Exhibit 10.7

THE ANNTAYLOR STORES CORPORATION

2003 EQUITY INCENTIVE PLAN, AS AMENDED

1. Purpose.

This 2003 Equity Incentive Plan (the “Plan”) is intended to encourage stock
ownership by employees of AnnTaylor Stores Corporation (the “Corporation”), its
divisions and Subsidiary Corporations, so that they may acquire or increase
their proprietary interest in the Corporation, and to encourage such employees
to remain in the employ of the Corporation, its divisions and Subsidiary
Corporations, and to put forth maximum efforts for the success of the business.
The Plan is also intended to encourage Directors of the Corporation who are not
employees or officers of the Corporation or its Subsidiary Corporations
(“Eligible Directors”) to acquire or increase their proprietary interest in the
Corporation and to further promote and strengthen the interest of such Eligible
Directors in the development and financial success of the Corporation and to
assist the Corporation in attracting and retaining highly qualified Directors.

2. Definitions.

As used in this Plan, the following words and phrases shall have the meanings
indicated:

 

  (a) “CAUSE” used in connection with the termination of employment or service
of a Grantee, shall, unless otherwise determined by the Committee, mean a
termination of employment or service of the Grantee by the Corporation or a
division or Subsidiary Corporation due to (i) the Grantee’s failure to render
services in accordance with the terms of such Grantee’s employment or service,
which failure amounts to a material neglect of such Grantee’s duties, (ii) the
commission by the Grantee of an act of fraud, misappropriation (including,
without limitation, the unauthorized disclosure of confidential or proprietary
information) or embezzlement, or (iii) a conviction of or guilty plea or
confession to any felony.

 

  (b) “CODE” shall mean the Internal Revenue Code of 1986, as amended.

 

  (c) “COMMON STOCK” shall mean shares of the Corporation’s Common Stock, par
value $.0068 per share.

 

  (d) “DISABILITY” shall mean a Grantee’s inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or that has lasted or can be
expected to last for a continuous period of not less than twelve (12) months.

 

  (e) “EXCHANGE ACT” shall mean the Securities Exchange Act of 1934, as amended.

 

  (f) “EXECUTIVE OFFICER” shall mean an officer of the Corporation who is an
“executive officer” within the meaning of Rule 3b-7 under the Exchange Act.

 

  (g) “FAIR MARKET VALUE” per share as of a particular date shall mean (i) the
closing sales price per share of Common Stock as reported on the New York Stock
Exchange (or if the shares of Common Stock are not then traded on such exchange,
on the principal national securities exchange on which they are then traded) for
the last preceding date on which there was a sale of such Common Stock on such
exchange, or (ii) if the shares of Common Stock are not then traded on a
national securities exchange but are traded on an over-the-counter market, the
average of the closing bid and asked prices for the shares of Common Stock in
such over-the-counter market for the last preceding date on which there was a
sale of such Common Stock in such market, or (iii) if the shares of Common Stock
are not then listed on a national securities exchange or traded in an
over-the-counter market, such value as the Committee (as defined in Section 3
hereof) in its discretion may determine.

 

  (h) “GRANTEE” shall mean a person to whom an Option, Restricted Stock Award or
Restricted Unit Award has been granted.

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  (i) “INCENTIVE STOCK OPTION” shall mean an Option that is intended to be an
“incentive stock option” within the meaning of Section 422 of the Code.

 

  (j) “NONSTATUTORY STOCK OPTION” shall mean an Option that is not intended to
be an Incentive Stock Option.

 

  (k) “OPTION” shall mean the right, granted to a Grantee pursuant to Section 6,
to purchase a specified number of shares of Common Stock, on the terms and
subject to the restrictions set forth in this Plan and by the Committee upon the
grant of the Option to the Grantee.

 

  (l) “PERFORMANCE GOAL” shall mean the specific objectives that may be
established by the Committee, from time to time, with respect to an award
granted under the Plan, which objectives may be based on one or more of the
following, determined in accordance with generally accepted accounting
principles, as applicable: revenue; net or gross comparable store sales; net
income; gross margin; operating profit (corporate and/or divisional); earnings
before all or any of interest, taxes, depreciation and/or amortization; cash
flow; working capital; return on equity, assets, capital or investment; market
share; sales (net or gross) measured by store, product line, territory,
operating or business unit, customers, or other category; earnings or book value
per share of Common Stock; earnings from continuing operations; net worth;
turnover or shrinkage in inventory; levels of expense, cost or liability by
store, product line, territory, operating or business unit or other category;
appreciation in the price of Common Stock; total shareholder return (stock price
appreciation plus dividends); implementation of critical projects or processes
consisting of one or more objectives based on meeting specified market
penetration, geographical business expansion, customer satisfaction, employee
satisfaction, human resources management, supervision of litigation, information
technology, and goals relating to acquisitions, divestitures, joint ventures and
similar transactions and budget comparisons; and personal professional
objectives, including any of the foregoing performance goals, the implementation
of policies and plans, the negotiation of transactions, the development of long
term business goals, formation of joint ventures, research or development
collaborations, and the completion of other corporate transactions. Where
applicable, the Performance Goal may be expressed in terms of attaining a
specified level of the selected criterion or the attainment of a percentage
increase or decrease in the selected criterion, or may be applied to the
performance of the Corporation relative to a market index, a group of other
companies or a combination thereof, all as determined by the Committee.
Performance Goals may relate to the performance of a store, business unit,
product line, division, territory, or the Corporation or a combination thereof.

 

  (m) “RESTRICTED SHARE” shall mean a share of Common Stock, awarded to a
Grantee pursuant to Section 7, that is subject to the terms and restrictions set
forth in this Plan and by the Committee upon the award of the Restricted Share
to the Grantee.

 

  (n) “RESTRICTED UNIT” shall mean the right, awarded to a Grantee pursuant to
Section 7, to receive a share of Common Stock or an amount in cash equal to the
Fair Market Value of one share of Common Stock, on the terms and subject to the
restrictions set forth in this Plan and by the Committee upon the award of the
Restricted Unit to the Grantee.

 

  (o) “RETIREMENT” shall mean a Grantee’s voluntary termination of employment
with the Corporation and its Subsidiary Corporations after age 65 with at least
5 years of service with the Corporation or its Subsidiary Corporations.

 

  (p) “SUBSIDIARY CORPORATION” shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the employer
corporation if, at the time of granting an Option, Restricted Stock Award or
Restricted Unit Award, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

3. Administration.

The Plan shall be administered by the Compensation Committee (the “Committee”)
of the Board of Directors of the Corporation (the “Board”). The Committee shall
consist solely of two or more members of

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the Board, each of whom shall be an “outside director” within the meaning of
Section 162(m) of the Code, a “nonemployee director” within the meaning of Rule
16b-3, as from time to time amended, promulgated under Section 16 of the
Exchange Act, and an “independent director” within the meaning of the New York
Stock Exchange Listed Company Manual.

The Committee shall have the authority in its discretion, subject to and not
inconsistent with the express provisions of the Plan, to administer the Plan and
to exercise all the powers and authorities either specifically granted to it
under the Plan or necessary or advisable in the administration of the Plan,
including, without limitation, the authority to grant Options and to make awards
of Restricted Shares and Restricted Units (“Restricted Stock Awards” and
“Restricted Unit Awards,” respectively, and sometimes collectively with the
grant of Options, “Grants”); to determine the purchase price of the shares of
Common Stock covered by each Option (the “Option Price”); to determine the
persons to whom, and the time or times at which, Options, Restricted Stock
Awards and Restricted Unit Awards shall be granted; to determine the number of
shares to be covered by each Option and to determine the number of Restricted
Shares and Restricted Units to be covered by each Restricted Stock Award and
Restricted Unit Award; to interpret the Plan; to prescribe, amend and rescind
rules and regulations relating to the Plan; to determine the terms and
provisions of the agreements (which need not be identical) entered into in
connection with grants of Options (“Option Agreements”) and Restricted Stock
Awards and Restricted Unit Awards (“Restricted Award Agreements”); and to make
all other determinations deemed necessary or advisable for the administration of
the Plan. Notwithstanding the foregoing (but subject to the provisions of
Section 6(j)), the Committee shall not have the authority to reduce the exercise
price for any Option by repricing or replacing such Option unless the
Corporation shall have obtained the prior consent of its stockholders.

The determinations of the Committee shall be binding and conclusive on all
parties. The Committee may delegate to one or more of its members or to one or
more agents such administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated duties as aforesaid may employ
one or more persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan. The Committee shall have the
authority in its discretion to delegate to specified officers of the Corporation
the power to make Grants, including, without limitation, to determine the terms
of such Grants, and the power to extend the exercisability of Options pursuant
to Section 6(f), 6(g) or 8(f) or 8(g) hereof, in each case consistent with the
terms of this Plan (but only to the extent permissible under Section 409A of the
Code, hereinafter, “Section 409A” and the provisions of Section 157 of the
Delaware General Corporations Law) and subject to such restrictions, if any, as
the Committee may specify when making such delegation; provided that the
delegates shall not have authority to make Grants to, or extend the
exercisability of Options held by, such delegates or any Executive Officer.

No member of the Board or Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Grant made
hereunder.

4. Eligibility.

Options, Restricted Stock Awards and Restricted Unit Awards may be granted to
employees (including, without limitation, officers who are employees) of the
Corporation or its present or future divisions and Subsidiary Corporations, and
to Eligible Directors. In determining the persons to whom Options, Restricted
Stock Awards and Restricted Unit Awards shall be granted and the number of
shares to be covered by each Option and the number of Restricted Shares and
Restricted Units to be covered by each Restricted Stock Award and Restricted
Unit Award, the Committee shall take into account the duties of the respective
persons, their present and potential contributions to the success of the
Corporation and such other factors as the Committee shall deem relevant in
connection with accomplishing the purpose of the Plan. A person to whom an
Option has been granted hereunder is sometimes referred to herein as an
“Optionee.”

A Grantee shall be eligible to receive more than one Grant during the term of
the Plan, but only on the terms and subject to the restrictions hereinafter set
forth.

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5. Stock.

The shares of Common Stock subject to Options and Restricted Stock Awards
hereunder may, in whole or in part, be authorized but unissued shares or shares
that shall have been or may be reacquired by the Corporation. Subject to the
next sentence, the aggregate number of shares of Common Stock as to which
Options, Restricted Shares and Restricted Units may be granted from time to time
under this Plan shall not exceed 8,750,000, of which no more than an aggregate
of 2,760,000 shares may be used for grants of Restricted Shares and Restricted
Units. The limitations established by the preceding sentence shall be subject to
adjustment as provided in Section 6(j) or 7(f) hereof, as applicable. Under the
Plan, no single employee may be granted Options covering more than 800,000
shares of Common Stock or Restricted Stock and Restricted Unit Awards
(constituting performance based compensation within the meaning of
Section 162(m) of the Code) covering more than 400,000 shares of Common Stock
(subject to any adjustments pursuant to Section 6(j) or 7(f) hereof, as
applicable) during any fiscal year of the Corporation.

If any shares subject to an Option grant or Restricted Stock Award are
forfeited, canceled, exchanged or surrendered or if a Grant otherwise terminates
or expires without a distribution of shares to the Grantee, the shares of Common
Stock with respect to such Grant shall, to the extent of any such forfeiture,
cancellation, exchange, surrender, termination or expiration, again be available
for Grants under the Plan. If any Restricted Units are forfeited, canceled,
exchanged or surrendered or if a Restricted Unit Award otherwise terminates or
expires without any payment being required to be made with respect to any of the
Restricted Units subject thereto, then such Restricted Units (and, if
applicable, the Common Stock subject thereto) shall, to the extent of any such
forfeiture, cancellation, exchange, surrender, termination or expiration, again
be available for Grants under the Plan. Notwithstanding the foregoing, the
shares of Common Stock available for Grants under the Plan shall be reduced by
the following: (i) shares tendered in payment of the exercise price of an award
and (ii) shares tendered or withheld in respect of tax withholding obligations.

6. Terms and Conditions of Options.

Each Option granted pursuant to the Plan shall be evidenced by a written Option
Agreement between the Corporation and the Optionee, which agreement shall comply
with and be subject to the following terms and conditions (and with such other
terms and conditions not inconsistent with the terms of this Plan as the
Committee, in its discretion, shall establish):

 

  (a) NUMBER OF SHARES. Each Option Agreement shall state the number of shares
of Common Stock to which the Option relates. The number of shares subject to any
Option shall be subject to adjustment as provided in Section 6(j) hereof.

 

  (b) TYPE OF OPTION. Each Option Agreement shall specifically state whether the
Option is intended to be an Incentive Stock Option.

 

  (c) OPTION PRICE. Each Option Agreement shall state the Option Price, which
shall be not less than one hundred percent (100%) of the Fair Market Value of
the shares of Common Stock of the Corporation on the date of grant of the
Option. The Option Price shall be subject to adjustment as provided in
Section 6(j) hereof. The date on which the Committee adopts a resolution
expressly granting an Option shall be considered the day on which such Option is
granted, unless such resolution expressly provides for a specific later date.

 

  (d) MEDIUM AND TIME OF PAYMENT. The Option Price shall be paid in full, at the
time of exercise, (i) in cash, (ii) in shares of Common Stock having a Fair
Market Value equal to such Option Price provided that such shares have been held
by the Grantee for at least six months prior to such exercise, (iii) in a
combination of cash and shares provided that such shares have been held by the
Grantee for at least six months prior to such exercise, or (iv) in the sole
discretion of the Committee, through a cashless exercise procedure involving a
broker; provided, however, that such method and time for payment shall be
permitted by and be in compliance with applicable law.

 

  (e)

TERM AND EXERCISE OF OPTIONS. Except as provided in Section 6(j) hereof or
unless otherwise determined by the Committee (but subject to Section 9), the
shares covered by an Option shall become exercisable over such period, in
cumulative installments or otherwise, or

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upon the satisfaction of such Performance Goals or other conditions, as the
Committee shall determine; provided, however, that, subject to Section 9, the
Committee shall have the authority to accelerate the exercisability of all or
any portion of any outstanding Option at such time and under such circumstances
as it, in its sole discretion, deems appropriate, and provided further, however,
that such exercise period shall not (i) be earlier than one year from the date
of grant of such Option (subject to Section 6(j)(2)), and (ii) exceed 10 years
from the date of grant of such Option. The exercise period shall be subject to
earlier termination as provided in Sections 6(f) and 6(g) hereof. An Option may
be exercised, as to any or all full shares of Common Stock as to which the
Option has become exercisable, by giving written notice of such exercise to the
Secretary of the Corporation; provided, however, that an Option may not be
exercised at any one time as to fewer than 100 shares (or such number of shares
as to which the Option is then exercisable if such number of shares is less than
100).

 

  (f) TERMINATION. Except as provided in this Section 6(f) and in Section 6(g)
hereof (and except as otherwise provided in the applicable award agreement), an
Option may not be exercised unless the Optionee is then in the employ or service
of the Corporation or one of its divisions or Subsidiary Corporations, and
unless the Optionee has remained continuously so employed or in service since
the date of grant of the Option. In the event that the employment or service of
an Optionee shall terminate or cease other than by reason of death, Disability,
Retirement or a termination by the Company for Cause, all Options theretofore
granted to such Optionee that are exercisable at the time of such termination
may, to the extent not theretofore exercised or canceled, be exercised at any
time within the earlier of when the Options expire pursuant to Section 6(e)
hereof and three (3) months after such termination of employment or cessation of
service, as applicable; provided, however, that the Committee may in its
discretion extend the period for exercise of such Options to a date later than
three (3) months after such separation or cessation date, but in any event not
beyond the date on which the Option would otherwise expire pursuant to
Section 6(e) hereof. Notwithstanding the foregoing, if the employment of an
Optionee shall terminate voluntarily by the Optionee or by the Company for
Cause, all Options theretofore granted to such Optionee shall, to the extent not
theretofore exercised, terminate on the day following termination.

 

  (g) DEATH, DISABILITY OR RETIREMENT OF OPTIONEE. If an Optionee shall die
while employed by or in service to the Corporation or a Subsidiary Corporation,
or if the Optionee’s employment or service shall terminate or cease by reason of
Disability or Retirement, all Options theretofore granted to such Optionee, to
the extent exercisable on the date of death or separation, may be exercised by
the Optionee or by the Optionee’s estate or by a person who acquired the right
to exercise such Option by bequest or inheritance or otherwise by reason of the
death or Disability of the Optionee, at any time within three (3) years after
the date of death or termination by reason of Disability or Retirement, or at
such later time as the Committee may in its discretion determine, but in any
event not beyond the date on which the Option would otherwise expire pursuant to
Section 6(e) hereof.

 

  (h) NONTRANSFERABILITY OF OPTIONS. Options granted under the Plan shall not be
transferable except (i) by will or the laws of descent and distribution, or
(ii) as specifically provided below in this Section (6)(h). Any Optionee may
transfer Nonstatutory Stock Options to members of his or her Immediate Family
(as defined below) if (x) the Option Agreement pursuant to which the
Nonstatutory Stock Option was granted so provides, (y) such agreement was
approved by the Board or the Committee, and (z) the Optionee does not receive
any consideration for the transfer. “Immediate Family” means children,
grandchildren, and spouse of the Optionee (including domestic partners under
applicable law) or one or more trusts for the benefit of such family members or
partnerships in which such family members are the only partners. Any
Nonstatutory Stock Option agreement may be amended to provide for the
transferability feature as outlined above, provided that such amendment is
approved by the Board or the Committee. Any Nonstatutory Stock Option not
granted pursuant to an Option Agreement expressly permitting its transfer shall
not be transferable. During the lifetime of the Optionee, Options may be
exercised only by the Optionee, the guardian or legal representative of the
Optionee, or the transferee as permitted under this Section 6(h).

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  (i) SPECIAL PROVISIONS APPLICABLE TO INCENTIVE STOCK OPTIONS. The provisions
of this Section 6(i) shall apply to the grant of Incentive Stock Options,
notwithstanding any other provision of the Plan to the contrary. Only employees
of the Corporation or any Subsidiary Corporation may be granted Incentive Stock
Options under the Plan. In the case of any Incentive Stock Option, to the extent
the aggregate Fair Market Value (determined at the time such Option is granted)
of the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
the Plan and all other Incentive Stock Option plans of the Corporation and any
Subsidiary Corporation) exceeds $100,000, such Option shall be treated as a
Nonstatutory Stock Option. In no event shall any employee who, at the time such
employee would otherwise be granted an Option, owns (within the meaning of
Section 424(d) of the Code) stock of the Corporation or any Subsidiary
Corporation possessing more than 10% of the total combined voting power of all
classes of stock of the Corporation or any Subsidiary Corporation, be eligible
to receive an Incentive Stock Option under the Plan. To the extent an Incentive
Stock Option is exercised more than three months following the termination of
the Grantee’s employment (other than a termination resulting from the Grantee’s
death or Disability), such Option shall be treated as a Nonstatutory Stock
Option.

 

  (j) EFFECT OF CERTAIN CHANGES. (1) In the event that any dividend or other
distribution is declared (whether in the form of cash, Common Stock, or other
property), or there occurs any recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, spin-off, combination, repurchase,
share exchange or other similar corporate transaction or event, the Committee
shall adjust, (i) the number and kind of shares of stock which may thereafter be
issued in connection with Options hereunder, (ii) the number and kind of shares
of stock or other property issued or issuable in respect of outstanding Options,
(iii) the exercise price, grant price or purchase price relating to any award,
and (iv) the limitations set forth in Section 5; in such equitable manner as it
deems appropriate, in its sole discretion, to prevent the dilution or
enlargement of rights; provided that, with respect to Incentive Stock Options,
such adjustment shall be made in accordance with Section 424 of the Code. Any
fractional shares resulting from such adjustment shall be disregarded.

(2) If an Acceleration Event (as defined below) shall occur while unexercisable
Options remain outstanding under the Plan, such Options not theretofore
exercisable by their terms shall become exercisable in full. An “Acceleration
Event” shall occur if:

(A) any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than any person who on the date hereof is a director or
officer of the Corporation, any trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation, or any corporation owned,
directly or indirectly, by the stockholders of the Corporation in substantially
the same proportions as their ownership of stock of the Corporation, is or
becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Corporation representing 20%
or more of the combined voting power of the Corporation’s then outstanding
securities;

(B) during any period of two consecutive years, individuals who at the beginning
of such period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Corporation to
effect a transaction described in clause (A) or (C) of this Section 6(j)(2))
whose election by the Board or nomination for election by the Corporation’s
stockholders 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 at least a majority thereof;

(C) there is consummated a merger or consolidation of the Corporation with any
other entity other than a merger or consolidation which would result in the
voting securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 80% of the combined
voting power of the voting securities of the Corporation or such surviving
entity outstanding immediately after such merger or consolidation; or

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(D) the stockholders of the Corporation approve a plan of complete liquidation
of the Corporation or an agreement for the sale or disposition by the
Corporation of all or substantially all of the Corporation’s assets.

Following the Acceleration Event, the Committee may provide for the cancellation
of all Options then outstanding. Upon such cancellation, the Corporation shall
make, in exchange for each such Option, a payment either in (i) cash;
(ii) shares of the successor entity; or (iii) some combination of cash or shares
thereof, at the discretion of the Committee, and in each case in an amount per
share subject to such Option equal to the difference between the per share
exercise price of such Option and the Fair Market Value of a share of Common
Stock on the date of the Acceleration Event.

(3) In the event of a change in the Common Stock of the Corporation as presently
constituted which is limited to a change of all of its authorized shares with
par value into the same number of shares with a different par value or without
par value, the shares resulting from any such change shall be deemed to be the
Common Stock within the meaning of the Plan.

(4) The foregoing adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive.

(5) Except as hereinbefore expressly provided in this Section 6(j), the Optionee
shall have no rights by reason of any subdivision or consolidation of shares of
stock of any class or the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class or by reason of any
dissolution, liquidation, merger, or consolidation or spin-off of assets or
stock of another corporation; and any issue by the Corporation of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to the Option. The
grant of an Option pursuant to the Plan shall not affect in any way the right or
power of the Corporation to make adjustments, reclassifications, reorganizations
or changes of its capital or business structures or to merge or to consolidate
or to dissolve, liquidate or sell, or transfer all or part of its business or
assets.

 

  (k) RIGHTS AS A STOCKHOLDER. An Optionee or a transferee of an Option shall
have no rights as a stockholder with respect to any shares covered by the Option
until the date of the issuance of a stock certificate for such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distribution of other rights for which
the record date is prior to the date such stock certificate is issued, except as
provided in Section 6(j) hereof.

 

  (l) PERFORMANCE GOALS. The Committee may determine that the vesting and/or
payment of an Option shall be made subject to one or more Performance Goals.
Performance Goals established by the Committee may be different with respect to
different Grantees. The Committee shall have the authority to make equitable
adjustments to any Performance Goal in recognition of unusual or nonrecurring
events affecting the Corporation, its financial statements or its shares, in
response to change in applicable laws or regulations, or to account for items of
gain, loss or expense determined to be extraordinary or unusual in nature or
infrequent in occurrence, including any major settlement, judgment or any other
material liability in connection with a litigation or governmental proceeding or
investigation, or any gain, loss or expense related to the acquisition,
disposition or discontinuance of a business or a segment of a business, or
related to a change in accounting principles, or to reflect capital charges.
With respect to Options granted to Executive Officers, the vesting and/or
payment of which are to be made subject to Performance Goals, the Committee may
comply with the applicable provisions of Section 162(m) of the Code, including,
without limitation, those provisions relating to the pre-establishment and
certification of such Performance Goals. With respect to Grantees who are not
Executive Officers, Performance Goals may also include such individual objective
or subjective performance criteria as the Committee may, from time to time,
establish. Performance Goals applicable to any Option may include a threshold
level of performance below which no portion of such Grant shall become vested
and/or payable, and levels of performance at which specified percentages of such
Grant shall become vested and/or payable.

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  (m) OTHER PROVISIONS. The Option Agreements authorized under the Plan may
contain such other provisions, including, without limitation, the imposition of
(1) restrictions upon the exercise of an Option and (2) provisions that will
result in the forfeiture of an Option and/or the shares acquired thereunder in
the event the Optionee breaches covenants relating to non-competition,
confidentiality and non-solicitation of employees and customers, as the
Committee shall deem advisable.

7. Terms and Conditions of Restricted Stock Awards and Restricted Unit Awards.

Each Restricted Stock Award and Restricted Unit Award granted under the Plan
shall be evidenced by a written Restricted Award Agreement between the
Corporation and the Grantee, which agreement shall comply with, and be subject
to, the following terms and conditions (and with such other terms and conditions
not inconsistent with the terms of this Plan as the Committee, in its
discretion, shall establish):

 

  (a) NUMBER OF SHARES AND UNITS. The Committee shall determine the number of
Restricted Shares to be awarded to a Grantee pursuant to the Restricted Stock
Award and the number of Restricted Units to be awarded to a Grantee pursuant to
a Restricted Unit Award.

 

  (b) NONTRANSFERABILITY. Except as set forth in subsections (f) and (h) of this
Section 7, a Grantee may not sell, assign, transfer, pledge, hypothecate or
otherwise dispose of any Restricted Shares or Restricted Units awarded to said
Grantee under this Plan, or any interest therein, except by will or the laws of
descent and distribution, until the Restricted Period (as defined below) shall
have elapsed, which Restricted Period shall be subject to Section 9 hereof. The
Committee may also in its discretion impose such other restrictions and
conditions on Restricted Shares and Restricted Units awarded as it deems
appropriate including, without limitation, the imposition of provisions that
will result in the forfeiture of Restricted Shares and Restricted Units in the
event the Grantee breaches covenants relating to non-competition,
confidentiality and non-solicitation of employees and customers. In determining
the Restricted Period of an award, the Committee may provide that the
restrictions shall lapse with respect to specified percentages of the awarded
shares or units on successive anniversaries of the date of such award or upon
the satisfaction of such other conditions as the Committee may impose,
including, without limitation, the attainment of one or more Performance Goals.
Subject to the occurrence of an Acceleration Event, as defined in
Section 6(j)(2) (in which case the Restricted Period with respect to Restricted
Stock Awards shall immediately end and the Restricted Period with respect to
Restricted Units shall immediately end if permissible under Section 409A), the
Restricted Period shall not end with respect to a Restricted Stock Award or a
Restricted Unit Award prior to one year following the date of grant, except for
the Restricted Period of a Restricted Stock Award of 200 shares or less (as such
shares may be appropriately adjusted by the Committee in the event of any change
as set forth in Section 6(j)), which may end earlier than one year, but no
earlier than 30 days following the date of grant. In no event shall the
Restricted Period end with respect to a Restricted Stock Award or Restricted
Unit Award prior to the satisfaction by the Grantee of any liability arising
under Section 8 hereof. Any attempt to dispose of any Restricted Shares in
contravention of any such restrictions shall be null and void and without
effect. The period during which such restrictions on transfer, and such other
restrictions as the Committee may impose, are in effect is referred to as the
“Restricted Period”.

 

  (c) CERTIFICATES REPRESENTING RESTRICTED SHARES. The Corporation shall not be
required to issue stock certificates representing Restricted Shares awarded to a
Grantee until the Restricted Period related to such shares has lapsed. If any
stock certificates representing Restricted Shares awarded pursuant to a
Restricted Stock Award are issued prior to the lapse of the Restricted Period,
such stock certificate shall bear an appropriate legend referring to such
restrictions. Such certificates may be retained by the Corporation during the
Restricted Period.

 

  (d)

TERMINATION. If the Grantee’s continuous employment or service with the
Corporation or any of its divisions or Subsidiary Corporations shall terminate
for any reason prior to the expiration of the Restricted Period applicable to
any Restricted Shares or Restricted Units granted to such Grantee, or prior to
the satisfaction of any other conditions established by the Committee applicable
to such Grant, any such Restricted Shares or Restricted Units then

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remaining subject to restrictions (after taking into account the provisions of
subsections (f) and (h) of this Section 7) shall thereupon be forfeited by the
Grantee and any such Restricted Shares shall be transferred to, and reacquired
by, the Corporation or its Subsidiary Corporation at no cost to the Corporation
or the Subsidiary Corporation. In such event, the Grantee, or in the event of
his/her death, his/her personal representative, shall, with respect to any such
shares, forthwith deliver to the Secretary of the Corporation any stock
certificates in the possession of the Grantee or the Grantee’s representative
representing the Restricted Shares remaining subject to such restrictions,
accompanied by such instruments of transfer, if any, as may reasonably be
required by the Secretary of the Corporation.

 

  (e) RIGHTS AS A STOCKHOLDER. Upon receipt by a Grantee of a Restricted Stock
Award, the Grantee shall possess all incidents of ownership of the Restricted
Shares (subject to subsection (b) of this Section 7), including, without
limitation, the right to receive or reinvest dividends (to the extent declared
by the Corporation) with respect to such shares and to vote such shares.

 

  (f) EFFECT OF CERTAIN CHANGES. The number of Restricted Shares or Restricted
Units subject to a Grant shall be appropriately adjusted by the Committee in the
event of any circumstance described in Section 6(j)(1). Upon the occurrence of
an Acceleration Event, as defined in Section 6(j)(2), all restrictions then
outstanding with respect to a Restricted Stock Award shall automatically expire
and be of no further force and effect. Upon the occurrence of an Acceleration
Event, as defined in Section 6(j)(2), all restrictions then outstanding with
respect to a Restricted Unit Award shall automatically expire and be of no
further force and effect, and full payment in respect of such Restricted Unit
Award shall be made as soon as practicable thereafter, but only if permissible
under Section 409A; if such settlement is not permissible under Section 409A,
then settlement shall occur in accordance with the other terms of the Restricted
Unit Award.

 

  (g) PERFORMANCE GOALS. The Committee may determine that the vesting and/or
payment of a Restricted Stock Award or a Restricted Unit Award shall be made
subject to one or more Performance Goals. Performance Goals established by the
Committee may be different with respect to different Grantees. The Committee
shall have the authority to make equitable adjustments to any Performance Goal
in recognition of unusual or nonrecurring events affecting the Corporation, its
financial statements or its shares, in response to change in applicable laws or
regulations, or to account for items of gain, loss or expense determined to be
extraordinary or unusual in nature or infrequent in occurrence or related to the
acquisition, disposition or discontinuance of a business or a segment of a
business, or related to a change in accounting principles, or to reflect capital
charges. With respect to Restricted Stock Awards or Restricted Unit Awards
granted to Executive Officers, the vesting and/or payment of which are to be
made subject to Performance Goals, the Committee may comply with the applicable
provisions of Section 162(m) of the Code, including, without limitation, those
provisions relating to the pre-establishment and certification of such
Performance Goals. With respect to Grantees who are not Executive Officers,
Performance Goals may also include such individual objective or subjective
performance criteria as the Committee may, from time to time, establish.
Performance Goals applicable to any Restricted Stock Award or Restricted Unit
Award may include a threshold level of performance below which no portion of
such Grant shall become vested and/or payable, and levels of performance at
which specified percentages of such Grant shall become vested and/or payable.

 

  (h) OTHER PROVISIONS. Subject to Section 9, the Committee shall have the
authority (and the Restricted Award Agreement may so provide) to cancel all or
any portion of any outstanding restrictions and conditions prior to the
expiration of the Restricted Period with respect to all or part of a Restricted
Stock Award or Restricted Unit Award on such terms and conditions as the
Committee may deem appropriate, provided that any such cancellation with respect
to Restricted Unit Awards shall only be made in compliance with the provisions
of Section 409A. The Restricted Award Agreements authorized under this Plan
shall contain such other provisions not inconsistent with the terms hereof as
the Committee shall deem advisable. Restricted Unit Awards shall be granted with
terms and conditions which comply with or are exempt from the provisions of
Section 409A and shall be administered and interpreted in a manner which causes
such Restricted Unit Awards to continue to comply with or be exempt from the
applicable provisions of Section 409A.

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8. Withholding Taxes.

When a Grantee or other person becomes entitled to receive shares of Common
Stock pursuant to the exercise of an Option or upon the lapse of restrictions
relating to a Restricted Stock Award, or to receive a cash payment with respect
to a Restricted Unit Award upon the lapse of restrictions relating thereto, the
Corporation shall have the right to require the Grantee or such other person to
remit to the Corporation an amount sufficient to satisfy any federal, state and
local withholding tax requirements related thereto. Unless otherwise prohibited
by the Committee or by applicable law, satisfaction of the withholding tax
obligation may be accomplished by any of the following methods or by a
combination of such methods: (a) tendering a cash payment, (b) authorizing the
Corporation to withhold from the shares of Common Stock or cash otherwise
payable (1) one or more of such shares having an aggregate Fair Market Value,
determined as of the date the withholding tax obligation arises, less than or
equal to the amount of the minimum withholding tax obligation or (2) cash in an
amount less than or equal to the amount of the total withholding tax obligation
and (c) delivering to the Corporation shares of Common Stock (provided that such
shares shall have been held for at least six months) having an aggregate Fair
Market Value, determined as of the date the withholding tax obligation arises,
less than or equal to the amount of the total withholding tax obligation.

9. Special Vesting Provisions.

(a) Subject to paragraph (c) below, to the extent that an Option is to become
exercisable, or an award of Restricted Shares or Restricted Units is to vest,
based upon the continued employment of the Grantee, such award shall become
exercisable or vest (as the case may be) pursuant to a schedule that provides
for exercisability or vesting at a rate no more rapid than in three equal
increments on each of the first three anniversaries of the date of grant
(subject to earlier exercisability or vesting upon an Acceleration Event or as
may provided in an award agreement with respect to the grantee’s death,
Disability, Retirement or termination without Cause).

(b) Subject to paragraph (c) below, to the extent an award of Restricted Shares
is to vest, subject to one or more Performance Goals, such award shall vest no
earlier than one (1) year from the date of grant (subject to earlier vesting
upon an Acceleration Event or as may be provided in an award agreement with
respect to the grantee’s death, Disability, Retirement or termination without
Cause).

(c) Notwithstanding the provisions of subparagraphs (a) and (b) of Section 9,
the Board and the Committee shall have the right to make awards on the following
terms and accelerate the exercisability or vesting of awards as set forth below,
provided that the aggregate of all such awards granted and so accelerated in any
fiscal year shall not exceed 5.0% of the total shares then authorized under the
Plan:

 

  (i) Grant time-vesting Options, time-vesting Restricted Shares and
time-vesting Restricted Units pursuant to a schedule that provides for
exercisability or vesting at a rate more rapid than in three equal increments on
each of the first three anniversaries of the date of grant and
performance-vesting Restricted Shares vesting sooner than one year from the date
of grant (in all cases excluding earlier exercisability or vesting upon an
Acceleration Event or as may be provided in an award agreement with respect to
the Grantee’s death, Disability, Retirement or termination without Cause); and

 

  (ii) Accelerate the exercisability or vesting of an award other than upon an
Acceleration Event or as may be provided in an award agreement with respect to
the Grantee’s death, Disability, Retirement or termination without Cause).

10. Term of Plan.

Unless terminated earlier by the Board, the term of this Plan shall be 10 years
from the date the Plan was adopted. No Option, Restricted Stock Award or
Restricted Unit Award shall be granted pursuant to this Plan later than May 1,
2013, but Options, Restricted Shares and Restricted Units theretofore granted
may extend beyond that date in accordance with their terms.

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11. Amendment and Termination of the Plan.

The Board may, at any time and from time to time, suspend, terminate, modify or
amend the Plan. Except as provided in Section 6 hereof, no suspension,
termination, modification or amendment of the Plan may adversely affect any
Grant previously made, unless the written consent of the Grantee is obtained.
Furthermore, except as provided in Section 6 hereof, no modification or
amendment of the Plan shall be made that, without the approval of stockholders,
would:

(a) increase the total number of shares reserved for the purpose of the Plan;

(b) reduce the exercise price for Options by repricing or replacing such Grants;
or

(c) otherwise require approval under applicable law or the rules of the New York
Stock Exchange (or such other national stock exchange upon which the Common
Stock is listed).

The Committee shall not have the authority to cancel any outstanding Option and
issue a new Option in its place with a lower exercise price; provided, however,
that this sentence shall not prohibit an exchange offer whereby the Corporation
provides certain Grantees with an election to cancel an outstanding Option and
receive a grant of a new Option at a future date if such exchange offer only
occurs with stockholder approval. Notwithstanding the foregoing, the Committee
shall have the authority to amend the Plan and any award made hereunder to the
extent necessary to cause the Plan or such award to comply with the provisions
of Section 409A and such amendment shall not require the consent of the Grantee.

12. Effective Date.

The Plan was initially adopted on March 11, 2003 by the Board of Directors. The
Plan has been amended from time to time thereafter, through August 21, 2008.

13. Miscellaneous.

 

  (a) EFFECT OF HEADINGS. The section and subsection headings contained herein
are for convenience only and shall not affect the construction hereof.

 

  (b) COMPLIANCE WITH LEGAL REQUIREMENTS. The Plan and the other obligations of
the Corporation under the Plan and any agreement shall be subject to all
applicable federal and state laws, rules and regulations, and to such approvals
by any regulatory or governmental agency as may be required. The Corporation, in
its discretion, may postpone the issuance or delivery of Common Stock under any
Grant as the Corporation may consider appropriate, and may require any Grantee
to make such representations and furnish such information as it may consider
appropriate in connection with the issuance or delivery of Common Stock in
compliance with applicable laws, rules and regulations.

 

  (c) NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan or in any agreement
entered into pursuant hereto shall confer upon any Grantee the right to continue
in the employ or service of the Corporation or any of its divisions or
Subsidiary Corporations, to be entitled to any remuneration or benefits not set
forth in the Plan or such agreement or to interfere with or limit in any way the
right of the Corporation or such division or Subsidiary Corporation to terminate
such Grantee’s employment.

 

  (d) GRANTEE RIGHTS. No Grantee shall have any claim to be made any Grant under
the Plan, and there is no obligation for uniformity of treatment for Grantees.
Except as provided specifically herein, a Grantee or a transferee of a Grant
shall have no rights as a stockholder with respect to any shares covered by any
Grant until the date of the issuance of a stock certificate for such shares.

 

  (e) BENEFICIARY. A Grantee may file with the Committee a written designation
of a beneficiary on such form as may be prescribed by the Committee and may,
from time to time, amend or revoke such designation. If no designated
beneficiary survives the Grantee, the executor or administrator of the Grantee’s
estate shall be deemed to be the Grantee’s beneficiary.

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14. Governing Law.

The Plan shall be construed and administered in accordance with the laws of the
State of Delaware without regard to its principles of conflicts of law.