FOAMEX INTERNATIONAL INC.

2007 MANAGEMENT INCENTIVE PLAN

EFFECTIVE FEBRUARY 12, 2007

 

 

 

 

 

 

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1.

Purpose of the Plan

The purposes of the Plan are:

(a)          To encourage ownership by key employees, non-employee directors and
consultants of the Group of stock of the Company, so that such persons will have
a proprietary interest in the performance of the Company;

(b)          To provide an incentive for such employees, non-employee directors
and consultants to expand and improve the growth and prosperity of the Group;
and

(c)          To assist the Group in attracting and retaining key employees,
non-employee directors and consultants.

2.

Definitions

As used in the Plan, the following definitions apply to the terms indicated
below:

“Award Agreement” shall have the meaning ascribed to such term in Section 5 of
the Plan.

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

“Cash Incentive Award” means an award granted pursuant to Section 8 of the Plan.

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated thereunder.

“Committee” shall mean a standing or ad hoc committee of members of the Board,
consisting of at least two members, as described in Section 4 of the Plan.

“Common Stock” shall mean the common stock of the Company, $0.01 par value per
share.

“Company” shall mean Foamex International Inc.

“Consultant” shall mean any natural person providing bona fide services to the
Company, which services are not in connection with the offer or sale of
securities in a capital-raising transaction and do not directly or indirectly
promote or maintain a market for the Company’s securities.

“Covered Employee” means a Participant who at the time of reference is a
“covered employee” as defined in Section 162(m) of the Code.

“Director” shall mean a member of the Board who is not at the time of reference
an employee of the Group.

 

 

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“Employee” shall mean an employee of the Group.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and
the regulations promulgated thereunder.

“Fair Market Value” of a share of Common Stock with respect to any day shall be
(i) if the Common Stock is listed on a national securities exchange, the closing
price on such day of a share of Common Stock as reported on the principal
securities exchange on which shares of Common Stock are then listed or admitted
to trading or, if not so reported, then on the last preceding date on which a
sale was so reported, (ii) if the Common Stock is listed on the National
Association of Securities Dealers Automated Quotation System, then the average
of the closing bid and ask prices on such day, or, if there was no such sale on
that date, then on the last preceding date on which such sale was reported, or
(iii) if the Common Stock is not so listed or reported, an amount determined by
the Committee to be the fair market value based upon a good faith attempt to
value the Common Stock accurately and computed in accordance with applicable
regulations under the Internal Revenue Service.

“Group” shall mean the Company and its Subsidiaries.

“Incentive Award” means one or more Stock Incentive Awards and Cash Incentive
Awards, collectively.

“Incentive Pool” means an amount available to be paid to one or more
Participants as Performance-Based Compensation, which amount is determined in
accordance with Section 162(m) of the Code.

“Option” shall mean a stock option to purchase shares of Common Stock of the
Company granted to a Participant pursuant to Section 6 of the Plan.

“Other Stock-Based Award” means an award granted to a Participant pursuant to
Section 7 of the Plan.

“Participant” shall mean a Director, Employee or Consultant designated by the
Committee as eligible to participate in the Plan and to whom one or more
Incentive Awards have been granted pursuant to the Plan and, following the death
of any such individual, his or her successors, heirs, executors, administrators,
and assigns, as the case may be.

“Performance-Based Compensation” means compensation that satisfies the
requirements of Section 162(m) of the Code for deductibility of remuneration
paid to Covered Employees.

“Performance Measures” means such measures as are described in Section 9 of the
Plan on which performance goals are based in order to qualify certain awards
granted hereunder as Performance-Based Compensation.

 

 

 

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“Performance Period” means the period of time during which the performance goals
must be met in order to determine the degree of payout and/or vesting with
respect to an Incentive Award that is intended to qualify as Performance-Based
Compensation.

“Performance Schedule” means a schedule or other objective method for
determining the applicable Performance Percentage to be applied to each Target
Award or Incentive Pool.

“Person” shall mean a “person” within the meaning of Section 13(d)(3) or Section
14(d)(2) of the Exchange Act.

“Plan” shall mean this Foamex International Inc. Management Incentive Plan, as
it may be amended from time to time.

“Securities Act” shall mean the Securities Act of 1933, as amended, and the
regulations promulgated thereunder.

“Stock Incentive Award” means an Option or Other Stock-Based Award granted
pursuant to the terms of the Plan.

“Subsidiary” shall mean any Person of which a majority of the voting power of
the voting equity securities or equity interest is owned, directly or
indirectly, by the Company.

“Target Award” means a Cash Incentive Award of a specific dollar amount or
portion of an Incentive Pool, determined by the Committee, pursuant to
Performance Measures as described in Section 9.

3. Stock Subject to the Plan

(a)

In General

Subject to adjustment as provided in Section 10 and the following provisions of
this Section 3, the maximum number of shares of Common Stock that may be issued
in connection with Stock Incentive Awards granted under the Plan shall not
exceed 9.3 million shares of Common Stock in the aggregate. All of such shares
may be issued in connection with Options and stock appreciation rights, subject
to adjustment as provided in Section 10 and the following provisions of this
Section 3. Shares of Common Stock issued under the Plan may be either authorized
and unissued shares or treasury shares, or both, in the discretion of the
Committee.

For purposes of the preceding paragraph, shares of Common Stock that may be
issued in connection with Stock Incentive Awards shall only be counted as used
to the extent they are actually issued and delivered to a Participant (or such
Participant’s permitted transferees as described in the Plan) pursuant to the
Plan. For purposes of clarification, in accordance with the preceding sentence,
if any Stock Incentive Award is settled for cash or if shares of Common Stock
are withheld to pay the exercise price of an Option or to satisfy any tax
withholding requirement in connection with any Stock Incentive Award only the
shares issued (if any), net of

 

 

 

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the shares withheld, will be deemed delivered for purposes of determining the
number of shares of Common Stock that are available for issuance under the Plan.
In addition, if shares of Common Stock are issued subject to conditions which
may result in the forfeiture, cancellation or return of such shares to the
Group, any portion of the shares forfeited, cancelled or returned shall be
treated as not issued pursuant to the Plan. In addition, if shares of Common
Stock owned by a Participant (or such Participant’s permitted transferees as
described in the Plan) are tendered (either actually or through attestation) to
the Group in payment of any obligation in connection with any Stock Incentive
Award, the number of shares tendered shall be added to the number of shares of
Common Stock that are available for delivery under the Plan. In addition, if the
Group uses cash received by the Group in payment of the exercise price or
purchase price in connection with any Stock Incentive Award granted pursuant to
the Plan to repurchase shares of Common Stock from any Participant, the shares
so repurchased will be added to the aggregate number of shares available for
issuance under the Plan. For purposes of the preceding sentence, shares of
Common Stock repurchased by the Group shall be deemed to have been repurchased
using such funds only to the extent that such funds have actually been
previously received by the Group and that the Group promptly designates in its
books and records that such repurchase was paid for with such funds.

Subject to adjustment as provided in Section 10, the maximum number of shares of
Common Stock that may be covered by Stock Incentive Awards granted under the
Plan to any single Participant in any fiscal year of the Company shall not
exceed 3.0 million shares. All of such Stock Incentive Awards may be Options and
stock appreciation rights. The amount payable to any Participant with respect to
any fiscal year of the Company for all Cash Incentive Awards for which the
Performance Period is not longer than one year shall not exceed $5.0 million.
The amount payable to any Participant with respect to any fiscal year for all
Cash Incentive Awards for which the Performance Period is longer than one fiscal
year shall not exceed $5.0 million per fiscal year (including a pro rata portion
for any portion of a fiscal year). For purposes of the preceding sentences, the
phrase “amount payable with respect to any fiscal year” means the amount of
cash, or value of other property, required to be paid based on the achievement
of applicable Performance Measures during a Performance Period that ends in a
fiscal year, disregarding any deferral pursuant to the terms of a deferred
compensation plan unless the terms of the deferral are intended to comply with
the requirements for performance-based compensation under Section 162(m) of the
Code.

(b)

Prohibition on Substitutions and Repricings

In no event shall any new Stock Incentive Awards be issued in substitution for
outstanding Stock Incentive Awards previously granted to Participants, nor shall
any repricing (within the meaning of US generally accepted accounting practices
or any applicable stock exchange rule) of Stock Incentive Awards issued under
the Plan be permitted at any time under any circumstances, in each case unless
the shareholders of the Company expressly approve such substitution or
repricing.

 

 

 

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4.

Administration of the Plan

The Plan shall be administered by the Board or a Committee of the Board
consisting of two or more persons. The Committee shall, consistent with the
terms of the Plan, from time to time designate those Employees, Consultants and
Directors who shall be granted Incentive Awards under the Plan and the amount,
type and other terms and conditions of such Incentive Awards. All of the powers
and responsibilities of the Committee under the Plan may be delegated by the
Committee, in writing, to any subcommittee thereof. In addition, the Committee
may from time to time authorize a committee consisting of one or more Directors
to grant Incentive Awards to persons who are not “executive officers” of the
Company (within the meaning of Rule 16a-1 under the Exchange Act), subject to
such restrictions and limitation as the Committee may specify. In addition, the
Board may, consistent with the terms of the Plan, from time to time grant
Incentive Awards to Directors.

The Committee shall have full discretionary authority to administer the Plan,
including discretionary authority to interpret and construe any and all
provisions of the Plan and the terms of any Incentive Award (and any agreement
evidencing any Incentive Award) granted thereunder and to adopt and amend from
time to time such rules and regulations for the administration of the Plan as
the Committee may deem necessary or appropriate (including without limitation
the adoption or amendment of rules or regulations applicable to the grant,
vesting or exercise of Incentive Awards issued to employees located outside the
United States). Without limiting the generality of the foregoing, (i) the
Committee shall determine whether an authorized leave of absence, or absence in
military or government service, shall constitute termination of employment and
(ii) the employment of a Participant with the Company shall be deemed to have
terminated for all purposes of the Plan if such person is employed by or
provides services to a Person that is a Subsidiary of the Company and such
Person ceases to be a Subsidiary of the Company, unless the Committee determines
otherwise. Decisions of the Committee shall be final, binding and conclusive on
all parties.

On or after the date of grant of an Incentive Award under the Plan, to the
extent not inconsistent with any applicable Award Agreement or any employment
agreement provisions, the Committee may (i) accelerate the date on which any
such Incentive Award becomes vested, exercisable or transferable, as the case
may be, (ii) extend the term of any such Incentive Award, including, without
limitation, extending the period following a termination of a Participant’s
employment during which any such Incentive Award may remain outstanding, (iii)
waive any conditions to the vesting, exercisability or transferability, as the
case may be, of any such Incentive Award, (iv) provide for the payment of
dividends or dividend equivalents with respect to any Stock Incentive Award, or
(v) otherwise amend an outstanding Incentive Award in whole or in part from
time-to-time as the Committee determines, in its sole and absolute discretion,
to be necessary or appropriate to conform such Incentive Award to, or required
to satisfy, any legal requirement (including without limitation the provisions
of Section 409A of the Code), which amendments may be made retroactively or
prospectively; provided, that, the Committee shall not have any authority
described in clauses (i) through (v) above (a) to the extent that the grant or
exercise of such authority would cause any tax to become due under Section 409A
of the Code or (b) to the extent that the exercise of any such authority would

 

 

 

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impair the rights of the holder or beneficiary of any Incentive Award unless the
Committee obtains the express written consent of the affected holder or
beneficiary of the Incentive Award.

No member of the Committee shall be liable for any action, omission, or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other Director, Employee or
Consultant to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Committee) arising out of any action, omission or
determination relating to the Plan, unless, in either case, such action,
omission or determination was taken or made by such member, Director, Employee
or Consultant in bad faith and without reasonable belief that it was in the best
interests of the Company.

5.

Eligibility to Participate

The individuals who shall be eligible to receive Incentive Awards pursuant to
the Plan shall be those Employees, Consultants and Directors whom the Committee
shall select from time to time. All Incentive Awards granted under the Plan
shall be evidenced by a separate written agreement in form and substance
approved by the Committee (an “Award Agreement”).

6.

Options.

The Committee may from time to time grant Options, subject to the following
terms and conditions:

 

(a)

Exercise Price

The exercise price per share of Common Stock covered by any Option shall be not
less than 100% of the Fair Market Value of a share of Common Stock on the date
on which such Option is granted. The agreement evidencing the award of each
Option shall clearly identify such Option as either an “incentive stock option”
within the meaning of Section 422 of the Code or as not an incentive stock
option.

 

(b)

Term and Exercise of Options

(1)          Each Option shall become vested and exercisable on such date or
dates, during such period and for such number of shares of Common Stock as shall
be determined by the Committee on or after the date such Option is granted
(including without limitation in accordance with terms and conditions relating
to the vesting or exercisability of an Option set forth in any employment,
severance, change in control or similar agreement entered into by the Company
with a Participant on or after the date of grant); provided, however that no
Option shall be exercisable after the expiration of ten years from the date such
Option is granted; and, provided, further, that each Option shall be subject to
earlier termination, expiration or cancellation as provided in the Plan or in
the agreement

 

 

 

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evidencing such Option, subject to the express terms of any individual agreement
between the Company and the Participant.

(2)          Each Option may be exercised in whole or in part; provided, however
that no partial exercise of an Option shall be for an aggregate exercise price
of less than $1,000 or such other amount as the Committee may determine from
time to time. The partial exercise of an Option shall not cause the expiration,
termination or cancellation of the remaining portion thereof.

(3)          An Option shall be exercised by such methods and procedures as the
Committee determines from time to time, including without limitation through net
physical settlement or other method of cashless exercise.

(4)          Options may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of a
Participant, only by the Participant; provided, however that the Committee may
permit Options other than “incentive stock options” within the meaning of
Section 422 of the Code to be sold, pledged, assigned, hypothecated,
transferred, or disposed of, on a general or specific basis, subject to such
conditions and limitations as the Committee may determine.

 

(c)

Effect of Termination of Employment or other Relationship

The agreement evidencing the award of each Option shall specify the consequences
with respect to such Option of the termination of the employment, service as a
director or other relationship between the Group and the Participant holding the
Option.

 

(d)

Special Rules for Incentive Stock Options

(1)          The aggregate Fair Market Value of shares of Common Stock with
respect to which “incentive stock options” (within the meaning of Section 422 of
the Code) are exercisable for the first time by a Participant during any
calendar year under the Plan and any other stock option plan of the Company (or
any “subsidiary corporation” as such term is defined in Section 424 of the Code)
shall not exceed $100,000. Such Fair Market Value shall be determined as of the
date on which each such incentive stock option is granted. In the event that the
aggregate Fair Market Value of shares of Common Stock with respect to such
incentive stock options exceeds $100,000, then incentive stock options granted
hereunder to such Participant shall, to the extent and in the order required by
regulations promulgated under the Code (or any other authority having the force
of regulations), automatically be deemed to be non-qualified stock options, but
all other terms and provisions of such incentive stock options shall remain
unchanged. In the absence of such regulations (and authority), or in the event
such regulations (or authority) require or permit a designation of the options
which shall cease to constitute incentive stock options, incentive stock options

 

 

 

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granted hereunder shall, to the extent of such excess and in the order in which
they were granted, automatically be deemed to be non-qualified stock options,
but all other terms and provisions of such incentive stock options shall remain
unchanged.

(2) No incentive stock option may be granted to an individual if, at the time of
the proposed grant, such individual owns stock possessing more than ten percent
of the total combined voting power of all classes of stock of the Company or any
of its “subsidiaries” (within the meaning of Section 424 of the Code), unless
(i) the exercise price of such incentive stock option is at least one hundred
and ten percent of the Fair Market Value of a share of Common Stock at the time
such incentive stock option is granted and (ii) such incentive stock option is
not exercisable after the expiration of five years from the date such incentive
stock option is granted.

(3) Any Participant who disposes of shares of Common Stock acquired upon the
exercise of an incentive stock option either (i) within two years after the date
of grant of such incentive stock option, or (ii) within one year after the
transfer of such shares to the Participant, shall notify the Company of such
disposition and of the amount realized upon such disposition.

7.

Other Stock-Based Awards

The Committee may grant equity-based or awards valued by reference to Common
Stock not otherwise described herein in such amounts and subject to such terms
and conditions as the Committee shall determine. Without limiting the generality
of the preceding sentence, each such Other Stock-Based Award may (i) involve the
transfer of actual shares of Common Stock to Participants, either at the time of
grant or thereafter, or payment in cash or otherwise of amounts based on the
value of shares of Common Stock, (ii) be subject to performance-based and/or
service-based conditions, (iii) be in the form of cash-settled stock
appreciation rights, stock-settled stock appreciation rights, phantom stock,
restricted stock, restricted stock units, performance shares, or
share-denominated performance units (iv) be designed to comply with applicable
laws of jurisdictions other than the United States, and (v) be designed to
qualify as Performance Based Compensation.

8.

Cash Incentive Awards

The Committee may grant Cash Incentive Awards with respect to any Performance
Period, subject to the terms and conditions of the Plan. Cash Incentive Awards
are awards settled in cash, and the term “Cash Incentive Award” shall exclude
any Option or Other Stock-Based Award. Cash Incentive Awards may be designed to
qualify as Performance-Based Compensation. Without limiting the generality of
the foregoing, a Cash Incentive Award may provide for Target Awards based on
allocation among Participants of an Incentive Pool.

9.

Performance Measures

 

 

 

 

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(a)

Calculation

The amount payable with respect to an Incentive Award that is intended to
qualify as Performance-Based Compensation shall be determined in any manner
permitted by Section 162(m) of the Code.

 

(b)

Performance Measures

The performance goals upon which the payment or vesting of any Incentive Award
(other than Options and stock appreciation rights) to a Covered Employee that is
intended to qualify as Performance-Based Compensation depends shall be objective
and relate to one or more of the following Performance Measures: (i) net
earnings or net income (before or after taxes); (ii) basic or diluted earnings
per share (before or after taxes); (iii) net revenue or net revenue growth; (iv)
gross profit or gross profit growth; (v) net operating profit (before or after
taxes); (vi) return measures (including, but not limited to, return on assets,
capital, invested capital, equity or sales); (vii) cash flow (including, but not
limited to, operating cash flow, free cash flow, and cash flow return on
capital); (viii) earnings before or after taxes, interest, depreciation and/or
amortization; (ix) gross or operating margins; (x) productivity ratios or
improvement; (xi) share price (including, but not limited to, growth measures
and total stockholder return); (xii) expense targets; (xiii) margins; (xiv)
operating efficiency; (xv) objective measures of customer satisfaction; (xvi)
working capital targets; (xvii) measures of economic value added; (xviii)
inventory control; (xix) pay down of debt or net debt reduction; (xx) unit
volume; (xxi) net sales or sales or product volume growth.

Performance Periods may be equal to or longer than, but not less than, one
fiscal year of the Company and may be overlapping. While the outcome for any
Performance Period is substantially uncertain and no more than (i) 90 days after
the beginning of a Performance Period or, (ii) for any Performance Period that
is longer than one year, the number of days after the beginning of the
Performance Period which is equal to 25% of the relevant Performance Period, the
Committee shall establish, in writing (a) performance goals and objectives for
the Company for such Performance Period, (b) target awards for each Participant,
and (c) schedules or other objective methods for determining the applicable
performance percentage to be applied to each such target award.

The Committee shall determine whether, with respect to a Performance Period, the
applicable performance goals have been met with respect to a given Participant
and, if they have, shall so certify in writing and ascertain the amount of the
applicable award. No awards will be paid for such Performance Period until such
certification is made by the Committee. The measurement of any Performance
Measure(s) may exclude the impact of charges for restructurings, discontinued
operations, extraordinary items, and other unusual or non-recurring items, and
the cumulative effects of accounting changes, each as defined by generally
accepted accounting principles and as identified in the Company’s audited
financial statements, including the notes thereto. Any Performance Measure(s)
may be used to measure the performance of the Company or a Subsidiary as a whole
or any business unit of the Company or any Subsidiary or any combination
thereof, as the Committee may deem appropriate, or any of the above

 

 

 

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Performance Measures as compared to the performance of a group of peer
companies, or a published or special index that the Committee, in its
discretion, deems appropriate.

 

(c)

Discretionary Reduction

The Committee may, in its discretion, subject to any contractual obligation of
the Company, reduce or eliminate the amount payable to any Participant with
respect to an Incentive Award that is intended to qualify as Performance-Based
Compensation, based on such factors as the Committee may deem relevant, but the
Committee may not increase any such amount above the amount established in
accordance with the relevant Performance Schedule. For purposes of clarity, the
Committee may exercise the discretion provided for by the foregoing sentence in
a non-uniform manner among Participants.

 

(d)

Committee Discretion

In the event that the requirements of Section 162(m) of the Code and the
regulations thereunder change to permit Committee discretion to alter the
Performance Measures without obtaining shareholder approval of such changes, the
Committee shall have discretion to make such changes without obtaining
shareholder approval.

Nothing in this Section 9 is intended to limit the Committee’s discretion to
adopt conditions with respect to any Incentive Award that is not intended to
qualify as Performance-Based Compensation that relate to performance other than
the Performance Measures. In addition, the Committee may, subject to the terms
of the Plan, amend previously granted Incentive Awards in a way that
disqualifies them as Performance-Based Compensation.

10.

Adjustment Upon Changes in Common Stock

 

(a)

Shares Available for Grants

In the event of any change in the number of shares of Common Stock outstanding
or changes in capitalization by reason of any stock dividend or split,
recapitalization, merger, consolidation, combination or exchange of shares,
extraordinary cash dividend, reorganization or similar corporate change, (i) the
maximum aggregate number of shares of Common Stock with respect to which the
Committee may grant Stock Incentive Awards and the maximum aggregate number of
shares of Common Stock with respect to which the Committee may grant Stock
Incentive Awards to any individual Participant in any year shall be
appropriately adjusted by the Committee, and (ii) the Committee shall make
adjustments to Stock Incentive Awards outstanding on the date on which such
change occurs, and to Award Agreements or any other agreements reflecting such
Stock Incentive Awards, as to the number, price, exercise price, kind or class
of shares subject to, or consideration payable in respect of, Stock Incentive
Awards, and such other terms of such Incentive Awards as the Committee may
consider appropriate, in each case, to reflect such change.

 

(b)

Certain Mergers

 

 

 

 

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Subject to any required action by the shareholders of the Company, in the event
that the Company shall be the surviving corporation in any merger, consolidation
or similar transaction as a result of which the holders of shares of Common
Stock receive consideration consisting exclusively of securities of such
surviving corporation, the Committee shall, to the extent deemed appropriate by
the Committee, adjust each Stock Incentive Award outstanding on the date of such
merger or consolidation so that it pertains to and applies to the securities
which a holder of the number of shares of Common Stock subject to such Stock
Incentive Award would have received in such merger or consolidation.

 

(c)

Certain Other Transactions

Unless the Committee expressly agrees otherwise in any individual agreement with
a Participant, in the event of (i) a dissolution or liquidation of the Group,
(ii) a sale of all or substantially all of the Group’s assets (on a consolidated
basis), (iii) a merger, consolidation or similar transaction involving the
Company in which the Company is not the surviving corporation or (iv) a merger,
consolidation or similar transaction involving the Company in which the Company
is the surviving corporation but the holders of shares of Common Stock receive
securities of another corporation and/or other property, including cash, the
Committee shall, in its discretion, have the power to:

(1) cancel, effective immediately prior to the occurrence of such event, each
Stock Incentive Award (whether or not then exercisable), and, in full
consideration of such cancellation, pay to the Participant to whom such Stock
Incentive Award was granted an amount in cash, for each share of Common Stock
subject to such Stock Incentive Award equal to the value, as determined by the
Committee in its discretion, of such Stock Incentive Award, provided that with
respect to any outstanding Option such value shall be equal to the excess of (A)
the value, as determined by the Committee in its discretion, of the property
(including cash) received by the holder of a share of Common Stock as a result
of such event over (B) the exercise price of such Option; or

(ii) provide for the exchange of each Stock Incentive Award (whether or not then
exercisable or vested) for an incentive award with respect to, as appropriate,
some or all of the property which a holder of the number of shares of Common
Stock subject to such Stock Incentive Award would have received in such
transaction and, incident thereto, make an equitable adjustment as determined by
the Committee in its discretion in the exercise price of the incentive award, or
the number of shares or amount of property subject to the incentive award or, if
appropriate, provide for a cash payment to the Participant to whom such Stock
Incentive Award was granted in partial consideration for the exchange of the
Stock Incentive Award.

 

(d)

No Other Rights

Except as expressly provided in the Plan, no Participant shall have any rights
by reason of any subdivision or consolidation of shares of stock of any class,
the payment of any

 

 

 

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dividend, any increase or decrease in the number of shares of stock of any class
or any dissolution, liquidation, merger or consolidation of the Company or any
other corporation. Except as expressly provided in the Plan, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number of shares or amount of other property
subject to any Stock Incentive Award.

 

(e)

Savings Clause

No provision of this Section 10 shall be given effect to the extent that such
provision would cause any tax to become due under Section 409A of the Code.

11.

Rights as a Stockholder

No person shall have any rights as a stockholder with respect to any shares of
Common Stock covered by or relating to any Stock Incentive Award granted
pursuant to the Plan until the date of the issuance of a stock certificate with
respect to such shares. Except as otherwise expressly provided in Section 10
hereof, no adjustment of any Stock Incentive Award shall be made for dividends
or other rights for which the record date occurs prior to the date such stock
certificate is issued.

12.

No Special Employment Rights; No Right to Incentive Award

(a)          Nothing contained in the Plan or any Incentive Award shall confer
upon any Participant any right with respect to the continuation of his
employment by or service to the Company or interfere in any way with the right
of the Company at any time to terminate such employment or to increase or
decrease the compensation of the Participant from the rate in existence at the
time of the grant of an Incentive Award.

(b)          No person shall have any claim or right to receive an Incentive
Award hereunder. The Committee’s granting of an Incentive Award to a Participant
at any time shall neither require the Committee to grant an Incentive Award to
such Participant or any other Participant or other person at any time nor
preclude the Committee from making subsequent grants to such Participant or any
other Participant or other person.

13.

Securities Matters

(a)          The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of any shares of Common Stock to be issued
hereunder or to effect similar compliance under any state laws. Notwithstanding
anything herein to the contrary, the Company shall not be obligated to cause to
be issued or delivered any certificates evidencing shares of Common Stock
pursuant to the Plan unless and until the Company is advised by its counsel that
the issuance and delivery of such certificates is in compliance with all
applicable laws, regulations of governmental authority and the requirements of
any securities exchange on which shares of Common Stock are traded. The
Committee may require, as a condition to the issuance and delivery of
certificates evidencing shares of Common Stock pursuant to the terms

 

 

 

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hereof, that the recipient of such shares make such covenants, agreements and
representations, and that such certificates bear such legends, as the Committee
deems necessary or desirable.

(b)          The exercise of any Option granted hereunder shall only be
effective at such time as counsel to the Company shall have determined that the
issuance and delivery of shares of Common Stock pursuant to such exercise is in
compliance with all applicable laws, regulations of governmental authority and
the requirements of any securities exchange on which shares of Common Stock are
traded. The Company may, in its discretion, defer the effectiveness of an
exercise of an Option hereunder or the issuance or transfer of shares of Common
Stock pursuant to any Stock Incentive Award pending or to ensure compliance
under federal or state securities laws or the rules or regulations of any
exchange on which the shares are then listed for trading. The Company shall
inform the Participant in writing of its decision to defer the effectiveness of
the exercise of an Option or the issuance or transfer of shares of Common Stock
pursuant to any Stock Incentive Award. During the period that the effectiveness
of the exercise of an Option has been deferred, the Participant may, by written
notice, withdraw such exercise and obtain the refund of any amount paid with
respect thereto.

14.

Withholding Taxes

 

(a)

Cash Remittance

Whenever shares of Common Stock are to be issued upon the exercise of an Option
or the grant or vesting of a Stock Incentive Award, the Company shall have the
right to require the Participant to remit to the Company in cash an amount
sufficient to satisfy federal, state and local withholding tax requirements, if
any, attributable to such exercise, grant or vesting prior to the delivery of
any certificate or certificates for such shares or the effectiveness of the
lapse of such restrictions. In addition, upon the exercise or settlement of any
Stock Incentive Award in cash, the Company shall have the right to withhold from
any cash payment required to be made pursuant thereto an amount sufficient to
satisfy the federal, state and local withholding tax requirements, if any,
attributable to such exercise or settlement.

 

(b)

Stock Remittance

Notwithstanding Section 14(a) hereof, unless the Committee provides otherwise,
at the election of the Participant, when shares of Common Stock are to be issued
upon the exercise, grant or vesting of any Stock Incentive Award, the
Participant may tender to the Company a number of shares of Common Stock that
have been owned by the Participant for at least six months (or such other period
as the Committee may determine) having a Fair Market Value at the tender date
determined by the Committee to be sufficient to satisfy the minimum federal,
state and local withholding tax requirements, if any, attributable to such
exercise, grant or vesting but not greater than such minimum withholding
obligations. Such election shall satisfy the Participant’s obligations under
Section 14(a) hereof, if any.

 

(c)

Stock Withholding

 

 

 

 

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Notwithstanding Section 14(a) hereof, unless the Committee provides otherwise,
at the election of the Participant, when shares of Common Stock are to be issued
upon the exercise, grant or vesting of any Stock Incentive Award, the Company
shall withhold a number of such shares having a Fair Market Value at the
exercise date determined by the Committee to be sufficient to satisfy the
minimum federal, state and local withholding tax requirements, if any,
attributable to such exercise, grant or vesting but not greater than such
minimum withholding obligations. Such election shall satisfy the Participant’s
obligations under Section 14(a) hereof, if any.

15.

Amendment or Termination of the Plan

The Board may at any time suspend or discontinue the Plan or revise or amend it
in any respect whatsoever; provided, however, that to the extent any applicable
law, regulation or rule of a stock exchange requires shareholder approval in
order for any such revision or amendment to be effective, such revision or
amendment shall not be effective without such approval. The preceding sentence
shall not restrict the Committee’s ability to exercise its discretionary
authority hereunder pursuant to Section 4 hereof, which discretion may be
exercised without amendment to the Plan. No provision of this Section 14 shall
be given effect to the extent that such provision would cause any tax to become
due under Section 409A of the Code. Except as expressly provided in the Plan, no
action hereunder may, without the consent of a Participant, reduce the
Participant’s rights under any previously granted and outstanding Incentive
Award. Nothing in the Plan shall limit the right of the Company to pay
compensation of any kind outside the terms of the Plan.

16.

No Obligation to Exercise

The grant to a Participant of any Stock Incentive Award shall impose no
obligation upon such Participant to exercise such Stock Incentive Award.

17.

Transfers Upon Death

Upon the death of a Participant, outstanding Incentive Awards granted to such
Participant may be exercised only by the executors or administrators of the
Participant’s estate or by any person or persons who shall have acquired such
right to exercise by will or by the laws of descent and distribution. No
transfer by will or the laws of descent and distribution of any Incentive Award,
or the right to exercise any Incentive Award, shall be effective to bind the
Company unless the Committee shall have been furnished with (a) written notice
thereof and with a copy of the will and/or such evidence as the Committee may
deem necessary to establish the validity of the transfer and (b) an agreement by
the transferee to comply with all the terms and conditions of the Incentive
Award that are or would have been applicable to the Participant and to be bound
by the acknowledgements made by the Participant in connection with the grant of
the Incentive Award.

18.

Expenses and Receipts

 

 

 

 

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The expenses of the Plan shall be paid by the Company. Any proceeds received by
the Company in connection with any Incentive Award will be used for general
corporate purposes.

19.

Governing Law

The Plan and the rights of all persons under the Plan shall be construed and
administered in accordance with the laws of the State of Delaware without regard
to its conflict of law principles that could cause the application of the laws
of any jurisdiction other than the State of Delaware.

20.

Effective Date and Term of Plan

On January 17, 2007, the Board authorized the Company to establish the Plan,
subject to the Company’s receipt of approval of the Plan by the United States
Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) on
February 12, 2007 (the “Effective Date”), as part of the Company’s confirmed
plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code, and is
subject to either (a) approval of the Plan by the shareholders of the Company in
accordance with applicable law, or (b) receipt by the Committee of advice of
counsel that the method of adoption and approval of the Plan meets the
shareholder approval requirements of Section 162(m) and Section 422 of the Code.
The expiration date of the Plan shall be the tenth anniversary of the Effective
Date, after which no grants of Incentive Awards may be made; provided, that
administration of the Plan shall continue in effect until all matters relating
to Incentive Awards previously granted have been settled. No Option shall be
treated as an “incentive stock option” within the meaning of Section 422 of the
Code unless the Plan has been approved by the shareholders of the Company in a
manner intended to comply with the shareholder approval requirements of Section
422(b)(1) of the Code; provided, that any Option intended to be an incentive
stock option shall not fail to be effective solely on account of a failure to
obtain such approval, but rather such Option shall be treated as a nonqualified
stock option unless and until such approval is obtained.

 

 

 

 

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