Exhibit 10.4
 
 

 
FBR CAPITAL MARKETS CORPORATION
 
PARTNER LEVERAGED STOCK PURCHASE PROGRAM
 
FBR Capital Markets Corporation, a corporation existing under the laws of the
Commonwealth of Virginia (the “Company”), hereby establishes and adopts the
following 2010 Partner Leveraged Stock Purchase Program (the “Program”),
effective as of December 17, 2009 and as amended time to time.

1.             PURPOSE OF THE PROGRAM

1.1.           Purpose.  The Program is designed to encourage employees who are
members of the Partnership Group of the Company to increase their ownership of
Shares and to more closely align their interests with the interests of the
Company’s non-employee shareholders.

2.             DEFINITIONS

2.1.           “Affiliate” shall mean (i) any person or entity that directly, or
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the Company (including any Subsidiary) or (ii) any entity
in which the Company has a significant equity interest, as determined by the
Committee.

2.2.           “Board” shall mean the board of directors of the Company.

2.3.           “Cause” shall mean (i) conviction of a Participating Partner for
any crime (or upon entering a plea of guilty or nolo contendre to a charge of
any crime) constituting a felony, (ii) dishonesty in the course of fulfilling a
Participating Partner’s employment duties, or (iii) willful and deliberate
failure on the part of a Participating Partner to perform his employment duties
in any material respect.  Notwithstanding the foregoing, if a Participating
Partner is a party to an employment agreement with the Company or any Subsidiary
or Affiliate that contains a definition of “Cause,” such definition shall apply
to the Participating Partner for purposes of the Program.

2.4.           “Committee” shall mean the Compensation Committee of the Board,
or, if such committee of the Board has not been appointed, the Board.

2.5.           “Disability” means permanent and total disability as determined
by the Committee, in its sole discretion.

2.6.           “Eligible Executive Officer” shall mean the Chief Financial
Officer of the Company and the General Counsel of the Company.

2.7.           “Employee” shall mean any employee of the Company, a Subsidiary
or an Affiliate.

2.8.           “Employment Related Forfeiture Event” shall occur if (a) a
Participating Partner voluntarily terminates his or her employment with the
Company, or (b) the Participating Partner’s employment is involuntarily
terminated for Cause by the Company, provided that an Employment Related
Forfeiture Event will be deemed not to have occurred in the event of a
Participating
 
 

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Partner’s termination (i) involuntarily other than for Cause by the Company,
(ii) by reason of the Participating Partner’s death or Disability, or (iii)
voluntarily by the Participating Partner upon Retirement.

2.9.           “Option” shall mean a non-qualified stock option granted under
the 2006 Plan by the Company as of a Purchase Date to a Participating Partner.

2.10.           “Option Reduction” shall occur if, upon the completion of a
Sale, the aggregate number of Shares deemed to be held by a Participating
Partner for purposes of the Partner Ownership Guidelines is less than the
Participating Partner’s Share Minimum.

2.11.           “Participating Partner” shall mean an eligible Employee who is
selected by the Committee to receive a Right under the Program.

2.12.           “Partner Ownership Guidelines” shall mean guidelines established
by the Board specifying stock ownership levels and Share Minimums for
Participating Partners.

2.13.           “Pricing Date” shall mean the trading date immediately preceding
a particular Purchase Date.

2.14.           “Program Loan” shall mean a full-recourse secured loan made by
the Company to a Participating Partner (other than a Participating Partner who
is an Eligible Executive Officer) in connection with a purchase of Shares by
such Participating Partner under the Program.

2.15.           “Purchase Date” shall mean a date within a Purchase Period
selected by the Committee on which Participating Partners may purchase Shares
under the Program.

2.16.           “Purchase Period” shall mean one of four one-month Purchase
Periods established by the Committee during which Participating Partners may
elect to exercise Rights and purchase Shares under the Program.

2.17.           “Purchase Price” shall equal the greater of the closing sale
price or the consolidated closing bid price of one Share on The NASDAQ Global
Select Market on a Pricing Date.

2.18.           “Reduction Amount” shall equal, in connection with a particular
Option Reduction, the original principal balance of the relevant Note multiplied
by the percentage by which such Option Reduction reduced the number of Shares
originally subject to the Option.

2.19.           “Retirement” shall mean retirement from employment with the
Company, a Subsidiary or an Affiliate of the Company as determined by the
Committee, in its sole discretion.

2.20.           “Right” shall mean any right granted to a Participating Partner
under the Program allowing such Participating Partner to purchase Shares on one
or more Purchase Dates designated by the Committee at the Purchase Price for
each such Purchase Date.
 
 
 
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2.21.           “Sale” shall mean a Participating Partner sells, assigns,
transfers or otherwise disposes of any Shares owned by the Participating Partner
before the expiration of the Participating Partner’s rights under an Option,
provided that (a) an actual or deemed disposition of Shares in connection with
the net or cashless exercise of options to purchase Shares, or the net or
cashless vesting of restricted Shares, shall not constitute a Sale, but only to
the extent necessary to pay the purchase price of such Shares and/or to satisfy
any tax withholding obligation in connection with such exercise or vesting, and
(b) a sale, transfer, assignment or other disposition to a person or entity
whose stockholdings are consolidated with the Participating Partner’s
stockholdings for purposes of the Partner Ownership Guidelines shall not
constitute a Sale.

2.22.           “Share Minimum” shall mean the minimum number of Shares
established for a Participating Partner under the Partner Ownership Guidelines.

2.23           “Shares” shall mean the shares of common stock of the Company,
par value $0.001 per share.

2.24.           “Stock Option Agreement” shall mean a written agreement,
contract or other instrument or document evidencing any Option granted by the
Committee to a Participating Partner under the 2006 Plan in connection with a
purchase of Shares by such Participating Partner under the Program.

2.25.           “Stock Purchase Agreement” shall mean a written agreement,
contract or other instrument or document evidencing any Right granted by the
Committee hereunder.

2.26.           “Subsidiary” shall mean any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company if, at the time
of the granting of the Right, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations
in the chain.

2.27.           “2006 Plan” shall mean the Company’s 2006 Long-Term Incentive
Plan, as in effect from time to time.

In addition, certain other terms used in the Program have definitions provided
to them in the first place in which they are used herein.

3.           SHARES SUBJECT TO THE PROGRAM

3.1.           Number of Shares.  Subject to adjustment as provided in Section
8.2, a total of 1,250,000 Shares shall be authorized for purchase under the
Program.
 
3.2.           Character of Shares.  Any Shares issued hereunder may consist, in
whole or in part, of authorized and unissued Shares, treasury Shares or Shares
purchased in the open market or otherwise.
 
4.           ELIGIBILITY AND ADMINISTRATION
 
 
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4.1.           Eligibility.  Any Employee who is designated as a member of the
Partnership Group of the Company (including any Eligible Executive Officer, but
excluding any other executive officer of the Company) shall be eligible to be
selected as a Participating Partner.  Notwithstanding the foregoing, a
Participating Partner who is an Eligible Executive Officer shall not be eligible
to receive a Program Loan.
 
4.2.           Administration.
 
(a)           The Program shall be administered by the Committee.  The Board may
remove from, add members to, or fill vacancies on, the Committee.
 
(b)           The Committee shall have full power and authority, subject to the
provisions of the Program and subject to such orders or resolutions not
inconsistent with the provisions of the Program as may from time to time be
adopted by the Board, to:  (i) select eligible Employees to become Participating
Partners; (ii) establish Purchase Periods and select Purchase Dates; (iii)
determine whether a Participating Partner should be granted Rights to purchase
25,000 Shares or 50,000 Shares, or such other amount as the Committee shall
determine in accordance with Section 5; (iv) determine the terms and conditions,
not inconsistent with the provisions of the Program, of any Right granted
hereunder; (v) determine the terms and conditions, not inconsistent with the
provisions of the Program, of any Program Loan made hereunder; (vi) determine
whether, to what extent and under what circumstances, not inconsistent with the
provisions of the Program, any Right or any Program Loan shall be suspended,
canceled or terminated; (vii) interpret and administer the Program and any
instrument or agreement entered into under or in connection with the Program,
including any Stock Purchase Agreement; (viii) correct any defect, supply any
omission or reconcile any inconsistency in the Program or any Right in the
manner and to the extent that the Committee shall deem desirable to carry it
into effect; (ix) establish such rules and regulations and appoint such agents
as it shall deem appropriate for the proper administration of the Program; and
(x) make any other determination and take any other action that the Committee
deems necessary or desirable for administration of the Program.
 
(c)           Decisions of the Committee shall be final, conclusive and binding
on all persons or entities, including the Company, any Participating Partner,
any shareholder and any Employee or any Affiliate.  A majority of the members of
the Committee may determine its actions and fix the time and place of its
meetings.
 
(d)           The Committee may delegate to a committee of one or more directors
of the Company or, to the extent permitted by law, to one or more officers or a
committee of officers the right to grant Rights to eligible Employees and to
suspend, cancel or terminate and Right or Program Loan.
 
5.           STOCK PURCHASE RIGHTS
 
5.1.           Grant of Rights.  The Committee shall grant Participating
Partners Rights to purchase Shares during one or more of four Purchase Periods
designated by the Committee.  Each Participating Partner will initially be
granted Rights to purchase either 25,000 Shares or 50,000 Shares, as determined
by the Committee.  If, as of a date in the final Purchase Period to be specified
by the Committee, the Participating Partners have not elected to exercise Rights
to
 
 
 
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purchase all of the Shares available under the Program, the Committee may grant
Rights to purchase the remaining Shares on a pro rata basis to the Participating
Partners who have purchased or elected to purchase the maximum number of Shares
otherwise allowed to be purchased by such Participating Partners, until all
Shares available under the Program have been purchased.
 
5.2.           Exercise of Rights.  With respect to each Purchase Period, a
Participating Partner may elect to purchase Shares on the Purchase Date for such
Purchase Period at the Purchase Price for such Purchase Date.  A Participating
Partner may elect to exercise some or all of his or her Rights during a Purchase
Period.  If a Participating Partner does not elect to exercise all of his or her
Rights on a particular Purchase Date, then subject to last sentence of Section
5.1, the Participating Partner may elect to exercise such Rights on a subsequent
Purchase Date (if any).  A Participant who wishes to purchase Shares on a
Purchase Date must make a binding election to purchase such Shares on or before
the applicable Pricing Date in accordance with such procedures, and subject to
such terms and conditions, not inconsistent with the provisions of the Program,
as the Committee shall deem desirable.
 
5.3.           Employment Related Forfeiture.  Unvested Rights held by a
Participating Partner will be forfeited upon the occurrence of either of the
following events (each, an “Employment Related Forfeiture Event”):  (1) the
Participating Partner voluntarily terminates his or her employment with the
Company, or (2) the Participating Partner’s employment is involuntarily
terminated for Cause by the Company.  Rights will not be forfeited in the event
of a Participating Partner’s termination (i) involuntarily other than for Cause
by the Company, (ii) by reason of the Participating Partner’s death or
Disability, or (iii) voluntarily by the Participating Partner upon
retirement.  In the event of death or Disability, all Rights held by a
Participating Partner will immediately vest and become exercisable.

5.4.           Limitation of Rights.  Any Right shall be subject to the terms
and conditions of this Section 5 and to such additional terms and conditions,
not inconsistent with the provisions of the Program, as the Committee shall deem
desirable.
 
5.5.           Right Agreements.  All Rights granted pursuant to this Section 5
shall be evidenced by a written Stock Purchase Agreement in such form and
containing such terms and conditions as the Committee shall determine which are
not inconsistent with the provisions of the Program.  The granting of a Right to
a Participating Partner shall impose no obligation on the Participating Partner
to elect to exercise such Right and purchase Shares under the Program.  A
Participating Partner who is granted a Right pursuant to this Section 5 may hold
more than one Right granted pursuant to the Program at the same time.
 
6.           PROGRAM LOANS
 
6.1.           Offer to Provide Leverage.  The Company shall offer to make a
Program Loan to each Participating Partner (other than a Participating Partner
who is an Eligible Executive Officer) for up to 50% of the aggregate Purchase
Price of the Shares purchased on a particular Purchase Date by such
Participating Partner under the Program.  Each Participating Partner who
receives a Program Loan will be required to execute a full-recourse secured
promissory note in favor of the Company and to enter into a pledge agreement
with the Company under which two Shares for each
 
 
 
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Share purchased with the Program Loan will be pledged to the Company as security
for the repayment of such Program Loan.
 
6.2.           Maturity Date; Acceleration.  A Program Loan will mature and
become due and payable three years after the Purchase Date to which the Program
Loan relates or, if earlier, on the date on which an Employment Related
Forfeiture Event occurs (the “Maturity Date”).  A Program Loan will bear
interest at a rate equal to the greater of 4% or the Federal funds rate plus
0.55%, determined and compounded quarterly.  Any unpaid principal and any
accrued but unpaid interest will be payable on the Maturity Date of a Program
Loan.  If a Participating Partner incurs an Option Reduction as a result of a
Sale of Shares purchased with the proceeds of a Program Loan, a portion of the
unpaid principal balance of such Program Loan (together with any accrued and
unpaid interest on such portion of the principal balance) shall immediately
mature and become due and payable.  The portion of the principal balance that
shall become due and payable shall equal the lesser of the entire unpaid
principal balance on the date of the Option Reduction and the Reduction Amount
relating to such Option Reduction.  To the extent that a Participating Partner
receives more than one Program Loan, the earliest advanced Program Loan will be
the first Program Loan to be repaid.
 
6.3.           Limitations.  Any Program Loan shall be subject to the terms and
conditions of this Section 6 and to such additional terms and conditions, not
inconsistent with the provisions of the Program, as the Committee shall deem
desirable.  In addition, a Program Loan may be subject to any additional
obligations required by United States Treasury Regulations.
 
7.           STOCK OPTION GRANTS UNDER THE 2006 PLAN
 
7.1.           Grant of Options.  In connection with the Program, the Company
will agree to grant an Option under the 2006 Plan to each Participating Partner
as of each Purchase Date.  Such Option (a) will vest and become exercisable on
the third anniversary of such Purchase Date, (b) will have an exercise price per
Share equal to the Purchase Price per Share on such Purchase Date, (c) will give
a Participating Partner who is not an Eligible Executive Officer the right to
purchase two additional Shares for each Share purchased by the Participating
Partner under the Program on such Purchase Date, and (d) will give a
Participating Partner who is an Eligible Executive Officer the right to purchase
three additional Shares for each Share purchased by the Participating Partner
under the Program on such Purchase Date.  Each such Option will be subject to
such additional terms and conditions, not inconsistent with the provisions of
the 2006 Plan, as the Committee shall deem appropriate.
 
7.2.           Sale Related Option Reductions.  If a Sale occurs which triggers
an Option Reduction, such Option Reduction shall result in an immediate
reduction in the number of Shares purchasable under an Option, whether vested or
not vested, previously granted to the Participating Partner who made such
Sale.  The amount of the Option Reduction upon each such Sale shall equal (a)
(i) 2 in the case of a Participating Partner who is not an Eligible Executive
Officer and (ii) 3 in the case of a Participating Partner who is an Eligible
Executive Officer, multiplied by (b) the lesser of (i) the number of Shares
involved in such Sale and (ii) the amount by which the aggregate number of
Shares deemed to be held by the Participating Partner immediately after the Sale
is less than Participating Partner’s Share Minimum, provided that (x) if a Sale
occurs before the Participating Partner’s Share Minimum has been established,
then the amount of the Option
 
 
 
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Reduction upon such Sale shall equal 2 (3 in the case of a Participating Partner
who is an Eligible Executive Officer) multiplied by the number of Shares
involved in the Sale, and (y) if the Company and the Participating Partner have
entered into more than one Stock Option Agreement that contains Option Reduction
provisions, upon each Sale triggering an Option Reduction, such Option Reduction
shall be applied to reduce the number of Shares purchasable under such Stock
Option Agreements in the chronological order in which the Company and
Participating Partner entered into such Stock Option Agreements.
 
8.           GENERALLY APPLICABLE PROVISIONS
 
8.1.           Amendment and Modification of the Program.  The Board may, from
time to time, alter, amend, suspend or terminate the Program as it shall deem
advisable, subject to the rules and regulations of any stock exchange or
quotation system on which Shares are listed or quoted; provided that the Board
may not amend the Program in any manner that would result in noncompliance with
Rule 16b-3 of the Securities Exchange Act of 1934, as amended; and provided
further that no amendments to, or termination of, the Program shall in any way
impair the rights of a Participating Partner under any Right previously granted
without such Participating Partner’s consent.
 
8.2.           Adjustments.  In the event of any merger, reorganization,
consolidation, recapitalization, dividend or distribution (whether in cash,
shares or other property, but without regard to the payment of any cash
dividends by the Company in the ordinary course), stock split, reverse stock
split, spin-off or similar transaction or other change in corporate structure
affecting the Shares or the value thereof, the terms of the Program and Rights
shall be adjusted and such adjustments shall be as the Committee, in its sole
discretion, deems equitable or appropriate, including such adjustments in the
aggregate number, class and kind of securities that may be delivered under the
Program and, in the aggregate or as to any one Participating Partner, in the
number, class, kind and purchase price of securities subject to outstanding
Rights granted under the Program (including, if the Committee deems appropriate,
the substitution of similar rights to purchase the shares of, or other rights
denominated in the shares of, another company) as the Committee may determine to
be appropriate in its sole discretion; provided, however, that the number of
Shares subject to any Right shall always be a whole number.
 
8.3.           Transferability of Rights.  Except as provided below, and except
as otherwise authorized by the Committee in a Stock Purchase Agreement, no Right
and no Shares subject to Rights described in Section 5 that have not been issued
or as to which any applicable restriction, performance or deferral period has
not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered,
other than by will or the laws of descent and distribution, or pursuant to a
qualified domestic relations order, and such Right may be exercised during the
life of the Participating Partner only by the Participating Partner or the
Participating Partner’s guardian or legal representative.
 
9.           MISCELLANEOUS
 
9.1.           Tax Withholding.  The Company shall have the right to make all
payments or distributions pursuant to the Program to a Participating Partner net
of any applicable Federal, State and local taxes required to be paid or withheld
as a result of (a) the grant of any Right, (b) the
 
 
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exercise of a Right, (c) the delivery of Shares or cash, (d) the funding of a
Program Loan or (e) any other event occurring pursuant to the Program.  The
Company or any Affiliate shall have the right to withhold from wages or other
amounts otherwise payable to a Participating Partner such withholding taxes as
may be required by law, or to otherwise require the Participating Partner to pay
such withholding taxes.  If the Participating Partner shall fail to make such
tax payments as are required, the Company or its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to such Participating Partner or to take such other
action as may be necessary to satisfy such withholding obligations.
 
9.2.           Right of Discharge Reserved; Claims to Rights.  Nothing in the
Program nor the grant of an Right hereunder shall confer upon any Employee the
right to continue in the employment of the Company or any Affiliate or affect
any right that the Company or any Affiliate may have to terminate the employment
or service of (or to demote or to exclude from future Rights under the Program)
any such Employee at any time for any reason.  Except as specifically provided
by the Committee, the Company shall not be liable for the loss of existing or
potential profit from a Right granted in the event of termination of an
employment or other relationship.  No Employee or Participating Partner shall
have any claim to be granted any Right under the Program, and, except as
expressly provided in the Program, there is no obligation for uniformity of
treatment of Employees or Participating Partners under the Program.
 
9.3.           Prospective Recipient.  The prospective recipient of any benefit
under the Program shall not, with respect to such benefit, be deemed to have
become a Participating Partner, or to have any rights with respect to such
benefit, until and unless such recipient shall have executed an agreement or
other instrument evidencing the benefit and delivered a copy thereof to the
Company, and otherwise complied with the then applicable terms and conditions of
the Program.
 
9.4.           Cancellation of Right.  Notwithstanding anything to the contrary
contained herein, all outstanding Rights granted to any Participating Partner
shall be canceled if the Participating Partner, without the consent of the
Company, while employed by the Company or any Affiliate or after termination of
such employment or service, establishes a relationship with a competitor of the
Company or any Affiliate or engages in activity that is in conflict with or
adverse to the interest of the Company or any Affiliate, as determined by the
Committee in its sole discretion.
 
9.5.           Stop Transfer Orders.  All certificates for Shares delivered
under the Program pursuant to any Right shall be subject to such stop-transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Shares are then listed, and any
applicable federal or state securities law, and the Committee may cause a legend
or legends to be put on any such certificates to make appropriate reference to
such restrictions.
 
9.6.           Nature of Payments.  All Rights and Program Loans granted under
the Program are in consideration of services performed or to be performed for
the Company or any Affiliate, division or business unit of the Company.  Any
income or gain realized pursuant to Rights and Program Loans under the Program
constitute a special incentive payment to the Participating Partner and shall
not be taken into account, to the extent permissible under applicable law, as
compensation for purposes of any of the employee benefit plans of the Company or
any Affiliate
 
 
 
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except as may be determined by the Committee or by the Board or the board of
directors of the applicable Affiliate.
 
9.7.           Other Programs.  Nothing contained in the Program shall prevent
the Board from adopting other or additional compensation arrangements, subject
to shareholder approval if such approval is required; and such arrangements may
be either generally applicable or applicable only in specific cases.
 
9.8.           Severability.  If any provision of the Program shall be held
unlawful or otherwise invalid or unenforceable in whole or in part by a court of
competent jurisdiction, such provision shall (a) be deemed limited to the extent
that such court of competent jurisdiction deems it lawful, valid and/or
enforceable and as so limited shall remain in full force and effect, and (b) not
affect any other provision of the Program or part thereof, each of which shall
remain in full force and effect.  If the making of any payment or the provision
of any other benefit required under the Program shall be held unlawful or
otherwise invalid or unenforceable by a court of competent jurisdiction, such
unlawfulness, invalidity or unenforceability shall not prevent any other payment
or benefit from being made or provided under the Program, and if the making of
any payment in full or the provision of any other benefit required under the
Program in full would be unlawful or otherwise invalid or unenforceable, then
such unlawfulness, invalidity or unenforceability shall not prevent such payment
or benefit from being made or provided in part, to the extent that it would not
be unlawful, invalid or unenforceable, and the maximum payment or benefit that
would not be unlawful, invalid or unenforceable shall be made or provided under
the Program.
 
9.9.           Construction.  All references in the Program to “Section or
Sections” are intended to refer to the Section or Sections, as the case may be,
of the Program.  As used in the Program, the words “include” and “including,”
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words “without limitation.”
 
9.10.           Unfunded Status of the Program.  The Program is intended to
constitute an “unfunded” pan for incentive and deferred compensation.  With
respect to any payments not yet made to a Participating Partner by the Company,
nothing contained herein shall give any such Participating Partner any rights
that are greater than those of a general creditor of the Company.  In its sole
discretion, the Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Program to deliver the
Shares or payments in lieu of or with respect to rights hereunder; provided,
however, that the existence of such trusts or other arrangements is consistent
with the unfunded status of the Program.
 
9.11.           Governing Law.  The Program and all determinations made and
actions taken thereunder, to the extent not otherwise governed by the Internal
Revenue Code or the laws of the United States, shall be governed by the laws of
the State of Virginia and construed accordingly.
 
9.12.           Effective Date of Program; Termination of Program.  The Program
shall be effective as of December 17, 2009.  Rights and Program Loans may be
granted and Shares may be purchased under the Program at any time and from time
to time until all Shares available under the Program have been Purchased by
Participating Partners.
 
 
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9.13.           Foreign Employees.  Rights and Program Loans may be granted to
Participating Partners who are foreign nationals or employed outside the United
States, or both, on such terms and conditions different from those applicable to
Rights and Program Loans granted to Employees employed in the United States as
may, in the judgment of the Committee, be necessary or desirable in order to
recognize differences in local law or tax policy.  The Committee also may impose
conditions on the exercise of Rights in order to minimize the Company’s
obligation with respect to tax equalization for Employees on assignments outside
their home country.
 
9.14.           Captions.  The captions in the Program are for convenience of
reference only, and are not intended to narrow, limit or affect the substance or
interpretation of the provisions contained herein.
 
 
 
 
 
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