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Exhibit 10.3
SMITHFIELD FOODS, INC.
AMENDED AND RESTATED
2008 INCENTIVE COMPENSATION PLAN
 
1.  Purpose. The purpose of this Smithfield Foods, Inc. 2008 Incentive
Compensation Plan (the “Plan”) is to further the long-term stability and
financial success of Smithfield Foods, Inc. and our related companies by
attracting and retaining employees and other service providers through the use
of cash and stock incentives. We believe that ownership of our common stock and
the use of cash incentives will stimulate the efforts of those service providers
upon whose judgment and interests we are and will be largely dependent for the
successful conduct of our business. We also believe that these awards will
strengthen the desire of our service providers to remain with us and will
further identify their interests with those of our shareholders. We also intend
to use the Plan to grant stock incentives to compensate non-employee members of
our Board of Directors.
 
The Plan replaces and supersedes the Smithfield Foods, Inc. 1998 Stock Incentive
Plan, effective as of July 1, 1998 (the “Prior Plan”) and the Smithfield Foods,
Inc. 2005 Non-Employee Director Stock Incentive Plan (the “Director Plan”). Upon
approval of the Plan by our shareholders, no additional awards shall be made
under the Prior Plan or the Director Plan, although outstanding awards
previously made under the Prior Plan or the Director Plan will continue to be
governed by the terms and conditions of the Prior Plan or the Director Plan.
Shares that are subject to outstanding awards under the Prior Plan (but not the
Director Plan) that expire, are forfeited, or otherwise terminate unexercised
may be subjected to new awards under the Plan as provided in Section 4.
 
2.  Definitions. As used in the Plan, the following terms have the meanings
indicated:
 
(a) “Act” means the Securities Exchange Act of 1934, as amended.
 
(b) “Affected Corporation” means, with respect to a Participant, (i) the
corporation for whom the Participant is performing services at the time of a
Qualifying Change in Control event, (ii) the corporation that is liable for the
payment of the deferred compensation (or all corporations liable for the payment
if more than one corporation is liable), within the meaning of Treasury
Regulations section 1.409A-3(i)(5)(ii)(2) of the Treasury Regulations; or
(iii) a corporation owning more than 50 percent of the total fair market value
and total voting power of a corporation described in subsections (i) or
(ii) above, or any corporation in a chain of corporations in which each
corporation owns more than 50 percent of the total fair market value and total
voting power of another corporation in the chain, ending in a corporation
described in subsections (i) or (ii) above.
 
(c) “Applicable Withholding Taxes” means the aggregate amount of federal, state
and local income and employment taxes that an Employer is required to withhold
in connection with any Performance Grant or award of Performance Shares, any
lapse of restrictions on Restricted Stock, any compensatory dividends paid on
Restricted Stock, any vesting of Restricted Stock Units or Performance Share
Units, or any exercise of a Nonstatutory Stock Option or Stock Appreciation
Right.
 
(d) “Award” means any Incentive Award or Director Award.
 
(e) “Board” means the board of directors of the Company; provided that, for all
purposes relating to Director Awards under the Plan, the Board shall refer
solely to the non-employee members of the board of directors of the Company (or
any committee appointed by the non-employee members of the board of directors of
the Company and composed entirely thereof).
 
(f) “Change of Control” means, unless otherwise provided in the Grant Agreement
with respect to a particular Award, the occurrence of any of the following
events:
 
(i) The acquisition, other than from the Company, by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Act) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Act) of 20% or more of either the then outstanding shares of Company Stock of or
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors, but excluding
for this purpose, any such acquisition by the Company or any of its
subsidiaries, or any employee benefit plan (or related trust) of the Company or
its subsidiaries, or any corporation with respect to which, following such
acquisition, more than 50% of, respectively, the then outstanding shares of
Company Stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
the individuals and entities who were the beneficial owners, respectively, of
the Company Stock and voting securities of the Company immediately prior to such
acquisition in substantially the same proportion as their ownership, immediately
prior to such acquisition, of the then outstanding shares of Company Stock or
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors, as the case may
be; or

 
 

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(ii) Individuals who, as of the date hereof, constitute the Board (as of the
date hereof the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board, provided that any individual becoming a director
subsequent to the date hereof 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 shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of the Company (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Securities Exchange Act of 1934); or
 
(iii) Consummation of a reorganization, merger or consolidation, in each case,
with respect to which the individuals and entities who were the respective
beneficial owners of the Company Stock and voting securities of the Company
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of, respectively, the then outstanding
shares of the common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such reorganization, merger
or consolidation, or a complete liquidation or dissolution of the Company or of
its sale or other disposition of all or substantially all of the assets of the
Company, provided that upon such consummation, any Change in Control provisions
in an Award shall be treated as in effect as of the date of approval by the
shareholders of the Company of the reorganization, merger, or consolidation.
 
(g) “Code” means the Internal Revenue Code of 1986, as amended.
 
(h) “Committee” means the Compensation Committee of the Board or a subcommittee
of the Compensation Committee, consisting of not less than two directors of the
Company, unless the Board shall appoint another committee (or subcommittee) to
administer the Plan; provided that, if any member of the Compensation Committee
does not qualify as (i) an outside director for purposes of Code section 162(m),
(ii) a non-employee director for purposes of Rule 16b-3, and (iii) an
independent director for purposes of the rules of the exchange on which the
Company Stock is traded, the remaining members of the committee (but not less
than two members) shall be constituted as a subcommittee to act as the Committee
for purposes of the Plan.
 
(i) “Company” means Smithfield Foods, Inc., a Delaware corporation.
 
(j) “Company Stock” means the common stock of the Company. In the event of a
change in the capital structure of the Company (as provided in Section 16), the
shares resulting from the change shall be deemed to be Company Stock within the
meaning of the Plan. Shares of Company Stock may be issued under this Plan
without cash consideration.
 
(k) “Consultant” means a Service Provider who is not an employee, officer or
director of the Company.

 
 

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(l) “Date of Grant” means (i) with respect to a Non-Option Award, the date on
which the Committee (or, with respect to a Director Award, the Board) grants the
award; (ii) with respect to a Nonstatutory Option or Stock Appreciation Right,
the date on which the Committee (or, with respect to a Director Award, the
Board) completes the corporate action necessary to create a legally binding
right constituting the Nonstatutory Stock Option or Stock Appreciation Right; or
(iii) with respect to an Incentive Stock Option, the date on which the Committee
completes the corporate action constituting an offer of stock for sale to a
Participant under the terms and conditions of the Incentive Stock Option. With
respect to any Award, the Committee (and, with respect to any Director Award,
the Board) may specify a future date on which the grant is to be granted or
become effective.
 
(m) “Deferred Unit” means a vested right to receive Company Stock or cash
granted under Section 12(c).
 
(n) “Director Award” means any Nonstatutory Option, Stock Appreciation Right,
share of Restricted Stock, Vested Share, Restricted Stock Unit, Performance
Share Unit or Deferred Unit awarded to an Non-Employee Director under the Plan.
 
(o) “Disability” means, as to an Incentive Stock Option, a Disability within the
meaning of Code section 22(e)(3). As to all other Awards, Disability (or
variations thereof) means, unless otherwise provided in the Grant Agreement with
respect to the award, a Disability within the meaning of Code section
409A(a)(2)(C) and Treasury Regulations section 1.409A-3(i)(4) (or any successor
provision). The Committee (or, with respect to a Director Award, the Board)
shall determine whether a Disability exists and the determination shall be
conclusive.
 
(p) “Effective Date” means the date on which the Plan is approved by
shareholders of the Company.
 
(q) “Employee” means a Service Provider who is a common law-employee of a
Service Recipient.
 
(r) “Employer” means, with respect to an Employee, the Service Recipient that
employs the Employee.
 
(s) “Fair Market Value” means the closing price per share of Company Stock on
the exchange on which the Company Stock has the highest trading volume on the
Date of Grant or any other date for which the value of Company Stock must be
determined under the Plan, or, if the determination date is not a trading day,
on the most recent trading day immediately preceding the determination date.
 
(t) “Grant Agreement” means the written or electronic agreement between the
Company and a Participant containing the terms and conditions with respect to an
Award.
 
(u) “Incentive Award” means any Performance Grant, Performance Share, Option,
Stock Appreciation Right, share of Restricted Stock, Restricted Stock Unit or
Performance Share Unit awarded to a Service Provider under the Plan.
 
(v) “Incentive Stock Option” means an Option intended to meet the requirements
of, and qualify for favorable federal income tax treatment under, Code section
422.
 
(w) “Non-Employee Director” means a member of the Board who is not an Employee
and who meets any other qualifications that may be established by the Board to
be treated as a Non-Employee Director under the Plan.
 
(x) “Non-Option Award” means an Award other than an Option or Stock Appreciation
Right.
 
(y) “Nonstatutory Stock Option” means an Option that does not meet the
requirements of Code section 422, or, even if meeting the requirements of Code
section 422, is not intended to be an Incentive Stock Option and is so
designated.

 
 

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(z) “Option” means a right to purchase Company Stock granted under the Plan, at
a price determined in accordance with the Plan granted under Section 10.
 
(aa) “Participant” means any Service Provider or Non-Employee Director who
receives an Award under the Plan.
 
(bb) “Performance Criteria” means the performance of the Company, any Related
Company, any subsidiary, division, or business unit thereof, or any individual
using one or more of the following measures, either on an operating or GAAP
basis where applicable, including or excluding nonrecurring or extraordinary
items where applicable, and including measuring the performance of any of the
following relative to a defined peer group of companies or an index: market
value of the Company’s Common Stock; pre-tax profits; unit production costs;
asset growth; pre-tax earnings; debt to equity ratio; earnings per share;
revenues; operating income; operating costs and efficiencies; operating cash
flow; net income, before or after taxes; net income before income taxes,
incentive payments and accounting for minority interest; return on total
capital, equity, revenue or assets; market share; unit production and sales
volume; earnings before interest, taxes, depreciation, rent and amortization
expenses; earnings before interest, taxes, depreciation and amortization;
earnings before interest and taxes; any of the prior measures or earnings before
taxes and unusual or nonrecurring items as measured either against the annual
budget or as a ratio to revenue or return on total capital; net earnings; profit
margin; operating margin; operating income; net worth; cash flow; cash flow per
share; total stockholder return; revenues; capital expenditures; improvements in
capital structure; industry indices; expenses and expense ratio management; debt
reduction; profitability of an identifiable business unit or product; or levels
of expense, cost or liability by category, operating unit or any other
delineation.
 
(cc) “Performance Goal” means an objectively determinable performance goal
established by the Committee that relates to one or more Performance Criteria.
 
(dd) “Performance Grant” means a right to receive cash or Company Stock subject
to the attainment of Performance Goals as set forth under Section 6.
 
(ee) “Performance Share” means a right to receive a share of Company Stock
subject to the satisfaction of performance conditions as set forth in Section 7.
 
(ff) “Performance Share Unit” means a right to receive Company Stock or cash
awarded upon the terms and subject to grant and vesting conditions as set forth
in Section 9.
 
(gg) “Plan” means this Smithfield Foods, Inc. 2008 Incentive Compensation Plan,
as it may be amended from time to time.
 
(hh) “Plan Year” means the calendar year.
 
(ii) “Qualifying Change of Control” means the date on which the Affected
Corporation experiences a change in ownership (as described in subsection (i)),
a change in effective control (as described in subsection (ii)), or a change in
the ownership of a substantial portion of its assets (as described in subsection
(iii)):
 
(i) any person or more than one person acting as a group acquires beneficial
ownership of Affected Corporation stock that, together with the Affected
Corporation stock already held by such person or group, represents more than 50
percent of the total fair market value or total voting power of the Affected
Corporation stock; provided, however, that if any one person or more than one
person acting as a group is considered to own more than 50 percent of the total
fair market value or total voting power of the Affected Corporation stock, the
acquisition of additional stock by the same person or persons is not considered
to cause a change in the ownership of the Affected Corporation for purposes of
this subsection (i) or to cause a change in effective control of the Affected
Corporation for purposes of subsection (ii);
 
(ii)(1) any person or more than one person acting as a group acquires (or has
acquired during the twelve-consecutive-month period ending on the date of the
most recent acquisition by such person or persons) beneficial ownership of
Affected Corporation stock possessing 30 percent or more of the total voting
power of the Affected Corporation stock; or (2) a majority of members of the
Board is replaced during a twelve-consecutive-month period by directors whose
appointment or election is not endorsed by a majority of the members of the
Board before the date of the appointment or election; provided, however, that if
any one person or more than one person acting as a group is considered to
effectively control the Affected Corporation for purposes of this subsection
(ii), the acquisition of additional control of the corporation by the same
person or persons is not considered to cause a change in the effective control
for purposes of this subsection (ii) or to cause a change in ownership of the
Affected Corporation for purposes of subsection (i); or

 
 

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(iii) any person or more than one person acting as a group acquires (or has
acquired during the twelve-consecutive-month period ending on the date of the
most recent acquisition by such person or group) assets from the Affected
Corporation having a total gross fair market value equal to 40 percent or more
of the total gross fair market value of all of the assets of the Affected
Corporation immediately prior to such acquisition or acquisitions; provided that
a transfer of assets by an Affected Corporation is not treated as a change in
the ownership of such assets if the assets are transferred to (I) a shareholder
of the Affected Corporation immediately before the asset transfer in exchange
for or with respect to Affected Corporation stock; (II) an entity, 50 percent or
more of the total fair market value or total voting power of which is owned,
directly or indirectly, by the Affected Corporation; (III) a person or more than
one person acting as a group that owns, directly or indirectly, 50 percent or
more of the total fair market value or total voting power of all outstanding
Affected Corporation stock; or (IV) an entity, at least 50 percent of the total
fair market value or total voting power of which is owned, directly or
indirectly, by a person described in (III) above. Except as otherwise provided
in this subsection (iii), a person’s status is determined immediately after the
transfer of the assets. For purposes of this subsection (iii), “gross fair
market value” means the value of the assets of the Affected Corporation, or the
value of the assets being disposed of, determined without regard to any
liabilities associated with such assets.
 
For purposes of this Section 2(hh), the term “group” shall have the meaning
provided in Treasury Regulations sections 1.409A-3(i)(5)(v)(B), (vi)(D) or
(vii)(C), as applicable. The term “beneficial ownership” shall have the meaning
provided in Treasury Regulations section 1.409A-3(i)(5)(v)(iii). Notwithstanding
anything in this Section 2(hh) to the contrary, an event which does not
constitute a change in the ownership, a change in the effective control, or a
change in the ownership of a substantial portion of the assets of the Affected
Corporation, each as defined in Treasury Regulations section 1.409A-3(i)(5),
shall not constitute a Qualifying Change of Control for purposes of this Plan.
 
(jj) “Related Company” means, (i) for all purposes relating to an Incentive
Stock Option awarded or to be awarded under the Plan, any “parent corporation”
with respect to the Company within the meaning of Code section 424(e) or any
“subsidiary corporation” with respect to the Company within the meaning of Code
section 424(f); (ii) for purposes of determining eligibility to receive a
Nonstatutory Stock Option or Stock Appreciation Right, any corporation or other
entity in a chain of corporations or other entities in which each corporation or
other entity has a controlling interest (within the meaning of Treasury
Regulations section 1.409A-1(b)(5)(iii)(E)(1)) in another corporation or other
entity in the chain, beginning with a corporation or other entity in which the
Company has a controlling interest; (iii) for purposes of determining whether a
Participant has experienced a “separation from service” as defined in Treasury
Regulations section 1.409A-1(h), any corporation, trade or business that would
be required to be treated as a single employer with the Participant’s Service
Recipient under Code sections 414(b) or (c), provided that, in applying Code
sections 1563(a)(1), (2) and (3) for purposes of determining a controlled group
of corporations, or in applying Treasury Regulations section 1.414(c)-2 for
purposes of determining trades or businesses under common control, the phrase
“at least 50%” shall replace the phrase “at least 80%” each time it appears in
those sections; and (iv) for all other purposes under the Plan, each of the
Company’s “subsidiaries or parents” within the meaning of General Instruction
A.1 to Form S-8 under the Securities Act of 1933, as amended.

 
 

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(kk) “Repricing” means, with respect to an Option or Stock Appreciation Right,
any of the following: (i) the lowering of the exercise price after the Date of
Grant; (ii) the taking of any other action that is treated as a repricing under
generally accepted accounting principles; or (iii) the cancellation of the
Option or Stock Appreciation Right at a time when its exercise price (or, with
respect to the Stock Appreciation Right, the Fair Market Value of the Company
Stock covered by the Stock Appreciation Right on the Date of Grant) exceeds the
Fair Market Value of the underlying Company Stock in exchange for any other
Award, unless the cancellation and exchange occurs in connection with a
Corporate Event (as defined in Section 16(b) below).
 
(ll) “Restricted Stock” means Company Stock awarded upon the terms and subject
to restrictions as set forth in Section 8.
 
(mm) “Restricted Stock Unit” means a right to receive Company Stock or cash
awarded upon the terms and subject to vesting conditions as set forth in
Section 9.
 
(nn) “Retirement” means, unless otherwise provided in the Grant Agreement for a
particular Award, a Participant’s termination of employment or other separation
from service on or after age 65.
 
(oo) “Rule 16b-3” means Rule 16b-3 of the Securities and Exchange Commission
promulgated under the Act, as amended from time to time.
 
(pp) “Service Provider” means any employee, director or officer of the Company
or a Related Company, or any advisor, consultant or other natural person
providing bona fide services to the Company, excluding in each case any
Non-Employee Director.
 
(qq) “Service Recipient” means the Company or the Related Company to which a
Participant provides services.
 
(rr) “Stock Appreciation Right” means a right to receive Company Stock or cash
granted under Section 11.
 
(ss) “Tandem Right” means a kind of Stock Appreciation Right granted in
connection with a Nonstatutory Stock Option as described in Section 11.
 
(tt) “Taxable Year” means the fiscal period used by the Company for reporting
taxes on its income under the Code.
 
(uu) “Ten Percent Shareholder” means a person who owns, directly or indirectly,
stock possessing more than ten percent of the total combined voting power of all
classes of stock of the Company or any Related Company. Indirect ownership of
stock shall be determined in accordance with Code section 424(d).
 
(vv) “Treasury Regulations” means Title 26 of the United States Code of Federal
Regulations, as amended from time to time.
 
(ww) “Vested Share” means a share of Company Stock awarded upon the terms set
forth in Section 12(b).
 
3.  General. The following types of Awards may be granted under the Plan:
Performance Grants, Performance Shares, shares of Restricted Stock, Vested
Shares, Restricted Stock Units, Performance Share Units, Deferred Units,
Options, or Stock Appreciation Rights. Options granted under the Plan may be
Incentive Stock Options or Nonstatutory Stock Options.
 
4.  Stock.
 
(a) Reserve. Subject to Section 16 of the Plan, there shall be reserved for
issuance under the Plan an aggregate of ten million (10,000,000) shares of
Company Stock, which shall be authorized but unissued shares plus any remaining
shares authorized for issuance under the Smithfield Foods, Inc. 1998 Stock
Incentive Plan, effective as of July 1, 1998 (the “Prior Plan”) as of the
Effective Date. Any shares subject to an award under the Prior Plan outstanding
as of the Effective Date that expire, are forfeited or otherwise terminate
unexercised shall be added to the shares reserved for issuance under the Plan.

 
 

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(b) Share Use. Shares allocable to Awards or portions thereof granted under the
Plan or to incentive awards granted under the Prior Plan that expire, are
forfeited, or that terminate unexercised may be subjected to a new Award under
the Plan. Any shares of Company Stock tendered or exchanged by a Participant as
full or partial payment to the Company of the exercise price under an Option and
any shares retained or withheld by the Employer in satisfaction of an Employee’s
obligations to pay Applicable Withholding Taxes with respect to any Incentive
Award shall not be available for issuance, subjected to new awards or otherwise
used to increase the share reserve under the Plan. The cash proceeds from Option
exercises shall not be used to repurchase shares on the open market for reuse
under the Plan.
 
(c) Prior Plans. Upon approval of the Plan by shareholders, no additional grants
of incentive awards shall be made under the Prior Plan or the Director Plan.
 
(d) Plan Limits. All of the shares of Company Stock that may be issued under
this Plan may be issued upon the exercise of Options that qualify as Incentive
Stock Options. No more than five million (5,000,000) shares of Company Stock may
be issued under the Plan under Non-Option Awards, provided that any shares that
are issuable under Non-Option Awards that expire, are forfeited, or terminate
unexercised shall not count against this limit. No more than one million
(1,000,000) shares may be allocated to Awards, including the maximum amounts
payable under a Performance Grant, that are granted to any individual
Participant during any single Taxable Year. The amount payable under a
Performance Grant to any Participant for a Taxable Year may not exceed the
greater of two million dollars or three percent of the Company’s net income
before income taxes, incentive payments and accounting for minority interests
for the year for which the Performance Grant is made.
 
5.  Eligibility.
 
(a) Incentive Awards. All present and future Service Providers of the Company or
any Related Company (whether now existing or hereafter created or acquired) who
have contributed or who can be expected to contribute significantly to the
Company or a Related Company shall be eligible to receive Incentive Awards under
the Plan. The Committee shall have the power and complete discretion, as
provided in Section 17, to select eligible Service Providers to receive
Incentive Awards and to determine for each Service Provider the nature of the
award and the terms and conditions of each Incentive Award.
 
(b) Director Awards. All present and future Non-Employee Directors shall be
eligible to receive Director Awards under the Plan. The Board shall have the
power and complete discretion to select eligible Non-Employee Directors to
receive Director Awards and to determine for each Non-Employee Director the
nature of the award and the terms and conditions of each Director Award.
 
(c) No Contract of Employment or Services. The grant of an Award shall not
obligate the Company or any Related Company to pay any Service Provider or
Non-Employee Director any particular amount of remuneration, to continue the
employment or services of the Service Provider or Non-Employee Director after
the grant or to make further grants to the Service Provider or Non-Employee
Director at any time thereafter.
 
(d) Foreign Awards. When granting Awards to Service Providers or Non-Employee
Directors who are not United States residents, the Committee (or with respect to
Director Awards, the Board) shall have complete discretion and authority to
grant such Awards in compliance with all present and future laws of the country
or countries with laws that may apply to the grant of the Award or the issuance
of Company Stock pursuant to the Award. Such authorization shall extend to and
include establishing one or more separate sub-plans which include provisions not
inconsistent with the Plan that comply with statutory or regulatory requirements
imposed by the foreign country or countries in which the Participant resides.

 
 

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6.  Performance Grants.
 
(a) The Committee may make Performance Grants to eligible Service Providers.
Each Performance Grant shall include the Performance Goals for the award, the
Performance Criteria with respect to which such goals are to be measured, the
target and maximum amounts payable under the award, the period over which the
award is to be earned, and any other terms and conditions as are applicable to
the Performance Grant. The terms of a Performance Grant may be set in an annual
or long-term bonus plan or other similar document. In the event of any conflict
between such document and the Plan, the terms of the Plan shall control.
Performance Grants shall be granted and administered in such a way as to qualify
as “performance-based compensation” for purposes of Code section 162(m).
 
(b) The Committee shall establish the Performance Goals for Performance Grants.
The Committee shall determine the extent to which any Performance Criteria shall
be used and weighted in determining Performance Grants. The Committee may vary
the Performance Criteria, Performance Goals, and weightings from Participant to
Participant, Performance Grant to Performance Grant and Plan Year to Plan Year.
The Committee may increase, but not decrease, the minimum and target levels (but
not increase the amount payable) with respect to any Performance Goal after the
start of a Performance Period.
 
(c) The Committee shall establish for each Performance Grant the amount of cash
or Company Stock payable at specified levels of performance, based on the
Performance Goal or Goals with respect to each Performance Criterion. Any
Performance Grant shall be made not later than the earlier of (i) 90 days after
the start of the period for which the Performance Grant relates and (ii) the
completion of 25% of such period. All determinations regarding the achievement
of any Performance Goals will be made by the Committee. The Committee may not
increase during a Plan Year the amount of cash or Company Stock that would
otherwise be payable upon achievement of the Performance Goal or Goals but may
reduce or eliminate the payments unless otherwise provided in a Performance
Grant. The Committee may provide for a Performance Grant to be payable at the
target level (or other level as determined by the Committee in its discretion)
prior to the attainment of a Performance Goal or Goals solely upon the
Participant’s death, Disability, or the occurrence of a Change of Control or
Qualifying Change of Control.
 
(d) The actual payments to a Participant under a Performance Grant will be
calculated by measuring the achievement of the Performance Goals with respect to
the Performance Criteria as established in the Performance Grant. All
calculations of actual payments shall be made by the Committee and the Committee
shall certify in minutes of a meeting or other writing the extent, if any, to
which the Performance Goals have been met.
 
(e) Performance Grants may be paid in cash, Company Stock, or a fixed
combination of Company Stock or cash as provided by the Committee at the time of
grant, or the Committee may reserve the right to determine the manner of payment
at the time the Performance Grant becomes payable. The Committee may provide in
the Grant Agreement that the Participant may make an election to defer the
payment under a Performance Grant subject to such terms as the Committee may
determine in accordance with Code section 409A.
 
(f) A Participant who receives a Performance Grant payable in Company Stock
shall have no rights as a shareholder until the Company Stock is issued pursuant
to the terms of the Performance Grant and all requirements with respect to the
issuance of such shares have been satisfied.
 
(g) A Participant’s interest in a Performance Grant may not be sold, assigned,
transferred, pledged, hypothecated, or otherwise encumbered.
 
(h) Whenever payments under a Performance Grant are to be made in cash to a
Participant who is an Employee, his Employer will withhold therefrom an amount
sufficient to satisfy any Applicable Withholding Taxes. Each Participant who is
an Employee shall agree as a condition of receiving a Performance Grant payable
in Company Stock to pay to his Employer, or make arrangements satisfactory to
his Employer regarding the payment to his Employer of, Applicable Withholding
Taxes. Until the amount has been paid or arrangements satisfactory to the
Employer have been made, no stock certificate shall be issued to the
Participant. Payment to the Employer in satisfaction of Applicable Withholding
Taxes may be in cash. In addition, if the Committee allows or the Grant
Agreement so provides, (A) payment to the Employer in satisfaction of Applicable
Withholding Taxes may be made in shares of Company Stock (valued at their Fair
Market Value as of the date of payment) to which the Participant has good title,
free and clear of all liens and encumbrances; (B) the Participant may elect to
have his Employer retain that number of shares of Company Stock (valued at their
Fair Market Value as of the date of such retention) that would satisfy all or a
specified portion of the Applicable Withholding Taxes; or (C) unless prohibited
by law, the Participant may deliver irrevocable instructions to a broker to
deliver promptly to the Employer, from the sale or loan proceeds with respect to
the sale of Company Stock or a loan secured by Company Stock, the amount
necessary to pay the Applicable Withholding Taxes.

 
 

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7.  Performance Shares.
 
(a) The Committee may grant Performance Shares to eligible Service Providers.
Whenever the Committee grants Performance Shares, notice shall be given to the
Service Provider stating the number of Performance Shares granted and the terms
and conditions to which the grant of Performance Shares is subject. This notice
shall become the Grant Agreement between the Company and the Service Provider
and, at that time, the Service Provider shall become a Participant. Performance
Shares may or may not be intended to qualify as “performance-based compensation”
for purposes of Code section 162(m). If intended to so qualify, the award shall
be governed by the provisions of Section 6(b)-(d).
 
(b) The Committee shall establish the performance goals to which each award of
Performance Shares shall be subject. The performance goals need not be objective
and may be based on any performance conditions selected by the Committee in its
discretion. The performance period with respect to an award may be any length of
time and the performance goals with respect to such award may be established at
any time after the start of such period in the Committee’s discretion. The
Committee may vary the performance and other terms and conditions from
Participant to Participant, grant to grant and Plan Year to Plan Year. The
Committee may increase or decrease the minimum, target or maximum levels with
respect to any performance goal after the start of a performance period in its
discretion.
 
(c) The Committee shall establish for each award the number of shares of Company
Stock payable at specified levels of performance. All determinations regarding
the achievement of any performance goals will be made by the Committee. The
actual number of shares to be paid to a Participant under an award will be
calculated by measuring the achievement of the performance goal(s) with respect
to the performance criteria as established by the Committee. All calculations of
actual payments shall be made by the Committee whose decision shall be final and
binding on all parties.
 
(d) The Committee may reserve the right in a Grant Agreement to settle all or
portion of an award of Performance Shares in cash instead of shares of Company
Stock, with the cash portion to be determined based on the Fair Market Value as
of the date of payment of the shares of Company Stock otherwise payable under
the award, or to allow the Participant to defer payment under the award, subject
to such terms as the Committee may determine in accordance with Code section
409A.
 
(e) A Participant shall have no rights as a shareholder until shares of Company
Stock are issued under the award and all requirements with respect to the
issuance of such shares have been satisfied.
 
(f) A Participant’s interest in an award of Performance Shares may not be sold,
assigned, transferred, pledged, hypothecated, or otherwise encumbered.
 
(g) Each Participant who is an Employee shall agree at the time of receiving an
award of Performance Shares, and as a condition thereof, to pay to the Employer,
or make arrangements satisfactory to the Employer regarding the payment to the
Employer of, Applicable Withholding Taxes. Until the amount has been paid or
arrangements satisfactory to the Employer have been made, no stock certificate
shall be issued to the Participant. Payment to the Employer in satisfaction of
Applicable Withholding Taxes may be in cash. In addition, if the Committee
allows or the Grant Agreement so provides, (A) payment to the Employer in
satisfaction of Applicable Withholding Taxes may be made in shares of Company
Stock (valued at their Fair Market Value as of the date of payment) to which the
Participant has good title, free and clear of all liens and encumbrances;
(B) the Participant may elect to have his Employer retain that number of shares
of Company Stock (valued at their Fair Market Value as of the date of such
retention) that would satisfy all or a specified portion of the Applicable
Withholding Taxes; or (C) unless prohibited by law, the Participant may deliver
irrevocable instructions to a broker to deliver promptly to the Employer, from
the sale or loan proceeds with respect to the sale of Company Stock or a loan
secured by Company Stock, the amount necessary to pay the Applicable Withholding
Taxes.

 
 

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8.  Restricted Stock Awards.
 
(a) The Committee may grant Restricted Stock to eligible Service Providers.
Whenever the Committee deems it appropriate to grant Restricted Stock, notice
shall be given to the Service Provider stating the number of shares of
Restricted Stock granted and the terms and conditions to which the Restricted
Stock is subject. This notice shall become the Grant Agreement between the
Company and the Service Provider and, at that time, the Service Provider shall
become a Participant.
 
(b) The Committee shall establish as to each award of Restricted Stock the terms
and conditions upon which the restrictions set forth in paragraph (c) below
shall lapse. The terms and conditions may include the continued performance of
services or the achievement of performance conditions measured on an individual,
corporate, or other basis, or any combination thereof. Restrictions conditioned
on employment and the passage of time shall not expire less than three years
from the Date of Grant of the Restricted Stock. Restrictions conditioned on the
achievement of Performance Goals or other performance conditions shall not
expire less than one year from the Date of Grant. Notwithstanding the foregoing,
the Committee may, in its discretion and without limitation, provide in the
Grant Agreement that restrictions will expire as a result of the Disability,
death, Retirement or involuntary termination of the Participant or the
occurrence of a Change of Control or Qualifying Change of Control. If the award
is intended to qualify as “performance-based compensation” for purposes of Code
section 162(m), the award shall be governed by the provisions of
Section 6(b)-(d).
 
(c) No shares of Restricted Stock may be sold, assigned, transferred, pledged,
hypothecated, or otherwise encumbered or disposed of until the restrictions on
the shares established by the Committee have lapsed or been removed.
 
(d) Upon the acceptance by a Participant of an award of Restricted Stock, the
Participant shall, subject to the restrictions set forth in paragraph (c) above,
have all the rights of a shareholder with respect to the shares of Restricted
Stock, including, but not limited to, the right to vote the shares of Restricted
Stock and the right to receive all dividends and other distributions paid
thereon. Unless otherwise provided in the Grant Agreement, (i) dividends or
other distributions paid in shares of Company Stock shall be subject to the same
restrictions set forth in paragraph (c) as the shares of Restricted Stock with
respect to which the dividends or other distributions are paid and
(ii) dividends or other distributions paid in cash shall be paid at the same
time and under the same conditions as such dividends or other distributions are
paid to the shareholders of record of Company Stock. Certificates representing
Restricted Stock shall be held by the Company until the restrictions lapse and
upon request, the Participant shall provide the Company with appropriate stock
powers endorsed in blank.
 
(e) Each Participant who is an Employee shall agree at the time his or her
Restricted Stock is granted, and as a condition thereof, to pay to his Employer,
or make arrangements satisfactory to his Employer regarding the payment to his
Employer of, Applicable Withholding Taxes. Until the amount has been paid or
arrangements satisfactory to the Employer have been made, no stock certificate
shall be issued to the Participant. Payment to the Employer in satisfaction of
Applicable Withholding Taxes may be in cash. In addition, if the Committee
allows or the Grant Agreement so provides, (A) payment to the Employer in
satisfaction of Applicable Withholding Taxes may be made in shares of Company
Stock (valued at their Fair Market Value as of the date of payment) to which the
Participant has good title, free and clear of all liens and encumbrances;
(B) the Participant may elect to have his Employer retain that number of shares
of Company Stock (valued at their Fair Market Value as of the date of such
retention) that would satisfy all or a specified portion of the Applicable
Withholding Taxes; or (C) unless prohibited by law, the Participant may deliver
irrevocable instructions to a broker to deliver promptly to the Employer, from
the sale or loan proceeds with respect to the sale of Company Stock or a loan
secured by Company Stock, the amount necessary to pay the Applicable Withholding
Taxes.

 
 

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9.  Performance Share Units and Restricted Stock Units.
 
(a) The Committee may grant Performance Share Units and Restricted Stock Units
to eligible Service Providers. Whenever the Committee deems it appropriate to
grant Performance Share Units or Restricted Stock Units, notice shall be given
to the Service Provider stating the number of Performance Share Units or
Restricted Stock Units granted and the terms and conditions to which the
Performance Share Units or Restricted Stock Units are subject. This notice shall
become the Grant Agreement between the Company and the Service Provider and, at
that time, the Service Provider shall become a Participant.
 
(b) The Committee shall establish as to each award of Performance Share Units
the terms and conditions upon which the Performance Share Units shall be earned,
vest and be paid. The issuance and vesting of Performance Share Units may be
conditioned on the achievement of performance conditions measured on an
individual, corporate, or other basis, or any combination thereof and on the
continued performance of services. The Committee shall establish as to each
award of Restricted Stock Units the terms and conditions upon which the
Restricted Stock Units shall vest and be paid. Vesting may be conditioned on the
continued performance of services or the achievement of performance conditions
measured on an individual, corporate, or other basis, or any combination
thereof. A Restricted Stock Unit the vesting of which is conditioned on
employment and the passage of time shall not vest less than three years from the
Date of Grant of the Restricted Stock Unit. A Performance Share Unit or
Restricted Stock Unit the vesting of which is conditioned on the achievement of
Performance Goals or other performance conditions shall not vest less than one
year from the Date of Grant. Notwithstanding the foregoing; the Committee may,
in its discretion and without limitation, provide in the Grant Agreement that
restrictions will expire as a result of one or more of the Disability, death,
Retirement or involuntary termination of the Participant or the occurrence of a
Change of Control or Qualifying Change of Control. If the award is intended to
qualify as “performance-based compensation” for purposes of Code section 162(m),
the award shall be governed by the provisions of Section 6(b)-(d).
 
(c) Performance Share Units and Restricted Stock Units may be paid in cash,
Company Stock, or a fixed combination of Company Stock or cash as provided in
the Grant Agreement, or the Committee may reserve the right to determine the
manner of payment at the time the Performance Share Units or Restricted Stock
Units become payable. The delivery of Company Stock in payment of Performance
Share Units or Restricted Stock Units may be subject to additional conditions
established in the Grant Agreement.
 
(d) A Participant who receives Performance Share Units or Restricted Stock Units
payable in Company Stock shall have no rights as a shareholder until the Company
Stock is issued pursuant to the terms of the Grant Agreement and all
requirements with respect to the issuance of such shares have been satisfied.
The Committee may, in its discretion, provide that a Participant shall be
entitled to receive dividend equivalents on outstanding Performance Share Units
or Restricted Stock Units. Dividend equivalents may be (i) paid in cash,
(ii) credited to the Participant as additional Performance Share Units or
Restricted Stock Units, or (iii) a fixed combination of cash and additional
Performance Share Units or Restricted Stock Units as provided in the Grant
Agreement, or the Committee may reserve the right to determine the manner of
payment at the time dividends are paid to shareholders of record. Unless
otherwise provided in the Grant Agreement, (i) dividend equivalents with respect
to dividends or other distributions that are paid in shares of Company Stock
shall be credited to the Participant as additional Restricted Stock Units
subject to the same restrictions as the Restricted Stock Units with respect to
which the dividend equivalents are paid, (ii) dividend equivalents with respect
to dividends or other distributions that are paid in cash shall be paid at the
same time and under the same conditions as such dividends or other distributions
are paid to the shareholders of record of Company Stock, and (iii) the same
provisions will apply to outstanding Performance Share Units following the end
of the performance period.  During the performance period, dividend equivalents
with respect to a Performance Share Unit shall be credited to the Participant as
additional Performance Stock Units subject to the same performance conditions as
the Performance Stock Unit with respect to which the dividend equivalents are
paid.

 
 

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(e) A Participant’s interest in Performance Share Units or Restricted Stock
Units may not be sold, assigned, transferred, pledged, hypothecated, or
otherwise encumbered.
 
(f) Whenever payments under Performance Share Units or Restricted Stock Units
are to be made in cash to a Participant who is an Employee, his Employer will
withhold therefrom an amount sufficient to satisfy any Applicable Withholding
Taxes. Each Participant who is an Employee shall agree as a condition of
receiving Performance Share Units or Restricted Stock Units payable in the form
of Company Stock to pay to his Employer, or make arrangements satisfactory to
his Employer regarding the payment to his Employer of, Applicable Withholding
Taxes. Until the amount has been paid or arrangements satisfactory to the
Employer have been made, no stock certificate shall be issued to the
Participant. Payment to the Employer in satisfaction of Applicable Withholding
Taxes may be in cash. In addition, if the Committee allows or the Grant
Agreement so provides, (A) payment to the Employer in satisfaction of Applicable
Withholding Taxes may be made in shares of Company Stock (valued at their Fair
Market Value as of the date of payment) to which the Participant has good title,
free and clear of all liens and encumbrances; (B) the Participant may elect to
have his Employer retain that number of shares of Company Stock (valued at their
Fair Market Value as of the date of such retention) that would satisfy all or a
specified portion of the Applicable Withholding Taxes; or (C) unless prohibited
by law, the Participant may deliver irrevocable instructions to a broker to
deliver promptly to the Employer, from the sale or loan proceeds with respect to
the sale of Company Stock or a loan secured by Company Stock, the amount
necessary to pay the Applicable Withholding Taxes.
 
10.  Stock Options.
 
(a) The Committee may grant Options to eligible Service Providers. Whenever the
Committee grants Options, notice shall be given to the Service Provider stating
the number of shares for which Options are granted, the Option exercise price
per share, whether the Options are Incentive Stock Options or Nonstatutory Stock
Options, the extent, if any, to which associated Stock Appreciation Rights are
granted, and the conditions to which the grant and exercise of the Options are
subject. This notice shall become the Grant Agreement between the Company and
the Service Provider and, at that time, the Service Provider shall become a
Participant.
 
(b) The exercise price of shares of Company Stock covered by an Option shall not
be, and shall never become, less than 100 percent of the Fair Market Value of
the shares on the Date of Grant, except as may be provided in Section 16. If the
Participant is a Ten Percent Shareholder and the Option is intended to qualify
as an Incentive Stock Option, the exercise price shall be not less than 110
percent of the Fair Market Value of such shares on the Date of Grant.
 
(c) Options may be exercised in whole or in part at the times as may be
specified by the Committee in the Participant’s Grant Agreement; provided that
no Option may be exercised after the expiration of ten (10) years from the Date
of Grant. If the Participant is a Ten Percent Shareholder and the Option is
intended to qualify as an Incentive Stock Option, the Option may not be
exercised after the expiration of five (5) years from the Date of Grant.
 
(d) Options shall not be transferable except to the extent specifically provided
in the Grant Agreement in accordance with applicable securities laws. Incentive
Stock Options, by their terms, shall not be transferable except by will or the
laws of descent and distribution and shall be exercisable, during the
Participant’s lifetime, only by the Participant.

 
 

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(e) Options that are intended to qualify as Incentive Stock Options shall be
granted only to Employees.
 
(f) Options that are intended to qualify as Incentive Stock Options shall, by
their terms, not be exercisable after the first to occur of (x) ten years from
the Date of Grant (five years if the Participant to whom the Option has been
granted is a Ten Percent Shareholder), (y) three months following the date of
the Participant’s termination of employment with the Company and all Related
Companies for reasons other than Disability or death, or (z) one year following
the date of the Participant’s termination of employment on account of Disability
or death.
 
(g) Options that are intended to qualify as Incentive Stock Options shall, by
their terms, be exercisable in any calendar year only to the extent that the
aggregate Fair Market Value (determined as of the Date of Grant) of the Company
Stock with respect to which Incentive Stock Options are exercisable for the
first time during the Plan Year does not exceed $100,000 (the “Limitation
Amount”). Incentive Stock Options granted under the Plan and all other plans of
the Company and all Related Companies shall be aggregated for purposes of
determining whether the Limitation Amount has been exceeded. The Committee may
impose any conditions as it deems appropriate on an Incentive Stock Option to
ensure that the foregoing requirement is met. If Incentive Stock Options that
first become exercisable in a Plan Year exceed the Limitation Amount, the excess
Options shall be treated as Nonstatutory Stock Options to the extent permitted
by law.
 
(h) A Participant who purchases shares of Company Stock under an Option shall
have no rights as a shareholder until the Company Stock is issued pursuant to
the terms of the Grant Agreement and all requirements with respect to the
issuance of such shares have been satisfied.
 
(i) Options may be exercised by the Participant giving notice of the exercise to
the Company, stating the number of shares the Participant has elected to
purchase under the Option. The notice shall be effective only if accompanied by
the exercise price in full in cash; provided, however, that if the terms of an
Option or the Committee in its discretion so permits, the Participant (i),
unless prohibited by law, may deliver a properly executed exercise notice
together with irrevocable instructions to a broker to deliver promptly to the
Company, from the sale or loan proceeds with respect to the sale of Company
Stock or a loan secured by Company Stock, the amount necessary to pay the
exercise price and, if required by the terms of the Option or the Committee in
its discretion, Applicable Withholding Taxes, (ii) may deliver shares of Company
Stock for which the holder thereof has good title, free and clear of all liens
and encumbrances (valued at their Fair Market Value on the date of exercise) in
satisfaction of all or any part of the exercise price, or (iii) may cause to be
withheld from the Option shares, shares of Company Stock (valued at their Fair
Market Value on the date of exercise) in satisfaction of all or any part of the
exercise price; or (iv) may use any other methods of payment as the Committee,
at its discretion, deems appropriate. Until the Participant has paid the
exercise price and any Applicable Withholding Taxes, no stock certificate shall
be issued.
 
(j) Each Participant who is an Employee shall agree as a condition of the
exercise of an Option to pay to his Employer, or make arrangements satisfactory
to his Employer regarding the payment to his Employer of, Applicable Withholding
Taxes. Until the amount has been paid or arrangements satisfactory to the
Employer have been made, no stock certificate shall be issued upon the exercise
of an Option. Payment to the Employer in satisfaction of Applicable Withholding
Taxes may be in cash. In addition, if the Committee allows or the Grant
Agreement so provides, (A) payment to the Employer in satisfaction of Applicable
Withholding Taxes may be made in shares of Company Stock (valued at their Fair
Market Value as of the date of payment) to which the Participant has good title,
free and clear of all liens and encumbrances; (B) the Participant may elect to
have his Employer retain that number of shares of Company Stock (valued at their
Fair Market Value as of the date of such retention) that would satisfy all or a
specified portion of the Applicable Withholding Taxes, or (C) unless prohibited
by law, the Participant may deliver irrevocable instructions to a broker to
deliver promptly to the Employer, from the sale or loan proceeds with respect to
the sale of Company Stock or a loan secured by Company Stock, the amount
necessary to pay the Applicable Withholding Taxes.

 
 

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(k) Unless specifically provided in the discretion of the Committee in a writing
that references and supersedes this Section 10(k), (i) no Modification shall be
made in respect to any Option if such Modification would result in the Option
constituting a deferral of compensation, and (ii) no Extension shall be made in
respect to any Option if such Extension would result in the Option having an
additional deferral feature from the Date of Grant, in each case within the
meaning of applicable Treasury Regulations under Code section 409A. Subject to
the remaining part of this subsection (k), (i) a “Modification” means any change
in the terms of the Option (or change in the terms of the Plan or applicable
Grant Agreement) that may provide the holder of the Option with a direct or
indirect reduction in the exercise price of the Option, regardless of whether
the holder in fact benefits from the change in terms; and (ii) an “Extension”
means either (A) the provision to the holder of an additional period of time
within which to exercise the Option beyond the time originally prescribed,
(B) the conversion or exchange of the Option for a legally binding right to
compensation in a future taxable year, (C) the addition of any feature for the
deferral of compensation to the terms of the Option, or (D) any renewal of the
Option that has the effect of (A) through (C) above. Notwithstanding the
preceding sentence, it shall not be a Modification or an Extension,
respectively, to change the terms of an Option in accordance with Section 16 of
the Plan, or in any of the other ways or for any of the other purposes provided
in applicable Treasury Regulations or other generally applicable guidance under
Code section 409A as not resulting in a Modification or Extension for purposes
of that section. In particular, it shall not be an Extension to extend the
exercise period of an Option to a date no later than the earlier of (i) the
latest date upon which the Option could have expired by its original terms under
any circumstances or (ii) the tenth anniversary of the original Date of Grant.
 
11.  Stock Appreciation Rights.
 
(a) The Committee may grant Stock Appreciation Rights to eligible Service
Providers. Whenever the Committee grants Stock Appreciation Rights, notice shall
be given to the Service Provider stating the number of shares with respect to
which Stock Appreciation Rights are granted, the extent, if any, to which the
Stock Appreciation Rights are granted in connection with all or any part of a
Nonstatutory Stock Option (“Tandem Rights”), and the conditions to which the
grant and exercise of the Stock Appreciation Rights are subject. This notice
shall become the Grant Agreement between the Company and the Service Provider
and, at that time, the Service Provider shall become a Participant.
 
(b) Stock Appreciation Rights (other than Tandem Rights) shall entitle the
Participant, upon exercise of all or any part of the Stock Appreciation Rights,
to receive in exchange from the Company an amount equal to the excess of (x) the
Fair Market Value on the date of exercise of the Company Stock covered by the
surrendered Stock Appreciation Right over (y) the Fair Market Value of the
Company Stock on the Date of Grant of the Stock Appreciation Right.
 
(c) Tandem Rights shall entitle the Participant, upon exercise of all or any
part of the Tandem Rights, to surrender to the Company unexercised that portion
of the underlying Nonstatutory Stock Option relating to the same number of
shares of Company Stock as is covered by the Tandem Right (or the portion of the
Tandem Right so exercised) and to receive in exchange from the Company an amount
equal to the excess of (x) the Fair Market Value on the date of exercise of the
Company Stock covered by the surrendered portion of the underlying Nonstatutory
Stock Option over (y) the exercise price of the Company Stock covered by the
surrendered portion of the underlying Nonstatutory Stock Option.
 
(d) Upon the exercise of a Tandem Right and surrender of the related portion of
the underlying Nonstatutory Stock Option, the Nonstatutory Stock Option, to the
extent surrendered, shall not thereafter be exercisable.
 
(e) Subject to any further conditions upon exercise imposed by the Committee, a
Tandem Right shall be granted on the same Date of Grant as the related
Nonstatutory Stock Option, be transferable only to the extent that the related
Nonstatutory Stock Option is transferable, be exercisable only to the extent
that the related Nonstatutory Stock Option is exercisable and shall expire no
later than the date on which the related Nonstatutory Stock Option expires.

 
 

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(f) The Committee may limit the amount that the Participant will be entitled to
receive upon exercise of Stock Appreciation Rights.
 
(g) Stock Appreciation Rights shall not be transferable except to the extent
specifically provided in the Grant Agreement and in accordance with applicable
securities laws.
 
(h) Stock Appreciation Rights may be exercised in whole or in part at the times
as may be specified by the Committee in the Participant’s Grant Agreement;
provided that no Stock Appreciation Right may be exercised after the expiration
of ten (10) years from the Date of Grant.
 
(i) A Stock Appreciation Right may only be exercised at a time when the Fair
Market Value of the Company Stock covered by the Stock Appreciation Right
exceeds the Fair Market Value of the Company Stock on the Date of Grant of the
Stock Appreciation Right (or, in the case of a Tandem Right, only to the extent
it exceeds the exercise price of the Company Stock covered by the underlying
Nonstatutory Stock Option).
 
(j) The manner in which the Company’s obligation arising upon the exercise of a
Stock Appreciation Right shall be paid shall be determined by the Committee and
shall be set forth in the Grant Agreement. The Grant Agreement may provide for
payment in Company Stock or cash, or a fixed combination of Company Stock or
cash, or the Committee may reserve the right to determine the manner of payment
at the time the Stock Appreciation Right is exercised. Shares of Company Stock
issued upon the exercise of a Stock Appreciation Right shall be valued at their
Fair Market Value on the date of exercise.
 
(k) A Participant who acquires shares of Company Stock upon exercise of a Stock
Appreciation Right shall have no rights as a shareholder until the Company Stock
is issued pursuant to the terms of the Grant Agreement and all requirements with
respect to the issuance of such shares have been satisfied.
 
(l) Stock Appreciation Rights may be exercised by the Participant giving notice
of the exercise to the Company, stating the number of Stock Appreciation Rights
the Participant has elected to exercise.
 
(m) Whenever payments upon exercise of Stock Appreciation Rights are to be made
in cash to a Participant who is an Employee, the Employer will withhold
therefrom an amount sufficient to satisfy any Applicable Withholding Taxes. Each
Participant who is an Employee shall agree as a condition of receiving Stock
Appreciation Rights payable in the form of Company Stock to pay to his Employer,
or make arrangements satisfactory to his Employer regarding the payment to his
Employer of, Applicable Withholding Taxes. Until the amount has been paid or
arrangements satisfactory to the Employer have been made, no stock certificate
shall be issued to the Participant. Payment to the Employer in satisfaction of
Applicable Withholding Taxes may be in cash. In addition, if the Committee
allows or the Grant Agreement so provides, (A) payment to the Employer in
satisfaction of Applicable Withholding Taxes may be made in shares of Company
Stock (valued at their Fair Market Value as of the date of payment) to which the
Participant has good title, free and clear of all liens and encumbrances;
(B) the Participant may elect to have his Employer retain that number of shares
of Company Stock (valued at their Fair Market Value as of the date of such
retention) that would satisfy all or a specified portion of the Applicable
Withholding Taxes; or (C) unless prohibited by law, the Participant may deliver
irrevocable instructions to a broker to deliver promptly to the Employer, from
the sale or loan proceeds with respect to the sale of Company Stock or a loan
secured by Company Stock, the amount necessary to pay the Applicable Withholding
Taxes.
 
(n) Unless specifically provided in the discretion of the Committee in a writing
that references and supersedes this Section 11(n), (i) no Modification shall be
made in respect to any Stock Appreciation Right if such Modification would
result in the Stock Appreciation Right constituting a deferral of compensation,
and (ii) no Extension shall be made in respect to any Stock Appreciation Right
if such Extension would result in the Stock Appreciation Right having an
additional deferral feature from the Date of Grant, in each case within the
meaning of applicable Treasury Regulations under Code section 409A. Subject to
the remaining part of this subsection (n), (i) a “Modification” means any change
in the terms of the Stock Appreciation Right (or change in the terms of the Plan
or applicable Grant Agreement) that may provide the holder of the Stock
Appreciation Right with a direct or indirect reduction in the exercise price of
the Stock Appreciation Right, regardless of whether the holder in fact benefits
from the change in terms; and (ii) an “Extension” means either (A) the provision
to the holder of an additional period of time within which to exercise the Stock
Appreciation Right beyond the time originally prescribed, (B) the conversion or
exchange of the Stock Appreciation Right for a legally binding right to
compensation in a future taxable year, (C) the addition of any feature for the
deferral of compensation to the terms of the Stock Appreciation Right, or
(D) any renewal of the Stock Appreciation Right that has the effect of
(A) through (C) above. Notwithstanding the preceding sentence, it shall not be a
Modification or an Extension, respectively, to change the terms of a Stock
Appreciation Right in accordance with Section 16 of the Plan, or in any of the
other ways or for any of the other purposes provided in applicable Treasury
Regulations or other generally applicable guidance under Code section 409A as
not resulting in a Modification or Extension for purposes of that section. In
particular, it shall not be an Extension to extend the exercise period of a
Stock Appreciation Right to a date no later than the earlier of (i) the latest
date upon which the Stock Appreciation Right could have expired by its original
terms under any circumstances or (ii) the tenth anniversary of the original Date
of Grant.

 
 

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12.  Director and Consultant Awards.
 
(a) General. The Board may grant Director Awards to Non-Employee Directors in
the form of shares of Restricted Stock, Restricted Stock Units, Performance
Share Units, Nonstatutory Options, or Stock Appreciation Rights as provided in
Sections 8 through 11 above, or in the form of Vested Shares or Deferred Units
as provided in subsections (b) and (c) below. The Board may also grant to
Consultants awards in the same forms as Director Awards. Whenever the Board
grants shares of Restricted Stock, Restricted Stock Units, Performance Share
Units, Nonstatutory Options, or Stock Appreciation Rights to an Non-Employee
Director, notice shall be given to the Non-Employee Director stating the type of
award being made, the number of shares with respect to which the award is
granted and the terms and conditions to which the award and (where applicable)
the exercise of the award is subject. This notice shall become the Grant
Agreement between the Company and the Non-Employee Director and, at that time,
the Non-Employee Director shall become a Participant. Restricted Stock,
Restricted Stock Units, Performance Share Units, Nonstatutory Options, or Stock
Appreciation Rights granted to Non-Employee Directors shall otherwise be subject
to the terms of the Plan applicable to each type of award as set forth in
Sections 8 through 11 above; provided, however, that, notwithstanding anything
in Sections 8(b) or 9(b) to the contrary, any service or performance period with
respect to Restricted Stock, Restricted Stock Units or Performance Share Units
granted to Non-Employee Directors or Consultants shall not be less than six
consecutive months in length; and provided further, that where context
reasonably requires, references throughout Sections 8 through 11 above to the
“Committee” shall be read instead as references to the Board wherever the award
is to be granted to an Non-Employee Director. The Board shall have all the same
rights and powers with respect to the administration of Director Awards as the
Committee has with respect to Incentive Awards as provided in Section 17 below
(provided that the Board may not delegate its authority with respect to the
granting of Director Awards pursuant to Section 17(c)(viii)), and the Board
shall be subject to the same limitations with respect to the modification and
Repricing of outstanding Director Awards as provided therein.
 
(b) Vested Shares. The Board may grant Vested Shares to Non-Employee Directors
or Consultants. Vested Shares shall be immediately transferable (subject to
compliance with any applicable securities laws) and the Participant receiving an
award of Vested Shares shall have all the rights of a shareholder with respect
to such shares as of the Date of Grant.
 
(c) Deferred Units.

 
 

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(i) The Board may grant Deferred Units to Non-Employee Directors or Consultants.
The terms relating to an award of Deferred Units may be set forth in an
individual grant agreement between the Company and the Non-Employee Director or
Consultant or in a deferred compensation plan or other similar document for
Non-Employee Directors or Consultants as a group. In the event of any conflict
between such document and the Plan, the terms of the Plan shall control.
 
(ii) The Board shall establish, or establish procedures for a Participant to
elect, as to each Deferred Unit the fixed time(s), schedule or event(s) and the
other terms and conditions upon which the Deferred Unit shall be paid in
accordance with Code section 409A. Deferred Units may be paid in cash, Company
Stock, or a fixed combination of Company Stock or cash as provided by the Board,
or the Board may reserve the right to determine the manner of payment at the
time the Deferred Unit become payable. The delivery of Company Stock in payment
of Deferred Units may be subject to additional conditions established by the
Board.
 
(iii) A Participant who receives Deferred Units payable in Company Stock shall
have no rights as a shareholder until the Company Stock is issued and all
requirements with respect to the issuance of such shares have been satisfied.
 
(iv) The Board may, in its discretion, provide that a Participant shall be
entitled to receive dividend equivalents on outstanding Deferred Units. Dividend
equivalents may be (i) paid in cash, (ii) credited to the Participant as
additional Deferred Units, or (iii) a fixed combination of cash and additional
Deferred Units as provided by the Board at the time of grant, or the Board may
reserve the right to determine the manner of payment at the time dividends are
paid to shareholders of record. Unless otherwise provided by the Board,
(i) dividend equivalents with respect to dividends or other distributions that
are paid in shares of Company Stock shall be credited to the Participant as
additional Deferred Units payable at the same time(s), schedule or event(s) as
the Deferred Units with respect to which the dividend equivalents are paid and
(ii) dividend equivalents with respect to dividends or other distributions that
are paid in cash shall be paid at the same time and under the same conditions as
such dividends or other distributions are paid to the shareholders of record of
Company Stock.
 
(v) A Participant’s interest in Deferred Units may not be sold, assigned,
transferred, pledged, hypothecated, or otherwise encumbered.
 
(vi) Under procedures established by the Board, a Non-Employee Director may
elect to defer the payment of cash retainer, meeting and other fees paid in
connection with his or her service on the Board for any Plan Year that would
otherwise be payable and receive in its place Deferred Units. The Board may
establish any other conditions related to the Deferred Units necessary to comply
with Code section 409A, including that existing deferral elections made under
the Director Plan shall be assumed by this Plan.
 
13.  Effective Date of the Plan. The Plan was approved by the Board on June 17,
2008 and shall become effective as of the date on which it is approved by the
shareholders of the Company (the “Effective Date”). Until (i) the Plan has been
approved by the Company’s shareholders, and (ii) the requirements of any
applicable federal or state securities laws have been met, no shares of Company
Stock issuable under Non-Option Awards shall be issued and no Options or Stock
Appreciation Rights shall be exercisable that, in either case, are not
contingent on the occurrence of both such events.
 
14.  Continuing Securities Law Compliance. If at any time on or after the
Effective Date, the requirements of any applicable federal or state securities
laws should fail to be met, no shares of Company Stock issuable under Non-Option
Awards shall be issued and no Options or Stock Appreciation Rights shall be
exercisable until the Committee (or, with respect to a Director Award, the
Board) has determined that these requirements have again been met. The Committee
(or, with respect to a Director Award, the Board) may suspend the right to
exercise an Option or Stock Appreciation Right at any time when it determines
that allowing the exercise and issuance of Company Stock would violate any
federal or state securities or other laws, and may provide that any time periods
to exercise the Option or Stock Appreciation Right are extended during a period
of suspension.

 
 

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15.  Termination, Modification, Change. If not sooner terminated by the Board,
this Plan shall terminate at the close of business on the date that immediately
follows the tenth anniversary of the date on which the Plan was approved by the
Board. No new Awards shall be granted under the Plan after its termination. The
Board may terminate the Plan at any time and may amend the Plan at any time in
any respect as it shall deem advisable; provided that no change shall be made
that increases the total number of shares of Company Stock reserved for issuance
under the Plan (except pursuant to Section 16), materially modifies the
requirements as to eligibility for participation in the Plan, or that would
otherwise be considered a material revision or amendment under Code section 422
or the listing standards of the exchange on which the Company Stock is traded,
unless the change is authorized by the shareholders of the Company.
Notwithstanding the foregoing, the Board may unilaterally amend the Plan and
outstanding Awards with respect to Participants as it deems appropriate to
ensure compliance with Rule 16b-3 and other applicable federal or state
securities laws and to meet the requirements of the Code and applicable
regulations or other generally applicable guidance thereunder. Except as
provided in the preceding sentence, a termination or amendment of the Plan shall
not, without the consent of the Participant, adversely affect a Participant’s
rights under an Award previously granted to him or her.
 
16.  Change in Capital Structure.
 
(a) The Committee (or, with respect to a Director Award, the Board) shall
proportionately adjust the number and kind of shares of stock or securities of
the Company to be subject to the Plan and to Awards then outstanding or to be
granted thereunder, the maximum number of shares or securities which may be
delivered under the Plan (including the maximum limit on Non-Option Awards or
Incentive Stock Options under Section 4), the maximum number of shares or
securities that can be granted to an individual Participant under Section 4, the
exercise price of Options, the initial Fair Market Value of Company Stock under
Stock Appreciation Rights, and other relevant terms of the Plan and any Awards
whenever, in the event of a stock dividend, stock split or combination of
shares, recapitalization or merger in which the Company is the surviving
corporation, or other change in the Company’s corporate structure or capital
stock without the receipt of consideration by the Company (including, but not
limited to, the creation or issuance to shareholders generally of rights,
options or warrants for the purchase of common stock or preferred stock of the
Company), it deems any such adjustment necessary or desirable to preserve the
intended benefits of the Plan and any outstanding Awards for the Company and the
Participants. The Committee’s (or, with respect to a Director Award, the
Board’s) determination in this regard shall be binding on all persons. If the
adjustment would produce fractional shares with respect to any unexercised
Option or Stock Appreciation Right or fractional cents with respect to the
exercise price thereof, the Committee (or, with respect to a Director Award, the
Board) shall round down the number of shares covered by the Option or Stock
Appreciation Right to the nearest whole share and round up the exercise price to
the nearest whole cent.
 
(b) In the event of a Change of Control as described in Sections 2(f)(i) or
(iii) or a Qualifying Change of Control as described in Sections 2(hh)(i) or
(iii), or if the Company is otherwise a party to a consolidation or a merger in
which the Company is not the surviving corporation, a transaction that results
in the acquisition of substantially all of the Company’s outstanding stock by a
single person or entity, or a sale or transfer of substantially all of the
Company’s assets occurs (in any such case, a “Corporate Event”), then the
Committee (or, with respect to a Director Award, the Board) may take any actions
with respect to outstanding Awards as it deems appropriate, consistent with
applicable provisions of the Code and any applicable federal or state securities
laws.
 
(c) Notwithstanding anything in the Plan to the contrary, the Committee (or,
with respect to a Director Award, the Board) may take the foregoing actions
without the consent of any Participant, and its determination shall be
conclusive and binding on all persons and for all purposes.
 
17.  Administration of the Plan.

 
 

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(a) The Plan shall be administered by the Committee. Subject to the express
provisions and limitations set forth in this Plan or the Committee’s charter or
as otherwise established by the Board, the Committee shall be authorized and
empowered to do all things necessary or desirable, in its sole discretion, in
connection with the administration of this Plan, including, without limitation,
the following:
 
(i) to prescribe, amend and rescind policies relating to this Plan, and to
interpret the Plan, including defining terms not otherwise defined;
 
(ii) to determine which persons are eligible Service Providers, to which of the
Service Providers, if any, Incentive Awards shall be granted hereunder and the
timing of any Incentive Awards;
 
(iii) to grant Incentive Awards to Service Providers and determine the terms and
conditions thereof, including the number of shares of Company Stock subject to
Incentive Awards and the exercise or purchase price of the shares of Company
Stock and the circumstances under which Incentive Awards become exercisable or
vested or are forfeited or expire, which terms may but need not be conditioned
upon the passage of time, continued employment, the satisfaction of performance
conditions (including Performance Goals), the occurrence of certain events, or
other factors;
 
(iv) to establish or verify the extent of satisfaction of any Performance Goals
or other conditions applicable to the grant, issuance, exercisability, vesting
and/or ability to retain any Incentive Award;
 
(v) to prescribe and amend the terms of the Grant Agreements or other documents
evidencing Incentive Awards made under this Plan (which need not be identical);
 
(vi) to determine whether, and the extent to which, adjustments are required
pursuant to Section 16;
 
(vii) to interpret and construe this Plan, any policies under this Plan and the
terms and conditions of any Incentive Award granted hereunder, and to make
exceptions to any provisions for the benefit of the Company;
 
(viii) to delegate, to the extent permitted by Virginia corporations law, any
portion of its authority under the Plan to make Incentive Awards to an executive
officer of the Company, subject to any conditions that the Committee may
establish (including but not limited to conditions on such officer’s ability to
make awards to “executive officers” within the meaning of Section 16 of the Act
or to “covered employees” within the meaning of Code section 162(m)(3)); and
 
(ix) to make all other determinations deemed necessary or advisable for the
administration of this Plan.
 
The Committee may amend the terms of previously granted Incentive Awards so long
as the terms as amended are consistent with the terms of the Plan and provided
that the consent of the Participant is obtained with respect to any amendment
that would be detrimental to him or her, except that the consent will not be
required if the amendment is for the purpose of complying with applicable
provisions of the Code or any federal or state securities laws.
 
The Committee is prohibited from Repricing any Option or Stock Appreciation
Right without the prior approval of the shareholders of the Company with respect
to the proposed Repricing.
 
(b) The interpretation and construction of any provision of the Plan by the
Committee shall be final and conclusive as to any Participant. The Committee may
consult with counsel, who may be counsel to the Company, and shall not incur any
liability for any action taken in good faith in reliance upon the advice of
counsel.

 
 

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(c) A majority of the members of the Committee shall constitute a quorum, and
all actions of the Committee shall be taken by a majority of the members
present. Any action may be taken by the Committee in writing or by electronic
transmission or transmissions as permitted by the Bylaws of the Company, and any
action so taken shall be fully effective as if it had been taken at a meeting.
 
(d) The Committee may delegate the administration of the Plan to an officer or
officers of the Company, and such officer(s) may have the authority to execute
and distribute agreements or other documents evidencing or relating to Incentive
Awards granted by the Committee under this Plan, to maintain records relating to
the grant, vesting, exercise, forfeiture or expiration of Incentive Awards, to
process or oversee the issuance of shares of Company Stock upon the exercise,
vesting and/or settlement of an Incentive Award, to interpret the terms of
Incentive Awards and to take any other actions as the Committee may specify,
provided that in no case shall any such officer(s) be authorized to grant
Incentive Awards under the Plan, except in accordance with Section 17(a)(viii)
above. Any action by an administrator within the scope of its delegation shall
be deemed for all purposes to have been taken by the Committee and references in
this Plan to the Committee shall include any such officer(s), provided that the
actions and interpretations of any such officer(s) shall be subject to review
and approval, disapproval or modification by the Committee.
 
18.  Notice. All notices and other communications required or permitted to be
given under this Plan shall be in written or electronic form and shall be deemed
to have been duly given if delivered personally or mailed first class, postage
prepaid, as follows (a) if to the Company—at the principal business address of
the Company to the attention of the Corporate Secretary of the Company; and
(b) if to any Participant—at the last address of the Participant known to the
sender at the time the notice or other communication is sent.
 
19.  No Effect on Other Plans. Except as provided in Section 4(c), nothing
contained in the Plan will be deemed in any way to limit or restrict the Company
or any Related Company from making any award or payment to any person under any
other plan, arrangement or understanding, whether now existing or hereafter in
effect.
 
20.  Interpretation. The Plan is intended to operate in compliance with the
provisions of Rule 16b-3 and to facilitate compliance with, and optimize the
benefits from, Code section 162(m). The terms of this Plan are subject to all
present and future regulations and rulings of the Secretary of the Treasury of
the United States or his or her delegate relating to the qualification of
Incentive Stock Options under the Code. This Plan and the individual Awards
under the Plan are intended to comply with any applicable requirements of Code
section 409A and shall be interpreted to the extent context reasonably permits
in accordance with such requirements. If any provision of the Plan conflicts
with any such regulation or ruling, then that provision of the Plan shall be
void and of no effect. The terms of this Plan shall be governed by the laws of
the Commonwealth of Virginia.
 
 

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