EXHIBIT 10.1

 

GRIFFON CORPORATION

2006 EQUITY INCENTIVE PLAN

AS AMENDED

 

 1.  Purpose.  The purpose of the Griffon Corporation 2006 Equity Incentive Plan
(the “Plan”) is to attract and retain employees, consultants and non-employee
directors for Griffon Corporation and its subsidiaries and to provide such
persons with incentives and rewards for superior performance.

 

 2.  Definitions.  As used in this Plan, the following terms shall be defined as
set forth below:

 

2.1.  “Award” means any Performance Shares, Performance Units, Options, Stock
Appreciation Rights, Restricted Shares or Deferred Shares granted under the
Plan.

 

2.2.  “Award Agreement” means an agreement, certificate, resolution or other
form of writing or other evidence approved by the Committee that sets forth the
terms and conditions of an Award. An Award Agreement may be in an electronic
medium, or may be limited to a notation on the Company’s books or records, but
shall be signed by a representative of the Company and the Participant unless
otherwise approved by the Committee.

 

2.3.  “Base Price” means the price used as the basis for determining the Spread
upon the exercise of Stock Appreciation Right.

 

2.4.  “Board” means the Board of Directors of the Company.

 

2.5.  “Cause” means, (a) if the applicable Participant is party to an effective
employment, consulting, severance or similar agreement with the Company or any
of its Subsidiaries, “Cause” shall have the same meaning as such term is defined
therein; (b) if the applicable Participant is not a party to an effective
employment, consulting, severance or similar agreement or if no definition of
“Cause” is set forth in the applicable employment, consulting, severance or
similar agreement, “Cause” shall have the same meaning as such term is defined
in the applicable Award Agreement; and (c) if the applicable Participant is not
a party to any effective employment, consulting, severance or similar agreement
or no definition of “Cause” is set forth in the applicable employment,
consulting, severance or similar agreement, and no definition of “Cause” is set
forth in the applicable Award Agreement, the existence of “Cause” shall be
determined in good faith by the Committee from time to time as circumstances
dictate; provided that the Committee shall provide notice to the Participant of
such determination and an opportunity for the Participant to cure such event (if
the Committee determines such event is reasonably curable).

 

2.6.  “Change in Control” means, after the effective date of the Plan:

 

(i)            the acquisition, directly or indirectly, by a “person” (within
the meaning of Section 13(d)(3) of the Exchange Act) (a “Person”) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of more than 20% of the combined voting power of the voting securities of the
Company entitled to vote generally in the election of directors (the “Voting
Securities”); provided, however, that the following acquisitions shall not
constitute a Change in Control: (a) any acquisition by or from the Company or
any Subsidiary, or

 

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by any employee benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary, (b) any acquisition by an individual who as of the
effective date of the Plan is a member of the Board, (c) any acquisition by any
underwriter in any firm commitment underwriting of securities to be issued by
the Company, or (d) any acquisition by any corporation (or other entity) if,
immediately following such acquisition, 65% or more of the then outstanding
shares of common stock (or other equity unit) of such corporation (or other
entity) and the combined voting power of the then outstanding voting securities
of such corporation (or other entity), are beneficially owned, directly or
indirectly, by all or substantially all of the individuals or entities who,
immediately prior to such acquisition, were the beneficial owners of the then
outstanding Shares and the Voting Securities in substantially the same
proportions, respectively, as their ownership immediately prior to the
acquisition of the Stock and Voting Securities; or

 

(ii)           the consummation of the sale or other disposition of all or
substantially all of the assets of the Company, other than to a wholly-owned
Subsidiary or to a holding company of which the Company is a direct or indirect
wholly owned subsidiary prior to such transaction; or

 

(iii)          the approval by stockholders of the Company of a reorganization,
merger or consolidation of the Company, other than a reorganization, merger or
consolidation, which would result in the Voting Securities outstanding
immediately prior to the transaction continuing to represent (whether by
remaining outstanding or by being converted to voting securities of the
surviving entity) 65% or more of the Voting Securities or the voting power of
the voting securities of such surviving entity outstanding immediately after
such transaction; or

 

(iv)          the approval by stockholders of the Company of a plan of complete
liquidation or substantial dissolution of the Company; or

 

(v)           the following individuals cease for any reason to constitute a
majority of the Board: individuals who, as of the effective date of the Plan,
constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including, but not limited to, a consent solicitation relating to the
election of directors of the Company) whose appointment or election by the Board
or nomination for election by the Company’s stockholders was approved and
recommended by a vote of at least two-thirds of the directors then still in
office who either were directors on the effective date of the Plan or whose
appointment, election or nomination for election was previously so approved or
recommended; or

 

(vi)          the sale, transfer, assignment, distribution or other disposition
by the Company and/or one of its Subsidiaries, in one transaction, or in a
series of related transactions within any period of 18 consecutive calendar
months (including, without limitation, by means of the sale, transfer,
assignment, distribution or other disposition of the capital stock of any
Subsidiary or Subsidiaries), of assets which account for an aggregate of 50% or
more of the consolidated revenues of the Company and its Subsidiaries, as
determined in accordance with U.S. generally accepted accounting principles, for
the fiscal year most recently ended prior to the date of such transaction (or,
in the case of a series of transactions as described above, the first such
transaction); provided, however, that no such transaction shall be taken into
account if

 

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substantially all the proceeds thereof (whether in cash or in kind) are used
after such transaction in the ongoing conduct by the Company and/or its
Subsidiaries of the business conducted by the Company and/or its Subsidiaries
prior to such transaction; or

 

(vii)         notwithstanding Sections 2.6(i) through 2.6(vi) above, in the case
of a distribution under the Plan of an amount which is subject to section 409A
of the Code, an event which constitutes a “change in control event” as defined
under Section 409A of the Code.

 

2.7.  “Code” means the Internal Revenue Code of 1986, as amended from time to
time and the regulations and other guidance issued thereunder.

 

2.8.  “Committee” means the Compensation Committee of the Board. The Committee
shall have at least two members, each of whom shall be a “non-employee director”
as defined in Rule 16b-3 under the Exchange Act and an “outside director” as
defined in Section 162(m) of the Code and the regulations thereunder, and, if
applicable meet the independence requirements of the applicable stock exchange,
quotation system or other self-regulatory organization on which the Shares are
traded.

 

2.9.  “Company” means Griffon Corporation., a Delaware corporation, or any
successor corporation.

 

2.10.  “Consultant” means an individual (other than an Employee or a
Non-employee Director) who renders services to the Company or a Subsidiary,
including an independent contractor or an advisor.

 

2.11.  “Deferral Period” means the period of time during which Deferred Shares
are subject to deferral limitations under Section 9.

 

2.12.  “Deferred Shares” means an Award pursuant to Section 9 of the right to
receive Shares at the end of a specified Deferral Period.

 

2.13.  “Employee” means any person, including an officer, employed by the
Company or a Subsidiary.

 

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

 

2.15.  “Fair Market Value” means, on any given date, unless otherwise determined
by the Committee, the closing sale prices reported as having occurred on the New
York Stock Exchange (or other principal exchange or market on which the Shares
are traded or listed) on such date, or, if no sale was made on such date on such
principal exchange or market, on the last preceding day on which the Shares were
traded or listed.

 

2.16.  “Grant Date” means the date specified by the Committee on which a grant
of an Award shall become effective, which shall not be earlier than the date on
which the Committee takes action with respect thereto.

 

2.17.  “Incentive Stock Option” means any Option which meets the requirements of
Section 422 of the Code and which is designated as an Incentive Stock Option by
the Committee.

 

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2.18.  “Nonemployee Director” means a member of the Board who is not an
Employee.

 

2.19.  “Nonqualified Stock Option” means an Option that is not intended to
qualify as an Incentive Stock Option, and designated as a Nonqualified Stock
Option by the Committee.

 

2.20.  “Option” means any option to purchase Shares granted under Section 6.

 

2.21.  “Optionee” means the person so designated in an agreement evidencing an
outstanding Option.

 

2.22.  “Option Price” means the purchase price payable upon the exercise of an
Option.

 

2.23.  “Participant” means an Employee, Nonemployee Director or Consultant who
is selected by the Committee to receive Awards, provided that only Employees may
receive grants of Incentive Stock Options.

 

2.24.  “Performance Objectives” means the performance objectives established in
the sole discretion of the Committee for Participants who are eligible to
receive Awards under the Plan. Performance Objectives may be described in terms
of Company-wide objectives or objectives that are related to the performance of
the individual Participant or the Subsidiary, division, department or function
within the Company or Subsidiary in which the Participant is employed.
Performance Objectives may be measured on an absolute or relative basis.
Relative performance may be measured by a group of peer companies or by a
financial market index. Any Performance Objectives applicable to a Qualified
Performance-Based Award shall be limited to: specified levels of or increases in
the Company’s, a division’s or a Subsidiary’s return on capital, equity or
assets; earnings measures/ratios (on a gross, net, pre-tax or post-tax basis),
including basic earnings per share, diluted earnings per share, total earnings,
operating earnings, earnings growth, earnings before interest and taxes and
earnings before interest, taxes, depreciation and amortization; net economic
profit (which is operating earnings minus a charge to capital); net income;
operating income; sales; sales growth; gross margin; direct margin; Share price
(including but not limited to growth measures and total stockholder return);
operating profit; per period or cumulative cash flow (including but not limited
to operating cash flow and free cash flow) or cash flow return on investment
(which equals net cash flow divided by total capital); inventory turns;
financial return ratios; market share; balance sheet measurements such as
receivable turnover; improvement in or attainment of expense levels; improvement
in or attainment of working capital levels; debt reduction; strategic
innovation; customer or employee satisfaction; individual objectives; and any
combination of the foregoing. If the Committee determines that a change in the
business, operations, corporate structure or capital structure of the Company,
or the manner in which it conducts its business, or other events or
circumstances render the Performance Objectives unsuitable, the Committee may
modify such Performance Objectives or the related minimum acceptable level of
achievement, in whole or in part, as the Committee deems appropriate and
equitable.

 

2.25.  “Performance Period” means a period of time established under Section 5
within which the Performance Objectives relating to Awards are to be achieved.

 

2.26.  “Performance Share” means a bookkeeping entry that records the equivalent
of one Share awarded pursuant to Section 5.

 

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2.27.  “Performance Unit” means a bookkeeping entry that records a unit
equivalent to $1.00 awarded pursuant to Section 5.

 

2.28.  “Qualified Performance-Based Award” means an Award or portion of an Award
that is intended to satisfy the requirements for “qualified performance-based
compensation” under Code Section 162(m). The Committee shall designate any
Qualified Performance-Based Award as such at the time of grant.

 

2.29.  “Restricted Shares” mean Shares granted under Section 8 subject to a
substantial risk of forfeiture.

 

2.30.  “Shares” means shares of the Common Stock of the Company, $.25 par value,
or any security into which Shares may be converted by reason of any transaction
or event of the type referred to in Section 14.

 

2.31.  “Spread” means, in the case of a Stock Appreciation Right, the amount by
which the Fair Market Value on the date when any such right is exercised exceeds
the Base Price specified in such right.

 

2.32.  “Stock Appreciation Right” means a right granted under Section 7.

 

2.33.  “Subsidiary” means a corporation or other entity in which the Company
owns or controls directly or indirectly at least 50 percent of the total
combined voting power represented by all classes of stock issued by such
corporation, or in the case of a noncorporate entity, at least 50% of the
profits or capital interest in such entity, at the time of such grant.

 

 3.  Shares Available Under the Plan.

 

3.1.  Reserved Shares.  Subject to adjustment as provided in Section 14, the
maximum number of Shares that may be (a) issued upon the exercise of Options or
Stock Appreciation Rights, (b) issued as Restricted Shares and released from
substantial risk of forfeiture, or (c) issued in payment of Deferred Shares or
Performance Shares, shall not in the aggregate exceed 2,000,000 Shares. Such
Shares may be Shares of original issuance, Shares held in Treasury, or Shares
that have been reacquired by the Company. In addition:

 

(i)            To the extent any Shares covered by an Award are not issued to a
Participant (or, if applicable, his heir, legatee or permitted transferee)
because the Award is forfeited or canceled, such Shares shall not be deemed to
have been issued for purposes of determining the maximum number of Shares
available for issuance under the Plan.

 

(ii)           Shares issued under the Plan in settlement, assumption or
substitution of outstanding awards (or obligations to grant future awards) under
the plans or arrangements of another entity shall not reduce the maximum number
of Shares available for issuance under the Plan, to the extent that such
settlement, assumption or substitution is a result of the Company acquiring
another entity (or an interest in another entity).

 

3.2.  Reduction Ratio.  For purposes of Section 3.1, each Share issued pursuant
to an Award other than an Option shall reduce the number of Shares available for
issuance under the Plan by two

 

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Shares. For example, if all Awards under the Plan are in the form of Restricted
Shares, 1,000,000 Shares are available for issuance, subject to adjustment as
provided in Section 14.

 

3.3.  ISO Maximum.  In no event shall the number of Shares issued upon the
exercise of Incentive Stock Options exceed 600,000 Shares, subject to adjustment
as provided in Section 14.

 

3.4.  Maximum Annual Award.  No Participant my receive Awards (including
performance-based Awards) representing more than 500,000 Shares underlying
Option grants (or 250,000 Shares underlying any Award, except for Options) in
any one fiscal year, subject to adjustment as provided in Section 14. The
maximum Qualified Performance-Based Award that may be granted to a Participant
in any one Performance Period is 250,000 Shares (subject to adjustment as
provided in Section 14).

 

 4.  Plan Administration.

 

4.1.  Committee Administration.  This Plan shall be administered by the
Committee. The interpretation and construction by the Committee of any provision
of this Plan or of any Award Agreement and any determination by the Committee
pursuant to any provision of this Plan or any such agreement, notification or
document, shall be final and conclusive. No member of the Committee shall be
liable to any person for any such action taken or determination, other than one
made in bad faith.

 

4.2.  Committee Powers.  The Committee shall have full authority to interpret
the Plan; to establish and amend rules and regulations relating to the Plan; to
select the Participants and determine the type of Awards to be made to
Participants, the number of shares subject to Awards and the terms, conditions,
restrictions and limitations of Awards; and to make all other determinations as
are necessary or advisable for the administration of the Plan.

 

4.3.  Committee Delegation.  The Committee may delegate to one or more officers
of the Company the authority to grant Awards to Participants who are not subject
to the requirements of Section 16 of the Exchange Act or Section 162(m) of the
Code and the rules and regulations thereunder, provided that the Committee shall
have fixed the total number of Shares subject to such grants. Any such
delegation shall be subject to the limitations of Section 157(c) of the Delaware
General Corporation Law. The Committee may revoke any such allocation or
delegation at any time for any reason with or without prior notice.

 

 5.  Performance Shares and Performance Units.  The Committee may authorize
grants of Performance Shares and Performance Units, which shall vest and become
payable to the Participant upon the achievement of specified Performance
Objectives during a specified Performance Period, upon such terms and conditions
as the Committee may determine in accordance with the following provisions:

 

5.1.  Terms and Conditions of Performance Share/Performance Unit Awards.  Each
grant shall specify the number of Performance Shares or Performance Units to
which it pertains. The Performance Period with respect to each Performance Share
or Performance Unit shall commence on the Grant Date and may be subject to
earlier termination in the event of a Change in Control or other similar
transaction or event. Each grant shall specify the Performance Objectives that
are to be achieved by the Participant. Each grant may specify in respect of the
specified Performance Objectives a minimum acceptable level of achievement below
which no payment will be made and may set forth a

 

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formula for determining the amount of any payment to be made if performance is
at or above such minimum acceptable level but falls short of the maximum
achievement of the specified Performance Objectives.

 

5.2.  Payment of Performance Shares and Units.  Each grant shall specify the
time and manner of payment of Performance Shares or Performance Units that shall
have been earned, and shall be paid by the Company in Shares.

 

5.3.  Maximum Payment.  Subject to Section 3.4 of the Plan, any grant of
Performance Shares may specify that the Shares payable with respect thereto may
not exceed a maximum specified by the Committee on the Grant Date. Any grant of
Performance Units may specify the number of Shares issued, with respect thereto
may not exceed maximums specified by the Committee on the Grant Date.

 

5.4.  Adjustment of Performance Objectives.  The Committee may adjust
Performance Objectives and the related minimum acceptable level of achievement
if, in the sole judgment of the Committee, events or transactions have occurred
after the Grant Date that are unrelated to the performance of the Participant
and result in distortion of the Performance Objectives or the related minimum
acceptable level of achievement.

 

5.5.  Qualified Performance-Based Awards.  In the case of a Qualified
Performance-Based Award the following provisions shall apply in addition to, and
where necessary, in lieu of other provisions of the Plan, including the
provisions of Sections 5.1 through 5.4:

 

(i)            Only Employees who are “Covered Employees” within the meaning of
Section 162(m) of the Code shall be eligible to receive Qualified
Performance-Based Awards. The Committee shall designate in its sole discretion
which Covered Employees will be Participants for a Performance Period within the
earlier of the (a) first 90 days of a Performance Period and (b) the lapse of
25% of the Performance Period.

 

(ii)           The Committee shall establish in writing within the earlier of
the (a) first 90 days of a Performance Period and (b) the lapse of 25% of the
Performance Period, and in any event, while the outcome is substantially
uncertain, (x) Performance Objectives for the Performance Period, and (y) in
respect of such Performance Objectives, a minimum acceptable level of
achievement below which no Award will be made, and an objective formula or other
method for determining the Award to be made if performance is at or above such
minimum acceptable level but falls short of the maximum achievement of the
specified Performance Objectives.

 

(iii)          Following the completion of a Performance Period, the Committee
shall review and certify in writing whether, and to what extent, the Performance
Objectives for the Performance Period have been achieved and, if so, to also
calculate and certify in writing the amount of the Qualified Performance-Based
Awards earned for the period based upon the Performance Objectives and the
related formulas or methods as determined pursuant to Section 5.5(ii). The
Committee shall then determine the actual number of Shares issuable under each
Participant’s Award for the Performance Period, and, in doing so, may reduce or
eliminate, unless otherwise and/or to the extent provided in the Award
Agreement, the amount of the Award. In no event shall the Committee have the
authority to increase Award amounts to any Covered Employee.

 

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(iv)          Subject to Section 20.2, Awards granted for a Performance Period
shall be made to Participants within a reasonable time after completion of the
certification described in Section 5.5(iii).

 

5.6.  Other Awards.  Any grant of an Award under Sections 6, 7, 8 or 9, and/or
the vesting or exercise thereof, may be further conditioned upon the attainment
of Performance Objectives established by the Committee in accordance with the
applicable provisions of this Section 5 regarding Performance Shares and
Performance Units.

 

 6.  Options.  The Committee may from time to time authorize grants of Options
to Participants upon such terms and conditions as the Committee may determine in
accordance with the following provisions:

 

6.1.  Number of Shares.  Each grant shall specify the number of Shares to which
it pertains.

 

6.2.  Option Price.  Each grant shall specify an Option Price per Share, which
shall be equal to or greater than the Fair Market Value per Share on the Grant
Date; provided that in the case of any Incentive Stock Option granted to a
person who on any given date owns, either directly or indirectly (taking into
account the attribution rules contained in Section 424(d) of the Code), stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or any Subsidiary, the Option Price shall not be
less than 110% of the Fair Market Value of a Share on the date of grant.

 

6.3.  Consideration.  Each grant shall specify the form of consideration to be
paid in satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check or
other cash equivalent, in each such case as is acceptable to the Company,
(ii) subject to approval by the Committee, nonforfeitable, unrestricted Shares
owned by the Optionee, (iii) any other legal consideration that the Committee
may deem appropriate, including without limitation any form of consideration
authorized under Section 6.4, on such basis as the Committee may determine in
accordance with this Plan, or (iv) any combination of the foregoing.

 

6.4.  Payment of Option Price in Restricted Shares.  On or after the Grant Date
of any Option other than an Incentive Stock Option, the Committee may determine
that payment of the Option Price may also be made in whole or in part in the
form of Restricted Shares or other Shares that are subject to risk of forfeiture
or restrictions on transfer. Unless otherwise determined by the Committee,
whenever any Option Price is paid in whole or in part by means of any of the
forms of consideration specified in this Section 6.4, the Shares received by the
Optionee upon the exercise of the Options shall be subject to the same risks of
forfeiture or restrictions on transfer as those that applied to the
consideration surrendered by the Optionee, provided that such risks of
forfeiture and restrictions on transfer shall apply only to the same number of
Shares received by the Optionee as applied to the forfeitable or restricted
Shares surrendered by the Optionee.

 

6.5.  Broker Assisted Exercise.  To the extent such program is permitted by the
Company and permitted by applicable law, rule or regulations, the Option Price
may be satisfied from the proceeds of a sale through a bank or broker on the
date of exercise of some or all of the Shares to which the exercise relates
pursuant to a broker assisted exercise program provided by such bank or broker.

 

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6.6.  Exercise Period.  No Option granted may be exercised more than ten years
after the Grant Date; provided that in the case of any Incentive Stock Option
granted to a person who on any given date owns, either directly or indirectly
(taking into account the attribution rules contained in Section 424(d) of the
Code), stock possessing more than 10 percent of the total combined voting power
of all classes of stock of the Company or any Subsidiary, such Option shall be
exercised within five years after the Grant Date.

 

6.7.  Disqualifying Dispositions of ISOs.  Each Participant awarded an Incentive
Stock Option under the Plan shall notify the Company in writing immediately
after the date he or she makes a disqualifying disposition (as defined in
Section 421(b) of the Code) of any Shares acquired pursuant to the exercise of
such Incentive Stock Option. The Company may, if determined by the Committee and
in accordance with procedures established by it, retain possession of any Shares
acquired pursuant to the exercise of an Incentive Stock Option as agent for the
applicable Participant until the end of the period described in the preceding
sentence, subject to complying with any instructions from such Participant as to
the sale of such Shares.

 

7.  Stock Appreciation Rights.  The Committee may also authorize grants to
Participants of Stock Appreciation Rights. A Stock Appreciation Right is the
right of the Participant to receive from the Company an amount, which, shall be
determined by the Committee and shall be expressed as a percentage (not
exceeding 100 percent) of the Spread at the time of the exercise of such right.
Any grant of Stock Appreciation Rights shall be upon such terms and conditions
as the Committee may determine in accordance with the following provisions:

 

7.1.  Payment in Shares.  Any amount payable upon the exercise of a Stock
Appreciation Right shall be paid by the Company in Shares. Any grant may specify
that the Shares payable upon the exercise of a Stock Appreciation Right shall
not exceed a maximum specified by the Committee on the Grant Date.

 

7.2.  Exercise Period.  Any grant may specify (a) a waiting period or periods
before Stock Appreciation Rights shall become exercisable and (b) permissible
dates or periods on or during which Stock Appreciation Rights shall be
exercisable; provided that no Stock Appreciation Right granted may be exercised
more than ten years after the Grant Date. A grant may specify that a Stock
Appreciation Right may be exercised only in the event of a Change in Control or
other similar transaction or event.

 

7.3.  Base Price.  Each grant shall specify in respect of each Stock
Appreciation Right a Base Price per Share, which shall be equal to or greater
than the Fair Market Value on the Grant Date.

 

7.4.  Deemed Exercise.  The Committee may provide that a Stock Appreciation
Right shall be deemed to be exercised at the close of business on the scheduled
expiration date of such Stock Appreciation Right if at such time the Stock
Appreciation Right by its terms remains exercisable and, if so exercised, would
result in a payment of Shares to the holder of such Stock Appreciation Right.

 

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8.  Restricted Shares.  The Committee may also authorize grants to Participants
of Restricted Shares upon such terms and conditions as the Committee may
determine in accordance with the following provisions:

 

8.1.  Transfer of Shares.  Each grant shall constitute an immediate transfer of
the ownership of Shares to the Participant in consideration of the performance
of services, subject to the substantial risk of forfeiture and restrictions on
transfer referred to in Section 10. Each grant may be made without additional
consideration from the Participant or in consideration of a payment by the
Participant that is less than the Fair Market Value on the Grant Date.

 

8.2.  Dividends.  Any grant may require that any or all dividends or other
distributions paid on the Restricted Shares during the period of such
restrictions be reinvested in additional Shares or held in cash, which
additional Shares or cash, as the case may be, may be subject to the same
restrictions as the underlying Award or such other restrictions as the Committee
may determine.

 

 9.  Deferred Shares.  The Committee may authorize grants of Deferred Shares to
Participants upon such terms and conditions as the Committee may determine in
accordance with the following provisions:

 

9.1.  Deferred Transfer of Shares.  Each grant shall constitute the agreement by
the Company to issue or transfer Shares to the Participant in the future in
consideration of the performance of services, subject to the fulfillment during
the Deferral Period of such conditions as the Committee may specify.

 

9.2.  Consideration.  Each grant may be made without additional consideration
from the Participant or in consideration of a payment by the Participant that is
less than the Fair Market Value on the Grant Date.

 

10.  Vesting.

 

10.1.  In General.  Each grant of Options and Stock Appreciation Rights shall
specify the period of continuous employment by the Company or any Subsidiary, or
service to the Company or any Subsidiary (and in the case of a Nonemployee
Director, service on the Board), of the Participant that is necessary before
such Options or Stock Appreciation Rights, or installments thereof, shall become
exercisable. Each grant of Restricted Shares shall specify the period during
which such Restricted Shares shall be subject to a “substantial risk of
forfeiture” within the meaning of Code Section 83, and each grant of Deferred
Shares shall specify the Deferral Period to which such Deferred Shares shall be
subject. Each grant of such Award may provide for the earlier exercise of
rights, termination of a risk of forfeiture or termination of a Deferral Period
in the event of a Change in Control or similar transaction or event.

 

10.2.  Restrictions on Transfer of Restricted Shares.  Each grant of Restricted
Shares shall provide that, during the period for which a substantial risk of
forfeiture is to continue, the transferability of the Restricted Shares shall be
prohibited or restricted in the manner and to the extent prescribed by the
Committee on the Grant Date. Such restrictions may include, without limitation,
rights of repurchase or first refusal in the Company or provisions subjecting
the Restricted Shares to a continuing substantial risk of forfeiture in the
hands of any transferee.

 

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11.  Dividends and Other Ownership Rights.

 

11.1.  Restricted Shares.  Unless otherwise determined by the Committee, an
Award of Restricted Shares shall entitle the Participant to dividend, voting and
other ownership rights during the period for which a substantial risk of
forfeiture is to continue.

 

11.2.  Deferred Shares.  Unless otherwise determined by the Committee, during
the Deferral Period, the Participant shall not have any right to transfer any
rights under an Award of Deferred Shares, shall not have any rights of ownership
in the Deferred Shares and shall not have any right to vote such Shares.

 

12.  Transferability.

 

12.1.  Transfer Restrictions.  Except as provided in Section 12.2, no Award
granted shall be transferable by a Participant other than by will or the laws of
descent and distribution, and Options and Stock Appreciation Rights shall be
exercisable during a Participant’s lifetime only by the Participant or, in the
event of the Participant’s legal incapacity, by his or her guardian or legal
representative acting in a fiduciary capacity on behalf of the Participant under
state law. Any attempt to transfer an Award in violation of this Plan shall
render such Award null and void.

 

12.2.  Limited Transfer Rights.  The Committee may expressly provide in an Award
Agreement (or an amendment to an Award Agreement) that a Participant may
transfer such Award (other than an Incentive Stock Option), in whole or in part,
to a spouse or lineal descendant (a “Family Member”), a trust for the exclusive
benefit of Family Members, a partnership or other entity in which all the
beneficial owners are Family Members, or any other entity affiliated with the
Participant that may be approved by the Committee. Subsequent transfers of
Awards shall be prohibited except in accordance with this Section 12.2. All
terms and conditions of the Award, including without limitation provisions
relating to termination of the Participant’s employment or service with the
Company or a Subsidiary, shall continue to apply following a transfer made in
accordance with this Section 12.2. In order for a transfer to be effective, a
Participant must agree in writing prior to the transfer on a form provided by
the Company to pay any and all payroll and withholding taxes due upon exercise
of the transferred Option. In addition, prior to the exercise of a transferred
Option by a transferee, arrangements must be made by the Participant with the
Company for the payment of all payroll and withholding taxes. Finally, the
Company shall be under no obligation to provide a transferee with any notice
regarding the transferred Awards held by the transferee upon forfeiture or any
other circumstance.

 

12.3.  Restrictions on Transfer.  Any Award granted may provide that all or any
part of the Shares that are (a) to be issued or transferred by the Company upon
the exercise of Options or Stock Appreciation Rights, upon termination of the
Deferral Period applicable to Deferred Shares or upon payment under any grant of
Performance Shares or Performance Units, or (b) no longer subject to the
substantial risk of forfeiture and restrictions on transfer referred to in
Section 10, shall be subject to further restrictions upon transfer, including
restrictions relating to any minimum Share ownership requirements imposed by the
Company with respect to a Participant.

 

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13.  Award Agreement.  Each grant under the Plan shall be evidenced by an Award
Agreement, which shall describe the subject Award, state that the Award is
subject to all of the terms and conditions of this Plan and contain such other
terms and provisions as the Committee may determine consistent with this Plan.

 

14.  Adjustments.  The Committee shall make or provide for appropriate
adjustments in the (a) number of Shares covered by outstanding Options, Stock
Appreciation Rights, Deferred Shares, Restricted Shares and Performance Shares
granted hereunder, (b) prices per Share applicable to such Options and Stock
Appreciation Rights, and (c) kind of Shares covered thereby (including Shares of
another issuer), as the Committee in its sole discretion may in good faith
determine to be equitably required in order to prevent dilution or enlargement
of the rights of Participants that otherwise would result from (x) any stock
dividend, stock split, combination or exchange of Shares, recapitalization or
other change in the capital structure of the Company, (y) any merger,
consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial
or complete liquidation or other distribution of assets (other than a normal
cash dividend), issuance of rights or warrants to purchase securities, or
(z) any other corporate transaction or event having an effect similar to any of
the foregoing. Moreover, in the event of any such transaction or event, the
Committee may provide in substitution for any or all outstanding Awards such
alternative consideration as it may in good faith determine to be equitable
under the circumstances and may require in connection therewith the surrender of
all Awards so replaced. The Committee may also make or provide for such
adjustments in each of the limitations specified in Section 3 as the Committee
in its sole discretion may in good faith determine to be appropriate in order to
reflect any transaction or event described in this Section 14. The Company shall
give each Participant notice of an adjustment hereunder and, upon notice, such
adjustment shall be conclusive and binding for all purposes.

 

15.  Fractional Shares.  The Company shall not be required to issue any
fractional Shares pursuant to this Plan. The Committee may provide for the
elimination of fractions or for the settlement thereof in cash.

 

16.  Withholding Taxes.  The Company shall be entitled to deduct from any
payment under the Plan, regardless of the form of such payment, the amount of
all applicable income and employment taxes required by law to be withheld with
respect to such payment or may require the Participant to pay to it such tax
prior to and as a condition of the making of such payment. In accordance with
any applicable administrative guidelines it establishes, the Committee may allow
a Participant to pay the amount of taxes required by law to be withheld from an
Award by withholding from any payment of Shares due as a result of such Award,
or by permitting the Participant to deliver to the Company Shares having a Fair
Market Value, as determined by the Committee, equal to the minimum amount of
such required withholding taxes.

 

17.  Certain Terminations of Employment, Hardship and Approved Leaves of
Absence.  In the event of termination of employment by reason of death,
disability, normal retirement, early retirement with the consent of the
Committee, other termination of employment or a leave of absence that is
approved by the Committee, or in the event of hardship or other special
circumstances that are approved by the Committee, of a Participant who holds an
Option or Stock Appreciation Right that is not immediately and fully
exercisable, any Restricted Shares as to which the substantial risk of
forfeiture or the prohibition or restriction on transfer has not lapsed, any
Deferred Shares as to which the Deferral Period is not complete, any Performance
Shares or Performance Units that have not been fully earned, or any Shares that
are

 

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subject to any transfer restriction pursuant to Section 12.3, the Committee may,
in its sole discretion, take any action that it deems to be equitable under the
circumstances or in the best interests of the Company, including without
limitation waiving or modifying any limitation or requirement with respect to
any Award and providing for post-termination exercise periods with respect to
any Option or Stock Appreciation Right.

 

18.  Termination for Cause.  A Participant who is terminated for Cause shall,
unless otherwise determined by the Committee, immediately forfeit, effective as
of the date the Participant engages in such conduct, all unexercised, unearned,
and/or unpaid Awards, including, but not by way of limitation, Awards earned but
not yet paid or exercised, all unpaid dividends and all interest, if any,
accrued on the foregoing.

 

19.  Foreign Participants.  In order to facilitate the making of any grant or
combination of grants under this Plan, the Committee may provide for such
special terms for Awards to Participants who are foreign nationals, or who are
employed by or perform services for the Company or any Subsidiary outside of the
United States of America, as the Committee may consider necessary or appropriate
to accommodate differences in local law, tax policy or custom. Moreover, the
Committee may approve such supplements to, or amendments, restatements or
alternative versions of, this Plan as it may consider necessary or appropriate
for such purposes without thereby affecting the terms of this Plan as in effect
for any other purpose, provided that no such supplements, amendments,
restatements or alternative versions shall include any provisions that are
inconsistent with the terms of this Plan, as then in effect, unless this Plan
could have been amended to eliminate such inconsistency without further approval
by the stockholders of the Company.

 

20.  Amendments and Other Matters.

 

20.1.  Plan Amendments.  This Plan may be amended from time to time by the
Board, but no such amendment shall: (a) increase any of the limitations
specified in Section 3, other than to reflect an adjustment made in accordance
with Section 14, (b) change the class of persons eligible to receive grants of
Awards or the types of Awards available under the Plan, or (c) increase the
benefits to Participants under the Plan, in any such case without the further
approval of the stockholders of the Company. The Board will also condition any
amendment on the approval of the stockholders of the Company if such approval is
necessary with respect to the applicable listing or other requirements of a
national securities exchange or other applicable laws, policies or regulations,
and the Board may condition any amendment on the approval of the stockholders of
the Company if such approval is deemed advisable to comply with such
requirements.

 

20.2.  Award Deferrals.  An Award Agreement may provide that payment of any
Award, dividend, or any portion thereof, may be deferred by a Participant until
such time as the Committee may establish. All such deferrals shall be
accomplished by the delivery of a written, irrevocable election by the
Participant prior to the time established by the Committee for such purpose, on
a form provided by the Company. Deferred Awards may also be credited with
interest, at such rates to be determined by the Committee.

 

20.3.  Conditional Awards.  The Committee may condition the grant of any Award
or combination of Awards on the surrender or deferral by the Participant of his
or her right to receive a cash bonus or other compensation otherwise payable by
the Company or any Subsidiary to the Participant.

 

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20.4.  Repricing Prohibited.  No Award may be repriced, replaced, regranted
through cancellation, or modified, directly or indirectly, without the approval
of the stockholders of the Company, provided that nothing herein shall prevent
the Committee from taking any action provided for in Section 14.

 

20.5.  Amendments to Awards.  Subject to the requirements of Section 20.4, the
Committee may at any time unilaterally amend any unexercised, unearned, or
unpaid Award, including, but not by way of limitation, Awards earned but not yet
paid, to the extent it deems appropriate (including for the purposes of
compliance with local laws and regulations or to avoid costly government
filings); provided, however, that except to the extent that the Committee
determines that an amendment is necessary to avoid a penalty tax under
Section 409A of the Code, any such amendment which, in the opinion of the
Committee, is adverse to the Participant shall require the Participant’s
consent.

 

20.6.  No Employment Right.  This Plan shall not confer upon any Participant any
right with respect to continuance of employment or other service with the
Company or any Subsidiary and shall not interfere in any way with any right that
the Company or any Subsidiary would otherwise have to terminate any
Participant’s employment or other service at any time.

 

20.7.  Compliance with Section 409A of the Code.  Notwithstanding any other
provision of the Plan to the contrary, (a) to the extent that any payment of or
in connection with an Award constitutes a payment under a “non-qualified
deferred compensation plan,” as defined in Section 409A of the Code, such
payment shall be made in compliance with Section 409A of the Code and (b) any
adjustment of Shares or prices per Share or substitution of Awards pursuant to
Section 14 and any modification of Awards pursuant to Section 17 shall not cause
the affected Award to violate the requirements of Section 409A of the Code.

 

21.  Change in Control.  Except as otherwise provided at the time of grant in an
Award Agreement relating to a particular Award and subject to the requirements
of Section 14, if a Change in Control occurs, then:

 

21.1.        The Participant’s Restricted Shares, Deferred Shares, Performance
Shares, Performance Units or other Share-based Awards that were forfeitable
shall, unless otherwise determined by the Committee prior to the occurrence of
the Change in Control, become nonforfeitable and, to the extent applicable,
shall be converted into Shares.

 

21.2.        Any unexercised Option or Stock Appreciation Right, whether or not
exercisable on the date of such Change in Control, shall thereupon be fully
exercisable and may be exercised, in whole or in part.

 

21.3.        Notwithstanding Sections 21.1 and 21.2, in the event of a Change in
Control, the Committee may in its discretion cancel any outstanding Awards and
(a) pay to the holders thereof, in cash or stock, or any combination thereof,
the value of such Awards based upon the price per share of Stock received or to
be received by other stockholders of the Company in the event or (b) arrange for
fully vested substitute awards to be granted to the holders thereof, denominated
in the equity of the acquirer or an affiliate thereof, provided such substitute
awards substantially preserve the value of the substituted Awards.

 

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21.4.        If a Change in Control occurs during the term of one or more
Performance Periods for which the Committee has granted performance-based Awards
pursuant to the provisions of Section 5, the term of each such Performance
Period (hereinafter a “current Performance Period”) shall immediately terminate
upon the occurrence of such Change in Control. Upon a Change in Control, for
each current Performance Period and each completed Performance Period for which
the Committee has not on or before such date made a determination as to whether
and to what degree the Performance Objectives for such period have been attained
(hereinafter a “completed Performance Period”), it shall be assumed that the
Performance Objectives have been attained at a level of one hundred percent
(100%) or the equivalent thereof. A Participant in one or more current
Performance Periods shall be considered to have earned and, therefore, be
entitled to receive, a prorated portion of the Award previously granted to him
for each such current Performance Period. Such prorated portion shall be
determined by multiplying the number of Performance Shares or Performance Units
(or other performance-based Awards), as the case may be, granted to the
Participant by a fraction, the numerator of which is the total number of days
that have elapsed since the beginning of the current Performance Period, and the
denominator of which is the total number of days in such current Performance
Period. A Participant in one or more completed Performance Periods shall be
considered to have earned and, therefore, be entitled to receive all the
Performance Shares or Performance Units (or other performance-based Awards), as
the case may be, previously granted to him during each such completed
Performance Period.

 

21.5.        Unless otherwise provided by the Committee, at any time, upon a
Change in Control, any Awards deferred by a Participant under Section 20.2, but
for which he or she has not received payment as of such date, shall be paid by
the 90th day following the Change in Control.

 

22.  Effective Date.  This Plan shall become effective upon its approval by the
stockholders of the Company.

 

23.  Termination.  This Plan shall terminate on the tenth anniversary of the
date upon which it is approved by the stockholders of the Company, and no Award
shall be granted after that date.

 

24.  Arbitration of Disputes.  Any and all disputes arising out of or relating
to the Plan or any Award Agreement (or breach thereof) shall be resolved
exclusively through binding arbitration in the State of New York in accordance
with the rules of the American Arbitration Association then in effect.

 

25.  Regulatory Approvals and Listings.  Notwithstanding anything contained in
this Plan to the contrary, the Company shall have no obligation to issue or
deliver certificates of Shares evidencing Awards or any other Award resulting in
the payment of Shares prior to (i) the obtaining of any approval from any
governmental agency which the Company shall, in its sole discretion, determine
to be necessary or advisable, (ii) the admission of such Shares to listing on
the stock exchange or market on which the Shares may be listed, and (iii) the
completion of any registration or other qualification of said Shares under any
state or federal law or ruling of any governmental body which the Company shall,
in its sole discretion, determine to be necessary or advisable. The Committee
may, from time to time, impose additional restrictions upon an Award, including
but not limited to, restrictions regarding tax withholdings and restrictions
regarding the Participant’s ability to exercise Awards under the Company’s
broker-assisted stock option exercise program.

 

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26.  No Right, Title, or Interest in Company Assets.  No Participant shall have
any rights as a stockholder of the Company as a result of participation in the
Plan until the date of issuance of a stock certificate in his or her name, and,
in the case of Restricted Shares, such rights are granted to the Participant
under the Plan. To the extent any person acquires a right to receive payments
from the Company under the Plan, such rights shall be no greater than the rights
of an unsecured creditor of the Company and the Participant shall not have any
rights in or against any specific assets of the Company. All of the Awards
granted under the Plan shall be unfunded.

 

27.  No Guarantee of Tax Consequences.  Notwithstanding any other provision of
the Plan, no person connected with the Plan in any capacity, including, but not
limited to, the Company and its directors, officers, agents and employees, makes
any representation, commitment, or guarantee that any tax treatment, including,
but not limited to, federal, state and local income, estate and gift tax
treatment, will be applicable with respect to the tax treatment of any Award,
any amounts deferred under the Plan, or paid to or for the benefit of a
Participant under the Plan, or that such tax treatment will apply to or be
available to a Participant on account of participation in the Plan, or that any
of the foregoing amounts will not be subject to the 20% penalty tax and interest
under Section 409A of the Code.

 

28.  Governing Law.  The validity, construction and effect of this Plan and any
Award hereunder will be determined in accordance with the laws of the State of
Delaware.

 

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