Exhibit 10.1.1

 

PRINCIPAL FINANCIAL GROUP, INC.
2005 STOCK INCENTIVE PLAN

 

SECTION 1.
PURPOSE

 

The purpose of the “PRINCIPAL FINANCIAL GROUP, INC. 2005 STOCK INCENTIVE PLAN”
(the “Plan”) is to foster and promote the long-term financial success of the
Company and its subsidiaries and materially increase shareholder value by
(a) motivating superior performance by means of performance-related incentives,
(b) encouraging and providing for the acquisition of an ownership interest in
the Company by the Company’s and its Subsidiaries’ employees and agents, and
(c) enabling the Company to attract and retain the services of outstanding
employees upon whose judgment, interest, and special effort the successful
conduct of its operations is largely dependent.

 

SECTION 2.
DEFINITIONS

 

(a)                                  Definitions.    Whenever used herein, the
following terms shall have the respective meanings set forth below:

 

(1)                                  “Agent” means each insurance agent (whether
or not a statutory employee) and each other individual providing personal
service to the Company or any Subsidiary who, in either case, is not an
Employee.

 

(2)                                  “Approved Retirement” means termination of
a Participant’s employment or service (i) on or after the normal retirement date
or any early retirement date established under any defined benefit pension plan
maintained by the Company or a Subsidiary and in which the Participant
participates or (ii) with the approval of the Committee (which may be given at
or after grant), on or after attaining age 50 and completing such period of
service as the Committee shall determine from time to time.

 

(3)                                  “Award” means an Option, SAR, award of
Restricted Stock or Performance Shares, an award of Restricted Stock Units or
Performance Units or an Other Stock-Based Award.

 

(4)                                  “Beneficial Owner” means such term as
defined in Rule 13d-3 under the Exchange Act.

 

(5)                                  “Board” means the Board of Directors of the
Company.

 

(6)                                  “Cause” means (i) dishonesty, fraud or
misrepresentation, (ii) the Participant’s engaging in conduct that is injurious
to the Company or any Subsidiary in any way, including, but not limited to, by
way of damage to its reputation or standing in the industry, (iii) the
Participant’s having been convicted of, or entered a plea of nolo contendere to,
a crime that constitutes a felony; (iv) the breach by the Participant of any
written covenant or agreement with the Company or any Subsidiary not to disclose
or misuse any information pertaining to, or misuse any property of, the Company
or any Subsidiary or not to compete or interfere with the Company or any
Subsidiary or (v) a violation by the Participant of any policy of the Company or
any Subsidiary.

 

(7)                                  “Change of Control” means the occurrence of
any one or more of the following:

 

(i)                                     any SEC Person becomes the Beneficial
Owner of 25% or more of the Common Stock or of Voting Securities representing
25% or more of the combined voting power of all Voting Securities of the Company
(such an SEC Person, a “25% Owner”); or

 

(ii)                                  the Incumbent Directors cease for any
reason to constitute at least a majority of the Board (other than in connection
with a Merger of Equals); or

 

(iii)                               consummation of a merger, reorganization,
consolidation, or similar transaction (any of the foregoing, a “Reorganization
Transaction”) other than a Reorganization Transaction (x) following which the
Continuity of Ownership is more than 60% or (y) which is (and continues to
qualify as) a Merger of Equals; or

 

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(iv)                              consummation of a plan or agreement that has
been approved by the shareholders of the Company for the sale or other
disposition of all or substantially all of the consolidated assets of the
Company or a plan of liquidation of the Company; or

 

(v)                                 any other event or circumstance (or services
of events or circumstances) that the Board shall determine to constitute a
Change of Control.

 

(8)                                  “Change of Control Price” means the highest
price per share of Common Stock offered in conjunction with any transaction
resulting in a Change of Control (as determined in good faith by the Committee
if any part of the offered price is payable other than in cash) or, in the case
of a Change of Control occurring solely by reason of a change in the composition
of the Board, the highest Fair Market Value of the Common Stock on any of the 30
trading days immediately preceding the date on which a Change of Control occurs.

 

(9)                                  “Code” means the Internal Revenue Code of
1986, as amended.

 

(10)                            “Committee” means the Human Resources Committee
of the Board or such other committee of the Board as the Board shall designate
from time to time.

 

(11)                            “Common Stock” means the common stock of the
Company, par value $0.01 per share.

 

(12)                            “Company” means Principal Financial Group, Inc.,
a Delaware corporation, and any successor thereto.

 

(13)                            “Continuity of Ownership” of a stated percentage
means that the SEC Persons who were the direct or indirect owners of the
outstanding Common Stock and Voting Securities of the Company immediately before
such Reorganization Transaction became, immediately after the consummation of
such Reorganization Transaction, the direct or indirect owners of both the
stated percentage of the then-outstanding common stock of the Surviving
Corporation and Voting Securities representing the stated percentage of the
combined voting power of the then-outstanding Voting Securities of the Surviving
Corporation, in substantially the same respective proportions as such Persons’
ownership of the Common Stock and Voting Securities of the Company immediately
before such Reorganization Transaction.

 

(14)                            “Disability” means, with respect to any
Participant, long-term disability as defined under any long-term disability plan
maintained by the Company or a Subsidiary in which the Participant participates.
In the event of any question as to whether a Participant has a Disability, the
plan administrator of the relevant long-term disability plan shall determine
whether a disability exists, in accordance with such plan.

 

(15)                            “Domestic Partner” means any person qualifying
to be treated as a domestic partner of a Participant under the applicable
policies, if any, of the Company or Subsidiary which employs the Participant.

 

(16)                            “Employee” means any employee (including each
officer) of the Company or any Subsidiary.

 

(17)                            “Exchange Act” means the Securities Exchange Act
of 1934, as amended.

 

(18)                            “Executive Officer” means any officer of the
Company or any Subsidiary who is subject to the reporting requirements under
Section 16(b) of the Exchange Act.

 

(19)                            “Fair Market Value” means, on any date, the
price of the last trade, regular way, in the Common Stock on such date on the
New York Stock Exchange or, if at the relevant time, the Common Stock is not
listed to trade on the New York Stock Exchange, on such other recognized
quotation system on which the trading prices of the Common Stock are then quoted
(the “applicable exchange”). In the event that (i) there are no Common Stock
transactions on the applicable exchange on any relevant date, Fair Market Value
for such date shall mean the closing price on the immediately preceding date on
which Common Stock transactions were so reported and (ii) the applicable
exchange adopts a trading policy permitting trades after 5 P.M. Eastern Standard
Time (“EST”), Fair Market Value shall mean the last trade, regular way, reported
on or before 5 P.M. EST (or such earlier or later time as the Committee may
establish from time to time).

 

(20)                            “Family Member” means, as to a Participant, any
(i) child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
mother-in-law, father-in-law, son-in-law or daughter-in-law (including adoptive
relationships), or Domestic Partner of such Participant, (ii) trusts for the
exclusive benefit of one or more such persons and/or the Participant and
(iii) other entity owned solely by one or more such persons and/or the
Participant.

 

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(21)                            “Imminent Control Change Period” means the
period commencing on the date any one or more of the following events occurs (or
the first of such events in a series of such events) and ending on the date on
which a Change of Control or a Merger of Equals occurs:

 

(i)                                     The Company enters into an agreement the
consummation of which would constitute a Change of Control;

 

(ii)                                  Any SEC Person attempts to become a 25%
Owner, as evidenced by filing or other certification of notice of such intent
with any state’s governmental agency established to regulate the insurance
industry, which, if consummated, would constitute a Change of Control;

 

(iii)                               Any SEC Person commences a “tender offer”
(as such term is used in Section 14(d) of the Exchange Act) or exchange offer,
which, if consummated, would result in a Change of Control; or

 

(iv)                              Any SEC Person files with the SEC a
preliminary or definitive proxy solicitation or election contest to elect or
remove one or more members of the Board, which, if consummated or effected,
would result in a Change of Control;

 

provided, however, that an Imminent Control Change Period will lapse upon the
occurrence of any of the following:

 

(A)                              With respect to an event described in
clause (i) of this definition, the date such agreement is terminated, cancelled
or expires without a Change of Control or Merger of Equals occurring;

 

(B)                                With respect to an event described in
clause (ii) of this definition, the date such filing or other certification is
withdrawn, expires or is denied or otherwise rejected by the relevant state
regulators without a Change of Control or Merger of Equals occurring;

 

(C)                                With respect to an event described in
clause (iii) of this definition, the date such tender offer or exchange offer is
withdrawn or terminates without a Change of Control or Merger of Equals
occurring;

 

(D)                               With respect to an event described in
clause (iv) of this definition, (1) the date the validity of such proxy
solicitation or election contest expires under relevant state corporate law, or
(2) the date such proxy solicitation or election contest culminates in a
stockholder vote, in either case without a Change of Control or Merger of Equals
occurring; or

 

(E)                                 The date a majority of the Incumbent
Directors makes a good faith determination that any event or condition described
in clause (i), (ii), (iii) or (iv) of this definition is no longer likely to
result in a Change of Control, provided that such determination may not be made
prior to the six (6) month anniversary of the occurrence of such event.

 

(22)                            “Incentive Stock Option” (ISO) means an option
within the meaning of Section 422 of the Code.

 

(23)                            “Incumbent Directors” means, as of any date, the
individuals then serving as members of the Board who were also members of the
Board as of the date two years prior to the date of determination; provided that
any member appointed or elected as a member of the Board after such prior date,
but whose election, or nomination for election, was approved by a vote or
written consent of at least a majority of the directors then comprising the
Incumbent Directors shall also be considered an Incumbent Director unless such
person’s election, or nominated for election, to the Board was as a result of,
or in connection with, a proxy contest or a Reorganization Transaction.

 

(24)                            “Merger of Equals” means the occurrence of a
Reorganization Transaction that satisfies all of the following:

 

(i)                                     the consummation of such Reorganization
Transaction results in Continuity of Ownership of at least 40%, but not more
than 60%; and

 

(ii)                                  an SEC Person does not become a 25% Owner
as a result of such Reorganization Transaction; and

 

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(iii)                               throughout the period beginning on the
effective date of the event and ending on the second anniversary of such
effective date, the Incumbent Directors continue to constitute not less than

 

(A)                              a majority of the Board, if subclause (i) of
this definition is satisfied because the Reorganization Transaction resulted in
Continuity of Ownership of at least 50%, but not more than 60%; or

 

(B)                                one (1) member less than a majority of the
Board, if subclause (i) of this definition is satisfied because the
Reorganization Transaction resulted in Continuity of Ownership of at least 40%,
but less than 50%; and

 

(iv)                              the person who was the Chief Executive Officer
of the Company immediately prior to the first to occur of (x) the day prior to
the beginning of the Imminent Control Change Period or (y) the day prior to the
effective date of the Reorganization Transaction shall serve as the Chief
Executive Officer of the Surviving Corporation at all times during the period
commencing on the effective date of the Reorganization Transaction and ending on
the first anniversary thereof, provided that this condition shall not fail to be
satisfied due to the death or Disability of the Chief Executive Officer;

 

provided, however, that a Reorganization Transaction shall cease to be
considered a Merger of Equals (and shall instead be treated as a Change of
Control) from and after the first date:

 

(A)                              during the two year period following the date
as of which such Reorganization Transaction occurs that any of the conditions of
any of clause (ii), (iii) or (iv) of this definition shall not be satisfied; or

 

(B)                                prior to the first anniversary of the
effective date of the Reorganization Transaction, the Company shall make a
filing with the Securities and Exchange Commission, issue a press release, or
make a public announcement to the effect that the Surviving Corporation is
seeking or intends to seek a replacement for its Chief Executive Officer (other
than due to the death or Disability of such person), whether such replacement is
to become effective before or after such first anniversary.

 

(25)                            “Net Exercised” shall mean the exercise of an
Option or any portion thereof by the delivery of the greatest number of whole
shares of Common Stock having a Fair Market Value on the date of exercise not in
excess of the difference between the aggregate Fair Market Value of the shares
of Common Stock subject to the Option (or the portion of such Option then being
exercised) and the aggregate exercise price for all such shares of Common Stock
under the Option (or the portion thereof then being exercised), with any
fractional share that would result from such equation to be payable in cash.

 

(26)                            “Nonstatutory Stock Option” (NSO) means an
option which is not an Incentive Stock Option within the meaning of Section 422
of the Code.

 

(27)                            “Option” means the right to purchase Common
Stock at a stated price for a specified period of time. For purposes of the
Plan, an Option may be either (i) an “Incentive Stock Option” (ISO) within the
meaning of Section 422 of the Code or (ii) an option which is not an Incentive
Stock Option (a “Nonstatutory Stock Option” (NSO)).

 

(28)                            “Other Stock-Based Award” means an award of, or
related to, shares of Common Stock other than an Award of Options, SAR,
Restricted Stock, Performance Shares, Restricted Stock Units or Performance
Units, as granted by the Committee in accordance with the provisions of
Section 9 hereof.

 

(29)                            “Participant” means any Employee or Agent
designated by the affirmative action of the Committee (or its delegate) to
participate in the Plan.

 

(30)                            “Performance Criteria” means the objectives
established by the Committee for a Performance Period pursuant to
Section 7(c) for the purpose of determining the extent to which an award of
Performance Shares or Performance Units has been earned.

 

(31)                            “Performance Period” means the period selected
by the Committee during which performance is measured for the purpose of
determining the extent to which an award of Performance Shares or Performance
Units has been earned.

 

(32)                            “Performance Share” means an award granted
pursuant to Section 7 of the Plan of a contractual right to receive one share of
Common Stock (or the Fair Market Value thereof in cash or any combination of

 

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cash and Common Stock, as determined by the Committee), or a fraction or
multiple thereof, upon the achievement, in whole or in part, of the applicable
Performance Criteria.

 

(33)                            “Performance Unit” means an award granted
pursuant to Section 7 of the Plan of a contractual right to receive a fixed or
variable dollar denominated unit (or a unit denominated in the Participant’s
local currency), or a fraction or multiple thereof, upon the achievement, in
whole or in part, of the applicable Performance Criteria. The Committee shall
determine whether the earned portion of any such Performance Units shall be
payable in cash, Common Stock or any combination thereof.

 

(34)                            “Period of Restriction” means the period
specified by the Committee or established pursuant to the Plan during which a
Restricted Stock or Restricted Stock Unit award is subject to forfeiture.

 

(35)                            “Prior Plan” means the Principal Financial
Group Inc. Stock Incentive Plan.

 

(36)                            “Reorganization Transaction” shall have the
meaning ascribed thereto in the definition of Change of Control.

 

(37)                            “Restricted Stock” means an award of Stock made
pursuant to Section 6 that is forfeitable by the Participant until the
completion of a specified period of future service, the achievement of
pre-established performance objectives or until otherwise determined by the
Committee or in accordance with the terms of the Plan.

 

(38)                            “Restricted Stock Unit” means a contractual
right awarded pursuant to Section 6 that entitles the holder to receive shares
of Common Stock (or the value thereof in cash) upon the completion of a
specified period of future service or the achievement of pre-established
performance objectives or at such other time or times determined by the
Committee or in accordance with the terms of the Plan.

 

(39)                            “SAR” means a stock appreciation right granted
under Section 8 of the Plan in respect of one or more shares of Common Stock
that entitles the holder thereof to receive, in Common Stock (unless otherwise
determined by the Committee at the time of grant), an amount per share of Common
Stock equal to the excess, if any, of the Fair Market Value on the date the SAR
is exercised over the Fair Market Value on the date the SAR is granted.

 

(40)                            “SEC Person” means any person (as such term is
defined in Section 3(a)(9) of the Exchange Act) or group (as such term is used
in Rule 13d-5 under the Exchange Act), other than an affiliate or any employee
benefit plan (or any related trust) of the Company or any of its affiliates.

 

(41)                            “Subsidiary” means (i) any corporation in which
the Company owns, directly or indirectly, at least 50% of the total combined
voting power of all classes of stock of such corporation, (ii) any partnership
or limited liability company in which the Company owns, directly or indirectly,
at least 50% of the capital interests or profits interest of such partnership or
limited liability company and (iii) any other business entity in which the
Company owns at least 50% of the equity interests thereof, provided that, in any
such case, the Company is in effective control of such corporation, partnership,
limited liability company or other entity.

 

(42)                            “Surviving Corporation” means the corporation
resulting from a Reorganization Transaction or, if securities representing at
least 50% of the aggregate voting power of such resulting corporation are
directly or indirectly owned by another corporation, such other corporation.

 

(43)                            “25% Owner” shall have the meaning ascribed
thereto in the definition of Change of Control.

 

(44)                            “Voting Securities” means, with respect to any
corporation, securities of such corporation that are entitled to vote generally
in the election of directors of such corporation.

 

SECTION 3.
POWERS OF THE COMMITTEE; GENERAL TERMS OF AWARDS

 

(a)                                  Power to Grant.    The Committee shall
determine those Employees and/or Agents to whom an Award shall be granted and
the terms and conditions of any and all such Awards. The Committee may establish
different terms and conditions for different Awards and different Participants
and for the same Participant for each Award such Participant may receive,
whether or not granted at different times.

 

(b)                                 Rules, Interpretations and
Determinations.    The Plan shall be administered by the Committee. The
Committee shall have full authority to interpret and administer the Plan, to
establish, amend, and rescind rules and regulations relating to the Plan, to
provide for conditions deemed necessary or advisable to protect the interests of

 

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the Company, to construe the terms of any Award or any document evidencing the
grant of such Award and to make all other determinations necessary or advisable
for the administration and interpretation of the Plan in order to carry out its
provisions and purposes. Unless otherwise expressly provided hereunder, any
power, discretion or authority conveyed to or reserved to the Committee may be
exercised by it in its sole and absolute discretion. Determinations,
interpretations, or other actions made or taken by the Committee shall be final,
binding, and conclusive for all purposes and upon all persons.

 

(c)                                  Delegation of Authority.    The Committee
may delegate to the Company’s Chief Executive Officer and/or to such other
officer(s) of the Company the power and authority to make and/or administer
Awards under the Plan with respect to individuals who are below the position of
Senior Vice President (or any analogous title), pursuant to such conditions and
limitations as the Committee may establish; provided that only the Committee or
the Board may select, and grant Awards to, Executive Officers or exercise any
other discretionary authority under the Plan in respect of Awards granted to
such Executive Officers. Unless the Committee shall otherwise specify, any
delegate shall have the authority and right to exercise (within the scope of
such person’s delegated authority) all of the same powers and discretion that
would otherwise be available to the Committee pursuant to the terms hereof. The
Committee may also appoint agents (who may be officers or employees of the
Company) to assist in the administration of the Plan and may grant authority to
such persons to execute agreements or other documents on its behalf. All
expenses incurred in the administration of the Plan, including, without
limitation, for the engagement of any counsel, consultant or agent, shall be
paid by the Company.

 

(d)                                 Restrictive Covenants and Other
Conditions.    Without limiting the generality of the foregoing, the Committee
may condition the grant of any Award under the Plan upon the Participant to whom
such Award would be granted agreeing in writing to certain conditions (such as
restrictions on the ability to transfer the underlying shares of Common Stock)
or covenants in favor of the Company and/or one or more Subsidiaries (including,
without limitation, covenants not to compete, not to solicit employees and
customers and not to disclose confidential information, that may have effect
following the termination of the Participant’s employment or service with the
Company and its Subsidiaries and after the Common Stock subject to the Award has
been transferred to the Participant), including, without limitation, the
requirement that the Participant disgorge any profit, gain or other benefit
received in respect of the Award prior to any breach of any such covenant.

 

(e)                                  Participants Based Outside the United
States.    To conform with the provisions of local laws and regulations, or with
local compensation practices and policies, in foreign countries in which the
Company or any of its Subsidiaries operate, but subject to the limitations set
forth herein regarding the maximum number of shares issuable hereunder and the
maximum award to any single Participant, the Committee may (i) modify the terms
and conditions of Awards granted to Participants employed outside the United
States (“Non-US Awards”), (ii) establish subplans with modified exercise
procedures and such other modifications as may be necessary or advisable under
the circumstances (“Subplans”), and (iii) take any action which it deems
advisable to obtain, comply with or otherwise reflect any necessary governmental
regulatory procedures, exemptions or approvals with respect to the Plan. The
Committee’s decision to grant Non-US Awards or to establish Subplans is entirely
voluntary, and at the complete discretion of the Committee. The Committee may
amend, modify or terminate any Subplans at any time, and such amendment,
modification or termination may be made without prior notice to the
Participants. The Company, Subsidiaries, and members of the Committee shall not
incur any liability of any kind to any Participant as a result of any change,
amendment or termination of any Subplan at any time. The benefits and rights
provided under any Subplan or by any Non-US Award (i) are wholly discretionary
and, although provided by either the Company or a Subsidiary, do not constitute
regular or periodic payments and (ii) are not to be considered part of the
Participant’s salary or compensation under the Participant’s employment with the
Participant’s local employer for purposes of calculating any severance,
resignation, redundancy or other end of service payments, vacation, bonuses,
long-term service awards, indemnification, pension or retirement benefits, or
any other payments, benefits or rights of any kind. If a Subplan is terminated,
the Committee may direct the payment of Non-US Awards (or direct the deferral of
payments whose amount shall be determined) prior to the dates on which payments
would otherwise have been made, and, in the Committee’s discretion, such
payments may be made in a lump sum or in installments.

 

(f)                                    Maximum Individual Grants.    Subject to
adjustment as provided in Section 4(d), no Participant shall be granted
(i) Options or SARs (with tandem Options and SARs being counted only once with
respect to this limit) during any 36-month period with respect to more than
3,000,000 shares of Common Stock or (ii) Restricted Stock, Restricted Stock
Units, Performance Shares and/or Other Stock-Based Awards during any 12-month
period that are denominated in shares of Common Stock with respect to more than
250,000 shares of Common Stock. In addition to the foregoing, the maximum dollar
value payable to any participant in any 12-month period with respect

 

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to Performance Units and/or Other Stock-Based Awards that are valued with
reference to cash or property other than shares of Common Stock is $10,000,000.

 

(g)                                 Dividends and Dividends
Equivalents.    Unless otherwise determined by the Committee at the time of
grant, to the extent that shares of Common Stock are issued at the time of grant
of any Award under the Plan, the Participant shall be entitled to receive all
dividends and other distributions paid with respect to those shares, provided
that if any such dividends or distributions are paid in shares of Common Stock,
such shares shall be subject to the same forfeiture restrictions and
restrictions on transferability as apply to the shares subject to such Award on
which such dividends or distributions were paid. To the extent that shares of
Common Stock are not issued at the time of the grant of any Award, the Committee
shall determine whether, and to what extent, the Participant shall be entitled
to receive the payment of dividend equivalents in respect of that number of
outstanding shares of Common Stock corresponding to the shares subject to such
Award. Unless otherwise determined by the Committee at or after grant, any
additional shares credited in respect of any dividends or dividend equivalents
payable in respect of any shares of Common Stock subject to any Award shall
become vested and nonforfeitable upon the same terms and conditions as are
applicable to the shares underlying the Award in respect of which they are
payable (including, with respect to any Award that will become earned and vested
upon the attainment of Performance Criteria, the achievement of such Performance
Criteria).

 

SECTION 4.
COMMON STOCK SUBJECT TO PLAN

 

(a)                                  Number.    Subject to Section 4(d) below,
unless the shareholders of the Company approve an increase in such number by a
shareholder vote, the maximum number of shares of Common Stock that may be made
issuable or distributable under the Plan is 24,000,000. The number of shares of
Common Stock subject to an Option or SAR shall be counted against such limit as
one share for each share issued or issuable, provided that when a SAR is granted
in tandem with an Option, so that only one may be exercised with the other
terminating upon such exercise, the number of shares of Common Stock subject to
the tandem Option and SAR award shall only be taken into account once (and not
as to both awards) for purposes of this limit (and for purposes of the
provisions of Section 4(b) below). Without limiting the generality of the
foregoing, the maximum number of shares as to which Incentive Stock Options may
be granted shall not exceed 10 million shares. The shares to be delivered under
the Plan may consist, in whole or in part, of treasury Common Stock or
authorized but unissued Common Stock, not reserved for any other purpose.

 

(b)                                 Canceled or Terminated Awards.    Any shares
of Common Stock subject to an Award (as determined under Section 4(a)) or any
award made or granted under the Prior Plan which for any reason expires without
having been exercised, is canceled or terminated or otherwise is settled without
the issuance of any Common Stock shall again be available for grant under the
Plan. In applying the immediately preceding sentence, if (i) shares otherwise
issuable or issued in respect of, or as part of, any Award that are withheld to
cover taxes shall not be treated as having been issued under the Plan and
(ii) any SARs are settled in shares of Common Stock or any Options are Net
Exercised, only the net number of shares of Common Stock issued in respect of
such SARs or Options shall be deemed issued under the Plan. In addition, shares
of Common Stock tendered to exercise outstanding Options or other Awards or to
cover taxes shall also be available for issuance under the Plan (and shall be
counted as one share for purposes of Section 4(a)), except and unless such
shares are tendered more than ten years after the effective date of the Plan.

 

(c)                                  Repurchased Shares.    In addition to the
shares otherwise authorized for issuance hereunder, any shares of Common Stock
that are acquired by the Company through the application of the cash proceeds
received in connection with the exercise of Options shall also be available for
issuance under the Plan in the same manner as though such shares had been
tendered to exercise the corresponding Options.

 

(d)                                 Adjustment Due to Change in
Capitalization.    In the event of any Common Stock dividend or Common Stock
split, recapitalization (including, but not limited to, the payment of an
extraordinary dividend to the shareholders of the Company), merger,
consolidation, combination, spin-off, distribution of assets to shareholders
(other than ordinary cash dividends), exchange of shares, or other similar
corporate change, the aggregate number of shares of Common Stock available for
grant under Section 4(a) or subject to outstanding Awards and the respective
exercise prices or base prices, if any, applicable to outstanding Awards may be
appropriately adjusted by the Committee, in its discretion, and the Committee’s
determination shall be conclusive.

 

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(e)                                  Assumption of Options and Other
Equity-Based Awards.    In the event that there is a merger, stock purchase or
other transaction whereby the Company or any of its Subsidiaries acquires
another business or any portion thereof, and that pursuant to the arrangements
governing such acquisition, the Company agrees to provided options and/or other
awards in respect of the Common Stock upon the assumption or in substitution of
existing equity-based awards for other securities held by employees and other
service providers of the acquired business, the shares of Common Stock subject
to such assumed or substituted awards shall not be counted against the limits
set forth under Section 4(a) (and no shares related to any such assumed or
substituted awards shall be added to the number of awards issuable under this
Plan pursuant to Section 4(b)), and none of the provisions of the Plan that
would otherwise limit or constrain the ability of the Company to make such
assumption or substitution (such as the provisions hereof that require the
issuance of Options with an exercise price at least equal to the Fair Market
Value on the date of grant) shall apply to the awards issued in substitution of
the awards granted in respect of the employees and service providers of such
acquired business.

 

SECTION 5.
STOCK OPTIONS

 

(a)                                  Grant of Options.    Subject to the
provisions of Section 3(f) and Section 4 above, Options may be granted to
Participants at such time or times as shall be determined by the Committee.
Options granted under the Plan may be of two types: (i) Incentive Stock Options
and (ii) Nonstatutory Stock Options. Except as otherwise provided herein, the
Committee shall have complete discretion in determining the number of Options,
if any, to be granted to a Participant, except that Incentive Stock Options may
only be granted to Employees. The terms and conditions of each Option grant,
including, but not limited to, the type of Option granted, the exercise price,
the duration of the Option, the number of shares of Common Stock to which the
Option pertains, shall be evidenced in writing. Each such Option grant may also
contain such other terms and conditions not inconsistent with the provisions of
the Plan as the Committee shall determine.

 

(b)                                 Exercise Price.    Nonstatutory Stock
Options and Incentive Stock Options granted pursuant to the Plan shall have an
exercise price no less than the Fair Market Value of a share of Common Stock on
the date on which the Option is granted. No Option granted hereunder may have
its exercise price reduced (other than pursuant to the provisions of
Section 4(d)) unless such action is expressly authorized by shareholder action
in accordance with Section 11.

 

(c)                                  Exercise of Options.    The Committee shall
determine the exercise schedule applicable with respect to any Option granted
hereunder. Such schedule may require a minimum period of service that must be
completed before all or a portion of such Option shall be exercisable, and may
establish performance-based conditions to the exercise of such Option which are
in addition to, in lieu of, or as an alternative to any service requirement.
Except as otherwise expressly provided in the Plan (i) upon a termination of
employment due to death, Disability or Approved Retirement or (ii) in connection
with a Change of Control, and unless the Committee shall determine that special
circumstances (including, but not limited to, the achievement of performance
objectives) justify an exception, the minimum period of service required to
exercise an Option, in whole or in part, shall be one year. Subject to the
provisions of this Section 5, once any portion of any Option has become
exercisable it shall remain exercisable for its full term. The Committee shall
determine the term of each Nonstatutory Stock Option or Incentive Stock Option
granted hereunder, but, except as expressly provided below, in no event shall
any such Option be exercisable for more than ten (10) years after the date on
which it is granted.

 

(d)                                 Payment.    The Committee shall establish
procedures governing the exercise of Options. No shares shall be delivered
pursuant to any exercise of an Option unless arrangements satisfactory to the
Committee have been made to assure full payment of the exercise price therefor.
Without limiting the generality of the foregoing, payment of the exercise price
may be made (i) in cash or its equivalent; (ii) by exchanging shares of Common
Stock (which are not the subject of any pledge or other security interest) which
have been owned by the person exercising the Option for at least six (6) months
at the time of exercise; (iii) by any combination of the foregoing; provided
that the combined value of all cash and cash equivalents paid and the Fair
Market Value of any such Common Stock tendered to the Company, valued as of the
date of such tender, is at least equal to such exercise price; or (iv) in
accordance with any other procedure or arrangement approved by the Committee.
Additionally, to the extent authorized by the Committee (whether at or after
grant), Options may be Net Exercised subject to such terms and conditions as the
Committee may from time to time impose.

 

(e)                                  Incentive Stock Options.    Notwithstanding
anything in the Plan to the contrary, no Option that is intended to be an
Incentive Stock Option may be granted after the tenth (10th) anniversary of the
effective date of

 

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the Plan and no term of this Plan relating to Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be so exercised, so as to disqualify the Plan under Section 422
of the Code, or, without the consent of any Participant affected thereby, to
disqualify any Incentive Stock Option under such Section 422.

 

(f)                                    Termination of Employment or Service.

 

(i)                                     Due to Death.    In the event a
Participant’s employment or service terminates by reason of death, any Options
granted to such Participant shall become immediately exercisable in full and may
be exercised by the Participant’s designated beneficiary or, if none is named,
by the person determined in accordance with Section 12(b) below, at any time
prior to the earlier to occur of (i) the expiration of the term of the Options
or (ii) the third (3rd) anniversary (or such earlier date as the Committee shall
determine at the time of grant) of the Participant’s death.

 

(ii)                                  Due to Disability.    In the event a
Participant’s employment or service is terminated by reason of Disability, any
Options granted to such Participant shall become immediately exercisable in full
and may be exercised by the Participant (or, in the event of the Participant’s
death after termination of employment or service when the Option is exercisable
pursuant to its terms, by the Participant’s designated beneficiary or, if none
is named, by the person determined in accordance with Section 12(b) below), at
any time prior to the earlier to occur of (i) the expiration of the term of the
Options or (ii) the third (3rd) anniversary (or such earlier date as the
Committee shall determine at the time of grant) of the Participant’s termination
of employment or service.

 

(iii)                               Approved Retirement.    In the event a
Participant’s employment or service terminates by reason of Approved Retirement,
any Options granted to such Participant shall become immediately exercisable in
full and may be exercised by the Participant (or, in the event of the
Participant’s death after termination of employment or service when the Option
is exercisable pursuant to its terms, by the Participant’s designated
beneficiary or, if none is named, by the person determined in accordance with
Section 12(b) below), at any time prior to the expiration date of the term of
the Options (or such shorter period following the Participant’s Approved
Retirement as the Committee shall determine at the time of grant).

 

(iv)                              Termination of Employment For Cause or
Resignation.    In the event a Participant’s employment or service is terminated
by the Company or any Subsidiary for Cause or by the Participant other than due
to the Participant’s death, Disability or Approved Retirement, any Options
granted to such Participant that have not yet been exercised shall expire at the
time of such termination and shall not be exercisable thereafter.

 

(v)                                 Termination of Employment for Any Other
Reason.    Unless otherwise determined by the Committee at or following the time
of grant, in the event the employment or service of the Participant shall
terminate for any reason other than one described in Section 5(f)(i), (ii),
(iii), or (iv) above, any Options granted to such Participant which are
exercisable at the date of the Participant’s termination of employment or
service may be exercised by the Participant (or, in the event of the
Participant’s death after termination of employment or service when the Option
is exercisable pursuant to its terms, by the Participant’s designated
beneficiary, or, if none is named, by the person determined in accordance with
Section 12(b)), at any time prior to the expiration of the term of the Options
or the ninetieth (90th) day following the Participant’s termination of
employment or service, whichever period is shorter, and any Options that are not
exercisable at the time of termination of employment or service shall expire at
the time of such termination and shall not be exercisable thereafter.

 

SECTION 6.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS

 

(a)                                  Grant of Restricted Stock.    The Committee
may grant Restricted Stock or Restricted Stock Units to Participants at such
times and in such amounts, and subject to such other terms and conditions not
inconsistent with the Plan as it shall determine. If Restricted Stock is
evidenced by the issuance of stock certificates, the Committee shall require
that such stock certificates be held in the custody of the Secretary of the
Company until the Period of Restriction lapses, and that, as a condition of such
Restricted Stock award, the Participant shall have delivered a stock power,
endorsed in blank, relating to the Common Stock covered by such award. The terms
and conditions of each grant of Restricted Stock or Restricted Stock Units shall
be evidenced in writing.

 

(b)                                 Restrictions on Transferability.    Except
as provided in Section 12(a), no Restricted Stock may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated until the lapse of the
Period of Restriction. The Committee shall determine the Period of Restriction
applicable with respect to any award of Restricted Stock;

 

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provided, however, that, except as otherwise expressly provided in the Plan the
Period of Restriction with respect to any such Award shall not be less than
three years but may lapse ratably over such three year Period of Restriction.
Notwithstanding the foregoing, such minimum three-year Period of Restriction
shall not be applicable with respect to any grant made to a newly-hired employee
made to compensate for equity-based or other forms of compensation forfeited
from a prior employer or grants made in satisfaction of incentive or other
compensation payable to the Participant in respect of service to the Company or
any of its Subsidiaries. The Committee may provide that the Period of
Restriction on Restricted Stock shall lapse, in whole or in part, upon the
achievement of performance criteria (and without regard to the minimum service
requirement), which criteria shall be selected from those available to the
Committee under Section 7(c), provided, however, that any Award of Restricted
Stock made to any Executive Officer that is intended to qualify as other
performance based compensation under Section 162(m) of the Code shall be subject
to the same restrictions and limitations applicable to Performance Share Awards
under Section 7(d) and subject to the certification required under Section 7(e).

 

(c)                                  Rights as a Shareholder.    Unless
otherwise determined by the Committee at the time of grant and subject to
Section 3(g), Participants holding shares of Restricted Stock may exercise full
voting rights and other rights as a shareholder with respect to those shares
during the Period of Restriction.

 

(d)                                 Termination of Employment Due to Approved
Retirement, Disability or Death.    Unless otherwise determined by the Committee
at the time of grant, in the event a Participant’s employment or service
terminates by reason of Approved Retirement, any shares related to Restricted
Stock held by such Participant shall become non-forfeitable at the time the
restrictions would have lapsed had the Participant continued in employment;
provided, however, that the Committee may waive any forfeiture and transfer
restrictions with respect to up to the portion of the Award as is necessary for
the Participant to satisfy any applicable tax withholding obligations in
connection with such Award arising at the time of such termination of
employment. Unless otherwise determined by the Committee at the time of grant,
in the event a Participant’s employment or service terminates by reason of
Disability or death, any shares related to Restricted Stock held by such
Participant shall become non-forfeitable on the date of termination.

 

(e)                                  Termination of Employment for Any Other
Reason.    Unless otherwise determined by the Committee at or after the time of
grant, in the event the employment or service of the Participant shall terminate
for any reason other than one described in Section 6(d), any Restricted Stock
awarded to such Participant as to which the Period of Restriction has not lapsed
shall be forfeited.

 

(f)                                    Restricted Stock Units.    The Committee
may elect to grant any Participant Restricted Stock Units, which are intended to
be the economic equivalent of an award of Restricted Stock. Any such Restricted
Stock Units Award shall be made on substantially the same terms as apply to an
Award of Restricted Stock under this Section 6, except that a Participant
receiving such Award shall not have any rights as a shareholder prior to the
actual issuance of such Common Stock (although, pursuant to Section 3(g), the
Committee may authorize the payment of dividend equivalents on such rights equal
to the dividends that would have been payable had the corresponding equity
rights been outstanding shares of Common Stock).

 

SECTION 7
PERFORMANCE SHARES AND PERFORMANCE UNITS

 

(a)                                  Generally.    The Committee shall have the
authority to determine the Participants who shall receive Performance Shares and
Performance Units, the number of Performance Shares and the number and value of
Performance Units each Participant receives for each or any Performance Period,
and the Performance Criteria applicable in respect of such Performance Shares
and Performance Units for each Performance Period. The Committee shall determine
the duration of each Performance Period (the duration of Performance Periods may
differ from each other), and there may be more than one Performance Period in
existence at any one time as to any Participant or all or any class of
Participants. Performance Periods may be no shorter than twelve months. Each
grant of Performance Shares and Performance Units shall be evidenced in writing
and shall specify the number of Performance Shares and the number and value of
Performance Units awarded to the Participant, the Performance Criteria
applicable thereto, and such other terms and conditions not inconsistent with
the Plan as the Committee shall determine. No shares of Common Stock will be
issued at the time an Award of Performance Shares is made, and the Company shall
not be required to set aside a fund for the payment of Performance Shares or
Performance Units.

 

(b)                                 Earned Performance Shares and Performance
Units.    Performance Shares and Performance Units shall become earned, in whole
or in part, based upon the attainment of specified Performance Criteria or the
occurrence

 

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of any event or events, including a Change of Control, as the Committee shall
determine, either at or after the time of grant. In addition to the achievement
of the specified Performance Criteria, the Committee may, at the grant date,
condition payment of Performance Shares and Performance Units on the Participant
completing a minimum period of service following the date of grant or on such
other conditions as the Committee shall specify.

 

(c)                                  Performance Criteria.    At the discretion
of the Committee, Performance Criteria may be based on the total return to the
Company’s shareholders, inclusive of dividends paid, during the applicable
Performance Period (determined either in absolute terms or relative to the
performance of one or more similarly situated companies or a published index
covering the performance of a number of companies), or upon the attainment of
one or more of the following criteria, whether in absolute terms or relative to
the performance of one or more similarly situated companies or a published index
covering the performance of a number of companies: stock price, operating
earnings, net earnings, return on equity, income, market share, combined ratio,
level of expenses, growth in revenue, earnings before interest, taxes,
depreciation and amortization, cash flow, earnings per share, return on invested
capital, return on assets, economic value added, improvements in or attainment
of working capital levels, and, in the case of persons who are not Executive
Officers, such other criteria as may be determined by the Committee. Performance
Criteria may be established on a Company-wide basis or with respect to one or
more business units or divisions or Subsidiaries. When establishing Performance
Criteria for a Performance Period, the Committee may exclude any or all
“extraordinary items” as determined under U.S. generally accepted accounting
principles including, without limitation, the charges or costs associated with
restructurings of the Company or any Subsidiary, discontinued operations, other
unusual or non-recurring items, and the cumulative effects of accounting
changes. Except to the extent that the exercise of (or the ability to exercise)
such discretion in the case of Awards to Executive Officers intended to be other
performance-based compensation under Section 162(m)(4) of the Code would cause
them to fail to satisfy that requirement, the Committee may also adjust the
Performance Criteria for any Performance Period as it deems equitable in
recognition of unusual or non-recurring events affecting the Company, changes in
applicable tax laws or accounting principles, or such other factors as the
Committee may determine.

 

(d)                                 Special Rule for Performance
Criteria.    If, at the time of grant, the Committee intends a Performance Share
Award or Performance Unit to qualify as other performance based compensation
within the meaning of Section 162(m)(4) of the Code, the Committee must
establish Performance Criteria for the applicable Performance Period no later
than the 90th day after the Performance Period begins (or by such other date as
may be required under Section 162(m) of the Code), and the Committee shall not
have the authority in respect of such Awards to exercise any discretion
applicable to a grant of Performance Shares or Performance Units otherwise
conveyed by this Section 7, if the ability to exercise such discretion would
cause such Award not to qualify as other performance based compensation.

 

(e)                                  Certification of Attainment of Performance
Criteria.    As soon as practicable after the end of a Performance Period and
prior to any payment in respect of such Performance Period, the Committee shall
certify in writing the number of Performance Shares and the number and value of
Performance Units which have been earned on the basis of performance in relation
to the established Performance Criteria.

 

(f)                                    Payment of Awards.    Earned Performance
Shares and the value of earned Performance Units shall be distributed to the
Participant or, if the Participant has died, to the Participant’s beneficiary,
as soon as practicable after the expiration of the Performance Period and the
Committee’s certification under paragraph 7(e) above, provided that (i) earned
Performance Shares and the value of earned Performance Units shall not be
distributed to a Participant until any other conditions on payment of such
Awards established by the Committee have been satisfied, and (ii) any amounts
payable in respect of Performance Shares or Performance Units pursuant to
Section 10 shall be distributed in accordance with Section 10. The Committee
shall determine whether Performance Shares and the value of earned Performance
Units are to be distributed in the form of cash, shares of Common Stock or in a
combination thereof, with the value or number of shares payable to be determined
based on the Fair Market Value of Common Stock on the date of the Committee’s
certification under paragraph 7(e) above.

 

(g)                                 Newly Eligible
Participants.    Notwithstanding anything in this Section 7 to the contrary, the
Committee shall be entitled to make such rules, determinations and adjustments
as it deems appropriate with respect to any Participant who becomes eligible to
receive Performance Shares or Performance Units after the commencement of a
Performance Period.

 

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(h)                                 Termination of Employment.

 

(i)                                     Termination of Employment due to
Approved Retirement, Disability or Death.    Unless otherwise determined by the
Committee at or after the time of grant, a Participant whose employment or
service terminates by reason of Approved Retirement, Disability or death shall
be entitled to receive the same payment or distribution in respect of
Performance Shares and Performance Units (without pro-ration) that would have
been payable for the Performance Period had his or her employment continued
until the end of the applicable Performance Period. Any Performance Shares or
value of Performance Units becoming payable in accordance with the preceding
sentence shall be paid at the same time as Performance Shares and the value of
Performance Units are paid to other Participants (or at such earlier time as the
Committee may permit). Any rights that a Participant or beneficiary may have in
respect of any Performance Shares or Performance Units outstanding at the date
of such termination of employment that may not be earned (or that are eligible
to be earned, but are not earned) in accordance with this section 7(h)(i) shall
be forfeited and canceled, effective as of the date of the Participant’s
termination of employment or service (or, if eligible to be earned, but are not
earned, the date of the Committee’s certification pursuant to Section 7(e)).

 

(ii)                                  Termination for any Other
Reason.    Unless otherwise determined by the Committee at or after the time of
grant, in the event the employment or service of the Participant shall terminate
during a Performance Period for any reason other than the one described in
Section 7(h)(i), all of the Participant’s rights to Performance Shares and
Performance Units related to such Performance Period shall be immediately
forfeited and canceled as of the date of such termination of employment.

 

(iii)                               Cause.    Notwithstanding anything in this
Section 7 to the contrary, a Participant’s rights in respect of unearned
Performance Shares and Performance Units shall in all events be immediately
forfeited and canceled as of the date of the Participant’s termination of
employment for Cause.

 

SECTION 8
STOCK APPRECIATION RIGHTS

 

(a)                                  Grant of SARs.    SARs may be granted to
any Participants, all Participants, any class of Participants at such time or
times as shall be determined by the Committee. SARs may be granted in tandem
with an Option, or may be granted on a freestanding basis, not related to any
Option. The term and conditions of any SAR grant shall be evidenced in writing,
and shall include such provisions not inconsistent with the Plan as the
Committee shall determine.

 

(b)                                 Terms and Conditions of SARs.    Unless the
Committee shall otherwise determine, the terms and conditions (including,
without limitation, the exercise period of the SAR, the vesting
schedule applicable thereto and the impact of any termination of service on the
Participant’s rights with respect to the SAR) applicable with respect to
(i) SARs granted in tandem with an Option shall be substantially identical (to
the extent possible taking into account the differences related to the character
of the SAR) to the terms and conditions applicable to the tandem Options and
(ii) freestanding SARs shall be substantially identical (to the extent possible
taking into account the differences related to the character of the SAR) to the
terms and conditions that would have been applicable under Section 5 above were
the grant of the SARs a grant of an Option.

 

(c)                                  Exercise of Tandem SARs.    SARs which are
granted in tandem with an Option may only be exercised upon the surrender of the
right to exercise such Option for an equivalent number of shares and may be
exercised only with respect to the shares of Common Stock for which the related
Option is then exercisable.

 

(d)                                 Payment of SAR Amount.    Upon exercise of a
SAR, the holder shall be entitled to receive payment, in cash, in shares of
Common Stock or in a combination thereof, as determined by the Committee, of an
amount determined by multiplying:

 

(i)                                     the excess, if any, of the Fair Market
Value of a share of Common Stock at the date of exercise over the Fair Market
Value of a share of Common Stock on the date of grant, by

 

(ii)                                  the number of shares of Common Stock with
respect to which the SARs are then being exercised.

 

SECTION 9.
OTHER STOCK-BASED AWARDS

 

(a)                                  Other Stock-Based Awards.    The Committee
may grant other types of equity-based and equity-related awards in addition to
Options, SARs, Restricted Stock, Performance Shares, Restricted Stock Units and

 

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Performance Units, including, but not limited to, the outright grant of Common
Stock in satisfaction of obligations of the Company or any Subsidiary under
another compensatory plan, program or arrangement, modified awards intended to
comply with or structured in accordance with the provisions of applicable
non-U.S. law or practice, or the sale of Common Stock, in such amounts and
subject to such terms and conditions as the Committee shall determine,
including, but not limited to, the satisfaction of Performance Criteria.
Notwithstanding the immediately preceding sentence, except in the case of Other
Stock-Based Awards issued in satisfaction of an obligation of the Company or any
Subsidiary to make a payment in cash in respect of a Participant (including, but
not limited to, when an annual or long-term incentive compensation award is
satisfied with the issuance of shares of Common Stock instead of cash or in
respect of a Participant’s accrued benefit under a deferred compensation plan),
except as provided under Section 10, no Participant shall be entitled to vest in
any such Other Stock-Based Award on a schedule which is more favorable to the
Participant than ratably over a period of three years from the date of grant.
Each such Other Stock-Based Award shall be evidenced in writing and specify the
terms and conditions applicable thereto. Any such Other Stock-Based Award may
entail the transfer of actual shares of Common Stock or the payment of the value
of such Award in cash based upon the value of a specified number of shares of
Common Stock, or any combination of the foregoing, as determined by the
Committee. The terms of any Other Stock-Based Award need not be uniform in
application to all (or any class of) Participants, and each Other Stock-Based
Award granted to any Participant (whether or not at the same time) may have
different terms.

 

(b)                                 Termination of Employment or Service.    In
addition to any other terms and conditions that may be specified by the
Committee but subject to the limitations set forth in Section 9(a), each Other
Stock Based Award shall specify the impact of termination of employment upon the
rights of a Participant in respect of such Award. At the discretion of the
Committee, such conditions may be the same as apply with respect to Restricted
Stock or Restricted Stock Units, or may be contain terms that are more or less
favorable to the Participant.

 

SECTION 10.
CHANGE OF CONTROL

 

(a)                                  Accelerated Vesting and Payment.    Subject
to the provisions of Section 10(b) below, in the event of a Change of Control
(i) each Option and SAR then outstanding shall be fully exercisable regardless
of the exercise schedule otherwise applicable to such Option and/or SAR,
(ii) the Period of Restriction shall lapse as to each share of Restricted Stock
then outstanding, (iii) each outstanding Restricted Stock Unit shall become
fully vested and payable, (iv) each outstanding Performance Share Award and
Performance Unit Award shall be deemed earned at the target level of performance
for such Award, and (v) each outstanding Other Stock-Based Award shall become
fully vested and payable. In addition, in connection with such a Change of
Control, the Committee may, in its discretion, provide that each Option and/or
SAR shall, upon the occurrence of such Change of Control, be canceled in
exchange for a payment per share in cash (the “Settlement Payment”) in an amount
equal to the excess, if any, of the Change of Control Price over the exercise
price for such Option or the base price of such SAR. Should the Committee
authorize any Settlement Payments in respect of Options, the Committee may
determine that any Options which have an exercise price per share below the
Change of Control Price shall be deemed cancelled and satisfied in full for a
deemed Settlement Payment of zero. The Committee may also direct that each
Restricted Stock Unit, Other Stock-Based Award, Performance Share and/or
Performance Unit shall be settled in cash with its value determined based on the
Change of Control Price.

 

(b)                                 Alternative Awards.    Notwithstanding
Section 10(a), no cancellation, acceleration of exercisability, vesting, cash
settlement or other payment shall occur with respect to any Award if the
Committee reasonably determines in good faith, prior to the occurrence of a
Change of Control, that such Award shall be honored or assumed, or new rights
substituted therefor (such honored, assumed or substituted award hereinafter
called an “Alternative Award”), by a Participant’s employer (or the parent or an
affiliate of such employer) immediately following the Change of Control;
provided that any such Alternative Award must:

 

(i)                                     be based on stock which is traded on an
established U.S. securities market;

 

(ii)                                  provide such Participant with rights and
entitlements substantially equivalent to or better than the rights, terms and
conditions applicable under such Award, including, but not limited to, an
identical or better exercise or vesting schedule and identical or better timing
and methods of payment;

 

(iii)                               have substantially equivalent economic value
to such Award (determined at the time of the Change of Control); and

 

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(iv)                              have terms and conditions which provide that
in the event that, during the 24-month period following the Change of Control,
the Participant’s employment or service is involuntarily terminated for any
reason (including, but not limited to a termination due to death, Disability or
without Cause) or Constructively Terminated (as defined below), all of such
Participant’s Options and/or SARs shall be deemed immediately and fully
exercisable, the Period of Restriction shall lapse as to each of the
Participant’s outstanding Restricted Stock awards, each of the Participant’s
outstanding Restricted Stock Unit awards and other Stock-Based Awards shall be
payable in full and each such Alternative Award shall be settled for a payment
per each share of stock subject to the Alternative Award in cash, in immediately
transferable, publicly traded securities or in a combination thereof, in an
amount equal to, in the case of an Option or SAR, the excess of the Fair Market
Value of such stock on the date of the Participant’s termination over the
corresponding exercise or base price per share and, in the case of any
Restricted Stock, Restricted Stock Unit, or Other Stock-Based Award, the Fair
Market Value of the number of shares of Common Stock subject or related thereto.

 

For this purpose, a Participant’s employment or service shall be deemed to have
been Constructively Terminated if, without the Participant’s written consent,
the Participant terminates employment or service within 120 days following
either (x) a material reduction in the Participant’s base salary or a
Participant’s incentive compensation opportunity, or (y) the relocation of the
Participant’s principal place of employment or service to a location more than
35 miles away from the Participant’s prior principal place of employment or
service.

 

(c)                                  Section 409A.    Should any event
constitute a Change of Control for purposes of the Plan, but not constitute a
change of control within the meaning of Section 409A of the Code, if necessary
to avoid the imposition of an additional tax on the recipient, no payment or
distribution shall be made to any affected Participant by reason of such Change
of Control (although any other modification or enhancement to the Award, such as
accelerated vesting, shall still apply) and the value of such Award as
determined by the Committee prior to such Change of Control shall be paid to the
affected Participant on the earlier to occur of (i) the day after the six month
anniversary of such Participant’s termination of employment and (ii) whichever
of the following is applicable to such Award (A) with respect to any unvested
Award that would have become vested solely upon the passage of time and the
continued performance of service, the date the Award would have otherwise become
vested without regard to the Change of Control, (B) with respect to any unvested
Award that would have become vested upon the achievement of specified
Performance Criteria, on the last day of the applicable Performance Period or
(C) if the Award was already vested at the time the Change of Control occurs, on
the date on which the Award would have expired in accordance with its terms.

 

SECTION 11
AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN

 

The Board may, at any time and from time to time amend, modify, suspend, or
terminate this Plan, in whole or in part, without notice to or the consent of
any Participant, Employee or Agent; provided, however, that any amendment which
would (i) increase the number of shares available for issuance under the Plan,
(ii) lower the minimum exercise price at which an Option (or the base price at
which a SAR) may be granted or otherwise permit the repricing of any outstanding
Options or SARs (other than in the context of a transaction referenced in
Section 4(d)), (iii) extend the maximum term for Options or SARs granted
hereunder or (iv) otherwise amend the Plan in a material fashion that would
require the approval of shareholders under the applicable rules and regulations
of any exchange or automated quotation system on which the Common Stock is
listed to trade shall be subject to the approval of the Company’s shareholders.
No amendment, modification, or termination of the Plan shall in any manner
adversely affect any Award theretofore granted under the Plan, without the
consent of the Participant.

 

SECTION 12.
MISCELLANEOUS PROVISIONS

 

(a)                                  Transferability.    No Award granted under
the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than in accordance with Section 12(b) below, provided that
the Committee may permit transfers of Awards (other than Incentive Stock
Options) to Family Members (including, without limitation, transfers effected by
a domestic relations order) subject to such terms and conditions as the
Committee shall determine.

 

(b)                                 Beneficiary Designation.    Each Participant
under the Plan may from time to time name any beneficiary or beneficiaries (who
may be named contingently or successively) to whom any benefit under the Plan is
to be paid or

 

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by whom any right under the Plan is to be exercised in case of the Participant’s
death; provided that, if the Participant shall not have designated any
beneficiary under this Plan, the Participant’s beneficiary shall be deemed to be
the person designated by the Participant under the group life insurance plan of
the Company or a Subsidiary in which such Participant participates (unless such
designated beneficiary is not a Family Member). Each designation made hereunder
will revoke all prior designations by the same Participant with respect to all
Awards previously granted (including, solely for purposes of this Plan, any
deemed designation), shall be in a form prescribed by the Committee, and will be
effective only when received by the Committee in writing during the
Participant’s lifetime. In the absence of any such effective designation
(including a deemed designation), benefits remaining unpaid at the Participant’s
death shall be paid to or exercised by the Participant’s surviving spouse, if
any, or otherwise to or by the Participant’s estate. Except as otherwise
expressly provided herein, nothing in this Plan is intended or may be construed
to give any person other than Participants any rights or remedies under this
Plan.

 

(c)                                  Deferral of Payment.    At the time any
Award is granted (or such earlier time as the Committee may require), the
Committee may permit a Participant to elect, upon such terms and conditions as
the Committee may establish, to defer receipt of shares of Common Stock that
would otherwise be issued in connection with an Award.

 

(d)                                 No Guarantee of Employment or
Participation.    The existence of this Plan, as in effect at any time or from
time to time, or any grant of Award under the Plan shall not interfere with or
limit in any way the rights of the Company or any Subsidiary to terminate any
Participant’s employment or other service provider relationship at any time, nor
confer upon any Participant any rights to continue in the employ or service of
the Company or any Subsidiary or any other affiliate of the Company. Except to
the extent expressly selected by the Committee to be a Participant, no person
(whether or not an Employee, an Agent or a Participant) shall at anytime have a
right to be selected for participation in the Plan or, having been selected as a
Participant, to receive any additional awards hereunder, despite having
previously participated in an incentive or bonus plan of the Company or an
affiliate. The existence of the Plan shall not be deemed to constitute a
contract of employment between the Company or any affiliate and any Employee,
Agent or Participant, nor shall it constitute a right to remain in the employ or
service of the Company or any affiliate. Except as may be provided in a separate
written agreement, employment with or service for the Company or any affiliate
is at-will and either party may terminate the participant’s employment or other
service provider relationship at any time, for any reason, with or without cause
or notice.

 

(e)                                  Tax Withholding.    The Company or an
affiliate shall have the right to deduct from all payments or distributions
hereunder any federal, state, foreign or local taxes or other obligations
required by law to be withheld with respect thereto. The Company may defer
issuance of Common Stock in respect of any Award until such requirements are
satisfied. The Committee may, in its discretion, permit a Participant to elect,
subject to such conditions as the Committee shall impose, (i) to have shares of
Common Stock otherwise to be issued under the Plan withheld by the Company or
(ii) to deliver to the Company previously acquired shares of Common Stock, in
either case for the greatest number of whole shares having a Fair Market Value
on the date immediately preceding the date on which the applicable tax liability
is determined not in excess of the minimum amount required to satisfy the
statutory withholding tax obligations with respect to any Award.

 

(f)                                    No Limitation on Compensation; Scope of
Liabilities.    Nothing in the Plan shall be construed to limit the right of the
Company to establish other plans if and to the extent permitted by applicable
law. The liability of the Company or any affiliate under this Plan is limited to
the obligations expressly set forth in the Plan, and no term or provision of
this Plan may be construed to impose any further or additional duties,
obligations, or costs on the Company or any affiliate thereof or the Committee
not expressly set forth in the Plan.

 

(g)                                 Requirements of Law.    The granting of
Awards and the issuance of shares of Common Stock shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.

 

(h)                                 Term of Plan.    The Plan shall be effective
upon the date, if any, on which it is approved by the Company’s shareholders.
The Plan shall continue in effect, unless sooner terminated pursuant to
Section 11 above, until the tenth anniversary of the date of such shareholder
approval.

 

(i)                                     Governing Law.    The Plan, and all
Awards granted hereunder (and the terms and conditions of any document
evidencing any such grant), shall be construed in accordance with and governed
by the laws of the State of Delaware, without regard to principles of conflict
of laws.

 

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(j)                                     No Impact On Benefits.    Except as may
otherwise be specifically stated under any employee benefit plan, policy or
program, Awards shall not be treated as compensation for purposes of calculating
an Employee’s or Agent’s right or benefits under any such plan, policy or
program.

 

(k)                                  No Constraint on Corporate
Action.    Except as provided in Section 11 above, nothing contained in this
Plan shall be construed to prevent the Company, or any affiliate, from taking
any corporate action (including, but not limited to, the Company’s right or
power to make adjustments, reclassifications, reorganizations or changes of its
capital or business structure, or to merge or consolidate, or dissolve,
liquidate, sell, or transfer all or any part of its business or assets) which is
deemed by it to be appropriate, or in its best interest, whether or not such
action would have an adverse effect on this Plan, or any awards made under this
Plan. No director, beneficiary, or other person shall have any claim against the
Company, or any of its affiliates, as a result of any such action.

 

(l)                                     Indemnification.    Each member of the
Board and each member of the Committee shall be indemnified and held harmless by
the Company and each Employer against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by such member of the
Board or Committee in connection with or resulting from any claim, action, suit,
or proceeding to which such member may be made a party or in which such member
may be involved by reason of any action taken or failure to act under the Plan
(in the absence of bad faith) and against and from any and all amounts paid by
such member in settlement thereof, with the Company’s approval, or paid by such
member in satisfaction of any judgment in any such action, suit, or proceeding
against such member, provided that such member shall give the Company an
opportunity, at its own expense, to handle and defend the same before such
member undertakes to handle and defend it individually. The foregoing right of
indemnification shall not be exclusive and shall be independent of any other
rights of indemnification to which any such person may be entitled under the
Company’s Certificate of Incorporation or By-Laws, by contract, as a matter of
law, or otherwise.

 

(m)                               Rights as a Stockholder.    A Participant
shall have no rights as a stockholder with respect to any shares of Common Stock
covered by any Award until the Participant shall have become the holder of
record of such shares.

 

(n)                                 Captions.    The headings and captions
appearing herein are inserted only as a matter of convenience. They do not
define, limit, construe, or describe the scope or intent of the provisions of
the Plan.

 

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