Exhibit 10.26

WASTE INDUSTRIES USA, INC.

2007 LONG TERM INCENTIVE PLAN

ARTICLE I

ESTABLISHMENT, PURPOSE AND TERM

1.1 Establishment. The Waste Industries USA, Inc. 2007 Long Term Incentive Plan
("Plan") is hereby established by Waste Industries USA, Inc. ("Company"),
effective as of the Effective Date. Subject to Section 13.1, Awards may be
granted as provided herein for the term of the Plan.

1.2 Purposes. The purposes of the Plan are to foster and promote the long term
financial success of the Company and increase shareholder value by motivating
performance through incentive compensation. The Plan also is intended to
encourage Participant ownership in the Company, attract and retain talent, and
enable Participants to participate in the long-term growth and financial success
of the Company. In addition, the Plan provides the ability to make Awards linked
to the profitability of the Company’s businesses and increases in shareholder
value.

1.3 Term. The term of the Plan shall extend from the Effective Date until the
tenth anniversary thereof. No additional Awards shall be made after the
expiration of the term, but outstanding awards shall be administered in
accordance with the provisions thereof. The Plan shall continue in effect until
all matters relating to the settlement of Awards and administration of the Plan
have been completed.

ARTICLE II

DEFINITIONS

For purposes of the Plan, the following terms are defined as set forth below:

2.1 "Affiliate" means any individual, corporation, partnership, association,
limited liability company, joint stock company, trust, unincorporated
association or other entity that directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Company.

2.2 "Agreement" means any agreement entered into pursuant to the Plan by which
an Award is granted to a Participant.

2.3 "Award" means any Stock Option, Stock Appreciation Right, Restricted Stock,
Deferred Stock or Performance Award granted to a Participant under the Plan.
Awards shall be subject to the terms and conditions of the Plan and shall be
evidenced by an Agreement

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containing such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall deem desirable.

2.4 "Beneficiary" means any person or other entity which has been designated by
a Participant in his or her most recent written beneficiary designation filed
with the Committee to receive the compensation specified under the Plan to the
extent permitted. If there is no designated beneficiary, then the term means any
person or other entity entitled by will or the laws of descent and distribution
to receive such compensation.

2.5 "Board of Directors" or "Board" means the Board of Directors of the Company.

2.6 "Cause" means, unless otherwise specifically provided in an Agreement, any
act or omission which permits the Company to terminate the written employment
agreement or arrangement between the Participant and the Company or an Affiliate
for "Cause" as defined in such agreement or arrangement, or in the event there
is no such agreement or arrangement or the agreement or arrangement does not
define the term "Cause," then "Cause" means: (a) the conviction or nolo
contendere plea of a Participant for a felony under federal law or the law of
the state in which such action occurred; (b) the misappropriation of any of the
Company’s assets or business opportunities; (c) any act of dishonesty or
misconduct on the part of Participant which results or is intended to result in
material damage to the Company’s business or reputation; or (d) the willful,
deliberate, substantial or continued failure on the part of the Participant to
perform his or her employment duties in any material manner, including, without
limitation, Participant’s failure to comply with the Company’s Code of Conduct
or other policies then in effect.

2.7 "Change in Control" means:

2.7.1 the acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of fifty percent (50%) or more of either (a) the then-outstanding shares of
Stock (the "Outstanding Company Shares") or (b) the combined voting power of the
then-outstanding voting securities (the "Outstanding Voting Securities") of the
Company (the "Outstanding Company Voting Securities"); provided that, for
purposes of this definition, the following acquisitions shall not constitute a
Change of Control: (i) any acquisition of Company securities directly from the
Company; (ii) any acquisition of Company securities by the Company; and
(iii) any acquisition of Company securities by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any of its Affiliates;

2.7.2 the event occurring when individuals who, as of the day after the
Effective Date, constitute the Board (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 shareholders, 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

 

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were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board;

2.7.3 the consummation of a merger or consolidation involving the Company or a
sale or other disposition of all or substantially all of the assets of the
Company (each, a "Business Combination"), in each case unless, following such
Business Combination, all or substantially all of the individuals and entities
that were the beneficial owners of the Outstanding Company Shares immediately
prior to such Business Combination beneficially own, directly or indirectly,
either (a) in the event of a merger or consolidation of the Company more than
fifty percent (50%) of the Outstanding Company Voting Securities immediately
following the consummation of the Business Combination or (b) in the event the
Business Combination results in another corporation ("New Parent Corporation")
owning the Company or all or substantially all of the Company’s assets either
directly or through one or more subsidiaries, more than fifty percent (50%) of
the Outstanding Voting Securities of the New Parent Corporation; or

2.7.4 the approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.

2.8 "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.

2.9 "Commission" means the Securities and Exchange Commission or any successor
thereto.

2.10 "Committee" means the committee of the Board responsible for granting and
administering Awards under the Plan, which initially shall be the Compensation
Committee of the Board, until such time as the Board may designate another
committee. The Committee shall consist solely of two or more directors and each
member of the Committee shall be a "non-employee director" within the meaning of
Rule 16b-3 and also an "outside director" under Section 162(m) of the Code. In
addition, each member of the Committee shall satisfy any independence or other
corporate governance standards imposed by The Nasdaq National Market or other
securities market on which the Stock shall be listed from time to time.

2.11 "Company" means Waste Industries USA, Inc., a North Carolina corporation,
and includes any successor or assignee corporation or corporations into which
the Company may be merged, changed or consolidated; any corporation for whose
securities the securities of the Company shall be exchanged; and any assignee of
or successor to substantially all of the assets of the Company. Wherever the
context of the Plan so admits or requires, "Company" also means "Affiliate."

 

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2.12 "Covered Employee" means a Participant who is determined to be a "covered
employee" within the meaning of Section 162(m) of the Code.

2.13 "Deferred Stock" means a right granted to a Participant under Section 9.1
hereof to receive Stock at the end of a specified deferral period.

2.14 "Disability" has the meaning provided by Code Section 22(e)(3), except to
the extent otherwise required by Code Section 409A(a)(2)(C) with respect to any
Award that is subject to Code Section 409A. The determination of Disability for
purposes of this Plan shall not be construed to be an admission of disability
for any other purpose.

2.15 "Effective Date" means the date of approval of the Plan by the shareholders
of the Company.

2.16 "Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

2.17 "Exercise Price" means the price that a Participant must pay to exercise an
Award or the amount upon which the value of an Award is based. Unless approved
by the Company's shareholders, in no event may the Exercise Price per share of
Stock covered by an Option, or the Exercise Price of a Stock Appreciation Right,
be reduced, directly or indirectly, through the technique commonly known as
"repricing" or through (i) the cancellation and regrant of such Award or
(ii) the surrender and cancellation of such Award for either a cash payment or
issuance of a different type of Award.

2.18 "Fair Market Value" means, as of any given date, the closing market price
on the NASDAQ Stock Market (or such other public trading market on which the
Stock is traded) on that date. If there is no regular public trading market for
such Stock, the Fair Market Value of the Stock shall be determined by the
Committee in good faith. In each case, Fair Market Value shall be determined
without regard to whether the Stock is restricted or represents a minority
interest.

2.19 "Grant Date" means the date as of which an Award is granted pursuant to the
Plan. In no event may the Grant Date be earlier than the Effective Date.

2.20 "Incentive Stock Option" means any Option that is intended to be, is
designated as, and actually qualifies as, an "incentive stock option" within the
meaning of Section 422 of the Code.

2.21 "Non-Qualified Stock Option" means a Stock Option that is not an Incentive
Stock Option.

2.22 "Option Period" means the period during which the Option shall be
exercisable in accordance with an Agreement and Article VI.

 

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2.23 "Participant" means a person who satisfies the eligibility conditions of
Article V and to whom an Award has been granted by the Committee under the Plan.
In the event that a Representative is appointed for a Participant, then the term
"Participant" shall mean such appointed Representative. Notwithstanding the
appointment of a Representative, the term "Termination of Employment" shall mean
the Termination of Employment of the Participant.

2.24 "Performance Award" means an Award consisting of Performance Shares,
Performance Units or other Award described in Article X that is dependent upon
the achievement of Performance Goals.

2.25 "Performance Goals" mean the level of performance established by the
Committee as the Performance Goal with respect to a Performance Measure.
Performance Goals may vary from Performance Period to Performance Period and
from Participant to Participant and may be established on a stand-alone basis,
in tandem or in the alternative.

2.26 "Performance Measure" means any measure based on any of the performance
criteria set out in this Section, either alone or in any combination, and, if
not based on individual performance, on either a consolidated or a division or
business unit level, as the Committee may determine: individual Participant
financial or non-financial performance goals; sales; cash flow; cash flow from
operations; operating profit or income; net income; operating margin; net income
margin; return on net assets; economic value added; return on total assets;
return on equity; return on total capital; total shareholder return; revenue;
revenue growth; earnings before interest, taxes, depreciation and amortization
("EBITDA"); EBITDA growth; basic earnings per share; diluted earnings per share;
funds from operations per share and per share growth; cash available for
distribution; cash available for distribution per share and per share growth;
share price performance on an absolute basis and relative to an index of
earnings per share or improvements in the Company's attainment of expense
levels; or implementation or completion of critical projects. The foregoing
criteria shall have any reasonable definitions that the Committee may specify,
which may include or exclude any or all of the following items as the Committee
may specify: extraordinary, unusual or non-recurring items; effects of
accounting changes; effects of financing activities; expenses for restructuring
or productivity initiatives; other non-operating items; spending for
acquisitions; effects of divestitures; and effects of litigation activities and
settlements. Any such performance criterion or combination of such criteria may
apply to the Participant's Award opportunity in its entirety or to any
designated portion or portions of the Award opportunity, as the Committee may
specify. In the event Code Section 162(m) or applicable tax or other laws change
to permit the Committee discretion to alter the governing performance measures
with respect to any Covered Employee without obtaining shareholder approval of
such changes, the Committee shall have sole discretion to make such changes
without obtaining shareholder approval. Performance Measures may vary from
Performance Period to Performance Period and from Participant to Participant.

2.27 "Performance Period" means the time period during which a Performance Award
shall be earned shall be the "Performance Period," and shall be at least one
(1) fiscal year in length, unless otherwise determined by the Committee.
Performance Awards shall be subject to Performance Goals which shall be
established by the Committee.

 

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2.28 "Performance Unit" means a right granted pursuant to the terms and
conditions established by the Committee which is described in Section 10.1.

2.29 "Performance Share" means a right granted pursuant to the terms and
conditions established by the Committee which is described in Section 10.1.

2.30 "Plan" means the Waste Industries USA, Inc. 2007 Long Term Incentive Plan,
as herein set forth and as may be amended from time to time.

2.31 "Representative" means (a) the person or entity acting as the executor or
administrator of a Participant's estate pursuant to the last will and testament
of a Participant or pursuant to the laws of the jurisdiction in which the
Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
Beneficiary of the Participant upon or following the Participant's death; or
(d) any other person, if any, to whom an Award has been permissibly transferred
under Section 13.9; provided that only one of the foregoing shall be the
Representative at any point in time as determined under applicable law and
recognized by the Committee.

2.32 "Restricted Stock" means Stock granted to a Participant under Section 8.1
hereof and which is subject to certain restrictions and to a risk of forfeiture
or repurchase by the Company.

2.33 "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Commission under
Section 16 of the Exchange Act.

2.34 "Stock" means the Company's common stock, whether presently or hereafter
issued, and any other stock or security resulting from adjustment thereof as
described hereinafter.

2.35 "Stock Appreciation Right" means a right granted under Section 7.1.

2.36 "Stock Option" or "Option" means a right, granted to a Participant under
Section 6.1 hereof, to purchase Stock at a specified price during specified time
periods.

2.37 "Termination of Employment" means the occurrence of any act or event
whether pursuant to an employment agreement or otherwise that actually or
effectively causes or results in the person's ceasing, for whatever reason, to
be an officer or employee of the Company or of any Affiliate, including, without
limitation, death, Disability, dismissal, severance at the election of the
Participant, or severance as a result of the discontinuance, liquidation, sale
or transfer by the Company or its Affiliates of a business owned or operated by
the Company or its Affiliates. With respect to any non-employee member of the
Board, Termination of Employment means the termination of a Participant’s status
as a non-employee director of the Board. With respect to any other person who is
not an employee with respect to the Company or an Affiliate, the Agreement shall
establish what act or event shall constitute a Termination of Employment for
purposes of the Plan. A Termination of Employment shall occur with respect to an
employee

 

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who is employed by an Affiliate if the Affiliate shall cease to be an Affiliate
and the Participant shall not immediately thereafter become an employee of the
Company or an Affiliate.

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

ARTICLE III

ADMINISTRATION

3.1 Committee Structure. The Plan shall be administered by the Committee. A
majority of the Committee shall constitute a quorum at any meeting thereof
(including telephone conference) and the acts of a majority of the members
present, or acts approved in writing by the entire Committee without a meeting,
shall be the acts of the Committee for purposes of this Plan. Any member of the
Committee may resign upon notice to the Board. The Board shall have the
authority to remove, replace or fill any vacancy of any member of the Committee
upon notice to the Committee and the affected member.

3.2 Committee Actions. The Committee may authorize any one or more of its
members or an officer of the Company to execute and deliver documents on behalf
of the Committee. The Committee may allocate among one or more of its members,
or may delegate to one or more of its agents, such duties and responsibilities
as it determines, provided that the Committee shall not delegate the authority
to grant Awards. A member of the Committee shall be recused from Committee
action regarding an Award granted or to be granted to such member.

3.3 Committee Authority. Subject to applicable law, the Company's certificate of
incorporation and by-laws, the Committee’s charter or the terms of the Plan, the
Committee shall have the authority:

3.3.1 to select those persons to whom Awards may be granted from time to time;

3.3.2 to determine whether and to what extent Awards are to be granted
hereunder;

3.3.3 to determine the number of shares of Stock to be covered by each Award
granted hereunder;

3.3.4 to determine the terms and conditions of any Award granted hereunder
(including any provisions deemed necessary or appropriate by the Committee in
good faith for an Award to avoid being subject to taxation under Code
Section 409A(a)(1)), provided that the Exercise Price of any Option or Stock
Appreciation Right shall not be less than the Fair Market Value per share of the
underlying stock as of the Grant Date;

 

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3.3.5 to adjust the terms and conditions, at any time or from time to time, of
any Award, subject to the limitations contained elsewhere herein, including but
not limited to Section 13.1;

3.3.6 to determine to what extent and under what circumstances Stock and other
amounts payable with respect to an Award shall be deferred, subject to
compliance in good faith with the requirements of the Plan and the Code;

3.3.7 to provide for the forms of Agreement to be utilized in connection with
this Plan;

3.3.8 to determine what legal requirements are applicable to the Plan, Awards,
and the issuance of Stock, and to require of a Participant that appropriate
action be taken with respect to such requirements;

3.3.9 to cancel, with the consent of the Participant or as otherwise provided in
the Plan or an Agreement, outstanding Awards;

3.3.10 to require as a condition of the exercise of an Award or the issuance or
transfer of a certificate (or other representation of title) of Stock, the
withholding from a Participant of the amount of any taxes as may be necessary in
order for the Company or any other employer to obtain a deduction or as may be
otherwise required by law;

3.3.11 to determine whether and with what effect an individual has incurred a
Termination of Employment;

3.3.12 to determine the restrictions or limitations on the transfer of Stock;

3.3.13 to determine whether an Award is to be adjusted, modified or purchased,
or is to become fully or partially exercisable, under the Plan or the terms of
an Agreement;

3.3.14 to determine the permissible methods of Award exercise and payment within
the terms and conditions of the Plan and the particular Agreement;

3.3.15 to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of this Plan;

3.3.16 to appoint and compensate agents, counsel, auditors or other specialists
to aid it in the discharge of its duties; and

3.3.17 to make all other determinations which may be necessary or advisable for
the administration of the Plan.

The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable,

 

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to interpret the terms and provisions of the Plan and any Award issued under the
Plan (and any Agreement) and to otherwise supervise the administration of the
Plan. The Committee's policies and procedures may differ with respect to Awards
granted at different times and may differ with respect to a Participant from
time to time, or with respect to different Participants at the same or different
times.

3.4 Committee Determinations and Decisions. Any determination made by the
Committee pursuant to the provisions of the Plan shall be made in its sole
discretion. All decisions made by the Committee pursuant to the provisions of
the Plan shall be final and binding on all persons, including the Company and
Participants. Any determination shall not be subject to de novo review if
challenged in court. Neither the Committee (including any member thereof) nor
the Company shall have any liability to any Participant for any matter it
determined in good faith as being in compliance with this Plan and the Code even
if such determination was later proved incorrect.

3.5 Board Authority. All duties, responsibilities and authority granted to the
Committee pursuant to the Plan shall also extend to the Board, unless
specifically delegated to the Committee, and all references to the “Committee”
in this Plan shall be deemed to also include the Board.

ARTICLE IV

SHARES SUBJECT TO PLAN

4.1 Number of Shares. Subject to the adjustment under Section 4.5, the total
number of shares of Stock reserved and available for distribution pursuant to
Awards under the Plan shall be 1,300,000 shares which are hereby authorized for
issuance on the Effective Date. All of the shares of Stock described in the
preceding sentence of this Section may be used for grants of Incentive Stock
Options. Upon approval of the Plan by shareholders, any existing long-term
incentive plans (including the Waste Industries USA, Inc. 1997 Stock Plan),
whether or not they have been approved by shareholders, will immediately cease
to be available for use for the grant of new incentive awards, but authorized
and unissued shares reserved under such plans for incentive awards outstanding
on the Effective Date may be re-reserved instead for issuance under this Plan
upon the future expiration, termination or forfeiture of any such outstanding
incentive awards without the delivery of shares. The shares of Stock available
under the Plan may be authorized and unissued shares, treasury shares or a
combination thereof, as the Committee may determine.

4.2 Release of Shares. Subject to Section 4.1, the Committee shall have full
authority to determine the number of shares of Stock available for Awards. In
its discretion the Committee may include (without limitation), as available for
distribution, (a) shares of Stock subject to any Award that have been previously
forfeited; or (b) shares under an Award that otherwise terminates without
issuance of Stock being made to a Participant. Notwithstanding the foregoing,
the Committee shall not include as available for distribution shares of Stock
that are received by the Company in connection with the exercise of an Award for
payment of the exercise or purchase price or for the satisfaction of any tax
liability or tax withholding obligation.

 

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Any shares that are available immediately prior to the termination of the Plan,
or any shares of Stock returned to the Company for any reason subsequent to the
termination of the Plan, may be transferred to a successor plan.

4.3 Restrictions on Shares. Stock issued upon exercise of an Award shall be
subject to the terms and conditions specified herein and to such other terms,
conditions and restrictions as the Committee in its discretion may determine or
provide in the Award Agreement. The Company shall not be required to issue or
deliver any certificates for Stock, cash or other property prior to (a) the
completion of any registration or qualification of such shares under federal,
state or other law, or any ruling or regulation of any government body which the
Committee determines to be necessary or advisable; (b) the satisfaction of any
applicable withholding obligation in order for the Company or an Affiliate to
obtain a deduction or discharge its legal obligation with respect to the
exercise of an Award; and (c) satisfaction of any other terms, conditions or
restrictions specified herein. The Company may cause any certificate (or other
representation of title) for any shares of Stock to be delivered to be properly
marked with a legend or other notation reflecting the limitations on transfer of
such Stock as provided in this Plan, any shareholder agreement then in effect or
as the Committee may otherwise require. The Committee may require any person
exercising an Award to make such representations and furnish such information as
it may consider appropriate in connection with the issuance or delivery of the
Stock in compliance with applicable law or otherwise. Fractional shares shall
not be delivered, but shall be rounded to the next lower whole number of shares.

4.4 Shareholder Rights. No person shall have any rights of a shareholder as to
Stock subject to an Award until, after proper exercise of the Award or other
action required, such shares shall have been recorded on the Company's official
shareholder records as having been issued and transferred. Upon exercise of the
Award or any portion thereof, the Company will have a reasonable period in which
to issue and transfer the shares, and a Participant will not be treated as a
shareholder for any purpose whatsoever prior to such issuance and transfer. No
adjustment shall be made for cash dividends or other rights for which the record
date is prior to the date such shares are recorded as issued and transferred in
the Company's official shareholder records, except as provided herein or in an
Agreement.

4.5 Effect of Certain Corporate Changes. In the event of any share dividend,
share split, combination or exchange of shares, recapitalization or other change
in the capital structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off or
distribution to Company shareholders other than a normal cash dividend),
reorganization, rights offering, a partial or complete liquidation, or any other
corporate transaction, Company securities offering or event involving the
Company and having an effect similar to any of the foregoing, then the Committee
shall make appropriate adjustments or substitutions relating, as applicable, to
the number of shares of Stock available for Awards under the Plan, the number of
shares of Stock covered by outstanding Awards, the Exercise Price per share of
outstanding Awards, and any other characteristics or terms of the Awards as the
Committee may deem necessary or appropriate to reflect equitably the effects of
such changes to the Participants. Notwithstanding the foregoing, any fractional
shares resulting from such adjustment shall be eliminated by rounding down to
the nearest whole share.

 

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ARTICLE V

ELIGIBILITY

5.1 Eligibility. Except as herein provided, the persons who shall be eligible to
participate in the Plan and be granted Awards shall be those persons who are
lawful employees of, or consultants or advisors to, the Company or any
Affiliate, or non-employee members of the Board of Directors. Of those persons
described in the preceding sentence, the Committee may, from time to time,
select persons to be granted Awards and shall determine the terms and conditions
with respect thereto. In making any such selection and in determining the form
of the Award, the Committee shall give consideration to such factors deemed
appropriate by the Committee.

ARTICLE VI

STOCK OPTIONS

6.1 General. The Committee shall have authority to grant Options under the Plan
at any time or from time to time. The Committee shall consider the potential
impact of Code Section 409A on each grant of Options and, if necessary, shall
make the terms and conditions of the Options, in its good faith determination,
comply with the requirements of Code Section 409A to avoid being subject to
taxation under Code Section 409A(a)(1). An Option shall entitle the Participant
to receive Stock upon exercise of such Option, subject to the Participant's
satisfaction in full of any conditions, restrictions or limitations imposed in
accordance with the Plan or an Agreement (the terms and provisions of which may
differ from other Agreements) including, without limitation, payment of the
Exercise Price.

6.2 Grant. The grant of an Option shall occur as of the Grant Date determined by
the Committee, provided that the Grant Date shall not be earlier than the date
upon which the Committee formally acts to grant the Option. Options may be
granted alone or in connection with other Awards. An Award of Options shall be
evidenced by, and subject to the terms of, an Agreement. Only a person who is a
common-law employee of the Company, any "parent corporation" of the Company, or
a "subsidiary corporation" of the Company (each term as defined in Section 424
of the Code) on the date of grant shall be eligible to be granted an Incentive
Stock Option. To the extent that any Option is not designated as an Incentive
Stock Option or even if so designated does not qualify as an Incentive Stock
Option, it shall constitute a Non-Qualified Stock Option.

6.3 Terms and Conditions. Options shall be subject to such terms and conditions
as shall be determined by the Committee, including the following:

6.3.1 Exercise Price. The Exercise Price per share shall not be less than the
Fair Market Value per share on the Grant Date. If an Option which is intended to
qualify as an Incentive Stock Option is granted to an individual (a "10% Owner")
who owns or who is deemed to own shares possessing more than ten percent
(10%) of the combined voting power of all classes of shares of the Company, a
parent corporation or any subsidiary

 

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corporation (each term as defined in Section 6.2), the Exercise Price per share
shall not be less than one hundred ten percent (110%) of the Fair Market Value
per share on the Grant Date.

6.3.2 Option Period. The Option Period of each Option shall be fixed by the
Committee, provided that no Option shall be exercisable more than ten (10) years
after the date the Option is granted. In the case of an Incentive Stock Option
granted to a 10% Owner, the Option Period shall not exceed five (5) years from
the date the Option is granted. No Option which is intended to be an Incentive
Stock Option shall be granted more than ten (10) years from the date the Plan is
adopted by the Company or the date the Plan is approved by the shareholders of
the Company, whichever is earlier.

6.3.3 Exercisability. Subject to Section 11.1, an Option shall be exercisable in
whole or in such installments and at such times, as established by the Committee
in an Agreement. The Committee may provide in an Agreement for an accelerated
exercise of all or part of an Option upon such events or standards that it may
determine, including one or more Performance Measures. In addition, the
Committee may at any time accelerate the exercisability of all or part of any
Option. If an Option is designated as an Incentive Stock Option, the aggregate
Fair Market Value (determined at the date of grant of the Option) of the Stock
as to which such Incentive Stock Option which is exercisable for the first time
during any calendar year (under the Plan or any other plan of the Company or any
parent corporation or subsidiary corporation) shall not exceed $100,000.

6.3.4 Method of Exercise. Subject to the provisions of this Article VI and the
Agreement, a Participant may exercise Options, in whole or in part, during the
Option Period by giving written notice of exercise on a form provided by the
Committee to the Company specifying the number of shares of Stock subject to the
Option to be purchased. Such notice shall be accompanied by payment in full of
the purchase price by cash or certified check or such other form of payment as
the Company may accept. If permitted in the applicable Agreement, payment in
full or in part may also be made by (a) delivering Stock already owned by the
Participant (for any minimum period required by the Committee) having a total
Fair Market Value on the date of such delivery equal to the Exercise Price;
(b) the delivery of cash by a broker-dealer as a "cashless" exercise, provided
such method of payment may not be used by an executive officer of the Company or
a member of the Board to the extent such payment method would violate Rule 16b-3
or the Sarbanes-Oxley Act of 2002; (c) withholding by the Company of Stock
subject to the Option having a total Fair Market Value as of the date of
delivery equal to the Exercise Price; or (d) any combination of the foregoing.

6.3.5 Conditions for Issuance of Shares. No shares of Stock shall be issued
until full payment therefore has been made. A Participant shall have all of the
rights of a shareholder of the Company holding the class of shares that is
subject to such Option (including, if applicable, the right to vote the shares
and the right to receive dividends) when the Participant has given written
notice of exercise, has paid in full for such shares, and such shares have been
recorded on the Company's official shareholder records as having been issued and
transferred.

 

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6.3.6 Non-transferability of Options. Unless otherwise specifically provided in
an Agreement, no Option shall be sold, assigned, margined, transferred,
encumbered, conveyed, gifted, alienated, hypothecated, pledged, or otherwise
disposed of, other than by will or by the laws of descent and distribution, and
all Options shall be exercisable during the Participant's lifetime only by the
Participant; provided, however, under no circumstances may a Participant assign,
transfer, convey or otherwise dispose of an Option for consideration unless
pursuant to a qualified domestic relations order.

6.4 Termination by Reason of Death. Unless otherwise specifically provided in an
Agreement or determined by the Committee, any unexpired and unexercised Option
held by a Participant who incurs a Termination of Employment due to death shall
thereafter be fully exercisable for a period of one (1) year immediately
following the date of such death or until the expiration of the Option Period,
whichever period is the shorter. In the event of a Termination of Employment due
to death, if an Incentive Stock Option shall be exercised after the expiration
of the exercise period that applies for purposes of Code Section 422, such Stock
Option thereafter shall be treated as a Non-Qualified Stock Option.

6.5 Termination by Reason of Disability. Unless otherwise specifically provided
in an Agreement or determined by the Committee, any unexpired and unexercised
Option held by a Participant who incurs a Termination of Employment due to
Disability shall thereafter be fully exercisable by the Participant for a period
of one (1) year immediately following the date of such Termination of Employment
or until the expiration of the Option Period, whichever period is the shorter,
and the Participant's death at any time following such Termination of Employment
due to Disability shall not affect the foregoing In the event of a Termination
of Employment due to Disability, if an Incentive Stock Option shall be exercised
after the expiration of the exercise period that applies for purposes of Code
Section 422, such Stock Option thereafter shall be treated as a Non-Qualified
Stock Option.

6.6 Other Termination. Unless otherwise specifically provided in an Agreement or
determined by the Committee, if a Participant incurs a Termination of Employment
that is involuntary on the part of the Participant (but is not due to death,
Disability or with Cause), any Option held by such Participant shall thereupon
terminate, except that such Option, to the extent then exercisable, may be
exercised for the lesser of the three consecutive month period commencing with
the date of such Termination of Employment or until the expiration of the Option
Period, whichever period is the shorter. Unless otherwise specifically provided
in an Agreement or determined by the Committee, if the Participant incurs a
Termination of Employment for Cause or that is voluntary on the part of the
Participant, the Option, to the extent not previously exercised, shall terminate
one business day prior to such Termination of Employment. Unless otherwise
provided in an Agreement, the death or Disability of a Participant after a
Termination of Employment otherwise provided herein shall not extend the time
permitted to exercise an Option. In the event of any Termination of Employment,
voluntary or involuntary, with Cause or without Cause, if an Incentive Stock
Option shall be exercised after the expiration the exercise period that applies
for purposes of Code Section 422, such Stock Option thereafter shall be treated
as a Non-Qualified Stock Option.

 

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ARTICLE VII

STOCK APPRECIATION RIGHTS

7.1 General. The Committee shall have authority to grant Stock Appreciation
Rights under the Plan at any time or from time to time. Stock Appreciation
Rights may be awarded alone or in tandem with other Awards granted under the
Plan. The Committee shall consider the potential impact of Code Section 409A on
each grant of Stock Appreciation Rights and, if determined to be necessary,
shall make the terms of conditions of the Stock Appreciation Rights, in its good
faith determination, comply with the requirements of Code Section 409A to avoid
being subject to taxation under Code Section 409A(a)(1). Subject to the
Participant's satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with the Plan or an Agreement, a Stock
Appreciation Right shall entitle the Participant to surrender to the Company the
Stock Appreciation Right and to receive in Stock the number of shares described
in Section 7.3(2).

7.2 Grant. The grant of a Stock Appreciation Right shall occur as of the Grant
Date determined by the Committee. A Stock Appreciation Right entitles a
Participant to receive Stock as described in Section 7.3.2. An Award of Stock
Appreciation Rights shall be evidenced by, and subject to the terms of an
Agreement, which shall become effective upon execution by the Participant.

7.3 Terms and Conditions. Stock Appreciation Rights shall be subject to such
terms and conditions as shall be determined by the Committee and set forth in an
Agreement, including (but not limited to) the following:

7.3.1 Period and Exercise. The term of a Stock Appreciation Right shall be
established by the Committee provided that no Stock Appreciation Right shall be
exercisable more than ten (10) years after the date the Stock Appreciation Right
is granted. A Stock Appreciation Right shall be for such period and, subject to
Section 11.1, shall be exercisable in whole or in installments and at such times
as established by the Committee in an Agreement. The Committee may provide in an
Agreement for an accelerated exercise of all or part of a Stock Appreciation
Right upon such events or standards that it may determine, including one or more
Performance Measures. In addition, the Committee may at any time accelerate the
exercisability of all or part of any Stock Appreciation Right. Stock
Appreciation Rights shall be exercised by the Participant's giving written
notice of exercise, on a form provided by the Committee, to the Company
specifying the portion of the Stock Appreciation Right to be exercised.

7.3.2 Delivery of Stock. Upon the exercise of a Stock Appreciation Right, a
Participant shall receive a number of shares of Stock equal in value to the
excess of the Fair Market Value per share of Stock over the Exercise Price per
share of Stock specified in the related Agreement, multiplied by the number of
shares in respect of which the Stock Appreciation Right is exercised. The
Exercise Price per share shall not be less than the Fair Market Value per share
on the Grant Date. The aggregate Fair Market Value per share of Stock shall be
determined as of the date of exercise of such Stock Appreciation Right.

 

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7.3.3 Non-transferability of Stock Appreciation Rights. Except as specifically
provided in the Plan or in an Agreement, no Stock Appreciation Rights shall be
sold, assigned, margined, transferred, encumbered, conveyed, gifted, alienated,
hypothecated, pledged or otherwise disposed of, other than by will or the laws
of descent and distribution, and all Stock Appreciation Rights shall be
exercisable during the Participant's lifetime only by the Participant; provided,
however, under no circumstances may a Participant assign or transfer a Stock
Appreciation Right for consideration unless pursuant to a qualified domestic
relations order.

7.3.4 Termination of Employment. A Stock Appreciation Right shall be forfeited
or terminated at such time as an Option would be forfeited or terminated under
the Plan, unless otherwise specifically provided in an Agreement.

ARTICLE VIII

RESTRICTED STOCK

8.1 General. The Committee shall have authority to grant Restricted Stock under
the Plan at any time or from time to time. The Committee shall determine the
number of shares of Restricted Stock to be awarded to any Participant, the time
or times within which such Awards may be subject to forfeiture, and any other
terms and conditions of the Awards. Each Award shall be confirmed by, and be
subject to the terms of, an Agreement which contains the applicable terms and
conditions of the Award, including the rate or times provided by the Committee
for the lapse of any forfeiture restrictions or other conditions regarding the
Award. The Committee may provide in an Agreement for an accelerated lapse of any
such restrictions upon such events or standards that it may determine, including
one or more Performance Measures. In addition, the Committee may at any time
accelerate the lapse of any such restrictions with respect to any Restricted
Stock. Each Award of Restricted Stock shall become effective upon execution by
the Participant of an Agreement.

8.2 Grant, Awards and Certificates. The grant of an Award of Restricted Stock
shall occur as of the Grant Date determined by the Committee. Restricted Stock
may be awarded either alone or in addition to other Awards granted under the
Plan. Notwithstanding the limitations on issuance of Stock otherwise provided in
the Plan, each Participant receiving an Award of Restricted Stock shall be
issued a certificate (or other representation of title) in respect of such
Restricted Stock. Such certificate shall be registered in the name of such
Participant and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Award as determined by the
Committee and any restrictions that the Stock may be subject to, including any
shareholder agreement then in effect. The Committee may require that the
certificates evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed and that, as a condition of any Award of
Restricted Stock, the Participant shall have delivered a share power, endorsed
in blank, relating to the Stock covered by such Award.

 

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8.3 Terms and Conditions. Restricted Stock shall be subject to such terms and
conditions as shall be determined by the Committee, including the following:

8.3.1 Limitations on Transferability. Subject to the provisions of the Plan and
the Agreement, during a period set by the Committee, commencing with the date of
such Award (the "Restriction Period"), the Participant shall not be permitted to
sell, assign, margin, transfer, encumber, convey, gift, alienate, hypothecate,
pledge or otherwise dispose of Restricted Stock; provided, however, under no
circumstances may a Participant assign or transfer Restricted Stock for
consideration unless pursuant to a qualified domestic relations order.

8.3.2 Rights. Except as provided in Section 8.3.1 and notwithstanding
Section 4.4, the Participant shall have, with respect to the Restricted Stock,
all of the rights of a shareholder of the Company holding the class of Stock
that is the subject of the Restricted Stock, including, if applicable, the right
to vote the shares and the right to receive any dividends. If any dividends or
other distributions are paid in shares of Stock, all such shares shall be
subject to the same restrictions on transferability as the shares of Restricted
Stock with respect to which they were paid.

8.3.3 Criteria. As described in Section 8.1 above, the Committee may provide in
an Agreement for the lapse of restrictions in installments and may accelerate
the vesting of all or any part of any Award and waive the restrictions for all
or any part of such Award; such provisions of an Agreement or Committee action
may be based on service, performance by the Participant or by the Company or the
Affiliate, including any division or department for which the Participant is
employed or such other factors or criteria as the Committee may determine.

8.3.4 Forfeiture. Unless otherwise provided in an Agreement or determined by the
Committee, if the Participant incurs a Termination of Employment due to death or
Disability during the Restriction Period, the restrictions shall lapse and the
Participant shall be fully vested in the Restricted Stock. Except to the extent
otherwise provided in the applicable Agreement and the Plan, upon a
Participant's Termination of Employment for any reason during the Restriction
Period other than a Termination of Employment due to death or Disability, all
shares of Restricted Stock still subject to restriction shall be forfeited by
the Participant, except the Committee shall have the discretion to waive in
whole or in part any or all remaining restrictions with respect to any or all of
such Participant's Restricted Stock.

8.3.5 Delivery. If a share certificate is issued in respect of Restricted Stock,
the certificate shall be registered in the name of the Participant but shall be
held by the Company for the account of the Participant until the end of the
Restriction Period. If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction Period,
unlegended certificates (or other representation of title) for such shares shall
be delivered to the Participant.

 

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ARTICLE IX

DEFERRED STOCK

9.1 General. The Committee shall have authority to grant an Award of Deferred
Stock under the Plan at any time or from time to time. Deferred Stock may be
awarded either alone or in addition to other Awards granted under the Plan. The
Committee may denominate a Deferred Stock Award in either shares or units. The
Committee shall consider the impact of Code Section 409A on each grant of
Deferred Stock and, if determined to be necessary, shall make the terms and
conditions of the Deferred Stock, in its good faith determination, comply with
the requirements of Code 409A to avoid being subject to taxation under Code
Section 409A(a)(1). The Committee shall determine the number of shares of
Deferred Stock to be awarded to any Participant, the duration of the period (the
"Deferral Period") prior to which the Common Stock will be delivered, and the
conditions under which receipt of the Stock will be deferred and any other terms
and conditions of the Awards. Each Deferred Stock Award shall be evidenced by,
and subject to the terms of, an Agreement, which will become effective upon
execution by the Participant.

9.2 Terms and Conditions. Deferred Stock Awards shall be subject to such terms
and conditions as shall be determined by the Committee, including the following:

9.2.1 Limitations on Transferability. Subject to the provisions of the Plan and
the Agreement, Deferred Stock Awards may not be sold, assigned, margined,
transferred, encumbered, conveyed, gifted, alienated, hypothecated, pledged, or
otherwise disposed of during the Deferral Period; provided, however, under no
circumstances may a Participant assign or transfer a Deferred Stock Award for
consideration unless pursuant to a qualified domestic relations order. Subject
to the provisions of an Agreement, at the expiration of the Deferral Period, the
Committee shall deliver Stock to the Participant pursuant to the Deferred Stock
Award.

9.2.2 Rights. Unless otherwise provided in an Agreement or required by Code
Section 409A, cash dividends on Deferred Stock shall be deemed to be paid and
automatically reinvested in additional shares of Deferred Stock to be delivered
with the original delivery of the Deferred Stock.

9.2.3 Criteria. Based on service, performance by the Participant or by the
Company or the Affiliate, including any division or department for which the
Participant is employed, or such other factors or criteria as the Committee may
determine, the Committee may provide for the lapse of deferral limitations in
installments and may accelerate the vesting of all or any part of any Award and
waive the deferral limitations for all or any part of such Award.

9.2.4 Forfeiture. Unless otherwise provided in an Agreement or determined by the
Committee, if the Participant incurs a Termination of Employment due to death or
Disability during the Deferral Period, the restrictions shall lapse and the
Participant shall be fully vested in the Deferred Stock. Unless otherwise
provided in an Agreement or determined by

 

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the Committee, upon a Participant's Termination of Employment for any reason
during the Deferral Period other than a Termination of Employment due to death
or Disability, the rights to the shares still covered by the Award shall be
forfeited by the Participant, except the Committee shall have the discretion to
waive in whole or in part any or all remaining deferral limitations with respect
to any or all of such Participant's Deferred Stock.

9.2.5 Election. A Participant may elect to further defer receipt of the Deferred
Stock payable under an Award (or an installment of an Award) for a specified
time (or pursuant to a fixed schedule) or until the occurrence of a permissible
distribution event under Code Section 409A, subject to such terms and conditions
determined by the Committee. Any such election must be made no later than the
time provided by Section 409A(a)(4) of the Code, as determined by the Committee.

ARTICLE X

PERFORMANCE AWARDS

10.1 General. The Committee shall have authority to grant Performance Awards
under the Plan at any time or from time to time. The Committee shall consider
the impact of Code Section 409A on each grant of a Performance Award and, if
determined to be necessary, shall make the terms and conditions of the
Performance Awards, in its good faith determination, comply with the
requirements of Code Section 409A to avoid being subject to taxation under Code
Section 409A(a)(1). A Performance Unit and a Performance Share each consist of
the right to receive shares of Stock or cash, as provided in the particular
Award Agreement, upon achievement of certain Performance Goals and may be
awarded either alone or in addition to other Awards granted under the Plan.
Performance Units shall be denominated in units of value (including dollar value
of shares of Stock) and Performance Shares shall be denominated in a number of
shares of Stock. Subject to the terms of the Plan, the Committee shall have
complete discretion to determine the number of Performance Units and Performance
Shares, if any, granted to a Participant. Each Performance Award shall be
evidenced by, and be subject to the terms of, an Agreement which will become
effective upon execution by the Participant.

10.2 Earning Performance Awards. After the applicable Performance Period shall
have ended, the Committee shall determine the extent to which the established
Performance Goals have been achieved.

10.3 Termination of Employment. Unless otherwise specifically provided in an
Agreement or determined by the Committee, in the event of a Termination of
Employment due to death or Disability, during a Performance Period, the
Participant shall receive, after the expiration of the Performance Period, a pro
rata share of the Performance Awards relating to such Performance Period based
upon the period of time he or she is employed by the Company in the Performance
Period. Unless otherwise specifically provided in an Agreement or determined by
the Committee, in the event that a Participant's employment terminates for any
other reason, all Performance Awards shall be forfeited by the Participant to
the Company. Any distribution of earned Performance Awards authorized by an
Agreement or determined by the

 

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Committee may be made at the same time payments are made to Participants who did
not incur a Termination of Employment during the applicable Performance Period.

10.4 Nontransferability. Unless otherwise specifically provided in an Agreement,
Performance Awards may not be sold, assigned, margined, transferred, encumbered,
conveyed, gifted, alienated, hypothecated, pledged, or otherwise disposed of,
other than by will or by the laws of descent and distribution; provided,
however, under no circumstances may a Participant assign or transfer a Stock
Appreciation Right for consideration unless pursuant to a qualified domestic
relations order.

ARTICLE XI

CHANGE IN CONTROL PROVISIONS

11.1 Impact of Event. Notwithstanding any other provision of the Plan to the
contrary and unless otherwise specifically provided in an Agreement, in the
event of a Change in Control:

11.1.1 any Stock Options and Stock Appreciation Rights outstanding as of the
date of such Change in Control shall become fully vested and exercisable to the
full extent of the original grant;

11.1.2 the restrictions applicable to any Restricted Stock Awards shall lapse,
and such Restricted Stock shall become free of all restrictions and become fully
vested and transferable to the full extent of the original grant; and

11.1.3 any unvested Deferred Stock shall vest and shall be distributed within
thirty (30) days following the Change in Control; and

11.1.4 any Performance Goal or other condition with respect to any Performance
Shares and Performance Units shall be deemed to have been satisfied in full, and
such Award shall be fully distributable within thirty (30) days following the
Change in Control.

11.2 Assumption, Substitution or Termination. Subject in all cases to
Section 11.1, and notwithstanding anything herein or in an Agreement to the
contrary, the Committee shall have full discretion with respect to an
outstanding Award upon a Change in Control in which the Company is not the
surviving entity to provide that the Award will be assumed by another entity or
securities of another entity will be substituted for the Award and to make
equitable adjustment with respect thereto. In the event of a Change in Control
in which the Company is not the surviving entity, if an outstanding Award is not
assumed or substituted as set forth above, unless otherwise determined by the
Committee in its full discretion and subject in all cases to Section 11.1, the
Award shall terminate upon the completion of the Change in Control event.

 

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ARTICLE XII

PROVISIONS APPLICABLE TO SHARES ACQUIRED UNDER THIS PLAN

12.1 No Company Obligation. Except to the extent specifically required by
applicable securities laws, none of the Company, an Affiliate or the Committee
shall have any duty or obligation to affirmatively disclose material information
to a record or beneficial holder of Stock or an Award, and such holder shall
have no right to be advised of any material information regarding the Company or
any Affiliate at any time prior to, upon, or in connection with receipt or the
exercise or distribution of an Award. The Company makes no representation or
warranty as to the future value of the Stock issued or acquired in accordance
with the provisions of the Plan.

ARTICLE XIII

MISCELLANEOUS

13.1 Amendments and Termination. The Board may amend, alter, or discontinue the
Plan at any time, but no amendment, alteration or discontinuation shall be made
which would materially impair the rights of a Participant under an Award
theretofore granted without the Participant's consent. Notwithstanding the
immediately preceding sentence, an amendment may be made without a Participant's
consent to (a) cause the Plan or an Award to comply with applicable law
(including, but not limited to, any changes needed to avoid taxation of an Award
as a "nonqualified deferred compensation plan" under Code Section 409A) or
(b) permit the Company or an Affiliate a tax deduction under applicable law
(including, without limitation, Section 162(m) of the Code). The Committee may
amend, alter or discontinue the terms of any Award theretofore granted,
prospectively or retroactively, on the same conditions and limitations (and
exceptions to limitations) as apply to the Board, and further subject to any
approval or limitations the Board may impose. Notwithstanding the foregoing, any
amendments to the Plan shall require shareholder approval to the extent required
by Federal or state law or any regulations or rules promulgated thereunder or
the rules of the national securities exchange or market on which shares of Stock
are listed.

13.2 Unfunded Status of Plan. It is intended that the Plan be an "unfunded" plan
for incentive compensation. The Company may create trusts or other arrangements
to meet the obligations created under the Plan to deliver Stock or make
payments; provided, however, that the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan and all
property held thereunder and income thereon shall remain solely the property and
rights of the Company (without being restricted to satisfying the obligations
created under the Plan) and shall be subject to the claims of the Company's
general creditors. The Company's obligations created under the Plan shall
constitute a general, unsecured obligation, payable solely out of its general
assets.

13.3 Provisions Relating to Internal Revenue Code Section 162(m). To the extent
that Section 162(m) of the Code applies with respect to Awards to Covered
Employees under the Plan, the Plan shall be administered, and the provisions of
the Plan shall be interpreted, in a

 

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manner consistent with Code Section 162(m). If any provision of the Plan or any
Agreement relating to such an Award does not comply or is inconsistent with the
requirements of Code Section 162(m), such provision shall be construed or deemed
amended to the extent necessary to conform to such applicable requirements. In
addition, the following provisions shall apply to the Plan or an Award to the
extent necessary to obtain a tax deduction for the Company or an Affiliate:

13.3.1 Committee Determination. Not later than the date required or permitted
for "qualified performance-based compensation" under Code Section 162(m), the
Committee shall determine the Participants who are Covered Employees who will
receive Awards that are intended as qualified performance-based compensation,
the Performance Goals, the maximum amount of compensation that could be paid to
any eligible Covered Employee, and the amount or method for determining the
amount of such compensation.

13.3.2 Share Limitation. During any three-consecutive calendar year period, the
maximum number of shares of Stock for which Options and Stock Appreciation
Rights, in the aggregate, may be granted to any Covered Employee shall not
exceed 650,000 shares.

13.3.3 Earning Performance Awards. Subject to the provisions of Section 13.3(4)
below, payment with respect to Performance Awards for Covered Employees shall be
a direct function of the extent to which the Company's Performance Goals have
been achieved. A Performance Award to a Participant who is a Covered Employee
shall (unless the Committee determines otherwise in an Agreement) provide that
in the event of the Participant's Termination of Employment prior to the end of
the Performance Period for any reason, such Award will be payable only (a) if
the applicable Performance Goals are achieved and (b) to the extent, if any, as
the Committee shall determine.

13.3.4 Other Section 162(m) Provisions. In the manner required by Section 162(m)
of the Code, the Committee shall, promptly after the date on which the necessary
financial and other information for a particular Performance Period becomes
available, certify the extent to which Performance Goals have been achieved with
respect to any Performance Award or Restricted Stock Award intended to qualify
as performance-based compensation under Section 162(m) of the Code. In addition,
the Committee may, in its discretion, reduce or eliminate the amount of any
Performance Award payable to any Participant, based on such factors as the
Committee may deem relevant, but the Committee may not increase the amount of
any Performance Award payable to any Participant above the amount established
for the relevant Performance Goals with respect to any Performance Award
intended to qualify as performance-based compensation.

13.4 Misconduct of a Participant. Notwithstanding anything to the contrary in
the Plan, the Committee, in its sole discretion, may establish procedures, at or
before the time that an Award is granted (or, with the consent of the
Participant, after such time), in the applicable Award Agreement or in a
separate agreement, providing for the forfeiture or cancellation of such Award
(whether vested or unvested), or the disgorgement of gains from the exercise,
vesting or settlement of the Award, in each case to be applied if the
Participant engages in

 

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conduct detrimental to the Company. For purposes of this Plan, conduct
detrimental to the Company may include conduct that the Committee in its sole
discretion determines (a) to be injurious or prejudicial to any interest of the
Company or any of its Affiliates, or (b) to otherwise violate a policy,
procedure or rule applicable to the Participant with respect to the Company or
any of its subsidiaries, or (c) if the Participant incurs a Termination of
Employment for Cause.

13.5 Withholding. No later than the date as of which an amount first becomes
includible in the gross income of the Participant for federal income tax
purposes with respect to any Award, the Participant shall pay to the Company (or
other entity identified by the Committee), or make arrangements satisfactory to
the Company or other entity identified by the Committee regarding the payment
of, any federal, state, or local taxes of any kind (including any employment
taxes) required by law to be withheld with respect to such income. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements, and the Company and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to the Participant. Subject to approval by the Committee, a
Participant may elect to have such tax withholding obligation satisfied, in
whole or in part, by (i) authorizing the Company to withhold from shares of
Stock to be issued pursuant to any Award a number of shares with an aggregate
Fair Market Value (as of the date the withholding is effected) that would
satisfy the required statutory minimum (but no more than such required minimum)
with respect to the Company's withholding obligation, or (ii) transferring to
the Company shares of Stock owned by the Participant with an aggregate Fair
Market Value (as of the date the withholding is effected) that would satisfy the
required statutory minimum (but no more than such required minimum) with respect
to the Company's withholding obligation.

13.6 Controlling Law. The Plan and all Awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the state of
North Carolina (other than its law respecting choice of law). The Plan shall be
construed to comply with all applicable law and to avoid liability to the
Company, an Affiliate or a Participant. In the event of litigation arising in
connection with actions under the Plan, the parties to such litigation shall
submit to the jurisdiction of courts located in Wake County, North Carolina, or
to the federal district court that encompasses said county.

13.7 Nontransferability; Beneficiaries. Unless otherwise specifically provided
in an Agreement, no Award or Stock subject to an Award shall be assignable or
transferable by the Participant, otherwise than by will or the laws of descent
and distribution or pursuant to a beneficiary designation, and Awards shall be
exercisable during the Participant's lifetime only by the Participant (or by the
Participant's Representative in the event of the Participant's incapacity);
provided, however, under no circumstances may a Participant assign or transfer
an Award or Stock subject to an Award for consideration unless pursuant to a
qualified domestic relations order. Each Participant may designate a Beneficiary
to exercise any Option or Stock Appreciation Right or receive any Award held by
the Participant at the time of the Participant's death or to be assigned any
other Award outstanding at the time of the Participant's death. No Award or
Stock subject to an Award shall be subject to the debts of a Participant or
Beneficiary or subject to attachment or execution or process in any court action
or proceeding unless

 

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otherwise provided in this Plan. If a deceased Participant has named no
Beneficiary, any Award held by the Participant at the time of death shall be
transferred as provided in his or her will or by the laws of descent and
distribution.

13.8 No Effect on Employment Relationship. Nothing contained herein shall be
deemed to alter the relationship between the Company or an Affiliate and a
Participant, or the contractual relationship between a Participant and the
Company or an Affiliate if there is a written contract regarding such
relationship. Nothing contained herein shall be construed to constitute a
contract of employment between the Company or an Affiliate and a Participant or
any guaranty of employment or continued employment. The Company or an Affiliate
and each of the Participants continue to have the right to terminate the
employment or service relationship at any time for any reason, except as
provided in a written contract. The Company or an Affiliate shall have no
obligation to retain the Participant in its employ or service as a result of
this Plan. There shall be no inference as to the length of employment or service
hereby, and the Company or an Affiliate reserves the same rights to terminate
the Participant's employment or service as existed prior to the individual
becoming a Participant in this Plan.

13.9 Awards in Substitution for Awards Granted by Other Corporations. Awards may
be granted under the Plan from time to time in substitution for awards held by
employees, directors or service providers of other corporations who are about to
become officers or employees of the Company or an Affiliate as the result of a
merger or consolidation of the employing corporation with the Company or an
Affiliate, or the acquisition by the Company or an Affiliate of the assets of
the employing corporation, or the acquisition by the Company or Affiliate of the
share of the employing corporation, as the result of which it becomes an
Affiliate. The terms and conditions of the Awards so granted may vary from the
terms and conditions set forth in this Plan at the time of such grant as the
Committee may deem appropriate to conform, in whole or in part, to the
provisions of the awards in substitution for which they are granted are met.

13.10 Listing, Registration and Compliance with Laws and Regulations. All Awards
made under this Plan shall be subject to the requirement that if at any time the
Committee shall determine, in its discretion, that the listing, registration or
qualification of the Stock subject to such Award upon any securities exchange or
under any state or federal securities or other law or regulation, or the consent
or approval of any governmental regulatory body, is necessary or desirable as a
condition to or in connection with the granting of the Awards or the issuance or
purchase of shares thereunder, no Awards may be granted or exercised and no
restrictions of Restricted Stock or Deferred Stock be lifted, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Committee. The holders of such Awards shall supply the Company with such
certificates, representations and information as the Company shall request and
shall otherwise cooperate with the Company in obtaining such listing,
registration, qualification, consent or approval. In the case of officers and
other Persons subject to Section 16(b) of the Exchange Act, the Committee may at
any time impose any limitations upon the exercise of an Option, Stock
Appreciation Right or Restricted Stock or the lifting of restrictions on an
Award of Deferred Stock or a Performance Award that, in the Committee’s

 

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discretion, are necessary or desirable in order to comply with such
Section 16(b) and the rules and regulations thereunder.

13.11 Delivery of Stock Certificates. To the extent the Company uses
certificates to represent shares of Stock, certificates to be delivered to
Participants under this Plan shall be deemed delivered for all purposes when the
Company or a stock transfer agent of the Company shall have mailed such
certificates in the United States mail, addressed to the Participant, at the
Participant's last known address on file with the Company. Any reference in this
Section or elsewhere in the Plan or an Agreement to actual stock certificates
and/or the delivery of actual stock certificates shall be deemed satisfied by
the electronic record-keeping and electronic delivery of shares of Stock or
other mechanism then utilized by the Company and its agents for reflecting
ownership of such shares.

13.12 Indemnification. Indemnification of members of the Committee and the Board
with respect to any action taken or failure to act under the Plan or any
Agreement shall be determined under the Company's Articles of Incorporation and
by-laws. The foregoing rights of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under
contract, as a matter of law or otherwise, or under any power that the Company
may have to indemnify them or hold them harmless.

13.13 Severability. If any provision of this Plan shall for any reason be held
to be invalid or unenforceable, such invalidity or unenforceability shall not
effect any other provision hereby, and this Plan shall be construed as if such
invalid or unenforceable provision were omitted.

13.14 Successors and Assigns. This Plan shall inure to the benefit of and be
binding upon each successor and assign of the Company. All obligations imposed
upon a Participant, and all rights granted to the Company hereunder, shall be
binding upon the Participant's heirs, legal representatives and successors.

13.15 Entire Agreement. This Plan and the Agreement constitute the entire
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between the Plan and the Agreement, the terms
and conditions of this Plan shall control.

13.16 Term. No Award shall be granted under the Plan after the tenth anniversary
of the Effective Date.

13.17 Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.

13.18 Headings. The headings contained in this Plan are for reference purposes
only and shall not affect the meaning or interpretation of this Plan.

 

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