Exhibit 10.4

 

AK STEEL HOLDING CORPORATION

 

STOCK INCENTIVE PLAN

 

(as amended and restated as of January 16, 2003)

 

Article 1.    Amendment and Restatement, Purpose, and Duration.

 

1.1    Amendment and Restatement of the Plan.    AK Steel Holding Corporation, a
Delaware corporation (the “Company”), previously established an incentive
compensation plan known as the “AK Steel Holding Corporation Stock Incentive
Plan” (the “Plan”). The Plan is hereby amended and restated as set forth in this
document effective as of January 16, 2003. The Plan permits the grant of
Nonqualified Stock Options and awards of Restricted Stock to directors,
executive officers and key employees of the Company.

 

1.2    Purpose of the Plan.    The purpose of the Plan is to promote the success
and enhance the value of the Company by linking the personal interests of
Participants to those of the Company’s shareholders, and by providing
Participants with an incentive for outstanding performance. The Plan is further
intended to enhance the Company’s ability to motivate, attract, and retain the
services of Participants upon whose judgment, interest, and special effort the
successful conduct of its operation is largely dependent.

 

1.3    Duration of the Plan.    The Plan shall remain in effect until all Shares
subject to it shall have been purchased or acquired or are no longer available
for Awards according to the Plan’s provisions, subject to the right of the Board
to terminate the Plan at any time pursuant to Article 10 herein. In no event may
an Award be granted under the Plan on or after December 31, 2011. Termination of
the Plan shall not affect the rights of any person under an outstanding Award
Agreement unless otherwise specifically provided in such Award Agreement.

 

Article 2.    Definitions.

 

Whenever used in the Plan, the following terms shall have the meanings set forth
below and, when the meaning is intended, the initial letter of the word is
capitalized:

 

  (a)   “Award” means either or both of an Option Award or a Restricted Stock
Award.

 

  (b)   “Award Agreement” means either or both of an Option Award Agreement or a
Restricted Stock Award Agreement. A Participant is bound by the terms of an
Award Agreement and this Plan by reason of accepting the benefits of the Award.

 

  (c)   “Beneficial Owner” shall have the meaning ascribed to such term in Rule
l3d-3 of the General Rules and Regulations under the Exchange Act.

 

  (d)   “Beneficiary” means the person or persons named by a Participant to
succeed to the Participant’s rights under any then unexpired Award Agreements.
Each such designation shall: (i) revoke all prior designations by the same
Participant; (ii) be in a form acceptable to the Committee; and (iii) be
effective only when delivered to the Committee by the Participant in writing and
during the Participant’s lifetime. No beneficiary shall be entitled to any
notice of any change in a designation of beneficiary.  In the absence of any
such designation, the Participant’s estate shall be the beneficiary.

 

  (e)   “Board” means the Board of Directors of the Company.

 

  (f)   “Cause” means a willful engaging in gross misconduct materially and
demonstrably injurious to the Company or any subsidiary or affiliate thereof,
including AK Steel Corporation. “Willful” means an act or omission in bad faith
and without reasonable belief that such act or omission was in or not opposed to
the best interests of the Company or any subsidiary or affiliate thereof,
including AK Steel Corporation. “Cause” shall be determined in good faith by the
Committee.

 

  (g)   “Change in Control” shall be deemed to have occurred if:

 

  (i)  

any person (other than a trustee or other fiduciary holding securities under an
employee benefit plan in which employees of the Company participate) becomes the
Beneficial Owner, directly or

--------------------------------------------------------------------------------

 

indirectly, of securities of the Company representing forty percent (40%) or
more of the combined voting power of the Company’s then outstanding voting
securities; or

 

  (ii)   during any period of two (2) consecutive years individuals who at the
beginning of such period constitute the Board, including for this purpose any
new Director of the Company (other than a Director designated by a person who
has entered into an agreement with the Company to effect a transaction described
in clauses (i) or (iii) of this Subsection (g)) whose election by the Board or
nomination for election by the shareholders of the Company was approved by a
vote of at least two-thirds (2/3) of the Directors then still in office who
either were Directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority of the Board; or

 

  (iii)   the shareholders of the Company approve a merger or consolidation of
the Company with any other corporation (other than a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least fifty percent (50%) of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation) or the shareholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company’s assets.

 

  (h)   “Code” means the Internal Revenue Code of 1986, as amended from time to
time.

 

  (i)   “Committee” means the committee, as specified in Article 3, appointed by
the Board to administer the Plan.

 

  (j)   “Company” means AK Steel Holding Corporation, a Delaware corporation, or
any successor thereto, as provided in Article 13 herein.

 

  (k)   “Director” means any individual who is a member of the Board and who is
not an Employee.

 

  (l)   “Disability” means a physical or mental condition which, in the judgment
of the Committee, renders a Director unable to serve or an Employee unable to
perform the duties of his position with the Company or, in the case of an
Employee, the duties of another available position with the Company for which
the Employee is suited by education, background and training. Any Employee found
to be qualified for disability benefits under AK Steel Holding Corporation’s
long term disability plan or by the Federal Social Security Administration will
be considered to be disabled under this Plan, but qualification for such
benefits shall not be required as evidence of disability hereunder.

 

  (m)   “Employee” means any common law employee of the Company or any
subsidiary or affiliate thereof, including AK Steel Corporation. A Director is
not an Employee solely by reason of his position as a Director and, unless
otherwise employed by the Company, shall not be considered to be an Employee
under this Plan.

 

  (n)   “Exchange Act” means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.

 

  (o)   “Fair Market Value” shall mean:

 

  (i)   if the Shares are traded on an established United States national stock
exchange or in the United States over-the-counter market with prices reported on
the NASDAQ, the average of the highest and lowest sales prices for Shares on the
relevant date (or, if there were no sales of Shares on such date, the weighted
average of the mean between the highest and lowest sale prices for Shares on the
nearest preceding trading day on which there were sales of Shares); and

 

  (ii)   if the Shares are not traded as described in clause (i), the fair
market value of such Shares on the relevant date, as determined in good faith by
the Board.

 

2

--------------------------------------------------------------------------------

  (p)   “Insider” shall mean an Employee who is, on the relevant date, an
executive officer or ten percent (10%) Beneficial Owner of the Company, as
defined under Section 16 of the Exchange Act, or a Director.

 

  (q)   “Nonqualified Stock Option” or “Option” means an option to purchase
Shares from the Company at a price established in an Option Award Agreement. No
incentive stock option within the meaning of Code Section 422 may be granted
under this Plan.

 

  (r)   “Option Award” means, individually or collectively, a grant under this
Plan of a Nonqualified Stock Option.

 

  (s)   “Option Award Agreement” means an agreement setting forth the terms and
provisions applicable to an Option Award granted to a Participant under this
Plan.

 

  (t)   “Option Price” means the price at which a Share may be purchased by a
Participant under the terms of an Option Award Agreement.

 

  (u)   “Par Value” shall mean the designated par value of one Share.

 

  (v)   “Participant” means any Director or Employee who possesses an unexpired
Award granted under the Plan.

 

  (w)   “Restricted Stock” means Shares granted to a Participant subject to
certain restrictions on the Participant’s right to sell, transfer, assign,
pledge, encumber or otherwise alienate or hypothecate the Shares except in
accordance with the terms of this Plan.

 

  (x)   “Restricted Stock Award” means, individually or collectively, a grant
under this Plan of Shares of Restricted Stock.

 

  (y)   “Restricted Stock Award Agreement” means an agreement setting forth the
terms and provisions applicable to a Restricted Stock Award of Shares under this
Plan.

 

  (z)   “Retirement” shall mean termination of employment with the Company and
any affiliate of the Company with eligibility to immediately commence to receive
a pension under the Company’s noncontributory defined benefit pension plan as in
effect on the Employee’s termination date. For a Participant who is not
participating in such plan, Retirement shall mean any termination of employment
with the Company which would have entitled such Participant to be eligible to
immediately commence to receive a pension under the Company’s non-contributory
defined benefit pension plan had the Participant been a participant.

 

  (aa)    “Shares” means the shares of voting common stock of the Company.

 

 

Article 3.    Administration.

 

3.1    The Committee.    The Plan shall be administered by the Compensation
Committee of the Board, or by any other Committee appointed by the Board
consisting of not less than two (2) Directors. The members of the Committee
shall be appointed from time-to-time by, and shall serve at the sole discretion
of, the Board. The Committee shall be comprised solely of Directors who: (a) are
“non-employee directors” as defined in Rule 16b-3 promulgated under the Exchange
Act, (b) are “independent directors” as defined in the rules and regulations of
the New York Stock Exchange, and (c) are “outside directors” within the meaning
of Section 162(m) of the Code and related regulations.

 

The Committee may employ such legal or other counsel, consultants and agents as
it may deem desirable for the administration of the Plan and may rely upon any
opinion or computation received from any such counsel, consultant or agent.
Expenses incurred by the Committee in the engagement of such counsel, consultant
or agent

 

3

--------------------------------------------------------------------------------

shall be paid by the Company. No member or former member of the Board or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option Award or Restricted Stock Award granted
hereunder.

 

3.2    Authority of the Committee.    The Committee shall have full power,
subject to the provisions of this Plan, except as limited by law or by the
Articles of Incorporation or Bylaws of the Company: (a) to determine the size
and types of Awards (except as to Awards to Directors which shall be limited to
the size and shall be subject to the conditions expressly permitted by this
Plan); (b) to determine the terms and conditions of each Award Agreement in a
manner consistent with the Plan; (c) to construe and interpret the Plan and any
agreement or instrument entered into under the Plan; (d) to establish, amend, or
waive rules and regulations for the Plan’s administration; and, (e) subject to
the provisions of Article 10 herein, to amend the terms and conditions of any
outstanding Award Agreement to the extent such terms and conditions are within
the discretion of the Committee as provided in the Plan. Further, the Committee
shall make all other determinations which may be necessary or advisable for the
administration of the Plan. The Committee may delegate its authority hereunder
to the extent permitted by law. In no event shall a Director who is a
Participant vote in any matter related solely to such Director’s Award under
this Plan.

 

3.3    Decisions Binding.    All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders or
resolutions of the Board shall be final, conclusive and binding on all persons,
including the Company, its shareholders, Directors, Employees, Participants, and
their estates, beneficiaries or assignees. In all cases, Awards to Directors
shall be subject to the same terms, conditions and interpretations applicable
generally to Awards to non-Director Participants.

 

3.4    Arbitration.    Each Participant who is granted an Award hereunder agrees
as a condition of the Award to submit to binding arbitration any dispute
regarding the Plan or any Award made under the Plan, including by way of
illustration and not limitation, any decision of the Committee or any action of
the Company respecting the Plan. Such arbitration shall be held in accordance
with the rules of the American Arbitration Association before an arbitrator
selected by the Company and acceptable to the Participant. If the Participant
objects to the appointment of the arbitrator selected by the Company, and the
Company does not appoint an arbitrator acceptable to the Participant, then the
Company and the Participant shall each select an arbitrator and those two
arbitrators shall collectively appoint a third arbitrator who shall alone hear
and resolve the dispute. The Company and the Participant shall share equally the
cost of arbitration. No Company agreement of indemnity, whether under the
Articles of Incorporation, the By-Laws or otherwise, and no insurance purchased
by the Company shall apply to pay or reimburse any Participant’s costs of
arbitration.

 

Article 4.     Shares Subject to Grant Under the Plan.

 

4.1    Number of Shares.    Subject to adjustment as provided in this Section
and in Section 4.3, an aggregate of 16,000,000 Shares shall be available for the
grant of Option Awards and Restricted Stock Awards under the Plan (hereinafter
called the “Share Pool”); provided, however, that no Employee may be granted
Awards under the Plan in any calendar year with respect to more than 600,000
Shares. The Committee, in its sole discretion, shall determine the appropriate
division of the Share Pool as between Option Awards and Restricted Stock Awards.
Shares issued upon exercise of any Award may be either authorized and previously
unissued Shares or reacquired Shares.

 

The following rules will apply for purposes of the determination of the number
of Shares available for grant under the Plan:

 

  (a)   the grant of an Award to an Employee shall reduce the Shares available
in the Share Pool for grant under the Plan by the number of Shares subject to
the Award; and

 

4

--------------------------------------------------------------------------------

  (b)   to the extent that an Option is settled in cash rather than by the
delivery of Shares, the Share Pool shall be reduced by the number of Shares
represented by the cash settlement of the Option (subject to the limitation set
forth in Section 4.2 herein).

 

4.2    Lapsed Awards.    If any Award granted under this Plan is canceled,
terminates, expires or lapses for any reason, any Shares then subject to such
Award again shall be available for grant under the Plan and shall return to the
Share Pool.

 

4.3    Adjustments in Authorized Shares.    In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, stock
dividend, split-up, Share combination, or other change in the corporate
structure of the Company affecting the Shares, an appropriate adjustment shall
be made in the number and class of Shares which may be delivered under the Plan,
and in the number and class of and/or price of Shares subject to any then
unexercised and outstanding Awards, as determined to be appropriate and
equitable by the Committee, in its sole discretion, to prevent dilution or
enlargement of rights. The number of Shares subject to any Award shall always be
a whole number.

 

4.4    Rights as a Shareholder.    No person shall have any rights as a
shareholder with respect to Shares subject to an Option Award until the date the
Company receives full payment of the Option price, including any sum due for
withholding pursuant to Section 6.6. A person who has Restricted Shares shall
have the rights of an owner of Shares, except to the extent those rights are
expressly limited by then applicable restrictions on transfer contained in this
Plan and the Restricted Stock Award Agreement.

 

Article 5.    Eligibility and Participation.

 

5.1    Eligibility.    Directors who are not Employees, officers who are
Employees, and Employees who are not officers but who are recommended by the
Chairman of the Board shall be eligible to be Participants in this Plan.

 

5.2    Participation.    A person who is eligible to be a Participant shall
become a Participant upon receipt of an Award in accordance with the terms of
this Plan.

 

Article 6.    Stock Options.

 

6.1    Grant of Options.

 

  (a)   Options may be granted to an eligible Employee at any time and from time
to time as shall be determined by and in the sole discretion of the Committee,
subject to the provisions of Section 4.1.

 

  (b)   Options with respect to ten thousand (10,000) Shares shall be granted to
each Director who is not employed by the Company on the date of his or her
election to the Board, subject to the following terms and conditions:

 

  (i)   the Option Price described in Section 6.3 shall be the Fair Market Value
of the Shares on the date of grant;

 

  (ii)   the Options shall be exercisable in accordance with Section 6.4 until
the tenth (10th) anniversary of the date of grant;

 

  (iii)   the restriction on the right to exercise the Options in accordance
with Section 6.5(a) shall lapse on the first anniversary of the date of the
Option Award;

 

  (iv)   for the purposes of this Plan, death shall be treated as death while
employed under Section 6.8(a)(i); Disability or Retirement from the Board shall
be subject to the provisions of Sections 6.8(b) and (c); failure to be reelected
shall be an involuntary termination subject to the terms of Section 6.8(d)(i);
and resignation or failure to stand for reelection shall be deemed to be a
voluntary termination subject to the terms of Section 6.8(e); and

 

5

--------------------------------------------------------------------------------

  (v)   the limited right of transferability shall be granted in accordance with
Section 6.7.

 

Except as above modified or interpreted, the provisions of this Section 6 shall
apply to Directors in the same manner it applies to others.

 

6.2    Option Award Agreement.    Each Option shall be granted pursuant to a
written Option Award Agreement, signed by the appropriate member of the
Committee or its designee, and specifying the terms and conditions applicable to
the Options granted including: the Option Price; the period during which the
Option may be exercised; the number of Shares to which the Option pertains; the
conditions under which the Option is exercisable; and such other provisions as
the Committee may from time to time determine. The Option Agreement also shall
specify that the Option is intended to be a Nonqualified Stock Option whose
grant is intended not to fall under the provisions of Code Section 422.

 

6.3    Option Price.    The Option Price for each Share subject to purchase
shall be determined by the Committee and stated in the Option Award Agreement
but in no event shall be less than the Fair Market Value of the Shares on the
date of grant of the Award.

 

6.4    Duration of Options.    Each Option shall be exercisable for such period
as the Committee shall determine at the time of grant. No Option shall be
exercisable later than the tenth (10th) anniversary of the date of its grant.

 

6.5    Exercise of Options.

 

  (a)   Options granted under the Plan shall be exercisable at such times and be
subject to such restrictions and conditions as the Committee shall in each
instance approve, which need not be the same for each grant or for each
Participant. No Option shall be exercisable prior to six (6) months following
the date of its grant. The Committee may provide, by rule or regulation or in
any Option Award Agreement, that the exercisability of an Option may be
accelerated or extended under various circumstances to a date not later than the
latest expiration date permitted in accordance with Section 6.4.

 

  (b)   Each Option shall be exercisable only by delivery to the Committee in
care of the Secretary of the Company of a written notice of exercise in such
form as the Committee may require. A notice of exercise shall: specify the
number of shares to be purchased, shall be signed by the Participant or holder
of the Option and shall be dated the date the signature is affixed.

 

6.6    Payment.    A written notice of exercise shall be accompanied by full
payment for the Shares to be purchased. Subject to the provisions of Article 11,
payment shall include any income or employment taxes required to be withheld by
the Company from the employee’s compensation with respect to the Shares so
purchased.

 

  (a)   The Option Price upon exercise of any Option shall be payable to the
Company in full either: (i) in cash or its equivalent, or (ii) by tendering
previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price (provided that the Shares so tendered
shall have been held by the Participant for at least six (6) months prior to
such tender), in proper form for transfer and accompanied by all requisite stock
transfer tax stamps or cash in lieu thereof, or (iii) by a combination of (i)
and (ii).

 

  (b)   The Committee also may allow cashless exercises as permitted under
Federal Reserve Board Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan’s purpose and applicable law.

 

  (c)   As soon as practicable after receipt of a written notice of exercise and
full payment, the Company shall deliver to the Participant, in the Participant’s
name, Share certificates in an appropriate amount based upon the number of
Shares purchased.

 

 

6

--------------------------------------------------------------------------------

6.7    Restrictions on Transferability.    Except to the extent permitted under
this Section 6.7, no Option granted under the Plan may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or
by the laws of descent and distribution. Further, all Options granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant. Notwithstanding the foregoing, the right to purchase Shares
subject to an Option Award may be transferred, in whole or in part, by a
Participant during a Participant’s lifetime, to a Participant’s spouse, child or
grandchild, or to the trustee of a testamentary or other grantor trust
established primarily for the benefit of a Participant’s spouse, child or
grandchild; provided that:

 

  (a)   A transfer shall only be effective upon receipt by the Secretary of the
Company, on behalf of the Committee, of written notice of transfer in such form
as the Committee may require;

 

  (b)   A notice of transfer shall: (i) identify the name, address and
relationship of the transferee to the Participant; (ii) identify the Option
Award which is the subject of the transfer, the number of Shares transferred and
the consideration paid, if any, for the transfer; (iii) in the case of a
transfer to a trustee, include evidence satisfactory to the Committee that under
the terms of the trust the transfer is for the exclusive benefit of a
Participant’s spouse, child or grandchild; and (iv) include a copy of the
authorized signature of each person who will have the right to exercise the
option to purchase and all information relevant to the rights transferred; and

 

  (c)   A transferee may not transfer any rights. Upon the transferee’s death,
all rights shall revert to the Participant.

 

The Committee may impose such additional restrictions on transferability as it
may deem advisable, including, without limitation, restrictions under applicable
Federal securities laws, under the requirements of any stock exchange or market
upon which such Shares are then listed and/or traded, and under any blue sky or
state securities laws applicable to such Shares.

 

6.8    Termination of Employment.    Except as hereinafter provided, Options
granted under the Plan may not be exercised by any person, including a
transferee of any rights under an Option Award, unless the Participant is then
in the employ of the Company and unless the Participant has remained
continuously so employed since the date of grant of the Option. Unless otherwise
provided by the Committee and subject to the duration established in accordance
with Section 6.4, Options shall be exercisable in the following circumstances:

 

  (a)   in the case of a Participant’s death:

 

  (i)   while employed by the Company, by the Beneficiary or representative
during a period of three (3) years following the date of the Participant’s
death; and in such a case may be exercised even before expiration of the six
(6)-month or longer period established in accordance with Section 6.5(a); or

 

  (ii)   after his Retirement, but before the third anniversary of his
Retirement, by the Beneficiary or representative on or before the third
anniversary of his Retirement;

 

  (b)   in the case of the Participant’s Disability, by the Participant or by
the Participant’s appointed representative during a period of three (3) years
following the date of the Participant’s last day worked;

 

  (c)   in the case of the Participant’s Retirement, by the Participant during a
period of three (3) years following the date of the Participant’s last day
worked;

 

  (d)   in the case of a Participant’s involuntary termination of employment:

 

  (i)   for reasons other than Cause, by the Participant during a period of
three (3) years following the date of the Participant’s last day worked; or

 

  (ii)   for Cause, by the Participant on or before his last day worked whether
or not the Committee has made its final determination that there is Cause for
termination as of that last day worked; and

 

  (e)   in the case of a Participant’s voluntary termination of employment, his
last day worked.

 

7

--------------------------------------------------------------------------------

Article 7.    Restricted Stock.

 

7.1    Restricted Stock Awards.    Restricted Stock Awards may be made at any
time while the Plan is in effect. Such Awards may be made to any Director or
Employee whether or not prior Restricted Stock Awards have been made to said
person.

 

7.2    Notice.    The Committee shall promptly provide each Participant with
written notice setting forth the number of Shares covered by the Restricted
Stock Award and such other terms and conditions relevant thereto, including the
purchase price, if any, to be paid for the Shares by the Recipient of the Award,
as may be considered appropriate by the Committee.

 

7.3    Restrictions on Transfer.    The purpose of these restrictions is to
provide an incentive to each Participant to continue to provide services to the
Company and to perform his or her assigned tasks and responsibilities in a
manner consistent with the best interests of the Company and its stockholders.
The Shares awarded pursuant to the Plan shall be subject to the following
restrictions:

 

  (a)   Stock certificates evidencing shares shall be issued in the sole name of
the Participant (but may be held by the Company until the restrictions shall
have lapsed in accordance herewith) and shall bear a legend which, in part,
shall provide that:

 

“The shares of common stock evidenced by this certificate are subject to the
terms and restrictions of the AK Steel Holding Corporation Stock Incentive Plan.
These shares are subject to forfeiture or cancellation under the terms of said
Plan. These shares may not be sold, transferred, assigned, pledged, encumbered
or otherwise alienated or hypothecated except pursuant to the provisions of said
Plan, a copy of which Plan is available from the Secretary of the Company upon
request.”

 

  (b)   No Restricted Stock may be sold, transferred, assigned, pledged,
encumbered or otherwise alienated or hypothecated unless, until and then only to
the extent that said restrictions shall have lapsed in accordance with Section
7.4.

 

7.4    Lapse of Restrictions.    The restrictions set forth in Section 7.3 will
lapse only if, on the date restrictions are to lapse in accordance with this
Section 7.4, the Participant has been continuously employed by the Company or
has been a Director from the time of the Restricted Stock Award to such date of
lapse. If the lapse schedule would result in the lapse of restrictions in a
fractional share interest, the number of shares will be rounded down to the next
lowest number of full shares for each of the first two lapse dates, with the
balance to relate to the final lapse date. Unless otherwise provided by the
Board:

 

  (a)   with respect to a Restricted Stock Award to an Employee, the
restrictions set forth in Section 7.3 shall lapse with respect to twenty-five
percent (25%) of the Shares subject thereto on the second anniversary of the
date of the Award; and with respect to an additional twenty-five percent (25%)
of the Shares subject thereto on each of the third, fourth and fifth
anniversaries of the date of the Award; and

 

  (b)   with respect to a Restricted Stock Award to a Director, the restrictions
set forth in Section 7.3 shall lapse upon completion of the full tenure for
which the Director was elected to serve on the Board.

 

7.5    Vesting and Forfeiture.    Upon the lapse of the restrictions set forth
in Section 7.3 with respect to Shares covered by a Restricted Stock Award,
ownership of the Shares with respect to which the restrictions have lapsed shall
vest in the holder of the Award. In the event of termination of an Employee’s
employment, or in the event a Director fails to complete his or her full tenure
on the Board, all Shares then still subject to the restrictions described in
Section 7.3 shall be forfeited by the Participant and returned to the Company
for cancellation, except as follows:

 

  (a)  

Restrictions with respect to Shares covered by an outstanding Restricted Stock
Award held by a Director shall lapse upon the date of his or her mandatory
retirement from the Board by reason of age. In the case of an Employee’s
retirement, the Committee may in its sole discretion elect to waive all or

 

8

--------------------------------------------------------------------------------

 

any portion of the restrictions remaining in respect of a Restricted Stock Award
held by that employee. Any outstanding restrictions shall lapse in case of death
or Disability of the holder of a Restricted Stock Award. Evidence of Disability
will be entitlement to disability income benefits under the Federal Social
Security Act; and

 

  (b)   The Committee may at any time in its sole discretion accelerate or waive
all or any portion of restrictions remaining in respect of the Shares covered by
an outstanding Restricted Stock Award (to the extent not waived pursuant to
paragraph (a) above). This authority may be exercised for any or all
Participants; provided that the waiver in any particular case shall not bind the
Committee in any other similar case, it being the intention of the Company to
grant the Committee the broadest possible discretion to act or to refuse to act
in this regard. Any such action taken on behalf of a Director shall require the
unanimous consent of all Directors (excluding the Director for whose benefit the
action is taken) then in office.

 

7.6    Rights as Stockholder.    Upon issuance of the stock certificates
evidencing the Restricted Stock Award and subject to the restrictions set forth
in Section 7.3 hereof, the Participant shall have all the rights of a
stockholder of the Company with respect to the Shares of Restricted Stock
represented by that Restricted Stock Award, including the right to vote the
shares and receive all dividends and other distributions paid or made with
respect thereto.

 

7.7    Awards to Directors.    Except as otherwise determined by majority vote
of the Board with respect to any calendar year, fifty percent (50%) of each
Director’s annual retainer fee for services on the Board shall be paid in the
form of a Restricted Stock Award, and each Director may elect, according to
procedures established by the Committee, to have more than fifty percent (50%)
of his annual retainer fee, and/or all or a portion of any other fees to be
earned in the calendar year for his services on the Board, paid to him by means
of Restricted Stock Awards. Such Restricted Stock Awards shall be made effective
as of December 31 to Directors then serving. Any Director who leaves the Board
during the calendar year shall be paid in cash for services rendered during said
year.

 

Article 8.    Rights of Employees.

 

8.1    Employment.    Nothing in the Plan shall: (a) interfere with or limit in
any way the right of the Company to terminate any Participant’s employment at
any time; (b) confer upon any Participant any right to continue in the employ of
the Company or its subsidiaries; or (b) be evidence of any agreement or
understanding, express or implied, that the Company will employ any Participant
in any particular position at a particular rate of compensation or for any
particular period of time.

 

8.2    Participation.    Nothing in this Plan shall be construed to give any
person any right to be granted any Award other than at the sole discretion of
the Committee or as giving any person any rights whatsoever with respect to
Shares except as specifically provided in the Plan. No Participant shall have
the right to be selected to receive an Award under this Plan, or, having been so
selected, to be selected to receive a future Award.

 

Article 9.    Change in Control.

 

Upon the occurrence of a Change in Control, unless otherwise specifically
prohibited by the terms of this Article 9:

 

  (a)   any and all outstanding Options previously granted hereunder, if not
then exercisable, shall become immediately exercisable and any restrictions on
the transfer of Shares of Restricted Stock shall lapse and expire effective as
of the date of the Change in Control;

 

9

--------------------------------------------------------------------------------

  (b)   subject to Article 10 herein, the Committee shall have the authority to
make any modifications to any Option Award determined by the Committee to be
appropriate before the effective date of the Change in Control; and

 

  (c)   if the Shares are no longer traded over a national public securities
exchange following a Change in Control:

 

  (i)   Participants holding Options shall have the right to require the Company
to make a cash payment to them in exchange for their Options. Such cash payment
shall be contingent upon the Participant’s surrendering the Option. The amount
of the cash payment shall be determined by adding the total “spread” on all
outstanding Options. For this purpose, the total “spread” shall equal the
difference between: (1) the higher of (i) the highest price per Share paid or
offered in any transaction related to a Change in Control of the Company; or
(ii) the highest Fair Market Value per Share at any time during the ninety (90)
calendar day period preceding a Change in Control; and (2) the Option Price
applicable to each Share held under Option; and

 

  (ii)   Participants holding Shares of Restricted Stock shall have the right to
require the Company to make a cash payment to them in exchange for their
Restricted Stock. Such cash payment shall be contingent upon the Participant’s
surrendering the Restricted Stock. The amount of the cash payment shall be not
less than the higher of (1) the highest price per Share paid or offered in any
transaction related to a Change in Control of the Company; or (2) the highest
Fair Market Value per Share at any time during the ninety (90) calendar day
period preceding a Change in Control.

 

Article 10.    Amendment, Modification, and Termination.

 

10.1    Amendment, Modification, and Termination.    The Board may at any time
and from time to time, alter, amend, suspend or terminate this Plan in whole or
in part; provided, that no amendment that (a) requires shareholder approval in
order for this Plan to continue to comply with Rule 16b-3 under the Exchange
Act, including any successor to such Rule, or (b) would modify the provisions of
Section 3.1 or the first paragraph of Section 4.1 of this Plan, shall be
effective unless such amendment shall be approved by the requisite vote of
shareholders of the Company entitled to vote thereon.

 

10.2    Awards Previously Granted.    No termination, amendment, or modification
of the Plan shall adversely affect in any material way any Award previously
granted under the Plan without the written consent of the Participant holding
such Award. If consent is not given, the Award shall continue in force in
accordance with its terms without modification.

 

Article 11.    Withholding.

 

11.1    Tax Withholding.    The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes, (including the
Participant’s FICA obligation, if any) required by law to be withheld with
respect to any taxable event arising or as a result of this Plan. Failure to
cooperate with the Company in paying any such withholding shall cause the
cancellation of the Shares subject to the taxable transaction without liability
for such cancellation.

 

11.2    Share Withholding.    With respect to withholding required upon the
exercise of Options or the vesting of Shares under a Restricted Stock Award,
Participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares having a Fair Market Value on the date the tax is to be determined equal
to the minimum statutory total tax which could be imposed on the transaction.
All elections shall be irrevocable, made in writing, signed by the Participant.
In addition to the foregoing requirements, an Insider may elect Share
withholding only if such election is made in compliance with Section 16 of the
Exchange Act.

 

 

10

--------------------------------------------------------------------------------

Article 12.    Indemnification.    The Company shall indemnify and hold harmless
each member of the Committee, or of the Board, against and from any loss, cost,
liability or expense, including reasonable attorney’s fees and costs of suit,
that may be imposed upon or reasonably incurred by the member in connection with
or resulting from any claim, action, suit, or proceeding to which the member may
be a party defendant or in which the member may be involved as a defendant by
reason of any action taken or any failure to act under the Plan and against and
from any and all amounts paid in settlement thereof or paid in satisfaction of
any judgment in any such action, suit, or proceeding against the member,
provided that the member shall give the Company an opportunity, at its own
expense, to handle and defend the same before the member undertakes to handle
and defend it or agrees to any settlement of the claim. The foregoing right of
indemnification shall be in addition to, and not exclusive of, any other rights
of indemnification to which the member may be entitled under the Company’s
Articles of Incorporation or By-Laws, as a matter of law, or otherwise. This
right shall not extend to any action by a Director as a claimant of rights under
the Plan, whether on the Director’s behalf or on behalf of a class of persons
which would include the Director, unless filed in the form of a declaratory
judgment seeking relief for the Company or the Plan.

 

Article 13.    Successors.    All obligations of the Company under the Plan,
with respect to Awards granted hereunder, shall be binding on any successor to
the Company, whether the existence of such successor is the result of a direct
or indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Company.

 

Article 14.    Listing of Shares and Related Matters.    If at any time the
Committee shall determine that the listing, registration or qualification of the
Shares subject to any Award on any securities exchange or under any applicable
law, or the consent or approval of any governmental regulatory authority, is
necessary or desirable as a condition of, or in connection with, the granting of
an Option or the issuance of Shares thereunder or the granting of a Restricted
Stock Award, no Option that is the subject of such Award may be exercised in
whole or in part and no certificates may be issued or reissued in respect of any
Restricted Stock that is the subject of such Award unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.

 

Article 15.    Deferral Elections.    The Committee may permit a Participant to
elect to defer his or her receipt of Shares that would otherwise be due to such
Participant by virtue of the exercise of an Option, or due to the lapse of
restrictions with respect to Restricted Stock, awarded under the Plan. If any
such election is permitted, the Committee shall establish rules and procedures
for such deferrals, including, but not limited to: (a) the payment or crediting,
with respect to deferred amounts credited in cash, of reasonable interest or
other investment return determined with reference to any investment performance
measurement selected by the Committee from time to time, (b) the payment or
crediting of dividend equivalents in respect of deferrals credited in Share
units, and (c) the Participant’s rights with respect to the Options and/or
Restricted Stock subject to such deferral election during the period between the
Participant’s deferral election and the exercise of the Options or the lapse of
restrictions with respect to the Restricted Stock.

 

Article 16.    Legal Construction.

 

16.1    Gender and Number.    Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.

 

16.2    Severability.    If any provision of the Plan shall be held by a court
of competent jurisdiction to be illegal, invalid or unenforceable for any
reason, the illegality, invalidity or unenforceability shall not affect the
remaining parts of the Plan, and the Plan shall be construed and enforced as if
the illegal, invalid or unenforceable provision had not been included. Unless
otherwise specifically provided in a final order by a court of competent
jurisdiction, no such judicial determination shall deprive a Participant of the
economic advantage, if any, of unexpired Options under any Option Award
Agreement or of Shares of Restricted Stock then subject to

 

11

--------------------------------------------------------------------------------

restrictions under the terms of the Plan or the Restricted Stock Award
Agreement. If any such judicial determination does or would have an adverse
impact then the Company shall assure the Participant of the right to receive
cash in an amount equal to the value of any Award under the Plan prior to the
determination of its invalidity in the same manner as if such Award was lawful
and the benefit granted thereunder could be enjoyed in accordance with the terms
of the Award.

 

16.3    Requirements of Law.    The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.

 

16.4    Securities Law Compliance.    With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
l6b-13 or its successors under the Exchange Act. To the extent any provision of
the Plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
The obligations of the Company to issue or transfer Restricted Shares awarded
pursuant to the Plan or Option Shares upon exercise of an Option shall be
subject to: compliance with all applicable governmental rules and regulations,
and administrative action; the effectiveness of a registration statement under
the Securities Act of 1933, as amended, if deemed necessary or appropriate by
the Company; and the condition that listing requirements (or authority for
listing upon official notice of issuance) for each stock exchange on which
outstanding shares of the same class may then be listed shall have been
satisfied.

 

16.5    Governing Law.    To the extent not preempted by Federal law, the Plan
and all agreements hereunder shall be construed in accordance with and governed
by the laws of the State of Delaware.

 

12