionee or Grantee reasonably

 

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demonstrates was at the request of a third party who has indicated an intention
or has taken steps reasonably calculated to effect a Change in Control, shall
constitute Good Reason for purposes of this Agreement, notwithstanding that it
occurred prior to a Change in Control.

2.20    “Grantee” means a person to whom an Award has been granted under the
Plan.

2.21    “Incentive Stock Option” means an Option satisfying the requirements of
Section 422 of the Code and designated by the Committee as an Incentive Stock
Option.

2.22    “Non-employee Director” means a director of the Company who is a
“non-employee director” within the meaning of Rule 16b-3 promulgated under the
Exchange Act.

2.23    “Non-qualified Stock Option” means an Option which is not an Incentive
Stock Option.

2.24    “Option” means a Non-qualified Stock Option, an Incentive Stock Option
or either or both of them.

2.25    “Optionee” means a person to whom an Option has been granted under the
Plan.

2.26    “Outside Director” means a director of the Company who is an “outside
director” within the meaning of Section 162(m) of the Code and the regulations
promulgated thereunder.

2.27    “Parent” means any corporation which is a parent corporation within the
meaning of Section 424(e) of the Code with respect to the Company.

2.28    “Performance Awards” means Performance Units, Performance Shares or
either or both of them.

2.29    “Performance-Based Compensation” means any Option or Award that is
intended to constitute “performance based compensation” within the meaning of
Section 162(m)(4)(C) of the Code and the regulations promulgated thereunder.

2.30    “Performance Cycle” means the time period specified by the Committee at
the time Performance Awards are granted during which the performance of the
Company, a Subsidiary or a Division will be measured.

2.31    “Performance Objectives” has the meaning set forth in Section 9.

2.32    “Performance Shares” means Shares issued or transferred to an Eligible
Individual under Section 9.

2.33    “Performance Units” means performance units granted to an Eligible
Individual under Section 9.

2.34    “Plan” means Community Health Systems, Inc. 2009 Stock Option and Award
Plan, as amended and restated from time to time.

 

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2.35    “Restricted Stock” means Shares issued or transferred to an Eligible
Individual pursuant to Section 8.1.

2.36    “Restricted Stock Unit” means rights granted to an Eligible Individual
under Section 8.2 representing a number of hypothetical Shares.

2.37    “Share Award” means an Award of Shares granted pursuant to Section 10.

2.38    “Shares” means shares of the Common Stock of the Company, par value $.01
per share, and any other securities into which such shares are changed or for
which such shares are exchanged.

2.39    “Stock Appreciation Right” means a right to receive all or some portion
of the increase in the value of the Shares as provided in Section 7 hereof.

2.40    “Subsidiary” means (i) except as provided in subsection (ii) below, any
corporation which is a subsidiary corporation within the meaning of
Section 424(f) of the Code with respect to the Company, and (ii) in relation to
the eligibility to receive Options or Awards other than Incentive Stock Options
and continued employment for purposes of Options and Awards (unless the
Committee determines otherwise), any entity, whether or not incorporated, in
which the Company directly or indirectly owns 50% or more of the outstanding
equity or other ownership interests.

2.41    “Successor Corporation” means a corporation, or a Parent or Subsidiary
thereof within the meaning of Section 424(a) of the Code, which issues or
assumes a stock option in a transaction to which Section 424(a) of the Code
applies.

2.42    “Ten-Percent Stockholder” means an Eligible Individual, who, at the time
an Incentive Stock Option is to be granted to him or her, owns (within the
meaning of Section 422(b)(6) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company,
a Parent or a Subsidiary.

 

3. Administration.

3.1     The Plan shall be administered by the Committee, which shall hold
meetings at such times as may be necessary for the proper administration of the
Plan. The Committee shall keep minutes of its meetings. If the Committee
consists of more than one (1) member, a quorum shall consist of not fewer than
two (2) members of the Committee and a majority of a quorum may authorize any
action. Any decision or determination reduced to writing and signed by a
majority of all of the members of the Committee shall be as fully effective as
if made by a majority vote at a meeting duly called and held. The Committee
shall consist of at least one (1) Director and may consist of the entire Board;
provided, however, that (A) with respect to any Option or Award granted to an
Eligible Individual who is subject to Section 16 of the Exchange Act, the
Committee shall consist of at least two (2) Directors each of whom shall be a
Non-employee Director and (B) to the extent necessary for any Option or Award
intended to qualify as Performance-Based Compensation to so qualify, the
Committee shall consist of at least two (2) Directors, each of whom shall be an
Outside Director. For purposes of the preceding sentence, if any member of the
Committee is neither a Non-employee Director nor an Outside Director but recuses
himself or herself or abstains from voting with respect to a particular action
taken by the Committee, then the Committee, with

 

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respect to that action, shall be deemed to consist only of the members of the
Committee who have not recused themselves or abstained from voting. Subject to
applicable law, the Committee may delegate its authority under the Plan to any
other person or persons.

3.2    No member of the Committee shall be liable for any action, failure to
act, determination or interpretation made in good faith with respect to this
Plan or any transaction hereunder. The Company hereby agrees to indemnify each
member of the Committee for all costs and expenses and, to the extent permitted
by applicable law, any liability incurred in connection with defending against,
responding to, negotiating for the settlement of or otherwise dealing with any
claim, cause of action or dispute of any kind arising in connection with any
actions in administering this Plan or in authorizing or denying authorization to
any transaction hereunder.

3.3    Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time to:

(a)      determine those Eligible Individuals to whom Options shall be granted
under the Plan and the number of such Options to be granted, prescribe the terms
and conditions (which need not be identical) of each such Option, including the
exercise price per Share, the vesting schedule and the duration of each Option,
and make any amendment or modification to any Option Agreement consistent with
the terms of the Plan;

(b)      select those Eligible Individuals to whom Awards shall be granted under
the Plan, determine the number of Shares in respect of which each Award is
granted, the terms and conditions (which need not be identical) of each such
Award, and make any amendment or modification to any Award Agreement consistent
with the terms of the Plan;

(c)      construe and interpret the Plan and the Options and Awards granted
hereunder, establish, amend and revoke rules and regulations for the
administration of the Plan, including, but not limited to, correcting any defect
or supplying any omission, or reconciling any inconsistency in the Plan or in
any Agreement, in the manner and to the extent it shall deem necessary or
advisable, including so that the Plan and the operation of the Plan comply with
Rule 16b-3 under the Exchange Act, the Code to the extent applicable and other
applicable law, and otherwise make the Plan fully effective. All decisions and
determinations by the Committee in the exercise of this power shall be final,
binding and conclusive upon the Company, its Subsidiaries, the Optionees and
Grantees, and all other persons having any interest therein;

(d)      determine the duration and purposes for leaves of absence which may be
granted to an Optionee or Grantee on an individual basis without constituting a
termination of employment or service for purposes of the Plan;

(e)      exercise its discretion with respect to the powers and rights granted
to it as set forth in the Plan; and

(f)      generally, exercise such powers and perform such acts as are deemed
necessary or advisable to promote the best interests of the Company with respect
to the Plan.

 

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3.4    The Committee may delegate to one or more officers of the Company the
authority to grant Options or Awards to Eligible Individuals (other than to
himself or herself) and/or determine the number of Shares subject to each Option
or Award (by resolution that specifies the total number of Shares subject to the
Options or Awards that may be awarded by the officer and the terms of any such
Options or Awards, including the exercise price), provided that such delegation
is made in accordance with the Delaware General Corporation Law and with respect
to Options and Awards that are not intended to qualify as Performance-Based
Compensation and that are not made to executive officers of the Company covered
by Rule 16b-3 under the Exchange Act.

 

4. Shares Subject to the Plan; Grant Limitations.

4.1    Shares Subject to the Plan. The maximum number of Shares that may be made
the subject of Options and Awards granted under the Plan is:

(a)      4,000,000 Shares added to the Plan as a result of the amendment and
restatement dated March 19, 2014; and

(b)      8,506,6151 Shares in the Plan, as amended and restated March 20, 2013;

(c)      for a total of 12,506,615 Shares.

The Company shall reserve for the purposes of the Plan, out of its authorized
but unissued Shares or out of Shares held in the Company’s treasury, or partly
out of each, such number of Shares as shall be determined by the Board.
Following the approval by the holders of a majority of the securities of the
Company entitled to vote thereon, in accordance with the applicable laws, of the
modifications to the Plan approved by the Board on March 20, 2013, no further
grants may be made under the 2000 Stock Option and Award Plan, but Options and
Awards made under the 2000 Stock Option and Award Plan shall remain outstanding
in accordance with their terms.

4.2    Shares Returned to the Plan. Whenever any outstanding Option or Award or
portion thereof granted pursuant to the 2000 Stock Option and Award Plan and
outstanding as of March 20, 2013 would have again been available for grant as an
Option or Award pursuant to Section 4.3 of the 2000 Stock Option and Award Plan
as in effect on March 20, 2013, the number of Shares allocable to the expired,
canceled, forfeited, settled or otherwise terminated portion of such Option or
Award, determined in accordance with Section 4.3 of the 2000 Stock Option and
Award Plan, shall be added to the maximum number of Shares available to be
granted as Options or Awards granted hereunder, not to exceed 4,803,545
additional Shares

4.3    Grant Limitations. The following grant limitations shall apply when
making Awards pursuant to the Plan:

(a)      When aggregated with Options and Awards granted under the 2000 Stock
Option and Award Plan in any calendar year, no Eligible Individual (other than a
Director) may be granted Options in respect of more than 1,000,000 Shares, or
Options or Awards in the aggregate in respect of more than 1,000,000 Shares,

 

 

1  Section 4.1(c) of the Plan, as amended and restated on March 20, 2013, stated
that 808,799 shares, representing the Shares remaining for issuance under the
2000 Stock Option and Award Plan, as amended and restated on March 20, 2013,
were being made available for grants under the Plan. The correct number of such
shares was subsequently determined to be 806,615. Section 4.1(b) above reflects
the correct amount.

 

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(b)      When aggregated with Options and Awards granted under the 2000 Stock
Option and Award Plan in any calendar year, no Director may be granted Options
in respect of more than 100,000 Shares, or Options or Awards in the aggregate in
respect of more than 100,000 Shares,

(c)      The maximum grant date fair value of all Awards granted during any
calendar year to a single Director who is not also an employee of the Company or
a Subsidiary shall not exceed $1,000,000, and

(d)      In no event shall more than an aggregate of 30,000 Shares be issued
upon the exercise of Incentive Stock Options granted under the Plan.

4.4    Fungible Plan Design. Upon the granting of an Option or an Award, the
number of Shares available under Section 4.1 for the granting of further Options
and Awards shall be reduced as follows:

(a)      In connection with the granting of an Option or an Award, the number of
Shares shall be reduced by the number of Shares in respect of which the Option
or Award is granted or denominated.

(b)      Stock Appreciation Rights to be settled in shares of Common Stock shall
be counted in full against the number of shares available for award under the
Plan, regardless of the number of Exercise Gain Shares issued upon settlement of
the Stock Appreciation Right.

(c)      Notwithstanding the foregoing, Awards granted in the form of Restricted
Stock (including Restricted Stock Units), Performance Awards (including Shares
issued in respect to Performance Awards), and other Awards that are granted as
“full value awards” shall reduce the number of shares that may be the subject to
Options and Awards under the Plan by 1.52 Shares for each Share subject to such
an Award.

4.5    Whenever any outstanding Option or Award or portion thereof expires, is
canceled, is forfeited, or is otherwise terminated for any reason without having
been exercised or payment having been made in respect of the Option or Award (or
such portion thereof to which the expiration, forfeiture, or other termination
occurs), the Shares allocable to the expired, canceled, forfeited, or otherwise
terminated portion of the Option or Award may again be the subject of Options or
Awards granted hereunder. With regard to Awards referred to in Section 4.4(c),
for each Share subject to an Award that is cancelled, forfeited, settled in cash
or other otherwise terminated as provided in the foregoing sentence, 1.52 Shares
may again be the subject of Options or Awards under the Plan. Notwithstanding
the foregoing, the following events shall not result in any increase in Shares
available for issuance of Options or Awards under the Plan or such Shares again
becoming available for issuance of Options or Awards:

(a)      Withholding of Shares to pay Taxes on any Option or Award,

(b)      Tendering of Shares to pay for Option exercise prices (i.e., net
settlement of Shares), and

 

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(c)      The purchase of Shares on the open market as a result of Option
exercises.

4.6    Unless otherwise determined by the Committee, in no event shall an Option
or Award not subject to performance-based conditions have a vesting schedule
resulting in such Option or Award vesting in full prior to the third anniversary
of the grant date. For purposes of clarity, this restriction will not prohibit
any Option or Award from having partial vesting dates prior to the third
anniversary of the grant date in accordance with a proportionate vesting
schedule determined at the discretion of the Committee, so long as such Option
or Award does not vest in full prior to the third anniversary of the grant date.

 

5. Option Grants for Eligible Individuals.

5.1    Authority of Committee. Subject to the provisions of the Plan, the
Committee shall have full and final authority to select those Eligible
Individuals who will receive Options, and the terms and conditions of the grant
to such Eligible Individuals shall be set forth in an Agreement. Incentive Stock
Options may be granted only to Eligible Individuals who are employees of the
Company or any Subsidiary.

5.2    Exercise Price. The purchase price or the manner in which the exercise
price is to be determined for Shares under each Option shall be determined by
the Committee and set forth in the Agreement; provided, however, that the
exercise price per Share under each Non-qualified Stock Option and each
Incentive Stock Option shall not be less than 100% of the Fair Market Value of a
Share on the date the Option is granted (110% in the case of an Incentive Stock
Option granted to a Ten-Percent Stockholder).

5.3    Maximum Duration. Options granted hereunder shall be for such term as the
Committee shall determine, provided that an Incentive Stock Option shall not be
exercisable after the expiration of ten (10) years from the date it is granted
(five (5) years in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder) and a Non-qualified Stock Option shall not be
exercisable after the expiration of ten (10) years from the date it is granted;
provided, however, that unless the Committee provides otherwise, an Option
(other than an Incentive Stock Option) may, upon the death of the Optionee prior
to the expiration of the Option, be exercised for up to one (1) year following
the date of the Optionee’s death even if such period extends beyond ten
(10) years from the date the Option is granted. The Committee may, subsequent to
the granting of any Option, extend the term thereof, but in no event shall the
term as so extended exceed the maximum term provided for in the preceding
sentence.

5.4    Vesting. Subject to Section 5.10, each Option shall become exercisable in
such installments (which need not be equal) and at such times as may be
designated by the Committee and set forth in the Agreement. To the extent not
exercised, installments shall accumulate and be exercisable, in whole or in
part, at any time after becoming exercisable, but not later than the date the
Option expires. The Committee may accelerate the exercisability of any Option or
portion thereof at any time.

5.5    Deferred Delivery of Option Shares. The Committee may, in its discretion,
permit Optionees to elect to defer the issuance of Shares upon the exercise of
one or more Non-qualified Stock Options granted pursuant to the Plan. The terms
and conditions of such deferral shall be determined at the time of the grant of
the Option or thereafter and shall be set forth in the Agreement evidencing the
Option.

 

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5.6    Limitations on Incentive Stock Options. To the extent that the aggregate
Fair Market Value (determined as of the date of the grant) of Shares with
respect to which Incentive Stock Options granted under the Plan and “incentive
stock options” (within the meaning of Section 422 of the Code) granted under all
other plans of the Company or its Subsidiaries (in either case determined
without regard to this Section 5.6) are exercisable by an Optionee for the first
time during any calendar year exceeds $100,000, such Incentive Stock Options
shall be treated as Non-qualified Stock Options. In applying the limitation in
the preceding sentence in the case of multiple Option grants, Options which were
intended to be Incentive Stock Options shall be treated as Non-qualified Stock
Options according to the order in which they were granted such that the most
recently granted Options are first treated as Non-qualified Stock Options.

5.7    Non-Transferability. No Option shall be transferable by the Optionee
otherwise than by will or by the laws of descent and distribution or, in the
case of an Option other than an Incentive Stock Option, pursuant to a domestic
relations order (within the meaning of Rule 16a-12 promulgated under the
Exchange Act), and an Option shall be exercisable during the lifetime of such
Optionee only by the Optionee or his or her guardian or legal representative.
Notwithstanding the foregoing, the Committee may set forth in the Agreement
evidencing an Option (other than an Incentive Stock Option), at the time of
grant or thereafter, that the Option may be transferred to members of the
Optionee’s immediate family, to trusts solely for the benefit of such immediate
family members and to partnerships in which such family members and/or trusts
are the only partners, and for purposes of this Plan, a transferee of an Option
shall be deemed to be the Optionee. For this purpose, immediate family means the
Optionee’s spouse, parents, children, stepchildren and grandchildren and the
spouses of such parents, children, stepchildren and grandchildren. The terms of
an Option shall be final, binding and conclusive upon the beneficiaries,
executors, administrators, heirs and successors of the Optionee.

5.8    Method of Exercise. The exercise of an Option shall be made only by a
written notice delivered in person or by mail to the Secretary of the Company at
the Company’s principal executive office, specifying the number of Shares to be
exercised and, to the extent applicable, accompanied by payment therefor and
otherwise in accordance with the Agreement pursuant to which the Option was
granted; provided, however, that Options may not be exercised by an Optionee
following a hardship distribution to the Optionee to the extent such exercise is
prohibited under the Community Health Systems, Inc. 401(k) Plan. The exercise
price for any Shares purchased pursuant to the exercise of an Option shall be
paid in either of the following forms (or any combination thereof): (a) cash or
(b) the transfer, either actually or by attestation, to the Company of Shares
owned by the Optionee prior to the exercise of the Option, such transfer to be
upon such terms and conditions as determined by the Committee or (c) a
combination of cash and the transfer of Shares; provided, however, that the
Committee may determine that the exercise price shall be paid only in cash. In
addition, Options may be exercised through a registered broker-dealer pursuant
to such cashless exercise procedures which are, from time to time, deemed
acceptable by the Committee. Any Shares transferred to the Company as payment of
the exercise price under an Option shall be valued at their Fair Market Value on
the day of exercise of such Option. If requested by the Committee, the Optionee
shall deliver the Agreement evidencing the Option to the Secretary of the
Company who shall endorse thereon a notation of such exercise and return such
Agreement to the Optionee. No fractional Shares (or cash in lieu thereof) shall
be issued upon exercise of an Option and the number of Shares that may be
purchased upon exercise shall be rounded to the nearest number of whole Shares.

 

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5.9    Rights of Optionees. No Optionee shall be deemed for any purpose to be
the owner of any Shares subject to any Option unless and until (a) the Option
shall have been exercised pursuant to the terms thereof, (b) the Company shall
have issued and delivered Shares to the Optionee, and (c) the Optionee’s name
shall have been entered as a stockholder of record on the books of the Company.
Thereupon, the Optionee shall have full voting, dividend and other ownership
rights with respect to such Shares, subject to such terms and conditions as may
be set forth in the applicable Agreement.

5.10   Effect of Change in Control. Section 13(b) shall control the treatment of
any Options outstanding at the time of a Change in Control. Any Options that are
exercisable as of a Change in Control shall remain exercisable for a period
ending not before the earlier of (x) the six (6) month anniversary of the Change
in Control or (y) the expiration of the stated term of the Option.

5.11   Prohibition of Cashing-Out of Underwater Options. The Committee shall be
prohibited from making a cash payment in cancellation of all or part of an
Option with an exercise price in excess of the Fair Market Value of a Share on
the effective date of such cash payment.

 

6. [intentionally omitted].

 

7. Stock Appreciation Rights.

The Committee may in its discretion, either alone or in connection with the
grant of an Option, grant Stock Appreciation Rights in accordance with the Plan,
the terms and conditions of which shall be set forth in an Agreement. If granted
in connection with an Option, a Stock Appreciation Right shall cover the same
Shares covered by the Option (or such lesser number of Shares as the Committee
may determine) and shall, except as provided in this Section 7, be subject to
the same terms and conditions as the related Option.

7.1    Time of Grant. A Stock Appreciation Right may be granted (a) at any time
if unrelated to an Option, or (b) if related to an Option, either at the time of
grant or at any time thereafter during the term of the Option.

7.2    Stock Appreciation Right Related to an Option.

(a)      Exercise. A Stock Appreciation Right granted in connection with an
Option shall be exercisable at such time or times and only to the extent that
the related Option is exercisable, and will not be transferable except to the
extent the related Option may be transferable. A Stock Appreciation Right
granted in connection with an Incentive Stock Option shall be exercisable only
if the Fair Market Value of a Share on the date of exercise exceeds the exercise
price specified in the related Incentive Stock Option Agreement. In no event
shall a Stock Appreciation Right related to an Option have a term of greater
than ten (10) years.

(b)      Amount Payable. Upon the exercise of a Stock Appreciation Right related
to an Option, the Grantee shall be entitled to receive an amount determined by
multiplying (i) the excess of the Fair Market Value of a Share on the date of
exercise of such Stock Appreciation Right over the per Share exercise price
under the related Option, by (ii) the number of Shares as to which such Stock
Appreciation Right is being exercised. Notwithstanding the foregoing, the
Committee may limit in any manner the amount payable with respect to any Stock
Appreciation Right by including such a limit in the Agreement evidencing the
Stock Appreciation Right at the time it is granted.

 

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(c)      Treatment of Related Options and Stock Appreciation Rights Upon
Exercise. Upon the exercise of a Stock Appreciation Right granted in connection
with an Option, the Option shall be canceled to the extent of the number of
Shares as to which the Stock Appreciation Right is exercised, and upon the
exercise of an Option granted in connection with a Stock Appreciation Right, the
Stock Appreciation Right shall be canceled to the extent of the number of Shares
as to which the Option is exercised or surrendered.

7.3    Stock Appreciation Right Unrelated to an Option. The Committee may grant
to Eligible Individuals Stock Appreciation Rights unrelated to Options. Stock
Appreciation Rights unrelated to Options shall contain such terms and conditions
as to exercisability (subject to Section 7.7), vesting and duration as the
Committee shall determine, but in no event shall they have a term of greater
than ten (10) years. Upon exercise of a Stock Appreciation Right unrelated to an
Option, the Grantee shall be entitled to receive an amount determined by
multiplying (a) the excess of the Fair Market Value of a Share on the date of
exercise of such Stock Appreciation Right over the Fair Market Value of a Share
on the date the Stock Appreciation Right was granted, by (b) the number of
Shares as to which the Stock Appreciation Right is being exercised.
Notwithstanding the foregoing, the Committee may limit in any manner the amount
payable with respect to any Stock Appreciation Right by including such a limit
in the Agreement evidencing the Stock Appreciation Right at the time it is
granted.

7.4    Non-Transferability. No Stock Appreciation Right shall be transferable by
the Grantee otherwise than by will or by the laws of descent and distribution or
pursuant to a domestic relations order (within the meaning of Rule 16a-12
promulgated under the Exchange Act), and such Stock Appreciation Right shall be
exercisable during the lifetime of such Grantee only by the Grantee or his or
her guardian or legal representative. The terms of such Stock Appreciation Right
shall be final, binding and conclusive upon the beneficiaries, executors,
administrators, heirs and successors of the Grantee.

7.5    Method of Exercise. Stock Appreciation Rights shall be exercised by a
Grantee only by a written notice delivered in person or by mail to the Secretary
of the Company at the Company’s principal executive office, specifying the
number of Shares with respect to which the Stock Appreciation Right is being
exercised. If requested by the Committee, the Grantee shall deliver the
Agreement evidencing the Stock Appreciation Right being exercised and the
Agreement evidencing any related Option to the Secretary of the Company who
shall endorse thereon a notation of such exercise and return such Agreement to
the Grantee.

7.6    Form of Payment. Payment of the amount determined under Sections 7.2(b)
or 7.3 may be made in the discretion of the Committee solely in whole Shares in
a number determined at their Fair Market Value on the date of exercise of the
Stock Appreciation Right, or solely in cash, or in a combination of cash and
Shares. If the Committee decides to make full payment in Shares and the amount
payable results in a fractional Share, payment for the fractional Share will be
made in cash.

7.7    Effect of Change in Control. Section 13(b) shall control the treatment of
any Stock Appreciation Rights outstanding at the time of a Change in Control.
Any Stock Appreciation Rights that are exercisable as of a Change in Control
shall remain exercisable for a period ending not before the earlier of (x) the
six (6) month anniversary of the Change in Control or (y) the expiration of the
stated term of the Stock Appreciation Right.

 

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8. Restricted Stock and Restricted Stock Units.

8.1    Restricted Stock. The Committee may grant Awards to Eligible Individuals
of Restricted Stock, which shall be evidenced by an Agreement between the
Company and the Grantee. Each Agreement shall contain such restrictions, terms
and conditions as the Committee may, in its discretion, determine and (without
limiting the generality of the foregoing) such Agreements may require that an
appropriate legend be placed on Share certificates. Awards of Restricted Stock
shall be subject to the terms and provisions set forth below in this
Section 8.1.

(a)      Rights of Grantee. Shares of Restricted Stock granted pursuant to an
Award hereunder shall be issued in the name of the Grantee as soon as reasonably
practicable after the Award is granted provided that the Grantee has executed an
Agreement evidencing the Award, the appropriate blank stock powers and, in the
discretion of the Committee, an escrow agreement and any other documents which
the Committee may require as a condition to the issuance of such Shares. If a
Grantee shall fail to execute the Agreement evidencing a Restricted Stock Award,
or any documents which the Committee may require within the time period
prescribed by the Committee at the time the Award is granted, the Award shall be
null and void. At the discretion of the Committee, Shares issued in connection
with a Restricted Stock Award shall be deposited together with the stock powers
with an escrow agent (which may be the Company) designated by the Committee.
Unless the Committee determines otherwise and as set forth in the Agreement,
upon delivery of the Shares to the escrow agent, the Grantee shall have all of
the rights of a stockholder with respect to such Shares, including the right to
vote the Shares and to receive all dividends or other distributions paid or made
with respect to the Shares.

(b)      Non-Transferability. Until all restrictions upon the Shares of
Restricted Stock awarded to a Grantee shall have lapsed in the manner set forth
in Section 8.1(c), such Shares shall not be sold, transferred or otherwise
disposed of and shall not be pledged or otherwise hypothecated.

(c)      Lapse of Restrictions.

(1)    Generally. Restrictions upon Shares of Restricted Stock awarded hereunder
shall lapse at such time or times and on such terms and conditions as the
Committee may determine. The Agreement evidencing the Award shall set forth any
such restrictions.

(2)    Effect of Change in Control. Section 13(b) shall control the treatment of
any Shares of Restricted Stock then outstanding in the event of a Change in
Control.

(d)      Treatment of Dividends. At the time an Award of Shares of Restricted
Stock is granted, the Committee may, in its discretion, determine that the
payment to the Grantee of dividends, or a specified portion thereof, declared or
paid on such Shares by the Company shall be (a) deferred until the lapsing of
the restrictions imposed upon such Shares and (b) held by the Company for the
account of the Grantee until such time. In the event that dividends are to be
deferred, the Committee shall determine whether such dividends are to be
reinvested in Shares (which shall be held as additional Shares of Restricted
Stock) or held in cash. If deferred dividends are to be held in cash, there may
be credited at the end of each year (or portion thereof) interest on the amount
of the account at the beginning of the

 

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year at a rate per annum as the Committee, in its discretion, may determine.
Payment of deferred dividends in respect of Shares of Restricted Stock (whether
held in cash or as additional Shares of Restricted Stock), together with
interest accrued thereon, if any, shall be made upon the lapsing of restrictions
imposed on the Shares in respect of which the deferred dividends were paid, and
any dividends deferred (together with any interest accrued thereon) in respect
of any Shares of Restricted Stock shall be forfeited upon the forfeiture of such
Shares.

(e)      Delivery of Shares. Upon the lapse of the restrictions on Shares of
Restricted Stock, the Committee shall cause a stock certificate to be delivered
to the Grantee with respect to such Shares, free of all restrictions hereunder.

8.2    Restricted Stock Units. The Committee may grant to Eligible Individuals
Awards of Restricted Stock Units, which shall be evidenced by an Agreement. Each
such Agreement shall contain such restrictions, terms and conditions as the
Committee may, in its discretion, determine. Awards of Restricted Stock Units
shall be subject to the terms and provisions set forth below in this
Section 8.2.

(a)      Payment of Awards. Each Restricted Stock Unit shall represent the right
of a Grantee to receive a payment upon vesting of the Restricted Stock Unit or
on any later date specified by the Committee equal to the Fair Market Value of a
Share as of the date the Restricted Stock Unit was granted, the vesting date or
such other date as determined by the Committee at the time the Restricted Stock
Unit was granted. The Committee may, at the time a Restricted Stock Unit is
granted, provide a limitation on the amount payable in respect of each
Restricted Stock Unit. The Committee may provide for the settlement of
Restricted Stock Units in cash or with Shares having a Fair Market Value equal
to the payment to which the Grantee has become entitled.

(b)      Effect of Change in Control. Section 13(b) shall control the treatment
of any Restricted Stock Units then outstanding in the event of a Change in
Control.

 

9. Performance Awards.

9.1      Performance Units. The Committee, in its discretion, may grant Awards
of Performance Units to Eligible Individuals, the terms and conditions of which
shall be set forth in an Agreement between the Company and the Grantee; provided
that, when aggregated with Performance Awards granted under the 2000 Stock
Option and Award Plan in any calendar year, no Eligible Individual may be
granted Performance Awards in the aggregate in respect of more than 1,000,000
Shares. Contingent upon the attainment of specified Performance Objectives
within the Performance Cycle, Performance Units represent the right to receive
payment as provided in Section 9.1(b) of (i) the Fair Market Value of a Share on
the date the Performance Unit was granted, the date the Performance Unit became
vested or any other date specified by the Committee or (ii) a percentage (which
may be more than 100%) of the amount described in clause (i) depending on the
level of Performance Objective attainment; provided, however, that the Committee
may at the time a Performance Unit is granted specify a maximum amount payable
in respect of a vested Performance Unit. Each Agreement shall specify the number
of Performance Units to which it relates, the Performance Objectives which must
be satisfied in order for the Performance Units to vest and the Performance
Cycle within which such Performance Objectives must be satisfied.

 

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(a)      Vesting and Forfeiture. Subject to Sections 9.3(c) and 9.4, a Grantee
shall become vested with respect to the Performance Units to the extent that the
Performance Objectives set forth in the Agreement are satisfied for the
Performance Cycle.

(b)      Payment of Awards. Subject to Section 9.3(c), payment to Grantees in
respect of vested Performance Units shall be made as soon as practicable after
the last day of the Performance Cycle to which such Award relates unless the
Agreement evidencing the Award provides for the deferral of payment, in which
event the terms and conditions of the deferral shall be set forth in the
Agreement. Subject to Section 9.4, such payments may be made entirely in Shares
valued at their Fair Market Value, entirely in cash, or in such combination of
Shares and cash as the Committee in its discretion shall determine at any time
prior to such payment, provided, however, that if the Committee in its
discretion determines to make such payment entirely or partially in Shares of
Restricted Stock, the Committee must determine the extent to which such payment
will be in Shares of Restricted Stock and the terms of such Restricted Stock at
the time the Award is granted.

9.2    Performance Shares. The Committee, in its discretion, may grant Awards of
Performance Shares to Eligible Individuals, the terms and conditions of which
shall be set forth in an Agreement between the Company and the Grantee. Each
Agreement may require that an appropriate legend be placed on Share
certificates. Awards of Performance Shares shall be subject to the following
terms and provisions:

(a)      Rights of Grantee. The Committee shall provide at the time an Award of
Performance Shares is made the time or times at which the actual Shares
represented by such Award shall be issued in the name of the Grantee; provided,
however, that no Performance Shares shall be issued until the Grantee has
executed an Agreement evidencing the Award, the appropriate blank stock powers
and, in the discretion of the Committee, an escrow agreement and any other
documents which the Committee may require as a condition to the issuance of such
Performance Shares. If a Grantee shall fail to execute the Agreement evidencing
an Award of Performance Shares, the appropriate blank stock powers and, in the
discretion of the Committee, an escrow agreement and any other documents which
the Committee may require within the time period prescribed by the Committee at
the time the Award is granted, the Award shall be null and void. At the
discretion of the Committee, Shares issued in connection with an Award of
Performance Shares shall be deposited together with the stock powers with an
escrow agent (which may be the Company) designated by the Committee. Except as
restricted by the terms of the Agreement, upon delivery of the Shares to the
escrow agent, the Grantee shall have, in the discretion of the Committee, all of
the rights of a stockholder with respect to such Shares, including the right to
vote the Shares and to receive all dividends or other distributions paid or made
with respect to the Shares.

(b)      Non-Transferability. Until any restrictions upon the Performance Shares
awarded to a Grantee shall have lapsed in the manner set forth in Section 9.2(c)
or 9.4, such Performance Shares shall not be sold, transferred or otherwise
disposed of and shall not be pledged or otherwise hypothecated, nor shall they
be delivered to the Grantee. The Committee may also impose such other
restrictions and conditions on the Performance Shares, if any, as it deems
appropriate.

(c)      Lapse of Restrictions. Subject to Sections 9.3(c) and 9.4, restrictions
upon Performance Shares awarded hereunder shall lapse and such Performance
Shares shall become vested at such time or times and on such terms, conditions
and satisfaction of Performance Objectives as the Committee may, in its
discretion, determine at the time an Award is granted.

 

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(d)      Treatment of Dividends. At the time the Award of Performance Shares is
granted, the Committee may, in its discretion, determine that the payment to the
Grantee of dividends, or a specified portion thereof, declared or paid on Shares
represented by such Award which have been issued by the Company to the Grantee
shall be (i) deferred until the lapsing of the restrictions imposed upon such
Performance Shares and (ii) held by the Company for the account of the Grantee
until such time. In the event that dividends are to be deferred, the Committee
shall determine whether such dividends are to be reinvested in shares of Stock
(which shall be held as additional Performance Shares) or held in cash. If
deferred dividends are to be held in cash, there may be credited at the end of
each year (or portion thereof) interest on the amount of the account at the
beginning of the year at a rate per annum as the Committee, in its discretion,
may determine. Payment of deferred dividends in respect of Performance Shares
(whether held in cash or in additional Performance Shares), together with
interest accrued thereon, if any, shall be made upon the lapsing of restrictions
imposed on the Performance Shares in respect of which the deferred dividends
were paid, and any dividends deferred (together with any interest accrued
thereon) in respect of any Performance Shares shall be forfeited upon the
forfeiture of such Performance Shares.

(e)      Delivery of Shares. Upon the lapse of the restrictions on Performance
Shares awarded hereunder, the Committee shall cause a stock certificate to be
delivered to the Grantee with respect to such Shares, free of all restrictions
hereunder.

9.3    Performance Objectives.

(a)      Establishment. Performance Objectives for Performance Awards may be
expressed in terms of (i) earnings per Share, (ii) net revenue, (iii) adjusted
EBITDA (iv) Share price, (v) pre-tax profits, (vi) net earnings, (vii) return on
equity or assets, (viii) operating income, (ix) EBITDA margin, (x) EBITDA margin
improvement, (xi) bad debt expense, (xii) cash receipts, (xiii) uncompensated
care expense, (xiv) days in net revenue in net patient accounts receivable,
(xv) gross income, (xvi) net income (before or after taxes), (xvii) cash flow;
(xviii) gross profit, (xix) gross profit return on investment, (xx) gross margin
return on investment, (xxi) gross margin; (xxii) operating margin,
(xxiii) working capital, (xxiv) earnings before interest and taxes, (xxv) return
on capital, (xxvi) return on invested capital, (xxvii) revenue growth,
(xxviii) annual recurring revenues, (xxix) recurring revenues, (xxx) total
shareholder return, (xxxi) economic value added, (xxxii) specified objectives
with regard to limiting the level of increase in all or a portion of the
Company’s bank debt or other long-term or short-term public or private debt or
other similar financial obligations of the Company, which may be calculated net
of cash balances and/or other offsets and adjustments as may be established by
the Committee in its sole discretion, (xxxiii) reduction in operating expenses,
or (xxxiv) any combination of the foregoing. Performance Objectives may be in
respect of the performance of the Company, any of its Subsidiaries, any of its
Divisions or any combination thereof. Performance Objectives may be absolute or
relative (to prior performance of the Company or to the performance of one or
more other entities or external indices) and may be expressed in terms of a
progression within a specified range. The Performance Objectives with respect to
a Performance Cycle shall be established in writing by the Committee by the
earlier of (x) the date on which a quarter of the Performance Cycle has elapsed
or (y) the date which is ninety (90) days after the commencement of the
Performance Cycle, and in any event while the performance relating to the
Performance Objectives remain substantially uncertain.

 

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(b)    Effect of Certain Events. At the time of the granting of a Performance
Award, or at any time thereafter, in either case to the extent permitted under
Section 162(m) of the Code and the regulations thereunder without adversely
affecting the treatment of the Performance Award as Performance-Based
Compensation, the Committee may provide for the manner in which performance will
be measured against the Performance Objectives (or may adjust the Performance
Objectives) to reflect the impact of specified corporate transactions,
accounting or tax law changes and other extraordinary or nonrecurring events.

(c)    Determination of Performance. Prior to the vesting, payment, settlement
or lapsing of any restrictions with respect to any Performance Award that is
intended to constitute Performance-Based Compensation made to a Grantee who is
subject to Section 162(m) of the Code, the Committee shall certify in writing
that the applicable Performance Objectives have been satisfied to the extent
necessary for such Award to qualify as Performance Based Compensation.

9.4      Effect of Change in Control. Section 13(b) shall control the treatment
of any Performance Units then outstanding in the event of a Change in Control.

9.5      Non-Transferability. Until the vesting of Performance Units or the
lapsing of any restrictions on Performance Shares, as the case may be, such
Performance Units or Performance Shares shall not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise hypothecated.

 

10. Share Awards. The Committee may grant a Share Award to any Eligible
Individual on such terms and conditions as the Committee may determine in its
sole discretion. Share Awards may be made as additional compensation for
services rendered by the Eligible Individual or may be in lieu of cash or other
compensation to which the Eligible Individual is entitled from the Company.

 

11. Effect of a Termination of Employment.

The Agreement evidencing the grant of each Option and each Award shall set forth
the terms and conditions applicable to such Option or Award upon a termination
or change in the status of the employment of the Optionee or Grantee by the
Company, a Subsidiary or a Division (including a termination or change by reason
of the sale of a Subsidiary or a Division), which shall be as the Committee may,
in its discretion, determine at the time the Option or Award is granted or
thereafter.

 

12. Adjustment Upon Changes in Capitalization.

(a)    In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments, if any, to (i) the maximum
number and class of Shares or other stock or securities with respect to which
Options or Awards may be granted under the Plan, (ii) the number and class of
Shares or other stock or securities which are subject to outstanding Options or
Awards granted under the Plan and the exercise price therefor, if applicable,
and (iii) the Performance Objectives.

(b)    Any such adjustment in the Shares or other stock or securities
(a) subject to outstanding Incentive Stock Options (including any adjustments in
the exercise price) shall be made in such manner as not to constitute a
modification as defined by Section

 

19

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424(h)(3) of the Code and only to the extent permitted by Sections 422 and 424
of the Code or (b) subject to outstanding Options or Awards that are intended to
qualify as Performance-Based Compensation shall be made in such a manner as not
to adversely affect the treatment of the Options or Awards as Performance-Based
Compensation. In addition, (a) no adjustment to any Option or Award that is not
subject to Section 409A of the Code shall be made in a manner that would subject
the Option or Award to Section 409A of the Code and (b) any adjustment to an
Option or Award that is subject to Section 409A of the Code shall be made only
in a manner and to the extent permitted by Section 409A of the Code.

(c)    If, by reason of a Change in Capitalization, a Grantee of an Award shall
be entitled to, or an Optionee shall be entitled to exercise an Option with
respect to, new, additional or different shares of stock or securities of the
Company or any other corporation, such new, additional or different shares shall
thereupon be subject to all of the conditions, restrictions and performance
criteria which were applicable to the Shares subject to the Award or Option, as
the case may be, prior to such Change in Capitalization.

 

13. Effect of Certain Transactions; Effect of Change in Control.

(a)    Effect of Certain Transactions. Subject to Sections 5.10, 7.7, 8.2(b) and
9.4 or as otherwise provided in an Agreement, in the event of (a) the
liquidation or dissolution of the Company or (b) a merger or consolidation of
the Company (a “Transaction”), the Plan and the Options and Awards issued
hereunder shall continue in effect in accordance with their respective terms,
except that following a Transaction either (i) each outstanding Option or Award
shall be treated as provided for in the agreement entered into in connection
with the Transaction or (ii) if not so provided in such agreement, each Optionee
and Grantee shall be entitled to receive in respect of each Share subject to any
outstanding Options or Awards, as the case may be, upon exercise of any Option
or payment or transfer in respect of any Award, the same number and kind of
stock, securities, cash, property or other consideration that each holder of a
Share was entitled to receive in the Transaction in respect of a Share;
provided, however, that such stock, securities, cash, property, or other
consideration shall remain subject to all of the conditions, restrictions and
performance criteria which were applicable to the Options and Awards prior to
such Transaction. For the avoidance of doubt, the Committee may, without the
consent of any Optionee or Grantee, provide for the cancellation of outstanding
Awards in connection with a Transaction in exchange for the payment in cash or
property equal in value to the Fair Market Value of the Shares underlying such
Awards, less, in the case of Options, the aggregate exercise price thereof;
provided that Options with an aggregate exercise price that is equal to or in
excess of the aggregate Fair Market Value of the Shares underlying such Options
may be cancelled in connection with such Transaction without any consideration
being paid in respect thereof. The treatment of any Option or Award as provided
in this Section 13(a) shall be conclusively presumed to be appropriate for
purposes of Section 12.

(b)    Effect of Change in Control. Notwithstanding any other provision of the
Plan to the contrary, in the event of a Change in Control, the following
provisions of this Section 13(b) shall apply except to the extent an Option or
Award Agreement provides for a different treatment (in which case the Option or
Award Agreement shall govern and this Section 13(b) shall not be applicable):

(i)    If and to the extent that outstanding Options or Awards under the Plan
(A) are assumed by the successor corporation (or affiliate thereto) or continued
or (B) are replaced with equity awards that preserve the existing value of the
Options or

 

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Awards at the time of the Change in Control and provide for subsequent payout in
accordance with a vesting schedule and Performance Objectives, as applicable,
that are the same or more favorable to the Participants than the vesting
schedule and Performance Objectives applicable to the Options or Awards, then
all such Options or Awards or such substitutes thereof shall remain outstanding
and be governed by their respective terms and the provisions of the Plan,
subject to Section 13(b)(iv) below.

(ii)    If and to the extent that outstanding Options or Awards under the Plan
are not assumed, continued or replaced in accordance with Section 13(b)(i)
above, then upon the Change in Control the following treatment (referred to as
“Change-in-Control Treatment”) shall apply to such Options or Awards:
(A) outstanding Options and Stock Appreciation Rights shall immediately vest and
become exercisable; (B) the restrictions and other conditions applicable to
outstanding Restricted Shares, Restricted Stock Units and Stock Awards,
including vesting requirements, shall immediately lapse; such Awards shall be
free of all restrictions and fully vested; and, with respect to Restricted Stock
Units, shall be payable immediately in accordance with their terms or, if later,
as of the earliest permissible date under Code Section 409A; and (C) outstanding
Performance Awards granted under the Plan shall immediately vest and shall
become immediately payable in accordance with their terms as if the Performance
Objectives have been achieved at the target performance level.

(iii)    If and to the extent that outstanding Options or Awards under the Plan
are not assumed, continued or replaced in accordance with Section 13(b)(i)
above, then in connection with the application of the Change-in-Control
Treatment set forth in Section 13(b)(ii) above, the Board may, in its sole
discretion, provide for cancellation of such outstanding Awards at the time of
the Change in Control in which case a payment of cash, property or a combination
thereof shall be made to each such Optionee or Grantee upon the consummation of
the Change in Control that is determined by the Board in its sole discretion and
that is at least equal to the excess (if any) of the value of the consideration
that would be received in such Change in Control by the holders of the Company’s
securities relating to such Options or Awards over the exercise or purchase
price (if any) for such Options or Awards (except that, in the case of an Option
or Stock Appreciation Right, such payment shall be limited as necessary to
prevent the Option or Stock Appreciation Right from being subject to the excise
tax under Code Section 409A).

(iv)    If and to the extent that (A) outstanding Options or Awards are assumed,
continued or replaced in accordance with Section 13(b)(i) above and (B) a
Optionee’s or Grantee’s employment with, or performance of services for, the
Company or any of its Subsidiaries or successors is terminated by the Company or
such Subsidiary or successor for any reasons other than Cause or by such
Optionee or Grantee for Good Reason, in each case, within the two-year period
commencing on the Change in Control, then, as of the date of such Participant’s
termination, the Change-in-Control Treatment set forth in Section 13(b)(ii)
above shall apply to all assumed or replaced Options or Awards of such
Participant then outstanding.

(v)    Outstanding Options or Stock Appreciation Rights that are assumed,
continued or replaced in accordance with Section 13(b)(i) may be exercised by
the Optionee or Grantee in accordance with the applicable terms and conditions
of such Option or Award as set forth in the applicable Agreement or elsewhere;
provided, however, that Options or Stock Appreciation Rights that become
exercisable in accordance with Section 13(b)(iv) may be exercised until the
expiration of the original full term of such Option or Stock Appreciation Right
notwithstanding the other original terms and conditions of such Award, to the
extent allowed without such Option or Stock Appreciation Right becoming subject
to the excise tax under Code Section 409A).

 

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14. Interpretation.

Following the required registration of any equity security of the Company
pursuant to Section 12 of the Exchange Act:

(a)    The Plan is intended to comply with Rule 16b-3 promulgated under the
Exchange Act and the Committee shall interpret and administer the provisions of
the Plan or any Agreement in a manner consistent therewith. Any provisions
inconsistent with such Rule shall be inoperative and shall not affect the
validity of the Plan.

(b)    Unless otherwise expressly stated in the relevant Agreement, each Option,
Stock Appreciation Right and Performance Award granted under the Plan is
intended to be Performance-Based Compensation. The Committee shall not be
entitled to exercise any discretion otherwise authorized hereunder with respect
to such Options or Awards if the ability to exercise such discretion or the
exercise of such discretion itself would cause the compensation attributable to
such Options or Awards to fail to qualify as Performance-Based Compensation.

(c)    To the extent that any legal requirement of Section 16 of the Exchange
Act or Section 162(m) of the Code as set forth in the Plan ceases to be required
under Section 16 of the Exchange Act or Section 162(m) of the Code, that Plan
provision shall cease to apply.

 

15. Termination and Amendment of the Plan or Modification of Options and Awards.

15.1      Plan Amendment or Termination. The Plan shall terminate on the day
preceding the tenth anniversary of the date of its most recent adoption by the
Board and no Option or Award may be granted thereafter. The Board may sooner
terminate the Plan and the Board may at any time and from time to time amend,
modify or suspend the Plan; provided, however, that:

(a)    no such amendment, modification, suspension or termination shall impair
or adversely alter any Options or Awards theretofore granted under the Plan,
except with the written consent of the Optionee or Grantee, nor shall any
amendment, modification, suspension or termination deprive any Optionee or
Grantee of any Shares which he or she may have acquired through or as a result
of the Plan; and

(b)    to the extent necessary under any applicable law, regulation or exchange
requirement no amendment shall be effective unless approved by the stockholders
of the Company in accordance with applicable law, regulation or exchange
requirement.

15.2      Modification of Options and Awards. No modification of an Option or
Award shall adversely alter or impair any rights or obligations under the Option
or Award without the written consent of the Optionee or Grantee, as the case may
be.

15.3      No Repricing of Options or Stock Appreciation Rights. The Committee
shall have no authority to make any adjustment (other than in connection with a
stock dividend, recapitalization or other transaction where an adjustment is
permitted or required under the

 

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terms of the Plan) or amendment, and no such adjustment or amendment shall be
made, that reduces or would have the effect of reducing the exercise price of an
Option or Stock Appreciation Right previously granted under the Plan, whether
through amendment, cancellation or replacement grants, or other means (including
without limitation the buyout for cash of any Option or Stock Appreciation Right
that has a fair market value that is less than the strike price for said Option
or Stock Appreciation Right), unless the Company’s stockholders shall have
approved such adjustment or amendment.

 

16. Non-Exclusivity of the Plan.

The adoption of the Plan by the Board shall not be construed as amending,
modifying or rescinding any previously approved incentive arrangement or as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under the Plan, and such arrangements
may be either applicable generally or only in specific cases.

 

17. Limitation of Liability.

As illustrative of the limitations of liability of the Company, but not intended
to be exhaustive thereof, nothing in the Plan shall be construed to:

(a)    give any person any right to be granted an Option or Award other than at
the sole discretion of the Committee;

(b)    give any person any rights whatsoever with respect to Shares except as
specifically provided in the Plan;

(c)    limit in any way the right of the Company or any Subsidiary to terminate
the employment of any person at any time; or

(d)    be evidence of any agreement or understanding, expressed or implied, that
the Company will employ any person at any particular rate of compensation or for
any particular period of time.

 

18. Regulations and Other Approvals; Governing Law.

18.1      Except as to matters of federal law, the Plan and the rights of all
persons claiming hereunder shall be construed and determined in accordance with
the laws of the State of Delaware without giving effect to conflicts of laws
principles thereof.

18.2      The obligation of the Company to sell or deliver Shares with respect
to Options and Awards granted under the Plan shall be subject to all applicable
laws, rules and regulations, including all applicable federal and state
securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.

18.3      The Board may make such changes as may be necessary or appropriate to
comply with the rules and regulations of any government authority, or to obtain
for Eligible Individuals granted Incentive Stock Options the tax benefits under
the applicable provisions of the Code and regulations promulgated thereunder.

 

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18.4      Each Option and Award is subject to the requirement that, if at any
time the Committee determines, in its discretion, that the listing, registration
or qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or Award or the
issuance of Shares, no Options or Awards shall be granted or payment made or
Shares issued, in whole or in part, unless listing, registration, qualification,
consent or approval has been effected or obtained free of any conditions as
acceptable to the Committee.

18.5      Notwithstanding anything contained in the Plan or any Agreement to the
contrary, in the event that the disposition of Shares acquired pursuant to the
Plan is not covered by a then current registration statement under the
Securities Act of 1933, as amended (the “Securities Act”), and is not otherwise
exempt from such registration, such Shares shall be restricted against transfer
to the extent required by the Securities Act and Rule 144 or other regulations
thereunder. The Committee may require any individual receiving Shares pursuant
to an Option or Award granted under the Plan, as a condition precedent to
receipt of such Shares, to represent and warrant to the Company in writing that
the Shares acquired by such individual are acquired without a view to any
distribution thereof and will not be sold or transferred other than pursuant to
an effective registration thereof under the Securities Act or pursuant to an
exemption applicable under the Securities Act or the rules and regulations
promulgated thereunder. The certificates evidencing any such Shares shall be
appropriately amended or have an appropriate legend placed thereon to reflect
their status as restricted securities as aforesaid.

18.6      Compliance With Section 409A. All Options and Awards granted under the
plan are intended either not to be subject to Section 409A of the Code or, if
subject to Section 409A of the Code, to be administered, operated and construed
in compliance with Section 409A of the Code and any guidance issued thereunder.
Notwithstanding this or any other provision of the Plan to the contrary, the
Committee may amend the Plan or any Option or Award granted hereunder in any
manner, or take any other action, that it determines, in its sole discretion, is
necessary, appropriate or advisable to cause the Plan or any Option or Award
granted hereunder to comply with Section 409A and any guidance issued
thereunder. Any such action, once taken, shall be deemed to be effective from
the earliest date necessary to avoid a violation of Section 409A and shall be
final, binding and conclusive on all Eligible Individuals and other individuals
having or claiming any right or interest under the Plan.

 

19. Miscellaneous.

19.1      Multiple Agreements. The terms of each Option or Award may differ from
other Options or Awards granted under the Plan at the same time or at some other
time. The Committee may also grant more than one Option or Award to a given
Eligible Individual during the term of the Plan, either in addition to, or in
substitution for, one or more Options or Awards previously granted to that
Eligible Individual.

19.2      Beneficiary Designation. Each Optionee or Grantee may, from time to
time, name one or more individuals (each, a “Beneficiary”) to whom any benefit
under the Plan is to be paid or who may exercise any rights of the Optionee or
Grantee under any Option or Award granted under the Plan in the event of the
Optionee’s or Grantee’s death before he or she receives any or all of such
benefit or exercises such Option. Each such designation shall revoke all prior
designations by the same Optionee or Grantee, shall be in a form prescribed by
the Company, and will be effective only when filed by the Optionee or Grantee in
writing with

 

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the Company during the Optionee’s or Grantee’s lifetime. In the absence of any
such designation, benefits remaining unpaid at the Optionee’s or Grantee’s death
and rights to be exercised following the Optionee’s or Grantee’s death shall be
paid to or exercised by the Optionee’s or Grantee’s estate.

 

19.3 Withholding of Taxes.

(a)    At such times as an Optionee or Grantee recognizes taxable income in
connection with the receipt of Shares or cash hereunder (a “Taxable Event”), the
Optionee or Grantee shall pay to the Company an amount equal to the federal,
state and local income taxes and other amounts as may be required by law to be
withheld by the Company in connection with the Taxable Event (the “Withholding
Taxes”) prior to the issuance, or release from escrow, of such Shares or the
payment of such cash. The Company shall have the right to deduct from any
payment of cash to an Optionee or Grantee an amount equal to the Withholding
Taxes in satisfaction of the obligation to pay Withholding Taxes. The Committee
may provide in an Agreement evidencing an Option or Award at the time of grant
or thereafter that the Optionee or Grantee, in satisfaction of the obligation to
pay Withholding Taxes to the Company, may elect to have withheld a portion of
the Shares issuable to him or her pursuant to the Option or Award having an
aggregate Fair Market Value equal to the Withholding Taxes. In the event Shares
are withheld by the Company to satisfy any obligation to pay Withholding Taxes,
such Shares shall be retired and cancelled and shall not thereafter be available
to grant an Option or Award with respect thereto.

(b)    If an Optionee makes a disposition, within the meaning of Section 424(c)
of the Code and regulations promulgated thereunder, of any Share or Shares
issued to such Optionee pursuant to the exercise of an Incentive Stock Option
within the two-year period commencing on the day after the date of the grant or
within the one-year period commencing on the day after the date of transfer of
such Share or Shares to the Optionee pursuant to such exercise, the Optionee
shall, within ten (10) days of such disposition, notify the Company thereof, by
delivery of written notice to the Company at its principal executive office.

19.4      Effective Date. The effective date of this Plan shall be March 19,
2014, subject only to the approval by the holders of a majority of the
securities of the Company entitled to vote thereon, in accordance with the
applicable laws, within twelve (12) months of the adoption of the Plan by the
Board.

 

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