Exhibit 10.3

 

SMURFIT-STONE CONTAINER CORPORATION

 

EQUITY INCENTIVE PLAN

 

I               INTRODUCTION

 

1.1          Purposes.  The purposes of the Smurfit-Stone Container Corporation
Equity Incentive Plan (this “Plan”) are (i) to align the interests of the
Company’s stockholders and the recipients of awards under this Plan by
increasing the proprietary interest of such recipients in the Company’s growth
and success, (ii) to advance the interests of the Company by attracting and
retaining directors, officers, other employees and consultants and (iii) to
motivate such persons to act in the long-term best interests of the Company and
its stockholders.

 

1.2          Certain Definitions.

 

“Agreement” shall mean the written agreement evidencing an award hereunder
between the Company and the recipient of such award.

 

“Bankruptcy Court” shall have the meaning set forth in Section 5.1.

 

“Bankruptcy Proceedings” shall mean the bankruptcy proceedings in the United
States Bankruptcy Court for the District of Delaware with respect to In re:
Smurfit-Stone Container Corp., Case No. 09-10235 (BLS).

 

“Board” shall mean the Board of Directors of the Company.

 

“Change in Control” shall have the meaning set forth in Section 5.8(b).

 

“Code” shall mean the Internal Revenue Code of 1986, as amended.

 

“Committee” shall mean the Committee designated by the Board, consisting of two
or more members of the Board, each of whom may be (i) a “Non-Employee Director”
within the meaning of Rule 16b-3 under the Exchange Act, (ii) an “outside
director” within the meaning of Section 162(m) of the Code and
(iii) “independent” within the meaning of the rules of the principal national
stock exchange on which the Common Stock is then traded.

 

“Common Stock” shall mean the common stock, par value $0.001 per share, of the
Company, and all rights appurtenant thereto.

 

“Company” shall mean Smurfit-Stone Container Corporation, a Delaware
corporation, or any successor thereto.

 

“Emergence Equity Awards” shall mean stock option, restricted stock or other
equity compensation awards granted in connection with the Company’s emergence
from bankruptcy following the confirmation of the Plan of Reorganization.

 

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“Employment Agreement” shall mean the Employment Agreement or Employment
Security Agreement, if any, (as amended, if applicable) between the Company and
the recipient of an award.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“Fair Market Value” shall mean the closing transaction price of a share of
Common Stock as reported on the principal national stock exchange on which the
Common Stock is traded on the date as of which such value is being determined
or, if there shall be no reported transactions for such date, on the next
preceding date for which transactions were reported; provided, however, that if
the Common Stock is not listed on a national stock exchange or if Fair Market
Value for any date cannot be so determined, Fair Market Value shall be
determined by the Committee by whatever means or method as the Committee, in the
good faith exercise of its discretion, shall at such time deem appropriate and
in compliance with Section 409A of the Code; provided further that, with respect
to the Emergence Equity Awards, Fair Market Value shall mean the average of the
closing transaction prices of a share of Common Stock as reported on the
principal national stock exchange on which the Common Stock is traded for the
30-day period commencing on the Listing Date.

 

“Free-Standing SAR” shall mean an SAR which is not granted in tandem with, or by
reference to, an option, which entitles the holder thereof to receive, upon
exercise, shares of Common Stock (which may be Restricted Stock) with an
aggregate value equal to the excess of the Fair Market Value of one share of
Common Stock on the date of exercise over the base price of such SAR, multiplied
by the number of such SARs which are exercised.

 

“Incapacity” shall have the meaning set forth in the Employment Agreement;
provided that if a recipient of an award is not a party to an Employment
Agreement that contains such definition, then “Incapacity” shall mean an
individual’s long-term disability as defined under the long-term disability plan
of the Company that covers that individual; or if the individual is not covered
by such a long-term disability plan, an individual’s disability as defined for
purposes of eligibility for a disability award under the Social Security Act.

 

“Incentive Stock Option” shall mean an option to purchase shares of Common Stock
that meets the requirements of Section 422 of the Code, or any successor
provision, which is intended by the Committee to constitute an Incentive Stock
Option.

 

“Listing Date” shall mean the date on which the Common Stock first becomes
listed on a national stock exchange after the Company’s emergence from
bankruptcy following the confirmation of the Plan of Reorganization.

 

“Non-Employee Director” shall mean any director of the Company who is not an
officer or employee of the Company or any Subsidiary.

 

“Nonqualified Stock Option” shall mean an option to purchase shares of Common
Stock which is not an Incentive Stock Option.

 

“Performance Measures” shall mean the criteria and objectives, established by
the Committee and set forth in the Agreement, which shall be satisfied or met
(i) as a condition to

 

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the grant or exercisability of all or a portion of an option or SAR or
(ii) during the applicable Restriction Period or Performance Period as a
condition to the vesting of the holder’s interest, in the case of a Restricted
Stock Award, of the shares of Common Stock subject to such award, or, in the
case of a Restricted Stock Unit Award, to the holder’s receipt of the shares of
Common Stock subject to such award or of payment with respect to such award.  To
the extent necessary for an award to be qualified performance-based compensation
under Section 162(m) of the Code and the regulations thereunder, such criteria
and objectives shall include one or more of the following corporate-wide or
subsidiary, division, operating unit or individual measures, stated in either
absolute terms or relative terms, such as rates of growth or improvement: the
attainment by a share of Common Stock of a specified Fair Market Value for a
specified period of time, earnings per share, return to stockholders (including
dividends), return on assets, return on equity, earnings of the Company before
or after taxes and/or interest, revenues, market share, cash flow or cost
reduction goals, interest expense after taxes, return on investment, return on
investment capital, economic value created, operating margin, net income before
or after taxes, pretax earnings before interest, depreciation and/or
amortization, pretax operating earnings after interest expense and before
incentives, and/or extraordinary or special items, operating earnings, net cash
provided by operations, and strategic business criteria, consisting of one or
more objectives based on meeting specified market penetration, geographic
business expansion goals, cost targets, customer satisfaction, reductions in
errors and omissions, reductions in lost business, management of employment
practices and employee benefits, supervision of litigation and information
technology, quality and quality audit scores, productivity, efficiency, and
goals relating to acquisitions or divestitures, or any combination of the
foregoing.

 

“Performance Option” shall mean an Incentive Stock Option or Nonqualified Stock
Option, the grant of which or the exercisability of all or a portion of which is
contingent upon the attainment of specified Performance Measures within a
specified Performance Period.

 

“Performance Period” shall mean any period designated by the Committee and set
forth in the Agreement during which (i) the Performance Measures applicable to
an award shall be measured and (ii) the conditions to vesting applicable to an
award shall remain in effect.

 

“Performance Unit” shall mean a right to receive, contingent upon the attainment
of specified Performance Measures within a specified Performance Period, a
specified cash amount or, in lieu thereof, shares of Common Stock having a Fair
Market Value equal to such cash amount.

 

“Performance Unit Award” shall mean an award of Performance Units under this
Plan.

 

“Plan of Reorganization” shall mean the Plan of Reorganization approved and
confirmed pursuant to the Bankruptcy Proceedings.

 

“Restricted Stock” shall mean shares of Common Stock which are subject to a
Restriction Period and which may, in addition thereto, be subject to the
attainment of specified Performance Measures within a specified Performance
Period.

 

“Restricted Stock Award” shall mean an award of Restricted Stock under this
Plan.

 

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“Restricted Stock Unit” shall mean a right to receive one share of Common Stock
or, in lieu thereof, the Fair Market Value of such share of Common Stock in
cash, which shall be contingent upon the expiration of a specified Restriction
Period and which may, in addition thereto, be contingent upon the attainment of
specified Performance Measures within a specified Performance Period.

 

“Restricted Stock Unit Award” shall mean an award of Restricted Stock Units
under this Plan.

 

“Restriction Period” shall mean any period designated by the Committee and set
forth in the Agreement during which (i) the Common Stock subject to a Restricted
Stock Award may not be sold, transferred, assigned, pledged, hypothecated or
otherwise encumbered or disposed of, except as provided in this Plan or the
Agreement relating to such award, or (ii) the conditions to vesting applicable
to a Restricted Stock Unit Award shall remain in effect.

 

“Retirement” shall have the meaning set forth in the Employment Agreement;
provided that if an Agreement does not specify such definition, then
“Retirement” shall mean an employee’s retirement from the Company after the
attainment of age 55 and the completion of at least five years of service with
the Company.

 

“SAR” shall mean a stock appreciation right which may be a Free-Standing SAR or
a Tandem SAR.

 

“Stock Award” shall mean a Restricted Stock Award or a Restricted Stock Unit
Award.

 

“Subsidiary” shall mean any corporation, limited liability company, partnership,
joint venture or similar entity in which the Company owns, directly or
indirectly, an equity interest possessing more than 50% of the combined voting
power of the total outstanding equity interests of such entity.

 

“Tandem SAR” shall mean an SAR which is granted in tandem with, or by reference
to, an option (including a Nonqualified Stock Option granted prior to the date
of grant of the SAR), which entitles the holder thereof to receive, upon
exercise of such SAR and surrender for cancellation of all or a portion of such
option, shares of Common Stock (which may be Restricted Stock) with an aggregate
value equal to the excess of the Fair Market Value of one share of Common Stock
on the date of exercise over the base price of such SAR, multiplied by the
number of shares of Common Stock subject to such option, or portion thereof,
which is surrendered.

 

“Tax Date” shall have the meaning set forth in Section 5.5.

 

“Ten Percent Holder” shall have the meaning set forth in Section 2.1(a).

 

1.3          Administration.  This Plan shall be administered by the Committee.
Any one or a combination of the following awards may be made under this Plan to
eligible persons: (i) options to purchase shares of Common Stock in the form of
Incentive Stock Options or Nonqualified Stock Options (which may include
Performance Options), (ii) SARs in the form of Tandem SARs or Free-Standing
SARs, (iii) Stock Awards in the form of Restricted Stock or

 

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Restricted Stock Units and (iv) Performance Units. The Committee shall, subject
to the terms of this Plan, select eligible persons for participation in this
Plan and determine the form, amount and timing of each award to such persons
and, if applicable, the number of shares of Common Stock, the number of SARs,
the number of Restricted Stock Units and the number of Performance Units subject
to such an award, the exercise price or base price associated with the award,
the time and conditions of exercise or settlement of the award and all other
terms and conditions of the award, including, without limitation, the form of
the Agreement evidencing the award.  The Committee may, in its sole discretion
and for any reason at any time, subject to the requirements of Section 162(m) of
the Code and regulations thereunder in the case of an award intended to be
qualified performance-based compensation, take action such that (i) any or all
outstanding options and SARs shall become exercisable in part or in full,
(ii) all or a portion of the Restriction Period applicable to any outstanding
Restricted Stock or Restricted Stock Units shall lapse, (iii) all or a portion
of the Performance Period applicable to any outstanding Restricted Stock,
Restricted Stock Units or Performance Units shall lapse and (iv) the Performance
Measures (if any) applicable to any outstanding award shall be deemed to be
satisfied at the target or any other level.  The Committee shall, subject to the
terms of this Plan, interpret this Plan and the application thereof, establish
rules and regulations it deems necessary or desirable for the administration of
this Plan and may impose, incidental to the grant of an award, conditions with
respect to the award, such as limiting competitive employment or other
activities, which shall be set forth in the applicable Agreement.  All such
interpretations, rules, regulations and conditions shall be conclusive and
binding on all parties.

 

The Committee may delegate some or all of its power and authority hereunder to
the Board or, subject to applicable law, to the Chief Executive Officer or other
executive officer of the Company as the Committee deems appropriate; provided,
however, that (i) the Committee may not delegate its power and authority to the
Board or the Chief Executive Officer or other executive officer of the Company
with regard to the grant of an award to any person who is a “covered employee”
within the meaning of Section 162(m) of the Code or who, in the Committee’s
judgment, is likely to be a covered employee at any time during the period an
award hereunder to such employee would be outstanding and (ii) the Committee may
not delegate its power and authority to the Chief Executive Officer or other
executive officer of the Company with regard to the selection for participation
in this Plan of an officer, director or other person subject to Section 16 of
the Exchange Act or decisions concerning the timing, pricing or amount of an
award to such an officer, director or other person.

 

No member of the Board or Committee, and neither the Chief Executive Officer nor
any other executive officer to whom the Committee delegates any of its power and
authority hereunder, shall be liable for any act, omission, interpretation,
construction or determination made in connection with this Plan in good faith,
and the members of the Board and the Committee and the Chief Executive Officer
or other executive officer shall be entitled to indemnification and
reimbursement by the Company in respect of any claim, loss, damage or expense
(including attorneys’ fees) arising therefrom to the full extent permitted by
law (except as otherwise may be provided in the Company’s Certificate of
Incorporation and/or By-laws) and under any directors’ and officers’ liability
insurance that may be in effect from time to time.

 

A majority of the Committee shall constitute a quorum. The acts of the Committee
shall be either (i) acts of a majority of the members of the Committee present
at any meeting at which

 

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a quorum is present or (ii) acts approved in writing by all of the members of
the Committee without a meeting.

 

1.4          Eligibility.  Participants in this Plan shall consist of such
officers, other employees, consultants and nonemployee directors, and persons
expected to become officers, other employees, consultants and nonemployee
directors, of the Company and its Subsidiaries as the Committee in its sole
discretion may select from time to time or as specified in the Plan of
Reorganization.  The Committee’s selection of a person to participate in this
Plan at any time shall not require the Committee to select such person to
participate in this Plan at any other time.  For purposes of this Plan,
references to employment by the Company shall also mean employment by a
Subsidiary.

 

1.5          Shares Available.  Subject to adjustment as provided in Section 5.7
and to all other limits set forth in this Section 1.5, 8,695,652 shares of
Common Stock shall be available for all awards under this Plan, reduced by the
sum of the aggregate number of shares of Common Stock which become subject to
outstanding options, outstanding Free-Standing SARs and outstanding Stock Awards
and delivered upon the settlement of Performance Units.  To the extent that
shares of Common Stock subject to an outstanding option, SAR or stock award
granted under the Plan are not issued or delivered by reason of (i) the
expiration, termination, cancellation or forfeiture of such award (excluding
shares subject to an option cancelled upon settlement in shares of a related
tandem SAR or shares subject to a tandem SAR cancelled upon exercise of a
related option) or (ii) the settlement of such award in cash, then such shares
of Common Stock shall again be available under this Plan.

 

Shares of Common Stock to be delivered under this Plan shall be made available
from authorized and unissued shares of Common Stock, or authorized and issued
shares of Common Stock reacquired and held as treasury shares or otherwise or a
combination thereof.

 

To the extent necessary for an award to be qualified performance-based
compensation under Section 162(m) of the Code and the regulations thereunder
(i) the maximum number of shares of Common Stock with respect to which options
or SARs or a combination thereof may be granted during any fiscal year of the
Company to any person shall be 2% of the total outstanding shares of Common
Stock determined as of the effective date of the Plan, subject to adjustment as
provided in Section 5.7; (ii) the maximum number of shares of Common Stock with
respect to which Stock Awards subject to Performance Measures may be granted
during any fiscal year of the Company to any person shall be 2% of the total
outstanding shares of Common Stock determined as of the effective date of the
Plan, subject to adjustment as provided in Section 5.7, and (iii) the maximum
amount that may be payable with respect to Performance Units granted during any
fiscal year of the Company to any person shall be the cash equivalent of (x) 2%
of the total outstanding shares of Common Stock determined as of the effective
date of the Plan multiplied by (y) the Fair Market Value of a share of Common
Stock determined as of the effective date of the Plan, subject to adjustment as
provided in Section 5.7.

 

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II             STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

 

2.1          Stock Options.  The Committee may, in its discretion, or shall,
pursuant to the Plan of Reorganization, grant options to purchase shares of
Common Stock to such eligible persons as may be selected by the Committee or as
specified in the Plan of Reorganization. Each option, or portion thereof, that
is not an Incentive Stock Option, shall be a Nonqualified Stock Option.  To the
extent that the aggregate Fair Market Value (determined as of the date of grant)
of shares of Common Stock with respect to which options designated as Incentive
Stock Options are exercisable for the first time by a participant during any
calendar year (under this Plan or any other plan of the Company, or any parent
or Subsidiary) exceeds the amount (currently $100,000) established by the Code,
such options shall constitute Nonqualified Stock Options.

 

Options shall be subject to the following terms and conditions and shall contain
such additional terms and conditions, not inconsistent with the terms of this
Plan, as the Committee shall deem advisable or as approved in the Plan of
Reorganization, and set forth in the applicable Agreement:

 

(a)           Number of Shares and Purchase Price.  The number of shares of
Common Stock subject to an option and the purchase price per share of Common
Stock purchasable upon exercise of the option shall be determined by the
Committee and set forth in the Agreement; provided, however, that the purchase
price per share of Common Stock purchasable upon exercise of a Nonqualified
Stock Option or an Incentive Stock Option shall not be less than 100% of the
Fair Market Value of a share of Common Stock on the date of grant of such
option; provided further, that if an Incentive Stock Option shall be granted to
any person who, at the time such option is granted, owns capital stock
possessing more than 10 percent of the total combined voting power of all
classes of capital stock of the Company (or of any parent or Subsidiary) (a “Ten
Percent Holder”), the purchase price per share of Common Stock shall not be less
than the price (currently 110% of Fair Market Value) required by the Code in
order to constitute an Incentive Stock Option.

 

(b)           Option Period and Exercisability.  The period during which an
option may be exercised shall be determined by the Committee and set forth in
the Agreement; provided, however, that no Incentive Stock Option or Nonqualified
Stock Option shall be exercised later than ten years after its date of grant;
provided further, that if an Incentive Stock Option shall be granted to a Ten
Percent Holder, such option shall not be exercised later than five years after
its date of grant.  The Committee may, in its discretion, determine that an
option is to be granted as a Performance Option and may establish and include in
the Agreement an applicable Performance Period and Performance Measures which
shall be satisfied or met as a condition to the grant of such option or to the
exercisability of all or a portion of such option. The Committee shall determine
whether an option shall become exercisable in cumulative or non-cumulative
installments and in part or in full at any time. An exercisable option, or
portion thereof, may be exercised only with respect to whole shares of Common
Stock.

 

(c)           Method of Exercise.  An option may be exercised (i) by giving
written notice to the Company specifying the number of whole shares of Common
Stock to be purchased and accompanying such notice with payment therefor in full
(or arrangement made for such payment to the Company’s satisfaction) either
(A) in cash, (B) by delivery (either actual delivery or by

 

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attestation procedures established by the Company) of shares of Common Stock
having a Fair Market Value, determined as of the date of exercise, equal to the
aggregate purchase price payable by reason of such exercise, (C) authorizing the
Company to withhold whole shares of Common Stock which would otherwise be
delivered having an aggregate Fair Market Value, determined as of the date of
exercise, equal to the amount necessary to satisfy such obligation, (D)  in cash
by a broker-dealer acceptable to the Company to whom the optionee has submitted
an irrevocable notice of exercise or (E) a combination of (A), (B) and (C), in
each case to the extent set forth in the Agreement relating to the option,
(ii) if applicable, by surrendering to the Company any Tandem SARs which are
cancelled by reason of the exercise of the option and (iii) by executing such
documents as the Company may reasonably request.  Any fraction of a share of
Common Stock which would be required to pay such purchase price shall be
disregarded and the remaining amount due shall be paid in cash by the optionee. 
No shares of Common Stock shall be issued and no certificate representing Common
Stock shall be delivered until the full purchase price therefor and any
withholding taxes thereon, as described in Section 5.5, have been paid (or
arrangement made for such payment to the Company’s satisfaction).

 

2.2          Stock Appreciation Rights.  The Committee may, in its discretion,
or shall, pursuant to the Plan of Reorganization, grant SARs to such eligible
persons as may be selected by the Committee or as specified in the Plan of
Reorganization.  The Agreement relating to an SAR shall specify whether the SAR
is a Tandem SAR or a Free-Standing SAR.

 

SARs shall be subject to the following terms and conditions and shall contain
such additional terms and conditions, not inconsistent with the terms of this
Plan, as the Committee shall deem advisable or as approved in the Plan of
Reorganization, and set forth in the applicable Agreement:

 

(a)           Number of SARs and Base Price.  The number of SARs subject to an
award shall be determined by the Committee and set forth in the Agreement.  Any
Tandem SAR related to an Incentive Stock Option shall be granted at the same
time that such Incentive Stock Option is granted.  The base price of a Tandem
SAR shall be the purchase price per share of Common Stock of the related
option.  The base price of a Free-Standing SAR shall be determined by the
Committee and set forth in the Agreement; provided, however, that such base
price shall not be less than 100% of the Fair Market Value of a share of Common
Stock on the date of grant of such SAR.

 

(b)           Exercise Period and Exercisability.  The period for the exercise
of an SAR shall be determined by the Committee and set forth in the Agreement;
provided, however, that no Tandem SAR shall be exercised later than the
expiration, cancellation, forfeiture or other termination of the related option
and no Free-Standing SAR shall be exercised later than ten years after its date
of grant.  The Committee may, in its discretion, establish and include in the
Agreement applicable Performance Measures which shall be satisfied or met as a
condition to the grant of an SAR or to the exercisability of all or a portion of
an SAR.  The Committee shall determine whether an SAR may be exercised in
cumulative or non-cumulative installments and in part or in full at any time. 
An exercisable SAR, or portion thereof, may be exercised, in the case of a
Tandem SAR, only with respect to whole shares of Common Stock and, in the case
of a Free-Standing SAR, only with respect to a whole number of SARs.  If an SAR
is exercised for

 

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shares of Restricted Stock, a certificate or certificates representing such
Restricted Stock shall be issued in accordance with Section 3.2(c), or such
shares shall be transferred to the holder in book entry form with restrictions
on the Shares duly noted, and the holder of such Restricted Stock shall have
such rights of a stockholder of the Company as determined pursuant to
Section 3.2(d). Prior to the exercise of an SAR, the holder of such SAR shall
have no rights as a stockholder of the Company with respect to the shares of
Common Stock subject to such SAR.

 

(c)           Method of Exercise.  A Tandem SAR may be exercised (i) by giving
written notice to the Company specifying the number of whole SARs which are
being exercised, (ii) by surrendering to the Company any options which are
cancelled by reason of the exercise of the Tandem SAR and (iii) by executing
such documents as the Company may reasonably request.  A Free-Standing SAR may
be exercised (A) by giving written notice to the Company specifying the whole
number of SARs which are being exercised and (B) by executing such documents as
the Company may reasonably request.

 

2.3          Termination of Employment or Service.  All of the terms relating to
the exercise, cancellation or other disposition of an option or SAR upon a
termination of employment or service with the Company of the holder of such
option or SAR, as the case may be, whether by reason of Incapacity, Retirement,
death or any other reason, shall be determined by the Committee and set forth in
the Agreement, Employment Agreement and/or any other agreement between the
Company and the recipient of an award.

 

2.4          No Repricing.  Notwithstanding anything in this Plan to the
contrary and subject to Section 5.7, without the approval of the stockholders of
the Company, the Committee will not amend or replace any previously granted
option or SAR in a transaction that constitutes a “repricing,” as such term is
used in the listing rules of the applicable stock exchange on which shares of
Common Stock are listed.

 

III            STOCK AWARDS

 

3.1          Stock Awards.  The Committee may, in its discretion, or shall,
pursuant to the Plan of Reorganization, grant Stock Awards to such eligible
persons as may be selected by the Committee or as specified in the Plan of
Reorganization.  The Agreement relating to a Stock Award shall specify whether
the Stock Award is a Restricted Stock Award or a Restricted Stock Unit Award.

 

3.2          Terms of Restricted Stock Awards.  Restricted Stock Awards shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of this Plan, as the
Committee shall deem advisable or as approved in the Plan of Reorganization, and
set forth in the applicable Agreement.

 

(a)           Number of Shares and Other Terms.  The number of shares of Common
Stock subject to a Restricted Stock Award and the Restriction Period,
Performance Period (if any) and Performance Measures (if any) applicable to a
Restricted Stock Award shall be determined by the Committee and set forth in the
Agreement.

 

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(b)           Vesting and Forfeiture.  The Agreement relating to a Restricted
Stock Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of the
shares of Common Stock subject to such award (i) if the holder of such award
remains continuously in the employment of the Company during the specified
Restriction Period and (ii) if specified Performance Measures (if any) are
satisfied or met during a specified Performance Period, and for the forfeiture
of the shares of Common Stock subject to such award (x) if the holder of such
award does not remain continuously in the employment of the Company during the
specified Restriction Period or (y) if specified Performance Measures (if any)
are not satisfied or met during a specified Performance Period.  The Committee
may, in its sole discretion, grant shares of Common Stock pursuant to the Plan
that are not subject to any vesting or performance conditions.

 

(c)           Stock Issuance.  During the Restriction Period, the shares of
Restricted Stock shall be held by a custodian in book entry form with
restrictions on such shares duly noted or, alternatively, a certificate or
certificates representing a Restricted Stock Award shall be registered in the
holder’s name and may bear a legend, in addition to any legend which may be
required pursuant to Section 5.6, indicating that the ownership of the shares of
Common Stock represented by such certificate is subject to the restrictions,
terms and conditions of this Plan and the Agreement relating to the Restricted
Stock Award.  All such certificates shall be deposited with the Company,
together with stock powers or other instruments of assignment (including a power
of attorney), each endorsed in blank with a guarantee of signature if deemed
necessary or appropriate, which would permit transfer to the Company of all or a
portion of the shares of Common Stock subject to the Restricted Stock Award in
the event such award is forfeited in whole or in part.  Upon termination of any
applicable Restriction Period (and the satisfaction or attainment of applicable
Performance Measures), subject to the Company’s right to require payment of any
taxes in accordance with Section 5.5, the restrictions shall be removed from the
requisite number of any shares of Common Stock that are held in book entry form,
and all certificates evidencing ownership of the requisite number of shares of
Common Stock shall be delivered to the holder of such award.

 

(d)           Rights with Respect to Restricted Stock Awards.  Unless otherwise
set forth in the Agreement relating to a Restricted Stock Award, and subject to
the terms and conditions of a Restricted Stock Award, the holder of such award
shall have all rights as a stockholder of the Company, including, but not
limited to, voting rights, the right to receive dividends and the right to
participate in any capital adjustment applicable to all holders of Common Stock;
provided, however, that a distribution with respect to shares of Common Stock,
other than a regular cash dividend, shall be deposited with the Company and
shall be subject to the same restrictions as the shares of Common Stock with
respect to which such distribution was made.

 

3.3          Terms of Restricted Stock Unit Awards.  Restricted Stock Unit
Awards shall be subject to the following terms and conditions and shall contain
such additional terms and conditions, not inconsistent with the terms of this
Plan, as the Committee shall deem advisable or as approved in the Plan of
Reorganization, and set forth in the applicable Agreement.

 

(a)           Number of Shares and Other Terms.  The number of shares of Common
Stock subject to a Restricted Stock Unit Award and the Restriction Period,
Performance Period (if any)

 

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and Performance Measures (if any) applicable to a Restricted Stock Unit Award
shall be determined by the Committee and set forth in the Agreement.

 

(b)           Vesting and Forfeiture.  The Agreement relating to a Restricted
Stock Unit Award shall provide, in the manner determined by the Committee, in
its discretion, and subject to the provisions of this Plan, for the vesting of
such Restricted Stock Unit Award (i) if the holder of such award remains
continuously in the employment of the Company during the specified Restriction
Period and (ii) if specified Performance Measures (if any) are satisfied or met
during a specified Performance Period, and for the forfeiture of the shares of
Common Stock subject to such award (x) if the holder of such award does not
remain continuously in the employment of the Company during the specified
Restriction Period or (y) if specified Performance Measures (if any) are not
satisfied or met during a specified Performance Period.  The Committee may, in
its sole discretion, grant units representing the right to receive shares of
Common Stock that are not subject to any vesting or performance conditions.

 

(c)           Settlement of Vested Restricted Stock Unit Awards.  The Agreement
relating to a Restricted Stock Unit Award shall specify (i) whether such award
may be settled in shares of Common Stock or cash or a combination thereof and
(ii) whether the holder thereof shall be entitled to receive, on a current or
deferred basis, dividend equivalents, and, if determined by the Committee,
interest on, or the deemed reinvestment of, any deferred dividend equivalents,
with respect to the number of shares of Common Stock subject to such award. 
Prior to the settlement of a Restricted Stock Unit Award, the holder of such
award shall have no rights as a stockholder of the Company with respect to the
shares of Common Stock subject to such award.

 

3.4          Termination of Employment or Service.  All of the terms relating to
the satisfaction of Performance Measures and the termination of the Restriction
Period or Performance Period relating to a Stock Award, or any forfeiture and
cancellation of such award upon a termination of employment or service with the
Company of the holder of such award, whether by reason of Incapacity,
Retirement, death or any other reason, shall be determined by the Committee and
set forth in the Agreement, Employment Agreement and/or any other agreement
between the Company and the recipient of an award.

 

IV            PERFORMANCE UNIT AWARDS

 

4.1          Performance Unit Awards.  The Committee may, in its discretion, or
shall, pursuant to the Plan of Reorganization, grant Performance Unit Awards to
such eligible persons as may be selected by the Committee or as specified in the
Plan of Reorganization.

 

4.2          Terms of Performance Unit Awards.  Performance Unit Awards shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of this Plan, as the
Committee shall deem advisable or as approved in the Plan of Reorganization and
set forth in the applicable Agreement.

 

(a)           Number of Performance Units and Performance Measures.  The number
of Performance Units subject to a Performance Unit Award and the Performance
Measures and Performance Period applicable to a Performance Unit Award shall be
determined by the Committee and set forth in the Agreement.

 

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(b)           Vesting and Forfeiture.  The Agreement relating to a Performance
Unit Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of such
Performance Unit Award if the specified Performance Measures are satisfied or
met during the specified Performance Period and for the forfeiture of such award
if the specified Performance Measures are not satisfied or met during the
specified Performance Period.

 

(c)           Settlement of Vested Performance Unit Awards.  The Agreement
relating to a Performance Unit Award shall specify whether such award may be
settled in shares of Common Stock (including shares of Restricted Stock) or cash
or a combination thereof.  If a Performance Unit Award is settled in shares of
Restricted Stock, such shares of Restricted Stock shall be issued to the holder
in book entry form or a certificate or certificates representing such Restricted
Stock shall be issued in accordance with Section 3.2(c) and the holder of such
Restricted Stock shall have such rights as a stockholder of the Company as
determined pursuant to Section 3.2(d). Prior to the settlement of a Performance
Unit Award in shares of Common Stock, including Restricted Stock, the holder of
such award shall have no rights as a stockholder of the Company.

 

4.3          Termination of Employment or Service.  All of the terms relating to
the satisfaction of Performance Measures and the termination of the Performance
Period relating to a Performance Unit Award, or any forfeiture and cancellation
of such award upon a termination of employment or service with the Company of
the holder of such award, whether by reason of Incapacity, Retirement, death or
any other reason, shall be determined by the Committee and set forth in the
Agreement, Employment Agreement and/or any other agreement between the Company
and the recipient of an award.

 

V             GENERAL

 

5.1          Effective Date and Term of Plan.  This Plan shall be submitted to
the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy
Court”) for approval in connection with the Plan of Reorganization and, if
approved, shall become effective as of the effective date of the Plan of
Reorganization.  This Plan shall terminate as of the first annual meeting of the
Company’s stockholders to occur on or after the tenth anniversary of its
effective date, unless terminated earlier by the Board. Termination of this Plan
shall not affect the terms or conditions of any award granted prior to
termination.

 

Awards hereunder may be made at any time prior to the termination of this Plan,
provided that no award may be made later than ten years after the effective date
of this Plan. In the event that this Plan is not approved by the Bankruptcy
Court, this Plan and any awards hereunder shall be void and of no force or
effect.

 

5.2          Amendments.  The Board may amend this Plan as it shall deem
advisable, subject to any requirement of stockholder approval required by
applicable law, rule or regulation, including Section 162(m) of the Code and any
rule of the principal national stock exchange on which the Common Stock is then
traded; provided, however, that no amendment may impair the rights of a holder
of an outstanding award without the consent of such holder.

 

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5.3          Agreement.  Each award under this Plan shall be evidenced by an
Agreement setting forth the terms and conditions applicable to such award. No
award shall be valid until approved by the Company or, with respect to the
Emergence Equity Awards, the Bankruptcy Court.  Such award shall be effective as
of the effective date set forth in the Agreement.

 

5.4          Non-Transferability.  No award shall be transferable other than by
will, the laws of descent and distribution or pursuant to beneficiary
designation procedures approved by the Company or, to the extent expressly
permitted in the Agreement relating to such award, to the holder’s family
members, a trust or entity established by the holder for estate planning
purposes or a charitable organization designated by the holder.  Except to the
extent permitted by the foregoing sentence or the Agreement relating to an
award, each award may be exercised or settled during the holder’s lifetime only
by the holder or the holder’s legal representative or similar person.  Except as
permitted by the second preceding sentence, no award may be sold, transferred,
assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by
operation of law or otherwise) or be subject to execution, attachment or similar
process.  Upon any attempt to so sell, transfer, assign, pledge, hypothecate,
encumber or otherwise dispose of any award, such award and all rights thereunder
shall immediately become null and void.

 

5.5          Tax Withholding.  The Company shall have the right to require,
prior to the issuance or delivery of any shares of Common Stock or the payment
of any cash pursuant to an award made hereunder, payment by the holder of such
award of any federal, state, local or other taxes which may be required to be
withheld or paid in connection with such award.  An Agreement may provide that
(i) the Company shall withhold whole shares of Common Stock which would
otherwise be delivered to a holder, having an aggregate Fair Market Value
determined as of the date the obligation to withhold or pay taxes arises in
connection with an award (the “Tax Date”), or withhold an amount of cash which
would otherwise be payable to a holder, in the amount necessary to satisfy any
such obligation or (ii) the holder may satisfy any such obligation by any of the
following means: (A) a cash payment to the Company, (B) delivery (either actual
delivery or by attestation procedures established by the Company) to the Company
of previously owned whole shares of Common Stock having an aggregate Fair Market
Value, determined as of the Tax Date, equal to the amount necessary to satisfy
any such obligation, (C) authorizing the Company to withhold whole shares of
Common Stock which would otherwise be delivered having an aggregate Fair Market
Value, determined as of the Tax Date, or withhold an amount of cash which would
otherwise be payable to a holder, equal to the amount necessary to satisfy any
such obligation, (D) in the case of the exercise of an option and except as may
be prohibited by applicable law, a cash payment by a broker-dealer acceptable to
the Company to whom the optionee has submitted an irrevocable notice of exercise
or (E) any combination of (A), (B) and (C), in each case to the extent set forth
in the Agreement relating to the award. Shares of Common Stock to be delivered
or withheld may not have an aggregate Fair Market Value in excess of the amount
determined by applying the minimum statutory withholding rate.  Any fraction of
a share of Common Stock which would be required to satisfy such an obligation
shall be disregarded and the remaining amount due shall be paid in cash by the
holder.

 

5.6          Restrictions on Shares.  Each award made hereunder shall be subject
to the requirement that if at any time the Company determines that the listing,
registration or

 

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qualification of the shares of Common Stock subject to such award upon any
securities exchange or under any law, or the consent or approval of any
governmental body, or the taking of any other action is necessary or desirable
as a condition of, or in connection with, the delivery of shares thereunder,
such shares shall not be delivered unless such listing, registration,
qualification, consent, approval or other action shall have been effected or
obtained, free of any conditions not acceptable to the Company.  The Company may
require that certificates evidencing shares of Common Stock delivered pursuant
to any award made hereunder bear a legend indicating that the sale, transfer or
other disposition thereof by the holder is prohibited except in compliance with
the Securities Act of 1933, as amended, and the rules and regulations
thereunder.

 

5.7          Adjustment.  In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of securities available under this Plan, the
number and class of securities subject to each outstanding option and the
purchase price per security, the terms of each outstanding SAR, the terms of
each outstanding Restricted Stock Award and Restricted Stock Unit Award,
including the number and class of securities subject thereto, the terms of each
outstanding Performance Unit, the maximum number of securities with respect to
which options or SARs may be granted during any fiscal year of the Company to
any one grantee and the maximum number of shares of Common Stock that may be
awarded during any fiscal year of the Company to any one grantee pursuant to a
Stock Award that is subject to Performance Measures shall be equitably adjusted
by the Committee, such adjustments to be made in the case of outstanding options
and SARs in accordance with Section 409A of the Code.  The decision of the
Committee regarding any such adjustment shall be final, binding and conclusive.
If any such adjustment would result in a fractional security being (a) available
under this Plan, such fractional security shall be disregarded, or (b) subject
to an award under this Plan, the Company shall pay the holder of such award, in
connection with the first vesting, exercise or settlement of such award, in
whole or in part, occurring after such adjustment, an amount in cash determined
by multiplying (i) the fraction of such security (rounded to the nearest
hundredth) by (ii) the excess, if any, of (A) the Fair Market Value on the
vesting, exercise or settlement date over (B) the exercise or base price, if
any, of such award.

 

5.8          Change in Control.

 

(a)           Notwithstanding any provision in this Plan or any Agreement, in
the event of a Change in Control, (i) all outstanding options and SARs shall
immediately become exercisable in full, (ii) the Restriction Period applicable
to any outstanding Restricted Stock Award or Restricted Stock Unit Award shall
lapse, (iii) the Performance Period applicable to any outstanding award shall
lapse, (iv) the Performance Measures applicable to any outstanding award shall
be deemed to be satisfied at the maximum level and (v) the Board (as constituted
prior to such Change in Control) may, in its discretion:

 

(1)           require that shares of stock of the corporation resulting from
such Change in Control, or a parent corporation thereof, be substituted for some
or all of the shares of Common Stock subject to an outstanding award, with an
appropriate and equitable

 

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adjustment to such award as shall be determined by the Board in accordance with
Section 5.7; and/or

 

(2)           require outstanding awards, in whole or in part, to be surrendered
to the Company by the holder, and to be immediately cancelled by the Company,
and to provide for the holder to receive (A) a cash payment in an amount equal
to (i) in the case of an option or an SAR, the number of shares of Common Stock
then subject to the portion of such option or SAR surrendered multiplied by the
excess, if any, of the Fair Market Value of a share of Common Stock as of the
date of the Change in Control, over the purchase price or base price per share
of Common Stock subject to such option or SAR, (ii) in the case of a Stock
Award, the number of shares of Common Stock then subject to the portion of such
award surrendered multiplied by the Fair Market Value of a share of Common Stock
as of the date of the Change in Control, and (iii) in the case of a Performance
Unit Award, the number of Performance Units then subject to the portion of such
award surrendered; (B) shares of capital stock of the corporation resulting from
such Change in Control, or a parent corporation thereof, having a fair market
value not less than the amount determined under clause (A) above; or (C) a
combination of the payment of cash pursuant to clause (A) above and the issuance
of shares pursuant to clause (B) above.

 

(b)           For purposes of this Plan, a “Change in Control” shall have the
meaning set forth in the Employment Agreement; provided that if the holder of
any award is not party to an Employment Agreement that contains such definition,
then “Change in Control” shall mean the occurrence of any one or more of the
following events following the effective date of the Plan of Reorganization:

 

(1)           The “beneficial ownership” of securities representing more than
40% of the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
“Company Voting Securities”) is accumulated, held or acquired by a Person (as
defined in Section 3(a)(9) of the Exchange Act, as modified, and used in
Sections 13(d) and 14(d) thereof) other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, any
corporation owned, directly or indirectly, by the Company’s stockholders in
substantially the same proportions as their ownership of stock of the Company;
provided, however, that any acquisition from the Company or any acquisition
pursuant to a transaction that complies with clauses (i), (ii) and (iii) of
subparagraph (3) of this definition will not be a Change in Control under this
subparagraph (1), and provided further that immediately prior to such
accumulation, holding or acquisition, such person was not a direct or indirect
beneficial owner of 40% or more of the Company Voting Securities; or

 

(2)           Individuals who, as of the day next following the effective date
of the Plan of Reorganization, constitute the Board of Directors (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board;
provided, however, that an individual becoming a director subsequent to that
date 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 will be considered as though such

 

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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

 

(3)           Consummation by the Company of a reorganization, merger or
consolidation, or sale or other disposition of all or substantially all of the
assets of the Company or the acquisition of assets or stock of another entity (a
“Business Combination”), in each case, unless immediately following such
Business Combination: (i) more than 60% of the combined voting power of then
outstanding voting securities entitled to vote generally in the election of
directors of (A) the corporation resulting from such Business Combination (the
“Surviving Corporation”), or (B) if applicable, a corporation that as a result
of such transaction owns the Company or all or substantially all of the
Company’s assets either directly or through one or more subsidiaries (the
“Parent Corporation”), is represented, directly or indirectly, by Company Voting
Securities outstanding immediately prior to such Business Combination (or, if
applicable, is represented by shares into which such Company Voting Securities
were converted pursuant to such Business Combination), and such voting power
among the holders thereof is in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the Company Voting
Securities; (ii) no Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 40% or more of the
combined voting power of the then outstanding voting securities eligible to
elect directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) except to the extent that such ownership
of the Company existed prior to the Business Combination; and (iii) at least a
majority of the members of the board of directors of the Parent Corporation (or,
if there is no Parent Corporation, the Surviving Corporation) 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;

 

(4)           Approval by the Company’s stockholders of a complete liquidation
or dissolution of the Company;

 

(5)           The consummation of a reorganization under the U.S. Bankruptcy
Code; or

 

(6)           The consummation of a complete liquidation or dissolution of the
Company under the U.S. Bankruptcy Code.

 

However, in no event will a Change in Control be deemed to have occurred, with
respect to a Participant’s award, if the Participant is part of a purchasing
group that consummates the Change in Control transaction.  A Participant will be
deemed “part of a purchasing group” for purposes of the preceding sentence if
the Participant is an equity participant in the purchasing company or group
(except: (i) passive ownership of less than 2% of the stock of the purchasing
company; or (ii) ownership of equity participation in the purchasing company or
group that is otherwise not

 

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significant, as determined prior to the Change in Control by a majority of the
non-employee continuing directors).  For the avoidance of doubt, a Change in
Control shall not include transactions pursuant to the Plan of Reorganization
(as defined herein).

 

5.9          Deferrals.  The Committee may determine that the delivery of shares
of Common Stock or the payment of cash, or a combination thereof, upon the
exercise or settlement of all or a portion of any award (other than awards of
Incentive Stock Options, Nonqualified Stock Options and SARs) made hereunder
shall be deferred, or the Committee may, in its sole discretion, approve
deferral elections made by holders of awards.  Deferrals shall be for such
periods and upon such terms as the Committee may determine in its sole
discretion and as set forth in the Agreement, subject to the requirements of
Section 409A of the Code.

 

5.10        No Right of Participation, Employment or Service.  Unless otherwise
set forth in an employment agreement, no person shall have any right to
participate in this Plan.  Neither this Plan nor any award made hereunder shall
confer upon any person any right to continued employment by or service with the
Company, any Subsidiary or any affiliate of the Company or affect in any manner
the right of the Company, any Subsidiary or any affiliate of the Company to
terminate the employment of any person at any time without liability hereunder.

 

5.11        Rights as Stockholder.  No person shall have any right as a
stockholder of the Company with respect to any shares of Common Stock or other
equity security of the Company which is subject to an award hereunder unless and
until such person becomes a stockholder of record with respect to such shares of
Common Stock or equity security.

 

5.12        Designation of Beneficiary.  A holder of an award may file with the
Committee a written designation of one or more persons as such holder’s
beneficiary or beneficiaries (both primary and contingent) in the event of the
holder’s death or incapacity.  To the extent an outstanding option or SAR
granted hereunder is exercisable, such beneficiary or beneficiaries shall be
entitled to exercise such option or SAR pursuant to procedures prescribed by the
Committee.

 

Each beneficiary designation shall become effective only when filed in writing
with the Committee during the holder’s lifetime on a form prescribed by the
Committee.  The spouse of a married holder domiciled in a community property
jurisdiction shall join in any designation of a beneficiary other than such
spouse.  The filing with the Committee of a new beneficiary designation shall
cancel all previously filed beneficiary designations.

 

If a holder fails to designate a beneficiary, or if all designated beneficiaries
of a holder predecease the holder, then each outstanding option and SAR
hereunder held by such holder, to the extent exercisable, may be exercised by
such holder’s executor, administrator, legal representative or similar person.

 

5.13        Governing Law.  This Plan, each award hereunder and the related
Agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United States,
shall be governed by the laws of the State of Delaware and construed in
accordance therewith without giving effect to principles of conflicts of laws.

 

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5.14        Foreign Employees.  Without amending this Plan, the Committee may
grant awards to eligible persons who are foreign nationals on such terms and
conditions different from those specified in this Plan as may in the judgment of
the Committee be necessary or desirable to foster and promote achievement of the
purposes of this Plan and, in furtherance of such purposes the Committee may
make such modifications, amendments, procedures, subplans and the like as may be
necessary or advisable to comply with provisions of laws in other countries or
jurisdictions in which the Company or its Subsidiaries operates or has
employees.

 

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