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Exhibit 10.3
 

FREEPORT-MCMORAN COPPER & GOLD INC.
2004 DIRECTOR COMPENSATION PLAN

1. Purpose of the Plan.
 
The purpose of the Freeport-McMoRan Copper & Gold Inc. 2004 Director
Compensation Plan is to promote the interests of the Company and its
stockholders by strengthening the Company’s ability to attract, motivate and
retain directors of experience and ability, and to encourage the highest level
of director performance by providing directors with (i) a proprietary interest
in the Company’s financial success and growth through the ability to elect to
receive compensation in shares of Common Stock and (ii) the ability to defer
compensation.  As originally approved by stockholders, Section 5 of the Plan
also provided for annual and one-time grants of Awards to Directors and Advisory
Directors, but there are no longer sufficient shares remaining available for
future Awards under the Plan.
 
2. Definitions.
 
For purposes of this Plan, the following terms shall have the meanings
indicated:
 
2.1 “Advisory Director” means a person designated as such by the Board.
 
2.2 “Award” means any Option, Restricted Stock Unit or Stock Appreciation Right
granted under this Plan.
 
2.3 “Award Notice” means any written or electronic notice of grant, evidencing
any Award.
 
2.4 “Board” means the Board of Directors of the Company.
 
2.5 “Cash Compensation” means the annual cash retainer paid to an Eligible
Director and any meeting fees, but does not include any expense reimbursement
paid to an Eligible Director.
 
2.6 “Change of Control.”
 
(a) “Change of Control” means (capitalized terms not otherwise defined will have
the meanings ascribed to them in paragraph (b) below):
 
(i) the acquisition by any Person together with all Affiliates of such Person,
of Beneficial Ownership of the Threshold Percentage or more; provided, however,
that for purposes of this Section 2.6(a)(i), the following will not constitute a
Change of Control:
 
(A) any acquisition (other than a “Business Combination,” as defined below, that
constitutes a Change of Control under Section 2.6(a)(iii) hereof) of Common
Stock directly from the Company,
 
 

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(B) any acquisition of Common Stock by the Company or its subsidiaries,
 
(C) any acquisition of Common Stock by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation or other entity
controlled by the Company, or
 
(D) any acquisition of Common Stock pursuant to a Business Combination that does
not constitute a Change of Control under Section 2.6(a)(iii) hereof; or
 
(ii) individuals, excluding the representatives of Rio Tinto (as defined below),
who, as of the Effective Date, constitute the Board (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the Board; provided,
however, that any individual, excluding any representative of Rio Tinto,
becoming a director subsequent to the Effective Date whose election, or
nomination for election by the Company’s stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board will be
considered a member of the Incumbent Board, unless such individual’s initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or any other actual
or threatened solicitation of proxies or consents by or on behalf of a Person
other than the Incumbent Board; or
 
(iii) the consummation of a reorganization, merger or consolidation (including a
merger or consolidation of the Company or any direct or indirect subsidiary of
the Company), or sale or other disposition of all or substantially all of the
assets of the Company (a “Business Combination”), in each case, unless,
immediately following such Business Combination:
 
(A) the individuals and entities who were the Beneficial Owners of the Company
Voting Stock immediately prior to such Business Combination have direct or
indirect Beneficial Ownership of more than 50% of the then outstanding shares of
common stock, and more than 50% of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, of the Post-Transaction Corporation, and
 
(B) no Person together with all Affiliates of such Person (excluding the
Post-Transaction Corporation and any employee benefit plan or related trust of
either the Company, the Post Transaction Corporation or any subsidiary of either
corporation) Beneficially Owns 30% or more of the then outstanding shares of
common stock of the Post Transaction Corporation or 30% or more of the combined
voting power of the then outstanding voting securities of the Post Transaction
Corporation; provided, that if that certain Agreement dated as of May 2, 1995 by
and between the Company and Rio Tinto remains in effect as it may be amended
from time to time with respect to the Post Transaction Corporation, then Rio
Tinto and its Affiliates may Beneficially Own any amount less than the number of
shares of the Post Transaction Corporation that could elect a majority of the
directors of the Post Transaction Corporation if all directors were to be
elected at a single meeting, and
 
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(C) at least a majority of the members of the board of directors of the
Post-Transaction Corporation were members of the Incumbent Board at the time of
the execution of the initial agreement, and of the action of the Board,
providing for such Business Combination; or
 
(iv) approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company.
 
(b) As used in this Section 2.6 and elsewhere in this Plan, the following terms
have the meanings indicated:
 
(i) “Affiliate” means a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
another specified Person.
 
(ii) “Beneficial Owner” (and variants thereof), with respect to a security,
means a Person who, directly or indirectly (through any contract, understanding,
relationship or otherwise), has or shares (A) the power to vote, or direct the
voting of, the security, and/or (B) the power to dispose of, or to direct the
disposition of, the security.
 
(iii) “Company Voting Stock” means any capital stock of the Company that is then
entitled to vote for the election of directors.
 
(iv) “Effective Date” means the date this Plan is approved by the Company’s
stockholders.
 
(v) “Majority Shares” means the number of shares of Company Voting Stock that
could elect a majority of the directors of the Company if all directors were to
be elected at a single meeting.
 
(vi) “Person” means a natural person or entity, and will also mean the group or
syndicate created when two or more Persons act as a syndicate or other group
(including without limitation a partnership, limited partnership, joint venture
or other joint undertaking) for the purpose of acquiring, holding, or disposing
of a security, except that “Person” will not include an underwriter temporarily
holding a security pursuant to an offering of the security.
 
(vii) “Post-Transaction Corporation”:  Unless a Change of Control includes a
Business Combination, “Post-Transaction Corporation” means the Company after the
Change of Control.  If a Change of Control includes a Business Combination,
“Post-Transaction Corporation” will mean the corporation or other entity
resulting from the Business Combination unless, as a result of such Business
Combination, an ultimate parent entity controls the Company or all or
substantially all of the Company’s assets either directly or indirectly, in
which case, “Post Transaction Corporation” will mean such ultimate parent
entity.
 
(viii) “Threshold Percentage”: (A) As long as that certain Agreement dated as of
May 2, 1995, by and between the Company and Rio Tinto Indonesia Limited (“Rio
Tinto”) remains in effect as it may be amended from time to time, “Threshold
Percentage” means
 
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with respect to Rio Tinto and its Affiliates, that percentage of Common Stock
that would result in Rio Tinto and its Affiliates having Beneficial Ownership of
shares of Company Voting Stock equal to or greater than the Majority Shares;
provided that, solely for purposes of such calculation, the shares of Company
Voting Stock issuable upon exercise of warrants, options or other rights, or
upon conversion or exchange of convertible or exchangeable securities, owned by
Rio Tinto and its Affiliates, will be treated as outstanding Company Voting
Stock.  (B) With respect to any other Person and its Affiliates, “Threshold
Percentage” means 30% of all then outstanding Common Stock.
 
2.7 “Committee” means the Nominating and Corporate Governance Committee of the
Board or a subcommittee thereof.  The Committee shall consist of not fewer than
two members of the Board of Directors, each of whom shall (a) qualify as a
“non-employee director” under Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 (the “1934 Act”), or any successor rule, and (b) qualify as
an “outside director” under Section 162(m) of the Internal Revenue Code of 1986,
as amended from time to time (the “Code”), and the regulations promulgated
thereunder.
 
2.8 “Common Stock” means the common stock, $0.10 par value per share, of the
Company.
 
2.9 “Company” means Freeport-McMoRan Copper & Gold Inc., a Delaware corporation.
 
2.10 “Director” means each member of the Board who is not employed by the
Company or any of its subsidiaries.
 
2.11 “Eligible Director” means each Director and Advisory Director, and
includes, for purposes of Sections 6.6 and 7.6 hereof only, former Directors and
Advisory Directors who continue to provide services to the Company or a
subsidiary of the Company pursuant to a consulting or other arrangement.
 
2.12 “Fair Market Value.”  Except as provided below in connection with a
cashless exercise through a broker or the vesting of Restricted Stock Units, for
any purpose relevant under the Plan, the fair market value of a share of Common
Stock or any other security shall be the closing per share or security sale
price on the Composite Tape for New York Stock Exchange-Listed Stocks on the
date in question or, if there are no reported sales on such date, on the last
preceding date on which any reported sale occurred.  If on the date in question
the shares of Common Stock or other securities in question are not listed on
such Composite Tape, the fair market value shall be the closing sale price on
the New York Stock Exchange on such date or, if no sales occurred on such date,
on the last previous day on which a sale on the New York Stock Exchange is
reported.  In the context of a cashless exercise through a broker, the fair
market value shall be the price at which the shares of Common Stock are actually
sold.  In the context of the vesting of Restricted Stock Units, the fair market
value of a share of Common Stock or any other security shall be the closing per
share or security sale price on the Composite Tape for New York Stock
Exchange-Listed Stocks on the business day immediately preceding the vesting
date or, if there are no reported sales on such date, on the last preceding date
on which any reported sale occurred.
 
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2.13 “Grant Date” means June 1, 2004, and each subsequent anniversary thereof
throughout the term of this Plan, provided shares of Common Stock remain
available for issuance hereunder.
 
2.14 “Participant” means any individual granted an Award under this Plan.
 
2.15 “Option” means a stock option granted under Section 5 of this Plan that
does not satisfy the requirements of Section 422 of the Code.
 
2.16 “Plan” means the Freeport-McMoRan Copper & Gold Inc. 2004 Director
Compensation Plan as set forth herein and as amended, restated, supplemented or
otherwise modified from time to time.
 
2.17 “Restricted Stock Unit” or “RSU” means an award of restricted stock units
granted under Section 5 of this Plan.
 
2.18 “Stock Appreciation Right” or “SAR” means an award of stock appreciation
rights granted under Section 5 of this Plan.
 
3. Shares of Common Stock Subject to the Plan.
 
3.1 Subject to the adjustment provisions of Section 11, the aggregate number of
shares of Common Stock that may be issued pursuant to the terms of the Plan
shall be 1,000,000.  Shares issued or delivered upon the exercise of Options or
the vesting of RSUs may be either authorized but unissued shares or shares
issued and thereafter acquired by the Company.
 
3.2 To the extent any shares of Common Stock subject to an Award are not issued
because the Award is forfeited or cancelled or the Award is paid in cash, such
shares shall again be available for grant pursuant to Awards granted under the
Plan.  If the exercise price of any Option granted under this Plan is satisfied
by tendering shares of Common Stock to the Company (by either actual delivery or
by attestation), only the number of shares of Common Stock issued net of the
shares of Common Stock tendered shall be deemed delivered for purposes of
determining the maximum number of shares of Common Stock available for delivery
under the Plan.
 
4. Administration of the Plan.
 
4.1 The Plan shall be administered by the Committee, which shall have the power
to interpret the Plan and, subject to its provisions, to prescribe, amend and
rescind Plan rules and to make all other determinations necessary for the Plan’s
administration.
 
4.2 All action taken by the Committee in the administration and interpretation
of the Plan shall be final and binding upon all parties.  No member of the
Committee will be liable for any action or determination made in good faith by
the Committee with respect to the Plan or any Award.
 
4.3 The Committee does not have the authority to make discretionary grants of
Awards under the Plan. Grants may be made only as provided in Section 5 hereof.
 
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5. Grant of Options, Restricted Stock Units and Stock Appreciation Rights.
 
5.1 On each Grant Date, each Eligible Director shall be automatically granted
 
(a) an Option to acquire 10,000 shares of Common Stock; and
 
(b) 2,000 Restricted Stock Units.
 
5.2 While the Plan remains in effect and shares of Common Stock remain available
for issuance hereunder, upon any person’s initial election or appointment as an
Eligible Director, otherwise than at an annual meeting of stockholders, such
person shall be granted an Option and RSUs as follows:
 
(a) If less than six full calendar months have elapsed since the most recent
Grant Date, then the Eligible Director shall receive an Option to acquire 10,000
shares of Common Stock and 2,000 Restricted Stock Units; or
 
(b) If six or more full calendar months have elapsed since the most recent Grant
Date, then the Eligible Director shall receive an Option to acquire 5,000 shares
of Common Stock and 1,000 Restricted Stock Units.
 
5.3 On February 9, 2004, two Directors resigned from the Board and were
appointed Advisory Directors.  All outstanding incentive awards previously
granted to such directors under the Company’s 1995 Stock Option Plan for
Non-Employee Directors and the Company’s Stock Appreciation Rights Plan were or
will be terminated under the terms of those plans as a result of such
individuals’ resignations from the Board.  Accordingly, on May 9, 2004, the
following Advisory Directors will receive a one-time grant of Options and SARs
as described below to replace the previously granted awards that have or will
terminate.
 
(a) Gabrielle K. McDonald shall receive Options to acquire 79,517 shares of
Common Stock and 52,131 SARs related to an equal number of shares of Common
Stock, which Options and SARs shall have the specific terms described on Annex A
hereto.
 
(b) J. Stapleton Roy shall receive Options to acquire 22,500 shares of Common
Stock and 14,751 SARs related to an equal number of shares of Common Stock,
which Options and SARs shall have the specific terms described on Annex A
hereto.
 
6. Terms and Conditions of Options and Stock Appreciation Rights.
 
6.1 Unless exercisability is accelerated as provided in Section 12.1 hereof and
except for grants described in Section 5.3 hereof, the Options shall become
exercisable in one-quarter increments on the first, second, third and fourth
anniversaries of the applicable Grant Date.
 
6.2 Unless terminated earlier as provided in Sections 5.3, 6.6 or 12.2, the
Options shall expire ten years following the applicable Grant Date.
 
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6.3 Except for grants described in Section 5.3, the exercise price of the
Options granted to Eligible Directors shall be equal to the Fair Market Value,
as defined herein, of a share of Common Stock on the applicable Grant Date.
 
6.4 Options must be exercised by delivering written notice to the Company or any
person or entity designated by the Company on forms approved by the Company and
payment of the purchase price thereof in full.  Any such exercise shall be
effective upon receipt by the Company or its designee of such notice and such
payment.  Unless the Committee shall determine otherwise in any particular case,
such payment may be made by (a) cash, (b) cash equivalent (which may be the
personal check of the exercising holder of the Option), (c) by tendering shares
of Common Stock, either by actual delivery or by attestation, that are owned by
such holder and that have been held by the Participant or eligible transferee
for at least six months, or (d) instructing a broker approved by the Company to
sell shares of Common Stock acquired upon the exercise of the option and to
remit to the Company a sufficient portion of the cash proceeds to pay the
exercise price; or (e) a combination thereof, in each case having an aggregate
Fair Market Value equal to the aggregate exercise price of the portion of the
Option being exercised.
 
6.5 Any provision of this Plan or any Award Notice to the contrary
notwithstanding, the Committee may cause any Award granted hereunder to be
canceled in consideration of a cash payment or alternative Award made to the
holder of such canceled Award equal in value to such canceled
Award.  Notwithstanding the foregoing, except for adjustments permitted under
Sections 11 and 12.2 hereof, no action by the Committee shall cause a reduction
in the exercise price of Options granted under the Plan without the approval of
the stockholders of the Company.  The determinations of value under this
subparagraph shall be made by the Committee in its sole discretion.
 
6.6 (a)           For purposes of this Section 6.6, if a Participant continues
to provide services to the Company or a subsidiary of the Company pursuant to a
consulting or other arrangement, the Participant will not “cease to be an
Eligible Director” until such time as the Participant no longer provides such
services.
 
(b) If a Participant ceases to be an Eligible Director for any reason other than
death, retirement from the Board or disability (as defined in Section 6.6(f)),
all of the Options and SARs granted to such Participant while serving as an
Eligible Director shall be terminated except that any Options and SARs, to the
extent then exercisable, may be exercised by the holder thereof within three
months after such Participant ceases to be an Eligible Director, but not later
than the termination date of the Award.
 
(c) If a Participant ceases to be an Eligible Director by reason of the
Participant’s retirement from the Board or disability (as defined in Section
6.6(f)), all of the Options and SARs granted to such Participant while serving
as an Eligible Director shall be terminated except that any Options and SARs, to
the extent then exercisable or exercisable within one year thereafter, may be
exercised by the holder thereof within three years after such Participant ceases
to be an Eligible Director, but not later than the termination date of the
Award.
 
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(d) If a Participant dies while serving as an Eligible Director, all Options and
SARs granted to such Participant shall be terminated, except that any Options
and SARs, to the extent exercisable by the holder thereof at the time of such
death or exercisable within one year thereafter, may be exercised until the
third anniversary of the date of such death, but not later than the termination
date of the Award, by the holder thereof, the Participant’s estate, or the
person designated in the Participant’s last will and testament, as appropriate.
 
(e) If a Participant dies after ceasing to be an Eligible Director, all of the
Options and SARs granted to such Participant shall be terminated, except that
any Options and SARs, to the extent still outstanding and exercisable by the
holder thereof at the time of such death, may be exercised until the third
anniversary of the date the Participant ceased to be an Eligible Director, but
not later than the termination date of the Award, by the holder thereof, the
Participant’s estate, or the person designated in the Participant’s last will
and testament, as appropriate.
 
(f) For purposes of this Section 6.6, a “disability” shall occur if (a) a
physical or mental illness renders the Participant incapable of satisfactorily
discharging his or her duties and responsibilities as a Director for a period of
90 consecutive days, and (b) a duly qualified physician chosen by the Company
and reasonably acceptable to the Participant or his or her legal representative
certifies in writing that the Participant has become disabled.
 
6.7 A Stock Appreciation Right is a right to receive, without payment to the
Company, for each share of Common Stock to which the SAR relates, an amount in
cash equal to the excess, if any, of the Fair Market Value of a Share on the
date of exercise of the SAR over the grant price. SARs will only be granted
under the Plan in accordance with Section 5.3 hereof.
 
7. Terms and Conditions of Restricted Stock Units.
 
7.1 Subject to the terms, conditions, and restrictions set forth herein, each
RSU granted under Section 5.1 hereof represents the right to automatically
receive from the Company, on the respective scheduled vesting date for such RSU,
one share (a “Share”) of Common Stock, free of any restrictions and all cash,
securities and property credited to or deposited in the Participant’s Dividend
Equivalent Account (as defined in Section 7.4) with respect to such RSU.
 
7.2 Unless vesting is accelerated as provided in Section 7.6 or 12.1, the RSUs
shall vest in one-quarter increments on the first, second, third and fourth
anniversaries of the applicable Grant Date.  Upon vesting, a Participant shall
be issued the Shares to which the Participant is entitled, unless the
Participant has elected to defer receipt as permitted herein.
 
7.3 Except as provided in Section 7.4, an RSU shall not entitle the Participant
to any incidents of ownership (including, without limitation, dividend and
voting rights) (a) in any Share until the RSU shall vest and the Participant
shall be issued a Share to which such RSU relates nor (b) in any cash,
securities or property credited to or deposited in a Dividend Equivalent Account
related to such RSU until such RSU vests.
 
7.4 From and after the Grant Date of an RSU until the issuance of the Share
payable in respect of such RSU, the Participant shall be credited, as of the
payment date therefor, with (a) the amount of any cash dividends and (b) the
amount equal to the Fair Market Value of any
 
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Shares, securities, or other property distributed or distributable in respect of
one share of Common Stock to which the Participant would have been entitled had
the Participant been a record holder of one share of Common Stock at all times
from the Grant Date to such issuance date (a “Property Distribution”).  All such
credits shall be made notionally to a dividend equivalent account (a “Dividend
Equivalent Account”) established for the Participant with respect to all RSUs
granted with the same vesting date.  All credits to a Dividend Equivalent
Account for the Participant shall be notionally increased by the Account Rate
(as hereinafter defined), compounded quarterly, from and after the applicable
date of credit until paid in accordance with the terms of the Plan and the
applicable Award Notice.  The “Account Rate” shall be the prime commercial
lending rate announced from time to time by JPMorgan Chase Bank or by another
major national bank headquartered in New York, New York designated by the
Committee.  The Committee may, in its discretion, deposit in the Participant’s
Dividend Equivalent Account the securities or property comprising any Property
Distribution in lieu of crediting such Dividend Equivalent Account with the Fair
Market Value thereof.
 
7.5           No later than December 31st of the year prior to the applicable
Grant Date of any RSUs, a Participant may elect, in accordance with procedures
established by the Committee, that all or a portion of the Shares issuable to
the Participant upon the vesting of such RSUs and all or a portion of the
amounts notionally credited in the Dividend Equivalent Account related to such
RSUs shall not be distributed on the vesting date but shall be deferred and paid
in one or more periodic installments not in excess of ten, beginning at such
time or times elected by the Participant; provided, however, that the deferral
period shall end no later than 10 years after the date that the Participant
ceases to be an Eligible Director (“Termination”) for any reason.  In the event
of any Termination, a distribution of all amounts due hereunder shall be made in
full to the Participant or his or her designated beneficiary as soon as
administratively possible following the date the Participant is scheduled to
receive a distribution hereunder.  All securities or property comprising
Property Distributions deposited in such Dividend Equivalent Account related to
such RSUs shall, however, be distributed to the Participant as soon as
practicable after the vesting date for such RSUs, irrespective of such deferral
election.
 
7.6 (a)           Except as otherwise set forth in Section 7.6(b), all unvested
RSUs, all amounts credited to the Participant’s Dividend Equivalent Accounts
with respect to such RSUs, and all securities and property comprising Property
Distributions deposited in such Dividend Equivalent Accounts with respect to
such RSUs shall immediately be forfeited on the date the Participant ceases to
be an Eligible Director, unless the Participant continues providing services to
the Company pursuant to a consulting or other arrangement.
 
(b) If a Participant ceases to be an Eligible Director by reason of the
Participant’s death, retirement or disability (as defined in Section 7.6(d)),
all unvested RSUs and all amounts credited to or property deposited in the
Participant’s Dividend Equivalent Accounts with respect to such RSUs shall vest
as of the date the Participant ceases to be an Eligible Director.
 
(c) For purposes of this Section 7.6, if a Participant continues to provide
services to the Company or a subsidiary of the Company pursuant to a consulting
or other arrangement, the Participant will not “cease to be an Eligible
Director” until such time as the Participant no longer provides such services.
 
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(d) For purposes of this Section 7.6, a “disability” shall have occurred if the
Participant is (i) unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months, or (ii) by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, receiving
income replacement benefits for a period of not less than 3 months under an
accident and health plan covering employees of the Participant’s employer.
 
8. Election to Have Annual Retainer Paid in Common Stock.
 
8.1 Each Eligible Director may make a stock purchase election on a form approved
by the Committee (the “Stock Purchase Election Form”) directing that up to one
hundred percent of his or her annual retainer, in twenty-five percent
increments, be allocated to the purchase of Common Stock on his or her behalf.
 
8.2 A stock purchase election will be effective on the first date that the
portion of the annual retainer subject to the election is paid that is at least
five business days after the date the Stock Purchase Election Form is filed with
the Company’s Human Resources Department in the manner required by the
Company.  Stock purchase elections may be revoked or modified effective on the
first date that the portion of the annual retainer is paid that is at least five
business days following the date the revocation or modified election is filed
with the Company in the manner required by the Company.
 
8.3 If an Eligible Director has timely submitted a satisfactory Stock Purchase
Election Form, the Eligible Director shall be issued that number of whole shares
of Common Stock, rounded down if necessary, equal to the amount of the
Director's retainer to be allocated to the purchase of Common Stock on that date
divided by the Fair Market Value of a share of Common Stock as of the trading
date immediately preceding the issue date.
 
8.4 The shares of Common Stock authorized under this Section 8 shall be issued
under the terms of this Plan, to the extent shares remain available for
issuance, or another stock incentive plan maintained by the Company permitting
such issuance.
 
9. Deferral of Cash Compensation.
 
9.1 Each Eligible Director may elect to defer his or her Cash Compensation that
is not used to purchase Common Stock pursuant to Section 8 hereof, in
twenty-five percent increments, to a deferred compensation account (a “Deferred
Compensation Account”) established for the Eligible Director’s benefit.  An
election to defer Cash Compensation hereunder shall be made by means of a form
approved by the Company (the “Deferral Election Form”) and shall be effective
only with respect to Cash Compensation earned on or after January 1st of the
fiscal year following the receipt of the Deferral Election Form by the Company’s
Human Resources Department.
 
9.2 An Eligible Director may revoke or modify an election made pursuant to
Section 9.1 with respect to deferrals of Cash Compensation to be earned in the
future and such revocation or modification shall take effect on the first day of
the fiscal quarter that is more than
 
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twelve months after receipt of the written revocation or modification by the
Committee and subject to such other rules as may be established by the
Committee.
 
10. Deferred Compensation Accounts.
 
10.1 A Deferred Compensation Account shall be established for each Eligible
Director who executes a Deferral Election Form.
 
10.2 An Eligible Director’s Deferred Compensation Account shall be credited with
that portion of the Eligible Director’s Cash Compensation that the Eligible
Director has elected to defer to his or her Deferred Compensation Account
pursuant to Section 9.1 as of the date such Compensation would otherwise have
been paid to the Eligible Director.
 
10.3 All amounts in an Eligible Director’s Deferred Compensation Account shall
accrue interest at a rate equal to the prime commercial lending rate announced
from time to time by JPMorgan Chase (compounded quarterly) or by another major
national bank headquartered in New York, New York and designated by the
Committee.
 
10.4 Amounts credited to an Eligible Director's Deferred Compensation Account
shall be distributed in either a single lump sum or annual installments (not to
exceed ten), as designated by the Eligible Director in his or her applicable
Deferral Election Form.  Distribution of a Deferred Compensation Account shall
be made (in the case of a lump sum payment) or commence (in the case of
installment payments) as follows:  (i) as soon as administratively possible
following the date the Eligible Director ceases to be an Eligible Director, or
(ii) on such other date as may be specified by the Eligible Director in his or
her Deferral Election Form, provided such date is at least two years after the
date the Deferral Election Form is received by the Committee.  Notwithstanding
an Eligible Director’s election pursuant to his or her applicable Deferral
Election Form, a distribution of all amounts remaining unpaid in the Deferred
Compensation Account shall be made as soon as administratively possible after
the tenth anniversary of the date the Eligible Director ceases to be an Eligible
Director.  If an Eligible Director elects to have his or her Deferred
Compensation Account distributed in installments, the amount of the first
installment shall be a fraction of the value of the Eligible Director's Deferred
Compensation Account, the numerator of which is one and denominator of which is
the total number of installments elected, and the amount of each subsequent
installment shall be a fraction of the value (including income credited pursuant
to Section 10.3) on the date preceding each subsequent payment, the numerator of
which is one and the denominator of which is the total number of installments
elected minus the number of installments previously paid.
 
10.5 In the event of the death of an Eligible Director prior to the distribution
of his or her Deferred Compensation Account in full, the value of such Deferred
Compensation Account shall be determined as of the date of death and such amount
shall be distributed in a single lump sum payment to the Eligible Director's
estate or designated beneficiary as soon as administratively feasible
thereafter.
 
10.6 At least once per year, each Eligible Director who has executed a Deferral
Election Form shall be provided with a statement of his or her Deferred
Compensation Account.
 
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10.7 The right of any Eligible Director to receive distributions under the
provisions of this Section 10 shall constitute an unsecured claim against the
general assets of the Company.
 
11. Adjustment Provisions.
 
In the event of any recapitalization, reclassification, stock dividend, stock
split, combination of shares or other change in the Common Stock, all
limitations on numbers of shares of Common Stock provided in this Plan, and the
number of shares subject to outstanding Options, SARs, RSUs and stock purchase
elections, shall be equitably adjusted in proportion to the change in
outstanding shares of Common Stock.  In addition, in the event of any such
change in the Common Stock, the Committee shall make any other adjustment that
it determines to be equitable, including without limitation adjustments to the
exercise price of any Option or base price of any SAR in order to provide
Participants with the same relative rights before and after such adjustment.
 
12. Change of Control.
 
12.1 Upon a Change of Control, or immediately prior to the closing of a
transaction that will result in a Change of Control if consummated, all
outstanding Options and SARs  granted pursuant to this Plan shall automatically
become fully vested and exercisable.  If a Change of Control also qualified as a
change in the ownership of the Company, a change in the effective control of the
Company or a change in the ownership of a substantial portion of the assets of
the Company under Section 409A of the Code and any related implementing
regulations or guidance, then all outstanding RSUs shall become fully vested.
 
12.2 No later than 30 days after a Change of Control, the Committee, acting in
its sole discretion without the consent or approval of any Participant (and
notwithstanding any removal or attempted removal of some or all of the members
thereof as directors or Committee members), may act to effect one or more of the
alternatives listed below, which may vary among individual Participants and
which may vary among Options, SARs and RSUs held by any individual Participant:
 
(a) require that all outstanding Options and SARs be exercised on or before a
specified date (before or after such Change of Control) fixed by the Committee,
after which specified date all unexercised Options and SARs and all rights of
Participants thereunder shall terminate,
 
(b) make such equitable adjustments to Awards then outstanding as the Committee
deems appropriate to reflect such Change of Control (provided, however, that the
Committee may determine in its sole discretion that no adjustment is necessary),
 
(c) provide for mandatory conversion or exchange of some or all of the
outstanding Options and SARs held by some or all Participants as of a date,
before or after such Change of Control, specified by the Committee, in which
event such Options and SARs shall be deemed automatically cancelled and the
Company shall pay, or cause to be paid, to each such Participant an amount of
cash per share equal to the excess, if any, of the Change of Control Value of
the shares subject to such Option or SAR, as defined and calculated below, over
the per share exercise price of such Options and SARs or, in lieu of such cash
payment, the issuance of
 
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Common Stock or securities of an acquiring entity having a Fair Market Value
equal to such excess, or
 
(d) provide that thereafter, upon any exercise of an Option that entitles the
holder to receive Common Stock, the holder shall be entitled to purchase or
receive under such Option, in lieu of the number of shares of Common Stock then
covered by such Option, the number and class of shares of stock or other
securities or property (including, without limitation, cash) to which the holder
would have been entitled pursuant to the terms of the agreement providing for
the reorganization, share exchange, merger, consolidation or asset sale, if,
immediately prior to such Change of Control, the holder had been the record
owner of the number of shares of Common Stock then covered by such Option.
 
12.3 For the purposes of any conversions or exchanges under paragraph (c) of
Section 12.2, the “Change of Control Value” shall equal the amount determined by
whichever of the following items is applicable:
 
(a) the per share price to be paid to holders of Common Stock in any such
merger, consolidation or other reorganization,
 
(b) the price per share offered to holders of Common Stock in any tender offer
or exchange offer whereby a Change of Control takes place, or
 
(c) in all other events, the Fair Market Value of a share of Common Stock, as
determined by the Committee as of the date determined by the Committee to be the
date of conversion or exchange.
 
12.4 In the event that the consideration offered to stockholders of the Company
in any transaction described in this Section 12 consists of anything other than
cash, the Committee shall determine the fair cash equivalent of the portion of
the consideration offered that is other than cash.
 
13. General Provisions.
 
13.1 Nothing in the Plan or in any instrument executed pursuant to the Plan will
confer upon any Eligible Director any right to continue as an Eligible
Director or affect the right of the Board to remove any Eligible Director.
 
13.2 No shares of Common Stock will be issued or transferred pursuant to an
Award unless and until all then-applicable requirements imposed by federal and
state securities and other laws, rules and regulations and by any regulatory
agencies having jurisdiction, and by any stock exchanges upon which the Common
Stock may be listed, have been fully met to the Company’s satisfaction.  As a
condition precedent to the issuance of shares pursuant to an Award, the Company
may require the Participant to take any reasonable action to meet such
requirements.
 
13.3 No Participant and no beneficiary or other person claiming under or through
such Participant will have any right, title or interest in or to any shares of
Common Stock allocated or
 
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reserved under the Plan or subject to any Award except as to such shares of
Common Stock, if any, that have been issued or transferred to such Participant.
 
13.4 No Awards granted hereunder, including amounts notionally credited to the
Participant’s Dividend Equivalent Account, and any Property Distributions
deposited in such Dividend Equivalent Account, may be transferred, pledged,
assigned or otherwise encumbered by a Participant except: (i) by will; (ii) by
the laws of descent and distribution; (iii) pursuant to a domestic relations
order, as defined in the Code, if permitted by the Committee and so provided in
the Award Notice or an amendment thereto; or (iv) if permitted by the Committee
and so provided in the Award Notice or an amendment thereto, Options may be
transferred or assigned (w) to Immediate Family Members, (x) to a partnership in
which Immediate Family Members, or entities in which Immediate Family Members
are the owners, members or beneficiaries, as appropriate, are the partners, (y)
to a limited liability company in which Immediate Family Members, or entities in
which Immediate Family Members are the owners, members or beneficiaries, as
appropriate, are the members, or (z) to a trust for the benefit of Immediate
Family Members; provided, however, that no more than a de minimus beneficial
interest in a partnership, limited liability company or trust described in (x),
(y) or (z) above may be owned by a person who is not an Immediate Family Member
or by an entity that is not beneficially owned solely by Immediate Family
Members.  “Immediate Family Members” shall be defined as the spouse and natural
or adopted children or grandchildren of the Participant and their spouses.  Any
attempted assignment, transfer, pledge, hypothecation or other disposition of
Awards, or levy of attachment or similar process upon Awards not specifically
permitted herein, shall be null and void and without effect.  The designation of
a designated beneficiary shall not be a violation of this Section 13.4.
 
13.5 Each Award shall be evidenced by an Award Notice.
 
14. Amendment, Discontinuance or Termination of the Plan.
 
14.1 The Board may amend or discontinue the Plan at any time; provided, however,
that no such amendment may
 
(a) without the approval of the stockholders, (i) increase, subject to
adjustments permitted herein, the maximum number of shares of Common Stock that
may be issued through the Plan, (ii) materially increase the benefits accruing
to Participants under the Plan, (iii) materially expand the classes of persons
eligible to participate in the Plan, (iv) expand the types of awards available
under the Plan, (v) materially extend the term of the Plan, (vi) materially
change the method for determining the exercise price of an Award, or (vii) amend
Section 6.5 to permit a reduction in the exercise price of Options; or
 
(b) materially impair, without the consent of the recipient, an Award previously
granted.
 
14.2 Term of the Plan.  Subject to Section 14.1, the Plan shall continue until
terminated by the Board, provided no Awards may be granted under the Plan later
than May 6, 2014, which is ten years after the Effective Date of the Plan;
provided, however, that Awards granted prior to
 
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 such date shall remain in effect until all such Awards have either been
satisfied, expired or canceled under the terms of the Plan.
 
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ANNEX A to 2004 Director Compensation Plan

Special Awards to be Granted May 9, 2004

Gabrielle K. McDonald, Advisory Director, shall receive the following Options
and SARs:

Number of
Options/SARs
Exercise
Price
Vesting Schedule
Termination
Date*
7,017 options
$20.2672
May 9, 2004
    May 1, 2005
10,000 options
$26.6875
May 9, 2004
August 1, 2005
10,000 options
$30.4375
May 9, 2004
August 1, 2006
10,000 options
$29.1563
May 9, 2004
August 1, 2007
10,000 options
$17.3125
May 9, 2004
August 1, 2009
5,000 options
$  9.0938
50% on May 9, 2004, and 50% on August 1, 2004
August 1, 2010
7,500 options
$11.165
33.3% on May 9, 2004, 33.3% on August 1, 2004, and on the next anniversary
thereof
August 1, 2011
10,000 options
$15.195
25% on May 9, 2004, 25% on August 1, 2004, and on each of the next two
anniversaries thereof
August 1, 2012
10,000 options
$26.975
25% on August 1, 2004, and on each of the next three anniversaries thereof
August 1, 2013
       
4,600 SARs
$20.2672
May 9, 2004
    May 2, 2005
6,556 SARs
$26.6875
May 9, 2004
August 1, 2005
6,556 SARs
$30.4375
May 9, 2004
August 1, 2006
6,556 SARs
$29.1563
May 9, 2004
August 1, 2007
6,556 SARs
$17.3125
May 9, 2004
August 1, 2009
3,278 SARs
$9.0938
50% on May 9, 2004, and 50% on August 1, 2004
August 1, 2010
4,917 SARs
$11.165
33.3% on May 9, 2004, 33.3% on August 1, 2004, and on the next anniversary
thereof
August 1, 2011
6,556 SARs
$15.195
25% on May 9, 2004, 25% on August 1, 2004, and on each of the next two
anniversaries thereof
August 1, 2012
6,556 SARs
$26.975
25% on August 1, 2004 and on each of the next three anniversaries thereof
August 1, 2013

J. Stapleton Roy, Advisory Director, shall receive the following Options and
SARs:

Number of
Options/SARs
Exercise
Price
Vesting Schedule
Termination
Date*
5,000 options
$11.165
50% on August 1, 2004, and on the next anniversary thereof
August 1, 2011
7,500 options
$15.195
33.3% on August 1, 2004, and on each of the next two anniversaries thereof
August 1, 2012
10,000 options
$26.975
25% on August 1, 2004, and on each of the next three anniversaries thereof
August 1, 2013
       
3,278 SARs
$11.165
50% on August 1, 2004, and on the next anniversary thereof
August 1, 2011
4,917 SARs
$15.195
33.3% on August 1, 2004, and on each of the next two anniversaries thereof
August 1, 2012
6,556 SARs
$26.975
25% on August 1, 2004, and on each of the next three anniversaries thereof
August 1, 2013

_______________
*Unless terminated earlier pursuant to the terms of the Plan.

                                                   
 
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