EXHIBIT 10.1

 

RLI Corp.

Omnibus Stock Plan

 

1.             PURPOSE  THE PURPOSE OF THE RLI CORP. OMNIBUS STOCK PLAN (THE
“PLAN”) IS TO PROMOTE THE INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS BY
PROVIDING KEY PERSONNEL OF THE COMPANY AND ITS AFFILIATES WITH AN OPPORTUNITY TO
ACQUIRE A PROPRIETARY INTEREST IN THE COMPANY AND REWARD THEM FOR ACHIEVING A
HIGH LEVEL OF CORPORATE PERFORMANCE AND THEREBY DEVELOP A STRONGER INCENTIVE TO
PUT FORTH MAXIMUM EFFORT FOR THE CONTINUED SUCCESS AND GROWTH OF THE COMPANY AND
ITS AFFILIATES.  IN ADDITION, THE OPPORTUNITY TO ACQUIRE A PROPRIETARY INTEREST
IN THE COMPANY WILL AID IN ATTRACTING AND RETAINING KEY PERSONNEL OF OUTSTANDING
ABILITY.  THE PLAN IS ALSO INTENDED TO PROVIDE OUTSIDE DIRECTORS WITH AN
OPPORTUNITY TO ACQUIRE A PROPRIETARY INTEREST IN THE COMPANY, TO COMPENSATE
OUTSIDE DIRECTORS FOR THEIR CONTRIBUTION TO THE COMPANY AND TO AID IN ATTRACTING
AND RETAINING OUTSIDE DIRECTORS.

 

2.             DEFINITIONS

 

2.1           THE CAPITALIZED TERMS USED ELSEWHERE IN THE PLAN HAVE THE MEANINGS
SET FORTH BELOW.

 

(A)           “AFFILIATE” MEANS ANY CORPORATION THAT IS A “PARENT CORPORATION”
OR “SUBSIDIARY CORPORATION” OF THE COMPANY, AS THOSE TERMS ARE DEFINED IN CODE
SECTIONS 424(E) AND (F), OR ANY SUCCESSOR PROVISIONS, AND, FOR PURPOSES OTHER
THAN THE GRANT OF INCENTIVE STOCK OPTIONS, ANY JOINT VENTURE IN WHICH THE
COMPANY OR ANY SUCH “PARENT CORPORATION” OR “SUBSIDIARY CORPORATION” OWNS AN
EQUITY INTEREST.

 

(B)           “AGREEMENT” MEANS A WRITTEN CONTRACT (I) CONSISTENT WITH THE TERMS
OF THE PLAN ENTERED INTO BETWEEN THE COMPANY OR AN AFFILIATE AND A PARTICIPANT
AND (II) CONTAINING THE TERMS AND CONDITIONS OF AN AWARD IN SUCH FORM AND NOT
INCONSISTENT WITH THE PLAN AS THE COMMITTEE SHALL APPROVE FROM TIME TO TIME,
TOGETHER WITH ALL AMENDMENTS THERETO, WHICH AMENDMENTS MAY BE UNILATERALLY MADE
BY THE COMPANY (WITH THE APPROVAL OF THE COMMITTEE) UNLESS SUCH AMENDMENTS ARE
DEEMED BY THE COMMITTEE TO BE MATERIALLY ADVERSE TO THE PARTICIPANT AND NOT
REQUIRED AS A MATTER OF LAW.

 

(C)           “AWARD” OR “AWARDS” MEANS A GRANT MADE UNDER THE PLAN IN THE FORM
OF RESTRICTED STOCK, OPTIONS, STOCK APPRECIATION RIGHTS, PERFORMANCE UNITS,
STOCK OR ANY OTHER STOCK-BASED AWARD.

 

(D)           “BOARD” MEANS THE BOARD OF DIRECTORS OF THE COMPANY.

 

(E)           “CODE” MEANS THE INTERNAL REVENUE CODE OF 1986, AS AMENDED AND IN
EFFECT FROM TIME TO TIME OR ANY SUCCESSOR STATUTE.

 

(F)            “COMMITTEE” MEANS THE EXECUTIVE RESOURCES COMMITTEE OF THE BOARD,
OR ANY OTHER COMMITTEE OF THE BOARD CONSISTING OF TWO OR MORE NON-EMPLOYEE
DIRECTORS DESIGNATED BY THE BOARD TO ADMINISTER THE PLAN UNDER PLAN SECTION 3.1
AND CONSTITUTED SO AS TO PERMIT

 

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grants thereby to comply with Exchange Act Rule 16b-3 and Code Section 162(m).

 

(G)           “COMPANY” MEANS RLI CORP., AN ILLINOIS CORPORATION, OR ANY
SUCCESSOR TO ALL OR SUBSTANTIALLY ALL OF ITS BUSINESSES BY MERGER,
CONSOLIDATION, PURCHASE OF ASSETS OR OTHERWISE.

 

(H)           “EFFECTIVE DATE” MEANS THE DATE SPECIFIED IN PLAN SECTION 12.1.

 

(I)            “EMPLOYEE” MEANS AN EMPLOYEE (INCLUDING AN OFFICER OR DIRECTOR
WHO IS ALSO AN EMPLOYEE) OF THE COMPANY OR AN AFFILIATE.

 

(J)            “EXCHANGE ACT” MEANS THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED AND IN EFFECT FROM TIME TO TIME OR ANY SUCCESSOR STATUTE.

 

(K)           “EXCHANGE ACT RULE 16B-3” MEANS RULE 16B-3 PROMULGATED BY THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE EXCHANGE ACT, AS NOW IN FORCE AND
IN EFFECT FROM TIME TO TIME OR ANY SUCCESSOR REGULATION.

 

(L)            “FAIR MARKET VALUE” AS OF ANY DATE MEANS, UNLESS OTHERWISE
EXPRESSLY PROVIDED IN THE PLAN:

 

(i)            the closing sale price of a Share on such date or on the next
business day, if such date is not a business day:

 

(A)          AS REFLECTED IN THE WALL STREET JOURNAL, OR

 

(B)           IF THE SHARES SHALL NOT HAVE BEEN TRADED ON THE NEW YORK STOCK
EXCHANGE FOR MORE THAN TEN DAYS IMMEDIATELY PRECEDING SUCH DATE, ON THE
PRINCIPAL UNITED STATES SECURITIES EXCHANGE REGISTERED UNDER THE EXCHANGE ACT ON
WHICH THE SHARES ARE LISTED, OR

 

(C)           IF THE SHARES ARE NOT LISTED ON ANY SUCH EXCHANGE, ON THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. AUTOMATED QUOTATIONS NATIONAL MARKET
SYSTEM OR ANY SYSTEM THEN IN USE, OR

 

(ii)           if clause (i) is inapplicable, the mean between the closing “bid”
and the closing “asked” quotation of a Share on the date immediately preceding
that date, or, if no closing bid or asked quotation is made on that date, on the
next preceding day on which a closing bid and asked quotation is made, on the
National Association of Securities Dealers, Inc. Automated Quotations System or
any system then in use, or

 

(iii)          if clauses (i) and (ii) are inapplicable, what the Committee
determines in good faith to be 100% of the Fair Market Value of a Share on that
date, using such criteria as it shall determine, in its sole discretion, to be
appropriate for valuation.

 

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The determination of Fair Market Value shall be subject to adjustment as
provided in Plan Section 16.

 

(M)          “FUNDAMENTAL CHANGE” MEANS A DISSOLUTION OR LIQUIDATION OF THE
COMPANY; A SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY; A MERGER OR
CONSOLIDATION OF THE COMPANY WITH OR INTO ANY OTHER CORPORATION, REGARDLESS OF
WHETHER THE COMPANY IS THE SURVIVING CORPORATION; OR A STATUTORY SHARE EXCHANGE
INVOLVING CAPITAL STOCK OF THE COMPANY.

 

(N)           “INCENTIVE STOCK OPTION” MEANS ANY OPTION DESIGNATED AS SUCH AND
GRANTED IN ACCORDANCE WITH THE REQUIREMENTS OF CODE SECTION 422 OR ANY SUCCESSOR
PROVISION.

 

(O)           “INSIDER” AS OF A PARTICULAR DATE MEANS ANY PERSON WHO, AS OF THAT
DATE IS AN OFFICER OF THE COMPANY AS DEFINED UNDER EXCHANGE ACT RULE 16A-1(F) OR
ITS SUCCESSOR PROVISION.

 

(P)           “NON-EMPLOYEE DIRECTOR” MEANS A MEMBER OF THE BOARD WHO IS
CONSIDERED A NON-EMPLOYEE DIRECTOR WITHIN THE MEANING OF EXCHANGE ACT
RULE 16B-3(B)(3) OR ITS SUCCESSOR PROVISION AND AN OUTSIDE DIRECTOR FOR PURPOSES
OF CODE SECTION 162(M).

 

(Q)           “NON-STATUTORY STOCK OPTION” MEANS AN OPTION OTHER THAN AN
INCENTIVE STOCK OPTION.

 

(R)            “OPTION” MEANS A RIGHT TO PURCHASE STOCK, INCLUDING BOTH
NON-STATUTORY STOCK OPTIONS AND INCENTIVE STOCK OPTIONS.

 

(S)           “OUTSIDE DIRECTOR” MEANS A DIRECTOR WHO IS NOT AN EMPLOYEE.

 

(T)            “PARTICIPANT” MEANS A PERSON OR ENTITY TO WHOM AN AWARD IS OR HAS
BEEN MADE IN ACCORDANCE WITH THE PLAN.

 

(U)           “PERFORMANCE CYCLE” MEANS THE PERIOD OF TIME AS SPECIFIED IN AN
AGREEMENT OVER WHICH PERFORMANCE UNITS ARE TO BE EARNED.

 

(V)           “PERFORMANCE GOALS” MEANS THE PERFORMANCE GOALS ESTABLISHED BY THE
COMMITTEE IN CONNECTION WITH THE GRANT OF AN AWARD.  IN THE CASE OF SUCH GRANTS
TO “COVERED EMPLOYEES” UNDER CODE SECTION 162(M), THE PERFORMANCE GOALS SHALL BE
BASED ON SPECIFIED LEVELS OF ONE OR MORE OF THE FOLLOWING MEASURES WITH RESPECT
TO THE PERFORMANCE OF THE COMPANY OR A GROUP, UNIT, AFFILIATE OR AN INDIVIDUAL: 
SPECIFIED LEVELS OF THE COMPANY’S STOCK PRICE, MARKET SHARE, SALES, REVENUE,
PREMIUMS, UNDERWRITING PROFIT, MARKET VALUE POTENTIAL, EARNINGS PER SHARE,
RETURN ON EQUITY, COSTS, CASH FLOW, DIVIDENDS PAID, OPERATING INCOME, RETURN ON
ASSETS, EXPENSE RATIOS, LOSS RATIOS OR COMBINED RATIOS.  SUCH PERFORMANCE GOALS
SHALL BE SET BY THE COMMITTEE WITHIN THE TIME PERIOD PRESCRIBED BY CODE
SECTION 162(M) AND RELATED REGULATIONS.

 

(W)          “PERFORMANCE UNITS” MEANS AN AWARD MADE PURSUANT TO PLAN
SECTION 11.

 

(X)            “PLAN” MEANS THIS RLI CORP. OMNIBUS STOCK PLAN, AS MAY BE AMENDED
AND IN EFFECT FROM TIME TO TIME.

 

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(Y)           “RESTRICTED STOCK” MEANS STOCK GRANTED UNDER PLAN SECTION 7 SO
LONG AS SUCH STOCK REMAINS SUBJECT TO ONE OR MORE RESTRICTIONS.

 

(Z)            “RETIREMENT” MEANS THE RETIREMENT OF A PARTICIPANT WHEN THE
PARTICIPANT’S AGE PLUS YEARS OF SERVICE EQUAL AT LEAST 75.

 

(AA)         “SECTION 16” OR “SECTION 16(B)” MEANS SECTION 16 OR SECTION 16(B),
RESPECTIVELY, OF THE EXCHANGE ACT OR ANY SUCCESSOR STATUTE AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER AS IN EFFECT AND AS AMENDED FROM TIME TO
TIME.

 

(BB)         “SHARE” MEANS A SHARE OF STOCK.

 

(CC)         “STOCK” MEANS THE COMMON STOCK, PAR VALUE $1.00 PER SHARE, OF THE
COMPANY.

 

(DD)         “STOCK APPRECIATION RIGHT” MEANS A RIGHT, THE VALUE OF WHICH IS
DETERMINED IN RELATION TO THE APPRECIATION IN VALUE OF SHARES PURSUANT TO AN
AWARD GRANTED UNDER PLAN SECTION 10.

 

(EE)         “SUBSIDIARY” MEANS A “SUBSIDIARY CORPORATION,” AS THAT TERM IS
DEFINED IN CODE SECTION 424(F) OR ANY SUCCESSOR PROVISION.

 

(FF)           “SUCCESSOR” WITH RESPECT TO A PARTICIPANT MEANS THE LEGAL
REPRESENTATIVE OF AN INCOMPETENT PARTICIPANT, AND IF THE PARTICIPANT IS
DECEASED, THE ESTATE OF THE PARTICIPANT OR THE PERSON OR PERSONS WHO MAY, BY
BEQUEST OR INHERITANCE, OR PURSUANT TO THE TERMS OF AN AWARD, ACQUIRE THE RIGHT
TO EXERCISE AN OPTION OR STOCK APPRECIATION RIGHT OR TO RECEIVE CASH AND/OR
SHARES ISSUABLE IN SATISFACTION OF AN AWARD IN THE EVENT OF THE PARTICIPANT’S
DEATH.

 

(GG)         “TERM” MEANS THE PERIOD DURING WHICH AN OPTION OR STOCK
APPRECIATION RIGHT MAY BE EXERCISED OR THE PERIOD DURING WHICH THE RESTRICTIONS
OR TERMS AND CONDITIONS PLACED ON RESTRICTED STOCK OR ANY OTHER AWARD ARE IN
EFFECT.

 

(HH)         “TRANSFEREE” MEANS ANY MEMBER OF THE PARTICIPANT’S IMMEDIATE FAMILY
(I.E., HIS OR HER CHILDREN, STEP-CHILDREN, GRANDCHILDREN AND SPOUSE) OR ONE OR
MORE TRUSTS FOR THE BENEFIT OF SUCH FAMILY MEMBERS OR PARTNERSHIPS IN WHICH SUCH
FAMILY MEMBERS ARE THE ONLY PARTNERS.

 

2.2           Gender and Number.  Except when otherwise indicated by the
context, reference to the masculine gender shall include, when used, the
feminine gender and any term used in the singular shall also include the plural.

 

3.             ADMINISTRATION AND INDEMNIFICATION

 

3.1           Administration.

 

(A)           THE COMMITTEE SHALL ADMINISTER THE PLAN.  THE COMMITTEE SHALL HAVE
EXCLUSIVE POWER TO:

 

(I)            MAKE AWARDS,

 

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(II)           DETERMINE WHEN AND TO WHOM AWARDS WILL BE GRANTED, THE FORM OF
EACH AWARD, THE AMOUNT OF EACH AWARD, AND ANY OTHER TERMS OR CONDITIONS OF EACH
AWARD CONSISTENT WITH THE PLAN, AND

 

(III)          DETERMINE WHETHER, TO WHAT EXTENT AND UNDER WHAT CIRCUMSTANCES
AWARDS MAY BE SETTLED, PAID OR EXERCISED IN CASH, SHARES OR OTHER AWARDS, OR
OTHER PROPERTY OR CANCELED, FORFEITED OR SUSPENDED.  EACH AWARD SHALL BE SUBJECT
TO AN AGREEMENT AUTHORIZED BY THE COMMITTEE.  A MAJORITY OF THE MEMBERS OF THE
COMMITTEE SHALL CONSTITUTE A QUORUM FOR ANY MEETING OF THE COMMITTEE, AND ACTS
OF A MAJORITY OF THE MEMBERS PRESENT AT ANY MEETING AT WHICH A QUORUM IS PRESENT
OR THE ACTS UNANIMOUSLY APPROVED IN WRITING BY ALL MEMBERS OF THE COMMITTEE
SHALL BE THE ACTS OF THE COMMITTEE.  NOTWITHSTANDING THE FOREGOING, THE BOARD
SHALL HAVE THE SOLE AND EXCLUSIVE POWER TO ADMINISTER THE PLAN WITH RESPECT TO
AWARDS GRANTED TO OUTSIDE DIRECTORS.

 

(B)           SOLELY FOR PURPOSES OF DETERMINING AND ADMINISTERING AWARDS TO
PARTICIPANTS WHO ARE NOT INSIDERS, THE COMMITTEE MAY DELEGATE ALL OR ANY PORTION
OF ITS AUTHORITY UNDER THE PLAN TO ONE OR MORE PERSONS WHO ARE NOT NON-EMPLOYEE
DIRECTORS.

 

(C)           TO THE EXTENT WITHIN ITS DISCRETION AND SUBJECT TO PLAN
SECTIONS 15 AND 16, OTHER THAN PRICE, THE COMMITTEE MAY AMEND THE TERMS AND
CONDITIONS OF ANY OUTSTANDING AWARD.

 

(D)           IT IS THE INTENT THAT THE PLAN AND ALL AWARDS GRANTED PURSUANT TO
IT SHALL BE ADMINISTERED BY THE COMMITTEE SO AS TO PERMIT THE PLAN AND AWARDS TO
COMPLY WITH EXCHANGE ACT RULE 16B-3, EXCEPT IN SUCH INSTANCES AS THE COMMITTEE,
IN ITS DISCRETION, MAY SO PROVIDE.  IF ANY PROVISION OF THE PLAN OR OF ANY AWARD
WOULD OTHERWISE FRUSTRATE OR CONFLICT WITH THE INTENT EXPRESSED IN THIS
SECTION 3.1(D), THAT PROVISION TO THE EXTENT POSSIBLE SHALL BE INTERPRETED AND
DEEMED AMENDED IN THE MANNER DETERMINED BY THE COMMITTEE SO AS TO AVOID THE
CONFLICT.  TO THE EXTENT OF ANY REMAINING IRRECONCILABLE CONFLICT WITH THIS
INTENT, THE PROVISION SHALL BE DEEMED VOID AS APPLICABLE TO INSIDERS TO THE
EXTENT PERMITTED BY LAW AND IN THE MANNER DEEMED ADVISABLE BY THE COMMITTEE.

 

(E)           THE COMMITTEE’S INTERPRETATION OF THE PLAN AND OF ANY AWARD OR
AGREEMENT MADE UNDER THE PLAN AND ALL RELATED DECISIONS OR RESOLUTIONS OF THE
BOARD OR COMMITTEE SHALL BE FINAL AND BINDING ON ALL PARTIES WITH AN INTEREST
THEREIN.  CONSISTENT WITH ITS TERMS, THE COMMITTEE SHALL HAVE THE POWER TO
ESTABLISH, AMEND OR WAIVE REGULATIONS TO ADMINISTER THE PLAN.  IN CARRYING OUT
ANY OF ITS RESPONSIBILITIES, THE COMMITTEE SHALL HAVE DISCRETIONARY AUTHORITY TO
CONSTRUE THE TERMS OF THE PLAN AND ANY AWARD OR AGREEMENT MADE UNDER THE PLAN.

 

3.2           Indemnification.  Each person who is or shall have been a member
of the Committee, or of the Board, and any other person to whom the Committee
delegates authority under the Plan, shall be indemnified and

 

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held harmless by the Company, to the extent permitted by law, against and from
any loss, cost, liability or expense that may be imposed upon or reasonably
incurred by such person in connection with or resulting from any claim, action,
suit or proceeding to which such person may be a party or in which such person
may be involved by reason of any action taken or failure to act, made in good
faith, under the Plan and against and from any and all amounts paid by such
person in settlement thereof, with the Company’s approval, or paid by such
person in satisfaction of any judgment in any such action, suit or proceeding
against such person, provided such person shall give the Company an opportunity,
at the Company’s expense, to handle and defend the same before such person
undertakes to handle and defend it on such person’s own behalf.  The foregoing
right of indemnification shall not be exclusive of any other rights of
indemnification to which such person or persons may be entitled under the
Company’s Articles of Incorporation or By-Laws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.

 

4.             SHARES AVAILABLE UNDER THE PLAN

 

4.1           THE NUMBER OF SHARES AVAILABLE FOR DISTRIBUTION UNDER THE PLAN
SHALL NOT EXCEED 1,500,000 (SUBJECT TO ADJUSTMENT PURSUANT TO PLAN SECTION 16).

 

4.2           ANY SHARES SUBJECT TO THE TERMS AND CONDITIONS OF AN AWARD UNDER
THE PLAN THAT ARE NOT USED BECAUSE THE TERMS AND CONDITIONS OF THE AWARD ARE NOT
MET MAY AGAIN BE USED FOR AN AWARD UNDER THE PLAN.

 

4.3           ANY UNEXERCISED OR UNDISTRIBUTED PORTION OF ANY TERMINATED,
EXPIRED, EXCHANGED, OR FORFEITED AWARD, OR ANY AWARD SETTLED IN CASH IN LIEU OF
SHARES SHALL BE AVAILABLE FOR FURTHER AWARDS.

 

4.4           If the purchase price of any Shares with respect to an Option is
satisfied by delivering Shares to the Company (by either actual delivery or
attestation), only the number of Shares delivered to the Participant, net of the
Shares delivered to the Company or attested to, shall be deemed delivered for
purposes of determining the number of Shares available for further Awards.

 

4.5           For the purposes of computing the total number of Shares granted
under the Plan, the following rules shall apply to Awards payable in Shares
where appropriate:

 

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A              EACH OPTION SHALL BE DEEMED TO BE THE EQUIVALENT OF THE MAXIMUM
NUMBER OF SHARES THAT MAY BE ISSUED UPON EXERCISE OF THE PARTICULAR OPTION;

 

B.             AN AWARD (OTHER THAN AN OPTION) PAYABLE IN SOME OTHER SECURITY
SHALL BE DEEMED TO BE EQUAL TO THE NUMBER OF SHARES TO WHICH IT RELATES;

 

C.             WHERE THE NUMBER OF SHARES AVAILABLE UNDER THE AWARD IS VARIABLE
ON THE DATE IT IS GRANTED, THE NUMBER OF SHARES SHALL BE DEEMED TO BE THE
MAXIMUM NUMBER OF SHARES THAT COULD BE RECEIVED UNDER THAT PARTICULAR AWARD; AND

 

D.             WHERE TWO OR MORE TYPES OF AWARDS (ALL OF WHICH ARE PAYABLE IN
SHARES) ARE GRANTED TO A PARTICIPANT IN TANDEM WITH EACH OTHER, SUCH THAT THE
EXERCISE OF ONE TYPE OF AWARD WITH RESPECT TO A NUMBER OF SHARES CANCELS AT
LEAST AN EQUAL NUMBER OF SHARES OF THE OTHER, EACH SUCH JOINT AWARD SHALL BE
DEEMED TO BE THE EQUIVALENT OF THE MAXIMUM NUMBER OF SHARES AVAILABLE UNDER THE
LARGEST SINGLE AWARD.

 

Additional rules for determining the number of Shares granted under the Plan may
be made by the Committee as it deems necessary or desirable.

 

4.6           NO FRACTIONAL SHARES MAY BE ISSUED UNDER THE PLAN; HOWEVER, CASH
SHALL BE PAID IN LIEU OF ANY FRACTIONAL SHARE IN SETTLEMENT OF AN AWARD.

 

4.7           THE MAXIMUM NUMBER OF SHARES THAT MAY BE AWARDED TO A PARTICIPANT
IN ANY CALENDAR YEAR IN THE FORM OF OPTIONS IS 250,000 AND THE MAXIMUM NUMBER OF
SHARES THAT MAY BE AWARDED TO A PARTICIPANT IN ANY CALENDAR YEAR IN THE FORM OF
STOCK APPRECIATION RIGHTS IS 250,000.

 

4.8           The maximum number of Shares that may be issued pursuant to
Options intended to be Incentive Stock Options shall be 750,000.

 

5.             Eligibility  Participation in the Plan shall be limited to
Employees and to individuals or entities who are not Employees but who provide
services to the Company or an Affiliate, including services provided in the
capacity of a consultant, advisor or director.  The granting of Awards is solely
at the discretion of the Committee, except that Incentive Stock Options may only
be granted to Employees.  References herein to “employed,” “employment” or
similar terms (except “Employee”) shall include the providing of services in any
capacity or as a director. Neither the transfer of employment of a Participant
between any of the Company or its Affiliates, nor a leave of absence granted to
such Participant and approved by the Committee, shall be deemed a termination of
employment for purposes of the Plan.

 

6.             General Terms of Awards

 

6.1           Amount and Conditions of Award.  Each Agreement shall set forth
the number of Shares of Restricted Stock, Stock or Performance Units subject to
the Agreement, or the number of Shares to which the Option subject to the
Agreement applies or with respect to which payment upon the exercise of the
Stock Appreciation Right subject to the Agreement is to be determined, as the
case may be, together with such other terms and conditions applicable to the
Award as determined by the Committee

 

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acting in its sole discretion, which may include conditions on Options or Stock
Appreciation Rights becoming exercisable or the lapsing of restrictions on
Restricted Stock that are tied to Performance Goals.

 

6.2           Term.  Each Agreement, other than those relating solely to Awards
of Shares without restrictions, shall set forth the Term of the Option, Stock
Appreciation Right, Restricted Stock or other Award or the Performance Cycle for
the Performance Units, as the case may be.  Acceleration of the expiration of
the applicable Term is permitted, upon such terms and conditions as shall be set
forth in the Agreement, which may, but need not, include, without limitation,
acceleration in the event of the Participant’s death, disability or retirement. 
Acceleration of the Performance Cycle of Performance Units shall be subject to
Plan Section 11.2.

 

6.3           Transferability.  Except as provided in this Section, during the
lifetime of a Participant to whom an Award is granted, only that Participant (or
that Participant’s legal representative) may exercise an Option or Stock
Appreciation Right, or receive payment with respect to Performance Units or any
other Award.  No Award of Restricted Stock (before the expiration of the
restrictions), Options, Stock Appreciation Rights or Performance Units or other
Award may be sold, assigned, transferred, exchanged or otherwise encumbered
other than to a Successor in the event of a Participant’s death or pursuant to a
qualified domestic relations order as defined in the Code or Title 1 of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or the
rules thereunder; any attempted transfer in violation of this Section 6.3 shall
be of no effect.  Notwithstanding the immediately preceding sentence, the
Committee, in an Agreement or otherwise at its discretion, may provide that the
Award (other than Incentive Stock Options) may be transferable to a Transferee
if the Participant does not receive any consideration for the transfer.  Any
Award held by a Transferee shall continue to be subject to the same terms and
conditions that were applicable to that Award immediately before the transfer
thereof to the Transferee.  For purposes of any provision of the Plan relating
to notice to a Participant or to acceleration or termination of an Award upon
the death, disability or termination of employment of a Participant, the
references to “Participant” shall mean the original grantee of an Award and not
any Transferee.

 

6.4           Termination of Employment.  Except as otherwise determined by the
Committee or provided by the Committee in an Agreement, in case of a
Participant’s termination of employment, the following provisions shall apply:

 

(a)           Options and Stock Appreciation Rights.

 

(i)            If a Participant’s employment or other relationship with the
Company and its Affiliates terminates because of the Participant’s death, then
any Option or Stock Appreciation Right that has not expired or been terminated
shall become exercisable in full if the Participant’s employment or other
relationship with the Company and its Affiliates has been continuous between the
date the Option or Stock Appreciation Right was granted and a date not more than
three months prior to such death, and may be exercised by the Participant’s

 

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Successor at any time, or from time to time, within one year after the date of
the Participant’s death.

 

(ii)           If a Participant’s employment or other relationship with the
Company and its Affiliates terminates because the Participant is disabled
(within the meaning of Section 22(e)(3) of the Code), then any Option or Stock
Appreciation Right that has not expired or been terminated shall become
exercisable in full if the Participant’s employment or other relationship with
the Company and its Affiliates has been continuous between the date the Option
or Stock Appreciation Right was granted and the date of such disability, and the
Participant or the Participant’s Successor may exercise such Option or Stock
Appreciation Right at any time, or from time to time, within three years after
the date of the Participant’s disability.

 

(iii)          If a Participant’s employment or other relationship with the
Company and its Affiliates terminates because of the Participant’s Retirement,
then any Option or Stock Appreciation Right that has not expired or been
terminated shall remain exercisable for three years after the Participant’s
Retirement, but, unless otherwise provided in the Agreement, only to the extent
that such Option or Stock Appreciation Right was exercisable immediately prior
to such Participant’s termination of employment; provided, however, that if the
Participant is an Outside Director, the Option or Stock Appreciation Right shall
remain exercisable until the expiration of the Term after such Outside Director
ceases to be a director of the Company, but, unless otherwise provided in the
Agreement, only to the extent that such Option or Stock Appreciation Right was
exercisable immediately prior to such Outside Director ceasing to be a director.

 

(iv)          If a Participant’s employment terminates for any reason other than
death, disability or Retirement, then any Option or Stock Appreciation Right
that has not expired or been terminated shall, unless the Committee shall
otherwise provide in the Agreement, remain exercisable for three months after
termination of the Participant’s employment, but, unless otherwise provided in
the Agreement, only to the extent that such Option or Stock Appreciation Right
was exercisable immediately prior to such Participant’s termination of
employment; provided, however, that if the Participant is an Outside Director,
the Option or Stock Appreciation Right shall remain exercisable until the
expiration of the Term after such Outside Director ceases to be a director of
the Company, but, unless otherwise provided in the Agreement, only to the extent
that such Option or Stock Appreciation Right was exercisable immediately prior
to such Outside Director ceasing to be a director.

 

(v)           Notwithstanding the foregoing Plan Sections 6.4(a)(i), (ii),
(iii) and (iv) in no event shall an Option or a Stock Appreciation Right be
exercisable after the expiration of the Term of such Award.  Any Option or Stock
Appreciation Right that is not exercised within the periods set forth in Plan
Sections 6.4 (i), (ii), (iii) and (iv) except as otherwise

 

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provided by the Committee in the Agreement, shall terminate as of the end of the
periods described in such Sections.

 

(b)           Performance Units.  If a Participant’s employment or other
relationship with the Company and its Affiliates terminates during a Performance
Cycle because of the Participant’s death or disability, or under other
circumstances provided by the Committee in its discretion in the Agreement or
otherwise, the Participant, unless the Committee shall otherwise provide in the
Agreement, shall be entitled to a payment with respect to Performance Units at
the end of the Performance Cycle based upon the extent to which achievement of
performance targets was satisfied at the end of the Performance Cycle and
prorated for the portion of the Performance Cycle during which the Participant
was employed by the Company or its Affiliates.  Except as provided in this
Section 6.4(b) or in the Agreement, if a Participant’s employment or other
relationship with the Company and its Affiliates terminates during a Performance
Cycle, then such Participant shall not be entitled to any payment with respect
to that Performance Cycle.

 

(c)           Restricted Stock Awards.  If a Participant’s employment or other
relationship with the Company and its Affiliates terminates during the Term of a
Restricted Stock Award because of the Participant’s death or disability, or
under other circumstances provided by the Committee in its discretion in the
Agreement or otherwise, the Participant, unless the Committee shall otherwise
provide in the Agreement, shall be entitled to receive a number of Shares of
Restricted Stock under the Award that has been prorated for the portion of the
Term of the Award during which the Participant was employed by the Company and
its Affiliates, and, with respect to such Shares, all restrictions shall lapse. 
Any Shares of Restricted Stock as to which restrictions do not lapse under the
preceding sentence or under the Agreement shall terminate at the date of the
Participant’s termination of employment and such Shares of Restricted Stock
shall be forfeited to the Company.

 

6.5           Rights as Shareholder.  Each Agreement shall provide that a
Participant shall have no rights as a shareholder with respect to any securities
covered by an Award unless and until the date the Participant becomes the holder
of record of the Stock, if any, to which the Award relates.

 

7.             RESTRICTED STOCK AWARDS

 

7.1           AN AWARD OF RESTRICTED STOCK UNDER THE PLAN SHALL CONSIST OF
SHARES SUBJECT TO RESTRICTIONS ON TRANSFER AND CONDITIONS OF FORFEITURE, WHICH
RESTRICTIONS AND CONDITIONS SHALL BE INCLUDED IN THE APPLICABLE AGREEMENT.  THE
COMMITTEE MAY PROVIDE FOR THE LAPSE OR WAIVER OF ANY SUCH RESTRICTION OR
CONDITION BASED ON SUCH FACTORS OR CRITERIA AS THE COMMITTEE, IN ITS SOLE
DISCRETION, MAY DETERMINE.

 

7.2           EXCEPT AS OTHERWISE PROVIDED IN THE APPLICABLE AGREEMENT, EACH
STOCK CERTIFICATE ISSUED WITH RESPECT TO AN AWARD OF RESTRICTED STOCK SHALL
EITHER BE DEPOSITED WITH THE COMPANY OR ITS DESIGNEE, TOGETHER WITH AN
ASSIGNMENT SEPARATE FROM THE CERTIFICATE, IN BLANK, SIGNED BY THE PARTICIPANT,
OR BEAR SUCH LEGENDS WITH RESPECT TO THE RESTRICTED NATURE OF THE RESTRICTED
STOCK EVIDENCED THEREBY AS SHALL BE PROVIDED FOR IN THE APPLICABLE AGREEMENT.

 

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7.3           THE AGREEMENT SHALL DESCRIBE THE TERMS AND CONDITIONS BY WHICH THE
RESTRICTIONS AND CONDITIONS OF FORFEITURE UPON AWARDED RESTRICTED STOCK SHALL
LAPSE.  UPON THE LAPSE OF THE RESTRICTIONS AND CONDITIONS, SHARES FREE OF
RESTRICTIVE LEGENDS, IF ANY, RELATING TO SUCH RESTRICTIONS SHALL BE ISSUED TO
THE PARTICIPANT OR A SUCCESSOR OR TRANSFEREE.

 

7.4           A PARTICIPANT OR A TRANSFEREE WITH A RESTRICTED STOCK AWARD SHALL
HAVE ALL THE OTHER RIGHTS OF A SHAREHOLDER INCLUDING, BUT NOT LIMITED TO, THE
RIGHT TO RECEIVE DIVIDENDS AND THE RIGHT TO VOTE THE SHARES OF RESTRICTED STOCK.

 

7.5           NO MORE THAN 750,000 OF THE TOTAL NUMBER OF SHARES AVAILABLE FOR
AWARDS UNDER THE PLAN SHALL BE ISSUED DURING THE TERM OF THE PLAN AS RESTRICTED
STOCK.  THIS LIMITATION SHALL BE CALCULATED PURSUANT TO THE APPLICABLE
PROVISIONS OF PLAN SECTIONS 4 AND 16.

 

8.             OTHER AWARDS  THE COMMITTEE MAY FROM TIME TO TIME GRANT STOCK AND
OTHER AWARDS UNDER THE PLAN INCLUDING, WITHOUT LIMITATION, THOSE AWARDS PURSUANT
TO WHICH SHARES ARE OR MAY IN THE FUTURE BE ACQUIRED, AWARDS DENOMINATED IN
STOCK UNITS, RESTRICTED STOCK UNITS, SECURITIES CONVERTIBLE INTO STOCK AND
PHANTOM SECURITIES.  THE COMMITTEE, IN ITS SOLE DISCRETION, SHALL DETERMINE THE
TERMS AND CONDITIONS OF SUCH AWARDS PROVIDED THAT SUCH AWARDS SHALL NOT BE
INCONSISTENT WITH THE TERMS AND PURPOSES OF THE PLAN.  THE COMMITTEE MAY, AT ITS
SOLE DISCRETION, DIRECT THE COMPANY TO ISSUE SHARES SUBJECT TO RESTRICTIVE
LEGENDS AND/OR STOP TRANSFER INSTRUCTIONS THAT ARE CONSISTENT WITH THE TERMS AND
CONDITIONS OF THE AWARD TO WHICH THE SHARES RELATE.  NO MORE THAN 750,000 OF THE
TOTAL NUMBER OF SHARES AVAILABLE FOR AWARDS UNDER THE PLAN SHALL BE ISSUED
DURING THE TERM OF THE PLAN IN THE FORM OF STOCK WITHOUT RESTRICTIONS.

 

9.             STOCK OPTIONS

 

9.1           Terms of All Options.

 

(A)           AN OPTION SHALL BE GRANTED PURSUANT TO AN AGREEMENT AS EITHER AN
INCENTIVE STOCK OPTION OR A NON-STATUTORY STOCK OPTION.  THE PURCHASE PRICE OF
EACH SHARE SUBJECT TO AN OPTION SHALL BE DETERMINED BY THE COMMITTEE AND SET
FORTH IN THE AGREEMENT, BUT SHALL NOT BE LESS THAN 100% OF THE FAIR MARKET VALUE
OF A SHARE AS OF THE DATE THE OPTION IS GRANTED (EXCEPT AS PROVIDED IN PLAN
SECTIONS 9.2 AND 19).

 

(B)           THE PURCHASE PRICE OF THE SHARES WITH RESPECT TO WHICH AN OPTION
IS EXERCISED SHALL BE PAYABLE IN FULL AT THE TIME OF EXERCISE, PROVIDED THAT TO
THE EXTENT PERMITTED BY LAW, THE AGREEMENT MAY PERMIT SOME OR ALL PARTICIPANTS
TO SIMULTANEOUSLY EXERCISE OPTIONS AND SELL THE SHARES THEREBY ACQUIRED PURSUANT
TO A BROKERAGE OR SIMILAR RELATIONSHIP AND USE THE PROCEEDS FROM THE SALE AS
PAYMENT OF THE PURCHASE PRICE OF THE SHARES.  THE PURCHASE PRICE MAY BE PAYABLE
IN CASH, BY DELIVERY OR TENDER OF SHARES (BY ACTUAL DELIVERY OR ATTESTATION)
HAVING A FAIR MARKET VALUE AS OF THE DATE THE OPTION IS EXERCISED EQUAL TO THE
PURCHASE PRICE OF THE SHARES BEING PURCHASED PURSUANT TO THE OPTION, OR A
COMBINATION THEREOF, AS DETERMINED BY THE COMMITTEE, BUT NO FRACTIONAL SHARES
WILL BE ISSUED OR ACCEPTED.  PROVIDED, HOWEVER, THAT A PARTICIPANT EXERCISING A
STOCK OPTION SHALL NOT BE PERMITTED TO PAY ANY PORTION

 

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OF THE PURCHASE PRICE WITH SHARES IF, IN THE OPINION OF THE COMMITTEE, PAYMENT
IN SUCH MANNER COULD HAVE ADVERSE FINANCIAL ACCOUNTING CONSEQUENCES FOR THE
COMPANY.

 

(C)           EACH OPTION SHALL BE EXERCISABLE IN WHOLE OR IN PART ON THE TERMS
PROVIDED IN THE AGREEMENT.  IN NO EVENT SHALL ANY OPTION BE EXERCISABLE AT ANY
TIME AFTER THE EXPIRATION OF ITS TERM.  WHEN AN OPTION IS NO LONGER EXERCISABLE,
IT SHALL BE DEEMED TO HAVE LAPSED OR TERMINATED.

 

(d)           Upon receipt of notice of exercise, the Committee may elect to
cash out all or part of the portion of the Shares for which an Option is being
exercised by paying the Participant an amount, in cash or Shares, equal to the
excess of the Fair Market Value of the Shares over the aggregate purchase price
for the Shares for which the Option is being exercised on the effective date of
such cash-out.

 

9.2           Incentive Stock Options.  In addition to the other terms and
conditions applicable to all Options:

 

(A)           THE PURCHASE PRICE OF EACH SHARE SUBJECT TO AN INCENTIVE STOCK
OPTION SHALL NOT BE LESS THAN 100% OF THE FAIR MARKET VALUE OF A SHARE AS OF THE
DATE THE INCENTIVE STOCK OPTION IS GRANTED IF THIS LIMITATION IS NECESSARY TO
QUALIFY THE OPTION AS AN INCENTIVE STOCK OPTION (EXCEPT AS PROVIDED IN PLAN
SECTION 19);

 

(B)           THE AGGREGATE FAIR MARKET VALUE (DETERMINED AS OF THE DATE THE
OPTION IS GRANTED) OF THE SHARES WITH RESPECT TO WHICH INCENTIVE STOCK OPTIONS
HELD BY AN INDIVIDUAL FIRST BECOME EXERCISABLE IN ANY CALENDAR YEAR (UNDER THE
PLAN AND ALL OTHER INCENTIVE STOCK OPTION PLANS OF THE COMPANY AND ITS
AFFILIATES) SHALL NOT EXCEED $100,000 (OR SUCH OTHER LIMIT AS MAY BE REQUIRED BY
THE CODE) IF THIS LIMITATION IS NECESSARY TO QUALIFY THE OPTION AS AN INCENTIVE
STOCK OPTION AND TO THE EXTENT AN OPTION OR OPTIONS GRANTED TO A PARTICIPANT
EXCEED THIS LIMIT THE OPTION OR OPTIONS SHALL BE TREATED AS A NON-STATUTORY
STOCK OPTION;

 

(C)           AN INCENTIVE STOCK OPTION SHALL NOT BE EXERCISABLE MORE THAN 10
YEARS AFTER THE DATE OF GRANT (OR SUCH OTHER LIMIT AS MAY BE REQUIRED BY THE
CODE) IF THIS LIMITATION IS NECESSARY TO QUALIFY THE OPTION AS AN INCENTIVE
STOCK OPTION;

 

(d)           an Incentive Stock Option shall not be exercisable more than one
year after termination of the Participant’s employment with the Company and its
Affiliates if the Participant’s employment with the Company and its Affiliates
terminates because of the Participant’s death or disability or more than three
months after termination of the Participant’s employment if the Participant’s
employment terminates for any reason other than death or disability.

 

(e)           the Agreement covering an Incentive Stock Option shall contain
such other terms and provisions that the Committee

 

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determines necessary to qualify this Option as an Incentive Stock Option; and

 

(f)            notwithstanding any other provision of the Plan to the contrary,
no Participant may receive an Incentive Stock Option under the Plan if, at the
time the Award is granted, the Participant owns (after application of the
rules contained in Code Section 424(d), or its successor provision), Shares
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or its Subsidiaries, unless (i) the option price for that
Incentive Stock Option is at least 110% of the Fair Market Value of the Shares
subject to that Incentive Stock Option on the date of grant and (ii) that Option
is not exercisable after the date five years from the date that Incentive Stock
Option is granted.

 

10.          STOCK APPRECIATION RIGHTS  AN AWARD OF A STOCK APPRECIATION RIGHT
SHALL ENTITLE THE PARTICIPANT (OR A SUCCESSOR OR TRANSFEREE), SUBJECT TO TERMS
AND CONDITIONS DETERMINED BY THE COMMITTEE, TO RECEIVE UPON EXERCISE OF THE
STOCK APPRECIATION RIGHT ALL OR A PORTION OF THE EXCESS OF THE FAIR MARKET VALUE
OF A SPECIFIED NUMBER OF SHARES AS OF THE DATE OF EXERCISE OF THE STOCK
APPRECIATION RIGHT OVER A SPECIFIED PRICE THAT SHALL NOT BE LESS THAN 100% OF
THE FAIR MARKET VALUE OF SUCH SHARES AS OF THE DATE OF GRANT OF THE STOCK
APPRECIATION RIGHT.  A STOCK APPRECIATION RIGHT MAY BE GRANTED IN CONNECTION
WITH PART OR ALL OF, IN ADDITION TO, OR COMPLETELY INDEPENDENT OF AN OPTION OR
ANY OTHER AWARD UNDER THE PLAN.  IF ISSUED IN CONNECTION WITH A PREVIOUSLY OR
CONTEMPORANEOUSLY GRANTED OPTION, THE COMMITTEE MAY IMPOSE A CONDITION THAT
EXERCISE OF A STOCK APPRECIATION RIGHT CANCELS A PRO RATA PORTION OF THE OPTION
WITH WHICH IT IS CONNECTED AND VICE VERSA.  EACH STOCK APPRECIATION RIGHT MAY BE
EXERCISABLE IN WHOLE OR IN PART ON THE TERMS PROVIDED IN THE AGREEMENT.  NO
STOCK APPRECIATION RIGHT SHALL BE EXERCISABLE AT ANY TIME AFTER THE EXPIRATION
OF ITS TERM.  WHEN A STOCK APPRECIATION RIGHT IS NO LONGER EXERCISABLE, IT SHALL
BE DEEMED TO HAVE LAPSED OR TERMINATED.  UPON EXERCISE OF A STOCK APPRECIATION
RIGHT, PAYMENT TO THE PARTICIPANT OR A SUCCESSOR OR TRANSFEREE SHALL BE MADE AT
SUCH TIME OR TIMES AS SHALL BE PROVIDED IN THE AGREEMENT IN THE FORM OF CASH,
SHARES OR A COMBINATION OF CASH AND SHARES AS DETERMINED BY THE COMMITTEE.  THE
AGREEMENT MAY PROVIDE FOR A LIMITATION UPON THE AMOUNT OR PERCENTAGE OF THE
TOTAL APPRECIATION ON WHICH PAYMENT (WHETHER IN CASH AND/OR SHARES) MAY BE MADE
IN THE EVENT OF THE EXERCISE OF A STOCK APPRECIATION RIGHT.

 

11.          PERFORMANCE UNITS

 

11.1         Initial Award.

 

(A)           AN AWARD OF PERFORMANCE UNITS UNDER THE PLAN SHALL ENTITLE THE
PARTICIPANT (OR A SUCCESSOR OR TRANSFEREE) TO FUTURE PAYMENTS OF CASH, SHARES OR
A COMBINATION OF CASH AND SHARES, AS DETERMINED BY THE COMMITTEE, BASED UPON THE
ACHIEVEMENT OF PERFORMANCE GOALS.  THE AGREEMENT MAY ESTABLISH THAT A PORTION OF
A PARTICIPANT’S AWARD WILL BE PAID FOR PERFORMANCE THAT EXCEEDS THE MINIMUM
TARGET BUT FALLS BELOW THE MAXIMUM TARGET APPLICABLE TO THE AWARD.  THE
AGREEMENT SHALL ALSO PROVIDE FOR THE TIMING OF THE PAYMENT.

 

(B)           FOLLOWING THE CONCLUSION OR ACCELERATION OF EACH PERFORMANCE
CYCLE, THE COMMITTEE SHALL DETERMINE THE EXTENT TO WHICH

 

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(I) PERFORMANCE TARGETS HAVE BEEN ATTAINED, (II) ANY OTHER TERMS AND CONDITIONS
WITH RESPECT TO AN AWARD RELATING TO THE PERFORMANCE CYCLE HAVE BEEN SATISFIED
AND (III) PAYMENT IS DUE WITH RESPECT TO AN AWARD OF PERFORMANCE UNITS.

 

11.2         Acceleration and Adjustment.  The Agreement may permit an
acceleration of the Performance Cycle and an adjustment of performance targets
and payments with respect to some or all of the Performance Units awarded to a
Participant, upon the occurrence of certain events, which may, but need not
include, without limitation, a Fundamental Change; a recapitalization; a change
in the accounting practices of the Company; a change in the Participant’s title
or employment responsibilities; the Participant’s death, disability or
Retirement or; with respect to payments in Shares with respect to Performance
Units, a reclassification, stock dividend, stock split or stock combination as
provided in Plan Section 16.  The Agreement also may provide for a limitation on
the value of an Award of Performance Units that a Participant may receive.

 

12.          EFFECTIVE DATE AND DURATION OF THE PLAN

 

12.1         Effective Date.  The Plan shall become effective as of May 5, 2005,
if the Plan is approved by the requisite vote of shareholders at the 2005 Annual
Meeting of Shareholders or any adjournment thereof.

 

12.2         Duration of the Plan.  The Plan shall remain in effect until all
Stock subject to it shall be distributed, all Awards have expired or lapsed, the
Plan is terminated pursuant to Plan Section 15, or May 5, 2015 (the “Termination
Date”); provided, however, that Awards made before the Termination Date may be
exercised, vested or otherwise effectuated beyond the Termination Date unless
limited in the Agreement or otherwise.  No Award of an Incentive Stock Option
shall be made more than 10 years after the Effective Date (or such other limit
as may be required by the Code) if this limitation is necessary to qualify the
Option as an Incentive Stock Option.  The date and time of approval by the
Committee of the granting of an Award shall be considered the date and time at
which the Award is made or granted.

 

13.          PLAN DOES NOT AFFECT EMPLOYMENT STATUS

 

13.1         STATUS AS AN ELIGIBLE EMPLOYEE SHALL NOT BE CONSTRUED AS A
COMMITMENT THAT ANY AWARD WILL BE MADE UNDER THE PLAN TO THAT ELIGIBLE EMPLOYEE
OR TO ELIGIBLE EMPLOYEES GENERALLY.

 

13.2         NOTHING IN THE PLAN OR IN ANY AGREEMENT OR RELATED DOCUMENTS SHALL
CONFER UPON ANY EMPLOYEE OR PARTICIPANT ANY RIGHT TO CONTINUE IN THE EMPLOYMENT
OF THE COMPANY OR ANY AFFILIATE OR CONSTITUTE ANY CONTRACT OF EMPLOYMENT OR
AFFECT ANY RIGHT THAT THE COMPANY OR ANY AFFILIATE MAY HAVE TO CHANGE SUCH
PERSON’S COMPENSATION, OTHER BENEFITS, JOB RESPONSIBILITIES, TITLE, OR TO
TERMINATE THE EMPLOYMENT OF SUCH PERSON WITH OR WITHOUT CAUSE.

 

14.          TAX WITHHOLDING  THE COMPANY SHALL HAVE THE RIGHT TO WITHHOLD FROM
ANY CASH PAYMENT UNDER THE PLAN TO A PARTICIPANT OR OTHER PERSON (INCLUDING A
SUCCESSOR OR A TRANSFEREE) AN AMOUNT SUFFICIENT TO COVER ANY REQUIRED

 

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WITHHOLDING TAXES.  THE COMPANY SHALL HAVE THE RIGHT TO REQUIRE A PARTICIPANT OR
OTHER PERSON RECEIVING SHARES UNDER THE PLAN TO PAY THE COMPANY A CASH AMOUNT
SUFFICIENT TO COVER ANY REQUIRED WITHHOLDING TAXES BEFORE ACTUAL RECEIPT OF
THOSE SHARES.  IN LIEU OF ALL OR ANY PART OF A CASH PAYMENT FROM A PERSON
RECEIVING SHARES UNDER THE PLAN, THE COMMITTEE MAY PERMIT THE INDIVIDUAL TO
COVER ALL OR ANY PART OF THE REQUIRED WITHHOLDINGS THROUGH A REDUCTION OF THE
NUMBER OF SHARES DELIVERED OR DELIVERY OR TENDER RETURN TO THE COMPANY OF SHARES
HELD BY THE PARTICIPANT OR OTHER PERSON, IN EACH CASE VALUED IN THE SAME MANNER
AS USED IN COMPUTING THE WITHHOLDING TAXES UNDER THE APPLICABLE LAWS.

 

15.          AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN

 

15.1         THE BOARD MAY AT ANY TIME AND FROM TIME TO TIME TERMINATE, SUSPEND
OR MODIFY THE PLAN.  EXCEPT AS LIMITED IN 15.2 BELOW, THE COMMITTEE MAY AT ANY
TIME ALTER OR AMEND ANY OR ALL AGREEMENTS UNDER THE PLAN TO THE EXTENT PERMITTED
BY LAW.

 

15.2         NO TERMINATION, SUSPENSION, OR MODIFICATION OF THE PLAN WILL
MATERIALLY AND ADVERSELY AFFECT ANY RIGHT ACQUIRED BY ANY PARTICIPANT OR
SUCCESSOR OR TRANSFEREE UNDER AN AWARD GRANTED BEFORE THE DATE OF TERMINATION,
SUSPENSION, OR MODIFICATION, UNLESS OTHERWISE AGREED TO BY THE PARTICIPANT IN
THE AGREEMENT OR OTHERWISE, OR REQUIRED AS A MATTER OF LAW; BUT IT WILL BE
CONCLUSIVELY PRESUMED THAT ANY ADJUSTMENT FOR CHANGES IN CAPITALIZATION PROVIDED
FOR IN PLAN SECTIONS 11.2 OR 16 DOES NOT ADVERSELY AFFECT THESE RIGHTS.

 

16.          ADJUSTMENT FOR CHANGES IN CAPITALIZATION  SUBJECT TO ANY REQUIRED
ACTION BY THE COMPANY’S SHAREHOLDERS, APPROPRIATE ADJUSTMENTS, SO AS TO PREVENT
ENLARGEMENT OF RIGHTS OR INAPPROPRIATE DILUTION — (I) IN THE AGGREGATE NUMBER
AND TYPE OF SHARES AVAILABLE FOR AWARDS UNDER THE PLAN, (II) IN THE LIMITATIONS
ON THE NUMBER OF SHARES THAT MAY BE ISSUED TO AN INDIVIDUAL PARTICIPANT AS AN
OPTION OR A STOCK APPRECIATION RIGHT IN ANY CALENDAR YEAR OR THAT MAY BE ISSUED
IN THE FORM OF RESTRICTED STOCK OR SHARES WITHOUT RESTRICTIONS, (III) IN THE
NUMBER AND TYPE OF SHARES AND AMOUNT OF CASH SUBJECT TO AWARDS THEN OUTSTANDING,
(IV) IN THE OPTION PRICE AS TO ANY OUTSTANDING OPTIONS AND, (V) SUBJECT TO PLAN
SECTION 11.2, IN OUTSTANDING PERFORMANCE UNITS AND PAYMENTS WITH RESPECT TO
OUTSTANDING PERFORMANCE UNITS — MAY BE MADE BY THE COMMITTEE, IN ITS SOLE
DISCRETION, TO GIVE EFFECT TO ADJUSTMENTS MADE IN THE NUMBER OR TYPE OF SHARES
THROUGH A FUNDAMENTAL CHANGE (SUBJECT TO PLAN SECTION 17), RECAPITALIZATION,
RECLASSIFICATION, STOCK DIVIDEND, STOCK SPLIT, STOCK COMBINATION OR OTHER
RELEVANT CHANGE, PROVIDED THAT FRACTIONAL SHARES SHALL BE ROUNDED TO THE NEAREST
WHOLE SHARE.

 

17.          FUNDAMENTAL CHANGE

 

IN THE EVENT OF A PROPOSED FUNDAMENTAL CHANGE, THE COMMITTEE MAY, BUT SHALL NOT
BE OBLIGATED TO TAKE THE FOLLOWING ACTIONS:

 

17.1         IF THE FUNDAMENTAL CHANGE IS A MERGER OR CONSOLIDATION OR STATUTORY
SHARE EXCHANGE, MAKE APPROPRIATE PROVISION FOR THE PROTECTION OF THE OUTSTANDING
OPTIONS AND STOCK APPRECIATION RIGHTS BY THE SUBSTITUTION OF OPTIONS, STOCK
APPRECIATION RIGHTS AND APPROPRIATE VOTING COMMON STOCK OF THE CORPORATION
SURVIVING ANY MERGER OR CONSOLIDATION OR, IF APPROPRIATE, THE PARENT CORPORATION
OF THE COMPANY OR SUCH SURVIVING CORPORATION; OR

 

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17.2         AT LEAST TEN DAYS BEFORE THE OCCURRENCE OF THE FUNDAMENTAL CHANGE,
DECLARE, AND PROVIDE WRITTEN NOTICE TO EACH HOLDER OF AN OPTION OR STOCK
APPRECIATION RIGHT OF THE DECLARATION, THAT EACH OUTSTANDING OPTION AND STOCK
APPRECIATION RIGHT, WHETHER OR NOT THEN EXERCISABLE, SHALL BE CANCELED AT THE
TIME OF, OR IMMEDIATELY BEFORE THE OCCURRENCE OF THE FUNDAMENTAL CHANGE IN
EXCHANGE FOR PAYMENT TO EACH HOLDER OF AN OPTION OR STOCK APPRECIATION RIGHT,
WITHIN TEN DAYS AFTER THE FUNDAMENTAL CHANGE, OF CASH EQUAL TO (I) FOR EACH
SHARE COVERED BY THE CANCELED OPTION, THE AMOUNT, IF ANY, BY WHICH THE FAIR
MARKET VALUE (AS DEFINED IN THIS SECTION) PER SHARE EXCEEDS THE EXERCISE PRICE
PER SHARE COVERED BY SUCH OPTION, OR (II) FOR EACH STOCK APPRECIATION RIGHT, THE
PRICE DETERMINED PURSUANT TO SECTION 10, EXCEPT THAT FAIR MARKET VALUE OF THE
SHARES AS OF THE DATE OF EXERCISE OF THE STOCK APPRECIATION RIGHT, AS USED IN
CLAUSE (I) OF PLAN SECTION 10, SHALL BE DEEMED TO MEAN FAIR MARKET VALUE FOR
EACH SHARE WITH RESPECT TO WHICH THE STOCK APPRECIATION RIGHT IS CALCULATED
DETERMINED IN THE MANNER HEREINAFTER REFERRED TO IN THIS SECTION.  AT THE TIME
OF THE DECLARATION PROVIDED FOR IN THE IMMEDIATELY PRECEDING SENTENCE, EACH
STOCK APPRECIATION RIGHT AND EACH OPTION SHALL IMMEDIATELY BECOME EXERCISABLE IN
FULL AND EACH PERSON HOLDING AN OPTION OR A STOCK APPRECIATION RIGHT SHALL HAVE
THE RIGHT, DURING THE PERIOD PRECEDING THE TIME OF CANCELLATION OF THE OPTION OR
STOCK APPRECIATION RIGHT, TO EXERCISE THE OPTION AS TO ALL OR ANY PART OF THE
SHARES COVERED THEREBY OR THE STOCK APPRECIATION RIGHT IN WHOLE OR IN PART, AS
THE CASE MAY BE.  IN THE EVENT OF A DECLARATION PURSUANT TO PLAN SECTION 17(2),
EACH OUTSTANDING OPTION AND STOCK APPRECIATION RIGHT GRANTED PURSUANT TO THE
PLAN THAT SHALL NOT HAVE BEEN EXERCISED BEFORE THE FUNDAMENTAL CHANGE SHALL BE
CANCELED AT THE TIME OF, OR IMMEDIATELY BEFORE, THE FUNDAMENTAL CHANGE, AS
PROVIDED IN THE DECLARATION.  NOTWITHSTANDING THE FOREGOING, NO PERSON HOLDING
AN OPTION OR A STOCK APPRECIATION RIGHT SHALL BE ENTITLED TO THE PAYMENT
PROVIDED FOR IN THIS SECTION 17(2) IF SUCH OPTION OR STOCK APPRECIATION RIGHT
SHALL HAVE TERMINATED, EXPIRED OR BEEN CANCELLED.  FOR PURPOSES OF THIS
SECTION ONLY, “FAIR MARKET VALUE” PER SHARE MEANS THE CASH PLUS THE FAIR MARKET
VALUE, AS DETERMINED IN GOOD FAITH BY THE COMMITTEE, OF THE NON-CASH
CONSIDERATION TO BE RECEIVED PER SHARE BY THE SHAREHOLDERS OF THE COMPANY UPON
THE OCCURRENCE OF THE FUNDAMENTAL CHANGE.

 

18.          FORFEITURES  AN AGREEMENT MAY PROVIDE THAT IF A PARTICIPANT HAS
RECEIVED OR BEEN ENTITLED TO PAYMENT OF CASH, DELIVERY OF SHARES, OR A
COMBINATION THEREOF PURSUANT TO AN AWARD WITHIN SIX MONTHS BEFORE THE
PARTICIPANT’S TERMINATION OF EMPLOYMENT WITH THE COMPANY AND ITS AFFILIATES, THE
COMMITTEE, IN ITS SOLE DISCRETION, MAY REQUIRE THE PARTICIPANT TO RETURN OR
FORFEIT THE CASH AND/OR SHARES RECEIVED WITH RESPECT TO THE AWARD (OR ITS
ECONOMIC VALUE AS OF (I) THE DATE OF THE EXERCISE OF OPTIONS OR STOCK
APPRECIATION RIGHTS, (II) THE DATE OF, AND IMMEDIATELY FOLLOWING, THE LAPSE OF
RESTRICTIONS ON RESTRICTED STOCK OR THE RECEIPT OF SHARES WITHOUT RESTRICTIONS,
OR (III) THE DATE ON WHICH THE RIGHT OF THE PARTICIPANT TO PAYMENT WITH RESPECT
TO PERFORMANCE UNITS VESTS, AS THE CASE MAY BE, IN THE EVENT OF CERTAIN
OCCURRENCES SPECIFIED IN THE AGREEMENT.  THE COMMITTEE’S RIGHT TO REQUIRE
FORFEITURE MUST BE EXERCISED WITHIN 90 DAYS AFTER DISCOVERY OF SUCH AN
OCCURRENCE BUT IN NO EVENT LATER THAN 15 MONTHS AFTER THE PARTICIPANT’S
TERMINATION OF EMPLOYMENT WITH THE COMPANY AND ITS AFFILIATES.  THE OCCURRENCES
MAY, BUT NEED NOT, INCLUDE COMPETITION WITH THE COMPANY OR ANY AFFILIATE,
UNAUTHORIZED DISCLOSURE OF MATERIAL PROPRIETARY INFORMATION OF THE COMPANY OR
ANY AFFILIATE, A VIOLATION OF APPLICABLE BUSINESS ETHICS POLICIES OF THE COMPANY
OR AFFILIATE OR ANY OTHER OCCURRENCE SPECIFIED IN THE AGREEMENT WITHIN THE
PERIOD OR PERIODS OF TIME SPECIFIED IN THE AGREEMENT.

 

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19.          CORPORATE MERGERS, ACQUISITIONS, ETC.  THE COMMITTEE MAY ALSO GRANT
OPTIONS, STOCK APPRECIATION RIGHTS, RESTRICTED STOCK OR OTHER AWARDS UNDER THE
PLAN IN SUBSTITUTION FOR, OR IN CONNECTION WITH THE ASSUMPTION OF, EXISTING
OPTIONS, STOCK APPRECIATION RIGHTS, RESTRICTED STOCK OR OTHER AWARD GRANTED,
AWARDED OR ISSUED BY ANOTHER CORPORATION AND ASSUMED OR OTHERWISE AGREED TO BE
PROVIDED FOR BY THE COMPANY PURSUANT TO OR BY REASON OF A TRANSACTION INVOLVING
A CORPORATE MERGER, CONSOLIDATION, ACQUISITION OF PROPERTY OR STOCK, SEPARATION,
REORGANIZATION OR LIQUIDATION TO WHICH THE COMPANY OR A SUBSIDIARY IS A PARTY. 
THE TERMS AND CONDITIONS OF THE SUBSTITUTE AWARDS MAY VARY FROM THE TERMS AND
CONDITIONS SET FORTH IN THE PLAN TO THE EXTENT AS THE BOARD AT THE TIME OF THE
GRANT MAY DEEM APPROPRIATE TO CONFORM, IN WHOLE OR IN PART, TO THE PROVISIONS OF
THE AWARDS IN SUBSTITUTION FOR WHICH THEY ARE GRANTED.

 

20.          UNFUNDED PLAN  THE PLAN SHALL BE UNFUNDED AND THE COMPANY SHALL NOT
BE REQUIRED TO SEGREGATE ANY ASSETS THAT MAY AT ANY TIME BE REPRESENTED BY
AWARDS UNDER THE PLAN.  NEITHER THE COMPANY, ITS AFFILIATES, THE COMMITTEE, NOR
THE BOARD SHALL BE DEEMED TO BE A TRUSTEE OF ANY AMOUNTS TO BE PAID UNDER THE
PLAN NOR SHALL ANYTHING CONTAINED IN THE PLAN OR ANY ACTION TAKEN PURSUANT TO
ITS PROVISIONS CREATE OR BE CONSTRUED TO CREATE A FIDUCIARY RELATIONSHIP BETWEEN
THE COMPANY AND/OR ITS AFFILIATES, AND A PARTICIPANT OR SUCCESSOR OR
TRANSFEREE.  TO THE EXTENT ANY PERSON ACQUIRES A RIGHT TO RECEIVE AN AWARD UNDER
THE PLAN, THIS RIGHT SHALL BE NO GREATER THAN THE RIGHT OF AN UNSECURED GENERAL
CREDITOR OF THE COMPANY.

 

21.          LIMITS OF LIABILITY

 

21.1         Any liability of the Company to any Participant with respect to an
Award shall be based solely upon contractual obligations created by the Plan and
the Award Agreement.

 

21.2         Except as may be required by law, neither the Company nor any
member of the Board or of the Committee, nor any other person participating in
any determination of any question under the Plan, or in the interpretation,
administration or application of the Plan, shall have any liability to any party
for any action taken, or not taken, in good faith under the Plan.

 

22.          COMPLIANCE WITH APPLICABLE LEGAL REQUIREMENTS  NO CERTIFICATE FOR
SHARES DISTRIBUTABLE PURSUANT TO THE PLAN SHALL BE ISSUED AND DELIVERED UNLESS
THE ISSUANCE OF THE CERTIFICATE COMPLIES WITH ALL APPLICABLE LEGAL REQUIREMENTS
INCLUDING, WITHOUT LIMITATION, COMPLIANCE WITH THE PROVISIONS OF APPLICABLE
STATE SECURITIES LAWS, THE SECURITIES ACT OF 1933, AS AMENDED AND IN EFFECT FROM
TIME TO TIME, OR ANY SUCCESSOR STATUTE, THE EXCHANGE ACT AND THE REQUIREMENTS OF
THE EXCHANGES ON WHICH THE COMPANY’S SHARES MAY, AT THE TIME, BE LISTED.

 

23.          DEFERRALS AND SETTLEMENTS  THE COMMITTEE MAY REQUIRE OR PERMIT
PARTICIPANTS TO ELECT TO DEFER THE ISSUANCE OF SHARES OR THE SETTLEMENT OF
AWARDS IN CASH UNDER SUCH RULES AND PROCEDURES AS IT MAY ESTABLISH UNDER THE
PLAN.  IT MAY ALSO PROVIDE THAT DEFERRED SETTLEMENTS INCLUDE THE PAYMENT OR
CREDITING OF INTEREST ON THE DEFERRAL AMOUNTS.

 

24.          OTHER BENEFIT AND COMPENSATION PROGRAMS  PAYMENTS AND OTHER
BENEFITS RECEIVED BY A PARTICIPANT UNDER AN AWARD MADE PURSUANT TO THE PLAN
SHALL NOT BE DEEMED A PART OF A PARTICIPANT’S REGULAR, RECURRING COMPENSATION
FOR

 

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PURPOSES OF THE TERMINATION, INDEMNITY OR SEVERANCE PAY LAWS OF ANY COUNTRY AND
SHALL NOT BE INCLUDED IN, NOR HAVE ANY EFFECT ON, THE DETERMINATION OF BENEFITS
UNDER ANY OTHER EMPLOYEE BENEFIT PLAN, CONTRACT OR SIMILAR ARRANGEMENT PROVIDED
BY THE COMPANY OR AN AFFILIATE UNLESS EXPRESSLY SO PROVIDED BY SUCH OTHER PLAN,
CONTRACT OR ARRANGEMENT, OR UNLESS THE COMMITTEE EXPRESSLY DETERMINES THAT AN
AWARD OR PORTION OF AN AWARD SHOULD BE INCLUDED TO ACCURATELY REFLECT
COMPETITIVE COMPENSATION PRACTICES OR TO RECOGNIZE THAT AN AWARD HAS BEEN MADE
IN LIEU OF A PORTION OF COMPETITIVE CASH COMPENSATION.

 

25.          BENEFICIARY UPON PARTICIPANT’S DEATH  TO THE EXTENT THAT THE
TRANSFER OF A PARTICIPANT’S AWARD AT HIS OR HER DEATH IS PERMITTED UNDER AN
AGREEMENT, A PARTICIPANT’S AWARD SHALL BE TRANSFERABLE AT DEATH TO THE ESTATE OR
TO THE PERSON WHO ACQUIRES THE RIGHT TO SUCCEED TO THE AWARD BY BEQUEST OR
INHERITANCE.

 

26.          Requirements of Law

 

26.1         To the extent that federal laws do not otherwise control, the Plan
and all determinations made and actions taken pursuant to the Plan shall be
governed by the laws of the State of Illinois without regard to its
conflicts-of-law principles and shall be construed accordingly.

 

26.2         If any provision of the Plan shall be held illegal or invalid for
any reason, the illegality or invalidity shall not effect the remaining parts of
the Plan, and the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included.

 

27.           Repricing; Shareholder Approval  Except as provided in Plan
Section 16, neither the Board nor any committee thereof shall cause the Company
to adjust or amend the exercise price of any outstanding Award, whether through
amendment, replacement grant, or other means, without the prior approval of the
shareholders of the Company.

 

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