EXHIBIT 10.6
SECOND AMENDED AND RESTATED
DIAMOND OFFSHORE DRILLING, INC.
2000 STOCK OPTION PLAN
SECTION 1
GENERAL
     1.1. Purpose. The Diamond Offshore 2000 Stock Option Plan, which became
effective as of May 15, 2000 and was amended and restated effective as of
May 18, 2004 and, as herein further amended and restated, will become effective
on the Effective Date (as so amended and restated, the “Plan”), has been
established by Diamond Offshore Drilling, Inc. (the “Company”) to (i) attract
and retain persons eligible to participate in the Plan, (ii) motivate
Participants, by means of appropriate incentives, to achieve long-term Company
goals, and reward Participants for achievement of those goals, and (iii) provide
incentive compensation opportunities that are competitive with those of other
similar companies, and thereby promote the financial interest of the Company and
its Subsidiaries.
     1.2. Operation and Administration. The operation and administration of the
Plan shall be subject to the provisions of Section 4 (relating to operation and
administration). Capitalized terms in the Plan shall be defined as set forth in
the Plan (including the definition provisions of Section 7 of the Plan).
SECTION 2
OPTIONS
     2.1. Option Grant. The Board may grant Options in accordance with this
Section 2.
     2.2. Definitions. The grant of an “Option” permits the Participant to
purchase shares of Stock at an Exercise Price established by the Board. Any
Option granted under the Plan may be either an incentive stock option (an “ISO”)
or a non-qualified option (an “NQO”), as determined in the discretion of the
Board. An “ISO” is an Option that is intended to be an “incentive stock option”
described in section 422(b) of the Code and does in fact satisfy the
requirements of that section. An “NQO” is an Option that is not intended to be
an “incentive stock option” as that term is described in section 422(b) of the
Code, or that fails to satisfy the requirements of that section.
     2.3. Exercise Price. The “Exercise Price” of each Option granted under this
Section 2 shall be established by the Board or shall be determined by a method
established by the Board at the time the Option is granted; except that the
Exercise Price shall not be less than 100% of the Fair Market Value of a share
of Stock on the date of grant (or, if greater, the par value of a share of
Stock). In no event may any Option granted under this Plan be amended, other
than pursuant to Section 4.2(e), to decrease the exercise price thereof, be
cancelled in conjunction with the

 

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

 

grant of any new Option with a lower exercise price, or otherwise be subject to
any action that would be treated, for accounting purposes, as a “repricing” of
such Option, unless such amendment, cancellation, or action is approved by the
Company’s stockholders.
     2.4. Vesting and Exercise. An Option shall be exercisable in accordance
with such terms and conditions and during such periods as may be established by
the Board.

(a)   Unless otherwise provided by the Board at the time of grant or thereafter,
each Option shall vest and become exercisable in four equal annual installments
beginning on the first anniversary of the date of grant, and shall thereafter
remain exercisable during the Term.

(b)   Unless otherwise provided by the Board at the time of grant or thereafter,
the Term of each Option shall end on the earliest of (1) the date on which such
Option has been exercised in full, (2) the date on which the Participant
experiences a Termination for Cause or a voluntary Termination, (3) the one-year
anniversary of the date on which the Participant experiences a Termination due
to death or Disability, (4) the three-year anniversary of the date on which the
Participant experiences a Termination due to such person’s Retirement, and
(5) the 90th day after the Participant experiences a Termination for any other
reason; provided, that in no event may the Term exceed ten (10) years from the
date of grant of the Option. Except as otherwise determined by the Board at the
time of grant or thereafter, upon the occurrence of a Termination of a
Participant for any reason, the Term of all outstanding Options held by the
Participant that are unvested as of the date of such Termination shall thereupon
end and such unvested Options shall be forfeited immediately; provided, however,
that the Board may, in its sole discretion, accelerate the vesting of any Option
and/or extend the exercise period of any Option (but not beyond the ten-year
anniversary of the grant date).

(c)   An Option may be exercised and the underlying shares purchased in
accordance with this Section 2 at any time after the Option with respect to
those shares vests and before the expiration of the Term. To exercise an Option,
the Participant shall give written notice to the Company stating the number of
shares with respect to which the Option is being exercised.

(d)   The full Exercise Price for shares of Stock purchased upon the exercise of
any Option shall be paid at the time of such exercise (except that, in the case
of an exercise arrangement approved by the Board and described in the last
sentence of this Section 2.4(d), payment may be made as soon as practicable
after the exercise). The Exercise Price shall be payable by check, or such other
instrument as the Board may accept. The Board may permit a Participant to elect
to pay the Exercise Price upon the exercise of an Option by irrevocably
authorizing a third party to sell shares of Stock (or a sufficient portion of
the shares) acquired upon exercise of the Option and remit to the Company a
sufficient portion of the sale proceeds to pay the entire Exercise Price and any
tax withholding resulting from such exercise. In the case of any ISO such
permission must be provided for at the time of grant and set forth in an Award
Certificate. In addition, if approved by the Board, payment, in full or in part,
may also be made in the form of unrestricted Mature Shares, based on the Fair
Market Value of the Mature Shares on the date the Option is exercised; provided,
however, that, in the case of an ISO the right to

-2-

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

 

    make a payment in such Mature Shares may be authorized only at the time the
Option is granted.

SECTION 3
STOCK APPRECIATION RIGHTS
     3.1. Types and Nature of Stock Appreciation Rights. Stock Appreciation
Rights may be “Tandem SARs,” which are granted in conjunction with an Option, or
“Free-Standing SARs,” which are not granted in conjunction with an Option. Upon
the exercise of a Stock Appreciation Right, the Participant shall be entitled to
receive an amount equal to the product of (i) the excess of the Fair Market
Value of one share of Stock over the exercise price of the applicable Stock
Appreciation Right, multiplied by (ii) the number of shares of Stock in respect
of which the Stock Appreciation Right has been exercised. Such amount shall be
paid in cash, Stock, or a combination thereof (with the amount of such cash
being determined based upon the Fair Market Value of the Stock on the date of
exercise). As determined by the Board, the applicable Award Certificate shall
specify whether such payment is to be made in cash or Stock or both, or shall
reserve to the Board or the Participant the right to make that determination
prior to or upon the exercise of the Stock Appreciation Right.
     3.2. Tandem SARs. A Tandem SAR may be granted on the grant date of the
related Option or, in the case of a related NQO, at any time after the grant
date thereof while the related NQO remains outstanding. A Tandem SAR shall be
exercisable only at such time or times and to the extent that the related Option
is exercisable in accordance with the provisions of Section 2, and shall at all
times have the same exercise price as the related Option. A Tandem SAR shall
terminate or be forfeited upon the exercise or forfeiture of the related Option,
and the related Option shall terminate or be forfeited upon the exercise or
forfeiture of the Tandem SAR.
     3.3. Exercise Price. The “Exercise Price” per share of Stock subject to a
Free-Standing SAR shall be determined by the Board and set forth in the
applicable Award Certificate, and shall not be less than the Fair Market Value
of a share of Stock on the applicable grant date. In no event may any
Free-Standing SAR granted under this Plan be amended, other than pursuant to
Section 4.2(e), to decrease the exercise price thereof, be cancelled in
conjunction with the grant of any new Option or Free-Standing SAR with a lower
exercise price, or otherwise be subject to any action that would be treated, for
accounting purposes, as a “repricing” of such Free-Standing SAR, unless such
amendment, cancellation or action is approved by the Company’s stockholders.
     3.4. Term. Unless otherwise provided by the Board at the time of grant or
thereafter, the Term of each Free-Standing SAR shall end on the earliest of
(1) the date on which such Free-Standing SAR has been exercised in full, (2) the
date on which the Participant experiences a Termination for Cause or a voluntary
Termination, (3) the one-year anniversary of the date on which the Participant
experiences a Termination due to death or Disability, (4) the three-year
anniversary of the date on which the Participant experiences a Termination due
to such person’s Retirement, and (5) the 90th day after the Participant
experiences a Termination for any other reason; provided, that in no event may
the Term exceed ten (10) years from the date of grant of the Free-Standing SAR.
Except as otherwise determined by the Board at the time of grant, upon

-3-

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

 

the occurrence of a Termination of a Participant for any reason, the Term of all
outstanding Free-Standing SARs held by the Participant that are unvested as of
the date of such Termination shall thereupon end and such unvested Free-Standing
SARs shall be forfeited immediately; provided, however, that the Board may, in
its sole discretion, accelerate the vesting of any Stock Appreciation Right
and/or extend the exercise period of any Stock Appreciation Right (but not
beyond the ten-year anniversary of the grant date).
     3.5. Vesting and Exercise. Except as otherwise provided herein,
Free-Standing SARs shall vest and be exercisable at such time or times and
subject to such terms and conditions as shall be determined by the Board and set
forth in the applicable Award Certificate.
SECTION 4
OPERATION AND ADMINISTRATION
     4.1. Effective Date. Subject to the approval of the stockholders of the
Company at the Company’s 2005 annual meeting of its stockholders, the Plan shall
be effective as of May 23, 2005 (the “Effective Date”); provided, however, that
to the extent that Options or Stock Appreciation Rights are granted under the
Plan prior to its approval by stockholders, the Options and Stock Appreciation
Rights shall be contingent on approval of the Plan by the stockholders of the
Company at such annual meeting. The Plan shall be unlimited in duration and, in
the event of Plan termination, shall remain in effect as long as any Options and
Stock Appreciation Rights under it are outstanding.
     4.2. Shares Subject to Plan. The shares of Stock for which Options and
Stock Appreciation Rights may be granted under the Plan shall be subject to the
following:

(a)   The shares of Stock with respect to which Options and Stock Appreciation
Rights may be granted under the Plan shall be shares currently authorized but
unissued or currently held or subsequently acquired by the Company as treasury
shares, including shares purchased in the open market or in private
transactions.

(b)   Subject to the following provisions of this Section 4.2, the maximum
number of shares of Stock that may be delivered to Participants and their
beneficiaries under the Plan shall be 1,500,000 shares of Stock.

(c)   To the extent any shares of Stock covered by an Option are not delivered
to a Participant or beneficiary because the Option is forfeited or canceled,
such shares shall not be deemed to have been delivered for purposes of
determining the maximum number of shares of Stock available for delivery under
the Plan.

(d)   Subject to Section 4.2(e), the maximum number of shares that may be
covered by Options and/or Stock Appreciation Rights granted to any one
individual during any one calendar year period shall be 200,000 shares.

(e)   In the event of a corporate transaction involving the Company (including,
without limitation, any stock dividend, stock split, extraordinary cash
dividend, recapitalization, reorganization, merger, consolidation, split-up,
spin-off, combination or exchange of

-4-

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

 

    shares), the Board shall make adjustments to preserve the benefits or
potential benefits of the Plan and outstanding Options and/or Stock Appreciation
Rights. Action by the Board may include: (i) adjustment of the number and kind
of shares which may be delivered under the Plan; (ii) adjustment of the number
and kind of shares referred to in Sections 4.2(b) and (d); (iii) adjustment of
the number and kind of shares subject to outstanding Options and Stock
Appreciation Rights; (iv) adjustment of the Exercise Price of outstanding
Options and Stock Appreciation Rights; (v) settlement in cash or Stock in an
amount equal to the excess of the value of the Stock subject to such Options and
Stock Appreciation Rights over the aggregate Exercise Price (as determined by
the Board) of such Options and Stock Appreciation Rights; and (vi) any other
adjustments that the Board determines to be equitable. The Board shall make all
such adjustments, and its determination as to what adjustments shall be made,
and the extent thereof, shall be final.

     4.3. General Restrictions. Delivery of shares of Stock or other amounts
under the Plan shall be subject to the following:

(a)   Notwithstanding any other provision of the Plan, the Company shall have no
liability to deliver any shares of Stock under the Plan or make any other
distribution of benefits under the Plan unless such delivery or distribution
would comply with all applicable laws (including, without limitation, the
requirements of the Securities Act of 1933 and Code Section 409A), and the
applicable requirements of any securities exchange or similar entity.

(b)   To the extent that the Plan provides for issuance of stock certificates to
reflect the issuance of shares of Stock, the issuance may be effected on a
non-certificated basis, to the extent not prohibited by applicable law or the
applicable rules of any stock exchange.

     4.4. Tax Withholding. All distributions under the Plan are subject to
withholding of all applicable taxes, and the delivery of any shares or other
benefits under the Plan shall be conditioned on satisfaction of the applicable
withholding obligations. The Board, in its discretion, and subject to such
requirements as the Board may impose prior to the occurrence of such
withholding, may permit such withholding obligations to be satisfied through
cash payment by the Participant, through the surrender of shares of Stock which
the Participant already owns, or through the surrender of shares of Stock to
which the Participant is otherwise entitled under the Plan; provided that
surrender of shares may be used only to satisfy the minimum withholding required
by law.
     4.5. Grant and Use of Options. In the discretion of the Board, more than
one Option and/or Stock Appreciation Right may be granted to a Participant.
Options and Stock Appreciation Rights may be granted as alternatives to or
replacements of Options and Stock Appreciation Rights granted or outstanding
under the Plan, or any other plan or arrangement of the Company or a Subsidiary
(including a plan or arrangement of a business or entity, all or a portion of
which is acquired by the Company or a Subsidiary). Subject to the overall
limitation on the number of shares of Stock that may be delivered under the
Plan, the Board may use available shares of Stock as the form of payment for
compensation, grants or rights earned or due under any other compensation plans
or arrangements of the Company or a Subsidiary, including the plans and
arrangements of the Company or a Subsidiary assumed in business combinations.

-5-

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

 

Notwithstanding the foregoing, the assumption by the Company of options in
connection with the acquisition of a business or other entity and the conversion
of such options into options to acquire Stock shall not be treated as a new
grant of Options under the Plan unless specifically so provided by the Board.
     4.6. Settlement of Options. Subject to the provisions of Section 4.7, the
Board may from time to time establish procedures pursuant to which a Participant
may elect to defer, until a time or times later than the exercise of an Option
or Stock Appreciation Right, receipt of all or a portion of the shares of Stock
subject to such Option or Stock Appreciation Right and/or to receive cash at
such later time or times in lieu of such deferred shares, all on such terms and
conditions as the Board shall determine. If any such deferrals are permitted,
then a Participant who elects such deferral shall not have any rights as a
stockholder with respect to such deferred shares unless and until shares are
actually delivered to the Participant with respect thereto, except to the extent
otherwise determined by the Board.
     4.7. Code Section 409A.

(a)   It is the intention of the Company that no grant, exercise or settlement
of Options or Stock Appreciation Rights (including Tandem SARs) shall constitute
or give rise to “deferred compensation” subject to tax under Code
Section 409A(a)(1), unless and to the extent that the Board specifically
determines otherwise as provided below, and the Plan and the terms and
conditions of all grants of Options and Stock Appreciation Rights shall be
established and interpreted accordingly.

(b)   The terms and conditions governing any grants of Options and Stock
Appreciation Rights that the Board determines will be subject to Code
Section 409A, including any rules for elective or mandatory deferral of the
delivery of cash pursuant thereto, shall be set forth in writing, and shall
comply in all respects with Code Section 409A.

     4.8. Other Plans. Amounts payable under this Plan shall not be taken into
account as compensation for purposes of any other employee benefit plan or
program of the Company or any of its Subsidiaries, except to the extent
otherwise provided by such plans or programs, or by an agreement between the
affected Participant and the Company.
     4.9. Heirs and Successors. The terms of the Plan shall be binding upon, and
inure to the benefit of, the Company and its successors and assigns, and upon
any person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company’s assets and business.
     4.10. Transferability. Options and Stock Appreciation Rights granted under
the Plan are not transferable except (i) as designated by the Participant by
will or by the laws of descent and distribution or (ii) in the case of a
Free-Standing SAR of NQO and any associated Tandem SAR, as otherwise expressly
permitted by the Board including, if so permitted, pursuant to a transfer to
such Participant’s immediate family, whether directly or indirectly or by means
of a trust or partnership or otherwise. If any rights exercisable by a
Participant or benefits deliverable to a Participant under any Award Certificate
under the Plan have not been exercised or delivered, respectively, at the time
of the Participant’s death, such rights shall be exercisable

-6-

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

 

by the Designated Beneficiary, and such benefits shall be delivered to the
Designated Beneficiary, in accordance with the provisions of the applicable
terms of the Award Certificate and the Plan. The “Designated Beneficiary” shall
be the beneficiary or beneficiaries designated by the Participant to receive
benefits under the Company’s group term life insurance plan or such other person
or persons as the Participant may designate by notice to the Company. If a
deceased Participant fails to have designated a beneficiary, or if the
Designated Beneficiary does not survive the Participant, any rights that would
have been exercisable by the Participant and any benefits distributable to the
Participant shall be exercised by or distributed to the legal representative of
the estate of the Participant. If a deceased Participant designates a
beneficiary and the Designated Beneficiary survives the Participant but dies
before the Designated Beneficiary’s exercise of all rights under the Award
Certificate or before the complete distribution of benefits to the Designated
Beneficiary under the Award Certificate, then any rights that would have been
exercisable by the Designated Beneficiary shall be exercised by the legal
representative of the estate of the Designated Beneficiary, and any benefits
distributable to the Designated Beneficiary shall be distributed to the legal
representative of the estate of the Designated Beneficiary. All Options and
Stock Appreciation Rights shall be exercisable, subject to the terms of this
Plan, only by the Participant or any person to whom such Option or Stock
Appreciation Right is transferred pursuant to this Section 4.10, it being
understood that the term Participant shall include such transferee for purposes
of the exercise provisions contained herein.
     4.11. Notices. Any written notices provided for in the Plan or under any
Award Certificate shall be in writing and shall be deemed sufficiently given if
either hand delivered or if sent by confirmed fax or overnight courier, or by
postage paid first class mail. Notice and communications shall be effective when
actually received by the addressee. Notices shall be directed, if to the
Participant, at the Participant’s address indicated in the Award Certificate, or
if to the Company, at the Company’s principal executive office to the attention
of the Company’s Corporate Secretary.
     4.12. Action by Company. Any action required or permitted to be taken by
the Company shall be by resolution of the Board of Directors, or by action of
one or more members of the Board (including a committee of the Board) who are
duly authorized to act for the Board, or by a duly authorized officer of the
Company.
     4.13. Limitation of Implied Rights.

(a)   Neither a Participant nor any other person shall, by reason of
participation in the Plan, acquire any right in or title to any assets, funds or
property of the Company whatsoever, including, without limitation, any specific
funds, assets, or other property which the Company, in its sole discretion, may
set aside in anticipation of a liability under the Plan. A Participant shall
have only a contractual right to the amounts, if any, payable under the Plan,
unsecured by any assets of the Company, and nothing contained in the Plan shall
constitute a guarantee that the assets of the Company shall be sufficient to pay
any benefits to any person.

(b)   The Plan does not constitute a contract of employment, and selection as a
Participant will not give any Participant the right to be retained in the employ
of, or as a director or

-7-

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

 

    consultant to, the Company or any Subsidiary, nor any right or claim to any
benefit under the Plan, unless such right or claim has specifically accrued
under the terms of the Plan.

     4.14. Gender and Number. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
     4.15. Laws Applicable to Construction. The interpretation, performance and
enforcement of this Plan and all Award Certificates shall be governed by the
laws of the State of Delaware without reference to principles of conflict of
laws, as applied to contracts executed in and performed wholly within the State
of Delaware.
     4.16. Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
SECTION 5
BOARD OF DIRECTORS
     5.1. Administration. The authority to control and manage the operation and
administration of the Plan shall be vested in the Board in accordance with this
Section 5; provided, however, that with respect to any Participant under this
Plan who (i) is at such time a participant in the Company’s Incentive
Compensation Plan for Executive Officers, as it may be amended from time to time
(the “Incentive Compensation Plan”), or (ii) is, with respect to the Company, a
“covered employee” within the meaning of Section 1.162-27(c)(2) of the
Regulations under the Code, then the authority to control and manage the
operation and administration of the Plan with respect to such Participant shall
be vested in the Committee (as such term is defined in the Incentive
Compensation Plan) (the “Incentive Compensation Committee”), and otherwise in
accordance with this Section 5 and, notwithstanding anything in this Plan to the
contrary, with respect to any such Participant, any reference in this Plan to
the “Board” (except in connection with the right of the Board to amend or
terminate the Plan pursuant to Section 6) shall be deemed to refer to the
Incentive Compensation Committee.
     5.2. Powers of Board. The Board’s administration of the Plan shall be
subject to the following:

(a)   Subject to the provisions of the Plan, the Board will have the authority
and discretion to select from among the Eligible Grantees those persons who
shall receive Options and/or Stock Appreciation Rights, to determine the grant
date of, the number of shares subject to and the Exercise Price of those Options
and Stock Appreciation Rights, to establish all other terms and conditions of
such Options, and (subject to the restrictions imposed by Section 6) to cancel
or suspend Options and Stock Appreciation Rights.

(b)   The Board will have the authority and discretion to interpret the Plan, to
establish, amend, and rescind any rules and regulations relating to the Plan,
and to make all other determinations that may be necessary or advisable for the
administration of the Plan.

-8-

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

 

(c)   Any interpretation of the Plan by the Board and any decision made by it
under the Plan is final and binding on all persons.   (d)   In controlling and
managing the operation and administration of the Plan, the Board shall take
action in a manner that conforms to the articles and by-laws of the Company, and
applicable state corporate law.

     5.3. Delegation by Board. Except to the extent prohibited by applicable law
or the applicable rules of a stock exchange, the Board may allocate all or any
portion of its responsibilities and powers to any one or more of its members and
may delegate all or any part of its responsibilities and powers to any person or
persons selected by it. Any such allocation or delegation may be revoked by the
Board at any time.
     5.4. Information to be Furnished to Board. The Company and Subsidiaries
shall furnish the Board with such data and information as it determines may be
required for it to discharge its duties. The records of the Company and
Subsidiaries as to an employee’s or Participant’s employment, engagement,
Termination, leave of absence, reemployment and compensation shall be conclusive
on all persons unless determined to be incorrect. Participants and other persons
eligible for benefits under the Plan must furnish the Board such evidence, data
or information as the Board considers desirable to carry out the terms of the
Plan.
SECTION 6
AMENDMENT AND TERMINATION
     The Board may, at any time, amend or terminate the Plan; provided that no
amendment or termination may, in the absence of written consent to the change by
the affected Participant (or, if the Participant is not then living, the
affected beneficiary), adversely affect the rights of any Participant or
beneficiary under any Option or Stock Appreciation Right granted under the Plan
prior to the date such amendment is adopted by the Board; and further provided
that adjustments pursuant to Section 4.2(e) shall not be subject to the
foregoing limitations of this Section 6.
SECTION 7
DEFINED TERMS
     In addition to the other definitions contained herein, the following
definitions shall apply:

(a)   Award Certificate. The term “Award Certificate” shall mean a written
Option certificate setting forth the terms and conditions of an Option, in the
form the Board may from time to time prescribe or a written Stock Appreciation
Right certificate setting forth the terms and conditions of a Stock Appreciation
Right, in the form the Board may from time to time prescribe.   (b)   Board. The
term “Board” means the Board of Directors of the Company; provided, however,
that with respect to any Participant under this Plan who is also at such time a

-9-

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

 

    participant in the Incentive Compensation Plan, any reference in this Plan
to the “Board” (except in connection with the right of the Board to amend or
terminate the Plan pursuant to Section 6) shall be deemed to refer to the
Incentive Compensation Committee, in accordance with Section 5.1.

(c)   Cause: The term “Cause” shall have the meaning set forth in the employment
or engagement agreement between a Participant and the Company or any Subsidiary
thereof, if such an agreement exists and contains a definition of Cause;
otherwise Cause shall mean (1) conviction of the Participant for committing a
felony under Federal law or the law of the state in which such action occurred,
(2) dishonesty in the course of fulfilling a Participant’s employment,
engagement or directorial duties, (3) willful and deliberate failure on the part
of a Participant to perform the Participant’s employment, engagement or
directorial duties in any material respect or (4) such other events as shall be
determined in good faith by the Board. The Board shall, unless otherwise
provided in an Award Certificate or employment agreement with the Participant,
have the sole discretion to determine whether Cause exists, and its
determination shall be final.

(d)   Code. The term “Code” means the Internal Revenue Code of 1986, as amended,
the Treasury Regulations thereunder and other relevant interpretive guidance
issued by the Internal Revenue Service or the Treasury Department. Reference to
any specific section of the Code shall be deemed to include such regulations and
guidance, as well as any successor provision of the Code.   (e)   Company. The
term “Company” shall have the meaning set forth in Section 1.1.

(f)   Designated Beneficiary. The term “Designated Beneficiary” shall have the
meaning set forth in Section 4.10.

(g)   Disability. The term “Disability” shall mean, unless otherwise provided by
the Board, (1) “Disability” as defined in any individual Award Certificate to
which the Participant is a party, or (2) if there is no such Award Certificate
or it does not define “Disability,” permanent and total disability as determined
under the Company’s long-term disability plan applicable to the Participant.

(h)   Effective Date. The term “Effective Date” shall have the meaning set forth
in Section 4.1.

(i)   Eligible Grantee. The term “Eligible Grantee” shall mean any individual
who is employed on a full-time or part-time basis by, or who serves as a
consultant to, the Company or a Subsidiary and any non-employee director of the
Company. An Option or Stock Appreciation Right may be granted to an individual
in connection with such individual’s hiring or engagement prior to the date the
individual first performs services for the Company or the Subsidiaries, provided
that the individual will be an Eligible Grantee upon his hiring or engagement,
and further provided that such Options and/or Stock Appreciation Rights shall
not become vested prior to the date the individual first performs such services.

-10-

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

 

(j)   Exercise Price. The term “Exercise Price” shall have the meaning set forth
in Section 2.3 (in the case of any Option or Tandem SAR) and Section 3.3 (in the
case of any Free-Standing SAR).

(k)   Fair Market Value. The “Fair Market Value” of a share of Stock shall be,
as of any given date, the mean between the highest and lowest reported sales
prices on the immediately preceding date (or, if there are no reported sales on
such immediately preceding date, on the last date prior to such date on which
there were sales) of the Stock on the New York Stock Exchange Composite Tape or,
if not listed on such exchange, on any other national securities exchange on
which the Stock is listed or on NASDAQ. If there is no regular public trading
market for such Stock, the Fair Market Value of the Stock shall be determined by
the Board in good faith.   (l)   ISO. The term “ISO” shall have the meaning set
forth in Section 2.2.

(m)   Mature Shares. The term “Mature Shares” shall mean shares of Stock that
have been owned by the Participant in question for at least six months.   (n)  
NQO. The term “NQO” shall have the meaning set forth in Section 2.2.   (o)  
Option. The term “Option” shall have the meaning set forth in Section 2.2.   (p)
  Plan: The term “Plan” shall have the meaning set forth in Section 1.1.   (q)  
Retirement: The term “Retirement” shall mean retirement from active employment
with the Company pursuant to any retirement plan or program of the Company or
any Subsidiary in which the Participant participates. A Termination by a
consultant or non-employee director shall in no event be considered a
Retirement.   (r)   Term: The term “Term” shall mean the period beginning on the
date of grant of an Option or Stock Appreciation Right and ending on the date
the Option or Stock Appreciation Right expires pursuant to the Plan and the
relevant Award Certificate.   (s)   Stock. The term “Stock” shall mean shares of
common stock of the Company.   (t)   Subsidiary. The term “Subsidiary” means any
business or entity in which at any relevant time the Company holds at least a
50% equity (voting or non-voting) interest.   (u)   Termination. A Participant
shall be considered to have experienced a Termination if he or she ceases, for
any reason, to be an employee, consultant or non-employee director of the
Company or any of its Subsidiaries, including, without limitation, as a result
of the fact that the entity by which he or she is employed or engaged or of
which he or she is a director has ceased to be affiliated with the Company.

-11-