Exhibit 10.3

 

SCIENTIFIC GAMES CORPORATION

 

2003 Incentive Compensation Plan

As Amended and Restated

 

1.  Purpose.  The purpose of this 2003 Incentive Compensation Plan, as amended
and restated (the “Plan”), is to assist Scientific Games Corporation, a Delaware
corporation (the “Company”), and its subsidiaries in attracting, retaining,
motivating and rewarding executives, directors, employees, and other persons who
provide services to the Company and/or its subsidiaries, to provide for
equitable and competitive compensation opportunities, to encourage long-term
service, to recognize individual contributions and reward achievement of Company
goals, and promote the creation of long-term value for stockholders by closely
aligning the interests of participants with those of stockholders. The Plan
authorizes stock-based and cash-based performance incentives for participants,
to encourage such persons to expend their maximum efforts in the creation of
stockholder value. The Plan is also intended to qualify certain compensation
awarded under the Plan for tax deductibility under Section 162(m) of the
Internal Revenue Code to the extent deemed appropriate by the Committee which
administers the Plan.

 

2.  Definitions.  For purposes of the Plan, the following terms shall be defined
as set forth below, in addition to such terms defined in Section 1 hereof:

 

(a) “Additional Shares” has the meaning ascribed to such term in Section 4(a) of
the Plan.

 

(b) “Annual Incentive Award” means a type of Performance Award granted to a
Participant under Section 7(c) representing a conditional right to receive cash,
Stock or other Awards or payments, as determined by the Committee, based on
performance in a performance period of one fiscal year or a portion thereof.

 

(c) “Award” means any award of an Option, SAR (including Limited SAR),
Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of another
award, Dividend Equivalent, Other Stock-Based Award, or Performance Award
(including an Annual Incentive Award) together with any other right or interest
granted to a Participant under the Plan.

 

(d) “Beneficiary” means the person, persons, trust, or trusts which have been
designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefits specified under the
Plan upon such Participant’s death or to which Awards or other rights are
transferred if and to the extent permitted under Section 10(b) hereof. If, upon
a Participant’s death, there is no designated Beneficiary or surviving
designated Beneficiary, then the term Beneficiary means person, persons, trust,
or trusts entitled by will or the laws of descent and distribution to receive
such benefits.

 

(e) “Beneficial Owner” shall have the meaning ascribed to such term in
Rule 13d-3 under the Exchange Act and any successor to such Rule.

 

(f) “Board” means the Company’s Board of Directors.

 

(g) “Change in Control” means Change in Control as defined with related terms in
Section 9 of the Plan.

 

(h) “Change in Control Price” means the amount calculated in accordance with
Section 9(c) of the Plan.

 

(i) “Code” means the Internal Revenue Code of 1986, as amended from time to
time, including regulations thereunder and successor provisions and regulations,
proposed regulations and other applicable guidance or pronouncement of the
Department of the Treasury and Internal Revenue Service.

 

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(j) “Committee” means the Compensation Committee of the Board of Directors, the
composition and governance of which is established in the Committee’s Charter as
approved from time to time by the Board and other corporate governance documents
of the Company. No action of the Committee shall be void or deemed to be without
authority due to the failure of any member, at the time the action was taken, to
meet any qualification standard set forth in the Committee Charter or this Plan.

 

(k) “Covered Employee” means a person designated by the Committee as likely to
be a “covered employee,” as defined under Code Section 162(m), with respect to a
specified fiscal year or other performance period.

 

(l) “Deferred Stock” means a conditional right, granted to a Participant under
Section 6(e) hereof, to receive Stock, at the end of a specified deferral
period.

 

(m) “Dividend Equivalent” means a conditional right, granted to a Participant
under Section 6(g), to receive cash, Stock, other Awards, or other property
equal in value to dividends paid with respect to a specified number of shares of
Stock, or other periodic payments.

 

(n) “Effective Date” means June 23, 2003.

 

(o) “Eligible Person” means each executive officer and other officer or
full-time employee of the Company or of any subsidiary, including each such
person who may also be a director of the Company, each non-employee director of
the Company, each other person who provides substantial services to the Company
and/or its subsidiaries and who is designated as eligible by the Committee, and
any person who has been offered employment by the Company or a subsidiary or
affiliate, provided that such prospective employee may not receive any payment
or exercise any right relating to an Award until such person has commenced
employment with the Company or a subsidiary. An employee on leave of absence may
be considered as still in the employ of the Company or a subsidiary for purposes
of eligibility for participation in the Plan.

 

(p) “Exchange Act” means the Securities Exchange Act of 1934, as amended from
time to time, including rules thereunder and successor provisions and
rules thereto.

 

(q) “Fair Market Value” means the fair market value of Stock, Awards, or other
property as determined in good faith by the Committee or under procedures
established by the Committee. Unless otherwise determined by the Committee, the
Fair Market Value of Stock shall be the average of the high and low sales prices
of Stock on a given date or, if there are no sales on that date, on the latest
previous date on which there were sales, reported for composite transactions in
securities listed on the principal trading market on which Stock is then listed.
Fair Market Value relating to the exercise price or grant price of any Non-409A
Option or SAR shall conform to requirements under Code Section 409A.

 

(r) “409A Awards” means Awards that constitute a deferral of compensation under
Code Section 409A and regulations thereunder. “Non-409A Awards” means Awards
other than 409A Awards; an Award granted before January 1, 2005 which is
eligible for “grandfathering” under Code Section 409A (generally such an Award
must be vested before January 1, 2005 in order to be grandfathered) constitutes
a Non-409A Award unless the Committee instead designates it as a 409A Award.
Although the Committee retains authority under the Plan to grant Options, SARs
and Restricted Stock on terms that will qualify those Awards as 409A Awards,
Options, SARs exercisable for Stock, and Restricted Stock will be Non-409A
Awards (with conforming terms, as provided in Section 10(h)) unless otherwise
expressly specified by the Committee.

 

(s) “Full-Value Awards” has the meaning ascribed to such term in Section 4(a) of
the Plan.

 

(t) “Incentive Stock Option” or “ISO” means any Option intended to be and
designated as an incentive stock option within the meaning of Code Section 422
or any successor provision thereto that may be granted to Eligible Persons who
are employees.

 

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(u) “Initial Shares” has the meaning ascribed to such term in Section 4(a) of
the Plan.

 

(v) “Limited SAR” means a conditional right granted to a Participant under
Section 6(c) hereof.

 

(w) “Option” means a conditional right, granted to a Participant under
Section 6(b) hereof, to purchase Stock or other Awards at a specified price
during specified time periods.

 

(x) “Other Stock-Based Awards” means Awards granted to a Participant under
Section 6(h) hereof.

 

(y) “Participant” means a person who has been granted an Award under the Plan
which remains outstanding, including a person who is no longer an Eligible
Person.

 

(z) “Performance Award” means a conditional right, granted to a Participant
under Section 7, to receive cash, Stock or other Awards or payments, as
determined by the Committee, based upon performance criteria specified by the
Committee.

 

(aa) “Preexisting Plan” mean the Company’s 1997 Incentive Compensation Plan, as
amended and restated.

 

(bb) “Restricted Stock” means Stock granted to a Participant under
Section 6(d) hereof, that is subject to certain restrictions and to a risk of
forfeiture.

 

(cc) “Rule 16b-3” means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.

 

(dd) “Stock” means the Company’s Class A Common Stock, $.01 par value, and such
other securities as may be substituted (or resubstituted) for Stock pursuant to
Section 10(c) hereof.

 

(ee) “Stock Appreciation Rights” or “SAR” means a conditional right granted to a
Participant under Section 6(c) hereof.

 

3.  Administration.

 

(a) Authority of the Committee.  Except as otherwise provided below, the Plan
shall be administered by the Committee. The Committee shall have full and final
authority, in each case subject to and consistent with the provisions of the
Plan, to select Eligible Persons to become Participants, grant Awards, determine
the type, number, and other terms and conditions of, and all other matters
relating to, Awards, prescribe Award agreements (which need not be identical for
each Participant) and rules and regulations for the administration of the Plan,
construe and interpret the Plan and Award agreements and correct defects, supply
omissions, or reconcile inconsistencies therein, and to make all other decisions
and determinations as the Committee may deem necessary or advisable for the
administration of the Plan. The foregoing notwithstanding, the Board shall
perform the functions of the Committee for purposes of granting Awards under the
Plan to non-employee directors, and may perform any function of the Committee
under the Plan for any other purpose (subject to Nasdaq Marketplace
Rule 4350(c)(3)), including for the purpose of ensuring that transactions under
the Plan by Participants who are then subject to Section 16 of the Exchange Act
in respect of the Company are exempt under Rule 16b-3. In any case in which the
Board is performing a function of the Committee under the Plan, each reference
to the Committee herein shall be deemed to refer to the Board, except where the
context otherwise requires. Any action of the Committee shall be final,
conclusive and binding on all persons, including the Company, its subsidiaries,
Participants, Beneficiaries, transferees under Section 10(b) hereof, or other
persons claiming rights from or through a Participant, and stockholders.

 

(b) Manner of Exercise of Committee Authority.  The Committee may act through
subcommittees, including for purposes of perfecting exemptions under Rule 16b-3
or qualifying Awards under Code Section 162(m) as performance-based
compensation, in which case the subcommittee shall be subject to and have
authority under the charter applicable to the Committee, and the acts of the
subcommittee shall

 

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be deemed to be acts of the Committee hereunder. The express grant of any
specific power to the Committee, and the taking of any action by the Committee,
shall not be construed as limiting any power or authority of the Committee. The
Committee may delegate to officers or managers of the Company or any subsidiary
or affiliate, or committees thereof, the authority, subject to such terms as the
Committee shall determine, to perform such functions, including administrative
functions, as the Committee may determine, to the fullest extent permitted under
Section 157 and other applicable provisions of the Delaware General Corporation
Law. The Committee may appoint agents to assist it in administering the Plan.

 

(c) Limitation of Liability.  The Committee and each member thereof, and any
person acting pursuant to authority delegated by the Committee, shall be
entitled, in good faith, to rely or act upon any report or other information
furnished by any executive officer, other officer or employee of the Company or
a subsidiary or affiliate, the Company’s independent auditors, consultants or
any other agents assisting in the administration of the Plan. Members of the
Committee, any person acting pursuant to authority delegated by the Committee,
and any officer or employee of the Company or a subsidiary or affiliate acting
at the direction or on behalf of the Committee or a delegee shall not be
personally liable for any action or determination taken or made in good faith
with respect to the Plan, and shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action or
determination.

 

4.  Shares Available Under the Plan.

 

(a) Number of Shares Available for Delivery.  Subject to adjustment as provided
in Section 10(c) hereof, the total number of shares of Stock reserved and
available for delivery in connection with Awards under the Plan shall be
(i) 8,500,000 plus the number of shares that, under the Preexisting Plan, were
available at the Effective Date or thereafter have or will become available (the
“Initial Shares”), provided that the maximum number of Initial Shares available
for delivery in connection with Awards other than Options, SARs and Dividend
Equivalents paid in cash (collectively, “Full-Value Awards”) that were
outstanding on April 24, 2008 or thereafter become outstanding shall be
2,000,000, plus (ii) 3,000,000 (the “Additional Shares”), provided that the
maximum number of Additional Shares available for delivery in connection with
Full-Value Awards under the Plan shall be 1,250,000. Any shares of Stock
delivered under the Plan shall consist of authorized and unissued shares or
treasury shares.

 

(b) Share Counting Rules.  Subject to the provisions of this Section 4(b), the
Committee may adopt reasonable counting procedures to ensure appropriate
counting, avoid double counting (as, for example, in the case of tandem or
substitute awards) and make adjustments if the number of shares of Stock
actually delivered differs from the number of shares previously counted in
connection with an Award. Any shares which are (i) underlying an Option or SAR
which is cancelled or terminated without having been exercised, including due to
expiration or forfeiture, (ii) subject to Full-Value Awards which are cancelled,
terminated or forfeited, (iii) not delivered to a Participant because all or a
portion of the Full-Value Awards is settled in cash or (iv) withheld in
connection with a Full-Value Award to satisfy tax withholding obligations, shall
in each case again be available for Awards under the Plan (with shares subject
to Full-Value Awards again available for those types of Awards); provided,
however, that shares shall not become available under this Section 4(b) in an
event that would constitute a “material amendment” of the Plan subject to
shareholder approval under Marketplace Rule 4350(i) and other applicable
rules of the

 

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Nasdaq National Market. Notwithstanding the foregoing, any shares subject to an
Option or SAR shall be deemed to be delivered upon exercise with respect to the
underlying shares even if the net number of shares delivered to the Participant
is less than the number of shares underlying the Award (as would occur, for
example, upon a net exercise of Options, upon a settlement of SARs in cash or
for a net number of shares, upon a stock-for-stock exercise of Options or upon
share withholding to satisfy tax obligations upon exercise of Options or SARs).
Shares repurchased on the open market with the proceeds from the exercise of an
Option may not again be made available for Awards under the Plan. For purposes
of determining the number of Shares that become available under the Preexisting
Plan, the share counting rules of this Plan shall apply. The payment of cash
dividends and Dividend Equivalents in conjunction with outstanding Awards shall
not be counted against the shares available for Awards under the Plan. In
addition, in the case of any Award granted in substitution for an award of a
company or business acquired by the Company or a subsidiary or affiliate, shares
issued or issuable in connection with such substitute Award shall not be counted
against the number of shares reserved under the Plan, but shall be available
under the Plan by virtue of the Company’s assumption of the plan or arrangement
of the acquired company or business. This Section 4(b) shall apply to the number
of shares reserved and available for ISOs only to the extent consistent with
applicable regulations relating to ISOs under the Code. Because shares will
count against the number reserved in Section 4(a) upon delivery (or later
vesting) and subject to the share counting rules under this Section 4(b), the
Committee may determine that Awards may be outstanding that relate to more
shares than the aggregate remaining available under the Plan, so long as Awards
will not result in delivery and vesting of shares in excess of the number then
available under the Plan.

 

5.  Eligibility; Per-Person Award Limitations.

 

(a) Grants to Eligible Persons.  Awards may be granted under the Plan only to
Eligible Persons.

 

(b) Annual Per-Person Award Limitations.  In each calendar year during any part
of which the Plan is in effect, an Eligible Person may be granted Awards under
each of Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g), and 6(h) (including
Performance Awards under Section 7 based on Awards authorized by each referenced
subsection) relating to a number of shares of Stock up to his or her Annual
Limit. A Participant’s Annual Limit, in any year during any part of which the
Participant is then eligible under the Plan, shall equal 1,500,000 shares plus
the amount of the Participant’s unused Annual Limit relating to the same type of
Award as of the close of the previous year, subject to adjustment as provided in
Section 10(c). In the case of a cash-denominated Award for which the limitation
set forth in the preceding sentence would not operate as an effective limitation
satisfying Treasury Regulation 1.162-27(e)(4) (including a cash Performance
Award under Section 7), an Eligible Person may not be granted Awards authorizing
the earning during any calendar year of an amount that exceeds the Participant’s
Annual Limit, which for this purpose shall equal $3,000,000 plus the amount of
the Participant’s unused cash Annual Limit as of the close of the previous year
(this limitation is separate and not affected by the number of Awards granted
during such calendar year subject to the limitation in the preceding sentence).
For this purpose, (i) “earning” means satisfying performance conditions so that
an amount becomes payable, without regard to whether it is to be paid currently
or on a deferred basis or continues to be subject to any service requirement or
other non-performance condition, and (ii) a Participant’s Annual Limit is used
to the extent a cash amount or number of shares may be potentially earned or
paid under an Award, regardless of whether such amount or shares are in fact
earned or paid.

 

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6.  Specific Terms of Awards.

 

(a) General.  Awards may be granted on the terms and conditions set forth in
this Section 6. In addition, the Committee may impose on any Award or the
exercise thereof, at the date of grant or thereafter (subject to
Sections 10(e) and 10(h)), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee shall determine,
including terms requiring forfeiture of Awards in the event of termination of
employment by the Participant and terms permitting a Participant to make
elections relating to his or her Award. The Committee shall retain full power
and discretion to accelerate, waive or modify, at any time, any term or
condition of an Award that is not mandatory under the Plan. The Committee shall
require the payment of lawful consideration for an Award to the extent necessary
to satisfy the requirements of the Delaware General Corporation Law, and may
otherwise require payment of consideration for an Award except as limited by the
Plan.

 

(b) Options.  The Committee is authorized to grant Options to Participants on
the following terms and conditions:

 

(i) Exercise Price.  The exercise price per share of Stock purchasable under an
Option shall be determined by the Committee, provided that such exercise price
shall be not less than the Fair Market Value of a share of Stock on the date of
grant of such Option except as provided under Section 8(a) hereof. In addition,
in connection with a merger, consolidation or reorganization of the Company or
any of its subsidiaries, the Committee may grant Options with an exercise price
per share less than the market value of the Common Stock on the date of grant if
such Options are granted in exchange for, or upon conversion of, options to
purchase capital stock of any other entity which is a party to such merger,
consolidation or reorganization.

 

(ii) Time and Method of Exercise.  The Committee shall determine the time or
times at which or the circumstances under which an Option may be exercised in
whole or in part (including based on achievement of performance goals and/or
future service requirements), the methods by which such exercise price may be
paid or deemed to be paid, the form of such payment (subject to
Section 10(h) and (i)), including, without limitation, cash, Stock (including
Stock deliverable upon exercise, if such withholding will not result in
additional accounting expense to the Company), other Awards or awards granted
under other plans of the Company or any subsidiary or affiliate, or other
property (including through broker-assisted “cashless exercise” arrangements, to
the extent permitted by applicable law), and the methods by or forms in which
Stock will be delivered or deemed to be delivered in satisfaction of Options to
Participants (including, to the extent permitted under Code Section 409A,
deferred delivery of shares as mandated by the Committee, with such deferred
shares subject to any vesting, forfeiture or other terms as the Committee may
specify).

 

(iii) ISOs.  The terms of any ISO granted under the Plan shall comply in all
respects with the provisions of Code Section 422. Anything in the Plan to the
contrary notwithstanding, no term of the Plan relating to ISOs (including any
SAR in tandem therewith) shall be interpreted, amended or altered, nor shall any
discretion or authority granted under the Plan be exercised, so as to disqualify
either the Plan or any ISO under Code Section 422, unless the Participant has
first consented to the change that will result in such disqualification. ISOs
may be granted only to employees of the Company or any of its subsidiaries. To
the extent that the aggregate Fair Market Value (determined as of the time the
Option is granted) of the Stock with respect to which ISOs granted under this
Plan and all other plans of the Company and any subsidiary are first exercisable
by any employee during any calendar year shall exceed the maximum limit
(currently, $100,000), if any, imposed from time to time under Code Section 422,
such Options shall be treated as Options that are not ISOs.

 

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(c) Stock Appreciation Rights.  The Committee is authorized to grant SARs to
Participants on the following terms and conditions:

 

(i) Right to Payment.  A SAR shall confer on the Participant to whom it is
granted a right to receive, upon exercise thereof, the excess of (A) the Fair
Market Value of one share of Stock on the date of exercise (or, in the case of a
“Limited SAR,” the Fair Market Value determined by reference to the Change in
Control Price, as defined under Section 9(c) hereof) over (B) the grant price of
the SAR as determined by the Committee, which grant price shall be not less than
the Fair Market Value of a share of Stock on the date of grant of such SAR.

 

(ii) Other Terms.  The Committee shall determine, at the date of grant or
thereafter, the term of each SAR, provided that in no event shall the term of an
SAR exceed a period of ten years from the date of grant, the time or times at
which and the circumstances under which an SAR may be exercised in whole or in
part (including based on achievement of performance goals and/or future service
requirements), the method of exercise, method of settlement, form of
consideration payable in settlement, method by or forms in which Stock will be
delivered or deemed to be delivered to Participants, whether or not an SAR shall
be in tandem or in combination with any other Award, whether or not the SAR will
be a 409A Award or Non-409A Award (cash SARs will in all cases be 409A Awards),
and any other terms and conditions of any SAR. Limited SARs that may only be
exercised in connection with a Change in Control, termination of service
following a Change in Control, or other event as specified by the Committee may
be granted on such terms, not inconsistent with this Section 6(c), as the
Committee may determine. SARs and Limited SARs may be either freestanding or in
tandem with other Awards. The Committee may require that an outstanding Option
be exchanged for an SAR exercisable for Stock having vesting, expiration, and
other terms substantially the same as the Option, so long as such exchange will
not result in additional accounting expense to the Company.

 

(d) Restricted Stock.  The Committee is authorized to grant Restricted Stock to
Participants on the following terms and conditions:

 

(i) Grant and Restrictions.  Restricted Stock shall be subject to such
restrictions on transferability, risk of forfeiture and other restrictions, if
any, as the Committee may impose, which restrictions may lapse separately or in
combination at such times, under such circumstances (including based on
achievement of performance goals and/or future service requirements), in such
installments or otherwise, as the Committee may determine at the date of grant
or thereafter. Except to the extent restricted under the terms of the Plan and
any Award agreement relating to the Restricted Stock, a Participant granted
Restricted Stock shall have all of the rights of a stockholder, including the
right to vote the Restricted Stock and the right to receive dividends thereon
(subject to any mandatory reinvestment or other requirement imposed by the
Committee). During the restricted period applicable to the Restricted Stock,
subject to Section 10(b) below, the Restricted Stock may not be sold,
transferred, pledged, hypothecated, margined, or otherwise encumbered by the
Participant.

 

(ii) Forfeiture.  Except as otherwise determined by the Committee, upon
termination of employment during the applicable restriction period, Restricted
Stock that is at that time subject to restrictions shall be forfeited and
reacquired by the Company; provided that the Committee may provide, by rule or
regulation or in any Award agreement, or may determine in any individual case,
that restrictions or forfeiture conditions relating to Restricted Stock shall be
waived in whole or in part in the event of terminations resulting from specified
causes, and the Committee may in other cases waive in whole or in part the
forfeiture of Restricted Stock.

 

(iii) Certificates for Stock.  Restricted Stock granted under the Plan may be
evidenced in such manner as the Committee shall determine. If certificates
representing Restricted Stock are registered in the name of the Participant, the
Committee may require that such certificates bear an appropriate legend
referring to the terms, conditions and restrictions applicable to such
Restricted Stock, that the

 

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Company retain physical possession of the certificates, and/or that the
Participant deliver a stock power to the Company, endorsed in blank, relating to
the Restricted Stock.

 

(iv) Dividends and Splits.  As a condition to the grant of an Award of
Restricted Stock, the Committee may require that any cash dividends paid on a
share of Restricted Stock be automatically reinvested in additional shares of
Restricted Stock or applied to the purchase of additional Awards under the Plan.
Unless otherwise determined by the Committee, Stock distributed in connection
with a Stock split or Stock dividend, and other property distributed as a
dividend, shall be subject to restrictions and a risk of forfeiture to the same
extent as the Restricted Stock with respect to which such Stock or other
property has been distributed.

 

(e) Deferred Stock.  The Committee is authorized to grant Deferred Stock to
Participants, which are rights to receive Stock at the end of a specified
deferral period, subject to the following terms and conditions:

 

(i) Award and Restrictions.  Settlement of an Award of Deferred Stock shall
occur upon expiration of the deferral period specified for such Deferred Stock
by the Committee (or, if permitted by the Committee, as elected by the
Participant). In addition, Deferred Stock shall be subject to such restrictions
(which may include a risk of forfeiture) as the Committee may impose, if any,
which restrictions may lapse at the expiration of the deferral period or at
earlier specified times (including based on achievement of performance goals
and/or future service requirements), separately or in combination, in
installments or otherwise, as the Committee may determine.

 

(ii) Forfeiture.  Except as otherwise determined by the Committee, upon
termination of employment during the applicable deferral period or portion
thereof to which forfeiture conditions apply (as provided in the Award agreement
evidencing the Deferred Stock), all Deferred Stock that is at that time subject
to deferral (other than a deferral at the election of the Participant) shall be
forfeited; provided that the Committee may provide, by rule or regulation or in
any Award agreement, or may determine in any individual case, that restrictions
or forfeiture conditions relating to Deferred Stock shall be waived in whole or
in part in the event of terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part the forfeiture of
Deferred Stock. Deferred Stock subject to a risk of forfeiture may be called
“restricted stock units” or otherwise designated by the Committee.

 

(iii) Dividend Equivalents.  Unless otherwise determined by the Committee at
date of grant, Dividend Equivalents on the specified number of shares of Stock
covered by an Award of Deferred Stock shall be either (A) paid with respect to
such Deferred Stock at the dividend payment date in cash or in shares of
unrestricted Stock having a Fair Market Value equal to the amount of such
dividends, or (B) deferred with respect to such Deferred Stock and the amount or
value thereof automatically deemed reinvested in additional Deferred Stock,
other Awards or other investment vehicles, as the Committee shall determine or
permit the Participant to elect.

 

(f) Bonus Stock and Awards in Lieu of Obligations.  The Committee is authorized
to grant Stock as a bonus, or to grant Stock or other Awards in lieu of
obligations of the Company or a subsidiary or affiliate to pay cash or deliver
other property under the Plan or under other plans or compensatory arrangements,
subject to such terms as shall be determined by the Committee.

 

(g) Dividend Equivalents.  The Committee is authorized to grant Dividend
Equivalents to a Participant, entitling the Participant to receive cash, Stock,
other Awards, or other property equivalent to all or a portion of the dividends
paid with respect to a specified number of shares of Stock. Dividend Equivalents
may be awarded on a free-standing basis or in connection with another Award. The
Committee may provide that Dividend Equivalents shall be paid or distributed
when accrued or shall be deemed to have been reinvested in additional Stock,
Awards, or other investment vehicles, and subject to restrictions on
transferability, risks of forfeiture and such other terms as the Committee may
specify.

 

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(h) Other Stock-Based Awards.  The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other Awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including, without limitation,
convertible or exchangeable debt securities, other rights convertible or
exchangeable into Stock, purchase rights for Stock, Awards with value and
payment contingent upon performance of the Company or any other factors
designated by the Committee, and Awards valued by reference to the book value of
Stock or the value of securities of or the performance of specified
subsidiaries. The Committee shall determine the terms and conditions of such
Awards. Stock delivered pursuant to an Award in the nature of a purchase right
granted under this Section 6(h) shall be purchased for such consideration, paid
for at such times, by such methods, and in such forms, including, without
limitation, cash, Stock, other Awards, or other property, as the Committee shall
determine.

 

7.  Performance Awards, Including Annual Incentive Awards

 

(a) Performance Awards Generally.  The Committee is authorized to grant
Performance Awards on the terms and conditions specified in this Section 7.
Performance Awards may be denominated as a cash amount, number of shares of
Stock, or specified number of other Awards (or a combination) which may be
earned upon achievement or satisfaction of performance conditions specified by
the Committee. In addition, the Committee may specify that any other Award shall
constitute a Performance Award by conditioning the right of a Participant to
exercise the Award or have it settled, or the timing thereof, upon achievement
or satisfaction of such performance conditions as may be specified by the
Committee. The Committee may use such business criteria and other measures of
performance as it may deem appropriate in establishing any performance
conditions, and may exercise its discretion to reduce or increase the amounts
payable under any Award subject to performance conditions, except as limited
under Sections 7(b) and 7(c) in the case of a Performance Award intended to
qualify as “performance-based compensation” under Code Section 162(m).

 

(b) Performance Awards Granted to Covered Employees.  If the Committee
determines that a Performance Award to be granted to an Eligible Person who is
designated by the Committee as a Covered Employee should qualify as
“performance-based compensation” for purposes of Code Section 162(m), the grant,
exercise and/or settlement of such Performance Award shall be contingent upon
achievement of a preestablished performance goal and other terms set forth in
this Section 7(b).

 

(i) Performance Goals Generally.  The performance goal for such Performance
Awards shall consist of one or more business criteria and a targeted level or
levels of performance with respect to each of such criteria, as specified by the
Committee consistent with this Section 7(b). The performance goal shall be
objective and shall otherwise meet the requirements of Code Section 162(m) and
regulations thereunder (including Treasury Regulation 1.162-27 and successor
regulations thereto), including the requirement that the level or levels of
performance targeted by the Committee result in the achievement of performance
goals being “substantially uncertain.” The Committee may determine that such
Performance Awards shall be granted, exercised and/or settled upon achievement
of any one performance goal or that two or more of the performance goals must be
achieved as a condition to grant, exercise and/or settlement of such Performance
Awards. Performance goals may differ for Performance Awards granted to any one
Participant or to different Participants.

 

(ii) Business Criteria.  One or more of the following business criteria for the
Company, on a consolidated basis, and/or for specified subsidiaries or
affiliates or other business units or lines of business of the Company shall be
used by the Committee in establishing performance goals for such Performance
Awards: (1) earnings per share (basic or fully diluted); (2) revenues;
(3) earnings, before or after taxes, from operations (generally or specified
operations), before or after interest expense, depreciation, amortization,
incentives, or extraordinary or special items; (4) cash flow, free cash flow,
cash flow return on investment (discounted or otherwise), net cash provided by
operations, or cash flow

 

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in excess of cost of capital; (5) return on net assets, return on assets, return
on investment, return on capital, return on equity; (6) economic value created;
(7) operating margin or operating expense; (8) net income; (9) Stock price or
total stockholder return; and (10) strategic business criteria, consisting of
one or more objectives based on meeting specified market penetration, geographic
business expansion goals, new products, ventures or facilities, cost targets,
internal controls, compliance, customer satisfaction and services, human
resources management, supervision of litigation and information technology, and
goals relating to acquisitions or divestitures of subsidiaries, affiliates,
joint ventures or facilities. The targeted level or levels of performance with
respect to such business criteria may be established at such levels and in such
terms as the Committee may determine, in its discretion, including in absolute
terms, as a goal relative to performance in prior periods, or as a goal compared
to the performance of one or more comparable companies or an index covering
multiple companies.

 

(iii) Performance Period; Timing for Establishing Performance Goals; Per-Person
Limit.  Achievement of performance goals in respect of such Performance Awards
shall be measured over a performance period of up to one year or more than one
year, as specified by the Committee. A performance goal shall be established not
later than the earlier of (A) 90 days after the beginning of any performance
period applicable to such Performance Award or (B) the time 25% of such
performance period has elapsed. In all cases, the maximum Performance Award of
any Participant shall be subject to the limitation set forth in Section 5(b).

 

(iv) Performance Award Pool.  The Committee may establish a Performance Award
pool, which shall be an unfunded pool, for purposes of measuring performance of
the Company or a business unit in connection with Performance Awards. The amount
of such Performance Award pool shall be based upon the achievement of a
performance goal or goals based on one or more of the business criteria set
forth in Section 7(b)(ii) during the given performance period, as specified by
the Committee in accordance with Section 7(b)(i). The Committee may specify the
amount of the Performance Award pool as a percentage of any of such business
criteria, a percentage thereof in excess of a threshold amount, or as another
amount which need not bear a strictly mathematical relationship to such business
criteria.

 

(v) Settlement of Performance Awards; Other Terms.  Settlement of such
Performance Awards shall be in cash, Stock, other Awards or other property, in
the discretion of the Committee. The Committee may, in its discretion, increase
or reduce the amount of a settlement otherwise to be made in connection with
such Performance Awards, but may not exercise discretion to increase any such
amount payable to a Covered Employee in respect of a Performance Award subject
to this Section 7(b). Any settlement which changes the form of payment from that
originally specified shall be implemented in a manner such that the Performance
Award and other related Awards do not, solely for that reason, fail to qualify
as “performance-based compensation” for purposes of Code Section 162(m). The
Committee shall specify the circumstances in which such Performance Awards shall
be paid or forfeited in the event of termination of employment by the
Participant or other event (including a Change in Control) prior to the end of a
performance period or settlement of such Performance Awards; any resulting
payments need not qualify as performance-based compensation under
Section 162(m) if the authorization of such non-qualifying payments would not
otherwise disqualify the Performance Award apart from the termination or change
in control.

 

(c) Annual Incentive Awards Granted to Designated Covered Employees.  The
Committee may grant a Performance Award in the form of an Annual Incentive Award
to an Eligible Person who is designated by the Committee as likely to be a
Covered Employee. Such Annual Incentive Award will be intended to qualify as
“performance-based compensation” for purposes of Code Section 162(m), and
therefore its grant, exercise and/or settlement shall be contingent upon
achievement of preestablished performance goals and shall comply with the other
requirements set forth in Section 7(b).

 

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(d) Written Determinations.  Determinations by the Committee as to the
establishment of performance goals, the amount potentially payable in respect of
Performance Awards, the level of actual achievement of the specified performance
goals relating to Performance Awards and the amount of any final Performance
Award shall be recorded in writing in the case of Performance Awards intended to
qualify under Section 162(m). Specifically, the Committee shall certify in
writing, in a manner conforming to applicable regulations under Section 162(m),
prior to settlement of each such Award granted to a Covered Employee, that the
performance objective relating to the Performance Award and other material terms
of the Award upon which settlement of the Award was conditioned have been
satisfied.

 

8.  Certain Provisions Applicable to Awards.

 

(a) Stand-Alone, Additional, Tandem, and Substitute Awards.  Subject to the
restrictions on “repricing” set forth in Section 10(e), Awards granted under the
Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution or exchange for, any other Award
or any award granted under another plan of the Company, any subsidiary or
affiliate, or any business entity to be acquired by the Company or a subsidiary
or affiliate, or any other right of a Participant to receive payment from the
Company or any subsidiary or affiliate; provided, however, that a 409A Award may
not be granted in tandem with a Non-409A Award. Awards granted in addition to or
in tandem with other Awards or awards may be granted either as of the same time
as or a different time from the grant of such other Awards or awards.

 

(b) Term of Awards.  The term of each Award shall be for such period as may be
determined by the Committee; provided that in no event shall the term of any
Option or SAR exceed a period of ten years (or, in the case of an ISO, such
shorter term as may be required under Code Section 422).

 

(c) Form and Timing of Payment under Awards; Deferrals.  Subject to the terms of
the Plan (including Sections 10(h) and (i)) and any applicable Award agreement,
payments to be made by the Company or a subsidiary upon the exercise of an
Option or other Award or settlement of an Award may be made in cash, Stock,
other Awards, or other property, and may be made in a single payment or
transfer, in installments, or on a deferred basis. The settlement of any Award
may be accelerated in the discretion of the Committee or upon occurrence of one
or more specified events (in addition to a Change in Control, subject to
Sections 10(h) and (i)). Installment or deferred payments may be required by the
Committee (subject to Section 10(e) of the Plan, including the consent
provisions thereof in the case of any deferral of an outstanding Award not
provided for in the original Award agreement) or permitted at the election of
the Participant on terms and conditions established by the Committee. Payments
may include, without limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments or the grant or
crediting of Dividend Equivalents or other amounts in respect of installment or
deferred payments denominated in Stock. Any payment deferred pursuant to this
Section 8(c) shall represent only an unfunded, unsecured promise by the Company
to pay the amount credited thereto to the Participant in the future. In the case
of any 409A Award that is vested and no longer subject to a risk of forfeiture
(within the meaning of Code Section 83) and deferred at the election of the
Participant, such Award will be distributed to the Participant, upon application
of the Participant, if the Participant has had an unforeseeable emergency within
the meaning of Code Sections 409A(a)(2)(A)(vi) and 409A(a)(2)(B)(ii), in
accordance with Section 409A(a)(2)(B)(ii).

 

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(d) Additional Award Forfeiture Provisions.  The Committee may condition a
Participant’s right to receive a grant of an Award, to exercise the Award, to
retain Stock acquired in connection with an Award, or to retain the profit or
gain realized by a Participant in connection with an Award, including cash
received upon sale of Stock acquired in connection with an Award, upon
compliance by the Participant with specified conditions relating to
non-competition, confidentiality of information relating to the Company,
non-solicitation of customers, suppliers, and employees of the Company,
cooperation in litigation, non-disparagement of the Company and its officers,
directors and affiliates, and other restrictions upon or covenants of the
Participant, including during specified periods following termination of
employment or service to the Company.

 

(e) Exemptions from Section 16(b) Liability.  With respect to a Participant who
is then subject to the reporting requirements of Section 16(a) of the Exchange
Act in respect of the Company, the Committee shall implement transactions under
the Plan and administer the Plan in a manner that will ensure that each
transaction with respect to such a Participant is exempt from liability under
Rule 16b-3 or otherwise not subject to liability under Section 16(b), except
that this provision shall not limit sales by such a Participant, and such a
Participant may elect to engage in other non-exempt transactions under the Plan.
The Committee may authorize the Company to repurchase any Award or shares of
Stock deliverable or delivered in connection with any Award (subject to
Section 10(i)) in order to avoid a Participant who is subject to Section 16 of
the Exchange Act incurring liability under Section 16(b). Unless otherwise
specified by the Participant, equity securities or derivative securities
acquired under the Plan which are disposed of by a Participant shall be deemed
to be disposed of in the order acquired by the Participant.

 

9.  Change in Control.

 

(a) Effect of “Change in Control.”  In the event of a “Change in Control,” the
following provisions shall apply unless otherwise provided in the Award
agreement:

 

(i) Any Award carrying a right to exercise that was not previously exercisable
and vested shall become fully exercisable and vested as of the time of the
Change in Control;

 

(ii) If any optionee holds an Option immediately prior to a Change in Control
that was not previously exercisable and vested in full throughout the 60-day
period preceding the Change in Control, he shall be entitled to elect, during
the 60-day period following the Change in Control, in lieu of acquiring the
shares of Stock covered by the portion of the Option that was not vested and
exercisable within such 60-day period, to receive, and the Company shall be
obligated to pay, in cash the excess of the Change in Control Price over the
exercise price of such Option, multiplied by the number of shares of Stock
covered by such portion of the Option;

 

(iii) The restrictions, deferral of settlement, and forfeiture conditions
applicable to any other Award granted under the Plan shall lapse and such Awards
shall be deemed fully vested as of the time of the Change in Control, except to
the extent of any waiver by the Participant and subject to applicable
restrictions set forth in Section 10(a) hereof; and

 

(iv) With respect to any outstanding Award subject to achievement of performance
goals and conditions under the Plan, such performance goals and other conditions
will be deemed to be met if and to the extent so provided by the Committee in
the Award agreement relating to such Award.

 

The foregoing notwithstanding, any benefit or right provided under this
Section 9 in the case of any non-409A Award shall be limited to those benefits
and rights permitted under Code Section 409A, and any benefit or right provided
under this Section 9 that would result in a distribution of a 409A Award at a
time or in a manner not permitted by Section 409A shall be limited to the extent
necessary so that the distribution is permitted under Section 409A. For this
purpose, the distribution of a 409A Award (i) triggered by a Change in Control
will remain authorized if the Change in Control also constitutes a change in the
ownership or effective control of the Company, or in the ownership of a
substantial portion of the assets of the Company, within the meaning of Code
Section 409A(a)(2)(A)(v), and (ii) triggered by

 

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a termination of employment with or service to the Company or a subsidiary
following a Change in Control by a specified employee, within the meaning of
Code Section 409A(a)(2)(B)(i), will remain authorized to occur six months after
such termination.

 

(b) Definition of “Change in Control.”  A “Change in Control” shall mean the
occurrence of any of the following:

 

(i) when any “person” as defined in Section 3(a)(9) of the Exchange Act and as
used in Sections 13(d) and 14(d) thereof, including a “group” as defined in
Section 13(d) of the Exchange Act but excluding the Company and any subsidiary
and any employee benefit plan sponsored or maintained by the Company or any
subsidiary (including any trustee of such plan acting as trustee), directly or
indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act) of securities of the Company representing at least 40% percent (or
such greater percentage as the Committee may specify in connection with the
grant of any Award) of the combined voting power of the Company’s
then-outstanding securities; or

 

(ii) the occurrence of a transaction requiring stockholder approval for the
acquisition of the Company by an entity other than the Company or a subsidiary
by merger or otherwise or for the purchase by an entity other than the Company
or a subsidiary of substantially all of the assets of the Company.

 

(c) Definition of “Change in Control Price.”  The “Change in Control Price”
means an amount in cash equal to the higher of (i) the amount of cash and fair
market value of property that is the highest price per share paid (including
extraordinary dividends) in any transaction triggering the Change in Control, or
(ii) the highest Fair Market Value per share at any time during the 60-day
period preceding the Change in Control.

 

10.  General Provisions.

 

(a) Compliance with Legal and Other Requirements.  The Company may, to the
extent deemed necessary or advisable by the Committee and subject to
Section 10(h), postpone the issuance or delivery of Stock or payment of other
benefits under any Award until completion of such registration or qualification
of such Stock or other required action under any federal or state law, rule, or
regulation, listing or other required action with respect to any stock exchange
or automated quotation system upon which the Stock or other securities of the
Company are listed or quoted, or compliance with any other obligation of the
Company, as the Committee may consider appropriate, and may require any
Participant to make such representations, furnish such information and comply
with or be subject to such other conditions as it may consider appropriate in
connection with the issuance or delivery of Stock or payment of other benefits
in compliance with applicable laws, rules, and regulations, listing
requirements, or other obligations. The foregoing notwithstanding, in connection
with a Change in Control, the Company shall take or cause to be taken no action,
and shall undertake or permit to arise no legal or contractual obligation, that
results or would result in any postponement of the issuance or delivery of Stock
or payment of benefits under any Award or the imposition of any other conditions
on such issuance, delivery or payment, to the extent that such postponement or
other condition would represent a greater burden on a Participant than existed
on the 90th day preceding the Change in Control.

 

(b) Limits on Transferability; Beneficiaries.  No Award or other right or
interest of a Participant under the Plan shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or liability of such
Participant to any party, or assigned or transferred by such Participant
otherwise than by will or the laws of descent and distribution or to a
Beneficiary upon the death of a Participant, and such Awards or rights that may
be exercisable shall be exercised during the lifetime of the Participant only by
the Participant or his or her guardian or legal representative, except that
Awards and other rights (other than ISOs and SARs in tandem therewith) may be
transferred for estate planning purposes to one or more Beneficiaries or other
transferees during the lifetime of the Participant, and may be exercised by such

 

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transferees in accordance with the terms of such Award, but only if and to the
extent such transfers are permitted by the Committee pursuant to the express
terms of an Award agreement (subject to any terms and conditions which the
Committee may impose thereon). A Beneficiary, transferee, or other person
claiming any rights under the Plan from or through any Participant shall be
subject to all terms and conditions of the Plan and any Award agreement
applicable to such Participant, except as otherwise determined by the Committee,
and to any additional terms and conditions deemed necessary or appropriate by
the Committee.

 

(c) Adjustments.  In the event that any large, special and non-recurring
dividend or other distribution (whether in the form of cash or property other
than Stock), recapitalization, forward or reverse split, Stock dividend,
reorganization, merger, consolidation, spin-off, combination, repurchase, share
exchange, liquidation, dissolution or other similar corporate transaction or
event affects the Stock such that an adjustment is determined by the Committee
to be appropriate or, in the case of any outstanding Award, necessary in order
to prevent dilution or enlargement of the rights of the Participant, then the
Committee shall, in such equitable manner as it may determine, adjust any or all
of (A) the number and kind of shares of Stock which may be delivered in
connection with Awards granted thereafter, (B) the number and kind of shares of
Stock by which annual per-person Award limitations are measured under
Section 5(b), (C) the number and kind of shares of Stock subject to or
deliverable in respect of outstanding Awards and (D) the exercise price, grant
price or purchase price relating to any Award or, if deemed appropriate, the
Committee may make provision for a payment of cash or property to the holder of
an outstanding Option (subject to Section 10(i)). In addition, the Committee is
authorized to make adjustments in the terms and conditions of, and the criteria
included in, Awards (including Performance Awards and performance goals and any
hypothetical funding pool relating thereto) in recognition of unusual or
nonrecurring events (including, without limitation, events described in the
preceding sentence, as well as acquisitions and dispositions of businesses and
assets) affecting the Company, any subsidiary or affiliate or other business
unit, or the financial statements of the Company or any subsidiary or affiliate,
or in response to changes in applicable laws, regulations, accounting
principles, tax rates and regulations or business conditions or in view of the
Committee’s assessment of the business strategy of the Company, any subsidiary
or affiliate or business unit thereof, performance of comparable organizations,
economic and business conditions, personal performance of a Participant, and any
other circumstances deemed relevant; provided that no such adjustment shall be
authorized or made if and to the extent that the existence of such authority
(A) would cause Options, SARs, or Performance Awards granted under Section 7 to
Participants designated by the Committee as Covered Employees and intended to
qualify as “performance-based compensation” under Code Section 162(m) and
regulations thereunder to otherwise fail to qualify as “performance-based
compensation” under Code Section 162(m) and regulations thereunder, or (B) would
cause the Committee to be deemed to have authority to change the targets, within
the meaning of Treasury Regulation 1.162-27(e)(4)(vi), under the performance
goals relating to Options or SARs granted to Covered Employees and intended to
qualify as “performance-based compensation” under Code Section 162(m) and
regulations thereunder; and provided further, that adjustments to Non-409A
Awards will be made only to the extent permitted under 409A.

 

(d) Taxes.  The Company and any subsidiary is authorized to withhold from any
Award granted, any payment relating to an Award under the Plan, including from a
distribution of Stock, or any payroll or other payment to a Participant, amounts
of withholding and other taxes due or potentially payable in connection with any
Award, and to take such other action as the Committee may deem advisable to
enable the Company and Participants to satisfy obligations for the payment of
withholding taxes and other tax obligations relating to any Award. This
authority shall include authority to withhold or receive Stock or other property
and to make cash payments in respect thereof in satisfaction of a Participant’s
tax obligations, either on a mandatory or elective basis, in the discretion of
the Committee, or in satisfaction of other tax obligations if such withholding
will not result in additional accounting expense to the Company. Other
provisions of the Plan notwithstanding, only the minimum amount of Stock
deliverable in connection with an Award necessary to satisfy statutory
withholding requirements will be withheld, unless

 

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withholding of any additional amount of Stock will not result in additional
accounting expense to the Company.

 

(e) Changes to the Plan and Awards.  The Board may amend, alter, suspend,
discontinue, or terminate the Plan or the Committee’s authority to grant Awards
under the Plan without the consent of stockholders or Participants, except that
any amendment or alteration to the Plan shall be subject to the approval of the
Company’s stockholders not later than the annual meeting the record date for
which is at or following the date of such Board action if such stockholder
approval is required by any federal or state law or regulation or the rules of
any stock exchange or automated quotation system on which the Stock may then be
listed or quoted, and the Board may otherwise, in its discretion, determine to
submit other such changes to the Plan to stockholders for approval; provided
that, without the consent of an affected Participant, no such Board action may
materially and adversely affect the rights of such Participant under any
previously granted and outstanding Award. (For this purpose, actions that alter
the timing of federal income taxation of a Participant will not be deemed
material unless such action results in an income tax penalty on the
Participant.) The Committee may waive any conditions or rights under, or amend,
alter, suspend, discontinue, or terminate any Award theretofore granted and any
Award agreement relating thereto; provided that the Committee shall have no
authority to waive or modify any Award term after the Award has been granted to
the extent the waived or modified term would be mandatory under the Plan for any
Award newly granted at the date of the waiver or modification; and provided
further, that, without the consent of an affected Participant, no such Committee
action may materially and adversely affect the rights of such Participant under
such Award. Without the prior approval of stockholders, the Committee will not
amend or replace previously granted Options in a transaction that constitutes a
“repricing.” For this purpose, a “repricing” means: (1) amending the terms of an
Option or SAR after it is granted to lower its exercise price, except pursuant
to Section 10(c) hereof; (2) any other action that is treated as a repricing
under generally accepted accounting principles; and (3) repurchasing for cash or
canceling an Option or SAR at a time when its exercise or grant price is equal
to or greater than the fair market value of the underlying Stock, in exchange
for another Option, Restricted Stock, or other equity, unless the cancellation
and exchange occurs in connection with a merger, acquisition, spin-off or other
similar corporate transaction. A cancellation and exchange described in
clause (3) of the preceding sentence will be considered a repricing regardless
of whether the Option, Restricted Stock or other equity is delivered
simultaneously with the cancellation, regardless of whether it is treated as a
repricing under generally accepted accounting principles, and regardless of
whether it is voluntary on the part of the Option holder.

 

(f) Limitation on Rights Conferred under Plan.  Neither the Plan nor any action
taken hereunder shall be construed as (i) giving any Eligible Person or
Participant the right to continue as an Eligible Person or Participant or in the
employ or service of the Company or a subsidiary, (ii) interfering in any way
with the right of the Company or a subsidiary to terminate any Eligible Person’s
or Participant’s employment or service at any time, (iii) giving an Eligible
Person or Participant any claim to be granted any Award under the Plan or to be
treated uniformly with other Participants and employees, or (iv) conferring on a
Participant any of the rights of a stockholder of the Company unless and until
the Participant is duly issued or transferred shares of Stock in accordance with
the terms of an Award.

 

(g) Unfunded Status of Awards; Creation of Trusts.  The Plan is intended to
constitute an “unfunded” plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant or obligation to deliver
Stock pursuant to an Award, nothing contained in the Plan or any Award shall
give any such Participant any rights that are greater than those of a general
creditor of the Company; provided that the Committee may authorize the creation
of trusts and deposit therein cash, Stock, other Awards or other property, or
make other arrangements to meet the Company’s obligations under the Plan. Such
trusts or other arrangements shall be consistent with the “unfunded” status of
the Plan unless the Committee otherwise determines with the consent of each
affected Participant. The trustee of such trusts may be authorized to dispose of
trust assets and reinvest the proceeds in alternative investments, subject to
such terms and conditions as the Committee may specify and in accordance with
applicable law.

 

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(h) Certain Limitations on Awards to Ensure Compliance with Section 409A.  For
purposes of this Plan, references to an Award term or event (including any
authority or right of the Company or a Participant) being “permitted” under
Section 409A mean, for a 409A Award, that the term or event will not cause the
Participant to be liable for payment of interest or a tax penalty under
Section 409A and, for a Non-409A Award, that the term or event will not cause
the Award to be treated as subject to Section 409A. Other provisions of the Plan
notwithstanding, the terms of any 409A Award and any Non-409A Award, including
any authority of the Company and rights of the Participant with respect to the
Award, shall be limited to those terms permitted under Section 409A, and any
terms not permitted under Section 409A shall be automatically modified and
limited to the extent necessary to conform with Section 409A. For this purpose,
other provisions of the Plan notwithstanding, the Company shall have no
authority to accelerate distributions relating to 409A Awards in excess of the
authority permitted under Section 409A, any distribution subject to
Section 409A(a)(2)(A)(i) (separation from service) to a “key employee” as
defined under Section 409A(a)(2)(B)(i), shall not occur earlier than the
earliest time permitted under Section 409A(a)(2)(B)(i), and any authorization of
payment of cash to settle a Non-409A Award shall apply only to the extent
permitted under Section 409A for such Award. Non-409A Awards that are
“grandfathered” under Section 409A and that, but for such grandfathered status,
would be deemed 409A Awards shall be subject to the terms and conditions of the
Plan as amended and restated as of May 5, 2005 other than Sections 6(b)(ii) and
6(c)(ii), provided that if any provision adopted by amendment to the Plan or an
Award Agreement after October 3, 2004, would constitute a material modification
of a grandfathered Non-409A Award, such provision will not be effective as to
such Award unless so stated by the Committee in writing with specific reference
to this last sentence of Section 10(h).

 

(i) Certain Limitations Relating to Accounting Treatment of Awards.  At any time
that the Company is accounting for stock-denominated Awards (other than SARs)
under Accounting Principles Board Opinion 25 (“APB 25”), the Company intends
that, with respect to such Awards, the compensation measurement date for
accounting purposes shall occur at the date of grant or the date performance
conditions are met if an Award is fully contingent on achievement of performance
goals, unless the Committee specifically determines otherwise. Therefore, other
provisions of the Plan notwithstanding, in order to preserve this fundamental
objective of the Plan, if any authority granted to the Committee hereunder or
any provision of the Plan or an Award agreement would result, under APB 25, in
“variable” accounting or a measurement date other than the date of grant or the
date such performance conditions are met with respect to such Awards, if the
Committee was not specifically aware of such accounting consequence at the time
such Award was granted or provision otherwise became effective, such authority
shall be limited and such provision shall be automatically modified and reformed
to the extent necessary to preserve the accounting treatment of the award
intended by the Committee, subject to Section 10(e) of the Plan. This provision
shall cease to be effective if and at such time as the Company elects to no
longer account for equity compensation under APB 25.

 

(j) Nonexclusivity of the Plan.  Neither the adoption of the Plan by the Board
nor its submission to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board or a committee
thereof to adopt such other incentive arrangements as it may deem desirable
including incentive arrangements and awards which do not qualify under Code
Section 162(m).

 

(k) Payments in the Event of Forfeitures; Fractional Shares.  Unless otherwise
determined by the Committee, in the event of a forfeiture of an Award with
respect to which a Participant paid cash or other consideration, the Participant
shall be repaid the amount of such cash or other consideration. No fractional
shares of Stock shall be issued or delivered pursuant to the Plan or any Award.
The Committee shall determine whether cash, other Awards or other property shall
be issued or paid in lieu of such fractional shares or whether such fractional
shares or any rights thereto shall be forfeited or otherwise eliminated.

 

(l) Awards to Participants Outside the United States.  The Committee may modify
the terms of any Award under the Plan made to or held by a Participant who is
then resident or primarily employed outside of the United States in any manner
deemed by the Committee to be necessary or appropriate in order that

 

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such Award shall conform to laws, regulations, and customs of the country in
which the Participant is then resident or primarily employed, or so that the
value and other benefits of the Award to the Participant, as affected by foreign
tax laws and other restrictions applicable as a result of the Participant’s
residence or employment abroad shall be comparable to the value of such an Award
to a Participant who is resident or primarily employed in the United States. An
Award may be modified under this Section 10(l) in a manner that is inconsistent
with the express terms of the Plan, so long as such modifications will not
contravene any applicable law or regulation or result in actual liability under
Section 16(b) for the Participant whose Award is modified.

 

(m) Governing Law.  The validity, construction and effect of the Plan, any
rules and regulations under the Plan, and any Award agreement shall be
determined in accordance with the Delaware General Corporation Law, the contract
and other laws of the State of New York without giving effect to principles of
conflicts of laws, and applicable federal law.

 

(n) Preexisting Plan.  Upon stockholder approval of the Plan as of the Effective
Date, no further grants of Awards will be made under the Preexisting Plan.

 

(o) Plan Effective Date and Termination.  The Plan was adopted by the Board of
Directors on April 24, 2003 and became effective upon its approval by the
Company’s stockholders on the Effective Date. The Plan was amended and restated
upon its approval by the Company’s stockholders on June 14, 2005. This amendment
and restatement of the Plan shall be effective upon its approval by the
Company’s stockholders by the affirmative vote of the holders of a majority of
the voting securities of the Company entitled to be cast in person or by proxy
at the Company’s 2008 annual meeting of stockholders. Unless earlier terminated
by action of the Board of Directors, the Plan will remain in effect until such
time as no Stock remains available for delivery under the Plan and the Company
has no further rights or obligations under the Plan with respect to outstanding
Awards under the Plan; provided, however, that no new Awards may be granted more
then ten years after the date of the latest approval of the Plan by stockholders
of the Company.

 

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